Executive Employment Agreement and Covenant Not to Compete - Charles Schwab Corp., U.S. Trust Corp. and H. Marshall Schwarz
EXECUTIVE EMPLOYMENT AGREEMENT AND COVENANT NOT TO COMPETE
This Employment Agreement (the "Agreement") is entered into as
of January 12, 2000, by and among The Charles Schwab Corporation, a Delaware
corporation ("Schwab"), U.S. Trust Corporation, a New York corporation ("UST"),
and H. Marshall Schwarz, an individual ("Executive").
R E C I T A L S
a. Executive is Chairman and Chief Executive Officer of UST
b. UST has been engaged in the business of providing
a broad array of financial services, including private banking,
fiduciary services, and tax, estate and financial planning. UST's
business is currently national in scope.
c. As of the date hereof, Schwab has entered into an
Agreement and Plan of Merger (the "Merger Agreement") with UST
for UST to become a wholly owned subsidiary of Schwab. Terms used
herein and not defined herein shall have the meanings given them
in the Merger Agreement.
d. Schwab, UST and Executive wish to assure the continuance
of the good will developed by Executive on behalf of UST during
Executive's employment and secure Executive's unique services in
connection with the business of UST, and Schwab and UST wish to
secure Executive's agreement not to compete with Schwab and UST,
or to infringe upon the protectible interests of Schwab and UST,
upon the terms and conditions set forth in this Agreement.
AGREEMENT
1. Employment. UST hereby employs Executive and Executive
hereby agrees to serve UST as Chairman and Chief Executive Officer of UST or in
such other comparable or more senior executive management position to which he
may be elected or appointed by the Board of Directors of UST (the "Board")
during the Employment Term (as defined below). Executive shall report to
Schwab's President and Co-Chief Executive Officer. The parties agree that
Executive will be appointed to the Board of Directors and Management Committee
of Schwab at the Effective Date of this Agreement. Executive's continued
appointment or removal from Schwab's Board of Directors during the term of this
Agreement is subject to the rules, by-laws or other provisions applicable to
such Board.
2. Employment Term. The term of Executive's employment under
this Agreement shall be for a period of three (3) years commencing on the
effective date of the consummation of the Merger of UST and Schwab pursuant to
the Merger Agreement (the "Effective Date") and terminating on the third
anniversary of the Effective Date, unless earlier terminated pursuant to Section
12 of this Agreement (the "Employment Term").
3. Responsibilities.
(a) Regular Duties. During the Employment Term,
Executive shall have responsibilities, duties and authority reasonably accorded
to and expected of a Chairman and Chief Executive Officer, as determined in good
faith by Schwab's President and Co-Chief Executive Officer.
(b) Devotion of Full Time. During the Employment Term,
Executive will devote all of Executive's business time, ability, attention,
energy, knowledge and skill to performing Executive's duties and all such
executive management duties as are reasonably assigned or delegated to
Executive. Executive will not, without written consent of Schwab, render to
others services of any kind for compensation, or engage in any other business
activity; provided that Executive will be entitled to sit on the boards of
directors of non-profit educational, charitable or religious organizations so
long as the extent of such service does not violate any Schwab policy or
policies applicable to such practices or materially interfere with the
performance of Executive's responsibilities under this Agreement, and provided
further that Executive may continue to serve on the boards of directors on which
Executive presently is serving, as specifically identified on Exhibit A hereto.
(c) Compliance with Employee Policies. Executive agrees
to comply with all Schwab and UST employee policies of which Executive is made
aware that relate to employee conduct, including but not limited to policies
prohibiting discrimination and harassment.
(d) Payments or Benefits from Other Sources. Executive
will comply with all Schwab policies of which Executive is made aware applicable
to any payments, gifts, entertainment, services or other benefits provided to
Executive from any person, organization or other entity as an inducement or
reward related to his performance as a representative of UST or Schwab.
(e) Place of Performance. During the Employment Term,
Executive shall be based at the principal executive offices of UST in the City
of New York, except for reasonably required travel consistent with Schwab policy
on UST's business. In connection with such reasonably required travel, Executive
shall not be required to make more than twelve (12) short-term trips to Schwab's
headquarters during each twelve-month period (beginning on the Effective Date)
of the Employment Term.
4. Compensation.
(a) Salary. In consideration for Executive's services
to UST during the Employment Term, Executive shall receive an annual base salary
equal to the annual base salary then being paid to Executive by UST as of the
Effective Date ("Annual Base Salary"), which shall be paid in substantially
equal installments biweekly, from which UST shall withhold and deduct all
applicable federal, state and city income, social security and disability taxes
as required by applicable laws. In no event shall Executive's Annual Base Salary
be reduced during the Employment Term.
(b) Short Term Incentive Compensation. Pursuant to the
terms of the UST Executive Incentive Plan, a current version of which is
attached as Exhibit B hereto, Executive shall receive, as additional
compensation, an annual bonus with a target of 165% of Executive's Annual Base
Salary ("Targeted Bonus"). After December 31, 2001, the specific terms of the
UST Executive Incentive Plan may be modified from time to time in Schwab's sole
discretion. For calendar year 2000, Executive's bonus shall not be less than the
short term incentive bonus Executive received from UST for calendar year 1999,
provided, however, that the portion of Executive's bonus converted to equity for
calendar year 2000 shall be calculated by Schwab using the methodology that is
utilized to value equity or option grants for Schwab Management Committee
members. For calendar year 2001, Executive's bonus shall not be less than eighty
percent (80%) of the short term incentive bonus Executive received from UST for
calendar year 1999, provided, however, that the portion of Executive's bonus
converted to equity for calendar year 2001 shall be calculated by Schwab using
the methodology that is utilized to value equity or option grants for Schwab
Management Committee members.
(c) Long Term Incentive Compensation. Subject to
approval by Schwab's Compensation Committee (which approval shall not be
unreasonably withheld), as soon as practicable after the Effective Date,
Executive shall receive an initial grant of options to purchase 25,000 of
Schwab's common shares subject to vesting and other provisions specified in the
grant, the key terms of which are attached as Exhibit C hereto. The value of
such grant is an amount that will put Executive's Targeted Total Compensation
within the range of the Targeted Total Compensation for Schwab Management
Committee members. "Targeted Total Compensation" is defined as the sum of
Executive's Annual Base Salary, Executive's Targeted Bonus, and the targeted
value of any options and/or restricted shares granted to Executive.
(d) Reimbursement of Expenses/Travel. During the
Employment Term, Executive shall be entitled to receive prompt reimbursement for
all travel, entertainment and other expenses properly incurred and documented by
Executive in connection with Executive's employment by UST in accordance with
Schwab policies applicable to senior management executives.
(e) Key Employee Retention Program. Executive is
scheduled to participate in the Key Employee Retention Program to be established
by UST and Schwab immediately prior to the Effective Date ("Retention Program"),
the key terms of which are attached as Exhibit D hereto, at a payment equal to
$2.8 million, five-sixths in cash and one-sixth in a grant of Schwab stock
options in accordance with the terms of Exhibit D.
5. Change In Executive's Mix of Total Compensation. Schwab and
the Executive agree that commencing January 1, 2002, the mix of Executive's
Targeted Total Compensation may be altered to reflect the Targeted Total
Compensation mix afforded Schwab Management Committee members. Such changes
could encompass changes to some or all of the components of Executive's Targeted
Total Compensation, but in any case would not represent a reduction in
Executive's Targeted Total Compensation and, in any event, neither Executive's
Annual Base Salary nor Executive's Targeted Total Compensation shall be reduced
at any time during the Employment Term.
6. Benefits.
(a) Executive Benefits. Up through and including
December 31, 2001, Executive shall be eligible to participate in all of UST's
applicable employee benefits and executive compensation plans, programs,
policies and arrangements in which Executive is eligible to participate
immediately prior to the Effective Date (collectively, "UST Plans").
(b) Schwab Employee Benefits. At the option of Schwab,
after December 31, 2001, or sooner if agreed by both Executive and Schwab,
Executive will be eligible to participate in Schwab's employee benefits and
executive compensation plans, programs, policies and arrangements as may be
applicable to Schwab Management Committee members, as such benefits may change
from time to time (collectively, "Schwab Plans"), instead of the benefits
described in Section 6(a); except that through the Employment Term, Executive
will not be eligible to participate in any such plans that provide for severance
pay or other benefits for which Executive would otherwise be eligible by virtue
of Executive's termination under the policies or practices of UST, Schwab or any
of its other affiliates or subsidiaries.
(c) Vacation and Sick Leave. During the Employment
Term, Executive shall be entitled to paid vacation and sick leave consistent
with the vacation and sick leave provided to employees of Schwab at the
Management Committee member level; provided, however, that in no event shall
Executive be entitled to less than five (5) weeks of vacation per each 12 month
period during the Employment Term.
(d) Credit for Service. Executive will receive credit
for prior service with UST to the extent length of service is relevant under
those UST Plans or Schwab plans for which Executive is eligible to participate.
(e) Relinquishment and waiver of all other employee
benefits or rights. Except as specifically set forth in this Agreement,
Executive hereby relinquishes and waives any rights in any other Schwab or UST
Plans, policies, or perquisites, including but not limited to any Plans,
policies or perquisites of any subsidiaries of UST. In particular, Executive
waives and relinquishes his right to severance benefits in the event of
voluntary termination under the 1990 Change in Control and Severance Policy for
Top Tier Officers Plan of UST.
