Executive Employment Agreement - Charles Schwab Corp., Schwab Capital Markets LP and Lon Gorman
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (the 'Agreement') is entered into as of
this ___ day of __________, 2002 (the "Effective Date") by and among The Charles
Schwab Corporation, a Delaware corporation ('TCSC'), Schwab Capital Markets,
L.P., a New Jersey limited partnership ('SCM') and Lon Gorman, an individual
('Executive').
R E C I T A L S
A. Executive commenced employment with TCSC as Executive Vice President
on June 10, 1996 and since then has been serving TCSC and SCM in
various capacities, including but not limited to serving as Vice
Chairman - Enterprise President of SCM (the "SCM President") since
August 1, 1999.
B. Executive desires to continue to serve TCSC and SCM and TCSC and SCM
desire to continue to so employ Executive and secure Executive's
agreement, inter alia, not to compete with TCSC, SCM and/or their
affiliates or subsidiaries for the period and on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises set forth herein,
and for other good and valuable consideration, the parties hereby agree as
follows:
AGREEMENT
1. Employment. TCSC hereby employs Executive as Vice Chairman and Executive
Vice President and SCM hereby employs Executive as SCM President and Executive
hereby agrees to serve in those positions or in such other comparable or higher
officer position to which he may be appointed or assigned by the Co-Chief
Executive Officers of TCSC during the Employment Term (as defined below).
Executive shall report to the President & Co-Chief Executive Officer of TCSC, or
to such other more senior person or persons within SCM, Charles Schwab & Co.
("Schwab") or TCSC as may be designated by the Board of Directors of TCSC ("the
Board").
2. Employment Term. The term of Executive's employment under this Agreement
shall be for a period of five (5) years commencing on the Effective Date, unless
earlier terminated pursuant to Section 7 of this Agreement (the "Employment
Term").
3. Duties and Responsibilities. During the Employment Term, Executive shall
have responsibilities, duties and authority reasonably accorded to and expected
of a Vice Chairman and Executive Vice President by TCSC and responsibilities,
duties and authority reasonably accorded to and expected of the SCM President by
SCM. During the Employment Term, Executive shall devote all of his business
time, ability, attention, energy, knowledge and skill to performing all such
duties and responsibilities as are reasonably assigned or delegated to him by
the Co-Chief Executive Officers of TCSC, including but not limited to serving as
the chief executive officer of SCM. Executive agrees to use his best efforts to
perform such duties and responsibilities. Executive further agrees that during
the Employment Term he shall not, without the prior written consent of the
Co-Chief Executive Officers of TCSC and the Compliance Department of TCSC: (i)
render to any other person or entity services of any kind or engage in any other
business activity, whether for compensation or otherwise (except for services
provided to Executive's friends and/or family members or non-profit,
educational, charitable or religious organizations), or (ii) serve on any board
of directors; provided that Executive may serve on the boards of directors of
non-profit, educational, charitable or religious organizations without such
prior written consent, so long as the fact of any such board service is
disclosed by Executive in writing to the Co-Chief Executive Officers of TCSC and
so long as the extent of any such service does not violate any material SCM,
Schwab or TCSC policy applicable to such practices, or materially interfere with
Executive's performance of his duties and responsibilities under this Agreement,
or conflict in any way with the business of SCM, Schwab, TCSC and/or any of
their respective affiliates and subsidiaries.
4. Compensation. For all services rendered by Executive during the
Employment Term in any capacity to SCM, Schwab, TCSC and/or any of their
respective affiliates or subsidiaries, including, without limitation, services
as an officer, director, or member of any committee (including, without
limitation, services as a member of the Executive Committee of TCSC), Executive
shall be compensated as follows:
(a) Base Salary. During the Employment Term, Executive shall receive a
gross base salary of $560,000 on an annualized basis to be paid in equal
installments twice every month (or otherwise in accordance with changes to SCM's
payroll practices), from which SCM shall withhold and deduct all applicable
federal and state taxes and authorized deductions as required or permitted by
applicable laws ("Base Salary"). Executive's Base Salary shall be reviewed and
is subject to adjustment annually by the Co-Chief Executive Officers of TCSC and
the Compensation Committee of the Board, in their sole and absolute discretion,
provided that Executive's Base Salary shall not be reduced below $560,000 except
to the extent consistent with adjustments made to the base salaries of the other
current Vice Chair-level members of the Executive Committee of TCSC.
(b) Executive Committee Bonus. During the Employment Term, Executive
shall be eligible to participate in TCSC's Corporate Executive Bonus Plan and
Annual Individual Incentive Performance Plan (collectively, the "Executive
Committee Bonus Plans"), as such plans may be amended from time to time by TCSC
in its sole and absolute discretion, on a basis comparable to the other Vice
Chair-level members of the Executive Committee of TCSC. Pursuant to the terms
and conditions of the current Executive Committee Bonus Plans, true and correct
copies of which are attached hereto as Exhibits A-1 and A-2, respectively,
Executive shall be eligible to earn an aggregate annual bonus under such plans
with a current target of 125% of his Base Salary, from which SCM shall withhold
and deduct all applicable federal and state taxes and authorized deductions as
required or permitted by applicable laws (the "Executive Committee Bonus"). The
amount of the Executive Committee Bonus, if any, awarded to Executive for any
calendar year during the Employment Term will be determined by the Co-Chief
Executive Officers of TCSC and the Compensation Committee of the Board, in their
sole and absolute discretion, on the basis of: (A) Executive's performance in
managing the non-SCM business units for which he is responsible and (B)
Executive's contribution to the overall management of TCSC as a member of the
Executive Committee. The Executive Committee Bonus paid to Executive, if any,
for any calendar year during the Employment Term will be paid on or before
February 28th of the following year, on the condition Executive is actively
employed with TCSC and SCM on that date, except as otherwise specifically
provided in Section 7, below. Executive acknowledges and agrees that nothing in
the Executive Committee Bonus Plans, this Section 4(b) or elsewhere in this
Agreement, or in any other agreement between Executive and SCM, Schwab, TCSC
and/or any of their respective affiliates or subsidiaries is intended to or does
guarantee Executive any minimum Executive Committee Bonus during the Employment
Term (except as otherwise specifically provided in Section 7, below) and nothing
in the Executive Committee Bonus Plans, this Section 4(b) or elsewhere in this
Agreement, or in any other agreement between Executive and SCM, Schwab, TCSC
and/or any of their respective affiliates or subsidiaries is intended to or does
affect the manner in which Executive's Executive Committee Bonus is determined
under the Executive Committee Plans, other than to specify a current target
bonus of 125% of Executive's Base Salary for purposes of the Executive Committee
Bonus Plans. In no event shall Executive's target bonus percentage of base
salary be reduced below 125% unless the other current Vice-Chair-level member of
the Executive Committee of TSCS receive comparable reductions.
(c) SCM Incentive. Subject to the TCSC stockholder approval described
in Section 4(f), below, during the Employment Term Executive shall be eligible
to participate in the Schwab Capital Markets Incentive Plan ("SCM Incentive
Plan"), which shall be reviewed on an annual basis and which may be amended by
TCSC with the written consent of Executive, which shall not be unreasonably
withheld, to reflect SCM's current business plan, financial goals or other
business objectives. TCSC agrees to submit the SCM Incentive Plan for the
Employment Term to the 2003 annual meeting of TCSC stockholders for their
approval. Pursuant to the terms and conditions of the current SCM Incentive
Plan, a summary of which is attached hereto as Exhibit B, Executive shall be
eligible to earn additional annual incentive compensation based on the financial
performance of SCM and other related capital markets businesses for which
Executive is responsible, from which SCM shall withhold and deduct all
applicable federal and state taxes and authorized deductions as required or
permitted by applicable laws (the "SCM Incentive"). The SCM Incentive, if any,
awarded to Executive in any calendar year during the Employment Term will be
awarded by the Compensation Committee of the Board, currently calculated in the
manner described on Exhibit C on the basis of SCM's financial performance as
measured by its Actual Adjusted Pre-Tax Contribution Margin for the combined
performance of all related capital markets businesses for which Executive is
responsible. For purposes of illustration and for calendar year 2002 only (as
baselines necessarily will change, upwards or downwards, as reasonably
determined by the parties hereto, for purposes of calculating Actual Adjusted
Pre-Tax Contribution Margins in subsequent years), an SCM Incentive Illustration
is attached hereto as Exhibit C. As set forth more fully on Exhibit C,
Executive's current target SCM Incentive is $3 million; provided, however, that:
(i) no SCM Incentive will be paid to Executive with respect to any calendar year
in which SCM fails to attain the applicable threshold percentage of its
financial goal (currently, 80% of its Adjusted Pre-Tax Contribution Margin goal
of $138.8 million); (ii) any SCM Incentive paid to Executive shall be pro-rated
by the Compensation Committee of the Board in its sole and absolute discretion
for Actual Adjusted Pre-Tax Contribution Margin between stated levels and for
partial years worked by Executive, except that 2002 shall not be considered a
partial year and should not be pro-rated as a result of this Agreement's
execution date; and, (iii) the maximum gross amount of SCM Incentive payable to
Executive in any calendar year during the Employment Term is $7 million. The SCM
Incentive payable to Executive, if any, with respect to any calendar year during
the Employment Term shall be paid and/or granted on or before February 28th of
the following year, on the condition Executive is actively employed with TCSC
and SCM on that date, except as otherwise specifically provided in Section 7,
below. The initial $1 million gross of any SCM Incentive payable to Executive in
any calendar year during the Employment Term shall be paid entirely in cash; any
amount of SCM Incentive payable to Executive in any calendar year during the
Employment Term above $1 million gross shall be paid 50% in cash and 50% in
equivalent grants of restricted shares of TCSC common stock. The number of
restricted shares so granted to Executive, if any, shall be determined by TCSC
on the date of grant by dividing the applicable gross dollar value of
Executive's SCM Incentive by the average of the high and low price of TCSC
common stock on the date of grant. Fifty percent (50%) of the restricted shares
subject to any such grant shall vest on the second anniversary of the date of
the grant and the remaining 50% shall vest on the third anniversary of the date
of the grant, provided in each case that Executive is actively employed by TCSC
and SCM on such date, except as otherwise specifically provided in Section 7,
below. SCM, TSCS and Executive hereby acknowledge and agree that if SCM's
financial performance attains the applicable threshold percentage of the
adjusted pre-tax contribution margin goal specified in the SCM Incentive Plan,
as it may be amended during the Employment Term in accordance with this Section
4(c), then he shall be entitled to the corresponding SCM Incentive amount
specifically allocated thereto; provided, however, that, except as provided in
this sentence or in Section 7 below, nothing in the SCM Incentive Plan, this
Section 4(c) or elsewhere in this Agreement, or in any other agreement between
Executive and SCM, Schwab, TCSC and/or any of their respective affiliates or
subsidiaries otherwise is intended to or does guarantee him any minimum SCM
Incentive during the Employment Term. Notwithstanding any other provision of
this Agreement, in no event shall the SCM Incentive Plan, the manner in which
the SCM Incentive Bonus is calculated (as described in Exhibit C), including the
threshold percentages listed on Exhibit C, or the Executive's target SCM
Incentive be altered, amended, terminated or changed in any way without the
Executive's written consent (which shall not be unreasonably withheld).
