8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of report: June 15, 2009

(Date of earliest event reported)

E*TRADE Financial Corporation

(Exact name of Registrant as Specified in its Charter)

Delaware	1-11921	94-2844166
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

135 East 57th Street, New York, New York 10022

(Address of Principal Executive Offices and Zip Code)

(646) 521-4300

(Registrant’s Telephone Number, including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On June 17, 2009, E*TRADE Financial Corporation (the “Company”) announced that it had agreed to enter into a series of transactions with Citadel Equity Fund Ltd., and its affiliates (“Citadel”) designed to raise cash proceeds, increase its equity and reduce the Company’s debt burden by reducing interest costs and lengthening its weighted average debt maturities. Citadel is the largest holder of the Company’s common stock, owning approximately 15% of the Company’s outstanding common stock, and a substantial majority of the Company’s outstanding high-yield debt securities.

These transactions include (i) an Amended and Restated Order Handling Agreement with an affiliate of Citadel, pursuant to which a subsidiary of the Company will receive an aggregate cash payment of $100 million as set forth below, (ii) Citadel’s commitment to participate in a public offering of common stock (the “Public Equity Offering”) and (iii) Citadel’s participation in an exchange offer for certain outstanding notes (the “Debt Exchange”) to be launched upon completion of the Public Equity Offering, each as more fully described in this Report. In connection with the agreements, the Company also amended its Stockholder Rights Agreement to allow Citadel to participate in the transactions contemplated without becoming an “Acquiring Person” under the Stockholder Rights Agreement and to make certain other changes, as described below.

Order Flow Agreement. On June 15, 2009, the Company and a subsidiary entered into an Amended and Restated Equities and Options Order Handling Agreement (the “Amended and Restated Order Handling Agreement”) with Citadel Derivatives Group, LLC, an affiliate of Citadel. The Amended and Restated Order Handling Agreement will become effective only upon receipt of prior regulatory approval. Subject to certain execution quality requirements, the Amended and Restated Order Handling Agreement requires the Company to route 97.5% (an increase from 40%) of its marketable customer orders in Regulation NMS Stocks until the sixth anniversary of the commencement date, and 97.5% (which is not a change) of the Company’s customer orders in exchange-listed options to Citadel for order handling and execution until the third anniversary of the commencement date. Citadel may extend the options order flow commitment for an additional year on the third, fourth and fifth anniversaries of the commencement date. The commencement date can be no later than 30 days after the later of (i) June 15, 2009 and (ii) three (3) business days following Citadel Derivative Group, LLC’s receipt of approval from the Office of Thrift Supervision (“OTS”). In addition, for each three-month period in which the Company routes less than its options order flow commitments to Citadel, the term of the options order flow commitment may be extended until such commitments are met. The Company will receive an aggregate cash payment of $100 million within three business days of the commencement date, of which $65 million is in full consideration for the increase in NMS Stock flow and $35 million is in exchange for a credit of $35 million toward future payment for options order flow, which the Company will continue to earn on a monthly basis.

In light of the change from monthly volume based payments to a substantial up-front payment, the liquidated damages payable upon early termination of the Amended and Restated Order Handling Agreement will be increased. As amended, the Company will be required to pay liquidated damages of up to $200 million in the first year of the Amended and Restated Order Handling Agreement to Citadel in the event of early termination, depending on the event giving rise to termination (such as a failure to route the minimum amount without justification), and the timing of the termination with such amounts decreasing each year. Because the Amended and Restated Order Handling Agreement is subject to approval by the OTS, there is no assurance that the agreement will become effective on the terms negotiated, if at all.

Exchange Agreement. On June 17, 2009, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Citadel. Pursuant to the Exchange Agreement, Citadel, among other things, has agreed to tender in the period ending at midnight New York City time on the fifth business day after the commencement of the Debt Exchange, as such date may be extended by the Company with the consent of Citadel (the “Early Tender Period”) not less than $200 million aggregate principal amount of the Company’s 8% Senior Notes due 2011 (the “2011 Notes”) and not less than $600 million, nor more than $1 billion aggregate principal amount of the Company’s 12.5% Springing Lien Notes due 2017 (the “2017 Notes” and together with the 2011 Notes, the “Notes”), and not withdraw any of these tendered Notes (except as set forth in the Exchange Agreement), for an equal aggregate principal amount of zero-coupon Senior Convertible Debentures due 2019 (the “Debentures”) on the same terms as the other holders of the Notes, as described below under Item 8.01 “Other Events.” Citadel’s participation in the Debt Exchange is subject to prior regulatory approval. Under the Exchange

Agreement, Citadel has agreed with the Company that it will place an order with the underwriters of the Public Equity Offering to purchase $50 million of the Company’s common stock if the public offering price is greater than $1.20 or $100 million of the Company’s common stock if the public offering price is $1.20 or less, as described below under Item 8.01 “Other Events.” The underwriters are not obligated to fill Citadel’s order and the actual amount of common stock purchased by Citadel in the Public Equity Offering may differ. In addition, under the Exchange Agreement, the Company granted Citadel pre-emptive rights to maintain its percentage ownership of the Company’s common stock, subject to certain terms, conditions and limitations.

The pre-emptive rights will be in effect so long as the Company has in effect a stockholder rights plan, provided that the pre-emptive rights shall terminate and be of no further force or effect upon the earliest to occur of (i) failure to consummate the Debt Exchange or (ii) such time as Citadel no longer beneficially owns at least 19.9% of the Company’s outstanding common stock on an as-converted basis (whether or not such securities are convertible or exchangeable for shares of Common Stock at such time in accordance with their terms or by reason of any condition precedent to such conversion or exchange not been satisfied at such time). The preemptive rights will be suspended upon the termination of the Company’s Stockholder Rights Plan, but will be automatically reinstated if the Company reinstates the Stockholder Rights Plan or if it subsequently adopts a new rights plan, “poison pill” or similar plan.

Under the Exchange Agreement, the Company agreed that at the Special Meeting, described below under Item 8.01 “Other Events,” it will submit to its stockholders for an advisory vote the question of whether the Company should maintain its Stockholder Rights Plan (the “Rights Plan Proposal”). The Company has agreed with Citadel that neither its Board of Directors nor Citadel will take any position on whether stockholders should vote for or against the Rights Plan Proposal or otherwise seek to influence the outcome of the advisory vote. Citadel has agreed that it will vote its shares representing no more than 9.9% of the Company’s shares outstanding and entitled to vote at the Special Meeting on the Rights Plan Proposal in its discretion, and that it will vote the balance of its shares on the Rights Plan Proposal in the same proportions for and against the Rights Plan Proposal as the votes cast by all other stockholders. Following the vote, which will not be binding, the Company’s Board of Directors will determine whether to maintain the Company’s Stockholder Rights Plan, based on its consideration of all factors deemed relevant to the exercise of its fiduciary duties.

The foregoing description of the Exchange Agreement does not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement, a copy of which is filed as Exhibit 10.1 and incorporated herein by reference.

The Exchange Agreement and the Company’s summary of its terms have been included with and filed as an exhibit to this Report to provide you with information regarding the terms of the agreement and are not intended to modify or supplement any factual disclosures about the Company or Citadel in the Company’s public reports filed with the SEC. In particular, the Exchange Agreement and related summary are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company or Citadel. The representations, warranties and covenants contained in the Exchange Agreement were made only for purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Exchange Agreement; may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Exchange Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors.

Stockholder Rights Plan. In connection with Public Equity Offering and the Debt Exchange, the Company amended its Stockholder Rights Plan to exempt Citadel from becoming an “Acquiring Person”, as defined in the Stockholder Rights Plan, in connection with its purchase of shares in the Public Equity Offering, its acquisition of Debentures in the Debt Exchange (including the common stock issuable upon conversion thereof), the exercise of its pre-emptive rights under the Exchange Agreement; or an increase Citadel’s ownership of shares of the Company’s common stock of up to 25.0 million shares, effective and contingent upon the settlement of the Debt Exchange. The amendment to the Stockholder Rights Plan also provides that Citadel will be exempt from becoming an Acquiring Person with respect to any acquisitions of additional shares of the Company’s common stock during certain periods after the Company’s failure to satisfy certain financial conditions, effective and contingent upon the settlement of the Debt Exchange.

The description of the terms of the Rights Agreement Amendment is a summary and does not purport to be complete, and is qualified in its entirety by reference to the copy of the Rights Agreement Amendment, attached hereto as Exhibit 4.1 which is incorporated herein by reference.

Item 3.02. Unregistered Sales of Equity Securities.

On June 17, 2009, the Company announced its intention to conduct a Debt Exchange, described below under Item 8.01 “Other Events,” pursuant to which the Company plans to issue two new series of Debentures under the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, in exchange for the Company’s outstanding Notes. In exchange for each $1,000 principal amount of Notes that is properly tendered and accepted, holders will receive $1,000 principal amount of either Class A Senior Convertible Debentures due 2019 (the “Class A Debentures”) or Class B Senior Convertible Debentures due 2019 (the “Class B Debentures”), depending on whether the holder tenders its Notes before the Early Tender Period. The terms of the Class A Debentures and the Class B Debentures will be identical except for the initial conversion price. The conversion price for the Debentures will be based on the price per share in the Public Equity Offering for the shares not purchased by Citadel or its affiliates after underwriting discounts but before expenses, provided that (i) if the per share net proceeds are greater than $1.20, the initial conversion price of the Class A Debentures will be $1.20, an (ii) if the per share net proceeds are less that $1.00, the initial conversion price of the Class A Debentures will be $1.00. The initial conversion price for the Class B Debentures will be 150% of the initial conversion price applicable to the Class A Debentures. No separate consideration will be paid to the Company for the issuance of the Debentures. The Company expects to deliver the Debentures on or about August 19, 2009, assuming the conditions to the completion of the Debt Exchange are satisfied as described below under Item 8.01 “Other Events”.

The Debentures will (i) have a ten year maturity; (ii) not bear interest; and (iii) be convertible into shares of common stock at any time at the election of the holder into a number of shares equal to the quotient of (x) the principal amount of Debentures of such class to be converted and (y) the conversion price applicable to such Debentures immediately prior to conversion; provided that no holder may convert Debentures to the extent such conversion would result in either (A) such holder beneficially owning in excess of 9.9% of our outstanding common stock (which limitations may be waived by such holder), or (B) such holder owning in excess of 24.9% of our outstanding common stock, under the OTS control rules, which limitations may be amended or waived, as applicable, upon the later of (a) one year notice to the Company and (b) receipt of any necessary regulatory approvals; (iv) contain customary anti-dilution provisions; and (v) will have covenants and events of default substantially similar to those of the 2017 Notes.

Item 3.03. Material Modification to Rights of Security Holders

The information set forth in Item 1.01 of this Report under the caption “Stockholder Rights Plan” is incorporated herein by reference.

Item 7.01. Other Events.

The Company will be conducting meetings with investors, employees and other parties to provide such parties with information regarding the transactions comprising its financial plan and other matters described in this Report. A copy of the Company’s investor presentation materials relating to the Public Equity Offering described in Item 8.01 of this Report are attached hereto as Exhibit 99.1 and incorporated herein in their entirety.

The information furnished under this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or incorporated by reference into any filing thereunder or under the Securities Act of 1933 unless expressly set forth by specific reference in such filing.

Item 8.01. Other Events.

Public Equity Offering. On June 17, 2009, the Company announced a registered underwritten public offering of $400 million of its common stock. The shares will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-158636), a preliminary prospectus supplement dated June 17, 2009 and such additional prospectus supplements that may be filed with the Securities and Exchange Commission. The Company intends to use net proceeds from the Public Equity Offering to contribute equity capital to E*TRADE Bank and may use a portion of the net proceeds for working capital and general corporate purposes.

The Company had previously suspended its equity drawdown program that commenced on May 8, 2009. During the period from May 11, 2009 through June 2, 2009, the Company sold 40.7 million shares of its common stock pursuant to the equity drawdown program, resulting in gross proceeds of $65.1 million, or approximately $63.2 million after deducting estimated expenses and an aggregate commission to J.P. Morgan Securities Inc., as distribution agent, of approximately $1.6 million.

Debt Exchange. On June 17, 2009, the Company announced its intention to commence an offer to exchange any and all of its 2011 Notes and a portion of its 2017 Notes for Debentures convertible into common stock, subject to receipt of gross proceeds from the Public Equity Offering of at least $350 million before underwriting discounts and expenses. Pursuant to the Debt Exchange, the Company may exchange (i) any and all outstanding 2011 Notes and (ii) up to $310 million aggregate principal amount of its outstanding 2017 Notes not held by Citadel plus the amount that Citadel has agreed to tender pursuant to the Exchange Agreement, in each case for an equal aggregate principal amount of zero-coupon convertible debentures due 2019. Holders tendering their Notes will receive, upon closing of the Debt Exchange, cash in the amount of the accrued and unpaid interest on the Notes exchanged. Citadel has agreed to tender not less than $200 million aggregate principal amount of its 2011 Notes and not less than $600 million nor more than $1 billion aggregate principal amount of its 2017 Notes in the Debt Exchange on the same terms as the other holders of the Notes. As of June 12, 2009, there were $435.5 million aggregate principal amount of 2011 Notes and $2,185.6 million aggregate principal amount of 2017 Notes outstanding.

The Debentures issued in the Debt Exchange will be designated as either Class A Debentures or Class B Debentures and will be identical except for the conversion price for each class of Debentures. Holders tendering Notes in the Early Tender Period will be entitled to receive Class A Debentures in exchange for their tendered Notes. Holders tendering their Notes in the Debt Exchange after the Early Tender Period will be entitled to receive Class B Debentures in exchange for their tendered Notes. The initial conversion price of the Class A Debentures will be equal to the public offering price per share to the Company in the Public Equity Offering for the shares not purchased by Citadel or its affiliates after underwriting discounts but before expenses (the “per share net proceeds”) provided, that (i) if the per share net proceeds are greater than $1.20, the initial conversion price of the Class A Debentures will be $1.20, and (ii) if the per share net proceeds are less than $1.00, the initial conversion price of the Class A Debentures will be $1.00. The initial conversion price for the Class B Debentures will be 150% of the initial conversion price applicable to the Class A Debentures. Citadel has agreed to tender the Notes it has committed to tender in the Debt Exchange during the Early Tender Period. Completion of the Debt Exchange is conditioned upon, among other things, receipt of stockholder approval to increase our authorized common stock, receipt of prior regulatory approval of the OTS permitting Citadel’s participation in the Debt Exchange and receipt of a minimum of $350 million of gross proceeds in the Public Equity Offering before underwriting discounts and expenses.

In connection with the Debt Exchange, the Company will be seeking consents to amendments and waivers of certain provisions of the indentures governing the Notes, for which it will pay a customary consent fee. By tendering their Notes in the Debt Exchange by the end of the Early Tender Period, holders will be automatically deemed to have delivered consent to each such amendment and waiver, and to have waived any consent fee, in each case as to their tendered Notes. Citadel has agreed to deliver consent with respect to the Notes it does not tender in the Debt Exchange and to waive any consent fee with respect to such Notes such that a majority of each class of Notes will have consented to the amendments.

The press release announcing the Public Equity Offering and the Debt Exchange, attached hereto as Exhibit 99.2, is incorporated herein in its entirety.

Special Meeting of Stockholders. Finally, in connection with the Debt Exchange, and in order to facilitate future transactions designed to increase the Company’s equity, on June 17, 2009, the Company announced that it will call a Special Meeting of Stockholders to (1) increase the authorized shares of our common stock, (2) approve the issuance of the consideration offered to holders of Notes (including Citadel) in the Debt Exchange and (3) approve the potential issuance of 365 million shares of common stock or securities convertible or exchangeable into or exercisable for, common stock in connection with future debt exchange transactions. In addition, the Company will also ask its stockholders for an advisory vote on whether to maintain its Stockholder Rights Plan. The record date of the Special Meeting is expected to be after the closing date of the Public Equity Offering and the meeting date is expected to be as soon as practicable thereafter, based on SEC review of the proxy statement, if any, and subject to applicable law. Holders of shares of the Company’s common stock on the record date, including shares of its common stock issued in the Public Equity Offering, will be able to vote their shares at the Special Meeting.

Updated Financial Information and Risk Disclosures. The Company released its Monthly Activity Report for May on June 17, 2009. The press release containing this Monthly Activity Report, attached hereto as Exhibit 99.3, is incorporated herein in its entirety. The Company incorporates by reference the section entitled “Risk Factors” from page S-15 through page S-30 of the Preliminary Prospectus Supplement filed on June 17, 2009 into this Report.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
4.1	Second Amendment to Rights Agreement, dated as of June 17, 2009, by and between E*TRADE Financial Corporation and American Stock Transfer & Trust Company, as Rights Agent
10.1	Exchange Agreement dated June 17, 2009 between E*TRADE Financial Corporation and Citadel Equity Fund Ltd.
99.1	Investor Presentation
99.2	Press Release dated June 17, 2009
99.3	Press Release with Monthly Activity Report dated June 17, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	E*TRADE FINANCIAL CORPORATION
Date: June 17, 2009	By:	/s/ Karl A. Roessner
		Name:   Karl A. Roessner Title:     Corporate Secretary

EXHIBIT INDEX

Exhibit No.	Description
4.1	Second Amendment to Rights Agreement, dated as of June 17, 2009, by and between E*TRADE Financial Corporation and American Stock Transfer & Trust Company, as Rights Agent
10.1	Exchange Agreement dated June 17, 2009 between E*TRADE Financial Corporation and Citadel Equity Fund Ltd.
99.1	Investor Presentation
99.2	Press Release dated June 17, 2009
99.3	Press Release with Monthly Activity Report dated June 17, 2009

EX-4.1

Exhibit 4.1

SECOND AMENDMENT TO RIGHTS AGREEMENT

This Amendment dated as of June 17, 2009 (this “Amendment”) to the Rights Agreement, dated as of July 9, 2001, as amended as of November 27, 2007 (the “Rights Agreement”), is entered into between E*TRADE Financial Corporation (formerly known as E*TRADE Group, Inc.), a Delaware corporation (the “Company”), and American Stock Transfer and Trust Company, as Rights Agent (the “Rights Agent”). Capitalized terms used herein and not defined shall have the meanings specified in the Rights Agreement.

WHEREAS, the Company and the Rights Agent are parties to the Rights Agreement;

WHEREAS, the Company is entering into an Exchange Agreement, dated as of June 17, 2009 (the “Exchange Agreement”), with Citadel Equity Fund Ltd., a Cayman Islands Company (“Citadel”), providing for, among other things, the issuance by the Company to Citadel of the Company’s Senior Convertible Debentures due 2019 (the “Convertible Debentures”), in exchange for the surrender and cancellation of certain of the Company’s 8% Senior Notes due 2011 and 12.5% Springing Lien Notes due 2017 owned by Citadel and its Affiliates (the “Citadel Exchange”);

WHEREAS, pursuant to the Exchange Agreement, Citadel has committed to purchase a number of shares of common stock, par value $0.01, of the Company (“Common Stock”) as described therein in a registered public offering to be consummated by the Company following the execution of the Exchange Agreement (the “Citadel Stock Purchase” and, together with the Citadel Exchange, the “Citadel Transactions”);

WHEREAS, Section 27 of the Rights Agreement permits the Company to amend the Rights Agreement on the terms set forth in this Amendment;

WHEREAS, the Board of Directors of the Company has determined that the Exchange Agreement and the transactions contemplated thereby, including, without limitation, the Citadel Transactions, are in the best interests of the Company and its shareholders;

WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company and its shareholders to modify the terms of the Rights Agreement to exempt the Citadel Transactions and certain acquisitions of Common Stock by Citadel or its Affiliates or Associates from the application of the Rights Agreement, and in connection therewith the Company is entering into this Amendment and directing the Rights Agent to enter into this Amendment; and

WHEREAS, all acts and things necessary to make this Amendment a valid agreement, enforceable according to its terms have been done and performed, and the execution and delivery of this Amendment by the Company and the Rights Agent have been in all respects duly authorized by the Company and the Rights Agent.

NOW, THEREFORE, in consideration of the promises and mutual agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Company and the Rights Agent hereby agree as follows:

A. Amendment of Certain Definitions.

Section 1 of the Rights Agreement is supplemented to add the following definitions in the appropriate alphabetical locations:

“Citadel” shall mean Citadel Equity Fund Ltd., a Cayman Islands Company.

“Citadel Exchange” shall mean the issuance by the Company to Citadel and its Affiliates of the Convertible Debentures in exchange for the surrender and cancellation of the aggregate principal amount of the Company’s 8% Senior Notes due 2011 and 12.5% Springing Lien Notes due 2017 held by Citadel and its Affiliates pursuant to the terms, conditions and limitations set forth in the Exchange Agreement.

“Citadel Stock Purchase” shall mean the purchase by Citadel and its Affiliates of Common Stock in the Public Offering (as such term is defined in the Exchange Agreement).

“Citadel Transactions” shall mean the Citadel Exchange and the Citadel Stock Purchase.

“Convertible Debentures” shall mean the Company’s Senior Convertible Debentures due 2019 issued to Citadel in the Exchange Offer.

“Exchange Agreement” shall mean the Exchange Agreement, dated as of June 17, 2009, entered into by and between the Company and Citadel, as may be amended, supplemented, modified or replaced from time to time.

“Exchange Offer” shall have the meaning set forth in the Exchange Agreement.

“First Amendment” shall mean the First Amendment to the Agreement dated as of November 29, 2007 between the Company and the Rights Agent.

“Preemptive Rights” shall mean the preemptive rights granted by the Company to Citadel to subscribe for equity securities of the Company at such times, in such amounts and on the terms and conditions set forth in Section 4.13 of the Exchange Agreement.

“Preemptive Securities” shall mean New Securities (as defined in the Exchange Agreement), and Common Stock issuable upon the exercise, exchange or conversion of New Securities, acquired pursuant to the exercise of, the Preemptive Rights.

