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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: July 17, 1998
THE CHARLES SCHWAB CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-9700 94-3025021
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
101 Montgomery Street
San Francisco, California 94104
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(Address of principal executive offices)
(415) 627-7000
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(Registrant's telephone number,
including area code)
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Item 5. Other Events. Attached hereto and incorporated herein by
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reference are (i) Distribution Agreement, dated July 13, 1998 by and among The
Charles Schwab Corporation (the "Company"), Morgan Stanley & Co. Incorporated,
Goldman, Sachs & Co., Credit Suisse First Boston Corporation, and Charles Schwab
& Co., Inc., relating to the issuance and sale from time to time by the Company
of up to $150,000,000 aggregate public offering price of such Medium-Term Notes
pursuant to Registration Statement No. 333-54001 (the "Offering"); (ii) forms of
Senior and Senior Subordinated Medium-Term Notes, Series A, relating to the
Offering; (iii) Credit Agreement (364-Day Commitment), between the Company and
each of the banks listed therein, dated as of June 26, 1998; and (iv) Credit
Agreement (3-Year Commitment), between the Company and each of the banks listed
therein, dated as of June 26, 1998.
Item 7(c). Exhibits
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1.3 Distribution Agreement, dated July 13, 1998.
4.3 Form of Senior Medium-Term Note, Series A (Fixed Rate).
4.4 Form of Senior Medium-Term Note, Series A (Floating Rate).
4.5 Form of Senior Subordinated Medium-Term Note, Series A (Fixed
Rate).
4.6 Form of Senior Subordinated Medium-Term Note, Series A (Floating
Rate).
10.1 Credit Agreement (364-Day Commitment), between the Company and
each of the banks listed therein, dated as of June 26, 1998.
10.2 Credit Agreement (3-Year Commitment), between the Company and
each of the banks listed therein, dated as of June 26, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 17, 1998 THE CHARLES SCHWAB CORPORATION
By: /s/ Steven L. Scheid
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Name: Steven L. Scheid
Title: Executive Vice President and
Chief Financial Officer
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EXHIBIT 1.3
THE CHARLES SCHWAB CORPORATION
Medium-Term Notes, Series A
Due More than 9 Months from Date of Issue
DISTRIBUTION AGREEMENT
July 13, 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
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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
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"Registration Statement," as used herein, means, at any time, such of the
foregoing registration statements, including the 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
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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.
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(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 (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.
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(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 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
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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 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
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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 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.
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(a) Solicitations as Agent. In connection with an Agent's actions as
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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
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(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:
Term Commission Rate
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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
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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
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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, which
may be 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 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
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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
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this Agreement as a condition
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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
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obligations of the Agents under this Agreement are several and not joint.
3. Agreements. The Company agrees with each Agent that:
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(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
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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
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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 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
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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 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.
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(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, 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.
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<PAGE>
(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 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
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<PAGE>
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;
(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
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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 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
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<PAGE>
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 (i) a separate but substantially identical Credit Agreement (364-
Day Commitment), between the Company and the banks listed therein,
dated as of June 26, 1998, as amended, and the Promissory Notes issued
pursuant thereto, and (ii) a separate but substantially identical
Credit Agreement (3-Year Commitment), between the Company and the
banks listed therein, dated as of June 26, 1998, as amended, and the
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 (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;
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<PAGE>
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 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
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<PAGE>
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 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 Corporate
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 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
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<PAGE>
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 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
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<PAGE>
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 of the
Notes, assuming such Notes were executed, issued and delivered in
accordance with this Agreement and the Indentures as of the
Commencement
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<PAGE>
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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<PAGE>
(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 Corporate Counsel of the Company
described in paragraph (b)(ii) above shall
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be rendered to the Agents at the request of the Company and shall so state
therein.
(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
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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 to be furnished forthwith to each Agent
written opinions of (i) independent counsel for the Company and (ii) the Office
of Corporate 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
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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 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
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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 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
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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 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
-28-
<PAGE>
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 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
--------
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
-29-
<PAGE>
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
-------
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 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 11 Madison Avenue,
5th Floor, New York, NY 10010, Attention: Helena Wilner (telefax number: 212-
325-8183) 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
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<PAGE>
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.
-31-
<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 /s/ Steven L. Scheid
---------------------------
Print Name: Steven L. Scheid
Title: Executive Vice President
and Chief Financial Officer
The foregoing Agreement
is hereby confirmed
and accepted as of the
date first above written.
MORGAN STANLEY & CO. INCORPORATED
By /s/ Harold J. Hendershot III
--------------------------------
Print Name: Harold J. Hendershot
Title: Vice President
GOLDMAN SACHS & CO.
By /s/ Goldman Sachs & Co.
--------------------------------
Print Name:
Title:
CHARLES SCHWAB & CO., INC.
By /s/ Steven L. Scheid
--------------------------------
Print Name: Steven L. Scheid
Title: Executive Vice President
and Chief Financial Officer
CREDIT SUISSE FIRST BOSTON CORPORATION
By /s/ Helena M. Willner
--------------------------------
Print Name: Helena M. Willner
Title: Vice President
-32-
<PAGE>
EXHIBIT 4.3
FACE OF SECURITY
Fixed Rate Senior Note
REGISTERED REGISTERED
No. FXR U.S. $ [PRINCIPAL
AMOUNT]
CUSIP:*
Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.*
THE CHARLES SCHWAB CORPORATION
SENIOR MEDIUM-TERM NOTE, SERIES A
(Fixed Rate)
ORIGINAL INITIAL REDEMPTION INTEREST RATE:
ISSUE DATE: DATE:
MATURITY
INTEREST INITIAL REDEMPTION DATE:
ACCRUAL DATE: PERCENTAGE:
OPTIONAL
APPLICABILITY ANNUAL REDEMPTION REPAYMENT
OF ANNUAL PERCENTAGE DATE(S):
INTEREST REDUCTION:
PAYMENTS:
- ------------------------
/*/ Applies only if this Note is a Registered Global Security.
<PAGE>
The Charles Schwab Corporation, a Delaware corporation (together with
its successors and assigns, the "Issuer"), for value received, hereby promises
to pay to , or registered assignees, the principal sum of U.S. $ , on the
Maturity Date specified above (except to the extent previously redeemed or
repaid) and to pay interest thereon at the Interest Rate per annum specified
above from the Interest Accrual Date specified above until the principal
hereof is paid or duly made available for payment (except as provided below),
semiannually in arrears on the first day of March and September in each year
(each such date an "Interest Payment Date") commencing on the Interest Payment
Date next succeeding the Interest Accrual Date specified above, and at
maturity (or on any redemption or repayment date); provided, however, that if
-------- -------
the Interest Accrual Date occurs between a Record Date, as defined below, and
the next succeeding Interest Payment Date, interest payments will commence on
the second Interest Payment Date succeeding the Interest Accrual Date to the
registered holder of this Note on the Record Date with respect to such second
Interest Payment Date; and provided, further, that if this Note is subject to
-------- -------
"Annual Interest Payments," interest payments shall be made annually in arrears
and the term "Interest Payment Date" shall be deemed to mean the first day of
March in each year.
Interest on this Note will accrue from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for, or,
if no interest has been paid or duly provided for, from and including the
Interest Accrual Date, until the principal hereof has been paid or duly made
available for payment (except as provided below). The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions described herein, be paid to the person in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the date 15 calendar days prior to such Interest Payment Date (whether or not
a Business Day) (each such date a "Record Date"); provided, however, that
-------- -------
interest payable at maturity (or on any redemption or repayment date) will be
payable to the person to whom the principal hereof shall be payable. As used
herein, "Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
2
<PAGE>
authorized or required by law or regulation to close in The City of New York.
Payment of the principal of this Note, any premium and the interest
due at maturity (or on any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the office or agency
of the Paying Agent, as defined on the reverse hereof, maintained for that
purpose in the Borough of Manhattan, The City of New York, or at such other
paying agency as the Issuer may determine. Payments of interest, other than
interest due at maturity or on any date of redemption or repayment, will be made
by check mailed to the address of the person entitled thereto as such address
shall appear in the Note register; provided, however, that if the registered
-------- -------
holder of this Note is (i) Cede & Co. or (ii) a holder of U.S. $10,000,000 or
more in aggregate principal amount of Notes having the same Interest Payment
Date, such holder will be entitled to receive payments of interest, other than
interest due at maturity or on any date of redemption or repayment, by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received by the Paying Agent in writing not less than 15
calendar days prior to the applicable Interest Payment Date.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Senior Indenture, as defined on
the reverse hereof, or be valid or obligatory for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed under its corporate seal.
DATED: THE CHARLES SCHWAB CORPORATION
By ___________________________
Chairman and Chief
Executive Officer
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned
Senior Indenture.
CHEMICAL BANK,
as Trustee
By _____________________________
Authorized Officer
4
<PAGE>
REVERSE OF SECURITY
This Note is one of a duly authorized issue of Senior Medium-Term
Notes, Series A, having maturities more than nine months from the date of issue
(the "Notes") of the Issuer. The Notes are issuable under a Senior Indenture,
dated as of July 15, 1993 (the "Senior Indenture"), between the Issuer and
Chemical Bank, as Trustee (the "Trustee," which term includes any successor
trustee under the Senior Indenture), to which Senior Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities of the Issuer,
the Trustee and holders of the Notes and the terms upon which the Notes are, and
are to be, authenticated and delivered. The Issuer has appointed Chemical Bank
at its corporate trust office in The City of New York as the paying agent (the
"Paying Agent," which term includes any additional or successor Paying Agent
appointed by the Issuer) with respect to the Notes. The terms of individual
Notes may vary with respect to interest rates, interest rate formulas, issue
dates, maturity dates, or otherwise, all as provided in the Senior Indenture.
To the extent not inconsistent herewith, the terms of the Senior Indenture are
hereby incorporated by reference herein.
This Note will not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the provisions of the
following two paragraphs, will not be redeemable or subject to repayment at the
option of the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in
whole or in part at the option of the Issuer on or after the Initial Redemption
Date specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption
(except as provided below). If this Note is subject to "Annual Redemption
Percentage Reduction," the Initial Redemption Percentage indicated on the face
hereof will be reduced on each anniversary of the Initial Redemption Date by the
Annual Redemption Percentage Reduction specified on the face hereof until the
redemption price of this Note is 100% of the principal amount hereof, together
with interest accrued and unpaid hereon to the date of redemption (except as
provided below). Notice of redemption shall be mailed, not less than 30 nor
more than 60 days prior to the date fixed for redemption, to the registered
holders of the Notes designated for redemption at their addresses as the same
shall appear on the Note
5
<PAGE>
register, subject to all the conditions and provisions of the Senior Indenture.
In the event of redemption of this Note in part only, a new Note or Notes for
the amount of the unredeemed portion hereof shall be issued in the name of the
holder hereof upon the cancellation hereof.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 (provided that any remaining principal amount hereof shall not be less
than the minimum authorized denomination hereof) at the option of the holder
hereof at a price equal to 100% of the principal amount to be repaid, together
with interest accrued and unpaid hereon to the date of repayment (except as
provided below). For this Note to be repaid at the option of the holder hereof,
the Paying Agent must receive at its corporate trust office in the Borough of
Manhattan, The City of New York, at least 15 but not more than 30 days prior to
the date of repayment, (i) this Note with the form entitled "Option to Elect
Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the certificate number of this Note or a
description of this Note's tenor and terms, the principal amount hereof to be
repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that this Note, together with the form entitled "Option
to Elect Repayment" duly completed, will be received by the Paying Agent not
later than the third Business Day after the date of such telegram, telex,
facsimile transmission or letter; provided, that such telegram, telex, facsimile
--------
transmission or letter shall only be effective if this Note and form duly
completed are received by the Paying Agent by such third Business Day. Exercise
of such repayment option by the holder hereof shall be irrevocable. In the
event of repayment of this Note in part only, a new Note or Notes for the amount
of the unpaid portion hereof shall be issued in the name of the holder hereof
upon the cancellation hereof.
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Interest payments for this
Note will be computed and paid on the basis of a 360-day year of twelve 30-day
months.
6
<PAGE>
In the case where the Interest Payment Date or the Maturity Date (or
any redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.
This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
---- -----
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.
This Note, and any Note or Notes issued upon transfer or exchange
hereof, is issuable only in fully registered form, without coupons, in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof.
The Trustee has been appointed registrar for the Notes, and the
Trustee will maintain at its office in The City of New York a register for the
registration and registration of transfer of Notes. The transfer of this Note
may be registered at the aforesaid office of the Trustee by surrendering this
Note for cancellation, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
-------- -------
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and
7
<PAGE>
during the period so provided in the Senior Indenture with respect to the
redemption of Notes. Notes are exchangeable at said office for other Notes of
other authorized denominations of equal aggregate principal amount having
identical terms and provisions. All such exchanges and registrations of
transfer of Notes will be free of charge, but the Issuer may require payment of
a sum sufficient to cover any tax or other governmental charge in connection
therewith. All Notes surrendered for exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Trustee and executed by the
registered holder in person or by the holder's attorney duly authorized in
writing. The date of registration of any Note delivered upon any exchange or
transfer of Notes shall be such that no gain or loss of interest results from
such exchange or registration of transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, a new Note of like tenor will be issued by the Issuer
in exchange for the Note so mutilated or defaced, or in lieu of the Note so
destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen
Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that such Note was destroyed or lost or stolen and, if required, upon receipt
also of indemnity satisfactory to each of them. All expenses and reasonable
charges associated with procuring such indemnity and with the preparation,
authentication and delivery of a new Note shall be borne by the owner of the
Note mutilated, defaced, destroyed, lost or stolen.
The Senior Indenture provides that, (a) if an Event of Default (as
defined in the Senior Indenture) due to the default in payment of principal of,
premium, if any, or interest on, any series of debt securities issued under the
Senior Indenture, including the series of Senior Medium-Term Notes of which this
Note forms a part, or due to the default in the performance or breach of any
other covenant or warranty of the Issuer applicable to the debt securities of
such series but not applicable to all outstanding debt securities issued under
the Senior 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 (voting as a single class) may then declare the
principal of all debt securities of all such series and interest accrued thereon
to be due
8
<PAGE>
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 the Senior Indenture
applicable to all outstanding debt securities issued thereunder, including this
Note, or due to certain events of bankruptcy, insolvency and reorganization of
the Issuer, 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 the Senior Indenture 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 (or premium, if any) or interest on such debt securities) by the
holders of a majority in principal amount of the debt securities of all affected
series then outstanding.
The Trustee also acts as trustee under a Senior Subordinated
Indenture, dated as of July 15, 1993 (the "Senior Subordinated Indenture" and,
together with the Senior Indenture, the "Indentures"), between the Issuer and
the Trustee, with respect to certain other debt securities of the Issuer. The
Senior Indenture provides that, should a default occur with respect to either
the debt securities issued under the Senior Indenture or the debt securities
issued under the Senior Subordinated Indenture, the Trustee 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 Senior Indenture permits the Issuer and the Trustee, with the
consent of the holders of not less than a majority in aggregate principal amount
of the debt securities of all series issued under the Senior Indenture then
outstanding and affected (voting as one class), to execute supplemental
indentures adding any provisions to or changing in any manner the rights of the
holders of each series so affected; provided that the Issuer and the Trustee may
--------
not, without the consent of the holder of each outstanding debt security
affected thereby, (a) extend the final maturity of any such 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 or
repayment thereof, or change the currency of payment thereof, or impair or
affect the rights of any holder to institute suit for the payment thereof
without the consent of the holder of each debt security so affected; or (b)
reduce the aforesaid percentage in principal amount of debt securities the
consent of the holders of which is required for any such supplemental
9
<PAGE>
indenture, without the consent of the holders of each debt security so affected.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, registration of transfer and exchange as
aforesaid of the Notes. The Issuer may designate other agencies for the payment
of said principal, premium and interest at such place or places (subject to
applicable laws and regulations) as the Issuer may decide. So long as there
shall be such an agency, the Issuer shall keep the Trustee advised of the names
and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or
any Paying Agent for payment of the principal of or interest or premium, if any,
on any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Senior Indenture shall alter or
impair the obligation of the Issuer, which is absolute and unconditional, to pay
the principal of, premium, if any, and interest on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note.
Prior to due presentment of this Note for registration of transfer,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
10
<PAGE>
No recourse shall be had for the payment of the principal of, premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of California.
All terms used in this Note which are defined in the Senior Indenture
and not otherwise defined herein shall have the meanings assigned to them in the
Senior Indenture.
11
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common
TEN ENT-as tenants by the entireties
JT TEN-as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT-...........Custodian..............
(Cust) (Minor)
Under Uniform Gifts to Minors Act...................
(State)
Additional abbreviations may also be used though not in the above list.
__________
12
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
- ---------------------------------------
|
|
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE,
OF ASSIGNEE]
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably
- --------------------------------------------------------------------------------
constituting and appointing such person attorney to transfer
- --------------------------------------------------------------------------------
such note on the books of the Issuer, with full power of
- --------------------------------------------------------------------------------
substitution in the premises.
Dated:_____________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular without
alteration or enlargement or any change whatsoever.
13
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite
name and address of the undersigned)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
__________________; and specify the denomination or denominations (which shall
not be less than the minimum authorized denomination) of the Notes to be issued
to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid):
____________________________.
Dated:_____________ ___________________________________
NOTICE: The signature on this
Option to Elect Repayment must
correspond with the name as written
upon the face of the within
instrument in every particular
without alteration or enlargement.
14
<PAGE>
EXHIBIT 4.4
FACE OF SECURITY
FLOATING RATE SENIOR NOTE
REGISTERED REGISTERED
NO. FLR U.S. $ [PRINCIPAL AMOUNT]
CUSIP:*
Unless this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.*
- -------------------------------
* Applies only if this Note is a Registered Global Security.
<PAGE>
THE CHARLES SCHWAB CORPORATION
SENIOR MEDIUM-TERM NOTE, SERIES A
(FLOATING RATE)
<TABLE>
<CAPTION>
================================================================================
<S> <C> <C>
BASE RATE: ORIGINAL ISSUE DATE: MATURITY DATE:
- -------------------------------------------------------------------------------
INDEX MATURITY: INTEREST ACCRUAL DATE: INTEREST PAYMENT DATE(S):
- -------------------------------------------------------------------------------
SPREAD (PLUS OR MINUS): INITIAL INTEREST RATE: INTEREST PAYMENT PERIOD:
- -------------------------------------------------------------------------------
ALTERNATE RATE EVENT INITIAL INTEREST RESET INTEREST RESET PERIOD:
SPREAD: DATE:
- -------------------------------------------------------------------------------
SPREAD MULTIPLIER: MAXIMUM INTEREST RATE: INTEREST RESET DATE(S):
- -------------------------------------------------------------------------------
REPORTING SERVICE: MINIMUM INTEREST RATE: CALCULATION AGENT:
- -------------------------------------------------------------------------------
INDEX CURRENCY: INITIAL REDEMPTION DATE: SPECIFIED CURRENCY:
- -------------------------------------------------------------------------------
EXCHANGE RATE AGENT: INITIAL REDEMPTION TOTAL AMOUNT OF OID:
PERCENTAGE:
- -------------------------------------------------------------------------------
OTHER PROVISIONS: ANNUAL REDEMPTION ORIGINAL YIELD TO
PERCENTAGE REDUCTION: MATURITY:
- -------------------------------------------------------------------------------
OPTIONAL REPAYMENT INITIAL ACCRUAL PERIOD OID:
DATE(S):
- -------------------------------------------------------------------------------
DESIGNATED CMT TELERATE
PAGE:
- -------------------------------------------------------------------------------
DESIGNATED CMT MATURITY
INDEX:
================================================================================
</TABLE>
2
<PAGE>
The Charles Schwab Corporation, a Delaware corporation (together with its
successors and assigns, the "ISSUER"), for value received, hereby promises to
pay to
, or registered assignees, the principal sum of U.S. $ , on
the Maturity Date specified above (except to the extent redeemed or repaid prior
to the Maturity Date) and to pay interest thereon, from the Interest Accrual
Date specified above at a rate per annum equal to the Initial Interest Rate
specified above until the Initial Interest Reset Date specified above, and
thereafter at a rate per annum determined in accordance with the provisions
specified on the reverse hereof until the principal hereof is paid or duly made
available for payment. The Issuer will pay interest in arrears monthly,
quarterly, semiannually or annually as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing with the
first Interest Payment Date next succeeding the Interest Accrual Date specified
above, and on the Maturity Date (or any redemption or repayment date); provided,
however, that if the Interest Accrual Date occurs between a Record Date, as
defined below, and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date succeeding the Interest
Accrual Date to the registered holder of this Note on the Record Date with
respect to such second Interest Payment Date; and provided, further, that,
subject to the next succeeding sentence, if an Interest Payment Date would fall
on a day that is not a Business Day, as defined on the reverse hereof, such
Interest Payment Date shall be postponed to the following day that is a Business
Day, except that if the Base Rate specified above is LIBOR and such next
Business Day falls in the next calendar month, the Interest Payment Date shall
be the immediately preceding day that is a Business Day. If the Maturity Date
or redemption or repayment date would fall on a day that is not a Business Day,
the payment of principal and interest will be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after such Maturity Date or redemption or repayment date, as the case may
be.
Interest on this Note will accrue from the most recent date to which
interest has been paid or duly provided for, or, if no interest has been paid or
duly provided for, from the Interest Accrual Date, until the principal hereof
has been paid or duly made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions described herein, be paid to the person in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the date 15 calendar days prior to such Interest Payment Date (whether or not
a Business Day) (each such date a "RECORD DATE"); provided, however, that
interest payable on the Maturity Date (or any redemption or repayment date) will
be payable to the person to whom the principal hereof shall be payable.
Payment of the principal of this Note, any premium and the interest due at
the Maturity Date (or any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the office or agency
of the Paying Agent, as defined on the reverse hereof, maintained for that
purpose in the Borough of Manhattan, The City of New York, or at such other
paying agency as the Issuer may determine. Payments of interest, other than
interest due at maturity or any date of redemption or repayment, will be made by
check mailed to the address of the person entitled thereto as such address shall
appear in the Note register; provided, however, that if the registered holder of
this Note is (i) Cede & Co. or (ii) a holder of U.S. $10,000,000 or more in
aggregate principal amount of Notes having the same Interest Payment Date, such
holder will be entitled to receive
3
<PAGE>
payments of interest, other than interest due at maturity or any date of
redemption or repayment, by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received by the Paying Agent in
writing not less than 15 calendar days prior to the applicable Interest Payment
Date.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Senior Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.
4
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under
its corporate seal.
DATED: THE CHARLES SCHWAB CORPORATION
By ______________________________
Chairman and Chief
Executive Officer
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes
referred to in the within-mentioned Senior Indenture.
THE CHASE MANHATTAN BANK, as Trustee
By ______________________________
Authorized Officer
5
<PAGE>
REVERSE OF SECURITY
This Note is one of a duly authorized issue of Senior Medium-Term Notes,
Series A, having maturities more than nine months from the date of issue (the
"NOTES") of the Issuer. The Notes are issuable under a Senior Indenture, dated
as of July 15, 1993 (the "SENIOR INDENTURE"), between the Issuer and The Chase
Manhattan Bank (formerly Chemical Bank), as Trustee (the "TRUSTEE," which term
includes any successor trustee under the Senior Indenture), to which Senior
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
of the Issuer, the Trustee and holders of the Notes and the terms upon which the
Notes are, and are to be, authenticated and delivered. The Issuer has appointed
The Chase Manhattan Bank (formerly Chemical Bank) at its corporate trust office
in The City of New York as the paying agent (the "PAYING AGENT," which term
includes any additional or successor Paying Agent appointed by the Issuer) with
respect to the Notes. The terms of individual Notes may vary with respect to
interest rates, interest rate formulas, issue dates, maturity dates, or
otherwise, all as provided in the Senior Indenture. To the extent not
inconsistent herewith, the terms of the Senior Indenture are hereby incorporated
by reference herein.
This Note will not be subject to any sinking fund and, unless otherwise
provided on the face hereof in accordance with the provisions of the following
two paragraphs, will not be redeemable or subject to repayment at the option of
the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in
whole or in part at the option of the Issuer on or after the Initial Redemption
Date specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption. If
this Note is subject to "Annual Redemption Percentage Reduction," the Initial
Redemption Percentage indicated on the face hereof will be reduced on each
anniversary of the Initial Redemption Date by the Annual Redemption Percentage
Reduction specified on the face hereof until the redemption price of this Note
is 100% of the principal amount hereof, together with interest accrued and
unpaid hereon to the date of redemption. Notice of redemption shall be mailed,
not less than 30 nor more than 60 days prior to the date fixed for redemption,
to the registered holders of the Notes designated for redemption at their
addresses as the same shall appear on the Note register, subject to all the
conditions and provisions of the Senior Indenture. In the event of redemption
of this Note in part only, a new Note or Notes for the amount of the unredeemed
portion hereof shall be issued in the name of the holder hereof upon the
cancellation hereof.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 (provided that any remaining principal amount hereof shall not be less
than the minimum authorized denomination hereof) at the option of the holder
hereof at a price equal to 100% of the principal amount to be repaid, together
with interest accrued and unpaid hereon to the date of repayment. For this Note
to be repaid at the option of the holder hereof, the Paying Agent must receive
at its corporate trust office in the Borough of Manhattan, The City of New York,
at least 15 but not more than 30 days prior to the date of repayment, (i) this
Note with the form entitled "Option
6
<PAGE>
to Elect Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the certificate number of this Note or a
description of this Note's tenor and terms, the principal amount hereof to be
repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that this Note, together with the form entitled "Option
to Elect Repayment" duly completed, will be received by the Paying Agent not
later than the fifth Business Day after the date of such telegram, telex,
facsimile transmission or letter; provided, that such telegram, telex, facsimile
transmission or letter shall only be effective if this Note and form duly
completed are received by the Paying Agent by such fifth Business Day. Exercise
of such repayment option by the holder hereof shall be irrevocable. In the event
of repayment of this Note in part only, a new Note or Notes for the amount of
the unpaid portion hereof shall be issued in the name of the holder hereof upon
the cancellation hereof.
This Note will bear interest at the rate determined in accordance with the
applicable provisions below by reference to the Base Rate shown on the face
hereof based on the Index Maturity, if any, shown on the face hereof (i) plus or
minus the Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if
any, specified on the face hereof. Commencing with the Initial Interest Reset
Date specified on the face hereof, the rate at which interest on this Note is
payable shall be reset as of each Interest Reset Date (as used herein, the term
"Interest Reset Date" shall include the Initial Interest Reset Date). The
Interest Reset Dates will be the Interest Reset Dates specified on the face
hereof; provided, however, that (i) the interest rate in effect for the period
from the Interest Accrual Date to the Initial Interest Reset Date will be the
Initial Interest Rate and (ii) the interest rate in effect hereon for the 10
days immediately prior to the Maturity Date hereof (or, with respect to any
principal amount to be redeemed or repaid, any redemption or repayment date)
shall be that in effect on the tenth calendar day preceding the Maturity Date
hereof or such date of redemption or repayment, as the case may be. If any
Interest Reset Date would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding day that is a
Business Day, except that if the Base Rate specified on the face hereof is LIBOR
and such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day. As used herein,
"BUSINESS DAY" means any day, other than a Saturday or Sunday, and that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York and, with
respect to Notes bearing interest calculated by reference to LIBOR, is also a
London Banking Day (as defined below).
The Interest Determination Date pertaining to an Interest Reset Date for
Notes bearing interest calculated by reference to the CD Rate, Commercial Paper
Rate, Federal Funds Rate, Prime Rate and CMT Rate will be the second Business
Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for Notes bearing interest calculated by
reference to LIBOR shall be the second London Banking Day preceding such
Interest Reset Date. As used herein, "LONDON BANKING DAY" means any day on which
dealings in deposits in U.S. dollars are transacted in the London interbank
market. The Interest Determination Date pertaining to an Interest Reset Date
for Notes bearing interest calculated by reference to the Treasury Rate shall be
the day of the week in which such Interest Reset Date falls on which Treasury
bills normally would
7
<PAGE>
be auctioned; provided, however, that if as a result of a legal holiday an
auction is held on the Friday of the week preceding such Interest Reset Date,
the related Interest Determination Date shall be such preceding Friday; and
provided, further, that if an auction shall fall on any Interest Reset Date,
then the Interest Reset Date shall instead be the first Business Day following
the date of such auction.
The "CALCULATION DATE" pertaining to any Interest Determination Date will
be the earlier (i) of the tenth calendar day after such Interest Determination
Date or, if such day is not a Business Day, the next succeeding Business Day or
(ii) the Business Day preceding the applicable Interest Payment Date or
maturity, as the case may be.
Determination of CD Rate. If the Base Rate specified on the face hereof is
the CD Rate, the CD Rate with respect to this Note shall be determined on each
Interest Determination Date and shall be the rate on such date for negotiable
certificates of deposit having the Index Maturity specified on the face hereof
as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the CD Rate will be the rate on such
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity specified on the face hereof as published by the Federal Reserve Bank
of New York in its daily statistical release "Composite 3:30 P.M. Quotations for
U.S. Government Securities" ("COMPOSITE QUOTATIONS") under the heading
"Certificates of Deposit." If neither of such rates is published by 3:00 P.M.,
New York City time, on such Calculation Date, then the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent referred to on
the face hereof and will be the arithmetic mean of the secondary market offered
rates as of 10:00 A.M., New York City time, on such Interest Determination Date
for certificates of deposit in the denomination of U.S. $5,000,000 with a
remaining maturity closest to the Index Maturity specified on the face hereof of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks in the market
for negotiable certificates of deposit; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the rate of interest in effect for the applicable period will be
the same as the CD Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable hereon
shall be the Initial Interest Rate).
