<PAGE>
RULE NO. 424(b)(2)
REGISTRATION NO. 33-50923
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 12, 1994)
$100,000,000
The Charles Schwab Corporation
MEDIUM-TERM NOTES, SERIES A
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Due More Than Nine Months From Date of Issue
--------------
The Charles Schwab Corporation (the "Company") may offer from time to time
its Medium-Term Notes, which are issuable in one or more series and will be
offered and sold in the United States. The Medium-Term Notes offered by this
Prospectus Supplement (the "Notes") are offered at an aggregate initial public
offering price of up to $100,000,000. Such aggregate offering price is subject
to reduction as a result of the sale by the Company of certain other Debt
Securities. See "Plan of Distribution." The Notes may be issued as Senior Debt
Securities or Senior Subordinated Debt Securities. Senior Subordinated Debt
Securities will be subordinate to all Senior Debt Securities. See "Description
of Debt Securities--Senior Debt" and "--Senior Subordinated Debt" in the
accompanying Prospectus. The interest rate on each Note will be either a fixed
rate established by the Company at the date of issue of such Note (a "Fixed
Rate Note") or a floating rate as set forth therein and specified in the
applicable Pricing Supplement (a "Floating Rate Note"). A Fixed Rate Note may
pay a level amount in respect of both interest and principal amortized over
the life of the Note (an "Amortizing Note").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable each March 1 and September 1 and at maturity
or any earlier redemption or repayment. Interest on each Floating Rate Note is
payable on the dates set forth herein and in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
Amortizing Notes will pay principal and interest semiannually each March 1 and
September 1, or quarterly each March 1, June 1, September 1 and December 1,
and at maturity or any earlier redemption or repayment. Each Note will mature
on any day more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, the Notes may not be redeemed
by the Company or repaid at the option of the holder prior to maturity and
will be issued in fully registered form in denominations of $1,000 or any
amount in excess thereof which is an integral multiple of $1,000. Each Note
will be represented either by a Global Security registered in the name of a
nominee of The Depository Trust Company, as Depositary (a "Book-Entry Note"),
or by a certificate issued in definitive form (a "Certificated Note"), as set
forth in the applicable Pricing Supplement. Interests in Global Securities
representing Book-Entry Notes will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to
participants' interests) and its participants. Book-Entry Notes will not be
issuable as Certificated Notes except under the circumstances described in the
accompanying Prospectus.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
------------ --------------------- ----------------------
<S> <C> <C> <C>
Per Note............. 100.000% .125%-.875% 99.875%-99.125%
Total................ $100,000,000 $125,000-875,000 $99,875,000-99,125,000
</TABLE>
- -------
(1) Unless otherwise specified in the applicable Pricing Supplement, Notes
will be sold at 100% of their principal amount. If the Company issues
any Note at a discount from or at a premium over its principal amount,
the Price to Public of any Note issued at a discount or premium will be
set forth in the applicable Pricing Supplement.
(2) Unless otherwise specified in the applicable Pricing Supplement, the
commission payable to an Agent for each Note sold through such Agent
shall range from .125% to .875% of the principal amount of such Note,
depending upon such Note's maturity. The Company may also sell Notes to
an Agent as principal at a discount equal to, unless otherwise specified
in the applicable Pricing Supplement, the commission applicable to an
agency sale of a Note of identical maturity for resale to investors or
other purchasers at a fixed reoffering price or varying prices related
to prevailing market prices at the time of resale or otherwise, to be
determined by such Agent. The Company has agreed to indemnify each Agent
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $275,000.
--------------
Offers to purchase the Notes may be solicited from time to time by Morgan
Stanley & Co. Incorporated, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Charles Schwab & Co., Inc. (individually, an "Agent"
and collectively, the "Agents"), on behalf of the Company. The Agents have
agreed to use reasonable efforts to solicit purchases of such Notes. The
Company may also sell Notes to an Agent acting as principal for its own
account for resale to one or more investors and other purchasers at a fixed
offering price or at varying prices related to prevailing market prices at the
time of resale or otherwise, to be determined by such Agent and specified in
the applicable Pricing Supplement. No termination date for the offering of the
Notes has been established. The Company or an Agent may reject any order in
whole or in part. The Notes will not be listed on any securities exchange, and
there can be no assurance that the Notes offered hereby will be sold or that
there will be a secondary market for the Notes. See "Plan of Distribution."