The definition of “Acquiring Person” in Section 1 of the Rights Agreement is hereby amended by adding the following clauses at the end thereof as paragraphs (e) and (f):

“(e) notwithstanding anything in this Agreement to the contrary, Citadel, together with its Affiliates and Associates, shall not be an “Acquiring Person” as a result of (i) the approval, execution, delivery and performance of the Exchange Agreement, (ii) the consummation of the Citadel Transactions, (iii) the issuance of the Common Stock (including the Common Stock issuable upon conversion of the Convertible Debentures) to Citadel and its Affiliates in

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connection with the Citadel Transactions, (iv) the acquisition by Citadel or any of its Affiliates or Associates of any shares of Common Stock, or any securities of the Company exercisable, convertible or exchangeable for shares of Common Stock, during any Rights Agreement Holiday Period, or (v) the acquisition by Citadel or any of its Affiliates or Associates in the aggregate after the Closing Date (as defined in the Exchange Agreement) of 25 million additional shares (for the avoidance of doubt, after the Closing Date, such 25 million shares shall replace and supersede the additional 8,474,989 shares of Common Stock as set forth in the First Amendment, wherever appearing therein, without duplication) of Common Stock, including shares of Common Stock issuable upon exercise, conversion or exchange of securities of the Company but excluding acquisitions of the securities identified in clause (e)(iii) above and Preemptive Securities (collectively, the “Citadel Basket Amount”), as the same may be adjusted for any stock splits, combinations and the like; and

(f) notwithstanding anything in this Agreement to the contrary, Citadel, together with its Affiliates and Associates, shall not be an “Acquiring Person” as a result of the exercise of the Preemptive Rights.”

The definition of “Stock Acquisition Date” in Section 1 of the Rights Agreement is hereby amended by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, a Stock Acquisition Date shall not be deemed to have occurred solely as the result of any public announcement (including any public filing), or the approval, execution, delivery and performance, of the Exchange Agreement, the consummation of the Citadel Transactions, the issuance of the Common Stock (including the Common Stock issuable upon conversion of the Convertible Debentures) to Citadel and its Affiliates in connection with the Citadel Transactions, the acquisition by Citadel or any of its Affiliates or Associates in the aggregate after the Closing Date of shares of Common Stock up to the Citadel Basket Amount, the acquisition by Citadel or any of its Affiliates or Associates of any shares of Common Stock, or any securities of the Company exercisable, convertible or exchangeable for shares of Common Stock, during any Rights Agreement Holiday Period or the acquisition by Citadel or any of its Affiliates or Associates of Preemptive Securities.”

B. Amendment of Section 3. Section 3(b) of the Rights Agreement is hereby amended and supplemented by adding the following sentence at the end thereof:

“Notwithstanding anything in this Agreement to the contrary, a Distribution Date shall not be deemed to have occurred solely as the result of any public announcement (including any public filing), or the approval, execution, delivery and performance, of the Exchange Agreement, the consummation of the Citadel Transactions, the issuance of the Common Stock (including the Common Stock issuable upon conversion of the Convertible Debentures) to Citadel and its Affiliates in connection with the Citadel Transactions, the acquisition by Citadel or any of its Affiliates or Associates in the aggregate after the Closing Date of shares of Common Stock up to the Citadel Basket Amount, the acquisition by Citadel or any of its Affiliates or Associates of any shares of Common Stock, or any securities of the Company exercisable, convertible or exchangeable for shares of Common Stock, during any Rights Agreement Holiday Period or the acquisition by Citadel or any of its Affiliates or Associates of Preemptive Securities.”

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Furthermore, Section 3 of the Rights Agreement is amended to add the following sentence at the end thereof as Section 3(e):

“(e) Nothing in this Agreement shall be construed to give any holder of Rights or any other Person any legal or equitable rights, remedies or claims under this Agreement by virtue of the approval, execution, delivery and performance of the Exchange Agreement, the consummation of the Citadel Transactions, the issuance of the Common Stock (including the Common Stock issuable upon conversion of the Convertible Debentures) to Citadel and its Affiliates in connection with the Citadel Transactions, the acquisition by Citadel or any of its Affiliates or Associates in the aggregate after the Closing Date of shares of Common Stock up to the Citadel Basket Amount, the acquisition by Citadel or any of its Affiliates or Associates of any shares of Common Stock, or any securities of the Company exercisable, convertible or exchangeable for shares of Common Stock, during any Rights Agreement Holiday Period or the acquisition by Citadel or any of its Affiliates or Associates of Preemptive Securities.”

C. New Section 36: Section 36 is hereby added to the Rights Agreement to read in its entirety as follows:

“Section 36. The Citadel Transactions. Notwithstanding anything contained in this Agreement to the contrary, (a) the approval, execution, delivery and performance of the Exchange Agreement; (b) the consummation of the Citadel Transactions; (c) the issuance of the Common Stock (including the Common Stock issuable upon conversion of the Convertible Debentures) to Citadel and its Affiliates in connection with the Citadel Transactions; (d) any public announcement of the foregoing, (e) the acquisition by Citadel or any of its Affiliates or Associates in the aggregate after the Closing Date of shares of Common Stock up to the Citadel Basket Amount, (f) the acquisition by Citadel or any of its Affiliates or Associates of any shares of Common Stock, or any securities of the Company exercisable, convertible or exchangeable for shares of Common Stock, during any Rights Agreement Holiday Period or (g) the acquisition by Citadel or any of its Affiliates or Associates, of Preemptive Securities, shall not cause (i) the Rights to become exercisable, (ii) Citadel or its Affiliates or Associates to be an Acquiring Person, (iii) a Stock Acquisition Date to occur or (iv) a Distribution Date to occur. In addition and notwithstanding anything to the contrary in this Amendment or the Rights Agreement, if CEFL or any of its Affiliates pledge, hypothocate, rehypothocate or otherwise transfer, sell or assign any securities of the Company in connection with any financing or similar transaction effected in the ordinary course, and the initial acquisition of such securities is excluded from causing Citadel, its Affiliates or Associates from becoming an Acquiring Person as set forth in paragraph (e) of the definition of “Acquiring Person” in Section 1 of the Rights Agreement, then any such securities that Citadel or its Affiliates receive back in connection therewith shall be deemed to have been “received” by Citadel or its Affiliates as of the date such securities were originally acquired by Citadel or its Affiliates for purposes of the Rights Agreement.”

D. Effect of Amendment. Except as expressly set forth herein, the Rights Agreement shall not by implication or otherwise be supplemented or amended by virtue of this Amendment, but shall remain in full force and effect, as amended hereby. This Amendment shall be construed in accordance with and as a part of the Rights Agreement, and all terms, conditions, representations, warranties, covenants and agreements set forth in the Rights Agreement and each other instrument or agreement referred to therein, except as herein amended, are hereby

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ratified and confirmed. To the extent that there is a conflict between the terms and provisions of the Rights Agreement and this Amendment, the terms and provisions of this Amendment shall govern for purposes of the subject matter of this Amendment only.

E. Amendment Irrevocable. This Amendment shall not be amended or terminated by the Company, and the Company and the Rights Agent shall not adopt any amendment to the Rights Agreement which purports to amend or terminate the provisions set forth in this Amendment, in any such case without the express written consent of Citadel, who shall be deemed a third party beneficiary of this Amendment.

G. Waiver of Notice. The Rights Agent and the Company hereby waive any notice requirement with respect to each other under the Rights Agreement, if any, pertaining to the matters covered by this Amendment.

H. Severability. If any provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other authority to be invalid, illegal or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be effected, impaired or invalidated.

I. Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts to be made and performed entirely within such state, except that the rights and obligations of the Rights Agent shall be governed by the law of the State of New York.

J. Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

K. Effective Date of Amendment. This Amendment shall be deemed effective as of the date first written above, as if executed on such date.

K. Descriptive Headings. Descriptive headings appear herein for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

E*TRADE FINANCIAL CORPORATION
By:	/s/ Karl A. Roessner
Name:	Karl A. Roessner
Title:	General Counsel

AMERICAN STOCK TRANSFER & TRUST COMPANY
By:	/s/ Herbert J. Lemmer
Name:	Herbert J. Lemmer
Title:	Vice President

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EX-10.1

Exhibit 10.1

Execution Version

EXCHANGE AGREEMENT

dated as of June 17, 2009

between

E*TRADE FINANCIAL CORPORATION

and

CITADEL EQUITY FUND LTD.

TABLE OF CONTENTS

		Page
	ARTICLE I
	DEFINITIONS
1.1	Definitions	2
1.2	General Interpretive Principles	9
	ARTICLE II
	NOTES EXCHANGE; CLOSING
2.1	Notes Exchange	9
2.2	Closing	10
2.3	Closing Conditions	11
	ARTICLE III
	REPRESENTATIONS AND WARRANTIES
3.1	Representations and Warranties of the Company	13
3.2	Representations and Warranties of CEFL	24
	ARTICLE IV
	ADDITIONAL AGREEMENTS
4.1	Taking of Necessary Action	26
4.2	Filings; Other Actions	27
4.3	Access, Information and Confidentiality	29
4.4	Conduct of the Business	30
4.5	Reservation for Issuance; HSR Filing on Conversion	30
4.6	Legends	30
4.7	NASDAQ	31
4.8	CUSIPs and DTC Eligibility	32
4.9	Public Offering	32
4.10	Exchange Offer	32
4.11	Approval of Issuance of Convertible Debentures	34
4.12	Tax Matters	34
4.13	Preemptive Rights	35
4.14	Rights Agreement	38
4.15	Registration Rights Agreement	39

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	ARTICLE V
	TERMINATION
5.1	Termination		39
5.2	Effects of Termination		40
	ARTICLE VI
	MISCELLANEOUS
6.1	Survival		40
6.2	Fees & Expenses		40
6.3	Waivers		41
6.4	Counterparts and Facsimile		41
6.5	Governing Law		41
6.6	Consent to Jurisdiction; WAIVER OF JURY TRIAL		41
6.7	Notices		42
6.8	Entire Agreement; Third Party Beneficiaries; Amendment		43
6.9	Indemnification		43
6.10	Successors and Assigns		46
6.11	Headings		46
6.12	Severability		46
6.13	Arm’s Length Transactions		46
6.14	No Presumption		46
6.15	Public Announcements		46
6.16	Specific Performance		47
Exhibit List:
Exhibit A:		Form of Amended and Restated Registration Rights Agreement
Exhibit B:		Offer Document
Exhibit C:		Amendment to the Rights Agreement
Exhibit D:		Form of Legal Opinion of Davis Polk & Wardwell
Exhibit E		Form of Announcement Press Release

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EXCHANGE AGREEMENT

EXCHANGE AGREEMENT, dated as of June 17, 2009 (this “Agreement”), between E*TRADE Financial Corporation, a Delaware corporation (the “Company”), and Citadel Equity Fund Ltd., a Cayman Islands company (together with any of its permitted assignees pursuant to this Agreement, “CEFL”).

RECITALS

A. Original Transaction.

1. On November 29, 2007, the Company entered into a Master Investment and Securities Purchase Agreement (as amended to date, the “Investment Agreement”) with Wingate Capital Ltd., a Cayman Islands company (“Wingate”), an Affiliate of Citadel Limited Partnership (“Citadel”). The Investment Agreement provided for, among other things, (i) the issuance to Citadel of $1,650,000,000 in aggregate principal amount of Springing Lien Notes, (ii) the exchange of approximately $186,000,000 of the Company’s senior unsecured notes held by Affiliates of Citadel for $186,000,000 in aggregate principal amount of Springing Lien Notes, (iii) the issuance to Citadel or its Affiliates of an aggregate of 79,867,087 shares of Common Stock and (iv) the sale by E*TRADE Bank and E*TRADE Global Asset Management, Inc. of their respective asset backed securities portfolios to an Affiliate of Citadel for approximately $800,000,000, subject to certain adjustments.

2. Pursuant to the Investment Agreement, Wingate and the Company entered into a Registration Rights Agreement, dated November 29, 2007 (as amended to date, the “Registration Rights Agreement”) granting Wingate certain registration rights with respect to securities issued pursuant to the Investment Agreement.

3. Pursuant to the Investment Agreement, the Company, E*TRADE Securities LLC and Citadel Derivatives Group LLC, an Affiliate of CEFL, entered into an Equities and Options Order Handling Agreement, dated November 29, 2007.

B. Interim Transactions. Following the date of the Investment Agreement, on each of March 4, 2008, March 6, 2008, March 7, 2008 and October 10, 2008, CEFL, an Affiliate of Wingate, or its Affiliates acquired a certain amount of the Company’s 2011 Notes at fair market value negotiated at arm’s length.

C. The Transactions. Subject to the terms and conditions of this Agreement, the Company shall offer (the “Exchange Offer”) all holders of 2011 Notes and Springing Lien Notes the opportunity to exchange up to (i) 100% of the aggregate principal amount of 2011 Notes and (ii) $310,000,000 of the aggregate principal amount of Springing Lien Notes not held by CEFL or its Affiliates and the amount of Springing Lien Notes held by CEFL as described below, in each case, for an equal principal amount of a new issue of zero coupon convertible debentures due 2019 of the Company (the “Convertible Debentures”). The terms and conditions of the Convertible Debentures shall be governed by an Indenture which shall be entered into at the

closing of the Exchange Offer (the “Convertible Debentures Indenture”). CEFL shall commit to tender in the Exchange Offer (x) not less than $200 million aggregate principal amount of 2011 Notes (“CEFL Exchanged 2011 Notes”) and (y) not less than $600 million nor more than $1 billion aggregate principal amount of Springing Lien Notes (together with the CEFL Exchanged 2011 Notes, the “CEFL Exchanged Notes”). The Closing is in contemplation of and expressly conditioned upon the satisfaction or waiver of the conditions set forth in Section 2.3.

D. The Securities. The term “Securities” refers to (1) the Convertible Debentures issued under this Agreement and (2) the shares of Common Stock into which the Convertible Debentures are convertible in accordance with the terms thereof and of this Agreement.

E. Registration Rights. The Company, CEFL and Wingate have agreed that contemporaneous with the Closing they will enter into an amendment and restatement of the Registration Rights Agreement, in the form attached as Exhibit A hereto (the “Amended and Restated Registration Rights Agreement”).

F. Public Offering. In connection with the foregoing transactions, the Company has proposed to issue shares of its Common Stock in a registered public offering having aggregate gross proceeds of no less than $350 million (the “Public Offering”).

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

“2011 Notes” shall mean the Company’s 8% Senior Notes due 2011 governed by the Indenture, dated June 8, 2004, between the Company and The Bank of New York as Trustee, as supplemented by the First Supplemental Indenture, dated September 19, 2005, and the Second Supplemental Indenture, dated November 1, 2006, between the Company and The Bank of New York as Trustee.

“Affiliate” shall mean, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or is under common control with such Person. As used in this definition, “control” (including its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise). To the extent that any such term is used in relation to or in connection with any statute and the definition of such term in such statute is broader or different, then, in such context, such term shall have the meaning set forth in such statute. Solely for the purposes of this Agreement, notwithstanding anything to the contrary set forth herein, neither the Company nor any of its Subsidiaries shall be deemed to be a Subsidiary or Affiliate of CEFL.

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“Agreement” shall have the meaning set forth in the Preamble.

“Amended and Restated Registration Rights Agreement” shall have the meaning set forth in the Recitals.

“Ancillary Documents” shall mean the Amended and Restated Registration Rights Agreement, the Rights Agreement Amendment and the Convertible Debentures Indenture.

“Board of Directors” shall mean the board of directors of the Company.

“Business Day” shall mean any day, other than a Saturday, Sunday or a day on which banking institutions in the City of New York, New York are authorized or obligated by law or executive order to close.

“CEFL” shall have the meaning set forth in the Preamble.

“CEFL Exchanged Notes” shall have the meaning set forth in the Recitals.

“CEFL Exchanged 2011 Notes” shall have the meaning set forth in the Recitals.

“CEFL Indemnitees” shall have the meaning set forth in Section 6.9(a).

“CEFL Information” shall have the meaning set forth in Section 3.2(f).

“Citadel” shall have the meaning set forth in the Recitals.

“Class A Convertible Debentures” shall have the meaning set forth in Section 2.1(d)(2).

“Class B Convertible Debentures” shall have the meaning set forth in Section 2.1(d)(2).

“Closing” shall have the meaning set forth in Section 2.2(a).

“Closing Date” shall have the meaning set forth in Section 2.2(a).

“Code” shall mean the United States Internal Revenue Code of 1986, as amended.

“Common Stock” shall mean the Company’s common stock, par value $0.01 per share.

“Company” shall have the meaning set forth in the Preamble.

“Company Disclosure Schedule” shall have the meaning set forth in Section 3.1.

“Company Group” shall have the meaning set forth in Section 3.1(k)(1).

“Company Indemnitees” shall have the meaning set forth in Section 6.9(b).

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“Company Pension Plans” and “Company Plans” shall have the meanings set forth in Section 3.1(k)(1).

“Consent Fee” shall have the meaning set forth in Section 4.10(c).

“Convertible Debentures” shall have the meaning set forth in the Recitals.

“Convertible Debentures Indenture” shall have the meaning set forth in the Recitals.

“CPP Transaction” shall mean a transaction pursuant to which the Company may receive proceeds from the United States Treasury in exchange for preferred stock of the Company and/or warrants to acquire Common Stock in accordance with the terms and conditions of the Capital Purchase Program, as in effect as of the Closing Date, established by the United States Treasury pursuant to the authority granted to it by the EESA and implemented under Section 111(b) of the EESA.

“Deductible” shall have the meaning set forth in Section 6.9(d).

“DGCL” shall mean the Delaware General Corporation Law.

“Early Tender Period” shall have the meaning set forth in Section 4.10(b).

“EESA” shall mean the Emergency Economic Stabilization Act of 2008, Div. A of Pub. Law 110-343.

“ERISA” shall have the meaning set forth in Section 3.1(k)(1).

“E*TRADE Bank Entity” shall mean each of, and collectively, E*TRADE Bank, E*TRADE Savings Bank and United Medical Bank and their Subsidiaries.

“Excess Risk-Based Capital” shall mean that portion of E*Trade Bank’s total capital, as such term is defined in 12 CFR 567.5(c) (as currently or hereafter in effect), that is in excess of the amount of total capital that would be required in order for E*Trade Bank to have a total risk-based capital ratio of 10.0% as calculated in accordance with 12 CFR Part 567 (as currently or hereafter in effect). For the avoidance of doubt, Excess Risk-Based Capital at March 31, 2009 was $444.2 million.

“Exchange” shall mean any exchange of 2011 Notes and/or Springing Lien Notes for Convertible Debentures pursuant to this Agreement.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Exchanged Note” shall mean, with respect to a Convertible Debenture issued pursuant to the Exchange, the 2011 Note or Springing Lien Note that is exchanged for such Convertible Debenture pursuant to this Agreement.

“Exchange Offer” shall have the meaning set forth in the Recitals.

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“FDIC” shall mean the Federal Deposit Insurance Corporation.

“Financial Metrics Test” shall mean, at the end of any fiscal quarter, that E*Trade Bank has both (i) at least $450 million in Excess Risk-Based Capital and (ii) a Tier 1 Capital Ratio of at least 6.00%.

“First Amendment to Rights Agreement” shall mean the First Amendment to the Rights Agreement dated as of November 29, 2007.

“GAAP” shall mean generally accepted accounting principles in the United States of America.

“Governmental Entity” shall mean any court, administrative, supervisory or regulatory agency or commission or other governmental authority or instrumentality, whether federal, state, local or foreign, and any applicable industry self-regulatory organization.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indemnified Party” shall have the meaning set forth in Section 6.9(f).

“Indemnifying Party” shall have the meaning set forth in Section 6.9(f).

“Information” shall have the meaning set forth in Section 4.3.

“Intellectual Property” shall mean trademarks, service marks, brand names, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not, in any jurisdiction; and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar intellectual property or proprietary rights.

“Investment Agreement” shall have the meaning set forth in the Recitals.

“IRS” shall have the meaning set forth in Section 3.1(l)(2).

“Issue Date” shall have the meaning set forth in Treasury Regulation Section 1.1273-2.

“Issue Price” shall have the meaning set forth in Section 1273(b)(3) of the Code.

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“knowledge of the Company” shall mean the actual knowledge of Donald Layton, Bruce Nolop, Karl A. Roessner, John Buchman and Matthew Audette.

“Loss” shall have the meaning set forth in Section 6.9(a).

“Material Adverse Effect” shall mean any material adverse effect on (a) the financial condition, results of operations, assets, liabilities or business of the Company and its Subsidiaries taken as a whole (provided, however, that, with respect to this clause (a), a “Material Adverse Effect” shall not be deemed to include any effects to the extent resulting from (i) changes, after the date hereof, in generally accepted accounting principles or regulatory accounting requirements applicable to companies in the industries in which the Company and its Subsidiaries operate, (ii) changes, after the date hereof, in laws, rules or regulations of general applicability or interpretations thereof by Governmental Entities, (iii) changes, after the date hereof, in general economic or market conditions generally affecting the other companies in the industries in which the Company and its Subsidiaries operate, (iv) any change in the market price or trading volume of the Common Stock or other securities of the Company after the date hereof (provided that this clause (iv) shall not exclude any underlying circumstance, change, event, fact, development or effect which may have caused such change in market price or trading volume), (v) the failure of the Company to meet any internal or public projections, forecasts or estimates or earnings for any period ending on or after March 31, 2009 (provided that this clause (v) shall not exclude any underlying circumstance, change, event, fact, development or effect which may have caused such failure to meet projections, forecasts, estimates or earnings), or (vi) changes in global, national or regional political conditions, including the outbreak or escalation of war or acts of terrorism, except, with respect to clauses (i), (ii), (iii) and (vi), to the extent such changes are disproportionately adverse to the financial condition, results of operations, assets, liabilities or business of the Company and its Subsidiaries, taken as a whole, as compared with other companies participating in the applicable industry), (b) the ability of the Company to perform its obligations under this Agreement or the Ancillary Documents or (c) the validity or enforceability of this Agreement or any of the Ancillary Documents or the rights or remedies of CEFL hereunder and thereunder.

“NASDAQ” shall mean the Nasdaq Global Market of the Nasdaq Stock Market, Inc.

“New Securities” shall have the meaning set forth in Section 4.13(a)(1).

“Non-CEFL Springing Lien Notes Exchange Limit” shall have the meaning set forth in Section 2.1(e).

“Notice” shall have the meaning set forth in Section 4.13(b).

“Offer Document” shall have the meaning set forth in Section 2.1(a).

