EXHIBIT 10.13
 
 
                              EMPLOYMENT AGREEMENT
 
     This Agreement is made effective this 15th day of March, 1996 (the
Effective Date"), by and between E*TRADE GROUP, INC., a California corporation
("Company") and CHRISTOS M. COTSAKOS, a resident of Florida ("Executive").
 
                                   BACKGROUND
                                   ----------
 
     Executive is serving as President and Chief Executive Officer of Company
pursuant to a letter agreement dated April 4, 1996 ("Letter Agreement"). The
parties desire to enter into a formal employment agreement with respect to the
continued employment of Executive by Company, which shall automatically become
effective as of the Effective Date.
 
                              TERMS AND CONDITIONS
                              --------------------
 
In consideration of the premises and the mutual covenants and agreements set
forth below, the parties agree as follows:
 
     1.  TERMINATION OF LETTER AGREEMENT. The Letter Agreement shall terminate
         -------------------------------                                      
and be of no further force and effect as of the execution of this Agreement.
 
     2.  EMPLOYMENT. Executive agrees to serve as President and Chief Executive
         ----------                                                            
Officer of Company, and as a member of the Company's Board of Directors, for the
term of this Agreement, subject to the terms set forth in this Agreement and the
provisions of the Bylaws of Company. Executive further shall serve as Chairman
(or in a similar capacity) of the Company's Board in the event the current
Chairman is no longer serving in that capacity. During his employment, 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.  Notwithstanding the
 
 
foregoing, with the prior approval of the Board of Directors (which approval
shall not be unreasonably withheld), Executive shall be entitled to serve as
director on the governing boards of other for-profit or not-for-profit entities
and to retain any compensation and benefits resulting from such service, so long
as such service does not unduly interfere with his duties under this Agreement.
 
     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 all effective as of the Effective Date unless otherwise specified:
 
          (a)  An annual salary of $250,000 ("Base Salary") prorated for any
     partial year of employment, subject to annual review for increases in the
     light of the size and performance of Company at such time as Company
     conducts salary reviews for its officers generally.  Executive's salary
     shall be payable semimonthly or in accordance with Company's regular
     payroll practices in effect from time to time for officers of his level in
     Company.
 
          (b)  Adjustments to the Base Salary as follows: If, at the end of any
     fiscal quarter during the term of this Agreement, Company's annualized
     revenues equal or exceed $75,000,000 (which shall be determined by
     multiplying such fiscal quarter times four) and there is a positive net
     income at the end of such quarter as reflected on Company's financial
     statements prepared in the ordinary course of business according to
     generally accepted accounting principles (but not including any
     extraordinary income or expense items), the Base Salary will increase
     automatically to an annualized basis of $320,000, effective on the first
     day following the close of such quarter. If, at the end of any fiscal
     quarter during the term of this Agreement, Company's annualized revenues
     equal or exceed $100,000,000 and there is a positive net income at the end
     of such quarter, the Base Salary will increase automatically to an
     annualized basis of $390,000 
 
                                      -2-
 
 
     effective on the first day following the close of such quarter. The
     adjusted Base Salary, as adjusted in accordance with this subsection (b),
     shall remain in effect unless and until it is increased upward in
     accordance with this subsection (b) or unless it is increased as provided
     in subsection (a) of this Section 3.
 
          (c)  Participation as a Level A participant in Company's bonus plan
     attached as Exhibit "A," with the participation effective date being March
     18, 1996, and any subsequent bonus or incentive plans established by
     Company for its executives (collectively "Bonus Plan"). Executive agrees to
     assist the Board in developing new bonus or incentive plans for adoption by
     Company, in which Executive and other management of Company shall be
     entitled to participate.
 
          (d)  Participation in the employee benefit plans maintained by Company
     and in other benefits provided by Company to senior executives, including
     retirement (if and when established) and 401K plans, deferred compensation
     medical and dental, annual vacation, paid holidays, a Fifty Five Percent
     (55%) rebate on trading commissions for trades through E*Trade accounts,
     sick leave, and similar benefits, which are subject to change from time to
     time at the reasonable discretion of Company.
 
          (e)  Reimbursement of the dues and costs of appropriate club and
     professional organization memberships, continuing professional education,
     and financial counseling.
 
