<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE CHARLES SCHWAB CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3025021
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
(415) 627-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOSEPH R. MARTINETTO
SENIOR VICE PRESIDENT AND TREASURER
THE CHARLES SCHWAB CORPORATION
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104
(415) 627-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
LAWRENCE B. RABKIN, ESQ.
HOWARD, RICE, NEMEROVSKI, JOHN M. BRANDOW, ESQ.
CANADY, FALK & RABKIN DAVIS POLK & WARDWELL
A PROFESSIONAL CORPORATION 450 LEXINGTON AVENUE
THREE EMBARCADERO CENTER, 7TH FLOOR NEW YORK, NEW YORK 10017
SAN FRANCISCO, CA 94111
--------------
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective as determined by
market conditions.
If the securities being registered on the form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, please 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
PROPOSED MAXIMUM
AGGREGATE
TITLE OF EACH CLASS OF OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Debt Securities(2)(3)................... $150,000,000 $44,250
================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) This Registration Statement also relates to offers and sales of Debt
Securities in connection with market-making transactions by and through
Charles Schwab & Co., Inc., an affiliate of the Registrant.
(3) Pursuant to Rule 429, the Prospectus in this Registration Statement also
relates to up to $55,000,000 of Debt Securities covered by Registration
Statement No. 333-12727, upon which a registration fee of approximately
$18,966 has been paid, but which have not been offered or sold.
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 THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOT SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Dated , 1998
$205,000,000
THE CHARLES SCHWAB CORPORATION
DEBT SECURITIES
--------------
The Company may offer and issue from time to time in one or more series
debt securities (the "Debt Securities") with an initial aggregate offering
price not to exceed U.S. $205,000,000. The Company will offer Debt Securities
to the public on terms determined by market conditions. Debt Securities will be
issuable in registered form without coupons. Debt Securities will be sold for
U.S. dollars; principal of, premium, if any, and any interest on Debt
Securities will likewise be payable in U.S. dollars.
The accompanying Prospectus Supplement sets forth the ranking as senior
or senior subordinated Debt Securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate (or manner of
calculation thereof), time of payment of interest, listing (if any) on a
securities exchange and any other specific terms of the Debt Securities and the
name of and compensation to each dealer, underwriter or agent (if any) involved
in the sale of such Debt Securities. The managing underwriters with respect to
each series sold to or through underwriters will be named in the accompanying
Prospectus Supplement. Any such underwriters (and any representative thereof),
dealers or agents may include Morgan Stanley & Co. Incorporated, Goldman, Sachs
& Co., Credit Suisse First Boston Corporation and Charles Schwab & Co., Inc.
--------------
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. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
--------------
Debt Securities may be offered through dealers, underwriters or agents
designated from time to time, as set forth in the accompanying Prospectus
Supplement. Net proceeds to the Company will be the purchase price in the case
of a dealer, the public offering price less discount in the case of an
underwriter or the purchase price less commission in the case of an agent--in
each case, less other expenses attributable to issuance and distribution. The
Company may also sell Debt Securities directly to investors on its own behalf.
In the case of sales made directly by the Company, no commission will be
payable. See "Plan of Distribution" for possible indemnification arrangements
for dealers, underwriters and agents.
This Prospectus and the accompanying Prospectus Supplement may be used by
Charles Schwab & Co., Inc., which is a wholly owned subsidiary of the Company,
in connection with offers and sales of Debt Securities 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.
, 1998
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any underwriter, dealer or agent. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create an implication that there has been no change in the
affairs of the Company since the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy 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.
---------------------
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
Website (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission through the Electronic Data Gathering,
Analysis and Retrieval system. The Company's Common Stock, par value $.01 per
share (the "Common Stock"), is listed on the New York Stock Exchange ("NYSE")
and the Pacific Stock Exchange. Reports, proxy statements and other
information concerning the Company can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and the Pacific Stock
Exchange, 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 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 Debt Securities. 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 has filed with the Commission (File No. 1-9700) its Annual
Report on Form 10-K for the year ended December 31, 1997 and its Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998, which are
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 later of (i) the termination of the offering of the Debt
Securities and (ii) the date on which Charles Schwab & Co., Inc. ("Schwab")
ceases offering and selling previously issued Debt Securities 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.
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.
2
<PAGE>
Copies of the above documents (excluding exhibits) may be obtained upon
request by persons to whom this Prospectus is delivered without charge from
the Investor Relations Department, 101 Montgomery Street, San Francisco,
California 94104 (telephone number 415/627-8786).
CERTAIN PERSONS PARTICIPATING IN THE OFFERING OF THE DEBT SECURITIES MAY
ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE
OF THE DEBT SECURITIES. SPECIFICALLY, THE UNDERWRITERS OR AGENTS SPECIFIED IN
THE RELEVANT PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT MAY OVERALLOT IN
CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE DEBT
SECURITIES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION" IN THIS PROSPECTUS AND "PLAN OF DISTRIBUTION" OR
"UNDERWRITING" IN THE RELEVANT PROSPECTUS SUPPLEMENT OR PRICING SUPPLEMENT.
3
<PAGE>
THE CHARLES SCHWAB CORPORATION
The Charles Schwab Corporation (the "Company") engages, through its
subsidiaries, in securities brokerage and related financial services,
including retail brokerage, mutual funds, support services for independent
investment managers, equity securities market-making and 401(k) defined
contribution plans. Schwab, the Company's principal operating subsidiary,
provides brokerage and related investment services to approximately 5 million
active investor accounts through 275 offices nationwide. The Company provides
similar services to British investors through its subsidiary in the United
Kingdom, Charles Schwab Europe (formerly known as ShareLink). Mayer &
Schweitzer, Inc. ("M&S"), a market maker in Nasdaq and other securities,
provides trade execution services to broker-dealers and institutional
customers. Charles Schwab Investment Management, Inc. is the investment
adviser for Schwab's proprietary mutual funds.
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, CA 94104 (telephone number 415/627-7000).
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of earnings to
fixed charges for the Company for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------ ------------------------
1998 1997 1997 1996 1995 1994 1993
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited)......................... 1.7 1.9 1.8 1.9 1.7 2.0 2.4
Ratio of earnings to fixed charges as
adjusted (unaudited)................ 5.4 6.4 5.9 5.9 5.9 7.0 7.2
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
earnings consist of income before extraordinary charge, income taxes and fixed
charges. Fixed charges for the purpose of calculating the ratio of earnings to
fixed charges consist of interest expense incurred on payables to customers,
subordinated borrowings, term debt, capitalized interest and one-third of
rental expense, which is estimated to be representative of the interest
factor.
For the purpose of calculating the ratio of earnings to fixed charges as
adjusted, interest expense incurred on payables to customers is eliminated as
a fixed charge. The Company considers interest expense incurred in connection
with payables to customers to be an operating expense, since such interest is
completely offset by interest revenue on related investments and margin loans.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be used for
general corporate purposes, which may include additions to working capital,
investing in or extending credit to subsidiaries, capital expenditures, stock
repurchases, repayment of indebtedness or acquisitions. Further details
relating to the use of the net proceeds may be set forth in the applicable
Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will constitute either senior or senior subordinated
debt of the Company and will be issued, in the case of Debt Securities that
will be senior debt, under a Senior Indenture dated as of July 15, 1993 (the
"Senior Debt Indenture") between the Company and The Chase Manhattan Bank
(formerly Chemical Bank), as trustee (the "Trustee"), and, in the case of Debt
Securities that will be senior subordinated debt, under a Subordinated
Indenture dated as of July 15, 1993 (the "Senior Subordinated Debt Indenture")
between the Company and the Trustee. The Senior Debt Indenture and the Senior
Subordinated Debt Indenture
4
<PAGE>
are sometimes hereinafter referred to individually as an "Indenture" and
collectively as the "Indentures." The Indentures are included as exhibits to
the Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Indentures and the Debt Securities do
not purport to be complete and such summaries are subject to the detailed
provisions of the applicable Indenture to which reference is hereby made for a
full description of such provisions, including the definition of certain terms
used herein, and for other information regarding the Debt Securities.
Numerical references in parentheses below are to sections in the applicable
Indenture. Wherever particular sections or defined terms of the applicable
Indenture are referred to, such sections or defined terms are incorporated
herein by reference as part of the statement made, and the statement is
qualified in its entirety by such reference. The Indentures are substantially
identical, except for the provisions relating to subordination and the
Company's negative pledge. See "Senior Subordinated Debt" and "Certain
Covenants of the Company." The Debt Securities offered by this Prospectus and
the accompanying Prospectus Supplement are referred to herein as the "Offered
Debt Securities."
GENERAL
Neither of the Indentures limits the amount of additional indebtedness
that the Company may incur. The Debt Securities will be unsecured senior or
senior subordinated obligations of the Company. The Company is a holding
company, the consolidated operations of which are carried out through wholly
owned subsidiaries. Therefore, the Company's rights and the rights of its
creditors, including holders of Debt Securities, to participate in the assets
of any subsidiary upon the latter's liquidation or recapitalization will be
subject to the prior claims of the subsidiary's creditors, except to the
extent that the Company may itself be a creditor with recognized claims
against the subsidiary. In addition, dividends, loans and advances from
certain subsidiaries, including Schwab, to the Company are restricted by net
capital requirements under the Exchange Act and under rules of certain
exchanges and various regulatory bodies.
The Indentures provide that Debt Securities may be issued from time to
time in one or more series.
Reference is made to the Prospectus Supplement for the following terms
of and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) classification as
senior or senior subordinated Debt Securities, the specific designation,
aggregate principal amount, purchase price and denomination; (ii) any date of
maturity; (iii) interest rate or rates (or the method by which such rate will
be determined); (iv) the dates on which any such interest will be payable; (v)
the place or places where the principal of, premium, if any, and interest on
the Offered Debt Securities will be payable; (vi) any redemption, repayment or
sinking fund provisions; (vii) any applicable United States federal income tax
consequences; and (viii) any other specific terms of the Offered Debt
Securities, including any additional events of default or covenants provided
for with respect to such Offered Debt Securities, and any terms which may be
required by or be advisable under applicable laws or regulations.
Debt Securities may be presented for exchange and registration of
transfer in the manner, at the places and subject to the restrictions set
forth in the Debt Securities and the Prospectus Supplement. Subject to the
limitations provided in the applicable Indenture, such services will be
provided without charge, other than any tax or other governmental charge
payable in connection therewith.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate
Security") or a floating rate (a "Floating Rate Security"). Certain Debt
Securities may be treated as having been issued at a discount for United
States federal income tax purposes, as described in the relevant Prospectus
Supplement.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
fully registered global securities (a "Registered Global Security") that will
be deposited with a depositary (a "Depositary") or with a nominee for a
Depositary identified in the Prospectus Supplement relating to such series and
registered in the name of the Depositary or a nominee thereof. In such case,
one or more Registered Global Securities will be
5
<PAGE>
issued in a denomination or aggregate denominations equal to the portion of
the aggregate principal amount of outstanding Debt Securities of the series to
be represented by such Registered Global Security or Registered Global
Securities. Unless and until it is exchanged in whole for Debt Securities in
definitive registered form, a Registered Global Security may not be
transferred except as a whole by the Depositary for such Registered Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor. The Depositary currently accepts only securities that are payable
in U.S. dollars.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered
Global Security will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will apply
to all depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will
be limited to persons that have accounts with the Depositary for such
Registered Global Security ("participants") or persons that may hold interests
through participants. Upon the issuance of a Registered Global Security, the
Depositary for such Registered Global Security will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interest will be effected only through, records
maintained by the Depositary for such Registered Global Security (with respect
to interests of participants) and on the records of participants (with respect
to interests of persons holding through participants). The laws of some states
may require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Registered Global
Securities.
So long as the Depositary for a Registered Global Security, or its
nominee, is the registered owner of such Registered Global Security, such
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Debt Securities represented by such Registered Global
Security for all purposes under the applicable Indenture. Except as set forth
below, owners of beneficial interests in a Registered Global Security will not
be entitled to have the Debt Securities represented by such Registered Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or holders thereof under the applicable Indenture.
Accordingly, each person owning a beneficial interest in a Registered Global
Security must rely on the procedures of the Depositary for such Registered
Global Security and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the applicable Indenture. The Company understands
that under existing industry practices, if the Company requests any action of
holders or if any owner of a beneficial interest in a Registered Global
Security desires to give or take any action which a holder is entitled to give
or take under the applicable Indenture, the Depositary for such Registered
Global Security would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Payments of principal, premium, if any, and interest on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global Security.
None of the Company, the Trustee or any other agent of the Company or agent of
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
6
<PAGE>
The Company expects that the Depositary for any Debt Securities
represented by a Registered Global Security, upon receipt of any payment of
principal, premium, if any, or interest in respect of such Registered Global
Security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in such
Registered Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such participants
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers registered
in "street name," and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary
or ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by the Company within 90 days, the Company will issue such Debt
Securities in definitive form in exchange for such Registered Global Security.
In addition, the Company may at any time and in its sole discretion determine
not to have any of the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt Securities of
such series in definitive form in exchange for all of the Registered Global
Security or Registered Global Securities representing such Debt Securities.
Any Debt Securities issued in definitive form in exchange for a Registered
Global Security will be registered in such name or names as the Depositary
shall instruct the Trustee. It is expected that such instructions will be
based upon directions received by the Depositary from participants with
respect to ownership of beneficial interests in such Registered Global
Security.
SENIOR DEBT
The Debt Securities that will constitute part of the senior debt of the
Company ("Senior Debt Securities") will be issued under the Senior Debt
Indenture and will rank pari passu with all the other unsecured and
unsubordinated debt of the Company.
SENIOR SUBORDINATED DEBT
The Debt Securities that will constitute part of the senior subordinated
debt of the Company ("Senior Subordinated Debt Securities") will be issued
under the Senior Subordinated Debt Indenture and will be subordinate and
junior in right of payment, to the extent and in the manner set forth in the
Senior Subordinated Debt Indenture, to all "Senior Indebtedness" of the
Company. The Senior Subordinated Debt Indenture defines "Senior Indebtedness"
as the principal of and premium, if any, and interest on (a) indebtedness of
the Company, whether outstanding on the date of the Senior Subordinated Debt
Indenture or thereafter created, that is (i) for money borrowed by the Company
(including, without limitation, capitalized lease obligations), (ii) for money
borrowed by others and guaranteed, directly or indirectly, by the Company or
(iii) constituting purchase money indebtedness, or indebtedness secured by
property at the time of the acquisition of such property by the Company, for
the payment of which the Company is directly or contingently liable, and (b)
all deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to (whether outstanding on the date of the
Senior Subordinated Debt Indenture or thereafter created), any such
indebtedness, unless by the terms of the instrument creating or evidencing any
such indebtedness referred to in clause (a) or clause (b) above it is
expressly provided that such indebtedness is not superior in right of payment
to the Senior Subordinated Debt Securities and/or it is expressly provided
that such indebtedness is itself subordinated to any other indebtedness of the
Company. As used in the preceding sentence, the term "purchase money
indebtedness" means indebtedness evidenced by a note, debenture, bond or other
instrument (whether or not secured by any lien or other security interest)
issued or assumed as all or a part of the consideration for the acquisition of
property, whether by purchase, merger, consolidation or otherwise. The term
Senior Indebtedness shall not include (i) indebtedness of the Company to a
subsidiary of the Company for money borrowed or advances from a subsidiary of
the Company or (ii) the Senior Subordinated Debt Securities. (Senior
Subordinated Debt Indenture, Section 1.1)
7
<PAGE>
In the event (a) of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or (b) that (i)
a default shall have occurred with respect to the payment of principal of (and
premium, if any) or any interest on or other monetary amounts due and payable
on any Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of principal, premium, if any, or
interest, or other monetary amount due and payable) with respect to any Senior
Indebtedness, as defined therein or in the instrument under which the same is
outstanding, permitting the holder or holders thereof to accelerate the
maturity thereof (with notice or lapse of time, or both), and such event of
default shall have continued beyond the period of grace, if any, in respect
thereof, and such default or event of default shall not have been cured or
waived or shall not have ceased to exist, or (c) that the principal of and
accrued interest on the Senior Subordinated Debt Securities shall have been
declared due and payable upon an Event of Default pursuant of Section 5.1 of
the Senior Subordinated Debt Indenture and such declaration shall not have
been rescinded and annulled as provided therein, then the holders of all
Senior Indebtedness shall first be entitled to receive payment of the full
amount unpaid thereon, or provision shall be made for such payment in money or
money's worth, before the holders of any of the Senior Subordinated Debt
Securities are entitled to receive a payment on account of the principal of
(and premium, if any) or any interest on the indebtedness evidenced by such
Senior Subordinated Debt Securities, other than a payment constituting shares
of stock of the Company, as reorganized or readjusted, or securities of the
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated to the payment of the Senior Indebtedness
which may at the time be outstanding. (Senior Subordinated Debt Indenture,
Section 13.1) If this Prospectus is being delivered in connection with a
series of Senior Subordinated Debt Securities, the accompanying Prospectus
Supplement or the information incorporated herein by reference will set forth
the approximate amount of Senior Indebtedness outstanding as of the end of the
most recent fiscal quarter.
CERTAIN COVENANTS OF THE COMPANY
The following restrictions apply to each series of Debt Securities
unless the terms of such series of Debt Securities provide otherwise.
NEGATIVE PLEDGE. The Senior Indenture provides that the Company and any
successor corporation will not, and will not permit any Subsidiary (as defined
in such Indenture) to, create, assume, incur or guarantee any indebtedness for
borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by such Indenture) on the Voting
Securities (as defined in such Indenture) of Schwab, M&S or Schwab Holdings,
Inc. (a wholly owned subsidiary of the Company that owns all of the common
stock of Schwab) without making effective provision whereby the Debt
Securities issued under such Indenture will be secured equally and ratably
with such secured indebtedness. (Senior Debt Indenture, Section 3.6)
MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE. Each Indenture
provides that the Company will not merge or consolidate with any other
corporation and will not sell, lease or convey all or substantially all its
assets to any person, unless the Company shall be the continuing corporation,
or the successor corporation in any merger or consolidation (if other than the
Company) or the person that acquires or leases all or substantially all the
assets of the Company shall be a corporation organized under the laws of the
United States or a State thereof or the District of Columbia and shall
expressly assume all obligations of the Company under such Indenture and the
Debt Securities issued thereunder, and immediately after such merger,
consolidation, sale, lease or conveyance, the Company, such person or such
successor corporation shall not be in default in the performance of the
covenants and conditions of such Indenture to be performed or observed by the
Company. (Senior and Senior Subordinated Debt Indentures, Section 9.1)
This covenant would not apply to a recapitalization transaction, a
change of control of the Company or a highly leveraged transaction unless such
transactions or change of control were structured to include a merger or
consolidation or sale, lease or conveyance of all or substantially all of the
assets of the Company. Except as may be described in a Prospectus Supplement
applicable to a particular series of Debt Securities, there are no covenants
or other provisions in the Indentures providing for a put or increased
interest or otherwise that would afford holders of Debt Securities additional
protection in the event of a recapitalization transaction, a change of control
of the Company or a highly leveraged transaction.
