Document:

Exhibit
      4.3

     

    FIRST
      AMENDMENT TO RIGHTS AGREEMENT

    

     

    This
      Amendment dated as of November 29, 2007 (this “Amendment”) to
      the Rights Agreement, dated as of July 9, 2001 (the “Rights
      Agreement”), 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 proposes to enter into a Master Investment and Securities Purchase
      Agreement, dated as of November 29, 2007 (as amended, supplemented, modified
      or
      replaced from time to time, the “Master Investment and Securities
      Purchase Agreement”), by and between the Company and Wingate Capital
      Ltd. (“Investor”), a Cayman Islands
      company, as well as the
      Ancillary
      Documents (as such term is defined in the Master Investment and Securities
      Purchase Agreement, the “Ancillary Documents”), providing for,
      among other transactions, the purchase by Investor of 12.5% Springing Lien
      Notes
      of the Company and shares of the Company’s Common Stock and (the
“Securities”) (collectively, the
“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 Master Investment
      and Securities Purchase Agreement, the Ancillary Documents and the terms and
      conditions set forth therein and the transactions contemplated thereby,
      including, without limitation, the 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 Master Investment and Securities Purchase Agreement,
      the
      Ancillary Documents and all of the transactions contemplated thereby including,
      without limitation, the Transactions, 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:

     

    “Investor”
      shall mean Wingate Capital Ltd., a Cayman Islands company.

     

    “Transactions”
      shall have the meaning ascribed to such term in the Master Investment and
      Securities Purchase Agreement.

     

    “Master
      Investment and Securities Purchase Agreement” shall mean the Master Investment
      and Securities Purchase Agreement, dated as of November 29, 2007, by and between
      the Company and Investor, as it may be amended, supplemented, modified or
      replaced from time to time.

     

    “Securities”
      shall have the meaning ascribed to such term in the Master Investment and
      Securities Purchase Agreement.

     

    The
      definition of “Acquiring Person” in Section 1 of the Rights Agreement is hereby
      amended by adding the following sentence at the end thereof as paragraph
      (d):

     

    “(d)
      notwithstanding anything in this Agreement to the contrary, Investor or any
      of
      its Affiliates or Associates shall not be deemed to be an Acquiring Person
      solely by virtue of (i) the approval, execution and delivery of the Master
      Investment and Securities Purchase Agreement and the Ancillary Documents, (ii)
      the consummation of the Transactions or (iii) the purchase of any Securities
      contemplated in the Master Investment and Securities Purchase Agreement or
      the
      Ancillary Documents, or the purchase by Investor or any of its Affiliates or
      Associates of up to an additional 8,474,989 shares of Common Stock (as adjusted
      for any stock splits, combinations and the like).”

     

    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 (i) the approval, execution,
      delivery or public announcement of the Master Investment and Securities Purchase
      Agreement or the Ancillary Documents, (ii) the consummation of the Transactions,
      or (iii) the purchase of any Securities contemplated in the Master Investment
      and Securities Purchase Agreement or the Ancillary Documents, or the purchase
      by
      Investor or any of its Affiliates or Associates of up to an
      additional

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    8,474,989
      shares of Common Stock (as adjusted for any stock splits, combinations and
      the
      like).”

     

    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 (i) the approval, execution
      and
      delivery of the Master Investment and Securities Purchase Agreement and the
      Ancillary Documents, (ii) the consummation of the Transactions, or (iii) the
      purchase of any Securities contemplated in the Master Investment and Securities
      Purchase Agreement or the Ancillary Documents, or the purchase by Investor
      or
      any of its Affiliates or Associates of up to an additional 8,474,989 shares
      of
      Common Stock (as adjusted for any stock splits, combinations and the
      like).”

     

    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 execution and delivery of the Master Investment
      and
      Securities Purchase Agreement and the Ancillary Documents or by virtue of any
      of
      the Transactions or the purchase of any Securities contemplated in the Master
      Investment and Securities Purchase Agreement or the Ancillary Documents, or
      the
      purchase by Investor or any of its Affiliates or Associates of up to an
      additional 8,474,989 shares of Common Stock (as adjusted for any stock splits,
      combinations and the like).

     

    C.           New
      Section 35:  Section 35 is hereby added to the Rights Agreement to
      read in its entirety as follows:

     

    “Section
      35. The Master Investment and Securities Purchase Agreement; The Ancillary
      Documents.  Notwithstanding anything contained in this Agreement to
      the contrary, neither the approval, execution, delivery or public announcement
      of the Master Investment and Securities Purchase Agreement and the Ancillary
      Documents nor the consummation of the Transactions or the purchase of any
      Securities contemplated in the Master Investment and Securities Purchase
      Agreement or the Ancillary Documents, or the purchase by Investor or any of
      its
      Affiliates or Associates of up to an additional 8,474,989 shares of Common
      Stock
      (as adjusted for any stock splits, combinations and the like), or the
      performance by the Company of its obligations thereunder shall cause (a) the
      Rights to become exercisable, (b) Investor or any of its Affiliates or
      Associates to be an Acquiring Person, (c) a Stock Acquisition Date to occur
      or
      (d) a Distribution Date to occur.”

     

    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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    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 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.           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.

     

    F.           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.

     

    G.           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.

     

    H.           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.

     

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

     

    J.           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.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    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/
              Robert Jarrett Lilien
	 	 	 	
              Name:
                Robert Jarrett Lilien

            
	 	 	 	
              Title:
                President

            

    

    

    

    
      	 	AMERICAN
              STOCK TRANSFER & TRUST COMPANY
	 	 	 
	 	 	
              By: 
                

            	 /s/
              Herbert J. Lemmer
	 	 	 	
              Name: Herbert
                J. Lemmer

            
	 	 	 	
              Title:
                Vice President

            

    

    

    
5Exhibit
      10.1

    

    

    

    

    
 

    

    MASTER
      INVESTMENT AND SECURITIES PURCHASE AGREEMENT

     

    By
      and
      Between

     

    WINGATE
      CAPITAL LTD.

     

    and

     

    E*TRADE
      FINANCIAL CORPORATION

     

    Dated
      as
      of November 29, 2007

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Table
      of Contents

     

    Page

    
      
        	 
	
                ARTICLE
                  I  

              
	
                Definitions  

              
	 	 	 
	
                Section
                  1.01.

              	
                Definitions

              	
                2

              
	
                Section
                  1.02.

              	
                General
                  Interpretive Principles

              	
                7

              
	 	 	 
	
                ARTICLE
                  II  

              
	
                Sale
                  and Purchase of the Securities  

              
	 	 	 
	
                Section
                  2.01.

              	
                Initial
                  Closing and Final Closing

              	
                7

              
	
                ARTICLE
                  III  

              
	
                Representations
                  and Warranties  

              
	 	 	 
	
                Section
                  3.01.

              	
                Representations
                  and Warranties of the Company

              	
                11

              
	
                Section
                  3.02.

              	
                Representations
                  and Warranties of Purchaser

              	
                23

              
	 
	
                ARTICLE
                  IV  

              
	
                Additional
                  Agreements of the Parties  

              
	 
	
                Section
                  4.01.

              	
                Taking
                  of Necessary Action

              	
                25

              
	
                Section
                  4.02.

              	
                Financial
                  Statements and Other Reports

              	
                25

              
	
                Section
                  4.03.

              	
                Inspection
                  of Property

              	
                25

              
	
                Section
                  4.04.

              	
                Securities
                  Laws; Legends; Transferability.

              	
                26

              
	
                Section
                  4.05.

              	
                Lost,
                  Stolen, Destroyed or Mutilated Securities

              	
                27

              
	
                Section
                  4.06.

              	
                Regulatory
                  Matters

              	
                27

              
	
                Section
                  4.07.

              	
                Board
                  of Directors

              	
                29

              
	
                Section
                  4.08.

              	
                Confidentiality
                  Agreement; Publicity

              	
                30

              
	
                Section
                  4.09.

              	
                PORTAL
                  and CUSIPs and DTC Eligibility

              	
                30

              
	
                Section
                  4.10.

              	
                NASDAQ

              	
                30

              
	
                Section
                  4.11.

              	
                Replacement
                  of Revolving Credit Facility

              	
                30

              
	
                Section
                  4.12.

              	
                10-K
                  Filing

              	
                30

              
	
                Section
                  4.13.

              	
                Purchaser
                  Acquisition of Additional Common Stock

              	
                30

              
	
                Section
                  4.14.

              	
                Use
                  of Proceeds

              	
                31

              
	
                Section
                  4.15.

              	
                Investment
                  Policy Covenant

              	
                31

              
	
                Section
                  4.16.

              	
                Put
                  Rights

              	
                32

              
	
                Section
                  4.17.

              	
                Call
                  Rights

              	
                32

              
	
                Section
                  4.18.

              	
                Change
                  of Control

              	
                33

              
	 
	
                ARTICLE
                  V 

              
	
                Conditions 

              
	 
	
                Section
                  5.01.

              	
                Conditions
                  of Purchase at Initial Closing

              	
                33

              
	
                Section
                  5.02.

              	
                Conditions
                  of Sale at Initial Closing

              	
                35

              

      

       

      
        
          
          

        

        
          -i-

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  5.03.

              	
                Conditions
                  of Purchase at Final Closing

              	
                36

              
	
                Section
                  5.04.

              	
                Conditions
                  of Sale at Final Closing

              	
                36

              
	 
	
                ARTICLE
                  VI 

              
	
                Miscellaneous  

              
	 
	
                Section
                  6.01.

              	
                Survival
                  of Representations and Warranties

              	
                37

              
	
                Section
                  6.02.

              	
                Notices

              	
                37

              
	
                Section
                  6.03.

              	
                Entire
                  Agreement; Third Party Beneficiaries; Amendment

              	
                38

              
	
                Section
                  6.04.

              	
                Termination
                  of Final Closing Obligation

              	
                38

              
	
                Section
                  6.05.

              	
                Counterparts

              	
                38

              
	
                Section
                  6.06.

              	
                Governing
                  Law

              	
                38

              
	
                Section
                  6.07.

              	
                Public
                  Announcements

              	
                39

              
	
                Section
                  6.08.

              	
                Expenses

              	
                39

              
	
                Section
                  6.09.

              	
                Indemnification

              	
                39

              
	
                Section
                  6.10.

              	
                Successors
                  and Assigns

              	
                42

              
	
                Section
                  6.11.

              	
                Remedies;
                  Waiver

              	
                42

              
	
                Section
                  6.12.

              	
                Securities
                  Contract; Qualified Financial Contract

              	
                42

              
	
                Section
                  6.13.

              	
                Consent
                  to Jurisdiction; WAIVER OF JURY TRIAL

              	
                43

              
	
                Section
                  6.14.

              	
                Severability

              	
                43

              
	
                Section
                  6.15.

              	
                Headings

              	
                43

              
	
                Section
                  6.16.

              	
                Aggregation

              	
                43

              
	
                Section
                  6.17.

              	
                Specific
                  Performance

              	
                43

              
	
                Section
                  6.18.

              	
                Arm’s
                  Length Transactions

              	
                43

              
	
                Section
                  6.19.

              	
                No
                  Presumption

              	
                43

              

      

    

     

    Exhibits

     

    A    -   Form
      of Indenture for Springing Lien Notes (including form of Springing Lien
      Notes)

     

    B    -   Form
      of Order Handling Agreement

     

    B-1 
      -  Form of Canadian Direct Market Access Agreement

     

    C    -   ABS
      Purchase Agreement

     

    D    -   Form
      of Registration Rights Agreement

     

    
      	
              E   
                -   Form of Parent
                Guaranty

            

    

     

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

     

    MASTER
      INVESTMENT AGREEMENT

     

    MASTER
      INVESTMENT AND SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as
      of November 29, 2007, by and between Wingate Capital Ltd. (“Purchaser”),
      and E*Trade Financial Corporation, a Delaware corporation (the
“Company”). Capitalized terms not otherwise defined where used shall have
      the meanings ascribed thereto in ARTICLE I.