          (f)  An Incentive Stock Option pursuant to the Stock Option Plan
     attached as Exhibit "B," the Stock Option Grant attached as Exhibit "C,"
     and the Amendment to the Stock Option Grant attached as Exhibit "D."
     Company agrees that there will be no change made in any Stock Option during
     the term of Executive's employment hereunder which adversely affects
     Executive's rights as established by the foregoing documents, without the
     prior written consent of Executive.  Company further agrees to grant
     Executive an 
 
                                      -3-
 
 
     additional option of 8,000 Shares ("re-split"), effective May 15, 1996, at
     the current fair market value (anticipated to be S420.00 per share). This
     8,000 Share option shall have substantially the same terms as the existing
     Stock Option Grant attached as Exhibit C, and with the same vesting
     schedule as set forth on the Amendment attached as Exhibit D.
 
          (g)  A one-time payment of $50,000, in order to cover storage and
     movement of household goods associated with accepting employment with
     Company.
 
          (h)  Lease of automobile for company use, of a mutually agreeable make
     and model, and reimbursement of reasonable operating expense.
 
          (i)  Reimbursement of all reasonable business-related expenses,
     including without limitation business-class air travel (international) and
     first-class air travel (domestic).
 
          (j)  Reimbursement of travel, hotel and meal expenses relating to
     completion of Ph.D. program.
 
          (k)  "Gross-up" payments to cover taxes due in the event any of the
     benefits described in subsections (e), (h), (i) and (j) above, or in 
     Section 5(c), are taxable to Executive.
 
          4.  Term. The term of this Agreement and the termination rights are as
              ----                                                              
follows:
 
          (a)  This Agreement and Executive's employment under this Agreement
     shall be effective as of the Effective Date and shall continue for a term
     ending on December 31, 2001 (the "Initial Term").  This Agreement and
     Executive's employment shall 
 
                                      -4-
 
 
     automatically continue for successive one-year periods at the end of the
     Initial Term, unless either party gives written notice to the other of its
     intent to terminate this Agreement and Executive's employment not less than
     180 days prior to the commencement of any such one-year renewal period. In
     the event such notice to terminate is properly given, this Agreement and
     Executive's employment shall terminate at the end of the Initial Term or
     the one-year renewal period during which the notice is given.
 
          (b)  This Agreement and Executive's employment may be terminated by
     either party prior to the end of the Initial Term (or any renewal period)
     upon 30 days' prior written notice to the other party, provided, that, in
     the event of such termination, Company shall be obligated to make the
     payments and provide the benefits described in Section 5 below.
 
     5.  Termination Payments. Upon termination of Executive's employment,
         --------------------                                             
Company shall pay to Executive, within three business days after the end of the
30-day notice period provided in Section 4 above, a payment in cash determined
under subsection (a) or (b) of this Section 5 and shall for the period or at the
time specified provide the other benefits described in subsections (c) and (e)
of this Section 5:
 
          (a)  The payment shall be equal to five full years of Executive's
     "Current Total Annual Compensation" as defined in subsection (d) of this
     Section 5, if: (i) Executive's employment is terminated by Company, other
     than for Cause, within three years after any "Change in Control" of Company
     as defined in subsection (d) of this Section 5, or at the request of or
     pursuant to an agreement with a third party who has taken steps reasonably
     calculated to effect a Change in Control, or otherwise in connection with
     or in anticipation of a Change in Control; or (ii) Executive elects to
     terminate employment for Good Reason within three years after any Change in
     Control of Company.
 
                                      -5-
 
 
          (b)  The payment shall be equal to four full years of Executive's
     Current Total Annual Compensation, if:  (i) Executive's employment is
     terminated by Company, other than for Cause, and such termination is not
     described in (a) above; or (ii) Executive elects to terminate his
     employment for "Good Reason," as defined in subsection (d) of this Section
     5, and such termination is not described in (a) above.
 
