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As filed with the Securities and Exchange Commission on June 22, 1998
REGISTRATION NO. 333-47107
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE CHARLES SCHWAB CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-3025021
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
101 MONTGOMERY STREET Joseph R. Martinetto
SAN FRANCISCO, CA 94104 Senior Vice President
(415) 627-7000 and Treasurer
(Address, Including Zip Code, 101 MONTGOMERY STREET
and Telephone Number, Including SAN FRANCISCO, CA 94104
Area Code, of Registrant's (415) 627-7000
Principal Executive Offices) (Name, Address, Including Zip Code,
and Telephone Number, Including
Area Code, of Agent for Service)
Copy to:
SCOTT P. SPECTOR, ESQ.
FENWICK & WEST LLP
TWO PALO ALTO SQUARE
PALO ALTO, CA 94306
(650) 494-0600
Approximate Date of Commencement of Proposed Sale to the Public: From time to
time after the effective date of this Registration Statement, in connection with
the exercise of the stock options described herein.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
THE CHARLES SCHWAB CORPORATION
35,995,806 SHARES OF COMMON STOCK
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This Prospectus relates to up to 35,995,806 shares (the "Shares") of Common
Stock, $.01 par value per share (the "Common Stock"), of The Charles Schwab
Corporation (the "Company") that may be offered and sold to participants
("Participants") and Approved Transferees (as defined below) of Participants in
the Company's 1992 Stock Incentive Plan, as amended as of October 22, 1997 (the
"1992 Plan"), the Company's 1987 Stock Option Plan, as amended as of October 22,
1997 (the "1987 Plan"), and the Company's 1987 Executive Officer Stock Option
Plan, as amended as of October 22, 1997 (the "1987 Executive Plan" and, together
with the 1992 Plan and the 1987 Plan, the "Plans") upon the exercise of
nonqualified stock options granted to Participants under the Plans, some or all
of which options may have been transferred by Participants to Approved
Transferees (the "Transferable Options"), upon the exercise, as permitted, of
incentive stock options granted to Participants (together with the Transferable
Options, the "Stock Options"), and upon the issuance of restricted stock
("Restricted Share Awards") or performance shares ("Performance Share Awards"
and, together with the Stock Options and the Restricted Share Awards, the
"Awards"), all in accordance with the terms of the respective Plans and the
documents specifying the terms and conditions of such Stock Options, Restricted
Share Awards or Performance Share Awards, respectively. "Approved Transferees"
means bona fide trusts or partnerships for the exclusive benefit of any one or
more of the Participant's child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, so long as the Participant has sole investment control over such
trust or partnership, or any transferee of the Participant by will or the laws
of descent or distribution.
The Company will sell the Shares to Participants in accordance with the
terms of the Awards, and to Approved Transferees in accordance with the terms of
the Transferable Options. The exercise price of each Stock Option has been or
will be determined by the Board of Directors of the Company or the Committee (as
defined herein).
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO PURCHASE ANY OF THESE SECURITIES IN ANY JURISDICTION IN WHICH, OR TO OR
FROM ANY PERSON TO OR FROM WHOM, IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION.
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THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
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The date of this Prospectus is June __, 1998.
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TABLE OF CONTENTS
Page
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Available Information. . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Information by Reference. . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Determination of Offering Price. . . . . . . . . . . . . . . . . . . 3
Information Relating to the Plans and the Awards . . . . . . . . . . 4
Certain Federal Income Tax Consequences Relating to the Plans. . . . 10
Information Relating to the Transferable Options . . . . . . . . . . 13
Certain Federal Income Tax Consequences Relating to the Transferable
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 or at the Commission's Regional Offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission. The Common Stock is listed on the New York
Stock Exchange ("NYSE") and the Pacific Exchange ("PCX"). Reports, proxy
statements and other information concerning the Company can also be inspected at
the offices of the NYSE, 20 Broad Street, New York, New York 10005 and the PCX,
301 Pine Street, San Francisco, California 94104 or 618 South Spring Street, Los
Angeles, California 90014.
The Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
omits certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the Shares. Statements contained
herein concerning the provisions of any document are not necessarily complete
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, and the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, each filed with the Commission (File No. 1-9700), and the
description of the Company's capital stock which is contained in its
Registration Statement on Form 8-A, including any amendments or reports filed
for the purpose of updating such description, each filed pursuant to the
Exchange Act, are hereby incorporated herein by reference.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents.
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Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of the above documents (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference herein) and any other
materials deemed to be part of this Prospectus, may be obtained upon request by
persons to whom this Prospectus is delivered, without charge, upon written or
oral request, by contacting the Office of the Corporate Secretary, The Charles
Schwab Corporation, 101 Montgomery Street, San Francisco, California 94104,
telephone (415) 636-1336.
THE COMPANY
The Company, through its principal operating subsidiary, Charles Schwab &
Co., Inc. ("Schwab"), provides brokerage and related investment services to
approximately 5,200,000 active investor accounts through 275 offices
in 47 states. The Company provides similar services to British investors
through its United Kingdom subsidiary, Charles Schwab Europe (formerly known as
ShareLink Investment Services plc). Mayer & Schweitzer, Inc. ("M&S"), a market
maker in Nasdaq securities, provides trade execution services to institutions
and broker-dealer clients.
The Company was incorporated in Delaware in November 1986. Schwab was
incorporated in California in 1971 and merged in 1983 with a subsidiary of
BankAmerica Corporation. The Company acquired Schwab in a management-led
leveraged buyout in March 1987 and became a publicly held company in September
1987. Its principal executive offices are located at 101 Montgomery Street, San
Francisco, California 94104 (telephone number (415) 627-7000).
USE OF PROCEEDS
The net proceeds from the sale of the Shares will be used for general
corporate purposes, which may include, but are not limited to, additions to
working capital, investments in or extensions of credit to subsidiaries, capital
expenditures, stock repurchases, repayment of indebtedness or acquisitions.
DETERMINATION OF OFFERING PRICE
The Company will sell the Shares to Participants in accordance with the
terms of the Stock Options (including the Transferable Options), the Restricted
Share Awards and the Performance Share Awards and to Approved Transferees in
accordance with the terms of the Transferable Options. The exercise price of
each Stock Option has been or will be determined by the Board of Directors of
the Company or the Committee.
