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Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2001.
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission file number 1-11921
E*TRADE Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-2844166
(Stateorotherjurisdiction (I.R.S.Employer
ofincorporationororganization) IdentificationNumber)
4500 Bohannon Drive, Menlo Park, CA 94025
(Address of principal executive offices and zip code)
(650) 331-6000
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
2002. EDGAR Online, Inc.

Table of contents

  • Page 1
    ... OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001. or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____. Commission file number 1-11921 E*TRADE Group, Inc. (Exact name...

  • Page 2
    ... Statement relating to the Company' s Annual Meeting of Shareowners to be held May 24, 2002, to be filed hereafter (incorporated into Part III hereof). Table of Contents E*TRADE GROUP, INC. FORM 10-K ANNUAL REPORT For the Fiscal Year ended December 31, 2001 TABLE OF CONTENTS 2002. EDGAR Online...

  • Page 3
    ... of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV Item 14. Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K Exhibit Index Signatures...

  • Page 4
    ...funds; bond trading and proprietary bond funds; access to separate account money management, individual retirement account ("IRA") and college savings plan products; real-time market commentary, quotes, news and professional research reports; and other information services. • Banking :Our banking...

  • Page 5
    ... listed our stock on the New York Stock Exchange. In fiscal year 2001, we executed against a number of initiatives to further diversify our product and services offerings and revenue streams, realize efficiencies and synergies from operations and acquisitions, and improve our global reach. Product...

  • Page 6
    ... services they can find on our web site. In fiscal year 2001, we separated our financial services businesses into four categories: (1) Domestic Retail Brokerage, (2) Banking, (3) Global and Institutional, and (4) Wealth Management and Other (formerly Asset Gathering and Other). 2002. EDGAR Online...

  • Page 7
    ...to buy U.S. equities online in real-time. A current focus of the Global and Institutional business is on the development and launch of an electronic trading platform for institutional customers. Our Wealth Management and Other business includes our mutual fund operations, E*TRADE Business Solutions...

  • Page 8
    ... stock, option, fixed income and mutual fund order processing; innovative products such as Stock Baskets and Personal Money Management; online investment portfolio tracking; and financial market news and information. We offer our services to customers through the Internet, desktop trading software...

  • Page 9
    ...invested in any of nine money market mutual funds. In addition, we provide free checking services with no minimum balance requirement through a commercial bank and are exploring the expansion of these services. We also offer electronic funds transfer via the Internet and an automatic deposit program...

  • Page 10
    .... Performing our own clearing operations allows E*TRADE Securities to retain customer free credit balances and securities for use in margin lending activities subject to SEC and National Association of Securities Dealers Regulation, Inc. ("NASDR") rules. E*TRADE Securities has an agreement with BETA...

  • Page 11
    ...time priority. Nasdaq market orders, subject to certain size limitations, are generally executed at the Best Bid/Offer, Inside Market or better at the time of receipt by the market-maker. All transaction and portfolio records are automatically updated to reflect trading activity. Buy and sell orders...

  • Page 12
    ...financial goals. Customers can make financial transactions in their E*TRADE Bank and E*TRADE Securities brokerage accounts, as well as participate in educational seminars, browse through our library of financial information, use E*TRADE Financial ATMs, and access all the research and tools available...

  • Page 13
    ... bill payment, SmartAlerts, access to a nationwide ATM network and an ATM/debit card. In fiscal 2002, customers will be able to integrate our checking accounts with Quicken and Microsoft Money, see real time bank activity and view checks online. Our money market and savings accounts are designed for...

  • Page 14
    ...loans and home equity loans and lines of credit. Customers can access E*TRADE Mortgage via telephone, email or through a proprietary "web-chat" system. Through a co-branding partnership with First USA, we offer credit card services. We are evaluating opportunities to offer a proprietary credit card...

  • Page 15
    ... commercial, mixed-use real estate home equity line of credit and second mortgage loans and other loans amounted to $38.1 million, or 0.5%, of our total gross loan portfolio. 13 Table of Contents The following table presents information concerning our banking loan portfolio, in dollar amounts and...

  • Page 16
    ...Five Years Total (in thousands) Real estate loans: One- to four-family fixed-rate One- to four-family adjustable-rate Multi-family Commercial Mixed-use Consumer and other loans: Home equity lines of credit and second mortgage loans Automobiles and recreational vehicles loans Other Total $ 8,465...

  • Page 17
    ... fiscal 1998, we acquired approximately $150.0 million in loans from Direct Financial Corporation ("DFC"). The following table shows our loan, purchase, sale, and repayment activity during the periods indicated including loans acquired through business combinations. Year Ended December 31, 2001...

  • Page 18
    ... 31, 2001, three months ended December 31, 2000, or fiscal years ended September 30, 2000 and 1999. Prior to fiscal 1998 we originated consumer loans as an accommodation to our customers or purchased such loans as part of larger 16 Table of Contents loan packages. To service our loan portfolio, we...

  • Page 19
    ... the allowance for loan losses. Management performs periodic valuations and establishes a valuation allowance for REO and repossessed assets through a charge to income if the carrying value of a property exceeds its estimated fair value less estimated selling costs. As of December 31, 2001, all of...

  • Page 20
    ... balance. These loans represented $22.5 million of the total loan portfolio at December 31, 2001, and are actively monitored. 18 Table of Contents Allowance for Loan Losses. As an investor in mortgage loans and other types of consumer loans, we recognize that we will experience occasional credit...

  • Page 21
    ... •regular reviews of delinquencies and loan portfolio quality; • the industry' s historical loan loss experience for similar asset types; and •evaluation of economic conditions. We increase our allowance for loan losses when we estimate that losses have been incurred by charging provisions...

  • Page 22
    ... 2001. The increase in the loan loss provision as compared to fiscal 2000 is principally attributable to the level of charge-offs and the significant growth in the portfolio. We believe that the combination of our loan loss allowance, net credit discount, and credit enhancement on certain loan pools...

  • Page 23
    ...ofLoans in Each Category to Total Loans (dollars in thousands) Real estate loans: One- to four-family Automobiles and recreational vehicles Multi-family Commercial Mixed-use Land Home equity lines of credit and second mortgage loans Other consumer Total allowance for loan losses $ $ 6,960 12,757 79...

  • Page 24
    ... Automobiles and recreational vehicles loans Other loans Total recoveries Net charge-offs Loan loss allowance acquired in acquisition (1) Additions charged to operations Allowance for loan losses at end of period Net charge-offs to average loans outstanding $ 4 669 - - - - 79 - 81 - 7 - - 702...

