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Published: 2008-03-26

Stock Option Agreement - E*Trade Group Inc. and Telebanc Financial Corp.



                           STOCK OPTION AGREEMENT


          STOCK OPTION AGREEMENT (the 'Agreement'), dated as of May 31, 1999, by
and between, E*TRADE Group, Inc., a Delaware corporation ('Parent'), and
Telebanc Financial Corporation, a Delaware corporation ('Company').  Capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Reorganization Agreement referred to below.

          WHEREAS, concurrently with the execution and delivery of this
Agreement, Company, Parent and Turbo Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ('Merger Sub'), are entering into an
Agreement and Plan of Merger and Reorganization, dated as of the date hereof
(the 'Reorganization Agreement'), pursuant to which, among other things, upon
the terms and subject to the conditions thereof, Merger Sub will be merged with
and into Company (the 'Merger'), with Company continuing as the surviving
corporation; and

          WHEREAS, as a condition and inducement to Parent's willingness to
enter into the Reorganization Agreement, Parent has required that Company agree,
and Company has agreed, to grant to Parent an option to purchase certain newly
issued shares of Company's Common Stock, par value $.01 per share ('Company
Common Stock'), upon the terms and subject to the conditions set forth herein;

          NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:

          1.  Grant of Option.  Company hereby grants to Parent an irrevocable 
              ---------------
option (the 'Company Option') to purchase up to 3,369,881 shares (the 'Company
Shares') of Company Common Stock' in the manner set forth below at a price
(the 'Exercise Price') of $93.45 per Company Share, payable in cash.

          2.  Exercise of Option.  (a)  The Company Option may be exercised by 
              ------------------
Parent, in whole or in part at any time or from time to time after (i) the
occurrence of any of the events described in Section 7.3(b) of the
Reorganization Agreement or (ii) immediately prior to the occurrence of any of
the events which obligate Company to pay Parent the Termination Fee pursuant
to section 7.3(c) of the Reorganization Agreement. In the event Parent wishes
to exercise the Company Option, Parent shall deliver to Company a written
notice (an 'Exercise Notice') specifying the total number of Company Shares it
wishes to purchase; provided that, if prior notification to or approval of the
                    --------
Office of Thrift Supervision (the 'OTS') or any other regulatory or antitrust
agency is required in connection with such purchase, Parent shall promptly
file the required notice or application for approval, shall promptly notify
Company of such filing, and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired
or been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed. Each closing of a purchase of
Company Shares (an

 
'Option Closing') shall occur at a place, on a date and at a time designated
by Parent in an Exercise Notice delivered at least two business days prior to
the date of the Option Closing. The Company Option shall terminate upon the
earlier of: (w) the Effective Time; (x) the termination of the Reorganization
Agreement pursuant to Section 7.1 thereof (other than a termination in
connection with which Parent is entitled to any payments as specified in
Sections 7.3(b) or (c) thereof); (y) 180 days following any termination of the
Reorganization Agreement in connection with which Parent is entitled to a
payment as specified in Section 7.3(b) thereof (or if, at the expiration of
such 180 day period, the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, twenty (20) business
days after such impediment to exercise shall have been removed or shall have
become final and not subject to appeal); or (z) 180 days following the
occurrence of any event in connection with which Parent has become entitled to
payment of the Termination Fee pursuant to Section 7.3(c) of the
Reorganization Agreement (or if, at the expiration of such 180 day period, the
Company Option cannot be exercised by reason of any applicable judgment,
decree, order, law or regulation, twenty (20) business days after such
impediment to exercise shall have been removed or shall have become final and
not subject to appeal).

     (b) Notwithstanding any other provision of this Agreement or the
Reorganization Agreement, in no event shall Parent's Total Profit (as
hereinafter defined) exceed in the aggregate $90,000,000 and, if it otherwise
would exceed such amount Parent, in its sole discretion, shall either (i) reduce
the number of Company Shares subject to the Company Option, (ii) pay cash to
Company, (iii) receive a smaller Termination Fee (as defined in Section 7.3(b)
of the Reorganization Agreement) or (iv) any combination thereof, so that
Parent's actually realized Total Profit shall not exceed in the aggregate
$90,000,000 after taking into account the foregoing actions.