This Prospectus Supplement and the accompanying Prospectus may be used by
Charles Schwab & Co., Inc., an affiliate of the Company, in connection with
offers and sales of the Notes in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale or otherwise.
Charles Schwab & Co., Inc. may act as principal or agent in such transactions.
--------------
MORGAN STANLEY & CO.
Incorporated
MERRILL LYNCH & CO.
CHARLES SCHWAB & CO., INC.
April 14, 1994
<PAGE>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE AGENTS. THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY DEBT SECURITIES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED HEREBY
SUPPLEMENTS, AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION
OF THE GENERAL TERMS AND PROVISIONS OF THE DEBT SECURITIES SET FORTH IN THE
ACCOMPANYING PROSPECTUS, TO WHICH REFERENCE IS HEREBY MADE. THE PARTICULAR
TERMS OF THE NOTES SOLD PURSUANT TO ANY PRICING SUPPLEMENT (A "PRICING
SUPPLEMENT") WILL BE DESCRIBED THEREIN. THE TERMS AND CONDITIONS SET FORTH IN
"DESCRIPTION OF NOTES" WILL APPLY TO EACH NOTE UNLESS OTHERWISE SPECIFIED IN
THE APPLICABLE PRICING SUPPLEMENT AND IN SUCH NOTE.
GENERAL
The Notes will be issued under the Senior Debt Indenture ("Senior Notes") or
the Senior Subordinated Debt Indenture ("Senior Subordinated Notes"), each
dated as of July 15, 1993 between the Company and Chemical Bank, as trustee
(the "Trustee"). The Notes issued under each Indenture will constitute a single
series under such Indenture, together with any medium-term notes of the Company
issued in the future under such Indenture which are designated by the Company
as constituting a single series of securities with the Notes for the purposes
of such Indenture. The Notes issued under the Senior Debt Indenture will
constitute part of the Senior Indebtedness of the Company and will rank pari
passu with all other unsecured and unsubordinated indebtedness of the Company.
Notes issued under the Senior Subordinated Debt Indenture will rank pari passu
with all other senior subordinated indebtedness of the Company and, together
with such other senior subordinated indebtedness, will be subordinated in right
of payment to the prior payment in full of the Senior Indebtedness of the
Company. See "Description of Debt Securities--Senior Subordinated Debt" in the
Prospectus. The Notes may be issued from time to time in an aggregate principal
amount of up to $100,000,000, subject to reduction as a result of the sale by
the Company of other Debt Securities referred to in the accompanying
Prospectus. At the date hereof the Company had approximately $150,000,000
aggregate principal amount of medium term notes outstanding under the Senior
Debt Indenture. Such aggregate principal amounts may be increased from time to
time as authorized by, or pursuant to authority delegated by, the Board of
Directors of the Company. Neither Indenture limits the amount of additional
indebtedness the Company may incur.
The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. The Notes will be
issued only in fully registered form in denominations of $1,000 or any amount
in excess thereof which is an integral multiple of $1,000.
The Notes will be offered on a continuing basis, and each Note will be issued
initially as either a Book-Entry Note or a Certificated Note. Except as set
forth in the accompanying Prospectus under "Description of Debt Securities--
Global Securities," Book-Entry Notes will not be issuable as Certificated
Notes. See "Book-Entry System" below.
The Notes may be presented for payments of principal and interest, and
transfer of the Notes will be registrable and the Notes will be exchangeable at
the agency in the Borough of Manhattan, The City of New York, maintained by the
Company for such purpose; provided that Book-Entry Notes will be exchangeable
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only in the manner and to the extent set forth under "Description of Debt
Securities--Global Securities" in the accompanying Prospectus. On the date
hereof, the agent for the payment, transfer and exchange of the Notes (the
"Paying Agent") is Chemical Bank, acting through its principal corporate trust
office at 450 West 33rd Street, New York, New York 10001.
The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto (unless such Note is to be sold at
100% of its principal amount), the interest rate or interest rate formula,
ranking, maturity, principal amount and any other terms on which each such Note
will be issued.