8
<PAGE>
EVENTS OF DEFAULT
An Event of Default is defined under each Indenture with respect to
Debt Securities of any series issued under such Indenture as being: (a)
default in payment of any principal of the Debt Securities of such series,
either at maturity (or upon any redemption), by declaration or otherwise; (b)
default for 30 days in payment of any interest on any Debt Securities of such
series; (c) default for 60 days after written notice in the observance or
performance of any other covenant or agreement in the Debt Securities of such
series or such Indenture other than a covenant included in such Indenture
solely for the benefit of a series of Debt Securities other than such series;
(d) certain events of bankruptcy, insolvency or reorganization; (e) failure by
the Company to make any payment at maturity, including any applicable grace
period, in respect of indebtedness, which term as used in each Indenture means
obligations (other than non-recourse obligations or the Debt Securities of
such series issued under such Indenture) of, or guaranteed or assumed by, the
Company for borrowed money (including, without limitation, capitalized lease
obligations) or evidenced by bonds, debentures, notes or other similar
instruments ("Indebtedness") in an amount due and payable at maturity in
excess of $10,000,000 and continuance of such failure for a period of 30 days
after written notice thereof to the Company by the Trustee, or to the Company
and the Trustee by the holders of not less than 25% in principal amount of the
outstanding Debt Securities (treated as one class) issued under such
Indenture; or (f) a default with respect to any Indebtedness, which default
results in the acceleration of Indebtedness in an amount in excess of
$10,000,000 without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded, or annulled for a period of
30 days after written notice thereof to the Company by the Trustee, or to the
Company and the Trustee by the holders of not less than 25% in principal
amount of the outstanding Debt Securities (treated as one class) issued under
such Indenture; provided, however, that if any such failure, default or
acceleration referred to in clause (e) or (f) above shall cease or be cured,
waived, rescinded or annulled, then the Event of Default by reason thereof
shall be deemed likewise to have been thereupon cured. (Senior and Senior
Subordinated Debt Indentures, Section 5.1)
Each Indenture provides that (a) if an Event of Default due to the
default in payment of principal of, premium, if any, or any interest on, any
series of Debt Securities issued under such Indenture or due to the default in
the performance or breach of any other covenant or warranty of the Company
applicable to the Debt Securities of such series but not applicable to all
outstanding Debt Securities issued under such Indenture shall have occurred
and be continuing, either the Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of each affected series (treated as
one class) issued under such Indenture and then outstanding may then declare
the principal of all Debt Securities of each such affected series and interest
accrued thereon to be due and payable immediately; and (b) if an Event of
Default due to a default in the performance of any other of the covenants or
agreements in such Indenture applicable to all outstanding Debt Securities
issued thereunder and then outstanding or due to certain events of bankruptcy,
insolvency and reorganization of the Company shall have occurred and be
continuing, either the Trustee or the holders of not less than 25% in
principal amount of all Debt Securities issued under such Indenture and then
outstanding (treated as one class) may declare the principal of all such Debt
Securities and interest accrued thereon to be due and payable immediately, but
upon certain conditions such declarations may be annulled and past defaults
may be waived (except a continuing default in payment of principal of (or
premium, if any) or any interest on such Debt Securities) by the holders of a
majority in principal amount of the Debt Securities of all such affected
series then outstanding. (Senior and Senior Subordinated Debt Indentures,
Section 5.1 and Section 5.10)
Each Indenture contains a provision entitling the Trustee, subject to
the duty of the Trustee during a default to act with the required standard of
care, to be indemnified by the holders of Debt Securities (treated as one
class) issued under such Indenture before proceeding to exercise any right or
power under such Indenture at the request of such holders. (Senior and Senior
Subordinated Debt Indentures, Section 6.2) Subject to such provisions in each
Indenture for the indemnification of the Trustee and certain other
limitations, the holders of a majority in principal amount of the outstanding
Debt Securities (treated as one class) issued under such Indenture may direct
the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee. (Senior and Senior Subordinated Debt Indentures, Section 5.9)
9
<PAGE>
Each Indenture provides that no holder of Debt Securities issued under
such Indenture may institute any action against the Company under such
Indenture (except actions for payment of overdue principal or interest) unless
such holder previously shall have given to the Trustee written notice of
default and continuance thereof and unless the holders of not less than 25% in
principal amount of the Debt Securities of each affected series (treated as
one class) issued under such Indenture and then outstanding shall have
requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity, the Trustee shall not have instituted such
action within 60 days of such request and the Trustee shall not have received
direction inconsistent with such written request by the holders of a majority
in principal amount of the Debt Securities of each affected series (treated as
one class) issued under such Indenture. (Senior and Senior Subordinated Debt
Indentures, Section 5.6 and Section 5.9)
Each Indenture contains a covenant that the Company will file annually
with the Trustee a certificate of no default or a certificate specifying any
default that exists. (Senior and Senior Subordinated Debt Indentures, Section
3.5) See "Concerning the Trustee," below.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligation under each Indenture
as set forth below. (Senior and Senior Subordinated Debt Indentures, Section
10.1)
Under terms satisfactory to the Trustee, the Company may discharge
certain obligations to holders of any series of Debt Securities issued under
such Indenture which have not already been delivered to the Trustee for
cancellation and which have either become due and payable or are by their
terms due and payable within one year (or scheduled for redemption within one
year) by irrevocably depositing with the Trustee cash or U.S. Government
Obligations (as defined in such Indenture) as trust funds in an amount
certified to be sufficient to pay at maturity (or upon redemption) the
principal of and interest on such Debt Securities.
The Company may also discharge any and all of its obligations to holders
of any series of Debt Securities issued under an Indenture at any time
("defeasance"), but may not thereby avoid its duty to register the transfer or
exchange of such series of Debt Securities, to replace any temporary,
mutilated, destroyed, lost, or stolen series of Debt Securities or to maintain
an office or agency in respect of such series of Debt Securities. Under terms
satisfactory to the Trustee, the Company may instead be released with respect
to any outstanding series of Debt Securities issued under the relevant
Indenture from the obligations imposed by Sections 3.6 and 9.1, in the case of
the Senior Debt Indenture, and Section 9.1, in the case of the Senior
Subordinated Debt Indenture (which contain the covenants described above
limiting liens and consolidations, mergers, asset sales and leases), and omit
to comply with such Sections without creating an Event of Default ("covenant
defeasance"). Defeasance or covenant defeasance may be effected only if, among
other things: (i) the Company irrevocably deposits with the Trustee cash or
U.S. Government Obligations, as trust funds in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of and
interest on all outstanding Debt Securities of such series issued under such
Indenture; (ii) the Company delivers to the Trustee an opinion of counsel to
the effect that the holders of such series of Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes
as a result of such defeasance or covenant defeasance and that defeasance or
covenant defeasance will not otherwise alter such holders' United States
federal income tax treatment of principal and interest payments on such series
of Debt Securities (in the case of a defeasance, such opinion must be based on
a ruling of the Internal Revenue Service or a change in the United States
federal income tax law occurring after the date of such Indenture, since such
a result would not occur under current tax law); and (iii) in the case of the
Senior Subordinated Debt Indenture (a) no event or condition shall exist that,
pursuant to certain provisions described under "Senior Subordinated Debt"
above, would prevent the Company from making payments of principal of (and
premium, if any) and interest on the Senior Subordinated Debt Securities at
the date of the irrevocable deposit referred to above or at any time during
the period ending on the 91st day after such deposit date and (b) the Company
delivers to the Trustee an opinion of counsel to the effect that (1) the trust
funds will not be subject to any rights of holders of Senior Indebtedness and
(2) after the 91st
10
<PAGE>
day following the deposit, the trust funds will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally, except that if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, then the Trustee and the holders of the Senior
Subordinated Debt Securities would be entitled to certain rights as secured
creditors in such trust funds.
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the holders of Debt Securities
to: (a) secure any Debt Securities, (b) evidence the assumption by a successor
corporation of the obligations of the Company, (c) add covenants for the
protection of the holders of Debt Securities, (d) cure any ambiguity or
correct any inconsistency in such Indenture, (e) establish the forms or terms
of Debt Securities of any series and (f) evidence the acceptance of
appointment by a successor trustee. (Senior and Senior Subordinated Debt
Indentures, Section 8.1)
Each Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than a majority in
principal amount of Debt Securities of all series issued under such Indenture
and then outstanding and affected (voting as a class), to add any provisions
to, or change in any manner or eliminate any of the provisions of, such
Indenture or modify in any manner the rights of the holders of the Debt
Securities of each series so affected; provided that the Company and the
Trustee may not, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) extend the stated maturity of the principal of
any Debt Security, or reduce the principal amount thereof or reduce the rate
or extend the time of payment of interest thereon, or reduce any amount
payable on redemption thereof or impair the right to institute suit for the
enforcement of any payment on any Debt Security when due or (b) reduce the
aforesaid percentage in principal amount of Debt Securities of any series
issued under such Indenture, the consent of the holders of which is required
for any such modification. (Senior and Senior Subordinated Debt Indentures,
Section 8.2)
The Senior Subordinated Debt Indenture may not be amended to alter the
subordination of any outstanding Senior Subordinated Debt Securities without
the consent of each holder of Senior Indebtedness then outstanding that would
be adversely affected thereby. (Senior Subordinated Debt Indenture, Section
8.6)
GOVERNING LAW
The Indentures and the Securities will be governed by, and construed in
accordance with, the laws of the State of California. (Senior and Senior
Subordinated Debt Indentures, Section 11.8)
CONCERNING THE TRUSTEE
Pursuant to the Trust Indenture Act of 1939, as amended, should a
default occur with respect to either the Debt Securities issued under the
Senior Debt Indenture or the Debt Securities issued under the Senior
Subordinated Debt Indenture, The Chase Manhattan Bank would be required to
resign as Trustee under one of the Indentures within 90 days of such default
unless such default were cured, duly waived or otherwise eliminated. The
Trustee is one of a number of banks with which the Company and its
subsidiaries maintain ordinary banking relationships and with which the
Company and its subsidiaries maintain credit facilities.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities being offered hereby in four
ways: (i) directly to purchasers, (ii) through agents, (iii) through
underwriters and (iv) through dealers. Any such underwriters, dealers or
agents may include Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co.,
Credit Suisse First Boston Corporation and Charles Schwab & Co., Inc.
11
<PAGE>
Offers to purchase Debt Securities may be solicited by agents designated
by the Company from time to time. Any such agent, who may be deemed to be an
underwriter as that term is defined in the Securities Act, involved in the
offer or sale of the Debt Securities in respect of which this Prospectus is
delivered will be named, and any commission payable by the Company to such
agent set forth, in the Prospectus Supplement. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a reasonable
efforts basis for the period of its appointment. Agents may be entitled under
agreements which may be entered into with the Company to indemnification by
the Company against certain liabilities, including liabilities under the
Securities Act, and may be customers of, engage in transactions with or
perform services for the Company in the ordinary course of business.
If any underwriters are utilized in the sale of the Debt Securities in
respect of which this Prospectus is delivered, the Company will enter into an
underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set
forth in the Prospectus Supplement, which will be used by the underwriters to
make resales of the Debt Securities in respect of which this Prospectus is
delivered to the public. The underwriters may be entitled, under the relevant
underwriting agreement, to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for the Company
in the ordinary course of business.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company will sell such Debt Securities
to the dealer, as principal. The dealer may then resell such Debt Securities
to the public at varying prices to be determined by such dealer at the time of
resale. Dealers may be entitled to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, and may
be customers of, engage in transactions with or perform services for the
Company in the ordinary course of business.
In order to facilitate the offering of the Debt Securities, the
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Debt Securities. Specifically, the underwriters may
overallot in connection with the offering, creating a short position in the
Debt Securities for their own accounts. In addition, to cover overallotments
or to stabilize the price of the Debt Securities, the underwriters may bid
for, and purchase, the Debt Securities in the open market. Finally, in any
offering of the Debt Securities through a syndicate of underwriters, the
underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Debt Securities in the offering
if the syndicate repurchases previously distributed Debt Securities in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
price of the Debt Securities above independent market levels. The underwriters
are not required to engage in these activities, and may end any of these
activities at any time.
Debt Securities may also be offered and sold, if so indicated in the
Prospectus Supplement, in connection with a remarketing upon their purchase,
in accordance with their terms, by one or more firms, including Morgan Stanley
& Co., Incorporated, Goldman, Sachs & Co., Credit Suisse First Boston
Corporation and Charles Schwab & Co., Inc. ("remarketing firms"), acting as
principals for their own accounts or as agents for the Company. Any
remarketing firm will be identified and the terms of its agreement, if any,
with the Company and its compensation will be described in the Prospectus
Supplement. Remarketing firms may be entitled under agreements which may be
entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, and
may be customers of, engage in transactions with or perform services for the
Company in the ordinary course of business.
Any underwriter, agent or dealer utilized in the initial offering of
Debt Securities will not confirm sales to accounts over which it exercises
discretionary authority without the prior specific written approval of its
customer.
12
<PAGE>
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters or dealers to solicit offers by certain purchasers to
purchase Offered Debt Securities from the Company at the public offering price
set forth in the Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. Such
contracts will be subject to only those conditions set forth in the Prospectus
Supplement, and the Prospectus Supplement will set forth the commission
payable for solicitation of such offers.
Schwab is a wholly owned subsidiary of the Company. Each initial
offering of Debt Securities will be conducted in compliance with the
requirements of Conduct Rule 2720 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 Debt
Securities, Schwab may offer and sell such Debt Securities in the course of
its business as a broker-dealer. Schwab may act as a principal or agent in
such transactions and may use this Prospectus 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 may, but is
not obligated to, make a market in the Debt Securities and may discontinue any
market-making activities at any time without notice.
LEGAL OPINIONS
The legality of the Debt Securities will be passed upon for the Company
by Howard, Rice, Nemerovski, Canady, 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 Debt Securities will be passed
upon on behalf of dealers, underwriters or agents by Davis Polk & Wardwell.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended December 31,
1997, have been audited by Deloitte & Touche llp, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
13
<PAGE>
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 and distribution of the securities being registered hereby, other
than underwriting discounts and commissions. All amounts are estimated except
the Securities and Exchange Commission registration fee and National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $ 44,250
NASD fee........................................................... 15,500
Printing and engraving expenses.................................... 10,000
Accountants' fees and expenses..................................... 10,000
Legal fees and expenses............................................ 80,000
Fees and expenses for qualification under state securities laws.... 20,000
Trustee's fees and expenses........................................ 5,000
Rating agency fees................................................. 50,000
Miscellaneous...................................................... 3,250
--------
Total............................................................ $238,000
========
</TABLE>
- --------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Third Restated Certificate of Incorporation provides that,
pursuant to Delaware law, its directors will not be personally liable to the
Company or it stockholders for monetary damages for breach of fiduciary duty
as a director, with specific exceptions. The exceptions related to (i) any
breach of a director's duty of loyalty to 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 Second 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 of 1933,
as amended. The Company has entered into indemnity agreements with its
directors that contain provisions that are in some respects broader than 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.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Distribution Agreement
4.1 Form of Senior Debt Indenture filed on July 1, 1993 as Exhibit 4.1 to
the Company's Registration Statement on Form S-3 (registration number
33-65342) and incorporated herein by reference.
4.2 Form of Senior Subordinated Debt Indenture filed on July 1, 1993 as
Exhibit 4.2 to the Company's Registration Statement on Form S-3
(registration number 33-65342) and incorporated herein by reference.
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
12.1 Computation of Consolidated Ratio of Earnings to Fixed Charges.
23.1 Independent Auditors' Consent.
23.2 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
24.1 Powers of Attorney.
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of the Chase Manhattan Bank.
28.1 Financial Data Schedule (electronic only) filed on May 12, 1998 as
Exhibit 27.1 to the Company's Form 10-Q and incorporated herein by
reference.
</TABLE>
ITEM 17. UNDERTAKINGS.
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:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in the Registration Statement.
II-2
<PAGE>
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose 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 therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(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.
(4) 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 any 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.
(5) 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
Act 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 Act
and will be governed by the final adjudication of such issue.
II-3
<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 28TH DAY
OF MAY, 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 MAY 28, 1998.
SIGNATURE TITLE
Chairman, Co-Chief Executive Officer and
/s/ Charles R. Schwab* Director (principal executive officer)
- ---------------------------------
Charles R. Schwab
/s/ David S. Pottruck* Co-Chief Executive Officer, President,
- --------------------------------- Chief Operating Officer and Director
David S. Pottruck (principal executive officer)
/s/ Steven L. Scheid Executive Vice President and Chief
- --------------------------------- Financial Officer (principal financial and
Steven L. Scheid accounting officer)
/s/ Nancy H. Bechtle* Director
- ---------------------------------
Nancy H. Bechtle
/s/ C. Preston Butcher* Director
- ---------------------------------
C. Preston Butcher
/s/ Donald G. Fisher* Director
- ---------------------------------
Donald G. Fisher
/s/ Anthony M. Frank* Director
- ---------------------------------
Anthony M. Frank
/s/ Frank C. Herringer* Director
- ---------------------------------
Frank C. Herringer
/s/ Stephen T. McLin* Director
- ---------------------------------
Stephen T. McLin
/s/ George P. Shultz* Director
- ---------------------------------
George P. Shultz
/s/ Roger O. Walther* Director
- ---------------------------------
Roger O. Walther
/s/ Steven L. Scheid Attorney-in-fact
* By_____________________________
Steven L. Scheid Attorney-in-
Fact
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Distribution Agreement
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
12.1 Computation of Consolidated Ratio of Earnings to Fixed Charges.
23.1 Independent Auditors' Consent.
24.1 Powers of Attorney.
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of the Chase Manhattan Bank.
</TABLE>
<PAGE>
EXHIBIT 1.1
THE CHARLES SCHWAB CORPORATION
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
(DEBT SECURITIES)
_______ __, 199_
From time to time, The Charles Schwab Corporation, a Delaware
corporation (the "Company"), may enter into one or more underwriting agreements
that provide for the sale of designated securities to the several underwriters
named therein. The standard provisions set forth herein may be incorporated by
reference in any such underwriting agreement (an "Underwriting Agreement"). The
Underwriting Agreement, including the provisions incorporated therein by
reference, is herein sometimes referred to as this Agreement. Terms defined in
the Underwriting Agreement are used herein as therein defined.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Debt Securities and has filed with, or transmitted for filing to, or shall
promptly hereafter file with or transmit for filing to, the Commission a
prospectus supplement (the "Prospectus Supplement") specifically relating to the
Offered Securities pursuant to Rule 424 under the Securities Act of 1933, as
amended (the "Securities Act"). The term "Registration Statement" means the
registration statement, including the exhibits thereto, as amended to the date
of this Agreement. The term "Basic Prospectus" means the prospectus included in
the Registration Statement. The term "Prospectus" means the Basic Prospectus
together with the Prospectus Supplement. The term "preliminary prospectus"
means a preliminary prospectus supplement specifically relating to the Offered
Securities, together with the Basic Prospectus. As used herein, the terms
"Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in
each case
<PAGE>
the documents, if any, incorporated by reference therein. The terms
"supplement", "amendment" and "amend" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). If the Company has filed as abbreviated registration statement
to register additional Debt Securities pursuant to Rule 462(b) under the
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement.
