Exhibit 1.1
E*TRADE FINANCIAL
CORPORATION
435,000,000 Shares of
Common Stock
($0.01 par value per share)
UNDERWRITING
AGREEMENT
J.P. Morgan Securities
Inc.
Sandler O'Neill & Partners,
L.P.
c/o J.P. Morgan Securities
Inc.
Sandler O'Neill & Partners,
L.P.
as Representatives of the
several
Underwriters listed in Schedule 1
hereto
c/o J.P. Morgan Securities
Inc.
Ladies and Gentlemen:
E*TRADE Financial Corporation, a Delaware
corporation (the “ Company ”), confirms its
agreement with the several Underwriters listed in Schedule 1 hereto
(the “ Underwriters ”), for whom J.P. Morgan
Securities Inc. (“ J.P. Morgan ”) and Sandler
O'Neill & Partners, L.P. are acting as representatives (the
“ Representatives ”), with respect to the
issuance and sale by the Company, subject to the terms and
conditions described below (this “ Agreement ”),
of an aggregate of 435,000,000 shares (the “ Underwritten
Shares ”) of common stock, $0.01 par value per share (the
“ Common Stock ”), of the Company and, at the
option of the Underwriters, up to an additional 65,000,000 shares
of common stock of the Company (the “ Option Shares
”). The Underwritten Shares and the Option Shares
are herein referred to as the “Shares”.
The Company has filed with the Securities and
Exchange Commission (the “ Commission ”) a
registration statement on Form S-3 (No. 333-158636) for the
registration of the Shares under the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the “ Securities Act ”); and such
registration statement sets forth the material terms of the
offering, sale and plan of distribution of the Shares and contains
additional information concerning the Company and its
business. As used herein, “ Registration
Statement ” means such registration statement, as amended
at the time of such registration statement’s effectiveness
for purposes of Section 11 of the Securities Act, as such section
applies to the Underwriters , including (1) all documents filed as
a part thereof or incorporated, or deemed to be incorporated, by
reference therein and (2) any information contained or incorporated
by reference in a prospectus filed with the Commission pursuant to
Rule 424(b) under the Securities Act, to the extent such
information is deemed, pursuant to Rule 430B or Rule 430C under the
Securities Act, to be part of the registration statement at the
effective time. “ Basic Prospectus ”
means the prospectus dated April 17, 2009, filed as part of the
Registration
Statement, including the documents
incorporated by reference therein as of the date of such
prospectus; “ Preliminary Prospectus ” means
each prospectus included in such registration statement (and any
amendments thereto) before effectiveness, any prospectus filed with
the Commission pursuant to Rule 424(a) under the Securities Act and
the prospectus included in the Registration Statement at the time
of its effectiveness that omits Rule 430 Information; “
Prospectus ” means the prospectus (including the Basic
Prospectus) in the form first used (or made available upon request
of purchasers pursuant to Rule 173 under the Securities Act) in
connection with confirmation of sales of the Shares; and “
Permitted Free Writing Prospectuses ” has the meaning
set forth in Section 3(b). Any reference herein to the
Registration Statement, any Preliminary Prospectus, the Basic
Prospectus or the Prospectus shall, unless otherwise stated, be
deemed to refer to and include the documents, if any, incorporated,
or deemed to be incorporated, by reference therein (the “
Incorporated Documents ”), including, unless the
context otherwise requires, the documents, if any, filed as
exhibits to such Incorporated Documents. Any reference
herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration
Statement, the Basic Prospectus, any Preliminary Prospectus, the
Prospectus or any Permitted Free Writing Prospectus shall, unless
stated otherwise, be deemed to refer to and include the filing of
any document under the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder
(collectively, the “ Exchange Act ”) on or after
the initial effective date of the Registration Statement or the
date of the Basic Prospectus, the Prospectus or such Permitted Free
Writing Prospectus, as the case may be, and deemed to be
incorporated therein by reference. At or prior to the
Time of Sale (as defined below), the Company had prepared the
following information (collectively with the pricing information
set forth on Annex A, the “ Pricing Disclosure Package
”): a Preliminary Prospectus dated June 17, 2009
and each “free-writing prospectus” (as defined pursuant
to Rule 405 under the Securities Act) listed on Annex B
hereto.