  • Page 25
    ...No. 115, Accounting for Certain Investments in Debt and Equity Securities , we classify our mortgage-backed securities in one of three categories:held-to-maturity, available-for-sale or trading. During the year ended December 31, 2001, three months ended December 31, 2000, and the fiscal years ended...

  • Page 26
    ... million for the fiscal year ended September 30, 1999. 22 Table of Contents The following table shows the Bank' s scheduled maturities, carrying values, and current yields for our portfolio of mortgage-backed securities, both available-for-sale and trading, at December 31, 2001. After One But...

  • Page 27
    ... maturities, carrying values, and current yields for our banking-related investment portfolio of debt securities at December 31, 2001. Within One Year After One But Within Five Years After Five But Within Ten Years Weighted Average Yield 4.47 % $ 6.88 Balance Due Weighted Average Yield (in...

  • Page 28
    ... the Year Ended December31, 2001 Percentage of Deposits Average Rate Average Balance for the Year Ended September30, 2000 Percentage of Deposits Average Rate Average Balance for the Year Ended September30, 1999 Percentage of Deposits Average Rate (in thousands) Passbook Money market Demand...

  • Page 29
    ...As of December 31, 2001, our outstanding advances from the FHLB totaled $906.3 million at interest rates ranging from 1.9% to 6.9% and at a weighted average rate of 2.7%. We also borrow funds by selling securities to nationally recognized investment banking firms under agreements to repurchase the...

  • Page 30
    ... retail brokerage services, and the business activities of E*TRADE Institutional and E*TRADE Technologies, which offer financial services to institutional investors. Our local operations in both the retail and institutional businesses are critical to our global strategy. During fiscal year 2001, we...

  • Page 31
    ...U.S. dollar denominated bank products, as well as U.S. margin and trading accounts currently available only to U.S. customers. For our institutional customers, we have developed a fully-electronic network to allow more efficient access to global exchanges (as discussed above in Products and Services...

  • Page 32
    ...of our revenues come from online investing services, downturns in the 27 Table of Contents securities markets have harmed and could further significantly harm our business, including by reducing transaction volumes and margin borrowing and increasing our dependence on our more active customers who...

  • Page 33
    ... available without transaction fees or loads. The center also offers several services free of charge, such as a state-of-the-art proprietary screening tool, and a wide spectrum of research, including risk measures, portfolio information, historical charts and online prospectuses. Mutual fund orders...

  • Page 34
    ... now E*TRADE Advisory Services, a platform which aggregates the services of individual money managers and investment advisers. This service provides customers with the ability to research and review managers performance and investment styles online. We branded this advisory service as Personal Money...

  • Page 35
    .... BSG provides products and services directly to publicly traded and privately held companies to facilitate the management and reporting of employee stock purchase and stock option plans and provides transactional services to corporations and their employees. BSG' s clients range in size from small...

  • Page 36
    ... with administrative assistance and stock plan account management up to and through a public offering. • Executive Services -A suite of financial tools and services tailored to fit the needs of corporate officers and other high-net-worth individuals. E*TRADE Financial' s Executive Services offers...

  • Page 37
    ...yielded savings without reducing our key technology investments or service levels to our customers. We have also gained significant efficiencies through expanded use of our state-of-the-art data center in Alpharetta, Georgia. Technology development expenses were $88.7million in the fiscal year ended...

  • Page 38
    ...or requiring replacement of existing hardware or software. Our transaction-enabling technology engine includes a wide variety of functions and services that allow customers to open and monitor investment accounts and to place orders for equity, option, mutual fund and fixed income transactions. Our...

  • Page 39
    ... www.institutional.etrade.com to serve the institutional customer base with account information, trade data and settlement instructions in addition to other relevant market content. Global Technology During the past two years, we evolved our domestic Stateless Architecture into a high availability...

  • Page 40
    ... of personalization, customer retention, loyalty and increased customer value. As an organization servicing multiple business units, each with unique customer goals and customer insight, we have learned that customer loyalty and long term relationships can combat price erosion. In fiscal year 2001...

  • Page 41
    .... As we continue to diversify our services beyond online domestic retail brokerage offerings to include banking, global cross-border trading, mutual fund offerings, market-making, mortgage lending and institutional investing, financial advice and insurance, the number of competitors in these varied...

  • Page 42
    ... business leases 36 Table of Contents additional facilities in the United States. In addition, we lease facilities in New York City, Boston, Beverly Hills, Denver and San Francisco where our E*TRADE Financial Centers are located. These leases expire at various dates through 2013. In fiscal 2001...

  • Page 43
    ..., 2001, Nasdaq halted trading in the stock of GENI, which had last traded at a price of $5.90 before the halt. As a 37 Table of Contents result, MJK was unable to meet its collateral requirements on the GENI and other securities with certain counterparties to those transactions. MJK was ordered to...

  • Page 44
    ...obtain insurance in the future. Reference is made to the information reported in prior filings with the Securities and Exchange Commission under Item 3. Legal and Administrative Proceedings in our Annual Report on Form 10-K, as amended, for the year ended September 30, 2000, and under Part II, Item...

  • Page 45
    ...our shares on the New York Stock Exchange. The following table shows the high and low sale prices of our common stock as reported by the Nasdaq National Market or the New York Stock Exchange, as applicable for the periods indicated. High Low Fiscal 2000: First Quarter Second Quarter Third Quarter...

  • Page 46
    ... of the Securities Act based on the fact that the common stock was sold by the issuer in a transaction not involving a public offering. On March 20, 2001, the Company filed a registration statement with the Securities and Exchange Commission for the resale of these 2,997,951 shares. The registration...

  • Page 47
    ... involving a public offering. On March 20, 2001, the Bank of New York as escrow agent authorized the release from escrow of 478,500 of the shares of common stock. On June 22, 2001, 41 Table of Contents the Company filed a registration statement with the Securities and Exchange Commission for the...

  • Page 48
    ... 4(2) of the Securities Act based on the fact that the common stock was sold by the issuer in a transaction not involving a public offering. On December 4, 2001, the Company filed a registration statement with the Securities and Exchange Commission for the resale of these shares. The registration...

  • Page 49
    ...,051 195,051 147,168 167,818 December 31, 2001 2000 1999 At September 30, 1998 1997 (in thousands) Consolidated Balance Sheet Data: Cash and equivalents Brokerage receivables-net Mortgage-backed securities Loans Total assets Convertible subordinated notes and capital lease liability Mandatorily...

