Exhibit 1.1
E*TRADE FINANCIAL
CORPORATION
$150,000,000
Common Stock
($0.01 par value per share)
DISTRIBUTION
AGREEMENT
September 14, 2009
Sandler O'Neill & Partners,
L.P.
Ladies and Gentlemen:
E*TRADE Financial Corporation, a Delaware
corporation (the “ Company ”), confirms its
agreement with Sandler O’Neill & Partners, L.P., as agent
and/or principal under any Terms Agreement (as defined in Section
1(a) below) (“ Sandler ”), with respect to the
issuance and sale from time to time by the Company, in the manner
and subject to the terms and conditions described below (this
“ Agreement ”), of shares (the “
Shares ”) of common stock, $0.01 par value per share
(the “ Common Stock ”), of the Company having an
aggregate Gross Sales Price (as defined
in Section 2(b) below) of up to $150,000,000 (the “
Maximum Amount ”) on the terms set forth in Section 1
of this Agreement. The Shares are described in the
Prospectus referred to below .
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 Sandler, 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; “
Prospectus Supplement ” means the most recent
prospectus supplement relating to the Shares, to be filed by the
Company with the Commission pursuant to Rule 424(b) under the
Securities Act on or before the second business day after the date
hereof (or such earlier time as may be
required under the Securities Act), in the form furnished by the
Company to Sandler in connection
with the offering of the Shares; “ Prospectus ”
means the Prospectus Supplement (and any additional prospectus
supplement pre-
pared in accordance with
the provisions of Sections 4(b) or 4(g) of this Agreement and filed
in accordance with the provisions of Rule 424(b)) together with the
Basic Prospectus attached to or used with the Prospectus
Supplement; and “ Permitted Free Writing Prospectuses
” has the meaning set forth in Section 3(b). Any
reference herein to the Registration Statement, the Basic
Prospectus, the Prospectus Supplement 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, the Prospectus Supplement, 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 Supplement, the
Prospectus or such Permitted Free Writing Prospectus, as the case
may be, and deemed to be incorporated therein by
reference.
1.
Issuance and Sale . The Company and Sandler agree
as follows:
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Upon the basis of the
representations, warranties and agreements and subject to the terms
and conditions set forth herein, on any Exchange Business Day (as
defined below) selected by the Company, the Company and Sandler
shall enter into an agreement in accordance with Section 2 hereof
regarding the number of Shares to be placed by Sandler and the
manner in which and other terms upon which such placement is to
occur (each such transaction being referred to as an “
Agency Transaction ”). The Company may also
offer to sell the Shares directly to Sandler, as principal, in
which event such parties shall enter into a separate agreement
(each, a “ Terms Agreement ”) in substantially
the form of Exhibit A hereto, relating to such sale in
accordance with Section 2(g) of this Agreement (each such
transaction being referred to as a “ Principal
Transaction ”). As used herein, (i) the
“ Term ” shall be the period commencing on the
date hereof and ending on the earliest of (x) the date on
which the Gross Sales Price of Shares issued and sold pursuant to
this Agreement and any Terms Agreements is equal to the Maximum
Amount and (y) any termination of this Agreement pursuant to
Section 8 (the “ Termination Date ”),
(ii) an “ Exchange Business Day ” means any
day during the Term that is a trading day for the Exchange, and
(iii) “ Exchange ” means the NASDAQ Global
Select Market.
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Subject to the terms and conditions
set forth below, the Company appoints Sandler as agent in
connection with the offer and sale of Shares in any Agency
Transactions entered into hereunder. Sandler shall use
commercially reasonable efforts to sell such Shares and any such
sales shall be made in accordance with the terms and conditions
hereof and of the applicable Transaction Notice (as defined in
Section 2(a)). Neither the Company nor Sandler shall
have any obligation to enter into an Agency
Transaction. The Company shall be obligated to issue and
sell through Sandler, and Sandler shall be obligated to use
commercially reasonable efforts, as provided herein and in the
applicable Transaction Notice, to place
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Shares issued by the Company only if
and when a Transaction Notice related to such an Agency Transaction
has been delivered by Sandler and accepted by the Company as
provided in Section 2 below.