The term Contract Securities means the Offered Securities to be
purchased pursuant to the delayed delivery contracts substantially in the form
of Schedule I hereto, with such changes therein as the Company may approve (the
"Delayed Delivery Contracts"). The term "Underwriters' Securities" means the
Offered Securities other than Contract Securities.
1. Representations and Warranties. The Company represents and
------------------------------
warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) each part of
the Registration Statement, when such part became effective, did not contain,
and each such part, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply, and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iv) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 1(b) do not apply (A) to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the Manager
expressly for use therein or (B)
2
<PAGE>
to that part of the Registration Statement that constitutes the Statement of
Eligi bility (Form T-1) under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), of the Trustee.
(c) The Company is a duly incorporated, validly existing corporation
in good standing under the laws of the State of Delaware, has the corporate
power and authority to own its property and conduct its business as described in
the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each of Schwab Holdings, Inc. ("Holdings"), Charles Schwab &
Co., Inc. ("Charles Schwab") and each other subsidiary of the Company that is a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the Commission (each, a "Significant Subsidiary" and collectively, the
"Significant Subsidiaries") is a duly incorporated, validly existing corporation
in good standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and conduct its business
as described in the Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) Each of the Senior Debt Indenture dated as of July 15, 1993 (the
"Senior Debt Indenture") and the Senior Subordinated Debt Indenture dated as of
July 15, 1993 (the "Senior Subordinated Debt Indenture") has been duly qualified
under the Trust Indenture Act and has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles of general
applicability.
(g) The Delayed Delivery Contracts have been duly authorized,
executed and delivered by the Company and are valid and binding agreements of
the Company, enforceable in accordance with their respective terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency or similar
3
<PAGE>
laws affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(h) The Offered Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the relevant
Indenture and delivered to and paid for by the Underwriters in accordance with
the terms of the Underwriting Agreement, in the case of the Underwriters'
Securities, or by institutional investors in accordance with the terms of the
Delayed Delivery Contracts, in the case of the Contract Securities, will be
entitled to the benefits of the relevant Indenture and will be valid and binding
obligations of the Company, in each case enforceable in accordance with their
respective terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration, if any, and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement, the Senior Debt
Indenture, the Senior Subordinated Debt Indenture, the Offered Securities and
the Delayed Delivery Contracts will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company or Charles
Schwab or any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, the Senior Debt Indenture, the Senior Subordinated Debt
Indenture, the Offered Securities or the Delayed Delivery Contracts, or for the
performance by Charles Schwab of its obligations under this Agreement, except
such as have been obtained, and such as may be required by the securities or
Blue Sky laws of the various states or similar laws in connection with the offer
and sale of the Offered Securities; provided, however, that no representation is
made as to whether the purchase of the Offered Securities constitutes a
"prohibited transaction" under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code
of 1986, as amended.
(j) There has not occurred any material adverse change, or any
development which could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business
or operations of the Company and its subsidiaries, taken as a whole, from that
set
4
<PAGE>
forth in the Prospectus (exclusive of any amendments of supplements thereto
effected since the date of the Underwriting Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed or incorporated by reference as exhibits to the
Registration Statement that are not described, filed or incorporated as
required.
(l) The Company is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(m) Each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain or file would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(n) Each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer, investment
adviser, or transfer agent, as the case may be, in each jurisdiction wherein the
conduct of its business requires such registration, and each of the Company and
its Significant Subsidiaries is in compliance in all material respects with all
applicable laws, rules, regulations, orders, by-laws and similar requirements in
connection with such registrations, except to the extent that the failure to be
so registered or be in compliance would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
(o) Charles Schwab is a member in good standing of the associations
and exchanges indicated in the Prospectus and is registered as a broker-dealer
with the Commission and in all 50 states, the District of Columbia and Puerto
Rico, except to the extent that the failure to be in good standing or be so
registered would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
2. Delayed Delivery Contracts. If the Prospectus provides for sales
--------------------------
of Offered Securities pursuant to Delayed Delivery Contracts, the Company
5
<PAGE>
hereby authorizes the Underwriters to solicit offers to purchase Contract
Securities on the terms and subject to the conditions set forth in the
Prospectus pursuant to Delayed Delivery Contracts. Delayed Delivery Contracts
may be entered into only with institutional investors approved by the Company.
On the Closing Date, the Company will pay to the Manager as compensation for the
accounts of the Underwriters the commission set forth in the Underwriting
Agreement in respect of the Contract Securities. The Underwriters will not have
any responsibility in respect of the validity or the performance of any Delayed
Delivery Contracts.
If the Company executes and delivers Delayed Delivery Contracts with
institutional investors, the aggregate amount of Offered Securities to be
purchased by the several Underwriters shall be reduced by the aggregate amount
of Contract Securities; such reduction shall be applied to the commitment of
each Underwriter pro rata in proportion to the amount of Offered Securities set
forth opposite such Underwriter's name in the Underwriting Agreement, except to
the extent that the Manager determines that such reduction shall be applied in
other proportions and so advises the Company; provided, however, that the total
amount of Offered Securities to be purchased by all Underwriters shall be the
aggregate amount set forth above, less the aggregate amount of Contract
Securities.
3. Public Offering. The Company is advised by the Manager that the
---------------
Underwriters propose to make a public offering of their respective portions of
the Underwriters' Securities as soon after this Agreement has been entered into
as in the Manager's judgment is advisable. The terms of the public offering of
the Underwriters' Securities are set forth in the Prospectus.
4. Purchase and Delivery. Except as otherwise provided in this
---------------------
Section 4, payment for the Underwriters' Securities shall be made to the Company
in Federal or other funds immediately available in New York City at the time and
place set forth in the Underwriting Agreement, upon delivery to the Manager for
the respective accounts of the several Underwriters of the Underwriters'
Securities, registered in such names and in such denominations as the Manager
shall request in writing not less than two full business days prior to the date
of delivery, with any transfer taxes payable in connection with the transfer of
the Underwriters' Securities to the Underwriters duly paid.
5. Conditions to Closing. The several obligations of the
---------------------
Underwriters hereunder are subject to the following conditions:
(a) Subsequent to the execution and delivery of the Underwriting
Agreement and prior to the Closing Date,
6
<PAGE>
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any development
which could reasonably be expected to result in a change, in the
condition, financial or otherwise, or in the earnings, business or
operations, of the Company and its subsidiaries, taken as a whole,
from that set forth in the Prospectus (exclusive of any amendments or
supplements thereto effected subsequent to the execution and delivery
of the Underwriting Agreement), that, in the judgment of the Manager,
is material and adverse and that makes it, in the judgment of the
Manager, impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Prospectus.
(b) The Manager shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed or satisfied on or before the
Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Manager shall have received on the Closing Date an opinion of
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional
Corporation, counsel for the Company, dated the Closing Date, to the effect
that:
(i) Charles Schwab is a duly incorporated, validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its
property and conduct its business as described in the Prospectus;
7
<PAGE>
(ii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iii) each of the Senior Debt Indenture and the Senior
Subordinated Debt Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as enforcement thereof
(a) may be limited by bankruptcy, insolvency, fraudulent transfer or
conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally, (b) is subject to general
principles of equity, regardless of whether codified by statute and
regardless of whether enforcement is considered in a proceeding in
equity or at law, and (c) is subject to certain additional customary
exceptions;
(iv) the Delayed Delivery Contracts have been duly authorized,
executed and delivered by the Company and are valid and binding
agreements of the Company;
(v) the Offered Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
relevant Indenture and delivered to and paid for by the Underwriters
in accordance with the terms of the Underwriting Agreement, in the
case of Underwriters' Securities, or by institutional investors in
accordance with the terms of the Delayed Delivery Contracts, in the
case of the Contract Securities, will be entitled to the benefits of
the relevant Indenture and will be valid and binding obligations of
the Company, in each case enforceable in accordance with their
respective terms except as enforcement thereof (a) may be limited by
bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally, (b) is subject to general principles of equity,
regardless of whether codified by statute and regardless of whether
enforcement is considered in a proceeding in equity or at law, and (c)
is subject to certain additional customary exceptions;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Senior Debt Indenture, the Senior Subordinated Debt Indenture, the
Offered Securities and the Delayed Delivery Contracts, at the time the
Offered Securities were issued, did not
8
<PAGE>
(a) contravene (1) any provision of applicable law (other than the
securities or Blue Sky laws of the various states as to which such
counsel need express no opinion) or (2) the certificate of
incorporation or by-laws of the Company or Charles Schwab, or (b)
constitute a default under the Revolving Credit Facility, consisting
of separate but substantially identical Credit Agreements, between the
Company and the banks listed therein, dated as of June 27, 1997, as
amended, and the Revolving Promissory Notes issued pursuant thereto,
or to the best knowledge of such counsel, after reasonable
investigation, any other instrument or agreement binding upon the
Company or any subsidiary and evidencing or related to indebtedness
for borrowed money, except such instruments and other agreements
relating to capitalized lease obligations and installment purchase
agreements for the acquisition of fixed assets, indebtedness pursuant
to which does not in the aggregate exceed $15 million; and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Senior Debt
Indenture, the Senior Subordinated Debt Indenture, the Offered
Securities or the Delayed Delivery Contracts, or for the performance
by Charles Schwab of its obligations under this Agreement, except such
as are specified and have been obtained or may be required by the
securities or Blue Sky laws of the various states in connection with
the offer and sale of the Offered Securities; provided, however, that
such counsel need not express an opinion as to whether the purchase of
the Offered Securities constitutes a "prohibited transaction" under
Section 406 of the Employee Retirement income Security Act of 1974, as
amended, or Section 4975 of the Internal Revenue Code of 1986, as
amended;
(vii) the statements (1) in the Prospectus under the captions
"Description of Debt Securities," "Plan of Distribution," "Description
of Notes," "Underwriting" and similar captions and (2) in the
Registration Statement under Item 15, in each case insofar as such
statements constitute summaries of the legal matters, documents or
proceedings referred to therein, fairly present the information called
for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
9
<PAGE>
(viii) such counsel is of the opinion ascribed to it in the
Prospectus under the caption "Certain United States Federal Income Tax
Consequences"; and
(ix) (1) such counsel is of the opinion that each document, if
any, filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Prospectus (except for financial
statements and schedules and other financial and statistical data
included therein, and except for any proxy statement of the Company,
as to which such counsel need not express any opinion), complied when
so filed as to form in all material respects with the Exchange Act and
the applicable rules and regulations of the Commission thereunder, (2)
no facts have come to the attention of such counsel to lead them to
believe that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not
express any belief and except for the part of the Registration
Statement that constitutes the Form T-1 heretofore referred to any
part of the Registration Statement, when such part became effective,
and, as of the date such opinion is delivered, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (3) such counsel is of the opinion that the
Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included
therein, and except for any proxy statement of the Company, as to
which such counsel need not express any opinion), comply as to form in
all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder and (4) no facts have
come to the attention of such counsel to lead them to believe that
(except for financial statements and schedules and other financial and
statistical data, as to which such counsel need not express any
belief) the Prospectus as of the date such opinion is delivered
contained any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(d) The Manager shall have received on the Closing Date an opinion of
the Office of General Counsel of the Company, dated the Closing Date, to
the effect that:
10
<PAGE>
(i) the Company is a duly incorporated, validly existing
corporation in good standing under the laws of the State of Delaware,
has the corporate power and authority to own its property and conduct
its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(ii) each of Holdings and the Company's Significant Subsidiaries
is a duly incorporated, validly existing corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and conduct its
business as described in the Prospectus and is duly qualified to
transact business, and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(iii) each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates
and permits of and from, and has made all declarations and filings
with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals,
to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus, as
amended or supplemented, except to the extent that the failure to
obtain or file would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(iv) the statements (1) in "Item 3 - Legal Proceedings" of the
Company's most recent annual report on Form 10-K incorporated by
reference in the Prospectus and (2) in "Item 1 - Legal Proceedings" of
Part II of the Company's quarterly reports on Form 10-Q, if any, filed
since such annual report, and (3) under the caption "Employment
Agreement and Name Assignment" in the Company's Proxy Statement for
its Annual Meeting of Stockholders immediately succeeding the filing
of the Company's most recent annual report on Form 10-K incorporated
by reference
11
<PAGE>
in the Prospectus, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
(v) after due inquiry, such counsel does not know of any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed or
incorporated by reference as exhibits to the Registration Statement
that are not described, filed or incorporated as required;
(vi) each of the Company and its Significant Subsidiaries are
duly registered as a broker-dealer, municipal securities broker or dealer,
investment adviser, or transfer agent, as the case may be, in each
jurisdiction wherein the conduct of its business requires such
registration, and each of the Company and its Significant Subsidiaries is
in compliance in all material respects with all applicable laws, rules,
regulations, orders, by-laws and similar requirements in connection with
such registrations, except to the extent that the failure to be so
registered or be in compliance would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(vii) Charles Schwab is a member in good standing of the
associations and exchanges indicated in the Prospectus and is registered as
a broker-dealer with the Commission and in all 50 states, the District of
Columbia and Puerto Rico, except to the extent that the failure to be so
registered or be in compliance would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole;
(viii) the execution and delivery by the Company of this
Agreement, the Offered Securities and the relevant Indenture and the
performance by the Company of its obligations under this Agreement, the
Offered Securities and the relevant Indenture at the time the Offered
Securities were issued did not violate, to such counsel's best knowledge,
after reasonable investigation, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary (except for such contravention that would not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole);
12
<PAGE>
(ix) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus, as
then amended or supplemented, and are not so described or of any
statutes or regulations that are required to be described in the
Registration Statement or the Prospectus, as then amended or
supplemented, that are not described as required; and
(x) (1) Such counsel is of the opinion that the proxy statement
most recently filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Prospectus, as then amended or
supplemented (except for financial statements and schedules and other
financial and statistical data included therein, as to which such
counsel need not express an opinion), complied when so filed as to
form in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (2) no facts have
come to the attention of such counsel to lead them to believe that
(except for financial statements and schedules and other financial and
statistical data, as to which such counsel need not express any
belief) the proxy statement most recently filed pursuant to the
Exchange Act by the Company and incorporated by reference in the
Prospectus, when such part of Registration Statement became effective,
and as of the date such opinion is delivered, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(e) The Manager shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, special counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraphs (ii),
(iii), (iv), (v), (vii) (but only as to the statements in the Prospectus
under "Description of Debt Securities," "Plan of Distribution,"
"Underwriting" and similar captions) and (ix) (2), (3) and (4) of paragraph
(c) above.
In giving the opinions referred to in paragraph (c) hereof, Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, may
rely on the opinion of Davis Polk & Wardwell as to any matters governed by
the laws of New York, and in giving the opinion referred to in paragraph
(e) hereof, Davis Polk & Wardwell may rely on the opinion of Howard, Rice,
Nemerovski, Canady, Falk & Rabkin, A Professional
13
<PAGE>
Corporation, as to any matters governed by laws of California. With respect
to subparagraph (ix) of paragraph (c) above, Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation, may state that their
opinion and belief are based upon their participation in the preparation of
the Registration Statement and Prospectus and any amendments or supplements
thereto (but not including documents incorporated therein by reference) and
review and discussion of the contents thereof (including documents
incorporated therein by reference), but are without independent check or
verification, except as specified. With respect to clauses (2), (3) and (4)
of subparagraph (ix) of paragraph (c) above, Davis Polk & Wardwell may
state that their opinion and belief are based upon their participation in
the preparation of the Registration Statement and Prospectus and any
amendments or supplements thereto (but not including documents incorporated
therein by reference) and review and discussion of the contents thereof
(including documents incorporated therein by reference), but are without
independent check or verification, except as specified.
The opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, described in paragraph (c) above shall be
rendered to you at the request of the Company and shall so state therein.
The opinion of the Office of General Counsel of the Company, described
in paragraph (d) above shall be rendered to you at the request of the
Company and shall so state therein.
(f) The Manager shall have received on the Closing Date a letter,
dated the Closing Date, in form and substance satisfactory to the Manager,
from the Company's independent auditors, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in or incorporated by reference
into the Prospectus, as then amended or supplemented.
6. Covenants of the Company. In further consideration of the
------------------------
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish the Manager, without charge, a signed copy of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and, during the period mentioned in paragraph
14
<PAGE>
(c) below, as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto or to the
Registration Statement as the Manager may reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus with respect to the Offered Securities, to furnish to the
Manager a copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which the Manager
reasonably objects; provided, however, that the foregoing requirement shall
not apply to any of the Company's periodic filings with the Commission
required to be filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, copies of which filings the Company will cause to be
delivered to each Underwriter promptly after being transmitted for filing
with the Commission.
(c) If, during such period after the first date of the public
offering of the Offered Securities as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall occur or
condition exist as a result of which it is necessary to amend or supplement
the Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with law,
forthwith to prepare, file with the Commission and furnish, at its own
expense, to the Underwriters, and to the dealers (whose names and addresses
the Manager will furnish to the Company) to which Offered Securities may
have been sold by the Manager on behalf of the Underwriters and to any
other dealers upon request, either amendments or supplements to the
Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Offered Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Manager
shall reasonably request and to maintain such qualification for as long as
the Manager shall reasonably request.
(e) To make generally available to its security holders and to the
Manager as soon as practicable an earning statement covering a twelve month
period beginning on the first day of the first full fiscal quarter after
the date of this Agreement, which earning statement shall satisfy the
15
<PAGE>
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder. If such fiscal quarter is the
first fiscal quarter of the Company's fiscal year, such earning statement
shall be made available not later than 90 days after the close of the
period covered thereby and in all other cases shall be made available not
later than 45 days after the close of the period covered thereby.
(f) During the period beginning on the date of the Underwriting
Agreement and continuing to and including the Closing Date, not to offer,
sell, contract to sell or otherwise dispose of any debt securities of the
Company or warrants to purchase debt securities of the Company
substantially similar to the Offered Securities (other than (i) the Offered
Securities and (ii) commercial paper issued in the ordinary course of
business), without the prior written consent of the Manager.