  • Page 50
    ... change in accounting principle. In fiscal year 2000, the cumulative effect of change in accounting principle resulted from the implementation by E*TRADE Financial Corporation ("ETFC") of Statement of Position 98-5 , Reporting on the Cost of Start-Up Activities, which requires that the cost of start...

  • Page 51
    ... securities broker-dealer, E*TRADE Institutional, a provider of global securities brokerage and other related services to institutional clients, ETFC, a provider of financial services whose primary business is conducted by its subsidiary, E*TRADE Bank (the "Bank"), a federally chartered savings bank...

  • Page 52
    ...31, 2001, our estimated future cash obligations were $89.5 million. This includes rental payments due for certain facilities no longer to be used by the Company totaling $170.4 million, offset by our best estimate of the future sublease income we expect to receive. In calculating the charge related...

  • Page 53
    ...in publicly-traded companies, mutual funds in which we are the sponsor, and other joint venture investments. See Note 8 to the Consolidated Financial Statements for further information. As of December 31, 2001, certain of the publicly-traded equity securities which we held had unrecognized losses of...

  • Page 54
    ...conditions or company-specific events indicate there has been a decline in value. During fiscal 2001, we recorded losses of $34.7 million on our venture fund investments. Accounting for financial derivatives The Bank uses various financial derivatives in managing the risks inherent in its business...

  • Page 55
    ... Company. The total of $30.2million is reflected as executive loan settlement in the consolidated statement of operations. Other related party transactions are described in Note 11 to our Consolidated Financial Statements. Transition Period As noted above, on January 22, 2001, our fiscal year end...

  • Page 56
    ...fair value of cash flow and fair value hedges. • In December 2000, we instituted a $15 per quarter maintenance fee for low-balance, inactive accounts, which is reflected in other revenues. 50 Table of Contents Results of Operations Year Ended December 31, 2001, Compared to Year Ended September...

  • Page 57
    ... Daily average domestic brokerage transactions Average commission per domestic brokerage transaction Rebate income per domestic brokerage transaction Active domestic brokerage accounts Active banking accounts Active global and institutional accounts Total active accounts at period end Total customer...

  • Page 58
    ... A bank account is included as an active account if a customer has made an initial deposit and the account is not considered abandoned or dormant under applicable Federal and State laws, and the account has not been closed. • Net new accounts is equal to the number of accounts opened during the...

  • Page 59
    ... revenue streams, which included integrating our Banking operations acquired January 2000, improvements in our cross-selling ability across business segments, and sustained growth in customer transaction volumes, net new active bank and brokerage customer accounts and total assets/deposits...

  • Page 60
    ... second quarter of fiscal 2000, which was somewhat offset by a decline in the latter part of that year. Active domestic brokerage accounts increased 15% from fiscal 2000 to fiscal 2001 compared to a 90% increase from fiscal 1999 to fiscal 2000. Daily average domestic brokerage transactions decreased...

  • Page 61
    ... securities on margin, interest received from other broker-dealers through our brokerage subsidiaries' stock borrow programs and fees on customer assets invested in money market accounts. Interest expense from brokerage-related activities is comprised of interest paid to customers on certain credit...

  • Page 62
    ...) Average Yield/Cost Average Balance Interest Inc./Exp. Average Yield/Cost Interest-earning banking assets: Loans receivable, net Interest bearingdeposits Mortgage-backed and related available for sale securities Available-for-sale investment securities Investment in FHLB Trading securities...

  • Page 63
    ...) Due To Volume Rate Total (in thousands) Volume Fiscal 2000 Versus Fiscal 1999 Increase (Decrease) Due To Rate Total Interest earning banking assets: Loans receivable, net Interest bearing deposits Mortgage-backed and related available-for-sale securities Available-for-sale investment securities...

  • Page 64
    ... retail brokerage-related transaction revenue from our international subsidiaries. The decrease in fiscal 2001 is primarily attributable to the decrease in net new global and institutional accounts as well as a slowdown in the institutional business due to global market conditions in the year ended...

  • Page 65
    ... 1, 2001. Also included in other revenues are Business Solutions Group revenue, mutual fund revenues, revenues from fees charged for advertising on our web site, investment banking revenue, and brokerage and banking-related fees for services. Provision for loan losses The provision for loan losses...

  • Page 66
    ... level of customer service across an account base that continues to grow and the need to service a wider range of product offerings. Looking forward, we plan to continue to identify and implement cost savings strategies in this area, including a greater integration of our bank and brokerage customer...

  • Page 67
    ..., such as product offerings supporting our active trader customer base completed in fiscal 2001. Also, during the third quarter of fiscal 2001, management reviewed our current technology development activities in conjunction with our restructuring plans and business initiatives. As a result, work on...

  • Page 68
    ... reviewed our current technology development activities and decided to focus on projects generating the highest return in the short term. As such, work on less critical projects has ceased. In total, we recorded a pre-tax charge of $52.5 million related to the write-off of capitalized software...

  • Page 69
    ... the end of the second quarter in fiscal 2001 and extending through the fourth quarter, we retired 6% subordinated notes totaling $214.8 million in share and cash exchanges. The reduction in our outstanding debt balance is expected to reduce corporate interest expense by $12.9 million annually. The...

  • Page 70
    ... market fluctuations on public investments held by the funds and changes in the estimated value of their non-public investments. Fund I was formed in the first quarter of fiscal 2000 and the Arrow Path Fund II was formed in the third quarter of fiscal 2000. In October, 2001, we amended our agreement...

  • Page 71
    ... competitors; market acceptance of online investing and banking services and products; the pace of development of the market for online commerce; changes in trading volume in securities markets; trends in the securities and banking markets; domestic and international regulation of the brokerage and...

  • Page 72
    ... deposit accounts, other borrowings, and sales of loans or securities. We believe that we will be able to renew or replace our funding sources at prevailing market rates, which may be higher or lower than current rates, as well as to supplement these funding sources with cash flow from operations...

  • Page 73
    ... financial statements. The lease payments vary based on LIBOR plus 30basis points. The Company has the right to acquire the related property during the five-year lease period at its lease purchase cost of $71.9 million. On March 27, 2002, the Company exercised its purchase option, and intends to use...

  • Page 74
    ... Estimated based on investment plans of the Funds. (4) Included in the facilities restructuring accrual. (5) Excludes commitments to fund certain development activities as further disclosed in Other Commitments below. (6) Does not include demand deposit, money market or passbook savings accounts...