“Time of Sale” means 6:30 P.M., New
York City time, on June 18, 2009.
1. Purchase of the
Shares by the Underwriters .
(a) The Company agrees
to issue and sell the Underwritten Shares to the several
Underwriters as provided in this Agreement, and each Underwriter,
on the basis of the representations, warranties and agreements set
forth herein and subject to the conditions set forth herein,
agrees, severally and not jointly, to purchase from the Company the
respective number of Underwritten Shares set forth opposite such
Underwriter’s name in Schedule 1 hereto at a price per share
(the “ Purchase Price ”) of $1.034; provided
that any shares sold by the several Underwriters to Citadel
Investment Group, L.L.C. (“ Citadel ”) shall be
sold to the Underwriters at a price per share of $1.10, which shall
be the same price at which the Underwriters sell the shares to the
public (the “ Citadel Shares Purchase Price
”).
In addition, the Company agrees to issue and
sell the Option Shares to the several Underwriters as provided in
this Agreement, and the Underwriters, on the basis of the
representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, shall have the option
to purchase, severally and not jointly, from the Company the Option
Shares at the Purchase Price or, with respect to any of the Option
Shares sold by the Underwriters to Citadel, the Citadel Shares
Purchase Price, less an amount per share equal to any dividends or
distributions declared by the Company and payable on the
Underwritten Shares but
not payable on the Option
Shares. The public offering price of the Shares is not
in excess of the price recommended by Sandler O’Neill &
Partners, L.P., acting as a “qualified independent
underwriter” within the meaning of NASD Rule 2720 of the
Financial Industry Regulatory Authority, Inc.
(“FINRA”).
If any Option Shares are to be purchased, the
number of Option Shares to be purchased by each Underwriter shall
be the number of Option Shares which bears the same ratio to the
aggregate number of Option Shares being purchased as the number of
Underwritten Shares set forth opposite the name of such Underwriter
in Schedule 1 hereto (or such number increased as set forth in
Section 8 hereof) bears to the aggregate number of Underwritten
Shares being purchased from the Company by the several
Underwriters, subject, however, to such adjustments to eliminate
any fractional Shares as the Representatives in their sole
discretion shall make.
The Underwriters may exercise the option to
purchase Option Shares at any time in whole, or from time to time
in part, on or before the thirtieth day following the date of the
Prospectus, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised
and the date and time when the Option Shares are to be delivered
and paid for, which may be the same date and time as the Closing
Date (as hereinafter defined) but shall not be earlier than the
Closing Date or later than the tenth full business day (as
hereinafter defined) after the date of such notice (unless such
time and date are postponed in accordance with the provisions of
Section 8 hereof). Any such notice shall be given at
least two business days prior to the date and time of delivery
specified therein.
(b) The Company
understands that the Underwriters intend to make a public offering
of the Shares as soon after the effectiveness of this Agreement as
in the judgment of the Representatives is advisable, and initially
to offer the Shares on the terms set forth in the
Prospectus. The Company acknowledges and agrees that the
Underwriters may offer and sell Shares to or through any affiliate
of an Underwriter.
(c) Payment for the
Shares shall be made by wire transfer in immediately available
funds to the account specified by the Company to the
Representatives in the case of the Underwritten Shares, at the
offices of Cahill Gordon & Reindel LLP, 80 Pine Street, New
York, New York 10005 at 10:00 A.M., New York City time, on June 24,
2009, or at such other time or place on the same or such other
date, not later than the fifth business day thereafter, as the
Representatives and the Company may agree upon in writing or, in
the case of Option Shares, on the date and at the time and place
specified by the Representatives in the written notice of the
Underwriters’ election to purchase such Option
Shares. The time and date of such payment for the
Underwritten Shares is referred to herein as the “ Closing
Date ”, and the time and date for any such payment for
Option Shares, if other than the Closing Date, is herein referred
to as an “Additional Closing Date.”
