Exhibit 10.54
 
EMPLOYMENT AGREEMENT
 
This Agreement is made effective this 1st day of October, 2001 (the “Effective
Date”), by and between E*TRADE Group, Inc., a Delaware corporation (“Company”),
and Jerry Gramaglia (“Executive”).
 
BACKGROUND
 
Executive is currently serving as President and Chief Customer Operations
Officer of the Company. As of the Effective Date, Executive shall also serve as
the leader of the Office of the President. The parties desire to enter into a
formal employment agreement with respect to the continued employment of
Executive by Company in this capacity, which shall automatically become
effective as of the Effective Date.
 
TERMS AND CONDITIONS
 
In consideration of the premises and the mutual covenants and agreements set
forth below, the parties agree as follows:
 
1.  Termination of Prior Agreements.    Subject to the provisions of Section 8
herein, any prior agreement shall terminate and be of no further force and
effect as of the execution of this Agreement.
 
2.  Employment.    Executive agrees to serve as President and Chief Customer
Operations Officer and leader of the Office of the President or a comparable
position of Company for the term of this Agreement, subject to the terms set
forth in this Agreement and the provisions of the Bylaws of Company. During his
employment, Executive shall devote his effort and attention, on a full-time
basis, to the performance of the duties required of him as an executive of
Company.
 
3.  Compensation.    As compensation for his services during the term of this
Agreement, Executive shall receive the amounts and benefits set forth in this
Section 3 all effective as of the Effective Date unless otherwise specified:
 
(a)  An annual salary of $675,000.00 (“Base Salary”) paid in accordance with the
Company’s ordinary payroll procedures. The Base Salary shall be subject to
review by the Compensation Committee of the Company’s Board of Directors for
adjustment in light of the size and performance of Company. The Base Salary, as
adjusted in accordance with this subsection (a), shall remain in effect unless
and until it is adjusted in accordance with this subsection (a).
 
(b)  The Executive will be eligible to participate in the Company’s standard
bonus plan, with a target bonus of up to 300% of his base salary, which may be
modified as determined by the Chairman/Chief Executive Officer and the
Compensation Committee of the Company (the “Maximum Target Bonus”). The
Executive will also be eligible to participate in the Company’s Long Term
Incentive Plan (“LTIP”) on the same basis as other executive officers of the
Company.

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(c)  Participation in the employee benefit plans maintained by Company and in
other benefits provided by Company to senior executives, including retirement
and 401(k) plans and other retirement plans, deferred compensation, medical and
dental, annual vacation, paid holidays, sick leave, and similar benefits, which
are subject to change from time to time at the reasonable discretion of Company.
 
(d)  It is acknowledged that Executive has received option grants during the
course of his employment with the Company. The stock option agreement covering
any and all such stock options, including any agreements relating to the
issuance of restricted stock, shall be amended to provide for “single trigger”
immediate vesting in the event of a Change in Control of the Company. Company
agrees that there will be no change made in any Stock Option during the Initial
Term or any Renewal Term of this agreement which adversely affects Executive’s
rights as established by the foregoing documents, without the prior written
consent of Executive. In the future, all stock option grants made to Executive
shall have a vesting schedule which provides for quarterly vesting in equal
installments over a four year period.
 
(e)  Lease of automobile for company use and reimbursement of reasonable
operating expense.
 
(f)  Reimbursement of all reasonable business-related expenses, including
without limitation, first-class air travel or travel by chartered or corporate
aircraft for all business travel.
 
(g)  Executive has leased a home owned by BRE Holdings, LLC, with an option to
purchase the home. The terms and conditions of this lease arrangement are set
forth in a separate writing (the “Lease Agreement”), and the terms of this
Agreement are not intended to alter any of the terms of the Lease Agreement.
 