As used herein, the following terms shall have the meanings set forth below:
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New
York and, with respect to LIBOR Notes (as defined below), is also a London
Banking Day.
An "Interest Payment Date" with respect to any Note shall be a date on
which, under the terms of such Note, regularly scheduled interest shall be
payable.
"London Banking Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
The "Record Date" with respect to any Interest Payment Date shall be the
date 15 calendar days prior to such Interest Payment Date, whether or not
such date shall be a Business Day.
INTEREST AND PRINCIPAL PAYMENTS
Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling after
the date the Note is issued; provided, however, that the initial payment of
interest (or, in the case of an Amortizing Note, principal and interest) on a
Note issued less than 15 calendar days before an Interest Payment Date will be
paid on the next succeeding Interest Payment Date to the holder of record on
the Record Date with respect to such succeeding Interest Payment Date.
Payments of interest, other than interest payable at maturity (or on the date
of redemption or repayment, if a Note is redeemed or repaid by the Company
prior to maturity), will be made by check mailed to the address of the person
entitled thereto as shown on the Note register. Payments of principal, premium,
if any, and interest upon maturity, redemption or repayment will be made in
immediately available funds against presentation and surrender of the Note.
Notwithstanding the foregoing, (a) the Depositary, as holder of Book-Entry
Notes, shall be entitled to receive payments of interest by wire transfer of
immediately available funds and (b) a holder of $10,000,000 or more in
aggregate principal amount of Certificated Notes having the same Interest
Payment Date shall be entitled to receive payments of interest by wire transfer
of immediately available funds upon written request to the Paying Agent not
later than 15 calendar days prior to the applicable Interest Payment Date.
Certain Notes may be considered to be issued with original issue discount,
which, under certain circumstances, may be required to be included in income
for United States federal income tax purposes at a constant rate, prior to the
receipt of the cash attributable to that income. See "Certain United States
Federal Tax Consequences--Inclusion of Interest Income" below.
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FIXED RATE NOTES
Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof until the principal thereof is paid or
made available for payment. Such interest will be computed on the basis of a
360-day year of twelve 30-day months. Unless otherwise specified in the
applicable Pricing Supplement, payments of interest on Fixed Rate Notes other
than Amortizing Notes will be made semiannually on each March 1 and September 1
and at maturity or upon any earlier redemption or repayment. Payments of
principal and interest on Amortizing Notes, which are securities on which
payments of principal and interest are made in equal installments over the life
of the security, will be made either quarterly on each March 1, June 1,
September 1 and December 1 or semiannually on each March 1 and September 1, as
set forth in the applicable Pricing Supplement, and at maturity or upon any
earlier redemption or repayment. Payments with respect to Amortizing Notes will
be applied first to interest due and payable thereon and then to the reduction
of the unpaid principal amount thereof. A table setting forth repayment
information in respect of each Amortizing Note will be provided to the original
purchaser and will be available, upon request, to subsequent holders.
If any Interest Payment Date for any Fixed Rate Note would fall on a day that
is not a Business Day, the interest payment shall be made on the next day that
is a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the maturity date (or date of
redemption or repayment) of any Fixed Rate Note would fall on a day that is not
a Business Day, the payment of principal, premium, if any, and interest may be
made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after the maturity date (or date of redemption
or repayment).
Interest payments for Fixed Rate Notes will include accrued interest from and
including the date of issue or from but excluding the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate
determined by reference to an interest rate basis (the "Base Rate"), which may
be adjusted by a Spread and/or Spread Multiplier (each as defined below). The
applicable Pricing Supplement will designate one of the following Base Rates as
applicable to each Floating Rate Note: (a) the CD Rate (a "CD Rate Note"), (b)
the Commercial Paper Rate (a "Commercial Paper Rate Note"), (c) the Federal
Funds Rate (a "Federal Funds Rate Note"), (d) LIBOR (a "LIBOR Note"), (e) the
Prime Rate (a "Prime Rate Note"), (f) the Treasury Rate (a "Treasury Rate
Note") or (g) such other Base Rate or interest rate formula as is set forth in
such Pricing Supplement and in such Floating Rate Note. The "Index Maturity"
for any Floating Rate Note is the period of maturity of the instrument or
obligation from which the Base Rate is calculated and will be specified in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any
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interest period ("Maximum Interest Rate"); and (ii) a minimum limitation, or
floor, on the rate of interest which may accrue during any interest period
("Minimum Interest Rate").