Determination of Commercial Paper Rate. If the Base Rate specified on the
face hereof is the Commercial Paper Rate, the Commercial Paper Rate with respect
to this Note shall be determined on each Interest Determination Date and shall
be the Money Market Yield (as defined herein) of the rate on such date for
commercial paper having the Index Maturity specified on the face hereof, as such
rate shall be published in H.15(519) under the heading "Commercial Paper," or if
not so published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Commercial Paper Rate shall
be the Money Market Yield of the rate on such Interest Determination Date for
commercial paper of the Index Maturity specified on the face hereof as published
in Composite Quotations under the heading "Commercial Paper." If neither of
8
<PAGE>
such rates is published by 3:00 P.M., New York City time, on such Calculation
Date, then the Commercial Paper Rate shall be the Money Market Yield of the
arithmetic mean of the offered rates as of 11:00 A.M., New York City time, on
such Interest Determination Date of three leading dealers in commercial paper in
The City of New York selected by the Calculation Agent for commercial paper of
the Index Maturity specified on the face hereof, placed for an industrial issuer
whose bond rating is "AA," or the equivalent, from a nationally recognized
rating agency; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, the rate of
interest in effect for the applicable period will be the same as the Commercial
Paper Rate for the immediately preceding Interest Reset Period (or, if there was
no such Interest Reset Period, the rate of interest payable hereon shall be the
Initial Interest Rate).
"MONEY MARKET YIELD" shall be the yield calculated in accordance with the
following formula:
D x 360
Money Market Yield = _________________ x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the period for which interest is being calculated.
Determination of Federal Funds Rate. If the Base Rate specified on the
face hereof is the Federal Funds Rate, the Federal Funds Rate with respect to
this Note shall be determined on each Interest Determination Date and shall be
the rate on such date for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)," or, if not so published by 9:00 A.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Federal Funds Rate will be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If neither of such rates is published by 3:00
P.M., New York City time, on such Calculation Date, the Federal Funds Rate for
such Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the rates for the last transaction in overnight
Federal funds as of 9:00 A.M., New York City time, on such Interest
Determination Date arranged by three leading brokers in Federal funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the rate of interest in
effect for the applicable period will be the same as the Federal Funds Rate for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable hereon shall be the Initial
Interest Rate).
Determination of LIBOR. If the Base Rate specified on the face hereof is
LIBOR, LIBOR with respect to this Note shall be determined as follows:
9
<PAGE>
(i) With respect to a LIBOR Interest Determination Date, LIBOR
will be, as specified on the face hereof, either: (a) the arithmetic
mean of the offered rates for deposits in U.S. dollars having the Index
Maturity specified on the face hereof, commencing on the second London
Banking Day immediately following the LIBOR Interest Determination Date,
that appear on the Reuters Screen LIBO Page as of 11:00 A.M., London
time, on that LIBOR Interest Determination Date, if at least two such
offered rates appear on the Reuters Screen LIBO Page ("LIBOR REUTERS"),
or (b) the rate for deposits in U.S. dollars having the Index Maturity
specified on the face hereof, commencing on the second London Banking
Day immediately following that LIBOR Interest Determination Date, that
appears on the Telerate Page 3750 as of 11:00 A.M., London time, on that
LIBOR Interest Determination Date ("LIBOR TELERATE"). "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank
offered rates of major banks). "Telerate Page 3750" means the display
designated as page "3750" on the Telerate Service (or such other page as
may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified on
the face hereof, LIBOR will be determined as if LIBOR Telerate had been
specified. If fewer than two offered rates appear on the Reuters Screen
LIBO Page, or if no rate appears on the Telerate Page 3750, as
applicable, LIBOR in respect of that LIBOR Interest Determination Date
will be determined as if the parties had specified the rate described in
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on
which fewer than two offered rates appear on the Reuters Screen LIBO
Page, as specified in (i)(a) above, or on which no rate appears on
Telerate Page 3750, as specified in (i)(b) above, as applicable, LIBOR
will be determined on the basis of the rates at which deposits in U.S.
dollars having the Index Maturity specified on the face hereof are
offered at approximately 11:00 A.M., London time, on that LIBOR Interest
Determination Date by four major banks in the London interbank market
selected by the Calculation Agent ("REFERENCE BANKS") to prime banks in
the London interbank market commencing on the second London Banking Day
immediately following that LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time. The
Calculation Agent will request the principal London office of each of
the Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR in respect of that LIBOR
Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M., New York City time, on that LIBOR
Interest Determination Date by three major banks in The City of New York
selected by the Calculation Agent for loans in U.S. dollars to leading
European banks having the Index Maturity specified on the face hereof
commencing on the second London Banking Day immediately following that
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than
10
<PAGE>
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
with respect to such LIBOR Interest Determination Date will be the rate of
LIBOR in effect on such date.
Determination of Prime Rate. If the Base Rate specified on the face hereof
is the Prime Rate, the Prime Rate with respect to this Note shall be determined
on each Interest Determination Date and shall be the rate set forth in H.15(519)
for such date opposite the caption "Bank Prime Loan." If such rate is not yet
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen USPRIME 1 Page (as defined
below) as such bank's prime rate or base lending rate as in effect for such
Interest Determination Date as quoted on the Reuters Screen USPRIME 1 Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen USPRIME 1 Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S. $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to quote such rate or rates; provided, however, that if the
substitute banks or trust companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate for such Interest Reset Period will
be the Prime Rate in effect for the immediately preceding Interest Reset Period
(or, if there is no such Interest Reset Period, the Initial Interest Rate).
"Reuters Screen USPRIME 1 Page" means the display designated as Page "USPRIME 1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME 1 Page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
Determination of Treasury Rate. If the Base Rate specified on the face
hereof is the Treasury Rate, the Treasury Rate with respect to this Note shall
be determined on each Interest Determination Date and shall be the rate for the
auction held on such date of direct obligations of the United States ("TREASURY
BILLS") having the Index Maturity specified on the face hereof, as published in
H.15(519) under the heading "Treasury Bills--auction average (investment)," or
if not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate on such
Interest Determination Date (expressed as a bond equivalent, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity specified on the face hereof are not published or reported as provided
above by 3:00 P.M., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a
11
<PAGE>
year of 365 or 366 days, as applicable, and applied on a daily basis) calculated
using the arithmetic mean of the secondary market bid rates, as of approximately
3:30 P.M., New York City time, on such Interest Determination Date, of three
leading primary United States government securities dealers selected by the
Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity specified on the face hereof; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate for such Interest Reset
Date will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period (or, if there was no such Interest Reset Period, the rate
of interest payable hereon shall be the Initial Interest Rate).
Determination of CMT Rate. If the Base Rate specified on the face hereof
is the CMT Rate, the CMT Rate with respect to this Note shall be determined on
each Interest Determination Date and shall be the rate displayed for the Index
Maturity specified on the face hereof on the Designated CMT Telerate Page (as
defined below) under the caption ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such Interest Determination Date and (ii) if the Designated
CMT Telerate Page is 7052, the week or the month, as applicable, ended
immediately preceding the week in which the related Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page, or is not
displayed by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or is not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to the related Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 p.m., New York City time, on the
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"REFERENCE DEALER") in The City of New York (which may include affiliates of the
Issuer) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent, after consultation with the Issuer, and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("TREASURY NOTES") with an original maturity of
approximately the Designated CMT Maturity Index and remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Notes quotations, the CMT
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary
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<PAGE>
market offer side prices as of approximately 3:30 p.m., New York City time, on
the Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Issuer, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100,000,000. If three or four (and
not five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate for such Interest Reset Date
will be the same as the CMT Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable hereon shall be the Initial Interest Rate). If two Treasury Notes with
an original maturity as described in the second preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the Treasury note with the shorter remaining term to maturity
will be used.
"DESIGNATED CMT TELERATE PAGE" means the display on the Dow Jones Telerate
Service specified on the face hereof (or any other page as may replace such page
on that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519)), for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified on the face
hereof, the Designated CMT Telerate Page shall be 7052, for the most recent
week.
"DESIGNATED CMT MATURITY INDEX" shall be the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified on the face hereof with respect to which the CMT Rate will be
calculated. If no such maturity is specified on the face hereof, the Designated
CMT Maturity Index shall be two years.
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. The Calculation Agent
shall calculate the interest rate hereon in accordance with the foregoing on or
before each Calculation Date.
At the request of the holder hereof, the Calculation Agent will provide to
the holder hereof the interest rate hereon then in effect and, if determined,
the interest rate that will become effective as of the next Interest Reset Date.
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be; provided, however, that if
the Interest Reset Period with respect to this Note is daily or weekly, interest
payable on any Interest Payment Date, other than interest payable on any date on
which principal hereof is payable, will include interest accrued through and
including the Record Date next preceding the applicable Interest Payment Date.
Accrued interest hereon shall be an amount calculated by multiplying the face
amount hereof by an accrued interest factor. Such accrued interest
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<PAGE>
factor shall be computed by adding the interest factor calculated for each day
in the period for which interest is being paid. The interest factor for each
such date shall be computed by dividing the interest rate applicable to such day
by 360 if the Base Rate is CD Rate, Commercial Paper Rate, Federal Funds Rate,
Prime Rate or LIBOR, as specified on the face hereof, or by the actual number of
days in the year if the Base Rate is the Treasury Rate or the CMT Rate, as
specified on the face hereof. All percentages resulting from any calculation of
the rate of interest on this Note will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point (.0000001), with five one-
millionths of a percentage point rounded upward, and all dollar amounts used in
or resulting from such calculation on this Note will be rounded to the nearest
cent (with one-half cent rounded upward). The interest rate in effect on any
Interest Reset Date will be the applicable rate as reset on such date. The
interest rate applicable to any other day is the interest rate from the
immediately preceding Interest Reset Date (or, if none, the Initial Interest
Rate).
This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.
This Note, and any Note or Notes issued upon transfer or exchange hereof,
is issuable only in fully registered form, without coupons, in denominations of
U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof.
The Trustee has been appointed registrar for the Notes, and the Trustee
will maintain at its office in The City of New York a register for the
registration and registration of transfer of Notes. The transfer of this Note
may be registered at the aforesaid office of the Trustee by surrendering this
Note for cancellation, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and during the period so provided in the Senior
Indenture with respect to the redemption of Notes. Notes are exchangeable at
said office for other Notes of other authorized denominations of equal aggregate
principal amount having identical terms and provisions. All such exchanges and
registrations of transfer of Notes will be free of charge, but the Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge in connection therewith. All Notes surrendered for exchange shall be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and executed by the registered holder in person or by the holder's
attorney duly authorized in writing. The date of registration of any Note
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<PAGE>
delivered upon any exchange or transfer of Notes shall be such that no gain or
loss of interest results from such exchange or registration of transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, a new Note of like tenor will be issued by the Issuer
in exchange for the Note so mutilated or defaced, or in lieu of the Note so
destroyed or lost or stolen, but, in the case of any destroyed or lost or stolen
Note, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that such Note was destroyed or lost or stolen and, if required, upon receipt
also of indemnity satisfactory to each of them. All expenses and reasonable
charges associated with procuring such indemnity and with the preparation,
authentication and delivery of a new Note shall be borne by the owner of the
Note mutilated, defaced, destroyed, lost or stolen.
The Senior Indenture provides that, (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of, premium,
if any, or interest on, any series of debt securities issued under the Senior
Indenture, including the series of Senior Medium-Term Notes of which this Note
forms a part, or due to the default in the performance or breach of any other
covenant or warranty of the Issuer applicable to the debt securities of such
series but not applicable to all outstanding debt securities issued under the
Senior 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 (voting as a single class) may then declare the principal
of all debt securities of all such 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 the Senior Indenture
applicable to all outstanding debt securities issued thereunder, including this
Note, or due to certain events of bankruptcy, insolvency and reorganization of
the Issuer, 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 the Senior Indenture 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 (or premium, if any) or interest on such debt securities) by the
holders of a majority in principal amount of the debt securities of all affected
series then outstanding.
The Trustee also acts as trustee under a Senior Subordinated Indenture,
dated as of July 15, 1993 (the "SENIOR SUBORDINATED INDENTURE" and, together
with the Senior Indenture, the "INDENTURES"), between the Issuer and the
Trustee, with respect to certain other debt securities of the Issuer. The
Senior Indenture provides that, should a default occur with respect to either
the debt securities issued under the Senior Indenture or the debt securities
issued under the Senior Subordinated Indenture, the Trustee 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.
15
<PAGE>
The Senior Indenture permits the Issuer and the Trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
debt securities of all series issued under the Senior Indenture then outstanding
and affected (voting as one class), to execute supplemental indentures adding
any provisions to or changing in any manner the rights of the holders of each
series so affected; provided that the Issuer and the Trustee may not, without
the consent of the holder of each outstanding debt security affected thereby,
(a) extend the final maturity of any such 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 or repayment thereof, or
change the currency of payment thereof, or impair or affect the rights of any
holder to institute suit for the payment thereof without the consent of the
holder of each debt security so affected; or (b) reduce the aforesaid percentage
in principal amount of debt securities the consent of the holders of which is
required for any such supplemental indenture, without the consent of the holders
of each debt security so affected.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, registration of transfer and exchange as
aforesaid of the Notes. The Issuer may designate other agencies for the payment
of said principal, premium and interest at such place or places (subject to
applicable laws and regulations) as the Issuer may decide. So long as there
shall be such an agency, the Issuer shall keep the Trustee advised of the names
and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or any
Paying Agent for payment of the principal of or interest or premium, if any, on
any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Senior Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Note at the time, place, and
rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note.
Prior to due presentment of this Note for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
16
<PAGE>
No recourse shall be had for the payment of the principal of, premium, if
any, or the interest on this Note, for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of California.
All terms used in this Note which are defined in the Senior Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Senior Indenture.
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<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
-------------------
(Minor) (Cust)
Under Uniform Gifts to Minors Act
-------------------------
(State)
Additional abbreviations may also be used though not in the above list.
--------------------
18
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- ---------------------------------------
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.
Dated:
-----------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular without
alteration or enlargement or any change whatsoever.
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<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of the undersigned)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
______________________; and specify the denomination or denominations (which
shall not be less than the minimum authorized denomination) of the Notes to be
issued to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid): ______________________.
Dated:
--------------------------------------------------
NOTICE: The signature on this Option to Elect
Repayment must correspond with the name as written
upon the face of the within instrument in every
particular without alteration or enlargement.
20
<PAGE>
EXHIBIT 4.5
FACE OF SECURITY
Fixed Rate Senior Subordinated Note
REGISTERED REGISTERED
No. FXR U.S. $ [PRINCIPAL AMOUNT]
CUSIP:*
Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York,
New York) to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.*
THE CHARLES SCHWAB CORPORATION
SENIOR SUBORDINATED MEDIUM-TERM NOTE, SERIES A
(Fixed Rate)
ORIGINAL INITIAL REDEMPTION INTEREST RATE:
ISSUE DATE: DATE:
MATURITY
INTEREST INITIAL REDEMPTION DATE:
ACCRUAL DATE: PERCENTAGE:
OPTIONAL
APPLICABILITY ANNUAL REDEMPTION REPAYMENT
OF ANNUAL PERCENTAGE DATE(S):
INTEREST REDUCTION:
PAYMENTS:
- -------------
* Applies only if this Note is a Registered Global Security.
<PAGE>
The Charles Schwab Corporation, a Delaware corporation (together with
its successors and assigns, the "Issuer"), for value received, hereby promises
to pay to
, or registered assignees, the principal sum of U.S. $ , on
the Maturity Date specified above (except to the extent previously redeemed or
repaid) and to pay interest thereon at the Interest Rate per annum specified
above from the Interest Accrual Date specified above until the principal hereof
is paid or duly made available for payment (except as provided below),
semiannually in arrears on the first day of March and September in each year
(each such date an "Interest Payment Date") commencing on the Interest Payment
Date next succeeding the Interest Accrual Date specified above, and at maturity
(or on any redemption or repayment date); provided, however, that if the
-------- -------
Interest Accrual Date occurs between a Record Date, as defined below, and the
next succeeding Interest Payment Date, interest payments will commence on the
second Interest Payment Date succeeding the Interest Accrual Date to the
registered holder of this Note on the Record Date with respect to such second
Interest Payment Date; and provided, further, that if this Note is subject to
-------- -------
"Annual Interest Payments," interest payments shall be made annually in arrears
and the term "Interest Payment Date" shall be deemed to mean the first day of
March in each year.
Interest on this Note will accrue from and including the most recent
Interest Payment Date to which interest has been paid or duly provided for, or,
if no interest has been paid or duly provided for, from and including the
Interest Accrual Date, until the principal hereof has been paid or duly made
available for payment (except as provided below). The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions described herein, be paid to the person in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the date 15 calendar days prior to such Interest Payment Date (whether or not
a Business Day) (each such date a "Record Date"); provided, however, that
-------- -------
interest payable at maturity (or on any redemption or repayment date) will be
payable to the person to whom the principal hereof shall be payable. As used
herein, "Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are
2
<PAGE>
authorized or required by law or regulation to close in The City of New York.
Payment of the principal of this Note, any premium and the interest
due at maturity (or on any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the office or agency
of the Paying Agent, as defined on the reverse hereof, maintained for that
purpose in the Borough of Manhattan, The City of New York, or at such other
paying agency as the Issuer may determine. Payments of interest, other than
interest due at maturity or on any date of redemption or repayment, will be made
by check mailed to the address of the person entitled thereto as such address
shall appear in the Note register; provided, however, that if the registered
-------- -------
holder of this Note is (i) Cede & Co. or (ii) a holder of U.S. $10,000,000 or
more in aggregate principal amount of Notes having the same Interest Payment
Date, such holder will be entitled to receive payments of interest, other than
interest due at maturity or on any date of redemption or repayment, by wire
transfer of immediately available funds if appropriate wire transfer
instructions have been received by the Paying Agent in writing not less than 15
calendar days prior to the applicable Interest Payment Date.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place, including, without
limitation, the provisions relating to the subordination of this Note to the
Issuer's Senior Indebtedness, as defined on the reverse hereof.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Note
shall not be entitled to any benefit under the Senior Subordinated Indenture, as
defined on the reverse hereof, or be valid or obligatory for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed under its corporate seal.
DATED: THE CHARLES SCHWAB CORPORATION
By
__________________________
Chairman and Chief
Executive Officer
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes referred
to in the within-mentioned
Senior Subordinated Indenture.
CHEMICAL BANK,
as Trustee
By
_____________________________
Authorized Officer
4
<PAGE>
REVERSE OF SECURITY
This Note is one of a duly authorized issue of Senior Subordinated
Medium-Term Notes, Series A, having maturities more than nine months from the
date of issue (the "Notes") of the Issuer. The Notes are issuable under a
Senior Subordinated Indenture, dated as of July 15, 1993 (the "Senior
Subordinated Indenture"), between the Issuer and Chemical Bank, as Trustee (the
"Trustee," which term includes any successor trustee under the Senior
Subordinated Indenture), to which Senior Subordinated Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities of the Issuer,
the Trustee and holders of the Notes and the terms upon which the Notes are, and
are to be, authenticated and delivered. The Issuer has appointed Chemical Bank
at its corporate trust office in The City of New York as the paying agent (the
"Paying Agent," which term includes any additional or successor Paying Agent
appointed by the Issuer) with respect to the Notes. The terms of individual
Notes may vary with respect to interest rates, interest rate formulas, issue
dates, maturity dates, or otherwise, all as provided in the Senior Subordinated
Indenture. To the extent not inconsistent herewith, the terms of the Senior
Subordinated Indenture are hereby incorporated by reference herein.
This Note will not be subject to any sinking fund and, unless
otherwise provided on the face hereof in accordance with the provisions of the
following two paragraphs, will not be redeemable or subject to repayment at the
option of the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in
whole or in part at the option of the Issuer on or after the Initial Redemption
Date specified on the face hereof on the terms set forth on the face hereof,
together with interest accrued and unpaid hereon to the date of redemption
(except as provided below). If this Note is subject to "Annual Redemption
Percentage Reduction," the Initial Redemption Percentage indicated on the face
hereof will be reduced on each anniversary of the Initial Redemption Date by the
Annual Redemption Percentage Reduction specified on the face hereof until the
redemption price of this Note is 100% of the principal amount hereof, together
with interest accrued and unpaid hereon to the date of redemption (except as
provided below). Notice of redemption shall be mailed, not less than 30 nor
more than 60 days prior to the date fixed for redemption, to the registered
holders of the Notes designated for redemption at
5
<PAGE>
their addresses as the same shall appear on the Note register, subject to all
the conditions and provisions of the Senior Subordinated Indenture. In the
event of redemption of this Note in part only, a new Note or Notes for the
amount of the unredeemed portion hereof shall be issued in the name of the
holder hereof upon the cancellation hereof.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 (provided that any remaining principal amount hereof shall not be less
than the minimum authorized denomination hereof) at the option of the holder
hereof at a price equal to 100% of the principal amount to be repaid, together
with interest accrued and unpaid hereon to the date of repayment (except as
provided below). For this Note to be repaid at the option of the holder hereof,
the Paying Agent must receive at its corporate trust office in the Borough of
Manhattan, The City of New York, at least 15 but not more than 30 days prior to
the date of repayment, (i) this Note with the form entitled "Option to Elect
Repayment" below duly completed or (ii) a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States setting forth the name of the holder of this Note,
the principal amount hereof, the certificate number of this Note or a
description of this Note's tenor and terms, the principal amount hereof to be
repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that this Note, together with the form entitled "Option
to Elect Repayment" duly completed, will be received by the Paying Agent not
later than the third Business Day after the date of such telegram, telex,
facsimile transmission or letter; provided, that such telegram, telex, facsimile
--------
transmission or letter shall only be effective if this Note and form duly
completed are received by the Paying Agent by such third Business Day. Exercise
of such repayment option by the holder hereof shall be irrevocable. In the
event of repayment of this Note in part only, a new Note or Notes for the amount
of the unpaid portion hereof shall be issued in the name of the holder hereof
upon the cancellation hereof.
Interest payments on this Note will include interest accrued to but
excluding the Interest Payment Dates or the Maturity Date (or any earlier
redemption or repayment date), as the case may be. Interest payments for this
Note will be computed and paid on the basis of a 360-day year of twelve 30-day
months.
6
<PAGE>
In the case where the Interest Payment Date or the Maturity Date (or
any redemption or repayment date) does not fall on a Business Day, payment of
interest, premium, if any, or principal otherwise payable on such date need not
be made on such date, but may be made on the next succeeding Business Day with
the same force and effect as if made on the Interest Payment Date or on the
Maturity Date (or any redemption or repayment date), and no interest on such
payment shall accrue for the period from and after the Interest Payment Date or
the Maturity Date (or any redemption or repayment date) to such next succeeding
Business Day.
This Note and all other obligations of the Issuer hereunder will
constitute part of the senior subordinated debt of the Issuer, will be issued
under the Senior Subordinated Indenture and will be subordinate and junior in
right of payment, to the extent and in the manner set forth in the Senior
Subordinated Indenture, to all "Senior Indebtedness" of the Issuer. The Senior
Subordinated Indenture defines "Senior Indebtedness" as the principal of and
premium, if any, and interest on (a) indebtedness of the Issuer, whether
outstanding on the date of the Senior Subordinated Indenture or thereafter
created, that is (i) for money borrowed by the Issuer (including, without
limitation, capitalized lease obligations), (ii) for money borrowed by others
and guaranteed, directly or indirectly, by the Issuer or (iii) constituting
purchase money indebtedness, or indebtedness secured by property at the time of
the acquisition of such property by the Issuer, for the payment of which the
Issuer 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 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 Notes and/or it is expressly provided that
such indebtedness is itself subordinated to any other indebtedness of the
Issuer. 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 Issuer to a
subsidiary of the Issuer for money borrowed or advances from a subsidiary of the
Issuer or (ii) the Notes.
7
<PAGE>
This Note, and any Note or Notes issued upon transfer or exchange
hereof, is issuable only in fully registered form, without coupons, in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof.
The Trustee has been appointed registrar for the Notes, and the
Trustee will maintain at its office in The City of New York a register for the
registration and registration of transfer of Notes. The transfer of this Note
may be registered at the aforesaid office of the Trustee by surrendering this
Note for cancellation, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
-------- -------
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and during the period so provided in the Senior
Subordinated Indenture with respect to the redemption of Notes. Notes are
exchangeable at said office for other Notes of other authorized denominations of
equal aggregate principal amount having identical terms and provisions. All
such exchanges and registrations of transfer of Notes will be free of charge,
but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge in connection therewith. All Notes surrendered for exchange
shall be accompanied by a written instrument of transfer in form satisfactory to
the Trustee and executed by the registered holder in person or by the holder's
attorney duly authorized in writing. The date of registration of any Note
delivered upon any exchange or transfer of Notes shall be such that no gain or
loss of interest results from such exchange or registration of transfer.
In case any Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and such Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, a new Note of
8
<PAGE>
like tenor will be issued by the Issuer in exchange for the Note so mutilated or
defaced, or in lieu of the Note so destroyed or lost or stolen, but, in the case
of any destroyed or lost or stolen Note, only upon receipt of evidence
satisfactory to the Trustee and the Issuer that such Note was destroyed or lost
or stolen and, if required, upon receipt also of indemnity satisfactory to each
of them. All expenses and reasonable charges associated with procuring such
indemnity and with the preparation, authentication and delivery of a new Note
shall be borne by the owner of the Note mutilated, defaced, destroyed, lost or
stolen.
The Senior Subordinated Indenture provides that, (a) if an Event of
Default (as defined in the Senior Subordinated Indenture) due to the default in
payment of principal of, premium, if any, or interest on, any series of debt
securities issued under the Senior Subordinated Indenture, including the series
of Senior Subordinated Medium-Term Notes of which this Note forms a part, or due
to the default in the performance or breach of any other covenant or warranty of
the Issuer applicable to the debt securities of such series but not applicable
to all outstanding debt securities issued under the Senior Subordinated
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 (voting as a single class) may then declare the principal of all
debt securities of all such 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 the Senior
Subordinated Indenture applicable to all outstanding debt securities issued
thereunder, including this Note, or due to certain events of bankruptcy,
insolvency and reorganization of the Issuer, 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 the Senior Subordinated Indenture
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 (or premium,
if any) or interest on such debt securities) by the holders of a majority in
principal amount of the debt securities of all affected series then outstanding.
The Trustee also acts as trustee under a Senior Indenture, dated as of
July 15, 1993 (the "Senior Indenture" and, together with the Senior Subordinated
Indenture, the "Indentures"), between the Issuer and the Trustee, with
9
<PAGE>
respect to certain other debt securities of the Issuer. The Senior Subordinated
Indenture provides that, should a default occur with respect to either the debt
securities issued under the Senior Subordinated Indenture or the debt securities
issued under the Senior Indenture, the Trustee 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 Senior Subordinated Indenture permits the Issuer and the Trustee,
with the consent of the holders of not less than a majority in aggregate
principal amount of the debt securities of all series issued under the Senior
Subordinated Indenture then outstanding and affected (voting as one class), to
execute supplemental indentures adding any provisions to or changing in any
manner the rights of the holders of each series so affected; provided that the
--------
Issuer and the Trustee may not, without the consent of the holder of each
outstanding debt security affected thereby, (a) extend the final maturity of any
such 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 or repayment thereof, or change the currency of payment thereof,
or impair or affect the rights of any holder to institute suit for the payment
thereof without the consent of the holder of each debt security so affected; or
(b) reduce the aforesaid percentage in principal amount of debt securities the
consent of the holders of which is required for any such supplemental indenture,
without the consent of the holders of each debt security so affected; provided,
--------
however, that neither this Note nor the Senior Subordinated Indenture may be
- -------
amended to alter the subordination provisions hereof or thereof without the
written consent of each holder of Senior Indebtedness then outstanding that
would be adversely affected thereby.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, registration of transfer and exchange as
aforesaid of the Notes. The Issuer may designate other agencies for the payment
of said principal, premium and interest at such place or places (subject to
applicable laws and regulations) as the Issuer may decide. So long as there
shall be such an agency, the Issuer shall keep the Trustee advised of the names
and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or
any Paying Agent for payment of the principal of or interest or premium, if any,
on any Notes
10
<PAGE>
that remain unclaimed at the end of two years after such principal, interest or
premium shall have become due and payable (whether at maturity or upon call for
redemption or otherwise), (i) the Trustee or such Paying Agent shall notify the
holders of such Notes that such moneys shall be repaid to the Issuer and any
person claiming such moneys shall thereafter look only to the Issuer for payment
thereof and (ii) such moneys shall be so repaid to the Issuer. Upon such
repayment all liability of the Trustee or such Paying Agent with respect to such
moneys shall thereupon cease, without, however, limiting in any way any
obligation that the Issuer may have to pay the principal of or interest or
premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Senior Subordinated Indenture
shall alter or impair the obligation of the Issuer, which is absolute and
unconditional, to pay the principal of, premium, if any, and interest on this
Note at the time, place, and rate, and in the coin or currency, herein
prescribed unless otherwise agreed between the Issuer and the registered holder
of this Note.
Prior to due presentment of this Note for registration of transfer,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
No recourse shall be had for the payment of the principal of, premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Senior Subordinated
Indenture or any indenture supplemental thereto, against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Issuer or of any successor corporation, either directly or through the Issuer or
any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released.
This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of California.
All terms used in this Note which are defined in the Senior
Subordinated Indenture and not otherwise defined herein shall have the meanings
assigned to them in the Senior Subordinated Indenture.
11
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common
TEN ENT-as tenants by the entireties
JT TEN-as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT-...........Custodian..............
(Cust) (Minor)
Under Uniform Gifts to Minors Act...................
(State)
Additional abbreviations may also be used though not in the above list.