7. Executive Change in Status. The amounts of compensation and
benefits (including any guarantees thereof) to be provided to Executive during
the Employment Term pursuant to Sections 4, 5, and 6 of this Agreement, as well
as the amounts of any Severance Payments to be provided to Executive pursuant to
Section 12 of this Agreement, are based on Executive's continuing status as a
full-time senior executive with UST throughout the Employment Term. Any change
in Executive's status as a full-time senior executive with UST to a status which
is less than that of a full-time senior executive with UST shall require
Schwab's express written consent. If Executive's status should change for any
reason during the Employment Term to a status which is less than that of a
full-time senior executive with UST, the amounts of the compensation and
benefits (including any guarantees thereof) to be provided to Executive pursuant
to Sections 4, 5, and 6 of this Agreement, as well as the amount of any
Severance Payments to be provided to Executive pursuant to Section 12 of this
Agreement, will be prorated accordingly. If Executive is promoted or otherwise
assumes duties, responsibilities and authority greater than those set forth in
Section 3(a), above, the amounts of compensation and benefits (including any
guarantees thereof) to be provided to Executive pursuant to Sections 4, 5 and 6
of this Agreement, as well as the amount of any severance payments to be
provided to Executive pursuant to Section 12 will be adjusted as appropriate.
8. Covenant Not to Compete.
(a) Until two years following any termination of
Executive's employment prior to or on the second anniversary of the Effective
Date, or until one year following any termination of Executive's employment
after the second anniversary of the Effective Date, for any reason whatsoever
pursuant to Section 12, including, without limitation, any termination of
Executive's employment pursuant to Section 12(f) or 12(g), Executive shall not
in, or directed to, the geographical areas set forth in Exhibit E hereto,
directly or indirectly:
(i) enter the employ of or render any
services to any person, joint venture, partnership, firm, corporation or other
entity (other than UST, Schwab or Schwab's other affiliates or subsidiaries)
engaged in providing private banking, fiduciary services, tax, estate or
financial planning services (any "Competitive Business");
(ii) engage in private banking, fiduciary
services, tax, estate or financial planning services, including, without
limitation, consultation or start-up activities in connection with such services
for Executive's own business, any third party or any Competitive Business; or
(iii) become interested in any Competitive
Business, directly or indirectly, in any capacity or in any relationship with
any other person or entity (other than with Schwab or its affiliates or
subsidiaries), whether as an individual, partner, shareholder, director,
officer, principal, agent, employee, trustee, or consultant; provided, however,
that nothing contained in this Agreement will 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) Until two years following any termination of
Executive's employment prior to or on the second anniversary of the Effective
Date, or until one year following any termination of Executive's employment
after the second anniversary of the Effective Date, for any reason whatsoever
pursuant to Section 12 including, without limitation, any termination pursuant
to Section 12(f) or 12(g), and unless such activities are performed as part of
Executive's employment and in the best interests of UST and Schwab, Executive
shall not, directly or indirectly:
(i) discourage any employee of, or
consultant under contract with, UST from becoming an employee of, or working
with, UST, Schwab or any of Schwab's other affiliates or subsidiaries;
(ii) hire any employee who has left the
employment of UST, Schwab or any of Schwab's other affiliates or subsidiaries
within one year of such employee's termination, or solicit or encourage any
employee to leave the employment of UST, Schwab or any of Schwab's other
affiliates or subsidiaries; or
(iii) hire, solicit or encourage to cease to
work with UST, Schwab or any of Schwab's other affiliates or subsidiaries, any
consultant then under contract with UST, Schwab or any of Schwab's other
affiliates or subsidiaries.
(c) Notwithstanding the foregoing, in the event the
Executive voluntarily terminates his employment prior to the end of the
Employment Term without Good Reason (as defined in Section 12(g) below), the
covenants set forth in subsections (a) and (b) of this Section 8 shall continue
until the third anniversary of the Effective Date of this Agreement or for one
year after the effective date of Executive's termination, whichever is later.
(d) During, and following the termination of, his
employment, Executive shall keep secret and retain in the strictest confidence
all confidential matters relating to UST, Schwab and other affiliates and
subsidiaries of Schwab including, without limitation, trade "know how", secrets,
customer lists, pricing policies, operational methods, 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 the Term, and shall not disclose such
confidential matters to anyone outside of UST, Schwab or any other affiliates
and subsidiaries of Schwab, except as required in the course of performing his
duties as an employee of UST or as required by law, or if such matters become
generally available to the public otherwise than by (x) disclosure by Executive
or anyone else owing a duty of confidentiality to UST, Schwab or any affiliate
or subsidiary of Schwab or (y) Executive's failure to put in place adequate
protections to prevent disclosure of confidential information relating to UST,
Schwab or any other affiliate or subsidiary of Schwab. As a further condition of
employment under this Agreement, Executive will execute Schwab's
Confidentiality, Nonsolicitation and Assignment Agreement attached hereto as
Exhibit F.
9. Certain Remedies. If Executive breaches, or threatens to
commit a breach of, any of the provisions of Section 8 herein, Schwab and UST
shall have the following rights and remedies, each of which rights and remedies
shall be independent of the other and severally enforceable, and all of which
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to Schwab and/or UST under law or in equity:
(a) The right and remedy to have the provisions of
Section 8 of this Agreement specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach will cause
irreparable injury to Schwab and/or UST and that money damages will not provide
an adequate remedy to Schwab or UST; and
(b) The right and remedy against Executive to require
Executive to account for and pay over to Schwab and/or UST the compensation,
profits, monies, accruals, increments or other benefits (collectively, "Benefits
from Breach"), if any, derived or received by Executive as the result of any
transaction constituting a breach of any of the provisions in Section 8 of this
Agreement, and Executive hereby agrees to account for and pay over such Benefits
from Breach to Schwab and/or UST.
10. Intellectual Property Rights Granted. Executive hereby
grants and assigns to UST and Schwab all rights (including all rights in
copyright, patent rights and or other proprietary rights) to all deliverables
and the other results of the services Executive performs for UST or Schwab,
including all original works of authorship and valuable information, ideas,
improvements, processes, developments, designs, know-how, data, computer
programs and formulae, inventions and expression created, developed or
discovered in connection with such services (collectively, the "Results"), for
any and all purposes, in any and all languages and any and all media, whether
now existing or later devised, throughout the world. This includes, without
limitation, on-line services, computer bulletin boards, Internet and World Wide
Web servers, publications, products utilizing CD-ROM, magnetic or other storage
media, microform and microfiche, databases, portable document formats, facsimile
transmission, and electronic mail or transmission. UST's and Schwab's rights to
the Results shall extend to all or any part of the Results, and to any work
derived from it or compiled from parts of it. Schwab or UST may publish the
Results in any version or translation, separately or with other works, and may
authorize others to do so. Executive also grants to Schwab and UST the right to
use Executive's name, photograph, likeness and biographical information in
connection with the exercise of any right Executive has granted under this
Contract, including for promotional purposes. To the extent permitted by
applicable law, Executive waives all artist's or moral rights associated with
the Results. Schwab and UST may (but neither is obligated to) take any actions
and file any documents necessary to register copyright (and otherwise protect
their rights) in the Results in any and all countries, and Executive will sign
and deliver any documents Schwab or UST reasonably asks Executive to for this
purpose.
11. Media Communication and Non-Disparagement. Executive
agrees to comply with the policies of Schwab with respect to media
communication, and will cause UST to submit proposed press releases to
designated Schwab management for review and approval prior to their release.
Executive acknowledges that as a high level officer, Executive will have access
to confidential and extremely sensitive information regarding Schwab, UST, their
executives and officers, and that any statements Executive may make regarding
Schwab, UST, their subsidiaries or executives or officers (collectively
"Schwab-related entities"), whether made during Executive's employment, or
thereafter, may be accorded substantial weight by Executive's audience simply by
virtue of Executive's high level officer status. Accordingly, Executive agrees
to make no public or voluntary statement disparaging of any Schwab-related
entities, or reasonably likely to damage the reputation of any Schwab-related
entities, or to cause other damage to any Schwab-related entities. Nothing in
this Section is intended to require Executive to testify other than truthfully
when testifying as required by law.
12. Termination of Employment.
(a) Expiration of the Employment Term. The Employment
Term shall automatically terminate on the third anniversary of the Effective
Date.
(b) Death. The Employment Term shall terminate upon the
death of Executive. UST's liability in such event shall be limited to payment
of: (i) Executive's salary and benefits through the last day of the month in
which the death of Executive occurs; (ii) any bonus due Executive under Section
4(b) above in respect of Schwab's fiscal year ended prior to Executive's
termination and any prorated bonus consistent with Schwab policies applicable to
Management Committee members; (iii) all unreimbursed out-of-pocket business
expenses of the type described in Section 4(d) above incurred 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 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 year following the date of
Executive's death (but not beyond their original term) or as otherwise specified
in the applicable plan document; and (vi) all other vested accrued benefits to
which Executive is entitled under applicable UST or Schwab Plans.
(c) Incapacity or Disability. If Executive is prevented
for (x) a continuous period of 120 days, or (y) a period of 180 days or more
during any one-year period, from properly performing, with reasonable
accommodation, Executive's duties or fulfilling Executive's responsibilities to
UST by reason of any physical or mental incapacity, disability or illness, then,
to the extent permitted by law, UST may consider such disability, incapacity or
illness permanent and may terminate Executive's employment hereunder. UST or
Schwab will give Executive notice of its intent to terminate Executive at least
seven (7) days before the effective date of such termination. In the event of
such incapacity, disability or illness, UST's liability shall be limited to
payment of: (i) Executive's salary and benefits through the date of termination;
(ii) any bonus due Executive under Section 4(b) above in respect of Schwab's
fiscal year ended prior to Executive's termination and any prorated bonus
consistent with Schwab policies applicable to Management Committee members;
(iii) all unreimbursed out-of-pocket business expenses of the type described in
Section 4(d) above incurred by Executive prior to Executive's termination; (iv)
all unused vacation days accrued to the date of Executive's termination; (v)
full and immediate vesting of all then outstanding stock options and other
equity-based awards, which, in the case of stock options, shall remain
exercisable by Executive (or Executive's legal representative) for one year
following the date of Executive's date of employment termination (but not beyond
their original term) or as otherwise specified in the applicable plan document;
and (vi) all other vested accrued benefits to which Executive is entitled under
applicable UST or Schwab Plans.