     

    RECITALS:

     

    WHEREAS,
      at the Initial Closing (as defined below) Purchaser has agreed to purchase
      and
      the Company has agreed to issue or sell, or to cause one of its Subsidiaries,
      in
      the case of clause (d) below, to sell, subject to the terms and conditions
      of
      this Agreement:

     

    
      	
               

            	
              (a)

            	
              $1,500,152,000
                aggregate principal amount of its 12.5% Springing Lien Notes due
                2017 (the
                “Springing Lien Notes”) to be issued at the Initial Closing in
                accordance with the terms and conditions of the Indenture for the
                Springing Lien Notes in the form attached hereto as Exhibit A (the
                “Springing Lien Notes
                Indenture”);

            

    

     

    
      	
               

            	
              (b)

            	
              $185,848,000
                aggregate principal amount of its Springing Lien Notes in exchange
                for the
                Existing Notes Consideration (as defined
                below);

            

    

     

    
      	
               

            	
              (c)

            	
              30,741,901
                shares of the Company’s common stock, par value $.01 per share (the
                “Common Stock”), of which 10,000,000 will be issued to Purchaser at
                the Initial Closing and 20,741,901 will be issued to Purchaser immediately
                following termination or expiration of any applicable waiting period
                under
                the HSR Act with respect to such issuance;
                and

            

    

     

    
      	
               

            	
              (d)

            	
              the
                ABS Assets pursuant to the ABS Purchase Agreement (each as defined
                below).

            

    

     

    WHEREAS,
      at the Initial Closing, (a) Purchaser or an Affiliate of Purchaser, the Company
      and E*Trade Securities LLC will enter into an Equities and Options Order
      Handling Agreement in the form attached hereto as Exhibit B to route 40%
      of the retail “normal market size” or NMS securities order flow and all of the
      options order flow of the Company, E*Trade Securities LLC and any other
      affiliate of the Company to Purchaser or its Affiliate for a three-year period,
      and (b) Purchaser or an Affiliate of Purchaser, and E*Trade Capital Markets
      LLC
      will enter into a Canadian Direct Market Access Agreement in the form attached
      hereto as Exhibit B-1  (such agreements together, the “Order
      Handling Agreement”);

     

    WHEREAS,
      the OTS has indicated their approval of a notice filed by the
      Company  pursuant to 12 CFR 563.22(c) with respect to the transfer of
      the ABS Assets;

     

    WHEREAS,
      the Company has agreed to issue to Purchaser subject to the terms and conditions
      of this Agreement:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               

            	
              (a)

            	
              an
                additional $150,000,000 aggregate principal amount of its Springing
                Lien
                Notes; and

            

    

     

    
      	
               

            	
              (b)

            	
              an
                additional 49,125,186 shares of Common Stock (together with the shares
                of
                Common Stock issued pursuant to clause (c) of the first WHEREAS clause,
                the “Purchased Common Stock” and the Purchased Common Stock
                together with the Springing Lien Notes being issued pursuant to this
                Agreement, the “Securities”);
                and

            

    

     

    WHEREAS,
      the Company and Purchaser desire to set forth certain agreements
      herein.

     

    NOW
      THEREFORE, in consideration of the premises and the representations, warranties
      and agreements herein contained and intending to be legally bound hereby, the
      parties hereby agree as follows:

     

    ARTICLE
      I

     

    Definitions

     

    Section
      1.01.   Definitions.

     

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

     

    “ABS
      Assets” shall mean the Company’s portfolio of asset backed securities listed
      on Schedule A to the ABS Purchase Agreement.

     

    “ABS
      Purchase Agreement” shall mean the purchase agreement to be executed by the
      Company, E*Trade Bank, E*Trade Global Asset Management, Inc., and Purchaser
      or
      its Affiliate at the Initial Closing with respect to the purchase by Purchaser
      or its Affiliate of the ABS Assets, which shall be in the form attached hereto
      as Exhibit C.

     

    “Affiliate”
      or “affiliate” shall mean, with respect to any Person, any other Person
      which 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.

     

    “Agreement”
      shall have the meaning set forth in the preamble hereto.

     

    “Ancillary
      Documents” shall mean the Registration Rights Agreement, the ABS Purchase
      Agreement, the Springing Lien Notes Indenture (including the Springing Lien
      Notes), and the Order Handling Agreement.

     

    “Banking
      Authority” shall have the meaning set forth in Section 3.01(q).

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    “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.

     

    “Change
      of Control” shall have the meaning given to such term in the Springing Lien
      Notes Indenture.

     

    “Change
      of Control
      Agreement” means a
      definitive agreement the consummation of which will result in a Change of
      Control.

     

    “Change
      of Control Payment
      Amount” shall
      have the meaning set forth in Section 4.17.

     

    “CIBC
      Act” shall mean the Change in Bank Control Act, as amended, 12 U.S.C.
§1817(j).

     

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

     

    “Commitment
      Fee” shall mean $47,142,857.14.

     

    “Common
      Stock” shall have the meaning set forth in the Recitals.

     

    “Company”
      shall have the meaning set forth in the preamble hereto.

     

    “Company
      Disclosure Schedule” shall have the meaning set forth in Section
      3.01.

     

    “Company
      Group” shall have the meaning set forth in Section 3.01(k).

     

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

     

    “Company
      Pension Plans” and “Company Plans” shall have the meanings set forth
      in Section 3.01(k).

     

     “Competitor”
      shall mean any of the entities listed on Section 1.01 of the Company Disclosure
      Schedule.

     

    “Confidentiality
      Agreement” shall mean that certain Mutual Non-Disclosure Agreement, dated
      November 12, 2007, between the Company and Citadel Limited
      Partnership.

     

    “Deductible”
      shall have the meaning set forth in Section 6.09(d).

     

    “DGCL”
      shall mean the Delaware General Corporation Law.

     

    “ERISA”
      shall have the meaning set forth in Section 3.01(k).

     

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

     

    “Existing
      Notes Accrued Interest” shall mean an amount in cash equal to all accrued
      and unpaid interest on the notes constituting the Existing Notes Consideration
      calculated through and including the Initial Closing Date.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    “Existing
      Notes Consideration” shall mean $185,848,000 in aggregate principal amount
      of the Company’s (A) 8% senior notes due 2011, (B) 7.875% senior notes due 2015
      and/or (C) 7.375% senior notes due 2013, held by Purchaser or one of its
      Affiliates on the Initial Closing Date.

     

    “E*Trade
      Bank” shall mean E*Trade Bank and each of its Subsidiaries.

     

    “FDIC”
      shall mean the Federal Deposit Insurance Corporation.

     

    “Final
      Cash Consideration” shall mean initially $150,000,000, and shall be reduced
      in accordance with the provisions of Section 2.01(c)(v).

     

    “Final
      Closing” and “Final Closing Date” shall have the meanings set forth
      in Section 2.01(b).

     

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

     

    “Governmental
      Entity” shall mean any court, administrative 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 6.09(f).

     

    “Indemnifying
      Party” shall have the meaning set forth in Section 6.09(f).

     

    “Initial
      Closing” and “Initial Closing Date” shall have their meanings set
      forth in Section 2.01(a).

     

    “Initial
      Consideration” shall mean $1,500,152,000.

     

    “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.

     

    “IRS”
      shall have the meaning set forth in Section 3.01(l).

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    “Loan
      Portfolio Announcement” shall have the meaning set forth in Section
      6.07.

     

    “Loss”
      shall have the meaning set forth in Section 6.09(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) actions or omissions of the Company taken with
      the prior written consent of Purchaser, (iv) 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, (v) 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 (v) shall not
      exclude any underlying circumstance, change, event, fact, development or effect
      which may have caused such change in market price or trading volume), (vi)
      the
      failure of the Company to meet any internal or public projections, forecasts
      or
      estimates or earnings for any period ending on or after September 30, 2007
      (provided that this clause (vi) 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 (vii) 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), (iv)
      and
      (vii), 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 Purchaser hereunder and
      thereunder.

     

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

     

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

     

    “OTS”
      shall mean the Office of Thrift Supervision.

     

    “Parent
      Guaranty” shall mean the Guaranty in the form attached hereto as Exhibit
      E pursuant to which Citadel Wellington LLC will guaranty, on the terms and
      conditions set forth therein, certain obligations of Purchaser hereunder and
      under the Registration Rights Agreement.

     

    “Permitted
      Transfer” shall mean any Transfer by Purchaser (i) to an Affiliate; (ii) in
      the form of a pledge, hypothecation (provided such hypothecation does not
      require registration under the Securities Act) or encumbrance of such Purchased
      Common Stock for financing purposes; (iii) to an acquiring or offering Person
      in
      a transaction that is a Change of Control (as defined in the Springing Liens
      Notes Indenture) or a tender offer for more than a majority of the outstanding
      shares of the Company’s Common Stock, or (iv) with respect to any Purchaser
      that

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    is
      an
      investment fund, any other investment fund with respect to which the sponsor
      and
      discretionary investment manager or advisor of such Purchaser or an Affiliate
      thereof, serves as sponsor and discretionary investment manager or
      advisor.

     

    “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.

     

    “Purchased
      Common Stock” shall have the meaning set forth in the Recitals.

     

    “Purchaser”
      shall have the meaning set forth in the preamble hereto.

     

    “Purchaser
      Indemnitees” shall have the meaning set forth in Section
      6.09(a).

     

    “Purchaser
      Information” shall have the meaning set forth in Section
      3.02(f).

     

    “Purchaser
      Schedule” shall mean a schedule to this Agreement provided or required to be
      provided by Purchaser.

     

    “Recent
      10-K” shall have the meaning set forth in Section 3.01.

     

    “Registration
      Rights Agreement” shall mean the registration rights agreement to be
      executed by the Company and Purchaser at the Initial Closing, which shall be
      in
      the form attached hereto as Exhibit D.

     

    “Regulatory
      Filings” shall have the meaning set forth in Section 3.01(r).

     

    “Reports”
      shall have the meaning set forth in Section 3.01(f).

     

    “Restated
      Certificate of Incorporation” shall mean the Restated Certificate of
      Incorporation of the Company as filed as Exhibit 3.1 to the Company’s
      Quarterly Report on Form 10-Q, filed November 7, 2003.

     

    “Rights
      Agreement” shall have the meaning set forth in Section 3.01(e).

     

    “S&LHC
      Act” shall mean the Savings and Loan Holding Company Act, as amended, 12
      U.S.C. §1467a.

     

    “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.

     

    “Springing
      Lien Notes” shall have the meaning set forth in the Recitals.

     

    “Springing
      Lien Notes Indenture” shall have the meaning set forth in the
      Recitals.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    “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 or one
      or
      more of its Subsidiaries, or by such first Person, or by such first Person
      and
      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.

     

    “Transactions”
      shall have the meaning set forth in Section 3.01(c).

     

     “Transfer”
      shall mean, directly or indirectly, to sell, transfer, assign, pledge, encumber,
      hypothecate or similarly dispose of, or to enter into any contract, option
      or
      other arrangement or understanding with respect to the sale,
      transfer,  assignment, pledge, encumbrance, hypothecation or similar
      disposition of, and shall include a short sale or the entry into of any other
      hedging or other derivative transaction that has the effect of materially
      changing the economic benefits and risks of ownership.

     

    “Voting
      Debt” shall have the meaning set forth in Section 3.01(e).

     

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

     

    Section
      1.02.   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

     

    Sale
      and Purchase of the Securities

     

    Section
      2.01.   Initial Closing and Final Closing.