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Sandler, as agent in any Agency
Transaction, hereby agrees not to make any sales of the Shares on
behalf of the Company, pursuant to this Agreement, other than (i)
by means of ordinary brokers’ transactions that qualify for
delivery of a Prospectus in accordance with Rule 153 under the
Securities Act and meet the definition of an “at the market
offering” under Rule 415(a)(4) under the Securities Act (such
transactions are hereinafter referred to as “ At the
Market Offerings ”) and (ii) such other sales of the
Shares on behalf of the Company in its capacity as agent of the
Company as shall be agreed by the Company and Sandler in
writing.
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Sandler shall confirm in writing to
the Company the number of Shares sold on any Exchange Business Day,
the related Gross Sales Price and, if Shares are to be sold in an
Agency Transaction in an At the Market Offering, the related Net
Sales Price (as defined in Section 2(b)
below) no later than the opening of trading on the immediately
following Exchange Business Day.
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If the Company shall default on its
obligation to deliver Shares to Sandler pursuant to the terms of
any Agency Transaction or Terms Agreement, the Company shall
(i) hold Sandler harmless against any loss, claim or damage
arising from or as a result of such default by the Company and (ii)
notwithstanding any such default, pay to Sandler any fee to which
it would otherwise be entitled in connection with such
sale.
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The Company acknowledges and agrees
that (i) there can be no assurance that Sandler will be successful
in selling the Shares, (ii) Sandler shall incur no liability or
obligation to the Company or any other person or entity if it does
not sell Shares for any reason other than a failure by Sandler to
use its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable law and regulations to
sell such Shares in accordance with the terms of this Agreement,
and (iii) Sandler shall be under no obligation to purchase Shares
on a principal basis pursuant to this Agreement, except as may
otherwise be specifically agreed by Sandler and the Company in a
Terms Agreement.
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2.
Transaction Notices and Terms Agreements .
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The Company may, from time to time
during the Term, propose to Sandler that such parties enter into an
Agency Transaction to be executed on a specified Exchange Business
Day or over a specified period of
Exchange Business Days . If Sandler agrees to the
terms of such proposed Agency Transaction or if the Company and
Sandler mutually agree to modified terms for such proposed Agency
Transaction, then Sandler shall promptly send to the Company by the
means set forth under Section 10 hereof a notice, substantially in
the form of Exhibit B hereto (each, a “ Transaction
Notice ”), confirming the agreed terms of such proposed
Agency Transaction. If the Company wishes such proposed
Agency Trans-
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action to become a binding agreement
between it and Sandler, the Company shall promptly indicate its
acceptance thereof by countersigning and returning such Transaction
Notice to Sandler or sending a written acceptance of such
Transaction Notice to Sandler, in each case by the means set forth
under Section 10 hereof. The terms reflected in a
Transaction Notice shall become binding on Sandler and the Company
only if accepted by the Company no later than the date and time
specified in such Transaction Notice. Each Transaction
Notice shall specify, among other things, the following:
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(i) the
Exchange Business Day(s) on which the Shares subject to such Agency
Transaction are intended to be sold (each, a “ Purchase
Date ”);
(ii) the
maximum number of Shares that the Company intends to sell (the
“ Specified Number of Shares ”) on, or over the
course of, such Purchase Date (s);
p rovided that the number of Shares sold on each such
Purchase Date shall be no mor e than 25% of the ADTV (as
defined in Rule 10b-18 of the Exchange Act) in the Common Stock on
the Exchange for the four calendar weeks preceding the week in
which the date of delivery of the Transaction Notice occurs, or as
otherwise agreed between the Company and Sandler and documented in
the relevant Transaction Notice; and
(iii) the
lowest price, if any, at which the Company is willing to sell
Shares on such Purchase Date(s) (each, a “ Floor Price
”).