(g) Whether or not any sale of Offered Securities is consummated, to
pay all expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation and filing of the Registration
Statement and the Prospectus and all amendments and supplements thereto,
(ii) the preparation, issuance and delivery of the Offered Securities,
(iii) the fees and disbursements of the Company's counsel and accountants
and of the Trustee and its counsel, (iv) the qualification of the Offered
Securities under securities or Blue Sky laws in accordance with the
provisions of Section 6(d), including filing fees and the fees and
disbursements of counsel for the Underwriters in connection therewith and
in connection with the preparation of any Blue Sky or Legal Investment
Memoranda, (v) the printing and delivery to the Underwriters in quantities
as hereinabove stated of copies of the Registration Statement and all
amendments thereto and of the Prospectus and any amendments or supplements
thereto, (vi) any fees charged by rating agencies for the rating of the
Offered Securities, (vii) the fees and expenses, if any, incurred with
respect to any filing with the National Association of Securities Dealers,
Inc. and (viii) all reasonable document production charges and reasonable
expenses of counsel to the Underwriters (but not including their fees for
professional services) in connection with the preparation of this
Agreement.
7. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Underwriter or any such
controlling
16
<PAGE>
person in connection with investigating or defending any such action or claim)
caused by any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Manager expressly for use therein, provided,
however, that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Offered Securities, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
to such Underwriter any such amendments or supplements thereto) was not sent or
given by or on behalf of such Underwriter to such person, if required by law so
to have been delivered, at or prior to the written confirmation of the sale of
the Offered Securities to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through the
Manager expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own
17
<PAGE>
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Manager, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a)
or (b) of this Section 8 is unavailable to an indemnified party or insufficient
in respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i)
18
<PAGE>
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and of the Underwriters
on the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand in connection with the offering
of the Offered Securities shall be deemed to be in the same respective
proportions as the net proceeds from the offering of such Offered Securities
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus Supplement, bear to the
aggregate public offering price of the Offered Securities. The relative fault of
the Company on the one hand and of the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Offered
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
8. Termination. This Agreement shall be subject to termination, by
-----------
notice given by the Manager to the Company, if (a) after the execution and
19
<PAGE>
delivery of the Underwriting Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange or the
National Association of Securities Dealers, Inc., (ii) trading of any securities
of the Company shall have been suspended on any exchange or in any over-the-
counter market, (iii) a general moratorium on commercial banking activities in
New York shall have been declared by either Federal or New York State
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis that,
in the judgment of the Manager, is material and adverse and (b) in the case of
any of the events specified in clauses (a)(i) through (iv), such event, singly
or together with any other such event, makes it, in the judgment of the Manager,
impracticable to market the Offered Securities on the terms and in the manner
contemplated in the Prospectus.
9. Defaulting Underwriters. If, on the Closing Date, any one or more
-----------------------
of the Underwriters shall fail or refuse to purchase Underwriters' Securities
that it has or they have agreed to purchase on such date, and the aggregate
amount of Underwriters' Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate amount of the Underwriters' Securities to be purchased on such
date, the other Underwriters shall be obligated severally in the proportions
that the amount of Underwriters' Securities set forth opposite their respective
names in the Underwriting Agreement bears to the aggregate amount of
Underwriters' Securities set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Manager may specify, to
purchase the Underwriters' Securities which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the amount of Underwriters' Securities that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such amount of
Underwriters' Securities without the written consent of such Underwriter. If,
on the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Underwriters' Securities and the aggregate amount of Underwriters'
Securities with respect to which such default occurs is more than one-tenth of
the aggregate amount of Underwriters' Securities to be purchased on such date,
and arrangements satisfactory to the Manager and the Company for the purchase of
such Underwriters' Securities are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case either the Manager or
the Company shall have the right to postpone the Closing Date but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this
20
<PAGE>
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering of the Offered Securities.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
indemnity and contribution agreements and the representations, warranties and
other statements of the Company, its officers and the Underwriters set forth in
this Agreement will remain in full force and effect, regardless of any
termination of this Agreement, any investigation made by or on behalf of any
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 7 and delivery of and payment for the Offered
Securities.
11. Successors. This Agreement will enure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 7, and no
other person will have any right or obligation hereunder.
12. Counterparts. The Underwriting Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
21
<PAGE>
UNDERWRITING AGREEMENT
___________, 199_
THE CHARLES SCHWAB CORPORATION
101 Montgomery Street
San Francisco, California 94104
Ladies and Gentlemen:
We (the "Manager") are acting on behalf of the underwriter or
underwriters (including ourselves) named below (such underwriter or underwriters
being herein called the "Underwriters"), and we understand that The Charles
Schwab Corporation, a Delaware corporation (the "Company"), proposes to issue
and sell [Currency and Principal Amount] aggregate initial offering price of
[Full title of Debt Securities] (the "Debt Securities") (The Debt Securities
are also referred to herein as the "Offered Securities"). The Debt Securities
will be issued pursuant to the provisions of a [Senior/Subordinated] Indenture
dated as of July 15, 1993 (the "[Senior/Subordinated] Debt Indenture") between
the Company and The Chase Manhattan Bank (formerly Chemical Bank), as Trustee
(the "Trustee").
Subject to the terms and conditions set forth or incorporated by
reference herein, the Company hereby agrees to sell and the Underwriters agree
to purchase, severally and not jointly, the respective principal amounts of Debt
Securities set forth below opposite their names at a purchase price of ____% of
the principal amount of Debt Securities[, plus accrued interest, if any, from
[Date of Offered Securities] to the date of payment and delivery]:/1/:
_____________________
/1/ To be added only if the transaction does not close flat.
<PAGE>
Principal Amount of
Name Debt Securities
---- ---------------
[Insert syndicate list]
Total . . . . . .
===========
[The principal amount of Debt Securities to be purchased by the
several Underwriters shall be reduced by the aggregate principal amount of Debt
Securities sold pursuant to delayed delivery contracts.]/2/
The Underwriters will pay for the Offered Securities [(less any
Offered Securities sold pursuant to delayed delivery contracts)]/3/ upon
delivery thereof at [office] at ______ a.m. (New York time) on ___________,
199_, or at such other time, not later than 5:00 p.m. (New York time) on
__________, 199_, as shall be designated by the Manager. The time and date of
such payment and delivery are hereinafter referred to as the Closing Date.
The Offered Securities shall have the terms set forth in the
Prospectus dated ___________, 199_, and the Prospectus Supplement dated
____________, 199_, including the following:
Terms of Debt Securities
Maturity Date: ___________ __, ____
Interest Rate:
Redemption Provisions:
Interest Payment Dates: ____________ __ and
- ---------------------
/2/ To be added only if delayed delivery contracts are contemplated.
/3/ To be added only if the transaction does not close flat.
2
<PAGE>
____________ __ commencing
____________ __, ____
[(Interest accrues from
____________ __, ____)]/3/
Form and Denomination:
Ranking: The Debt Securities will be [senior/
subordinated] indebtedness of the
Company issued under the [Senior/
Subordinated] Indenture dated as
of July 15, 1993, between the
Company and The Chase Manhattan
Bank (formerly Chemical Bank), as
trustee.
[Other Terms:]
[The commission to be paid to the Underwriters in respect of the
Offered Securities purchased pursuant to delayed delivery contracts arranged by
the Underwriters shall be ___% of the principal amount of the Debt Securities so
purchased.]/4/
All provisions contained in the document entitled The Charles Schwab
Corporation Underwriting Agreement Standard Provisions (Debt Securities) dated
_________, 199_, a copy of which is attached hereto, are herein incorporated by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein,
except that (i) if any term defined in such document is otherwise defined
herein, the definition set forth herein shall control, (ii) all references in
such document to a type of security that is not an Offered Security shall not be
deemed to be a part of this Agreement and (iii) all references in such document
to a type of agreement that has not been entered into in connection with the
transactions contemplated hereby shall not be deemed to be a part of this
Agreement.
- ----------------------
/3/ To be added only if the transaction does not close flat.
/4/ To be added only if delayed delivery contracts are contemplated.
3
<PAGE>
[SIGNATURE PAGE WHERE MORGAN STANLEY
-----------------------------------
OR MORGAN STANLEY & CO. INTERNATIONAL LIMITED IS A
--------------------------------------------------
CO-LEAD MANAGER]
----------------
Please confirm your agreement by having an authorized officer sign a
copy of this Agreement in the space set forth below.
Very truly yours,
[MORGAN STANLEY & CO. INCORPORATED]
[MORGAN STANLEY & CO. INTERNATIONAL
LIMITED]
[CHARLES SCHWAB & CO., INC.]
[Name of Other Lead Managers]
On behalf of themselves and the other
Underwriters named herein
By: [MORGAN STANLEY & CO.
INCORPORATED]
[MORGAN STANLEY & CO.
INTERNATIONAL LIMITED]
By:__________________________________
Name:
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By:___________________________
Name:
Title:
4
<PAGE>
Title:
5
<PAGE>
[SIGNATURE PAGE WHERE MORGAN STANLEY
------------------------------------
OR MORGAN STANLEY & CO. INTERNATIONAL LIMITED IS SOLE
-----------------------------------------------------
MANAGER]
--------
Please confirm your agreement by having an authorized officer sign a
copy of this Agreement in the space set forth below.
Very truly yours,
[MORGAN STANLEY & CO.
INCORPORATED,]
[MORGAN STANLEY & CO.
INTERNATIONAL LIMITED]
acting severally on behalf of itself
and the several Underwriters named herein
By:___________________________________
Name:
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By:___________________________
Name:
Title:
6
<PAGE>
Schedule I
DELAYED DELIVERY CONTRACT
________, 199_
Dear Sirs:
The undersigned hereby agrees to purchase from The Charles Schwab
Corporation, a Delaware corporation (the "Company"), and the Company agrees to
sell to the undersigned the Company's securities described in Schedule A annexed
hereto (the "Securities"), offered by the Company's Prospectus dated ______,
19__ and Prospectus Supplement dated ________, 19__, receipt of copies of which
is hereby acknowledged, at a purchase price stated in Schedule A and on the
further terms and conditions set forth in this Agreement. The undersigned does
not contemplate selling Securities prior to making payment therefor.
The undersigned will purchase from the Company Securities in the
principal amount and numbers on the delivery dates set forth in Schedule A.
Each such date on which Securities are to be purchased hereunder is hereinafter
referred to as a "Delivery Date."
Payment for the Securities which the undersigned has agreed to
purchase on each Delivery Date shall be made to the Company in Federal or other
funds immediately available in New York City on the Delivery Date, upon delivery
to the undersigned of the Securities to be purchased by the undersigned on the
Delivery Date, in such denominations and registered in such names as the
undersigned may designate by written or telegraphic communication addressed to
the Company not less than five full business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for the Securities on the Delivery Date shall be subject to the conditions that
(1) the purchase of Securities to be made by the undersigned shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which the
undersigned is subject and (2) the Company shall have sold, and delivery shall
have taken place to the underwriters (the "Underwriters") named in the
Prospectus Supplement referred to above of, such part of the Securities as is to
be sold to them. Promptly after completion of sale and delivery to the
Underwriters, the
<PAGE>
Company will mail or deliver to the undersigned at its address set forth below
notice to such effect, accompanied by a copy of the opinion of counsel for the
Company delivered to the Underwriters in connection therewith.
Failure to take delivery of and make payment for Securities by any
purchaser under any other Delayed Delivery Contract shall not relieve the
undersigned of its obligations under this agreement.
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
If this Agreement is acceptable to the Company, it is requested that
the Company sign the form of acceptance below and mail or deliver one of the
counterparts hereof to the undersigned at its address set forth below. This
will become a binding agreement, as of the date first above written, between the
Company and the undersigned when such counterpart is so mailed or delivered.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.
Yours very truly,
___________________________
(Purchaser)
By ________________________
___________________________
(Title)
___________________________
___________________________
(Address)
2
<PAGE>
Accepted:
The Charles Schwab Corporation
By ________________________
PURCHASER --- PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone and department of the representative
of the Purchaser with whom details of delivery on the Delivery Date may be
discussed is as follows: (Please print.)
Telephone No.
Name (Including Area Code) Department
----- --------------------- ----------
________________ _______________ _________________
3
<PAGE>
SCHEDULE A
----------
Securities:
- ----------
Principal Amounts or Numbers to be Purchased:
- --------------------------------------------
Purchase Price:
- --------------
Delivery Dates:
- --------------
4
<PAGE>
EXHIBIT 1.2
THE CHARLES SCHWAB CORPORATION
Medium-Term Notes, Series A
Due More than 9 Months from Date of Issue
DISTRIBUTION AGREEMENT
_______________, 1998
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Dear Ladies/Gentlemen:
The Charles Schwab Corporation, a Delaware corporation (the
"Company"), confirms its agreement with each of you with respect to the issue
and sale from time to time by the Company of such aggregate initial public
offering price of its Medium-Term Notes, Series A, due more than 9 months from
date of issue, as at such time (a) has been duly authorized for issuance and
sale by the Board of Directors of the Company and (b) is covered by one or more
registration statements that have become effective under the Securities Act of
1933, as amended (the "Notes"). The Notes may be issued as senior indebtedness
(the "Senior Notes") or as senior subordinated indebtedness (the "Senior
Subordinated Notes") of the Company. The Senior Notes will be issued pursuant
to the provisions of a senior indenture dated as of July 15, 1993 (the "Senior
Debt Indenture") between the Company and The Chase Manhattan Bank (formerly
Chemical Bank), as trustee (the "Trustee"). The Senior Subordinated Notes will
be issued pursuant to the provisions of a senior
-1-
<PAGE>
subordinated indenture dated as of July 15, 1993 (the "Senior Subordinated Debt
Indenture") between the Company and the Trustee. The Senior Debt Indenture and
the Senior Subordinated Debt Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." The Notes
will have the maturities, interest rates, redemption provisions, if any, and
other terms as set forth in supplements to the Basic Prospectus referred to
below.
Subject to the terms and conditions stated herein, and subject to the
reservation by the Company of the right to appoint additional Agents who will
agree to be subject to the terms hereof pursuant to Section 12 hereof and to
sell Notes directly on its own behalf at any time and to any person in those
jurisdictions where such offering by the Company is authorized, the Company
hereby appoints Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Goldman,
Sachs & Co. ("Goldman, Sachs"), Charles Schwab & Co., Inc. ("Charles Schwab"),
and Credit Suisse First Boston Corporation("CS First Boston") (individually, an
"Agent" and collectively, the "Agents") as its exclusive agents for the purpose
of soliciting and receiving offers to purchase Notes from the Company by others
and, on the basis of the representations and warranties herein contained, but
subject to the terms and conditions herein set forth, each Agent agrees to use
reasonable efforts to solicit and receive offers to purchase Notes upon terms
acceptable to the Company at such times and in such amounts as the Company shall
from time to time specify. In addition, any Agent may also purchase Notes as
principal pursuant to the terms of a terms agreement relating to such sale (a
"Terms Agreement") in accordance with the provisions of Section 2(b) hereof.
Each Agent acknowledges that, in the case of any sale of Notes by the Company
not resulting from a solicitation made or an offer to purchase received by such
Agent, or arising in connection with a purchase by such Agent as principal, no
commission shall be payable to such Agent with respect to such sale. Each Agent
further acknowledges that in acting under this Agreement and in connection with
the sale of any Notes by the Company (other than Notes sold to such Agent as
principal), such Agent is acting solely as agent of the Company and does not
assume any obligation towards or relationship of agency or trust with any
purchaser of Notes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, and may in the
future file one or more additional registration statements, in each case
including a prospectus, relating to the Notes. The term "Registration
Statement," as used herein, means, at any time, such of the foregoing
registration statements, including the
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<PAGE>
exhibits thereto, as are being used to offer Notes at such time. The Company
proposes to file with the Commission from time to time, pursuant to Rule 424
under the Securities Act of 1933, as amended (the "Securities Act"), supplements
to the prospectus included in the Registration Statement that will describe
certain terms of the Notes. The prospectus in the form in which it appears in
the Registration Statement is hereinafter referred to as the "Basic Prospectus."
The term "Prospectus" means the Basic Prospectus together with the prospectus
supplement or supplements (each a "Prospectus Supplement") specifically relating
to Notes, as filed with, or transmitted for filing to, the Commission pursuant
to Rule 424. As used herein, the terms "Basic Prospectus" and "Prospectus" shall
include in each case the documents, if any, incorporated by reference therein.
The terms "supplement," "amendment" and "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). If the Company has filed an abbreviated registration statement
to register additional Debt Securities pursuant to Rule 462(b) under the
Securities Act (the "Rule 462 Registration Statement"), then any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462 Registration Statement.
1. Representations and Warranties. The Company represents and
------------------------------
warrants to and agrees with each Agent as of the Commencement Date, as of each
date on which an Agent solicits offers to purchase Notes, as of each date on
which the Company accepts an offer to purchase Notes (including any purchase by
an Agent pursuant to a Terms Agreement), as of each date the Company issues and
delivers Notes and as of each date the Registration Statement or the Basic
Prospectus is amended or supplemented, as follows (it being understood that such
representations, warranties and agreements shall be deemed to relate to the
Registration Statement, the Basic Prospectus and the Prospectus, each as amended
or supplemented to each such date):
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission
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<PAGE>
thereunder, (ii) each part of the Registration Statement, when such part became
effective, did not contain, and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (iii) the Registration Statement and the
Prospectus comply, and, as amended or supplemented, if applicable, will comply
in all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that (1) the representations and
warranties set forth in this Section 1(b) do not apply (A) to statements or
omissions in the Registration Statement or the Prospectus based upon information
relating to an Agent furnished to the Company in writing by such Agent expressly
for use therein or (B) to that part of the Registration Statement that
constitutes the Statement of Eligibility (Form T-1) under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee and (2) the
representations and warranties set forth in clauses (iii) and (iv) above, when
made as of the Commencement Date or as of any date on which an Agent solicits
offers to purchase Notes or on which the Company accepts an offer to purchase
Notes, shall be deemed not to cover information concerning an offering of
particular Notes to the extent such information will be set forth in a
supplement to the Basic Prospectus.
(c) The Company is a duly incorporated, validly existing corporation
in good standing under the laws of the State of Delaware, has the corporate
power and authority to own its property and conduct its business as described in
the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each of Schwab Holdings, Inc. ("Holdings"), Charles Schwab, and
each other subsidiary of the Company that is a "significant subsidiary" within
the meaning of Rule 1-02 of Regulation S-X of the Commission (each, a
"Significant Subsidiary" and collectively, the "Significant Subsidiaries") is a
duly incorporated, validly existing corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and authority
to own
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<PAGE>
its property and conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole.
(e) Each of this Agreement and any applicable Written Terms Agreement
(as hereinafter defined) has been duly authorized, executed and delivered by the
Company.