__________
12
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
_________________________________________
|
________________________________________________________________________________
________________________________________________________________________________
[PLEASE PRINT OR TYPE NAME AND ADDRESS INCLUDING ZIP CODE,
OF ASSIGNEE]
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
________________________________________________________________________________
constituting and appointing such person attorney to transfer
________________________________________________________________________________
such note on the books of the Issuer, with full power of
________________________________________________________________________________
substitution in the premises.
Dated:
____________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular without
alteration or enlargement or any change whatsoever.
13
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite
name and address of the undersigned)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
__________________; and specify the denomination or denominations (which shall
not be less than the minimum authorized denomination) of the Notes to be issued
to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid):
____________________________.
Dated:
_____________ _________________________________________________
NOTICE: The signature on this Option to Elect
Repayment must correspond with the name as written
upon the face of the within instrument in every
particular without alteration or enlargement.
14
<PAGE>
EXHIBIT 4.6
FACE OF SECURITY
FLOATING RATE SENIOR SUBORDINATED NOTE
REGISTERED REGISTERED
NO. FLR [PRINCIPAL AMOUNT]
CUSIP:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof,
Cede & Co., has an interest herein.*
<PAGE>
THE CHARLES SCHWAB CORPORATION
SENIOR SUBORDINATED MEDIUM-TERM NOTE, SERIES A
(FLOATING RATE)
- --------------------------------------------------------------------------------
BASE RATE: ORIGINAL ISSUE DATE: MATURITY DATE:
- --------------------------------------------------------------------------------
INDEX MATURITY: INTEREST ACCRUAL DATE: INTEREST PAYMENT DATE(S):
- --------------------------------------------------------------------------------
SPREAD (PLUS OR MINUS): INITIAL INTEREST RATE: INTEREST PAYMENT PERIOD:
- --------------------------------------------------------------------------------
ALTERNATE RATE EVENT INITIAL INTEREST RESET INTEREST RESET PERIOD:
SPREAD: DATE:
- --------------------------------------------------------------------------------
SPREAD MULTIPLIER: MAXIMUM INTEREST RATE: INTEREST RESET DATES:
- --------------------------------------------------------------------------------
REPORTING SERVICE: MINIMUM INTEREST RATE: CALCULATION AGENT:
- --------------------------------------------------------------------------------
INITIAL REDEMPTION DATE: SPECIFIED CURRENCY:
- --------------------------------------------------------------------------------
EXCHANGE RATE AGENT: INITIAL REDEMPTION TOTAL AMOUNT OF OID:
PERCENTAGE:
- --------------------------------------------------------------------------------
INDEX CURRENCY: ANNUAL REDEMPTION ORIGINAL YIELD TO
PERCENTAGE REDUCTION: MATURITY:
- --------------------------------------------------------------------------------
OTHER PROVISIONS: OPTIONAL REPAYMENT INITIAL ACCRUAL PERIOD OID:
DATE(S):
- --------------------------------------------------------------------------------
DESIGNATED CMT TELERATE DESIGNATED CMT MATURITY
PAGE: INDEX:
================================================================================
The Charles Schwab Corporation, a Delaware corporation (together with its
successors and assigns, the "ISSUER"), for value received, hereby promises to
pay to
, or registered assignees, the principal sum of U.S. $ on the
Maturity Date specified above (except to the extent redeemed or repaid prior to
the Maturity Date) and to pay interest thereon, from the Interest Accrual Date
specified above at a rate per annum equal to the Initial Interest Rate specified
above until the Initial Interest Reset Date specified above, and thereafter at a
rate per annum determined in accordance with the provisions specified on the
reverse hereof until the principal hereof is paid or duly made available for
payment. The Issuer will pay interest in arrears monthly, quarterly,
semiannually or annually as specified above as the Interest Payment Period on
each Interest Payment Date (as specified above), commencing with the first
Interest Payment Date next succeeding the Interest Accrual Date specified above,
and on the Maturity Date (or any redemption or repayment date); provided,
however, that if the Interest Accrual Date occurs between a Record Date, as
defined below, and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date succeeding the Interest
Accrual Date to the registered holder of this Note on the Record Date with
respect to such second Interest Payment Date; and provided, further, that,
subject to the next succeeding sentence, if an Interest Payment Date would fall
on a day that is not a Business Day, as defined on the reverse hereof, such
Interest Payment Date shall be postponed to the following day that is a Business
Day,
2
<PAGE>
except that if the Base Rate specified above is LIBOR and such next
Business Day falls in the next calendar month, the Interest Payment Date shall
be the immediately preceding day that is a Business Day. If the Maturity Date
or redemption or repayment date would fall on a day that is not a Business Day,
the payment of principal and interest will be made on the next succeeding
Business Day, and no interest on such payment shall accrue for the period from
and after such Maturity Date or redemption or repayment date, as the case may
be.
Interest on this Note will accrue from the most recent date to which
interest has been paid or duly provided for, or, if no interest has been paid or
duly provided for, from the Interest Accrual Date, until the principal hereof
has been paid or duly made available for payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, subject
to certain exceptions described herein, be paid to the person in whose name this
Note (or one or more predecessor Notes) is registered at the close of business
on the date 15 calendar days prior to such Interest Payment Date (whether or not
a Business Day) (each such date a "RECORD DATE"); provided, however, that
interest payable on the Maturity Date (or any redemption or repayment date) will
be payable to the person to whom the principal hereof shall be payable.
Payment of the principal of this Note, any premium and the interest due at
the Maturity Date (or any redemption or repayment date) will be made in
immediately available funds upon surrender of this Note at the office or agency
of the Paying Agent, as defined on the reverse hereof, maintained for that
purpose in the Borough of Manhattan, The City of New York, or at such other
paying agency as the Issuer may determine. Payments of interest, other than
interest due at maturity or any date of redemption or repayment, will be made by
check mailed to the address of the person entitled thereto as such address shall
appear in the Note register; provided, however, that if the registered holder of
this Note is (i) Cede & Co. or (ii) a holder of U.S. $10,000,000 or more in
aggregate principal amount of Notes having the same Interest Payment Date, such
holder will be entitled to receive payments of interest, other than interest due
at maturity or any date of redemption or repayment, by wire transfer of
immediately available funds if appropriate wire transfer instructions have been
received by the Paying Agent in writing not less than 15 calendar days prior to
the applicable Interest Payment Date.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place, including, without limitation, the
provisions relating to the subordination of this Note to the Issuer's Senior
Indebtedness, as defined on the reverse hereof.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Senior Subordinated Indenture, as
defined on the reverse hereof, or be valid or obligatory for any purpose.
3
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed under
its corporate seal.
DATED: THE CHARLES SCHWAB CORPORATION
By
______________________________
Chairman and Chief
Executive Officer
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Notes
referred to in the within-mentioned Senior Subordinated
Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By
______________________________
Authorized Officer
4
<PAGE>
REVERSE OF SECURITY
This Note is one of a duly authorized issue of Senior Subordinated Medium-Term
Notes, Series A, having maturities more than nine months from the date of issue
(the "NOTES") of the Issuer. The Notes are issuable under a Senior Subordinated
Indenture, dated as of July 15, 1993 (the "SENIOR SUBORDINATED INDENTURE"),
between the Issuer and The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee (the "TRUSTEE," which term includes any successor trustee under the
Senior Subordinated Indenture), to which Senior Subordinated Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities of the Issuer,
the Trustee and holders of the Notes and the terms upon which the Notes are, and
are to be, authenticated and delivered. The Issuer has appointed The Chase
Manhattan Bank (formerly Chemical Bank) at its corporate trust office in The
City of New York as the paying agent (the "PAYING AGENT," which term includes
any additional or successor Paying Agent appointed by the Issuer) with respect
to the Notes. The terms of individual Notes may vary with respect to interest
rates, interest rate formulas, issue dates, maturity dates, or otherwise, all as
provided in the Senior Subordinated Indenture. To the extent not inconsistent
herewith, the terms of the Senior Subordinated Indenture are hereby incorporated
by reference herein.
This Note will not be subject to any sinking fund and, unless otherwise
provided on the face hereof in accordance with the provisions of the following
two paragraphs, will not be redeemable or subject to repayment at the option of
the holder prior to maturity.
If so indicated on the face of this Note, this Note may be redeemed in whole
or in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof, together
with interest accrued and unpaid hereon to the date of redemption. If this Note
is subject to "Annual Redemption Percentage Reduction," the Initial Redemption
Percentage indicated on the face hereof will be reduced on each anniversary of
the Initial Redemption Date by the Annual Redemption Percentage Reduction
specified on the face hereof until the redemption price of this Note is 100% of
the principal amount hereof, together with interest accrued and unpaid hereon to
the date of redemption. Notice of redemption shall be mailed, not less than 30
nor more than 60 days prior to the date fixed for redemption, to the registered
holders of the Notes designated for redemption at their addresses as the same
shall appear on the Note register, subject to all the conditions and provisions
of the Senior Subordinated Indenture. In the event of redemption of this Note
in part only, a new Note or Notes for the amount of the unredeemed portion
hereof shall be issued in the name of the holder hereof upon the cancellation
hereof.
If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 (provided that any remaining principal amount hereof shall not be less
than the minimum authorized denomination hereof) at the option of the holder
hereof at a price equal to 100% of the principal amount to be repaid, together
with interest accrued and unpaid hereon to the date of repayment. For this Note
to be repaid at the option of the holder hereof, the Paying Agent must receive
at its corporate trust office in the Borough of Manhattan, The City of New York,
at least 15
5
<PAGE>
but not more than 30 days prior to the date of repayment, (i) this Note with
the form entitled "Option to Elect Repayment" below duly completed or (ii) a
telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc. or a commercial bank or a trust company in the United States
setting forth the name of the holder of this Note, the principal amount
hereof, the certificate number of this Note or a description of this Note's
tenor and terms, the principal amount hereof to be repaid, a statement that
the option to elect repayment is being exercised thereby and a guarantee that
this Note, together with the form entitled "Option to Elect Repayment" duly
completed, will be received by the Paying Agent not later than the third
Business Day after the date of such telegram, telex, facsimile transmission or
letter; provided, that such telegram, telex, facsimile transmission or letter
shall only be effective if this Note and form duly completed are received by
the Paying Agent by such third Business Day. Exercise of such repayment option
by the holder hereof shall be irrevocable. In the event of repayment of this
Note in part only, a new Note or Notes for the amount of the unpaid portion
hereof shall be issued in the name of the holder hereof upon the cancellation
hereof.
This Note will bear interest at the rate determined in accordance with the
applicable provisions below by reference to the Base Rate shown on the face
hereof based on the Index Maturity, if any, shown on the face hereof (i) plus or
minus the Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if
any, specified on the face hereof. Commencing with the Initial Interest Reset
Date specified on the face hereof, the rate at which interest on this Note is
payable shall be reset as of each Interest Reset Date (as used herein, the term
"Interest Reset Date" shall include the Initial Interest Reset Date). The
Interest Reset Dates will be the Interest Reset Dates specified on the face
hereof; provided, however, that (i) the interest rate in effect for the period
from the Interest Accrual Date to the Initial Interest Reset Date will be the
Initial Interest Rate and (ii) the interest rate in effect hereon for the 10
days immediately prior to the Maturity Date hereof (or, with respect to any
principal amount to be redeemed or repaid, any redemption or repayment date)
shall be that in effect on the tenth calendar day preceding the Maturity Date
hereof or such date of redemption or repayment, as the case may be. If any
Interest Reset Date would otherwise be a day that is not a Business Day, such
Interest Reset Date shall be postponed to the next succeeding day that is a
Business Day, except that if the Base Rate specified on the face hereof is LIBOR
and such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day. As used herein,
"Business Day" means any day, other than a Saturday or Sunday, and that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York and, with
respect to Notes bearing interest calculated by reference to LIBOR, is also a
London Banking Day (as defined below).
The Interest Determination Date pertaining to an Interest Reset Date for Notes
bearing interest calculated by reference to the CD Rate, Commercial Paper Rate,
Federal Funds Rate, Prime Rate and CMT Rate will be the second Business Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for Notes bearing interest calculated by reference to
LIBOR shall be the second London Banking Day preceding such Interest Reset Date.
As used herein, "London Banking Day" means any day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market. The Interest
Determination Date pertaining to an Interest Reset Date for Notes bearing
interest calculated by reference to the Treasury Rate shall be
6
<PAGE>
the day of the week in which such Interest Reset Date falls on which Treasury
bills normally would be auctioned; provided, however, that if as a result of a
legal holiday an auction is held on the Friday of the week preceding such
Interest Reset Date, the related Interest Determination Date shall be such
preceding Friday; and provided, further, that if an auction shall fall on any
Interest Reset Date, then the Interest Reset Date shall instead be the first
Business Day following the date of such auction.
The "CALCULATION DATE" pertaining to any Interest Determination Date will be
the earlier of (i) the tenth calendar day after such Interest Determination Date
or, if such day is not a Business Day, the next succeeding Business Day or (ii)
the Business Day preceeding the applicable Interest Payment Date or maturity, as
the case may be.
Determination of CD Rate. If the Base Rate specified on the face hereof is
the CD Rate, the CD Rate with respect to this Note shall be determined on each
Interest Determination Date and shall be the rate on such date for negotiable
certificates of deposit having the Index Maturity specified on the face hereof
as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates," or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "CDs (Secondary Market)," or, if not so
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the CD Rate will be the rate on such
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity specified on the face hereof as published by the Federal Reserve Bank
of New York in its daily statistical release "Composite 3:30 P.M. Quotations for
U.S. Government Securities" ("Composite Quotations") under the heading
"Certificates of Deposit." If neither of such rates is published by 3:00 P.M.,
New York City time, on such Calculation Date, then the CD Rate on such Interest
Determination Date will be calculated by the Calculation Agent referred to on
the face hereof and will be the arithmetic mean of the secondary market offered
rates as of 10:00 A.M., New York City time, on such Interest Determination Date
for certificates of deposit in the denomination of U.S. $5,000,000 with a
remaining maturity closest to the Index Maturity specified on the face hereof of
three leading nonbank dealers in negotiable U.S. dollar certificates of deposit
in The City of New York selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks in the market
for negotiable certificates of deposit; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the rate of interest in effect for the applicable period will be
the same as the CD Rate for the immediately preceding Interest Reset Period (or,
if there was no such Interest Reset Period, the rate of interest payable hereon
shall be the Initial Interest Rate).
Determination of Commercial Paper Rate. If the Base Rate specified on the
face hereof is the Commercial Paper Rate, the Commercial Paper Rate with respect
to this Note shall be determined on each Interest Determination Date and shall
be the Money Market Yield (as defined herein) of the rate on such date for
commercial paper having the Index Maturity specified on the face hereof, as such
rate shall be published in H.15(519) under the heading "Commercial Paper," or if
not so published prior to 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Commercial Paper Rate shall
be the Money Market Yield of the rate on such Interest Determination Date for
commercial paper of the Index Maturity specified on the face
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hereof as published in Composite Quotations under the heading "Commercial
Paper." If neither of such rates is published by 3:00 P.M., New York City
time, on such Calculation Date, then the Commercial Paper Rate shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
A.M., New York City time, on such Interest Determination Date of three leading
dealers in commercial paper in The City of New York selected by the
Calculation Agent for commercial paper of the Index Maturity specified on the
face hereof, placed for an industrial issuer whose bond rating is "AA," or the
equivalent, from a nationally recognized rating agency; provided, however,
that if the dealers selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, the rate of interest in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable hereon shall be the Initial
Interest Rate).
"MONEY MARKET YIELD" shall be the yield calculated in accordance with
the following formula:
D x 360
Money Market Yield = _________________ x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the period for which interest is being calculated.
Determination of Federal Funds Rate. If the Base Rate specified on the face
hereof is the Federal Funds Rate, the Federal Funds Rate with respect to this
Note shall be determined on each Interest Determination Date and shall be the
rate on such date for Federal Funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York City
time, on the Calculation Date pertaining to such Interest Determination Date,
the Federal Funds Rate will be the rate on such Interest Determination Date as
published in Composite Quotations under the heading "Federal Funds/Effective
Rate." If neither of such rates is published by 3:00 P.M., New York City time,
on such Calculation Date, the Federal Funds Rate for such Interest Determination
Date will be calculated by the Calculation Agent and will be the arithmetic mean
of the rates for the last transaction in overnight Federal funds as of 9:00
A.M., New York City time, on such Interest Determination Date arranged by three
leading brokers in Federal funds transactions in The City of New York selected
by the Calculation Agent; provided, however, that if the brokers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the rate of interest in effect for the applicable period will be the
same as the Federal Funds Rate for the immediately preceding Interest Reset
Period (or, if there was no such Interest Reset Period, the rate of interest
payable hereon shall be the Initial Interest Rate).
Determination of LIBOR. If the Base Rate specified on the face hereof is
LIBOR, LIBOR with respect to this Note shall be determined as follows:
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(i) With respect to a LIBOR Interest Determination Date, LIBOR will be,
as specified on the face hereof, either: (a) the arithmetic mean of the
offered rates for deposits in U.S. dollars having the Index Maturity
specified on the face hereof, commencing on the second London Banking Day
immediately following the LIBOR Interest Determination Date, that appear on
the Reuters Screen LIBO Page as of 11:00 A.M., London time, on that LIBOR
Interest Determination Date, if at least two such offered rates appear on
the Reuters Screen LIBO Page ("LIBOR REUTERS"), or (b) the rate for deposits
in U.S. dollars having the Index Maturity specified on the face hereof,
commencing on the second London Banking Day immediately following that LIBOR
Interest Determination Date, that appears on the Telerate Page 3750 as of
11:00 A.M., London time, on that LIBOR Interest Determination Date ("LIBOR
TELERATE"). "Reuters Screen LIBO Page" means the display designated as page
"LIBO" on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks). "Telerate Page 3750" means the
display designated as page "3750" on the Telerate Service (or such other
page as may replace the 3750 page on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purpose of displaying London interbank offered rates for U.S. dollar
deposits). If neither LIBOR Reuters nor LIBOR Telerate is specified on the
face hereof, LIBOR will be determined as if LIBOR Telerate had been
specified. If fewer than two offered rates appear on the Reuters Screen LIBO
Page, or if no rate appears on the Telerate Page 3750, as applicable, LIBOR
in respect of that LIBOR Interest Determination Date will be determined as
if the parties had specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear on the Reuters Screen LIBO Page, as specified
in (i)(a) above, or on which no rate appears on Telerate Page 3750, as
specified in (i)(b) above, as applicable, LIBOR will be determined on the
basis of the rates at which deposits in U.S. dollars having the Index
Maturity specified on the face hereof are offered at approximately 11:00
A.M., London time, on that LIBOR Interest Determination Date by four major
banks in the London interbank market selected by the Calculation Agent
("REFERENCE BANKS") to prime banks in the London interbank market commencing
on the second London Banking Day immediately following that LIBOR Interest
Determination Date and in a principal amount equal to an amount of not less
than $1,000,000 that is representative for a single transaction in such
market at such time. The Calculation Agent will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If
at least two such quotations are provided, LIBOR in respect of that LIBOR
Interest Determination Date will be the arithmetic mean of such quotations.
If fewer than two quotations are provided, LIBOR in respect of that LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., New York City time, on that LIBOR Interest
Determination Date by three major banks in The City of New York selected by
the Calculation Agent for loans in U.S. dollars to leading European banks
having the Index Maturity specified on the face hereof, commencing on the
second London Banking Day immediately following that LIBOR Interest
Determination Date and in a principal amount equal to an amount of not less
than
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$1,000,000 that is representative for a single transaction in such market at
such time; provided, however, that if the banks selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR with
respect to such LIBOR Interest Determination Date will be the rate of LIBOR in
effect on such date.
Determination of Prime Rate. If the Base Rate specified on the face hereof is
the Prime Rate, the Prime Rate with respect to this Note shall be determined on
each Interest Determination Date and shall be the rate set forth in H.15(519)
for such date opposite the caption "Bank Prime Loan." If such rate is not yet
published by 9:00 A.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, the Prime Rate for such Interest
Determination Date will be the arithmetic mean of the rates of interest publicly
announced by each bank named on the Reuters Screen USPRIME 1 Page (as defined
below) as such bank's prime rate or base lending rate as in effect for such
Interest Determination Date as quoted on the Reuters Screen USPRIME 1 Page on
such Interest Determination Date, or, if fewer than four such rates appear on
the Reuters Screen USPRIME 1 Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money center
banks in The City of New York selected by the Calculation Agent from which
quotations are requested. If fewer than two quotations are provided, the Prime
Rate shall be calculated by the Calculation Agent and shall be determined as the
arithmetic mean on the basis of the prime rates in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, in each case
having total equity capital of at least U.S. $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to quote such rate or rates; provided, however, that if the
substitute banks or trust companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate for such Interest Reset Period will
be the Prime Rate in effect for the immediately preceding Interest Reset Period
(or, if there is no such Interest Reset Period, the Initial Interest Rate).
"Reuters Screen USPRIME 1 Page" means the display designated as Page "USPRIME 1"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the USPRIME 1 Page on that service for the purpose of displaying prime rates or
base lending rates of major United States banks).
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Determination of Treasury Rate. If the Base Rate specified on the face hereof
is the Treasury Rate, the Treasury Rate with respect to this Note shall be
determined on each Interest Determination Date and shall be the rate for the
auction held on such date of direct obligations of the United States ("TREASURY
BILLS") having the Index Maturity specified on the face hereof, as published in
H.15(519) under the heading "Treasury Bills--auction average (investment)," or
if not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the auction average rate on such
Interest Determination Date (expressed as a bond equivalent, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the Index
Maturity specified on the face hereof are not published or reported as provided
above by 3:00 P.M., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers selected by the Calculation Agent for the
issue of Treasury Bills with a remaining maturity closest to the Index Maturity
specified on the face hereof; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Treasury Rate for such Interest Reset Date will be the same as the
Treasury Rate for the immediately preceding Interest Reset Period (or, if there
was no such Interest Reset Period, the rate of interest payable hereon shall be
the Initial Interest Rate).
Determination of CMT Rate. If the Base Rate specified on the face hereof is
the CMT Rate, the CMT Rate with respect to this Note shall be determined on each
Interest Determination Date and shall be the rate displayed for the Index
Maturity specified on the face hereof on the Designated CMT Telerate Page (as
defined below) under the Caption ". . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15" under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such Interest Determination Date and (ii) if the Designated
CMT Telerate Page is 7052, the week or the month, as applicable, ended
immediately preceding the week in which the related Interest Determination Date
occurs. If such rate is no longer displayed on the relevant page, or is not
displayed by 3:00 p.m., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published, or is not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate for such Interest
Determination Date will be such Treasury Constant Maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the Interest Determination Date with respect
to the related Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 p.m., New York
time, on the related Calculation Date, then the CMT Rate for the Interest
Determination Date will be calculated by the
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Calculation Agent and will be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side prices as of approximately
3:30 p.m., New York City time, on the Interest Determination Date reported,
according to their written records, by three leading primary United States
government securities dealers (each, a "REFERENCE DEALER") in The City of New
York (which may include affiliates of the Issuer) selected by the Calculation
Agent (from five such Reference Dealers selected by the Calculation Agent,
after consultation with the Issuer, and eliminating the highest quotation (or,
in the event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("TREASURY
NOTES") with an original maturity of approximately the Designated CMT Maturity
Index and remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent cannot obtain three
such Treasury Notes quotations, the CMT Rate for such Interest Determination
Date will be calculated by the Calculation Agent and will be a yield to
maturity based on the arithmetic mean of the secondary market offer side
prices as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date of three Reference Dealers in The City of New York (from
five such Reference Dealers selected by the Calculation Agent, after
consultation with the Issuer, and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest)), for Treasury Notes with an
original maturity of the number of years that is the next highest to the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in an amount of at least $100,000,000. If
three or four (and not five) of such Reference Dealers are quoting as
described above, then the CMT Rate will be based on the arithmetic mean of the
offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; provided, however, that if fewer than three Reference
Dealers selected by the Calculation Agent are quoting as described herein, the
CMT Rate for such Interest Reset Date will be the same as the CMT Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable hereon shall be the Initial
Interest Rate). If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally
close to the Designated CMT Maturity Index, the quotes for the Treasury note
with the shorter remaining term to maturity will be used.
"DESIGNATED CMT TELERATE PAGE" means the display on the Dow Jones Telerate
Service specified on the face hereof (or any other page as may replace such page
on that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519)), for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified on the face
hereof, the Designated CMT Telerate Page shall be 7052, for the most recent
week.
"DESIGNATED CMT MATURITY INDEX" shall be the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified on
the face hereof with respect to which the CMT Rate will be calculated. If no
such maturity is specified on the face hereof, the Designated CMT Maturity Index
shall be two years.
Notwithstanding the foregoing, the interest rate hereon shall not be greater
than the Maximum Interest Rate, if any, or less than the Minimum Interest Rate,
if any, specified on the face hereof. The
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Calculation Agent shall calculate the interest rate hereon in accordance with
the foregoing on or before each Calculation Date.
At the request of the holder hereof, the Calculation Agent will provide to the
holder hereof the interest rate hereon then in effect and, if determined, the
interest rate that will become effective as of the next Interest Reset Date.
Interest payments on this Note will include interest accrued to but excluding
the Interest Payment Dates or the Maturity Date (or any earlier redemption or
repayment date), as the case may be; provided, however, that if the Interest
Reset Period with respect to this Note is daily or weekly, interest payable on
any Interest Payment Date, other than interest payable on any date on which
principal hereof is payable, will include interest accrued through and including
the Record Date next preceding the applicable Interest Payment Date. Accrued
interest hereon shall be an amount calculated by multiplying the face amount
hereof by an accrued interest factor. Such accrued interest factor shall be
computed by adding the interest factor calculated for each day in the period for
which interest is being paid. The interest factor for each such date shall be
computed by dividing the interest rate applicable to such day by 360 if the Base
Rate is CD Rate, Commercial Paper Rate, Federal Funds Rate, Prime Rate or LIBOR,
as specified on the face hereof, or by the actual number of days in the year if
the Base Rate is the Treasury Rate or the CMT Rate, as specified on the face
hereof. All percentages resulting from any calculation of the rate of interest
on this Note will be rounded, if necessary, to the nearest one hundred-
thousandth of a percentage point (.0000001), with five one-millionths of a
percentage point rounded upward, and all dollar amounts used in or resulting
from such calculation on this Note will be rounded to the nearest cent (with
one-half cent rounded upward). The interest rate in effect on any Interest
Reset Date will be the applicable rate as reset on such date. The interest rate
applicable to any other day is the interest rate from the immediately preceding
Interest Reset Date (or, if none, the Initial Interest Rate).
This Note and all other obligations of the Issuer hereunder will constitute
part of the senior subordinated debt of the Issuer, will be issued under the
Senior Subordinated Indenture and will be subordinate and junior in right of
payment, to the extent and in the manner set forth in the Senior Subordinated
Indenture, to all "Senior Indebtedness" of the Issuer. The Senior Subordinated
Indenture defines "Senior Indebtedness" as the principal of and premium, if any,
and interest on (a) indebtedness of the Issuer, whether outstanding on the date
of the Senior Subordinated Indenture or thereafter created, that is (i) for
money borrowed by the Issuer (including, without limitation, capitalized lease
obligations), (ii) for money borrowed by others and guaranteed, directly or
indirectly, by the Issuer or (iii) constituting purchase money indebtedness, or
indebtedness secured by property at the time of the acquisition of such property
by the Issuer, for the payment of which the Issuer 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 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 Notes
and/or it is expressly provided that such indebtedness is itself subordinated to
any other indebtedness of the Issuer. As used in the preceding sentence, the
term "purchase money indebtedness" means
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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 Issuer to a subsidiary of the Issuer
for money borrowed or advances from a subsidiary of the Issuer or (ii) the
Notes.
This Note, and any Note or Notes issued upon transfer or exchange hereof, is
issuable only in fully registered form, without coupons, in denominations of
U.S. $1,000 and any integral multiple of U.S. $1,000 in excess thereof.
The Trustee has been appointed registrar for the Notes, and the Trustee will
maintain at its office in The City of New York a register for the registration
and registration of transfer of Notes. The transfer of this Note may be
registered at the aforesaid office of the Trustee by surrendering this Note for
cancellation, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and during the period so provided in the Senior
Subordinated Indenture with respect to the redemption of Notes. Notes are
exchangeable at said office for other Notes of other authorized denominations of
equal aggregate principal amount having identical terms and provisions. All
such exchanges and registrations of transfer of Notes will be free of charge,
but the Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge in connection therewith. All Notes surrendered for exchange
shall be accompanied by a written instrument of transfer in form satisfactory to
the Trustee and executed by the registered holder in person or by the holder's
attorney duly authorized in writing. The date of registration of any Note
delivered upon any exchange or transfer of Notes shall be such that no gain or
loss of interest results from such exchange or registration of transfer.
In case any Note shall at any time become mutilated, defaced or be destroyed,
lost or stolen and such Note or evidence of the loss, theft or destruction
thereof (together with the indemnity hereinafter referred to and such other
documents or proof as may be required in the premises) shall be delivered to the
Trustee, a new Note of like tenor will be issued by the Issuer in exchange for
the Note so mutilated or defaced, or in lieu of the Note so destroyed or lost or
stolen, but, in the case of any destroyed or lost or stolen Note, only upon
receipt of evidence satisfactory to the Trustee and the Issuer that such Note
was destroyed or lost or stolen and, if required, upon receipt also of indemnity
satisfactory to each of them. All expenses and reasonable charges associated
with procuring such indemnity and with the preparation, authentication and
delivery of a new Note shall be borne by the owner of the Note mutilated,
defaced, destroyed, lost or stolen.