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INFORMATION RELATING TO THE PLANS AND THE AWARDS
This Prospectus contains information concerning the Company and the Plans,
and the exercise of Stock Options, Restricted Share Awards and Performance Share
Awards, including the related federal income tax consequences. This Prospectus
is being or will be distributed pursuant to the Securities Act to certain
non-employee directors and key employees of the Company and its subsidiaries who
are Participants, and Approved Transferees of Participants. Copies of the
applicable Plan pursuant to which Stock Options, Restricted Shares Awards or
Performance Share Awards were issued have been or will be furnished to
Participants and Approved Transferees. The following summary of certain
provisions of the Plans does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the complete provisions of the Plans,
which are incorporated herein by this reference. See "Available Information."
The terms and conditions of the offer and sale of the Shares, including
price, are governed by the provisions of the Plans and the agreements thereunder
between the Company and each Participant. Additional information about the
Plans and their administration can be obtained by contacting the Compensation
Administration Department, The Charles Schwab Corporation, 101 Montgomery
Street, San Francisco, California 94104, telephone (415) 627-8539.
DESCRIPTION OF THE PLANS
1992 PLAN
In March 1992, the Board of Directors of the Company adopted the 1992 Plan
covering 2,500,000 shares of Common Stock. The 1992 Plan was amended and
restated as of January 1, 1994, and the limitation on the number of shares of
Common Stock reserved for issuance pursuant to the 1992 Plan was increased by
2,800,000, as approved by the stockholders of the Company on May 9, 1994. The
limitation on shares of Common Stock reserved for issuance under the 1992 Plan
was increased by 9,500,000 as approved by the stockholders of the Company in
1997. The 1992 Plan was subsequently amended on October 22, 1997. The 1992
Plan covers 43,725,000 shares as adjusted for stock splits through September
1997. Under the 1992 Plan, non-employee directors of the Company and key
employees of the Company and its subsidiaries are eligible to receive awards in
the form of options to purchase Common Stock, performance shares (shares of
Common Stock issuable upon the satisfaction of specified conditions) or
restricted stock. The aggregate of such awards must not exceed the 43,725,000
shares of Common Stock reserved for issuance pursuant to the 1992 Plan (subject
to certain adjustments described in "Adjustment Provisions" below). Options
granted under the 1992 Plan may be designated to qualify as incentive stock
options, as defined under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Unless so designated, options granted under the 1992 Plan
will generally be referred to herein as "nonstatutory" or "nonqualified."
1987 PLAN
Effective March 24, 1987, the Board of Directors of the Company adopted the
1987 Plan covering 1,616,000 shares of Common Stock. The 1987 Plan was
subsequently amended on July 29, 1987, April 17, 1989, September 17, 1996,
February 26, 1997 and October 22, 1997. The 1987 Plan covers 16,362,000 shares
as adjusted for stock splits through September 1997. Under the 1987 Plan,
certain key employees of the Company and its subsidiaries are eligible to
receive awards in the form of options to purchase Common Stock, performance
shares (shares of Common Stock issuable upon the satisfaction of specified
conditions) or restricted stock. The aggregate of such awards must not exceed
the 16,362,000 shares of Common Stock reserved for issuance pursuant to the 1987
Plan (subject to certain adjustments described in "Adjustment Provisions"
below). Options granted under the 1987 Plan may be designated to qualify as
incentive stock options, as defined under Section 422 of the Code. Unless so
designated, options granted under the 1987 Plan will generally be referred to
herein as "nonstatutory" or "nonqualified."
1987 EXECUTIVE PLAN
Effective March 24, 1987, the Board of Directors of the Company adopted the
1987 Executive Plan covering 1,284,000 shares of Common Stock. The 1987
Executive Plan was subsequently amended on September 17, 1996, February 26, 1997
and October 22, 1997. The 1987 Executive Plan covers 13,000,500 shares as
adjusted for stock splits through September 1997. Under the 1987 Executive
Plan, certain key employees of the Company and its subsidiaries are eligible to
receive awards in the form of options to purchase Common Stock, performance
shares (shares of Common Stock issuable upon the satisfaction of specified
conditions) or restricted stock. The aggregate of
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such awards must not exceed the 13,000,500 shares of Common Stock reserved for
issuance pursuant to the 1987 Executive Plan (subject to certain adjustments
described in "--Terms of Options Under the Plans -- Adjustment Provisions"
below). Options granted under the 1987 Plan will generally be referred to
herein as "nonstatutory" or "nonqualified."
PURPOSE
The purpose of the Plans is to promote the long-term success of the Company
and the creation of incremental stockholder value by (a) encouraging
non-employee directors and key employees to focus on long-range objectives, (b)
enabling the Company and its subsidiaries to attract and retain non-employee
directors and key employees with exceptional qualifications, and (c) linking
non-employee directors and key employees directly with stockholder interests.
ADMINISTRATION
The Plans are administered by the Compensation Committee (the "Committee")
of the Board of Directors of the Company (the "Board"). The Committee includes
two or more "non-employee" directors (as that term is defined in the Plans)
appointed, and subject to removal, by the Board. Members of the Committee serve
no specified term.
The Committee has the authority to select the key employees and
non-employee directors who are to receive awards under the Plans, and to
determine the amount, vesting requirements and other conditions of such awards.
The Committee also has the power to construe and interpret the Plans, to make
all other decisions relating to the Plans' operation, and, subject to the
provisions of the Plans, to adopt, amend and revoke rules and guidelines for the
Plans' administration. Such interpretations are binding.
DURATION, AMENDMENT AND TERMINATION
The Committee may amend or terminate the Plans, subject to applicable laws,
regulations and rules, without stockholder approval or ratification, at any time
or from time to time. The Plans have no fixed termination date. However, no
incentive stock options may be granted under the 1992 Plan after May 7, 2002,
and no grants may be made under the 1987 Plan or the 1987 Executive Plan after
March 24, 1997. Termination of the Plans will not impair or alter any options
previously granted under the Plans without the consent of the person to whom
such options or award were granted.
ELIGIBILITY
The Plans provide that options, restricted share awards and performance
share awards may be granted to key employees and, in the case of the 1992 Plan,
non-employee directors, of the Company and its subsidiaries, selected by the
Committee in its sole discretion. In addition, nonstatutory stock options
covering 2,500 shares (1,500 shares if the price per share is $35 or more on the
grant date) are automatically granted under the 1992 Plan to each non-employee
director as of May 15 each year.