“Offer Price” shall have the meaning set forth in Section 2.1(d)(2).

“Original Issue Discount” shall have the meaning set forth in Section 1273(a) of the Code.

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“OTS” shall mean the Office of Thrift Supervision.

“Person” or “person” shall mean an individual, corporation, association, partnership, group (as such term is used in Section 13(d)(3) of the Exchange Act), trust, joint venture, business trust or unincorporated organization, or a government or any agency or political subdivision thereof.

“Preemptive Offerees” shall have the meaning set forth in Section 4.13(a).

“Preemptive Right” shall have the meaning set forth in Section 4.13(a).

“Prospectus Supplement” shall have the meaning set forth in Section 4.9(a).

“Proxy Materials” shall have the meaning set forth in Section 4.2(f).

“Public Offering” shall have the meaning set forth in the Recitals.

“Rebuttal of Control Filing” shall have the meaning set forth in Section 2.3(a)(6).

“Recent 10-K” shall have the meaning set forth in Section 3.1.

“Recommendation” shall have the meaning set forth in Section 4.2(f).

“Registration Rights Agreement” shall have the meaning set forth in the Recitals.

“Regulatory Filings” shall have the meaning set forth in Section 3.1(q).

“Reports” shall have the meaning set forth in Section 3.1(f)(1).

“Required Stockholder Proposals” shall have the meaning set forth in Section 2.3(a)(3).

“Restated Certificate of Incorporation” shall mean the Restated Certificate of Incorporation of the Company as filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed May 22, 2008.

“Rights Agreement” shall mean the Rights Agreement, dated as of July 9, 2001, between the Company and American Stock Transfer and Trust Company, as amended.

“Rights Agreement Amendment” shall have the meaning set forth in Section 2.3(a)(2).

“Rights Agreement Holiday Period” shall mean at any time in which the Rights Plan is in effect, the period commencing upon the Company’s public disclosure that E*Trade Bank has failed to satisfy the Financial Metrics Test at the end of any quarter and ending upon the Company’s next public disclosure that E*Trade Bank has once again satisfied the Financial Metrics Test for any subsequent quarter.

“Rights Agreement Proposal” shall have the meaning set forth in Section 4.14(a).

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“SEC” shall mean the United States Securities and Exchange Commission.

“Securities” shall have the meaning set forth in the Recitals.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Special Stockholder Meeting” shall have the meaning set forth in Section 4.2(f).

“Springing Lien Notes” shall mean the Company’s 12.5% Springing Lien Notes due 2017 governed by the Indenture, dated November 29, 2007, between the Company and The Bank of New York as Trustee, as supplemented by the First Supplemental Indenture, dated December 27, 2007, and the Second Supplemental Indenture, dated January 18, 2008, between the Company and The Bank of New York as Trustee.

“Stockholder Proposals” shall have the meaning set forth in Section 4.2(f).

“Subsidiary” shall mean, with respect to any Person, any other Person of which 50% or more of the shares of the voting securities or other voting interests are owned or controlled, or the ability to select or elect 50% or more of the directors or similar managers is held, directly or indirectly, by such first Person and/or one or more of its Subsidiaries.

“Tax” or “Taxes” shall mean all federal, state, local, and foreign income, excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup withholding, and other taxes, charges, levies or like assessments together with all penalties and additions to tax and interest thereon.

“Tax Return” shall mean a report, return or other information (including any amendments) required to be supplied to a governmental entity with respect to Taxes including, where permitted or required, combined or consolidated returns for any group of entities that includes the Company or any of its Subsidiaries.

“Tier 1 Capital Ratio” shall mean E*Trade Bank’s core capital, as such term is defined in 12 CFR 567.5(a) (as currently or hereafter in effect), divided by its adjusted total assets, as such term is defined in 12 CFR 567.1 (as currently or hereafter in effect).

“Transactions” shall have the meaning set forth in Section 3.1(c)(1).

“Underwriters” shall have the meaning set forth in Section 4.9(c).

“Voting Debt” shall have the meaning set forth in Section 3.1(e)(1).

“Well Capitalized” shall have the meaning set forth in 12 C.F.R. § 565.4(b)(1).

“Wingate” shall have the meaning set forth in the Recitals.

8

1.2 General Interpretive Principles. Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. The name assigned this Agreement and the section captions used herein are for convenience of reference only and shall not be construed to affect the meaning, construction or effect hereof. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Unless otherwise specified, the terms “hereto,” “hereof,” “herein” and similar terms refer to this Agreement as a whole (including the exhibits, schedules and disclosure statements hereto), and references herein to Articles or Sections refer to Articles or Sections of this Agreement.

ARTICLE II

NOTES EXCHANGE; CLOSING

2.1 Notes Exchange.

(a) Exchange Offer. Subject to the terms and conditions of this Agreement, the Company shall offer all holders of 2011 Notes and Springing Lien Notes the opportunity to exchange, pursuant to and on the terms described in the offering memorandum and consent solicitation statement relating to the Exchange Offer (the “Offer Document”) substantially in the form attached hereto as Exhibit B, up to (i) 100% of the aggregate principal amount of 2011 Notes and (ii) $310,000,000 of the aggregate principal amount of Springing Lien Notes not held by CEFL or its Affiliates and the amount of Springing Lien Notes held by CEFL as described in Section 2.1(b), in each case, for an equal principal amount of Convertible Debentures. The Exchange Offer shall be irrevocable subject only to the conditions set forth in this Agreement and in the Offer Document.

(b) CEFL Commitment. Unless this Agreement shall have been terminated in accordance with the terms of Section 5.1, CEFL shall (i) prior to the expiration of the Early Tender Period, validly tender or cause to be tendered the CEFL Exchanged 2011 Notes and not less than $600 million nor more than $1 billion aggregate principal amount of Springing Lien Notes into the Exchange Offer, pursuant to and in accordance with the terms of this Agreement and the Offer Document, (ii) deliver to the exchange agent designated in the Exchange Offer (A) a letter of transmittal with respect to the CEFL Exchanged Notes, complying with the terms of the Exchange Offer and the Offer Document, (B) a certificate or certificates representing the CEFL Exchanged Notes or, in the case of a book-entry transfer of any uncertificated CEFL Exchanged Notes, an “agent’s message” or such other evidence of transfer as the exchange agent may reasonably request, and (C) all other documents or instruments required to be delivered by all other holders of the 2011 Notes and Springing Lien Notes pursuant to the terms of the Exchange Offer and the Offer Document, and (iii) not withdraw any of such CEFL Exchanged Notes from the Exchange Offer unless the Exchange Offer shall have been terminated. Upon the expiration of the Exchange Offer, CEFL shall deliver to the Company a certification by CEFL of the aggregate principal amount of Springing Lien Notes that CEFL or its Affiliates hold, directly or indirectly, as of the expiration of the Exchange Offer.

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(c) Exchange Offer Consummation. Upon the terms and subject to the conditions of the Exchange Offer and the Offer Document, the Company shall accept, promptly after consummation of the Exchange Offer, all CEFL Exchanged Notes in consideration of and in exchange for Convertible Debentures having an aggregate principal amount equal to the aggregate principal amount of the CEFL Exchanged Notes validly tendered in the Exchange Offer.

(d) Terms and Pricing of the Convertible Debentures.

(1) Terms and Conditions of Convertible Debentures. The material terms and conditions of the Convertible Debentures will be as set forth in the Offer Document under the heading “Description of the Debentures”.

(2) Pricing. All Convertible Debentures issued in exchange for 2011 Notes and Springing Lien Notes tendered during the Early Tender Period shall be convertible into shares of Common Stock at an initial conversion price equal to the public offering price per share of the Public Offering, net of the underwriting discount, for all shares not purchased by CEFL or its Affiliates (the “Offer Price”); provided; however, that if the Offer Price is (i) greater than $1.20, then such initial conversion price shall be equal to $1.20, and (ii) less than $1.00, then such initial conversion price shall be equal to $1.00 (“Class A Convertible Debentures”). Convertible Debentures issued in exchange for 2011 Notes and Springing Lien Notes tendered following the Early Tender Period shall be convertible into shares of Common Stock at an initial conversion price equal to 150% of the conversion price of the Class A Convertible Debentures (“Class B Convertible Debentures”). Class B Convertible Debentures shall be identical to the Class A Convertible Debentures except for the conversion price as provided in this Section 2.1(d)(2).

(e) Non-CEFL Springing Lien Notes Exchange Limit. If the holders of Springing Lien Notes other than CEFL validly tender Springing Lien Notes in an amount greater than $310,000,000 of the aggregate principal amount of the Springing Lien Notes not held by CEFL (the “Non-CEFL Springing Lien Notes Exchange Limit”) in the Exchange Offer, the Company shall, upon the terms and subject to the conditions of the Exchange Offer and the Offer Document, prorate such tenders such that the tenders accepted from holders of Springing Lien Notes other than CEFL do not exceed the Non-CEFL Springing Lien Notes Exchange Limit.

2.2 Closing.

(a) The closing (the “Closing”) of the Transactions (as hereinafter defined) shall occur within two Business Days following the satisfaction or waiver of the conditions set forth in Section 2.3 at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP, One New York Plaza, New York, NY 10004, or such other date or location as agreed by the parties. The date of the Closing is referred to as the “Closing Date.”

(b) On the terms and subject to the conditions set forth herein, at the Closing, the Company shall consummate the Exchange Offer, including acceptance for exchange of the CEFL Exchanged Notes in the Exchange Offer in accordance with Article II. In no event shall the Company accept for exchange the CEFL Exchanged Notes in the Exchange Offer unless the conditions to Closing set forth in Section 2.3 have been satisfied or waived.

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(c) On the terms and subject to the conditions set forth herein, at the Closing, CEFL shall deliver an executed copy of the Amended and Restated Registration Rights Agreement to the Company.

(d) On the Closing Date, the Company shall deliver to CEFL (i) an executed copy of the Amended and Restated Registration Rights Agreement and (ii) an executed copy of the Convertible Debentures Indenture.

(e) Upon settlement of the Exchange Offer (which shall occur as promptly as practicable following the Closing), Company shall deliver to CEFL the principal amount of Convertible Debentures equal to the principal amount of the CEFL Exchanged Notes which shall be reflected in one or more global notes representing the Convertible Debentures and held by The Depository Trust Company or its nominee (or a custodian on its behalf).

2.3 Closing Conditions.

(a) The obligation of CEFL to consummate the Closing is subject to the fulfillment or written waiver by CEFL of each of the following conditions, which, if not so fulfilled or waived, will cause the Exchange Offer to terminate and the Company to return to each tendering holder all 2011 Notes and/or Springing Lien Notes such holder tendered in the Exchange Offer:

(1) Regulatory Approvals. Any approvals or authorizations of or filings with Governmental Entities required for the consummation by the parties of the Closing (excluding any approvals required under Section 2.3(a)(6)) shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired.

(2) Rights Agreement. The Company shall have irrevocably amended the Rights Agreement in substantially the form attached as Exhibit C hereto (the “Rights Agreement Amendment”), to provide that the rights thereunder shall not be triggered as a result of CEFL’s participation in the Transactions or the acquisition of Common Stock upon conversion of the Convertible Debentures received by CEFL or its Affiliates in the Exchange Offer or by (i) the acquisition of shares of Common Stock by CEFL or any of its Affiliates in the Public Offering, (ii) the acquisition of an additional 25 million shares of Common Stock of the Company after the Closing Date by CEFL or any of its Affiliates, (iii) the acquisition of shares of Common Stock by CEFL or any of its Affiliates during any Rights Agreement Holiday Period or (iv) the acquisition of shares of Common Stock by CEFL or any of its Affiliates pursuant to the Preemptive Right. For the avoidance of doubt, the exception set forth in clause (ii) of the immediately preceding sentence shall be in lieu of, and shall replace in its entirety, the analogous exception regarding additional shares purchased by Wingate Capital Ltd. as set forth in the First

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Amendment to Rights Agreement. The Rights Agreement Amendment shall provide that if CEFL or any of its Affiliates pledge, hypothocate, rehypothocate or otherwise transfer, sell or assign any securities of the Company in connection with any financing or similar transaction effected in the ordinary course, any securities CEFL or such Affiliates receive back in connection therewith shall be deemed to have been “received” by CEFL or its Affiliates in the Exchange Offer for purposes of the Rights Agreement.

(3) Approval of Required Stockholder Proposals. The Company shall have obtained all necessary and valid approvals from the stockholders of the Company (i) to permit the issuance of Common Stock upon the conversion of the Convertible Debentures contemplated hereby for purposes of Rule 5635 of the NASDAQ Marketplace Rules and (ii) to increase the number of authorized shares of Common Stock to provide for the Transactions (together, the “Required Stockholder Proposals”).

(4) No Adverse Action or Decision or Injunction. There shall not be in effect any law, rule or regulation or any order, decree or injunction of a court or Governmental Entity of competent jurisdiction which enjoins or prohibits consummation of the Closing.

(5) Closing Deliveries. The Company shall have delivered to CEFL the items to be delivered by the Company pursuant to Section 2.2(d).

(6) Rebuttal of Control Filing. The OTS shall have accepted or not objected to an amendment to the rebuttal of control agreement between the OTS, CEFL and certain Affiliates of CEFL, dated May 22, 2008, or if required by the OTS, the submission of a new rebuttal of control filing by CEFL or any of its Affiliates (collectively, the “Rebuttal of Control Filing”), approving the Transactions.

(7) Legal Opinion. CEFL shall have received, dated as of the Closing Date and addressed to CEFL, an opinion of Davis Polk & Wardwell, outside counsel to the Company, substantially in the form attached hereto as Exhibit D.

(8) Public Offering. The Company shall have consummated the Public Offering prior to July 15, 2009.

(9) Convertible Debentures Indenture. The Convertible Debentures Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended.

(b) The obligation of the Company to consummate the Closing and to consummate the Exchange Offer is subject to the fulfillment or written waiver by the Company of only the following conditions and the conditions set forth in the Offer Document:

(1) Regulatory Approvals. Any approvals or authorizations of or filings with Governmental Entities required for the consummation by the parties of the Closing shall have been obtained or made in form and substance reasonably satisfactory to each party and shall be in full force and effect and all waiting periods required by United States and other applicable law, if any, shall have expired.

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(2) No Adverse Action or Decision or Injunction. There shall not be in effect any law, rule or regulation or any order, decree or injunction of a court or Governmental Entity of competent jurisdiction which enjoins or prohibits consummation of the Closing.

(3) Stockholder Approval. The Company’s stockholders shall have approved the Required Stockholder Proposals.

(4) Closing Deliveries. CEFL shall have delivered to the Company the items to be delivered by CEFL pursuant to Section 2.2(c) and shall have tendered the CEFL Exchanged Notes pursuant to Section 2.1(b).

(5) Certain Covenants. CEFL shall have complied with its obligations set forth in Sections 4.2(h)(i) and 4.9(c).

(6) Convertible Debentures Indenture. The Convertible Debentures Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. Except as disclosed in (i) the Company’s 10-K covering the year ended December 31, 2008 (the “Recent 10-K”) or the Reports filed with the SEC by the Company after the Recent 10-K (excluding any risk factor disclosures contained in such documents under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or other statements that are similarly non-specific and are predictive or forward-looking in nature and excluding any exhibits to or referenced in such Reports) or (ii) the disclosure schedule (the “Company Disclosure Schedule”) delivered by the Company to CEFL prior to or concurrently with the execution of this Agreement (which schedule sets forth, among other things, items, the disclosure of which is necessary or appropriate, either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Section 3.1, or to one or more of the Company’s covenants; provided, however, that disclosure in any section of such Company Disclosure Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably apparent that such disclosure is relevant to another Section of this Agreement), the Company makes the following representations and warranties to CEFL, as of the date hereof, which representations and warranties shall also be made as of the Closing Date (or as of such specific date in the case of any representation or warranty expressly made as of a specific date):

(a) Organization and Good Standing of the Company; Organizational Documents. The Company is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority and governmental authorizations to own, operate and lease its properties and to carry on its business as it is being conducted on the date of this Agreement. The Company is duly licensed or qualified as a foreign corporation for the transaction of business and is in good

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standing under the laws of each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, except where the failure to be so licensed or qualified in any such jurisdiction would not reasonably be expected to have a Material Adverse Effect. True, complete and correct copies of the Company’s restated certificate of incorporation and by-laws, as in effect as of the date of this Agreement, are publicly available on the SEC’s website.

(b) Organization and Good Standing of Subsidiaries. Each Subsidiary of the Company is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all requisite corporate or other organizational power and authority and governmental authorizations to own, operate and lease its properties and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each other jurisdiction in which it owns or leases properties, or conducts any business, so as to require such qualification, except where the failure to be so authorized, licensed or qualified in any such jurisdiction, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. The deposit accounts of each E*TRADE Bank Entity that has deposit accounts are insured by the FDIC to the fullest extent permitted by the Federal Deposit Insurance Act and the rules and regulations of the FDIC thereunder, and all premiums and assessments required to be paid in connection therewith have been paid when due.

(c) Authorization; No Conflicts.

(1) The Company and each Subsidiary that is or will be a party to an Ancillary Document have full corporate or other organizational power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is or will be a party and to consummate the transactions, including the Public Offering and Exchange Offer, contemplated hereby and thereby (the “Transactions”). The execution, delivery and performance by the Company and each Subsidiary that is or will be a party to an Ancillary Document of this Agreement and each Ancillary Document to which it is or will be a party and the consummation of the Transactions (including the issuance of the Securities as contemplated by this Agreement) have been duly authorized by the Board of Directors (or equivalent governing body) of the Company or the relevant Subsidiary. Other than approval of the Required Stockholder Proposals, no other corporate or other organizational proceedings on the part of the Company (including approval of the Company’s stockholders), including under the NASDAQ rules and regulations relating to the continued listing of the Common Stock under the NASDAQ, or any Subsidiary, are necessary to authorize the execution, delivery and performance by the Company and each Subsidiary that is or will be a party to an Ancillary Document of this Agreement and each Ancillary Document and consummation of the Transactions (including the issuance of the Securities as contemplated by this Agreement). This Agreement has been, and at or prior to the Closing, each Ancillary Document to which it is a party will be, duly and validly executed and delivered by the Company or its Subsidiaries, as applicable. This Agreement is, and upon its execution at or prior to the Closing each Ancillary Document to which it is a party will be, a valid and binding obligation of the Company or its Subsidiaries, as applicable, enforceable against them in accordance with its terms. The Board of Directors at a duly held meeting has unanimously (except with one director abstaining and one director having recused himself from the meeting) resolved to recommend approval of the Stockholder Proposals to the holders of shares of Common Stock and directed that such matters be submitted for consideration of the holders of shares of Common Stock.

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(2) Assuming approval of the Required Stockholder Proposals, the execution, delivery and performance of this Agreement and the Ancillary Documents to which the Company and/or its Subsidiaries is or will be a party, the consummation by the Company and its Subsidiaries of the Transactions and the compliance by the Company and its Subsidiaries with any of the provisions hereof and thereof will not conflict with, violate or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both would constitute a default) under, or give rise to any rights of any Person other than the parties to this Agreement or the Ancillary Documents or give rise to any obligations of the Company other than under this Agreement and the Ancillary Documents under, or result in the termination of or accelerate the performance required by, or result in a right of termination or acceleration under any provision of the Restated Certificate of Incorporation or By-laws of the Company or the certificate of incorporation, charter, by-laws or other governing instrument of any Subsidiary of the Company that is or will be a party to any Ancillary Document, any mortgage, note, indenture, deed of trust, lease, loan agreement, commitment, arrangement, written or oral contract or other agreement or instrument or any permit, concession, grant, franchise, license, judgment, order, decree, ruling, injunction, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, other than any such conflict, violation, breach, default, rights, obligations, termination and acceleration that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

(d) Governmental Consents. No consent, approval, order, non-objection or authorization of, or registration, declaration or filing with any Governmental Entity is required on the part of the Company or any of its Subsidiaries in connection with the execution, delivery and performance by the Company of this Agreement and the Ancillary Documents to which it is or will be a party and the consummation by the Company of the Transactions other than (i) compliance with any applicable requirements of the Securities Act, the Exchange Act, and any other applicable foreign or state securities or “blue sky” laws, (ii) any consent, approval, order, non-objection or authorization of, or registration, declaration or filing with any Governmental Entity required of CEFL or its respective Affiliates, as to which the Company makes no representation and (iii) any consent, approval, actions or filings the absence of which would not have, or reasonably be expected to have, a material adverse affect on the Company or any of its material Subsidiaries, the Transactions, or CEFL or any of its respective Affiliates as a result of the Transactions.

(e) Capitalization.

(1) As of the date of this Agreement, the authorized capital stock of the Company consists of (i) 1,200,000,000 shares of Common Stock of which, as of June 11, 2009, 615,312,215 shares were issued and outstanding and (ii) 1,000,000 shares of preferred stock, $0.01 par value, of the Company of which, as of the date hereof, one share is designated Series A Preferred Stock and 500,000 shares are designated Series B Preferred Stock. As of the date hereof, no shares of Series A Preferred Stock or Series B Preferred Stock are issued and

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outstanding. All of the shares of Series B Preferred Stock are reserved for issuance in accordance with the Rights Agreement, pursuant to which the Company has issued rights to purchase Series B Preferred Stock. As of the date hereof, the Company held no shares of Common Stock in its treasury. As of June 11, 2009, there were 29,631,126 shares of Common Stock reserved for issuance in connection with employee benefit, stock option and dividend reinvestment and stock purchase plans. Assuming passage of the Stockholder Proposals, at the Closing, the authorized capital stock of the Company will consist of 4,000,000,000 shares of Common Stock and 1,000,000 shares of preferred stock, $0.01 par value, of the Company. All of the issued and outstanding shares of the Company’s capital stock have been duly and validly authorized and issued and are fully paid and nonassessable, and are not subject to preemptive rights. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the stockholders of the Company may vote (“Voting Debt”) are issued and outstanding. Other than as set forth in this Section 3.1(e)(1) or pursuant to this Agreement, (A) no equity securities or Voting Debt of the Company are or may be required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any character whatsoever, (B) there are outstanding no securities or rights convertible into or exchangeable for any equity securities or Voting Debt of the Company and (C) there are no contracts, commitments, understandings or arrangements by which the Company is bound to issue additional equity securities or Voting Debt or options, warrants or rights to purchase or acquire any additional equity securities or Voting Debt. The consummation of the Transactions contemplated by this Agreement will not result in the triggering of any anti-dilution adjustment provisions of any security of the Company convertible into equity securities of the Company. The Convertible Debentures will rank pari-passu with all other senior unsecured indebtedness of the Company.