(d) Termination by UST for Cause or Termination by
Executive Without Good Reason. UST will have the right to terminate the
Executive's employment hereunder for Cause (as defined below) and Executive will
have the right to terminate his employment hereunder without Good Reason (as
defined in Section 12(g), below). In the event of such a termination, UST shall
pay to Executive: (i) Executive's salary through the date of termination; (ii)
any bonus due under Section 4(b) above in respect of Schwab's fiscal year ended
prior to Executive's termination; (iii) payment of all unreimbursed
out-of-pocket business expenses of the type described in Section 4(d) incurred
by Executive prior to Executive's termination; (iv) all unused vacation days
accrued to the date of Executive's termination; and (v) all other vested accrued
benefits and to which Executive is entitled under applicable UST or Schwab
employee benefit plans. For purposes of this Agreement, an event or occurrence
constituting "Cause" shall be limited to any one of the following:
(i) Executive's failure or refusal to
substantially perform Executive's duties or Executive's continued neglect to
perform such duties to the full extent of Executive's abilities for reasons
other than death, physical or mental incapacity;
(ii) Executive's gross negligence or willful
misconduct in the performance of Executive's duties hereunder, or conduct which
is materially adverse, monetarily or otherwise, to UST or its shareholders;
(iii) A finding by a court or other
governmental body that an act or acts of the Executive constituted a felony or
other crime involving theft or fraud under the laws of the United States or any
state thereof;
(iv) Executive's violation of federal or
state laws and regulations and a good faith determination by UST's board of
directors that the continued employment of the Executive by UST would be
seriously detrimental to UST and its business; or
(v) A material breach by Executive of this
Agreement.
In the case of one or more events described
in clause (i), (ii) or (v) of this Section 12(d), Executive shall be given (i)
written notice describing the event or events constituting such Cause and (ii) a
reasonable opportunity (which is not less than ten business days) to cure such
event or events.
(e) Mutual Consent. The employment of the Executive
hereunder may be terminated upon mutual written consent of UST and Executive.
(f) Termination by UST Without Cause. UST may terminate
the employment of Executive hereunder without Cause, in which event UST shall
continue to pay to Executive: (i) Executive's salary for each year remaining in
the Employment Term (but not less than three times Executive's Annual Base
Salary if Executive is terminated prior to or on the second anniversary of the
Effective Date, or not less than two times Executive's Annual Base Salary if
Executive is terminated after the second anniversary of the Effective Date),
payable at Schwab's option in a discounted lump sum or in substantially equal
installments biweekly, from which Schwab 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) any bonus due under Section
4(b) above in respect of Schwab's fiscal year ended prior to Executive's
termination and a bonus for each year remaining in the Employment Term, (but not
less than three years of bonuses if Executive is terminated prior to or on the
second anniversary of the Effective Date, or not less than two years of bonuses
if Executive is terminated after the second anniversary of the Effective Date)
based on Executive's then current Targeted Bonus; (iii) full and immediate
vesting of any outstanding stock options and other equity based awards; (iv) all
unreimbursed out-of-pocket business expenses of the type described in Section
4(d) above incurred by Executive prior to Executive's termination, (v) all
unused vacation days accrued to the date of Executive's termination, (vi)
continuation of the medical, dental and life insurance coverage provided to
Executive immediately prior to the date of Executive's termination as determined
by Schwab consistent with the period during which Executive may receive Annual
Base Salary payments pursuant to this Section 12(f)(i), at the end of which
period Executive shall be entitled to group health continuation coverage in
accordance with Section 4980B of the Code; (vii) three additional years of
deemed age and service credit from the effective date of Executive's termination
if Executive is terminated prior to or on the second anniversary of the
Effective Date, or two additional years of deemed age and under service credit
from the effective date of Executive's termination if Executive is terminated
after the second anniversary of the Effective Date, under UST's (or, if
applicable, Schwab's) tax-qualified and nonqualified pension plans in which
Executive is then a participant; (viii) outplacement assistance services for up
to one year; and (ix) all other vested accrued benefits and to which Executive
is entitled under applicable UST or Schwab employee benefit plans. These
payments shall be given to Executive in lieu of any severance pay or any other
benefits for which Executive would otherwise be eligible by virtue of
Executive's termination under the policies or practices of UST, Schwab or any of
their other affiliates or subsidiaries.
(g) Termination by Executive with Good Reason. The
Executive may terminate his employment with UST with Good Reason, in which event
UST shall continue to pay to Executive: (i) Executive's salary for each year
remaining in the Employment Term (but not less than three times Executive's
Annual Base Salary if Executive is terminated prior to or on the second
anniversary of the Effective Date, or not less than two times Executive's Annual
Base Salary if Executive is terminated after the second anniversary of the
Effective Date), payable at Schwab's option in a discounted lump sum or in
substantially equal installments biweekly, from which Schwab 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) any bonus due
under Section 4(b) above in respect of Schwab's fiscal year ended prior to
Executive's termination and a bonus for each year remaining in the Employment
Term, (but not less than three years of bonuses if Executive is terminated prior
to or on the second anniversary of the Effective Date, or not less than two
years of bonuses if Executive is terminated after the second anniversary of the
Effective Date) based on Executive's then current Targeted Bonus; (iii) full and
immediate vesting of any outstanding stock options and other equity based
awards; (iv) all unreimbursed out-of-pocket business expenses of the type
described in Section 4(d) above incurred by Executive prior to Executive's
termination; (v) all unused vacation days accrued to the date of Executive's
termination; (vi) continuation of the medical, dental and life insurance
coverage provided to Executive immediately prior to the date of Executive's
termination as determined by Schwab consistent with the period during which
Executive may receive Annual Base Salary payments pursuant to this Section
12(g)(i), at the end of which period Executive shall be entitled to group health
continuation coverage in accordance with Section 4980B of the Code; (vii) three
additional years of deemed age and service credit from the effective date of
Executive's termination if Executive is terminated prior to or on the second
anniversary of the Effective Date, or two additional years of deemed age and
under service credit from the effective date of Executive's termination if
Executive is terminated after the second anniversary of the Effective Date,
under UST's (or, if applicable, Schwab's) tax-qualified and nonqualified pension
plans in which Executive is then a participant; (viii) outplacement assistance
services for up to one year; and (ix) all other vested accrued benefits and to
which Executive is entitled under applicable UST or Schwab employee benefit
plans. These payments shall be given to Executive in lieu of any severance pay
or any other benefits for which Executive would otherwise be eligible by virtue
of Executive's termination under the policies or practices of UST, Schwab or any
of their other affiliates or subsidiaries. For purposes of this Section 12(g),
an event or occurrence constituting "Good Reason" shall be limited to any one of
the following:
(i) a material breach of this Agreement by
Schwab;
(ii) a substantial diminution in the duties,
titles, positions or responsibilities of Executive as contemplated by Section
3(a) above;
(iii) the required relocation of Executive's
place of employment outside of New York City, New York;
(iv) a reduction in Executive's Annual Base
Salary or Executive's Targeted Total Compensation; or
(v) the failure by Schwab or UST to obtain
the express written assumption of this Agreement by any successor to Schwab or
UST.
(h) Resignation of Positions. Upon termination of
Executive's employment for any reason whatsoever, Executive shall be deemed to
have resigned from all offices and directorships then held with Schwab, UST, and
any of their other affiliates or subsidiaries.
(i) Unvested Schwab Options. Except as specifically
provided herein, unvested Schwab options held by Executive at the time of any
termination of his employment pursuant to this Section 12 will be subject to the
terms of the grant of those options.
(j) Excise Tax Gross-Up. In the event that Executive
becomes entitled to any payments provided under this Section 12 (the "Severance
Payments"), if any of the Severance Payments or any other payments or benefits
to which Executive is then entitled ("Other Payments"), will be subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code (the "Excise
Tax"), UST shall pay to Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by Executive, after deduction of any Excise
Tax on the Severance Payments and Other Payments and any Federal, state and
local income and employment tax and Excise Tax upon the payment provided for by
this Section 12(j), shall be equal to the Severance Payments and the Other
Payments.
(k) Expiration/Non-Renewal. Following the expiration
or non-renewal of the Employment Term and for so long as the covenants set forth
in Section 8, above, remain in effect as otherwise provided hereunder, Executive
shall receive such severance payments and benefits as may be provided pursuant
to policies or practices applicable to Management Committee members.
13. Effect of Termination of Employment. Upon the termination
of Executive's employment pursuant to Section 12, the parties' obligations under
this Agreement shall terminate, except those obligations expressly indicating
survival after termination in Sections 4, 8, 9, 10, 11, 12, 14 and 17; provided,
however, that rights and remedies accruing prior to such termination or arising
out of the breach of this Agreement shall survive.
14. Set-Off/Mitigation. Executive grants to UST the right, at
any time and from time to time, to set off from any and all amounts owed to
Executive, dollar for dollar, the amounts owed to UST resulting from damages to
UST for any breach by Executive of Sections 8, 10, or 11. In the event of
Executive's termination without Cause or with Good Reason pursuant to Section
12(f) or Section 12(g), respectively, Executive shall have no duty to mitigate
by seeking other employment.
15. Representations and Warranties.
(a) UST and Schwab represent and warrant that they have
the requisite corporate power to enter into this Agreement and to carry out
their obligations hereunder. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of UST and Schwab.