  • Page 75
    ... year ended September 30, 1999. Cash provided by operating activities resulted primarily from net loss of $56.8million, adjusted for non-cash items totalling $(44.5) million (including depreciation of $34.3 million and realized gains on securities of $54.7 million), an increase in brokerage-related...

  • Page 76
    ... by an excess of the net sale/maturity of investments over the purchases of investments of $1,183.5 million. For the fiscal years ended September 30, 2000 and 1999, cash used in investing activities resulted primarily from an increase in loans receivable, purchases of property and equipment and...

  • Page 77
    .... We face direct competition from retail and institutional brokerage firms, banks, thrifts and other financial institutions, mortgage companies, specialists, market makers, insurance companies, electronic communication networks ("ECNs"), mutual fund companies, credit card companies, Internet portals...

  • Page 78
    •Charles Schwab & Co., Inc. (including Schwab Capital Markets) •CNBC MoneyCentral •Citigroup Inc. •Countrywide Home Loans, Inc. • Datek Online Financial Services LLC (a subsidiary of Datek Online Holdings Corporation) • Deutsche Bank • E-Loan, Inc. •Fidelity Investments • ...

  • Page 79
    ...(a unit of Reuters Group) • Island ECN 70 Table of Contents • Intuit Inc. • J.P. Morgan Chase & Co. •Knight Securities (a division of Knight Trading Group, Inc.) • Merrill Lynch, Pierce, Fenner & Smith Incorporated (including Herzog, Heine, Gould) •Morgan Stanley Dean Witter & Co...

  • Page 80
    ... institutions have become more competitive with our brokerage operations by offering their customers certain corporate and individual financial services traditionally provided by securities firms and more competitive with our banking operations by offering products electronically. The current...

  • Page 81
    ...of our revenues come from online investing services, downturns or disruptions in the securities markets have harmed and could further significantly harm our business, including by reducing transaction volumes and margin borrowing and increasing our dependence on our more active customers who receive...

  • Page 82
    ... and Analysis of Financial Condition and Results of Operations-Recent Developments." An inability to retain and hire skilled personnel and senior management could seriously harm our ability to maintain and grow our business If the number of accounts and transaction volume increases significantly...

  • Page 83
    ... liabilities, such as deposits and borrowings. Changes in market interest rates (and the yield curve) could reduce the value of the Bank' s financial assets and thereby reduce net interest income. Fixed-rate investments, mortgage-backed and related securities and mortgage loans generally decline in...

  • Page 84
    ... may incur trading losses relating to the purchase, sale or short sale of securities for its own account. In any period, Dempsey also may incur trading losses in its specialist stocks and market-maker stocks for reasons such as price declines, lack of trading volume and the required performance of...

  • Page 85
    ... in securities pricing, levels of trading activity and trading through market makers and/or specialists could harm our specialist and market-maker business The listed marketplaces other than Nasdaq moved from trading using fractional share prices to trading using decimals in January 2001, and...

  • Page 86
    ... in doing business in international markets, particularly in the heavily regulated brokerage and banking industries, such as: •unexpected changes in regulatory requirements and trade barriers, •difficulties in staffing and managing foreign operations, •the level of investor interest in...

  • Page 87
    ... successfully integrate the companies that we acquire into our existing operations could harm our business In recent years, we have acquired E*TRADE Access, eInvesting, E*TRADE Advisory Services, E*TRADE Technologies, E*TRADE Mortgage, Web Street, several of our international affiliates and Dempsey...

  • Page 88
    ... to make payments on our debt, • make it more difficult or costly for us to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes, • limit our flexibility in planning for or reacting to changes in our business, and...

  • Page 89
    ... name "E*TRADE" or our other trademarks could harm our business. Despite any precautions we take, a third party may be able to copy or otherwise obtain and use our software or other proprietary information without authorization or develop similar software independently. Policing unauthorized use of...

  • Page 90
    ... us and our shareowners. In addition, certain provisions of our stock incentive plans, management retention and employment agreements (including severance payments, stock option acceleration, and loan forgiveness with associated tax gross-ups), and Delaware law may also discourage, delay or prevent...

  • Page 91
    ... under both federal and state laws. Broker-dealers are subject to regulations covering all aspects of the securities business, which include: •sales methods, • recommendations of securities, •trading practices among broker-dealers, •execution of customers' orders, •use and safekeeping...

  • Page 92
    ... services and transactions in the electronic commerce market. As a result, federal or state authorities could enact laws, rules or regulations affecting our business or operations. We may also be subject to federal, state or foreign money transmitter laws and state and foreign sales or use tax laws...

  • Page 93
    ... of customer account balances. Also, our ability to withdraw capital from brokerage subsidiaries could be restricted, which in turn could limit our ability to pay dividends, repay debt and redeem or purchase shares of our outstanding stock. A large operating loss or charge against net capital...

  • Page 94
    ... from trading using fractional share prices to trading using decimals in January 2001 and the Nasdaq initiated decimalization in March 2001. With the advent of decimalization, certain market makers have reduced payments for order flow, others have announced plans to reduce payments for order flow...

  • Page 95
    ... of cease-and-desist orders, or • the suspension or expulsion of a broker-dealer or any of its officers or employees. In addition, the federal banking agencies impose restrictions on bank advertising of non-deposit investment products to minimize the likelihood of customer confusion. 82 Table...

  • Page 96
    ... future material changes to the Bank' s business plan. Acquisitions of and mergers with other financial institutions, purchases of deposits and loan portfolios, the establishment of new Bank subsidiaries, and the commencement of new activities by Bank subsidiaries require the prior approval of the...

  • Page 97
    ... in future quarterly operating results that may be caused by many factors, including the following: • fluctuations in the fair market value of our equity investments in other companies, including through existing or future private investment funds managed by us, 2002. EDGAR Online, Inc.

  • Page 98
    ..., •market acceptance of online financial services and products, • domestic and international regulation of the brokerage, banking and Internet industries, •accounting for derivative instruments and hedging activities, •changes in domestic or international tax rates, 2002. EDGAR Online...

  • Page 99
    ... day. Thus, the rate of growth in customer transactions at any given time is not necessarily indicative of future transaction activity. We have incurred losses in the past and we cannot assure you that we will be profitable We have a long history of incurring operating losses in each fiscal year...

  • Page 100
    ..., if at all. If adequate funds are not available on acceptable terms, we may be unable to fund our business growth plans. In addition, if funds are available, the result of our issuing securities could be to dilute the value of shares of our common stock and cause the market price to fall. Item 7A...