(d) Participation in The Charles Schwab Corporation Stock Programs.
Subject to the approval of, and on the terms and conditions set out by, the
Compensation Committee of the Board, Executive may be granted options to
purchase common stock of TCSC from time to time during the Employment Term
pursuant to the stock plans, agreements and programs applicable to Executive
Committee members at the same corporate title and grade level. Any such option
granted shall have a ten-year term, an exercise price equal to the closing price
of TCSC common stock on the date of grant, and a vesting schedule consistent
with similar options granted to other Executive Committee members. Any options
granted shall be pursuant to and governed by the terms of the stock plans,
agreements and programs then in effect and applicable to Executive Committee
members at the same corporate title and grade level.
(e) Reimbursement of Expenses. During the Employment Term, Executive
shall be entitled to receive prompt reimbursement for all properly documented
travel, entertainment and other expenses properly incurred by him in connection
with his employment by TCSC and SCM in accordance with their policies.
(f) SCM Incentive Subject to TCSC Stockholder Approval. Executive
acknowledges and agrees that notwithstanding anything to the contrary in the SCM
Incentive Plan, this Section 4 or elsewhere in this Agreement, or in any other
agreement between Executive and SCM, Schwab, TCSC and/or any of their respective
affiliates or subsidiaries, the Executive's eligibility for and/or receipt of
(and any obligation of SCM, Schwab, TCSC and/or any of their respective
affiliates or subsidiaries to pay or otherwise provide to Executive) any SCM
Incentive pursuant to Section 4(c) above with respect to any calendar year after
2002 is expressly contingent upon the approval by a majority of TCSC's
stockholders at TCSC's 2003 annual meeting, of a proposal to approve the SCM
Incentive Plan and payments for the Employment Term which may become payable to
Executive as described in Section 4(c) above. SCM, TCSC and Executive also
acknowledge and agree that, if a majority of TCSC's stockholders fails to
approve such a proposal at the TCSC 2003 annual meeting, then, other than with
respect to the payments provided in Section 7 below, the SCM Incentive Plan and
Section 4(c), above, shall be null and void and of no further force and effect
with respect to any calendar year after 2002 and that the compensation (but not
the severance) payable to Executive under this Agreement after 2002 for all
services rendered by Executive during the Employment Term in any capacity to
SCM, Schwab, TCSC and/or any of their respective affiliates or subsidiaries
shall be determined without regard to the SCM Incentive Plan or Section 4(c),
above.
5. Benefits.
(a) Employee Benefits and Perquisites. During the Employment Term,
Executive shall be eligible to participate in those employee benefit plans and
perquisites of Schwab or TCSC comparable to those available to other Vice
Chair-level members of the Executive Committee of TCSC, provided that such
benefits and perquisites may be amended, revised or eliminated by Schwab or TCSC
from time to time in its sole and absolute discretion.
(b) Vacation and Sick Leave. During the Employment Term, Executive
shall be entitled to accrue paid vacation and sick leave consistent with
policies of Schwab or TCSC applicable to other Vice Chair-level members of the
Executive Committee of TCSC, provided that such policies may be amended, revised
or eliminated by Schwab or TCSC from time to time in its sole and absolute
discretion.
6. Non-Competition, Non-Solicitation, Confidentiality and Assignment of
Developments. As a material inducement to cause TCSC and SCM to employ Executive
hereunder and in consideration of TCSC's and SCM's employment of Executive
hereunder, Executive hereby covenants and agrees as follows:
(a) At all times during Executive's employment with SCM and/or TCSC
and for a period of one (1) year subsequent to the termination of Executive's
employment with SCM and/or TCSC for any reason, Executive shall not, directly or
indirectly, alone or with others, on his own behalf or on behalf of another:
(i) enter the employ of or render any services to any person,
joint venture, partnership, firm, corporation, limited liability company or
other entity other than SCM, Schwab, TCSC or any of their respective affiliates
or subsidiaries (each, a "Schwab Entity"; collectively, the "Schwab Entities"),
engaged in the business or businesses of the trading, sales, research and/or
underwriting of equity and/or equity-related instruments, including without
limitation option trading, market-making activities and/or electronic program
trading, and/or fixed income trading, sales and/or underwriting, including
without limitation UIT's and/or exchange-traded funds ("Competitive Business");
(ii) engage in, participate in, assist in or otherwise benefit
from any Competitive Business; or
(iii) continue to be or become interested in any Competitive
Business, directly or indirectly, in any capacity or in any relationship with
any other person or entity (other than any Schwab Entity) whether as an
individual, partner, member, shareholder, director, officer, principal, agent,
employee, trustee, or consultant; provided, however, that nothing contained in
this Agreement shall be deemed to prohibit Executive from acquiring, solely as
an investment, shares of capital stock of any corporation which are publicly
traded so long as Executive does not thereby own more than five percent (5%) of
the outstanding shares of such corporation.
(b) At all times during Executive's employment with TCSC and/or SCM
and for a period of one (1) year subsequent to the termination of Executive's
employment with TCSC and/or SCM for any reason, Executive shall not, directly or
indirectly, alone or with others, on his own behalf or on behalf of another:
(i) contact or solicit any person or entity who at such time is
or, during the twelve (12) months prior to such time was, employed by or engaged
as a consultant under contract to any Schwab Entity for the purpose of hiring
that person or entity on behalf of any person or entity other than a Schwab
Entity, or otherwise encouraging that person or entity to leave the employment
of any Schwab Entity;
(ii) hire on behalf of any person or entity other than a Schwab
Entity any person or entity who at such time is, or during the 12 months prior
to such time was, employed by or engaged as a consultant under contract to any
Schwab Entity; or
(iii) solicit for the benefit or account of any person or entity
other than a Schwab Entity, any person or entity who at such time is, or during
the 12 months prior to such time was, a customer of any Schwab Entity.
(c) During and at all times following the Employment Term, Executive
shall keep secret and retain in the strictest confidence all confidential
matters and information relating to the Schwab Entities and/or any of their
respective customers, including, without limitation, trade secrets, proprietary
information, "know-how", "show-how", customer identities, information or lists,
pricing policies, account and pricing valuation methods, operating methods or
procedures, marketing plans or strategies, product development techniques or
plans, designs or design projects, technical processes, formulae, source codes,
inventions and research projects learned by him prior to and during his
employment with TCSC and/or SCM ("Confidential Information"). Executive shall
not disclose such Confidential Information to anyone other than authorized
personnel of the Schwab Entities, or use such Confidential Information for his
own benefit or for the benefit of any person or entity other than the Schwab
Entities, except as required in the course of performing his duties as an
employee of SCM and/or TCSC or as required by law, or if such matters become
generally available to the public other than by (i) disclosure by Executive or
anyone else owing a duty of confidentiality to any Schwab Entity, provided
Executive has or reasonably should have actual or constructive knowledge that
such disclosure was made in breach of such other person's duty of
confidentiality, or (ii) Executive's failure to put in place adequate
protections to prevent disclosure of Confidential Information. In the event that
Executive is ordered to disclose any Confidential Information, whether in a
legal or regulatory proceeding or otherwise, Executive shall provide TCSC and
SCM, to the extent permitted by law, with prompt notice of such request or order
so that TCSC and SCM or any of the other Schwab Entities may seek to prevent
such disclosure. In the case of any disclosure required by law, Executive shall
disclose only that portion of the Confidential Information he is required to
disclose.