(b) Executive represents and warrants that Executive is
under no employment contract, bond, confidentiality agreement, noncompetition
agreement, or any other obligation that would violate or be in conflict with the
terms and conditions of this Agreement or encumber Executive's performance of
duties assigned to him by UST. Executive further represents and warrants that
Executive has not signed or committed to any employment or consultant duties or
other obligations that would divert Executive's full attention from the duties
assigned to Executive by UST under this Agreement.
16. Governing Law. This agreement shall be governed by the
laws of the state of New York.
17. Arbitration. Any dispute or controversy arising between or
among the parties hereto regarding any of the terms of this Agreement or the
breach thereof, the determination of which is not otherwise provided for in this
Agreement, shall be submitted to and determined in arbitration in the City of
New York in accordance with the rules then in effect of the American Arbitration
Association. The arbitrators are hereby instructed to enforce this Agreement as
written. In any arbitration, all services and notices shall be served or given
in accordance with Section 26. Any award or decision made by the arbitrators
shall be conclusive in the absence of fraud, and judgment upon said award or
decision may be entered in any court having jurisdiction thereof. Each party
shall bear his or its own costs (including attorneys' fees) in connection with
the arbitration of any dispute or controversy under this Agreement, unless
otherwise ordered by the arbitrator in accordance with law. The parties hereto
agree that for purposes of this Agreement all disputes hereunder shall be deemed
to be between Schwab and Executive and that it is the intention of the parties
that disputes be resolved outside of any securities industry arbitration.
18. 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.
19. 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.
20. Assignment. This Agreement is a personal contract and,
except as specifically set forth herein, the rights and interests of Executive
herein may not be sold, transferred, assigned, pledged or hypothecated. The
rights and obligations of UST and Schwab hereunder shall be binding upon and run
in favor of the successors and permitted assigns of UST and Schwab. This
Agreement may not be assigned by any party without the prior written consent of
the other parties hereto, except that without prior written consent Schwab and
UST may assign their rights and obligations hereunder to any person or entity to
which Schwab or UST transfers all or substantially all of their properties or
assets or to any person or entity with which Schwab or UST consolidates or
merges.
21. 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. In particular, this Agreement supercedes any prior
employment agreements between Executive and UST, or any other agreements or
policies pursuant to which Executive would be entitled to rights or benefits,
except as specifically stated in this Agreement, and Executive hereby
relinquishes any such rights under any such agreements or policies. No
amendment, modification or rescission of this Agreement will be effective unless
set forth in writing signed by Executive and a duly authorized officer of UST
and of Schwab.
22. 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.
23. Severability and Enforceability. If any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable as to any party or in any jurisdiction, then such provision or
provisions shall be 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 8 or 9 of this
Agreement are unenforceable because of the duration of such provision or the
area or scope covered thereby, the parties agree that the court making such
determination shall have the power to reduce the duration, area or scope of such
provision to the minimum extent necessary to allow such section to be
enforceable under applicable law and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
24. Separate Agreements. Executive's agreements in Section
8(a) shall be deemed to be a separate agreement with respect to each
jurisdiction contained within the area set forth in Exhibit E hereto. If any
such agreement with respect to any such geographical area shall be determined to
be invalid or unenforceable, the remaining agreement with respect to such other
geographical areas shall not be affected by such invalidity or unenforceability.
25. 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.
26. 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:
Schwab or UST:
Christopher V. Dodds
Executive Vice President and Chief
Financial Officer
The Charles Schwab Corporation
120 Kearney Street, 29th Floor
San Francisco, California 94108
Facsimile No.: (415) 663-5877
Telephone No.: (415) 627-7000
with copies to:
Carrie Dwyer
Executive Vice President Corporate
Oversight
The Charles Schwab Corporation
120 Kearney Street, 29th Floor
San Francisco, California 94108
Facsimile No.: (415) 667-3596
Telephone No.: (415) 627-7000
and to:
Lawrence B. Rabkin, Esq.
Howard, Rice, Nemerovski, Canady, Falk &
Rabkin,
A Professional Corporation
Three Embarcadero Center
Seventh Floor
San Francisco, CA 94111
Facsimile No.: (415) 399-3041
Telephone No.: (415) 434-1600
Executive:
H. Marshall Schwarz
U.S. Trust Corporation
114 West 47th Street
New York, New York 10036
Facsimile No.: (212) 852-3030
Telephone No.: (212) 852-3021
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>
Executed and effective as of the date first written above.
THE CHARLES SCHWAB CORPORATION
By: /s/ David S. Pottruck
-----------------------------
Name: David S. Pottruck
---------------------------
Title: President & Co-CEO
--------------------------
U.S. TRUST CORPORATION
By: /s/ Jeffrey S. Maurer
-----------------------------
Name: Jeffrey S. Maurer
---------------------------
Title: President
--------------------------
/s/ H. Marshall Schwarz
--------------------------------
H. MARSHALL SCHWARZ
<PAGE>
EXHIBIT A
Board(s) of Directors on which Executive currently is serving.
<PAGE>
H. MARSHALL SCHWARZ
Chairman - New York
AFFILIATIONS
Atlantic Mutual Companies
Director
Bowne & Co., Inc.
Director
American Red Cross to Greater New York
Trustee
The Camille and Henry Dreyfus Foundation, Inc.
Trustee
Milton Academy
President - Board of Trustees
Teachers College Columbia University
Trustee
The Committee to Encourage Corporate Philanthropy
Member
<PAGE>
EXHIBIT B
UST Executive Incentive Plan
<PAGE>
EXHIBIT B
I, Carol A. Strickland, Secretary and a Senior Vice President of U.S. Trust
Corporation, do hereby certify that the following is a true copy of resolutions
adopted at a regular meeting of the Board of Directors, duly convened and held
on February 23, 1999 pursuant to law at which a quorum was present, that said
resolutions were adopted by at least a majority of the entire Board of Directors
of this Corporation and that the following resolutions have not been amended or
repealed since their adoption:
RESOLVED, that the Executive Incentive Plan ("EIP") shall be amended
effective January 1, 1999 to increase the maximum percentage of the
Restricted Units Portion of a Participant's Award from 33-1/3% to 50% as
follows.
Section 6(b) of the EIP is hereby amended by replacing each
reference to "33 1/3%" contained therein to "50%."
FURTHER RESOLVED, that the appropriate officers of the Corporation be,
and each of them hereby is, authorized to execute any documents and to take
any and all other action as may be necessary or desirable in the judgment
of any of them and pursuant to advice of counsel, in order to effectuate
the intent and purpose of the foregoing resolution; and
FURTHER RESOLVED, that any and all action heretofore or hereafter
taken by such officer or officers pursuant to, or in furtherance of the
intent and purposes of the foregoing resolutions be, and each hereby is,
ratified and confirmed as the act and deed of the Corporation.
IN WITNESS WHEREOF, I have hereunto, set my hand as Secretary of said
Corporation and affixed the corporate seal as of February 23, 1999.
/s/ Carol A. Strickland
-------------------------------
Secretary
<PAGE>
Amendments to the Executive Incentive Plan of
United States Trust Corporation
As Amended and Restated through January 1, 1997
RESOLVED that the Executive Incentive Plan ("EIP") shall be amended
effective January 1, 1999 as follows:
1. The definition of the term "ESOP Contribution" in Section 2 shall be
deleted;
2. Section 6(a) is hereby amended to read as follows:
"The amount payable with respect to a Participant's Award for any Plan Year
beginning on or after January 1, 1999, shall be the total amount of the
Award earned by the Participant."
3. Section 6 is hereby amended by the addition of a new Section 6(i):
"Notwithstanding the foregoing provisions of this Section 6, a Participant
who is a Managing Director (or more senior executive); who has attained age
60; and holds more than twice his or her US. Trust stock ownership target,
may elect to receive the Restricted Unit Portion of his or her grant in
cash by filing a written notice with the Committee. Such election shall
provide for the deferral of payment of such cash amount. Such cash amount
shall become vested on the fifth anniversary of the date of grant, or if
earlier, on the date of the Participant's death, permanent disability, or
retirement on or after the date on which the Participant attains age 65,
and shall be forfeited in the event the Participant's employment terminates
prior to the vesting, except to the extent the Committee in its discretion
otherwise determines."
4. Section 9(c) is hereby amended to read as follows:
"As soon as practicable following the Change in Control, all Awards which
are deemed to have been earned to the full and maximum extent upon the
occurrence of the Change in Control shall be payable in full in single cash
lump sums, reduced by any taxes withheld pursuant to Section 10."
<PAGE>
Executive Incentive Plan
of
U.S. Trust Corporation
Pursuant to resolutions adopted by the Board of Directors of U.S. Trust
Corporation on December 10, 1996, the provisions set forth in the document
annexed hereto are hereby adopted as the final language for the Executive
Incentive Plan of U.S. Trust Corporation, as amended and restated effective
January 1, 1997.
Executed by the undersigned this 20th day of December, 1996.
/s/ Patricia W. McGuire
------------------------------------------
Patricia W. McGuire, Senior Vice President
U.S. Trust Corporation
<PAGE>
Executive Incentive Plan
of
U.S. Trust Corporation
As Amended and Restated effective January 1, 1997
1. Purpose
The purpose of the Executive Incentive Plan of U.S. Trust
Corporation is to (i) encourage greater focus on performance among the key
executives of U.S. Trust Corporation and its Affiliated Companies by relating a
significant portion of their total compensation to the achievement of annual
financial and strategic objectives, and (ii) promote on the part of such
executives an increased level of ownership of the Common Shares of the
Corporation by providing for a significant portion of their awards under the
Plan to be paid in the form of the Corporation's Common Shares.
2. Definitions
As used herein, the following terms shall have the following
meanings:
"Affiliated Companies" shall mean United States Trust Company
of New York, and each other direct or indirect subsidiary of the Corporation.