          (c)  In addition to the amount payable to Executive under subsection
     (a) or (b) of this Section 5, Executive shall be entitled to the following
     upon termination for any reason:
 
                     (i) The health care (including medical and dental) and life
                     insurance benefits coverage provided to Executive at his
                     date of termination shall be continued at the same level
                     and in the same manner as if his employment had not
                     terminated (subject to the customary changes in such
                     coverages if Executive reaches age 65 or similar events),
                     together with the benefits described in subsections (h),
                     (j) and (k) of Section 3 beginning on the date of such
                     termination and ending on the date forty-eight months from
                     the date of termination, followed by COBRA election rights.
                     Any additional coverages Executive had at termination,
                     including dependent coverage, will also be continued for
 
                                      -6-
 
 
                     such period on the same terms. Any costs Executive was
                     paying for such coverages at the time of termination shall
                     continue to be paid by Executive. If the terms of any
                     benefit plan referred to in this section do not permit
                     continued participation by Executive, then Company will
                     arrange for other coverage providing substantially similar
                     benefits at the same contribution level of Executive.
 
               (ii)  Reasonable relocation expenses for Executive and his
                     dependents to any location within the continental United
                     States incurred for the purpose of new employment on or
                     within eighteen months of the effective termination date of
                     this Agreement. Such expenses shall include without
                     limitation first-class airfare and other travel for
                     Executive and his family; moving and storage expenses; real
                     estate closing fees and costs upon the sale of his
                     residence and purchase of a new residence; all other
                     expenses reasonably incurred in relocating to a location
                     other than Palo Alto, California or environs; and an amount
 
                                      -7-
 
 
                     equal to Ten Percent (10%) of his Current Total Annual
                     Compensation to cover all incidental relocation expenses.
 
               (iii) Outplacement and financial counseling services selected by
                     Executive, up to a maximum of S30,000 (net of tax, if any).
 
               (iv)  A mutually acceptable office, together with secretarial
                     assistance and customary office facilities and services,
                     located at Company (or in lieu thereof reimbursement for
                     same at another location), for up to twelve months
                     following the effective termination date of this Agreement,
                     for the purpose of facilitating Executive's search for new
                     employment.
 
          (d)  For purposes of this Agreement, the following definitions shall
     apply:
 
               (i)   The "Board" shall mean the Board of Directors of Company.
 
               (ii)  "The Incumbent Board" shall mean the members of the Board 
                     as of the date of this Agreement and any person becoming a
                     member of 
 
                                      -8-
 
 
                     the Board hereafter whose election, or nomination for
                     election by Company's shareholders, was approved by a vote
                     of at least a majority of the directors then comprising the
                     Incumbent Board (other than an election or nomination of an
                     individual whose initial assumption of office is in
                     connection with an actual or threatened election contest
                     relating to the election of the directors of Company).
 
               (iii) "Change in Control" shall mean:
 
          (A)  The acquisition (other than from Company) by any person, entity
          or "group," within the meaning of Section 13(d)(3) or l4(d)(2) of the
          Exchange Act (excluding, for this purpose, any employee benefit plan
          of Company or its subsidiaries which acquires beneficial ownership of
          voting securities of Company) of beneficial ownership (within the
          meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
          more of either the then outstanding shares of Common Stock or the
          combined voting power of Company's then outstanding voting securities
          entitled to vote generally in the election of directors: or
 
          (B)  The failure for any reason of individuals who constitute the
          Incumbent Board to continue to constitute at least a majority of the
          Board; or
 
          (C)  Approval by the stockholders of Company of a reorganization,
          merger, consolidation, in each case, with respect to which the shares
          of Company voting stock outstanding immediately prior to such
          reorganization, merger or consolidation do not constitute or become
          exchanged for or converted into more than 50% of the combined voting
          power entitled to vote generally in the election of directors of the
          reorganized, merged or consolidated company's then 
 
                                      -9-
 
 
          outstanding voting securities, or a liquidation or dissolution of
          Company or of the sale of all or substantially all of the assets of
          Company.
 
