The Company also announced that, upon pricing of the Common Stock Offering, it will launch significant debt exchange transactions for certain of its outstanding notes (the "Exchange Transactions"). The consummation of the Exchange Transactions will be subject to certain conditions, including the closing of the Common Stock Offering and shareholder approval. Affiliates of Citadel Investment Group L.L.C. ("Citadel"), the Company's largest stock and bond holder, have agreed to participate in both the Common Stock Offering and the Exchange Transactions.

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

The Company had previously suspended its open market purchase program that commenced on May 8, 2009. The Company has raised net proceeds of approximately $63 million through the issuance of approximately 41 million shares of common stock under that program to date.
The Company will offer to exchange more than $1 billion of newly-issued zero coupon convertible debt for all of its 8% Senior Notes due 2011 (the "2011 Notes") and a portion of its 12.5% Springing Lien Notes due 2017 (the "2017 Notes"). This will significantly reduce the Company's debt service burden by eliminating interest costs relating to those debt securities that are exchanged and lengthening the weighted-average maturity of its debt securities. The convertible debt will have a maturity of 10 years and will be convertible into shares of common stock based on the public offering price in the Common Stock Offering (net of underwriting discounts), provided that the conversion price will be no less than $1.00 per share and no more than $1.20 per share.

Citadel has agreed to participate in the Exchange Transactions for an aggregate principal amount of at least $800 million face value of the Company's long-term debt, including $200 million face value of the 2011 Notes and at least $600 million face value of the 2017 Notes, subject to reduction under certain circumstances. The Company will offer to exchange all of its 2011 Notes and up to $310 million face value of its 2017 Notes not held by Citadel on the same terms. The Exchange Transactions are expected to be commenced immediately following the pricing of the Common Stock Offering. Complete details of the Exchange Transactions will be announced at that time.

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

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

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