(d) Executive agrees that any and all inventions, ideas, discoveries,
improvements, processes, developments, designs, "know-how", "show-how", data,
computer programs, algorithms, formulae, works of authorship, work
modifications, trademarks, trade names, documentation, techniques, designs,
methods, trade secrets, technical specifications, technical data, concepts,
expressions and all other intellectual property rights or other developments
whatsoever (collectively, "Developments"), whether or not patentable or
registrable under copyright, trademark, or similar statutes or subject to
analogous protection, made, authored, discovered, reduced to practice,
conceived, developed or otherwise obtained by Executive (alone or jointly with
others, whether during business hours or otherwise and whether on any Schwab
Entity's premises or otherwise) during his employment with TCSC and/or SCM, and
arising from or relating to such employment or the business of any Schwab
Entity, or made using any Schwab Entity's time, materials or facilities
(including, without limitation, all such information relating to corporate
opportunities, research, financial and sales data, pricing and trading terms,
evaluations, opinions, interpretations, acquisition prospects, the identity of
customers or their requirements, the identity of key contacts within the
customer's organizations or within the organization of acquisition prospects, or
marketing and merchandising techniques, prospective names and marks) shall be
promptly and fully disclosed to TCSC and/or SCM and to no one else and are and
shall be the sole property of TCSC and/or SCM and/or its or their nominees or
assigns as "works made for hire" (as that term is used under U.S. copyright law)
or otherwise, and TCSC and/or SCM and/or its or their nominees or assigns shall
be the sole owner of all patents, copyrights, and other rights in or connected
with such Developments. Executive agrees that all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any
Developments are and shall be the sole and exclusive property of TCSC and/or
SCM. To the extent any Developments are not or are deemed not to be works made
for hire, Executive hereby assigns to TCSC and SCM without further compensation
all right, title and interest he has or may have in any Developments at that
time or thereafter and agrees that he shall acquire no rights during the course
of his employment with TCSC and SCM with respect to Developments. During and
after his employment with TCSC and SCM, Executive shall assist TCSC and SCM
and/or their nominees or assigns (without charge but at no expense to Executive)
to obtain and maintain or enforce any patents, copyrights, mask works or other
rights or protections relating to such Developments in all countries. Executive
irrevocably designates and appoints TCSC, SCM and their duly authorized officers
and agents as his agent and attorney-in-fact to execute and file any and all
applications and other necessary documents and to do all other lawfully
permitted acts to further the prosecution, issuance or enforcement of patents,
copyrights, trade secrets and similar protections related to such Developments
with the same legal force and effect as if Executive had executed them himself.
Executive represents and agrees that Exhibit D hereto sets forth all inventions
(whether patentable or not), patents, trade secrets, trademarks, trade names,
copyrights, and other intellectual property owned by Executive before entering
into employment with TCSC and SCM hereunder. Executive will not assert any
rights in or to any inventions, patents, trade secrets, trade names, copyrights
and other intellectual property unless they are identified on Exhibit D.
(e) Executive acknowledges and agrees that the restrictions contained
in this Section 6 are material inducements to TCSC's and SCM's employment of
Executive hereunder. Executive further acknowledges that the restrictions
contained in this Section 6 are reasonable in scope and duration, will not
prevent him from earning a livelihood during the applicable period of
restriction, are necessary to protect the legitimate interests of the Schwab
Entities, and that any breach by Executive of any provision contained in this
Section 6 will result in immediate irreparable injury to TCSC, SCM and/or the
other Schwab Entities for which a remedy at law would be inadequate.
Accordingly, Executive acknowledges that TCSC, SCM and/or such other Schwab
Entity, shall be entitled to seek permanent injunctive relief against Executive
in the event of any breach or threatened breach by Executive of the provisions
of this Section 6, in addition to any other remedy that may be available to
TCSC, SCM and/or such other Schwab Entities whether at law or in equity. The
provisions of this Section 6 shall remain unmodified and in full force and
effect following the termination of Executive's employment. It is the intention
of the parties to this Agreement that the covenants and restrictions set forth
in this Section 6 be given the broadest interpretation permitted by law.
7. Termination of Employment.
(a) Expiration of the Employment Term. Unless earlier terminated in
accordance with this Section 7, the Employment Term shall automatically
terminate on that date which is five (5) years from the Effective Date. In such
event, the sole liability (other than as provided in Section 7(i) below) of
TCSC, SCM and the other Schwab Entities shall be to pay (or, as the case may be,
provide) to Executive: (i) Executive's Base Salary through the last day of the
Employment Term, (ii) any bonuses not yet paid to Executive, if any, under
Sections 4(b) and 4(c), above, in respect of TCSC's fiscal year ended prior to
Executive's termination and any pro-rated bonus payable to Executive under
Sections 4(b) and 4(c), above, as determined by the Compensation Committee of
the Board in a manner consistent with TCSC policies applicable to Executive
Committee members, (iii) all unreimbursed out-of-pocket business expenses of the
type described in Section 4(e) above, properly incurred and documented by
Executive, (iv) all unused vacation days accrued through the last day of the
Employment Term, and (v) any other benefits to which Executive is entitled under
applicable employee benefit plans in which he participated. In addition, if and
only if Executive retires effective as of the last day of the Employment Term
("Retirement Date") and fully complies with the restrictions and covenants set
forth in Section 6, above, then TCSC and/or SCM shall: (A) continue to pay
Executive his Base Salary in effect on the last day of the Employment Term for a
one-year period following the Retirement Date; (B) pay Executive his annual
target Executive Committee Bonus as soon as practicable after the one year
anniversary of the Retirement Date; and (C) vest all of the then-unvested shares
of restricted stock granted to Executive during the Employment Term pursuant to
Section 4(c), above, if any, effective upon the one year anniversary of the
Retirement Date. (For the avoidance of doubt, all unvested stock options and
equity based awards held by Executive other than the restricted stock granted to
Executive during the Employment Term pursuant to Section 4(c), above, if any,
shall cease to vest effective as of the Retirement Date, unless otherwise
specified in the applicable stock plans, agreements and programs). In the event
Executive fails to retire and/or fails to comply in any respect with his
obligations under Section 6, above, then neither TCSC, SCM or any other Schwab
Entity shall have any obligation to make any such additional post-employment
payments or benefits to Executive but rather shall be entitled to reimbursement
by Executive in full for any such additional payments or benefits already made.
All payments and benefits provided to Executive pursuant to this Section 7(a)
shall be in lieu of any and all other compensation, benefits, perquisites and
claims of any kind, excepting only such additional amounts as may be required by
law.
(b) Death. The Employment Term shall terminate upon the death of
Executive. In such event, the sole liability (other than as provided in Section
7(i) below) of TCSC, SCM and the other Schwab Entities shall be to pay (or, as
the case may be, provide) to Executive's estate: (i) Executive's Base Salary
through the last day of the month in which the death of Executive occurs, (ii)
any bonuses not yet paid to Executive, if any, under Sections 4(b) and 4(c),
above, in respect of TCSC's fiscal year ended prior to Executive's death and any
pro-rated bonus payable to Executive under Sections 4(b) and 4(c), above, as
determined by the Compensation Committee of the Board in a manner consistent
with TCSC policies applicable to Executive Committee members, (iii) all
unreimbursed out-of-pocket business expenses of the type described in Section
4(e) above, properly incurred and documented by Executive, (iv) all unused
vacation days accrued to the date of Executive's death, (v) full and immediate
vesting of all then outstanding stock options, restricted stock grants and other
equity-based awards, which, in the case of stock options, shall remain
exercisable by the legal representative of Executive's estate for one (1) year
following the date of Executive's death (but not beyond their original term) or
as otherwise specified in the applicable stock plans, agreements and programs,
and (vi) any other benefits to which Executive, his beneficiaries, or his estate
is entitled under applicable employee benefit plans in which Executive
participated including, but not limited to payments under any plan providing
life insurance benefits to Executive, his beneficiaries or his estate. All
payments and benefits provided to Executive pursuant to this Section 7(b) shall
be in lieu of any and all other compensation, benefits, perquisites and claims
of any kind, excepting only such additional amounts as may be required by law.
(c) Disability. If Executive is deemed to be disabled within the
meaning of The Charles Schwab Disability Plan, then TCSC/SCM and/or Executive
may terminate Executive's employment and their obligations hereunder. TCSC/SCM
and/or Executive shall provide the other written notice of their intent to
terminate Executive's employment pursuant to this Section 7(c) at least fourteen
(14) days before the effective date of such termination. In the event of such a
termination, subject to and in consideration of Executive's execution of a
waiver of liability and general release of all claims against the Schwab
Entities and their respective officers, directors, employees and agents in a
form acceptable to TCSC and SCM, the sole liability (other than as provided in
Section 7(i) below) of TCSC, SCM and the other Schwab Entities shall be to pay
(or, as the case may be, provide) to Executive: (i) Executive's Base Salary
through the effective date of termination, (ii) any bonuses not yet paid to
Executive, if any, under Sections 4(b) and 4(c), above, in respect of TCSC's
fiscal year ended prior to Executive's termination and any pro-rated bonus
payable to Executive under Sections 4(b) and 4(c), above, as determined by the
Compensation Committee of the Board in a manner consistent with TCSC policies
applicable to Executive Committee members, (iii) all unreimbursed out-of-pocket
business expenses of the type described in Section 4(e) above incurred by
Executive prior to the effective date of Executive's termination, (iv) all
unused vacation days accrued up to and including the effective date of
Executive's termination, (v) full and immediate vesting of all then outstanding
stock options, restricted stock grants and other equity-based awards, which, in
the case of stock options, shall remain exercisable by the Executive or the
legal representative of Executive for one (1) year following the date of
Executive's termination (but not beyond their original term) or as otherwise
specified in the applicable stock plans, agreements and programs, and (vi) any
other benefits to which Executive is entitled under applicable employee benefits
plans in which he participated including, but not limited to, payments under any
plan providing disability insurance benefits to Executive. In the event
Executive fails to execute the waiver of liability and general release described
above, then neither TCSC, SCM nor any other Schwab Entity shall have any
obligation to make any such post-employment payments or benefits to Executive,
with the exception of those payments or benefits described in subsections (i),
(iii), (iv), (v) and (vi) herein, but rather shall be entitled to reimbursement
by Executive in full for any such payments or benefits already made. All
payments and benefits provided to Executive pursuant to this Section 7(c) shall
be in lieu of any and all other compensation, benefits, perquisites and claims
of any kind, excepting only such additional amounts as may be required by law.