  • Page 101
    ... or trading purposes. 86 Table of Contents Interest Rate Sensitivity During the year ended December 31, 2001, we had a $50.0 million variable rate bank line of credit and three variable rate term loans. As of December 31, 2001, we had no borrowings outstanding under this line of credit and...

  • Page 102
    ... and mortgaged-backed securities. The values of these assets are sensitive to changes in interest rates as well as expected prepayment levels. The Bank' s liability structure consists primarily of transactional deposit relationships such as money market accounts, shorter-term certificates of deposit...

  • Page 103
    .... The decline was due primarily to deposit growth of transactional deposits (included in "savings account" in the table). For the "hedge affected" cumulative gap, the derivatives portfolio put the Bank' s gap for repricing within 12 months as more asset heavy at December 31, 2001. The shift in the...

  • Page 104
    ...-for-sale and trading Investment securities, available-for-sale and FHLB stock Federal funds sold and interest-bearing deposits 3,627,470 1,035,660 288,674 27.98 % 7.99 % 2.23 % 273,579 306,672 288,674 287,366 122,792 - 857,804 378,881 - 2,208,721 227,315 - Total interest-earning banking...

  • Page 105
    ...from increases in market interest rates while floor options ("floors") benefit from decreases in market interest rates. The total notional amount of derivative financial instruments relative to total assets is largely the result of the Bank' s exposure to mortgage securities and loans which involve...

  • Page 106
    ..., and the related consolidated statements of operations, shareowners' equity, and cash flows for the year ended December 31, 2001, the three months ended December 31, 2000 and the years ended September 30, 2000 and 1999. These consolidated financial statements are the responsibility of the Company...

  • Page 107
    ...the results of their operations and their cash flows for the years ended September 30, 2000 and 1999, in conformity with accounting principles generally accepted in the United States. As explained in the financial statements, effective January 1, 1999, E*TRADE Financial Corporation and subsidiaries...

  • Page 108
    ...in thousands, except share amounts) December 31, September 30, 2000 2001 ASSETS Cash and equivalents Cash and investments required to be segregated under federal or other regulations Brokerage receivables-net Mortgage-backed securities Loans receivable-net of allowance for loan losses of $19,874...

  • Page 109
    ... financial statements 94 Table of Contents E*TRADE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended December31, 2001 Revenues: Transaction revenues Interest income Global and institutional Gains on sales of originated loans...

  • Page 110
    ...Total cost of services and operating expenses Operating income (loss) 865,732 1,461,322 (185,958 ) 193,597 326,857 6,909 933,073 1,448,644 (80,326 ) 518,299 820,641 (149,193 ) Non-operating income (expense): Corporate interest income Corporate interest expense Gain (loss) on sale of investments...

  • Page 111
    ...Adjustment for ETFC earnings Issuance of common stock in public offering-ETFC/E*TRADE Technologies Options issued to consultants Exercise of stock options, including tax benefit Exercise of warrants, including tax benefit Associate Stock Purchase Plan Release of unearned ESOP shares Buyback of trust...

  • Page 112
    ...271 ) Exercise of stock options, including tax benefit Exercise of warrants, including tax benefit Release of unearned ESOP shares Issuance of common stock for purchase acquisitions Conversion of Exchangeable Shares of EGI Canada Corporation to common stock Other employee stock transactions Balance...

  • Page 113
    ... compensation Amortization of deferred stock compensation, net of cancelled stock options Issuance of common stock for purchase acquisitions Conversion of Exchangeable Shares of EGI Canada Corporation to common stock Other employee stock transactions Balance, December 31, 2001 - $ - 7,218 793 72...

  • Page 114
    Year Ended December31, 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) Non-cash items included in net income (loss): Provision for loan losses Depreciation, amortization and discount accretion Net realized gains on available-for-sale securities, loans held-for-sale and trading ...

  • Page 115
    ... net of deposits received in business acquisition Advances from the Federal Home Loan Bank Payments on advances from the Federal Home Loan Bank Net increase in securities sold under agreements to repurchase Proceeds from bank loans and lines of credit, net of transaction costs Payments on bank loans...

  • Page 116
    ... ("E*TRADE Securities"), a securities broker-dealer, TIR (Holdings) Limited and its subsidiaries (collectively, "E*TRADE Institutional"), a provider of global securities brokerage and other related services to institutional clients, E*TRADE Financial Corporation ("ETFC"), a provider of banking and...

  • Page 117
    ... institutional transaction execution and commission revenues in the Company' s international subsidiaries from retail customer broker-dealer transactions in equity and debt securities, options and payments from other broker-dealers for order flow. E*TRADE Institutional provides certain institutional...

  • Page 118
    ...ATM transaction fees, brokerage account maintenance fees, and other brokerage and banking-related fees for services. Also, beginning in the fourth quarter of fiscal 2001, other revenues includes market-making revenue earned by Dempsey. Realized and 102 Table of Contents unrealized gains and losses...

  • Page 119
    ... resulted in an $82,500 charge, net of tax, reported as a cumulative effect of a change in accounting principle, and a $6.2 million decrease, net of tax, in shareowner' s equity in the Company' s financial statements for the three months ended December 31, 2000. Earnings Per Share- Basic earnings...

  • Page 120
    ... the price to reflect differences between the two securities, such as credit risk, liquidity, term, coupon, payment characteristics and other information. Realized and unrealized gains or losses on available-for-sale securities except for publicly traded equity securities are computed using the...

  • Page 121
    ... the near term. Securities purchased for trading and financial derivative instruments that do not qualify for hedge accounting are carried at estimated fair value. Realized and unrealized gains and losses on securities classified as trading are included in gains on bank loans held for sale and other...

  • Page 122
    ... to market value or discounted cash flow is required. Financial Derivative Instruments and Hedging Activities- The Company enters into derivative transactions principally to protect against the risk of market price or interest rate movements on the value of certain assets and future cash flows. The...

  • Page 123
    ...- The Company reports its segment operating results consistent with the internal organization that is used by management for making operating decisions and assessing performance. New Accounting Standards -In September 2000, the FASB issued SFAS No. 140 , Accounting for Transfers and Servicing of...

  • Page 124
    ... a restructuring plan aimed at streamlining operations primarily by consolidating facilities in the United States and Europe. This restructuring resulted in a pre-tax charge of $202.8 million ($148.0 million after tax) in fiscal 2001. Over the past three years, the Company has completed more than...

  • Page 125
    ...) ) 23,981 12,399 9,161 7,631 7,067 22,126 82,365 $ 170,412 $ (14,684 ) $ (73,363 ) $ 109 Table of Contents 4.BUSINESS COMBINATIONS Purchase Acquisitions During the year ended December 31, 2001, three months ended December 31, 2000, and years ended September 30, 2000 and 1999, 2002. EDGAR...