(f) Each Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
(g) The forms of Notes have been duly authorized and, when the Notes
have been executed and authenticated in accordance with the provisions of the
relevant Indenture and delivered to and duly paid for by the purchasers thereof,
the Notes will be entitled to the benefits of such Indenture and will be valid
and binding obligations of the Company, enforceable in accordance with their
respective terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
(h) The execution and delivery by the Company of this Agreement, the
Notes, the Indentures and any applicable Written Terms Agreement, and the
performance by the Company of its obligations under this Agreement, the Notes,
the Indentures and any applicable Terms Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or Charles Schwab or any agreement or other instrument binding upon
the Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, the Notes,
the Indentures
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<PAGE>
and any applicable Terms Agreement, or for the performance by Charles Schwab of
its obligations under this Agreement and any applicable Terms Agreement, except
such as have been obtained, and such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale of the
Notes; provided, however, that no representation is made as to whether the
purchase of the Offered Securities constitutes a "prohibited transaction" under
Section 406 of the Employee Retirement Income Security Act of 1974, as amended,
or Section 4975 of the Internal Revenue Code of 1986, as amended.
(i) There has not occurred any material adverse change, or any
development which could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business
or operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus.
(j) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed or incorporated by reference as exhibits to the
Registration Statement that are not described, filed or incorporated as
required.
(k) The Company is not an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(l) Each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain or file would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(m) Each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer, investment
adviser, or transfer agent, as the case may be, in each jurisdiction wherein the
conduct of its business requires such registration, and each
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<PAGE>
of the Company and its Significant Subsidiaries is in compliance in all material
respects with all applicable laws, rules, regulations, orders, by-laws and
similar requirements in connection with such registrations, except to the extent
that the failure to be so registered or be in compliance would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
(n) Charles Schwab is a member in good standing of the associations
and exchanges indicated in the Prospectus and is registered as a broker-dealer
with the Commission and in all 50 states, the District of Columbia and Puerto
Rico, except to the extent that the failure to be in good standing or be so
registered would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
2. Solicitations as Agent; Purchases as Principal.
----------------------------------------------
(a) Solicitations as Agent. In connection with an Agent's actions as
----------------------
agent hereunder, such Agent agrees to use reasonable efforts to solicit offers
to purchase Notes upon the terms and conditions set forth in the Prospectus as
then amended or supplemented.
The Company reserves the right, in its sole discretion, to instruct
the Agents to suspend at any time, for any period of time or permanently, the
solicitation of offers to purchase Notes. Upon receipt of at least one business
day's prior notice from the Company, the Agents will forthwith suspend
solicitations of offers to purchase Notes from the Company until such time as
the Company has advised the Agents that such solicitation may be resumed. While
such solicitation is suspended, the Company shall not be required to deliver any
certificates, opinions or letters in accordance with Sections 5(a), 5(b) and
5(c); provided, however, that if the Registration Statement or Prospectus is
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amended or supplemented during the period of suspension (other than by an
amendment or supplement providing solely for a change in the interest rates,
redemption provisions, amortization schedules or maturities offered on the Notes
or for a change the Agents deem to be immaterial), no Agent shall be required to
resume soliciting offers to purchase Notes until the Company has delivered such
certificates, opinions and letters as such Agent may request.
The Company agrees to pay to each Agent, as consideration for the sale
of each Note resulting from a solicitation made or an offer to purchase received
by such Agent, a commission in the form of a discount from the purchase price of
such Note equal to the percentage set forth below of the purchase price of such
Note:
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<PAGE>
Term Commission Rate
---- ---------------
From 9 months to less than 12 months .125%
From 12 months to less than 18 months .150%
From 18 months to less than 2 years .200%
From 2 years to less than 3 years .250%
From 3 years to less than 4 years .350%
From 4 years to less than 5 years .450%
From 5 years to less than 6 years .500%
From 6 years to less than 7 years .550%
From 7 years to less than 10 years .600%
From 10 years to less than 15 years .625%
From 15 years to less than 20 years .700%
From 20 years to 30 years .750%
More than 30 years .875%
Each Agent shall communicate to the Company, orally or in writing,
each offer to purchase Notes received by such Agent as agent that in its
judgment should be considered by the Company. The Company shall have the sole
right to accept offers to purchase Notes and may reject any offer in whole or in
part. Each Agent shall have the right to reject any offer to purchase Notes
that it considers to be unacceptable, and any such rejection shall not be deemed
a breach of its agreements contained herein. The procedural details relating to
the issue and delivery of Notes sold by the Agents as agents and the payment
therefor shall be as set forth in the Administrative Procedures (as hereinafter
defined).
(b) Purchases as Principal. Each sale of Notes to an Agent as
----------------------
principal shall be made in accordance with the terms of this Agreement. In
connection with each such sale, the Company will enter into a Terms Agreement
that will provide for the sale of such Notes to and the purchase thereof by such
Agent. Each Terms Agreement will take the form of either (i) a written agreement
between such Agent and the Company, which may be substantially in the form of
Exhibit A hereto (a "Written Terms Agreement"), or (ii) an oral agreement
between such Agent and the Company confirmed in writing by such Agent to the
Company.
An Agent's commitment to purchase Notes as principal pursuant to a
Terms Agreement shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth. Each Terms Agreement
shall specify the principal amount of Notes to be purchased by such Agent
pursuant thereto, the maturity date of such Notes, the price to be paid to the
Company for such Notes, the interest rate and interest rate formula, if any,
applicable to such Notes and any other terms of such Notes. Each such Terms
Agreement may also specify any
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<PAGE>
requirements for officers' certificates, opinions of counsel and letters from
the independent auditors of the Company pursuant to Section 4 hereof. A Terms
Agreement may also specify certain provisions relating to the reoffering of such
Notes by such Agent.
Each Terms Agreement shall specify the time and place of delivery of
and payment for such Notes. Unless otherwise specified in a Terms Agreement,
the procedural details relating to the issue and delivery of Notes purchased by
an Agent as principal and the payment therefor shall be as set forth in the
Administrative Procedures. Each date of delivery of and payment for Notes to be
purchased by an Agent pursuant to a Terms Agreement is referred to herein as a
"Settlement Date."
Unless otherwise specified in a Terms Agreement, if an Agent is
purchasing Notes as principal such Agent may resell such Notes to other dealers.
Any such sales may be at a discount, which shall not exceed the amount set forth
in the Prospectus Supplement relating to such Notes.
(c) Administrative Procedures. The Agents and the Company agree to
-------------------------
perform the respective duties and obligations specifically provided to be
performed in the Medium-Term Notes, Series A, Administrative Procedures
(attached hereto as Exhibit B) (the "Administrative Procedures"), as amended
from time to time. The Administrative Procedures may be amended only by written
agreement of the Company and the Agents.
(d) Delivery. The documents required to be delivered by Section 4 of
--------
this Agreement as a condition precedent to each Agent's obligation to begin
soliciting offers to purchase Notes as an agent of the Company shall be
delivered at the office of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, counsel for the Company, not later than 1:00 p.m.,
California time, on the date hereof, or at such other time and/or place as the
Agents and the Company may agree upon in writing, but in no event later than the
day prior to the earlier of (i) the date on which the Agents begin soliciting
offers to purchase Notes and (ii) the first date on which the Company accepts
any offer by an Agent to purchase Notes pursuant to a Terms Agreement. The date
of delivery of such documents is referred to herein as the "Commencement Date."
(e) Obligations Several. The Company acknowledges that the
-------------------
obligations of the Agents under this Agreement are several and not joint.
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<PAGE>
3. Agreements. The Company agrees with each Agent that:
----------
(a) Prior to the termination of the offering of the Notes pursuant to
this Agreement or any Terms Agreement, the Company will not file any Prospectus
Supplement relating to the Notes or any amendment to the Registration Statement
unless the Company has previously furnished to the Agents copies thereof for
their review and will not file any such proposed supplement or amendment to
which the Agents reasonably object; provided, however, that (i) the foregoing
-------- -------
requirement shall not apply to any of the Company's periodic filings with the
Commission required to be filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, copies of which filings the Company will cause to be delivered
to the Agents promptly after being transmitted for filing with the Commission
and (ii) any Prospectus Supplement that merely sets forth the terms or a
description of particular Notes shall only be reviewed and approved by the Agent
or Agents offering such Notes. Subject to the foregoing sentence, the Company
will promptly cause each Prospectus Supplement to be filed with or transmitted
for filing to the Commission in accordance with Rule 424(b) under the Securities
Act. The Company will promptly advise the Agents (i) of the filing of any
amendment or supplement to the Basic Prospectus (except that notice of the
filing of an amendment or supplement to the Basic Prospectus that merely sets
forth the terms or a description of particular Notes shall only be given to the
Agent or Agents offering such Notes), (ii) of the filing and effectiveness of
any amendment to the Registration Statement, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Basic Prospectus or for any additional information, (iv) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the institution or threatening of any proceeding
for that purpose and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use reasonable efforts to prevent the issuance of any
such stop order or notice of suspension of qualification and, if issued, to
obtain as soon as possible the withdrawal thereof. If the Basic Prospectus is
amended or supplemented as a result of the filing under the Exchange Act of any
document incorporated by reference in the Prospectus, no Agent shall be
obligated to solicit offers to purchase Notes so long as it is not reasonably
satisfied with such document.
(b) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Securities
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<PAGE>
Act, any event occurs or condition exists as a result of which the Prospectus,
as then amended or supplemented, would include an untrue statement of a material
fact, or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances when the Prospectus, as then amended
or supplemented, is delivered to a purchaser, not misleading, or if, in the
opinion of the Agents or in the opinion of the Company, it is necessary at any
time to amend or supplement the Prospectus, as then amended or supplemented, to
comply with applicable law, the Company will immediately notify the Agents by
telephone (with confirmation in writing) to suspend solicitation of offers to
purchase Notes and, if so notified by the Company, the Agents shall forthwith
suspend such solicitation and cease using the Prospectus, as then amended or
supplemented. If the Company shall decide to amend or supplement the
Registration Statement or Prospectus, as then amended or supplemented, it shall
so advise the Agents promptly by telephone (with confirmation in writing) and,
at its expense, shall prepare and cause to be filed promptly with the Commission
an amendment or supplement to the Registration Statement or Prospectus, as then
amended or supplemented, satisfactory in all respects to the Agents, that will
correct such statement or omission or effect such compliance and will supply
such amended or supplemented Prospectus to the Agents in such quantities as they
may reasonably request. If any documents, certificates, opinions and letters
furnished to the Agents pursuant to paragraph (f) below and Sections 5(a), 5(b)
and 5(c) in connection with the preparation and filing of such amendment or
supplement are satisfactory in all respects to the Agents, upon the filing with
the Commission of such amendment or supplement to the Prospectus or upon the
effectiveness of an amendment to the Registration Statement, the Agents will
resume the solicitation of offers to purchase Notes hereunder. Notwithstanding
any other provision of this Section 3(b), until 180 days after the date any
Agent has purchased Notes as principal from the Company, if any event described
above in this paragraph (b) occurs, the Company will, at its own expense,
forthwith prepare and cause to be filed promptly with the Commission an
amendment or supplement to the Registration Statement or Prospectus, as then
amended or supplemented, satisfactory in all respects to such Agent, will supply
such amended or supplemented Prospectus to such Agent in such quantities as it
may reasonably request and shall furnish to such Agent pursuant to paragraph (f)
below and Sections 5(a), 5(b) and 5(c) such documents, certificates, opinions
and letters as it may request in connection with the preparation and filing of
such amendment or supplement.
(c) The Company will make generally available to its security holders
and to the Agents as soon as practicable
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<PAGE>
earning statements that satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder
covering twelve month periods beginning, in each case, not later than the first
day of the Company's fiscal quarter next following the "effective date" (as
defined in Rule 158 under the Securities Act) of the Registration Statement with
respect to each sale of Notes. If such fiscal quarter is the last fiscal quarter
of the Company's fiscal year, such earning statement shall be made available not
later than 90 days after the close of the period covered thereby and in all
other cases shall be made available not later than 45 days after the close of
the period covered thereby.
(d) The Company will furnish to each Agent, without charge, a signed
copy of the Registration Statement, including exhibits and all amendments
thereto, and as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto as such Agent may
reasonably request.
(e) The Company will endeavor to qualify the Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Agents shall
reasonably request and to maintain such qualification for as long as the Agents
shall reasonably request.
(f) The Company shall furnish to the Agents such relevant documents
and certificates of officers of the Company relating to the business, operations
and affairs of the Company, the Registration Statement, the Basic Prospectus,
any amendments or supplements thereto, the Indentures, the Notes, this
Agreement, the Administrative Procedures, any Terms Agreement and the
performance by the Company of its obligations hereunder or thereunder as the
Agents may from time to time reasonably request.
(g) The Company shall notify the Agents promptly in writing of any
downgrading, or of its receipt of any notice of any intended or potential
downgrading or of any review for possible change that does not indicate the
direction of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act.
(h) The Company will, whether or not any sale of Notes is consummated,
pay all expenses incident to the performance of its obligations under this
Agreement and any Terms Agreement, including: (i) the preparation and filing of
the Registration Statement and the Prospectus and all amendments and supplements
thereto, (ii) the preparation,
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<PAGE>
issuance and delivery of the Notes, (iii) the fees and disbursements of the
Company's counsel and accountants and of the Trustee and its counsel, (iv) the
qualification of the Notes under securities or Blue Sky laws in accordance with
the provisions of Section 3(e), including filing fees and the fees and
disbursements of counsel for the Agents in connection therewith and in
connection with the preparation of any Blue Sky or Legal Investment Memoranda,
(v) the printing and delivery to the Agents in quantities as hereinabove stated
of copies of the Registration Statement and all amendments thereto and of the
Prospectus and any amendments or supplements thereto, (vi) the printing and
delivery to the Agents of copies of any Blue Sky or Legal Investment Memoranda,
(vii) any fees charged by rating agencies for the rating of the Notes, (viii)
the fees and expenses, if any, incurred with respect to any filing with the
National Association of Securities Dealers, Inc., (ix) the reasonable fees and
disbursements of counsel for the Agents incurred in connection with the offering
and sale of the Notes, including any opinions to be rendered by such counsel
hereunder, and (x) any reasonable out-of-pocket expenses incurred by the Agents;
provided that any advertising expenses incurred by the Agents shall have been
- --------
approved by the Company.
(i) Between the date of any Terms Agreement and the Settlement Date
with respect to such Terms Agreement, the Company will not, without the prior
consent of the Agent under such Term Agreement, offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company substantially similar to
the Notes that are to be sold pursuant to such Terms Agreement (other than (i)
such Notes, (ii) Notes previously agreed to be sold by the Company and (iii)
commercial paper issued in the ordinary course of business), except as may
otherwise be provided in such Terms Agreement.
4. Conditions of the Obligations of the Agents. Each Agent's
-------------------------------------------
obligation to solicit offers to purchase Notes as agent of the Company, each
Agent's obligation to purchase Notes pursuant to any Terms Agreement and the
obligation of any other purchaser to purchase Notes will be subject to the
accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of the Company's officers made in each
certificate furnished pursuant to the provisions hereof and to the performance
and observance by the Company of all covenants and agreements herein contained
on its part to be performed and observed (in the case of an Agent's obligation
to solicit offers to purchase Notes, at the time of such solicitation, and, in
the case of an Agent's or any other purchaser's obligation to purchase Notes, at
the time the Company accepts the offer to
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<PAGE>
purchase such Notes and at the time of issuance and delivery) and (in each case)
to the following additional conditions precedent when and as specified:
(a) Prior to such solicitation or purchase, as the case may be:
(i) there shall not have occurred any change, or any development which
could reasonably be expected to result in a change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus, as amended or supplemented at the time of such solicitation or
at the time such offer to purchase was made, that, in the judgment of the
relevant Agent, is material and adverse and that makes it, in the judgment
of such Agent, impracticable to market the Notes on the terms and in the
manner contemplated by the Prospectus, as so amended or supplemented;
(ii) there shall not have occurred any (A) suspension or material
limitation of trading generally on or by, as the case may be, the New York
Stock Exchange, the American Stock Exchange or the National Association of
Securities Dealers, Inc., (B) suspension of trading of any securities of
the Company on any exchange or in any over-the-counter market, (C)
declaration of a general moratorium on commercial banking activities in New
York by either Federal or New York State authorities or (D) any outbreak or
escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the relevant Agent, is material
and adverse and, in the case of any of the events described in clauses
(ii)(A) through (D), such event, singly or together with any other such
event, makes it, in the judgment of such Agent, impracticable to market the
Notes on the terms and in the manner contemplated by the Prospectus, as
amended or supplemented at the time of such solicitation or at the time
such offer to purchase was made; and
(iii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by
any "nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act;
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<PAGE>
(A) except, in each case described in paragraph (i), (ii) or (iii) above, as
disclosed to the relevant Agent in writing by the Company prior to such
solicitation or, in the case of a purchase of Notes, as disclosed to the
relevant Agent before the offer to purchase such Notes was made or (B) unless in
each case described in (ii) above, the relevant event shall have occurred and
been known to the relevant Agent before such solicitation or, in the case of a
purchase of Notes, before the offer to purchase such Notes was made.
