Item 1.01. Entry into a Material Definitive Agreement.

Agreement and Plan of Merger

Overview

On February 20, 2020, E*TRADE Financial Corporation (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Morgan Stanley, a Delaware corporation ("Morgan Stanley"), and Moon-Eagle Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Morgan Stanley ("Merger Sub"). Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into the Company (the "Merger"), with the Company surviving as a wholly owned subsidiary of Morgan Stanley. The parties also intend, and Morgan Stanley has agreed to take such actions as are necessary to cause, immediately following the effective time of the Merger, the surviving corporation in the Merger to merge with and into a newly established Delaware limited liability company which is a direct, wholly owned subsidiary of Morgan Stanley ("Second Merger Sub") with Second Merger Sub surviving as a direct, wholly owned subsidiary of Morgan Stanley (the "Second Merger", together with the Merger, the "Mergers"). For U.S. federal income tax purposes, each of the parties to the Merger Agreement intends that the Mergers, taken together, will constitute an integrated transaction that qualifies as a "reorganization" within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended. Entry into the Merger Agreement was unanimously approved by the Board of Directors of each of Morgan Stanley and the Company.

Pursuant to the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of common stock, par value $0.01 per share, of the Company ("Company Common Stock") issued and outstanding immediately before the Effective Time (other than treasury shares held by the Company and certain shares held by Morgan Stanley) will be converted into the right to receive 1.0432 shares of common stock, par value $0.01 per share, of Morgan Stanley ("Morgan Stanley Common Stock" and such consideration, the "Common Merger Consideration"). At the Effective Time, each share of Series A Preferred Stock, par value $0.01 per share of the Company, outstanding immediately before the Effective Time will be converted into the right to receive one share of a newly created series of preferred stock of Morgan Stanley with such rights, preferences, privileges and voting powers, and limitations and restrictions, that, taken as a whole, are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Company's Series A Preferred Stock, taken as a whole. Additionally, at the Effective Time, each share of Series B Preferred Stock, par value $0.01 per share of the Company, outstanding immediately before the Effective Time will be converted into the right to receive one share of a separate, newly created series of preferred stock of Morgan Stanley with such rights, preferences, privileges and voting powers, and limitations and restrictions, that, taken as a whole, are not materially less favorable to the holders thereof than the rights, preferences, privileges and voting powers of the Company's Series B Preferred Stock, taken as a whole.

Treatment of Company Equity Awards

At the Effective Time, each outstanding time-based restricted stock unit award, performance-based restricted stock unit award, director deferred restricted stock unit award and director restricted stock award, whether vested or unvested, will vest (if unvested), and be converted into the right to receive the Common Merger Consideration as if such awards had been settled in shares of Company Common Stock immediately prior to the Effective Time.

With respect to any performance periods that are completed on or before the Effective Time, performance-based restricted stock unit awards will vest at the greater of the target or actual level of performance, as determined by the Company's Board of Directors or a committee thereof prior to the Effective Time. With respect to any performance periods that are not completed on or before the Effective Time, performance-based restricted stock unit awards will vest at the target level of performance.

Closing Conditions

The obligation of the parties to consummate the Merger is subject to customary conditions, including, among others, (i) the approval and adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Company Common Stock, (ii) the absence of any applicable law, regulation, injunction, judgment, order or decree



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prohibiting or making illegal the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement (or in the case of Morgan Stanley's obligation to close, imposing a Burdensome Condition (as defined below)), (iii) the absence of pending litigation or similar legal action by any governmental authority (in any jurisdiction in which Morgan Stanley, the Company or any of their respective subsidiaries conducts material operations) seeking to prohibit the Merger (or in the case of Morgan Stanley's obligation to close, imposing a Burdensome Condition); (iv) the early termination or expiration of any applicable waiting period or periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and receipt of specified governmental consents and approvals (in the case of Morgan Stanley's obligations to close, without the imposition of a Burdensome Condition); (v) compliance by Morgan Stanley and the Company in all material respects with their respective obligations under the Merger Agreement and (vi) subject in most cases to exceptions that do not rise to the level of a "Parent Material Adverse Effect" or a "Company Material Adverse Effect" (each as defined in the Merger Agreement), as applicable, the accuracy of representations and warranties made by the Company and Morgan Stanley, respectively. The obligation of the Company and Morgan Stanley to consummate the Merger is also subject to there not having occurred an event that has had or would reasonably be expected to have, individually or in the aggregate, a "Parent Material Adverse Effect" or "Company Material Adverse Effect", respectively.

Representations and Warranties; Covenants

The Merger Agreement contains customary representations and warranties from both the Company and Morgan Stanley with respect to each party and its businesses. The Merger Agreement also contains customary covenants, including covenants by the Company to, subject to certain exceptions, conduct its business in the ordinary course during the interim period between the execution of the Merger Agreement and the consummation of the Merger.

Under the Merger Agreement, each of the Company and Morgan Stanley has agreed to use its reasonable best efforts to take all actions and to do all things reasonably necessary, proper or advisable to consummate the Merger, including in connection with obtaining all consents required to be obtained from any governmental authority that are necessary, proper or advisable to consummate the Merger. Morgan Stanley has also agreed to use reasonable best efforts to resolve, avoid or eliminate impediments or objections, if any, that may be asserted by any governmental authority with respect to the Merger, so as to enable the Merger to occur prior to the End Date (as defined below), but in no event is Morgan Stanley required to (and without Morgan Stanley's prior written consent, the Company may not) divest assets or businesses, enter into consent decrees or take certain other actions, except with respect to the wealth management businesses of Morgan Stanley, the Company and their respective subsidiaries and only if such action (i) does not relate to any share plan administration or corporate services business (including Morgan Stanley's "Shareworks by Morgan Stanley" business) and (ii) would not otherwise reasonably be expected to materially and adversely affect the combined wealth management businesses of Morgan Stanley and its subsidiaries (including the surviving corporation in the Merger), taken as a whole (after giving effect to the Merger) (any of the actions described in this sentence, a "Burdensome Condition").

