eTrade 2005 Annual Report Download - page 308

Pursuant to the Purchase Contract and Pledge Agreement, the Applicable Ownership Interest in Subordinated Notes or the Applicable
Ownership Interest in the Treasury Portfolio (as specified in clause (i)of the definition of such term), as the case may be, constituting
part of each Corporate Unit evidenced hereby have been pledged to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising part of such Corporate Unit.
All payments of the principal amount with respect to the Subordinated Notes underlying the Pledged Applicable Ownership Interests
in Subordinated Notes or all payments with respect to the Applicable Ownership Interests in the Treasury Portfolio (as specified in
clause (i)of the definition of such term), as the case may be, or payments of interest on the Pledged Applicable Ownership Interests in
Subordinated Notes or distributions with respect to the Applicable Ownership Interests in the Treasury Portfolio (as specified in
clause (ii)of the definition of such term), as the case may be, constituting part of the Corporate Units shall be paid on the dates and in
the manner set forth in the Purchase Contract and Pledge Agreement. Interest on the Subordinated Notes underlying the Applicable
Ownership Interests in Subordinated Notes and distributions on the Applicable Ownership Interests in the Treasury Portfolio (as
specified in clause (ii)of the definition of such term), as the case may be, forming part of the Corporate Units evidenced hereby, which
are payable on each Payment Date, shall, subject to receipt thereof by the Purchase Contract Agent, be paid to the Person in whose
name this Corporate Units Certificate (or a Predecessor Corporate Units Certificate) is registered at the close of business on the Record
Date for such Payment Date.
Each Purchase Contract evidenced hereby obligates the Holder of this Corporate Units Certificate to purchase, and the Company to
sell, on the Purchase Contract Settlement Date, at a Purchase Price equal to the Stated Amount, a number of newly issued shares of
Common Stock of the Company, equal to the Settlement Rate, unless on or prior to the Purchase Contract Settlement Date there shall
have occurred a Termination Event, an Early Settlement or a Cash Merger Early Settlement with respect to such Purchase Contract, all
as provided in the Purchase Contract and Pledge Agreement. The Purchase Price for the shares of Common Stock purchased pursuant
to each Purchase Contract evidenced hereby, if not paid earlier, shall be paid on the Purchase Contract Settlement Date by application
of payment received in the Remarketing of the Subordinated Notes underlying the Pledged Applicable Ownership Interests in
Subordinated Notes equal to the principal amount thereof or the proceeds of the Pledged Applicable Ownership Interests in the
Treasury Portfolio (as specified in clause (i)of the definition of such term), as the case may be, pledged to secure the obligations under
such Purchase Contract of the Holder of the Corporate Units of which such Purchase Contract is a part.
Distributions on the Applicable Ownership Interests in Subordinated Notes and distributions on the Applicable Ownership Interests
in the Treasury Portfolio (as specified in clause (ii)of the definition of such term) will be payable at the office of the Purchase Contract
Agent in New York City, except that all payments with respect to Global Certificates will be made by wire transfer of immediately
available funds to the Depositary.
Each Purchase Contract evidenced hereby obligates the holder to agree, for U.S. federal income tax purposes (i)to treat each beneficial
owner of a Corporate Unit as the owner of the applicable interests in the Collateral Account, including the Subordinated Notes
underlying the Applicable Ownership Interests in Subordinated Notes, the Applicable Ownership Interests in the Treasury Portfolio or
the Treasury Securities, as applicable, (ii)not to treat the Subordinated Notes as contingent payment debt instruments, and (iii)to
allocate all of a holder’s purchase price for a Corporate Unit between the Applicable Ownership Interests in Subordinated Notes and
the Purchase Contract so that each holder’s initial tax basis in each Purchase Contract will be $0.8313 and each holder’s initial tax basis
in each Applicable Ownership Interest in Subordinated Notes will be $24.1687.
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