     (c) As used herein, the term 'Total Profit' shall mean the sum of (i) (x)
the amount (before taxes but net of reasonable and customary commissions paid or
payable in connection with such transaction) received by parent pursuant to the
sale of Company Shares less (y) Parent's purchase price for such Company Shares,
(ii) any amounts (before taxes but net of reasonable and customary commissions
paid or payable in connection with such transaction) received by parent on the
transfer of the Company Option (or any portion thereof) to any unaffiliated
Person(s) (if permitted hereunder) or to Company and (iii) the amount received
by Parent pursuant to Section 7.3(b) or Section 7.3(c) of the Reorganization
Agreement.

          3.  Conditions to Closing.  The obligation of Company to issue the 
              ---------------------
Company Shares to Parent hereunder is subject to the conditions that (i) all
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any Governmental Entity or Regulatory Entity if
any, required in connection with the issuance of the Company Shares hereunder
shall have been obtained or made, as the case may be; and (ii) no preliminary
or permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.

          4.  Closing.  At each Option Closing, (a) Company will deliver to 
              -------
Parent a certificate or certificates in definitive form representing the
number of Company Shares

                                       2

 
designated by Parent in its Exercise Notice, such certificate or certificates
to be registered in the name of Parent or its designee and to bear the legend
set forth in Section 10, and (b) Parent will deliver to Company the aggregate
Exercise Price for the Company Shares so designated by wire transfer of
immediately available funds or certified check or bank check. At any Option
Closing at which Parent is exercising the Company Option in part, Parent shall
present and surrender this Agreement to Company, and Company shall deliver to
Parent an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the remaining balance of the shares of
Company Common Stock purchasable hereunder.

          5.  Representations and Warranties of Company.  Company represents 
              -----------------------------------------
and warrants to Parent that (a) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Company and the consummation by Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Company and no other corporate proceedings on the part
of Company are necessary to authorize this Agreement or any of the
transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by Company and constitutes a valid and binding obligation of
Company, enforceable against Company in accordance with its terms, except as
such enforceability may be limited by bankruptcy and other laws affecting the
rights and remedies of creditors generally and general principles of equity,
(d) Company has taken all action necessary to authorize and reserve for
issuance and to permit it to issue, upon exercise of the Company Option, and
at all times from the date hereof through the expiration of the Company Option
will have reserved, that number of unissued Company Shares that are subject to
the Company Option, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, (e) upon delivery of the Company Shares to Parent upon
the exercise of the Company Option, Parent will acquire the Company Shares
free and clear of all liens, claims, charges, encumbrances and security
interests of any nature whatsoever except those imposed by Parent, (f)
assuming that the consents approvals, authorizations, permits, filings and
notifications referred to in subsection (g) are obtained or made, as
applicable, the execution and delivery of this Agreement by Company does not,
and the performance of this Agreement by Company will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or the creation
of a lien, pledge, security interest or other encumbrance on assets pursuant
to (any such conflict, violation, default, right of termination, cancellation
or acceleration, loss or creation, a 'Violation'), (A) any provision of the
Amended and Restated Certificate of Incorporation or By-laws, each as amended,
of Company or (B) any provisions of any material mortgage, indenture, lease,
contract or other agreement, instrument, permit, concession, franchise, or
license or (C) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Company or its properties or assets, except in the
case of clauses (B) and (C) immediately above, for violations which would not,
individually or in the aggregate, have a Material Adverse Effect on Company
and (g) except as described in Section 2.3 of the Reorganization Agreement,
the execution and delivery of this Agreement by Company does not, and the
performance of this Agreement by Company will not, require any 

                                       3

 
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity or Regulatory Entity.