  • Page 126
    ....) Developer of online separately managed accounts E*TRADE Germany To acquire 40% interest held by minority partner $ Fiscal 2000 Acquisitions: eInvesting (formerly, Electronic Investing Corporation) Provider of individual securities portfolios $ E*TRADE Access, Inc. (formerly Card Capture Services...

  • Page 127
    ... customer accounts of Web Street were transferred to E*TRADE Securities and the domestic operations of Web Street ceased on September 30, 2001. The net losses incurred by Web Street during this account transition period of $5.8million are included in acquisition-related expenses for the year ended...

  • Page 128
    ...based federally chartered savings bank. Under the terms of the agreement, ETFC shareowners received 1.05 shares of E*TRADE common stock for each share of ETFC common stock, representing a total of 35,671,622 shares of the Company' s common stock. The Company also assumed all outstanding ETFC options...

  • Page 129
    company offering global multi-currency securities execution and settlement services and a leader in providing independent research to institutional investors. The Company issued 4,488,000shares of common stock in exchange for all outstanding common stock of E*TRADE Institutional. The Company also ...

  • Page 130
    ...non-customer funds pending completion of securities transactions. The Company pays interest on certain customer and non-customer credit balances. 113 Table of Contents 6.MORTGAGE-BACKED SECURITIES The amortized cost basis and estimated fair values of available-for-sale mortgage-backed securities...

  • Page 131
    ... and Federal Home Loan Bank ("FHLB") advances. The Company had commitments to purchase $90.8 million of mortgage-backed securities at December 31, 2001. Realized gains and losses from sales of mortgage-backed securities were as follows (in thousands): Year Ended December31, 2001 ThreeMonths Ended...

  • Page 132
    ... Company has actively engaged in the origination and sale of mortgages. For the year ended December 31, 2001, E*TRADE Mortgage sold loans totaling approximately $4.7 billion, and recognized a net gain on sales of originated loans of 115 Table of Contents $95.5 million. In addition, the Bank sells...

  • Page 133
    ...2,713 $ $ 2,322 The average recorded investment in impaired loans was $1.9 million for the year ended December 31, 2001, $1.9 million for the three months ended December 31, 2000 and $2.1 million for the year ended September 30, 2000. The Company' s charge-off policy for 2002. EDGAR Online, Inc.

  • Page 134
    ...-sale investment securities Equity method and other investments Total investments $ 87,392 $ 998,487 82,744 1,168,623 $ 3,867 603,500 119,917 727,284 $ The Company recognized realized gains (losses) from the sale of trading securities of $16.6 million in the fiscal year ended December 31, 2001...

  • Page 135
    ... impairment of available-for-sale investment securities were as follows (in thousands): Year Ended December31, 2001 Three MonthsEnded December31, 2000 Year Ended September30, 2000 Year Ended September30, 1999 Realized gains Realized losses Impairment charges Net recognized gains (losses) $ 19...

  • Page 136
    ...). Gross realized gains and losses from the sales of available-for-sale securities held by the Bank in the three months ended December 31, 2000 and in the fiscal years ended September 30, 2000 and 1999 were not material. (2) In the second quarter of fiscal 2001, the Company determined there had...

  • Page 137
    ...initial public offering, the Company sold a portion of its investment recognizing a pre-tax gain of $77.5 million, which was included in gain on sale of investments in non-operating income, reducing its ownership percentage from 42% to 32% in fiscal 2000. In fiscal 2001, E*TRADE Japan K.K. completed...

  • Page 138
    ... 31 fiscal year end. The following table presents summarized combined financial data for the Fund I and Fund II (in thousands): Years Ended December 31, 2001 2000 1999 Statement of operations data: Investment income Unrealized gain (loss) on investments Realized loss on investments Management fees...

  • Page 139
    ...to be the exclusive source of initial public offerings and entering into certain arrangements concerning follow-on offerings, investment banking products and secondary market-making services. The Strategic Alliance Agreement had a total term of five years. The fair value of the consideration for the...

  • Page 140
    ... date of these transactions. Other Investments The Company has also made investments in non-public, venture capital-backed high technology companies with which it does business and which provide Internet-based services. These investments represent less than 20% of the outstanding shares of these...

  • Page 141
    ...in this program exercised and held the option shares purchased with the proceeds of the loans. Loans typically have a term of one year; during fiscal 2001, the Company extended the term of loans made in 2000 by one year and adjusted interest rates to applicable federal rates. Stock related loans are...

  • Page 142
    ... of purchasing a home in the Silicon Valley and the Company leased properties to certain other executives. All loans were made at the applicable federal interest rate and all leases were at fair market value. (4) This loan was made pursuant to the Company' s home loan/home lease program discussed...

  • Page 143
    ... Weighted Average Rate Amount Percent December31, 2001 September30, 2000 December31, 2001 September30, 2000 December31, 2001 September30, 2000 Checking accounts, interest-bearing Checking accounts, non-interest-bearing Money market Passbook savings Certificates of deposit Brokered callable...

  • Page 144
    ... summarized as follows (in thousands): Year Ended December31, 2001 Three MonthsEnded December 31, 2000 Year Ended September30, 2000 Year Ended September30, 1999 Money market $ Passbook savings Checking Certificates of deposit Brokered callable certificates of deposit Total $ 65,047 $ 12 4,872...

  • Page 145
    ...term borrowings is summarized as follows (in thousands): December31, 2001 September 2000 Weighted average balance during the year (calculated on a daily basis) Weighted average interest rate during the year (calculated on a daily basis) Weighted average interest rate at year-end Maximum month-end...

  • Page 146
    ...activity is cash balances in customers' accounts and financing obtained from other broker-dealers through E*TRADE Securities' stock loan program. E*TRADE Securities, also maintains financing facilities with banks totaling $275.0 million to finance margin lending. There were no borrowings outstanding...

  • Page 147
    ... been issued at the beginning of the fiscal year, the additional interest expense and issuance costs associated with the securities would have increased the reported basic and diluted net loss per share to $0.75 for fiscal year 2001. On February 7, 2000, the Company completed a private offering of...

  • Page 148
    ... in cash, offset by a $6.7 million loss (net of tax benefit of $4.5 million) recorded as a result of the early redemption of $827.0 million of adjustable and fixed rate advances from the FHLB. The FHLB advances were entered into as a result of normal funding requirements of the Company' s banking...