The rate of interest on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. The Interest Reset Date will be, in the case of Floating Rate Notes
which reset daily, each Business Day; in the case of Floating Rate Notes (other
than Treasury Rate Notes) which reset weekly, the Wednesday of each week; in
the case of Treasury Rate Notes which reset weekly, the Tuesday of each week,
except as provided below; in the case of Floating Rate Notes which reset
monthly, the third Wednesday of each month; in the case of Floating Rate Notes
which reset quarterly, the third Wednesday of March, June, September and
December; in the case of Floating Rate Notes which reset semiannually, the
third Wednesday of two months of each year, as specified in the applicable
Pricing Supplement; and in the case of Floating Rate Notes which reset
annually, the third Wednesday of one month of each year, as specified in the
applicable Pricing Supplement; provided, however, that (a) the interest rate in
effect from the date of issue to the first Interest Reset Date with respect to
a Floating Rate Note will be the initial interest rate set forth in the
applicable Pricing Supplement (the "Initial Interest Rate") and (b) unless
otherwise specified in the applicable Pricing Supplement, the interest rate in
effect for the ten days immediately prior to maturity, redemption or repayment
will be that in effect on the tenth day preceding such maturity, redemption or
repayment date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date shall
be postponed to the next succeeding Business Day, except that in the case of a
LIBOR Note, if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
Except as provided below, and unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December, as specified in the applicable Pricing
Supplement; (ii) in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December;
(iii) in the case of Floating Rate Notes with a semiannual Interest Reset Date,
on the third Wednesday of the two months specified in the applicable Pricing
Supplement; and (iv) in the case of Floating Rate Notes with an annual Interest
Reset Date, on the third Wednesday of the month specified in the applicable
Pricing Supplement and, in each case, at maturity or upon any earlier
redemption or repayment. Subject to the next succeeding sentence, if any
Interest Payment Date for any Floating Rate Note would fall on a day that is
not a Business Day with respect to such Floating Rate Note, such Interest
Payment Date will be postponed to the following day that is a Business Day with
respect to such Floating Rate Note, except that, in the case of a LIBOR Note,
if such Business Day is in the next succeeding calendar month, such Interest
Payment Date shall be the immediately preceding day that is a Business Day with
respect to such LIBOR Note. If the maturity date or any earlier redemption or
repayment date of a Floating Rate Note would fall on a day that is not a
Business Day, the payment of principal and interest will be made on the next
succeeding Business Day, and no interest on such payment shall accrue for the
period from and after such maturity, redemption or repayment date, as the case
may be.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from and
including the date of issue or from but excluding the last date in respect of
which interest has been paid to, but excluding, the Interest Payment Date. In
the case of a Floating Rate Note on which interest is reset daily or weekly,
interest payments shall be, unless otherwise specified in the applicable
Pricing Supplement, the amount of interest accrued from the date of issue or
from the last date to which interest has been paid, as the case may be, to and
including the Record Date immediately preceding such Interest Payment Date,
except that at maturity or earlier redemption or repayment, the interest
payable will include interest accrued to, but excluding, the maturity,
redemption or repayment date, as the case may be.
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With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes, or by
the actual number of days in the year, in the case of Treasury Rate Notes. All
percentages used in or resulting from any calculation of the rate of interest
on a Floating Rate Note will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point (.0000001), with five one-millionths
of a percentage point rounded upward, and all dollar amounts used in or
resulting from such calculation on Floating Rate Notes will be rounded to the
nearest cent, with one-half cent rounded upward. The interest rate in effect on
any Interest Reset Date will be the applicable rate as reset on such date. The
interest rate applicable to any other day will be the interest rate in effect
on the immediately preceding Interest Reset Date (or, if none, the Initial
Interest Rate).
The applicable Pricing Supplement shall specify a calculation agent (the
"Calculation Agent") with respect to any issue of Floating Rate Notes. Upon the
request of the holder of any Floating Rate Note, the Calculation Agent will
provide the interest rate then in effect and, if determined, the interest rate
that will become effective on the next succeeding Interest Reset Date with
respect to such Floating Rate Note.