(2) Except for any directors’ qualifying shares, all of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of the Company are owned by the Company, directly or indirectly, free and clear of any material liens, pledges, charges and security interests and similar encumbrances, and all of such shares or equity ownership interests have been duly and validly authorized and issued and are fully paid and nonassessable, and are not subject to preemptive rights. None of the outstanding shares of capital stock or other securities of any Subsidiary were issued in violation of the Securities Act or any other applicable federal, state or local law, rule or regulation. No Subsidiary of the Company has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of capital stock or any other equity security of such Subsidiary or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of such Subsidiary.

(f) Reports; Financial Statements; Controls.

(1) Since January 1, 2008, the Company and its Subsidiaries have timely filed all reports, registration statements, proxy statements and other materials, together with any amendments required to be made with respect thereto, that were required to be filed with (i) the SEC under the Securities Act or the Exchange Act, (ii) the OTS, (iii) the Federal Reserve Board, (iv) the FDIC and (v) any other Governmental Entity (all such reports and statements are collectively referred to herein as the “Reports”), and have paid all fees and assessments due and

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payable in connection therewith, other than such Reports or fees due after the date of this Agreement that, individually or in the aggregate, have not had or would reasonably not be expected to have a Material Adverse Effect. As of their respective dates, the Reports complied in all material respects with all of the statutes and published rules and regulations enforced or promulgated by the regulatory authority with which they were filed and (i) with respect to Reports filed with the SEC, did not as of the date of filing thereof with the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) with respect to all other Reports, were complete and accurate in all material respects as of their respective dates. There are no facts existing as of the date hereof peculiar to the Company or any of its Subsidiaries that the Company has not disclosed in the Reports or to CEFL in writing that, individually or in the aggregate, have had or would reasonably be expected to have a Material Adverse Effect. No executive officer of the Company has failed in any respect to make the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act of 2002.

(2) Each of the consolidated balance sheets, and the related consolidated statements of income, changes in stockholders’ equity and cash flows, included in the Reports filed with the SEC under the Exchange Act (A) have been prepared from, and are in accordance with, the books and records of the Company and its Subsidiaries, (B) fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates shown and the results of the consolidated operations, changes in stockholders’ equity and cash flows of the Company and its consolidated Subsidiaries for the respective fiscal periods or as of the respective dates therein set forth, subject, in the case of any unaudited financial statements, to normal recurring year-end audit adjustments, (C) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto and (D) have been prepared in accordance with GAAP consistently applied during the periods involved, except as otherwise set forth in the notes thereto.

(3) The books, records, systems, controls, data and information of the Company and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described below in this Section 3.1(f)(3). The Company (A) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities, and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s outside auditors and the audit committee of the Board of Directors (x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely

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to adversely affect the Company’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. As of the date hereof, to the knowledge of the Company, there is no reason that its outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, without qualification, when next due. Since January 1, 2008, (A) neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any director, officer, employee, auditor, accountant or representative of the Company or any of its Subsidiaries has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of its Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices, and (B) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Board of Directors or any committee thereof or to any director or officer of the Company.

(g) Absence of Certain Changes. Since March 31, 2009, until the date hereof, and except as publicly disclosed by the Company in the Reports filed by it with the SEC and publicly available prior to the date hereof,

(1) the Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary course, consistent with prior practice,

(2) the Company has not made or declared any distribution in cash or in kind to its stockholders or issued or repurchased any shares of its capital stock or other equity interests; and

(3) no event or events have occurred that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

(h) No Undisclosed Liabilities, etc. Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not fully reflected or reserved against in the financial statements described in Section 3.1(f)(2), except for liabilities that have arisen since March 31, 2009 in the ordinary and usual course of business and consistent with past practice and that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.

(i) Compliance with Applicable Law. Each of the Company and its Subsidiaries hold all licenses, charters, franchises, permits and authorizations necessary for the lawful conduct of its business under, and has complied in all material respects and is not in default or violation in any respect of, any law, statute, order, rule, regulation, policy or guideline

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of any Governmental Entity applicable to the Company or its Subsidiaries, other than such non-compliance, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect.

(j) Legal Proceedings. Neither the Company nor any of its Subsidiaries is a party to any, and there are no pending, or to the knowledge of the Company, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature against the Company or any of its Subsidiaries or to which any of their assets are subject that, (i) individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect or (ii) relating to or which challenges the validity or propriety of the Transactions. Neither the Company nor any of its Subsidiaries is subject to any order, judgment or decree of a Governmental Entity that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect, (i) there is no unresolved violation or unsatisfied money penalty imposed by any Governmental Entity with respect to any Report or relating to any examinations, investigations or inspections of the Company or any of its Subsidiaries, and (ii) since January 1, 2008, there has been no formal or informal inquiries by, or disagreements or disputes with, any Governmental Entity with respect to the business, operations, policies or procedures of the Company or any of its Subsidiaries.

(k) ERISA.

(1) All “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), that are subject to Title I of ERISA and are currently maintained or maintained since January 1, 2001, by either the Company or any companies which, with the Company, would be deemed to be a single employer under Section 414(b), (c), (m) or (o) of the Code (collectively, the “Company Group”) for the benefit of the Company Group employees, are collectively, for purposes of this Agreement, referred to herein as the “Company Plans.” All Company Plans that constitute employee “pension plans” as defined in Section 3(2) of ERISA that are subject to Title IV of ERISA are referred to herein as the “Company Pension Plans.” Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect, no non-exempt “prohibited transaction” (as such term is used in Section 406 of ERISA or Section 4975 of the Code), has heretofore occurred with respect to any Company Plan or any Company Pension Plan and, to the knowledge of the Company, no such non-exempt prohibited transaction with respect to any Company Plan or Company Pension Plan shall occur as a result of the execution and delivery of this Agreement or the Ancillary Documents and the consummation of the Transactions.

(2) The consummation of the Transactions will not result in a material increase in the amount of, or acceleration in the timing of payment or vesting of, any material compensation payable or awarded by the Company or any of its Subsidiaries to any of its or their employees under any employment agreements, plans or programs of the Company or any of its Subsidiaries.

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(l) Taxes. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect:

(1) each of the Company and its Subsidiaries has duly and timely filed (including all applicable extensions) all Tax Returns required to be filed by it on or prior to the date hereof (all such returns being accurate, true and complete in all material respects), has paid all Taxes due (whether or not shown on any Tax Return) and has duly paid or made provision for the payment of all Taxes that have been incurred or are due or claimed to be due from it by federal, state, foreign or local taxing authorities other than Taxes that are not yet delinquent or are being contested in good faith, have not been finally determined and have been adequately reserved against;

(2) the federal, state and local income Tax returns of the Company and its Subsidiaries have been examined by the Internal Revenue Service (the “IRS”) and any applicable state and local tax authorities for all years to and including 2004 and any liability with respect thereto has been satisfied or any liability with respect to deficiencies asserted as a result of such examination is covered by reserves that are adequate under GAAP;

(3) there are no disputes pending, or claims asserted, for Taxes or assessments upon the Company or any of its Subsidiaries for which the Company does not have reserves that are adequate under GAAP;

(4) each of the Company and its Subsidiaries has withheld and paid all Taxes required to be withheld and paid in connection with amounts paid and owing to any employee, independent contractor, creditor, stockholder or other third party (whether domestic or foreign);

(5) there are no liens for Taxes (other than Taxes not yet due and payable) upon any assets of the Company or any of its Subsidiaries;

(6) neither the Company nor any of its Subsidiaries is (A) a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among the Company and its Subsidiaries) or (B) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law);

(7) within the past two years, neither the Company nor any of its Subsidiaries has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify under Section 355(a) of the Code;

(8) neither the Company nor any of its Subsidiaries is required to include in income any adjustment pursuant to Section 481(a) of the Code, no such adjustment has been proposed by the IRS and no pending request for permission to change any accounting method has been submitted by the Company or any of its Subsidiaries; and

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(9) neither the Company nor any of its Subsidiaries has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).

(m) Intellectual Property. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect:

(1) the Company and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any claims, liens or encumbrances), all Intellectual Property used in or necessary for the conduct of its business as currently conducted;

(2) the use of any Intellectual Property by the Company and its Subsidiaries does not, to the knowledge of the Company, infringe on or otherwise violate the rights of any person and is in accordance with any applicable license pursuant to which the Company or any of its Subsidiaries acquired the right to use any Intellectual Property;

(3) no person is challenging, infringing on or otherwise violating any right of the Company or any of its Subsidiaries with respect to any material Intellectual Property owned by or licensed to the Company or its Subsidiaries;

(4) to the knowledge of the Company, neither the Company nor any of its Subsidiaries has received any notice of any pending claim with respect to any Intellectual Property used by the Company or any of its Subsidiaries; and

(5) to the knowledge of the Company, no Intellectual Property owned or licensed by the Company or any of its Subsidiaries is being used or enforced in a manner that would be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property.

(n) Environmental Liability. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect:

(1) there are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action or notices with respect to any environmental, health or safety matters or any private or governmental environmental, health or safety investigations or remediation activities of any nature seeking to impose, or that are reasonably likely to result in, any liability or obligation of the Company or any of its Subsidiaries arising under common law or under any local, state or federal environmental, health or safety statute, regulation or ordinance, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, pending or threatened against the Company or any of its Subsidiaries;

(2) to the knowledge of the Company, there is no reasonable basis for, or circumstances that are reasonably likely to give rise to, any such proceeding, claim, action, investigation or remediation by any Governmental Entity or any third party that would give rise to any liability or obligation on the part of the Company or any of its Subsidiaries; and

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(3) neither the Company nor any of its Subsidiaries is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation with respect to any of the foregoing.

(o) Mortgage Banking Business. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect, the Company and each of its Subsidiaries has complied with, and all documentation in connection with the origination, processing, underwriting and credit approval of any real estate secured loans originated, purchased or serviced by each E*TRADE Bank Entity that originates, purchases or services such secured loans, has satisfied all applicable federal, state and local laws, rules and regulations with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or filing of claims in connection with such loans, including all laws relating to real estate settlement procedures, consumer credit protection, truth in lending laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages.

(p) Broker-Dealer.

(1) The Company’s Subsidiaries, to the extent required, are members of the Securities Investor Protection Corporation. The Company is not required to be registered as a futures commission merchant, commodities trading adviser, commodity pool operator or introducing broker under the Commodities Exchange Act or any similar state laws. The Company is not subject to registration under the Investment Company Act of 1940, as amended.

(2) One or more Subsidiaries of the Company is duly registered, licensed or qualified as a broker-dealer in each jurisdiction where the conduct of the Company’s business requires such registration, licensing or qualification, and the Company is in compliance with all laws requiring any such registration, licensing or qualification and is not subject to any material liability or disability by reason of the failure to be so registered, licensed or qualified, except where such failure to register, license or qualify or noncompliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(3) Except as disclosed on Form BD filed prior to the date of this Agreement or as would not reasonably be expected to have a Material Adverse Effect, neither the Company nor any of its directors, officers, employees or “associated persons” (as defined in the Exchange Act) has been the subject of any disciplinary proceedings or orders of any Governmental Entity arising under applicable laws which would be required to be disclosed on Form BD. No such disciplinary proceeding or order is pending or threatened except for such disciplinary proceedings or orders pending or threatened after the date hereof that, individually or in the aggregate, have not had and would not reasonably be expected to have, a Material Adverse Effect. Except as disclosed on a Form BD filed prior to the date of this Agreement, neither the Company nor any of its directors, officers, employees or associated persons has been permanently enjoined by the order of any Governmental Entity from engaging or continuing any conduct or practice in connection with any activity or in connection with the purchase or sale of any security. Except as disclosed on Form BD filed prior to the date of this Agreement, neither the Company nor any of its directors, officers, employees or associated persons is or has been

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ineligible to serve as a broker-dealer or an associated person of a broker-dealer under Section 15(b) of the Exchange Act (including being subject to any “statutory disqualification” as defined in Section 3(a)(39) of the Exchange Act).

(q) Company Information. None of the information to be contained in any document filed with any regulatory agency in connection with the Transactions (the “Regulatory Filings”), in each case, other than CEFL Information, as to which no representation is made by the Company, will, at the time such filing is made, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

(r) State Takeover Laws. The Board of Directors has taken all action necessary to render inapplicable to CEFL or any of its Affiliates the restrictions on “business combinations” set forth in Section 203 of the DGCL and, to the knowledge of the Company, any similar “moratorium,” “control share,” “fair price,” “takeover” or “interested stockholder” law applicable to the Transactions between CEFL and the Company and CEFL’s commitment under Section 4.9(c) to place an order (and ultimately purchase) shares of Common Stock in the Public Offering.

(s) Rights Agreement. The Board of Directors has taken all actions necessary to irrevocably amend the Rights Agreement, in the form attached hereto as Exhibit C, to provide that the rights thereunder will not be triggered as a result of CEFL’s participation in the Transactions or the acquisition of Common Stock upon conversion of the Convertible Debentures received by CEFL or its Affiliates in the Exchange Offer or by (i) the acquisition of shares of Common Stock by CEFL or any of its Affiliates in the Public Offering, (ii) the acquisition of an additional 25 million shares of Common Stock of the Company after the Closing Date by CEFL or any of its Affiliates, (iii) the acquisition of shares of Common Stock by CEFL or any of its Affiliates during any Rights Agreement Holiday Period or (iv) the acquisition of shares of Common Stock by CEFL or any of its Affiliates pursuant to the Preemptive Right. For the avoidance of doubt, the exception set forth in clause (ii) of the immediately preceding sentence shall be in lieu of, and shall replace in its entirety, the analogous exception regarding additional shares purchased by Wingate Capital Ltd. as set forth in the First Amendment to Rights Agreement. The Rights Agreement Amendment shall provide that if CEFL or any of its Affiliates pledge, hypothocate, rehypothocate or otherwise transfer, sell or assign any securities of the Company in connection with any financing or similar transaction effected in the ordinary course, any securities CEFL or such Affiliates receive back in connection therewith shall be deemed to have been “received” by CEFL or its Affiliates in the Exchange Offer for purposes of the Rights Agreement.

(t) Status of Securities. The Securities have been duly authorized by all necessary corporate action. When issued as contemplated by this Agreement, the Securities will be validly issued, fully paid and nonassessable, will not subject the holders thereof to personal liability and will not be subject to preemptive rights of any other stockholder of the Company.

(u) Offering of Securities. The Company is issuing the Securities under an exemption from the registration requirements of the Securities Act pursuant to Section 3(a)(9) of

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the Securities Act. Neither the Company nor any Person acting on its behalf has offered the Securities or any similar securities of the Company for sale to, solicited any offers to buy any of the Securities or any similar securities of the Company from or otherwise approached or negotiated with respect to any of the Securities or any similar securities of the Company with any Person other than CEFL. Neither the Company nor any Person acting on its behalf has taken or will take any action (including any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of any of the Securities under the Securities Act and the rules and regulations of the SEC thereunder) which might subject the offering, issuance or sale of any of the Securities to the registration requirements of the Securities Act. The Company has not engaged any Person to solicit any holders of the 2011 Notes or Springing Lien Notes to exchange their securities in the Exchange Offer. The Company has not requested J.P. Morgan Securities Inc. or any other financial advisor to the Company to make any recommendation to, or engage in any discussions with, holders of the 2011 Notes or Springing Lien Notes, or to undertake any other activities that would preclude reliance by the Company on the exemption from registration for the Convertible Debentures under the Securities Act provided by Section 3(a)(9) thereunder.

(v) Brokers and Finders. Neither the Company nor any of its Subsidiaries nor any of their respective officers, directors, employees or agents has utilized any broker, finder, placement agent or financial advisor or incurred any liability for any fees or commissions (i) in connection with the Exchange Offer or (ii) other than fees and expenses paid to J.P. Morgan Securities Inc. by the Company. Payment of such fees and expenses was not contingent on the success of the Exchange Offer or the participation of any Person in the Exchange Offer.

3.2 Representations and Warranties of CEFL. CEFL makes the following representations and warranties to the Company, as of the date hereof, which representations and warranties shall also be made as of the Closing Date (or as of such specific date in the case of any representation or warranty expressly made as of a specific date):

(a) Organization. CEFL is duly organized, validly existing and in good standing under the laws of the state or country of its jurisdiction of formation and has all requisite power and authority to own, operate and lease its properties and to carry on its business as it is being conducted on the date of this Agreement.

(b) Authorization; No Conflicts.

(1) CEFL has full power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is or will be a party and to consummate the Transactions. The execution, delivery and performance by CEFL of this Agreement and each of the Ancillary Documents to which it is or will be a party and the consummation of the Transactions have been duly authorized by all necessary action on behalf of CEFL. No other proceedings on the part of CEFL are necessary to authorize the execution, delivery and performance by CEFL of this Agreement and each Ancillary Document to which it is a party and consummation of the Transactions. This Agreement has been, and on or prior to the Closing each Ancillary Document to which it is a party will be, duly and validly executed and delivered by CEFL. This Agreement is, and upon its execution at or prior to the Closing each Ancillary Document to which it is or will be a party will be, a valid and binding obligation of CEFL, enforceable against it in accordance with its terms.

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(2) The execution, delivery and performance of this Agreement and the Ancillary Documents to which it is or will be a party, the consummation by CEFL of the Transactions and the compliance by CEFL with any of the provisions hereof and thereof will not conflict with, violate or result in a breach of any provision of, or constitute a default (or an event, which, with notice or lapse of time or both would constitute a default) under, or result in the termination of or accelerate the performance required by, or result in a right of termination or acceleration under, (A) any provision of the governing documents of CEFL or (B) any mortgage, note, indenture, deed of trust, lease, loan agreement or other agreement or instrument of CEFL or any permit, concession, grant, franchise, license, judgment, order, decree, ruling, injunction, statute, law, ordinance, rule or regulation applicable to CEFL or any of its properties or assets other than any such conflict, violation, breach, default, termination and acceleration under clause (B) that, individually or in the aggregate, would not reasonably be expected to materially and adversely affect or delay the consummation of the Transactions.

(c) Consents and Approvals. Except for (i) the acceptance by the OTS of the Rebuttal of Control Filing and (ii) any consent, approval, action or filing the absence of which would not have, or reasonably be expected to have, a material adverse affect on the Company or on CEFL’s ability to consummate the Transactions, no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required on the part of CEFL in connection with the execution, delivery and performance by CEFL of this Agreement and the Ancillary Documents to which it is or will be a party and the consummation by CEFL of the Transactions. As of the date hereof, CEFL has no knowledge of any reason why, solely due to the current business operations of CEFL and its Affiliates, the acceptance and approval of the Rebuttal of Control Filing by the OTS should not be obtained.

(d) Securities Ownership. As of the date of this Agreement, CEFL and its Affiliates directly and, for the purposes of Rule 13d-3 promulgated under the Exchange Act, beneficially own 89,163,729 shares of Common Stock, $230,245,000 aggregate principal amount of the 2011 Notes and $1,773,976,000 aggregate principal amount of the Springing Lien Notes.

(e) Brokers and Finders. Neither CEFL nor any of its officers, directors, employees or agents has utilized any broker, finder, placement agent or financial advisor or incurred any liability for any fees or commissions in connection with any of the Transactions.

(f) CEFL Information. None of the information with respect to CEFL and its Affiliates or any of their respective officers and directors that is provided to the Company by CEFL or any of its representatives (collectively, “CEFL Information”) specifically for inclusion in any of the Regulatory Filings, will, at the time such filing is made, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they are made, not misleading.

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(g) Legal Proceedings. CEFL is not a party to any, and there are no pending, or to the knowledge of CEFL, threatened, legal, administrative, arbitral or other proceedings, claims, actions or governmental investigations of any nature against CEFL or any of its Affiliates or to which any of their assets are subject, that as of the date hereof relate to or which challenge the validity of the Transactions.

(h) Clear Title. As of the time of the expiration of the Early Tender Period, CEFL will have good and valid title to the CEFL Exchanged Notes, free and clear of all liens, encumbrances, equities or adverse claims.

(i) No Other Representations. CEFL is an informed and sophisticated purchaser, and has engaged to the extent it deemed appropriate expert advisors experienced in the evaluation of transactions of the type contemplated hereby. CEFL acknowledges that it has not relied upon any express or implied representations or warranties of any nature made by or on behalf of or imputed to the Company, except as expressly set forth in this Agreement or the Ancillary Documents. Without limiting the generality of the foregoing, CEFL acknowledges that the Company makes no representation or warranty with respect to (i) any projections, estimates or budgets delivered to or made available to CEFL of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) of the Company and its Subsidiaries or the future business and operations of the Company and its Subsidiaries or (ii) any other information or documents made available to CEFL or its counsel, accountants or advisors with respect to the Company or its Subsidiaries or their respective businesses or operations, except as expressly set forth in this Agreement, the Ancillary Documents and the schedules hereto and thereto. CEFL further understands and acknowledges that certain information about the Company, which may include material information (including but not limited to information concerning the Company’s financial position and results of operations for any period subsequent to March 31, 2009), has not been made public by the Company or made available to CEFL by the Company, that CEFL does not have such access to such information and that CEFL has specifically requested that the Company not share this information with it. CEFL hereby represents that it (either alone or together with its advisors) is capable of evaluating the risks associated with the Transactions and the Company, including the risk of transacting on the basis of inferior information, and that CEFL is capable of sustaining any loss resulting therefrom without material injury.

ARTICLE IV

ADDITIONAL AGREEMENTS

4.1 Taking of Necessary Action. Subject to the terms and conditions hereof, (i) each of the parties hereto agrees to use all reasonable best efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the Transactions, and (ii) each party shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement the Transactions or to evidence such events or matters.

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4.2 Filings; Other Actions.

(a) CEFL and the Company shall use reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities, and take all other actions, which are necessary or advisable to consummate the Transactions.