(d) Termination of Executive for Cause. TCSC and SCM may terminate
Executive's employment and their obligations hereunder at any time during the
Employment Term for Cause (as defined below), provided that TCSC and SCM have
given Executive written notice of the event or events constituting Cause and a
reasonable opportunity (not to exceed fourteen (14) calendar days) for Executive
to cure such event or events, provided such event or events are capable of being
cured. In the event of such a termination, the sole liability (other than as
provided in Section 7(i) below) of TCSC, SCM and the other Schwab Entities shall
be to pay (or, as the case may be, provide) to Executive: (i) Executive's Base
Salary through the effective date of termination, (ii) payment of all
unreimbursed out-of-pocket business expenses of the type described in Section
4(e) incurred by Executive prior to the effective date of Executive's
termination, (iii) all unused vacation days accrued up to and including the
effective date of Executive's termination, and (iv) any other benefits to which
Executive is entitled under applicable employee benefit plans in which he
participated. The effect of a termination under this Section 7(d) on Executive's
outstanding stock options, restricted stock grants and other equity-based awards
shall be determined in accordance with the applicable stock plans, agreements
and programs. For purposes of this Agreement, an event or occurrence
constituting "Cause" shall mean any one or more of the following:
(i) Executive's failure or refusal to substantially perform his
duties, responsibilities, agreements or covenants as set forth or referenced
herein, or Executive's continued neglect to perform such duties,
responsibilities, agreements or covenants to the full extent of his abilities
for reasons other than death, physical or mental incapacity;
(ii) Executive's gross negligence or willful misconduct in the
performance of his duties, responsibilities, agreements and covenants as set
forth or referenced herein, or conduct which is materially adverse, monetarily
or otherwise, to SCM or its shareholders;
(iii) A finding by a court or other governmental body that an act
or acts of Executive constituted a felony or other crime involving theft or
fraud under the laws of the United States or any state thereof, or any other
event that would operate as a statutory disqualification under applicable
securities laws, rules or regulations;
(iv) Executive's violation of federal or state laws or
regulations, or Executive's violation of the regulations of any self-regulatory
organization, and a good faith determination by the Co-Chief Executive Officers
of TCSC that the continued employment of Executive would be seriously
detrimental to TCSC, SCM or their respective businesses;
(v) Executive's refusal, unwillingness or failure to
substantially comply with compliance or risk management rules, policies,
directions and/or restrictions of SCM, Schwab or TCSC, or Executive's refusal,
unwillingness or failure to substantially comply with human resources rules,
policies, directions and/or restrictions of SCM, Schwab or TCSC relating to
harassment and/or discrimination, as such rules, policies, directions and/or
restrictions are and/or may be established by SCM, Schwab or TCSC from time to
time;
(vi) An uncurable loss by Executive of any license or
registration that is necessary for Executive to perform the duties of SCM
President, or the imposition by a self-regulatory organization of special
supervision or other special requirements as prerequisites for maintaining any
license or registration that is necessary for Executive to perform the duties of
SCM President, or the commission of any act or occurrence of any event that
could result in the statutory disqualification of Executive from being employed
or otherwise associated with a broker-dealer; or
(vii) a material breach by Executive of this Agreement.
(e) Termination of Executive Without Cause. TCSC and SCM may terminate
the employment of Executive and their obligations hereunder at any time during
the Employment Term without Cause upon not less than fourteen (14) days written
notice to Executive. In the event of such a termination, subject to and in
consideration of Executive's execution of a waiver of liability and general
release of all claims against the Schwab Entities and their respective officers,
directors, employees and agents in a form acceptable to TCSC and SCM and
Executive's full compliance with the restrictions and covenants set forth in
Section 6, above, the sole liability (other than as provided in Section 7(i)
below) of TCSC, SCM and the other Schwab Entities shall be to pay (or, as the
case may be, provide) to Executive: (i) Executive's Base Salary for the
three-year period immediately following the effective date of Executive's
termination, payable at TCSC/SCM's option in a lump sum discounted to present
value by a compounded six percent (6%) interest rate or in substantially equal
installments biweekly, from which TCSC/SCM shall withhold and deduct in either
event all applicable federal, state and city income, social security and
disability taxes as required by applicable law, (ii) an additional $10 million,
(iii) any bonuses not yet paid to Executive, if any, under Sections 4(b) and
4(c), above, in respect of TCSC's fiscal year ended prior to Executive's
termination and any pro-rated bonus payable to Executive under Sections 4(b) and
4(c) above, calculated by the Compensation Committee of the Board in a manner
consistent with TCSC policies applicable to Executive Committee members; (iv) an
amount equivalent to three years of bonuses payable to Executive under Section
4(b) above, based on Executive's target bonus levels under the plans described
in Sections 4(b) above, (v) continued vesting of all of Executive's then
outstanding stock options, restricted stock grants and other equity-based awards
for the three-year period commencing on the effective date of Executive's
termination (TCSC agrees that notwithstanding any provision in the applicable
stock plans, agreements or programs to the contrary regarding when a vested
stock option may be exercised, Executive shall be treated as having his
employment terminated on the third anniversary of the date of termination
permitting him to exercise any vested stock options for up to three (3) years
and three (3) months following the effective date of Executive's termination
under this Section 7(e), and Executive acknowledges and agrees that any such
exercise by him more than three (3) months after the effective date of his
termination shall preclude the treatment of any such stock option as an
incentive stock option for tax purposes), (vi) continuation of the medical,
dental and life insurance coverage provided to Executive immediately prior to
the effective date of Executive's termination for the three-year period
commencing on the effective date of Executive's termination, at the end of which
period Executive shall be entitled to group health continuation coverage in
accordance with Section 4980B of the Code or other benefits equivalent thereto;
(vii) payment of all unreimbursed out-of-pocket business expenses of the type
described in Section 4(e) incurred by Executive prior to the effective date of
Executive's termination, (viii) all unused vacation days accrued up to and
including the effective date of Executive's termination, and (ix) any other
benefits to which Executive is entitled under applicable employee benefit plans
in which he participated. In the event Executive fails to execute the waiver of
liability and general release described above and/or fails to comply in any
respect with his obligations under Section 6, above, then neither TCSC, SCM nor
any other Schwab Entity shall have any obligation to make any such
post-employment payments or benefits to Executive, with the exception of those
payments or benefits described in subsections (vii), (viii) and (ix) herein, but
rather shall be entitled to reimbursement by Executive in full for any such
payments or benefits already made. All payments and benefits provided to
Executive pursuant to this Section 7(e) shall be in lieu of any and all other
compensation, benefits, perquisites and claims of any kind, excepting only such
additional amounts as may be required by law.