Unless otherwise specified in the applicable Pricing Supplement: (i) the
"Interest Determination Date" pertaining to an Interest Reset Date for CD Rate
Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes and Prime Rate
Notes will be the second Business Day preceding such Interest Reset Date; (ii)
the Interest Determination Date pertaining to an Interest Reset Date for a
LIBOR Note will be the second London Banking Day preceding such Interest Reset
Date; and (iii) the Interest Determination Date pertaining to an Interest Reset
Date for a Treasury Rate Note will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day preceding the applicable Interest Payment
Date or maturity as the case may be.
Interest rates will be determined by the Calculation Agent as follows:
CD Rate Notes
CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor
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publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "CDs (Secondary Market)," or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the CD Rate will be the rate on such
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Pricing Supplement as published by the
Federal Reserve Bank of New York in its daily statistical release "Composite
3:30 P.M. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated
in the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money center banks in the market for negotiable certificates of deposit;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as set forth above, the CD Rate in effect for the
applicable period will be the CD Rate in effect for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the
Initial Interest Rate).
Commercial Paper Rate Notes
Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper." In the event that such rate is not published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of the
rate on such Interest Determination Date for commercial paper of the specified
Index Maturity as published in Composite Quotations under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet available in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate shall be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Interest Determination Date of three leading dealers of commercial
paper in The City of New York selected by the Calculation Agent for commercial
paper of the specified Index Maturity, placed for an industrial issuer whose
bond rating is "AA," or the equivalent, from a nationally recognized rating
agency; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting offered rates as mentioned in this sentence,
the Commercial Paper Rate in effect for the applicable period will be the
Commercial Paper Rate in effect for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the Initial Interest
Rate).
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
Money Market Yield = D X 360 X 100
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360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period for which interest is being calculated.
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Federal Funds Rate Notes
Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate will be the rate on such Interest Determination
Date as published in the Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not yet published in either H.15(519) or
the Composite Quotations by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the Federal Funds Rate for
such Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight Federal funds, as of 9:00 A.M., New York City time, on such Interest
Determination Date, arranged by three leading brokers of Federal funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
Agent are not quoting as set forth above, the Federal Funds Rate in effect for
the applicable period will be the Federal Funds Rate in effect for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the Initial Interest Rate).
LIBOR Notes
LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified
in the LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, LIBOR will
be determined by the Calculation Agent as follows:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified in the applicable Pricing Supplement, either: (a) the
arithmetic mean of the offered rates for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following that
LIBOR Interest Determination Date, that appear on the Reuters Screen LIBO
Page as of 11:00 A.M., London time, on that LIBOR Interest Determination
Date, if at least two such offered rates appear on the Reuters Screen LIBO
Page ("LIBOR Reuters"), or (b) the rate for deposits in U.S. dollars having
the Index Maturity designated in the applicable Pricing Supplement,
commencing on the second London Banking Day immediately following that
LIBOR Interest Determination Date, that appears on the Telerate Page 3750
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date
("LIBOR Telerate"). "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks). "Telerate Page
3750" means the display designated as page "3750" on the Telerate Service
(or such other page as may replace the 3750 page on that service or such
other service or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank offered rates
for U.S. dollar deposits). If neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable Pricing Supplement, LIBOR will be determined as
if LIBOR Telerate had been specified. If fewer than two offered rates
appear on the Reuters Screen LIBO Page, or if no rate appears on the
Telerate Page 3750, as applicable, LIBOR in respect of that LIBOR Interest
Determination Date will be determined as if the parties had specified the
rate described in (ii) below.
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(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as specified
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity designated in the applicable Pricing Supplement are offered at
approximately 11:00 A.M., London time, on that LIBOR Interest Determination
Date by four major banks in the London interbank market selected by the
Calculation Agent ("Reference Banks") to prime banks in the London
interbank market commencing on the second London Banking Day immediately
following that LIBOR Interest Determination Date and in a principal amount
equal to an amount of not less than $1,000,000 that is representative for a
single transaction in such market at such time. The Calculation Agent will
request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will
be the arithmetic mean of the rates quoted at approximately 11:00 A.M., New
York City time, on that LIBOR Interest Determination Date by three major
banks in The City of New York selected by the Calculation Agent for loans
in U.S. dollars to leading European banks having the Index Maturity
designated in the applicable Pricing Supplement commencing on the second
London Banking Day immediately following that LIBOR Interest Determination
Date and in a principal amount equal to an amount of not less than
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
with respect to such LIBOR Interest Determination Date will be the rate of
LIBOR in effect on such date.