          6.  Representations and Warranties of Parent.  Parent represents and 
              ----------------------------------------
warrants to Company that (a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry
out its obligations hereunder, (b) the execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parent and no other corporate proceedings on the part of
Parent are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered
by Parent and constitutes a valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except as such
enforceability may be limited by bankruptcy and other laws affecting the
rights and remedies of creditors generally and general principles of equity,
(d) assuming that the consents, approvals, authorizations, permits, filings
and notifications referred to in subsection (e) are obtained or made, as
applicable, the execution and delivery of this Agreement by Parent does not,
and the performance of this Agreement by Parent will not, result in any
Violation pursuant to, (A) any provision of the Certificate of Incorporation
or By-laws, each as amended, of Parent, (B) any provisions of any material
mortgage, indenture, lease, contract or other agreement, instrument, permit,
concession, franchise, or license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or its properties or
assets, except in the case of each of clauses (B) and (C) immediately, above,
for Violations which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent, (e) except as described in Section 3.3 of
the Reorganization Agreement and Section 3(a) of this Agreement, and except as
may be required under the Exchange Act, the execution and delivery of this
Agreement by Parent does not, and the performance of this Agreement by Parent
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity or Regulatory Entity and (f)
any Company Shares acquired upon exercise of the Company Option will not be,
and the Company Option is not being, acquired by Parent with a view to the
public distribution thereof and Parent will not sell or otherwise dispose of
such shares in violation of applicable law or this Agreement.

          7.  Registration Rights.
              ------------------- 

              (a)  Following any exercise of the Company Option, Parent may by
written notice (the 'Registration Notice') to Company request Company to
register under the Securities Act all or any part of the shares of Company
Common Stock acquired pursuant to this Agreement, including any voting
securities issued by way of dividend, distribution or otherwise in respect
thereof (the 'Restricted Shares'), beneficially owned by Parent (the
'Registrable Securities') in order to permit the sale or other distribution of
such Registrable Securities, including pursuant to a firm commitment
underwritten public offering; provided, however, that any such Registration
                              --------  -------                            
Notice must relate to a number of shares equal to at least 2% of the
outstanding shares of Company Common Stock and that any rights to require
registration hereunder shall terminate with respect to any Shares that may
be sold in any 90-day period pursuant to Rule 144 under the Securities Act.
The Registration Notice shall include a certificate executed by Parent and
its proposed managing underwriter, which underwriter shall be an 

                                       4

 
investment banking firm of nationally recognized standing and reasonably
acceptable to the Company (the 'Manager'), stating that Manager in good faith
believes that, based on the then prevailing market conditions, it will be able
to sell the Registrable Securities at a per share price equal to at least 90%
of the Fair Market Value of such shares. For purposes of this Section 8, the
term 'Fair Market Value' shall mean the per share average of the closing sale
prices of Company's Common Stock on the Nasdaq National Market for the twenty
(20) trading days immediately preceding the date of the Registration Notice.

              (b) Company shall use commercially reasonable efforts to effect,
as promptly as practicable, the registration under the Securities Act of the
unpurchased Registrable Securities; provided, however, that (i) Parent shall
                                    --------  -------
not be entitled to more than two effective registration statements hereunder
and (ii) Company will not be required to file any such registration statement
during any period of time (not to exceed 40 days after such request in the
case of clause (A) below or 90 days in the case of clauses (B) and (C) below)
when (A) Company is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and,
based on consultation with counsel to Company, such information would have to
be disclosed if a registration statement were filed at that time; (B) Company
is required under the Securities Act to include audited financial statements
for any period in such registration statement and such financial statements
are not yet available for inclusion in such registration statement; or (C)
Company determines, in its reasonable good faith, judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving Company or any of its affiliates. If consummation of the
sale of any Registrable Securities pursuant to a registration hereunder does
not occur within 180 days after the filing with the SEC of the initial
registration statement, then such registration shall not be taken into account
as an effective registration for purposes of clause (i) above. Company shall
use commercially reasonable efforts to cause any Registrable Securities
registered pursuant to this Section 8 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as Parent may reasonably
request and shall continue such registration or qualification in effect in
such jurisdiction; provided, however, that Company shall not be required to
                   --------  -------
qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.