"Average Market Value" shall mean, with respect to one Common
Share as of any date or with respect to any period, the mean between the
per-share high and low prices for the Corporation's Common Shares on such date,
or the average of the mean between such prices on each day during such period,
as quoted on the NASDAQ National Market System, or, if the Corporation's Common
Shares are not traded on such system, on such other securities market or
securities exchange on which such shares are traded as the Committee shall
determine.
"Award" shall mean payment earned by a Participant in
accordance with the provisions of the Plan.
"Beneficiary" shall mean the person or person designated by a
Participant in accordance with Section 11 to receive any amount, or any Common
Shares, payable under the Plan upon the Participant's death.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Change in Control" shall mean that any of the following
events has occurred:
(i) 20% or more of the Corporation's Common Shares has been
acquired by any person (as defined by Section 3(a)(9) of the Securities
Exchange Act of 1934) other than directly from the Corporation;
(ii) there has been a merger or equivalent combination after
which 49% or more of the voting shares of thc surviving corporation is
held by persons other than former shareholders of the Corporation; or
(iii) 20% or more of the directors elected by shareholders to
the Board of Directors are persons who were not nominated by the Board
of Directors or the Executive Committee of the Board of Directors in
the most recent proxy statement of the Corporation;
provided, however, that notwithstanding anything in the Plan to the contrary, no
Change in Control shall be deemed to have occurred, and no rights arising upon a
Change in Control as provided in Section 9 shall exist, to the extent that the
Board of Directors so directs by resolution adopted prior to the Change in
Control, or not later than 45 days after the Change in Control if the percentage
of Common Shares acquired or directors elected under clause (i) or (iii) of the
foregoing definition of Change in Control shall be at least 20% but less than
25%. Any resolution of the Board of Directors adopted in accordance with the
provisions of this definition directing that a Change in Control shall be deemed
not to have occurred for purposes of the Plan and that Section 9 shall not
become effective may be rescinded or countermanded at any time with or without
retroactive effect.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Committee" shall mean the Compensation and Benefits Committee
of the Board of Directors.
"Common Shares" shall mean the common shares ($1.00 par value
per share) of the Corporation.
"Corporation" shall mean U.S. Trust Corporation.
"Determined Value" shall mean (i) the highest price per Common
Share paid in connection with any Change in Control (including, without
limitation, prices paid in any subsequent merger or combination with any entity
that acquires control of the Corporation), or (ii) in the case of a Change in
Control occurring as a result of an event described in clause (iii) of the
definition of Change in Control contained in this Section 2, the Average Market
Value of a Common Share during the 30-day period ending on the day preceding the
occurrence of such Change in Control.
"ESOP Contribution" shall mean the ESOP Contribution as
defined under the 401(k) Plan.
"Executive Deferred Compensation Plan" shall mean the
Executive Deferred Compensation Plan of U.S. Trust Corporation.
"401(k) Plan" shall mean the 401(k) Plan and ESOP of United
States Trust Company of New York and Affiliated Companies.
"Participant" shall mean an officer of the Corporation or any
of its Affiliated Companies who is selected to participate in the Plan.
"Plan" shall mean the Executive Incentive Plan of U.S. Trust
Corporation, as set forth herein and as amended from time to time.
"Plan Year" shall mean, initially, the period beginning on
September 1, 1995 and ending on December 31, 1995, and thereafter, each calendar
year.
"Restricted Unit shall mean a unit of measurement equivalent
to One Common Share, with none of the attendant rights of a shareholder of such
share, including, without limitation, the right to vote such share and the right
to receive dividends thereon, except to the extent otherwise specifically
provided herein.
"Vesting Date" shall mean, with respect to any Restricted
Units granted to a Participant hereunder, the date on which such Restricted
Units become vested, as provided in Section 6(d) or Section 9(e).
3. Maximum Number of Common Shares of Stock Available for Awards
Notwithstanding any other provision of the Plan, the number of
Common Shares that may be distributed with respect to Restricted Units granted
under the Plan after January 1,1997 (whether distributed under the Plan or under
the Deferred Restricted Unit Plan of U.S. Trust Corporation) shall be limited to
the sum of (i) 150,000 Common Shares, plus (ii) that number of Common Shares,
out of the total number of Common Shares approved prior to January 1, 1997 by
the Corporation's shareholders for the grant of Restricted Units hereunder that
were not covered by Restricted Units granted hereunder prior to January 1, 1997,
plus (iii) a number of Common Shares equal to the total number of additional
Restricted Units credited to Participants with respect to dividends paid on
Common Shares, as provided in Section 6(d)ii). If any Restricted Units initially
granted or thereafter credited to a Participant shall be forfeited, the number
of Common Shares no longer payable with respect to the Restricted Units so
forfeited shall thereupon be released and shall thereafter be available for new
grants of Restricted Units under the Plan. The limitation provided under this
Section 3 shall be subject to adjustment as provided in Section 7.
The Common Shares distributed under the Plan may be authorized
and unissued shares, shares held in the treasury of the Corporation, or shares
purchased on the open market by the Corporation at such time or times and in
such manner as it may determine. The Corporation shall be under no obligation to
acquire Common Shares for distribution to Participants before payment in Common
Shares is due.
4. Participation
Participants in the Plan shall be limited to those officers of
the Corporation and its Affiliated Companies whom the Committee, in its sole
discretion, selects to participate in the Plan.
The Committee may select as a Participant for any Plan Year
any officer who, in the sole judgment of the Committee, is expected to make
contributions that are critical to the success of the Corporation and its
Affiliated Companies and to the growth of their businesses.
Any person who has been selected as a Participant for any Plan
Year shall continue to be a Participant in the Plan for each subsequent Plan
Year during the period of his or her employment, subject, however, to the
Committee's right to terminate such individual's participation in the Plan as of
any Plan Year commencing after the date on which the Committee makes its
determination to terminate such individual's participation.
5. Awards
Awards for any Plan Year beginning on or after January 1, 1997
shall be made in accordance with the following provisions:
(a) Within such period of time after the start of the year as may
be permitted by the regulations issued under Section 162(m) of the Code, the
Committee shall establish in writing (i) the corporate performance goal (the
"Performance Goal") that will apply in determining the Awards for the year, (ii)
the aggregate amount that will be available for Awards for the year if the
Performance Goal is achieved (the "Target Awards Pool"), and (iii) the
percentages of the Target Awards Pool that will in fact be available for Awards
for the year based on the level of achievement of the Performance Goal, which
percentages may be greater than 100% if the Performance Goal is exceeded and
less than 100% if the Performance Goal has not been fully achieved (the "Actual
Awards Pool").
(b) The Performance Goal to be established for the year shall be
the achievement of such level of Adjusted Earnings Per Share of the Corporation
as the Committee shall determine. The Corporation's "Adjusted Earnings Per
Share" for any year shall mean the Corporation's reported earnings per share for
the year as determined on a fully diluted basis, adjusted so as to eliminate the
effects of any (i) charges to earnings for any acquisitions, divestitures,
discontinuance of business operations, restructuring or any other special
charges that are separately disclosed in the Corporation's Annual Report for the
year, (ii) charges to earnings for the cumulative effect of any accounting
changes, and (iii) charges to earnings for any "extraordinary items" as
determined under generally accepted accounting principles.
(c) The Target Awards Pool to be established for the year shall be
determined by the Committee as a percentage or percentages of the aggregate base
salary earned for the year, while a Participant, of all Participants, either
individually or by categories of Participants, provided that the Committee may,
in its discretion, also apply such percentage or percentages to other current or
deferred compensation and determine the year for which such deferred
compensation shall be counted.
(d) As of the end of the Plan Year, the Committee shall determine
the extent to which the Performance Goal for the year has been met and, based
thereon, the amount of the Actual Awards Pool. The Committee shall not have any
discretion to increase the Actual Awards Pool, as so determined; but the
Committee may, in its discretion, reduce the amount of the Actual Awards Pool,
as so determined, to reflect any charges to earnings that were not taken into
account in determining the Corporation's Adjusted Earnings Per Share for the
year pursuant to Section 5(b)i), (ii) or (iii), or to reflect any other events,
circumstances or factors which the Committee believes to be appropriate in
determining the total amount to be made available for Awards to Participants for
the year.
(e) After determining the Actual Awards Pool in accordance with
Section 5(d), the Committee shall determine the amount of the Award, if any,
earned for the year by each Participant, in accordance with the following rules:
(i) In the case of any Participant who, on the last day of
the year, is the Chief Executive Officer of the Corporation or one of
the four highest compensated officers of the Corporation other than
its Chief Executive Officer (each such Participant is referred to
hereinafter as a "Covered Executive"), the Award payable to the
Covered Executive for the year shall be equal to (A) the portion of
his or her base salary taken into account in determining the Target
Awards Pool for the year, multiplied by (B) the percentage determined
by dividing (1) the amount of the Actual Awards Pool for the year as
finally determined under Section 5(d) by (2) the amount of the Target
Awards Pool for the year. The Committee shall not have any discretion
to increase the amount of any Covered Executive's Award, as so
determined; but the Committee may, in its discretion, reduce the
amount of any Covered Executive's Award, as so determined, to reflect
the Committee's evaluation of the Covered Executive's individual
performance or to reflect any other factors the Committee deems
appropriate in determining the amount of the Covered Executive's Award
for the year.
(ii) In the case of each Participant who is nor a Covered
Executive, the amount of the Award, if any, earned by such Participant
for the year shall be determined by the Committee, in its discretion,
based on the level of such Participant's achievement of the goals and
objectives established for the Participant at the start of the year
and on such other factors as the Committee deems appropriate. The
individual goals for each such Participant for each Plan Year shall be
set, and such Participant's performance relative to such goals shall
be measured, by the Committee based upon the recommendations of the
Chief Executive Officer.
