eTrade 2000 Annual Report Download - page 84

early to mid-stage companies offering e-commerce related services, products or infrastructure. Fund II is managed by its General
Partner, E*TRADE Ventures II, LLC (“General Partner II”). Christos M. Cotsakos, the Chairman of the Board of Directors and Chief
Executive Officer, and Thomas A. Bevilacqua, the Company’ s Chief Strategic Investment Officer, are the managing members of
General Partner II. The Company is a non-managing member of General Partner II. General Partner II receives an annual management
fee of 1.75% of the total committed capital. The mana gement fee is paid entirely to the Company and used to offset the costs and
expenses of the Company’ s corporate development/strategic investment group. In addition, to the extent that Fund II generates profits,
25% are allocated to General Partner II as a carried interest. As a member of General Partner II, the Company is entitled to receive
32% of such amount provided that up to one-fifth of the Company’ s interest can be allocated by the managing members to associates
of the Company.
The Company also has limited partnership interests in two other unrelated venture capital funds.
E*OFFERING
Included in equity method investments in fiscal 1999 is a 23.6% investment in E*OFFERING Corp. (“E*OFFERING”), a full service,
Internet-based investment bank. On May 15, 2000, Wit Capital Group, Inc., renamed Wit Soundview Group, Inc. (“Wit”), entered into
a definitive agreement to acquire E*OFFERING. Under the terms of the agreement, E*TRADE received approximately 10,532,000
shares of Wit common stock. Concurrently with this agreement, E*TRADE and Wit entered into a strategic alliance pursuant to which
Wit will be the exclusive source of initial public offerings, follow-on offerings, and other investment banking products to E*TRADE
for a five year term. As part of the consideration for the strategic alliance, Wit issued to E*TRADE approximately 4,026,000 shares of
its common stock, which are subject to a three-year prohibition on transfer. In a related transaction, E*TRADE also acquired Wit’ s
retail brokerage business. In addition, Wit issued E*TRADE a warrant to purchase up to 2,000,000 shares of Wit common stock for
$10.25 per share. Finally, E*TRADE also purchased 2,000,000 shares of Wit common stock for $10.25 per share pursuant to a stock
purchase agreement. The transactions contemplated by the strategic alliance were contingent upon each other and on the closing of the
acquisition of E*OFFERING by Wit, which occurred in October 2000.
Other Investments
The Company has also made investments in non-public, venture capital-backed high technology companies with which it does
business and which provide Internet-based services, as well as venture capital funds. These investments represent less than 20% of the
outstanding shares of these companies and are accounted for under the cost method. 8. PROPERTY AND EQUIPMENT—NET
Property and equipment—net consists of the following (in thousands):
September 30,
2000 1999
Equipment $ 170,489 $ 110,705
Software 157,753 75,208
Leasehold improvements 70,394 27,015
Land and buildings 36,452 13,765
Transportation 24,298 6,237
Furniture and fixtures 10,230 7,792
469,616 240,722
Less accumulated depreciation and amortization (135,354 ) (59,047 )
Total property and equipment—net $ 334,262 $ 181,675
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Included in property and equipment as of September 30, 2000 are gross capital leases of $37.0 million. Total accumulated
amortization of these leases as of September 30, 2000 was $11.7 million. There were no material capital leases as of September 30,
1999. The capital lease liability is included in accounts payable, accrued and other liabilities on the balance sheet. 9. RELATED
PARTY TRANSACTIONS
During fiscal 2000, the Company made relocation loans to three executive officers in the aggregate principal amount of $9.8 million.
The relocation loans accrue interest at the rates of between 6.2% and 6.8% per annum, and are collateralized by residential properties.
The principal amounts of $1.6 million, $4.0 million, and $4.2 million are due in March 2002, March 2005, and May 2005,
respectively. Interest on the $4.0 million and $4.2 million loans begins to accrue in March 2003 and May 2003, respectively, and
interest on the $1.6 million loan begins to accrue immediately. Accrued interest on the loans is due upon loan maturity. Related party
2002. EDGAR Online, Inc.