Payment for the Shares to be purchased on the
Closing Date or the Additional Closing Date, as the case may be,
shall be made against delivery to the Representatives for the
respective accounts of the several Underwriters of the Shares to be
purchased on such date with any transfer taxes payable in
connection with the sale of such Shares duly paid by the
Company. Delivery of the Shares shall be made through
the facilities of The Depository Trust Company (“ DTC
”)
unless the Representatives shall
otherwise instruct. The certificates for the Shares will
be made available for inspection and packaging by the
Representatives at the office of DTC or its designated custodian
not later than 1:00 P.M., New York City time, on the business day
prior to the Closing Date or the Additional Closing Date, as the
case may be.
3.
Representations, Warranties and Agreements of the Company
. The Company represents and warrants to, and agrees
with, each Underwriter, on and as of (i) the Time of Sale, (ii) the
Closing Date and (iii) each Additional Closing Date, as applicable
(each such date listed in (i) through (iii), a “
Representation Date ”), as follows:
(a) No order
preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission, and each Preliminary Prospectus
included in the Pricing Disclosure Package, at the time of filing
thereof, complied in all material respects with the Securities Act,
and no Preliminary Prospectus, at the time of filing thereof,
contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in
any Preliminary Prospectus, it being understood and agreed that the
only such information furnished by any Underwriter consists of the
information described as such in Section 9(b)
hereof. The Pricing Disclosure Package as of the Time of
Sale did not, and as of the Closing Date and, if applicable, as of
any Additional Closing Date, as the case may be, will not, contain
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that the Company makes no representation and
warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use in such Pricing
Disclosure Package, it being understood and agreed that the only
such information furnished by any Underwriter consists of the
information described as such in Section 9(b)
hereof. The Registration Statement is an
“automatic shelf registration statement” as defined
under Rule 405 of the Securities Act that has been filed with the
Commission not earlier than three years prior to the date hereof;
there is no order preventing or suspending the use of the
Registration Statement, the Prospectus or any Permitted Free
Writing Prospectus, and, to the knowledge of the Company, no
proceeding for that purpose or pursuant to Section 8A of the
Securities Act against the Company or related to the offering has
been initiated or threatened by the Commission; no notice of
objection of the Commission to the use of such Registration
Statement pursuant to Rule 401(g)(2) under the Securities Act has
been received by the Company; the Registration Statement complied
when it initially became effective, complies as of the date hereof
and, as then amended or supplemented, as of each other
Representation Date will comply, in all material respects, with the
requirements of the Securities Act; the conditions to the use of
Form S-3 in connection with the offering and sale of the
Shares
as contemplated hereby have been
satisfied; the Registration Statement meets, and the offering and
sale of the Shares as contemplated hereby complies with, the
requirements of Rule 415 under the Securities Act (including,
without limitation, Rule 415(a)(5)); the Prospectus complied or
will comply, at the time it was or will be filed with the
Commission, and will comply, as then amended or supplemented, as of
each Representation Date (other than the date hereof), in all
material respects, with the requirements of the Securities Act; the
Registration Statement did not, as of the time of its initial
effectiveness, and does not or will not, as then amended or
supplemented, as of each Representation Date, contain an 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 not misleading; as of each Representation Date (other than
the date hereof), the Prospectus, as then amended or supplemented,
together with all of the then issued Permitted Free Writing
Prospectuses, if any, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
the Company makes no representation or warranty with respect to any
statement or omission in the Registration Statement, the Prospectus
or any Permitted Free Writing Prospectus in reliance upon and in
conformity with information concerning any Underwriter and
furnished in writing by or on behalf of such Underwriter through
the Representatives expressly for use in the Registration
Statement, the Prospectus or such Permitted Free Writing Prospectus
(it being understood that such information consists solely of the
information specified in Section 9(b)).