              (c) The registration rights set forth in this Section 8 are
subject to the condition that Parent shall provide Company with such
information with respect to Parent's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to Parent as, in
the reasonable judgment of counsel for Company, is necessary to enable Company
to include in such registration statement all material facts required to be
disclosed with respect to a registration thereunder.

              (d) If Company securities of the same type as the Registrable
Securities are then authorized for quotation or trading or listing on the New
York Stock Exchange, the Nasdaq National Market, or any other securities
exchange or automated quotations system, Company, upon the request of Parent,
shall promptly file an application, if required, to authorize for quotation,
trading or listing the shares of Registrable Securities on such exchange or
system and will use its reasonable best efforts to obtain approval, if
required, of such quotation, trading or listing as soon as practicable.

                                       5

 
              (e) A registration effected under this Section 7 shall be
effected at Company's expense, except for underwriting discounts and
commissions and fees and expenses of counsel to Parent, and Company shall
provide to the underwriters such documentation (including certificates,
opinions of counsel and 'comfort' letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree (i) to indemnify each other and the underwriters in the customary manner
and (ii) to enter into an underwriting agreement in form and substance
customary for transactions of the type contemplated hereby with the Manager
and the other underwriters participating in such offering.

          8.  Adjustment Upon Changes in Capitalization.
              -----------------------------------------

              (a) In the event of any change in Company Common Stock by reason
of stock dividends, splits, mergers (other than the Merger),
recapitalizations, combinations, exchange of shares or the like, the type and
number of shares or securities subject to the Company Option, and the Exercise
Price per share, shall be adjusted appropriately, and proper provision shall
be made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Company Option, the number and class of shares
or other securities or property that Parent would have received in respect of
the Company Common Stock if the Company Option had been exercised immediately
prior to such event or the record date therefor, as applicable.

              (b) In the event that Company shall enter in an agreement: (i)
to consolidate with or merge into any person, other than Parent or any of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Parent or one
of its subsidiaries, to merge into Company and Company shall be the continuing
or surviving corporation, but, in connection with such merger, the then-
outstanding shares of Company Common Stock shall be changed into or exchanged
for stock or other securities of Company or any other person or cash or any
other property or the outstanding shares of Company Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company; or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Parent or any of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that upon the consummation of any such transaction and upon the terms and
conditions set forth herein, Parent shall receive for each Company Share with
respect to which the Company Option has not been exercised an amount of
consideration in the form of and equal to the per share amount of
consideration that would be received by the holder of one share of Company
Common Stock less the Exercise Price (and, in the event of an election or
similar arrangement with respect to the type of consideration to be received
by the holders of Company Common Stock, subject to the foregoing, proper
provision shall be made so that the holder of the Company Option would have
the same election or similar rights as would the holder of the number of
shares of Company Common Stock for which the Company Option is then
exercisable).

          9.  Certain Agreements of Company.  Company agrees: (1) that it will 
              -----------------------------
not, by charter amendment or through reorganization, consolidation, merger,
dissolution or sale of 

                                       6

 
assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Company and (2) promptly to take all action
as may from time to time be required (including (x) complying with all
applicable premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. Section 18a and regulations promulgated thereunder and
(y) in the event that, under the Home Owners' Loan Act, as amended, or any
state or other federal banking law, prior approval of or notice to the OTS or
to any state or other federal regulatory authority is necessary before the
Option may be exercised, cooperating fully with Parent in preparing such
applications or notices and providing such information to the OTS or such
state or other federal regulatory authority as they may require) in order to
permit Parent to exercise the Option and Company duly and effectively to issue
shares of Company Common Stock pursuant hereto.

          10.  Restrictive Legends.  Each certificate representing shares of 
               -------------------
Company Common Stock issued to Parent hereunder shall, to the extent
applicable, include a legend in substantially the following form:

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.  SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF MAY 31, 1999, A
COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.