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The Senior Subordinated Indenture provides that, (a) if an Event of Default
(as defined in the Senior Subordinated Indenture) due to the default in payment
of principal of, premium, if any, or interest on, any series of debt securities
issued under the Senior Subordinated Indenture, including the series of Senior
Subordinated Medium-Term Notes of which this Note forms a part, or due to the
default in the performance or breach of any other covenant or warranty of the
Issuer applicable to the debt securities of such series but not applicable to
all outstanding debt securities issued under the Senior Subordinated 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
(voting as a single class) may then declare the principal of all debt securities
of all such 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 the Senior Subordinated Indenture
applicable to all outstanding debt securities issued thereunder, including this
Note, or due to certain events of bankruptcy, insolvency and reorganization of
the Issuer, 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 the Senior Subordinated Indenture 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 (or premium, if any) or interest on
such debt securities) by the holders of a majority in principal amount of the
debt securities of all affected series then outstanding.
The Trustee also acts as trustee under a Senior Indenture, dated as of July
15, 1993 (the "SENIOR INDENTURE" and, together with the Senior Subordinated
Indenture, the "INDENTURES"), between the Issuer and the Trustee, with respect
to certain other debt securities of the Issuer. The Senior Subordinated
Indenture provides that, should a default occur with respect to either the debt
securities issued under the Senior Subordinated Indenture or the debt securities
issued under the Senior Indenture, the Trustee 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 Senior Subordinated Indenture permits the Issuer and the Trustee, with the
consent of the holders of not less than a majority in aggregate principal amount
of the debt securities of all series issued under the Senior Subordinated
Indenture then outstanding and affected (voting as one class), to execute
supplemental indentures adding any provisions to or changing in any manner the
rights of the holders of each series so affected; provided that the Issuer and
the Trustee may not, without the consent of the holder of each outstanding debt
security affected thereby, (a) extend the final maturity of any such 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 or repayment thereof, or change the currency of payment thereof, or
impair or affect the rights of any holder to institute suit for the payment
thereof without the consent of the holder of each debt security so affected; or
(b) reduce the aforesaid percentage in principal amount of debt securities the
consent of the holders of which is required for any such supplemental indenture,
without the consent of the holders of each debt security so affected; provided,
however, that neither this Note nor the Senior Subordinated Indenture may be
amended to alter the subordination provisions hereof or thereof
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without the written consent of each holder of Senior Indebtedness then
outstanding that would be adversely affected thereby.
So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, registration of transfer and exchange as
aforesaid of the Notes. The Issuer may designate other agencies for the payment
of said principal, premium and interest at such place or places (subject to
applicable laws and regulations) as the Issuer may decide. So long as there
shall be such an agency, the Issuer shall keep the Trustee advised of the names
and locations of such agencies, if any are so designated.
With respect to moneys paid by the Issuer and held by the Trustee or any
Paying Agent for payment of the principal of or interest or premium, if any, on
any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.
No provision of this Note or of the Senior Subordinated Indenture shall alter
or impair the obligation of the Issuer, which is absolute and unconditional, to
pay the principal of, premium, if any, and interest on this Note at the time,
place, and rate, and in the coin or currency, herein prescribed unless otherwise
agreed between the Issuer and the registered holder of this Note.
Prior to due presentment of this Note for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.
No recourse shall be had for the payment of the principal of, premium, if any,
or the interest on this Note, for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Senior Subordinated Indenture
or any indenture supplemental thereto, against any incorporator, shareholder,
officer or director, as such, past, present or future, of the Issuer or of any
successor corporation, either directly or through the Issuer or any successor
corporation, whether by virtue of any constitution, statute or rule of law or by
the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
This Note shall for all purposes be governed by, and construed in accordance
with, the laws of the State of California.
16
<PAGE>
All terms used in this Note which are defined in the Senior Subordinated
Indenture and not otherwise defined herein shall have the meanings assigned to
them in the Senior Subordinated Indenture.
17
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - Custodian
______________________
(Minor) (Cust)
Under Uniform Gifts to Minors Act
_____________________________________
(State)
Additional abbreviations may also be used though not in the above list.
________________
18
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
_______________________________________
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.
Dated:
______________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular without
alteration or enlargement or any change whatsoever.
19
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address of the undersigned)
If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
______________________; and specify the denomination or denominations (which
shall not be less than the minimum authorized denomination) of the Notes to be
issued to the holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid): ______________________.
Dated:
_______________________________________
NOTICE: The signature on this Option
to Elect Repayment must correspond
with the name as written upon the face
of the within instrument in every
particular without alteration or
enlargement.
20
<PAGE>
EXHIBIT 10.1
CREDIT AGREEMENT
(364-DAY COMMITMENT)
DATED AS OF
JUNE 26, 1998
==============
THE CHARLES SCHWAB CORPORATION
<PAGE>
CREDIT AGREEMENT (364-DAY COMMITMENT)
THIS CREDIT AGREEMENT (364-DAY COMMITMENT) ("this Agreement") is
entered into as of June 26, 1998, between The Charles Schwab Corporation, a
Delaware corporation (the "Borrower"), and the Bank named on the signature page
hereto (the "Bank").
WHEREAS, the Bank is willing to make revolving credit loans to the
Borrower from time to time through June 25 1999, and to make Term Loans to the
Borrower on or before June 25, 1999 and maturing no later than June 24, 2000, on
the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS
Assessment Rate: For any Interest Period for any Advance or Term Loan
for which the CD Rate has been selected, the assessment
rate per annum (adjusted upward, if necessary, to the
nearest 1/100 of 1%) determined by the Confirming Bank
on the first day of such Interest Period for
determining the then current annual assessment payable
by the Bank to the Federal Deposit Insurance
Corporation (or any successor thereto) for such
Corporation's (or successor's) insuring U.S. dollar
time deposits of the Bank in the United States. The CD
Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
Banking Day: Any Monday, Tuesday, Wednesday, Thursday or Friday,
other than a day on which banks are authorized or
required to be closed in California or New York.
Borrowing Advice: A written request made by the Borrower with respect to
an Advance or Term Loan specifying the information
required in Paragraph 2.3 hereof and executed by the
Borrower from time to time.
-1-
<PAGE>
Borrowing Agreement: Any of those separate credit agreements (so long as
the Credit (as defined herein) thereunder has not
been terminated) between the Borrower and any of the
Banks referred to in Schedule I hereto (other than
the Bank) and having terms substantially similar to
those contained in this Agreement. Such Schedule I
may from time to time be amended by the Borrower by
Borrower's delivery to each Bank (including the
Bank) of a new Schedule I, and each such new
Schedule I delivered by the Borrower to each Bank
(including the Bank) shall replace and supersede the
then-existing Schedule I and shall be the Schedule I
referred to in this Agreement; provided, however,
-------- -------
that no such newly delivered Schedule I shall amend
or otherwise change the name, address, or amount of
Credit applicable to the Bank on the initial
Schedule I hereto without the prior written consent
of the Bank or as otherwise permitted in accordance
with the terms of this Agreement. Each such newly
delivered Schedule I shall include all of the then-
existing credit agreements between the Borrower and
any Bank having terms substantially similar to those
contained in this Agreement so long as the Credit
(as defined herein) thereunder has not been
terminated.
Broker Subsidiary: Charles Schwab & Co., Inc., a California corporation,
and its successors and assigns.
CD Banking Day: Any Banking Day on which dealings in bank certificates
of deposit are conducted by New York City certificate
of deposit dealers.
CD Rate: For any Interest Period for any Advance or Term Loan
for which the CD Rate has been selected or is
applicable, the sum of:
(a) the Assessment Rate for the Interest Period, plus
(b) the rate per annum obtained by dividing (i) the
rate of interest per
-2-
<PAGE>
annum determined by the Confirming Bank to be (aa)
the average (adjusted upward, if necessary, to the
nearest 1/16 of 1%) rate per annum at which bids
are received by the CD Reference Banks for their
certificates of deposit as at 11:00 a.m. New York
City time (or as soon as practicable thereafter),
on the first day of an Interest Period from two or
more New York City certificate of deposit dealers
of recognized standing selected by the Confirming
Bank for the purchase at face value of such
certificates of deposit in an amount comparable to
the Advance or Term Loan for which the CD Rate has
been selected and having a maturity comparable to
such Interest Period or (bb) in the event the
Confirming Bank cannot, without undue effort,
obtain rates from such CD Reference Banks, the
certificate of deposit rate as reported for the
date of the Borrowing Advice in "Federal Reserve
Statistical Release--Selected Interest Rates--
H.15(519)," published by the Board of Governors of
the Federal Reserve System, or any successor
publication, under the caption "CDs (Secondary
Market)" having a maturity most closely
approximating the conclusion of such Interest
Period, by (ii) a percentage (expressed as a
decimal) equal to 1.00 minus the CD Rate Reserve
Percentage.
CD Rate Reserve
Percentage: For any Interest Period for any Advance or Term Loan
for which the CD Rate has been selected or is
applicable, the percentage (expressed as a decimal)
as calculated by the Confirming Bank that is in
effect on the first day of such Interest Period, as
prescribed by the Board of Governors of the Federal
Reserve System (or any successor), for determining
the maximum reserve requirements (including,
-3-
<PAGE>
without limitation, basic, supplemental, marginal and
emergency reserves) for a bank with deposits exceeding
five billion dollars that is a member of the Federal
Reserve System, in respect of new non-personal time
deposits in U.S. dollars in the United States having a
maturity comparable to the applicable Interest Period
for said Advance or Term Loan for which the CD Rate has
been selected (such bank's reserve ratio on such time
deposits in effect on June __, 1998 was 0%). The CD
Rate shall be adjusted automatically on and as of the
effective date of any change in the CD Rate Reserve
Percentage.
CD Reference Banks: Bank of America NT&SA
Citibank, N.A.
Change in
Control: The consummation of a reorganization, merger or
consolidation by the Borrower or the sale or other
disposition of all or substantially all of the assets
of the Borrower (a "Business Combination"), unless,
following such Business Combination, (i) no person or
entity (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Borrower or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
outstanding voting securities of such corporation
(except to the extent that such ownership existed prior
to the Business Combination); and (ii) at least a
majority of the members of the board of directors of
the corporation resulting from such Business
Combination were members of the board of directors of
the Borrower as of the time of the action of the board
of directors of the
-4-
<PAGE>
Borrower providing for such Business Combination.
Change in Law
Affecting Cost: The occurrence of any one of the following events:
(a) the imposition, modification or application of any
reserve, capital adequacy requirement, special
deposit or similar requirement against assets held
by, or deposits in or for the account of, or
commitments, advances or loans by, or any other
acquisition of funds by, the Bank (other than such
requirements described in the Eurodollar Rate
Reserve Percentage section hereof), or the
imposition upon the Bank of any other condition
with respect to the London interbank market or to
this Agreement or any borrowing hereunder,
(b) a change in the basis of taxation of payments to
the Bank of principal, interest or any other
amount payable hereunder (except for changes in
Federal, state or local income tax rates and their
equivalents), or
(c) the adoption or enactment of any applicable law,
treaty, regulation or directive, or any change
therein or in the interpretation or application
thereof, or compliance by the Bank with any
request (whether or not having the force of law)
of any relevant government or corporation entity.
Closing Date: June 26, 1998
Confirming Bank: Citibank, N.A.
-5-
<PAGE>
Confirming Bank
Agreement: The Confirming Bank Agreement between the
Borrower and Citibank, N.A. dated June 26, 1998,
in substantially the form attached as Exhibit B
to the Credit Agreement, as the same may be
amended from time to time.
Controlled Subsidiary: Any corporation 80% of whose voting stock (except
for any qualifying shares) is owned directly or
indirectly by the Borrower.
Federal Funds
Effective Rate: For any day, an interest rate per annum equal to
the weighted average of the rates on overnight
Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such
day is not a Banking Day, for the next preceding
Banking Day) by the Federal Reserve Bank of New
York; or, if such rate is not published for any
day which is a Banking Day, an interest rate per
annum equal to the arithmetic mean of the rates
on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers on such day, received by
each Reference Rate Reference Bank from three
Federal funds brokers of recognized standing
selected by each Reference Rate Reference Bank in
its sole discretion.
Interest Period: Any period specified in accordance with Paragraph
2.4 hereof.
Intermediate Parent: Schwab Holdings, Inc. and its successors and
assigns.
Eurodollar Banking Day: Any Banking Day on which dealings in dollar
deposits are conducted by and among banks in the
London Eurodollar Market, or such other
Eurodollar Market as may from time to time be
selected by the Bank with the approval of the
Borrower.
-6-
<PAGE>
Eurodollar Rate: The rate obtained by dividing (i) the average rate per
annum at which deposits of U.S. dollars for the
selected Interest Period and in the amount of the
Advance or Term Loan for which the Eurodollar Rate has
been selected are offered (a) if at least two such
offered rates appear on the Reuters Screen LIBO Page as
at 11:00 am. (London time) two Eurodollar Banking Days
prior to the commencement of the relevant Interest
Period, the arithmetic mean (adjusted upward, if
necessary, to the nearest 1/16 of 1%), of such offered
rates as determined in accordance with the provisions
of the Confirming Bank Agreement or (b) if fewer than
two offered rates appear, in immediately available
funds to the Eurodollar Rate Reference Banks in the
London interbank market (adjusted upward, if necessary,
to the nearest 1/16 of 1%) as at 11:00 a.m. (London
time) two Eurodollar Banking Days prior to the
commencement of the relevant Interest Period,
determined in accordance with the provisions of the
Confirming Bank Agreement, by (ii) a percentage
(expressed as a decimal) equal to 1.00 minus the
Eurodollar Rate Reserve Percentage.
Eurodollar Rate Reserve
Percentage: For any Interest Period for any Advance or Term Loan
for which the Eurodollar Rate has been selected or is
applicable, the percentage (expressed as a decimal)
as calculated by the Confirming Bank that is in
effect on the first day of such Interest Period, as
prescribed by the Board of Governors of the U.S.
Federal Reserve System (or any successor), for
determining reserve requirements to be maintained by
the Bank under Regulation D (or any successor
regulation thereof) as amended to the date hereof
(including such reserve requirements as become
applicable to the Bank pursuant to phase-in or other
similar requirements of Regulation D at any time
subsequent to the date hereof) in respect of
-7-
<PAGE>
"Eurocurrency liabilities" (as defined in Regulation
D). The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any
change in the Eurodollar Rate Reserve Percentage.
Eurodollar Rate
Reference Banks: Union Bank of Switzerland
The Bank of New York
Indebtedness: Indebtedness, as to any corporation, means any
obligation of, or guaranteed or assumed by, such
corporation for (i) borrowed money evidenced by
bonds, debentures, notes or other similar
instruments, (ii) the deferred purchase price of
property or services (excluding trade and other
accounts payable), (iii) the leasing of tangible
personal property under leases which, under any
applicable Financial Accounting Standards Board
Statement, have been or should be recorded as
capitalized leases, or (iv) direct or contingent
obligations under letters of credit issued for the
account of such corporation.
Minimum Stockholder's
Equity: As of the last day of September 1998, and the last day
of each fiscal quarter thereafter, the greater of:
(a) $575 million, or
(b) $575 million plus 40% of the sum of cumulative Net
Earnings of the Borrower and its Subsidiaries
beginning with July 1, 1998.
MSI: Mayer & Schweitzer, Inc., a New Jersey corporation, and
its successors and assigns.
Net Capital Ratio: As of the date of determination, that percentage of
net capital to aggregate debit items of any entity
subject to the Net Capital Rule 15c3-1 promulgated by
the Securities Exchange Commission pursuant to the
-8-
<PAGE>
Securities Exchange Act of 1934 and any successor or
replacement rule or regulation therefor.
Net Earnings: With respect to any fiscal period, the consolidated net
income of the Borrower and its Subsidiaries, after
taking into account all extraordinary items, taxes and
other proper charges and reserves for the applicable
period, determined in accordance with U.S. generally
accepted accounting principles, consistently applied.
Notice of Interest
Period: A written request made by the Borrower with respect to
an outstanding Term Loan prior to its maturity date
specifying the information required in Paragraph 2.3
hereof and executed by the Borrower from time to time.
Reference Rate: For any Interest Period for any Advance or Term Loan
for which the Reference Rate has been selected (or for
any post-Interest Period period covered by clause (ii)
of Paragraph 2.7 hereof), the average daily per annum
rate of interest calculated by the Confirming Bank
during such Interest Period or period, with the rate on
each day being equal to the higher of (i) the highest
per annum rate of interest (adjusted upward, if
necessary, to the nearest 1/16 of 1%) publicly
announced by any of the Reference Rate Reference Banks
on such day as its "prime rate," "prime commercial
lending rate," "reference rate," or "base rate," as the
case may be, and (ii) the highest per annum Federal
Funds Effective Rate available to any Reference Rate
Reference Bank, plus 1/2 of 1%.
Reference Rate
Reference Banks: The First National Bank of Chicago
Chase Manhattan Bank
Revolving Credit
-9-
<PAGE>
Facility: The revolving credit facility available to the
Borrower pursuant to paragraph 2.1 hereof.
Stockholder's Equity: As of any date of determination, Stockholders'
Equity of Borrower and its Subsidiaries as of that
date determined in accordance with U.S. generally
accepted accounting principles, consistently
applied.
Subsidiary: Any corporation or other entity of which a
sufficient number of voting securities or other
interests having power to elect a majority of the
board of directors or other persons performing
similar functions are at the time directly or
indirectly owned by the Borrower.
Term Loan Facility: The term loan facility available to the Borrower
pursuant to Paragraph 2.2 hereof.
2. THE FACILITIES
The Bank agrees that consistent with the terms and conditions set
forth in this Article 2 respecting Advances under the Revolving Credit Facility
and Term Loans under the Term Loan Facility, it will lend to the Borrower sums
which, in the aggregate principal amount outstanding at any one time, shall not
exceed the dollar amount of the Bank's commitment as specified in Schedule I
hereto (the "Commitment"). Such amount, as it may from time to time be reduced
pursuant to Paragraph 2.11 hereof, shall be referred to as the "Credit," and the
Credit shall encompass both the Revolving Credit Facility described in Paragraph
2.1 hereof and the Term Loan Facility described in Paragraph 2.2 hereof.
2.1 The Revolving Credit Facility. From time to time commencing on
-----------------------------
June 26, 1998 and ending on June 25, 1999, the Borrower may borrow, repay at the
end of any Interest Period (or otherwise as permitted by Paragraph 3.2 hereof)
and reborrow amounts during the continuation of the Credit, as the Borrower may
see fit, subject to the applicable provisions of this Agreement. Each such
revolving credit loan made hereunder (an "Advance") shall be in the amount of
$1,000,000 or integral multiples thereof and shall become due and payable on the
last day of the Interest Period for such Advance.
The obligation of the Borrower to repay the aggregate unpaid principal
amount of the Advances shall be evidenced by a promissory note of
-10-
<PAGE>
the Borrower (the "Revolving Note") in substantially the form attached hereto as
Exhibit A-1, with the blanks appropriately completed, payable to the order of
the Bank, bearing interest as hereinafter specified. The Revolving Note shall
be dated, and shall be delivered to the Bank, on the date of the execution and
delivery of this Agreement by the Borrower. The Bank shall, and is hereby
authorized by the Borrower to, endorse on the schedule contained on the
Revolving Note, or on a continuation of such schedule attached thereto and made
a part thereof, appropriate notations regarding the Advances evidenced by the
Revolving Note as specifically provided therein; provided, however, that the
failure to make, or error in making, any such notation shall not limit or
otherwise affect the obligations of the Borrower hereunder or under the
Revolving Note.
2.2 Term Loan Facility. The Borrower from time to time may borrow
------------------
under the Term Loan Facility (and may reborrow any amount theretofore prepaid)
until close of business on June 25, 1999, for a term not to exceed 364 days from
the date of the borrowing. Each such loan under the Term Loan Facility (a "Term
Loan") shall be in the amount of $1,000,000 or an integral multiple thereof and
shall become due and payable on the last day of the term selected by the
Borrower for such Term Loan (the "Term Loan Maturity Date"), which shall in no
event be later than 364 days from the date of such Term Loan. The maximum
availability under the Term Loan Facility shall be the amount of the Credit
minus the aggregate outstanding principal amount of Advances and Term Loans made
- -----
by the Bank; provided, however, that to the extent the proceeds of a Term Loan
-------- -------
are used to repay an outstanding Advance (or a portion thereof), such Advance
(or portion thereof) shall not be considered part of the aggregate principal
amount of outstanding Advances made by the Bank for purposes of this sentence
(such maximum availability hereafter being referred to as the "Term Loan
Availability"). Under no circumstances shall the aggregate outstanding
principal amount of Term Loans and Advances made by the Bank exceed the Credit,
and under no circumstances shall the Bank be obligated (i) to make any Term Loan
(nor may the Borrower reborrow any amount heretofore prepaid) after June 25,
1999, or (ii) to make any Term Loan in excess of the Term Loan Availability.
Each Term Loan made hereunder shall fully and finally mature and be due and
payable in full on the Term Loan Maturity Date specified in the Borrowing Advice
for such Term Loan; provided, however, that to the extent the Borrowing Advice
-------- -------
for any Term Loan selects an Interest Period that expires before the Term Loan
Maturity Date specified in such Borrowing Advice, the Borrower may from time to
time select additional interest rate options and Interest Periods (none of which
shall extend beyond the Term Loan Maturity Date for such Term Loan) by
delivering a new Notice of Interest Period pursuant to Paragraphs 2.3, 2.4 and
2.5 hereof.
-11-
<PAGE>
The obligation of the Borrower to repay the aggregate unpaid principal
amount of the Term Loans shall be evidenced by a promissory note of the Borrower
(the "Term Note") in substantially the form attached hereto as Exhibit A-2, with
the blanks appropriately completed, payable to the order of the Bank, bearing
interest as hereinafter specified. The Term Note shall be dated, and shall be
delivered to the Bank, on the date of the execution and delivery of this
Agreement by the Borrower. The Bank shall, and is hereby authorized by the
Borrower to, endorse on the schedule contained on the Term Note, or on a
continuation of such schedule attached thereto and made a part thereof,
appropriate notations regarding the Term Loans evidenced by the Term Note as
specifically provided therein; provided, however, that the failure to make, or
-------- -------
error in making, any such notation shall not limit or otherwise affect the
obligations of the Borrower hereunder or under the Term Note.
2.3 Making of Advances and Term Loans; Interest Periods; Notice.
-----------------------------------------------------------
Whenever the Borrower desires the Bank to make an Advance or a Term Loan, or to
specify a new Interest Period in respect of a Term Loan as to which an Interest
Period is expiring (a "new Term Loan Interest Period"), it shall give the Bank
(i) same Banking Day's irrevocable written notice prior to 2:00 p.m. (New York
City time) for Reference Rate Advances or Reference Rate Term Loans (or New Term
Loan Interest Periods to which the Reference Rate applies) to be made on such
Banking Day, (ii) one CD Banking Day's prior irrevocable written notice for CD
Rate Advances or CD Term Loans (or New Term Loan Interest Periods to which the
CD Rate applies), or (iii) three Eurodollar Banking Days' prior irrevocable
written notice for Eurodollar Rate Advances or Eurodollar Term Loans (or new
Term Loan Interest Periods to which the Eurodollar Rate applies) (each such
notice to be in the form of a Borrowing Advice in substantially the form
attached hereto as Exhibit C) setting forth the following information:
(a) The date, which shall be either a Banking Day, a CD Banking day,
or a Eurodollar Banking Day, on which such Advance or Term Loan
is to be made or on which such New Term Loan Interest Period is
to commence;
(b) The Interest Period selected in accordance with Paragraph 2.4
hereof;
(c) The interest rate option selected in accordance with Paragraph
2.5 hereof; and
(d) The aggregate principal amount of the Advance or Term Loan to
which such Interest Period and interest rate shall apply.
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<PAGE>
Notice of each Borrowing Advice or Notice of Interest Period
indicating the selection of an Interest Period and whether the interest
calculation is to be based on the Eurodollar Rate, the CD Rate or the Reference
Rate shall simultaneously be given to the Confirming Bank by the Borrower. Any
notice required pursuant to this Paragraph 2.3 for a same day Reference Rate
Advance or Reference Rate Term Loan shall be given no later than 2:00 p.m. (New
York City time) on the date of such Advance or Term Loan. Any other notice
required pursuant to this Paragraph 2.3 shall be given no later than 12:00 noon
(New York City time) on the date such notice is required to be given.
With respect to any Advance having an Interest Period ending on or
before June 25, 1999, if prior to the last day of the Interest Period for such
Advance the Borrower fails timely to provide a new Borrowing Advice in
accordance with this Paragraph 2.3, such Advance shall, on the last day of the
then-existing Interest Period for such Advance, automatically convert into a new
Reference Rate Advance with an Interest Period of thirty (30) days (or, in the
event that there are fewer than thirty (30) days remaining to June 25, 1999, an
Interest Period of the number of days remaining to June 25, 1999). In the event
of any such automatic conversion, the Borrower on the date of such conversion
shall be deemed to make a representation and warranty to the Bank that, to the
best of the Borrower's knowledge, (i) neither the Broker Subsidiary nor MSI is
in violation of minimum net capital requirements as described in Paragraph 7.1,
(ii) the Borrower's Stockholders' Equity is not below the Minimum Stockholders'
Equity as described in Paragraph 7.2, and (iii) no amount owing with respect to
any Commitment Fee, any outstanding Advance, any outstanding Term Loan, or any
interest thereon, or any other amount hereunder, is due and unpaid.
If prior to the last day of the Interest Period applicable to any Term
Loan the Borrower fails timely to provide a Notice of Interest Period in
accordance with this Paragraph 2.3, such Term Loan shall, on the last day of the
then-existing Interest Period for such Term Loan, automatically, have applicable
to it a New Term Loan Interest Period of thirty (30) days (or, in the event
there are fewer than thirty (30) days remaining to the Term Loan Maturity Date
for such Term Loan, an Interest Period of the number of days remaining to such
Term Loan Maturity Date) and shall bear interest at the Reference Rate.
Each Advance or Term Loan to the Borrower under this Agreement shall
be made by 12:00 noon (New York City time) on the date the Advance is to be made
(except with respect to any Reference Rate Advance or Reference Rate Term Loan
for which same-day written notice has been given by Borrower, such Advance or
Term Loan shall be made by 3:30 p.m. (New York City time) on the date of such
same-day written notice), and shall be in
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<PAGE>
immediately available funds credited to the account of Borrower with the Bank or
wired to the Borrower's account at Citibank, N.A. (Account 4055-4016) or such
other account as may be designated by the Borrower.
The Bank, by notice to the Borrower (to be given not later than two
Banking Days prior to the initial Advance or Term Loan hereunder) may request
that Advances or Term Loans made hereunder for which the interest calculation is
to be based on the Eurodollar Rate be evidenced by separate Revolving Notes (in
the case of Advances) and Term Notes (in the case of Term Loans), substantially
in the form of Exhibit A-1 hereto (in the case of Advances) and Exhibit A-2
hereto (in the case of Term Loans), payable to the order of such Bank for the
account of its office, branch or affiliate it may designate as its Eurodollar
lending office. Each reference to the Bank in Paragraph 2.6(b) and 3.5 shall
include the Bank's designated Eurodollar lending office; all notices given to
the Bank in accordance with this Agreement shall be deemed to have been given to
such Eurodollar lending office.
2.4 Interest Periods. The Borrower may select the Interest Period
----------------
(as defined in the next sentence) for each Advance and an Interest Period
applicable from time to time for each Term Loan, it being understood that the
Borrower (i) may request multiple Advances on the same day and may select a
different Interest Period for each such Advance; and (ii) may request multiple
Term Loans having different Interest Periods (including New Term Loan Interest
Periods) applicable thereto; provided, however, that each such Advance or Term
--------- --------
Loan shall be in the amount of $1,000,000 or an integral multiple thereof. An
Interest Period shall be each period, as selected by the Borrower in accordance
with the terms of this Agreement, (i) in the case of each Advance, beginning on
the day such Advance is made under this Agreement, and (ii) in the case of a
Term Loan, beginning on the date specified in the Borrowing Advice or Notice of
Interest Period pertaining thereto, as the case may be, and ending on the date
specified by the Borrower:
(a) Not more than 180 days thereafter, in the case of any Interest
Period for which the interest is to be based on the Reference
Rate, provided that if the last day of an Interest Period would
be a day that is not a Banking Day, such Interest Period shall be
extended to the next succeeding Banking Day;
(b) either 30, 60, 90 or 180 days thereafter, in the case of any
Interest Period for which the interest is to be based on the CD
Rate, provided that if the last day of an Interest Period would
be a day that is not a CD Banking Day, such Interest Period shall
be extended to the next succeeding CD Banking Day; or
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<PAGE>
(c) not less than 7 nor more than 180 days thereafter, in the case
of any Interest Period that is to be based on the Eurodollar
Rate, provided that if the last day of an Interest Period would
be a day that is not a Eurodollar Banking Day, such Interest
Period shall be extended to the next succeeding Eurodollar
Banking Day, unless such next succeeding Eurodollar Banking Day
is in a different calendar month, in which case such interest
period shall end on the next preceding Eurodollar Banking Day;
provided, however, that (i) no Interest Period applicable to any Advance shall
- -------- -------
extend beyond September 23, 1999; and (ii) no Interest Period applicable to any
Term Loan shall extend beyond the Term Loan Maturity Date specified in the
Borrowing Advice for such Term Loan, which in no event shall be later than June
24, 2000.
2.5 Interest Rates. Each Advance and each Term Loan, while
--------------
outstanding, shall bear interest, payable on the last day of each Interest
Period applicable thereto (provided that (i) if any Advance, Term Loan or New
-------- ----
Term Loan Interest Period is based on the Reference Rate, interest attributable
thereto also shall be payable on the last day of each calendar quarter that
occurs before the last day of the applicable Interest Period, or (ii) if the
Interest Period is longer than 90 days, interest with respect thereto also shall
be payable on the Banking Day following the 90th day from the commencement of
the Interest Period) at a rate per annum (based on a 360-day year and actual
days elapsed for Eurodollar Rate and CD Rate Advances and Eurodollar Rate and CD
Rate Term Loans, and a 365-day year and actual days elapsed for Reference Rate
Advances and Reference Rate Term Loans, counting the first day but not the last
day of any Interest Period) that shall be equal to one of the following as
selected by the Borrower:
(a) the Eurodollar Rate, plus 1/4 of 1% per annum;
(b) the CD Rate, plus 3/8 of 1% per annum; or
(c) the Reference Rate.