(f) Termination by Executive with Good Reason. Executive may resign
his employment with TCSC and SCM with Good Reason (as defined below), provided
that Executive has given TCSC and SCM written notice of the event or events
constituting Good Reason and a reasonable opportunity (not to exceed fourteen
(14) calendar days) for TCSC and SCM to cure such event or events, provided such
event or events are capable of being cured. In the event of such a resignation,
subject to and in consideration of Executive's execution of a waiver of
liability and general release of all claims against the Schwab Entities and
their respective officers, directors, employees and agents in a form acceptable
to TCSC and SCM and Executive's full compliance with the restrictions and
covenants set forth in Section 6, above, the sole liability (other than as
provided in Section 7(i) below) of TCSC, SCM and the other Schwab Entities shall
be to pay (or, as the case may be, provide) to Executive: (i) Executive's Base
Salary for the three-year period immediately following the effective date of
Executive's resignation, payable at TCSC/SCM's option in a lump sum discounted
to present value by a compounded six percent (6%) interest rate or in
substantially equal installments biweekly, from which TCSC/SCM shall withhold
and deduct in either event all applicable federal, state and city income, social
security and disability taxes as required by applicable law, (ii) an additional
$10 million, (iii) any bonuses not yet paid to Executive, if any, under Sections
4(b) and 4(c), above, in respect of TCSC's fiscal year ended prior to
Executive's resignation and any pro-rated bonus payable to Executive under
Sections 4(b) and 4(c) above, calculated by the Compensation Committee of the
Board in a manner consistent with TCSC policies applicable to Executive
Committee members; (iv) an amount equivalent to three years of bonuses payable
to Executive under Section 4(b) above, based on Executive's target bonus levels
under the plans described in Section 4(b) above, (v) continued vesting of all of
Executive's then outstanding stock options, restricted stock grants and other
equity-based awards for the three-year period commencing on the effective date
of Executive's resignation (TCSC agrees that notwithstanding any provision in
the applicable stock plans, agreements or programs to the contrary regarding
when a vested stock option may be exercised, Executive shall be treated as
having his employment terminated on the third anniversary of the date of
termination permitting him to exercise any vested stock options for up to three
(3) years and three (3) months following the effective date of Executive's
termination under this Section 7(f), and Executive acknowledges and agrees that
any such exercise by him more than three (3) months after the effective date of
his termination shall preclude the treatment of any such stock option as an
incentive stock option for tax purposes), (vi) continuation of the medical,
dental and life insurance coverage provided to Executive immediately prior to
the effective date of Executive's resignation for the three-year period
commencing with the effective date of resignation, at the end of which period
Executive shall be entitled to group health continuation coverage in accordance
with Section 4980B of the Code or other benefits equivalent thereto; (vii)
payment of all unreimbursed out-of-pocket business expenses of the type
described in Section 4(e) incurred by Executive prior to the effective date of
Executive's termination, (viii) all unused vacation days accrued up to and
including the effective date of Executive's termination, and (ix) any other
benefits to which Executive is entitled under applicable employee benefit plans
in which he participated. In the event Executive fails to execute the waiver of
liability and general release described above and/or fails to comply in any
respect with his obligations under Section 6, above, then neither TCSC, SCM nor
any other Schwab Entity shall have any obligation to make any such
post-employment payments or benefits to Executive, with the exception of those
payments or benefits described in subsections (vii), (viii) and (ix) herein, but
rather shall be entitled to reimbursement by Executive in full for any such
payments or benefits already made. All payments and benefits provided to
Executive pursuant to this Section 7(f) shall be in lieu of any and all other
compensation, benefits, perquisites and claims of any kind, excepting only such
additional amounts as may be required by law. For purposes of this Agreement, an
event or occurrence constituting "Good Reason" shall mean any one or more of the
following:
(i) a material breach of this Agreement by TCSC or SCM;
(ii) a substantial diminution in the title, duties or
responsibilities of Executive as SCM President, or a substantial diminution in
the titles of Executive as Vice Chairman and/or Executive Vice President of
TCSC;
(iii) the relocation of Executive's principal place of business
to a location more than 25 miles from Jersey City, New Jersey without his
cIonsent, which shall not be unreasonably withheld;
(iv) (A) a reduction in Executive's bonus opportunity as
described in Section 4(c) above, and Exhibits B and C hereto, or (B) the failure
of the Board to recommend for approval the SCM Incentive Plan for the Employment
Term at the 2003 annual meeting of TCSC's stockholders, or the taking of any
action by the Board, after having recommended for approval the SCM Incentive
Plan for the Employment Term at the 2003 annual meeting of TCSC's stockholders,
to rescind such recommendation; (C) the failure of the Board to recommend or
present for approval the SCM Incentive Plan for the Employment Term at the 2003
annual meeting of TCSC's stockholders, or (D) the failure of a majority of
TCSC's stockholders to approve the SCM Incentive Plan at that 2003 annual
meeting;
(v) a reduction in Executive's Base Salary or bonus opportunity
as described in section 4(b), above, and Exhibit A hereto, unless such reduction
similarly affects all other Vice-Chair level members of the Executive Committee
of TCSC; or
(vi) the failure by TCSC or SCM to obtain the express written
assumption of this agreement by an successor to TCSC or SCM.
(g) Resignation by Executive. Executive may resign from his employment
without Good Reason during the Employment Term and effective upon fourteen (14)
days written notice to TCSC and SCM. In the event of such a resignation, subject
to and in consideration of Executive's execution of a waiver of liability and
general release of all claims against the Schwab Entities and their respective
officers, directors, employees and agents in a form acceptable to TCSC and SCM
and Executive's full compliance with the restrictions and covenants set forth in
Section 6, above, the sole liability (other than as provided in Section 7(i)
below) of TCSC, SCM and the other Schwab Entities shall be to pay (or, as the
case may be, provide) to Executive: (i) Executive's Base Salary for the one-year
period immediately following the effective date of Executive's resignation,
payable at TCSC/SCM's option in a lump sum discounted to present value by a
compounded six percent (6%) interest rate or in substantially equal installments
biweekly, from which TCSC/SCM shall withhold and deduct in either event all
applicable federal, state and city income, social security and disability taxes
as required by applicable law, (ii) continuation of the medical, dental and life
insurance coverage provided to Executive immediately prior to the date of
Executive's resignation for the one-year period immediately following the
effective date of resignation, at the end of which period Executive shall be
entitled to group health continuation coverage in accordance with Section 4980B
of the Code or other benefits equivalent thereto, (iii) payment of all
unreimbursed out-of-pocket business expenses of the type described in Section
4(e) incurred by Executive prior to the effective date of Executive's
resignation, (iv) all unused vacation days accrued up to and including the
effective date of Executive's resignation; and (v) any other benefits to which
Executive is entitled under applicable employee benefit plans in which is
participated. The effect of a resignation under this Section 7(g) on Executive's
outstanding stock options, restricted stock grants and other equity-based awards
shall be determined in accordance with the applicable stock plans, agreements
and programs. In the event Executive fails to execute the waiver of liability
and general release described above and/or fails to comply in any respect with
his obligations under Section 6, above, then neither TCSC, SCM nor any other
Schwab Entity shall have any obligation to make any such post-employment
payments or benefits to Executive, with the exception of those payments or
benefits described in subsections (iii), (iv) and (v) herein, but rather shall
be entitled to reimbursement by Executive in full for any such payments or
benefits already made. All payments and benefits provided to Executive pursuant
to this Section 7(g) will be in lieu of any and all other compensation,
benefits, perquisites and claims of any kind, excepting only such additional
amounts as may be required by law.
(h) Resignation of Positions. Upon the effective date of any
termination or resignation of Executive's employment for any reason whatsoever,
Executive shall be deemed to have resigned from any and all offices and
directorships then held with SCM, Schwab, TCSC, and/or any of their respective
affiliates or subsidiaries.
(i) Retirement Eligibility. TCSC acknowledges and agrees that
Executive will have satisfied the requisite criteria for retirement eligibility
under the terms and conditions of the SchwabPlan Retirement Savings and
Investment Plan, the TCSC Deferred Compensation Plan, the TCSC 1992 Stock
Incentive Plan, and the TCSC 2001 Stock Incentive Plan as of June 1, 2002,
because he was actively employed by SCM and TCSC on that date. As a result,
Executive is entitled to have all options granted become fully exercisable and
all restricted shares granted become fully vested, but only if such retirement
occurs at least two (2) years after the date of grant. For purposes of this
retirement eligibility, his "retirement" shall be deemed to be on the date on
which his base salary payments cease, calculated assuming the company does not
elect to pay the Executive in a lump sum. Nothing in this Agreement shall limit
Executive's ability to "retire" for purposes of these plans upon any termination
of his employment and his "retiring" for purposes of these plans shall not
affect his entitlement to any severance resulting from his termination of
employment.
8. Effect of Termination of Employment. Upon the termination of Executive's
employment, the parties' obligations under this Agreement shall terminate,
except for those rights and obligations set forth in Sections 6, 7, 8, 10, 11,
12, 16, 20 and 23 hereof, which shall survive such termination. The benefits and
payments provided to Executive under Section 7 are expressly in lieu of any
eligibility for or entitlement to severance benefits under any severance plan or
policy of SCM, Schwab, TCSC, or any of their respective affiliates or
subsidiaries.
9. Representations and Warranties.
(a) TCSC and SCM represent and warrant that they have the requisite
corporate power to enter into this Agreement and to carry out the obligations
hereunder. The execution and delivery of this Agreement have been duly
authorized by all necessary corporate action on the part of TCSC and SCM.
(b) Executive represents and warrants that he has the legal capacity
to enter into this Agreement, is under no employment contract, bond,
confidentiality agreement, non-competition agreement, or any other obligation
that would violate or be in conflict with the terms and conditions of this
Agreement or encumber his performance of duties assigned to him by SCM or TCSC.
Executive further represents and warrants that he has not signed or committed to
any employment or consultant duties or other obligations that would divert his
full attention or conflict with from the duties assigned to him by SCM or TCSC
under this Agreement.
10. Indemnification. Executive shall be indemnified by TCSC for his acts or
omissions occurring during the Employment Term to the same extent TCSC
indemnifies all other employees at the Executive Committee level.
11. Governing Law/Jurisdiction. Any and all actions arising out of this
Agreement or Executive's employment with TCSC and/or SCM, including, without
limitation, tort and contract claims, shall be governed by and construed in
accordance with the laws of the State of New Jersey, without reference to the
choice of law principles thereof. Subject to Section 12 below, any and all
actions arising out of this Agreement or Executive's employment with TCSC and/or
SCM shall be brought only and heard in the state and federal courts of the State
of New Jersey, and Executive hereby irrevocably submits to the exclusive
jurisdiction of such courts. Executive hereby irrevocably consents to the
jurisdiction and proper venue of any such courts in any such suit, action or
proceeding and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Executive and SCM and TCSC each hereby agree to waive their respective rights to
a trial by jury.