     

    (a)  Initial
      Closing.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    

    (i)    Subject
      to the satisfaction or waiver of the conditions set forth in Section 5.01 and
      Section 5.02 of this Agreement, and in reliance upon the representations and
      warranties hereinafter set forth, the purchase and sale of:

     

    
      	
               

            	
              (A)

            	
              $1,686,000,000
                aggregate principal amount of Springing Lien
                Notes;

            

    

     

    
      	
            	
              (B)

            	
              10,000,000
                shares of the Purchased Common Stock;
                and

            

    

     

    
      	
            	
              (C)

            	
              the
                ABS Assets (the “Initial
                Closing”)

            

    

     

     shall
      take place at the offices of Fried, Frank, Harris, Shriver & Jacobson LLP,
      One New York Plaza, New York, NY, concurrently with the execution and delivery
      of this Agreement by the parties (the date that the Initial Closing occurs,
      the
“Initial Closing Date”). 

     

    (ii)    At
      the Initial Closing: (A) the Company will deliver to Purchaser (1) certificates
      for the shares of Common Stock in the amounts set forth in the Section
      2.01(a)(i)(B) registered in the name of Purchaser; (2) $1,686,000,000 of
      executed Springing Lien Notes which shall be reflected in one or more global
      notes representing the Springing Lien Notes and held by The Depository Trust
      Corporation or its nominee (or a custodian on its behalf); (3) an executed
      copy
      of the ABS Purchase Agreement, the Registration Rights Agreement, the Springing
      Lien Notes Indenture and the Order Handling Agreement; (4) the Commitment Fee
      by
      wire transfer of immediately available funds to the accounts set forth on
      Purchaser Schedule 2.01(a); and (5) the Existing Notes Accrued Interest by
      wire
      transfer of immediately available funds to the accounts set forth on Purchaser
      Schedule 2.01(a); (B) Purchaser, in full payment for such shares of the
      Purchased Common Stock and such Springing Lien Notes, will deliver (1) the
      Initial Consideration by wire transfer of immediately available funds to the
      accounts set forth on  Company Disclosure Schedule 2.01(a), and
      (2) the Existing Notes Consideration; (C) Purchaser will deliver to the Company
      an executed copy of the Parent Guaranty and an executed counterpart to the
      Registration Rights Agreement, the ABS Purchase Agreement and the Order Handling
      Agreement; (D) the Company will contribute the full amount of the Initial
      Consideration to E*Trade Bank and $50,000,000 of any other consideration
      received with respect to the Springing Lien Notes sold contemporaneously
      herewith to any Person other than Purchaser; (E) following delivery to Purchaser
      of the written certification of the Company’s Chief Financial Officer that the
      actions contemplated by preceding clause (D) have been completed, E*Trade Bank,
      E*Trade Global Asset Management, Inc. and Purchaser will consummate the purchase
      and sale of the ABS Assets pursuant to the ABS Purchase Agreement; and (F)
      each
      party shall take or cause to happen such other actions, and shall execute and
      deliver such other instruments or documents, as shall be required under Section
      5.01 and Section 5.02.

     

    (iii)    Notwithstanding
      any other provision of this Agreement, after the Initial Closing Date in
      consideration, in part, of the payments made by Purchaser at the Initial
      Closing, Purchaser shall have the right to receive an additional 20,741,901
      shares of the Purchased Common Stock, which shares of Purchased Common Stock
      shall be issued by the Company to Purchaser upon termination or expiration
      of
      any applicable waiting periods with respect to such issuance under the HSR
      Act.   Immediately upon expiration or notice of termination of
      any such applicable waiting period, the Company shall issue such
      additional

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    shares
      to
      Purchaser registered in the name of Purchaser.   The Company
      shall not be required to issue such additional shares at any time that there
      shall be in effect any law, rule or regulation or any order, decree or
      injunction of a court or agency of competent jurisdiction which enjoins or
      prohibits consummation of such issuance.  Notwithstanding the
      foregoing, in the event Purchaser determines that the issuance of all of such
      shares of Purchased Common Stock under this Section 2.01(a)(iii) will or may
      give rise to regulatory concerns for Purchaser or its Affiliates, Purchaser
      may
      elect to receive a fewer number of shares of Purchased Common Stock otherwise
      issuable pursuant to this 2.01(a)(iii), and the number of shares not issued
      to
      Purchaser as a result of such election shall be issued to Purchaser at the
      time
      shares of Purchased Common Stock are issued to Purchaser pursuant to Section
      2.01(b)(i)(A) at the Final Closing or pursuant to Section 2.01(b)(iii), as
      applicable.   Notwithstanding the foregoing or anything to the
      contrary herein, until the earlier of the Final Closing or the date shares
      of
      Purchased Common Stock are issuable to Purchaser pursuant to Section
      2.01(b)(iii), Purchaser shall not have the right to receive any shares of Common
      Stock to the extent that, after receiving such shares, Purchaser (together
      with
      its Affiliates) would beneficially own in excess of 9.90% of the number of
      shares of Common Stock outstanding immediately after giving effect to such
      issuance (the “Issuance Limitation”).   For purposes of
      this Section, beneficial ownership shall be calculated in accordance with Rule
      13(d)(3) of the Exchange Act.  By not less than sixty-one (61) days’
prior written notice to the Company, Purchaser may, at its election, increase
      or
      decrease the Issuance Limitation to any other percentage not in excess of 9.90%
      specified in such notice, and the Issuance Limitation shall continue to apply
      until such sixty-first day (or such later date, as determined by Purchaser,
      as
      may be specified in such notice).

     

    (iv)    If
      the Initial Closing is consummated, the conditions to the Initial Closing set
      forth in Sections  5.01 and 5.02 shall be deemed to have been
      satisfied or waived, and neither party shall assert the failure of any such
      condition as the basis for failing to consummate the Final Closing or as the
      basis for terminating this Agreement.

     

    (b)  Final
      Closing.

     

    (i)    On
      the third Business Day following the satisfaction or waiver (to the extent
      permitted by applicable law) of the conditions set forth in Section 5.03 and
      Section 5.04 (other than those conditions that by their nature are to be
      satisfied at the Final Closing, but subject to the satisfaction or waiver of
      such conditions) (the “Final Closing” and the date that the Final Closing
      occurs, the “Final Closing Date”), and in reliance upon the
      representations and warranties hereinafter set forth and in consideration,
      in
      part, of the payments made by the Purchaser at the Final Closing or allocable
      portions of the payments made by Purchaser at the Initial Closing, the Company
      will issue:

     

    (A)
      49,125,186 shares of Purchased Common Stock; and

     

    (B)
      $150,000,000 of Springing Lien Notes.

     

    The
      Final
      Closing shall take place at the offices of Fried, Frank, Harris, Shriver &
Jacobson LLP, One New York Plaza, New York, NY on the Final Closing
      Date.  Notwithstanding the foregoing or any other provision in this
      Agreement, the Company shall not be obligated to consummate the Final Closing
      or
      any Additional Closing with respect to all or

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    any
      portion of the $150,000,000 of Springing Lien Notes to the extent that its
      Chief
      Financial Officer certifies in writing to the Company and Purchaser that the
      Company cannot incur all or any portion of such additional indebtedness under
      the terms of its existing indentures.

     

    (ii)    At
      the Final Closing, (A) the Company will deliver to Purchaser (1) certificates
      for the shares of Common Stock in the amounts set forth in Section 2.01(b)(i)(A)
      registered in the name of Purchaser; and (2) $150,000,000 of executed Springing
      Lien Notes which shall be reflected in one or more global notes representing
      the
      Springing Lien Notes and held by The Depository Trust Corporation or its nominee
      (or a custodian on its behalf); (B) Purchaser, in exchange for such shares
      of
      Purchased Common Stock and Springing Lien Notes, will deliver to the Company
      the
      Final Cash Consideration by wire transfer of immediately available funds to
      the
      accounts set forth on Schedule 2.01; (C) the Company shall contribute all
      of the Final Cash Consideration on the Final Closing Date to E*Trade
      Bank, and (D) each party shall take or cause to happen such other actions,
      and shall execute and deliver such other instruments or documents, as shall
      be
      required under Section 5.03 and Section 5.04.

     

    (iii)    Notwithstanding
      any other provision of this Agreement, whether or not the Final Closing is
      consummated, the shares of Purchased Common Stock contemplated by Section
      2.01(b)(i)(A) above shall be issued by the Company to Purchaser immediately
      following (A) the expiration or termination of any applicable waiting periods
      under the HSR Act with respect to the issuance of Purchased Common Stock after
      the Initial Closing and (B) the acceptance by the OTS of a rebuttal of control
      submission for the proposed Transactions without, unless approved by Purchaser
      in its sole discretion, the imposition of any Burdensome Condition (subject
      to
      the absence of any law, rule or regulation or any order or regulation or any
      order, decree or injunction of a court or agency of competent jurisdiction
      which
      enjoins or prohibits such sale); provided, however, that in the event Purchaser
      determines that the issuance of such shares will or may give rise to regulatory
      concerns for Purchaser or its Affiliates, Purchaser may elect to delay receipt
      of all or any portion of such shares until Purchaser is reasonably satisfied
      that receipt of such shares is permitted by regulatory
      authorities.  The Company shall issue such additional shares to
      Purchaser registered in the name of Purchaser.

     

    (c)  (i)  Notwithstanding
      Section 2.01(b) above, following the date hereof, Purchaser shall use its
      commercially reasonable efforts to assign prior to January 15, 2008 in
      accordance with Section 6.10, and if such right is not exercised prior to
      January 15, 2008, the Company shall have the right, upon the prior consent
      of
      Purchaser (such consent not to be unreasonably withheld), to assign, Purchaser’s
      right to purchase the Springing Lien Notes to be purchased on the Final Closing
      Date.  Any such assignment shall only be made in increments of
      $50,000,000 (or a lesser amount if, as of the Final Closing Date, an amount
      less
      than such amount that has not previously been purchased has been
      assigned).

     

    (ii)    The
      sale of the Springing Lien Notes to an assignee as set forth in Section
      2.01(c)(i) shall be an “Additional Closing” and shall occur promptly
      after such assignment (subject to the absence of any law, rule or regulation
      or
      any order or regulation or any order, decree or injunction of a court or agency
      of competent jurisdiction which enjoins or prohibits such sale).

     

    (iii)    On
      the date each such Additional Closing occurs (such date, the “Additional
      Closing Date”), in consideration of the payment made by the assignee on
      such

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Additional
      Closing Date, the Company will issue such assignee for each $50,000,000 (or
      such
      lesser amount as permitted by Section 2.01(c)) increment assigned to such
      assignee, $50,000,000 (or such lesser amount as permitted by Section 2.01(c))
      of
      Springing Lien Notes.

     

    (iv)    At
      each such Additional Closing, (A) the Company will deliver to such assignee
      $50,000,000 (or such lesser amount as permitted by Section 2.01(c)) of executed
      Springing Lien Notes, which will be reflected in one or more global notes
      representing the Springing Lien Notes and held by the Depository Trust
      Corporation or its nominee (or a custodian on its behalf); (B) such assignee,
      in
      exchange for such Springing Lien Notes shall deliver to the Company $50,000,000
      (or such lesser amount as permitted by Section 2.01(c)) by wire transfer of
      immediately available funds to the account specified by the Company; and (C)
      the
      Company will contribute the proceeds of such Additional Closing to E*Trade
      Bank.

     

    (v)    Upon
      the occurrence of an Additional Closing, the amount of Springing Lien Notes
      to
      be issued under Section 2.01(b) shall be reduced for the Springing Lien Notes
      issued under this Section 2.01(c) and the Final Cash Consideration shall be
      reduced dollar for dollar for any funds received by the Company pursuant to
      Section 2.01(c)(iv).