SHARES SUBJECT TO THE PLANS
Up to 43,725,000 shares of Common Stock are authorized for issuance under
the 1992 Plan. Up to 16,362,000 shares of Common Stock are authorized for
issuance under the 1987 Plan. Up to 13,000,500 shares of Common Stock are
authorized for issuance under the 1987 Executive Plan. These figures are
subject to certain adjustments as described in "Adjustment Provisions" below.
Common Stock subject to the Plans may be unissued shares or reacquired shares.
If options granted under the Plans expire or otherwise terminate without being
exercised, or if awards of performance shares or restricted stock expire or
otherwise terminate prior to the satisfaction of the conditions to the grant of
shares of Common Stock or vesting called for thereunder, the shares not
purchased under such options or issued under such awards again become available
for issuance under the respective Plans. If shares of Common Stock are
forfeited to, or are repurchased by, the Company pursuant to the provisions of
an applicable stock option agreement or stock award agreement as discussed more
fully below, those shares again become eligible for issuance under the Plans.
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TERMS OF OPTIONS UNDER THE PLANS
OPTION AGREEMENTS
Each option granted under the Plans will be evidenced by a stock option
agreement between the optionee and the Company in such form as the Committee
deems appropriate, consistent with the Plans. Each such agreement must state
the number of Shares covered by the option, the exercise prices of such Shares
and whether or not the option is an incentive stock option, all as determined by
the Committee. Effective as of January 1, 1994, the 1992 Plan limits to 500,000
the number of Shares that may be granted subject to an Option to any one
Participant in any year.
TERM AND EXERCISE OF OPTIONS
Each stock option agreement must specify the date when all or any
installment of the option granted thereby vests (i.e., is to become
exercisable). In the discretion of the Committee, all or a portion of the
option may vest immediately upon grant, or only at some future date or dates.
However, nonstatutory stock options granted under the 1992 Plan to non-employee
directors of the Company pursuant to automatic annual grants will be fully
exercisable immediately upon grant.
The Committee, in its sole discretion, may determine, at the time of
granting an option, that the option will become fully vested as to all Shares
called for thereunder upon the occurrence of certain events deemed to be a
change in control of the Company as specified in the Plans. Upon a key
employee's retirement, all options will vest, except for any options issued
within two years of the individual's retirement date. For this purpose,
"retirement" means any termination of employment after the key employee has
reached age 50 and has completed seven years of service with the Company.
The duration of the period for exercising an option granted to a key
employee is also subject to determination by the Committee and must be stated in
the stock option agreement pursuant to which the option is granted.
Nonstatutory stock options granted to non-employee directors will terminate ten
years after the date of grant, subject to earlier termination if the director
ceases to provide services to the Company or its subsidiaries.
An option granted under the Plans may be exercised by giving written notice
of exercise to the Company, specifying the number of full Shares to be purchased
and tendering payment of the purchase price to the Company.
OPTION EXERCISE PRICE
The exercise price of options granted to key employees under the Plans may
not be less than the fair market value of the Common Stock on the date the
option is granted. The exercise price of nonstatutory stock options granted to
non-employee directors will be equal to the fair market value of the Common
Stock on the date of each such grant.
An optionee may pay the exercise price by check or other immediately
available funds at the time the option is exercised. If permitted by the
Committee at the time such payment is due, the holder of a nonstatutory stock
option may instead elect to make all or a portion of such payment either (1) by
delivering shares of Common Stock that have been held for at least six months
and that have an aggregate fair market value on the date of exercise equal to
the exercise price (or applicable portion thereof), (2) by delivering to Schwab
an irrevocable direction to sell shares of Common Stock (including Shares to be
issued upon exercise of the option) and to deliver all or part of the sales
proceeds to the Company as payment for such exercise price (or applicable
portion thereof), or (3) any combination of the foregoing payment methods. The
holder of an incentive stock option also may pay the exercise price by either or
a combination of the foregoing methods, if specifically provided for in the
applicable stock option agreement. If permitted by the Committee, the holder of
a nonstatutory option may elect to satisfy any tax withholding obligations to
the Company upon exercise of the option by surrendering to the Company
already-owned shares of Common Stock that have been held for at least six months
or by having the Company withhold a portion of the Shares that otherwise are to
be issued to the Participant. (See "Certain Federal Income Tax Consequences
Relating to the Plans - Tax Withholding" below.)
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ISSUANCE IN TANDEM WITH PERFORMANCE UNITS
The Plans permit the issuance of nonqualified stock options in "tandem"
with "Performance Units" (the terms of which will be set forth in the option
agreement entered into between the optionee and the Company) entitling the
recipient to receive certain cash payments from the Company. If an option is
issued in tandem with such a Performance Unit, the exercise of either an option
or a Performance Unit will result in the forfeiture of the Performance Unit or
option (as the case may be) associated therewith. Performance Units will not be
issued to members of the Company's executive management, and in the event that
an employee to whom a Performance Unit has been issued is promoted into
executive management (i.e., Executive Vice President or higher), the Performance
Unit will cease to be exercisable.
REPLACEMENT OPTIONS
Except in the case of options granted to a non-employee director, a stock
option agreement, in the discretion of the Committee, may provide that effective
upon the exercise of options covered thereby, "replacement options" will be
granted to the optionee in the event the optionee uses shares of Common Stock to
pay the exercise price of the original options (or tax withholding obligation of
the Company, as described above), provided that the number of such replacement
options will be limited to the number of shares used for such purpose. Subject
to the following limitations, the terms of such replacement options will be set
forth in the stock option agreement. The exercise price of replacement options
will be no less than the fair market value of the Common Stock of the Company on
the effective date of the grant of such options. No replacement options may be
incentive stock options, regardless of whether the original options were
designated as such. Replacement options may not be granted if the original
options are exercised after the termination of the optionee's employment with
the Company, and will expire no later than the expiration date of the original
options.
VOTING RIGHTS AND DIVIDENDS
Optionees will have no voting, dividend or other rights as stockholders of
the Company until such time as the issuance of the stock certificate for the
Common Stock covered thereby, at which time they will have the same voting,
dividend and other rights as the Company's other stockholders.
OTHER PROVISIONS
An option agreement under the Plans may contain such other terms,
provisions and conditions as may be determined by the Committee, consistent with
the Plans.
