eTrade 2003 Annual Report Download - page 104

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Table of Contents
Index to Financial Statements
of its keyboard loans (of approximately $100 million) and write-off of other assets, resulting in a loss of approximately $2.7 million.
Contributions from keyboard lending activities were insignificant to the overall operating results of E*TRADE Consumer Finance.
Sale of German Subsidiary
The Company sold its German subsidiary to an unrelated party in March 2003 for $4.9 million in cash. The Company recorded an
impairment loss on its German subsidiary at December 31, 2002, as a result of these negotiations. In addition, the Company will receive future
services and technology assets for its European operations from the buyer valued at $5.1 million. The Company recorded these future services
in other assets and will amortize the value of these services over the anticipated period during which it expects to receive the actual services.
provided for a partial reimbursement to the Company for losses incurred through the regulatory approval period and to the appreciation in the
EURO during the approval period.
NOTE 21—EXECUTIVE AGREEMENT AND LOAN SETTLEMENT
Executive Agreement
Effective January 23, 2003, the former CEO resigned from the Company. Concurrent with his resignation in 2003, the Company reversed
$3.7 million of compensation expense accrued in 2002 for the unvested portion of the former CEO’s restricted common stock, held by a
subsidiary trust of the Company.
In May 2002, the Company executed a new employment agreement (the “Employment Agreement”) with its former CEO, which
2002 through his subsequent departure from the Company on January 23, 2003. Under this Employment Agreement, the former CEO’s base
salary was reduced to zero and the 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 2002 performance objectives and a bonus of $4.0 million for the former
CEO was accrued in 2002 and paid in January 2003.
The total benefit to the Company for amounts previously paid on the former CEO’s behalf or for amounts due to be paid in 2002 and
waived under his revised employment agreement totaled $23.5 million and is reflected as a nonrecurring reduction in operating expenses in the
consolidated statements of operations.
Loan Settlement
In connection with the renegotiation of the Company’s previous employment contract with the former CEO and as part of other
contractual renegotiations undertaken by the Company, in August 2001 the Company cancelled a note receivable of $15.0 million from the
former CEO related to the Company’s Home Loan/Home Lease Program, and agreed to reimburse $15.2 million in related taxes in return for
the elimination of certain benefits contained in the former CEO’s prior employment agreement. This action also had the effect of eliminating
the Company’s contractual obligation to cancel the note and reimburse related taxes in the event of a change of control of the Company. The
total of $30.2 million is reflected as executive loan settlement in the 2001 consolidated statement of operations.
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