Prime Rate Notes
Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth in
H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate is
not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such
Interest Determination Date will be the arithmetic mean of the rates of
interest publicly announced by each bank named on the Reuters Screen NYMF Page
(as defined below) as such bank's prime rate or base lending rate as in effect
for such Interest Determination Date as quoted on the Reuters Screen NYMF Page
on such Interest Determination Date, or, if fewer than four such rates appear
on the Reuters Screen NYMF Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two major money center banks in
The City of New York selected by the Calculation Agent from which quotations
are requested. If fewer than two quotations are provided, the Prime Rate shall
be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each
case having total equity capital of at least U.S. $500 million and being
subject to supervision or examination by federal or state authority, selected
by the Calculation Agent to quote such rate or rates; provided, however, that
if the substitute banks or trust companies selected as aforesaid are not
quoting as mentioned in this sentence, the Prime Rate for such Interest Reset
Period will be the Prime Rate in effect for the immediately preceding Interest
Reset Period (or, if there is no such Interest Reset Period, the Initial
Interest Rate). "Reuters Screen NYMF Page" means the display designated as Page
"NYMF" on the Reuters Monitor Money Rates Service (or such other page as may
replace the NYMF Page on that service for the purpose of displaying prime rates
or base lending rates of major United States banks).
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Treasury Rate Notes
Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills--auction average (investment)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (expressed as a bond equivalent,on the basis of a year of 365 to 366 days,
as applicable, and applied on a daily basis) as otherwise announced by the
United States Department of the Treasury. In the event that the results of the
auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above
by 3:00 P.M., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 to 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers selected by the Calculation Agent for the
issue of Treasury Bills with a remaining maturity closest to the Index Maturity
designated in the applicable Pricing Supplement; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting bid
rates as mentioned in this sentence, the Treasury Rate for such Interest Reset
Date will be the Treasury Rate in effect for the immediately preceding Interest
Reset Period (or, if there was no such Interest Reset Period, the initial
Interest Rate).
BOOK-ENTRY SYSTEM
Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, amortization schedule, if any, ranking, maturity date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, ranking, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depositary"), and registered in the name of a
nominee of the Depositary. Certificated Notes will not be exchangeable for
Book-Entry Notes and, except under the circumstances described in the
accompanying Prospectus under "Description of Debt Securities--Global
Securities," Book-Entry Notes will not be exchangeable for Certificated Notes
and will not otherwise be issuable as Certificated Notes.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the accompanying
Prospectus under "Description of Debt Securities--Global Securities." The
Depositary has confirmed to the Company, each Agent and the Trustee that it
intends to follow such procedures.
OPTIONAL REDEMPTION
The Pricing Supplement will indicate either that the Notes cannot be redeemed
prior to maturity or will indicate the terms on which the Notes will be
redeemable at the option of the Company. Notice of redemption will be provided
by mailing a notice of such redemption to each holder by first class mail,
postage prepaid, at least 30 days and not more than 60 days prior to the date
fixed for redemption to the respective address of each holder as that address
appears upon the books maintained by the Paying Agent. The Notes, except for
Amortizing Notes, will not be subject to any sinking fund.
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REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment.
In order for such a Note to be repaid, the Paying Agent must receive, unless
otherwise specified in the applicable Pricing Supplement, at least 15 days but
not more than 30 days prior to the repayment date (i) the Note with the form
entitled "Option to Elect Repayment" on the reverse of the Note duly completed
or (ii) a telegram, telex, facsimile transmission or a letter from a member of
a national securities exchange, or the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company in the United
States setting forth the name of the holder of the Note, the principal amount
of the Note, the principal amount of the Note to be repaid, the certificate
number or a description of the tenor and terms of the Note, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
the Note to be repaid, together with the duly completed form entitled "Option
to Elect Repayment" on the reverse of the Note, will be received by the Paying
Agent not later than the fifth Business Day after the date of such telegram,
telex, facsimile transmission or letter; provided, however, that such telegram,
telex, facsimile transmission or letter shall only be effective if such Note
and form duly completed are received by the Paying Agent by such fifth Business
Day. Unless otherwise specified in the applicable Pricing Supplement, exercise
of the repayment option by the holder of a Note will be irrevocable. The
repayment option may be exercised by the holder of a Note for less than the
entire principal amount of the Note but, in that event, the principal amount of
the Note remaining outstanding after repayment must be an authorized
denomination.
