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Executive Employment Agreement - Charles Schwab Corp., Schwab Capital Markets LP and Lon Gorman

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                         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