4.  Term.    The term of this Agreement and the termination rights are as
follows:
 
(a)  This Agreement and Executive’s employment under this Agreement shall be
effective as of the Effective Date and shall continue for a term ending on
October 1, 2005 (the “Initial Term”). The parties may extend the Initial Term
for additional one year periods (each a “Renewal Term”), provided that both
parties mutually agree during the sixty day period prior to the conclusion of
the Initial Term or any Renewal Term.
 
(b)  This Agreement and Executive’s employment may be terminated by either party
prior to the end of the Initial Term (or any Renewal Term) upon 30 days’ prior
written notice to the other party, provided that, in the event of such
termination, Company shall be obligated to make the payments and provide the
benefits described in Section 5 below. However, in the event that the Company
terminates Executive’s employment for “Cause”, the Company shall not be required
to provide Executive with any prior notice of termination.

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5.  Termination Payments.    Upon termination of Executive’s employment, Company
shall provide the following benefits to Executive:
 
(a)  Except during the period surrounding a Change in Control as described in
Section 5(b), below, in the event that the Company elects to terminate
Executive’s employment for any reason other than Cause or the Executive’s
Disability or death, the Company shall provide Executive with the following
benefits; (i) within three business days after the end of the 30-day notice
period provided in Section 4 above, the Company shall pay Executive a lump sum
payment equivalent to one year’s Base Salary at the rate in effect at the time
of such termination; and (ii) the Company shall, in its sole discretion, either:
(X) arrange for Executive to continue to participate in those benefit programs
in which Executive participated as an active associate for a period of one year
following the termination date; or (Y) within three business days after the end
of the 30-day notice period provided in Section 4 above, provide Executive with
a lump sum payment equivalent to the Company’s cost to provide such benefits for
a one year period. In the event that Executive’s employment is terminated for
“Cause”, Executive shall be entitled to no benefits from the Company other than
those accrued as of the date of such termination. In the event that Executive’s
employment is terminated due to his Disability or death, the Executive shall be
entitled to receive those benefits available under the Company’s then existing
benefits plans and policies, but no further benefits or severance.
 
(b)  In the event of an Involuntary Termination of Executive’s employment during
the period that is within sixty days prior to or three years following a Change
in Control, then the Company shall provide Executive with the following
benefits; (i) within three business days after the end of the 30-day notice
period provided in Section 4 above, the Company shall pay Executive a lump sum
payment equivalent to two years of Executive’s Current Total Annual
Compensation; (ii) the Company shall, in its sole discretion, either: (X)
arrange for Executive to continue to participate in those benefit programs in
which Executive participated as an active associate for a period of two years
following the termination date; or (Y) provide Executive with a lump sum payment
equivalent to the Company’s cost to provide such benefits for a two year period;
(iii) the Company shall provide Executive with outplacement services valued at a
minimum of forty thousand dollars ($40,000.00) in a form and manner acceptable
to Executive; and the Company shall provide Executive a mutually acceptable
office, together with secretarial assistance and customary office facilities and
services, located at Company (or in lieu thereof reimbursement for same at
another location), for up to two years following the effective termination date
of this Agreement, for the purpose of facilitating Executive’s search for new
employment.
 
For purposes of this Agreement, the following definitions shall apply:
 
(i)  The “Board” shall mean the Board of Directors of Company.
 
(ii)  “Cause” shall mean (A) any act of personal dishonesty taken by the
Executive in connection with his responsibilities as an Executive and intended
to result in personal enrichment of the Executive or others at the expense of
the Company or its shareholders; (B) committing a felony or an act of fraud
against the Company or its affiliates; (C) refusal of Executive to substantially
perform all of his duties and responsibilities, or

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Executive’s persistent neglect of duty or chronic unapproved absenteeism (other
than for a temporary or permanent disability), which remains uncured following
thirty days after written notice of such alleged Cause by the Board of
Directors; or (D) any material and substantial breach by Executive of other
terms and conditions of this Agreement, which, in the reasonable judgment of the
Board of Directors, has a material adverse financial effect on the Company or on
Executive’s ongoing abilities to carry out his duties under this Agreement and
which remains uncured following thirty days after written notice of such alleged
Cause by either the Board of Directions, or Company’s chairman and Chief
Executive Officer.
 