(b) In furtherance of the foregoing, CEFL and the Company shall promptly prepare and deliver (but in no event more than seven Business Days after the date of this Agreement) to the OTS the Rebuttal of Control Filing in respect of the Transactions that are proposed to be consummated at the Closing and seek acceptance and approval of such Rebuttal of Control Filing by the OTS with respect to the Transactions to the effect that CEFL will not be deemed to control the Company or any of its Subsidiaries for purposes of the Change in Bank Control Act or the Home Owners Loan Act as a result of the consummation of the Transactions. CEFL and the Company shall use reasonable best efforts (including using good faith efforts to respond to all requests for additional information from the OTS as promptly as practicable following each such request) to obtain such acceptance and approval (including, subject to Section 4.2(e), CEFL entering into an amended and restated rebuttal of control agreement with the OTS to the extent required materially in conformance with the form contained in 12 CFR §574.100 and, subject to Section 4.2(e), agreeing to such other conditions as required by the OTS to obtain such acceptance and approval). The Company and CEFL shall have the right to consult the other, in each case subject to applicable laws relating to the exchange of information, with respect to any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the Transactions. In exercising the foregoing right, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the Transactions and each party will keep the other apprised of the status of matters relating to completion of the Transactions. Without limiting the generality of the foregoing and subject to applicable law and except as prohibited by the OTS, each of CEFL and the Company shall keep the other apprised of the status of matters relating to completion of the Transactions, including promptly furnishing the other with copies of notices or other written communications, and the substance of any material oral communications, between CEFL and the Company, as the case may be, or any of their respective Subsidiaries or Affiliates, and the OTS with respect to the Transactions and the Rebuttal of Control Filing referred to in this Section 4.2(b).

(c) CEFL and the Company shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of CEFL, the Company or any of their respective Subsidiaries to any Governmental Entity in connection with the Transactions (other than information that must be kept confidential under applicable law).

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(d) CEFL and the Company shall promptly furnish the other with copies of written communications received by them or their Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the Transactions (other than in respect of information filed or otherwise submitted confidentially to any such Governmental Entity).

(e) Notwithstanding anything in this Agreement, including the provisions of Section 4.2(b), in no event will CEFL or its Affiliates be obligated to:

(1) without limiting CEFL’s obligation under clause (2) below, propose or accept any divestiture of any of CEFL’s or any of its Affiliate’s assets, accept any operational restriction on CEFL’s or any of its Affiliate’s business, or agree to take any action that limits CEFL’s or its Affiliate’s commercial practices in any way (other than with respect to the Company as set forth in the Rebuttal of Control Filing) to obtain any consent, acceptance or approval of any Governmental Entity to consummate the Transactions; or

(2) propose or agree to accept any term or condition or otherwise modify the terms of this Agreement or the Ancillary Documents, including for the avoidance of doubt the terms or the amount of the Securities to be delivered by the Company under this Agreement, to obtain any consent, acceptance or approval of any Governmental Entity to the consummation of the Transactions if such term, condition or modification would (A) materially adversely affect (with respect to CEFL or its Affiliates) any term of the Transactions (other than a financial term), or (B) adversely affect (with respect to CEFL or its Affiliates) any financial term of the Transactions contemplated hereby.

(f) As promptly as practicable after the date hereof, the Company shall call a special meeting of its stockholders (the “Special Stockholder Meeting”) to vote on (i) the Required Stockholder Proposals, (ii) the approval for purposes of Rule 5635 of the NASDAQ Marketplace Rules of the potential issuance of Common Stock, or securities convertible into or exchangeable or exercisable for Common Stock, in connection with potential future debt exchange transactions in an amount up to 365 million shares and (iii) the matters described in Section 4.14 (together with the Required Stockholder Proposals, the “Stockholder Proposals”). Subject to Section 4.14(b), the Board of Directors shall recommend to the Company’s stockholders that such stockholders vote in favor of the Stockholder Proposals (the “Recommendation”). The Recommendation of the Board of Directors shall be included in the Proxy Materials and, subject to Section 4.14(b), the Board of Directors shall use its reasonable best efforts to secure the approval of the Stockholder Proposals by the Company’s stockholders. Notwithstanding the foregoing, the Board of Directors reserves the right to change its recommendation pursuant to its fiduciary duties; provided, however, that no such change of the Recommendation shall affect the Company’s commitment to hold the Special Stockholder Meeting. In connection with the Special Stockholder Meeting, the Company shall promptly prepare (and CEFL will reasonably cooperate with the Company to prepare) and file (but in no event more than five Business Days after the date of this Agreement) with the SEC a preliminary proxy statement, shall use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause a definitive proxy statement related to the Special Stockholder Meeting to be mailed to the Company’s stockholders not more than seven Business Days after clearance thereof by the SEC (together, the “Proxy Materials”) and, subject to Section 4.14(b), shall use its

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reasonable best efforts to solicit proxies for such stockholder approval. The Company shall notify CEFL promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to such proxy statement or for additional information and will supply CEFL with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to such proxy statement. If at any time prior to the Special Stockholder Meeting there shall occur any event that is required to be set forth in an amendment or supplement to the proxy statement, the Company shall as promptly as practicable prepare and mail to its stockholders such an amendment or supplement. CEFL and the Company agree promptly to correct any information provided by it or on its behalf for use in the proxy statement if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall, to the extent required as a matter of law, as promptly as practicable prepare and mail to its stockholders an amendment or supplement to correct such information to the extent required by applicable laws and regulations. The Company shall consult with CEFL prior to filing any proxy statement, or any amendment or supplement thereto, and provide CEFL with a reasonable opportunity to comment thereon.

(g) CEFL, on the one hand, and the Company, on the other hand, agrees, upon request, to furnish the other party with all information concerning itself, its Affiliates, directors, officers, partners and stockholders and such other matters as may be reasonably necessary or advisable in connection with the proxy statement in connection with the Special Stockholder Meeting and any other statement, filing, notice or application made by or on behalf of such other party or any of its Subsidiaries to any Governmental Entity in connection with the Closing and the Transactions.

(h) Unless this Agreement has been terminated pursuant to Section 5.1, CEFL hereby agrees that at any meeting of the stockholders of the Company held to vote on the Stockholder Proposals, however called and any adjournment(s) thereof, CEFL shall vote, or cause to be voted, the shares of Common Stock beneficially owned by CEFL and its Affiliates as follows: (i) all of such shares shall be voted in favor of the Stockholder Proposals other than the Rights Agreement Proposal and (ii) with respect to the Rights Agreement Proposal, shares beneficially owned by CEFL or any of its Affiliates representing no more than 9.9% of the Company’s shares outstanding and entitled to vote at the Special Stockholders Meeting shall be voted in CEFL’s sole discretion, and the remainder of such shares shall be voted on the Rights Agreement Proposal in the same proportions for and against the Rights Agreement Proposal as the votes cast by all other stockholders of the Company.

(i) As promptly as practicable following the date of this Agreement, the Company shall qualify the Convertible Debentures Indenture under the Trust Indenture Act of 1939, as amended.

4.3 Access, Information and Confidentiality. Each party to this Agreement will hold, and will cause its respective Affiliates and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a regulatory authority is necessary or appropriate in connection with any necessary regulatory approval or unless disclosure is required by judicial or administrative process or, in the written opinion of its

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counsel, by other requirement of law or the applicable requirements of any regulatory agency or relevant stock exchange, all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other party furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a non-confidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors.

4.4 Conduct of the Business. Prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Section 5.1, (i) the Company shall not declare or pay any dividend or distribution on the Common Stock and (ii) if the Company takes any action that would require any antidilution adjustment (including an adjustment resulting from a reverse stock split) to be made under the Convertible Debentures Indenture as if issued on the date of this Agreement, the Company shall make appropriate adjustments such that CEFL will receive the benefit of or proportional adjustment resulting from such transaction as if the Convertible Debentures to be issued to CEFL at the Closing had been outstanding as of the date of such action.

4.5 Reservation for Issuance; HSR Filing on Conversion.

(a) Following the issuance of the Convertible Debentures pursuant to this Agreement, the Company will at all times reserve and keep available, out of its authorized but unissued Common Stock, the aggregate number of shares of Common Stock then issuable upon conversion of the Convertible Debentures at any time.

(b) If, at any time after the date hereof, CEFL or any of its Affiliates proposes to purchase any shares of Common Stock or convert any Convertible Debentures into shares of Common Stock, CEFL and the Company shall, prior to any such purchase or conversion, (i) each make any required filings pursuant to the HSR Act and (ii) observe all applicable waiting periods under the HSR Act. CEFL and the Company agree to make any such required HSR Act filings, and to supply any additional information and documentary material that may be requested pursuant those filings, as promptly as practicable, and to use their commercially reasonable efforts to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act.

4.6 Legends.

(a) The Securities issued to CEFL pursuant to this Agreement (and any Common Stock issuable upon conversion thereof) shall not be legended, provided, however, that CEFL agrees that it will not sell, transfer, re-hypothecate or lend the Securities (or take similar actions under the account agreement pursuant to which such securities are held) except in accordance with applicable law; and provided, further, that the Securities shall be legended upon a transfer of such Securities that is not completed pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144 (for the avoidance of doubt, the

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Securities shall not be legended upon sale by a pledgee of such securities completed pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144) unless the Company has received an opinion of counsel reasonably satisfactory to it that CEFL is not an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company. Certificates for such securities requiring a legend upon a transfer not registered under the Securities Act or in compliance with Rule 144 thereunder shall bear legends in substantially the following form:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY BENEFICIAL INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

(b) The Company shall remove the legends on the securities issued pursuant to the Investment Agreement; provided, however, that CEFL agrees that it will not sell, transfer, re-hypothecate or lend such securities (or take similar actions under the account agreement pursuant to which such securities are held) except in accordance with applicable law; and provided, further, that such securities shall be legended upon a transfer of such securities that is not completed pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144 (for the avoidance of doubt, such securities shall not be legended upon sale by a pledgee of such securities completed pursuant to an effective registration statement under the Securities Act or in compliance with Rule 144) unless the Company has received an opinion of counsel reasonably satisfactory to it that CEFL is not an “affiliate” (as defined in Rule 144 under the Securities Act) of the Company. Certificates for such securities requiring a legend upon a transfer not registered under the Securities Act or in compliance with Rule 144 thereunder shall bear legends in substantially the following form:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY BENEFICIAL INTEREST HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

4.7 NASDAQ. The Company shall use its reasonable best efforts to obtain approval prior to the Closing Date from the NASDAQ for the listing on the NASDAQ of (i) the Common Stock issuable upon conversion of the Convertible Debentures and (ii) the Convertible Debentures, to the extent the Convertible Debentures are eligible to be listed under the NASDAQ Marketplace Rules.

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4.8 CUSIPs and DTC Eligibility. The Company shall use its reasonable best efforts to (a) obtain all necessary Committee on Uniform Securities Identification Procedures numbers (CUSIP numbers) for the Convertible Debentures issued pursuant to this Agreement and (b) make the Convertible Debentures issued and sold in accordance with this Agreement eligible for clearance and settlement through the facilities of The Depository Trust Company.

4.9 Public Offering.

(a) Within two Business Days of the date of this Agreement, the Company shall commence the Public Offering through the filing with the SEC of a prospectus supplement (the “Prospectus Supplement”) to the Company’s existing Registration Statement on Form S-3 (Registration Number 333-158636). The Company shall use its reasonable best efforts to consummate the Public Offering.

(b) The Company shall furnish to CEFL, and provide CEFL with a reasonable opportunity to comment on, all information concerning CEFL, its Affiliates, directors, officers, partners and stockholders set forth in the Prospectus Supplement and in any other roadshow or marketing materials made or distributed by or on behalf of the Company or any of its Subsidiaries in connection with the Public Offering. The Company shall consult with CEFL prior to filing the Prospectus Supplement, or any amendment or supplement thereto, and provide CEFL with a reasonable opportunity to comment thereon. The Company shall supply CEFL with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Prospectus Supplement. CEFL and the Company agree promptly to correct any information provided by it or on its behalf for use in the Prospectus Supplement if and to the extent that such information shall have become false or misleading in any material respect.

(c) Subject to applicable law and the rules and regulations of any Governmental Entity, CEFL hereby commits to place an order with J.P. Morgan Securities Inc. and Sandler O’Neill & Partners, L.P. (collectively, the “Underwriters”) in the Public Offering and to purchase, to the extent allocated such shares by the Underwriters, an amount of Common Stock determined based upon the public offering price of the Common Stock in the Public Offering, to be filled by the Underwriters in accordance with their normal and customary practices, as follows:

Offering Price	CEFL’s Commitment Amount
$1.20 or less	$	100 million
Greater than $1.20	$	50 million

4.10 Exchange Offer.

(a) The Company shall commence the Exchange Offer on the same day that the Offer Price is determined in the Public Offering. The Exchange Offer shall be made through, and on the terms and conditions described in, the Offer Document. Subject to valid termination of this Agreement pursuant to Section 5.1, the Company shall use its reasonable best efforts to consummate the Exchange Offer. The Company’s obligation to consummate the Exchange Offer shall be subject only to the conditions contained in this Agreement and the Offer Document.

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(b) The Early Tender Period shall expire at 12:00 midnight New York City time on the fifth Business Day following the date of the commencement of the Exchange Offer (the “Early Tender Period”). At or around 5:30 p.m. New York City time on the day the Early Tender Period expires, the Company shall make a preliminary public announcement of the aggregate principal amount of 2011 Notes and Springing Lien Notes tendered, and not withdrawn, during the Early Tender Period up to the time of such announcement. Following the expiration of the Early Tender Period, any holders who tendered 2011 Notes and/or Springing Lien Notes prior to the expiration of the Early Tender Period shall have no further withdrawal rights; provided that, (i) if any of the conditions set forth in the Offer Document or this Agreement are not satisfied or are incapable of being satisfied by October 31, 2009, or (ii) if this Agreement is validly terminated pursuant to Section 5.1, the Company shall immediately terminate the Exchange Offer and, as promptly as practicable thereafter, return to CEFL all 2011 Notes and Springing Lien Notes tendered pursuant to Section 2.1(b).

(c) The Company shall use its reasonable best efforts to solicit and obtain valid and binding consents from (i) all holders of Springing Lien Notes approving the Company’s proposals to (x) amend the definition of “Change of Control” in the indenture governing the Springing Lien Notes to make clause (1) of such definition consistent with the analogous provision in the indentures relating to the 2011 Notes and the Company’s 7.375% Senior Notes due 2013 and 7.875% Notes due 2015; provided, that if the Company does not receive such consent, the amount of Springing Lien Notes that may be exchanged by CEFL in the Exchange Offer shall be limited as set forth in the Offer Document such that, following the Closing, CEFL and its Affiliates shall not own more than 49.9% of the fully diluted Common Stock of the Company (assuming full conversion of all Convertible Debentures held by CEFL and its Affiliates whether or not such Convertible Debentures can be converted pursuant to their terms) and (y) amend the “Limitation of Restricted Payments” covenant in the in the indenture governing the Springing Lien Notes to exempt any payment of dividends on any preferred stock issued to the United States Treasury, or any redemption or repurchase of any preferred stock or any warrants issued to the United States Treasury with the proceeds of certain qualifying issuances of capital stock, in each case, pursuant to a CPP Transaction and (ii) all holders of 2011 Notes approving the Company’s proposal to amend the “Limitation of Restricted Payments” covenant in the indenture governing the 2011 Notes to exempt any payment of dividends on any preferred stock issued to the United States Treasury, or any redemption or repurchase of any preferred stock or any warrants issued to the United States Treasury with the proceeds of certain qualifying issuances of capital stock, in each case, pursuant to a CPP Transaction. The Company shall pay, in accordance with the terms and conditions set forth in the Offer Document, to each holder of 2011 Notes and/or Springing Lien Notes who validly delivers and does not revoke a consent to the amendments contemplated by this Section 4.10(c) prior to the expiration of the Early Tender Period, a cash payment equal to $5.00 for each $1,000 in principal amount of 2011 Notes or Springing Lien Notes in respect of which such consent has been validly delivered (the “Consent Fee”); provided, however, all holders who tender Springing Lien Notes and 2011 Notes in the Exchange Offer shall be deemed to have consented to the

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amendments contemplated by this Section 4.10(c) and to have waived the Consent Fee with respect to all 2011 Notes and Springing Lien Notes tendered by such holders in the Exchange Offer. Unless this Agreement has been terminated pursuant to Section 5.1, CEFL hereby agrees that it shall affirmatively consent by tendering the CEFL Exchanged Notes held by it, and cause each of its respective Affiliates who are holders of 2011 Notes or Springing Lien Notes to consent by tendering the CEFL Exchanged Notes held by it, to the amendments contemplated by this Section 4.10(c). CEFL hereby agrees to waive the Consent Fee with respect to its 2011 Notes and Springing Lien Notes, whether or not such Notes are tendered in the Exchange Offer. Unless this agreement has been terminated pursuant to Section 5.1, CEFL hereby agrees that it shall, and shall cause its Affiliates who are holders of 2011 Notes or Springing Lien Notes to, affirmatively consent to the amendments contemplated by this Section 4.10(c) by submitting consents in respect of all 2011 Notes and Springing Lien Notes such that CEFL shall have ensured that more than 50% of the 2011 Notes and the Springing Lien Notes have submitted consents. At such time as CEFL shall have satisfied its obligations with respect to the consents contemplated by this Section 4.10(c), CEFL shall be permitted to freely transfer, sell or assign any Springing Lien Notes not tendered.

(d) The Company shall furnish to CEFL, and provide CEFL with a reasonable opportunity to comment on, all information concerning CEFL, its Affiliates, directors, officers, partners and stockholders set forth in the Offer Document and in any other materials made or distributed by or on behalf of the Company or any of its Subsidiaries in connection with the Exchange Offer or the Offer Document.

4.11 Approval of Issuance of Convertible Debentures. The Company shall approve the issuance of the Convertible Debentures to CEFL as contemplated by this Agreement, for purposes of exempting such issuance from Section 16 of the 1934 Act pursuant to Rule 16b-3.

4.12 Tax Matters.

(a) The parties agree:

(1) to treat any Exchange as pursuant to a recapitalization within the meaning of Section 368(a)(1)(E) of the Code;

(2) that it is their current intention to treat the Convertible Debentures as debt for U.S. federal income tax purposes and that they will treat the Convertible Debentures as debt for U.S. federal income tax purposes, unless the Company reasonably determines, based on a change of circumstances after the date hereof and the advice of nationally recognized independent third-party tax advisors, that it does not have a “reasonable basis” for such position for purposes of Section 6662 of the Code;

(3) to treat any Exchange as an issuance of Convertible Debentures in exchange for securities that are traded on an established securities market within the meaning of Section 1273(b)(3)(B)(i) of the Code;

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(4) that, assuming that the Convertible Debentures are debt for U.S. federal income tax purposes, the Issue Price of a Convertible Debenture issued in an Exchange is the fair market value of the Exchanged Note or the fair market value of the Convertible Debenture on the Issue Date;

(5) to the extent that the Issue Price of a Convertible Debenture (or, if such Convertible Debenture is treated as equity, the fair market value thereof) issued pursuant to an Exchange is less than or equal to the original Issue Price of the Exchanged Note, to treat the amount received by the holder of the Exchanged Note in such Exchange as being allocable to the Issue Price of the Exchanged Note, and to the extent that the amount received by the holder of the Exchanged Note in an Exchange exceeds the Issue Price of the Exchanged Note, to allocate such excess to the accrued Original Issue Discount on the Exchanged Note; and

(6) that they will not treat any modifications of the 2011 Notes and Springing Lien Notes made pursuant to the transactions contemplated by this Agreement, including those contemplated by Section 4.10(c) of this Agreement, as constituting significant modifications of either the 2011 Notes or the Springing Lien Notes within the meaning of Treasury Regulation Section 1.1001-3;

in each case, unless otherwise required pursuant to a “determination” (as defined in Section 1313(a) of the Code); provided, however, that in the event that any taxing authority challenges any such position taken by the Company, the Company shall promptly inform CEFL of such challenge, shall allow CEFL to participate in such contest at its own cost and expense, and shall not settle such challenge without the consent of CEFL, which consent shall not be unreasonably withheld.

(b) CEFL presently holds and will continue to hold securities of the Company in custodial accounts in its name at various “financial institutions”, as such term is defined in Treasury Regulation Section 1.1441-1(c)(5), each of which is a “U.S. person” (as defined in Treasury Regulation Section 1.1441-1(c)(2)). Each such financial institution will act as CEFL’s authorized agent and each will (1) make decisions pertaining to U.S. tax withholding payments; (2) make any applicable withholding payments required by U.S. tax law; (3) file any applicable information reports with the IRS; and (4) provide to the Company the appropriate documentation (e.g., Form W-9) upon request. Each such financial institution will be an exempt recipient, not subject to 30 percent withholding, backup withholding, nor to information reporting on Form 1042-S or Form 1099. Accordingly, the Company agrees not to withhold on any payments made or deemed made to any such financial institutions with respect to the transactions contemplated by this Agreement.