  • Page 149
    ... in investments Net operating loss carryforwards Depreciation and amortization Deferred compensation Capitalized technology development Provision for loan loss Undistributed earnings in subsidiaries Alternative minimum tax credit Restructuring reserve and related writedowns Other Total deferred tax...

  • Page 150
    ... in its foreign subsidiaries at December 31, 2001, as it is the Company' s intention to permanently reinvest such earnings. At December 31, 2001, the Company had net operating loss carry forwards of approximately $298.5 million for federal income tax purposes. These carry forwards expire through...

  • Page 151
    ... Exchangeable Shares may be exchanged at any time, at the option of the holder, on a one-for-one basis for E*TRADE common stock. The Company may redeem all outstanding Exchangeable Shares for E*TRADE common stock after August 23, 2005 or earlier under certain circumstances. In the fiscal year ended...

  • Page 152
    ... market value of those shares on the grant date. The Salary Investment Option Grant Program and the Director Fee Option Grant Program have each been activated for the first time to allow for the granting of such options in fiscal year 2001. The Company has also assumed option plans as a result...

  • Page 153
    ... stock option activity schedule above. The following table summarizes information on outstanding and exercisable stock options as of December31, 2001: Options Outstanding Number Outstanding (inthousands) Weighted Average Contractual Life (Years) Weighted Average Exercise Price Options Exercisable...

  • Page 154
    ... two-year offering period or the end of each of the six-month purchase periods. At December 31, 2001, 113,712 shares were available for purchase under the Purchase Plan. Additional Stock Plan Information As permitted by SFAS No. 123, the Company applied APB Opinion 25 and related interpretations...

  • Page 155
    ..., 2001, $4.60 for three months ended December31, 2000, $12.78 for the fiscal year ended September 30, 2000 and $8.41 for the fiscal year ended September 30, 1999. Employee Stock Ownership Plan ETFC sponsored an Employee Stock Ownership Plan ("ESOP"). The ESOP previously borrowed from ETFC and used...

  • Page 156
    ...program for eligible associates who have met certain service requirements. The Company matches certain associate contributions; additional contributions to this plan are at the discretion of the Company. Total contribution expense under this plan was $5.9 million for the year ended December 31, 2001...

  • Page 157
    ... costs incurred to purchase certain of the Company' s trust preferred securities on the open market. The costs were charged against additional paid-in capital but increase the net loss for earnings per share purposes (see Note 17). Because the Company reported a net loss for the fiscal years ended...

  • Page 158
    ..., pay cash dividends or make any unsecured advances or loans to its parent or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar amount requirement. E*TRADE Institutional' s and E*TRADE Technologies' brokerage...

  • Page 159
    December 31, 2001 Required Net Capital Net Capital Excess Net Capital Required Net Capital September 30, 2000 Net Capital Excess Net Capital E*TRADE Institutional Securities, Inc. Marquette Securities, Inc. E*TRADE Global Asset Management, Inc. E*TRADE Canada Securities Corporation Web Street ...

  • Page 160
    ... based on increases in certain costs incurred by the lessor. Rent expense was $33.5 million for the fiscal year ended December 31, 2001, $10.3million for the three months ended December 31, 2000, $43.6 million for the fiscal year ended September30, 2000 and $37.1 million for the fiscal year ended...

  • Page 161
    ... financial statements. The lease payments vary based on LIBOR plus 30basis points. The Company has the right to acquire the related property during the five-year lease period at its lease purchase cost of $71.9 million. On March 27, 2002, the Company exercised its purchase option, and intends to use...

  • Page 162
    ...future. 24.ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES The Company enters into derivative transactions principally to protect against the risk of market price or interest rate movements on the value of certain assets and future cash flows. The Company is also required to...

  • Page 163
    ... of fair value hedge accounting are recorded in gains on bank loans held for sale and other securities, net, in the consolidated statement of operations, which totaled $2.8 million of gains for the fiscal year ended December 31, 2001 and none for the three months ended December 31, 2000...

  • Page 164
    ... term of 7 years. The Company reclassified $10.0 million during the fiscal year ended December 31, 2001 and $0 during the three months ended December 31, 2000 of derivative losses from OCI to gain on bank loans held for sale and other securities,net, in the consolidated 2002. EDGAR Online, Inc...

  • Page 165
    ...Weighted Average Pay Rate Weighted Average Receive Rate Weighted Average Remaining Life(years) Liabilities hedged Time Deposits: Pay fixed interest $ rate swap Repurchase Agreements: Pay fixed interest rate swap Federal Home Loan Bank Advances: Pay fixed interest rate swap Total Cash Flow Hedges...

  • Page 166
    ... a net gain of $4.5 million for the fiscal year ended December 31, 2001 and none for the period ended December 31, 2000. Loans held for sale expose the company to interest rate risk. The Company manages this risk for certain loans held for sale by selling mortgages or mortgage-backed securities on...

  • Page 167
    ... of loans. Retail deposits -For passbook savings, checking and money market accounts, fair value is estimated to be carrying value. For fixed maturity certificates of deposit, fair value is estimated by discounting future cash flows at the currently offered rates for deposits of similar remaining...

  • Page 168
    ... mutual fund operations, the E*TRADE Business Solutions Group, Inc. ("BSG"), eInvesting, and other services focused on retirement and 401(k) rollover programs, college savings plans, delivery of electronic advice and money management, tiered product offerings and activities generated from corporate...

  • Page 169
    ... Company' s consolidated amounts as reported in the consolidated financial statements. Domestic Retail Brokerage and Other Banking Global and Institutional Total (in thousands) Year Ended December 31, 2001: Interest-net of interest expense Non-interest revenue-net of provision for loan losses...

  • Page 170
    ... FINANCIAL INFORMATION (PARENT COMPANY ONLY) The following presents the Parent' s condensed balance sheets as of December 31, 2001 and September 30, 2000 and statements of operations and cash flows for the fiscal year ended December 31, 2001, three months ended December 31, 2000, and fiscal years...

  • Page 171
    ... Other Net revenues Cost of services Operating expenses: Selling and marketing Technology development General and administrative Amortization of goodwill Acquisition-related expenses Facility restructuring and other non-recurring charges Executive loan settlement Total operating expenses Total cost...

  • Page 172
    Gain (loss) on sale of investments Fair value adjustments of financial derivatives Equity in losses of investments Unrealized loss on venture funds Other non-operating expense Total non-operating income Pre-tax income (loss) Income tax expense (benefit) Extraordinary gain on early extinguishment of ...