(b) Prior to the
execution of this Agreement, the Company has not, directly or
indirectly, offered or sold any of the Shares by means of any
“prospectus” (within the meaning of the Securities Act)
or used any “prospectus” (within the meaning of the
Securities Act) in connection with the offer or sale of the Shares,
in each case other than the Basic Prospectus and the Preliminary
Prospectus. The Company represents and agrees that,
unless it obtains the prior consent of the Representatives, it has
not made and will not make any offer relating to the Shares that
would constitute an “issuer free writing prospectus”
(as defined in Rule 433 under the Securities Act) or that would
otherwise constitute a “free writing prospectus” (as
defined in Rule 405 under the Securities Act). Any such
free writing prospectus relating to the Shares consented to by the
Representatives is hereinafter referred to as a “
Permitted Free Writing Prospectus .” The
Company represents that it has complied and will comply in all
material respects with the requirements of Rule 433 under the
Securities Act applicable to any Permitted Free Writing Prospectus,
including timely filing with the Commission where required,
legending and record keeping. The conditions set forth
in one or more of subclauses (i) through (iv), inclusive, of Rule
433(b)(1) under the Securities Act are satisfied, and the
registration statement relating to the offering of the Shares
contemplated hereby, as initially filed with the Commission,
includes a prospectus that, other than by reason of Rule 433 or
Rule 431 under the Securities Act, satisfies the requirements of
Section 10 of the Securities Act; neither the Company nor any
Underwriter is disqualified, by reason of Rule 164(f) or (g) under
the Securities Act, from using, in connection with the offer and
sale of the Shares, “ free writing prospectuses
” (as defined in Rule 405 under the Securities Act) pursuant
to Rules 164 and 433 under the Securities Act; the Company is not
an “ ineligible issuer ” (as defined in Rule 405
under the Securities Act) as of the
eligibility determination date for
purposes of Rules 164 and 433 under the Securities Act with respect
to the offering of the Shares contemplated by the Registration
Statement.
(c) The Incorporated
Documents, when they were filed with the Commission, conformed in
all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and none of such documents
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading; and any further documents so
filed and incorporated by reference in the Registration Statement,
the Pricing Disclosure Package, the Prospectus or any Permitted
Free Writing Prospectus, when such documents become effective or
are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and will not contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(d) The financial
statements and the related notes thereto included or incorporated
by reference in the Registration Statement, the Pricing Disclosure
Package, the Prospectus and any Permitted Free Writing Prospectus
comply in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as applicable, and present
fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and their results of
operations, stockholders’ equity and cash flows for the
periods specified, and such financial statements have been prepared
in conformity with the generally accepted accounting principles in
the United States (“ GAAP ”) applied on a
consistent basis throughout the periods involved. The
other historical financial and statistical information and data
included in the Registration Statement, the Pricing Disclosure
Package, Prospectus or any Permitted Free Writing Prospectus are,
in all material respects, fairly presented.
(e) Except in each
case as otherwise disclosed in the Registration Statement, the
Pricing Disclosure Package, the Prospectus and any Permitted Free
Writing Prospectus, since the date of the most recent financial
statements of the Company included or incorporated by reference in
the Registration Statement, the Pricing Disclosure Package, the
Prospectus and any Permitted Free Writing Prospectus, (i) there has
not been any material change in the capital stock or long-term debt
of the Company or any of its subsidiaries and there has not been a
Material Adverse Effect (as defined below), (ii) neither the
Company nor any of its subsidiaries has entered into any
transaction or agreement that is material to the Company and its
subsidiaries, taken as a whole, or incurred any liability or
obligation, direct or contingent, except for such liabilities or
obligations that, individually or in the aggregate, would not have
a Material Adverse Effect and (iii) neither the Company nor any of
its subsidiaries has sustained any loss or interference with its
business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor disturbance or dispute
or any action, order or decree of any court or arbitrator or
governmental or regulatory authority, except for such losses that,
individually or in the aggregate, would not have a Material Adverse
Effect. As used herein, “ Material Adverse
Effect ” means a material adverse
effect on the earnings, business,
properties, condition (financial or otherwise), results of
operations or prospects of the Company and its subsidiaries taken
as a whole.
(f) The Company has
been duly incorporated, is validly existing as a corporation in
good standing under the laws of the state of Delaware, has the
corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified
to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse
Effect.
(g) Each of the
subsidiaries of the Company listed on Schedule 2 hereto (the
“ Named Subsidiaries ”) has been duly organized,
and is validly existing and in good standing under the laws of its
respective jurisdictions of formation or organization, has the
corporate power and authority to own, lease and operate its
property and to conduct its business as described in Registration
Statement, the Pricing Disclosure Package and the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership
or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect; all of the issued shares
of capital stock of each Named Subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable
and are owned directly or indirectly by the Company, free and clear
of all liens, encumbrances, equities or claims (“
Liens ”), except as to Liens disclosed in the
Prospectus. Each significant subsidiary (as defined in Rule 1-02(w)
of Regulation S-X) of the Company is a Named Subsidiary.