(iii) The Committee may, in its discretion, make Awards to
Participants in an aggregate amount less than the amount of the Actual
Awards Pool. The Committee may also, in its discretion, allocate any
position of the Actual Awards Pool for use in making special
additional Awards to any Participant who is not a Covered Executive or
to any group of such Participants.
(iv) Notwithstanding any other provision herein to the
contrary, the amount of the Award payable to any Participant for any
year shall not exceed $2.5 million, as adjusted annually beginning in
1998 to reflect percentage increases in the Consumer Price Index.
(v) A Participant who terminates employment with the
Corporation and its Affiliated Companies prior to the end of any Plan
Year shall receive such portion of an Award, if any, for that year as
the Committee shall determine.
(f) All actions taken by the Committee hereunder in determining
the Awards payable to Participants for each year shall be reflected in the
minutes of the meetings of the Committee at which such actions were taken.
6. Payment of Awards
The amount payable hereunder to a Participant with respect to
an Award earned for any Plan Year shall be determined in accordance with the
following provisions:
(a) The amount payable with respect to a Participant's Award for
any Plan Year beginning on or after January 1, 1996, shall be the total amount
of the Award earned by the Participant, reduced by the amount of any ESOP
Contribution to be made on behalf of the Participant under the 401(k) Plan for
the "Plan Year") (as defined in the 401(k) Plan) corresponding to such Plan
Year, with respect to the base salary of such Participant that was taken into
account in determining the Target Awards Pool for that Plan Year.
(b) The amount payable with respect to a Participant's Award, as
determined under (a) above, shall be payable partly in cash and partly in the
form of Restricted Units (the portions so payable are hereinafter referred to,
respectively, as the "Cash Portion", and the "Restricted Units Portion", of the
Participant's Award), in such percentages as the Committee in its discretion
shall determine; provided, however, that the Restricted Units Portion shall be
equal to at least 25%, and shall not exceed 33-1/3%, of the total amount so
payable with respect to the Participant's Award. Notwithstanding the foregoing,
the aggregate number of Restricted Units granted with respect to Awards made to
Participants hereunder for any Plan Year shall not exceed 80,000 Restricted
Units. The 25% minimum and 33-1/3% maximum for the Restricted Units Portion of a
Participant's Award referred to in the second preceding sentence shall be
reduced in such manner as the Committee shall determine, in its discretion, to
the extent necessary to comply with the foregoing limitation.
(c) The number of Restricted Units to be granted to a Participant
with respect to the Restricted Units Portion of the Participant's Award shall be
determined by dividing the amount of the Restricted Units Portion by the Average
Market Value of one Common Share on the date on which the Committee makes its
determination of the Awards earned by Participants for the Plan Year in
question.
(d) The grant of Restricted Units with respect to the Restricted
Units Portion of a Participant's Award for any Plan Year shall be evidenced by a
written notice so the Participant specifying the number of Restricted Units
granted to the Participant, and the date of grant. In addition to such other
terms and conditions as the Committee may require in such notice, each grant of
Restricted Units to a Participant hereunder shall be subject to the following
terms and conditions:
(i) The Restricted Units covered by such grant shall become
vested on the fifth anniversary of the date of grant, or if earlier,
on the date of the Participant's death, permanent disability, or
retirement on or after the date on which the Participant attains age
65.
(ii) Until the Vesting Date for the Restricted Units covered
by such grant, additional Restricted Units shall be credited to the
Participant, with respect to the Restricted Units so granted, as of
each date on which the Corporation pays a dividend on its Common
Shares ("Dividend Payment Date"). The number of additional Restricted
Units so be credited shall be determined by first multiplying (A) the
sum of (1) the number of Restricted Units covered by such grant, plus
(2) the total number of additional Restricted Units credited to the
Participant with respect to such Restricted Units prior to such
Dividend Payment Date, by (B) the per-share dollar amount of the
dividend so paid, and then, dividing the resulting amount by the
Average Market Value of one Common Share on the Dividend Payment Date.
Any additional Restricted Units credited to the Participant with
respect to the Restricted Units covered by such grant shall become
vested on the Vesting Date for the Restricted Units so granted.
(iii) If the Restricted Units covered by such grant become
vested, payment with respect to such Restricted Units, and with
respect to the additional Restricted Units credited to the Participant
under (ii) above in respect of such Restricted Units, shall be made as
soon as practicable after the Vesting Date for the Restricted Units so
granted, except as otherwise provided in (iv) below. Subject to
provisions of Section 6(f), payment shall be made in the form of a
single lump sum payment consisting of (A) a number of Common Shares
equal to the total number of whole Restricted Units that become vested
on such Vesting Date, and (B) a cash payment in an amount determined
by multiplying (1) the fractional part of a Restricted Unit that
becomes vested on such Vesting Date, by (2) the Average Market Value
of one Common Share on such Vesting Date.
(iv) To the extent that the Participant has elected, under
the applicable provisions of the Deferred Restricted Unit Plan of U.S.
Trust Corporation, to defer payment with respect to any Restricted
Units that become vested, the Corporation's obligation under this Plan
for making payment with respect to such Restricted Units shall be
fully discharged upon the crediting of such Restricted Units to the
Participant's account under the Deferred Restricted Unit Plan in
accordance with the applicable provisions of such plan.
(v) In the event the Participant's employment terminates for
any reason prior to the Vesting Date for the Restricted Units covered
by such grant, the Restricted Units covered by such grant, and any
additional Restricted Units credited to the Participant under (ii)
above with respect to such Restricted Units, shall be forfeited,
except to the extent the Committee in its discretion otherwise
determines.
(e) The Cash Portion of a Participant's Award for any Plan Year
shall be paid in the form of a single lump sum cash payment as soon as
practicable after the end of such Plan Year, except to the extent that the
Participant (i) has elected, under the applicable provisions of the 401(k) Plan,
to have any part of such portion of such Award reduced, and to have an amount
equal to such part contributed to the 401(k) Plan on the Participant's behalf
and/or (ii) has elected, under the applicable provisions of the Executive
Deferred Compensation Plan, to defer any part of such portion of such Award.
(f) With respect so that part of the Cash Portion of any
Award that is subject to a Participant's election under the 401(k) Plan, an
amount equal to such part of the Cash Portion shall be contributed to the 401(k)
Plan on behalf of the Participant; and thereupon, the obligation of the
Corporation and its Affiliated Companies under this Plan with respect to payment
of such part of the Cash Portion of the Award shall be fully discharged.
However, no such contribution shall be made to the extent it would cause any
limitation applicable under the 401(k) Plan to be exceeded.
(g) With respect so that part of the Cash Portion of any Award
that is subject to a Participant's election under the Executive Deferred
Compensation Plan, the obligation of the Corporation and its Affiliated
Companies under this Plan with respect to payment of such part of the Cash
Portion of the Award shall be fully discharged upon the crediting of such part
of the Cash Portion of the Award to the Participant's account under the
Executive Deferred Compensation Plan in accordance with the applicable
provisions of such plan.
(h) All liabilities in respect of the Cash Portion of Awards
earned by Participants under the Plan shall be discharged by the respective
Affiliated Companies employing such Participants.
7. Certain Adjustments to Plan Shares
In the event of any change in the Common Shares by reason of
any stock dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, or any rights offering to purchase
Common Shares at a price substantially below fair market value, or any similar
change affecting the Common Shares, the number and kind of shares represented by
Restricted Units shall be appropriately adjusted consistent with such change in
such manner as the Committee, in its discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to, or available for,
the Participants hereunder. The Committee shall give notice to each Participant
of any adjustment made pursuant to this Section and, upon such notice, such
adjustment shall be effective and binding for all purposes.
8. Listing and Qualification of Common Shares
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of Common Shares pursuant to a grant of Restricted
Units until completion of such stock exchange listing or other qualification of
such shares under any state or federal law, rule or regulation as the
Corporation may consider appropriate, and may require any Participant or
Beneficiary to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable laws, rules and. regulations.
9. Change in Control
Notwithstanding any other provision in the Plan to the
contrary (but subject to the proviso contained in the definition of "Change in
Control" in Section 2), upon the occurrence of a Change in Control, the
following provisions shall apply.
(a) All Performance Goals and individual goals and objectives with
respect to the Plan Year in which the Change in Control occurs (the "Year of
Change") shall be deemed to have been attained to the full and maximum extent,
and the Actual Awards Pool for the Year of Change shall be determined by
multiplying the Target Awards Pool for such year by the highest percentage
thereof established by the Committee under Section 5(a)(iii) for determining the
amount of the Actual Awards Pool for such year.
(b) Unless another formula shall have been designated by the
Committee prior to the Change in Control, each Participant shall be allocated a
portion of the Actual Awards Pool for the Year of Change, as determined under
(a) above, equal to the amount of such Actual Awards Pool, multiplied by a
fraction, the numerator of which is the portion of the anticipated annual
compensation of the Participant which was taken into account by the Committee in
determining the Target Awards Pool for the Year of Change, and the denominator
of which is the sum of such amounts for all Participants.
(c) As soon as practicable following the Change in Control, all
Awards which under (a) above are deemed to have been earned to the full and
maximum extent upon the occurrence of the Change in Control shall be payable in
full in single cash lump sums, reduced by any taxes withheld pursuant to Section
10 and by the amount of any ESOP Contributions to be made on behalf of
Participants under the 401(k) Plan for the Year of Change.
(d) No Awards payable in accordance with this Section shall be
forfeitable on account of a Participant's termination of employment upon or
following the Change in Control.
(e) All Restricted Units granted or credited to a Participant
hereunder that had not previously become vested shall become vested upon the
occurrence of the Change in Control.