2.6 Substitute Rates. If upon receipt by the Bank of a Borrowing
----------------
Advice relating to an Advance or of a Borrowing Advice or Notice of Interest
Period relating to a Term Loan:
(a) the Confirming Bank shall determine in accordance with the
provisions of the Confirming Bank Agreement that by reason of
changes affecting the New York City certificate of deposit market
and/or the London interbank market,
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<PAGE>
adequate and reasonable means do not exist for ascertaining the
applicable CD Rate and/or Eurodollar Rate, respectively, with
respect to any Interest Period; or
(b) the Bank shall determine that by reason of any change since the
date hereof in any applicable law or governmental regulation
(other than any such change in the regulations described in the
definition of Eurodollar Rate Reserve Percentage in Article I
hereof), guideline or order (or any interpretation thereof), the
adoption or enactment of any new law or governmental regulation
or order or any other circumstance affecting the Bank or the New
York City certificate of deposit market and/or the London
interbank market, the CD Rate and/or Eurodollar Rate, determined
in accordance with the Confirming Bank Agreement shall no longer
represent the effective cost to the Bank of certificates of
deposit and/or of U.S. dollar deposits, respectively, in the
relevant amount and for the relevant period; or
(c) the Confirming Bank or the Bank shall determine that, as a result
of any change since the date hereof in any applicable law or
governmental regulation or as a result of the adoption of any new
applicable law or governmental regulation, the applicable CD Rate
and/or Eurodollar Rate, would be unlawful;
then, and in any such event, the Bank and the Borrower shall agree upon a rate
of interest applicable to the Advance or Term Loan that is reasonably judged by
them to be the nearest equivalent of the selected rate; provided, however, that
if no such rate is judged by them to be equivalent to the selected rate, the
basis for determining the rate of interest and the Interest Period shall be the
Reference Rate for an Interest Period of 30 days.
2.7 Interest Upon Default. After the principal amount of any Advance
---------------------
or Term Loan, accrued interest upon such Advance or Term Loan, Commitment Fee,
or any other amount hereunder shall have become due and payable by acceleration,
or otherwise, it shall thereafter (until paid) bear interest, payable on demand,
(i) until the end of the Interest Period with respect to such Advance or Term
Loan at a rate per annum equal to 1% per annum in excess of the rate or rates in
effect with respect to such Advance or Term Loan and (ii) thereafter, at a rate
per annum equal to 1% per annum in excess of the Reference Rate.
2.8 Commitment Fee. Through June 25, 1999, the Borrower will pay to
--------------
the Bank a credit commitment fee (the "Commitment Fee") for each
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<PAGE>
calendar quarter at a rate per annum (based on a 360-day year and actual days
elapsed) of 80/1000 of 1% of the average daily unused principal amount of the
Credit in effect during such quarter, payable on the first Banking Day after the
end of such quarter (or portion of such quarter, if applicable), and upon
termination of the Credit; provided, however, that any such payment upon
-------- -------
termination of the Credit during any calendar quarter shall be in lieu of (and
not in addition to) the payment otherwise due for such portion of such quarter
on the first Banking Day after the end of such quarter.
2.9 Facility Fee. On June 26, 1998, the Borrower shall pay a
------------
facility fee to the Bank in an amount equal to 20/1000 of 1% of the Bank's
Commitment as specified in Schedule I.
2.10 Confirming Bank Fee. On June 26, 1998, the Borrower shall pay
-------------------
to the Confirming Bank a fee of $5,000.
2.11 Reduction of Credit. The Borrower, from time to time, upon at
-------------------
least three Banking Days' written notice to the Bank, may permanently reduce any
then-unutilized portion of the Credit in units of $1,000,000 without penalty or
premium; thereafter, during the continuation of the Credit, the computation of
the Commitment Fee and the Bank's obligations for Advances or Term Loans shall
be based upon such reduced Credit. The Borrower, from time to time, upon at
least three Banking Days' written notice to the Bank, may permanently reduce all
or any part of the then-utilized portion of the Credit by making payment to the
Bank on such utilized portion pursuant to Paragraph 2.1 or Paragraph 3.2 hereof,
and thereafter, during the continuation of the Credit, the computation of the
Commitment Fee and the Bank's obligations for Advances or Term Loans shall be
based upon such reduced Credit; provided, however, that in order for a payment
-------- -------
to result in a permanent reduction of the Credit under this paragraph, the
written notice required under this paragraph must expressly provide that the
payment is being tendered pursuant to this paragraph and is intended to result
in a permanent reduction of the Credit. Any written notice delivered pursuant
to either of the foregoing two sentences shall be irrevocable unless the Bank
consents in writing to its revocation. In the event the Credit shall be reduced
to zero pursuant to this paragraph, the Credit shall be deemed terminated, and
any Commitment Fee or any other amount payable hereunder then accrued shall
become immediately payable. Such termination of the Credit shall terminate the
Borrower's obligations with respect to the Commitment Fee to the extent not
theretofore accrued and shall terminate the Bank's obligations to make any
further Advances or Term Loans under this Agreement.
2.12 Termination Date; Extensions. The termination date of the
----------------------------
Bank's Commitment with respect to the Credit (the "Termination Date"), including
both the Revolving Credit Facility under Paragraph 2.1 hereof and
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<PAGE>
the Term Loan Facility under Paragraph 2.2 hereof, is initially June 25, 1999.
At any time no earlier than sixty (60) days and no later than thirty (30) days
prior to the Termination Date then in effect (whether the initial Termination
Date of June 25, 1999 or any later Termination Date as extended under this
Paragraph 2.12), the Borrower may, by written notice to the Bank in the form
attached as Exhibit D hereto, request that the Termination Date be extended for
a period of 364 calendar days. Such request shall be irreovcable and binding
upon the Borrower. If the Bank agrees, in its individual and sole discretion,
to so extend its Commitment and the Termination Date, it shall evidence such
agreement by executing and returning to the Borrower a copy of the Borrower's
written request countersigned by the Bank and delivered to the Borrower by the
Bank no later than fifteen (15) days after the Bank's receipt of Borrower's
written request. If the Bank fails to so respond to and accept the Borrower's
request for extension of the Termination Date then in effect, the Bank's
Commitment shall be terminated on the Termination Date then in effect. If, on
the other hand, the Bank so responds to and accepts the Borrower's request for
extension of the Termination Date, then upon receipt by the Borrower of a copy
of the Borrower's written request countersigned by the Bank, (i) the Bank's
Commitment then in effect and the Termination Date then in effect shall
automatically be extended for the 364-day period specified in such written
request, and (ii) each reference in this Agreement to "June 25, 1999",
"September 23, 1999" and "June 24, 2000" (and any prior extension thereof
pursuant to this Paragraph 2.12) also shall automatically be correspondingly
extended for 364 days.
3. PAYMENT
3.1 Method of Payment. All payments hereunder and under the
-----------------
Revolving Note and the Term Note shall be payable in lawful money of the United
States of America and in immediately available funds not later than 12:00 noon
(New York City time) on the date when due at the principal office of the Bank or
at such other place as the Bank may, from time to time, designate in writing to
the Borrower.
3.2 Optional Prepayment. The Borrower shall be entitled to prepay the
-------------------
Revolving Note and/or the Term Note in whole or in part (such part being in
integral multiples of $1,000,000) without premium or penalty. In the case of
each such prepayment (i) the Borrower shall give to the Bank at least three
Banking Days' prior irrevocable notice of the aggregate principal amount of any
such prepayment, (ii) at the time of prepayment, the Borrower shall pay all
unpaid interest accrued on the amount prepaid, and (iii) the Borrower shall pay
the Bank any amount payable to the Bank in accordance with Paragraph 3.4 hereof
as a result of such prepayment.
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<PAGE>
3.3 Net Payments. All payments by Borrower hereunder and under the
------------
Revolving Note and the Term Note shall be made without set-off or counterclaim
and in such amounts as may be necessary in order that all such payments, after
deduction or withholding for or on account of any present or future taxes,
levies, imposts, duties or other charges of whatsoever nature imposed by any
government or any political subdivision or taxing authority thereof
(collectively, "Taxes"), shall not be less than the amounts otherwise specified
to be paid under this Agreement. Notwithstanding the foregoing, the Borrower
shall not be liable for the payment of any tax on or measured by the net income
of the Bank pursuant to the laws of the jurisdiction where an office of the Bank
making any loan hereunder is located or does business. The Borrower shall pay
all Taxes when due and shall promptly send to the Bank original tax receipts or
copies thereof certified by the relevant taxing authority together with such
other documentary evidence with respect to such payments as may be required from
time to time by the Bank. If the Borrower fails to pay any Taxes to the
appropriate taxing authorities when due or fails to remit to the Bank any such
original tax receipts or certified copies thereof as aforesaid or other required
documentary evidence, the Borrower shall indemnify the Bank for any taxes,
interest or penalties that may become payable by the Bank as a result of such
failure.
3.4 Indemnity for Losses. The Borrower shall indemnify the Bank for
--------------------
any loss or expense (including, without limitation, any interest paid by the
Bank to lenders of funds borrowed by it to make or maintain any Advance or Term
Loan and any loss incurred by the Bank in connection with the reemployment of
funds obtained by the Bank for the purpose of making or maintaining any Advance
or Term Loan hereunder) which the Bank may sustain as a result of (i) any
payment or prepayment of any Advance or Term Loan on a date other than the last
day of any Interest Period, (ii) any failure of the Borrower to borrow on a date
specified in a Borrowing Advice furnished hereunder or (iii) any failure by the
Borrower to prepay any amount on the date and in the amount specified in a
notice furnished by the Borrower in accordance with the terms hereof. A
certificate as to any amounts payable pursuant to the foregoing submitted by the
Bank to the Borrower shall, in the absence of manifest error, be conclusive.
3.5 Change in Law. In the event that the Bank shall become subject
-------------
to any increased cost (including, but not limited to, taxes, increases in
reserves and reductions in amounts receivable by the Bank) with respect to this
Agreement or making or maintaining any borrowing hereunder as a result of any
Change in Law Affecting Cost, then as soon as practicable thereafter, the Bank
shall give the Borrower notice of such Change in Law Affecting Cost and a
certificate containing the amount and basis of demand, and the Borrower shall
pay to the Bank additional amounts that will compensate the Bank for such
increased cost or reduced amount receivable and, at the option of the
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<PAGE>
Borrower on notice to the Bank, the Borrower may either elect to (i) change the
basis for determining interest on outstanding indebtedness for the remainder of
the applicable Interest Period in accordance with Paragraph 2.4 hereof, or (ii)
prepay the principal amount outstanding with accrued interest thereon to the
date of prepayment. If such change or prepayment is made on a day that is not
the last day of an Interest Period, the Borrower shall pay the Bank, upon
request, such amount or amounts as will compensate the Bank for any loss or
expense incurred by the Bank in the redeployment of funds obtained by the Bank
for the purpose of making or maintaining the Advances or Term Loans provided for
herein. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by the Bank to the Borrower shall, in the absence
of manifest error, be conclusive.
4. CONDITIONS
4.1 Conditions Precedent to the Effectiveness of this Agreement. The
-----------------------------------------------------------
Borrower shall deliver to the Bank the following documents concurrently with the
execution of this Agreement:
(a) A written opinion, dated the date hereof, of counsel for the
Borrower, in the form of Exhibit E.
(b) A copy of a resolution or resolutions adopted by the Board of
Directors or Executive Committee of the Borrower, certified by
the Secretary or an Assistant Secretary of the Borrower as being
in full force and effect on the date hereof, authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and a copy
of the Certificate of Incorporation and the By-Laws of the
Borrower, similarly certified.
(c) A certificate, signed by the Secretary or an Assistant Secretary
of the Borrower and dated the date hereof, as to the incumbency
of the person or persons authorized to execute and deliver this
Agreement.
(d) A certificate signed by the Chief Financial Officer of the
Borrower that, as of the date hereof, there has been no material
adverse change in its consolidated financial condition since
December 31, 1997 not reflected on its Quarterly Report on Form
10-Q filed with the SEC for the period ending March 31, 1998.
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<PAGE>
(e) A certificate, signed by the Secretary or an Assistant Secretary
of the Borrower and dated the date hereof, as to the persons
authorized to execute and deliver a Borrowing Advice, a Notice of
Interest Period, and the Revolving Note and the Term Note. The
Bank may rely on such certificate with respect to the Advances
and Term Loans hereunder unless and until it shall have received
an updated certificate and, after receipt of such updated
certificate, similarly may rely thereon.
4.2 Conditions Precedent to Advances and Term Loans. The Bank shall
-----------------------------------------------
not be required to make any Advance or Term Loan pursuant to Article 2 hereof:
(a) when the Credit, the Revolving Credit Facility (in the case of an
Advance) or the Term Loan Facility (in the case of a Term Loan)
has been terminated; or
(b) when any of the representations or warranties of the Borrower set
forth in Article 5 hereof shall prove to have been untrue in any
material respect when made, or when any Event of Default or any
event that, upon lapse of time or notice or both, would become an
Event of Default as defined in Article 8, has occurred; or
(c) when the Broker Subsidiary or MSI is in violation of minimum net
capital requirements as described in Paragraph 7.1; or
(d) when the Borrower's Stockholder's Equity is below the Minimum
Stockholders' Equity as described in Paragraph 7.2.; or
(e) when any amount owing with respect to any Commitment Fee or any
outstanding Advance or Term Loan or any interest thereon or any
other amount payable hereunder is due and unpaid.
Each Borrowing Advice given by the Borrower shall be deemed to be a
representation and warranty by the Borrower to the Bank, effective on and as of
the date of the Advance or Term Loan covered thereby, that (i) the
representations and warranties set forth in Article 5 hereof are true and
correct as of such date, and (ii) no Event of Default, and no event which with
the lapse of time or notice or both would become an Event of Default, has
occurred and is continuing.
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<PAGE>
5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, as of the date of delivery of
this Agreement and as of the date of any Advance or Term Loan, as follows:
5.1 The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and has full power,
authority and legal right and has all governmental licenses, authorizations,
qualifications and approvals required to own its property and assets and to
transact the business in which it is engaged; and all of the outstanding shares
of capital stock of Borrower have been duly authorized and validly issued, are
fully paid and non-assessable.
5.2 The Borrower has full power, authority and legal right to execute
and deliver, and to perform its obligations under, this Agreement, and to borrow
hereunder, and has taken all necessary corporate and legal action to authorize
the borrowings hereunder on the terms and conditions of this Agreement and to
authorize the execution and delivery of this Agreement, and the performance of
the terms thereof.
5.3 This Agreement has been duly authorized and executed by the
Borrower, and when delivered to the Bank will be a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, except, in each case, as enforcement thereof may be limited by
bankruptcy, insolvency or other laws relating to or affecting enforcement of
creditors' rights or by general equity principles.
5.4 The execution and delivery of this Agreement by the Borrower and
the performance of the terms hereof will not violate any provision of any law or
regulation or any judgment, order or determination of any court or governmental
authority or of the charter or by-laws of, or any securities issued by, the
Borrower or any provision of any mortgage, indenture, loan or security
agreement, or other instrument, to which the Borrower is a party or which
purports to be binding upon it or any of its assets in any respect that
reasonably could be expected to have a material adverse effect on the Borrower
and its Subsidiaries taken as a whole on a consolidated basis; nor will the
execution and the delivery of this Agreement by the Borrower and the performance
of the terms hereof result in the creation of any lien or security interest on
any assets of the Borrower pursuant to the provisions of any of the foregoing.
5.5 Except as disclosed in writing by Borrower, no consents of others
(including, without limitation, stockholders and creditors of the
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<PAGE>
Borrower) nor any consents or authorizations of, exemptions by, or
registrations, filings or declarations with, any governmental authority are
required to be obtained by the Borrower in connection with this Agreement.
5.6 The consolidated financial statements of the Borrower contained
in the documents previously delivered to the Bank have been prepared in
accordance with U.S. generally accepted accounting principles and present fairly
the consolidated financial position of the Borrower.
5.7 The Broker Subsidiary possesses all material licenses, permits
and approvals necessary for the conduct of its business as now conducted and as
presently proposed to be conducted as required by law or the applicable rules of
the SEC and the National Association of Securities Dealers, Inc.
5.8 The Broker Subsidiary is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended.
5.9 The Broker Subsidiary is not in arrears with respect to any
assessment made upon it by the Securities Investor Protection Corporation,
except for any assessment being contested by Broker Subsidiary in good faith by
appropriate proceedings and with respect to which adequate reserves or other
provisions are being maintained to the extent required by U.S. generally
accepted accounting principles.
5.10 The Borrower has paid and discharged or caused to be paid and
discharged all taxes, assessments, and governmental charges prior to the date on
which the same would have become delinquent, except to the extent that such
taxes, assessments or charges are being contested in good faith and by
appropriate proceedings by or on behalf of the Borrower and with respect to
which adequate reserves or other provisions are being maintained to the extent
required by U.S. generally accepted accounting principles.
5.11 The Borrower is in compliance with the provisions of and
regulations under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Internal Revenue Code of 1986, as amended, applicable
to any pension or other employee benefit plan established or maintained by the
Borrower or to which contributions are made by the Borrower (the "Plans"). The
Borrower has met all of the funding standards applicable to each of its Plans,
and there exists no event or condition that would permit the institution of
proceedings to terminate any of the Plans under Section 4042 of ERISA. The
estimated current value of the benefits vested under each of the Plans does not,
and upon termination of any of the Plans will not, exceed the estimated current
value of any such Plan's assets. The Borrower has not, with respect to any of
the Plans, engaged in a
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<PAGE>
prohibited transaction set forth in Section 406 of ERISA or Section 4975(c) of
the Internal Revenue Code of 1986.
5.12 The Borrower will not use any amounts advanced to it under this
Agreement to remedy a default under any mortgage, indenture, agreement or
instrument under which there may be issued any Indebtedness of the Borrower to
any bank or bank holding company, or their respective assignees, for borrowed
money. Further, the Borrower will not use any amounts advanced to it under this
Agreement for the immediate purpose of acquiring a company where the Board of
Directors or other governing body of the entity being acquired has made (and not
rescinded) a public statement opposing such acquisition.
5.13 This Agreement contains terms no less favorable to the Bank than
the terms of any Borrowing Agreement.
5.14 The Borrower will not use the proceeds of any loan provided
hereby in such a manner as to result in a violation of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System.
5.15 The persons named for such purpose in the certificates delivered
pursuant to Paragraph 4.1(e) hereof are authorized to execute Borrowing Advices.
5.16 Borrower is not in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note or lease to which
the Borrower is a party or by which it may be bound.
5.17 There is no action, suit or proceeding pending against, or to
the knowledge of the Borrower, threatened against or affecting, the Borrower or
any of its Subsidiaries before any court, arbitrator, governmental body, agency
or official in which there is a significant probability of an adverse decision
which could materially adversely affect the business or the financial position
of the Borrower.
5.18 The Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as the Credit shall
continue or any Advance or Term Loan by the Bank remains outstanding
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<PAGE>
and until full payment of all amounts due to the Bank hereunder, it will, unless
and to the extent the Bank waives compliance in writing:
6.1 Give prompt notice to the Bank, no later than three Banking Days
after becoming aware thereof, of any Event of Default or any event that, upon
lapse of time or notice or both, would become an Event of Default.
6.2 Deliver to the Bank, within ten Banking Days of the filing
thereof with the SEC, a copy of each registration statement filed under the
Securities Act of 1933, a copy of each filing (including exhibits) made by the
Borrower with the SEC under the Securities Exchange Act of 1934, as amended
(but, in the event the Borrower requests an extension of any such filing from
the SEC, promptly (but not later than the second Banking Day following the
filing of such request) deliver a copy of such request to the Bank).
6.3 Maintain and keep in force in adequate amounts such insurance as
is usual in the business carried on by the Borrower.
6.4 Maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with U.S. generally
accepted accounting principles and practices and in compliance with the
regulations of any governmental regulatory body having jurisdiction thereof.
6.5 Advise the Bank, in a timely manner, of material changes to the
nature of business of the Borrower or its Broker Subsidiary as at present
conducted. The Broker Subsidiary is at present engaged in the business of
providing financial services, primarily to individual investors and/or their
advisors.
6.6 With respect to each and any Advance or Term Loan requested by
the Borrower under this Agreement (a "primary Advance" or a "primary Term Loan,"
as the case may be), the Borrower will concurrently request an Advance (or Term
Loan) under each of the Borrowing Agreements (each such other Advance or Term
Loan under each of the Borrowing Agreements being hereinafter individually
referred to as an "other Advance" or "other Term Loan" and collectively referred
to as the "other Advances" or "other Term Loans," as the case may be), with each
such other Advance or other Term Loan being requested in an amount equal to the
same percentage of the Credit under the applicable Borrowing Agreement as the
primary Advance or Term Loan constitutes as a percentage of the Credit under
this Agreement. As an illustration of the application of this Paragraph 6.6 and
by way of example only, if the Borrower requests an Advance under this Agreement
that is in an amount equal to 10% of the Credit under this Agreement, the
Borrower shall simultaneously seek an other Advance under each of the Borrowing
Agreements, each of which other Advances shall be
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<PAGE>
requested in an amount equal to 10% of the Credit under the applicable Borrowing
Agreement.
7. NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as the Credit shall
continue or any Advance or Term Loan by the Bank remains outstanding and until
full payment of all amounts due to the Bank hereunder, unless and to the extent
the Bank waives compliance in writing:
7.1 The Borrower will not permit the Broker Subsidiary to allow (i)
the average of two consecutive month-end Net Capital Ratios to be less than 7%,
or (ii) any month-end Net Capital Ratio to be less than 5%. The Borrower
similarly will not permit MSI to allow (i) the average of two consecutive month-
end Net Capital Ratios to be less than 7%, or (ii) any month-end Net Capital
Ratio to be less than 5%.
7.2 The Borrower will not allow Stockholder's Equity to fall below
the Minimum Stockholders' Equity.
7.3 The Borrower will not (i) permit either Broker Subsidiary or
Intermediate Parent to (a) merge or consolidate, unless the surviving company is
a Controlled Subsidiary, or (b) convey or transfer its properties and assets
substantially as an entirety except to one or more Controlled Subsidiaries; or,
(ii) except as permitted by (i) immediately preceding, sell, transfer or
otherwise dispose of any voting stock of Broker Subsidiary or Intermediate
Parent, or permit either Broker Subsidiary or Intermediate Parent to issue, sell
or otherwise dispose of any of its voting stock, unless, after giving effect to
any such transaction, Broker Subsidiary or Intermediate Parent, as the case may
be, remains a Controlled Subsidiary.
7.4 The Borrower will not permit the Broker Subsidiary to create,
incur or assume any Indebtedness other than:
(a) (i) Indebtedness to customers, other brokers or dealers,
securities exchanges or securities markets, self-regulatory
organizations, clearing houses and like institutions (including,
without limitation, letters of credit or similar credit support
devices issued for the account of Broker Subsidiary and for the
benefit of any of the foregoing in order to comply with any
margin, collateral or similar requirements imposed by or for the
benefit of any of the foregoing), (ii) "broker call" credit,
(iii) stock loans, (iv) obligations to banks for disbursement
accounts,
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<PAGE>
(v) Indebtedness incurred for the purchase of tangible personal
property on a non-recourse basis or for the leasing of tangible
personal property under a capitalized lease; (vi) Indebtedness
incurred for the purchase, installation or servicing of computer
equipment and software; and (vi) Indebtedness incurred in the
ordinary course of the Broker Subsidiary's business, to the
extent not already included in the foregoing clauses (i) through
(vi);
(b) intercompany Indebtedness; and
(c) other Indebtedness in the aggregate not exceeding $100,000,000.
7.5 The Borrower will not, and will not permit any Subsidiary at any
time directly or indirectly to create, assume, incur or permit to exist any
Indebtedness secured by a pledge, lien or other encumbrance (hereinafter
referred to as a "lien") on the voting stock of any Subsidiary without making
effective provision whereby the Revolving Note and the Term Note shall be
secured equally and ratably with such secured Indebtedness so long as other
Indebtedness shall be so secured; provided, however, that the foregoing covenant
shall not be applicable to Permitted Liens (as defined in Paragraph 7.6 below).
7.6 The Borrower will not create, incur, assume or suffer to exist
any lien or encumbrance upon or with respect to any of its properties, whether
now owned or hereafter acquired, except the following (the "Permitted Liens"):
(a) liens securing taxes, assessments or governmental charges or
levies, or in connection with workers' compensation, unemployment
insurance or social security obligations, or the claims or
demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like persons not yet delinquent or which are
being contested in good faith by appropriate proceedings with
respect to which adequate reserves or other provisions are being
maintained to the extent required by U.S. generally accepted
accounting principles;
(b) liens not for borrowed money incidental to the conduct of its
business or the ownership of property that do not materially
detract from the value of any item of property;
(c) attachment, judgment or other similar liens arising in the
connection with court proceedings that do not, in the
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<PAGE>
aggregate, materially detract from the value of its property,
materially impair the use thereof in the operation of its
businesses and (i) that are discharged or stayed within sixty
(60) days of attachment or levy, or (ii) payment of which is
covered in full (subject to customary and reasonable deductibles)
by insurance or surety bonds; and
(d) liens existing at Closing Date provided that the obligations
secured thereby are not increased.
8. EVENT OF DEFAULT
8.1 The occurrence of any of the following events shall constitute an
"Event of Default":
(a) The Borrower shall fail to pay any interest with respect to the
Revolving Note or the Term Note or any Commitment Fee in
accordance with the terms hereof within 10 days after such
payment is due.
(b) The Borrower shall fail to pay any principal with respect to the
Revolving Note or the Term Note in accordance with the terms
thereof on the date when due or shall fail to pay when due (after
expiration of any applicable grace periods) any principal or
interest with respect to any advance or other loan under any of
the Borrowing Agreements.
(c) Any representation or warranty made by the Borrower herein or
hereunder or in any certificate or other document furnished by
the Borrower hereunder shall prove to have been incorrect when
made (or deemed made) in any respect that is materially adverse
to the interests of the Bank or its rights and remedies
hereunder.
(d) Except as specified in (a) and (b) above, the Borrower shall
default in the performance of, or breach, any covenant of the
Borrower with respect to this Agreement, and such default or
breach shall continue for a period of thirty days after there has
been given, by registered or certified mail, to the Borrower by
the Bank a written notice specifying such default or breach and
requiring it to be remedied.
(e) An event of default as defined under any Borrowing Agreement, or
an event of default as defined in any
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mortgage, indenture, agreement or instrument under which there
may be issued, or by which there may be secured or evidenced, any
Indebtedness of the Borrower in a principal amount not less than
$60 million, shall have occurred and shall result in such
Indebtedness becoming or being declared due and payable prior to
the date on which it otherwise would become due and payable;
provided, however, that if such event of default shall be
remedied or cured by the Borrower, or waived by the holders of
such Indebtedness, within twenty days after the Borrower has
received written notice of such event of default and
acceleration, then the Event of Default hereunder by reason
thereof shall be deemed likewise to have thereupon been remedied,
cured or waived without further action upon the part of either
the Borrower or the Bank.
(f) Any involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction
seeking (i) relief against the Borrower or the Broker Subsidiary,
or against all or a substantial part of the property of either of
them, under Title 11 of the United States Code or any other
federal, state or foreign bankruptcy, insolvency, reorganization
or similar law, (ii) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official
for the Borrower or the Broker Subsidiary or for all or a
substantial part of the property of either of them, or (iii) the
winding-up or liquidation of the Borrower or the Broker
Subsidiary; and, in any such case, such involuntary proceeding or
involuntary petition shall continue undismissed for 60 days, or,
before such 60-day period has elapsed, there shall be entered an
order or decree ordering the relief requested in such involuntary
proceeding or involuntary petition.
(g) The Borrower or the Broker Subsidiary shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case under such law, or
shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Borrower or Broker Subsidiary or for
any substantial part of its respective properties, or shall make
any general assignment for the benefit of creditors, or shall
fail generally to pay its respective debts as they become due or
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<PAGE>
shall take any corporate action in furtherance of any of the
foregoing.
(h) A final judgment or judgments for the payment of money in excess
of $50,000,000 in the aggregate shall be entered against the
Borrower by a court or courts of competent jurisdiction, and the
same shall not be discharged (or provisions shall not be made for
such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the
Borrower shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed
during such appeal.
(i) At any time after a Change in Control, the Borrower fails to
maintain at least one of the following credit ratings for its
Senior Medium-Term Notes, Series A: (a) BBB- (or better) by
Standard & Poor's Rating Group, or (b) Baa3 (or better) by
Moody's Investor Service.
8.2 If an Event of Default occurs and is continuing, then and in
every such case the Bank at its option may terminate the Credit and all
obligations of the Bank to make any further Advances or Term Loans, and declare
the principal, any accrued and unpaid interest, any accrued and unpaid
Commitment Fees, or any other amounts payable under the outstanding Revolving
Note and/or under the outstanding Term Note, to be due and payable immediately,
by a notice in writing to the Borrower, and upon such declaration such
principal, interest, Commitment Fees, or other amounts payable hereunder accrued
thereon shall become immediately due and payable, together with any funding
losses that may result as a consequence of such declaration, without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by the Borrower; provided, however, that in the case of any of
the Events of Default specified in subparagraph (f) or (g) of Paragraph 8.1,
automatically without any notice to the Borrower or any other act by the Bank,
the Credit and the Bank's obligations to make any further Advances or Term Loans
shall thereupon terminate and the outstanding principal of the Revolving Note
and of the Term Note, any accrued and unpaid interest, any accrued and unpaid
Commitment Fees or any other amounts payable hereunder shall become immediately
due and payable, together with any funding losses that may result as a
consequence thereof, without presentment, demand, protest or other notice of any
kind, all of which are expressly waived by the Borrower.