     

     

    ARTICLE
      III

     

    Representations
      and Warranties

     

    Section
      3.01.   Representations and Warranties of the
      Company.  Except as disclosed in (i) the Company’s 10-K covering
      the year ended December 31, 2006 (the “Recent 10-K”) and 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) in the disclosure schedule (the “Company
      Disclosure Schedule”) delivered by the Company to Purchaser prior to 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
      3.01, 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 represents and warrants to
      Purchaser, as of the date hereof (or as of such specific date in the case of
      any
      representation or warranty expressly made as of a specific date), as
      follows:

     

    (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 standing
      under

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    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 E*Trade Bank 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.

     

    (i)    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 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.  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 Initial Closing or Final Closing, as applicable, 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 Initial Closing or the Final Closing,
      as applicable, 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.

     

    (ii)    The
      execution, delivery and performance of this Agreement and the Ancillary
      Documents to which the Company and/or its Subsidiaries is a party, the
      consummation by the Company and its Subsidiaries of the Transactions and the
      compliance by

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    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 (x) 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 Agreement or (y) 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
      under clause (y) (other than with respect to the indentures governing the
      Company’s outstanding senior notes) that, individually or in the aggregate,
      would not reasonably be expected to have a Material Adverse Effect.

     

    (d)  Governmental
      Consents.  No consent, approval, order 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 the applicable
      requirements of the HSR Act, (ii) compliance with any applicable requirements
      of
      the Securities Act, the Exchange Act, and any other applicable foreign or state
      securities or “blue sky” laws, (iii) filing of notice with the OTS pursuant to
      12 CFR 563.22(c) with respect to the transfer of the ABS Assets; (iv) with
      respect to the Final Closing, the acceptance by the OTS of the rebuttal of
      control submission referred to in Section 4.06(a), and (v) 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 the Purchasers or any of
      their respective Affiliates as a result of the Transactions.

     

    (e)  Capitalization.

     

    (i)    The
      authorized capital stock of the Company consists of (i) 600,000,000 shares
      of Common Stock of which, as of November 29, 2007,  423,749,462 shares
      were issued and outstanding and (ii) 1,000,000 shares of preferred stock, $0.01
      par value, of the Company (the “Preferred Stock”) 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
      outstanding.  All of the shares of Series B Preferred Stock are
      reserved for issuance in accordance with the Rights Agreement, dated as of
      July
      9, 2001 between the Company and American Stock Transfer and Trust Company (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 the date
      hereof, there were 61,188,234 shares of Common Stock reserved for issuance
      in
      connection with employee benefit, stock option and dividend reinvestment and
      stock purchase plans.  All of the issued and

     

    
      
        
        

      

      
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    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 3.01(e)(i) 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 Springing Lien
      Notes will rank pari-passu with all other senior indebtedness of the
      Company.  The Purchased Common Stock, collectively with the Common
      Stock issued on the date hereof to Persons other than Purchaser, represents
      19.99% of the Company’s issued and outstanding shares of Common Stock as of the
      date of this Agreement, before giving effect to any shares of Common Stock
      to be
      issued under this Agreement to Purchaser or such Common Stock issued to such
      other Persons.

     

    (ii)    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.

     

    (i)    Since
      January 1, 2005, the Company and each of its Subsidiaries has 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
      federal, state or foreign Governmental Entity (all such reports and statements
      are collectively referred to herein as the “Reports”), and have paid all
      fees and assessments due and payable in connection therewith.  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

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    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 Purchaser 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.

     

    (ii)    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.

     

    (iii)    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
      3.01(f)(iii).  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 Company’s 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 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, 2005, (A) neither the
      Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
      director, officer, employee, auditor, accountant or

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    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 of the Company or any committee thereof or to any
      director or officer of the Company.

     

    (g)  Absence
      of Certain Changes.  Since September 30, 2007 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,

     

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

     

    (ii)    
      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

     

    (iii)    
      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 3.01(f), except for
      liabilities that have arisen since September 30, 2007 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
      holds all licenses, 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 of any federal, state or local
      governmental authority applicable to the Company or such Subsidiary, 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

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    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, criticism or exception
      by
      any Governmental Entity with respect to any Report or relating to any
      examinations or inspections of the Company or any of its Subsidiaries and (ii)
      since January 1, 2005, 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.

     

    (i)           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.

     

    (ii)           The
      consummation of the transactions contemplated hereby 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.

     

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

     

    (i)           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;

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    (ii)           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 2003 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;

     

    (iii)          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;

     

    (iv)         
      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);

     

    (v)           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;

     

    (vi)          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);

     

    (vii)          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;

     

    (viii)         
      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

     

    (ix)            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:

     

    (i)           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;

     

    (ii)           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;

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    (iii)          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;

     

    (iv)          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

     

    (v)           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:

     

    (i)           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;

     

    (ii)           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

     

    (iii)          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 E*Trade Bank or any of its Subsidiaries 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.

     

    
      
        
        

      

      
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    (i)           Section
      3.01(p) of the Company Disclosure Schedule sets forth a complete list of all
      securities exchanges, boards of trade, clearing organizations, trade
      associations and similar organizations in which the Company holds a membership
      or has been granted trading privileges and which memberships or trading
      privileges are material to the Company’s broker-dealer business.  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.

     

    (ii)           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 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.

     

    (iii)          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. Except as set forth in
      Section 3.01(p) of the Company Disclosure Schedule, no such disciplinary
      proceeding or order is pending or threatened. 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 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) Regulatory
      Actions.  Except as set forth in the Company Disclosure Schedule,
      since January 1, 2005 neither E*Trade Bank nor any its Subsidiaries have
      received any written communication from any federal or state banking authority
      (“Banking Authority”) (i) asserting that it is in material violation of
      any law, (ii) threatening to revoke any of its material permits or licenses,
      (iii) requiring it (x) to enter into or consent to the issuance of a cease
      and
      desist order, written agreement, consent decree, directive, commitment or
      memorandum of understanding, or (y) to adopt any policy, procedure or resolution
      of its Board of Directors or similar undertaking, that restricts the conduct
      of
      its business, or relates to its capital adequacy, its credit or reserve
      policies, it management, or the payment of dividends or any other policy or
      procedure, in either case, that would be material to the conduct of the business
      or E*Trade Bank or any of its Subsidiaries or (iv) threatening or contemplating
      revocation or limitation of, or which would

     

    
      
        
        

      

      
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    have
      the
      effect of revoking or limiting,  FDIC deposit insurance, and neither
      E*Trade Bank nor any of its Subsidiaries has received any written notice from
      a
      Banking Authority that it is considering issuing or requiring any of the
      foregoing.  Since January 1, 2005, each of E*Trade Bank and its
      Subsidiaries has filed all reports and statements, together with any amendment
      required to be made with respect thereto, that it was required to file with
      any
      Banking Authority, and has paid all fees and assessments due and payable in
      connection with its business.

     

    (r) Company
      Information.  None of the information to be contained in any
      document filed with any regulatory agency in connection with the transactions
      contemplated by this Agreement (the “Regulatory Filings”), in each case,
      other than Purchaser 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.

     

    (s) State
      Takeover Laws.  The Company’s Board of Directors has taken all
      action necessary to render inapplicable to Purchaser 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 transactions
      between Purchaser and the Company taking into account shares of Common Stock
      issued contemporaneously herewith to Persons other than the
      Purchaser.

     

    (t) Rights
      Agreement.   The Company has taken all actions necessary to
      irrevocably amend the Rights Agreement to provide that the rights thereunder
      will not be triggered as a result of the Transactions or by the acquisition
      of
      an additional 8,474,989 shares of Common Stock of the Company after the Initial
      Closing Date by the Purchaser or any of its Affiliates or Associates, in
      addition to the shares of Purchased Common Stock issuable pursuant to the terms
      hereof on or after the Initial Closing Date.

     

    (u) Solvency.  Immediately
      after giving effect to all of the Transactions contemplated by this Agreement,
      including payment of all related fees and expenses, the Company and each of
      its
      Subsidiaries will be Solvent.  For purposes of this Section 3.01, the
      term “Solvent” with respect to the Company and each of its Subsidiaries means
      that, as of any date of determination, (a) the amount of the Fair Value and
      Present Fair Saleable Value of the assets of the Company and each of its
      Subsidiaries, exceeds as of such date, their respective Stated Liabilities
      and
      other Contingent Liabilities on an individual basis; (b) the Company and each
      of
      its Subsidiaries will not have, as of such date, an unreasonably small amount
      of
      capital for the operation of the business in which each of the Company and
      its
      Subsidiaries is engaged as a going concern following such date on an individual
      basis; and (c) the Company and each of its Subsidiaries will have sufficient
      assets and cash flow to pay each of their respective Stated Liabilities and
      other Contingent Liabilities as they mature or otherwise become due on an
      individual basis.  For purposes of this Section 3.01, the term, “Fair
      Value” means the amount at which the assets, in their entirety, of the Company
      or any of its Subsidiaries as the case may be (on an individual basis) would
      change hands between a willing buyer and a willing seller, within a commercially
      reasonable period of time, each having reasonable knowledge of the relevant
      facts, with neither being under any compulsion to act; the term “Present Fair
      Saleable Value” means the amount that could be obtained by an independent
      willing seller from an independent

     

    
      
        
        

      

      
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    willing
      buyer if the assets of the Company or any of its Subsidiaries as the case may
      be
      (on an individual basis) are sold with reasonable promptness under normal
      selling conditions in a current market, the term “Stated Liabilities” means all
      known liabilities and recorded liabilities (including Contingent Liabilities
      that would be recorded in accordance with GAAP consistently applied) of the
      Company or any of its Subsidiaries as the case may be (on an individual basis)
      and the term “Contingent Liabilities” means the maximum estimated amount of
      liability reasonably likely to result from pending litigation, asserted claims
      and assessments, guaranties, uninsured risks and other contingent liabilities
      of
      the Company or any of its Subsidiaries as the case may be (on an individual
      basis).

     

    (v) 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.

     

    (w) Offering
      of Securities.  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 Purchaser.  Neither the Company nor any Person
      acting on its behalf has taken or will take any action (including, without
      limitation, 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.

     

    (x) 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 in connection with any of the
      Transactions, other than Evercore Partners and JP Morgan, the fees and expenses
      of which will be paid by the Company.

     

    (y) Liquidity.  Pro
      forma for the Transactions and projected as of December 31, 2007, the Company
      will have at least $125 million of cash not subject to regulatory
      limitations.

     

    (z) Capital.  Pro
      forma for the Transactions and
      projected as of December 31, 2007, the Company’s bank capital position will
      exceed by at least $200 million the regulatory capital standards to maintain
      “Well Capitalized” status within the meaning of 12 U.S.C. 1831(o) (as in effect
      on the date hereof) as determined by E*Trade Bank’s principal federal banking
      agency or the FDIC, but in no event, less than the amount required in a capital
      directive from a federal banking agency.

     

     

    
      
        
        

      

      
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    Section
      3.02. Representations and Warranties of Purchaser.  Each
      Purchaser represents and warrants to, and agrees with, the Company, as of the
      date hereof and as of each of the Initial Closing Date and the Final Closing
      Date (or as of such specific date in the case of any representation or warranty
      expressly made as of a specific date) as follows:

     

    (a) Organization.  Purchaser
      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.

     

    (i)           Purchaser
      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 Purchaser 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 Purchaser.  No other proceedings on the
      part of Purchaser are necessary to authorize the execution, delivery and
      performance by Purchaser of this Agreement and each Ancillary Document and
      consummation of the Transactions.  This Agreement has been, and on or
      prior to the Initial and Final Closing each Ancillary Document to which it
      is a
      party will be, duly and validly executed and delivered by
      Purchaser.  This Agreement is, and upon its execution at or prior to
      the Initial and Final Closing each Ancillary Document to which it is or will
      be
      a party will be, a valid and binding obligation of Purchaser, enforceable
      against it in accordance with its terms.