(h) The Company has an
authorized capitalization as set forth in the Registration
Statement, the Pricing Disclosure Package, the Prospectus and any
Permitted Free Writing Prospectus; all the outstanding shares of
capital stock of the Company have been duly and validly authorized
and issued and are fully paid and non-assessable and are not
subject to any pre-emptive or similar rights; except as described
in or expressly contemplated by the Registration Statement, the
Pricing Disclosure Package, the Prospectus or any Permitted Free
Writing Prospectus, there are no outstanding rights (including,
without limitation, pre-emptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interests in the Company or
any of its significant subsidiaries, nor any contracts,
commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of the Company or any
such significant subsidiary, any such convertible or exchangeable
securities or any such rights, warrants or options; and the capital
stock of the Company conforms in all material respects to the
description thereof contained in the Registration Statement, the
Pricing Disclosure Package, the Prospectus and any Permitted Free
Writing Prospectus.
(i) The Shares have
been duly authorized by the Company and, when issued and delivered
and paid for as provided under this Agreement, will be duly and
validly issued, will be fully paid and nonassessable and will
conform to the description thereof in the Registration Statement,
the Pricing Disclosure Package, the Prospectus, and any
Permitted Free Writing Prospectus;
and the shareholders of the Company do not have any preemptive or
similar rights with respect to the Shares.
(j) The Company has
full right, power and authority to execute and deliver this
Agreement and perform its obligations hereunder or thereunder; and
all action required to be taken for the due and proper
authorization, execution and delivery by it of this Agreement and
the consummation by it of the transactions contemplated hereby and
thereby has been duly and validly taken.
(k) This Agreement has
been duly authorized, executed and delivered by the
Company.
(l) This Agreement
conforms in all material respects to the description thereof
contained in the Registration Statement, the Pricing Disclosure
Package, the Prospectus and any Permitted Free Writing
Prospectus.
(m) Neither the
Company nor any of its subsidiaries is (i) in violation of its
charter or by-laws or similar organizational documents, (ii) in
default, and no event has occurred that, with notice or lapse of
time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, or (iii) in
violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory
authority, except, in the case of clauses (ii) and (iii) above, for
any such default or violation that would not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect.
(n) The execution,
delivery and performance by the Company of this Agreement, the
issuance and sale of the Shares, the compliance by the Company with
the terms hereof and the consummation of the transactions
contemplated hereby will not (i) contravene, conflict with or
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other material agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of
its subsidiaries is subject, (ii) contravene or result in any
violation of the provisions of the charter or bylaws of the Company
or (iii) contravene or result in the violation of any law or
statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the
case of clauses (i) and (iii) above, for any such conflict, breach,
violation or default that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the execution, delivery
and performance by the Company of this Agreement, the issuance and
sale of the Shares and compliance by the Company with the terms
hereof and the consummation of the transactions
contemplated hereby, except as have
been made or obtained and except as may be required by and made
with or obtained from state securities laws or
regulations.
(o) The execution and
delivery by the Company of, and the performance by the Company of
its obligations under, this Agreement, including without
limitation, the issuance and sale of the Shares, do not require any
consent or approval of any shareholders or any other
securityholders of the Company.
(p) The Company and
its subsidiaries own or possess, or can acquire on reasonable
terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names or
other intellectual property (collectively, “ Intellectual
Property ”) necessary to carry on the business now
operated by them, and neither the Company nor its subsidiaries has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect
the interest of the Company or any of its subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or
in the aggregate, would result in a Material Adverse
Effect.
(q) Except as set
forth in the Registration Statement, the Pricing Disclosure
Package, the Prospectus or any Permitted Free Writing Prospectus,
each of the Company and its subsidiaries holds, and is in
compliance in all material respects with, all material permits,
licenses, authorizations, exemptions, orders and approvals (“
Permits ”), necessary for the operation of their
respective businesses, and there are no proceedings pending to
which the Company or any of its subsidiaries is a party or, to the
knowledge of the Company, threatened by any governmental entity
seeking to terminate, revoke or limit any such Permits, nor, to the
knowledge of the Company, do grounds exist for any such action by
any governmental entities.