(b) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall have
received:
(i) The opinion, dated as of such date, of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation, counsel for the Company
to the effect that:
(A) Charles Schwab is a duly incorporated, validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its
property and conduct its business as described in the Prospectus, as
then amended or supplemented;
(B) each of this Agreement and any applicable Written Terms
Agreement has been duly authorized, executed and delivered by the
Company;
(C) each Indenture has been duly qualified under the Trust
Indenture Act and has been duly authorized, executed and delivered by
the Company and is a valid and binding agreement of the Company,
enforceable in accordance with its terms except as enforcement thereof
(a) may be limited by bankruptcy, insolvency, fraudulent transfer or
conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally, (b) is subject to general
principles of equity, regardless of whether codified by statute and
regardless of whether enforcement is considered in a proceeding in
equity or at law, and (c) is subject to certain additional customary
exceptions;
(D) the forms of Notes have been duly authorized by the Company,
and if the terms of a particular Note and its issuance and sale are
duly established in conformity with the relevant Indenture, and if
such Note is duly executed by the Company and the Trustee and
completed and authenticated in accordance with the terms of the
relevant Indenture and delivered to and paid for by
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the purchasers thereof in accordance with this Agreement and any
applicable Terms Agreement on the date of such opinion, such Note
would be entitled to the benefits of such Indenture and would be valid
and binding obligations of the Company, enforceable in accordance with
their respective terms except as enforcement thereof (a) may be
limited by bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally, (b) is subject to general principles of equity,
regardless of whether codified by statute and regardless of whether
enforcement is considered in a proceeding in equity or at law, and (c)
is subject to certain additional customary exceptions;
(E) (1) the execution and delivery by the Company of this
Agreement, the Indentures and any applicable Written Terms Agreement,
and the performance by the Company of its obligations under this
Agreement, the Indentures and any applicable Terms Agreement, as of
the Commencement Date (or Settlement Date, if applicable) did not
contravene, and (2) the execution and delivery by the Company of the
Notes, assuming such Notes were executed, issued and delivered in
accordance with this Agreement and the Indentures as of the
Commencement Date (or Settlement Date, if applicable) would not
contravene, (a) any provision of applicable law (other than the
securities or Blue Sky laws of the various states as to which such
counsel need express no opinion), or (b) the certificate of
incorporation or by-laws of the Company or Charles Schwab, or
constitute a default under the Revolving Credit Facility, consisting
of separate but substantially identical Credit Agreements, between the
Company and the banks listed therein, dated as of June 27, 1997, as
amended, and the Revolving Promissory Notes issued pursuant thereto,
or to the best knowledge of such counsel, after reasonable
investigation, any other instrument or agreement binding upon the
Company or any subsidiary and evidencing or related to indebtedness
for borrowed money, except such instruments and other agreements
relating to capitalized lease obligations and installment purchase
agreements for the acquisition of fixed assets, indebtedness pursuant
to which does not in the aggregate exceed $15 million; and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, the Notes
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(assuming such Notes were executed, issued and delivered in accordance
with this Agreement and the Indentures as of the Commencement Date or
Settlement Date, if applicable), the Indentures and any applicable
Terms Agreement, or for the performance by Charles Schwab of its
obligations under this Agreement and any applicable Terms Agreement,
except such as are specified and have been obtained, and such as may
be required by the securities or Blue Sky laws of the various states
in connection with the offer and sale of the Notes; provided, however,
that such counsel need not express an opinion as to whether the
purchase of the Offered Securities constitutes a "prohibited
transaction" under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Internal
Revenue Code of 1986, as amended;
(F) the statements (1) in the Prospectus, as then amended or
supplemented, under the captions "Description of Notes" (in the
Prospectus Supplement), "Description of Debt Securities" (in the Basic
Prospectus), "Plan of Distribution" (in the Prospectus Supplement and
in the Basic Prospectus), and (2) in the Registration Statement, as
then amended or supplemented, under Item 15, in each case insofar as
such statements constitute summaries of the legal matters, documents
or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein;
(G) such counsel is of the opinion ascribed to it in the
Prospectus, as then amended or supplemented, under the caption
"Certain United States Federal Income Tax Consequences";
(H) (1) such counsel is of the opinion that each document, if
any, filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Prospectus, as then amended or
supplemented (except for financial statements and schedules and other
financial and statistical data included therein, and except for any
proxy statement of the Company, as to which such counsel need not
express any opinion), complied when so filed as to form in all
material respects with the Exchange Act and the applicable rules and
regulations of the Commission thereunder, (2) no facts have come to
the attention of such counsel to
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lead them to believe that (except for financial statements and
schedules and other financial and statistical data as to which such
counsel need not express any belief and except for that part of the
Registration Statement that constitutes the Form T-1 heretofore
referred to and except for any proxy statement of the Company) any
part of the Registration Statement, as then amended, if applicable, as
of the date such opinion is delivered, contains any untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (3) such counsel is of the opinion that the Registration
Statement and Prospectus, as then amended or supplemented, if
applicable (except for financial statements and schedules and other
financial and statistical data included therein and except for any
proxy statement of the Company, as to which such counsel need not
express any opinion) comply as to form in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder and (4) no facts have come to the attention of
such counsel to lead them to believe that (except for financial
statements and schedules and other financial and statistical data and
except for any proxy statement of the Company, as to which such
counsel need not express any belief) the Prospectus, as then amended
or supplemented, if applicable, as of the date such opinion is
delivered, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that in the case of an opinion delivered on
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the Commencement Date or pursuant to Section 5(b), the opinion and
belief set forth in clauses (3) and (4) above shall be deemed not to
cover information concerning an offering of particular Notes to the
extent such information will be set forth in a supplement to the Basic
Prospectus.
(ii) The opinion, dated as of such date, of The Office of General
Counsel of the Company to the effect that:
(A) the Company is a duly incorporated, validly existing
corporation in good standing under the laws of the State of Delaware,
has the corporate power and authority to own its property and conduct
its business as described in the
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Prospectus, as then amended or supplemented, and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(B) each of Holdings and the Company's Significant Subsidiaries
is a duly incorporated, validly existing corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and conduct its
business as described in the Prospectus, as then amended or
supplemented, and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole;
(C) each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates
and permits of and from, and has made all declarations and filings
with, all federal, state, local and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals,
to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus, as
amended or supplemented, except to the extent that the failure to
obtain or file would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(D) the statements (1) in "Item 3 - Legal Proceedings" of the
Company's most recent annual report on Form 10-K incorporated by
reference in the Prospectus, as then amended or supplemented and (2)
in "Item 1 - Legal Proceedings" of Part II of the Company's quarterly
reports on Form 10-Q, if any, filed since such annual report, and (3)
under the caption "Employment Agreement and Name Assignment" in the
Company's Proxy Statement for its Annual Meeting of Stockholders
immediately succeeding the filing of the Company's most recent
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<PAGE>
annual report on Form 10-K incorporated by reference in the
Prospectus, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
(E) after due inquiry, such counsel does not know of any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus, as then amended or
supplemented, or to be filed or incorporated by reference as exhibits
to such Registration Statement that are not described, filed or
incorporated as required;
(F) each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer,
investment adviser, or transfer agent, as the case may be, in each
jurisdiction wherein the conduct of its business requires such
registration, and each of the Company and its Significant Subsidiaries
is in compliance in all material respects with all applicable laws,
rules, regulations, orders, by-laws and similar requirements in
connection with such registrations, except to the extent that the
failure to be so registered or be in compliance would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(G) Charles Schwab is a member in good standing of the
associations and exchanges indicated in the Prospectus, as then
amended or supplemented, and is registered as a broker-dealer with the
Commission and in all 50 states, the District of Columbia and Puerto
Rico, except to the extent that the failure to be in good standing or
be so registered would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; and
(H) (1) the execution and delivery by the Company of the
Agreement, the Indentures and any applicable Written Terms Agreement,
and the performance by the Company of its obligations under the
Agreement, the Indentures and any applicable Terms Agreement, as of
the Commencement Date (or Settlement Date, if applicable), did not
violate, and (2) the execution and delivery by the Company
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of the Notes, assuming such Notes were executed, issued and delivered
in accordance with this Agreement and the Indentures as of the
Commencement Date (or Settlement Date, if applicable), would not
violate, to such counsel's best knowledge, after reasonable
investigation, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary
(except for such contravention that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole).
(I) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus, as
then amended or supplemented, and are not so described or of any
statutes or regulations that are required to be described in the
Registration Statement or the Prospectus, as then amended or
supplemented, that are not described as required.
(J) (1) Such counsel is of the opinion that the proxy statement
most recently filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Prospectus, as then amended or
supplemented, (except for financial statements and schedules and other
financial and statistical data included therein, as to which such
counsel need not express an opinion), complied when so filed as to
form in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (2) no facts have
come to the attention of such counsel to lead them to believe that
(except for financial statements and schedules and other financial and
statistical data, as to which such counsel need not express any
belief) the proxy statement most recently filed pursuant to the
Exchange Act by the Company and incorporated by reference in the
Prospectus, when such part of Registration Statement became effective,
and as of the date such opinion is delivered, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
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(iii) The opinion, dated as of such date, of Davis Polk & Wardwell,
counsel for the Agents, covering the matters in subparagraphs (B), (C), (D)
and (F) (with respect to statements in the Prospectus, as then amended or
supplemented, under the captions "Description of Notes" (in the Prospectus
Supplement), "Description of Debt Securities" (in the Basic Prospectus) and
"Plan of Distribution" (in the Prospectus Supplement and in the Basic
Prospectus)), and clauses (2), (3) and (4) of subparagraph (H) in paragraph
(b)(i) above.
In giving the opinions referred to in paragraph (i) hereof, Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, may
rely on the opinion of Davis Polk & Wardwell as to any matters governed by
the laws of New York, and in giving the opinion referred to in paragraph
(iii) hereof, Davis Polk & Wardwell may rely on the opinion of Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, as to
any matters governed by laws of California. With respect to subparagraph
(H) of paragraph (b)(i) above, Howard, Rice, Nemerovski, Canady, Falk &
Rabkin, A Professional Corporation, may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto (but not
including documents incorporated therein by reference) and review and
discussion of the contents thereof (including documents incorporated
therein by reference), but are without independent check or verification,
except as specified. With respect to clauses (2), (3) and (4) of
subparagraph (H) of paragraph (b)(i) above, Davis Polk & Wardwell may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments
or supplements thereto (but not including documents incorporated therein by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), but are without independent
check or verification, except as specified.
The opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, described in paragraph (b)(i) above shall be
rendered to the Agents at the request of the Company and shall so state
therein.
The opinion of The Office of General Counsel of the Company described
in paragraph (b)(ii) above shall be rendered to the Agents at the request
of the Company and shall so state therein.
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(c) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the relevant Agents shall have
received a certificate, dated the Commencement Date or such Settlement Date, as
the case may be, signed by an executive officer of the Company to the effect set
forth in subparagraph (a)(iii) above and to the effect that the representations
and warranties of the Company contained herein are true and correct as of such
date and that the Company has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied on or before such
date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(d) On the Commencement Date and, if called for by any Terms
Agreement, on the corresponding Settlement Date, the Company's independent
auditors shall have furnished to the relevant Agents a letter or letters, dated
as of the Commencement Date or such Settlement Date, as the case may be, in form
and substance satisfactory to such Agents containing statements and information
of the type ordinarily included in accountant's "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in or incorporated by reference into the Prospectus, as
then amended or supplemented.
(e) On the Commencement Date and on each Settlement Date, the Company
shall have furnished to the relevant Agents such appropriate further
information, certificates and documents as they may reasonably request.
5. Additional Agreements of the Company.
------------------------------------
(a) Each time the Registration Statement or Prospectus is amended or
supplemented (other than by an amendment or supplement providing solely for a
change in the interest rates, redemption provisions, amortization schedules or
maturities offered on the Notes or for a change the Agents deem to be
immaterial), the Company will deliver or cause to be delivered forthwith to each
Agent a certificate signed by an executive officer of the Company, dated the
date of such amendment or supplement, as the case may be, in form reasonably
satisfactory to the Agents, of the same tenor as the certificate referred to in
Section 4(c) relating to the Registration Statement or the Prospectus as amended
or supplemented to the time of delivery of such certificate.
(b) Each time the Company furnishes a certificate pursuant to Section
5(a), the Company will furnish or cause
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<PAGE>
to be furnished forthwith to each Agent written opinions of (i) independent
counsel for the Company and (ii) the General Counsel for the Company. All such
opinions shall be dated the date of such amendment or supplement, as the case
may be, shall be in a form satisfactory to the Agents and shall be of the same
tenor as the opinions referred to in Sections 4(b)(i) and (ii), but modified to
relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such opinions. In lieu of such opinions,
counsel last furnishing such an opinions to an Agent may furnish to each Agent a
letter to the effect that such Agent may rely on such last opinions to the same
extent as though it were dated the date of such letter (except that statements
in such last opinions will be deemed to relate to the Registration Statement and
the Prospectus as amended or supplemented to the time of delivery of such
letter.)
(c) Each time the Registration Statement or the Prospectus is amended
or supplemented to set forth amended or supplemental financial information or
such amended or supplemental information is incorporated by reference in the
Prospectus, the Company shall cause its independent public accountants forthwith
to furnish each Agent with a letter, dated the date of such amendment or
supplement, as the case may be, in form satisfactory to the Agents, of the same
tenor as the letter referred to in Section 4(d), with regard to the amended or
supplemental financial information included or incorporated by reference in the
Registration Statement or the Prospectus as amended or supplemented to the date
of such letter.
6. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Agent and
each person, if any, who controls such Agent within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Agent or any
such controlling person in connection with investigating or defending any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof
or the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to such Agent
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furnished to the Company in writing by such Agent expressly for use therein.
(b) Each Agent agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to such Agent, but
only with reference to information relating to such Agent furnished to the
Company in writing by such Agent expressly for use in the Registration Statement
or the Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley or, if Morgan Stanley is not an
indemnified party and is not reasonably likely to become an indemnified party,
by the Agents that are indemnified parties, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not
be liable for any settlement
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of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 6 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein in
connection with any offering of Notes, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and each Agent on the other hand from the offering of such Notes or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and each Agent on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and each Agent on the other hand in
connection with the offering of such Notes shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such Notes
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by each Agent in respect thereof. The relative fault of
the
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Company on the one hand and of each Agent on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by such Agent
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Each Agent's
obligation to contribute pursuant to this Section 6 shall be several (in the
proportion that the principal amount of the Notes the sale of which by or
through such Agent gave rise to such losses, claims, damages or liabilities
bears to the aggregate principal amount of the Notes the sale of which by or
through any Agent gave rise to such losses, claims, damages or liabilities) and
not joint.
(e) The Company and the Agents agree that it would not be just or
equitable if contribution pursuant to this Section 6 were determined by pro rata
--- ----
allocation (even if the Agents were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 6, no Agent shall be required to contribute any amount in excess of the
amount by which the total price at which the Notes referred to in paragraph (d)
above that were offered and sold to the public through such Agent exceeds the
amount of any damages that such Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 6 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
7. Position of the Agents. In acting under this Agreement and in
----------------------
connection with the sale of any Notes by the Company (other than Notes sold to
an Agent as principal pursuant to a Terms Agreement), each Agent is acting
solely as agent of the Company and does not assume any obligation towards or
relationship of agency or trust with any purchaser of Notes. An Agent shall
make reasonable efforts to assist the Company in obtaining performance by each
purchaser whose
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offer to purchase Notes has been solicited by such Agent and accepted by the
Company, but such Agent shall not have any liability to the Company in the event
any such purchase is not consummated for any reason. If the Company shall
default in its obligations to deliver Notes to a purchaser whose offer it has
accepted, the Company shall hold the relevant Agent harmless against any loss,
claim, damage or liability arising from or as a result of such default and
shall, in particular, pay to such Agent the commission it would have received
had such sale been consummated.
8. Termination. This Agreement may be terminated at any time by the
-----------
Company or, as to any Agent, by the Company or such Agent upon the giving of
written notice of such termination to the other parties hereto, but without
prejudice to any rights, obligations or liabilities of any party hereto accrued
or incurred prior to such termination. The termination of this Agreement shall
not require termination of any Terms Agreement, and the termination of any such
Terms Agreement shall not require termination of this Agreement. If this
Agreement is terminated, the provisions of the third paragraph of Section 2(a),
Section 2(e), the last sentence of Section 3(b) and Sections 3(c), 3(h), 6, 7,
9, 11 and 14 shall survive; provided that if at the time of termination an offer
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to purchase Notes has been accepted by the Company but the time of delivery to
the purchaser or its agent of such Notes has not occurred, the provisions of
Sections 2(b), 2(c), 3(a), 3(e), 3(f), 3(g), 3(i), 4 and 5 shall also survive
until such delivery has been made.
9. Representations and Indemnities to Survive. The respective
------------------------------------------
indemnity and contribution agreements, representations, warranties and other
statements of the Company, its officers and the Agents set forth in or made
pursuant to this Agreement or any Terms Agreement will remain in full force and
effect, regardless of any termination of this Agreement or any such Terms
Agreement, any investigation made by or on behalf of an Agent or the Company or
any of the officers, directors or controlling persons referred to in Section 6
and delivery of and payment for the Notes.
10. Notices. All communications hereunder will be in writing and
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effective only on receipt, and, if sent to Morgan Stanley, will be mailed,
delivered or telefaxed and confirmed to Morgan Stanley at 1585 Broadway, 2nd
Floor, New York, New York 10036, Attention: Manager--Continuously Offered
Products (telefax number: 212-761-0780), with a copy to Morgan Stanley at 1585
Broadway, 34th Floor, New York, New York 10036, Attention: Investment Banking
Information Center (telefax number: 212-761-0260), if sent to Goldman, Sachs,
will be mailed, delivered or telefaxed and confirmed to
-28-
<PAGE>
Goldman, Sachs at 85 Broad Street, New York, New York 10004, Attention: Credit
Department, Medium-Term Notes (telefax number: 212-357-8680), if sent to Charles
Schwab, will be mailed, delivered or telefaxed and confirmed to Charles Schwab
at 101 Montgomery Street, San Francisco, California 94104, Attention: Chief
Financial Officer (telefax number: 415-627-8188), if sent to CS First Boston,
will be mailed, delivered or telefaxed and confirmed to CS First Boston at
________________________________________________________________________________
____________________________, Attention: ________________ (telefax number:
_____________________) or, if sent to the Company, will be mailed, delivered or
telefaxed and confirmed to the Company at 101 Montgomery Street, San Francisco,
California 94104, Attention: Chief Financial Officer.
11. Successors. This Agreement and any Terms Agreement will inure to
----------
the benefit of and be binding upon the parties hereto and their respective
successors and the officers, directors and controlling persons referred to in
Section 6 and the purchasers of Notes (to the extent expressly provided in
Section 4), and no other person will have any right or obligation hereunder.
12. Amendments. This Agreement may be amended or supplemented if,
----------
but only if, such amendment or supplement is in writing and is signed by the
Company and each Agent; provided that the Company may from time to time, on
--------
seven days prior written notice to the Agents but without the consent of any
Agent, amend this Agreement to add as a party hereto one or more additional
firms registered under the Exchange Act, whereupon each such firm shall become
an Agent hereunder on the same terms and conditions as the other Agents that are
parties hereto. The Agents shall sign any amendment or supplement giving effect
to the addition of any such firm as an Agent under this Agreement.
13. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws of the State of New York.
15. Headings. The headings of the sections of this Agreement have
--------
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
-29-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Company and each of you.
Very truly yours,
THE CHARLES SCHWAB CORPORATION
By _________________________________
Print Name:
Title:
The foregoing Agreement
is hereby confirmed
and accepted as of the
date first above written.
MORGAN STANLEY & CO. INCORPORATED
By _______________________________
Print Name:
Title:
By _______________________________
Goldman, Sachs & Co.
CHARLES SCHWAB & CO., INC.
By _______________________________
Print Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By _______________________________
Print Name:
Title:
-30-
<PAGE>
EXHIBIT A
THE CHARLES SCHWAB CORPORATION
MEDIUM-TERM NOTES, SERIES A
TERMS AGREEMENT
_________________, 19__
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, California 94104
Attention:
Re: Distribution Agreement dated ______________, 1998
(the "Distribution Agreement")
-------------------------------------------------
We agree to purchase your Medium-Term Notes, Series A, having the
following terms:
[We agree to purchase, severally and not jointly, the principal
amount of Notes set forth below opposite our names:
Principal Amount
Name of Notes
---- ----------------
Morgan Stanley & Co.
Incorporated
Goldman, Sachs & Co.
Charles Schwab & Co., Inc.
Credit Suisse First Boston
Corporation
Total . . . . $
===========
The Notes shall have the following terms:]/*/
- ----------------
/*/ Delete if the transaction will not be syndicated.