The Company shall have responsibility for
maintaining records with respect to the aggregate dollar amount of
Shares sold, or for otherwise monitoring the availability of Shares
for sale under the Registration Statement. In the event
that more than one Transaction Notice with respect to any Purchase
Date(s) is accepted by the Company, the latest executed Transaction
Notice shall govern any sales of Shares for the relevant Purchase
Date, except to the extent of any action occurring pursuant to a
prior accepted Transaction Notice and prior to the acceptance of
such latest Transaction Notice. The Company or Sandler
may, upon notice to the other party hereto by telephone (confirmed
promptly by e-mail in “pdf” format or facsimile),
suspend the offering of the Shares; provided ,
however , that such suspension or termination shall
not affect or impair the parties’ respective obligations with
respect to the Shares sold hereunder prior to the giving of such
notice. Notwithstanding the foregoing, if the terms of
any Agency Transaction contemplate that Shares shall be sold on
more than one Purchase Date, then the Company and Sandler shall
mutually agree to such additional terms and conditions as they deem
necessary in respect of such multiple Purchase Dates, and such
additional terms and conditions shall be set forth in the relevant
Transaction Notice and be binding to the same extent as any other
terms contained therei n.
References herein to this Agreement shall,
unless the context otherwise requires, include all Transaction
Notices accepted by the Company.
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Sandler’s commission shall be
2.00% of the actual sales price of the Shares (the “ Gross
Sales Price ”) sold pursuant to this Agreement;
provided , however , that
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such commission shall not apply when
Sandler acts as principal, in which case such commission shall be
set forth in the applicable Terms Agreement. The Gross
Sales Price less Sandler’s commission is referred to herein
at the “ Net Sales Price .”
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Payment of the Net Sales Price for
Shares sold by the Company on any Purchase Date pursuant to a
Transaction Notice shall be made to the Company by federal funds
wire transfer to the account specified in Schedule 2 hereto against
delivery of such Shares to Sandler. Such payment and
delivery shall be made at or about 10:00 a.m. (New York city time)
on the third Exchange Business Day (or such other day as may, from
time to time, become standard industry practice for settlement of
such a securities issuance) following each Purchase Date (each, an
“ Agency Settlement Date ”).
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If, as provided in the related
Transaction Notice, a Floor Price has been agreed to by the parties
with respect to a Purchase Date, and Sandler thereafter determines
and notifies the Company that the Gross Sales Price for such Agency
Transaction would not be at least equal to such Floor Price, then
the Company shall not be obligated to issue and sell through
Sandler, and Sandler shall not be obligated to place , the Shares proposed to be sold pursuant to such
Agency Transaction on such Purchase Date .
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Under no circumstances shall the
aggregate Gross Sales Price of the Shares sold pursuant to this
Agreement and any Terms Agreement exceed the Maximum
Amount.
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If either party hereto has reason to
believe that the exemptive provisions set forth in
Rule 101(c)(1) of Regulation M under the Exchange Act are not
satisfied with respect to the Shares, it shall promptly notify the
other party and sales of the Shares under this Agreement, any
Transaction Notice or any Terms Agreement shall be suspended until
that or other exemptive provisions have been satisfied in the
judgment of each party. On or prior to the delivery of a
prospectus that is required (whether
physically or through compliance with Rule 172 under the Securities
Act or any similar rule) in connection with the offering or sale of
the Shares, Sandler shall
calculate the average daily trading volume (as defined by Rule 100
of Regulation M under the Exchange Act) of the Common Stock based
on market data provided by Bloomberg L.P. or such other sources as
agreed upon by Sandler and the
Company.