(r) Each of the
Company and its subsidiaries (i) has not violated its charter,
by-laws or any other applicable organizational documents, (ii) has
not defaulted, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which it is a party or by which
it is bound or to which any of its property or assets is subject,
(iii) is in compliance, in the conduct of its business, with all
applicable laws, ordinances, governmental rules, capital regulatory
requirements, regulations or court decrees to which it or its
property or assets may be subject, including, but not limited to,
the laws, regulations and rules administered by the Commission,
FINRA, the Federal Reserve, the Office of Thrift Supervision (the
“ OTS ”), the Federal Deposit Insurance
Corporation (the “ FDIC ”), any applicable
state, federal or self regulatory organization and the Office of
Foreign Assets Control of the U.S. Department of the Treasury
(“ OFAC ”), the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act, the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, all other applicable fair lending and fair housing
laws or other laws relating to discrimination (including, without
limitation, anti-redlining, equal credit opportunity and fair
credit reporting), truth-in-lending, real estate settlement
procedures, adjustable rate mortgages disclosures or consumer
credit (including, without limitation, the federal Consumer Credit
Protection Act, the federal Truth-in Lending Act and Regulation Z
thereunder, the federal Real Estate Settlement Procedures Act of
1974 and Regulation X thereunder, and the federal Equal Credit
Opportunity Act and Regulation B thereunder) or with respect to the
Flood Disaster Protection Act and the Bank Secrecy Act, except, in
the case of clause (ii) and (iii) for any default or violation that
is accurately described in all material respects in the
Registration Statement, the Pricing Disclosure Package, the
Prospectus or any Permitted Free Writing Prospectus and any default
or violation that would not have a Material Adverse
Effect.
(s) Each of the
Company and ETB Holdings, Inc. is duly registered with the OTS as a
savings and loan holding company under the Home Owners Loan Act, as
amended (“ HOLA ”); E*TRADE Bank continues to
hold a valid charter to do business as a federal savings bank;
E*TRADE Bank meets the qualified thrift lender test under Section
10(m) of HOLA; and the Company is a savings and loan holding
company under Section 10 of HOLA, as amended; and the direct and
indirect activities of the Company and its subsidiaries comply with
restrictions on holding company activities provided in Section 10
of HOLA. E*TRADE Bank is well capitalized according to
the capital standards set forth by the OTS. E*TRADE Bank
and its deposits are insured by FDIC to the fullest extent
permitted by law.
(t) Each of E*TRADE
Securities LLC, E*TRADE Clearing LLC and E*TRADE Capital Markets,
LLC is duly registered as a broker-dealer with the Commission, and
is registered as a broker-dealer with each state and is a member in
good standing of each self-regulatory organization where its
business so requires.
(u) None of the
Company and its Named Subsidiaries (including E*TRADE Asset
Management, Inc., E*TRADE Capital Management, LLC, Kobren Insight
Management, Inc., Howard Capital Management, Inc. and E*TRADE
Financial Advisory Services, Inc. (together, the “
Advisers ”)) (i) is subject or is party to, or has
received any notice or advice that any of them may become subject
or party to, any legal or governmental proceedings pending or
threatened, including but not limited to, any investigation with
respect to any cease-and-desist order, consent agreement, any
commitment letter or similar undertaking to, memorandum of
understanding or other regulatory enforcement action, proceeding or
order with or by, other than proceedings accurately described in
all material respects in the Registration Statement, the Pricing
Disclosure Package, the Prospectus or any Permitted Free Writing
Prospectus and proceedings that would not have a Material Adverse
Effect, or on the power or ability of the Company to perform its
obligations under this Agreement or to consummate the transactions
contemplated hereby or (ii) is subject to any directive by, or has
been a recipient of any supervisory letter from, or has adopted any
board resolutions at the request of, any Regulatory Agency (as
defined below) that currently restricts in any material respect the
conduct of their business or that in any material manner relates
to
their capital adequacy, their credit
policies, their management or their business (each, a “
Regulatory Agreement ”), nor has the Company or any of
its subsidiaries been advised by any Regulatory Agency that it is
considering issuing or requesting any such Regulatory Agreement or
that they may be subject to an investigation, audit or other
examination which is likely to lead to the imposition of any civil
monetary or other penalties that would have a Material Adverse
Effect, and there is no unresolved violation, criticism or
exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Company or any of its
subsidiaries which, in the reasonable judgment of the Company, is
expected to result in a Material Adverse Effect. As used
herein, the term “ Regulatory Agency ” means
OTS, FDIC, the Federal Reserve Bank, and any other federal or state
agency charged with the supervision or regulation of depository
institutions or holding companies of depository institutions, or
engaged in the insurance of depository institution deposits, or the
Commission, FINRA or any other applicable self regulatory
organization, or any court, administrative agency or commission or
other governmental agency, authority or instrumentality having
supervisory or regulatory authority with respect to the Company or
any of its subsidiaries.
