eTrade 2003 Annual Report Download - page 131

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This Settlement Agreement is made and entered into this 10th day of December, 2003, by and among E*TRADE Financial Corporation
(formerly, “E* TRADE Group Inc.”) and its subsidiaries and affiliates (“ E*TRADE ”) and Christos M. Cotsakos (“ Cotsakos ”) (hereinafter
the “ Parties” ).
Whereas, Cotsakos was employed by E*TRADE as its President and Chief Executive Officer on March 21, 1996 and served as
E*TRADE’s Chairman of the Board and Chief Executive Officer until January 23, 2003 when his employment by E*TRADE terminated;
Whereas, during the period of his employment Cotsakos entered into certain employment agreements and other agreements, including a
Time Sharing Agreement dated September 1, 2000 (the “ Time Sharing Agreement ”), which granted him compensation for services
performed as Chairman of the Board and Chief Executive Officer, including cash and stock options, and provided him with certain other
benefit arrangements relating to his use of company aircraft;
Whereas, during the period of his employment Cotsakos caused contributions to be made to charitable organizations which E*TRADE
alleges were not authorized by its Board of Directors and which Cotsakos alleges either were authorized in fact or were within the general
authority of the Chief Executive Officer to make without express approval of the Board of Directors;
Whereas, in May 2002 Cotsakos voluntarily waived his entitlement to certain forms and amounts of compensation, including 2,000,000
shares of restricted stock and $6,000,000 contributed by E*TRADE to his Supplemental Executive Retirement Plan (the “ May 2002 Waiver
”);
Whereas, upon the termination of his employment as E*TRADE’s Chairman of the Board and Chief Executive Officer, Cotsakos and
E*TRADE entered into a Separation Agreement dated as of January 23, 2003 (the “ Separation Agreement ”) pursuant to which Cotsakos
was to receive an aggregate of $4,000,000 to be paid in four bi-monthly installments between January 23, 2003 and July 23, 2003, and in
connection with which E*TRADE audited the compensation, benefits and charitable contributions paid and committed by E*TRADE during
Cotsakos’s employment;
Whereas, E*TRADE has made the first severance payment of $1,000,000 to Cotsakos but has refused, pursuant to Section 6(b) of the
Separation Agreement, to make subsequent payments aggregating $3,000,000 (the “ 2003 Unpaid Severance ”) and has asserted claims
against Cotsakos, arising out of the payment of allegedly unauthorized charitable contributions and the failure of Cotsakos to reimburse
E*TRADE for allegedly non-business personal use of company aircraft under the terms of the Time Sharing Agreement;
Whereas, Cotsakos has agreed to reimburse E*TRADE with respect to certain of the claims, compromise and settle certain of the claims,
denied liability with respect to certain of the claims, and alleged that certain of the claims asserted by E*TRADE should have been discharged
by compensation reductions made pursuant to the May 2002 Waiver;