12. Dispute Resolution.
(a) Except as otherwise provided herein, Executive and TCSC and SCM
agree that any and all disputes between Executive and SCM, Schwab, TCSC and/or
any of their respective affiliates or subsidiaries, or their respective
employees, officers, directors, agents or assigns, which relate to, arise out of
or pertain to Executive's employment, separation from employment or the
construction or interpretation of this Agreement shall be submitted to and
resolved by final and binding arbitration. The arbitration shall be instead of
any civil litigation; this means that Executive, SCM and TCSC are each waiving
any rights to a jury trial. Executive and TCSC and SCM expressly understand and
agree that consistent with the foregoing, no party to this Agreement shall
institute a proceeding in any court or administrative agency to resolve a
dispute arising under or in connection with this Agreement.
(b) Executive and SCM and TCSC expressly understand and agree that
there will be no court or jury trial of disputes between them arising out of or
in connection with this Agreement, Executive's employment or separation from
employment, including, but not limited to, claims under federal, state or local
laws prohibiting employment discrimination. The only disputes not covered by
this agreement to arbitrate are actions for injunctive relief brought by either
the Executive or SCM, Schwab, TCSC and/or any of their respective affiliates or
subsidiaries concerning the rights and obligations set forth in Section 6 above.
Furthermore, claims for unemployment insurance benefits, for workers'
compensation insurance benefits, and for benefits under any ERISA-governed
employee benefit plan(s), shall be resolved pursuant to the claims procedures
under such benefit plans.
(c) All disputes between the parties which are covered by the
agreement to arbitrate and which cannot be resolved within two weeks after a
demand for direct negotiation between the parties shall be settled exclusively
by binding arbitration in Newark, New Jersey under the Commercial Arbitration
Rules of the American Arbitration Association before a panel of three (3)
neutral arbitrators selected under said Rules. The arbitrators shall award the
prevailing party its attorneys fees, arbitration costs, expert fees, and all
other costs and expenses incurred in connection with the arbitration, including
any fees and costs incurred in confirming and enforcing the award. In the event
a dispute concerning or arising out of this Agreement involves regulatory
matters or compliance with applicable securities laws, rules or regulations, SCM
and/or TCSC or Executive at its or his option may elect to pursue arbitration of
all issues between the parties under the arbitration rules of the National
Association of Securities Dealers ("NASD") or the New York Stock Exchange
("NYSE") in accordance with the applicable rules. Executive and SCM and TCSC
expressly understand and agree that any limitations in the NASD or NYSE
arbitration rules excluding statutory discrimination from the scope of the
arbitration clause shall not apply and that it is the parties' desire to include
statutory discrimination claims within the scope of arbitration. Executive and
SCM and TCSC knowingly and voluntarily agree to this arbitration provision. A
decision in arbitration shall be final and binding.
(d) Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The arbitration filing fee expenses shall be borne
according to the rules of the NASD or NYSE, as the case may be; provided that if
and only if the arbitration involves statutory discrimination claims, SCM and/or
TCSC shall pay all types of costs that are unique to arbitration, such as the
arbitrator's fees.
13. Nonwaiver of Rights of Parties. No right or power of any party under
this Agreement shall be deemed to have been waived by any act or conduct on the
part of such party, or by any neglect to exercise that right or power, or by any
delay in so doing; and, except as otherwise provided herein, every right or
power shall continue in full force and effect until specifically waived or
released by an instrument in writing executed by such party.
14. Headings. The headings of the several sections of this Agreement are
inserted for reference only and not intended to affect the meaning or
interpretation of this Agreement.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of Executive, his heirs, executors, administrators, distributes,
devisees and legatees and to the benefit of TCSC, SCM and their successors and
assigns. With respect to the obligations, representations and warranties of
Executive under Sections 6 and 9(b) this Agreement shall also inure to the
benefit of all of the Schwab Entities and their respective successors and
assigns.
16. Assignment. This Agreement is a personal contract and the rights and
interests of Executive herein may not be sold, transferred, assigned, pledged or
hypothecated. The rights and obligations of TCSC, SCM and the other Schwab
Entities, as applicable, hereunder shall be binding upon and run in favor of the
successors and permitted assigns of TCSC, SCM and/or the other Schwab Entities,
as applicable. This Agreement may not be assigned by either party without the
prior written consent of the other; except that, without such prior written
consent, TCSC and/or SCM may assign their rights and obligations hereunder to
any entity owned, directly or indirectly, by SCM, Schwab or TCSC on the
condition that TCSC remains liable to perform the obligations of any such
assignee in the event such assignee fails to so perform. TCSC and/or SCM shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its business and/or
assets of TCSC and/or SCM, as the case may be, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that TCSC
and/or SCM is required to perform it.
17. Entire Agreement. This Agreement, together with its Exhibits,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect thereto. No amendment, modification or rescission of this Agreement
shall be effective unless set forth in writing signed by Executive, on the one
hand, and by the President & Co-Chief Executive Officer of TCSC and the
Executive Vice-President, General Counsel and Corporate Secretary of TCSC on the
other hand.
18. No Mitigation. Executive shall not be required to mitigate the amount
of any payment provided for under this Agreement by seeking other employment or
otherwise, and compensation earned from such employment or otherwise shall not
reduce the amounts otherwise payable under this Agreement.
19. Further Assurances. Each party hereto shall, whenever and as often as
reasonably requested to do so by any party hereto, do, execute, acknowledge, and
deliver, or cause to be done, executed, acknowledged, delivered, filed or
recorded, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney, instruments, and assurances as such other party may
reasonably request in order to carry out fully the terms and provisions of this
Agreement.
20. Severability and Enforceability. If any one or more of the provisions
contained in this Agreement should be held to be invalid, illegal or
unenforceable as to any party or in any jurisdiction, then such provision or
provisions only shall be deemed invalid, illegal or unenforceable without
affecting or otherwise impairing the enforceability of the remaining provisions
contained herein and without affecting or otherwise impairing the enforceability
of the same provisions in this Agreement with respect to any other party or in
any other jurisdiction. If any of the covenants contained in Sections 6 or 12 of
this Agreement are held to be invalid, illegal or unenforceable for any reason,
the parties agree that the judicial body making such determination shall have
the power to reform that provision only to the limited extent required to make
the provision enforceable, and as reformed, such provision shall then be
enforceable and shall be enforced.
21. Counterparts. This Agreement may be executed in separate counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.
22. Legal Fees. SCM and/or TCSC shall promptly pay, or if Executive has
already paid such amounts reimburse Executive for all properly documented
attorneys fees and expenses, including disbursements, reasonably incurred by
Executive in connection with the review and negotiation of this Agreement,
subject to a maximum of $25,000.
23. Notices. Any notice or other communication to be given hereunder by any
party to another shall be in writing and delivered to the following addresses
personally, by facsimile transmission, by postage prepaid registered or
certified mail, or by a national overnight carrier:
(a) Schwab Capital Markets, L.P. and The Charles Schwab Corporation:
David S. Pottruck
President & Co-Chief Executive Officer
The Charles Schwab Corporation
120 Kearny Street
San Francisco, Ca 94108
Facsimile No.: (415) 636-5431
with copies to:
Carrie E. Dwyer, Esq.
Executive Vice President, General Counsel
and Corporate Secretary
The Charles Schwab Corporation
120 Kearny Street
San Francisco, Ca 94108
Facsimile No.: (415) 667-3596
and
Lawrence B. Rabkin, Esq.
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation
3 Embarcadero Center, 6th Floor
San Francisco, CA 94111
Facsimile: 415/217-5910
Executive: Lon Gorman
--------------------
--------------------
--------------------
Facsimile No.: (___) __________
with a copy to:
Charles J. Conroy, Jr.
Milbank, Tweed, Hadley & McCloy, LLP
1 Chase Manhattan Plaza
New York, NY 10005
Facsimile No.: (212) 530-5219
or such other persons or such other addresses as may be designated in writing by
the parties, by a notice given as aforesaid.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Schwab Capital Markets L.P.:
By: /s/ James Leonard
------------------------------
Its: SVP of General Partner
------------------------------
The Charles Schwab Corporation:
By: /s/ David S. Pottruck
------------------------------
Its:
------------------------------
EXECUTIVE:
/s/ Lon Gorman
----------------------------------
Lon Gorman
<PAGE>
EXHIBIT A-1
The Charles Schwab Corporation
Corporate Executive Bonus Plan
(As Amended February 27, 2002)
<PAGE>
I. Purposes
The purposes of this Corporate Executive Bonus Plan (the "Plan") are: (a)
to provide greater incentive for key executives continually to exert their
best efforts on behalf of The Charles Schwab Corporation (the "Company") by
rewarding them for services rendered with compensation that is in addition
to their regular salaries; (b) to attract and to retain in the employ of
the Company persons of outstanding competence; and (c) to further the
identity of interests of such employees with those of the Company's
stockholders through a strong performance-based reward system.
II. Form of Awards
1. Incentive compensation awards under this Plan shall be generally
granted in cash, less any applicable withholding taxes; provided that
the Committee may determine, from time to time, that all or a portion
of any award may be paid in the form of an equity based incentive,
including without limitation stock options, restricted shares, or
outright grants of Company stock. The number of shares and stock
options granted in any year, when added to the number of shares and
stock options granted for such year pursuant to the Company's Annual
Executive Individual Performance Plan, shall in no event exceed .5% of
the outstanding shares of the Company.