4.13 Preemptive Rights.

(a) For purposes of this Section 4.13 only, all calculations of the number of shares of Common Stock beneficially owned or held by any Person shall be made assuming the calculation is made on a fully diluted basis and assuming the full conversion of any securities of the Company convertible or exchangeable into Common Stock beneficially owned or held by such Person (whether or not such securities are convertible or exchangeable into Common Stock

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by such Person at such time according to their terms or by reason of any condition precedent to such conversion or exchange not having been satisfied at such time). The Company hereby grants to CEFL and any of its Affiliates which beneficially own any shares of Common Stock or other securities convertible or exchangeable for Common Stock whenever such securities were acquired (the “Preemptive Offerees”) a right (the “Preemptive Right”) to purchase, from time to time, all or any part of its pro rata share of any New Securities (as defined in this Section 4.13(a)) that the Company may, from time to time, sell and issue for cash. Such pro rata share, for purposes of this Preemptive Right, is based on the ratio of (x) the number of shares of Common Stock then beneficially owned by such Preemptive Offerees immediately prior to the issuance of the New Securities, to (y) the total number of shares of Common Stock then outstanding immediately prior to the issuance of the New Securities, assuming the full conversion or exercise of all outstanding securities of the Company (other than shares of Series B Preferred Stock issued pursuant to the Rights Agreement) convertible into Common Stock and all other rights, options or warrants then outstanding to acquire Common Stock. For the avoidance of doubt, Preemptive Offerees may assign all or any portion their Preemptive Right to any of their Affiliates. This Preemptive Right shall be exercisable at any time and from time to time during the term of this Agreement subject to the following provisions:

(1) “New Securities” shall mean any Common Stock of the Company, whether or not authorized on the date hereof, and any options, warrants, convertible securities, or other rights to purchase or subscribe for or exchangeable into Common Stock; provided, however, that “New Securities” do not include the following:

(A) securities of the Company issuable upon conversion or exercise of (x) any outstanding securities as of the date hereof or (y) any securities referred to in subsections (B) through (H) below;

(B) any New Securities issued in accordance with this Agreement (including pursuant to the Public Offering or the Exchange Offer);

(C) shares or options granted pursuant to the Company’s current or future incentive stock option plans or programs to officers, directors, employees or consultants of the Company in connection with services rendered or to be rendered to the Company;

(D) securities issued pursuant to warrants issued in connection with a CPP Transaction;

(E) securities issued in connection with any pro rata stock split, stock dividend or recapitalization by the Company;

(F) securities issued in connection with any dividend investment or stockholder purchase plan;

(G) securities issued where the consideration is the outstanding debt of the Company or any Subsidiary; or

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(H) securities issued by the Company as full or partial consideration for a merger, acquisition, joint venture, strategic alliance, license agreement or other transaction the primary purpose of which is other than raising capital.

(b) In the event that the Company proposes to undertake an issuance of New Securities for cash, it shall give the Preemptive Offerees written notice (the “Notice”) of its intention, describing the type of New Securities, the price, and the amount, kind and terms upon which the Company proposes to issue the same. Any Preemptive Offeree who does not deliver to the Company written notice of acceptance of any offer made pursuant to the Notice within five Business Days after such Preemptive Offeree’s receipt of such offer (except in firm commitment underwritings in which written notice of acceptance must be received within two Business Days after such Preemptive Offeree’s receipt of such offer) shall be deemed to have waived its right to purchase the New Securities which are the subject of such Notice (including, if the New Securities include convertible securities, options, or other rights to acquire other securities, such other securities).

(c) In the event that any Preemptive Offeree waives its right to purchase such New Securities pursuant to Section 4.13(b), the Company shall have sixty days thereafter to sell (or enter into an agreement pursuant to which the sale of New Securities that had been subject to the Preemptive Right shall be closed, if at all, within sixty days from the date of said agreement) the New Securities with respect to which the rights of Preemptive Rights were not exercised at a price and upon terms, including manner of payment, no more favorable to the purchasers thereof than specified in the Notice. In the event the Company has not sold all offered New Securities within such sixty-day period (or sold and issued New Securities in accordance with the foregoing within sixty days from the date of such agreement), the Company shall not thereafter issue or sell any New Securities, without first again offering such New Securities to the Preemptive Offerees in the manner provided above.

(d) To the extent the Preemptive Offeree is unable to fully exercise such pre-emptive rights due to OTS restrictions on control persons, the Company will use its commercially reasonable efforts to structure and issue to Preemptive Offeree upon exercise of such rights an alternate security (such as non-voting securities, warrants or convertible securities) structured as an equity instrument under United States Generally Accepted Accounting Principles and designed to provide Preemptive Offeree with the same economic value (ignoring discounts related to the liquidity of such alternate security or transfer restrictions applicable thereto) as the security Preemptive Offeree was not permitted to purchase.

(e) To the extent the issuance of securities to the Preemptive Offeree pursuant to its exercise of the Preemptive Right would require shareholder approval pursuant to Rule 5635 of the NASDAQ Marketplace Rules, the Company will use its commercially reasonable efforts to structure and issue to Preemptive Offeree upon exercise of such rights an alternate security (such as non-voting securities, warrants or convertible securities) structured as an equity instrument under United States Generally Accepted Accounting Principles and designed to provide Preemptive Offeree with the same economic value (ignoring discounts related to the liquidity of such alternate security or transfer restrictions applicable thereto) as the security the Preemptive Offeree was not permitted to purchase, and promptly thereafter, the Company will

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use its commercially reasonable efforts to obtain any such shareholder approval required under Rule 5635 of the NASDAQ Marketplace Rules to allow such securities to convert into or be exercisable for Common Stock.

(f) The Preemptive Right granted by this Section 4.13 shall terminate and be of no further force or effect upon the earliest to occur of (i) the earlier of termination of this Agreement or failure to consummate the Closing by October 31, 2009, or (ii) the date, after the time of the Closing, that CEFL and its Affiliates beneficially own less than 19.9% of the shares of Common Stock on a fully diluted basis assuming conversion of all securities beneficially owned by CEFL and its Affiliates (whether or not such securities are convertible or exchangeable for shares of Common Stock at such time in accordance with their terms or by reason of any condition precedent to such conversion or exchange not been satisfied at such time). The Preemptive Right granted by this Section 4.13 shall be suspended upon the termination of the Rights Agreement, but shall automatically be reinstated if the Company reinstates the Rights Agreement or if the Company subsequently adopts a new rights plan, “poison pill” or similar plan.

4.14 Rights Agreement.

(a) The Company agrees that at the Special Stockholder Meeting it will submit to the Company’s stockholders a non-binding resolution whether to retain the Rights Agreement, subject to earlier termination or amendment in accordance with the Rights Agreement (the “Rights Agreement Proposal”). For the avoidance of doubt, the Rights Agreement Proposal will be an advisory resolution that will not be binding on the Board of Directors. The Board of Directors may determine to retain or terminate the Rights Agreement following the outcome of the vote, in the exercise of its business judgment and the exercise of its fiduciary duties, based on its judgment of what is in the best interests of all of the Company’s stockholders.

(b) Neither the Company nor the Board of Directors, nor CEFL or any of its Affiliates shall, nor shall the Company, the Board of Directors, CEFL or its Affiliates authorize or permit any of its or their officers, directors or any other person acting on behalf of or in concert with any of the foregoing to, directly or indirectly, take any position on whether stockholders should vote for or against the Rights Agreement Proposal or otherwise seek to advise or influence any person with respect to the voting of the Company’s Common Stock with respect to the Rights Agreement Proposal or to otherwise influence the outcome of the advisory vote on the Rights Agreement Proposal. Notwithstanding the foregoing, the parties understand and agree that Company will include in the proxy statement for the Special Stockholders Meeting, to the extent available, (i) disclosure required or advisable in the judgment of the Company and its counsel under the proxy rules, or requested by the SEC, including disclosure concerning the terms of and reasons for adopting stockholder rights agreements and the general effect of adopting the Rights Agreement Proposal, (ii) disclosure regarding the number of S&P 500 and/or Fortune 1000 companies that have (and do not have) stockholder rights agreements at the time of such disclosure and (iii) disclosure regarding the number of S&P 500 and/or Fortune 1000 companies that had (and did not have) stockholder rights agreements three to five years ago.

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4.15 Registration Rights Agreement.

(a) CEFL and the Company agree that the Registration Rights Agreement is hereby amended, effective the date hereof, by:

(1) deleting the definition of “Covered Securities” in the Registration Rights Agreement and replacing it with the following:

“Covered Securities” means the Purchased Common Stock and any other shares of Common Stock held as of January 18, 2008 or shares of Common Stock underlying options with respect to shares of Common Stock held as of January 18, 2008 by the Purchaser, Citadel AC Investments, Ltd. as assignee of the Purchaser or any of their Affiliates, any Notes and any shares of Common Stock purchased by CEFL or any of its Affiliates in the Public Offering.

(2) adding the definition of “Public Offering” as follows:

“Public Offering” means the Public Offering as defined in that certain Exchange Agreement, dated as of June 17, 2009, between CEFL and the Company.

(b) Within ten Business Days following the date of this Agreement, the Company shall file the Shelf Registration Statement contemplated by Section 2.1 of the Registration Rights Agreement.

ARTICLE V

TERMINATION

5.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by mutual written agreement of the Company and CEFL;

(b) by any party, upon written notice to the other party, in the event that the Public Offering is not consummated on or before July 15, 2009 or the Closing does not occur prior to October 31, 2009; provided, however, that the right to terminate this Agreement pursuant to this Section 5.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Public Offering to be consummated, or the failure of the Closing, to occur on or prior to such applicable date;

(c) by any party, upon written notice to the other party, in the event that any Governmental Entity shall have issued any order, notice, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the Transactions, and such order, notice, decree, injunction or other action shall have become final and nonappealable;

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(d) by CEFL, if (i) there shall have been a breach by the Company of any of its representations, warranties, covenants or agreements contained in this Agreement, which breach would result in the failure to satisfy one or more of the conditions set forth in Section 2.3(a), and (ii) such breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 15 days after written notice thereof shall have been given to the Company;

(e) by the Company, if (i) there shall have been a breach by CEFL of any of its representations, warranties, covenants or agreements contained in this Agreement, which breach would result in the failure to satisfy one or more of the conditions set forth in Section 2.3(b), and (ii) such breach shall be incapable of being cured or, if capable of being cured, shall not have been cured within 15 days after written notice thereof shall have been given to CEFL; or

(f) by CEFL, if upon a vote taken by the Company’s stockholders pursuant to Section 4.2(f), the Required Stockholder Proposals shall not have been approved by the requisite vote of the Company’s stockholders.

5.2 Effects of Termination. In the event of any termination of this Agreement as provided in Section 5.1 prior to the Closing Date, this Agreement (other than this Section 5.2 and Article VI, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect, and the Company shall terminate the Exchange Offer in accordance with the terms of 4.10(b) and return to each tendering holder all 2011 Notes and/or Springing Lien Notes such holder tendered in the Exchange Offer; provided that nothing herein shall relieve any party from liability for willful breach of this Agreement.

ARTICLE VI

MISCELLANEOUS

6.1 Survival. All covenants and agreements shall survive the Closing Date until expired in accordance with their terms. Except for (i) the representations and warranties contained in (x) Section 3.1(a), Section 3.1(b), Section 3.1(c)(1), Section 3.1(e)(1), Section 3.1(t) and Section 3.1(v) and (y) Section 3.2(a), Section 3.2(b) and Section 3.2(d), which shall survive the Closing until the latest date permitted by law, the representations and warranties made herein or in any Ancillary Documents or in any certificates delivered in connection with the Closing shall survive the Closing for a period of two years and shall then expire.

6.2 Fees & Expenses.

(a) On or prior to August 1, 2009, and promptly from time to time afterward in connection with the Transactions contemplated hereby and as requested in writing by CEFL, the Company shall reimburse CEFL or any of its Affiliates for all reasonable, documented out-of-pocket expenses (including costs of due diligence and fees and expenses of legal counsel and other advisors) incurred by CEFL in connection with and in furtherance of the Transactions up to a maximum reimbursement of $5.0 million.

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(b) In the event that (i) the Board of Directors changes the Recommendation pursuant to its fiduciary duties in accordance with Section 4.2(f) and (ii) the Required Stockholder Proposals are not approved by the requisite vote of the Company’s stockholders at the Special Stockholder Meeting, the Company shall pay to each holder who tendered 2011 Notes and/or Springing Lien Notes during the Early Tender Period an amount in cash equal to 3% of the aggregate principal amount of 2011 Notes and/or Springing Lien Notes that such holder tendered during the Early Tender Period. Any payment required to be made pursuant to this Section 6.2(b) shall be made to each holder of 2011 Notes and/or Springing Lien Notes in accordance with the terms and conditions of the Offer Document.

(c) CEFL agrees that, if (i) the Board of Directors changes the Recommendation pursuant to its fiduciary duties in accordance with Section 4.2(f), (ii) the Company convenes the Special Stockholder Meeting and the Required Stockholder Proposals are not approved by the requisite vote of the Company’s stockholders at the Special Stockholder Meeting, (iii) the amounts set forth in Section 6.2(b) are payable by the Company pursuant to Section 6.2(b) and (iv) such amounts are paid in full, CEFL shall be precluded from any other remedy against the Company, at law or in equity or otherwise, and CEFL shall not seek to obtain any recovery, judgment, or damages of any kind, including consequential, indirect, or punitive damages, against the Company or any of its directors, officers, employees, partners, managers, members, shareholders or Affiliates arising out of such change in the Recommendation; provided, that, for the avoidance of doubt, nothing contained herein shall limit or otherwise restrict CEFL’s or its Affiliates’ right to indemnification for third party claims pursuant to Section 6.9, to reimbursement of expenses pursuant to Section 6.2(a) or right to seek specific performance pursuant to Section 6.16.

(d) Except as otherwise specifically provided in this Section 6.2, each party shall bear its own costs and expenses.

6.3 Waivers. To the extent permitted by law, all rights and remedies existing under this Agreement or any Ancillary Document are cumulative to, and are exclusive of, any rights or remedies otherwise available under applicable law. No failure on the part of any party to exercise, or delay in exercising, any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right.

6.4 Counterparts and Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same document. Executed signature pages to this Agreement may be delivered by facsimile and such facsimiles will be deemed as sufficient as if actual signature pages had been delivered.

6.5 Governing Law. This Agreement shall be governed by, and interpreted in accordance with, the laws of the State of New York.

6.6 Consent to Jurisdiction; WAIVER OF JURY TRIAL. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal or state court located in the Borough of Manhattan in the City of New York, New York in the event any dispute arises

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out of this Agreement, any of the Ancillary Documents or the Transactions, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement, any of the Ancillary Documents or the Transactions in any court other than a Federal or state court located in the Borough of Manhattan in the City of New York, New York. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

6.7 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given, if delivered personally, by telecopier or sent by overnight courier as follows:

(a) If to CEFL:

Citadel Equity Fund Ltd.

c/o Citadel Limited Partnership

131 South Dearborn Street

Chicago, IL 60603

Attention: Adam Cooper, Esq.

Fax: (312) 267-7444

with a copy (which copy alone shall not constitute notice):

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attention: Robert C. Schwenkel

                 Thomas P. Vartanian

Fax: (212) 859-4000

(b) If to the Company:

E*TRADE Financial Corporation

135 East 57^th Street

New York, NY 10022

Attention: Karl Roessner

                 General Counsel

Fax: (212) 826-2803

with a copy (which copy alone shall not constitute notice):

Davis Polk & Wardwell

1600 El Camino Real

Menlo Park, CA 94025

Attention: Daniel G. Kelly, Jr.

                 Bruce K. Dallas

Fax: (650) 752-2111

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or to such other address or addresses as shall be designated in writing. All notices shall be effective when received.

6.8 Entire Agreement; Third Party Beneficiaries; Amendment. This Agreement and the Ancillary Documents and the documents described herein and therein or attached or delivered pursuant hereto or thereto set forth the entire agreement between the parties hereto with respect to the Transactions and, other than as set forth in Section 6.9, are not intended to and shall not confer upon any person other than the parties hereto any rights or remedies hereunder. Any provision of this Agreement may be amended or modified in whole or in part at any time by an agreement in writing between the parties hereto executed in the same manner as this Agreement. No failure on the part of any party to exercise, and no delay in exercising, any right shall operate as a waiver thereof nor shall any single or partial exercise by any party of any right preclude any other or future exercise thereof or the exercise of any other right. No investigation by CEFL of the Company prior to or after the date hereof shall stop or limit CEFL from exercising any right hereunder or be deemed to be a waiver of any such right. Notwithstanding the foregoing, unless specifically modified pursuant to this Agreement, this Agreement will not affect the rights and obligations of the parties under the Investment Agreement, which shall remain in full force and effect in accordance with its terms.

6.9 Indemnification.

(a) The Company agrees to indemnify and hold harmless CEFL, each Affiliate of CEFL and each officer, director, employee, partner, member, shareholder and agent of CEFL and their Affiliates in their respective capacities as such (the “CEFL Indemnitees”), to the fullest extent lawful, from and against any and all actions, suits, claims, proceedings, damages, losses, deficiencies, liabilities, penalties, fines, interest, costs, judgments, amounts paid in settlement (subject to the penultimate sentence of Section 6.9(g) below) and expenses (including the cost and expenses of any litigations, actions, judgments and settlements related thereto, and the reasonable costs and expenses of attorneys and accountants incurred in the investigation or defense thereof or the enforcement of rights hereunder) (collectively, “Loss”) arising out of or resulting from (i) subject to the provisions set forth in Section 6.9(c) and Section 6.9(d), any inaccuracy in or breach of the representations or warranties made by the Company in this Agreement or any Ancillary Document, (ii) any breach of or failure to comply with the covenants and agreements of the Company or any of its Subsidiaries under this Agreement or any Ancillary Document; or (iii) any action, claim, suit, proceeding or investigation by any Governmental Entity, stockholder or creditor of the Company or any other Person (other than the Company or any CEFL Indemnitee) against or involving a CEFL Indemnitee relating to the execution and delivery of this Agreement and the Ancillary Documents or the performance by the parties of their obligations hereunder and thereunder or the consummation of the Transactions contemplated hereby and thereby, except, with respect to this clause (iii), to the extent it is determined pursuant to a final, non-appealable order of a court with competent jurisdiction that the CEFL Indemnitees’ liability is based on acts of the CEFL Indemnitee constituting fraud, gross negligence, willful misconduct or violations of applicable law.

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(b) CEFL agrees to indemnify and hold harmless the Company, its Affiliates and each of their respective officers, directors, employees and agents in their respective capacities as such (the “Company Indemnitees”), to the fullest extent lawful (i) subject to the provisions set forth in Section 6.9(e), from and against any and all Losses arising out of or resulting from any inaccuracy in or breach of the representations or warranties made by CEFL in this Agreement or any Ancillary Document, and (ii) any breach of or failure to comply with the covenants and agreements of CEFL under this Agreement or any Ancillary Document.

(c) For purposes of the indemnity contained in Section 6.9(a)(i), the Material Adverse Effect and other materiality (or correlative meaning) qualifications included in the representations and warranties contained herein shall have no effect on any provisions in this Section 6.9 concerning the indemnities of the Company or CEFL with respect to such representations and warranties, each of which representations and warranties shall be read as though there were no Material Adverse Effect or other materiality qualification for purposes of such indemnities.

(d) Notwithstanding anything to the contrary set forth in this Agreement, except in the case of fraud, the CEFL Indemnitees shall not make a claim against the Company for indemnification under Section 6.9(a)(i) (not including indemnification for breaches of the representations and warranties made by the Company in Section 3.1(e)) for CEFL Losses unless and until the aggregate amount of CEFL Losses under Section 6.9(a)(i) (not including indemnification for breaches of the representations and warranties made by the Company in Section 3.1(e)) exceeds an amount equal to the quotient of (i) the aggregate principal amount of the CEFL Exchanged Notes actually tendered into the Exchange Offer divided by (ii) 15 (the “Deductible”) and then the CEFL Indemnitees shall be entitled to indemnification for all Losses in excess of the Deductible. The aggregate amount of CEFL Losses for which the Company is obligated to indemnify CEFL in respect of claims under Section 6.9(a)(i) shall not exceed an amount equal to the aggregate principal amount of the CEFL Exchanged Notes actually tendered into the Exchange Offer.

(e) Notwithstanding anything to the contrary set forth in this Agreement, except in the case of fraud, the Company Indemnitees shall not make a claim against CEFL for indemnification under Section 6.9(b)(i) for Company Losses unless and until the aggregate amount of Company Losses under Section 6.9(b)(i) exceeds the Deductible and then the Company Indemnitees shall be entitled to indemnification for all Losses in excess of the Deductible. The aggregate amount of Company Losses for which CEFL is obligated to indemnify the Company in respect of claims under Section 6.9(b)(i) shall not exceed an amount equal to the aggregate principal amount of the CEFL Exchanged Notes actually tendered into the Exchange Offer.

(f) A party obligated to provide indemnification under this Section 6.9 (an “Indemnifying Party”) shall reimburse the indemnified parties of the other party (the “Indemnified Party”) for all reasonable out-of-pocket expenses (including attorneys’ fees and

44

disbursements) as they are incurred in connection with investigating, preparing to defend or defending any such action, suit, claim or proceeding (including any inquiry or investigation) whether or not an Indemnified Party is a party thereto. If an Indemnified Party makes a claim under this Section 6.9 for payment or reimbursement of expenses, such expenses shall be paid or reimbursed promptly upon receipt of appropriate documentation relating thereto even if the Indemnifying Party reserves the right to dispute whether this Agreement requires the payment or reimbursement of such expenses.

(g) An Indemnified Party shall give written notice to the Indemnifying Party of any claim with respect to which it seeks indemnification promptly after the discovery by such party of any matters giving rise to a claim for indemnification; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6.9 unless and to the extent that the Indemnifying Party shall have been materially prejudiced by the failure of such Indemnified Party to so notify such party. In case any such action, suit, claim or proceeding is brought against an Indemnified Party, the Indemnified Party shall be entitled to hire, at its own expense, separate counsel and participate in the defense thereof unless there are conflicts that make it reasonably necessary for separate counsel to represent the Indemnifying Party and the Indemnified Party, in which case the Indemnifying Party shall pay such expenses; provided, however, that the Indemnifying Party shall be entitled to assume and conduct the defense, unless the Indemnifying Party determines otherwise and following such determination the Indemnified Party assumes responsibility for conducting the defense (in which case the Indemnifying Party shall be liable for any legal or other expenses reasonably incurred by the Indemnified Party in connection with assuming and conducting the defense). No Indemnifying Party shall be liable for any settlement of any action, suit, claim or proceeding effected without its written consent; provided, however, the Indemnifying Party shall not unreasonably withhold, delay or condition its consent. The Indemnifying Party further agrees that it will not, without the Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Party is an actual or potential party to such action, suit, claim or proceeding) unless such settlement or compromise includes an unconditional release of each Indemnified Party from all liability arising out of such action, suit, claim or proceeding.

(h) The obligations of the Indemnifying Party under this Section 6.9 shall survive the transfer or redemption of the Securities, the Closing and termination of this Agreement, any Ancillary Document and the Transactions. The agreements contained in this Section 6.9 shall be in addition to any other rights of the Indemnified Party against the Indemnifying Party or others, at common law or otherwise. The Indemnifying Party consents to personal jurisdiction, service and venue in any court in the continental United States in which any claim subject to this Agreement is brought against any Indemnified Party.