(iii)  “Change of Control” shall mean the occurrence of any of the following
events:
 
(A)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than forty percent (40%) of the total voting power
represented by the Company’s then outstanding voting securities;
 
(B)  A merger or consolidation of the Company with any other corporation or
business entity, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least sixty percent (60%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation;
 
(C)  A change in the composition of the Board of Directors of the Company
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. “Incumbent Directors” shall mean
directors who either (a) are directors of the Company as of the date hereof, or
(b) are elected, or nominated for election, to the Board of Directors of the
Company with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
 
(D)  Effectiveness of an agreement for the sale, lease or disposition by the
Company of all or substantially all of the Company’s assets; or
 
(E)  Change in the identity of the Chairman/Chief Executive Officer of the
Company.
 
(iv)  “Current Total Annual Compensation” shall be the greater of: (i)
Executive’s Base Salary plus Maximum Target Bonus for the calendar year in which
his employment terminates or (ii) such Base Salary plus Maximum Target Bonus for
the calendar year prior to the year of such termination.
 
(v)  “Disability” shall mean the total and permanent inability of

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Executive due to illness, accident or other physical or mental incapacity to
perform the usual duties of his employment under this Agreement, as determined
by a physician selected by Company and acceptable to Executive or Executive’s
legal representative (which agreement as to acceptability shall not be
unreasonably withheld).
 
(vi)  The “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.
 
(vii)  The “Incumbent Board” shall mean the members of the Board as of the date
of this Agreement and any person becoming a member of the Board hereafter whose
election, or nomination for election by Company’s shareholders, was approved by
a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of Company).
 
(viii)  “Involuntary Termination” shall mean either: (X) the Company’s
termination of the employment relationship for any reason other than “Cause” or
the Executive’s death or Disability; or (Y) the Executive’s voluntary
resignation within 12 months of the occurrence of any one of the following
events: (i) without the Executive’s express written consent, the assignment to
the Executive of any duties or the significant reduction of the Executive’s
duties, either of which is inconsistent with the Executive’s position or
responsibilities with the Company as set forth in this Agreement, or the removal
of the Executive from such position and responsibilities; (ii) without the
Executive’s express written consent, a substantial reduction of the facilities
and perquisites (including office space, support staff and location) available
to the Executive, unless substantially all of the Company’s other Executives of
rank and responsibilities substantially similar to those of the Executive
undergo substantially similar reductions; (iii) a substantial reduction by the
Company in the Base Salary of the Executive as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level of
Executive benefits to which the Executive is entitled under this Agreement with
the result that the Executive’s overall benefits package is significantly
reduced; or (v) the relocation of the Executive’s principal place of work to a
location more than 50 miles from the Executive’s then present location. An
Involuntary Termination will also include (i) any purported termination for
“Cause” for which the grounds relied upon are not valid, or (ii) the failure of
the Company to obtain the assumption of this agreement by any successor(s) as
required in Section 9, below. In the event that Executive contends his voluntary
resignation constitutes an Involuntary Termination, Executive shall inform the
Company of the basis for his contention at the time he provides notice of his
resignation.
 
6.  Executive agrees that during his employment with E*TRADE Executive will not
engage in any other employment, business, or business related activity unless
Executive receives E*TRADE’s prior written approval to hold such outside
employment or engage in such business or activity. Such written approval will
not be unreasonably withheld if such outside employment, business or activity
would not in any way be competitive with the business or proposed business of
E*TRADE or otherwise conflict with or adversely affect in any way his
performance of his employment obligations to E*TRADE; however, Executive agrees
that under no circumstances shall he participate as a member of the board of
directors of more than two

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outside businesses or entitities, whether such businesses or entities are for
profit or not-for-profit, unless specifically approved by the Chairman and Chief
Executive Officer of the Company.
 