(v) The Company,
E*TRADE Bank and each of the Company’s applicable
subsidiaries have duly filed with the OTS and the FDIC, as the case
may be, in correct form the reports required to be filed under
applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations; provided
that information as of a later date shall be deemed to modify
information as of an earlier date; and the Company has previously
delivered or made available to the Representatives which has
requested the same accurate and complete copies of all such
reports. Except as disclosed in the Registration
Statement, the Pricing Disclosure Package, the Prospectus or any
Permitted Free Writing Prospectus, neither the Company nor E*TRADE
Bank is subject to, or expects to be subject to, any formal or
informal enforcement or supervisory action by the OTS or the
FDIC. Neither the Company nor E*TRADE Bank has been
required by the OTS or the FDIC to make material corrections or
changes in its management, operations or policies or procedures,
which to the knowledge of the Company or E*TRADE Bank, have not
been substantially corrected or changed to the satisfaction of the
regulators.
(w) The Company has
delivered or made available to the Representatives, a true and
complete copy of the Company’s and its subsidiaries’
currently effective Forms BD and ADV as filed with the Commission
and all other similar forms required to be filed with governmental
entities. The information contained in such forms and
reports was or will be, in the case of any forms and reports filed
after the date of this Agreement, complete and accurate in all
material respects as of the time of filing thereof.
(x) Except for such as
would not, individually or in the aggregate, have a Material
Adverse Effect, neither the Company nor any of its subsidiaries nor
any of their respective officers, directors or employees has been
the subject of any disciplinary proceedings or orders of any
governmental entity arising under applicable laws or regulations
which would be required to be disclosed on Forms BD or ADV except
as disclosed thereon, and no such disciplinary proceeding or order
is pending or, to the knowledge of the Company, threatened, nor, to
the knowledge of the Company, do
grounds exist for any such material
action by any governmental entity; and except as disclosed on such
Form BD or ADV, neither the Company nor any of its subsidiaries nor
any of their respective officers, directors or employees has been
enjoined by the order, judgment or decree of any governmental
entity from engaging in or continuing any conduct or practice in
connection with any Company activity or in connection with the
purchase or sale of any security.
(y) Except as
disclosed in the Registration Statement, the Pricing Disclosure
Package, the Prospectus or any Permitted Free Writing Prospectus,
no subsidiary of the Company is currently prohibited, directly or
indirectly, under any agreement or other instrument to which it is
a party or is subject, from paying any dividends to the Company or
to a subsidiary of the Company, from making any other distribution
on such subsidiary’s capital stock to the Company or to a
subsidiary of the Company, from repaying to the Company or to a
subsidiary of the Company any loans or advances to such subsidiary
from the Company or a subsidiary of the Company or from
transferring any of such subsidiary’s properties or assets to
the Company or any other subsidiary of the Company, other than
prohibitions arising under applicable law.
(z) There are no
contracts or other documents that are required under the Securities
Act to be filed as exhibits to the Registration Statement and
described in the Registration Statement, the Pricing Disclosure
Package, Prospectus or any Permitted Free Writing Prospectus that
are not so filed as exhibits to the Registration Statement, the
Pricing Disclosure Package or described in the Registration
Statement and the Prospectus.
(aa) Deloitte &
Touche LLP, who certified the financial statements and supporting
schedules, if any, included or incorporated by reference in the
Pricing Disclosure Package or the Prospectus, is (i) an independent
certified public accountant with respect to the Company and the
subsidiaries within the meaning of Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public
Accountants and (ii) registered with the Public Company Accounting
Oversight Board.