     

    (ii)           The
      execution, delivery and performance of this Agreement and the Ancillary
      Documents to which it is or will be a party, the consummation by Purchaser
      of
      the Transactions and the compliance by Purchaser 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 Purchaser or (B) any mortgage, note, indenture, deed of trust, lease, loan
      agreement or other agreement or instrument of Purchaser or any permit,
      concession, grant, franchise, license, judgment, order, decree, ruling,
      injunction, statute, law, ordinance, rule or regulation applicable to Purchaser
      or 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) filing of notice with the OTS
      pursuant to 12 CFR 563.22(c) with respect to the transfer of the ABS Assets;
      (ii) the applicable requirements of the HSR Act, (iii) with respect to the
      Final
      Closing, the acceptance by the OTS of a rebuttal of control submission referred
      to in Section 4.06(a), and (iv) any consent, approval, action or filing the
      absence of which would not have, or reasonably be expected to have, a material
      adverse affect on Purchaser’s ability to consummate the Transactions or the
      Company, no consent, approval, order or authorization of, or registration,
      declaration or filing with, any Governmental Entity is required on the part
      of
      Purchaser in connection with the execution,

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    delivery
      and performance by Purchaser of this Agreement and the Ancillary Documents
      to
      which it is or will be a party and the consummation by Purchaser of the
      Transactions.  As of the date hereof, Purchaser has no knowledge of
      any reason why, solely due to the current business operations of Purchaser
      and
      its Affiliates, the acceptance and approval of the rebuttal of control
      submission referred to in Section 4.06(a) by the OTS should not be
      obtained.

     

    (d) Securities
      Act.  Purchaser is acquiring the Securities solely for the purpose
      of investment and not with a view to, or for resale in connection with, any
      distribution thereof in violation of the Securities Act.  Purchaser
      (either alone or together with its advisors) has sufficient knowledge and
      experience in financial and business matters so as to be capable of evaluating
      the merits and risks of its investment in the Securities and is capable of
      bearing the economic risks of such investment.

     

    (e) Brokers
      and Finders.  Neither Purchaser 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) Purchaser
      Information.  None of the information with respect to Purchaser
      and its Affiliates or any of their respective officers and directors that is
      provided to the Company by Purchaser or any of its representatives
      (collectively, “Purchaser 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.

     

    (g) Legal
      Proceedings.  Purchaser is not a party to any, and there are no
      pending, or to the knowledge of Purchaser, threatened, legal, administrative,
      arbitral or other proceedings, claims, actions or governmental investigations
      of
      any nature against Purchaser 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) Financing.  Purchaser
      has, or will have prior to the Initial Closing or Final Closing, as applicable,
      sufficient cash, available lines of credit or other sources of immediately
      available funds to enable it to consummate the Initial Closing or Final Closing,
      as applicable.

     

    (i) Current
      Ownership.  As of the date hereof and prior to giving effect to
      the Transactions contemplated hereby, except as set forth on Purchaser Schedule
      3.02(i), Purchaser and its Affiliates are not owners of record or the
“Beneficial Owner” (as such term is defined under Rule 13d-3 of the Exchange
      Act) of any shares of Common Stock or any interest therein, including any right,
      swap, derivative or other such arrangement in relation to shares of Common
      Stock.

     

    (j) No
      Other Representations.  Purchaser 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.  Purchaser 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

     

    
      
        
        

      

      
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    Ancillary
      Documents.   Without limiting the generality of the foregoing,
      Purchaser acknowledges that the Company makes no representation or warranty
      with
      respect to (i) any projections, estimates or budgets delivered to or made
      available to Purchaser 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 Purchaser 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.

     

    ARTICLE
      IV

     

    Additional
      Agreements of the Parties

     

    Section
      4.01.   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 Initial Closing and the Final 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.

     

    Section
      4.02.   Financial Statements and Other
      Reports.   The Company covenants that from and after the date
      hereof, to the extent it has not previously publicly filed such information
      with
      the SEC in an annual report on Form 10-K or periodic report on Form 10-Q, it
      will deliver to Purchaser:

     

    (a) within
      40 days after the end of each quarterly period (other than the last quarterly
      period) in each fiscal year, consolidated statements of income, changes in
      stockholders’ equity and cash flows of the Company and its consolidated
      Subsidiaries (including the Company Subsidiary) for the period from the
      beginning of the then current fiscal year to the end of such quarterly period,
      and a consolidated balance sheet of the Company and its consolidated
      Subsidiaries (including the Company Subsidiary) as of the end of such quarterly
      period; and

     

    (b) within
      75 days after the end of each fiscal year, a consolidated balance sheet of
      the
      Company and its consolidated Subsidiaries as of the end of such fiscal year
      and
      the related consolidated statements of income, changes in stockholders’ equity
      and cash flows for such fiscal year, together with the audit report of Deloitte
      & Touche LLP or other independent public accountants of recognized standing
      selected by the Company.

     

               The
      obligations of the Company to deliver the materials described in this Section
      4.02 shall continue in full force and effect until such time as Purchaser shall
      no longer own shares of Common Stock representing at least five percent of
      the
      Common Stock then outstanding.

     

    Section
      4.03.   Inspection of Property.  The Company
      covenants that it will permit

     

    
      
        
        

      

      
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    representatives
      of Purchaser to visit and inspect, at Purchaser’s expense, any of the properties
      of the Company or its Subsidiaries to examine the corporate books and make
      copies or extracts therefrom and to discuss the affairs, finances and accounts
      of the Company and its Subsidiaries with the principal officers of the Company,
      all upon reasonable notice and at such reasonable times and as often as
      Purchaser may reasonably request.  Any investigation pursuant to this
      Section shall be conducted during normal business hours and in such manner
      as
      not to interfere unreasonably with the conduct of the business of the Company,
      and nothing herein shall require the Company or any of its Subsidiaries to
      disclose any information to the extent (a) that the Company reasonably believes
      such information to be competitively sensitive proprietary information (except
      to the extent Purchaser provides reasonable assurances that such information
      shall not be shared with employees of its or its Affiliates’ competing
      businesses or otherwise used by the Purchaser or its Affiliates to compete
      with
      the Company and its Subsidiaries), (b) prohibited by applicable law or
      regulation, or (c) that such disclosure would reasonably be expected to cause
      a
      violation of any agreement to which the Company or any of its Subsidiaries
      is a
      party or would cause a risk of a loss of privilege to the Company or any of
      its
      Subsidiaries (provided that the Company shall use reasonable best
      efforts to make appropriate substitute disclosure arrangements under
      circumstances where the restrictions in this clause (c) apply).  The
      provisions of this Section 4.03 shall terminate and no longer be of any effect
      from and after such time as Purchaser no longer beneficially owns Common Stock
      representing at least five percent of the Common Stock then
      outstanding.

     

    Section
      4.04.   Securities Laws; Legends;
      Transferability.

     

    (a) Purchaser
      acknowledges and agrees that as of the date hereof the Securities issuable
      pursuant to this Agreement shall not have been or will not be registered under
      the Securities Act or the securities laws of any state and that they may be
      sold
      or otherwise disposed of only in one or more transactions registered under
      the
      Securities Act and, where applicable, such laws or as to which an exemption
      from
      the registration requirements of the Securities Act and, where applicable,
      such
      laws is available.  Purchaser acknowledges that, except as provided in
      the Ancillary Documents, Purchaser has no right to require the Company to
      register the Securities.  Purchaser further acknowledges and agrees
      that each certificate for the Purchased Common Stock shall bear a legend
      substantially as set forth in paragraph (b) of this Section 4.04, and each
      Springing Lien Note shall bear a legend substantially as set forth in the
      Springing Lien Notes Indenture.

     

    (b) Certificates
      for the Purchased Common Stock shall bear legends in substantially the following
      form:

     

    The
      securities represented by this Certificate have not

    been
      registered under the Securities Act of 1933, as amended,

    and
      may not be transferred, sold or otherwise disposed of

    except
      while such a registration is in effect under such act and

    applicable
      state securities laws or pursuant to an exemption

    from
      registration under such act or such laws.

     

    (c) When
      issued pursuant hereto, the certificates evidencing the Securities shall also
      bear any legend required by any applicable state blue sky law.

     

    
      
        
        

      

      
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    (d) Any
      holder of the Purchased Common Stock may request the Company to remove any
      or
      all of the legends described in this Section 4.04 from the certificates
      evidencing such Purchased Common Stock by submitting to the Company such
      certificates, together with an opinion of counsel reasonably satisfactory to
      the
      Company to the effect that such legend or legends are no longer required under
      the Securities Act or applicable state laws, as the case may be.  Any
      holder of Springing Lien Notes may request the Company to remove legends on
      the
      Springing Lien Notes in accordance with the Springing Lien Notes
      Indenture.

     

    (e) Prior
      to the date six months after the Initial Closing Date, Purchaser will not,
      without the Company’s prior consent, Transfer any shares of Purchased Common
      Stock, except for Permitted Transfers to Persons who agree with the Company
      (other than in the case of Transfers contemplated by clause (iii) of the
      definition of “Permitted Transfers”) in writing to be bound by the provisions of
      this Section 4.04(e) and Section 4.04(f) to the same extent as
      Purchaser.  For the avoidance of doubt, the provisions of this Section
      4.04(e) are waivable by the Company in its sole discretion.

     

    (f) Notwithstanding
      anything in this Agreement to the contrary and except for Transfers pursuant
      to
      the exercise of rights under the Registration Rights Agreement, in connection
      with a Change of Control transaction or pursuant to Rule 144 under the
      Securities Act, Purchaser may not Transfer in excess of  five percent
      (5%) of the shares of Purchased Common Stock issuable hereunder to any
      Competitor in a single transaction or series of related transactions without
      the
      prior consent of the Company.

     

    Section
      4.05. Lost, Stolen, Destroyed or Mutilated
      Securities.  Upon receipt of evidence satisfactory to the Company
      of the loss, theft, destruction or mutilation of any certificate for any
      security of the Company and, in the case of loss, theft or destruction, upon
      delivery of an undertaking by the holder thereof to indemnify the Company (and,
      if requested by the Company, the delivery of an indemnity bond sufficient in
      the
      judgment of the Company to protect the Company from any loss it may suffer
      if a
      certificate is replaced), or, in the case of mutilation, upon surrender and
      cancellation thereof, the Company will issue a new certificate for an equivalent
      number of shares or another security of like tenor, as the case may
      be.

     

    Section
      4.06.   Regulatory Matters.

     

    (a) Purchaser
      and the Company shall use reasonable best efforts to promptly prepare and file
      all necessary documentation, to effect all applications, notices, petitions
      and
      filings (including, without limitation, under the HSR Act, which filing shall
      be
      made by Purchaser and the Company within four (4) Business Days following the
      date of this Agreement), 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.  Purchaser and the Company shall, within
      four (4) Business Days of the date hereof, prepare and deliver to the OTS a
      rebuttal of control submission in respect of the Transactions that are proposed
      to be consummated at the Final Closing and seek acceptance and approval of
      such
      rebuttal of control submission by the OTS with respect to such Transactions
      to
      the effect that Purchaser will not be deemed to control the Company or any
      of
      its Subsidiaries for purposes of the CIBC Act or the S&LHC Act as a result
      of the consummation of the Transactions and shall use reasonable best efforts
      (including

     

    
      
        
        

      

      
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    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 4.06(d), the Purchaser
      entering into a rebuttal of control agreement with the OTS materially in
      conformance with the form contained in 12 CFR §574.100 and (subject to Section
      4.06(d)) agreeing to such other conditions as required by the OTS to obtain
      such
      acceptance and approval and the Company using the proceeds of the Transactions
      in a manner directed by the OTS).  The Company and Purchaser 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
      appraised 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 the
      Purchaser 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 the Purchaser 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 submission
      referred to in this Section 4.06(a).