The Merger Agreement provides that Morgan Stanley will take all necessary action permitted by applicable law and the rules of any applicable stock exchange to cause one of the Company's directors selected by the Company and reasonably acceptable to Morgan Stanley to be appointed to the Board of Directors of Morgan Stanley as of the Effective Time.

Stockholder Meetings; Non-Solicitation; Intervening Events

The Merger Agreement requires the Company to convene a stockholder meeting for purposes of obtaining the necessary Company stockholder approval. In addition, subject to certain exceptions, the Company has agreed (i) not to solicit alternative transactions or enter into discussions concerning, or provide information in connection with, any alternative transaction and (ii) that its Board of Directors will recommend that the Company's stockholders approve and adopt the Merger Agreement, as applicable.

Prior to the adoption of the Merger Agreement by the Company's stockholders, the Board of Directors of the Company may, in connection with (i) the receipt of a "Company Superior Proposal" (as defined in the Merger Agreement), respectively, or (ii) a "Company Intervening Event" (as defined in the Merger Agreement), respectively, change its recommendation to the Company's stockholders to approve and adopt the Merger Agreement, subject to complying with notice requirements and other specified conditions (including giving Morgan Stanley the opportunity to propose changes to the Merger Agreement in response to such Company Superior Proposal or Company Intervening Event, as applicable), if the failure to make such change in recommendation would be reasonably likely to be inconsistent with its fiduciary duties.



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Termination; Termination Fees

The Merger Agreement may be terminated by the Company and Morgan Stanley by mutual agreement. Furthermore, either party may terminate the Merger Agreement if (i) the Merger has not been consummated on or before March 31, 2021, which date will be extended to June 30, 2021 under certain circumstances if required regulatory approvals have not been obtained by March 31, 2021 (such March 31, 2021 date as it may be extended, the "End Date"), (ii) an applicable law, regulation, injunction, judgment, order or decree permanently prohibits the Merger and, in the case of an injunction, judgment, order or decree, has become final and non-appealable or (iii) the required vote of the Company's stockholders is not obtained at the Company's stockholder meeting convened for such purpose.

Morgan Stanley may terminate the Merger Agreement if (i) the Board of Directors of the Company changes its recommendation to the Company's stockholders to approve and adopt the Merger Agreement prior to the Company's stockholder meeting convened for such purpose, (ii) a required regulatory approval has been denied and such denial has become final and non-appealable, (iii) the Company is in breach of the Merger Agreement in a manner that would result in a failure of an applicable closing condition and such breach cannot be cured prior to the End Date or has not been cured within 45 days' notice by Morgan Stanley of such breach or (iv) the Company has willfully breached its obligations to hold the Company stockholder meeting for the Company's stockholders to approve and adopt the Merger Agreement or to refrain from soliciting alternate transaction proposals.

The Company may terminate the Merger Agreement if (i) a required regulatory approval has been denied and such denial has become final and non-appealable, (ii) prior to the receipt of the required vote of the Company's stockholders approving and adopting the Merger Agreement, the Company desires to enter into an alternative agreement with respect to a Company Superior Proposal in accordance with the Merger Agreement or (iii) Morgan Stanley or Merger Sub is in breach of the Merger Agreement in a manner that would result in a failure of an applicable closing condition and such breach cannot be cured prior to the End Date or has not been cured within 45 days' notice by the Company of such breach.

The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including termination by Morgan Stanley as a result of a change of recommendation by the Company's Board of Directors that the Company's stockholders approve and adopt the Merger Agreement, or termination by the Company in order to enter into an alternative agreement with respect to a Company Superior Proposal, Morgan Stanley will receive a termination fee from the Company equal to $375 million in cash, on the terms and conditions further set forth in the Merger Agreement. In addition, under specified circumstances, upon the termination of the Merger Agreement solely relating to the failure to obtain necessary clearances for the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or approval under any other applicable antitrust law, the Company will receive a termination fee from Parent equal to $525 million in cash, on the terms and conditions further set forth in the Merger Agreement.



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Important Statement Regarding the Merger Agreement

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.

A copy of the Merger Agreement has been included to provide Company stockholders, Morgan Stanley stockholders and other security holders with information regarding its terms and is not intended to provide any factual information about the Company or Morgan Stanley. The representations, warranties and covenants contained in the Merger Agreement have been made solely for the purposes of the Merger Agreement and as of specific dates; were made solely for the benefit of the parties to the Merger Agreement; are not intended as statements of fact to be relied upon by Company stockholders, Morgan Stanley . . .

Item 9.01 Financial Statements and Exhibits

(d) Exhibits. The following exhibits are filed with this report:



 Exhibit
   No.                                       Description

   2.1             Agreement and Plan of Merger, dated as of February 20, 2020, by
                 and among Morgan Stanley, Moon-Eagle Merger Sub, Inc., and E*TRADE
                 Financial Corporation.*

   104           The cover page from this Current Report on Form 8-K, formatted in
                 Inline XBRL

* The schedules and exhibits have been omitted pursuant to Item 601(b)(2) of

Regulation S-K. The Company agrees to furnish supplementally a copy of such

schedules and exhibits, or any section thereof, to the SEC upon request.




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