TERMS OF SHARE AWARDS UNDER THE PLANS
In addition to options, the Committee may grant to key employees awards of
Shares subject to certain restrictions described below (Restricted Share Awards)
and awards that take the form of a right to acquire Shares upon the satisfaction
of certain specified conditions (Performance Share Awards). Either Restricted
Share Awards or Performance Share Awards may be made alone or in combination
with one another and in such amounts as the Committee may determine from time to
time. Such awards also may be made by the Committee in conjunction with
nonstatutory options, and any such awards may provide that the Restricted Share
Awards or Performance Share Awards are subject to forfeiture upon the exercise
of the related options. Effective as of January 1, 1994, the 1992 Plan limits
to 200,000 the total number of Restricted Share Awards and Performance Share
Awards that may be granted to any one Participant in any year.
STOCK AWARD AGREEMENTS
Each Restricted Share Award and Performance Share Award will be evidenced
by an agreement (a "Stock Award Agreement") between the Company and the award
recipient in such form as the Committee deems appropriate, consistent with the
Plan. The Committee, exercising its discretion from time to time, will
establish conditions that must be satisfied for Shares to become vested (i.e.,
no longer subject to certain transfer restrictions and rights of the Company to
repurchase the Shares at less than the fair market value thereof), in the case
of a Restricted Share Award, or for the issuance of Shares, in the case of a
Performance Share Award. Such conditions, if any, will be specified in
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each Stock Award Agreement, and may include the Participant's continued service
to the Company, the Participant's performance, the Company's performance or such
other criteria as the Committee may adopt.
RESTRICTED SHARES
A Stock Award Agreement for a Restricted Share Award may provide that its
vesting conditions with respect to the Shares set forth in such Agreement will
be satisfied either all at once or on two or more occasions over a specified
period of time. Such Agreements shall provide for accelerated vesting of Shares
in the event of a Participant's death or disability. Moreover, at the time of
making a Restricted Share Award, the Committee may determine that such vesting
conditions will be waived if there is a change in control of the Company as
specified in the Plans. Restricted Share Awards will vest upon a recipient's
retirement (as defined above), except for any Restricted Shares awarded within
two years of the individual's retirement date.
The holders of Restricted Shares have the same voting, dividend and other
rights as the Company's other stockholders.
PERFORMANCE SHARES
A Stock Award Agreement for a Performance Share Award may provide that its
conditions to issuance of the maximum number of Shares called for thereunder
will be satisfied, and such Shares will be issued, either all at once or on two
or more occasions over a specified period of time. Such Agreements also may
provide for accelerated issuance of Shares in the event of a Participant's
death, disability or retirement. Moreover, at the time of making a Performance
Share Award, the Committee may determine that such conditions to issuance of
Shares will be waived if there is a change in control of the Company as
specified in the Plan.
Any Shares that are to be issued pursuant to a Performance Share Award
after the recipient's death will be delivered or distributed to the beneficiary
or beneficiaries, as designated by the award recipient. At any time before the
award recipient's death, he or she may change a beneficiary designation by
filing the prescribed form with the Company. If the recipient fails to
designate a beneficiary, or no designated beneficiary survives the recipient,
then any Shares that are to be issued pursuant to a Performance Share Award
after the recipient's death will be delivered or distributed to the recipient's
estate. The Committee has the sole discretion to determine the form and timing
of any such distribution to a recipient's beneficiary or estate.
The recipients of Performance Share Awards will have no voting, dividend or
other rights as stockholders of the Company until such time as the issuance of
the Shares covered thereby, at which time they will have the same voting,
dividend and other rights as the Company's other stockholders.
ADJUSTMENT PROVISIONS
If the Common Stock is changed by a stock split, reverse stock split,
recapitalization, or other change in the capital structure of the Company, or if
the Company increases the number of outstanding shares of Common Stock by paying
a stock dividend, the Committee will make appropriate adjustments in (a) the
number of shares of Common Stock available for issuance pursuant to future Stock
Options, Restricted Share Awards and Performance Share Awards granted under the
Plans, (b) the number of Shares covered by each outstanding Performance Share
Award that has not been settled and/or (c) the number of Shares covered by each
outstanding unexercised Stock Option, and the exercise price thereof. However,
the Committee is not required to make any such adjustments because of the
Company's issuance or sale of stock or any class of securities convertible into
or exchangeable for stock of any class.
If the Company is a party to an agreement of merger or other
reorganization, all outstanding options, restricted shares and Performance Share
Awards will be subject to that agreement. Such an agreement may, but need not,
provide for (a) the assumption by the surviving corporation (or its parent) of
outstanding options and other awards made under the Plans if the Company is not
the surviving corporation as a result of such merger or other reorganization,
(b) continuation of such options and other awards by the Company if it is the
surviving corporation, (c) accelerated vesting, or (d) settlement in cash.
8
<PAGE>
LIENS ON FUNDS OR PROPERTY
Under the provisions of the Plan, no person has or may create a lien on any
funds, securities or other property held thereunder except to the extent
permitted by the law of descent and distribution.
ERISA AND OTHER QUALIFICATIONS
The Company is not aware of any provisions of the Employee Retirement
Income Security Act of 1974, as amended, to which the Plans are subject. The
Plans are not qualified stock bonus, pension or profit-sharing plans under
Section 401(a) of the Code.
ISSUANCE OF SHARES
Shares may only be issued, either in connection with a Restricted Share
Award or Performance Share Award, or upon exercise of options granted under the
Plans in compliance with all applicable federal and state laws, including
securities laws, as well as listing requirements of the New York Stock Exchange
and any other securities exchange upon which the Common Stock may then be
listed.
The Company's typical forms of stock option agreement or Stock Award
Agreement may require Participants, as a condition of acquiring Shares pursuant
to an option or other award granted under the Plans, to give certain written
assurances to the Company necessary to ensure the availability of exemptions
from certain registration requirements relating to the acquisition of such
Shares. The Company does not currently intend to require such assurances so
long as the Registration Statement remains effective.
NO EMPLOYMENT RIGHTS
An award granted under the Plans do not impose any obligation whatsoever
upon Participants or the Company to continue the Participant's employment
relationship with the Company. Such relationship is terminable at will at any
time by the Participant or the Company.
TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the Company is
terminated, the extent to which the Participant will continue to have the right
to exercise options granted under the Plans will be governed by the terms of the
Participant's stock option agreement.