(i) The amount the Indemnifying Party shall pay to the Indemnified Party with respect to a claim made pursuant to this Section 6.9 shall be an amount equal to the Loss incurred by the Indemnified Party with respect to such claim, after giving effect to any taxes payable by the Indemnified Party on receipt of any indemnification hereunder with respect to such claim and any tax benefit actually realizable (including deductions) by the Indemnified Party with respect to such claim for tax purposes.

45

(j) Notwithstanding anything to the contrary in this Section 6.9, if and to the extent any Ancillary Document provides for indemnification with respect to matters for which indemnity is provided by Section 6.9(a) or Section 6.9(b) of this Agreement, the indemnity provisions of such Ancillary Document shall govern and control.

6.10 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the Company’s successors and assigns and CEFL’s successors and assigns, and no other person and neither party may assign their rights or obligations under this Agreement; provided, that, subject to applicable law, CEFL may assign all or any portion of its rights and obligations under this Agreement to any Affiliate under common control with CEFL’s ultimate parent entity or general partner of CEFL, but in each case only if the transferee agrees in writing for the benefit of the Company (with a copy thereof to be furnished to the Company) to be bound by the terms of this Agreement (any such transferee shall be included in the term “CEFL”); provided, further, that no such assignment shall relieve CEFL of its obligations hereunder.

6.11 Headings. The headings of Articles and Sections contained in this Agreement are for reference purposes only and are not part of this Agreement.

6.12 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect; provided that the economic and legal substance of any of the Transactions is not affected in any manner materially adverse to any party. In the event of any such determination, the parties agree to negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intent and purpose hereof. To the extent permitted by law, the parties hereby to the same extent waive any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

6.13 Arm’s Length Transactions. This Agreement and the Transactions have been negotiated and entered into by the parties on an arms-length basis, and the Company expressly acknowledges and agrees that neither CEFL nor any of its Affiliates is, or has acted in any capacity as, an advisor to the Company in connection with this Agreement or the Transactions.

6.14 No Presumption. If any claim is made by a party relating to any conflict, omission or ambiguity in this Agreement or any Ancillary Document, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement or any Ancillary Document was prepared by or at the request of a particular party or its counsel.

6.15 Public Announcements. Subject to each party’s disclosure obligations imposed by law or regulation or the rules of any stock exchange upon which its securities are listed, each of the parties hereto will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement and any of the Transactions, and no party hereto will make any such news release or public disclosure

46

without first consulting with the other party hereto. The first public announcement by the Company regarding the Transactions shall be in substantially the form attached hereto as Exhibit E and shall include all material non-public information which the Company has provided to CEFL or any of its Affiliates, whether in connection with its consideration of this Agreement and the Transactions, or otherwise (to the extent it remains material non-public information at such time), and from and after the date of such public announcement, the Company shall not provide to CEFL or any of its Affiliates any material non-public information concerning the Company without the consent of CEFL. Such announcement shall be made within two Business Days after the execution of this Agreement.

6.16 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, in addition to any other remedy to which they are entitled at law or in equity.

* * *

47

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first herein above written.

E*TRADE FINANCIAL CORPORATION
By:	/s/ Donald H. Layton
Name:	Donald H. Layton
Title:	Chief Executive Officer and Chairman of the Board
CITADEL EQUITY FUND LTD.
By:	Citadel Advisors LLC, its Portfolio Manager
By:	/s/ Adam C. Cooper
Name:	Adam C. Cooper
Title:	Authorized Signatory

[Signature Page to Exchange Agreement]

EX-99.1

E*TRADE Common Stock Offering

Investor Presentation

June 2009

Donald H. Layton, Chairman & CEO

Robert V. Burton, EVP & Bank President

Bruce P. Nolop, EVP & CFO

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

This presentation contains confidential information and may not be disclosed without

E*TRADE FINANCIAL Corporation’s written permission.

Exhibit 99.1

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

2

Notice to Investors

Forward-Looking Statements

The

statements

contained

in

this

presentation

that

are

forward

looking

are

based

on

current

expectations

that

are

subject

to

a

number

of

uncertainties

and

risks,

and

actual

results

may

differ

materially.

Such

statements

include

those

relating

to

the

ability

of

the

Company

to

complete

the

offering,

complete

the

proposed

debt

exchange

and

thereby

reduce

interest

expense

and

debt

burden,

strengthen

its

capital

structure

and

ensure

long-term

success

of

its

core

trading

and

investing

business.

The

uncertainties

and

risks

include,

but

are

not

limited

to,

potential

negative

regulatory

consequences

resulting

from

actions

by

the

Office

of

Thrift

Supervision

or

other

regulators,

underparticipation

in

this

offering

or

the

proposed

debt

exchange,

given

that

there

are

no

binding

agreements

with

any

holder

of

the

Company’s

debt

securities

other

than

Citadel,

and

potential

failure

to

obtain

regulatory

and

shareholder

approval

for

the

proposed

debt

exchange

and

related

matters.

Additional

uncertainties

and

risks

affecting

the

business,

financial

condition,

results

of

operations

and

prospects

of

the

Company

include,

but

are

not

limited

to,

potential

changes

in

market

activity,

anticipated

changes

in

the

rate

of

new

customer

acquisition,

the

conversion

of

new

visitors

to

the

site

to

customers,

the

activity

of

customers

and

assets

held

at

the

institution,

seasonality,

macro

trends

of

the

economy

in

general

and

the

residential

real

estate

market,

instability

in

the

consumer

credit

markets

and

credit

trends,

rising

mortgage

interest

rates,

tighter

mortgage

lending

guidelines

across

the

industry,

increased

mortgage

loan

delinquency

and

default

rates,

portfolio

growth,

portfolio

seasoning

and

resolution

through

collections,

sales

or

charge-offs,

the

development

and

enhancement

of

products

and

services,

competitive

pressures

(including

price

competition),

system

failures,

economic

and

political

conditions,

including

changes

to

the

U.S.

Treasury’s

Troubled

Asset

Relief

Program,

changes

in

consumer

behavior

and

the

introduction

of

competing

products

having

technological

and/or

other

advantages.

We

encourage

all

investors

to

read

and

consider

the

risks

discussed

in

the

“Risk

Factors”

section

of

our

preliminary

prospectus

supplement

dated

June

17,

2009

for

a

more

complete

understanding

of

the

risks

associated

with

an

investment

in

the

Company.

Further

information

about

these

risks

and

uncertainties

can

be

found

in

the

information

included

or

incorporated

in

the

annual,

quarterly

and

current

reports

on

Form

10-K,

Form

10-Q

and

Form

8-K

previously

filed

by

E*TRADE

FINANCIAL

Corporation

with

the

Securities

and

Exchange

Commission

(“SEC”)

(including

information

under

the

caption

“Risk

Factors”).

Any

forward-looking

statement

included

in

this

release

speaks

only

as

of

the

date

of

this

communication;

the

Company

disclaims

any

obligation

to

update

any

information.

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

3

Notice to Investors

Proxy Statement 

In connection with the Special Meeting of Stockholders, E*TRADE FINANCIAL Corporation is filing a

preliminary proxy statement with the SEC and expects to file a definitive proxy statement as soon as

practicable and to mail a definitive proxy statement to stockholders as soon as practicable.

STOCKHOLDERS ARE ADVISED TO READ THE DEFINITIVE PROXY STATEMENT BECAUSE IT

WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSALS TO BE PRESENTED AND

VOTED UPON. Stockholders may also obtain a copy of the definitive proxy statement and any other

relevant documents filed by E*TRADE FINANCIAL Corporation for free at the SEC web site at

www.sec.gov. The definitive proxy statement and other documents also may be obtained for free from

E*TRADE FINANCIAL Corporation, Attn: Corporate Secretary, 135 East 57th Street, New York, New

York 10022. 

E*TRADE FINANCIAL Corporation and its directors, executive officers and other members of

management and employees may be deemed participants in the solicitation of proxies and voting

instructions for the 2009 Special Meeting of Stockholders. Information concerning the interests of these

persons, if any, in the matters to be voted upon is set forth in the proxy statement. 

Registration Statement

The issuer has filed a registration statement (including a prospectus) and a prospectus supplement with

the SEC for the offering to which this communication relates. Before you invest, you should read the

prospectus in that registration statement, the prospectus supplement and other documents the issuer

has filed with the SEC for more complete information about the issuer and this offering. You may get

these documents for free by visiting IDEA on the SEC Web site at www.sec.gov. Alternatively, the

issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus

and prospectus supplement if you request it by calling J.P. Morgan Securities Inc. toll-free at

866.430.0686 or Sandler O’Neill & Partners, L.P. toll-free at 866.805.4128.

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

4

Offering Summary

Thursday,

June 18

Expected pricing:

90 days for Company, Management, Directors and Citadel

Lock-up provisions:

$400 million

Transaction Size:

E*TRADE Securities LLC

Co-Manager:

J.P. Morgan Securities Inc. and Sandler O'Neill + Partners, L.P.

Lead Book-Running Managers:

$50 –

100 million participation at the offering price

Citadel Commitment:

Debt Exchange:  Minimum $800MM exchange of Notes due

2011 and 2017 for zero-coupon convertible debt due 2019

Other Capital Action:

Primarily to contribute equity capital to E*TRADE Bank

General corporate purposes

Use of Proceeds:

Follow-on Public Common Stock Offering

Type of Offering:

E*TRADE FINANCIAL Corporation (NASDAQ: ETFC)

Issuer:

$1.2 Billion Capital Strengthening Plan

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

5

Overview

Thriving online brokerage business

Demonstrating leadership in industry with strong secular growth

trends

Continuing to exceed expectations and remaining competitive among

largest online brokers

Strategically investing for long term growth

Improving loan performance trends

Showing meaningful signs of improvement

Proactively strengthening capital structure

Reducing balance sheet risk

Bolstering Bank capital ratios

Reducing Parent debt burden

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

6

Thriving Online Brokerage Business

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

7

Excellent growth through market downturn

Trading and account growth match leading competitors

Market recognition of industry leadership

Profit and growth through discipline and focus

Emphasis on core customer franchise

Disciplined management: expense, profit, service quality

Full investment pipeline

Marketing to drive account acquisition

Thriving Online Brokerage Business

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

161

161

185

204

181

172

184

216

184

182

215

230

239

50

75

100

125

150

175

200

225

250

Daily Average Revenue Trades

8

Online Brokerage Business:

Customer DART growth exceeding expectations…

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

DARTs Indexed to Q1 2008

90

95

100

105

110

115

120

125

130

135

140

ETFC

AMTD

SCHW

9

Online Brokerage Business :

…and at levels competitive within largest online brokers

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

2,716

2,449

2,475

2,492

2,453

2,478

2,501

2,520

2,597

2,623

2,661

2,693

2,611

2,300

2,350

2,400

2,450

2,500

2,550

2,600

2,650

2,700

2,750

2,800

Brokerage Accounts

10

Online Brokerage Business:

Total

Customer

Accounts

May-09:

4,541

5% y/y

increase

Continued record brokerage and total customer accounts

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

76%

124%

124%

120%

167%

0%

161%

150%

199%

239%

213%

0%

50%

100%

150%

200%

250%

Gross New Brokerage Accounts / Attriting Brokerage Accounts

11

Online Brokerage Business:

Improved brokerage account replacement rate

Attrition Rate

(1)

Q1

08:

17%

Q1

09:

13%

(1)(a)

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

12

Online Brokerage Business:

Continued third-party recognition as best in class

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

$294

$355

$490

$354

$319

$296

$321

$0

$100

$200

$300

$400

$500

$600

Total Corporate Operating Expenses

Online Brokerage Business:

13

Disciplined expense management

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

Trailing Four Quarters (Q2 08 –

Q1 09)

40%

$834

1,230

886

344

2,064

844

$1,220

All            

Segments

824

Commission, fees and other revenue

(2)

1,609

Total net revenue (pre-credit costs)

(2)

39%

$621

988

701

287

$785

Trading and

Investing segment

Operating margin (pre-credit cost)

(4)

Segment income (pre-credit cost)

(3)

Total operating expenses

Non-compensation expenses

Compensation and benefits

Net operating interest income

($ in millions)

Online Brokerage Business:

14

Strong Company results (pre-credit cost)

Footnoted items are non-GAAP financial measures.  See the Appendix for a reconciliation to the most directly comparable GAAP financial measures.

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

15

Enhancements

Back-testing and advanced

screeners

Fixed Income, Mutual fund, ETF

tools for long term investors;

Portfolio Margining

New Products

E*TRADE Mobile Pro for

BlackBerry

®

and iPhone

™

Investor Resource Center

Pro Sectors & Industry Tracker

Excel Manager on Power E*TRADE

Pro

Online Brokerage Business:

Full development pipeline of tools for active traders

and long-term investors

iPhone™

is

a

trademark

of

Apple

Inc.

BlackBerry®

is

a

registered

trademark

of

RIM

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

16

Tools focused on           

long-term investors

Tools focused on active traders

Online Brokerage Business:

Full development pipeline of tools for active traders

and long-term investors

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

Brand identification /

Features and function

Market &

Event driven

Validation tagline

Online Brokerage Business:

17

Highly effective advertising driving account acquisition

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

18

Improving Loan Performance Trends

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

19

Portfolio in full run-off mode

Proactively managing to reduce charge-offs

Eliminated significant risk from open lines

Comprehensive loan modification program proving successful

Portfolio showing meaningful 2009 improvements

Home equity delinquency trends show improvement

1-4 family delinquency levels stable

Building reserves ahead of charge-offs

Well-developed stress test regimen for loan portfolio

Improving Loan Performance Trends

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

20

Loan Performance:

$2.2

($0.1)

($0.7)

$3.0

Consumer

$9.5

($1.2)

($1.7)

$12.4

Home equity

($1.5)

($0.2)

Net     

Charge-Offs

Loan

Balance

(5)

3/31/09

TOTAL

1-4 family Loans

($ in billions)

($6.5)

($4.1)

Net 

Paydowns

(6)

$32.3

$16.9

Loan   

Balance

(5)

9/30/07

$24.3

$12.6

Loan portfolio in full run-off mode

25% Decline

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

0%

$0.0B

2009

0%

$0.0B

2008

7%

$0.7B

2003

and older

$9.5B

$1.0B

$2.3B

$4.4B

$1.1B

11%

2004

24%

2005

100%

Total

46%

2006

12%

2007

Home Equity Unpaid

Balances by Origination Vintage

Loan Performance:

21

Home equity delinquency trends show improvement

partly due to low 2007 vintage and overall seasoning

2007

2003

and older

2004

2005

2006

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

$2.0

$2.5

$3.0

$3.7

$5.6

$6.3

$7.3

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

Undrawn Home Equity Lines

Loan Performance:

22

Proactively managing to reduce future charge-offs

Total Loan Put-Backs

$175MM since Q3 07

Comprehensive Loan

Modification Program

Nearly $200MM in

loans modified

Majority are permanent

interest rate reductions

Conservative reserving

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

$0

$100

$200

$300

$400

$500

$600

$700

30-89 Days Delinquent

90-179 Days Delinquent

180 + Days Delinquent

23

Loan Performance:

Expected recovery value

Home equity delinquency trend improvement in 2009

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

$0

$200

$400

$600

$800

$1,000

$1,200

30-89 Days Delinquent

90-179 Days Delinquent

180 + Days Delinquent

24

Loan Performance:

1-4 Family delinquency levels stabilizing in 2009

Expected recovery value

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

25

Loan Performance:

$0

$250

$500

$750

$1,000

$1,250

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Consumer and other

1-4 family

Home equity

$1,201

$1,081

$874

$636

$566

$508

Building reserves ahead of charge-offs; provision recently declining

Over Past

6 Quarters

Provision for loan

losses

1.7x

net

charge-offs

Allowance for

loan losses

Provision for

loan losses

Net charge

-offs

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

26

Loan Performance:

$1,011

$62

$812

$137

2008 

Charge-offs

$2,791

$2,131

Implied charge-offs

$257

$175

Consumer and other

2009 & 2010 Charge-offs       

at SCAP Ratios

Treasury Department’s “More Adverse”

scenario applied to 12/31/08 loan balances

$1,183

$773

Low

$1,484

$1,050

High

Home equity

1-4 family

($ in millions)

Well-developed stress test regimen for credit portfolio

$1,201

Allowance

(Reserve

for

Q2

09

–

Q1

10)

$334

Net charge-offs

Q1 09

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

27

Proactively Strengthening Capital

Structure

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

28

Proactively Strengthening Capital Structure

Aggressive and Early Capital Actions

Successful divestitures of non-core assets

Reducing loan portfolio and balance sheet risk

Maintaining Bank capital in excess of regulatory well-capitalized

thresholds

Objectives of $1.2 Billion Capital Plan

Increasing Bank Capital

Reducing Parent debt burden

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

29

Capital Structure Actions:

$24

$69

Aircraft related assets

$3

$25

RAA Wealth Management

$754

$145

$515

Net Proceeds

$478

$22

$429

Pre-Tax Gain

Total

IL&FS Investsmart

E*TRADE Canada

2008 Transactions

($ in millions)

Raised significant capital through divestitures of non-core assets in

2008

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

30

($14.8)

$49.4

$64.2

Total assets –

E*TRADE FINANCIAL

($9.1)

$23.3

$32.4

Loan Portfolio

($6.2)

$14.9

$21.1

Other assets

$24.4

$11.2

Balance

3/31/09

($10.4)

$34.8

Risk weighted assets –

E*TRADE Bank

($ in billions)

Balance

9/30/07

Change

Agency securities

$10.7

$0.5

Capital Structure Actions:

Total Assets

Reducing loan portfolio and balance sheet risk

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

$0

$50

$100

$150

$200

$250

$300

$350

$400

6 Quarter Avg: $288MM

Capital release

(7)

from loan run-off

6 Quarter Avg: $102MM

Bank earnings

(8)

6 Quarter Avg: $186MM

31

Capital Structure Actions:

Strong organic capital generation to absorb loan charge-offs

Footnoted items are non-GAAP financial measures.  See the Appendix for a reconciliation to the most directly comparable GAAP financial measures.

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

32

Total Proceeds

2008 Actions

$463

Total

$754

$400

$63

Total Proceeds

Non-core asset sales

Follow-on common stock offering

Current Actions

($ in millions)

Equity Drawdown Program

Capital Structure Actions:

Raising

additional

cash

for

Bank

and

enhancing

Parent

liquidity

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

33

as of 3/31/09                           

($ in millions)

Actual

Ratio

Excess

to well-

capitalized

Pro Forma

Ratio*

Pro Forma

Excess*

Total capital to          

risk-weighted assets

11.8%

$444

13.9%

$944

Tier I Capital to         

risk-weighted assets

10.5%

$1,105

12.6%

$1,605

Tier I Capital to  

adjusted total assets

5.6%

$288

6.7%

$763

Capital Structure Actions:

E*TRADE Bank

*Pro

forma

includes

contributions

to

Bank:

$200MM

(4/01/09

–

5/31/09)

plus

$300MM

from

follow-on

common

stock

offering

Maintaining Bank capital in excess of regulatory well-capitalized

thresholds

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

34

$273

$2,186

12 ½%

Due 2017

(9)

$150

Management goal

$358

$19

$31

$35

Annual interest

expense

Senior Notes

($ in millions)

8%

Due 2011

7 3/8%

Due 2013

7 7/8%

Due 2015

Total

Total outstanding

$435

$415

$243

$3,279

Capital Structure Actions:

Parent Company Debt Expense

Reducing

corporate interest expense through debt exchanges

Reduce Interest Expense to …

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

35

Capital Structure Actions:

Citadel commits to exchange a minimum $800 million

At least $200 million –

8% notes due 2011

At

least

$600

million

–

12.5%

SLN

notes

due

2017

Offer

to

exchange

up

to

$516

million

with

other

bondholders

Exchange all outstanding 8% notes due 2011

Exchange up to $310 million face amount of 12.5% SLN notes due 2017

Key convertible debt terms

Zero coupon

10 year maturity

Conversion price, at the offering price, subject to a collar of $1.00 to $1.20

Offering to exchange zero coupon convertible debt for

certain existing company debt

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

36

Overview

Thriving online brokerage business

Demonstrating leadership in industry with strong secular growth

trends

Continuing to exceed expectations and remaining competitive among

largest online brokers

Strategically investing for long-term growth

Improving loan performance trends

Showing meaningful signs of improvement

Proactively strengthening capital structure

Reducing balance sheet risk

Bolstering Bank capital ratios

Reducing Parent debt burden

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

37

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

38

Appendix

Q407

Q108

Q208

Q308

Q408

Q109

Beginning Excess Risk-Based Capital

192

$        

435

$        

695

$        

622

$        

524

$        

715

$        

Pre - credit earnings

197

183

204

188

164

181

Loan Portfolio Run-Off

156

108

98

101

79

71

Other

(110)

(31)

(375)

(387)

(52)

(523)

Ending Excess Risk-Based Capital

435

$        

695

$        

622

$        

524

$        

715

$        

444

$        

3/31/09

12/31/08

9/30/08

6/30/08

Trailing 4 Qtrs

Operating income

(251)

$     

(348)

$     

(436)

$     

(105)

$     

(1,140)

$         

Add back:

Provision for loan losses

454

513

518

319

1,804

(Gain) loss on securities, net

(a)

(17)

11

160

16

170

Operating income (pre-credit cost)

186

$      

176

$      

242

$      

230

$      

834

$             

Explanation of Non-GAAP Measures and Certain Metrics

Management believes that operating income (pre-credit cost) and bank earnings before taxes and before credit losses are appropriate measures for evaluating the operating and liquidity

performance of the Company. Management believes that the elimination of certain items from the related GAAP measures is helpful to investors and analysts who may wish to use some or all

of this information to analyze our current performance, prospects and valuation. Management uses non-GAAP information internally to evaluate our operating performance in formulating our

budget for future periods.

(1)

The

attrition

rate

is

calculated

by

dividing

attriting

brokerage

accounts

(a)

(annualized)

by

total

brokerage

accounts.

(a)

Attriting

brokerage accounts: Gross new brokerage accounts, less net new brokerage accounts

(2)

The consolidated entity excludes credits costs recorded in the Gain (loss) on loans and securities, net line item of $170MM.