               (iv)  "Good Reason" shall mean:
 
                     (A)  The assignment to Executive of any duties inconsistent
                     in any respect with Executive's position (including status,
                     offices, titles and reporting requirements), authority,
                     duties or responsibilities as contemplated by Section 2
                     above, or any other action by Company which results in a
                     diminution in such position, authority, duties or
                     responsibilities excluding for this purpose any action
                     taken with the consent of Executive and any isolated,
                     insubstantial and inadvertent action not taken in bad faith
                     and which is remedied by Company promptly after receipt of
                     notice of such action given by Executive;
 
                     (B)  A reduction in the overall level of Executive's
                     compensation or benefits as provided in Section 3;
 
                     (C)  Company's requiring Executive to be based at any 
                     office or location other than Company's executive offices
                     either in Palo Alto, California or environs, or near
                     Executive's residence in North Palm Beach, Florida or
                     environs, except for travel reasonably required in the
                     performance of Executive's responsibilities;
 
                     (D)  Any purported termination by Company of Executive's
                     employment otherwise than as expressly permitted by this
                     Agreement; or
 
                                      -10-
 
 
                     (E)  Any failure by Company to comply with and satisfy
                     Section 6 below.
 
                     (F)  The nomination by the Board of a Chairman (or person
                     serving in a similar capacity) of a person other than the
                     current Chairman or Executive.
 
For purposes of this Agreement, any good faith determination of "Good Reason"
made by Executive shall be conclusive.
 
               (v)   "Current Total Annual Compensation" shall be the total of
                     the following amounts: (A) the greater of (i) Executive's
                     Base Salary for the calendar year in which his employment
                     terminates or (ii) such salary for the calendar year prior
                     to the year of such termination; and (B) the greater of (i)
                     any total amount that became payable to Executive under the
                     Bonus Plan during the calendar year prior to the calendar
                     year in which his employment terminates, and (ii) the 
                     maximum amount to which Executive would be paid for the
                     calendar year in which his employment terminates as if all
                     Plan criteria had been or are met, regardless of when such
                     amounts are actually to be paid. Any longer term Bonus Plan
                     payments are to be accelerated and included within the
                     meaning of this definition.
 
               (vi)  "Disability" shall mean the total and permanent inability
                     of Executive due to illness, accident or other physical or
                     mental incapacity to perform the usual duties of his
                     employment under this Agreement, as determined by a
                     physician selected by Company and 
 
                                      -11-
 
 
                      acceptable to Executive or Executive's legal
                      representative (which agreement as to acceptability shall
                      not be unreasonably withheld).
 
               (vii)  The "Exchange Act" shall mean the Securities Exchange Act
                      of 1934, as amended
 
               (viii) "Cause" shall be defined solely as (i) Executive's
                      defalcation or misappropriation of funds or property of
                      the Company, or the commission of any other illegal act in
                      the course of his employment with Company which, in the
                      reasonable judgment of the Board of Directors, has a
                      material adverse financial effect on the Company or on
                      Executive's ongoing abilities to carry out his duties
                      under this Agreement; (ii) Executive's conviction of a
                      felony or of any crime involving moral turpitude, and
                      affirmance of such conviction following the exhaustion of
                      any appeals; (iii) refusal of Executive to substantially
                      perform all of his duties and responsibilities, or
                      Executive's persistent neglect of duty or chronic
                      unapproved absenteeism (other than for a temporary or
                      permanent Disability), which remains uncured following
                      thirty days after written notice of such alleged Cause by
                      the Board of Directors; or (iv) any material and
                      substantial breach by Executive of other terms and
                      conditions of this Agreement, which, in the reasonable
                      judgment of the Board of Directors, has a material adverse
                      financial effect on the Company or on Executive's ongoing
                      abilities to carry out his duties under this Agreement and
                      which remains uncured following thirty days after written
                      notice of such alleged Cause by the Board of Directors.
 
                                      -12-
 
 
          (e)  In addition to the amounts payable under subsection (a), (b) or
     (c) of this Section 5, Company shall pay Executive a tax equalization
     payment in accordance with this subsection.  The tax equalization payment
     shall be in an amount which when added to the other amounts payable to
     Executive under this Section 5 will place Executive in the same after-tax
     position as if the excise tax penalty of Section 4999 of the Internal
     Revenue Code of 1986, as amended (the "Code"), or any successor statute of
     similar import, did not apply to any of the amounts payable under this
     Section 5 including any amounts paid under this subsection (e). The amount
     of this tax equalization payment shall be determined by Company's
     independent accountants and shall be payable to Executive at the same time
     as the payment under subsection (a) or (b) of this Section 5.
 
