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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
E*TRADE GROUP, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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SPECIAL SUPPLEMENT TO NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
FOR THE ANNUAL MEETING OF THE SHAREOWNERS OF
E*TRADE GROUP, INC. TO BE HELD ON DECEMBER 21, 1999
The following information is provided as supplemental disclosure regarding
the cancellation/regrant program for options that the Company implemented
during the 1999 fiscal year.
OPTION REPRICING
As discussed in the Compensation Committee Report on Option Repricing below,
on October 22, 1998 the Company implemented a special option
cancellation/regrant program for all of its associates (including executive
officers) holding stock options issued under the 1996 Stock Incentive Plan
(the "Plan") with an exercise price per share in excess of the fair market
value of the Company's Common Stock on the regrant date. The
cancellations/regrants were effected on October 22, 1998, and approximately
14,422,604 outstanding options with an exercise price in excess of $4.25 per
share were surrendered for cancellation and new options (subject to a new
vesting schedule, see "Compensation Committee Report on Option Repricing") for
the same aggregate number of shares were granted with an exercise price of
$4.25 per share.
COMPENSATION COMMITTEE REPORT ON SPECIAL OPTION REGRANT PROGRAM
During the 1999 fiscal year, the Compensation Committee felt that
circumstances had made it necessary for the Company to implement an option
cancellation/regrant program. Accordingly, on October 22, 1998, all of the
Company's associates (including executive officers) were given the opportunity
to surrender their outstanding options (including certain performance based
options held by some of the executive officers) issued under the Plan with
exercise prices in excess of $4.25 per share in return for a new option grant
for the same number of shares but with a lower exercise price of $4.25 per
share, the fair market value per share of the Company's Common Stock on the
regrant date.
The Compensation Committee determined that this program was necessary
because equity incentives are a significant component of the total
compensation package of each Company associate and play a substantial role in
the Company's ability to retain the services of individuals essential to the
Company's long-term financial success. Prior to the implementation of the
program, the market price of the Company's Common Stock had fallen as a result
of market factors which adversely impacted the Company's financial results and
which did not necessarily reflect the associates' contributions to the
Company's progress. The Compensation Committee felt that the Company's ability
to retain key associates would be significantly impaired unless value was
restored to their options in the form of regranted options at the current
market price of the Company's Common Stock. However, in order for the
regranted options to serve their primary purpose of assuring the continued
service of each optionee, a new exercise schedule was imposed with respect to
the option shares. The new options granted in cancellation of options granted
under the Plan were granted completely unvested, i.e., each optionee who
surrendered his or her existing option lost all vesting that had accrued under
the option. Most of the new options vest in a series of four equal annual
installments measured from the new option grant date, October 22, 1998, so
long as the optionee continues in service with the Company. New options that
replaced options with certain stock price performance goals were also granted
completely unvested with adjusted performance goals.
As a result of the new vesting schedules imposed on the regranted options,
the Compensation Committee believes that the program strikes an appropriate
balance between the interests of the option holders and those of the
shareowners. The lower exercise prices in effect under the regranted options
make those options valuable once again to the executive officers and key
associates critical to the Company's financial performance. However, those
individuals will enjoy the benefits of the regranted options only if they in
fact remain in the Company's employ and contribute to the Company's financial
success.
The table on the reverse side of this page sets forth information with
respect to each of the Company's executive officers concerning his or her
participation in the option cancellation/regrant program effected on October
22, 1998.
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TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Market Price Length of Original
Number of of Stock at Exercise Price Option Term
Securities Underlying Time of at Time of Remaining at Time
Name and Principal Option Repriced Repricing or Repricing or New Exercise of Repricing or
Position Date or Amended (#) Amendment ($) Amendment ($) Price ($) Amendment
------------------ -------- --------------------- ------------- -------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Christos M. Cotsakos.... 10/22/98 1,200,000 $4.25 $6.91 $5.00 8 years 10 months
Chairman of the Board 10/22/98 107,344 $4.25 $7.27 $4.25 9 years 0 months
and Chief Executive 10/22/98 54,224 $4.25 $5.21 $4.25 9 years 7 months
Officer 10/22/98 38,432 $4.25 $5.21 $4.25 9 years 7 months
Judy Balint............. 10/22/98 400,000 $4.25 $6.28 $4.25 8 years 9 months
Chief International 10/22/98 300,000 $4.25 $6.91 $5.00 8 years 10 months
Officer 10/22/98 18,656 $4.25 $7.27 $4.25 9 years 0 months
10/22/98 133,604 $4.25 $5.21 $4.25 9 years 7 months
10/22/98 6,396 $4.25 $5.21 $4.25 9 years 7 months
Debra Chrapaty.......... 10/22/98 879,220 $4.25 $6.19 $4.25 8 years 9 months
Chief Media Officer 10/22/98 80,780 $4.25 $6.19 $4.25 8 years 9 months
10/22/98 300,000 $4.25 $6.91 $5.00 8 years 10 months
10/22/98 22,000 $4.25 $7.94 $4.25 9 years 0 months
10/22/98 133,604 $4.25 $5.21 $4.25 9 years 7 months
10/22/98 6,396 $4.25 $5.21 $4.25 9 years 7 months
Jerry A. Dark........... 10/22/98 240,000 $4.25 $5.40 $4.25 9 years 6 months
Chief People Officer 10/22/98 80,000 $4.25 $4.30 $4.25 9 years 10 months
Connie M. Dotson........ 10/22/98 8,256 $4.25 $7.27 $4.25 9 years 0 months
Chief Service Quality 10/22/98 40,000 $4.25 $5.58 $4.25 9 years 2 months
Officer 10/22/98 100,000 $4.25 $5.77 $4.25 9 years 8 months
10/22/98 200,000 $4.25 $4.30 $4.25 9 years 10 months
Jerry D. Gramaglia...... 10/22/98 900,000 $4.25 $5.63 $4.25 9 years 8 months
Chief Marketing Officer 10/22/98 100,000 $4.25 $6.91 $5.00 9 years 8 months
Kathy Levinson.......... 10/22/98 158,000 $4.25 $6.28 $4.25 8 years 9 months
President and Chief 10/22/98 42,000 $4.25 $6.28 $4.25 8 years 9 months
Operating Officer 10/22/98 600,000 $4.25 $6.91 $5.00 8 years 10 months
10/22/98 193,604 $4.25 $5.21 $4.25 9 years 7 months
10/22/98 6,396 $4.25 $5.21 $4.25 9 years 7 months
Leonard C. Purkis....... 10/22/98 300,000 $4.25 $6.91 $5.00 9 years 8 months
Chief Financial Officer 10/22/98 200,000 $4.25 $5.73 $4.25 9 years 8 months
Stephen C. Richards..... 10/22/98 100,000 $4.25 $6.91 $5.00 8 years 10 months
Chief Online Trading 10/22/98 17,504 $4.25 $7.27 $4.25 9 years 0 months
Officer 10/22/98 74,416 $4.25 $5.21 $4.25 9 years 7 months
10/22/98 25,584 $4.25 $5.21 $4.25 9 years 7 months
Brigitte VanBaelen...... 10/22/98 28,000 $4.25 $6.28 $4.25 8 years 9 months
Chief Community 10/22/98 37,648 $4.25 $6.91 $4.25 8 years 10 months
Development Officer 10/22/98 12,352 $4.25 $6.91 $4.25 8 years 10 months
</TABLE>
Submitted by the Compensation Committee of the Company's Board of Directors:
Richard S. Braddock
William E. Ford
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