RESTRICTIONS ON RESALES BY AFFILIATES
Participants who are, at the time they wish to sell Shares acquired under
the Plans, officers, directors or other "affiliates" (as that term is defined
under the Securities Act) of the Company, may only do so pursuant to Rule 144
under the Securities Act, unless there exists an effective registration
statement under the Securities Act covering the resale of such Shares or unless
another exemption from registration for such resale is available. Resales or
reoffers may not be made pursuant to this Prospectus or the Registration
Statement.
Purchases and sales of the Company's equity securities by officers,
directors and 10% stockholders (collectively, "Section 16 Holders") are subject
to the provisions of Section 16 of the Exchange Act that, among other things,
generally impose on Section 16 Holders certain obligations to file with the
Commission initial and annual reports as well as reports regarding changes of
beneficial ownership. Questions about these reporting obligations should be
directed to the Office of the Corporate Secretary of the Company.
Section 16 Holders generally are subject to the provisions of Section 16(b)
of the Exchange Act, which provides in effect that any profit realized as a
result of matching purchases and sales, or sales and purchases, of the Company's
stock in any six-month period belongs to the Company. It is important to know
that the six-month period is calculated from the date of any transaction, and
may be carried backward as well as forward.
Pursuant to Commission regulations governing the application of Section 16,
neither the grant nor the exercise of an option under the Plans will generally
be considered a "purchase" for purposes of applying the provisions of
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Section 16. As a result, the grant or exercise of an option under the Plans
generally will not subject a Section 16 Holder to potential liability under
Section 16, even if the Section 16 Holder has sold shares within six months of
the grant or exercise. However, a sale of shares acquired pursuant to the
exercise of an option under the Plans (including a "same day sale") is
considered a "sale" for purposes of applying the rules of Section 16, and
accordingly could result in liability under Section 16 if the sale occurs within
six months of a "matchable" purchase.
Similarly, neither a grant nor the vesting of a Restricted Share Award or a
Performance Share Award under the Plan is considered a "purchase" for purposes
of applying Section 16. As a result, the grant of a Restricted Share Award or a
Performance Share Award under the Plan generally will not subject a Section 16
Holder to potential liability under Section 16, even if the Section 16 Holder
has sold shares within six months of the award. However, a sale of shares
acquired as a result of a grant of a Restricted Share Award or Performance Share
Award could result in liability under Section 16 if the sale occurs within six
months of a "matchable" purchase.
No stockholder of the Company, including Participants, may sell Shares
while they are in possession of material, nonpublic information relating to the
Company. The Company has certain procedures governing the times and
circumstances under which directors and executive officers may buy or sell
Company securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE PLANS
The following summarizes certain of the federal income tax consequences
associated with the grant of Stock Options, Restricted Share Awards and
Performance Share Awards under the Plans. The discussion is based on federal
income tax laws and regulations currently in effect, and the administrative and
judicial interpretations thereof, all of which are subject to change.
Furthermore, the following discussion does not purport to address all aspects of
the potentially applicable federal income tax consequences nor does it address
any state or local taxes that may be applicable. Participants should consult
with their own tax advisers as to any specific transaction that they contemplate
undertaking.
NONSTATUTORY STOCK OPTIONS
GRANT OF NONSTATUTORY STOCK OPTION
The grant of a nonstatutory stock option normally has no tax effect on the
Company or on the optionee to whom it is granted at the time of grant, assuming
(as is the case with those that may be granted pursuant to the Plans) that the
option itself does not have a readily ascertainable fair market value at the
time it is granted.
EXERCISE OF NONSTATUTORY STOCK OPTION
Upon exercise of a nonstatutory option, the optionee will recognize
ordinary income on the measurement date (described below) in the amount by which
the fair market value of the Shares, determined as of the measurement date,
exceeds the exercise price. For key employees, such ordinary income is subject
to withholding tax. Generally, the amount of ordinary income recognized by the
optionee is deductible by the Company in the year that the income is recognized.
For Shares that, when issued, are not subject to restrictions on transfer
and a substantial risk of forfeiture within the meaning of Code Section 83 and
the regulations thereunder (including, for example, the Company's right to
repurchase the Shares at less than fair market value), the measurement date is
the date the nonstatutory stock option is exercised. Accordingly, the optionee
will recognize ordinary income on the date of exercise in an amount equal to the
excess of the fair market value of such Shares, determined as of the date of
exercise, over the exercise price.
For those Shares received, upon exercise of a nonstatutory option, that are
subject to restrictions on transfer and a substantial risk of forfeiture, the
measurement date will be the date on which the transfer restrictions lapse or
the risk of forfeiture terminates, whichever occurs earlier, unless the optionee
elects (pursuant to Code Section 83(b)) within 30 days of the date of exercise,
to have the income determined and recognized as of the date of exercise.
Optionees who, upon exercise of an option, receive Shares that are subject
to restrictions on transfer and a substantial risk of forfeiture should consult
with their own tax advisers regarding the advisability of making an election
under Code Section 83(b). The election, if made, must be filed with the
Internal Revenue Service within 30 days of the
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<PAGE>
date the option is exercised, and a copy of the election must be provided to the
Company, as well as filed with the optionee's income tax return for the year in
which the exercise occurred.
DISPOSITION OF NONSTATUTORY STOCK OPTION SHARES
For purposes of determining the amount of taxable gain or loss upon a
subsequent disposition of Shares acquired pursuant to the exercise of a
nonstatutory option, the optionee's tax basis for the Shares will be the fair
market value of the Shares on the measurement date, as described above. The
measurement date will also be the date on which the optionee's holding period
for the Shares commences for purposes of determining whether any capital gain or
loss on the ultimate sale of the Shares will be short-term, mid-term or
long-term. The Shares must be held for more than eighteen months following the
measurement date to qualify for long-term capital gain treatment. The Shares
must be held for more than one year but not more than eighteen months following
the measurement date to qualify for mid-term capital gain treatment.
There are no tax consequences to the Company when optionees dispose of
Shares they acquired upon exercise of a nonqualified stock option.
INCENTIVE STOCK OPTIONS
GRANT OF INCENTIVE STOCK OPTION
The grant of an incentive stock option has no tax effect on the Company or
on the employee to whom it is granted at the time of grant.