-1-
<PAGE>
<TABLE>
<CAPTION>
Fixed Rate Rate Floating
All Notes: Notes: Notes:
- --------- ----- -----
<S> <C> <C>
Principal Interest Base Rate:
Amount: Rate:
Index
Purchase Amortization Maturity:
Price: Schedule:
Spread (Plus or
Price to Applicability Minus):
Public: of Annual
Interest Spread
Settlement Payments: Multiplier:
Date and Time:
Interest Payment
Place of Date(s):
Delivery:
Initial Interest
Original Issue Rate:
Date:
Initial Interest
Interest Accrual Reset Date:
Date:
Interest Reset
Maturity Dates:
Date:
Interest Reset
Optional Repayment Period:
Date(s):
Maximum Interest
Optional Redemption Rate:
Date(s):
Minimum Interest
Initial Redemption Rate:
Date:
Interest Payment
Initial Redemption Period:
Percentage
Reduction: Calculation Agent:
Annual Redemption LIBOR
Percentage Reuters/Telerate:
Reduction:
</TABLE>
-2-
<PAGE>
Ranking:
Other Terms:
The provisions of Sections 1, 2(b) and 2(c) and 3 through 6, 9, 10, 11
and 14 of the Distribution Agreement and the related definitions are
incorporated by reference herein and shall be deemed to have the same force and
effect as if set forth in full herein.
[If on the Settlement Date any one or more of the Agents shall fail or
refuse to purchase Notes that it has or they have agreed to purchase on such
date, and the aggregate amount of Notes which such defaulting Agent or Agents
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate amount of the Notes to be purchased on such date, the other Agents
shall be obligated severally in the proportions that the amount of Notes set
forth opposite their respective names above bears to the aggregate amount of
Notes set forth opposite the names of all such non-defaulting Agents, or in such
other proportions as _______________ may specify, to purchase the Notes which
such defaulting Agent or Agents agreed but failed or refused to purchase on such
date; provided that in no event shall the amount of Notes that any Agent has
--------
agreed to purchase pursuant to this Agreement be increased pursuant to this
paragraph by an amount in excess of one-ninth of such amount of Notes without
the written consent of such Agent. If on the Settlement Date any Agent or
Agents shall fail or refuse to purchase Notes and the aggregate amount of Notes
with respect to which such default occurs is more than one-tenth of the
aggregate amount of Notes to be purchased on such date, and arrangements
satisfactory to _______________ and the Company for the purchase of such Notes
are not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Agent or the Company. In
any such case either _______________ or the Company shall have the right to
postpone the Settlement Date but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Agent from
liability in respect of any default of such Agent under this Agreement.]/**/
This Agreement is subject to termination on the terms incorporated by
reference herein. If this Agreement is so terminated, the provisions of
Sections 3(h), 6, 9, 11 and 14 of the Distribution Agreement shall survive for
the purposes of this Agreement.
- --------------------
/**/ Delete if the transaction will not be syndicated.
-3-
<PAGE>
The following information, opinions, certificates, letters and
documents referred to in Section 4 of the Distribution Agreement will be
required: ________________
[NAME OF RELEVANT AGENT(S)]
By ______________________________
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By ___________________________
Title:
-4-
<PAGE>
EXHIBIT B
---------
THE CHARLES SCHWAB CORPORATION
MEDIUM-TERM NOTES, SERIES A
ADMINISTRATIVE PROCEDURES
_________________________________
Explained below are the administrative procedures and specific terms
of the offering of Medium-Term Notes, Series A (the "Notes"), on a continuous
basis by The Charles Schwab Corporation (the "Company") pursuant to the
Distribution Agreement, dated as of ____________________, 1998 (the
"Distribution Agreement") among the Company and Morgan Stanley & Co.
Incorporated, Goldman, Sachs & Co., Charles Schwab & Co., Inc. and Credit Suisse
First Boston Corporation (the "Agents"). The Notes may be issued as senior
indebtedness (the "Senior Notes") or senior subordinated indebtedness (the
"Senior Subordinated Notes") of the Company, and as used herein the term "Notes"
includes the Senior Notes and the Senior Subordinated Notes. The Senior Notes
will be issued pursuant to the provisions of a senior indenture dated as of July
15, 1993 (the "Senior Debt Indenture"), between the Company and The Chase
Manhattan Bank (formerly Chemical Bank), as trustee (the "Trustee"). The Senior
Subordinated Notes will be issued pursuant to the provisions of a senior
subordinated indenture dated as of July 15, 1993 (the "Senior Subordinated Debt
Indenture"), between the Company and the Trustee. The Senior Debt Indenture and
the Senior Subordinated Debt Indenture are sometimes hereinafter referred to
individually as an "Indenture" and collectively as the "Indentures." In the
Distribution Agreement, the Agents have agreed to use reasonable efforts to
solicit purchases of the Notes, and the administrative procedures explained
below will govern the issuance and settlement of any Notes sold through the
Agents, as agents of the Company. An Agent, as principal, may also purchase
Notes for its own account, and in connection with such purchase the Company and
such Agent will enter into a terms agreement (a "Terms Agreement"), as
contemplated by the Distribution Agreement. The administrative procedures
explained below will govern the issuance and settlement of any Notes purchased
by an Agent, as principal, unless otherwise specified in the applicable Terms
Agreement.
<PAGE>
Trustee will be the Registrar, Calculation Agent, Authenticating Agent
and Paying Agent for both the Senior Notes and the Subordinated Notes and will
perform the duties specified herein. Each Note will be represented by either a
Global Security (as defined below) delivered to the Trustee, as agent for The
Depository Trust Company ("DTC"), and recorded in the book-entry system
maintained by DTC (a "Book-Entry Note") or a certificate delivered to the holder
thereof or a person designated by such holder (a "Certificated Note"). Except
as set forth in the Indentures, an owner of a Book-Entry Note will not be
entitled to receive a Certificated Note.
Book-Entry Notes, which may be payable only in U.S. dollars, will be
issued in accordance with the administrative procedures set forth in Part I
hereof as they may subsequently be amended as the result of changes in DTC'S
operating procedures. Certificated Notes will be issued in accordance with the
administrative procedures set forth in Part II hereof. Unless otherwise defined
herein, terms defined in the Indentures, the Notes or any Prospectus Supplement
relating to the Notes shall be used herein as therein defined.
The Company will advise the Agents in writing of the employees of the
Company with whom the Agents are to communicate regarding offers to purchase
Notes and the related settlement details.
PART I: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
the custodial, document control and administrative functions described below, in
accordance with its respective obligations under a Letter of Representation from
the Company and the Trustee to DTC, dated as of August 3, 1993 (the "Letter of
Representation"), as amended, and a Medium-Term Note Certificate Agreement
between the Trustee and DTC, dated as of December 2, 1988 (the "MTN Certificate
Agreement") , and its obligations as a participant in DTC, including DTC's Same-
Day Funds Settlement System ("SDFS").
Issuance: On any date of settlement (as defined under
"Settlement" below) for one or more Book-Entry Notes,
the Company will issue a single global security in
fully registered form without coupons (a "Global
Security") representing up to U.S. $150,000,000
principal amount of all
B-2
<PAGE>
such Notes that have the same Original Issue Date,
Maturity Date and other terms. Each Global Security
will be dated and issued as of the date of its
authentication by the Trustee. Each Global Security
will bear an "Interest Accrual Date," which will be (i)
with respect to an original Global Security (or any
portion thereof), its original issuance date and (ii)
with respect to any Global Security (or any portion
thereof) issued subsequently upon exchange of a Global
Security, or in lieu of a destroyed, lost or stolen
Global Security, the most recent Interest Payment Date
to which interest has been paid or duly provided for on
the predecessor Global Security or Securities (or if no
such payment or provision has been made, the original
issuance date of the predecessor Global Security),
regardless of the date of authentication of such
subsequently issued Global Security. Book-Entry Notes
may be payable only in U.S. dollars. No Global
Security will represent any Certificated Note.
Denominations: Book-Entry Notes will be issued in principal amounts
of U.S. $1,000 or any amount in excess thereof that is
an integral multiple of U.S. $1,000. Global Securities
will be denominated in principal amounts not in excess
of U.S. $150,000,000. If one or more Book-Entry Notes
having an aggregate principal amount in excess of
$150,000,000 would, but for the preceding sentence, be
represented by a single Global Security, then one
Global Security will be issued to represent each U.S.
$150,000,000 principal amount of such Book-Entry Note
or Notes and an additional Global Security will be
issued to represent any remaining principal amount of
such Book-Entry Note or Notes. In such a case, each of
the Global Securities
B-3
<PAGE>
representing such Book-Entry Note or Notes shall be
assigned the same CUSIP number.
Preparation If any offer to purchase a Book-Entry Note is accepted
of Pricing by or on behalf of the Company, the Company will
Supplement: prepare a pricing supplement (a "Pricing Supplement")
reflecting the terms of such Note. The Company (i) will
arrange to file 10 copies (or, if participating in the
Commission's Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR"), such number of copies as is
required by the rules and regulations of the Commission
governing EDGAR filings then in effect) of such Pricing
Supplement with the Commission in accordance with the
applicable paragraph of Rule 424(b) under the Act, (ii)
will, as soon as possible and in any event not later
than 11:00 A.M. on the Business Day following the trade
date, deliver the number of copies of such Pricing
Supplement to the relevant Agent at the address listed
below as such Agent shall request and (iii) will, on
the relevant Agent's behalf, promptly file five copies
of such Pricing Supplement with the National
Association of Securities Dealers, Inc. (the "NASD").
The relevant Agent will cause such Pricing Supplement
to be delivered to the purchaser of the Note.
Pricing Supplements shall be delivered as follows:
If to Morgan Stanley & Co. Incorporated, at:
Morgan Stanley & Co. Incorporated
1585 Broadway, 2nd Floor
New York, New York 10036
Attn.: Medium-Term Note Trading
Desk, Carlos Cabrera
Telephone: (212) 761-2000
Telecopier: (212) 761-8846
B-4
<PAGE>
with a copy to:
Morgan Stanley & Co. Incorporated
1585 Broadway, ___th Floor
New York, New York 10036
Attn.: Manager - Credit Department
Telephone: (212) ___-____
Telecopier: (212) ___-____
If to Goldman, Sachs & Co., at:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Credit Department -
Medium Term Notes
Telephone: (212) ___-____
Telecopier: (212) 357-8680
with a copy to:
__________________________________
__________________________________
__________________________________
Attn: ___________________________
___________________________
Telephone: ______________________
Telecopier: ______________________
If to Credit Suisse First Boston Corporation, at:
Credit Suisse First Boston Corporation
__________________________________
__________________________________
__________________________________
Attn: ___________________________
___________________________
Telephone: ______________________
Telecopier: ______________________
with a copy to:
__________________________________
__________________________________
__________________________________
Attn: ___________________________
___________________________
Telephone: ______________________
B-5
<PAGE>
Telecopier: ______________________
In each instance that a Pricing Supplement is prepared,
the relevant Agent will affix the Pricing Supplement to
Prospectuses prior to their use. Outdated Pricing
Supplements, and the Prospectuses to which they are
attached (other than those retained for files), will be
destroyed.
Settlement: The receipt by the Company of immediately available
funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Security
representing such Note shall constitute "settlement"
with respect to such Note. All offers accepted by the
Company will be settled on the third Business Day next
succeeding the date of acceptance pursuant to the
timetable for settlement set forth below, unless the
Company and the purchaser agree to settlement on
another day, which shall be no earlier than the next
Business Day.
Settlement Settlement Procedures with regard to each Book-Entry
Procedures: Note sold by the Company to or through an Agent
(unless otherwise specified pursuant to a Terms
Agreement and reasonably acceptable to the Trustee)
shall be as follows:
A. The relevant Agent will advise the Company by
telephone that such Note is a Book-Entry Note and
of the following settlement information:
1. Principal amount.
2. Maturity Date.
3. In the case of a Fixed
Rate Book-Entry Note, the Interest Rate,
whether such Note will pay
B-6
<PAGE>
interest annually or semiannually and
whether such Note is an Amortizing Note,
and, if so, the amortization schedule, or,
in the case of a Floating Rate Book-Entry
Note, the Initial Interest Rate (if known at
such time), Interest Payment Date(s),
Interest Payment Period, Calculation Agent,
Base Rate (and, if LIBOR, Reuters or
Telerate), Index Maturity, Interest Reset
Period, Initial Interest Reset Date,
Interest Reset Dates, Spread or Spread
Multiplier (if any), Minimum Interest Rate
(if any) and Maximum Interest Rate (if any).
4. Redemption or repayment provisions (if any).
5. Ranking.
6. Settlement date and time
(Original Issue Date).
7. Interest Accrual Date.
8. Price.
9. Agent's commission (if
any) determined as provided in the
Distribution Agreement.
10. Any other applicable
terms.
B. The Company will advise the Trustee by telephone
or electronic transmission (confirmed in writing
at any time on the same date) of the information
set forth in Settlement Procedure "A" above and of
the name of the
B-7
<PAGE>
applicable Agent. The Company will then assign a
CUSIP number to the Global Security representing
such Note and will notify the Trustee and the
relevant Agent of such CUSIP number by telephone
as soon as practicable.
C. The Trustee will enter a pending deposit message
through DTC's Participant Terminal System,
providing the following settlement information to
DTC, the relevant Agent and Standard & Poor's
Corporation:
1. The information set forth in Settlement
Procedure "A".
2. The Initial Interest
Payment Date for such Note, the number of
days by which such date succeeds the related
DTC Record Date (which in the case of
Floating Rate Notes which reset daily or
weekly, shall be the date five calendar days
immediately preceding the applicable
Interest Payment Date and, in the case of
all other Notes, shall be the Record Date as
defined in the Note) and, if known, the
amount of interest payable on such Initial
Interest Payment Date.
3. The CUSIP number of the Global Security
representing such Note.
4. Whether such Global Security will represent
any other Book-Entry Note (to the extent
known at such time).
B-8
<PAGE>
5. Whether such Note is an
Amortizing Note (by an appropriate notation
in the comments field of DTC's Participant
Terminal System).
6. The number of Participant accounts to be
maintained by DTC on behalf of the relevant
Agent and the Trustee.
D. The Trustee will complete and
authenticate the Global Security representing such
Note.
E. DTC will credit such Note to
the Trustee's participant account at DTC.
F. The Trustee will enter an SDFS deliver order
through DTC's Participant Terminal System
instructing DTC to (i) debit such Note to the
Trustee's participant account and credit such Note
to the relevant Agent's participant account and
(ii) debit such Agent's settlement account and
credit the Trustee's settlement account for an
amount equal to the price of such Note less such
Agent's commission (if any). The entry of such a
deliver order shall constitute a representation
and warranty by the Trustee to DTC that (a) the
Global Security representing such Book-Entry Note
has been issued and authenticated and (b) the
Trustee is holding such Global Security pursuant
to the MTN Certificate Agreement.
G. Unless the relevant Agent is the end purchaser of
such Note, such Agent will enter an SDFS deliver
order through DTC's
B-9
<PAGE>
Participant Terminal System instructing DTC (i) to
debit such Note to such Agent's participant
account and credit such Note to the participant
accounts of the Participants with respect to such
Note and (ii) to debit the settlement accounts of
such Participants and credit the settlement
account of such Agent for an amount equal to the
price of such Note.
H. Transfers of funds in accordance with SDFS deliver
orders described in Settlement Procedures "F" and
"G" will be settled in accordance with SDFS
operating procedures in effect on the settlement
date.
I. The Trustee will credit to the account of the
Company maintained at Citibank, N.A., New York,
New York, in immediately available funds, the
amount transferred to the Trustee in accordance
with Settlement Procedure "F".
J. Unless the relevant Agent is the end purchaser of
such Note, such Agent will confirm the purchase of
such Note to the purchaser either by transmitting
to the Participants with respect to such Note a
confirmation order or orders through DTC's
institutional delivery system or by mailing a
written confirmation to such purchaser.
K. Monthly, the Trustee will send to the Company a
statement setting forth the principal amount of
Notes outstanding as of that date under the
Indentures and setting forth a brief description
of any sales of which the Company has
B-10
<PAGE>
advised the Trustee that have not yet been
settled.
Settlement For sales by the Company of Book-Entry Notes to or
Procedures through an Agent (unless otherwise specified pursuant
Timetable: to a Terms Agreement and reasonably acceptable to the
Trustee) for settlement on the first Business Day after
the sale date, Settlement Procedures "A" through "J"
set forth above shall be completed as soon as possible
but not later than the respective times in New York
City set forth below:
Settlement
Procedure Time
---------- ----
A 11:00 A.M. on the sale date
B 12:00 Noon on the sale date
C 2:00 P.M. on the sale date
D 9:00 A.M. on settlement date
E 10:00 A.M. on settlement date
F-G 2:00 P.M. on settlement date
H 4:45 P.M. on settlement date
I-J 5:00 P.M. on settlement date
If a sale is to be settled more than one Business Day
after the sale date, Settlement Procedures "A", "B" and
"C" shall be completed as soon as practicable but no
later than 11:00 A.M., 12:00 and 2:00 P.M.,
respectively, on the first Business Day after the sale
date. If the Initial Interest Rate for a Floating Rate
Book-Entry Note has not been determined at the time
that Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as
such rate has been determined but no later than 12:00
and 2:00 P.M., respectively, on the first Business Day
before the settlement date. Settlement Procedure "H" is
subject to extension in accordance with any extension
of Fedwire closing deadlines and in the other events
specified in the SDFS operating
B-11
<PAGE>
procedures in effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or
cancelled, the Trustee, after receiving notice from the
Company or the relevant Agent no later than 12:00 Noon
on the Business Day immediately preceding the scheduled
settlement date, will deliver to DTC, through DTC's
Participant Terminal System, a cancellation message to
such effect by no later than 2:00 P.M. on the Business
Day immediately preceding the scheduled settlement
date.
Failure to If the Trustee fails to enter an SDFS deliver order
Settle: with respect to a Book-Entry Note pursuant to
Settlement Procedure "F", the Trustee may deliver to
DTC, through DTC's Participant Terminal System, as soon
as practicable a withdrawal message instructing DTC to
debit such Note to the Trustee's participant account,
provided that the Trustee's participant account
contains a principal amount of the Global Security
representing such Note that is at least equal to the
principal amount to be debited. If a withdrawal message
is processed with respect to all the Book-Entry Notes
represented by a Global Security, the Trustee will mark
such Global Security "cancelled," make appropriate
entries in the Trustee's records and send such
cancelled Global Security to the Company. The CUSIP
number assigned to such Global Security shall, in
accordance with the procedures of the CUSIP Service
Bureau of Standard & Poor's Corporation, be cancelled
and not immediately reassigned. If a withdrawal message
is processed with respect to one or more, but not all,
of the Book-Entry Notes represented by a Global
Security, the Trustee will
B-12
<PAGE>
exchange such Global Security for two Global
Securities, one of which shall represent such Book-
Entry Note or Notes and shall be cancelled immediately
after issuance and the other of which shall represent
the remaining Book-Entry Notes previously represented
by the surrendered Global Security and shall bear the
CUSIP number of the surrendered Global Security.