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<PAGE>
9. MISCELLANEOUS
9.1 Notices. Any communications between the parties hereto or
-------
notices provided herein shall be effective upon receipt and shall be, unless
otherwise specified, in writing (which may include telex or telecopy
transmission) and shall be given to the Bank at the address specified in
Schedule I hereto and to the Borrower at The Charles Schwab Corporation, Attn:
Treasury Department, 101 Montgomery Street, San Francisco, California 94104, fax
number (415) 667-3155, or to such other address as either party shall hereafter
have indicated to the other party in writing. In the event the Borrower
consents to any assignment by the Bank with respect to this Agreement, upon
receiving written notice from the Bank that such assignment has been effected,
the Borrower thereafter shall give all notices required to be given under this
Agreement to the assignee at the address specified for such assignee by the Bank
or such assignee. Notwithstanding the granting of any participation by the Bank
with respect to this Agreement as permitted by Paragraph 9.4, all notices
required to be given under this Agreement may continue to be given by the
Borrower only to the Bank and shall be effective upon delivery to the Bank as
though no such participation had been granted.
9.2 Waivers. No delay or omission to exercise any right, power or
-------
remedy accruing to the Bank upon any breach or default of the Borrower under
this Agreement shall impair any such right, power or remedy of the Bank, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any amendment,
modification, waiver, permit, consent or approval of any kind or character on
the part of the Bank of any breach or default under this Agreement, or any
waiver on the part of the Bank of any provision or condition of this Agreement,
must be in writing signed by the Bank and shall be effective only to the extent
specifically set forth in writing. All remedies, either under this Agreement or
by law or otherwise afforded to the Bank, shall be cumulative and not
alternative.
9.3 Expenses. The Borrower agrees to pay all reasonable out-of-
--------
pocket expenses of the Bank (including the reasonable fees and expenses of its
counsel) in connection with the negotiation, preparation, execution and delivery
of this Agreement, any amendments or modifications of or supplements to any of
the foregoing and any and all other documents furnished in connection herewith,
as well as, after the occurrence of any event that upon a lapse of time or
notice or both, would become an Event of Default, all costs and expenses
(including reasonable fees and expenses of counsel who may be employees of Bank)
in connection with the enforcement or administration (including, without
limitation, actions taken by the Bank in
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<PAGE>
connection with litigation or regulatory proceedings as to which this Agreement
becomes relevant) of, or legal advice in respect to the rights and
responsibilities or the exercise of any right or remedy under, any provision of
this Agreement, the Revolving Note, the Term Note, and any amendments or
modifications of or supplements to any of the foregoing.
9.4 Assignment. Except as hereinafter set forth in this Paragraph
----------
9.4, no rights of the Bank hereunder may be assigned, transferred, sold,
assigned, pledged or otherwise disposed of, and no lien, charge or other
encumbrance may be created or permitted to be created thereon without the prior
written consent of the Borrower.
(a) Transfers to Affiliated Entities and Federal Reserve Banks. The
Bank shall have the right at any time and from time to time, to
transfer any loan hereunder to any Federal Reserve Bank or to any
parent, subsidiary, affiliate, branch or other related office of
the Bank which is not engaged in the securities brokerage
business or the investment advisory business, and to grant
participations hereunder to any such Federal Reserve Bank,
parent, subsidiary, affiliate, branch or other related office of
the Bank. In no event shall any such transferee or participant
be considered a party to the Agreement, and Bank shall continue
to service any loan transferred pursuant to this Paragraph 9.4(a)
and shall remain liable for the performance of all of its
obligations under this Agreement. Notwithstanding any such
transfer or grant of a participation, Borrower shall continue to
make payments required under this Agreement to Bank unless and
until otherwise notified in writing by Bank, and Bank agrees to
indemnify and hold Borrower harmless from and against any claims
by any transferee or participant arising out of any payment made
to Bank in accordance with this Paragraph 9.4(a).
(b) Transfers to Unrelated Entities. Subject to the provisions of
this Paragraph 9.4(b), the Bank may at any time sell to one or
more unrelated financial institutions not engaged in the
securities brokerage business or the investment advisory business
(each a "Participant") participating interests in any Advance or
Term Loans, the Revolving Note, the Term Note, the Bank's Credit
hereunder or any other interest of the Bank hereunder. In the
event of any such sale by the Bank to a Participant, the Bank's
obligations under this Agreement shall remain unchanged, the Bank
shall remain solely responsible for the
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<PAGE>
performance hereof, the Bank shall remain the holder of the
Revolving Note and of the Term Note for all purposes under this
Agreement, and the Borrower shall continue to deal solely and
directly with the Bank in connection with the Bank's rights and
obligations under this Agreement. Any agreement pursuant to
which Bank may grant a participation shall provide that the Bank
shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to declare an acceleration or default
hereunder and the right to approve any amendment, modification or
waiver of any provision of this Agreement.
The Borrower may not assign this Agreement or any of its rights
hereunder without the prior written consent of the Bank.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the Bank and the Borrower and their respective successors and
assigns, and the term "Borrower" as used in this Agreement shall include the
Borrower and all such successors and assigns.
9.5 Confidentiality. Bank agrees to hold any confidential
---------------
information that it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure: (a) to legal counsel and accountants for
Borrower or Bank; (b) to other professional advisors to Borrower or Bank,
provided that the recipient has delivered to the Bank a written confidentiality
agreement substantially similar to this Paragraph 9.5; (c) to regulatory
officials having jurisdiction over Bank; (d) as required by applicable law or
legal process or in connection with any legal proceeding in which Bank and
Borrower are adverse parties; and (e) to another financial institution in
connection with a disposition or proposed disposition to that financial
institution of all or part of Bank's interests hereunder or a participation
interest in the Revolving Note and/or the Term Note, each in accordance with
Paragraph 9.4 hereof, provided that the recipient has delivered to Bank a
written confidentiality agreement substantially similar to this Paragraph 9.5.
Bank further agrees that it will not use such confidential information in any
activity or for any purpose other than the administration of credit facilities
extended to Borrower and its Subsidiaries and, without limitation, will take
such steps as are reasonably appropriate to preclude access to any such
confidential information to be obtained by any person employed by Bank, or by an
affiliate of Bank, who is not involved in the administration of credit
facilities extended to Borrower and its Subsidiaries. For purposes of the
foregoing, "confidential information" shall mean any information respecting
Borrower or its Subsidiaries reasonably specified by Borrower as confidential,
other than (i) information filed with any governmental agency and available to
- ----------
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<PAGE>
the public, (ii) information published in any public medium from a source other
than, directly or indirectly, Bank, and (iii) information disclosed by Borrower
to any person not associated with Borrower without a written confidentiality
agreement substantially similar to this Paragraph 9.5. Certain of the
confidential information pursuant to this Agreement is or may be valuable
proprietary information that constitutes a trade secret of Borrower or its
Subsidiaries; neither the provision of such confidential information to Bank or
the limited disclosures thereof permitted by this Paragraph 9.5 shall affect the
status of any such confidential information as a trade secret of Borrower and
its Subsidiaries. Bank, and each other person who agrees to be bound by this
Paragraph 9.5, acknowledges that any breach of the agreements contained in this
Paragraph 9.5 would result in losses that could not be reasonably or adequately
compensated by money damages. Accordingly, if Bank or any such other person
breaches its obligations hereunder, Bank or such other person recognizes and
consents to the right of Borrower, Intermediate Parent, and/or Broker Subsidiary
to seek injunctive relief to compel such Bank or other Person to abide by the
terms of this Paragraph 9.5.
9.6 Waiver of Jury Trial. The Borrower waives any right it may have
--------------------
to trial by jury in any action or proceeding to enforce or defend any rights or
remedies arising under this Agreement and the Revolving Note and the Term Note.
9.7 Entire Agreement. This instrument and the exhibits hereto
----------------
embody the entire agreement with respect to the subject matter hereof between
the Borrower and the Bank.
9.8 Counterparts. This Agreement may be executed in as many
------------
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instrument.
9.9 Governing Law. This Agreement and the Revolving Note and the
-------------
Term Note shall be deemed to be contracts under, and for all purposes shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of California.
9.10 Notice of Modification of Borrowing Agreements. The Borrower
----------------------------------------------
shall give prior notice to the Bank of any proposed modification in the terms of
any of the Borrowing Agreements and hereby agrees, should the Bank so request,
to make identical modifications in the terms of this Agreement.
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<PAGE>
9.11 No Priority. Nothing in this Agreement is intended, or shall be
-----------
interpreted, to create any priority of any of the banks listed on Schedule I
over any other of such banks with respect to their rights under the Borrowing
Agreements.
9.12 Headings. All headings in this Agreement are for convenience of
--------
reference only and shall not be construed to limit or interpret the provisions
they introduce.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
Bank: Borrower:
[NAME OF BANK] THE CHARLES SCHWAB CORPORATION
By By /s/ Joseph R. Martinetto
_________________________________ ______________________________
Its Joseph R. Martinetto
________________________________ Senior Vice President and Treasurer
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<PAGE>
SCHEDULE OF CREDIT AGREEMENTS OMITTED
The following are the banks that are each signatories to separate but
substantially identical credit agreements that materially differ only with
respect to (i) the bank involved and (ii) the amount of the bank's commitment.
Bank of America NT&SA
By /s/ Steven W. Kastenholz
-------------------------
Its Managing Director
-----------------------
Bank of New York
By /s/ Mark J. Rogers
---------------------------
Its Vice President
-------------------------
The Chase Manhattan Bank
By /s/ Robert J. Gould
---------------------------
Its Managing Director
-------------------------
Citicorp USA, Inc.
By /s/ Kelly Hebert
---------------------------
Its Attorney-in-fact
-------------------------
The First National Bank of Chicago
By /s/ Jeanne M. Madej
---------------------------
Its Assistant Vice President
-------------------------
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<PAGE>
First Tennessee Bank National Association
By /s/ Victor Notaro
---------------------------
Its Vice President
-------------------------
Norwest Bank Minnesota, N.A.
By /s/ Janet M. Klein
---------------------------
Its Vice President
-------------------------
PNC Bank
By /s/ Philip Jackson
---------------------------
Its Senior Vice President
-------------------------
NationsBank, N.A.
By /s/ Kenneth Ricciardi
---------------------------
Its Senior Vice President
-------------------------
Union Bank of Switzerland
By /s/ Virginia M. Loebel
---------------------------
Its Managing Director
-------------------------
By /s/ Vincent Piazza
---------------------------
Its Assistant Treasurer
-------------------------
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<PAGE>
SCHEDULE I
TO CREDIT AGREEMENT (364-DAY COMMITMENT) DATED AS OF JUNE 26, 1998 BETWEEN
THE CHARLES SCHWAB CORPORATION AND THE BANKS LISTED BELOW
(Dollars in Millions)
Amount
------
Bank of America NT&SA $ 25
Attn: Steven W. Kastenholz, Managing Director
231 South LaSalle Street
Chicago, IL 60697
Bank of New York 25
Attn: Mark Rogers, Vice President
One Wall Street, First Floor
New York, NY 10286
Chase Manhattan Bank 17.5
Broker Dealer Division
Attn: Robert J. Gould, Managing Director
One Chase Plaza, 21st Floor
New York, NY 10081
Citicorp USA, Inc. 25
Attn: Michael Mauerstein, Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
The First National Bank of Chicago 17.5
Attn: Denise de Diego, Senior Vice President
153 West 51st Street, Suite 4000
New York, NY 10019
First Tennessee Bank National Association 10
Attn: Victor Notaro, Vice President
165 Madison Avenue
Main Office, 9th Floor
Memphis, TN 38103
Norwest Bank Minnesota, N.A. 10
Attn: Bradley A. Hardy, Vice President
6th and Marquette
Minneapolis, MN 55479-0085
PNC Bank 25
Attn: Philip Jackson, Senior Vice President
1600 Market Street, 21st Floor
Philadelphia, PA 19101
NationsBank, N.A. 10
Attn: Kenneth Ricciardi, Senior Vice President
55 Broadway, 4th Floor
New York, NY 10006
-38-
<PAGE>
Union Bank of Switzerland 10
New York Branch
Attn: Virginia Loebel, Managing Director
299 Park Avenue
New York, NY 10171-0026
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<PAGE>
EXHIBIT A-1
REVOLVING NOTE
Date:
$ ____________________
For value received, the undersigned The Charles Schwab Corporation
("Schwab") hereby promises to pay to the order of ________________ (the "Bank")
at ______________, the principal amount of each Advance made by the Bank to
Schwab under the terms of a Credit Agreement (364-Day Commitment) between Schwab
and the Bank, dated as of June 26, 1998, as amended from time to time (the
"Credit Agreement"), as shown in the schedule attached hereto and any
continuation thereof, on the last day of the Interest Period (as defined in the
Credit Agreement) for such Advance. The undersigned also promises to pay
interest on the unpaid principal amount of each Advance from the date of such
Advance until such principal amount is paid, at the rates per annum, and payable
at such times, as are specified in the Credit Agreement. This Note shall be
subject to the Credit Agreement, and all principal and interest payable
hereunder shall be due and payable in accordance with the terms of the Credit
Agreement. Terms defined in the Credit Agreement are used herein with the same
meanings.
Principal and interest payments shall be in money of the United States
of America, lawful at such times for the satisfaction of public and private
debts, and shall be in immediately available funds.
Schwab promises to pay costs of collection, including reasonable
attorney's fees, if default is made in the payment of this Note.
The terms and provisions of this Note shall be governed by the
applicable laws of the State of California.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officers or employees thereunto duly authorized and directed by
appropriate corporate authority.
The Charles Schwab Corporation
By:
-----------------------------------
Joseph R. Martinetto
Senior Vice President and Treasurer
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<PAGE>
EXHIBIT A-2
TERM NOTE
Date:
$____________________
For value received, the undersigned The Charles Schwab Corporation
("Schwab") hereby promises to pay to the order of ___________________ (the
"Bank") at ____________________________, the principal amount of each Term Loan
made by the Bank to Schwab under the terms of a Credit Agreement (364-Day
Commitment) between Schwab and the Bank, dated as of June 26, 1998, as amended
from time to time (the "Credit Agreement"), as shown in the schedule attached
hereto and any continuation thereof, on the Term Loan Maturity Date (as defined
in the Credit Agreement) for such Term Loan. The undersigned also promises to
pay interest on the unpaid principal amount of each Term Loan from the date of
such Term Loan until such principal amount is paid, at the rates per annum, and
payable at such times, as are specified in the Credit Agreement. This Note
shall be subject to the Credit Agreement, and all principal and interest payable
hereunder shall be due and payable in accordance with the terms of the Credit
Agreement. Terms defined in the Credit Agreement are used herein with the same
meanings.
Principal and interest payments shall be in money of the United States
of America, lawful at such times for the satisfaction of public and private
debts, and shall be in immediately available funds.
Schwab promises to pay costs of collection, including reasonable
attorney's fees, if default is made in the payment of this Note.
The terms and provisions of this Note shall be governed by the
applicable laws of the State of California.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officers or employees thereunto duly authorized and directed by
appropriate corporate authority.
The Charles Schwab Corporation
By:
-------------------------------------
Joseph R. Martinetto
Senior Vice President and Treasurer
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<PAGE>
EXHIBIT B
CONFIRMING BANK AGREEMENT
This Agreement is entered into as of June 26, 1998 between The Charles
Schwab Corporation (the "Borrower") and Citibank, N.A. (the "Confirming Bank").
WHEREAS, under the terms of separate substantially similar Credit
Agreements (364-Day Commitment) (the "Credit Agreements") between the Borrower
and each of the banks (the "Banks") set forth on Schedule I hereto, the Banks
have severally agreed to lend certain amounts to the Borrower on a revolving
credit loan basis through June 25, 1999 and maturing no later than September 23,
1999 and to make Term Loans to the Borrower on or before June 25, 1999 and
maturing no later than June 24, 2000 (as such dates may be extended from time to
time pursuant to Paragraph 2.12 of each of the Credit Agreements);
WHEREAS, the Borrower desires the Confirming Bank to calculate the
basis for the rates of interest to be borne by certain of the loans which may be
made by the Banks to the Borrower under the Credit Agreements:
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Terms defined in the Credit Agreements shall bear the same
meanings herein unless the context otherwise requires.
2. Upon the terms and subject to the conditions hereinafter
mentioned, the Confirming Bank shall determine the CD Rate (including the
Assessment Rate and the CD Rate Reserve Percentage), the Eurodollar Rate
(including the Eurodollar Rate Reserve Percentage) or the Reference Rate which
is to serve as the basis for the interest rate of certain loans made under any
of the Credit Agreements.
3. Simultaneously with the giving of a Borrowing Advice, to any of
the Banks, the Borrower shall give to the Confirming Bank notice of such
Borrowing Advice (such notice being hereinafter referred to as a "Rate Request")
which shall specify the Bank to which such Borrowing Advice was given and the
principal amount, the Interest Period, and the basis for interest calculation
referred to therein.
4. (a) Upon receipt by the Confirming Bank of a Rate Request
relating to an Interest Period for which the interest calculation is to be based
on the Eurodollar Rate, the Confirming Bank, as soon as practicable, shall (i)
calculate the Eurodollar Rate Reserve Percentage for such Interest Period, which
shall be the percentage (expressed as a decimal) that is in effect on the first
day of such Interest Period, as prescribed by the Board of Governors of the U.S.
Federal Reserve System (or any successor), for determining the reserve
requirements to be maintained by the Bank under Regulation D (or any successor
regulation thereof) as amended to the date hereof (including such reserve
requirements as become applicable to the Bank
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<PAGE>
pursuant to phase-in or other similar requirements of Regulation D at any time
subsequent to the date hereof) in respect of "Eurocurrency liabilities" (as
defined in Regulation D), (ii) (aa) if there appear on the Reuters Screen LIBO
Page as at 11:00 A.M. (London time) two Eurodollar Banking Days prior to the
commencement of the relevant Interest Period at least two rates at which
deposits of U.S. dollars for the selected Interest Period are offered, identify
such offered rates and calculate the Eurodollar Rate to be the arithmetic mean
(adjusted upward, if necessary, to the nearest 1/16 of 1%) of such offered rates
or (bb) if fewer than two offered rates appear, obtain from each of the
Eurodollar Rate Reference Banks information with respect to the average rate per
annum (adjusted upward, if necessary, to the nearest 1/16 of 1%) at which
deposits of U.S. dollars for the selected Interest Period and in the amount
specified in the Rate Request are offered in immediately available funds to such
Eurodollar Rate Reference Bank (without giving effect to reserve requirements
described in the Eurodollar Rate Reserve Percentage section of the Credit
Agreement) in the London interbank market as at 11:00 a.m. (London time) two
Banking Days prior to the commencement of the relevant Interest Period and shall
determine the Eurodollar Rate for the relevant Interest Period to be the average
of the rates so obtained, adjusted upward, if necessary, to the nearest 1/16 of
1%, and (iii) determine the Eurodollar Rate for the relevant Interest Period to
be (aa) the applicable rate obtained pursuant to paragraph 4(a)(ii)(aa) or (bb)
hereof, divided by a percentage (expressed as a decimal) equal to 1.00 minus the
Eurodollar Rate Reserve Percentage. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurodollar
Rate Reserve Percentage.
In the event that (x) fewer than two offered rates appear on the
Reuters Screen LIBO Page as described above and fewer than two Eurodollar Rate
Reference Banks shall have provided information with respect to such offered
rates to the Confirming Bank, or (y) the Confirming Bank shall have determined
(which determination shall be conclusive and binding upon the Borrower and the
Banks) that by reason of changes affecting the London interbank market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for the
relevant Interest Period, the Confirming Bank shall notify the Borrower and the
Bank specified in the Rate Request of such fact as soon as possible (and provide
information concerning the basis for any such determination described in (y)
above).
(b) As soon as possible after the determination of the Eurodollar
Rate, the Confirming Bank shall forthwith notify the Borrower and the Bank
specified in the Rate Request of such determination by telephone, confirmed by
written or telegraphic communication. The Confirming Bank shall simultaneously
notify the Borrower and the Bank as to which of the Eurodollar Rate Reference
Banks supplied information used in determining the Eurodollar Rate and the
information supplied by each such bank.
5. (a) Upon receipt by the Confirming Bank of a Rate Request
relating to an Interest Period for which the interest calculation is to be based
on the CD Rate, the Confirming Bank, as soon as practicable, shall:
(i) estimate the Assessment Rate for such Interest Period,
which shall be the assessment rate per annum (adjusted upward, if necessary,
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to the nearest 1/100 of 1%) on the first day of such Interest Period for
determining the then current annual assessment payable by the Bank specified in
the Rate Request to the Federal Deposit Insurance Corporation (or any successor
thereto) for such Corporation's (or such successor's) insuring U.S. dollar
deposits of the Bank specified in the Rate Request in the United States;
(ii) calculate the CD Rate Reserve Percentage for such Interest
Period, which shall be the percentage (expressed as a decimal) that is in effect
on the first day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor), for determining the
maximum reserve requirements (including, without limitation, supplemental,
marginal and emergency reserves) for a bank with deposits exceeding five billion
dollars that is a member of the Federal Reserve System, in respect of new non-
personal time deposits in U.S. dollars in the United States in the amount
specified in the Rate Request having a maturity comparable to such Interest
Period (such bank's reserve ratio on such time deposits in effect on June __,
1998 was 0%);
(iii) obtain (aa) from each of the CD Reference Banks information
with respect to the average rate per annum (adjusted upward, if necessary, to
the nearest 1/16 of 1%) at which bids are received by each such CD Reference
Bank for its certificates of deposit for the selected Interest Period and in
the amount specified in the Rate Request as at 11:00 a.m., New York City time
(or as soon as practicable thereafter), on the first day of the relevant
Interest Period from two or more New York City certificate of deposit dealers
of recognized standing selected by the Confirming Bank for the purchase at
face value of such certificates of deposit, and calculate the applicable rate
to be the arithmetic mean (adjusted upward, if necessary, to the nearest 1/16
of 1%) of the average rates per annum of the CD Reference Banks, or (bb) in
the event the Confirming Bank cannot, without undue effort, obtain rates from
such CD Reference Banks the certificate of deposit rate as reported for the
date of the Borrowing Advice, in "Federal Reserve Statistical Release--
Selected Interest Rates--H.15 (519)" published by the Board of Governors of
the Federal Reserve System, or any successor publication, under the caption
"CDs (Secondary Market)" having a maturity most closely approximating the
conclusion of the Interest Period; and
(iv) determine the CD Rate for the relevant Interest Period to be
the sum of (aa) the Assessment Rate for such Interest Period, plus (bb) the
applicable rate obtained pursuant to paragraph 5(a) (iii)(aa) or (bb) hereof
(adjusted upward, if necessary, to the nearest 1/16 of 1%) divided by a
percentage (expressed as a decimal) equal to 1.00 minus the CD Rate Reserve
Percentage. The CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate and the CD Rate Reserve
Percentage.
In the event that (x) fewer than two CD Reference Banks shall have
provided information with respect to such offered rates to the Confirming Bank,
or (y) the Confirming Bank shall have determined (which determination shall be
conclusive and binding upon the Borrower and the Banks) that by reason of
changes affecting the New York City certificate of deposit market, adequate and
reasonable means do not exist for ascertaining the CD Rate for the relevant
Interest Period, the
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<PAGE>
Confirming Bank shall notify the Borrower and the Bank specified in the Rate
Request of such fact as soon as possible (and provide information concerning the
basis for any such determination described in (y) above).
(b) As soon as possible after the determination of the CD Rate or any
adjustment of the CD Rate, the Confirming Bank shall forthwith notify the
Borrower and the Bank specified in the Rate Request of such determination by
telephone, confirmed by written or telegraphic communication. The Confirming
Bank shall simultaneously notify the Borrower and the Bank as to which of the CD
Reference Banks supplied information used in determining the CD Rate and the
information supplied by each such Bank.
6. (a) Upon receipt by the Confirming Bank of a Rate Request relating
to an Interest Period for which the interest calculation is to be based on the
Reference Rate, the Confirming Bank shall:
(i) determine, on a daily basis during such Interest Period, the
higher of (a) the highest per annum rate of interest (adjusted upward, if
necessary, to the nearest 1/16 of 1%) publicly announced by any Reference Rate
Reference Bank as its "prime rate," "prime commercial lending rate," "reference
rate," or "base rate," as the case may be, and (b) the highest per annum Federal
Funds Effective Rate available to any Reference Rate Reference Bank, plus 1/2 of
1%;
(ii) on the last day of each month falling within such Interest
Period, determine the Reference Rate for the applicable portion of each month
then ending, which shall be equal to the arithmetic mean of the daily rates of
interest with the rate on each day being equal to the rate determined under (i)
above.
(b) At 10:00 a.m. on the first day of the month following each month
for which the Reference Rate has been determined, the Confirming Bank shall
notify the Borrower and the Bank specified in the Rate Request of such
determination by telephone, confirmed by written or telegraphic communication.
The Confirming Bank shall immediately notify the Borrower and the Bank as to
which of the Reference Rate Reference Banks supplied information used in
determining the Reference Rate and the information supplied by each such bank.
7. The determination of the Eurodollar Rate, the CD Rate or the
Reference Rate by the Confirming Bank shall be final and binding in the absence
of manifest error.
8. The Confirming Bank accepts its obligations herein set forth,
upon the terms and conditions hereof, including the following, to all of which
the Borrower agrees:
(a) The Confirming Bank shall be entitled to the compensation to be
agreed upon with the Borrower for all services rendered by the Confirming Bank,
and the Borrower agrees promptly to pay such compensation and to reimburse the
Confirming Bank for the reasonable out-of-pocket expenses (including reasonable
counsel fees) incurred by it in connection with the services
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<PAGE>
rendered by it hereunder. The Borrower also agrees to indemnify the Confirming
Bank for, and to hold it harmless against, any loss, liability or expense
(including the costs and expenses of defending against any claim of liability)
incurred without gross negligence or willful misconduct, arising out of or in
connection with its acting as Confirming Bank hereunder.
(b) In acting under this Agreement, the Confirming Bank does not
assume any obligation or relationship of agency or trust for or with any of the
Banks.
(c) The Confirming Bank shall be protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or
anything suffered by it in reliance upon any notice (including any Rate
Request), direction, certificate, affidavit, statement or other paper or
document reasonably believed by such Confirming Bank to be genuine and to have
been passed or signed by the proper parties. Under all circumstances, the
Confirming Bank's maximum liability for any error or omission in the performance
of its rate determination and notification obligations under this Agreement
shall be the difference between (1) any erroneous rate it determined and/or
provided notification of in response to a Rate Request from the Borrower, and
(2) the corresponding actual rate it should have determined and/or provided
notification of pursuant to the provisions of this Agreement.
(d) The Confirming Bank, its officers, directors and employees may
engage or be interested in any financial or other transaction with the Borrower
(including the lending of moneys to the Borrower under one of the Borrowing
Agreements), and may act on, or as depositary, trustee or agent for, any
committee or body of holders of notes or other obligations of the Borrower, as
freely as if it were not the Confirming Bank.
(e) The Confirming Bank shall be obligated to perform such duties and
only such duties as are herein specifically set forth, and no implied duties or
obligations shall be read into this Agreement against the Confirming Bank.
(f) The Confirming Bank may consult with counsel satisfactory to it
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, omitted to be taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel.
(g) Any written order, certificate, notice (including any Rate
Request), request, direction, or other communication, from the Borrower made or
given under any provision of this Agreement shall be sufficient if signed by a
person authorized to execute and deliver a Borrowing Advice.
9. (a) The Confirming Bank may at any time resign as such Confirming
Bank by giving written notice to the Borrower and the Banks of such intention
on its part, specifying the date on which its desired resignation shall become
effective; provided, however, that no such resignation shall become effective
until a successor Confirming Bank is selected by the Borrower. The Confirming
Bank may be
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<PAGE>
removed at any time by the filing with it of an instrument in writing signed on
behalf of the Borrower and specifying such removal and the date when it is
intended to become effective. Such resignation or removal shall take effect
upon the date of the appointment by the Borrower, as hereinafter provided, of a
successor Confirming Bank (which shall be acceptable to the Banks) and the
acceptance of such appointment by such successor Confirming Bank. Upon its
resignation or removal, the Confirming Bank shall be entitled to the payment by
the Borrower of its compensation for the services rendered hereunder and to the
reimbursement of all out-of-pocket expenses, including reasonable fees of
counsel, incurred in connection with the services rendered hereunder by the
Confirming Bank.
(b) In case at any time the Confirming Bank shall resign, or shall be
removed, or shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or shall file a voluntary petition in bankruptcy or make an
assignment for the benefit of its creditors or consent to the appointment of a
conservator, liquidator or receiver of all or any substantial part of its
property, or shall admit in writing its inability to pay or meet its debts as
they mature or shall suspend payment thereof, or if an order of any court shall
be entered approving any petition filed by or against the Confirming Bank under
the provisions of any applicable bankruptcy or insolvency law, or if a
liquidator or receiver of it or of all or any substantial part of its property
shall be appointed, or if any public officer shall take charge or control of it
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, a successor Confirming Bank (which shall be acceptable to the
Banks) may be appointed by the Borrower by an instrument in writing, filed with
the successor Confirming Bank. Upon the appointment as aforesaid of a successor
Confirming Bank and acceptance by it of such appointment, the Confirming Bank so
superseded shall cease, if not previously disqualified by operation of law, to
be such Confirming Bank hereunder.