  • Page 173
    ... Restricted deposits Proceeds from sale of subsidiary Other Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock Proceeds from issuance of convertible subordinated notes, net of issuance costs Repurchase of treasury stock Dividends issued...

  • Page 174
    ... Not applicable. 153 Table of Contents P A R T III The Company' s Proxy Statement for its Annual Meeting of Shareowners, to be held May 24, 2002 which, when filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, will be incorporated by reference in this Annual Report on...

  • Page 175
    ... Versus Brokerage Services Inc., Versus Brokerage Services (U.S.) Inc. and Fairvest Securities Corporation (incorporated by reference to Exhibit 2.1 of the Company' s Registration Statement on Form S-3, Registration Statement No.333-41628). 2.3 Agreement and Plan of Mergers, Member Interest Purchase...

  • Page 176
    ... the Company and The Bank of New York (Incorporated by reference to Exhibit 4.1 to the Company' s Registration Statement on Form S-3, Registration Statement No. 333-64102). 4.7 Rights Agreement dated as of July 9, 2001 between E*TRADE Group, Inc. and American Stock Transfer and Trust Company, as...

  • Page 177
    ..., 2000). 10.30 E*TRADE Ventures II, LLC, Limited Liability Company Operating Agreement. (Incorporated by reference to Exhibit 10.30 to the Company' s Annual Report on Form 10-K filed November 9, 2000). 10.31 E*TRADE eCommerce Fund II, L.P., Limited Partnership Agreement (Incorporated by reference to...

  • Page 178
    ... Statement of Earnings to Fixed Charges. *21.1 Subsidiaries of the Registrant. *23.1 Consent of Independent Auditors. *23.2 Consent of Independent Public Accountants. * Filed herewith 157 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange...

  • Page 179
    ..., Executive shall devote his effort and attention, on a full-time basis, to the performance of the duties required of him as an executive of Company. 3. Compensation. As compensation for his services during the term of this Agreement, Executive shall receive the amounts and 2002. EDGAR Online...

  • Page 180
    ... of all reasonable business-related expenses, including without limitation, first-class air travel or travel by chartered or corporate aircraft for all business travel. (g)Executive has leased a home owned by BRE Holdings, LLC, with an option to purchase the home. The terms and conditions of this...

  • Page 181
    ..., then the Company shall provide Executive with the following benefits; (i) within three business days after the end of the 30-day notice period provided in Section 4 above, the Company shall pay Executive a lump sum payment equivalent to two years of Executive' s Current Total Annual Compensation...

  • Page 182
    ..."person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than forty percent (40%) of the total voting...

  • Page 183
    ... directly or indirectly: i.engage in any activity, in any market where E*TRADE conducts business, in which Executive participates, manages or advises in the design, development, marketing, sale or servicing of any product related to global institutional and retail internet securities trading...

  • Page 184
    ...disputes relating to this Agreement, any disputes regarding Executive' s employment by E*TRADE or the termination thereof, claims for breach of contract or breach of the covenant of good faith and fair dealing, and any claims of discrimination or other claims under any federal, state or local law or...

  • Page 185
    ... guarantee of performance (including as a result of any contest by Executive about the amount of any payment pursuant to Section 6 of this Agreement), plus in each case interest at the applicable Federal Rate provided for in Section 7872(f)(2) of the Code. 13. Governing Law. This Agreement shall be...

  • Page 186
    ..., E*TRADE Group, Inc. Each executive listed below is party to an agreement in the same form as attached: Name of Executive Current Title: Mitchell H. Caplan R. (Robert) Jarrett Lilien Joshua Levine Chief Financial Products Officer and Managing Director, North America Chief Brokerage Officer...

  • Page 187
    ...full-time basis, to the performance of the duties required of him as an executive of Company. 3. Compensation. As compensation for his services during the term of this Agreement, Executive shall receive the amounts and benefits set forth in this Section 3: (a)An annual salary of $615,000.00 ("Base...

  • Page 188
    ...three business days after the end of the 30-day notice period provided in Section 4 above, the Company shall pay Executive a lump sum payment equivalent to two years of Executive' s Current Total Annual Compensation; (ii) the Company shall, in its sole discretion, either: (X) 2002. EDGAR Online, Inc...

  • Page 189
    ... Company' s cost to provide such benefits for a two year period; (iii) the Company shall provide Executive with outplacement services valued at a minimum of forty thousand dollars ($40,000.00) in a form and manner acceptable to Executive; and the Company shall provide Executive a mutually acceptable...

  • Page 190
    ...shall inform the Company of the basis for his contention at the time he provides notice of his resignation. 6.Executive agrees that during his employment with E*TRADE Executive will not engage in any other employment, business, or business related activity unless Executive receives E*TRADE' s prior...

  • Page 191
    ... directly or indirectly: i.engage in any activity, in any market where E*TRADE conducts business, in which Executive participates, manages or advises in the design, development, marketing, sale or servicing of any product related to global institutional and retail internet securities trading...

  • Page 192
    ... and Company shall require the assumption of this Agreement by such successor as a condition to such purchase, merger, consolidation, sale of assets or other similar transaction. 10. Notices. Any notice or other communications under this Agreement shall be in writing, signed by the party making the...

  • Page 193
    ... guarantee of performance (including as a result of any contest by Executive about the amount of any payment pursuant to Section 6 of this Agreement), plus in each case interest at the applicable Federal Rate provided for in Section 7872(f)(2) of the Code. 13. Governing Law. This Agreement shall be...

  • Page 194
    ... OF COMPUTATION OF RATIO EARNINGS TO FIXED CHARGES Year Ended December31, 2001 Three Months Ended December31, 2000 2000 (dollars in thousands) Year Ended September 30, 1999 1998 1997 Fixed Charges: Interest expense Amortization of debt issuance costs Estimated interest within rental expense...

  • Page 195
    ... E*TRADE Business Solutions Group, Inc. E*TRADE Canada Securities Corporation E*TRADE Capital, Inc. E*TRADE Europe Securities Limited E*TRADE Europe Services Limited E*TRADE Financial Corporation E*TRADE Germany AG E*TRADE Global Asset Management, Inc. E*TRADE Institutional Holdings, Ltd. E*TRADE...

  • Page 196
    ... Note 22) appearing in this Annual Report on Form 10-K of E*TRADE Group, Inc. for the year ended December 31, 2001. / S /D ELOITTE & T OUCHE LLP San Jose, California March 27, 2002 Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the...

  • Page 197
    March 28, 2002 End of Filing 2002. EDGAR Online, Inc.