If a Note is represented by a Registered Global Security, the Depositary's
nominee will be the holder of such Note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to
a particular Note, the beneficial owner of such Note must instruct the broker
or other direct or indirect participant through which it holds an interest in
such Note to notify the Depositary of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through which
it holds an interest in a Note in order to ascertain the cut-off time by which
such an instruction must be given in order for timely notice to be delivered to
the Depositary.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the Trustee for cancellation.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the ownership and disposition of the Notes. This summary is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), revenue rulings, judicial decisions and existing and proposed Treasury
Regulations, including regulations concerning the treatment of debt instruments
issued with original issue discount (the "OID Regulations"), all of which are
subject to change (possibly with retroactive effect) or differing
interpretations. This summary discusses only Notes held as capital assets,
within the meaning of Section 1221 of the Code by initial purchasers who
acquired such Notes at the issue price. It does not discuss all of the tax
consequences that may be relevant to a Holder (as defined below) in light of
such Holder's particular circumstances or to Holders subject to special rules,
such as certain financial institutions, insurance companies, dealers in
securities, or Holders whose functional currency (as defined in Section 985 of
the Code) is not the U.S. dollar. Persons considering the purchase of Notes
should consult their own tax advisors with regard to the application of the
United States federal income tax laws to their particular situation, as well as
any tax consequences arising under the laws of any other taxing jurisdiction.
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As used herein, the term "Holder" means the beneficial owner of a Note (a)
that is (i) for United States federal income tax purposes a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source or (b) whose
income from such Note is treated as effectively connected with such owner's
conduct of a United States trade or business. The term Holder also includes
certain former citizens of the United States whose interest and gain on the
Notes will be subject to United States federal income taxation.
INCLUSION OF INTEREST INCOME
In General. Interest payable with respect to a Note will generally be taxable
to a Holder as ordinary interest income as it accrues or at the time it is
received, in accordance with the Holder's normal method of accounting for
federal income tax purposes. Except as otherwise noted below with respect to
Short-Term Notes or in the applicable Pricing Supplement, it is not expected
that any Note will be treated as having been issued with more than a de minimis
amount of original issue discount for United States federal income tax
purposes.
Short-Term Notes. Certain Notes may be issued with a maturity date that is
one year or less from its issue date ("Short-Term Notes"). Under the OID
Regulations, interest on such Notes may be treated as included in the stated
redemption price of the Notes, with the result that the Notes would be treated
as bearing original issue discount. In general, a cash method Holder of a
Short-Term Note is not required to accrue original issue discount on a Short-
Term Note for United States federal income tax purposes unless it elects to do
so. Cash method holders who make such an election, other Holders who report
income for federal income tax purposes on the accrual method and certain other
Holders, including banks and dealers in securities, are required to include
original issue discount on such Short-Term Notes in income as it accrues on a
straight-line basis, unless an election is made to accrue the original issue
discount according to a constant yield method based on daily compounding. In
the case of a Holder who is not required and who does not elect to include
original issue discount in income currently, any gain realized on the sale,
exchange or retirement of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis (or, if
elected, according to a constant yield method based on daily compounding)
through the date of sale, exchange or retirement. Furthermore, such Holders
will be required to defer deductions for any interest paid on indebtedness
incurred to purchase or carry such Short-Term Notes in an amount not exceeding
the deferred interest income, until such deferred interest income is recognized
for tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
A Holder's adjusted tax basis in a Note generally will equal the cost of the
Note to such Holder, reduced by any return of principal on Amortizing Notes,
and in the case of certain Holders of Short-Term Notes, increased by discount
accrued but not received with respect to such Notes. Any amount received by the
Holder that is attributable to accrued but unpaid interest (and which has not
previously been included in the Holder's income) will be treated as interest
income and will not be treated as an amount realized upon the sale, exchange or
retirement of such Note.