III. Determination of Awards
1. Incentive awards for participants other than the President/Co-Chief
Executive Officer shall be determined quarterly according to a
Corporate Performance Payout Matrix that shall be adopted at the
beginning of each year by the Compensation Committee of the Board of
Directors (the "Committee"). The Executive Committee Corporate
Performance Payout Matrix shall be based on corporate performance
criteria to be selected by the Committee from among the following:
revenue growth, operating revenue growth, consolidated pretax profit
margin, consolidated pretax operating margin, customer net new asset
growth, stockholder return, return on net assets, earnings per share,
return on equity, and return on investment. Awards shall be defined by
reference to a target percentage of base salary determined, from time
to time, by the Committee. Payouts described in this subsection shall
be calculated and paid on a quarterly basis, based on year-to-date
performance compared with the comparable period in the preceding year.
2. With respect to payments made pursuant to Section III.1, the amount of
base salary included in the computation of incentive awards shall not
exceed 250% of the base salary in effect for the officer holding the
same or substantially similar position on March 31, 2000. In addition,
for all participants other than the President/Co-Chief Executive
Officer, (i) the maximum target incentive percentage shall be 100% of
base salary and (ii) the maximum award shall be 400% of the
participant's target award.
3. Incentive awards for the President/Co-Chief Executive Officer shall be
determined in accordance with a Corporate Performance Payout Matrix
that shall be adopted at the beginning of each year by the Committee.
The Committee shall determine the President/Co-Chief Executive
Officer's award each year, up to the maximum amount defined by the
matrix for a given level of performance. This matrix may, if the
Committee deems appropriate, differ from that described in Subsection
III.1. However, the performance criteria shall be the same as referred
to above. Payouts for the President/Co-Chief Executive Officer shall
be made on an annual basis, based on the Company's results for the
full year.
4. The maximum award payable for the President/Co-Chief Executive Officer
under this plan shall be no more than 500% of his target incentive
award. The target incentive amount shall be determined each year by
the Committee, but may not exceed 500% of base salary. The amount of
base salary taken into account for purposes of computing the target
incentive award may not exceed 250% of the President/Co-Chief
Executive Officer's base salary as of March 31, 2000.
5. Notwithstanding anything to the contrary contained in this Plan, the
Committee shall have the power, in its sole discretion, to reduce the
amount payable to any Participant (or to determine that no amount
shall be payable to such Participant) with respect to any award prior
to the time the amount otherwise would have become payable hereunder.
In the event of such a reduction, the amount of such reduction shall
not increase the amounts payable to other participants under the Plan.
IV. Administration
1. Except as otherwise specifically provided, the Plan shall be
administered by the Committee. The Committee members shall be
appointed pursuant to the Bylaws of the Company, and the members
thereof shall be ineligible for awards under this Plan for services
performed while serving on said Committee.
2. The decision of the Committee with respect to any questions arising as
to interpretation of the Plan, including the severability of any and
all of the provisions thereof, shall be, in its sole and absolute
discretion, final, conclusive and binding.
V. Eligibility for Awards
1. Awards under the Plan may be granted by the Committee to those
employees who have contributed the most in a general way to the
Company's success by their ability, efficiency, and loyalty,
consideration being given to ability to succeed in more important
managerial responsibility in the Company. This is intended to include
the President/Co-Chief Executive Officer, Vice Chairmen, Executive
Vice Presidents, and from time to time, certain other officers having
comparable positions.
No award may be granted to a member of the Company's Board of
Directors except for services performed as an employee of the Company.
2. Except in the event of retirement, death, or disability, to be
eligible for an award an employee shall be employed by the Company as
of the date awards are calculated and approved by the Committee under
this Plan.
3. For purposes of this Plan, the term "employee" shall include an
employee of a corporation or other business entity in which this
Company shall directly or indirectly own 50% or more of the
outstanding voting stock or other ownership interest.
VI. Awards
1. The Committee shall determine each year the payments, if any, to be
made under the Plan. Awards for any calendar year shall be granted not
later than the end of the first quarter of the calendar year, and
payments pursuant to the Plan shall be made as soon as practicable
after the close of each calendar quarter (or, in the case of the
President/Co-Chief Executive Officer, as soon as practicable after the
close of each calendar year).
2. Upon the granting of awards under this Plan, each participant shall be
informed of his or her award by his or her direct manager and that
such award is subject to the applicable provisions of this Plan.
VII. Deferral of Awards
1. A participant in this Plan who is also eligible to participate in The
Charles Schwab Corporation Deferred Compensation Plan may elect to
defer payments pursuant to the terms of that plan.
VIII. Recommendations and Granting of Awards
1. Recommendations for awards shall be made to the Committee by the
Co-Chief Executive Officers, except that, with respect to the
President/Co-Chief Executive Officer, recommendations for awards shall
be made solely by the Chairman/Co-Chief Executive Officer.
2. Any award shall be made in the sole discretion of the Committee, which
shall take final action on any such award. No person shall have a
right to an award under this Plan until final action has been taken
granting such award.
IX. Amendments and Expiration Date
While it is the present intention of the Company to grant awards annually,
the Committee reserves the right to modify this Plan from time to time or
to repeal the Plan entirely, or to direct the discontinuance of granting
awards either temporarily or permanently; provided, however, that no
modification of this plan shall operate to annul, without the consent of
the beneficiary, an award already granted hereunder; provided, also, that
no modification without approval of the stockholders shall increase the
maximum amount which may be awarded as hereinabove provided.
X. Miscellaneous
All expenses and costs in connection with the operation of this Plan shall
be borne by the Company and no part thereof shall be charged against the
awards anticipated by the Plan. Nothing contained herein shall be construed
as a guarantee of continued employment of any participant hereunder. This
Plan shall be construed and governed in accordance with the laws of the
State of California.
<PAGE>
EXHIBIT A-2
The Charles Schwab Corporation
Annual Executive Individual Performance Plan
(As Amended February 27, 2002)
<PAGE>
I. Purposes
The purposes of this Annual Executive Individual Performance Plan (the
"Plan") are: (a) to provide greater incentive for key executives to
continually exert their best efforts on behalf of The Charles Schwab
Corporation (the "Company") by rewarding them for services rendered with
incentive compensation that is in addition to their regular salaries; (b)
to attract and to retain in the employ of the Company persons of
outstanding competence; and (c) to further align the interests of such
employees with those of the Company's stockholders through a strong
performance-based reward system.
II. Form of Awards
Incentive compensation awards under this Plan shall be generally granted in
cash, less any applicable withholding taxes; provided that the Committee
may determine, from time to time, that all or a portion of any award may be
paid in the form of an equity based incentive, including without limitation
stock options, restricted shares, or outright grants of Company stock. The
number of shares and stock options granted in any year, when added to the
number of shares and stock options granted for such year pursuant to the
Company's Corporate Executive Bonus Plan, shall in no event exceed .5% of
the outstanding shares of the Company.
III. Determination of Awards
1. Incentive awards for participants shall be determined annually. The
participants in the Plan shall be the executive officers who are
selected by the Compensation Committee of the Board of Directors (the
"Committee") to participate in the Charles Schwab Corporate Executive
Bonus Plan (the "CEB Plan"), except that the President and Co-Chief
Executive Officer shall not be eligible to participate in the Plan.
Payouts under the CEB Plan are defined by reference to a target
percentage of base salary determined, from time to time, by the
Committee and pursuant to a payout matrix, adopted from time to time
by the Committee, that uses corporate performance criteria, to be
selected by the Committee from among the following: revenue growth,
operating revenue growth, consolidated pretax profit margin,
consolidated pretax operating margin, customer net new asset growth,
stockholder return, return on net assets, earnings per share, return
on equity, and return on investment. Each participant shall have a
bonus target under the Plan equal to such Participant's bonus target
under the CEB Plan, multiplied by 160%. Payouts described in this
subsection shall be calculated and paid on an annual basis.
2. With respect to payments made pursuant to Section III.1, the amount of
base salary included in the computation of incentive awards pursuant
to the CEB Plan shall not exceed 250% of the base salary in effect for
the officer holding the same or substantially similar position on
March 31, 2000. In addition, (i) the maximum target incentive
percentage pursuant to the CEB Plan shall be 100% of base salary and
(ii) the maximum award pursuant to the CEB Plan shall be 400% of the
participant's target award.
3. Notwithstanding anything to the contrary contained in this Plan, the
Committee shall have the power, in its sole discretion, to reduce the
amount payable to any Participant (or to determine that no amount
shall be payable to such Participant) with respect to any award prior
to the time the amount otherwise would have become payable hereunder.
In the event of such a reduction, the amount of such reduction shall
not increase the amounts payable to other participants under the Plan.
IV. Administration
1. Except as otherwise specifically provided, the Plan shall be
administered by the Committee. The Committee members shall be
appointed pursuant to the Bylaws of the Company, and the members
thereof shall be ineligible for awards under this Plan for services
performed while serving on said Committee.
2. The decision of the Committee with respect to any questions arising as
to interpretation of the Plan, including the severability of any and
all of the provisions thereof, shall be, in its sole and absolute
discretion, final, conclusive and binding.
V. Eligibility for Awards
1. Awards under the Plan shall be granted by the Committee to those
employees who are eligible to participate in the CEB Plan. This is
intended to include the Vice Chairmen, Executive Vice Presidents, and
other officers having comparable positions.
No award may be granted to a member of the Company's Board of
Directors except for services performed as an employee of the Company.
2. Except in the event of retirement, death, or disability, to be
eligible for an award an employee must be employed by the Company as
of the date awards are calculated and approved by the Committee under
this Plan.
3. For purposes of this Plan, the term "employee" shall include an
employee of a corporation or other business entity in which this
Company shall directly or indirectly own 50% or more of the
outstanding voting stock or other ownership interest.