EXERCISE OF INCENTIVE STOCK OPTION
In contrast to the exercise of a nonstatutory stock option, the exercise of
an incentive stock option will not cause the optionee to recognize taxable
income for regular income tax purposes, nor will the Company be entitled to any
compensation deduction. However, in calculating alternative minimum tax
liability, the incentive stock option is treated as if it were a nonstatutory
stock option. Thus, the excess of the fair market value of the Shares on the
measurement date (as described above in connection with the exercise of
nonstatutory stock options) over the exercise price will be included in the
calculation of alternative minimum taxable income. Optionees would then be
required to pay the greater of their regular or alternative minimum tax
liability as computed for such year.
DISPOSITION OF INCENTIVE STOCK OPTION SHARES
For purposes of determining the amount of taxable gain or loss upon a
subsequent disposition of Shares acquired pursuant to the exercise of an
incentive stock option, the optionee's tax basis for regular tax purposes will
be the amount paid for the Shares upon exercise of such option. For alternative
minimum tax purposes, the optionee's tax basis may be increased to equal the
amount that was included in calculating alternative minimum taxable income upon
exercise (as discussed above).
If an optionee holds the Shares acquired upon exercise of an incentive
stock option for a minimum of two years from the date of the grant of such
option, and for at least one year after such exercise, any gain or loss
recognized by the optionee on the subsequent sale or exchange of such Shares
generally would be treated as a capital gain or loss, taxed at a rate that
depends on the holding period of the Shares. Shares held for more than 18
months are generally taxable at long-term capital gains rates. The maximum
long-term capital gains rate is 20%. Shares held for more than one year but not
for more than eighteen months are generally taxable at mid-term capital gains
rates. The maximum mid-term capital gains rate is 28%. If the Shares are sold
or otherwise disposed of prior to the expiration of such periods (a
"disqualifying disposition"), then a portion of any gain recognized by the
employee which would otherwise be characterized as capital gain would instead be
taxable as ordinary compensation income, and the Company will be entitled to a
deduction in that same amount. The amount of such gain which would be
characterized as ordinary income would not exceed an amount equal to the excess
of (i) the fair market value of such Shares as of the date the option was
exercised over (ii) the amount paid for such Shares.
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<PAGE>
NON-CASH EXERCISES OF STOCK OPTIONS
The foregoing discussion presumes that the optionee pays the exercise price
for any option Shares with cash. If an optionee pays the exercise price for an
option, in whole or in part, with previously acquired shares of Common Stock,
complex rules will govern the determination of the optionee's taxable income
upon exercise, or other measurement date, with respect to nonstatutory stock
options, as well as the optionee's basis and holding period in the new Shares.
If an optionee uses the proceeds from the sale of Shares that are to be acquired
upon exercise of an option to pay all or a portion of the exercise price for
that option, there generally will be no increase or decrease in the taxable
income (if any) recognized by the optionee upon exercise of the option, and the
net Shares acquired will have the same tax basis that they would have had if the
exercise price had been paid in full in cash. Optionees should consult with
their own tax advisers before using Common Stock to pay for option Shares.
RESTRICTED SHARE AWARDS
GRANT AND VESTING OF RESTRICTED SHARES
A recipient of Restricted Shares will recognize ordinary income in an
amount equal to the excess of the fair market value of the Shares on the
measurement date (described below) over the amount paid for the Shares. Such
ordinary income is subject to withholding tax, and the amount of ordinary income
recognized by the recipient is deductible by the Company in the year that the
income is recognized, except to the extent that the amount of such income, when
added to certain other compensation paid by the Company to any individual who is
a "named executive officer" of the Company (within the meaning of Section 162(m)
of the Code) at the end of the Company's fiscal year, exceeds $1,000,000.
For Restricted Shares that are subject to transfer restrictions and a
substantial risk of forfeiture, the measurement date will be the date on which
the transfer restrictions lapse or the risk of forfeiture terminates, whichever
occurs earlier, unless the recipient elects (pursuant to Code Section 83(b))
within 30 days of the date the Shares are issued, to have the income determined
and recognized as of the date of issuance.
Recipients of Restricted Shares should consult with their own tax advisers
regarding the advisability of making an election under Code Section 83(b). The
election, if made, must be filed with the Internal Revenue Service within 30
days of the date the Shares are acquired, and a copy of the election must be
provided to the Company, as well as filed with the recipient's income tax return
for the year in which the Shares are issued.
DISPOSITION OF RESTRICTED SHARES
For purposes of determining the amount of taxable gain or loss upon a
subsequent disposition of the Shares, the recipient's tax basis for the Shares
will be the fair market value of the Shares on the measurement date, as
described above. The measurement date will also be the date on which the
recipient's holding period for the Shares commences for purposes of determining
whether any capital gain or loss on the ultimate sale of the Shares will be
short-term, mid-term or long-term. The Shares must be held for more than
eighteen months following the measurement date to qualify for long-term capital
gain treatment. The Shares must be held for more than one year but not for more
than eighteen months from the measurement date to qualify for mid-term capital
gain treatment.
PERFORMANCE SHARE AWARDS
GRANT OF PERFORMANCE SHARE AWARD
The grant of Performance Share Awards will have no federal income tax
consequences to the Company or the recipient at the time of the grant.
ISSUANCE OF SHARES PURSUANT TO PERFORMANCE SHARE AWARD
The recipient of any Shares issued pursuant to the terms of a Performance
Share Award will recognize ordinary income in an amount equal to the excess of
the fair market value of the Shares on the measurement date (described below)
over the amount, if any, paid for the Shares. Such ordinary income is subject
to withholding tax, and the amount of ordinary income recognized by the
recipient generally is deductible by the Company in the year that the
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<PAGE>
income is recognized, except to the extent that the amount of such income, when
added to certain other compensation paid by the Company to any individual who is
a "named executive officer" of the Company (within the meaning of Section 162(m)
of the Code) at the end of the Company's fiscal year, exceeds $1,000,000.
For Shares that are not subject to restrictions on transfer or substantial
risk of forfeiture, the measurement date is the date the Shares are issued. For
Shares that are subject to any transfer restrictions or risk of forfeiture, the
measurement date will be the date on which the transfer restrictions lapse or
the risk of forfeiture terminates, whichever occurs earlier, unless the
recipient elects (pursuant to Code Section 83(b)) within 30 days of the date the
Shares are issued, to have the income determined and recognized as of the date
of issuance.
