former CEO Mitch Caplan will receive nearly $11 million for his time spent as head of the online brokerage firm whipsawed by deterioration in the mortgage industry.
The New York-based company said as part of Caplan's severance agreement from a pre-existing contract dated Sept. 1, 2004, he will be paid $10.9 million. The company arrived at the amount by calculating "two times the sum of his base salary and bonus during 2006," as well as two years of medical, life and disability coverage.
Caplan, who officially resigned from E*Trade's board of directors on Monday, resigned in late November as CEO from the troubled brokerage firm.
Caplan's departure came in conjunction with the company's announcement that Citadel Investments would pay $1.6 billion of capital in exchange for a 20% stake in the firm. The cash injection provided much-needed liquidity for the beleaguered E*Trade, which saw its mortgage business slump after taking writedowns on its $3 billion asset-backed securities portfolio, primarily within collateralized debt obligations, or CDOs, and second-lien securities.
The investment also calls for Citadel to buy E*Trade's entire asset-backed securities portfolio for just $800 million.
E*Trade President and COO Jarrett Lilien was named acting CEO, while Don Layton was named chairman of the board.
Layton is heading up an executive search for a new CEO, in which Lilien and external candidates are being considered, the company said. The company expects to announce its new CEO by the end of February.
"E*Trade's board and management team are acting swiftly to establish and execute a turnaround plan designed to unlock the company's value," Layton said in a statement. "E*Trade's board of directors remains confident in the strength of the core franchise and the loyalty of its customer base."
E*Trade's stock lost 85% of its value in 2007 amid the mortgage industry deterioration. Shares fell 12 cents to $3.43 on Wednesday and were flat in recent after-hours trading.