eTrade 2002 Annual Report Download - page 144

Table of Contents
Index to Financial Statements
2001, the Company extended the term of loans made in 2000 by one year and adjusted interest rates to applicable federal rates. Stock related to
outstanding loans receivable was shown as a deduction from shareholders’ equity in the consolidated balance sheet in fiscal 2001.
Home Loan/Home Lease Program
As of December 31, 2002, all loans granted under a home loan/home lease program implemented in fiscal 2000 to assist executives relocating
to the Silicon Valley from other areas of the country were repaid. In addition to loans made under this program, through fiscal 2001, a
wholly-owned subsidiary of the Company purchased a total of four residential properties that were leased to certain of its executive officers
with options to buy. The Company recorded rental income of $104,000 for fiscal 2002, $152,000 for fiscal 2001, $40,000 for the three months
ended December 31, 2000 and $12,000 for fiscal 2000 related to these properties. Rental income is recorded in other income.
As of December 31, 2002, three of the properties have been sold. The Company continues to lease one property to a former executive. During
2002, the Company sold two of these properties, one of which was originally purchased from an entity controlled by the Former CEO. The
Company incurred a $0.7 million loss related to the sale of the property, which was reimbursed by that same related entity. During 2001, the
Company sold the other property, incurring a loss of $2.9 million.
Other Loan Activity
During fiscal 2002, the Company made advances to a founder and director of the Company, which were fully repaid by the director as of
August 2002. These advances accrued interest at a rate of 3.75% annually (based on the applicable federal rate) and were collateralized by
shares of the Company’ s common stock currently held in the name of the director.
Other
The Company has entered into management retention agreements and/or employment agreements with its key executive officers. These
agreements provide for annual base salary compensation, tax reimbursements, severance payments and the acceleration of option vesting in the
event of termination of employment under defined circumstances within 18 months following a change of control in the Company, or in some
circumstances, solely in the event of termination. Base salaries are subject to adjustments according to the individual’ s and the Company’ s
financial performance. See Note 22 for a discussion of events involving the employment agreement of the Former CEO.
In the normal course of business, the Company has transactions with companies that are considered related parties. Through July 2002,
SOFTBANK held more than 10% of the Company’ s outstanding common stock and has a representative on the Company’ s Board of Directors.
SOFTBANK is the majority owner of E*TRADE Japan K.K. and is an investor in venture capital funds sponsored by the Company, as more
fully described in Note 7. The Company repurchased stock from SOFTBANK during the fiscal 2001 at a discount from market price and
repurchased the remainder of SOFTBANK’ s interest in 2002, as more fully disclosed in Note 19.
A member of the Company’ s Board of Directors is an executive officer of Fox Entertainment Group (“Fox”) and the Company’ s Former CEO
is on Fox’ s Board of Directors. The Company purchased advertising services from Fox of $3.6 million in fiscal 2002, $1.6 million in fiscal
2001, $9.8 million in the three months ended December 31, 2000 and $11.4 million in fiscal 2000. These services were purchased through
third-party advertising agencies.
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2003. EDGAR Online, Inc.