(f) The Corporation shall make payment to each Participant with
respect to all of the Restricted Units standing to his or her credit under the
Plan at the time of the Change in Control. Payment to each Participant shall be
made in the form of a single lump sum payment, in an amount determined by
multiplying the aggregate number of Restricted Units then standing to the
Participant's credit by the Determined Value of one Common Share. All amounts
payable to Participants pursuant to this Section 9(f), reduced by any taxes
withheld pursuant to Section 10, shall be paid to such Participants as soon as
practicable following the Change in Control.
10. Taxes
The Corporation or any of its Affiliated Companies may make
such provisions and take such steps as it may deem necessary or appropriate for
the withholding of all federal, state and local taxes required by law to be
withheld with respect to amounts payable under the Plan including, but not
limited to (i) deducting the amount so required to be withheld from any other
amount then or thereafter payable to a Participant or Beneficiary, and/or (ii)
requiring a Participant or Beneficiary to pay to the Corporation or any of its
Affiliated Companies the amount so required to be withheld as a condition of the
issuance, delivery, or distribution of any Common Shares. The Committee may
permit such amount to be paid in Common Shares previously owned by the
Participant, or a portion of the Common Shares that otherwise would be
distributed to such Participant in respect to his or her vested Restricted
Units, or a combination of cash and such Common Shares.
11. Designation and Change of Beneficiary
Each Participant shall file with the Committee a written
designation of one or more persons as the Beneficiary who shall be entitled so
receive any amount, or any Common Shares, payable under the Plan upon his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If at the date of a
Participant's death, there is no designation of a Beneficiary in effect for the
Participant pursuant so the provisions of this Section 11, or if no Beneficiary
designated by the Participant in accordance with the provisions hereof survives
to receive any amount, or any Common Shares, payable under the Plan by reason of
the Participant's death, the Participant's estate shall be treated as the
Participant's Beneficiary for purposes of the Plan.
12. Payments to Persons Other Than Participant
If the Committee shall find that any person to whom any
amount, or any Common Shares, is payable under the Plan is unable to care for
his or her affairs because of illness, accident or legal incapacity, then, if
the Committee so directs, any payment due to such person may be paid so such
person's spouse, child or other relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee to be a
proper recipient on behalf of such person, unless a prior claim for payment of
such amount, or payment of such Common Shares, has been made by a duly appointed
legal representative of such person. Any such payment shall be a complete
discharge of the liability of the Corporation or the applicable Affiliated
Company therefor.
13. Rights of Participants
A Participant's rights and interests under the Plan shall be
subject to the following provisions:
(a) A Participant shall have the status of a general unsecured
creditor of the Corporation with respect to his or her right to receive any
payment under the Plan. The Plan shall constitute a mere promise by the
Corporation or the applicable Affiliated Company to make payments in the future
of the benefits provided for herein. It is intended that the arrangements
reflected in the Plan be treated as unfunded for tax purposes, as well as for
purposes of any applicable provisions of Title I of ERISA.
(b) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employment
of the Corporation or any of its Affiliated Companies.
(d) No Participant shall have the right, by virtue of having been
selected as a Participant in the Plan, to be automatically entitled to receive
an Award for any Plan Year.
(e) No Award shall be considered as compensation under any
employee benefit plan of the Corporation or any of its Affiliated Companies,
except as specifically provided in any such plan or as otherwise determined by
the Board of Directors.
14. Administration
The Plan shall be administered by the Committee. A majority of
the members of the Committee shall constitute a quorum. The Committee may act at
a meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan. The Committee may delegate any ministerial or
nondiscretionary function pertaining so the administration of the Plan to any
one or more officers of the Corporation.
All decisions, actions or interpretations of the Committee
under the Plan shall be final, conclusive and binding upon all parties
No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by such member or on his or
her behalf in his or her capacity as a member of the Committee nor for any
mistake of judgment made in good faith, and the Corporation shall indemnify and
hold harmless each member of the Committee, and each employee, officer, director
or trustee of the Corporation or any of its Affiliated Companies to whom any
duty or power relating to the administration or interpretation of the Plan may
be delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
15. Amendment or Termination
The Board of Directors may, with prospective or retroactive
effect, amend, suspend or terminate the Plan or any portion thereof at any time,
provided, however, that no amendment, suspension or termination of the Plan
shall deprive any Participant of any rights to Awards previously made under the
Plan without his or her written consent. Any amendment that the Board of
Directors would be permitted to make pursuant to the preceding sentence may also
be made by the Committee where appropriate to facilitate the administration of
the Plan or to comply with applicable law or any applicable rules and
regulations of government authorities, provided that the cost of the Plan to the
Corporation and its affiliated Companies is not materially increased thereby.
16. Successor Corporation
The obligations of the Corporation under the Plan shall be
binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Corporation, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
17. Governing Law
The Plan shall be governed by and construed in accordance with
the laws of the State of New York.
18. Effective Date
The Plan was adopted effective as of September 1, 1995. The
amendments reflected in this restatement of the Plan shall be effective as of
January 1, 1997, subject, however, in the case of the amendments to Sections 3
and 5, to approval by the shareholders of the Corporation by a majority of the
votes cast in person or by proxy at the annual meeting of the Corporation's
shareholders to be held on April 22, 1997. The Committee may grant Restricted
Units as provided herein prior to such shareholder approval, subject to such
approval being obtained at such meeting.
<PAGE>
EXHIBIT C
TERM SHEET - SCHWAB STOCK GRANTS
1992 STOCK INCENTIVE PLAN
BACKGROUND
The exercise price for all stock option grants is set as the closing price of
Schwab's stock on the date of grant. All stock grants to officers, both options
and restricted shares, are subject to the review and approval of the
Compensation Committee of the Schwab Board of Directors, and are only granted at
the Committee's meetings.
GRANT TYPES
o Non Qualified Stock Options
o Incentive Stock Options (Subject to $100,000 IRS Limits)
o Restricted Shares
VESTING SCHEDULES
o STOCK OPTIONS
Time Annual Cumulative
Period Vesting % Vesting %
1st year 25% 25%
2nd year 25% 50%
3rd year 25% 75%
4th year 25% 100%
Stock option grants currently have a ten year term and any options vested as of
an employee's termination are exercisable for a period of 90 days after
termination.
o RESTRICTED SHARES
Time Annual Cumulative
Period Vesting % Vesting %
1st year 0% 0%
2nd year 0% 0%
3rd year 50% 50%
4th year 50% 100%
All stock grants are governed by the terms and conditions of the 1992 Stock
Incentive Plan Document, and are subject to change in Schwab sole discretion.
<PAGE>
EXHIBIT D
Key Terms of KEY EMPLOYEE RETENTION PROGRAM
I. Purpose
To encourage U.S. Trust Corporation ("UST") employees to continue their
employment with The Charles Schwab Corporation or one of its subsidiaries
(collectively, "Schwab").
II. Eligibility
All UST employees employed on January 12, 2000 and who remain in continuous
employment throughout the close of the acquisition are eligible for retention
bonuses, provided such employees meet the vesting and continuous service
employment requirements specified in the "Timing of Awards" section below.
Amount of Bonus
Eligible employees will receive retention bonuses in accordance with the
following:
Level Approximate Target Bonus Percentage/Amount
Non-Officer 25% of base salary as of date of announcement
Officer Below VP 50% of base salary as of date of announcement
VP or SVP 100% of base salary as of date of announcement
Managing Directors and 100 - 150% of base salary and target bonus as
Operating Committee of date of announcement
Office of Chairman $2.8 million for each of the four persons in
the Office of Chairman
The retention bonus will be based on the employee's title and base salary as of
the date of the announcement.
III. Form of Payment
The retention bonus of approximately $150 million in the aggregate will consist
of two components: five-sixths in cash and one-sixth in a grant of Schwab stock
options. The stock options granted will have a ten (10) year term and the number
of options granted will be calculated using Schwab valuation methodology
assuming a fifteen percent (15%) annual growth rate in Schwab common stock over
two years. By way of example, if the price of Schwab stock is $40 on the
effective date of the close of the acquisition, the price of this stock two
years later is assumed to be $52.90 (based on the 15% annual growth rate over
two years); accordingly, Schwab would divide $25 million (which is the one-sixth
of the $150 million retention bonus amount to be paid in stock options) by the
$12.90 difference in stock price to arrive at 1,937,984.50 options to be
granted.
The exercise price of the stock options will be the closing price of Schwab
stock on the date of the grant (which will be on the effective date of the close
of the acquisition).
IV. Timing of Awards
The cash award will be payable two years after the effective date of the close
of the acquisition, provided the eligible employee is continuously employed with
Schwab from the effective date of the close of the acquisition through the
second anniversary of the effective date of the close of the acquisition.
Stock options will be granted as of the effective date of the close of the
acquisition. Fifty percent (50%) of the stock options granted will vest on the
third anniversary of the effective date of the close of the acquisition and the
remaining fifty percent (50%) will vest on the fourth anniversary of the
effective date of the close of the acquisition. An eligible employee who has
vested shares at the time he/she terminates his/her employment with Schwab will
have three months from his/her termination date to exercise the vested options.
V. TERMINATION OF EMPLOYMENT
o An otherwise eligible employee who voluntarily terminates his/her
employment with Schwab will forfeit any retention bonus that has not been
paid or which has not vested as of the last day worked.
o An otherwise eligible employee who is terminated by Schwab with cause will
forfeit any retention bonus that has not been paid or which has not vested
as of the last day worked.
o An otherwise eligible employee who is terminated by Schwab without cause
(including a termination with good reason) and who otherwise has severance
benefits of 200% of base salary or more will receive a prorated retention
bonus. The last day worked will be used to calculate the amount of this
bonus.
o An otherwise eligible employee who is terminated without cause (including a
termination with good reason) by Schwab and who otherwise has severance
benefits of less than 200% of base salary or more will receive his or her
full retention bonus.
o For purposes of this Key Employee Retention Program, the meaning of "cause"
and "good reason" shall be mutually agreed upon by Schwab and UST no later
than the effective date of the close of the acquisition.
