eTrade 2011 Annual Report Download - page 22

litigation could occur again in the future. Declines in the market price of our common stock or failure of the
market price to increase could also harm our ability to retain key employees, reduce our access to capital, impact
our ability to utilize deferred tax assets in the event of another ownership change and otherwise harm our
business.
We have various mechanisms in place that may discourage takeover attempts.
Certain provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a third
party from acquiring control of us in a merger, acquisition or similar transaction that a shareholder may consider
favorable. Such provisions include:
• authorization for the issuance of “blank check” preferred stock;
• the prohibition of cumulative voting in the election of directors;
• a super-majority voting requirement to effect business combinations and certain amendments to our
certificate of incorporation and bylaws;
• limits on the persons who may call special meetings of shareholders;
• the prohibition of shareholder action by written consent; and
• advance notice requirements for nominations to the Board or for proposing matters that can be acted on
by shareholders at shareholder meetings.
In addition, certain provisions of our stock incentive plans, management retention and employment
agreements (including severance payments and stock option acceleration), certain provisions of Delaware law
and the requirements under our debt securities to offer to purchase such securities at 101% of their principal
amount may also discourage, delay or prevent someone from acquiring or merging with us.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other
actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial
condition, operating performance, and our ability to receive dividend payments from our subsidiaries which is
subject to prevailing economic and competitive conditions and to certain financial, business and other factors
beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to
permit us to pay the principal and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be
forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or
restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit
us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt instruments
may restrict us from adopting some of these alternatives.
Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our
financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us
to comply with more onerous covenants, which could further restrict our business operations. In addition, any
failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely
result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. If our
cash flows and available cash are insufficient to meet our debt service obligations, we could face substantial
liquidity problems and might be required to dispose of material assets or operations to meet our debt service and
other obligations. We may not be able to consummate those dispositions or to obtain the proceeds that we could
realize from them, and these proceeds may not be adequate to meet any debt service obligations then due.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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