(3)

Segment income (pre-credit cost) represents the operating income of the Company before loss on securities, net and provision for loan losses. This metric shows the amount of operating

income that the Company, after accruing for interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and gain (loss) on

securities.

Management

believes

this

non-GAAP

measure

is

useful

to

investors

and

analysts

as

it

is

an

indication

of

the

underlying

profitability

of

the

business

that

the

Company

intends

to

grow in the future. Below is a reconciliation of operating income (pre-credit cost) from GAAP operating income (dollars in millions):

(a)

(Gain)

loss

on

securities,

net

is

included

in

the

Gain

(loss)

on

loans

and

securities,

net

line

item

on

the

consolidated

statement

of

loss.

(4)

Operating margin (pre-credit cost) is the percentage of net revenue that results in income (loss) before credit costs, other income (expense), income taxes and discontinued operations. 

The percentage is calculated by dividing income (loss) (pre-credit cost) before other income (expense), income taxes and discontinued operations by total net revenue. 

(5)

Represents unpaid principal balances.

(6)

Net

paydowns

includes

paydowns

on

loans,

as

well

as

limited

origination

activity,

home

equity

advances,

repurchase

activity

and

transfers

to

real

estate

owned

assets.

(7)

The capital release from loan run-off only includes the decrease in risk based capital required for our 1-4 family, home equity and consumer loan portfolios.  This slide does not depict the

capital impact

related

to

changes

in

other

risk-weighted

assets

(represented

in

‘other’

line

in

the

below

chart),

such

as

securities,

and

the

impact

of

our

provision

for

loan

losses.

©

2009 E*TRADE FINANCIAL Corp. All rights reserved.

39

Appendix

Below is a reconciliation of Bank earnings before taxes and before credit losses from Income (loss) before income taxes and discontinued operations (dollars in millions):

(a)

Excess risk-based capital is the excess capital that E*TRADE Bank has compared to the regulatory minimum well-capitalized

threshold.

(b)

Non-bank loss represents all of the Company’s subsidiaries including Corporate and Brokerage, but excluding the Bank.

(c)

(Gain) loss on securities, net is included in the Gain (loss) on loans and securities, net line item on the consolidated statement of

income (loss).

(9)

Interest on the 12 ½% Springing Lien Notes may be paid in kind (PIK) through May 2010.

3/31/09

12/31/08

9/30/08

6/30/08

3/31/08

12/31/07

Loss before income taxes and discontinued operations

(344)

$      

(445)

$      

(502)

$      

(182)

$      

(150)

$      

(2,581)

$      

Add back:

Non-bank loss before tax and discontinued operations(b)

88

85

12

51

91

-

Provision for loan losses

454

513

518

319

234

402

(Gain) loss on securities, net(c)

(17)

11

160

16

8

2,275

Impairment of goodwill

-

-

-

-

-

101

Bank earnings before taxes and before credit losses

181

$       

164

$       

188

$       

204

$       

183

$       

197

$           

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to

retail investors.  Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC).  Bank products and services are

offered

by

E*TRADE

Bank,

a

Federal

savings

bank,

Member

FDIC,

or

its

subsidiaries.

(8)

Bank earnings before taxes and before credit losses represents the pre-tax earnings of E*TRADE Bank Holding Company (“ETBH” or “Bank”) before

discontinued operations, loss on securities, net and provision for loan losses.  This metric shows the amount of earnings that the Bank, after accruing for the

interest expense on its trust preferred securities, generates each quarter prior to credit related losses, primarily provision and gain (loss) on securities. 

Management believes this non-GAAP measure is useful to investors and analysts as it is an indicator of the level of credit related losses the Bank can absorb

without causing a decline in E*TRADE Bank’s excess risk-based capital.

EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE

E*TRADE FINANCIAL Media Relations Contact

Pam Erickson

617-296-6080

pam.erickson@etrade.com

E*TRADE FINANCIAL Investor Relations Contact

Brett Goodman

646-521-4406

brett.goodman@etrade.com

E*TRADE FINANCIAL ANNOUNCES $1.2 BILLION PLAN TO STRENGTHEN CAPITAL STRUCTURE; INCLUDES COMMON EQUITY OFFERING, DEBT EXCHANGE TRANSACTIONS

New York, NY, June 17, 2009 – E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced the launch of a registered public offering (the “Common Stock Offering”) of $400 million of its common stock. The Company also announced that, upon pricing of the Common Stock Offering, it will launch significant debt exchange transactions for certain of its outstanding notes (the “Exchange Transactions”). The consummation of the Exchange Transactions will be subject to certain conditions, including the closing of the Common Stock Offering and shareholder approval. Affiliates of Citadel Investment Group L.L.C. (“Citadel”), the Company’s largest stock and bond holder, have agreed to participate in both the Common Stock Offering and the Exchange Transactions.

The proceeds from the Common Stock Offering will provide additional equity capital, primarily for E*TRADE Bank and secondarily for other corporate purposes. Citadel has committed to place an order with the underwriters to purchase either $50 million or $100 million of stock in the Common Stock Offering, depending on the public offering price.

The Company had previously suspended its open market purchase program that commenced on May 8, 2009. The Company has raised net proceeds of approximately $63 million through the issuance of approximately 41 million shares of common stock under that program to date.

The Company will offer to exchange more than $1 billion of newly-issued zero coupon convertible debt for all of its 8% Senior Notes due 2011 (the “2011 Notes”) and a portion of its 12.5% Springing Lien Notes due 2017 (the “2017 Notes”). This will significantly reduce the Company’s debt service burden by eliminating interest costs relating to those debt securities that are exchanged and lengthening the weighted-average maturity of its debt securities. The convertible debt will have a maturity of 10 years and will be convertible into shares of common stock based on the public offering price in the Common Stock Offering (net of underwriting discounts), provided that the conversion price will be no less than $1.00 per share and no more than $1.20 per share.

Citadel has agreed to participate in the Exchange Transactions for an aggregate principal amount of at least $800 million face value of the Company’s long-term debt,

including $200 million face value of the 2011 Notes and at least $600 million face value of the 2017 Notes, subject to reduction under certain circumstances. The Company will offer to exchange all of its 2011 Notes and up to 75 percent of its 2017 Notes not held by Citadel on the same terms. The Exchange Transactions are expected to be commenced immediately following the pricing of the Common Stock Offering. Complete details of the Exchange Transactions will be announced at that time.

The Company’s ability to execute the Exchange Transactions requires, among other things, shareholder approval under NASDAQ Marketplace Rules. Accordingly, E*TRADE will file a preliminary proxy statement with the Securities and Exchange Commission calling for a special meeting of its shareholders to authorize the Exchange Transactions, the issuance of up to 365 million shares of common stock in additional debt exchange transactions, and an increase in the number of authorized shares of the Company.

In addition to approval by shareholders, the extent of Citadel’s participation in the Exchange Transactions is subject to approval from E*TRADE’s primary federal banking regulator, the Office of Thrift Supervision (“OTS”).

J.P. Morgan Securities Inc. and Sandler O’Neill & Partners, L.P. are joint book-running managers and E*TRADE Securities LLC is co-manager of the Common Stock Offering. J.P. Morgan Securities Inc. has also been retained as the Company’s exclusive financial advisor in connection with the Exchange Transactions. The Company is paying customary fees for these services and has agreed to indemnify it for certain liabilities. J.P. Morgan Securities Inc.’s compensation for its advisory services with respect to the Exchange Transactions is in no way contingent on the results or the success of the exchange offer or consent solicitation relating to any outstanding notes, and J. P. Morgan Securities Inc. has not been retained to, and will not, solicit acceptances of the Exchange Transactions or consents to any outstanding notes or make any recommendations with respect thereto.

An investor presentation detailing the offering is available via webcast at http://www.retailroadshow.com

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to retail investors. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

# # #

Important Notices

Forward-Looking Statements. E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. Such statements include those relating to the ability of the

Company to complete the Common Stock Offering and the Exchange Transactions, reduce debt service burden by eliminating interest costs and increase equity. The uncertainties and risks include, but are not limited to, potential negative regulatory consequences resulting from actions by the OTS or other regulators, potential failure to obtain regulatory and shareholder approval for the Exchange Transactions and related matters. Additional uncertainties and risks affecting the business, financial condition, results of operations and prospects of the Company include, but are not limited to, potential changes in market activity, anticipated changes in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, including changes to the U.S. Treasury’s Troubled Asset Relief Program, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the “Risk Factors” section of our preliminary prospectus supplement dated June 17, 2009 and in the information included or incorporated in the annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K previously filed by E*TRADE FINANCIAL Corporation with the SEC (including information under the caption “Risk Factors”). Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.

Proxy Statement. In connection with the Special Meeting of Stockholders, E*TRADE FINANCIAL Corporation is filing a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”) and expects to file and mail a definitive proxy statement to stockholders as soon as practicable. Stockholders are advised to read the definitive proxy statement because it will contain important information about the proposals to be presented and voted upon. Stockholders may also obtain a copy of the definitive proxy statement and any other relevant documents filed by E*TRADE FINANCIAL Corporation for free at the SEC web site at www.sec.gov. The definitive proxy statement and other documents also may be obtained for free from E*TRADE FINANCIAL Corporation, Attn: Corporate Secretary, 135 East 57th Street, New York, New York, 10022.

E*TRADE FINANCIAL Corporation and its directors, executive officers and other members of management and employees may be deemed participants in the solicitation of proxies and voting instructions for the 2009 Special Meeting of Stockholders. Information concerning the interests of these persons, if any, in the matters to be voted upon is set forth in the proxy statement.

Registration Statement. The issuer has filed a registration statement (including a prospectus) and a prospectus supplement with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the prospectus supplement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting IDEA on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the

offering will arrange to send you the prospectus and prospectus supplement if you request it by calling J.P. Morgan Securities Inc. toll-free at 866-430-0686 or Sandler O’Neill & Partners, L.P. toll-free at 866-805-4128.

© 2009 E*TRADE FINANCIAL Corporation. All rights reserved.

EX-99.3

Exhibit 99.3

FOR IMMEDIATE RELEASE

E*TRADE FINANCIAL Media Relations Contact

Pam Erickson

617-296-6080

pam.erickson@etrade.com

E*TRADE FINANCIAL Investor Relations Contact

Brett Goodman

646-521-4406

brett.goodman@etrade.com

E*TRADE FINANCIAL CORPORATION REPORTS MONTHLY ACTIVITY FOR MAY 2009; PROVIDES UPDATES TO LOAN DELINQUENCIES AND CERTAIN FINANCIAL AND BALANCE SHEET METRICS

New York, June 17, 2009 – E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today released its Monthly Activity Report for May and provided an intra-quarter update on its loan portfolio delinquencies and certain key financial and balance sheet metrics.

The Company ended May with record total accounts of more than 4.5 million, which included record brokerage accounts of more than 2.7 million. This included gross new brokerage accounts of 43,000 and net new brokerage accounts of 23,000. Total Daily Average Revenue Trades (“DARTs”) for May were 239,439 – an increase of 4 percent from April and 34 percent from the year ago period. The Company reported approximately 220,000 DARTs for June month to date (as of June 12), with second-quarter DARTs on track to be approximately 15 percent higher than the prior quarter.

Asset flows continued to be positive, as the Company realized $500 million in net new customer assets during May, marking the eighth consecutive month of positive inflows. Total customer cash and deposits (including brokerage-related cash) decreased slightly during the month, while total customer assets increased 5.8 percent. Customers were net buyers of more than $450 million in securities during the month.

The Company also provided an update concerning delinquencies in its loan portfolio. Special mention delinquencies (30 to 89 days delinquent) for its home equity portfolio, which represents the Company’s greatest exposure to loan losses, declined 10 percent from March 31 to May 31. Home equity “at risk” delinquencies (30 to 179 days delinquent) declined 14 percent from March 31 to May 31. Total special mention delinquencies for the Company’s loan portfolio, which includes one- to four-family, home equity and consumer and other loans, declined by 7 percent quarter to date as of May 31, 2009.

Detailed information concerning loan delinquencies is provided in table form on page 4 of this release.

The Company also provided an update to certain key financial and balance sheet metrics through the first two months of the second quarter of 2009, as well as certain forecasts for the second quarter 2009 results. The Company cautions that this data is preliminary as of June 12, 2009 and subject to change.

(more)

E*TRADE FINANCIAL Monthly Activity Report for May 2009, Page 2

April and May Quarter-to-Date Results

• Total Net Revenue of $448 million

• Commission, Fees and Other Revenue of $165 million

• Operating Expense of $192 million

May Bank Capital Metrics (as of May 31, 2009)

• Bank Tier-1 and risk-based capital ratios of 6.07% and 12.75%, respectively

• Bank excess risk-based capital (excess to the regulatory well-capitalized threshold) of $644 million

• Bank Tier-1 capital to risk-weighted assets ratio of 11.46%

Net revenue totaled $448 million for April and May, inclusive of gains on the sale of agency mortgage-backed securities of $54 million. Commission, fees and other revenue totaled just over $165 million, and operating expenses totaled just over $192 million for April and May.

The Company also forecasted a range for loan loss provision and expected net charge-offs for the full second quarter:

• Estimated provision for loan losses of $375 million to $450 million

• Estimated net charge-offs of $375 million to $400 million

The estimated range for net charge-offs and provision expenses are based on a combination of actual data from the Company’s loan servicers through the second month of the quarter, a forecast for loan charge-offs and recoveries for the month ended June 30, 2009, and an updated loan loss forecast as of April 30, 2009, following the Company’s standard quarterly procedures. The forecast is based on actual loan delinquencies through April 30, 2009, and model calibration for delinquency roll rates was based on results as of the same period. The Company’s methodology for estimating allowance for loan losses is more fully described in E*TRADE FINANCIAL’s Quarterly Report on Form 10-Q for the three months ended March 31, 2009, and the Company’s Current Report on Form 8-K filed May 14, 2009.

(more)

E*TRADE FINANCIAL Monthly Activity Report for May 2009, Page 3

Monthly Activity Data

	May-09			Apr-09			May-08(1)		% Chg. M/M	% Chg. Y/Y
Trading days		20.0			21.0			21.0	N.M.	N.M.
Daily Average Revenue Trades		239,439			230,345			178,279	3.9%	34.3%
Gross new brokerage accounts		43,402			56,000			37,553	(22.5)%	15.6%
Gross new stock plan accounts		16,611			12,213			21,562	36.0%	(23.0)%
Gross new banking accounts		4,865			7,411			18,869	(34.4)%	(74.2)%
Total gross new accounts		64,878			75,624			77,984	(14.2)%	(16.8)%
Net new brokerage accounts		23,030			32,550			16,221	N.M.	N.M.
Net new stock plan accounts		10,383			3,520			6,264	N.M.	N.M.
Net new banking accounts		(10,307	)		(6,677	)		2,946	N.M.	N.M.
Net new accounts		23,106			29,393			25,431	N.M.	N.M.
End of period brokerage accounts		2,716,164			2,693,134			2,514,328	0.9%	8.0%
End of period stock plan accounts		1,016,765			1,006,382			1,008,820	1.0%	0.8%
End of period banking accounts		808,815			819,122			802,418	(1.3)%	0.8%
End of period total accounts		4,541,744			4,518,638			4,325,566	0.5%	5.0%
Customer Assets ($MM)
Security holdings	$	94,356		$	87,096		$	141,797	8.3%	(33.5)%
Brokerage related cash		18,267			18,013			17,922	1.4%	1.9%
Other customer cash and deposits		16,170			16,670			16,195	(3.0)%	(0.2)%
Total customer assets	$	128,793		$	121,779		$	175,914	5.8%	(26.8)%
Net new customer assets ($B)	$	0.5		$	0.3		$	1.4	N.M.	N.M.

(1) These metrics have been re-presented to exclude activity from discontinued operations.

E*TRADE FINANCIAL Monthly Activity Report for May 2009, Page 4

Loan Delinquency Data⁽¹⁾

	May-09		Apr-09		Mar-09		% Chg. May 09 - Apr 09	% Chg. Apr 09 - Mar 09	QTD % Chg. May 09 - Mar 09
One- to Four-Family ($MM)
Current	$	10,564	$	10,841	$	11,112	(3)%	(2)%	(5)%
30-89 days delinquent		556		581		587	(4)%	(1)%	(5)%
90-179 days delinquent		451		460		453	(2)%	2%	(0)%
Total 30-179 days delinquent		1,007		1,041		1,040	(3)%	0%	(3)%
180+ days delinquent(2)		599		512		429	17%	19%	40%
Total delinquent loans		1,606		1,553		1,469	3%	6%	9%
Gross loans receivable(3)	$	12,170	$	12,394	$	12,581	(2)%	(1)%	(3)%
Home Equity ($MM)
Current	$	8,678	$	8,825	$	8,961	(2)%	(2)%	(3)%
30-89 days delinquent		276		277		305	(0)%	(9)%	(10)%
90-179 days delinquent		284		329		347	(14)%	(5)%	(18)%
Total 30-179 days delinquent		560		606		652	(8)%	(7)%	(14)%
180+ days delinquent(2)		81		81		72	0%	13%	13%
Total delinquent loans		641		687		724	(7)%	(5)%	(11)%
Gross loans receivable(3)	$	9,319	$	9,512	$	9,685	(2)%	(2)%	(4)%
Consumer and Other ($MM)
Current	$	2,078	$	2,116	$	2,157	(2)%	(2)%	(4)%
30-89 days delinquent		32		31		41	3%	(24)%	(22)%
90-179 days delinquent		18		17		8	6%	113%	125%
Total 30-179 days delinquent		50		48		49	4%	(2)%	2%
180+ days delinquent(2)		1		1		1	0%	0%	0%
Total delinquent loans		51		49		50	4%	(2)%	2%
Gross loans receivable(3)	$	2,129	$	2,165	$	2,207	(2)%	(2)%	(4)%
Total Loans Receivable ($MM)
Current	$	21,320	$	21,782	$	22,230	(2)%	(2)%	(4)%
30-89 days delinquent		864		889		933	(3)%	(5)%	(7)%
90-179 days delinquent		753		806		808	(7)%	(0)%	(7)%
Total 30-179 days delinquent		1,617		1,695		1,741	(5)%	(3)%	(7)%
180+ days delinquent(2)		681		594		502	15%	18%	36%
Total delinquent loans		2,298		2,289		2,243	0%	2%	2%
Total gross loans receivable(3)	$	23,618	$	24,071	$	24,473	(2)%	(2)%	(3)%

(1) Amounts and percentages may not calculate due to rounding.

(2) Loans that are delinquent for 180+ days have been written down to the estimated current property value.

(3) Includes unpaid principal balances and premiums (discounts).

E*TRADE FINANCIAL Monthly Activity Report for May 2009, Page 5

Supplemental Metrics

	QTD 5/31/2009
Financial Metrics ($ ‘000s)
Net operating interest income	$	228,153
Gain on loans and securities, net(1)		54,334
Commission, fees and other revenue(2)		165,088
Total net revenue	$	447,575
Operating expense	$	192,384
	May-09
Balance Sheet Management Metrics ($MM)
E*TRADE Bank Tier 1 Capital ratio(3)		6.07%
E*TRADE Bank Tier 1 Capital to risk weighted assets ratio(3)		11.46%
E*TRADE Bank Risk-based capital ratio(3)		12.75%
E*TRADE Bank excess Tier 1 Capital(3)	$	479.6
E*TRADE Bank excess Tier 1 Capital to risk weighted assets(3)	$	1,278.0
E*TRADE Bank excess risk-based capital(3)	$	644.3

(1) Gain on loans and securities, net does not reflect other-than-temporary impairment, which is calculated and booked at quarter end. We expect the impairment for Q209 to be consistent with prior quarters.

(2) Commission, fees and other revenue consists of the commission, fees and service charges, principal transactions and other revenue line items on the consolidated statement of loss.

(3) Monthly capital metrics are estimates and are prepared on a basis consistent with the capital information in the quarterly regulatory filings.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and related banking products and services to retail investors. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

# # #

Important Notice

E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. Such statements include those relating to the range for loan loss provision and expected net charge-offs and expected impairment for the second quarter of 2009. The uncertainties and risks include, but are not limited to, potential negative regulatory consequences resulting from actions by the OTS or other regulators, potential failure to obtain regulatory and shareholder approval for exchange transactions and related matters. Additional uncertainties and risks affecting the business, financial condition, results of operations and prospects of the Company include, but are not limited to, potential changes in market activity, anticipated changes in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the

E*TRADE FINANCIAL Monthly Activity Report for May 2009, Page 6

development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, including changes to the U.S. Treasury’s Troubled Asset Relief Program, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the “Risk Factors” section our preliminary prospectus supplement dated June 17, 2009 and in the information included or incorporated in the annual, quarterly and current reports on Form 10-K, Form 10-Q and Form 8-K previously filed by E*TRADE FINANCIAL Corporation with the SEC (including information under the caption “Risk Factors”). Any forward-looking statement included in this release speaks only as of the date of this communication; the Company disclaims any obligation to update any information.

Proxy Statement. In connection with the Special Meeting of Stockholders, E*TRADE FINANCIAL Corporation is filing a preliminary proxy statement with the Securities and Exchange Commission (the “SEC”) and expects to file and mail a definitive proxy statement to stockholders as soon as practicable. Stockholders are advised to read the definitive proxy statement because it will contain important information about the proposals to be presented and voted upon. Stockholders may also obtain a copy of the definitive proxy statement and any other relevant documents filed by E*TRADE FINANCIAL Corporation for free at the SEC web site at www.sec.gov. The definitive proxy statement and other documents also may be obtained for free from E*TRADE FINANCIAL Corporation, Attn: Corporate Secretary, 135 East 57th Street, New York, New York, 10022.

E*TRADE FINANCIAL Corporation and its directors, executive officers and other members of management and employees may be deemed participants in the solicitation of proxies and voting instructions for the 2009 Special Meeting of Stockholders. Information concerning the interests of these persons, if any, in the matters to be voted upon is set forth in the proxy statement.

Registration Statement. The issuer has filed a registration statement (including a prospectus) and a prospectus supplement with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the prospectus supplement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting IDEA on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus and prospectus supplement if you request it by calling J.P. Morgan Securities Inc. toll-free at 866-430-0686 or Sandler O’Neill & Partners, L.P. toll-free at 866-805-4128.

© 2009 E*TRADE FINANCIAL Corporation. All rights reserved.