If the purchase price for any Book-Entry Note is not
timely paid to the Participants with respect to such
Note by the beneficial purchaser thereof (or a person,
including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in
turn, the relevant Agent may enter SDFS deliver orders
through DTC's Participant Terminal System reversing the
orders entered pursuant to Settlement Procedures "F"
and "G", respectively. Upon receipt of notice of such
event, the Trustee will deliver the withdrawal message
and take the related actions described in the preceding
paragraph.
Notwithstanding the foregoing, upon any failure to
settle with respect to a Book-Entry Note, DTC may take
any actions in accordance with its SDFS operating
procedures then in effect.
In the event of a failure to settle with respect to one
or more, but not all, of the Book-Entry Notes to have
been represented by a Global Security, the Trustee will
provide, in accordance with Settlement Procedures "D"
and "F", for the authentication and issuance of a
Global Security representing the Book-Entry Notes to be
represented by such Global Security and will
B-13
<PAGE>
make appropriate entries in its records.
B-14
<PAGE>
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
The Trustee will serve as Registrar in connection with the
Certificated Notes.
Issuance: Each Certificated Note will be dated and issued as of
the date of its authentication by the Trustee. Each
Certificated Note will bear an Original Issue Date,
which will be (i) with respect to an original
Certificated Note (or any portion thereof), its
original issuance date (which will be the settlement
date) and (ii) with respect to any Certificated Note
(or portion thereof) issued subsequently upon transfer
or exchange of a Certificated Note or in lieu of a
destroyed, lost or stolen Certificated Note, the
original issuance date of the predecessor Certificated
Note, regardless of the date of authentication of such
subsequently issued Certificated Note.
Preparation
of Pricing Supplement: If any offer to purchase a Certificated Note is
accepted by or on behalf of the Company, the Company
will prepare a Pricing Supplement reflecting the terms
of such Note. The Company (i) will arrange to file 10
copies (or, if participating in EDGAR, such number of
copies as is required by the rules and regulations of
the Commission governing EDGAR filings then in effect)
of such Pricing Supplement with the Commission in
accordance with the applicable paragraph of Rule 424(b)
under the Act, (ii) will, as soon as possible and in
any event not later than 11:00 A.M. on the Business Day
following the trade date, deliver the number of copies
of such Pricing Supplement to the relevant Agent at the
address set-forth above as such Agent shall request and
(iii) will, on the relevant
B-15
<PAGE>
Agent's behalf, promptly file five copies of such
Pricing Supplement with the NASD. The relevant Agent
will cause such Pricing Supplement to be delivered to
the purchaser of the Note.
In each instance that a Pricing Supplement is prepared,
the relevant Agent will affix the Pricing Supplement to
Prospectuses prior to their use. Outdated Pricing
Supplements, and the Prospectuses to which they are
attached (other than those retained for files), will be
destroyed.
Settlement: The receipt by the Company of immediately available
funds in exchange for an authenticated Certificated
Note delivered to the relevant Agent and such Agent's
delivery of such Note against receipt of immediately
available funds shall constitute "settlement" with
respect to such Note. All offers accepted by the
Company will be settled on or before the third Business
Day next succeeding the date of acceptance pursuant to
the timetable for settlement set forth below, unless
the Company and the purchaser agree to settlement on
another date.
Settlement Settlement Procedures with regard to each Certificated
Procedures: Note sold by the Company to or through an Agent
(unless otherwise specified pursuant to a Terms
Agreement and reasonably acceptable to the Trustee)
shall be as follows:
A. The relevant Agent will advise
the Company by telephone that such Note is a
Certificated Note and of the following settlement
information:
1. Name in which such Note
is to be registered ("Registered Owner").
B-16
<PAGE>
2. Address of the Registered
Owner and address for payment of principal
and interest.
3. Taxpayer identification number of the
Registered Owner (if available).
4. Principal amount.
5. Maturity Date.
6. In the case of a Fixed Rate Certificated
Note, the Interest Rate, whether such Note
will pay interest annually or semiannually
and whether such Note is an Amortizing Note
and, if so, the amortization schedule, or,
in the case of a Floating Rate Certificated
Note, the Initial Interest Rate (if known at
such time), Interest Payment Date(s),
Interest Payment Period, Calculation Agent,
Base Rate (and, if LIBOR, Reuters or
Telerate), Index Maturity, Interest Reset
Period, Initial Interest Reset Date,
Interest Reset Dates, Spread or Spread
Multiplier (if any), Minimum Interest Rate
(if any) and Maximum Interest Rate (if any).
7. Redemption or repayment provisions (if
any).
8. Ranking.
9. Settlement date and time (Original Issue
Date).
10. Interest Accrual Date.
B-17
<PAGE>
11. Price.
12. Agent's commission (if any) determined as
provided in the Distribution Agreement.
13. Denominations.
14. Any other applicable
terms.
B. The Company will advise the Trustee by telephone
or electronic transmission (confirmed in writing
at any time on the same date) of the information
set forth in Settlement Procedure "A" above and of
the name of the applicable Agent.
C. The Company will have delivered to the Trustee a
pre-printed four-ply packet for such Note, which
packet will contain the following documents in
forms that have been approved by the Company, the
relevant Agent and the Trustee:
1. Note with customer
confirmation.
2. Stub One - For the Trustee.
3. Stub Two - For the relevant Agent.
4. Stub Three - For the
Company.
D. The Trustee will complete such Note and
authenticate such Note and deliver it (with the
confirmation) and Stubs One and Two to the
relevant Agent at the address set-forth below, and
such Agent will
B-18
<PAGE>
acknowledge receipt of the Note by stamping or
otherwise marking Stub One and returning it to the
Trustee. In the event that the instructions given
by such Agent for payment to the account of the
Company are revoked, the Company will as promptly
as possible wire transfer to the account of such
Agent an amount of immediately available funds
equal to the amount of such payment made.
Certificated Notes shall be delivered as follows:
If to Morgan Stanley & Co. Incorporated, at:
Bank of New York
Dealer Clearance Department
1 Wall Street, 4th Floor
New York, New York 10005
Attn: For the Account of
Morgan Stanley & Co.
Incorporated
If to Goldman, Sachs & Co., at:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Corporate Bond
Operations
Telephone: (212) 902-5836
If to Charles Schwab & Co., Inc., at:
______________________________
______________________________
Attn:_________________________
_________________________
_________________________
Telephone: __________________
Telecopier: __________________
If to Credit Suisse First
Boston Corporation, at:
B-19
<PAGE>
______________________________
______________________________
______________________________
Attn:_________________________
_________________________
Telephone: __________________
Telecopier: __________________
E. Unless the relevant Agent is the end purchaser of
such Note, such Agent will deliver such Note (with
confirmation) to the customer against payment in
immediately available funds. Such Agent will
obtain the acknowledgment of receipt of such Note
by retaining Stub Two.
F. The Trustee will send Stub Three to the Company by
first-class mail. Periodically, the Trustee will
also send to the Company a statement setting forth
the principal amount of the Notes outstanding as
of that date under each Indenture and setting
forth a brief description of any sales of which
the Company has advised the Trustee that have not
yet been settled.
Settlement For sales by the Company of Certificated Notes to or
Procedures through an Agent (unless otherwise specified pursuant
Timetable: to a Terms Agreement and reasonably acceptable to the
Trustee), Settlement Procedures "A" through "F" set
forth above shall be completed on or before the
respective times in New York City set forth below:
B-20
<PAGE>
<TABLE>
Settlement
Procedure Time
---------- ----
<S> <C>
A 2:00 P.M. on day before
settlement date
B 3:00 P.M. on day before
settlement date
C-D 2:15 P.M. on settlement
date
E 3:00 P.M. on settlement
date
F 5:00 P.M. on settlement
date
</TABLE>
Failure If a purchaser fails to accept delivery of and make
to Settle: payment for any Certificated Note, the relevant Agent
will notify the Company and the Trustee by telephone
and return such Note to the Trustee. Upon receipt of
such notice, the Company will immediately wire transfer
to the account of such Agent an amount equal to the
amount previously credited thereto in respect of such
Note. Such wire transfer will be made on the settlement
date, if possible, and in any event not later than the
Business Day following the settlement date. If the
failure shall have occurred for any reason other than a
default by such Agent in the performance of its
obligations hereunder and under the Distribution
Agreement, then the Company will reimburse such Agent
or the Trustee, as appropriate, on an equitable basis
for its loss of the use of the funds during the period
when they were credited to the account of the Company.
Immediately upon receipt of the Certificated Note in
respect of which such failure occurred, the Trustee
will mark such Note "cancelled," make appropriate
entries in the Trustee's records and send such Note to
the Company.
B-21
<PAGE>
EXHIBIT 5.1
Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin,
A Professional Corporation, as to the legality of securities being registered.
May 28, 1998
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Ladies and Gentlemen:
You have requested our opinion as counsel for the Charles Schwab
Corporation, a Delaware corporation (the "Company"), in connection with the
registration under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, and the public offering by the Company of up
to $150,000,000 of debt securities (the "Debt Securities").
We have examined the Company's Registration Statement on Form S-3 in the
form to be filed with the Securities and Exchange Commission on or about May 28,
1998 (the "Registration Statement"). We further have examined the Certificate of
Incorporation of the Company as certified by the Secretary of State of the State
of Delaware, the Bylaws and the minute books of the Company, the Senior
Indenture and Senior Subordinated Indenture entered into as of July 15, 1993 by
and between the Company and The Chase Manhattan Bank (formerly Chemical Bank) as
trustee (each, and "Indenture") and the form of Underwriting Agreement between
the Company and the underwriters named therein. In addition, we have examined
such corporate records, certificates and other documents (of which we are aware)
and such questions of law as we have considered necessary or appropriate for the
purposes of this opinion.
Based on the foregoing examination, we are of the opinion that, the
issuance of Debt Securities has been duly authorized by appropriate corporate
action and when the Debt Securities have been duly completed, executed,
authenticated and delivered in accordance with the relevant Indenture and sold
as described in the Registration Statement, any amendment thereto, the
prospectus and any supplement thereto, the Debt Securities will be legal, valid
and binding obligations of the Company entitled to the benefits of such
Indenture.
In connection with this opinion we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; (c)
the truth, accuracy and completeness of the information, representations and
warranties contained in the instruments, documents, records and certificates we
have reviewed; (d) the due authorization, execution and delivery on behalf of
the respective parties thereto of the documents referred to herein and, except
for the Debt Securities, the legal, valid and binding nature thereof with
respect to such parties; and (e) the absence of any evidence extrinsic to the
provisions of the written agreements between the parties that the parties
intended a meaning contrary to that expressed by those provisions. We have not
independently verified such assumptions.
<PAGE>
We express no opinion as to laws other than the substantive laws of the
State of California (without regard to conflicts-of-laws or choice-of-law
principles), the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, in each case to the extent
applicable and not excepted from the scope of the opinions expressed above.
Our opinion that any document is legal, valid and binding is qualified
as to the effects of:
(a) bankruptcy, reorganization, fraudulent transfer or conveyance,
moratorium, insolvency or other similar laws or court decisions relating to or
affecting the rights of creditors generally;
(b) equitable principles of general applicability (including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing, equitable subordination and the possible unavailability of specific
performance or injunctive relief), regardless of whether codified by statute
and regardless of whether enforcement is considered in a proceeding in equity or
at law;
(c) the unenforceability of any indemnity obligation imposed or
undertaken by the Company, to the extent that such obligation does not satisfy
the requirements of Section 2772 et seq. of the California Civil Code and
-- ---
judicial decisions thereunder or otherwise violates public policy;
(d) the unenforceability of provisions purporting to require the
award of attorneys' fees, expenses or costs, where such provisions do not
satisfy the requirements of Section 1717 et seq. of the California Civil Code
-- ---
and judicial decisions thereunder or otherwise violates public policy;
(e) the unenforceability, under certain circumstances, of provisions
that contain a waiver of (i) broadly or vaguely stated rights, (ii) the benefits
of statutory, regulatory or constitutional rights, unless and to the extent the
statute, regulation or constitution explicitly allows waiver, (iii) unknown
future defenses, and (iv) rights to damages; and
(f) the unenforceability, under certain circumstances, of provisions
of agreements to the effect that rights or remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to or with
any other right or remedy, or that the election of some particular remedy or
remedies does not preclude recourse to one or another remedy.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in the
Registration Statement, any amendment thereto, the prospectus and any supplement
thereto.
Very truly yours,
HOWARD, RICE, NEMEROVSKI, CANADY,
FALK & RABKIN
A Professional Corporation
By /s/ Ellyn K. Lazarus
---------------------------------
Ellyn K. Lazarus
<PAGE>
EXHIBIT 12.1
THE CHARLES SCHWAB CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Earnings before taxes on income
and extraordinary charge $112,334 $110,320 $ 447,247 $394,063 $277,104 $224,343 $206,272
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest expense - customer 137,672 108,790 480,988 368,462 321,225 178,067 114,609
Interest expense - other 17,923 14,340 65,495 57,410 35,998 20,169 17,943
Interest portion of rental expense 7,399 6,226 26,045 23,051 20,810 17,102 15,428
- ------------------------------------------------------------------------------------------------------------------------------------
Total fixed charges (a) 162,994 129,356 572,528 448,923 378,033 215,338 147,980
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income,
extraordinary charge and fixed charges (b) $275,328 $239,676 $1,019,775 $842,986 $655,137 $439,681 $354,252
====================================================================================================================================
Ratio of earnings to fixed charges (b)/(a)/*/ 1.7 1.9 1.8 1.9 1.7 2.0 2.4
====================================================================================================================================
Ratio of earnings to fixed charges as
adjusted/**/ 5.4 6.4 5.9 5.9 5.9 7.0 7.2
====================================================================================================================================
</TABLE>
/*/The ratio of earnings to fixed charges is calculated in a manner
consistent with SEC requirements. For such purposes, "earnings" consist of
earnings before taxes on income, extraordinary charge and fixed charges. "Fixed
charges" consist of interest expense incurred on payables to customers,
subordinated borrowings, term debt, capitalized interest and one-third of rental
expense, which is estimated to be a representative of the interest factor.
/**/Because interest expense incurred in connection with payables to
customers is completely offset by interest revenue on related investments and
margin loans, the Company considers such interest to be an operating expense.
Accordingly, the ratio of earnings to fixed charges as adjusted reflects the
elimination of such interest expense as a fixed charge.
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
We consent to the incorporation by reference in this Registration Statement of
The Charles Schwab Corporation on Form S-3 of our reports dated February 23,
1998, appearing in and incorporated by reference in the Annual Report on
Form 10-K of The Charles Schwab Corporation for the year ended December 31,
1997 and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Francisco, CA
May 28, 1998
<PAGE>
EXHIBIT 24.1
Powers of Attorney.
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory"), being a member of the Board of Directors of
The Charles Schwab Corporation (the "Company"), constitutes and appoints Charles
R. Schwab, David S. Pottruck and Steven L. Scheid (each, an "Agent," and
collectively, "Agents") and each or any of them, his or her true and lawful
attorney-in-fact and agent, each with full power of substitution and
resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign the Company's Registration Statement on Form S-3, any and
all amendments (including post-effective amendments) thereto and any
Registration Statement relating to the same offering pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto, and all other documents in connection therewith and with this
Registration Statement, with the Securities and Exchange Commission. Each
Signatory further grants to the Agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary, in the judgment of such Agent, to be done in connection with any such
signing and filing, as full to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that said Agents, or any of
them, or their or his or her other substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Dated: May 28, 1998
/s/ Charles R. Schwab
------------------------------
Charles R. Schwab
/s/ David S. Pottruck
------------------------------
David S. Pottruck
/s/ Nancy H. Bechtle
------------------------------
Nancy H. Bechtle
/s/ C. Preston Butcher
------------------------------
C. Preston Butcher
/s/ Donald G. Fisher
------------------------------
Donald G. Fisher
/s/ Anthony M. Frank
------------------------------
Anthony M. Frank
/s/ Frank C. Herringer
------------------------------
Frank C. Herringer
/s/ Stephen T. McLin
------------------------------
Stephen T. McLin
/s/ George P. Shultz
------------------------------
George P. Shultz
/s/ Roger O. Walther
------------------------------
Roger O. Walther
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
____________________________________________
THE CHARLES SCHWAB CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 94-3025021
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
101 MONTGOMERY STREET
SAN FRANCISCO, CALIFORNIA 94104
(Address of principal executive offices) (Zip Code)
____________________________________________
DEBT SECURITIES
(Title of the indenture securities)
__________________________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New
York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference. On July 14, 1996, in connection with
the merger of Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 29th day of April, 1998.
THE CHASE MANHATTAN BANK
By /s/ P. Morabito
________________________________
P. Morabito
Vice President
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin................................. $ 12,428
Interest-bearing balances......................... 3,428
Securities:
Held to maturity securities......................... 2,561
Available for sale securities....................... 43,058
Federal funds sold and securities purchased under
agreements to resell.............................. 29,633
Loans and lease financing receivables:
Loans and leases, net of unearned income $129,260
Less: Allowance for loan and lease losses 2,783
Less: Allocated transfer risk reserve.... 0
--------
Loans and leases, net of unearned income,
allowance, and reserve............................ 126,477
Trading Assets...................................... 62,575
Premises and fixed assets (including capitalized
leases)........................................... 2,943
Other real estate owned............................. 295
Investments in unconsolidated subsidiaries and
associated companies.............................. 231
Customers' liability to this bank on acceptances
outstanding....................................... 1,698
Intangible assets................................... 1,466
Other assets........................................ 10,268
--------
TOTAL ASSETS........................................ $297,061
========
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits
In domestic offices..................................................... $ 94,524
Noninterest-bearing................................ $39,487
Interest-bearing................................... 55,037
-------
In foreign offices, Edge and Agreement,
subsidiaries and IBF's.................................................. 71,162
Noninterest-bearing................................ $ 3,205
Interest-bearing................................... 67,957
Federal funds purchased and securities sold under
agreements to repurchase.................................................. 43,181
Demand notes issued to the U.S. Treasury.................................. 1,000
Trading liabilities....................................................... 48,903
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less........................... 3,599
With a remaining maturity of more than one year
through three years................................................ 253
With a remaining maturity of more than three
years.............................................................. 132
Bank's liability on acceptances executed and outstanding.................. 1,698
Subordinated notes and debentures......................................... 5,715
Other liabilities......................................................... 9,896
TOTAL LIABILITIES......................................................... 280,063
--------
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus............................. 0
Common stock.............................................................. 1,211
Surplus (exclude all surplus related to preferred stock)................. 10,291
Undivided profits and capital reserves.................................... 5,502
Net unrealized holding gains (losses)
on available-for-sale securities.......................................... (22)
Cumulative foreign currency translation adjustments....................... 16
TOTAL EQUITY CAPITAL...................................................... 16,998
--------
TOTAL LIABILITIES AND EQUITY CAPITAL...................................... $297,061
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