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If the Company wishes to issue and
sell the Shares pursuant to this Agreement but other than as set
forth in Section 2(a) of this Agreement, it will notify Sandler of
the proposed terms of the Principal Transaction. If
Sandler, acting as principal, wishes to accept such proposed terms
(which it may decline to do for any reason in its sole discretion)
or, following discussions with the Company, wishes to accept
amended terms, the Company and Sandler shall enter into a Terms
Agreement setting forth the terms of such Principal
Transaction.
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(ii) The
terms set forth in a Terms Agreement shall not be binding on the
Company or Sandler unless and until the Company and Sandler have
each executed such Terms Agreement accepting all of the terms of
such Terms Agreement. In the event of a conflict between
the terms of this Agreement and the terms of a Terms Agreement, the
terms of such Terms Agreement shall control.
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Each sale of the Shares to Sandler
in a Principal Transaction shall be made in accordance with the
terms of this Agreement and a Terms Agreement, which shall provide
for the sale of such Shares to, and the purchase thereof by,
Sandler. A Terms Agreement may also specify certain
provisions relating to the reoffering of such Shares by
Sandler. The commitment of Sandler to purchase the
Shares pursuant to any Terms Agreement shall be deemed to have been
made on the basis of the representations, warranties and agreements
of the Company herein contained and shall be subject to the terms
and conditions herein set forth. Any such Terms
Agreement shall specify the number of the Shares to be purchased by
Sandler pursuant thereto, the price to be paid to the Company for
such Shares, any provisions relating to rights of, and default by,
underwriters acting together with Sandler in the reoffering of the
Shares, and the time and date (each such time and date being
referred to herein as a “ Principal Settlement Date
” and, together with any Agency Settlement Date, a “
Settlement Date ”) and place of delivery of and
payment for such Shares.
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The Company shall provide Sandler
with a copy of its policy on insider trading (“ Insider
Trading Policy ”) and advise Sandler in writing of any
material changes thereto. Subject to the limitations set
forth herein and as may be mutually agreed upon by the Company and
Sandler, sales pursuant to this Agreement may not be requested by
the Company and need not be made by Sandler during any
“blackout period” under the Insider Trading Policy as
in effect from time to time. Notwithstanding the
foregoing, without the prior written consent of each of the Company
and Sandler, the Company shall not request the sale of any Shares
that would be sold, and Sandler need not make any sale of Shares,
during any period in which the Company is in possession of material
non-public information.
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3.
Representations, Warranties and Agreements of the Company
. The Company represents and warrants to, and agrees
with, Sandler, on and as of (i) the date hereof, (ii) each date on
which the Company accepts a Transaction Notice (the “ Time
of Acceptance ”) or executes and delivers a Terms
Agreement, (iii) each Time of Sale (as defined below), (iv) each
Settlement Date and (v) each Bring-Down Delivery Date (as defined
in Section 6(b)) (each such date listed in (i) through (v), a
“ Representation Date ”), as follows:
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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
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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 Sandler and furnished in
writing by or on behalf of Sandler 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)). As used herein, “ Time of Sale
” means (i) with respect to each offering of Shares
pursuant to this Agreement, the time of Sandler’s initial
entry into contracts with investors for the sale of such Shares and
(ii) with respect to each offering of Shares pursuant to any
relevant Terms Agreement, the time of sale of such
Shares.
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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. The Company represents
and agrees that, unless it obtains the prior consent of Sandler,
until the termination of this Agreement, 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 Sandler is hereinafter
referred to as a “ Permitted Free Writing Prospectus
.” The Company represents that it has complied and
will
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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 Sandler
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.
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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 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.
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The financial statements and the
related notes thereto included or incorporated by reference in the
Registration Statement, 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, Prospectus or any Permitted
Free Writing Prospectus are, in all material respects, fairly
presented.
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Except in each case as otherwise
disclosed in the Registration Statement, the Prospectus and any
Permitted Free Writing Prospectus, since the date of the most
re-
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cent financial statements of the
Company included or incorporated by reference in the Registration
Statement, 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.
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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.
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Each of the subsidiaries of the
Company listed on Schedule 1 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 organizati
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