     

    (b) Purchaser
      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
      Purchaser, the Company or any of their respective Subsidiaries to any
      Governmental Entity in connection with the Transactions.

     

    (c) Purchaser
      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).

     

    (d) Notwithstanding
      anything in this Agreement, including, without limitation, the provisions of
      Section 4.06(a), in no event will Purchaser or its Affiliates be obligated
      to:

     

    (i)           without
      limiting Purchaser’s obligation under clause (ii) below, propose or accept any
      divestiture of any of Purchaser’s or any of its Affiliate’s assets, accept any
      operational restriction on Purchaser’s or any of its Affiliate’s business, or
      agree to take any action that limits Purchaser’s or its Affiliate’s commercial
      practices in any way to obtain any consent, acceptance or approval of any
      Governmental Entity to consummate the Transactions; or

     

    (ii)           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

     

    
      
        
        

      

      
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    consummation
      of the Transactions if such term, condition or modification would (A) materially
      adversely affect (with respect to Purchaser or its Affiliates) any term of
      the
      Transactions (other than a financial term), or (B) adversely affect (with
      respect to Purchaser or its Affiliates) any financial term of the Transactions
      contemplated hereby.

     

    (iii)    Any
      of the foregoing contemplated by clauses (i) and (ii) above shall be a
“Burdensome Condition”.

     

    (iv)    With
      regard to any Governmental Entity, neither the Company nor any Company
      Subsidiary (or any of their respective Affiliates) shall, without Purchaser’s
      prior written consent, discuss or commit to any Burdensome
      Condition.

     

    Section
      4.07.  Board of Directors.

     

    (a) Effective
      as of the date the Company issues (or is obligated to issue) to Purchaser the
      shares of Purchased Common Stock contemplated by Section
      2.01(b)(i)(A)  (whether in connection with the consummation of Final
      Closing or, absent the consummation of the Final Closing, in accordance with
      Section 2.01(b)(iii) after satisfaction of the conditions contemplated thereby),
      the Board of Directors of the Company shall appoint to the Board
      one  nominee of Purchaser to serve as a Class III director on the
      Board until the Company’s 2009  annual meeting, provided such nominee
      shall be reasonably acceptable to the nominating committee of the Company’s
      Board of Directors (which approval shall not be unreasonably
      withheld).  Beginning with such annual meeting of the Company’s
      stockholders or at any meeting of the stockholders of the Company at which
      the
      Class III directors of the Board of Directors of the Company are to be elected,
      or whenever such members of the Board of Directors are to be elected by written
      consent, the Company will include in the slate of directors recommended for
      election to Class III by the Board of Directors to the stockholders of the
      Company one member of the Company’s Board of Directors designated by Purchaser,
      which nominee shall be reasonably acceptable to the nominating committee of
      the
      Company’s Board of Directors (which approval shall not be unreasonably
      withheld), and will use its reasonable best efforts to take all action necessary
      (including the solicitation of proxies on such person’s behalf) to ensure such
      person is elected by the stockholders of the Company as a Class III director
      of
      the Company’s Board of Directors.

     

    (b) In
      the event of resignation, death, removal or disqualification of a director
      nominated by Purchaser in accordance with Section 4.07(a) and subsequently
      elected to the Company's Board of Directors, Purchaser shall promptly designate
      a replacement director, which nominee shall be reasonably acceptable to the
      nominating committee of the Company’s Board of Directors (which approval shall
      not be unreasonably withheld), and the Company will use its reasonable best
      efforts to take all action necessary (including the solicitation of proxies
      on
      such person’s behalf) to ensure such person is elected by the stockholders of
      the Company to the Company’s Board of Directors at the next meeting of the
      Company’s stockholders at which Class III directors are
      elected.   Any director nominated by Purchaser in accordance with
      Section 4.07(a) may be removed at any time and from time to time, with or
      without cause (subject to the bylaws of the Company as in effect from time
      to
      time and any requirements of law), in Purchaser’s sole discretion.

     

    
      
        
        

      

      
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    (c) At
      such time as Purchaser shall no longer own shares of Common Stock representing
      at least five percent of the Common Stock then outstanding, this Section 4.07
      shall terminate and be of no further force or effect.

     

    Section
      4.08.   Confidentiality Agreement; Publicity.

     

    (a) Effective
      on the Initial Closing Date, the Purchaser and its Affiliates will be released
      from their obligations under paragraph 11 of the Confidentiality Agreement
      and
      the Confidentiality Agreement will otherwise continue to remain in full force
      and effect.

     

    (b) Notwithstanding
      anything to the contrary in the Confidentiality Agreement, Purchaser may
      disclose Proprietary Information (as defined in the Confidentiality Agreement)
      to prospective debt and equity financing sources for the Transactions
      contemplated hereby, provided that any such disclosure shall not relieve
      Purchaser of its obligations with respect to the continued confidentiality
      of
      such information pursuant to the Confidentiality Agreement.

     

    Section
      4.09.   PORTAL and CUSIPs and DTC
      Eligibility.  The Company will use its reasonable best efforts to
      (a) permit the Springing Lien Notes issued pursuant to this Agreement to be
      designated PORTAL securities in accordance with the rules and regulations
      adopted by the NASD relating to the PORTAL Market as of the Closing or as
      promptly as practicable thereafter, (b) obtain all necessary Committee on
      Uniform Securities Identification Procedures numbers (CUSIP numbers) for the
      Springing Lien Notes issued pursuant to this Agreement required for creating
      a
      market in the Springing Lien Notes traded pursuant to Rule 144A under the
      Securities Act or which are not “restricted securities” for purposes of Rule 144
      under the Securities Act and (c) make the Securities issued and sold in
      accordance with this Agreement eligible for clearance and settlement through
      the
      facilities of the Depository Trust Company.

     

    Section
      4.10.   NASDAQ.   The
      Company shall use
      its reasonable best efforts to obtain approval from the NASDAQ for the listing
      on the NASDAQ of the Purchased Common Stock issued at the Initial Closing and
      issuable after such date pursuant to the terms and conditions hereof as soon
      as
      practicable after the Initial Closing Date, subject to notice of issuance only
      with respect to shares of Purchased Common Stock issuable after the Initial
      Closing Date.

     

    Section
      4.11.   Replacement of Revolving Credit
      Facility.   The Company shall use its commercially reasonable
      efforts to obtain, and enter into customary agreements on
      terms  reasonably satisfactory to Purchaser in its capacity as a
      holder of Springing Lien Notes with respect to, a replacement for and access
      to
      a secured revolving credit facility of up to $300,000,000.

     

    Section
      4.12.   10-K Filing.   The Company shall,
      as soon as reasonably practicable but in any event within the period prescribed
      therefor under the rules and regulations of the SEC, file with the SEC its
      annual report on Form 10-K (or such successor form prescribed by the SEC) for
      the year ended December 31, 2007, which filing shall include, for the avoidance
      of doubt, all material non-public information which the Company has provided
      to
      Purchaser in connection with its consideration of this Agreement and the
      Transactions (to the extent it remains material non-public information at such
      time).

     

    Section
      4.13.   Purchaser Acquisition of Additional Common
      Stock.   From the Initial

     

    
      
        
        

      

      
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    Closing
      Date until the earlier of: (a) the date the condition contemplated by Section
      5.03(d) has been satisfied, and (b) the date the obligation to consummate the
      purchase and sale of the Springing Lien Notes at the Final Closing is terminated
      in accordance with Section 6.04, Purchaser shall not and shall cause its
      Affiliates not to, purchase any shares of Common Stock in addition to the shares
      of Common Stock owned as of the date hereof and set forth in Purchaser Schedule
      3.02(i), except for the shares of Purchased Common Stock issuable pursuant
      to
      this Agreement.

     

    Section
      4.14.   Use of Proceeds.  Upon receipt of any
      proceeds from the sales of Securities contemplated by this Agreement, the
      Company shall immediately contribute the  amount of such cash proceeds
      contemplated to be contributed by Article II to its intermediate Subsidiary
      holding company that owns E*Trade Bank, and cause such intermediate Subsidiary
      holding company to immediately contribute the full amount of such proceeds
      to
      E*Trade Bank.

     

    Section
      4.15.   Investment Policy
      Covenant.   Notwithstanding anything herein or anywhere else
      in this Agreement to the contrary, during the period beginning on the Initial
      Closing Date and ending January 1, 2010 (or such earlier date as the Springing
      Lien Notes are no longer outstanding), without the prior written consent of
      Purchaser, the Company will not permit E*Trade Bank to, and shall cause E*Trade
      Bank not to, purchase for its own account:

     

    (a) asset-backed
      securities, collateralized debt obligations, collateralized loan obligations
      and
      similar instruments, including any derivative products based on any of the
      foregoing,

     

    (b) preferred
      securities and common stock of any Person other than (x) the common stock of
      the
      Company or any of its Subsidiaries otherwise permitted to be issued hereunder
      or
      (y) the Capital Stock of Federal Home Loan Banks,

     

    (c) indebtedness
      that is, at the time of such purchase, (x) rated lower than “A-” from S&P
      and “A3” from Moody’s (in each case, with stable outlook) or (y) issued by
      corporations incorporated in any jurisdiction other than a state of the United
      States of America or the District of Columbia,

     

    (d) (w)
      any second lien mortgage loan, (x) any mortgage loan with a combined loan to
      value ratio of greater than 80%, (y) any mortgage loan borrowed by a Person
      with
      a FICO score of less than 700 at the time of origination or (z) any mortgage
      loan that is not a “full documentation loan,” or

     

    (e) any
      home equity lines of credit;

     

    provided
      that:

     

    (1)           notwithstanding
      the foregoing clauses (a) through (e), (1) any purchase or agreement to purchase
      entered into prior to the date hereof shall be permitted, (2) any purchase
      of
      securities issued by Federal National Mortgage Association or Freddie Mac shall
      be permitted, and (3) none of the restrictions in the foregoing clauses (i)
      through (v) shall apply during any fiscal quarter of E*Trade Bank immediately
      following the quarter in which its

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    regulatory
      capital exceeds the amount of regulatory capital required for it to be Well
      Capitalized by $500 million;

     

    (2)           “purchase
      for its own account” shall mean purchases of assets subject to E*TRADE Bank’s
      investment policy and included in an “investment portfolio” (as defined in FASB
      115); and

     

    (3)           for
      purposes of clauses (iv) and (v) above, the term “purchase for its own account”
shall mean purchases in the secondary market and shall not include purchases
      of
      such mortgage loans or equity lines of credit originated by any Affiliate of
      the
      Company.

     

    Section
      4.16.    Put Rights.

     

    (a)  
      If the condition set forth in Section 5.03(d) has not been satisfied prior
      to
      January 15, 2008, then Purchaser, upon not less than 15 nor more than 30 days’
prior written notice to the Company and the Trustee (as defined in the Springing
      Lien Notes Indenture), may require the Company to redeem all, but not less
      than
      all, of the Proportionate Percentage as of December 1, 2009 of Springing Lien
      Notes held by the Purchaser or its Affiliates on December 1, 2009 at a
      redemption price in cash equal to (i) 115.00% of the principal amount of such
      Springing Lien Notes plus (ii) accrued and unpaid interest thereon
      through December 1, 2009.  Upon consummation of such redemption, the
      Company shall have no further obligation under this Agreement with respect
      to
      the shares of Purchased Common Stock that remain unissued as of such
      date.

     

    (b)  
      This section shall expire and have no further effect if at any time prior to
      December 1, 2009 the condition set forth in Section 5.03(d) is satisfied and
      the
      Purchaser has been issued all of the Purchased Common Stock to be issued by
      the
      Company under this Agreement.