Subject to the approval of the Chief Legal Affairs and Human Resources Officer
or the equivalent position, commencing on the date of termination of his
employment with E*TRADE and continuing for a period not to exceed twelve (12)
months, Executive will not, except as provided below, as an employee, agent,
consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender or guarantor of any corporation, partnership or
other entity, or in any other capacity directly or indirectly:
 
i.  engage in any activity, in any market where E*TRADE conducts business, in
which Executive participates, manages or advises in the design, development,
marketing, sale or servicing of any product related to global institutional and
retail internet securities trading, clearing services or execution (hereafter
referred to as “the Business”);
 
ii.  induce, encourage or solicit any individual who was employed by E*TRADE
within six (6) months of the date his employment with E*TRADE terminates to
leave the Company for any reason or to accept employment with any other company,
or to employ, interview or arrange to have business opportunities offered to any
such individual; or
 
iii.  permit his name to be used in connection with a business which is
competitive or substantially similar to the Business.
 
Notwithstanding the foregoing, Executive may own, directly or indirectly, solely
as an investment, up to one percent (1%) of any class of “publicly traded
securities” of any person or entity which owns a business that is competitive or
substantially similar to the Business. The term “publicly traded securities”
shall mean securities that are traded on a national securities exchange of
listed on the National Association of Securities Dealers Automated Quotation
System.
 
If any restriction set forth in this non-competition section is found by a court
to be unreasonable, then Executive agrees, and hereby submit, to the reduction
and limitation of such prohibition to such area or period as shall be deemed
reasonable. Executive acknowledges that the services that Executive will provide
to E*TRADE under this Agreement are unique and that irreparable harm will be
suffered by E*TRADE in the event of the breach by Executive of any of his
obligations under this Agreement, and that E*TRADE will be entitled, in addition
to its other rights, to enforce by an injunction or decree of specific
performance the obligations set forth in this Agreement. Any claims asserted by
Executive against E*TRADE shall not constitute a defense in any injunction
action brought by E*TRADE to obtain specific enforcement of said paragraphs.
 
Executive agrees that if the Company establishes that Executive, or those acting
in concert with Executive or on his behalf, materially violate the
Non-Competition provision in any way, the Company shall be entitled to recover
the reasonable attorneys’ fees and litigation

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expenses incurred, arising out of or relating to the Company’s efforts to
prevent the breach, to establish that a breach has occurred, to enforce the
Non-Competition provisions or to seek to redress a breach, including any appeals
if necessary. If the Company fails to establish that Executive, or those acting
in concert with Executive or on his behalf, have materially violated any of the
Non-Competition provisions in any way, Executive shall be entitled to
reimbursement of reasonable attorneys’ fees and litigation expenses incurred in
his defense.
 
7.  Arbitration.    The parties each agree that any and all disputes between
them which arise out of Executive’s employment, the termination of his
employment, or under the terms of this Agreement shall be resolved through final
and binding arbitration. This shall include, without limitation, disputes
relating to this Agreement, any disputes regarding Executive’s employment by
E*TRADE or the termination thereof, claims for breach of contract or breach of
the covenant of good faith and fair dealing, and any claims of discrimination or
other claims under any federal, state or local law or regulation now in
existence or hereinafter enacted and as amended from time to time concerning in
any way the subject of his employment with E*TRADE or its termination. The only
claims not covered by this section are the following: (i) claims for benefits
under the unemployment insurance or workers’ compensation laws; (ii) claims
concerning the validity, infringement or enforceability of any trade secret,
patent right, copyright, trademark or any other intellectual property held or
sought by E*TRADE, or which E*TRADE could otherwise seek; in each of these
instances such disputes or claims shall not be subject to arbitration, but
rather, will be resolved pursuant to applicable California law. Binding
arbitration will be conducted in San Mateo County in accordance with the rules
and regulations of the American Arbitration Association. Each side will bear its
own attorneys’ fees, unless otherwise decided by the arbitrator. Executive
understand and agree that the arbitration shall be instead of any civil
litigation, that each side waives its right to a jury trial, and that the
arbitrator’s decision shall be final and binding to the fullest extent permitted
by law and enforceable by any court having jurisdiction thereof.
 