(c) Any successor Confirming Bank appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Borrower (which shall
deliver a copy of same to the Banks) an instrument accepting such appointment
hereunder, and thereupon such successor Confirming Bank, without any further
act, deed or conveyance, shall become vested with all the authority, rights,
powers, trusts, immunities, duties and obligations of such predecessor with like
effect as if originally named as such Confirming Bank hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obliged to transfer and deliver, and such successor Confirming
Bank shall be entitled to receive, copies of any relevant information maintained
by such predecessor Confirming Bank.
(d) Any corporation or bank into which the Confirming Bank may be
merged or converted, or any corporation or bank with which the Confirming Bank
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Confirming Bank shall be a party, or
any corporation or bank to which the Confirming Bank shall sell or otherwise
transfer all or substantially all the assets and business of such Confirming
Bank, shall, to the extent permitted by applicable law and provided that it
shall be qualified as aforesaid, be the successor Confirming Bank under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto. Notice
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<PAGE>
of any such merger, conversion, consolidation or sale shall forthwith be given
to the Borrower and to each of the Banks.
10. The Borrower undertakes that, so long as any Revolving Note or
Term Note is outstanding under any of the Credit Agreements, there shall at all
times be two Eurodollar Rate Reference Banks, two CD Reference Banks, and two
Reference Rate Reference Banks. The initial Eurodollar Rate Reference Banks, CD
Reference Banks and Reference Rate Reference Banks shall be those stated in the
Credit Agreements.
If any Reference Bank (i.e., any Eurodollar Rate Reference Bank, any
CD Reference Bank or any Reference Rate Reference Bank) or office thereof is
later unable or unwilling to act as such, the Borrower will appoint another
leading bank or office thereof (independent of the Borrower and acceptable to
the Banks) engaged in business in the appropriate market for determination of
applicable rates to replace such Reference Bank in such capacity. The Borrower
shall notify the Confirming Bank and each of the Banks forthwith upon any change
in the identity of any of the Reference Banks. Pending receipt of any such
notification the Confirming Bank shall be entitled to assume that the Reference
Banks are those named in the Credit Agreement as modified by changes of which
notification has already been received by the Confirming Bank.
11. Except where telephonic instructions or notices are authorized
herein to be given, all notices, demands, instructions and other communications
required or permitted to be given or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt request, or by prepaid Telex, TWX or
telegram (with messenger delivery specified in the case of a telegram), or by
telecopier, and shall be deemed to be given for purposes of this Agreement on
the day that such writing is delivered to the intended recipient thereof in
accordance with the provisions of this paragraph. Unless otherwise specified in
a notice sent or delivered in accordance with the foregoing provisions of this
paragraph, notices, demands, instructions and other communications in writing
shall be given to or made upon the respective parties hereto at their respective
addresses (or to their respective Telex, TWX or telecopier numbers) indicated
below, and, in the case of telephonic instructions or notices, by calling the
telephone number or numbers indicated for such party below:
If to the Borrower: The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Attn: Treasurer
Telephone: (415) 627-7000
FAX: (415) 667-3155
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<PAGE>
If to the Confirming Bank: Citibank, N.A.
Attn: Michael Mauerstein
Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
Telephone: (212) 559-6985
FAX: (212) 371-6309
If to any of the Banks: To the respective address, telephone number or telex
number set forth opposite the name of such Bank on
Schedule I hereto.
12. Schedule I hereto may be amended from time to time by the
Borrower by the Borrower's delivery to the Confirming Bank of a new Schedule I.
Each such new Schedule I delivered by the Borrower to the Confirming Bank shall
replace and supersede the then-existing Schedule I, and any such newly delivered
Schedule I shall be the Schedule I referred to in this Agreement. Each such
newly delivered Schedule I shall include all of the then-existing Credit
Agreements between the Borrower and any Bank having substantially similar terms
to the Credit Agreements listed on the original Schedule I hereto.
13. This Agreement shall be deemed to be a contract under, and for
all purposes shall be governed by and construed and interpreted in accordance
with, the laws of the State of California.
14. This Agreement may be executed in as many counterparts as may be
deemed necessary or convenient, and by the parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
CITIBANK, N.A. THE CHARLES SCHWAB CORPORATION
By: By:
____________________________ ________________________________
Joseph R. Martinetto
Its: Senior Vice President and Treasurer
___________________________
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<PAGE>
SCHEDULE I
TO CONFIRMING BANK AGREEMENT DATED AS OF JUNE 26, 1998 BETWEEN
THE CHARLES SCHWAB CORPORATION AND CITIBANK, N.A.
(Dollars in Millions)
Amount
------
Bank of America NT&SA $ 25
Attn: Steven W. Kastenholz, Managing Director
231 South LaSalle Street
Chicago, IL 60697
Bank of New York 25
Attn: Mark Rogers, Vice President
One Wall Street, First Floor
New York, NY 10286
Chase Manhattan Bank 17.5
Broker Dealer Division
Attn: Robert J. Gould, Managing Director
One Chase Plaza, 21st Floor
New York, NY 10081
Citicorp USA, Inc. 25
Attn: Michael Mauerstein, Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
The First National Bank of Chicago 17.5
Attn: Denise de Diego, Senior Vice President
153 West 51st Street, Suite 4000
New York, NY 10019
First Tennessee Bank National Association 10
Attn: Victor Notaro, Vice President
165 Madison Avenue
Main Office, 9th Floor
Memphis, TN 38103
Norwest Bank Minnesota, N.A. 10
Attn: Bradley A. Hardy, Vice President
6th and Marquette
Minneapolis, MN 55479-0085
PNC Bank 25
Attn: Philip Jackson, Senior Vice President
1600 Market Street, 21st Floor
Philadelphia, PA 19101
NationsBank, N.A. 10
Attn: Kenneth Ricciardi, Senior Vice President
55 Broadway, 4th Floor
New York, NY 10006
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Union Bank of Switzerland 10
New York Branch
Attn: Virginia Loebel, Managing Director
299 Park Avenue
New York, NY 10171-0026
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<PAGE>
EXHIBIT C
BORROWING ADVICE
1. This Borrowing Advice is executed and delivered by The Charles
Schwab Corporation ("Borrower") to [Bank] pursuant to that certain Credit
Agreement (364-Day Commitment) dated as of June 26, 1998, entered into by
Borrower and [Bank] (the "Credit Agreement"). Terms defined in the Credit
Agreement and not otherwise defined herein are used herein as defined in the
Credit Agreement.
2. Borrower hereby requests that [Bank] make an Advance [or Term
Loan] for the account of Borrower (at _______________, Account No.
________________) pursuant to Paragraph 2.3 of the Credit Agreement as follows:
(a) Amount of Advance [or Term Loan]:_________________
(b) Date of Advance [or Term Loan]: _________________
(c) [If an Advance] Type of Advance (check one only):
________ Reference Rate with ____ - day Interest Period
________ CD Rate with _________- day Interest Period
________ Eurodollar Rate with ________- day Interest Period
(d) [If a Term Loan] Type of Term Loan (check one only):
________ Reference Rate with initial ____ - day Interest Period
________ CD Rate with initial _________- day Interest Period
________ Eurodollar Rate with initial ________- day Interest
Period
(e) [If a Term Loan] Maturity Date of Term Loan: _________________
3. Following this request for Advance [or Term Loan], the aggregate
outstanding amount of all Advances and Term Loans under the Revolving Note will
not exceed the Credit amount.
4. This Borrowing Advice is executed on ______________ by the
Borrower.
BORROWER:
THE CHARLES SCHWAB CORPORATION
a Delaware Corporation
By
________________________________________
[Printed Name and Title]
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EXHIBIT D
COMMITMENT AND TERMINATION DATE EXTENSION REQUEST
[Date]
[Bank name and Address]
Reference is made to that certain Credit Agreement (364-Day
Commitment) dated as of June 26, 1998 ("Credit Agreement") entered into by The
Charles Schwab Corporation ("Borrower") and [Bank] ("Bank"). Terms defined in
the Credit Agreement and not otherwise defined herein are used herein as defined
in the Credit Agreement.
Pursuant to Paragraph 2.12 of the Credit Agreement, Borrower hereby
requests Bank to agree to the extension of Bank's Commitment presently in
effect, in the amount of $[specify amount of existing Commitment], and the
---------------------------------------
Termination Date presently in effect for an additional 364 days.
Bank's execution of a copy of this letter in the space provided below
and the transmission of such executed copy to Borrower shall constitute Lender's
acceptance of Borrower's request and Lender's agreement to the 364-day extension
sought herein. More specifically, upon the execution of a copy of this letter
by Bank and the transmission thereof to Borrower within 15 days after Bank's
receipt of this letter, (1) the Termination Date as defined in Paragraph 2.12 of
the Credit Agreement shall be extended 364 days and deemed changed to
_____________, and (2) all other dates appearing in the Credit Agreement that
are referred to in Paragraph 2.12 of the Credit Agreement shall correspondingly
be extended 364 days.
This Commitment and Termination Date Extension Request is executed by
Borrower on ____________________.
BORROWER:
THE CHARLES SCHWAB CORPORATION
a Delaware Corporation
By
_____________________________________
[Printed Name and Title]
ACCEPTED AND AGREED:
[BANK]
By
__________________________________
[Printed Name and Title]
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EXHIBIT 10.2
CREDIT AGREEMENT
(3-YEAR COMMITMENT)
DATED AS OF
JUNE 26, 1998
==============
THE CHARLES SCHWAB CORPORATION
<PAGE>
CREDIT AGREEMENT (3-YEAR COMMITMENT)
THIS CREDIT AGREEMENT (3-YEAR COMMITMENT) ("this Agreement") is
entered into as of June 26, 1998, between The Charles Schwab Corporation, a
Delaware corporation (the "Borrower"), and the Bank named on the signature page
hereto (the "Bank").
WHEREAS, the Bank is willing to make revolving credit loans to the
Borrower from time to time through June 22, 2001, on the terms and subject to
the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. DEFINITIONS
Applicable
Commit-
ment Rate: The Applicable Commitment Rate shall be the rate per annum
set forth in the following table opposite the credit rating
for the Borrower's Senior Medium-Term Notes, Series A that
is in effect at the time a Commitment Fee is payable to the
Bank pursuant to Paragraph 2.6 hereof:
===============================================================
Credit Rating Rate Per Annum
---------------------------------------------------------------
At least A by Standard & Poor's Rating 110/1000 of 1%
Group or A2 by Moody's Investor Service
---------------------------------------------------------------
At least A- by Standard & Poor's Rating 120/1000 of 1%
Group or A3 by Moody's Investor Service
---------------------------------------------------------------
At least BBB by Standard & Poor's Rating 140/1000 of 1%
Group or Baa2 by Moody's Investor Service
---------------------------------------------------------------
At least BBB- by Standard & Poor's Rating 180/1000 of 1%
Group or Baa3 by Moody's Investor Service
---------------------------------------------------------------
Lower than BBB- by Standard & Poor's Rating 375/1000 of 1%
Service and lower than Baa3 by Moody's
Investor Service
===============================================================
Assessment Rate: For any Interest Period for any Advance for
which the CD Rate has been selected, the
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<PAGE>
assessment rate per annum (adjusted upward, if
necessary, to the nearest 1/100 of 1%) determined by
the Confirming Bank on the first day of such Interest
Period for determining the then current annual
assessment payable by the Bank to the Federal Deposit
Insurance Corporation (or any successor thereto) for
such Corporation's (or successor's) insuring U.S.
dollar time deposits of the Bank in the United
States. The CD Rate shall be adjusted automatically
on and as of the effective date of any change in the
Assessment Rate.
Banking Day: Any Monday, Tuesday, Wednesday, Thursday or Friday,
other than a day on which banks are authorized or
required to be closed in California or New York.
Borrowing Advice: A written request made by the Borrower with respect to
an Advance specifying the information required in
Paragraph 2.3 hereof and executed by the Borrower from
time to time.
Borrowing Agreement: Any of those separate credit agreements (so long as
the Credit (as defined herein) thereunder has not been
terminated) between the Borrower and any of the Banks
referred to in Schedule I hereto (other than the Bank)
and having terms substantially similar to those
contained in this Agreement. Such Schedule I may from
time to time be amended by the Borrower by Borrower's
delivery to each Bank (including the Bank) of a new
Schedule I, and each such new Schedule I delivered by
the Borrower to each Bank (including the Bank) shall
replace and supersede the then-existing Schedule I and
shall be the Schedule I referred to in this Agreement;
provided, however, that no such newly delivered
-------- -------
Schedule I shall amend or otherwise change the name,
address, or amount of Credit applicable to the Bank on
the initial Schedule I hereto without the prior written
consent of the
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Bank or as otherwise permitted in accordance with the
terms of this Agreement. Each such newly delivered
Schedule I shall include all of the then-existing
credit agreements between the Borrower and any Bank
having terms substantially similar to those contained
in this Agreement so long as the Credit (as defined
herein) thereunder has not been terminated.
Broker Subsidiary: Charles Schwab & Co., Inc., a California corporation,
and its successors and assigns.
CD Banking Day: Any Banking Day on which dealings in bank certificates
of deposit are conducted by New York City certificate
of deposit dealers.
CD Rate: For any Interest Period for any Advance for which the
CD Rate has been selected or is applicable, the sum of:
(a) the Assessment Rate for the Interest Period, plus
(b) the rate per annum obtained by dividing (i) the
rate of interest per annum determined by the
Confirming Bank to be (aa) the average (adjusted
upward, if necessary, to the nearest 1/16 of 1%)
rate per annum at which bids are received by the
CD Reference Banks for their certificates of
deposit as at 11:00 a.m. New York City time (or as
soon as practicable thereafter), on the first day
of an Interest Period from two or more New York
City certificate of deposit dealers of recognized
standing selected by the Confirming Bank for the
purchase at face value of such certificates of
deposit in an amount comparable to the Advance for
which the CD Rate has been selected and having a
maturity comparable to such Interest Period or
(bb) in the event the Confirming Bank cannot,
without undue effort, obtain rates from such CD
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<PAGE>
Reference Banks, the certificate of deposit rate
as reported for the date of the Borrowing Advice
in "Federal Reserve Statistical Release--Selected
Interest Rates-- H.15(519)," published by the
Board of Governors of the Federal Reserve System,
or any successor publication, under the caption
"CDs (Secondary Market)" having a maturity most
closely approximating the conclusion of such
Interest Period, by (ii) a percentage (expressed
as a decimal) equal to 1.00 minus the CD Rate
Reserve Percentage.
CD Rate Spread: The CD Rate Spread applicable to a CD Rate Advance
shall be the rate per annum set forth in the following
table opposite the credit rating for the Borrower's
Senior Medium-Term Notes, Series A that is in effect on
the date such CD Rate Advance is made pursuant to
Article 2 hereof:
==============================================================
Credit Rating Rate Per Annum
- --------------------------------------------------------------
At least A by Standard & Poor's Rating 350/1000 of 1%
Group or A2 by Moody's Investor Service
- --------------------------------------------------------------
At least A- by Standard & Poor's Rating 375/1000 of 1%
Group or A3 by Moody's Investor Service
- --------------------------------------------------------------
At least BBB by Standard & Poor's Rating 450/1000 of 1%
Group or Baa2 by Moody's Investor Service
- --------------------------------------------------------------
At least BBB- by Standard & Poor's Rating 575/1000 of 1%
Group or Baa3 by Moody's Investor Service
- --------------------------------------------------------------
Lower than BBB- by Standard & Poor's Rating 1 + 130/1000%
Service and lower than Baa3 by Moody's
Investor Service
==============================================================
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<PAGE>
CD Rate Reserve
Percentage: For any Interest Period for any Advance for which the
CD Rate has been selected or is applicable, the
percentage (expressed as a decimal) as calculated by
the Confirming Bank that is in effect on the first
day of such Interest Period, as prescribed by the
Board of Governors of the Federal Reserve System (or
any successor), for determining the maximum reserve
requirements (including, without limitation, basic,
supplemental, marginal and emergency reserves) for a
bank with deposits exceeding five billion dollars
that is a member of the Federal Reserve System, in
respect of new non-personal time deposits in U.S.
dollars in the United States having a maturity
comparable to the applicable Interest Period for said
Advance for which the CD Rate has been selected (such
bank's reserve ratio on such time deposits in effect
on June __, 1998 was 0%). The CD Rate shall be
adjusted automatically on and as of the effective
date of any change in the CD Rate Reserve Percentage.
CD Reference Banks: Bank of America NT&SA
Citibank, N.A.
Change in
Control: The consummation of a reorganization, merger or
consolidation by the Borrower or the sale or other
disposition of all or substantially all of the assets
of the Borrower (a "Business Combination"), unless,
following such Business Combination, (i) no person or
entity (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or
related trust) of the Borrower or such corporation
resulting from such Business Combination) beneficially
owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such Business
Combination or the combined voting power of the then
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<PAGE>
outstanding voting securities of such corporation
(except to the extent that such ownership existed prior
to the Business Combination); and (ii) at least a
majority of the members of the board of directors of
the corporation resulting from such Business
Combination were members of the board of directors of
the Borrower as of the time of the action of the board
of directors of the Borrower providing for such
Business Combination.
Change in Law
Affecting Cost: The occurrence of any one of the following events:
(a) the imposition, modification or application of any
reserve, capital adequacy requirement, special
deposit or similar requirement against assets held
by, or deposits in or for the account of, or
commitments, advances or loans by, or any other
acquisition of funds by, the Bank (other than such
requirements described in the Eurodollar Rate
Reserve Percentage section hereof), or the
imposition upon the Bank of any other condition
with respect to the London interbank market or to
this Agreement or any borrowing hereunder,
(b) a change in the basis of taxation of payments to
the Bank of principal, interest or any other
amount payable hereunder (except for changes in
Federal, state or local income tax rates and their
equivalents), or
(c) the adoption or enactment of any applicable law,
treaty, regulation or directive, or any change
therein or in the interpretation or application
thereof, or compliance by the Bank with any
request (whether or not having the
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<PAGE>
force of law) of any relevant government or
corporation entity.
Closing Date: June 26, 1998
Confirming Bank: Citibank, N.A.
Confirming Bank
Agreement: The Confirming Bank Agreement between the Borrower and
Citibank, N.A. dated June 26, 1998, in substantially
the form attached as Exhibit B to the Credit Agreement,
as the same may be amended from time to time.
Controlled
Subsidiary: Any corporation 80% of whose voting stock (except
for any qualifying shares) is owned directly or
indirectly by the Borrower.
Federal Funds
Effective Rate: For any day, an interest rate per annum equal to the
weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Banking Day, for
the next preceding Banking Day) by the Federal Reserve
Bank of New York; or, if such rate is not published for
any day which is a Banking Day, an interest rate per
annum equal to the arithmetic mean of the rates on
overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds
brokers on such day, received by each Reference Rate
Reference Bank from three Federal funds brokers of
recognized standing selected by each Reference Rate
Reference Bank in its sole discretion.
Interest Period: Any period specified in accordance with Paragraph 2.4
hereof.
Intermediate
Parent: Schwab Holdings, Inc. and its successors and assigns.
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<PAGE>
Eurodollar
Banking Day: Any Banking Day on which dealings in dollar
deposits are conducted by and among banks in the London
Eurodollar Market, or such other Eurodollar Market as
may from time to time be selected by the Bank with the
approval of the Borrower.
Eurodollar Rate: The rate obtained by dividing (i) the average rate per
annum at which deposits of U.S. dollars for the
selected Interest Period and in the amount of the
Advance for which the Eurodollar Rate has been selected
are offered (a) if at least two such offered rates
appear on the Reuters Screen LIBO Page as at 11:00 am.
(London time) two Eurodollar Banking Days prior to the
commencement of the relevant Interest Period, the
arithmetic mean (adjusted upward, if necessary, to the
nearest 1/16 of 1%), of such offered rates as
determined in accordance with the provisions of the
Confirming Bank Agreement or (b) if fewer than two
offered rates appear, in immediately available funds to
the Eurodollar Rate Reference Banks in the London
interbank market (adjusted upward, if necessary, to the
nearest 1/16 of 1%) as at 11:00 a.m. (London time) two
Eurodollar Banking Days prior to the commencement of
the relevant Interest Period, determined in accordance
with the provisions of the Confirming Bank Agreement,
by (ii) a percentage (expressed as a decimal) equal to
1.00 minus the Eurodollar Rate Reserve Percentage.
Eurodollar Rate Reserve
Percentage: For any Interest Period for any Advance for which the
Eurodollar Rate has been selected or is applicable, the
percentage (expressed as a decimal) as calculated by
the Confirming Bank that is in effect on the first day
of such Interest Period, as prescribed by the Board of
Governors of the U.S. Federal Reserve System (or any
successor), for determining reserve requirements to be
maintained by the Bank under Regulation D (or any
successor
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<PAGE>
regulation thereof) as amended to the date hereof
(including such reserve requirements as become
applicable to the Bank pursuant to phase-in or other
similar requirements of Regulation D at any time
subsequent to the date hereof) in respect of
"Eurocurrency liabilities" (as defined in Regulation
D). The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any
change in the Eurodollar Rate Reserve Percentage.
Eurodollar Rate
Reference Banks: Union Bank of Switzerland
The Bank of New York
Eurodollar Rate
Spread: The Eurodollar Rate Spread applicable to a Eurodollar
Rate Advance shall be the rate per annum set forth in
the following table opposite the credit rating for
Borrower's Senior Medium-Term Notes, Series A that is
in effect on the date
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<PAGE>
such Eurodollar Rate Advance is made pursuant to
Article 2 hereof:
==============================================================
Credit Rating Rate Per Annum
--------------------------------------------------------------
At least A by Standard & Poor's Rating 225/1000 of 1%
Group or A2 by Moody's Investor Service
--------------------------------------------------------------
At least A- by Standard & Poor's Rating 250/1000 of 1%
Group or A3 by Moody's Investor Service
--------------------------------------------------------------
At least BBB by Standard & Poor's Rating 325/1000 of 1%
Group or Baa2 by Moody's Investor Service
--------------------------------------------------------------
At least BBB- by Standard & Poor's Rating 450/1000 of 1%
Group or Baa3 by Moody's Investor Service
--------------------------------------------------------------
Lower than BBB- by Standard & Poor's Rating 1%
Service and lower than Baa3 by Moody's
Investor Service
==============================================================
Indebtedness: Indebtedness, as to any corporation, means any
obligation of, or guaranteed or assumed by, such
corporation for (i) borrowed money evidenced by
bonds, debentures, notes or other similar
instruments, (ii) the deferred purchase price of
property or services (excluding trade and other
accounts payable), (iii) the leasing of tangible
personal property under leases which, under any
applicable Financial Accounting Standards Board
Statement, have been or should be recorded as
capitalized leases, or (iv) direct or contingent
obligations under letters of credit issued for the
account of such corporation.
Minimum Stockholder's
Equity: As of the last day of September 1998, and the last day
of each fiscal quarter thereafter, the greater of:
(a) $575 million, or
(b) $575 million plus 40% of the sum of cumulative Net
Earnings of the
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<PAGE>
Borrower and its Subsidiaries beginning with July
1, 1998.
MSI: Mayer & Schweitzer, Inc., a New Jersey corporation, and
its successors and assigns.
Net Capital Ratio: As of the date of determination, that percentage of
net capital to aggregate debit items of any entity
subject to the Net Capital Rule 15c3-1 promulgated by
the Securities Exchange Commission pursuant to the
Securities Exchange Act of 1934 and any successor or
replacement rule or regulation therefor.
Net Earnings: With respect to any fiscal period, the consolidated net
income of the Borrower and its Subsidiaries, after
taking into account all extraordinary items, taxes and
other proper charges and reserves for the applicable
period, determined in accordance with U.S. generally
accepted accounting principles, consistently applied.
Reference Rate: For any Interest Period for any Advance for which the
Reference Rate has been selected (or for any post-
Interest Period period covered by clause (ii) of
Paragraph 2.7 hereof), the average daily per annum rate
of interest calculated by the Confirming Bank during
such Interest Period or period, with the rate on each
day being equal to the higher of (i) the highest per
annum rate of interest (adjusted upward, if necessary,
to the nearest 1/16 of 1%) publicly announced by any of
the Reference Rate Reference Banks on such day as its
"prime rate," "prime commercial lending rate,"
"reference rate," or "base rate," as the case may be,
and (ii) the highest per annum Federal Funds Effective
Rate available to any Reference Rate Reference Bank,
plus 1/2 of 1%.
Reference Rate
Reference Banks: The First National Bank of Chicago
-11-
<PAGE>
Chase Manhattan Bank
Revolving Credit
Facility: The revolving credit facility available to the Borrower
pursuant to paragraph 2.1 hereof.
Stockholder's Equity: As of any date of determination, Stockholders'
Equity of Borrower and its Subsidiaries as of that date
determined in accordance with U.S. generally accepted
accounting principles, consistently applied.
Subsidiary: Any corporation or other entity of which a sufficient
number of voting securities or other interests having
power to elect a majority of the board of directors or
other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
2. THE REVOLVING CREDIT FACILITY
The Bank agrees that consistent with the terms and conditions set
forth in this Article 2, it will lend to the Borrower sums which, in the
aggregate principal amount outstanding at any one time, shall not exceed the
dollar amount of the Bank's commitment as specified in Schedule I hereto (the
"Commitment"). Such amount, as it may from time to time be reduced pursuant to
Paragraph 2.10 hereof, shall be referred to as the "Credit."
2.1 The Advances. The Credit shall be a revolving credit, such that
------------
from time to time commencing on June 26, 1998 and ending on June 22, 2001, the
Borrower may borrow, repay at the end of any Interest Period (or otherwise as
permitted by Paragraph 3.2 hereof) and reborrow amounts during the continuation
of the Credit, as the Borrower may see fit, subject to the applicable provisions
of this Agreement. Each such revolving credit loan made hereunder (an
"Advance") shall be in the amount of $1,000,000 or integral multiples thereof
and shall become due and payable on the last day of the Interest Period for such
Advance.
The obligation of the Borrower to repay the aggregate unpaid principal
amount of the Advances shall be evidenced by a promissory note of the Borrower
(the "Revolving Note") in substantially the form attached hereto as Exhibit A,
with the blanks appropriately completed, payable to the order of the Bank,
bearing interest as hereinafter specified. The Revolving Note shall
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<PAGE>
be dated, and shall be delivered to the Bank, on the date of the execution and
delivery of this Agreement by the Borrower. The Bank shall, and is hereby
authorized by the Borrower to, endorse on the schedule contained on the
Revolving Note, or on a continuation of such schedule attached thereto and made
a part thereof, appropriate notations regarding the Advances evidenced by the
Revolving Note as specifically provided therein; provided, however, that the
failure to make, or error in making, any such notation shall not limit or
otherwise affect the obligations of the Borrower hereunder or under the
Revolving Note.
2.2 Making of Advances; Interest Periods; Notice. Whenever the
--------------------------------------------
Borrower desires the Bank to make an Advance, it shall give the Bank (i) same
Banking Day's irrevocable written notice prior to 2:00 p.m. (New York City time)
for Reference Rate Advances to be made on such Banking Day, (ii) one CD Banking
Day's prior irrevocable written notice for CD Rate Advances, or (iii) three
Eurodollar Banking Days' prior irrevocable written notice for Eurodollar Rate
Advances (each such notice to be in the form of a Borrowing Advice in
substantially the form attached hereto as Exhibit C) setting forth the following
information:
(a) The date, which shall be either a Banking Day, a CD Banking day,
or a Eurodollar Banking Day, on which such Advance is to be made;
(b) The Interest Period selected in accordance with Paragraph 2.3
hereof;
(c) The interest rate option selected in accordance with Paragraph
2.4 hereof; and
(d) The aggregate principal amount of the Advance to which such
Interest Period and interest rate shall apply.
Notice of each Borrowing Advice indicating the selection of an
Interest Period and whether the interest calculation is to be based on the
Eurodollar Rate, the CD Rate or the Reference Rate shall simultaneously be given
to the Confirming Bank by the Borrower. Any notice required pursuant to this
Paragraph 2.2 for a same day Reference Rate Advance shall be given no later than
2:00 p.m. (New York City time) on the date of such Advance. Any other notice
required pursuant to this Paragraph 2.2 shall be given no later than 12:00 noon
(New York City time) on the date such notice is required to be given.
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<PAGE>
With respect to any Advance having an Interest Period ending on or
before June 22, 2001, if prior to the last day of the Interest Period for such
Advance the Borrower fails timely to provide a new Borrowing Advice in
accordance with this Paragraph 2.2, such Advance shall, on the last day of the
then-existing Interest Period for such Advance, automatically convert into a new
Reference Rate Advance with an Interest Period of thirty (30) days (or, in the
event that there are fewer than thirty (30) days remaining to June 22, 2001, an
Interest Period of the number of days remaining to June 22, 2001). In the event
of any such automatic conversion, the Borrower on the date of such conversion
shall be deemed to make a representation and warranty to the Bank that, to the
best of the Borrower's knowledge, (i) neither the Broker Subsidiary nor MSI is
in violation of minimum net capital requirements as described in Paragraph 7.1,
(ii) the Borrower's Stockholders' Equity is not below the Minimum Stockholders'
Equity as described in Paragraph 7.2, and (iii) no amount owing with respect to
any Commitment Fee, any outstanding Advance, or any interest thereon, or any
other amount hereunder, is due and unpaid.
Each Advance to the Borrower under this Agreement shall be made by
12:00 noon (New York City time) on the date the Advance is to be made (except
with respect to any Reference Rate Advance for which same-day written notice has
been given by Borrower, such Advance shall be made by 3:30 p.m. (New York City
time) on the date of such same-day written notice), and shall be in immediately
available funds credited to the account of Borrower with the Bank or wired to
the Borrower's account at Citibank, N.A. (Account 4055-4016) or such other
account as may be designated by the Borrower.
