eTrade 2002 Annual Report Download - page 61

Table of Contents
Index to Financial Statements
of $3.6 million in fiscal 2002 as a part of our consolidation and integration efforts. As required by generally accepted accounting principles,
severance is recorded in the period in which employees are identified and communication is made to these individuals. See Note 21 to
Consolidated Financial Statements.
Executive Agreement consists of nonrecurring savings from an amendment of the contract between the Company and our Former CEO.
Effective January 23, 2003, our Former CEO resigned from the Company. A termination payment of $4.0million required under his
employment agreement, which is further discussed below, will be expensed in the first quarter of fiscal 2003 and paid in increments during
fiscal 2003. Concurrent with his resignation in fiscal 2003, the Company reversed $3.7 million of compensation expense accrued in fiscal 2002
for the unvested portion of the Former CEO’ s restricted stock, held by a subsidiary trust of the Company.
In May 2002, we executed a new employment agreement (the “Employment Agreement”) with our Former CEO, which included concessions
resulting in a fiscal 2002 benefit to executive agreement and loan settlement. The Employment Agreement was effective May 2002 through his
subsequent departure from the Company on January 23, 2003. The Employment Agreement included significant concessions by our Former
CEO. Under this Employment Agreement, our Former CEO’ s base salary was reduced to zero. In addition, under the Employment Agreement,
our Former CEO became contractually entitled to a bonus payment to be determined and paid based on the Company’ s meeting performance
objectives. The Company met its fiscal 2002 performance objectives and a bonus of $4.0 million for the Former CEO was accrued in fiscal
2002 and paid in January 2003. Concessions reflected as a nonrecurring reduction to our operating expenses for fiscal 2002 included:
• Our Former CEO waived his right to receive vested benefits in our SERP program totaling $16.1 million that were previously deposited
into a trust on his behalf on January 1, 2001 and 2002; these amounts had been previously recorded as part of general and administrative
expense in fiscal 2001. Of this amount, $14.0 million was retained by the Company and recorded as a nonrecurring benefit in executive
agreement and loan settlement, and $2.1 million was paid out as a one-time bonus to eligible non-executive employees of the Company.
(The amounts distributed to non-executive employees had no net effect on the results of operations.)
• Our Former CEO waived his right to have the Company reimburse him for taxes due on his restricted stock grants. The accrued liability
for unpaid estimated taxes of $9.5 million for unvested shares as of March 31, 2002 was reversed and credited to executive agreement
and loan settlement.
The total benefit to the Company for amounts previously paid on our Former CEO’ s behalf or for amounts due to be paid in fiscal 2002 and
waived under his revised employment agreement (net of the amounts distributed to the non-executive employees of the Company which had no
net effect on the results of operations) totaled $23.5 million and is reflected as a nonrecurring reduction in our operating expenses in our
consolidated statements of operations.
Executive loan settlement relates to our Former CEO’ s original employment contract and other contractual negotiations undertaken by the
Company in August 2001. As part of the original negotiated employment contract, we cancelled a $15.0 million note receivable and agreed to
reimburse $15.2 million dollars in related taxes in return for the elimination of certain benefits contained in our Former CEO’ s employment
agreement. The total of $30.2 million is reflected as executive loan settlement in the consolidated statement of operations.
Other related party transactions are described in Note 11 to Consolidated Financial Statements.
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2003. EDGAR Online, Inc.