          11.  Binding Effect; No Assignment.  This Agreement shall be binding 
               -----------------------------
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor the rights or the
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person other
than the parties hereto and their respective permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement. Any Restricted
Shares sold by Parent in compliance with the provisions of Section 7 shall,
upon consummation of such sale, be free of the restrictions imposed with
respect to such shares by this Agreement, unless and until Parent shall
repurchase or otherwise become the beneficial owner of such shares, and any
transferee of such shares shall not be entitled to the rights of Parent.
Certificates representing shares sold in a registered public offering pursuant
to Section 7 shall not be required to bear the legend set forth in Section 10.

          12.  Specific Performance. The parties recognize and agree that if
               --------------------
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not
be an adequate remedy. Accordingly, each party agrees that, in addition to
other remedies, the other party shall be entitled to an injunction restraining
any violation or threatened violation of the provisions of this Agreement. In
the event that any action should be brought in equity to enforce the
provisions of this Agreement, neither party will allege, and each party hereby
waives the defense, that there is an adequate remedy at law.

                                       7

 
          13.  Entire Agreement. This Agreement and the Reorganization
               ----------------
Agreement (including the Company Disclosure Schedule and the Parent Disclosure
Schedule relating thereto) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.

          14.  Further Assurance. Each party will execute and deliver all such
               -----------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.

          15.  Validity. The invalidity or unenforceability of any provision of
               --------
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith,
or not take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof or of
any other provision of this Agreement or part hereof as the result of such
holding or order.

          16.  Notices. Any notice or communication required or permitted
               -------
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address
or addresses as such person may subsequently designate by notice given
hereunder.

               (a)  if to Parent or Merger Sub, to:

                    E*TRADE Group, Inc.
                    Four Embarcadero Place
                    2400 Geng Road
                    Palo Alto, CA  94303
                    Attention: Thomas A. Bevilacqua, Esq.
                    Facsimile No.:  (650) 842-8781
                    Telephone No.:  (650) 842-2475
 
                    with a copy to:
 
                    Brobeck, Phleger & Harrison LLP
                    2200 Geng Road
                    Two Embarcadero Place

                                       8

 
                    Palo Alto, CA  94303
                    Attention: Curtis L. Mo, Esq.
                    Facsimile No.:  (650) 496-2885

                    and



                    Brobeck, Phleger & Harrison LLP
                    Spear Street Tower
                    One Market
                    San Francisco, CA  94105
                    Attention:  J. Michael Shepherd, Esq.
                                Steve L. Camahort, Esq.
                    Facsimile No.:  (415) 442-1010

               (b)  if to Company, to:
                    Telebanc Financial Corporation
                    1111 North Highland Street
                    Arlington, VA  22201-2807
                    Attention:  President
                    Facsimile No.:  (703) 524-0556

                    with a copy to:

                    Hogan & Hartson LLP
                    Columbia Square
                    555 Thirteenth Street, N.W.
                    Washington D.C. 20204
                    Attention:   Steven Museles, Esq.
                                 Stuart Stein, Esq.
                    Facsimile No.:   (202) 637-5600


          17.  Governing Law. This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State without regard to any
applicable conflicts of law rules.

          18.  Descriptive Headings. The descriptive headings herein are
               --------------------
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.

                                       9

 
          19.  Counterparts. This Agreement may be executed in counterparts,
               ------------
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.

          20.  Expenses. Except as otherwise expressly provided herein or in
               --------
the Reorganization Agreement, all costs and expenses incurred in connection
with the transactions contemplated by this Agreement shall be paid by the
party incurring such expenses.

          21.  Amendments; Waiver. This Agreement may be amended by the parties
               ------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of
a waiver, by an instrument signed on behalf of the party waiving compliance.

                                       10

 
          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.

                              E*TRADE Group, Inc.


                              By: /s/ Christos M. Cotsakos
                                 ---------------------------------------
                                  Name:  Christos M. Cotsakos
                                  Title: Chief Executive Officer



                              Telebanc Financial Corporation


                              By: /s/ Mitchell H. Caplan
                                 ---------------------------------------
                                  Name:  Mitchell H. Caplan
                                  Title: President and Chief Executive Officer






                  SIGNATURE PAGE TO STOCK OPTION AGREEMENT