eTrade 2003 Annual Report Download - page 26

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Table of Contents
Index to Financial Statements
matter have commenced. At this time, we are unable to predict the ultimate outcome of this dispute in relation to the parties with which we
have not settled. However, the ultimate resolution of this litigation may be material to the Company’s operating results or cash flows for any
particular period. The Company believes that its current reserves are adequate in view of its assessment of exposure at this time.
In April 2002, a putative class action was filed in the Superior Court of California and for the County of Orange entitled, “
Lisa Arroyo, et
al., v. E*TRADE Financial, et al., alleging that E*TRADE Mortgage misclassified certain classes of employees as “exempt,” rather than as
“non-exempt” employees. The Company agreed to a proposed settlement and established a reserve under the terms of which the Company
received an unconditional general release from all participating class members and in exchange paid a total of approximately $7.2 million
(including payroll taxes and withholdings). Plaintiffs dismissed this action against the Company with prejudice on January 14, 2004.
Except as to matters that we have reported as settled or tentatively settled, we intend to defend vigorously against the foregoing claims.
An unfavorable outcome in any matter that is not covered by insurance could have a material adverse effect on our business, financial
condition, results of operations and cash flows. In addition, even if the ultimate outcomes are resolved in our favor, the defense of such
litigation could entail considerable cost and the diversion of the efforts of management, either of which could have a material adverse effect on
the normal course of business, which we believe will not have a material adverse effect on our financial position, results of operations or cash
flows.
The Company maintains insurance coverage that management believes is reasonable and prudent. The principal insurance coverage it
maintains covers commercial general liability, property damage, hardware/software damage, directors and officers, employment practices
liability, certain criminal acts against the Company and errors and omissions. We believe that such insurance coverage is adequate for the
purpose of our business. Our ability to maintain this level of insurance coverage in the future, however, is subject to the availability of
affordable insurance in the marketplace.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18