     

    (c)   “Proportionate
      Percentage” shall mean, as of any date, the product of (i) $1,750,000,000
less the aggregate principal amount of Springing Lien Notes not held
      by
      Purchaser or its Affiliates, multiplied by (ii) a fraction (A) the
      numerator of which is the Undelivered Common Stock as of such date and (B)
      the
      denominator of which is the total number of shares of Purchased Common Stock
      to
      be issued under this Agreement.

     

    (d)  
      For the avoidance of doubt, the rights under this Section 4.16 may not be
      transferred by Purchaser to any subsequent holder of the Springing Lien
      Notes.

     

    Section
      4.17.   Call Rights.

     

    (a)  If
      the condition set forth in Section 5.03(d) has not been satisfied prior to
      May
      29, 2008, then at any time following such date, the Company may redeem from
      Purchaser and its Affiliates all but not less than all of the Proportionate
      Percentage of Springing Lien Notes held by Purchaser and its Affiliates, upon
      not less than 15 nor more than 30 days’ prior written notice, at a redemption
      price in cash equal to (i) 101% of the principal amount of the Springing Lien
      Notes  redeemed plus (ii) the Call Premium as of, and accrued
      and unpaid interest if any to, the date of redemption (the “Redemption
      Date”).  Upon consummation of such redemption, the

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    Company
      shall have no further obligation under this Agreement with respect to the shares
      of Purchased Common Stock that remain unissued as of such date.

     

    (b) If
      a Change of Control Agreement is entered into within 18 months of the Redemption
      Date, then upon consummation of the transactions contemplated by such Change
      of
      Control Agreement the Company will make a further payment to Purchaser equal
      to
      (x) (A) the per share payment in respect of a share of Common Stock pursuant
      to
      such Change of Control Agreement less (B) the Redemption Date Value
multiplied by (y) the Undelivered Common Stock as of the Redemption
      Date.  The payment pursuant to this Section 4.16(b) shall be
      disregarded if the application of the formula above would yield a negative
      number.

     

    (c) The
      “Call Premium” means an amount in dollars equal to (x)the Undelivered
      Common Stock as of the Redemption Date multiplied by
(y) the Redemption Date Value.

     

    (d) The
      “Redemption Date Value” means the average of closing prices of the Common
      Stock on the NASDAQ over the ten trading day period ending the last day prior
      to
      the Redemption Date.

     

    Section
      4.18.   Change of Control.

     

    (a) If,
      prior to the date that all of the shares of Purchased Common Stock issuable
      to
      Purchaser pursuant to this Agreement have been issued to Purchaser, a Change
      of
      Control occurs or the Company enters into a Change of Control Agreement, then
      the Company must pay to Purchaser simultaneously with the consummation of any
      such transaction that would give rise to such Change of Control an amount in
      cash (a “Change of Control Payment Amount”) equal to the value that would
      have been payable upon closing of such Change of Control transaction with
      respect to the Undelivered Common Stock as of the date of the consummation
      of
      such Change of Control transaction, which Change of Control Payment Amount
      is
      independent of any amounts that Purchaser or its Affiliates may actually receive
      as a result of such transaction in consideration of Common Stock or Springing
      Lien Notes owned by Purchaser or its Affiliates as of such date.  Upon
      Purchaser’s receipt of such payment, the Company shall have no further
      obligation under this Agreement with respect to the shares of Purchased Common
      Stock that remain unissued as of such date.

     

    (b) “Undelivered
      Common Stock” means, as of any date, the number of shares of the Company’s
      Common Stock equal to the difference between (i) 79,867,087 and (ii) the number
      of shares of Purchased Common Stock issued as of such date.

     

    ARTICLE
      V

     

    Conditions

     

    Section
      5.01.   Conditions of Purchase at Initial
      Closing.  The obligations of Purchaser to complete the Initial
      Closing and pay the Initial Consideration are subject to satisfaction or waiver
      of each of the following conditions precedent by Purchaser:

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

     

    (a)  Representations
      and Warranties; Covenants.

     

    (i)           The
      representations and warranties of the Company (i) contained in Section
      3.01(e)(i) of this Agreement shall be true and correct in all material respects,
      (ii) contained in Sections 3.01(g)(iii) and 3.01(u) shall be true and correct
      in
      all respects and (iii) contained in any other Section of this Agreement and
      in
      the Ancillary Documents shall be true and correct (disregarding all
      qualifications or limitations set forth in such representations and warranties
      as to “materiality,” “Material Adverse Effect” and words of similar import),
      except, in the case of clause (iii), where the failure of such representations
      and warranties to be so true and correct has not had and would not reasonably
      be
      expected to have, individually or in the aggregate, a Material Adverse Effect,
      in each case on and as of the date of this Agreement or the date of such
      Ancillary Documents, as the case may be, and on and as of the Initial Closing
      Date with the same effect as though made on and as of such respective dates
      (unless any such representation or warranty is made only as of a specific date,
      in which event such representation or warranty shall be true and correct only as
      of such specific date); and

     

    (ii)           the
      Company shall have performed all obligations and complied with all covenants
      required hereunder to be performed by it at or prior to the Initial
      Closing.

     

    (b) Material
      Adverse Effect.  Except as disclosed in the Company Disclosure
      Schedule, there shall not have occurred, since the date hereof, any event,
      circumstance, change or effect that, individually or in the aggregate, has
      had
      or would reasonably be expected to have a Material Adverse Effect.

     

    (c) Company
      Certificate.  The Company shall have delivered to Purchaser a
      certificate, dated the Initial Closing Date, signed by an executive officer
      of
      the Company, to the effect that the conditions set forth in Section 5.01(a)
      and
      Section 5.01(b) have been satisfied to the best knowledge of the officer
      executing the same.

     

    (d) No
      Adverse Law, 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 agency of competent jurisdiction which enjoins or prohibits
      consummation of the Transactions.

     

    (e) Regulatory
      Approvals.

     

    (i)           All
      material permits, consents, authorizations, orders and approvals of, and filings
      and registrations required under any federal, state or foreign law, rule or
      regulation for or in connection with the execution and delivery of this
      Agreement and the Ancillary Documents and the consummation by the parties hereto
      of the Transactions to take place on the Initial Closing Date contemplated
      on
      such parties’ part hereby and thereby shall have been obtained or made,
      including without limitation, any required foreign competition approvals and
      all
      statutory waiting periods thereunder in respect thereof shall have
      expired.

     

    (ii)           The
      OTS shall have approved or not objected to the notice filed by the Company
      pursuant to 12 CFR 563.22(c) with respect to the sale of the ABS
      Assets.

     

    (f) Closing
      Deliveries.  Purchaser shall have received the items to be
      delivered by the Company pursuant to Section 2.01(a)(ii).

     

    
      
        
        

      

      
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    (g) ABS
      Assets.  The purchase of the ABS Assets pursuant to the ABS
      Purchase Agreement shall be completed immediately after the contribution
      contemplated by Section 2.01(a)(ii)(D) and Section 4.14 and as part of the
      Initial Closing.

     

    (h) Regulatory
      Enforcement.  Except as disclosed in the Company Disclosure
      Schedule, as of the date hereof, neither the OTS nor any other
      Governmental Entity has (i) initiated an administrative or enforcement
      investigation or proceeding, or has taken any remedial action, including the
      imposition of a cease and desist order, against the Company or any of its
      subsidiaries, directors, officers or employees or (ii) changed the status of
      any
      investigation, including without limitation the SEC informal inquiry initiated
      on October 17, 2007.

     

    (i) Legal
      Opinion.  The Purchaser shall have received, dated the Initial
      Closing Date and addressed to the Purchaser, an opinion of Davis Polk &
Wardwell, outside counsel to the Company, in the form attached hereto
      as Schedule
      5.01(i).

     

    (j) Revolving
      Credit Facility.  The Company’s revolving credit facility shall
      have been terminated effective prior to the Initial Closing.

     

    (k) Simultaneous
      Closing.  Except for the purchase of the ABS Assets, all
      transactions to be completed on the Initial Closing Date pursuant to Section
      2.01(a) shall be completed simultaneously with the Initial Closing.

     

    Section
      5.02.   Conditions of Sale at Initial
      Closing.  The obligation of the Company to issue and sell the
      Securities and sell the ABS Assets at the Initial Closing as contemplated by
      Section 2.01(a)(i) is subject to satisfaction or waiver of each of the following
      conditions precedent:

     

    (a) Representations
      and Warranties; Covenants.  The representations and warranties of
      Purchaser contained in this Agreement shall be true and correct in all material
      respects on and as of the date of this Agreement and on and as of the Initial
      Closing Date with the same effect as though made on and as of such dates (unless
      any such representation or warranty is made only as of a specific date, in
      which
      event such representation or warranty shall be true and correct in all material
      respects only as of such specific date), and Purchaser shall have performed
      all
      obligations and complied with all covenants required hereunder to be performed
      by it at or prior to the Initial Closing.

     

    (b) Purchaser’s
      Certificate.  An executive officer of Purchaser shall have
      delivered to the Company a certificate, dated the Initial Closing Date, to
      the
      effect that the condition set forth in Section 5.02(a) has been satisfied to
      the
      best knowledge of the officer executing the certificate.

     

    (c) 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 agency of competent jurisdiction which enjoins or prohibits consummation
      of
      the Transactions.

     

    (d) Closing
      Deliveries.  The Company shall have received the items to be
      delivered by Purchaser pursuant to Section 2.01(a)(ii).

     

    
      
        
        

      

      
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    (e) Purchase
      of ABS Assets.  The purchase of the ABS Assets pursuant to the ABS
      Purchase Agreement shall be completed immediately after the contribution
      contemplated by Section 2.01(a)(ii)(D) and Section 4.14 and as part of the
      Initial Closing.

     

    Section
      5.03.   Conditions of Purchase at Final
      Closing.  The obligations of Purchaser to complete the Final
      Closing and to pay the Final Cash Consideration at the Final Closing are subject
      to satisfaction or waiver (to the extent permitted by applicable law) of each
      of
      the following conditions precedent by Purchaser:

     

    (a) No
      Adverse Law, Action or Decision or Injunction.  There shall not be
      in effect any law or any order, decree or injunction of a court or agency of
      competent jurisdiction which enjoins or prohibits consummation of the
      Transactions to be consummated at the Final Closing Date.

     

    (b) Antitrust
      Approvals.  Any applicable waiting period under the HSR Act
      relating to the issuance of the Purchased Common Stock issued after the Initial
      Closing Date shall have expired or been terminated.

     

    (c) Final
      Closing Deliveries.  Purchaser shall have received the items to be
      delivered by the Company pursuant to Section 2.01(b)(ii).

     

    (d) OTS
      Approval.  The OTS shall have accepted a rebuttal of control
      submission for the proposed Transactions without, unless approved by Purchaser
      in its sole discretion,  imposition of any Burdensome
      Condition.

     

    (e) Legal
      Opinion.  The Purchaser shall have received, dated the Final
      Closing Date and addressed to the Purchaser, an opinion of Davis Polk &
Wardwell, outside counsel to the Company, in the form attached hereto
      as Schedule
      5.03(e).

     

    Section
      5.04.   Conditions of Sale at Final
      Closing.  The obligation of the Company to issue the shares of
      Purchased Common Stock listed in Section 2.01(b)(i) (subject to the provisions
      of Section 2.01(b)(iii)), and the Springing Lien Notes to be issued at the
      Final
      Closing is subject to satisfaction or waiver (to the extent permitted by
      applicable law) of each of the following conditions precedent:

     

    (a) 
      No Adverse Action or Decision or Injunction.  There shall not be
      in effect any law or any order, decree or injunction of a court or agency of
      competent jurisdiction which enjoins or prohibits consummation of the
      Transactions to be consummated at the Final Closing.