VI. DEATH OR DISABILITY
o An employee who dies or becomes disabled will be eligible for a prorated
retention bonus. The last day worked will be used in calculating the amount
of this bonus.
<PAGE>
EXHIBIT E
NONCOMPETITION GEOGRAPHIC AREAS
STATE OR COUNTY
Alabama
Alaska
Arizona
Arkansas
Alameda County, CA
Alpine County, CA
Amador County, CA
Butte County, CA
Calaveras County, CA
Colusa County, CA
Contra Costa County, CA
Del Norte County, CA
El Dorado County, CA
Fresno County, CA
Glenn County, CA
Humboldt County, CA
Imperial County, CA
Inyo County, CA
Kern County, CA
Kings County, CA
Lake County, CA
Lassen County, CA
Los Angeles County, CA
Madera County, CA
Marin County, CA
Mariposa County, CA
Mendocino County, CA
Merced County, CA
Modoc County, CA
Mono County, CA
Monterey County, CA
Napa County, CA
Nevada County, CA
Orange County, CA
Placer County, CA
Plumas County, CA
Riverside County, CA
Sacramento County, CA
San Benito County, CA
San Bernardino County, CA
San Diego County, CA
San Francisco County, CA
San Joaquin County, CA
San Louis Obispo County, CA
San Mateo County, CA
Santa Barbara County, CA
Santa Clara County, CA
Santa Cruz County, CA
Shasta County, CA
Sierra County, CA
Siskiyou County, CA
Solano County, CA
Sonoma County, CA
Stanislaus County, CA
Sutter County, CA
Tehama County, CA
Trinity County, CA
Tulare County, CA
Tuolumne County, CA
Ventura County, CA
Yolo County, CA
Yuba County, CA
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
<PAGE>
EXHIBIT F
EXHIBIT F
Schwab's Confidentiality, Nonsolicitation and Assignment Agreement
<PAGE>
Confidentiality, Nonsolicitation and Assignment Agreement
In consideration of my employment, receipt of employment benefits, and/or
continued employment by Charles Schwab & Co., Inc. and/or its parent company and
its/their subsidiaries, affiliates or successors ("Schwab"), and other valuable
consideration, the adequacy and receipt of which I acknowledge, I agree to abide
by this Agreement during and after my employment with Schwab.
1. I understand and agree that, during and related to my employment with Schwab,
I may obtain, or have access to, certain information which is confidential
and/or proprietary to Schwab ("Confidential Information"). I understand that
Confidential Information Includes, but is not limited to:
a. trade secrets, information about products and services (past, current
or future), know-how, techniques, computer passwords, computer
software designs, hardware configurations, policies and procedures,
and research projects;
b. market, financial, trade, and sales information and data, financial
models or formulae, business plans, financial and business forecasts
and estimates, and information about costs and profits;
c. the Identities of Schwab customers and prospective customers
(including but not limited, to names, addresses, telephone numbers
and/or modal security numbers), any account, personal, business,
financial and other information pertaining to such customers, and
prospective customers, and customer and prospective customer lists in
any form;
d. account, personal or financial information pertaining to current and
former employees of Schwab, business, financial, and other information
pertaining to Schwab's vendors and independent contractors, and any
lists of employees, vendor, and/or independent contractors;
e. all developments, as defined in Paragraph 3 below, and all information
which relates to Developments; and/or
f. all information which Schwab has a legal obligation to treat as
confidential, or which Schwab treats as proprietary or designates as
confidential or for internal use only, whether or not owned or
developed by Schwab.
2. I understand and agree that Schwab owns all such
Confidential Information and desires (or is under legal obligations, in the case
of information owned by others) to protect its confidential and proprietary
nature. I will not, for any purpose, directly or indirectly, disclose,
reproduce, use, or disseminate in any manner during or after my employment with
Schwab, any Confidential Information unless: (a) such disclosure is required in
the ordinary course of my duties at Schwab and necessary for me to perform my
duties; or (b) I have received advance written consent from an authorized
officer of Schwab. I will promptly notify Schwab if I become aware of or suspect
any unauthorized (whether intentional or accidental) use or disclosure of
Confidential Information.
3. I will promptly disclose in confidence to Schwab all
inventions, improvements, designs, original works of authorship, formulas,
processes, computer software programs, databases and trade secrets
("Developments") that I make, conceive, first reduce to practice, or create,
either alone or jointly with others while I am employed by Schwab, and that: (a)
result from any work performed by me for Schwab, whether or not in the normal
course of my employment or during normal business hours; (b) reasonably relate
to the actual or anticipated business, services, products, research or
development of Schwab; or (c) are developed with the use of Schwab time,
equipment, supplies, Confidential Information or facilities. I must promptly
disclose Developments whether or not such Developments are patentable,
copyrightable or protectible as trade secrets. I understand and agree that all
Developments shall be the sole and exclusive property of Schwab, and I hereby
irrevocably assign, transfer and convey to Schwab, exclusively and perpetually,
all right, title and interest which I may have or acquire in and to such
Developments throughout the world, including without limitation any copyrights
and patents, and the right to secure registrations, renewals, reissues, and
extensions thereof. I agree to sign any documents and to do all things
necessary, without additional compensation, whether during my employment or
after, to assist Schwab to register, perfect, maintain and enforce Schwab's
rights in any Development, including without limitation any patent, copyright,
trade secret or other right or interest. I understand that if I am now a
California resident, or if I become a California resident while employed by
Schwab, then this paragraph will not apply to any Developments which fully
qualify under Section 2870 of the California Labor Code, which section is set
forth in the accompanying Exhibit A.
4. I agree that during my employment with Schwab, I will
not, directly or indirectly, for my benefit or on behalf of any third party,
solicit, induce, or attempt to solicit or induce (a) any customer of Schwab to
divert, transfer or take away any of Schwab's existing business or prospective
business; or (b) any employee, vendor or independent contractor of, or
consultant to, Schwab to leave their employment or assignment with Schwab.
5. I agree that I will promptly return to Schwab, upon its
request or, in any event, immediately upon separation from my employment for any
reason, all documents and materials that contain, refer to, or relate in any way
to any Confidential Information as well as any other Schwab property in my
possession or control including but not limited to electronic and telephonic
equipment, credit cards, security badges, and passwords.
6. I further agree that for a period of eighteen (18)
months after my employment with Schwab ceases, I will not, directly or
indirectly, or on behalf of any third party: (a) solicit, induce or attempt to
solicit or induce any existing and/or prospective customers I serviced (directly
or indirectly) or whose identity I learned during my employment with Schwab to
divert, transfer or otherwise take away business from Schwab: (b) sell or offer
to sell any security, retirement, insurance or annuity product or related
service to any customer or prospective customer of Schwab I serviced (directly
or indirectly) or whose identity I learned during my employment with Schwab; or
(c) solicit, induce or attempt to solicit or induce any employee, vendor or
independent contractor of, or consultant to, Schwab, to leave his or her
employment or assignment. Nothing in Paragraph 6 is intended to prevent me from
discussing possible employment with any employee or independent contractor who
contacts me directly of his or her own volition without my solicitation or
attempted solicitation of him or her. Also, I understand that nothing in
Paragraph 6 limits my absolute obligation under Paragraph 2 to never use
Confidential information to solicit Schwab customers or prospective customers,
or for any other purpose, at any time after my employment with Schwab ceases.
7. I represent and warrant that I do not have any
agreement(s) with any former employer or other third party that would be
breached by my performance of my duties at Schwab or that would limit, impair or
otherwise adversely affect my performance of such duties, and that I will not
take any action to breach any such agreement while I am employed by Schwab. In
any event, I will not use or disclose to Schwab any confidential information
that belongs to others. I have listed on Exhibit B to this Agreement all the
confidential, proprietary, trade secret, non-solicitation and/or non-competition
agreements to which I am subject. I agree that I will disclose my obligations
under this Agreement to any prospective or future employer and that my
obligations under this Agreement will survive the separation from my employment
with Schwab regardless of the reason for the separation.
8. I understand and agree that any breach of this Agreement
may subject me to disciplinary action, up to and including termination of my
employment (if I am still employed at Schwab), and may cause irreparable injury
to Schwab that cannot be adequately compensated by money damages and/or is
incapable of precise calculation. If I breach this Agreement, I agree that
Schwab has the right to seek equitable relief (including injunctive relief and
specific performance) in addition to monetary damages and any other legal
remedies which may be available. I consent to Schwab's obtaining equitable
relief in the most expeditious forum to preserve the status quo pending
resolution of any dispute relating to this Agreement.
9. If any provision of this Agreement is f ound to be
invalid or unenforceable, that provision will be enforced to the maximum extent
permissible, and the remaining provisions shall remain in full force and effect.
I agree that the terms of this Agreement and any disputes arising out of it
shall be governed by, and construed in accordance with, the laws of the state in
which I was last employed by Schwab, without giving effect to such state's
conflict of law principles. I understand and agree that nothing in this
Agreement changes "at will" employment status with Schwab, and that either
Schwab or I may end the employment relationship at any time, for any reason or
no reason at all.
Printed
Signed:___________________ Name:___________________ Date:_______________
<PAGE>
EXHIBIT A
California Labor Code Section 2870
(a) Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(1) relate at the time of conception or reduction to practice of the
invention to the employer's business, or actually or demonstrably
anticipated research or development of the employer; or
(2) result from any work performed by the employee for the employer.
(b) To the extent that a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
requited to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
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Exhibit B
List of Prior Agreements