DISPOSITION OF SHARES ACQUIRED PURSUANT TO PERFORMANCE SHARE AWARD
For purposes of determining the amount of taxable gains or loss upon a
subsequent disposition of the Shares, the recipient's tax basis for the Shares
will be the fair market value of the Shares on the measurement date, as
described above. The measurement date will also be the date on which the
recipient's holding period for the Shares commences for purposes of determining
whether any capital gain or loss on the ultimate sale of the Shares will be
short-term, mid-term or long-term. The Shares must be held for more than
eighteen months following the measurement date to qualify for long-term capital
gain treatment. The Shares must be held for more than one year but not for more
than eighteen months from the measurement date to qualify for mid-term capital
gains treatment.
TAX WITHHOLDING
To comply with federal income tax withholding requirements, the Company
will require Participants who are key employees to pay to the Company the
required federal income tax withholding simultaneously with the exercise (or
other measurement date) of any nonstatutory stock options, the vesting of
Restricted Shares, or the issuance (or other measurement date) of Shares issued
pursuant to Performance Share Awards, unless other provision has previously been
made for satisfying the withholding requirements. In this regard, Section 16
Holders should note that the use of Shares to satisfy tax withholding
requirements may be considered a sale of the Shares for purposes of applying the
Section 16 rules.
INFORMATION RELATING TO THE TRANSFERABLE OPTIONS
TYPE OF OPTIONS
Transferable Options granted under the Plans are or will be nonqualified
stock options.
TRANSFERABILITY
Under the Plans, options are transferable only by will, by the laws of
descent and distribution or pursuant to a qualified domestic relations order;
provided that options may be transferred by the Participant to an Approved
Transferee of the option holder in accordance with the provisions outlined
below.
Upon transfer to an Approved Transferee, the Transferable Option continues
to be governed by and subject to the terms and limitations of the respective
Plan and the relevant grant, and the Approved Transferee is required to abide by
the Company's then-current stock option transfer guidelines and is entitled to
the same rights thereunder as the Participant transferring such Transferable
Option (a "Participant Transferor"), as if no transfer had taken place.
Accordingly, the rights of the Approved Transferee are subject to the terms and
limitations of the original grant to the Participant Transferor, including
provisions relating to expiration date, exercisability, exercise price and
forfeiture upon termination of the Participant Transferor's employment with the
Company.
EXERCISE OF TRANSFERABLE OPTIONS BY APPROVED TRANSFEREES
A Transferable Option may be exercised by an Approved Transferee at any
time until the close of business on the expiration date of the Transferable
Option (as may be affected by the Participant Transferor's employment status as
described below).
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The purchase price of the shares as to which Transferable Options are
exercised shall be paid to the Company at the time of exercise in the manner
described above.
Upon exercise of a Transferable Option by an Approved Transferee, any
federal, state or local withholding taxes arising from the exercise are the
obligation of the Participant Transferor or the Participant Transferor's estate,
as applicable.
A Transferable Option will be deemed exercised on the date the Company has
received a copy of the option exercise notice, completed in all respects and
signed by the Approved Transferee (accompanied by payment of the exercise
price). The Transferable Option shares will generally be transferred to the
Approved Transferee as of the day following the date that (i) the above
conditions have been met, (ii) the funds and/or shares of Common Stock paid by
the Approved Transferee in satisfaction of the exercise price have been received
by the Company free and clear of all restrictions, and (iii) the Company has
received confirmation that the Participant Transferor's tax withholding
obligations have been satisfied.
Once the exercise is completed as described above, stock certificates for
the appropriate number of shares will be delivered to the Approved Transferee or
his or her estate or beneficiaries, or otherwise delivered in such manner as the
person(s) entitled thereto may direct.
TERMINATION
Because Stock Options transferred to Approved Transferees continue to be
governed by the terms of the respective Plan and the original grant, their
exercisability continues to be affected by the Participant Transferor's
employment status. In addition to terminating upon exercise and upon expiration
of the stated term of the option, each option shall terminate upon termination
of a Participant's employment as set forth below.
Under the Plans, all previously unexercised options terminate and are
forfeited automatically upon the termination of the Participant Transferor's
employment with the Company, unless the Committee or the Board of Directors
specifies otherwise. However, if a Participant Transferor dies at a time when
an Approved Transferee is entitled to exercise an option, then the portion
formerly exercisable by the Approved Transferee may be exercised by the Approved
Transferee within one year of the death of the Participant Transferor.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE TRANSFERABLE OPTIONS
The following does not purport to address the possible estate and gift tax
consequences of transferring a Stock Option. Accordingly, prior to making a
transfer of a Stock Option, a Participant should consult with his or her
personal tax advisor concerning the possible federal and state gift, estate,
inheritance, and generation skipping tax consequences of such a transfer, as
well as state and local income tax consequences which are not addressed herein.
The discussion of federal income tax consequences for the Participant Transferor
and the Approved Transferee set forth below assumes that the Transferable Option
does not have a readily ascertainable fair market value at the date of grant and
that the transfer of a Stock Option during a Participant's lifetime is made by
way of gift and no consideration is received therefor.
FEDERAL INCOME TAX CONSEQUENCES FOR PARTICIPANT TRANSFERORS
A Participant Transferor who transfers a Transferable Option by way of gift
to an Approved Transferee or a trust for the benefit of an Approved Transferee
will not recognize income at the time of the transfer. Instead, at the time the
Approved Transferee exercises the Transferable Option, the Participant
Transferor will generally recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the shares purchased over the
exercise price. (Special rules may apply to Participants subject to potential
liability under Section 16(b) of the Exchange Act, which may defer the
recognition of compensation income.) Moreover, such income will be subject to
payment and withholding of income and FICA taxes. Normally, Participant
Transferors may satisfy the withholding obligation by writing a check to the
Company or by another method permitted by the Company. Subject to certain
limitations, the Company will generally be entitled to claim a federal income
tax deduction at such time and in the same amount that the Participant
Transferor recognizes as ordinary income. In the event the Approved Transferee
exercises the Transferable Option after the death of the Participant Transferor,
any such ordinary income will generally be recognized by the Participant
Transferor's estate.
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FEDERAL INCOME TAX CONSEQUENCES FOR APPROVED TRANSFEREES
An Approved Transferee will not recognize income at the time of the
transfer of a Stock Option. As described in the preceding paragraph, the
Participant Transferor (or the estate of the Participant Transferor, as the case
may be) and not the Approved Transferee will generally recognize ordinary
compensation income at the time the Approved Transferee exercises the
Transferable Option. An Approved Transferee who chooses to exercise a
Transferable Option in whole or in part by delivery of other shares of Common
Stock already owned by the Approved Transferee should consult with his or her
own tax advisor concerning the tax consequences of such a transaction.