VI. Awards
1. The Committee shall determine each year the payments, if any, to be
made under the Plan. Awards for any calendar year shall be granted not
later than the end of the first quarter of the calendar year, and
payments pursuant to the Plan shall be made as soon as practicable
after the close of the calendar year.
2. Upon the granting of awards under this Plan, each participant shall be
informed of his or her award by his or her direct manager and that
such award is subject to the applicable provisions of this Plan.
VII. Deferral of Awards
1. A participant in this Plan who is also eligible to participate in The
Charles Schwab Corporation Deferred Compensation Plan may elect to
defer payments pursuant to the terms of that plan.
VIII. Recommendations and Granting of Awards
1. Recommendations for awards shall be made to the Committee by the
Co-Chief Executive Officers.
2. Any award shall be made in the sole discretion of the Committee, which
shall take final action on any such award. No person shall have a
right to an award under this Plan until final action has been taken
granting such award.
IX. Amendments and Expiration Date
While it is the present intention of the Company to grant awards annually,
the Committee reserves the right to modify this Plan from time to time or
to repeal the Plan entirely, or to direct the discontinuance of granting
awards either temporarily or permanently; provided, however, that no
modification of this plan shall operate to annul, without the consent of
the beneficiary, an award already granted hereunder; provided, also, that
no modification without approval of the stockholders shall increase the
maximum amount which may be awarded as hereinabove provided.
X. Miscellaneous
All expenses and costs in connection with the operation of this Plan shall
be borne by the Company and no part thereof shall be charged against the
awards anticipated by the Plan. Nothing contained herein shall be construed
as a guarantee of continued employment of any participant hereunder. This
Plan shall be construed and governed in accordance with the laws of the
State of California.
<PAGE>
EXHIBIT B
SUMMARY OF SCM INCENTIVE PLAN
Schwab Capital Markets Incentive ("SCM Incentive")
As a participant in the SCM Incentive Plan, Mr. Gorman will be eligible for
annual incentive compensation on the basis of the performance of Schwab Capital
Markets and other related capital markets businesses under his authority. The
SCM Incentive will fund on the basis of the financial performance of SCM as
measured by the actual adjusted pretax contribution margin for the combined
performance of all capital markets-related businesses that report to Mr. Gorman.
The target SCM Incentive for Mr. Gorman is $3 million and the maximum SCM
Incentive payable to Mr. Gorman is $7 million. No bonus payment from this plan
will be made unless SCM attains the threshold of 80% of its financial goals and
Mr. Gorman is employed by SCM on the date of payment.
SCM performance vs. plan and the resulting SCM Incentive, if any, will be
pro-rated for performance between levels ( e.g., performance at 110% of goal
would result in a bonus of between $3 million and $4 million, as calculated by
Corporate Finance based on the matrix in Exhibit C (which matrix may be revised
each year as specified in Section 4(c) of the Agreement)) and for partial years
worked by Mr. Gorman.
Form Of SCM Incentive Payment
The first $1 million in annual SCM Incentive payable under this Plan, if any,
shall be paid entirely in cash. Any amount earned above $1 million will be paid
50% in cash and 50% in restricted shares (e.g., if an SCM Incentive of $3
million is payable, $2 million will be paid in cash and $1 million in restricted
shares).
The restricted share grant amount will be determined by TCSC on the date of
grant, so that the total dollar value of restricted shares is converted into
TCSC shares by dividing the total dollar value by the average of the high and
low price of TCSC stock on the date of grant. E.g., if a $1 million value is to
be granted in restricted shares, an average TCSC stock price of $13 on the date
of grant, would result in a restricted share grant of 76,923 shares (rounded).
Restricted shares grants in lieu of cash incentive will vest following the below
vesting schedule:
Time Annual Cumulative
Period Vesting % Vesting %
1st year 0% 0%
2nd year 50% 50%
3rd year 50% 100%
Timing Of SCM Incentive Payment
The cash portion of any SCM Incentive will be paid by the end of February of
each year, based on performance for the prior year (e. g., incentive for year
2002 will be paid in February, 2003), unless Mr. Gorman elects to defer the
payment under Schwab's Officer Deferred Compensation Plan. Assuming that the
cash portion of any SCM Incentive is determined prior to the February
Compensation Committee meeting of TCSC Board of Directors, then any restricted
grant portion of the SCM Incentive payable to Mr. Gorman will be granted at the
February meeting of the Committee. In 2002, this meeting was held February 27.
SCM Incentive Plan Subject to TCSC Stockholder Approval in 2003
The SCM Incentive Plan (and any payments payable to Mr. Gorman under said plan)
with respect to any calendar year after 2002 are expressly contingent upon the
approval by a majority of TCSC's stockholders at TCSC's 2003 annual meeting, of
a proposal to approve the potential SCM Incentive payments which may be payable
to Mr. Gorman under said plan. If a majority of TCSC's stockholders fails to
approve such a proposal at the TCSC 2003 annual meeting the SCM Incentive Plan
shall be null and void and of no further force and effect with respect to any
calendar year after 2002.
<PAGE>
EXHIBIT C
SCM INCENTIVE MATRIX ILLUSTRATION
-----------------------------------------------------------------------------------------------------------------------------
SCM Bonus
Bonus Paid As:
------------------------------------------
If Actual Adjusted Pretax Payout as % of Shares
Contribution Margin is: SCM Performance SCM Bonus Target Bonus Cash Shares $ Value $13.00*
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
Less than $111.1mm <80% $ 0 0% $ 0 $ 0 0
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$111.1 mm 80% $1,000,000 33% $1,000,000 $ 0 0
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$124.9 mm 90% $2,000,000 67% $1,500,000 $ 500,000 38,462
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$138.8 mm 100% $3,000,000 100% $2,000,000 $1,000,000 76,923
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$156.2 mm 112.5% $4,000,000 133% $2,500,000 $1,500,000 115,385
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$173.5 mm 125% $5,000,000 167% $3,000,000 $2,000,000 153,846
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$190.9 mm 137.5% $6,000,000 200% $3,500,000 $2,500,000 192,308
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
$208.2 mm 150%** $7,000,000 233% $4,000,000 $3,000,000 230,769
---------------------------- ----------------- -------------- -------------------- -------------- --------------- -----------
* In this example, the dollar amount represents the number of shares granted by
dividing the shares' dollar value by the appropriate SCH stock price.
**150% or greater; the plan payout is capped at $7 million
The plan is based on a SCM 2002 revenue goal of $437 million and an adjusted
2002 pretax contribution margin goal of $138.8 million, or 31.77%. These figures
do not include AMPS. The adjusted pretax contribution margin goal is derived by
starting with an unadjusted pretax contribution margin of 34.3% and subtracting
the cost of equity applied to the equity capital maintained in SCM and the
equity capital required by the Securities Lending business. At the end of 2001,
SCM's equity capital was $66.9 million and the equity implied in the Securities
Lending business was $7.5 million (i.e., loan balance of $602 million multiplied
by an equity requirement of 1.25%). TCSC's cost of equity at the end of 2001 was
about 15%; thus, the pretax contribution margin has been adjusted down by $11.2
million, or 15% of $74.4 million (i.e., $66.9 million plus $7.5 million).
The adjusted actual pretax contribution margin calculated to determine the
achieved performance measure will also include an adjustment to cover the cost
of equity required to support any acquisition by SCM.
<PAGE>
EXHIBIT D
EXECUTIVE'S INVENTIONS
[to be inserted]
<PAGE>
SUPPLEMENTAL AGREEMENT
This Supplemental Agreement (the "Agreement") is entered into as of August 30,
2002 by and among the Charles Schwab Corporation, a Delaware corporation
("TCSC"), Schwab Capital Markets, L.P., a New Jersey Limited partnership ("SCM")
and Lon Gorman, an individual ("Executive").
WHEREAS TCSC, SCM and Executive entered into an Executive Employment Agreement
(the "Employment Agreement") in July, 2002 but inadvertently failed to fill in
the Effective Date for the Employment Agreement when executing it; and
WHEREAS, TCSC, SCM and Executive wish to avoid any misunderstanding and confirm
the Effective Date of the Employment Agreement.
NOW, THEREFORE, in consideration of the mutual premises set forth herein, and
for other good and valuable consideration, the parties hereby agree as follows:
AGREEMENT
1. Defined Terms
Any term used in this Agreement that is defined in the Employment Agreement
shall have the same meaning as set forth in the Employment Agreement.
2. Effective Date
The parties acknowledge and agree that the Effective Date of the Employment
Agreement is July 16, 2002.
3. No Other Addition or Deletion
Except as set forth herein, no addition or deletion to the Employment
Agreement has been made.
4. Other Provisions
Sections 11, 12, 13, 14, 15(other than second sentence), 16, 17, 19,
20(other than reference to Sections 6 and 12) , 21, 22(other than reference
to $25,000) and 23 of the Employment Agreement shall be deemed to be set
forth in this Agreement mutatis mutandis.
<PAGE>
IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first
written above.
Schwab Capital Markets, L.P.:
By: /s/ James Leonard
-----------------------
Its: SVP of General Partner
-----------------------
The Charles Schwab Corporation:
By: /s/ David S. Pottruck
-----------------------
Its: President & Co-CEO
-----------------------
By: /s/ Carrie E. Dwyer
-----------------------
Carrie E. Dwyer
Its:
-----------------------
Executive Vice-President,
General Counsel and Corporate Secretary
Executive:
/s/ Lon Gorman
--------------------------
Lon Gorman