     6.  Assignment; Successors. Any assignment of this Agreement shall be in
         ----------------------                                              
accordance with the following:
 
          (a)  The rights and benefits of Executive under this Agreement, other
     than accrued and unpaid amounts due hereunder, are personal to him and
     shall not be assignable by Executive, except with the prior written consent
     of Company.
 
          (b)  Subject to the provisions of subsection (c) of this Section 6,
     this Agreement shall not be assignable by Company, provided, that with the
     consent of Executive, Company may assign this Agreement to another
     corporation wholly owned by it either directly or through one or more
     other corporations, or to any corporate successor of Company or any such
     corporation.
 
          (c)  Any business entity succeeding to substantially all of the
     business of Company by purchase, merger, consolidation, sale of assets or
     otherwise, shall be bound by and shall adopt and assume this Agreement and
     Company shall require the assumption 
 
                                      -13-
 
 
     of this Agreement by such successor as a condition to such purchase,
     merger, consolidation, sale or assets or other similar transaction.
 
     7.  Notices. Any notice or other communications under this Agreement shall
         -------                                                               
be in writing, signed by the party making the same, and shall be delivered
personally or sent by certified or registered mail, postage prepaid, addressed
as follows:
 
     If to Executive;               Mr. Christos M. Cotsakos
                                    Old Port Cove Lake Point Tower
                                    Unit 2053
                                    100 Lakeshore Drive
                                    North Palm Beach, Florida 33408
 
     If to Company:                 The Board of Directors
                                    Four Embarcadero Place
                                    2400 Geng Road
                                    Palo Alto, California 94303
 
or to such other address or agent as may hereafter be designated by either party
hereto. All such notices shall be deemed given on the date personally delivered
or mailed.
 
     8.  Full Settlement and Legal Expenses. Company's obligation to make the
         ---- -----------------------------                                  
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counter-claim, recoupment,
defense or other claim, right or action which Company may have against Executive
or others. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The prevailing party shall be
entitled to recover all legal fees and expenses which such party may reasonably
incur as a result of any legal proceeding relating to the validity,
enforceability, or breach of, or liability under, any provision of this
Agreement or any guarantee of performance (including as a result of any contest
by Executive 
 
                                      -14-
 
 
about the amount of any payment pursuant to Section 5 of this Agreement), plus
in each case interest at the applicable Federal Rate provided for in Section
7872(f)(2) of the Code.
 
     9.  Governing Law. This Agreement shall be interpreted and enforced in
         -------------                                                     
accordance with the laws of the State of California, except that any
arbitration shall be governed by the Federal Arbitration Act.
 
     10.  Severability. Whenever possible, each provision of this Agreement
          ------------                                                     
shall be interpreted in such manner as to be effective and valid, but if any one
or more of the provisions contained in this Agreement shall be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provisions in every other respect and of the
remaining provisions of this Agreement shall not be in any way impaired.
 
     11.  Entire Agreement. This Agreement (including all Exhibits) contains the
          ----------------                                                      
entire agreement of the parties with respect to the subject matter contained in
this Agreement. There are no restrictions, promises, covenants, or undertakings
between Company and Executive, other than those expressly set forth in this
Agreement. This Agreement supersedes all prior agreements and understandings
between the parties. This Agreement may not be amended or modified except in
writing executed by the parties.
 
     12.  Arbitration. Any controversy or claim arising out of or relating to
          -----------                                                        
this Agreement shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitration panel, which shall consist of three members,
may be entered in any court having jurisdiction. Any arbitration shall be held
in Palo Alto, California, unless otherwise agreed in writing by the parties.
 
                                      -15-
 
 
     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
 
 
                          E*TRADE GROUP, INC.
 
 
(CORPORATE SEAL]
 
                          By:  /s/ William A Porter
                             --------------------------------------
                             William A Porter, Founder and Chairman
 
Attest:
 
 
- --------------------------------------
Secretary
 
 
                          EXECUTIVE
 
 
                         /s/ Christos M. Cotsakos
                         --------------------------------------
                          Christos M. Cotsakos
 
Witnesseth:
 
 
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