8.  Miscellaneous Provisions.    This Agreement, the stock option grant
agreements and the previously executed Employee Agreements Re: Proprietary
Information and Inventions and the Lease Agreement will be the entire agreement
between Executive and E*TRADE relating to his employment and the additional
matters provided for herein. This Agreement supersedes and replaces (i) any
prior verbal or written agreements between the parties except as provided for
herein, including, but not limited to, any Management Continuity Agreement
between the Executive and the Company; and (ii) any prior verbal or written
agreements between the undersigned Executive and the Company relating to the
subject matter hereof. This Agreement may be amended or altered only in a
writing signed by Executive and the Company. This Agreement shall be construed
and interpreted in accordance with the laws of the State of California. Each
provision of this Agreement is severable from the other, and if any provision
hereof shall be to any extent unenforceable it and the other provisions shall
continue to be enforceable to the full extent allowable, as if such offending
provision had not been a part of this Agreement.

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9.  Assignment; Successors.    Any assignment of this Agreement shall be in
accordance with the following:
 
(a) The rights and benefits of Executive under this Agreement, other than
accrued and unpaid amounts due hereunder, are personal to him and shall not be
assignable by Executive.
 
(b) Subject to the provisions of subsection (c) of this Section 9 and the
provisions of Section 5, above, this Agreement shall not be assignable by
Company, provided that Company may assign this Agreement to another corporation
wholly owned by it either directly or through one or more other corporations, or
to any corporate successor of Company or any such corporation.
 
(c) Any business entity succeeding to substantially all of the business of
Company, by purchase, merger, consolidation, sale of assets or otherwise, shall
be bound by and shall adopt and assume this Agreement, and Company shall require
the assumption of this Agreement by such successor as a condition to such
purchase, merger, consolidation, sale of assets or other similar transaction.
10.  Notices.    Any notice or other communications under this Agreement shall
be in writing, signed by the party making the same, and shall be delivered
personally or sent by certified or registered mail, postage prepaid, addressed
as follows:
 
If to Executive:
  
Mr. Jerry Gramaglia
    
c/o E*TRADE Group, Inc.
    
4500 Bohannon Drive
    
Menlo Park, CA 94025
 
If to Company:
  
Chief Legal Affairs and Human Resources Officer
    
c/o E*TRADE Group, Inc.
    
4500 Bohannon Drive
    
Menlo Park, CA 94025

 
or such other address or agent as may hereafter be designated by either party
hereto. All such notices shall be deemed given on the date personally delivered
or mailed.
 
11.  Full Settlement and Legal Expenses.    In no event shall Executive be
obligated to seek other employment or take any action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement.
The prevailing party shall be entitled to recover all legal fees and expenses
which such party may reasonably incur as a result of any legal proceeding
relating to the validity, enforceability, or breach of, or liability under, any
provision of this Agreement or any guarantee of performance (including as a
result of any contest by Executive about the amount of any payment pursuant to
Section 6 of this Agreement), plus in each case interest at the applicable
Federal Rate provided for in Section 7872(f)(2) of the Code.
 
13.  Governing Law.    This Agreement shall be interpreted and enforced in
accordance with the laws of the State of California, except that any arbitration
shall be governed by the Federal Arbitration Act.

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14.  Severability.    Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective ad valid, but if any one or
more of the provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality, and
enforceability of any such provisions in every other respect and of the
remaining provisions of this Agreement shall not be in any way impaired.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.
 

 
E*
TRADE GROUP, INC.

 

 
/s/  
  Christos M. Cotsakos

 
                                                 
 

 
By
:    Christos M. Cotsakos

 
   Chairman & Chief Executive Officer

 

 
EX
ECUTIVE

 

 
/s/  
  Jerry Gramaglia

 
                                                 
 

 
Jer
ry Gramaglia

 

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