FEDERAL INCOME TAX CONSEQUENCES ON SUBSEQUENT SALE OF SHARES
If Shares acquired upon exercise of a Transferable Option are later sold or
exchanged, then the difference between the sale price and the Approved
Transferee's tax basis for the shares will generally be taxable as long-term,
mid-term or short-term capital gain or loss (if the Shares are a capital asset
of the Approved Transferee) depending upon how long the Shares have been held
after the exercise date. If the Shares have been held for more than eighteen
months, the difference will generally be taxable as long-term capital gain. If
the Shares have been held for more than one year but not more than eighteen
months, the difference will generally be taxable as mid-term capital gain. The
tax basis for the Shares in the hands of the Approved Transferee would be the
exercise price for the Transferable Option plus the amount of the income
recognized by the Participant Transferor (or his or her estate, as the case may
be) at the time of exercise.
PLAN OF DISTRIBUTION
The Shares are being registered to permit the sale by the Company of such
Shares to Participants or Approved Transferees upon the exercise from time to
time of the Awards. The Company has agreed, among other things, to bear all
expenses in connection with the Registration Statement and the sale of the
Shares. The Shares may be sold from time to time in one or more transactions at
offering prices determined in accordance with the terms of the Awards.
The Common Stock is listed for trading on the NYSE and the PCX, and the
Shares have been approved for listing on the NYSE and the PCX.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Shares offered
hereby will be passed upon for the Company by Fenwick & West LLP, Palo Alto,
California.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
issuance of the securities being registered. All of the amounts shown are
estimates except the Commission registration fee. Such expenses will be borne by
the Company.
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Registration fee $ 162,500
Accounting fees and expenses 5,000
Legal fees and expenses 15,000
Printing fees 1,000
Miscellaneous 1,500
---------
Total $ 180,000
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation provides that,
pursuant to Delaware law, its directors will not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, with specified exceptions. The exceptions relate to (i) any breach
of a director's duty of loyalty of the Company or its stockholders, (ii) acts or
omissions that are not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) approval by a director of certain unlawful
dividend payments, distributions or stock redemptions or repurchases or (iv)
engaging in a transaction from which a director derives an improper personal
benefit. Among the types of breaches for which directors will not be liable are
those resulting from negligent or grossly negligent behavior.
The Company's Amended and Restated Bylaws also provides for the
indemnification of both its directors and officers within the limitations
permitted by Delaware law. Section 145 of the Delaware General Corporation Law
authorizes indemnification of directors and officers for actions taken in good
faith and in a manner such person reasonably believed to be in, or not opposed
to, the best interests of the Company. This provision is sufficiently broad to
permit indemnification under certain circumstances for liabilities (and for
reimbursement of expenses incurred) arising under the Securities Act. The
Company has entered into indemnity agreements with its directors that contain
provisions that are in some respects broader that the specified indemnification
provisions contained in Delaware law.
The Company has obtained directors' and officers' liability and
corporate reimbursement insurance covering all officers and directors of the
Company and its subsidiaries and providing for the reimbursement of amounts paid
by the Company or its subsidiaries to directors and officers pursuant to
indemnification arrangements, subject to certain deductibles and coinsurance
provisions.
ITEM 16. EXHIBITS
The following exhibits are either filed herewith or incorporated by
reference to documents previously filed with the Commission as indicated below:
3.1 Third Restated Certificate of Incorporation, as amended as of December 1,
1988, of the Registrant, filed as Exhibit 3.7 to the Registrant's
Quarterly Report on Form 10-Q for the period ending September 30, 1996
and incorporated herein by reference.
4.1 Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.8 to
the Registrant's Quarterly Report on Form 10-Q for the period ending
September 30, 1996, and incorporated herein by reference.
5.1 Opinion of Fenwick & West LLP. *
II-1
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10.1 Executive Officer Stock Option Plan (1987), as amended and restated as of
October 22, 1997. *
10.2 1987 Stock Option Plan, as amended and restated as of October 22, 1997. *
10.3 The Charles Schwab Corporation 1992 Stock Incentive Plan, as amended and
restated as of October 22, 1997.*
23.1 Consent of Fenwick & West LLP (included with Exhibit 5.1 hereof).*
23.2 Consent of Deloitte & Touche LLP.
24.1 Powers of Attorney. *
--------------------
* Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) That, for the purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California on the 19th day of
June 1998.
THE CHARLES SCHWAB CORPORATION
By: /s/ Steven L. Scheid
------------------------------------
Steven L. Scheid,
Executive Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons on behalf
of the Company in the capacities indicated and on June 19, 1998.
SIGNATURE TITLE
--------- -----
/s/ Charles R. Schwab Chairman, Co-Chief Executive Officer and
- ------------------------------ Director (principal executive officer)
Charles R. Schwab*
/s/ David S. Pottruck President, Co-Chief Executive Officer,
- ------------------------------ Chief Operating Officer and Director
David S. Pottruck*
/s/ Steven L. Scheid Executive Vice President and Chief
- ------------------------------ Financial Officer (principal financial
Steven L. Scheid and accounting officer)
/s/ Nancy H. Bechtle Director
- ------------------------------
Nancy H. Bechtle*
/s/ C. Preston Butcher Director
- ------------------------------
C. Preston Butcher*
Director
- ------------------------------
Donald G. Fisher
Director
- ------------------------------
Anthony M. Frank
Director
- ------------------------------
Frank C. Herringer
/s/ Stephen T. McLin Director
- ------------------------------
Stephen T. McLin*
/s/ George P. Shultz Director
- ------------------------------
George P. Shultz*
Director
- ------------------------------
Roger O. Walther
*By /s/ Steven L. Scheid
---------------------------
Steven L. Scheid
Attorney-in-Fact
II-3
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT:
We consent to the incorporation by reference in this Post-Effective Amendment
No. 1 to Registration Statement No. 333-47107 of The Charles Schwab
Corporation on Form S-3 of our reports dated February 23, 1998, appearing,
and incorporated by reference, in the Annual Report on Form 10-K of The
Charles Schwab Corporation for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
San Francisco, California
June 19, 1998