(bb) Each of the
Company and its subsidiaries has filed all material federal, state,
local and foreign income and franchise tax returns required to be
filed through the date hereof (taking into account any extension of
time to file granted or obtained on behalf of the Company or any of
its subsidiaries) and has paid all taxes due thereon (except as
contested in good faith and adequately reserved for in accordance
with GAAP), and no tax deficiency has been determined, as a result
of a final determination, adversely to the Company or any of its
subsidiaries which has had (nor does the Company or any of its
subsidiaries have any knowledge of any tax deficiency which, if
determined adversely to the Company or any of its subsidiaries,
would have) a Material Adverse Effect.
(cc) The Company is not
and, after giving effect to the offering and sale of the Shares and
the application of the net proceeds thereof as described in the
Registration Statement, the Pricing Disclosure Package, the
Prospectus or any Permitted Free Writing Prospectus, will not be an
“investment company” within the meaning of the
Investment
Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder
(collectively, the “ Investment Company Act
”).
(dd) No client of the
Advisers, except for E*TRADE Funds, is currently registered as an
investment company under the Investment Company Act of
1940.
(ee) Each of the
Company and its subsidiaries (i) is in compliance with any and all
applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“ Environmental Laws ”), (ii)
has received all permits, licenses or other approvals required of
it under applicable Environmental Laws to conduct its respective
businesses and (iii) is in compliance with all terms and conditions
of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would
not, singly or in the aggregate, have a Material Adverse
Effect.
(ff) There are no costs
or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities
to third parties) which would, singly or in the aggregate, and to
the Company’s knowledge, have a Material Adverse
Effect.
(gg) No prohibited
transaction (as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder (“ ERISA
”), or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time (the “ Code ”)) has
occurred with respect to any employee benefit plan of the Company
or any of its subsidiaries, excluding transactions effected
pursuant to a statutory or administrative exemption, which would
have a Material Adverse Effect; each such employee benefit plan is
in compliance with applicable law, including ERISA and the Code,
except where such noncompliance, individually or in the aggregate,
would not have a Material Adverse Effect; none of the Company, any
subsidiary, or any entity that was at any time required to be
treated as a single employer together with the Company under
Section 414(b)(c)(m) or (o) of the Code or Section 4001(a)(14) of
ERISA has at any time maintained, sponsored or contributed to, and
none of the employee benefit plans of the Company or any subsidiary
is, a single employer plan (within the meaning of Section
4001(a)(15) of ERISA), a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) or a single employer pension
plan (within the meaning of Section 4001(a)(15) of ERISA) for which
the Company or any subsidiary could incur liability under Section
4063 or 4064 of ERISA; and each such pension plan that is intended
to be qualified under Section 401(a) of the Code is so qualified in
all material respects and, to the knowledge of the Company, nothing
has occurred, whether by action or by failure to act, which would
cause the loss of such qualification.
(hh) The Company and
its subsidiaries maintain an effective system of “disclosure
controls and procedures” (as defined in Rule 13a-15(e) of the
Exchange Act) that complies with the requirements of the Exchange
Act and that has been designed to ensure that information required
to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the
Commission’s rules and forms, including controls and
procedures designed to ensure that such information is accumulated
and communicated to the Company’s management as appropriate
to allow timely decisions regarding required
disclosure. The Company and its subsidiaries have
carried out evaluations of the effectiveness of their disclosure
controls and procedures as required by Rule 13a-15 of the Exchange
Act.
(ii) The Company and
its subsidiaries maintain systems of “internal control over
financial reporting” (as defined in Rule 13a-15(f) of the
Exchange Act) that comply with the requirements of the Exchange Act
and have been designed by, or under the supervision of, their
respective principal executive and principal financial officers, or
persons performing similar functions, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles,
including, but not limited to, internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted
only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences. Based on the Company’s most recent
evaluation of its internal controls over financial reporting
pursuant to Rule 13a-15(c) of the Exchange Act, except as disclosed
in the Registration Statement, the Pricing Disclosure Package, the
Prospectus or any Permitted Free Writing Prospectus, as of December
31, 2008, there
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