Subject to the discussion relating to Short-Term Notes above, gain or loss
realized on the sale, exchange or retirement of a Note will be capital gain or
loss, and will be long-term capital gain or loss if at the time of sale,
exchange or retirement the Note has been held for more than one year. For this
purpose, Holders of Amortizing Notes acquired at a cost less than par will
recognize some amount of capital gain upon the receipt of each principal
payment, the same as though they had sold a proportionate amount of the related
Amortizing Note. Under current law, the excess of net long-term capital gains
over net short-term capital
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losses may be taxed at a lower rate than ordinary income for certain
noncorporate taxpayers. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal and interest on, and the proceeds of
disposition of, a Note. Backup withholding will apply only if the noncorporate
Holder (i) fails to furnish its Taxpayer Identification Number ("TIN"), which,
for an individual, would be his Social Security number, (ii) furnishes an
incorrect TIN, (iii) is notified by the Internal Revenue Service that it has
failed to properly report payments of interest and dividends or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. Holders should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
INCOME TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through the
Agents, who have agreed to use reasonable efforts to solicit offers to purchase
Notes. The Company may appoint additional agents to solicit sales of the Notes;
provided that any such solicitation and sale of the Notes shall be on the same
terms and conditions to which the Agents have agreed. The Company will have the
sole right to accept offers to purchase Notes and may reject any offer to
purchase Notes in whole or in part. An Agent will have the right to reject any
offer to purchase Notes solicited by it in whole or in part. Payment of the
purchase price of the Notes will be required to be made in immediately
available funds. Unless otherwise specified in the applicable Pricing
Supplement, the Company will pay an Agent, in connection with sales of Notes
resulting from a solicitation made or an offer to purchase received by such
Agent, a commission ranging from .125% to .875% of the principal amount of
Notes to be sold, depending upon the maturity of the Notes. The Company may
also sell Notes directly to investors on its own behalf. In the case of sales
made directly by the Company, no commission will be payable.
The Company may also sell Notes to an Agent as principal for its own account
at a discount equal to the commission applicable to any agency sale of a Note
of identical maturity unless otherwise specified in the applicable Pricing
Supplement. Such Notes may be resold to investors and other purchasers at a
fixed reoffering price or at prevailing market prices, or prices related
thereto at the time of such resale or otherwise, as determined by the Agent and
specified in the applicable Pricing Supplement. In addition, the Agents may
offer the Notes they have purchased as principal to other dealers. The Agents
may sell Notes to any dealer at a discount and, unless otherwise specified in
the applicable Pricing Supplement, such discount allowed to any dealer will not
be in excess of the discount to be received by such Agent from the Company.
After the initial public offering of Notes to be resold by an Agent to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
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The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company and the
Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents
for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Agents that the
Agents intend to make a market in the Notes, as permitted by applicable laws
and regulations. The Agents are not obligated to do so, however, and the Agents
may discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
Schwab is a wholly owned subsidiary of the Company. Each offering of Notes
will be conducted in compliance with the requirements of Schedule E of the By-
laws of the National Association of Securities Dealers, Inc. ("NASD") regarding
an NASD member firm's distributing the securities of an affiliate. Following
the initial distribution of any Notes, Schwab may sell such Notes in the course
of its business as a broker-dealer. Schwab may act as principal or agent in
such transactions. This Prospectus Supplement may be used by Schwab in
connection with such transactions. Such sales, if any, will be made at varying
prices related to prevailing market prices at the time of sale or otherwise.
Schwab is not obligated to make a market in any Notes and may discontinue any
market-making activities at any time without notice.
The Agents and any dealers utilized in the sale of Notes will not confirm
sales to accounts over which they exercise discretionary authority.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indentures
referred to herein.
LEGAL MATTERS
The validity of the Notes and the accuracy of the summary of certain tax
matters described under the caption "Certain United States Federal Income Tax
Consequences" will be passed upon for the Company by Howard, Rice, Nemerovski,
Canady, Robertson, Falk & Rabkin, A Professional Corporation. Certain directors
of that firm beneficially own an aggregate of less than 1% of the Common Stock
of the Company.
Certain legal matters relating to the Notes will be passed upon for the
Agents by Davis Polk & Wardwell.
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