     

    (b) Antitrust
      Approvals.  Any applicable waiting period under the HSR Act
      relating to the issuance of the Purchased Common Stock issued after the Initial
      Closing Date shall have expired or been terminated.

     

    (c) Closing
      Deliveries.  The Company shall have received the items to be
      delivered by Purchaser pursuant to Section 2.01(b).

     

    
      
        
        

      

      
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    ARTICLE
      VI

     

    Miscellaneous

     

    Section
      6.01.   Survival of Representations and
      Warranties.  All covenants and agreements shall survive the
      Initial Closing Date and the Final Closing Date until expired in accordance
      with
      their terms.   Except for the representations and warranties
      contained in (i) Section 3.01(a), Section 3.01(b), Section 3.01(c)(i), Section
      3.01(e)(i), Section 3.01(v) and Section 3.01(x) and (ii) Section 3.02(a),
      Section 3.02(b) and Section 3.02(e), which shall survive the Initial Closing
      and
      Final 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 Initial Closing or the Final Closing, as
      applicable, shall survive the Final Closing for a period of two years and shall
      then expire.

     

    Section
      6.02.   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 the Company, to:

            
	 	 
	 	
              E*TRADE
                Financial Corporation

              671
                N. Glebe Road

              Arlington,
                VA 22203

              Attention:  Arlen
                W. Gelbard, Esq.

                                Chief
                Administrative Officer & General Counsel

              Fax:  (703)
                236-7223

               

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

               

              Davis
                Polk & Wardwell

              450
                Lexington Avenue

              New
                York, NY 10017

              Attention:  Daniel
                G. Kelly, Jr.

                                John
                D. Amorosi

              Fax:  (212)
                450-3800

               

              (b)
                If to Purchaser:

               

              Wingate
                Capital 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 shall not constitute notice)
                to:

            

    

    
       

      
        
          
          

        

        
          -37-

          
            

          

        

        
          
          

        

      

       

      
        	 	
                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

              

      

       

    

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

     

    Section
      6.03.    Entire Agreement; Third Party Beneficiaries;
      Amendment.  This Agreement, the Confidentiality 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 4.04(d) and Section 6.09, 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 any Purchaser of the Company
      prior to or after the date hereof shall stop or limit Purchaser from exercising
      any right hereunder or be deemed to be a waiver of any such right.

     

    Section
      6.04.   Termination of Final Closing
      Obligation.  If the purchase and sale of the Springing Lien Notes
      contemplated to occur at the Final Closing shall not have occurred on or prior
      to September 30, 2008, then the obligations of the parties to consummate such
      purchase and sale shall automatically terminate at such date.

     

    Section
      6.05.   Counterparts.  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 documents.

     

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

     

     

     

    
      
        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

     

    Section
      6.07.   Public Announcements.  Subject to each
      party’s disclosure obligations imposed by law and notwithstanding any provision
      to the contrary contained in the Confidentiality Agreement, 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 without first consulting with the other party
      hereto.  In conjunction with the Company’s and Purchaser’s joint
      public disclosure of this Agreement and the transactions contemplated hereby
      (which shall occur no later than 24 hours following the execution of this
      Agreement), the Company will pre-announce fourth quarter 2007 incremental
      provisions for the Company’s One-to-Four Family (1st Lien) and
      Home
      Equity Loan Portfolios (the “Loan Portfolio Announcement”).

     

    Section
      6.08.   Expenses.  Upon the occurrence of the
      Initial Closing, and from time to time afterward in connection with the
      Transactions contemplated hereby and as requested by the Purchaser, the Company
      will reimburse the Purchaser for all reasonable, documented, out-of-pocket
      expenses (including fees and expenses of legal counsel and accounting
      consultants) incurred by Purchaser in connection with the transactions
      contemplated by this Agreement and the Ancillary Documents (including
      Purchaser’s due diligence review of the Company and the negotiation of all
      definitive documentation entered into in connection with the transactions
      contemplated by this Agreement) up to a maximum reimbursement of
      $8,000,000.  If the Initial Closing shall not occur, each party shall
      bear its own costs and expenses.

     

    Section
      6.09.   Indemnification.

     

    (a) The
      Company agrees to indemnify and hold harmless Purchaser, each Affiliate of
      Purchaser and each officer, director, employee, partner, member, shareholder
      and
      agent of the Purchaser and their Affiliates in their respective capacities
      as
      such (the “Purchaser 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 6.09(g)
      below) and expenses (including, without limitation, 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 6.09(c) and Section 6.09(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 of
      the
      Company or any other Person (other than the Company or any Purchaser Indemnitee)
      against or involving a Purchaser 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 Purchaser Indemnitees’
liability is based on acts of the Purchaser Indemnitee constituting fraud,
      gross
      negligence, willful misconduct or violations of applicable law.

     

    
      
        
        

      

      
        -39-

        
          

        

      

      
        
        

      

    

     

    (b) Purchaser
      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 6.09(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 Purchaser in this Agreement
      or any Ancillary Document, and (ii) any breach of or failure to comply with
      the
      covenants and agreements of Purchaser under this Agreement or any Ancillary
      Document.

     

    (c) For
      purposes of the indemnity contained in Section 6.09(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 6.09 concerning the indemnities of the Company or
      Purchaser 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 Purchaser Indemnitees shall not make a claim against the Company
      for
      indemnification under Section 6.09(a)(i) (not including indemnification for
      breaches of the representations and warranties made by the Company in Section
      3.01)(e)) for Purchaser Losses unless and until the aggregate amount of
      Purchaser Losses under Section 6.09(a)(i) (not including indemnification for
      breaches of the representations and warranties made by the Company in Section
      3.01(e)) exceeds $100,000,000 (the “Deductible”) and then the Purchaser
      Indemnitees shall be entitled to indemnification for all Losses in excess of
      the
      Deductible. The aggregate amount of Purchaser Losses for which the Company
      is
      obligated to indemnify Purchaser in respect of claims under Section 6.09(a)(i)
      shall not exceed $1,500,000,000 (the “Cap”) (it being acknowledged and
      agreed that Purchaser shall be responsible for only a pro rata share of the
      Deductible and shall be subject to a pro rata share of the Cap calculated based
      on the aggregate amount of Springing Lien Notes issuable to Purchaser under
      this
      Agreement in proportion to the Springing Lien Notes issued to Persons other
      than
      Purchaser).

     

    (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 Purchaser for
      indemnification under Section 6.09(b)(i) for Company Losses unless and until
      the
      aggregate amount of Company Losses under Section 6.09(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 Purchaser is obligated to indemnify the Company in
      respect of claims under Section 6.09(b)(i) shall not exceed
      $1,500,000,000.

     

    (f) A
      party obligated to provide indemnification under this Section 6.09 (an
“Indemnifying Party”) shall reimburse the indemnified parties of the
      other party (the “Indemnified Parties”) for all reasonable out-of-pocket
      expenses (including attorneys’ fees and 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

     

    
      
        
        

      

      
        -40-

        
          

        

      

      
        
        

      

    

     

    under
      this
      Section 6.09 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 6.09 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 6.09 shall survive
      the
      transfer or redemption of the Securities, the Initial Closing, the Final Closing
      and termination of this Agreement, any Ancillary Document, and the
      Transactions.  The agreements contained in this Section 6.09 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 6.09 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.

     

    
      
        
        

      

      
        -41-

        
          

        

      

      
        
        

      

    

     

    (j) In
      addition to and without limitation of any other indemnities in this Agreement,
      as a protection to the Purchaser against the existence of issued shares or
      other
      securities of the Company not disclosed in Section 3.01(e), in the
      event that, at any time after the Initial Closing, the representation and
      warranty set forth in the last sentence of Section 3.01(e)(i) is
      determined not to have been true as of the Initial Closing, the Company shall
      issue to the Purchaser, at no cost to the Purchaser, an additional amount of
      Common Stock such that, if such issuance of additional Common Stock had been
      made under this Agreement, such representation and warranty would have been
      true
      and accurate in all respects at the Initial Closing.

     

    (k) Notwithstanding
      anything to the contrary in this Section 6.09, if and to the extent any
      Ancillary Document provides for indemnification with respect to matters for
      which indemnity is provided by Section 6.09(a) or Section 6.09(b) of this
      Agreement, the indemnity provisions of such Ancillary Document shall govern
      and
      control.

     

    Section
      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
      Purchaser’s successors and assigns, and no other person; provided,
      that, subject to applicable law, Purchaser may (prior to or following the
      Initial Closing or prior to the Final Closing) assign all or any portion of
      its
      right to be issued Securities under this Agreement to any proposed transferee
      (who is not a Competitor) in a transfer in compliance with applicable law that
      (a) makes substantially similar investment representations to the Company as
      made by the Purchaser in Section 3.02 and acknowledgements made in Section
      4.04(a)-(d), and (b) to the extent such transferee receives shares of Purchased
      Common Stock, as a condition of such Transfer, shall be bound by restrictions
      substantially similar to the provisions of Section 4.04(e) and Section 4.04(f)
      (with the Company as a third party beneficiary of such agreement), but no such
      assignment shall relieve Purchaser of its obligations hereunder;
provided, further, that the Company may not assign any of its
      rights or delegate any of its duties under this Agreement without the prior
      consent of Purchaser.    In connection with the purchase by
      any assignee of Springing Lien Notes pursuant to this Section 6.10, the Company
      shall, to the extent deliverable, deliver to such assignee a certificate of
      the
      Chief Financial Officer of the Company, dated the date of such purchase,
      certifying that such issuance does not violate the terms and conditions of
      the
      Company’s outstanding indebtedness.

     

    Section
      6.11.   Remedies; Waiver.  To the extent
      permitted by law, all rights and remedies existing under this Agreement or
      any
      Ancillary Documents 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.

     

    Section
      6.12.   Securities Contract; Qualified Financial
      Contract.  This Agreement is intended to be a “securities
      contract” within the meaning of section 741 of title 11 of the United States
      Code.  This Agreement is intended to be a “qualified financial
      contract” within the meaning of section 1821(e)(8) of title 12 of the United
      States Code and the Company agrees to maintain this Agreement and the evidence
      of authority in its official books and records.

     

    
      
        
        

      

      
        -42-

        
          

        

      

      
        
        

      

    

     

    Section
      6.13.   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 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.

     

    Section
      6.14.   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.

     

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

     

    Section
      6.16.   Aggregation.   For purposes of the
      rights of Purchaser that are contingent on ownership of Common Stock, under
      Sections 4.02, 4.03 and 4.07, Purchaser’s ownership of Common Stock then
      outstanding shall be calculated in the aggregate among Purchaser and its
      controlled Affiliates.

     

    Section
      6.17.   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.

     

    Section
      6.18.   Arm’s Length Transactions.  This
      Agreement and the Transactions contemplated hereby have been negotiated and
      entered into by the parties on an arms-length basis, and the Company expressly
      acknowledges and agrees that neither Purchaser 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 contemplated hereby.

     

    Section
      6.19.   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

     

    
      
        
        

      

      
        -43-

        
          

        

      

      
        
        

      

    

     

    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.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        -44-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS
      WHEREOF, this Agreement has been executed by the parties hereto or by their
      respective duly authorized officers, all as of the date first above
      written.

     

    
      	 	
              E*TRADE
                FINANCIAL CORPORATION

            
	 	 
	 	 
	 	
              By:         
                /s/ R. Jarrett Lilien

            
	 	
              Name:

            	R.
              Jarrett Lilien	 
	 	
              Title:

            	President
              and COO	 
	 	 
	 	 
	 	
              WINGATE
                CAPITAL LTD.

            
	 	 
	 	 
	 	
              By:           /s/
                Adam Cooper

            
	 	
              Name:

            	Adam
              Cooper	 
	 	
              Title:

            	Senior
              Managing Director and General Counsel	 
	 	 

    

    

     

    [Investment
      Agreement Signature Page]

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