The Bank, by notice to the Borrower (to be given not later than two
Banking Days prior to the initial Advance hereunder) may request that Advances
made hereunder for which the interest calculation is to be based on the
Eurodollar Rate be evidenced by separate Revolving Notes substantially in the
form of Exhibit A hereto, payable to the order of such Bank for the account of
its office, branch or affiliate it may designate as its Eurodollar lending
office. Each reference to the Bank in Paragraph 2.5(b) and 3.5 shall include
the Bank's designated Eurodollar lending office; all notices given to the Bank
in accordance with this Agreement shall be deemed to have been given to such
Eurodollar lending office.
2.3 Interest Periods. The Borrower may select the Interest Period
----------------
(as defined in the next sentence) for each Advance, it being understood that the
Borrower may request multiple Advances on the same day and may select a
different Interest Period for each such Advance; provided, however, that each
--------- --------
such Advance shall be in the amount of $1,000,000 or an integral multiple
thereof. An Interest Period shall be each period, as selected by the Borrower
in accordance with the terms of this Agreement, beginning on the day such
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<PAGE>
Advance is made under this Agreement, and ending on the day specified by the
Borrower:
(a) Not more than 180 days thereafter, in the case of any Interest
Period for which the interest is to be based on the Reference
Rate, provided that if the last day of an Interest Period would
be a day that is not a Banking Day, such Interest Period shall be
extended to the next succeeding Banking Day;
(b) either 30, 60, 90 or 180 days thereafter, in the case of any
Interest Period for which the interest is to be based on the CD
Rate, provided that if the last day of an Interest Period would
be a day that is not a CD Banking Day, such Interest Period shall
be extended to the next succeeding CD Banking Day; or
(c) not less than 7 nor more than 180 days thereafter, in the case of
any Interest Period that is to be based on the Eurodollar Rate,
provided that if the last day of an Interest Period would be a
day that is not a Eurodollar Banking Day, such Interest Period
shall be extended to the next succeeding Eurodollar Banking Day,
unless such next succeeding Eurodollar Banking Day is in a
different calendar month, in which case such interest period
shall end on the next preceding Eurodollar Banking Day;
provided, however, that no Interest Period applicable to any Advance shall
- -------- -------
extend beyond September 21, 2001.
2.4 Interest Rates. Each Advance, while outstanding, shall bear
--------------
interest, payable on the last day of each Interest Period applicable thereto
(provided that (i) if any Advance is based on the Reference Rate, interest
- --------- ----
attributable thereto also shall be payable on the last day of each calendar
quarter that occurs before the last day of the applicable Interest Period, or
(ii) if the Interest Period is longer than 90 days, interest with respect
thereto also shall be payable on the Banking Day following the 90th day from the
commencement of the Interest Period) at a rate per annum (based on a 360-day
year and actual days elapsed for Eurodollar Rate and CD Rate Advances, and a
365-day year and actual days elapsed for Reference Rate Advances, counting the
first day but not the last day of any Interest Period) that shall be equal to
one of the following as selected by the Borrower:
(a) the Eurodollar Rate, plus the Eurodollar Rate Spread;
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<PAGE>
(b) the CD Rate, plus the CD Rate Spread; or
(c) the Reference Rate.
2.5 Substitute Rates. If upon receipt by the Bank of a Borrowing
----------------
Advice relating to an Advance:
(a) the Confirming Bank shall determine in accordance with the
provisions of the Confirming Bank Agreement that by reason of
changes affecting the New York City certificate of deposit market
and/or the London interbank market, adequate and reasonable means
do not exist for ascertaining the applicable CD Rate and/or
Eurodollar Rate, respectively, with respect to any Interest
Period; or
(b) the Bank shall determine that by reason of any change since the
date hereof in any applicable law or governmental regulation
(other than any such change in the regulations described in the
definition of Eurodollar Rate Reserve Percentage in Article I
hereof), guideline or order (or any interpretation thereof), the
adoption or enactment of any new law or governmental regulation
or order or any other circumstance affecting the Bank or the New
York City certificate of deposit market and/or the London
interbank market, the CD Rate and/or Eurodollar Rate, determined
in accordance with the Confirming Bank Agreement shall no longer
represent the effective cost to the Bank of certificates of
deposit and/or of U.S. dollar deposits, respectively, in the
relevant amount and for the relevant period; or
(c) the Confirming Bank or the Bank shall determine that, as a result
of any change since the date hereof in any applicable law or
governmental regulation or as a result of the adoption of any new
applicable law or governmental regulation, the applicable CD Rate
and/or Eurodollar Rate, would be unlawful;
then, and in any such event, the Bank and the Borrower shall agree upon a rate
of interest applicable to the Advance that is reasonably judged by them to be
the nearest equivalent of the selected rate; provided, however, that if no such
rate is judged by them to be equivalent to the selected rate, the basis for
determining the rate of interest and the Interest Period shall be the Reference
Rate for an Interest Period of 30 days.
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<PAGE>
2.6 Interest Upon Default. After the principal amount of any
---------------------
Advance, accrued interest upon such Advance, Commitment Fee, or any other amount
hereunder shall have become due and payable by acceleration, or otherwise, it
shall thereafter (until paid) bear interest, payable on demand, (i) until the
end of the Interest Period with respect to such Advance at a rate per annum
equal to 1% per annum in excess of the rate or rates in effect with respect to
such Advance and (ii) thereafter, at a rate per annum equal to 1% per annum in
excess of the Reference Rate.
2.7 Commitment Fee. Through June 22, 2001, the Borrower will pay to
--------------
the Bank a credit commitment fee (the "Commitment Fee") for each calendar
quarter in an amount equal to the Applicable Commitment Rate (based on a 360-day
year and actual days elapsed) on the average daily unused principal amount of
the Credit in effect during such quarter, payable on the first Banking Day after
the end of such quarter (or portion of such quarter, if applicable), and upon
termination of the Credit; provided, however, that any such payment upon
-------- -------
termination of the Credit during any calendar quarter shall be in lieu of (and
not in addition to) the payment otherwise due for such portion of such quarter
on the first Banking Day after the end of such quarter.
2.8 Facility Fee. On June 26, 1998, the Borrower shall pay a
------------
facility fee to the Bank in an amount equal to 20/1000 of 1% of the Bank's
Commitment as specified in Schedule I.
2.9 Confirming Bank Fee. On June 26, 1998, the Borrower shall pay to
-------------------
the Confirming Bank a fee of $5,000.
2.10 Reduction of Credit. The Borrower, from time to time, upon at
-------------------
least three Banking Days' written notice to the Bank, may permanently reduce any
then-unutilized portion of the Credit in units of $1,000,000 without penalty or
premium; thereafter, during the continuation of the Credit, the computation of
the Commitment Fee and the Bank's obligations for Advances shall be based upon
such reduced Credit. The Borrower, from time to time, upon at least three
Banking Days' written notice to the Bank, may permanently reduce all or any part
of the then-utilized portion of the Credit by making payment to the Bank on such
utilized portion pursuant to Paragraph 2.1 or Paragraph 3.2 hereof, and
thereafter, during the continuation of the Credit, the computation of the
Commitment Fee and the Bank's obligations for Advances shall be based upon such
reduced Credit; provided, however, that in order for a payment to result in a
-------- -------
permanent reduction of the Credit under this paragraph, the written notice
required under this paragraph must expressly provide that the payment is being
tendered pursuant to this paragraph and is intended to result in a permanent
reduction of the Credit. Any written notice delivered pursuant to either of the
foregoing two sentences shall be irrevocable unless the Bank consents in writing
to its revocation. In
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<PAGE>
the event the Credit shall be reduced to zero pursuant to this paragraph, the
Credit shall be deemed terminated, and any Commitment Fee or any other amount
payable hereunder then accrued shall become immediately payable. Such
termination of the Credit shall terminate the Borrower's obligations with
respect to the Commitment Fee to the extent not theretofore accrued and shall
terminate the Bank's obligations to make any further Advances under this
Agreement.
2.11 Termination Date; Extensions. The termination date of the
----------------------------
Bank's Commitment with respect to the Credit (the "Termination Date") is
initially June 22, 2001. At any time no earlier than sixty (60) days and no
later than thirty (30) days prior to the Termination Date then in effect
(whether the initial Termination Date of June 22, 2001 or any later Termination
Date as extended under this Paragraph 2.11), the Borrower may, by written notice
to the Bank in the form attached as Exhibit D hereto, request that the
Termination Date be extended for a period of 364 calendar days. Such request
shall be irrevocable and binding upon the Borrower. If the Bank agrees, in its
individual and sole discretion, to so extend its Commitment and the Termination
Date, it shall evidence such agreement by executing and returning to the
Borrower a copy of the Borrower's written request countersigned by the Bank and
delivered to the Borrower by the Bank no later than fifteen (15) days after the
Bank's receipt of Borrower's written request. If the Bank fails to so respond
to and accept the Borrower's request for extension of the Termination Date then
in effect, the Bank's Commitment shall be terminated on the Termination Date
then in effect. If, on the other hand, the Bank so responds to and accepts the
Borrower's request for extension of the Termination Date, then upon receipt by
the Borrower of a copy of the Borrower's written request countersigned by the
Bank, (i) the Bank's Commitment then in effect and the Termination Date then in
effect shall automatically be extended for the 364-day period specified in such
written request, and (ii) each reference in this Agreement to "June 22, 2001"
and "September 21, 2001" (and any prior extension thereof pursuant to this
Paragraph 2.11) also shall automatically be correspondingly extended for 364
days.
3. PAYMENT
3.1 Method of Payment. All payments hereunder and under the
-----------------
Revolving Note shall be payable in lawful money of the United States of America
and in immediately available funds not later than 12:00 noon (New York City
time) on the date when due at the principal office of the Bank or at such other
place as the Bank may, from time to time, designate in writing to the Borrower.
3.2 Optional Prepayment. The Borrower shall be entitled to prepay the
-------------------
Revolving Note in whole or in part (such part being in integral
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<PAGE>
multiples of $1,000,000) without premium or penalty. In the case of each such
prepayment (i) the Borrower shall give to the Bank at least three Banking Days'
prior irrevocable notice of the aggregate principal amount of any such
prepayment, (ii) at the time of prepayment, the Borrower shall pay all unpaid
interest accrued on the amount prepaid, and (iii) the Borrower shall pay the
Bank any amount payable to the Bank in accordance with Paragraph 3.4 hereof as a
result of such prepayment.
3.3 Net Payments. All payments by Borrower hereunder and under the
------------
Revolving Note shall be made without set-off or counterclaim and in such amounts
as may be necessary in order that all such payments, after deduction or
withholding for or on account of any present or future taxes, levies, imposts,
duties or other charges of whatsoever nature imposed by any government or any
political subdivision or taxing authority thereof (collectively, "Taxes"), shall
not be less than the amounts otherwise specified to be paid under this
Agreement. Notwithstanding the foregoing, the Borrower shall not be liable for
the payment of any tax on or measured by the net income of the Bank pursuant to
the laws of the jurisdiction where an office of the Bank making any loan
hereunder is located or does business. The Borrower shall pay all Taxes when
due and shall promptly send to the Bank original tax receipts or copies thereof
certified by the relevant taxing authority together with such other documentary
evidence with respect to such payments as may be required from time to time by
the Bank. If the Borrower fails to pay any Taxes to the appropriate taxing
authorities when due or fails to remit to the Bank any such original tax
receipts or certified copies thereof as aforesaid or other required documentary
evidence, the Borrower shall indemnify the Bank for any taxes, interest or
penalties that may become payable by the Bank as a result of such failure.
3.4 Indemnity for Losses. The Borrower shall indemnify the Bank for
--------------------
any loss or expense (including, without limitation, any interest paid by the
Bank to lenders of funds borrowed by it to make or maintain any Advance and any
loss incurred by the Bank in connection with the reemployment of funds obtained
by the Bank for the purpose of making or maintaining any Advance hereunder)
which the Bank may sustain as a result of (i) any payment or prepayment of any
Advance on a date other than the last day of any Interest Period, (ii) any
failure of the Borrower to borrow on a date specified in a Borrowing Advice
furnished hereunder or (iii) any failure by the Borrower to prepay any amount on
the date and in the amount specified in a notice furnished by the Borrower in
accordance with the terms hereof. A certificate as to any amounts payable
pursuant to the foregoing submitted by the Bank to the Borrower shall, in the
absence of manifest error, be conclusive.
3.5 Change in Law. In the event that the Bank shall become subject
-------------
to any increased cost (including, but not limited to, taxes, increases in
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<PAGE>
reserves and reductions in amounts receivable by the Bank) with respect to this
Agreement or making or maintaining any borrowing hereunder as a result of any
Change in Law Affecting Cost, then as soon as practicable thereafter, the Bank
shall give the Borrower notice of such Change in Law Affecting Cost and a
certificate containing the amount and basis of demand, and the Borrower shall
pay to the Bank additional amounts that will compensate the Bank for such
increased cost or reduced amount receivable and, at the option of the Borrower
on notice to the Bank, the Borrower may either elect to (i) change the basis for
determining interest on outstanding indebtedness for the remainder of the
applicable Interest Period in accordance with Paragraph 2.4 hereof, or (ii)
prepay the principal amount outstanding with accrued interest thereon to the
date of prepayment. If such change or prepayment is made on a day that is not
the last day of an Interest Period, the Borrower shall pay the Bank, upon
request, such amount or amounts as will compensate the Bank for any loss or
expense incurred by the Bank in the redeployment of funds obtained by the Bank
for the purpose of making or maintaining the Advances provided for herein. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by the Bank to the Borrower shall, in the absence of manifest
error, be conclusive.
4. CONDITIONS
4.1 Conditions Precedent to the Effectiveness of this Agreement. The
-----------------------------------------------------------
Borrower shall deliver to the Bank the following documents concurrently with the
execution of this Agreement:
(a) A written opinion, dated the date hereof, of counsel for the
Borrower, in the form of Exhibit E.
(b) A copy of a resolution or resolutions adopted by the Board of
Directors or Executive Committee of the Borrower, certified by
the Secretary or an Assistant Secretary of the Borrower as being
in full force and effect on the date hereof, authorizing the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, and a copy
of the Certificate of Incorporation and the By-Laws of the
Borrower, similarly certified.
(c) A certificate, signed by the Secretary or an Assistant Secretary
of the Borrower and dated the date hereof, as to the incumbency
of the person or persons authorized to execute and deliver this
Agreement.
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<PAGE>
(d) A certificate signed by the Chief Financial Officer of the
Borrower that, as of the date hereof, there has been no material
adverse change in its consolidated financial condition since
December 31, 1997 not reflected on its Quarterly Report on Form
10-Q filed with the SEC for the period ending March 31, 1998.
(e) A certificate, signed by the Secretary or an Assistant Secretary
of the Borrower and dated the date hereof, as to the persons
authorized to execute and deliver a Borrowing Advice and the
Revolving Note. The Bank may rely on such certificate with
respect to the Advances hereunder unless and until it shall have
received an updated certificate and, after receipt of such
updated certificate, similarly may rely thereon.
4.2 Conditions Precedent to Advances. The Bank shall not be required
--------------------------------
to make any Advance pursuant to Article 2 hereof:
(a) when the Credit has been terminated; or
(b) when any of the representations or warranties of the Borrower set
forth in Article 5 hereof shall prove to have been untrue in any
material respect when made, or when any Event of Default or any
event that, upon lapse of time or notice or both, would become an
Event of Default as defined in Article 8, has occurred; or
(c) when the Broker Subsidiary or MSI is in violation of minimum net
capital requirements as described in Paragraph 7.1; or
(d) when the Borrower's Stockholder's Equity is below the Minimum
Stockholders' Equity as described in Paragraph 7.2.; or
(e) when any amount owing with respect to any Commitment Fee or any
outstanding Advance or any interest thereon or any other amount
payable hereunder is due and unpaid.
Each Borrowing Advice given by the Borrower shall be deemed to be a
representation and warranty by the Borrower to the Bank, effective on and as of
the date of the Advance covered thereby, that (i) the representations and
warranties set forth in Article 5 hereof are true and correct as of such date,
and (ii) no Event of Default, and no event which with the lapse of time or
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notice or both would become an Event of Default, has occurred and is continuing.
5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, as of the date of delivery of
this Agreement and as of the date of any Advance, as follows:
5.1 The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and has full power,
authority and legal right and has all governmental licenses, authorizations,
qualifications and approvals required to own its property and assets and to
transact the business in which it is engaged; and all of the outstanding shares
of capital stock of Borrower have been duly authorized and validly issued, are
fully paid and non-assessable.
5.2 The Borrower has full power, authority and legal right to execute
and deliver, and to perform its obligations under, this Agreement, and to borrow
hereunder, and has taken all necessary corporate and legal action to authorize
the borrowings hereunder on the terms and conditions of this Agreement and to
authorize the execution and delivery of this Agreement, and the performance of
the terms thereof.
5.3 This Agreement has been duly authorized and executed by the
Borrower, and when delivered to the Bank will be a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, except, in each case, as enforcement thereof may be limited by
bankruptcy, insolvency or other laws relating to or affecting enforcement of
creditors' rights or by general equity principles.
5.4 The execution and delivery of this Agreement by the Borrower and
the performance of the terms hereof will not violate any provision of any law or
regulation or any judgment, order or determination of any court or governmental
authority or of the charter or by-laws of, or any securities issued by, the
Borrower or any provision of any mortgage, indenture, loan or security
agreement, or other instrument, to which the Borrower is a party or which
purports to be binding upon it or any of its assets in any respect that
reasonably could be expected to have a material adverse effect on the Borrower
and its Subsidiaries taken as a whole on a consolidated basis; nor will the
execution and the delivery of this Agreement by the Borrower and the performance
of the terms hereof result in the creation of any lien or security interest on
any assets of the Borrower pursuant to the provisions of any of the foregoing.
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5.5 Except as disclosed in writing by Borrower, no consents of others
(including, without limitation, stockholders and creditors of the Borrower) nor
any consents or authorizations of, exemptions by, or registrations, filings or
declarations with, any governmental authority are required to be obtained by the
Borrower in connection with this Agreement.
5.6 The consolidated financial statements of the Borrower contained
in the documents previously delivered to the Bank have been prepared in
accordance with U.S. generally accepted accounting principles and present fairly
the consolidated financial position of the Borrower.
5.7 The Broker Subsidiary possesses all material licenses, permits
and approvals necessary for the conduct of its business as now conducted and as
presently proposed to be conducted as required by law or the applicable rules of
the SEC and the National Association of Securities Dealers, Inc.
5.8 The Broker Subsidiary is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended.
5.9 The Broker Subsidiary is not in arrears with respect to any
assessment made upon it by the Securities Investor Protection Corporation,
except for any assessment being contested by Broker Subsidiary in good faith by
appropriate proceedings and with respect to which adequate reserves or other
provisions are being maintained to the extent required by U.S. generally
accepted accounting principles.
5.10 The Borrower has paid and discharged or caused to be paid and
discharged all taxes, assessments, and governmental charges prior to the date on
which the same would have become delinquent, except to the extent that such
taxes, assessments or charges are being contested in good faith and by
appropriate proceedings by or on behalf of the Borrower and with respect to
which adequate reserves or other provisions are being maintained to the extent
required by U.S. generally accepted accounting principles.
5.11 The Borrower is in compliance with the provisions of and
regulations under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Internal Revenue Code of 1986, as amended, applicable
to any pension or other employee benefit plan established or maintained by the
Borrower or to which contributions are made by the Borrower (the "Plans"). The
Borrower has met all of the funding standards applicable to each of its Plans,
and there exists no event or condition that would permit the institution of
proceedings to terminate any of the Plans under Section 4042 of ERISA. The
estimated current value of the benefits vested under each of the Plans does not,
and upon termination of any of the Plans will not, exceed the estimated current
value of any such Plan's assets.
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The Borrower has not, with respect to any of the Plans, engaged in a prohibited
transaction set forth in Section 406 of ERISA or Section 4975(c) of the Internal
Revenue Code of 1986.
5.12 The Borrower will not use any amounts advanced to it under this
Agreement to remedy a default under any mortgage, indenture, agreement or
instrument under which there may be issued any Indebtedness of the Borrower to
any bank or bank holding company, or their respective assignees, for borrowed
money. Further, the Borrower will not use any amounts advanced to it under this
Agreement for the immediate purpose of acquiring a company where the Board of
Directors or other governing body of the entity being acquired has made (and not
rescinded) a public statement opposing such acquisition.
5.13 This Agreement contains terms no less favorable to the Bank than
the terms of any Borrowing Agreement.
5.14 The Borrower will not use the proceeds of any loan provided
hereby in such a manner as to result in a violation of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System.
5.15 The persons named for such purpose in the certificates delivered
pursuant to Paragraph 4.1(e) hereof are authorized to execute Borrowing Advices.
5.16 Borrower is not in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
material contract, indenture, mortgage, loan agreement, note or lease to which
the Borrower is a party or by which it may be bound.
5.17 There is no action, suit or proceeding pending against, or to
the knowledge of the Borrower, threatened against or affecting, the Borrower or
any of its Subsidiaries before any court, arbitrator, governmental body, agency
or official in which there is a significant probability of an adverse decision
which could materially adversely affect the business or the financial position
of the Borrower.
5.18 The Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
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<PAGE>
6. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as the Credit shall
continue or any Advance by the Bank remains outstanding and until full payment
of all amounts due to the Bank hereunder, it will, unless and to the extent the
Bank waives compliance in writing:
6.1 Give prompt notice to the Bank, no later than three Banking Days
after becoming aware thereof, of any Event of Default or any event that, upon
lapse of time or notice or both, would become an Event of Default.
6.2 Deliver to the Bank, within ten Banking Days of the filing
thereof with the SEC, a copy of each registration statement filed under the
Securities Act of 1933, a copy of each filing (including exhibits) made by the
Borrower with the SEC under the Securities Exchange Act of 1934, as amended
(but, in the event the Borrower requests an extension of any such filing from
the SEC, promptly (but not later than the second Banking Day following the
filing of such request) deliver a copy of such request to the Bank).
6.3 Maintain and keep in force in adequate amounts such insurance as
is usual in the business carried on by the Borrower.
6.4 Maintain adequate books, accounts and records and prepare all
financial statements required hereunder in accordance with U.S. generally
accepted accounting principles and practices and in compliance with the
regulations of any governmental regulatory body having jurisdiction thereof.
6.5 Advise the Bank, in a timely manner, of material changes to the
nature of business of the Borrower or its Broker Subsidiary as at present
conducted. The Broker Subsidiary is at present engaged in the business of
providing financial services, primarily to individual investors and/or their
advisors.
6.6 With respect to each and any Advance requested by the Borrower
under this Agreement (a "primary Advance"), the Borrower will concurrently
request an Advance under each of the Borrowing Agreements (each such other
Advance under each of the Borrowing Agreements being hereinafter individually
referred to as an "other Advance" and collectively referred to as the "other
Advances"), with each such other Advance being requested in an amount equal to
the same percentage of the Credit under the applicable Borrowing Agreement as
the primary Advance constitutes as a percentage of the Credit under this
Agreement. As an illustration of the application of this Paragraph 6.6 and by
way of example only, if the Borrower requests an Advance under this Agreement
that is in an amount equal to 10% of the Credit under this Agreement, the
Borrower shall simultaneously seek an
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other Advance under each of the Borrowing Agreements, each of which other
Advances shall be requested in an amount equal to 10% of the Credit under the
applicable Borrowing Agreement.
7. NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as the Credit shall
continue or any Advance by the Bank remains outstanding and until full payment
of all amounts due to the Bank hereunder, unless and to the extent the Bank
waives compliance in writing:
7.1 The Borrower will not permit the Broker Subsidiary to allow (i)
the average of two consecutive month-end Net Capital Ratios to be less than 7%,
or (ii) any month-end Net Capital Ratio to be less than 5%. The Borrower
similarly will not permit MSI to allow (i) the average of two consecutive month-
end Net Capital Ratios to be less than 7%, or (ii) any month-end Net Capital
Ratio to be less than 5%.
7.2 The Borrower will not allow Stockholder's Equity to fall below
the Minimum Stockholders' Equity.
7.3 The Borrower will not (i) permit either Broker Subsidiary or
Intermediate Parent to (a) merge or consolidate, unless the surviving company is
a Controlled Subsidiary, or (b) convey or transfer its properties and assets
substantially as an entirety except to one or more Controlled Subsidiaries; or,
(ii) except as permitted by (i) immediately preceding, sell, transfer or
otherwise dispose of any voting stock of Broker Subsidiary or Intermediate
Parent, or permit either Broker Subsidiary or Intermediate Parent to issue, sell
or otherwise dispose of any of its voting stock, unless, after giving effect to
any such transaction, Broker Subsidiary or Intermediate Parent, as the case may
be, remains a Controlled Subsidiary.
7.4 The Borrower will not permit the Broker Subsidiary to create,
incur or assume any Indebtedness other than:
(a) (i) Indebtedness to customers, other brokers or dealers,
securities exchanges or securities markets, self-regulatory
organizations, clearing houses and like institutions (including,
without limitation, letters of credit or similar credit support
devices issued for the account of Broker Subsidiary and for the
benefit of any of the foregoing in order to comply with any
margin, collateral or similar requirements imposed by or for the
benefit of any of the foregoing), (ii) "broker call" credit,
(iii) stock loans,
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(iv) obligations to banks for disbursement accounts, (v)
Indebtedness incurred for the purchase of tangible personal
property on a non-recourse basis or for the leasing of tangible
personal property under a capitalized lease; (vi) Indebtedness
incurred for the purchase, installation or servicing of computer
equipment and software; and (vi) Indebtedness incurred in the
ordinary course of the Broker Subsidiary's business, to the
extent not already included in the foregoing clauses (i) through
(vi);
(b) intercompany Indebtedness; and
(c) other Indebtedness in the aggregate not exceeding $100,000,000.
7.5 The Borrower will not, and will not permit any Subsidiary at any
time directly or indirectly to create, assume, incur or permit to exist any
Indebtedness secured by a pledge, lien or other encumbrance (hereinafter
referred to as a "lien") on the voting stock of any Subsidiary without making
effective provision whereby the Revolving Note shall be secured equally and
ratably with such secured Indebtedness so long as other Indebtedness shall be so
secured; provided, however, that the foregoing covenant shall not be applicable
to Permitted Liens (as defined in Paragraph 7.6 below).
7.6 The Borrower will not create, incur, assume or suffer to exist
any lien or encumbrance upon or with respect to any of its properties, whether
now owned or hereafter acquired, except the following (the "Permitted Liens"):
(a) liens securing taxes, assessments or governmental charges or
levies, or in connection with workers' compensation, unemployment
insurance or social security obligations, or the claims or
demands of materialmen, mechanics, carriers, warehousemen,
landlords and other like persons not yet delinquent or which are
being contested in good faith by appropriate proceedings with
respect to which adequate reserves or other provisions are being
maintained to the extent required by U.S. generally accepted
accounting principles;
(b) liens not for borrowed money incidental to the conduct of its
business or the ownership of property that do not materially
detract from the value of any item of property;
(c) attachment, judgment or other similar liens arising in the
connection with court proceedings that do not, in the
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aggregate, materially detract from the value of its property,
materially impair the use thereof in the operation of its
businesses and (i) that are discharged or stayed within sixty
(60) days of attachment or levy, or (ii) payment of which is
covered in full (subject to customary and reasonable deductibles)
by insurance or surety bonds; and
(d) liens existing at Closing Date provided that the obligations
secured thereby are not increased.
8. EVENT OF DEFAULT
8.1 The occurrence of any of the following events shall constitute an
"Event of Default":
(a) The Borrower shall fail to pay any interest with respect to the
Revolving Note or any Commitment Fee in accordance with the terms
hereof within 10 days after such payment is due.
(b) The Borrower shall fail to pay any principal with respect to the
Revolving Note in accordance with the terms thereof on the date
when due or shall fail to pay when due (after expiration of any
applicable grace periods) any principal or interest with respect
to any advance or other loan under any of the Borrowing
Agreements.
(c) Any representation or warranty made by the Borrower herein or
hereunder or in any certificate or other document furnished by
the Borrower hereunder shall prove to have been incorrect when
made (or deemed made) in any respect that is materially adverse
to the interests of the Bank or its rights and remedies
hereunder.
(d) Except as specified in (a) and (b) above, the Borrower shall
default in the performance of, or breach, any covenant of the
Borrower with respect to this Agreement, and such default or
breach shall continue for a period of thirty days after there has
been given, by registered or certified mail, to the Borrower by
the Bank a written notice specifying such default or breach and
requiring it to be remedied.
(e) An event of default as defined under any Borrowing Agreement, or
an event of default as defined in any
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mortgage, indenture, agreement or instrument under which there
may be issued, or by which there may be secured or evidenced, any
Indebtedness of the Borrower in a principal amount not less than
$60 million, shall have occurred and shall result in such
Indebtedness becoming or being declared due and payable prior to
the date on which it otherwise would become due and payable;
provided, however, that if such event of default shall be
remedied or cured by the Borrower, or waived by the holders of
such Indebtedness, within twenty days after the Borrower has
received written notice of such event of default and
acceleration, then the Event of Default hereunder by reason
thereof shall be deemed likewise to have thereupon been remedied,
cured or waived without further action upon the part of either
the Borrower or the Bank.
(f) Any involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction
seeking (i) relief against the Borrower or the Broker Subsidiary,
or against all or a substantial part of the property of either of
them, under Title 11 of the United States Code or any other
federal, state or foreign bankruptcy, insolvency, reorganization
or similar law, (ii) the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official
for the Borrower or the Broker Subsidiary or for all or a
substantial part of the property of either of them, or (iii) the
winding-up or liquidation of the Borrower or the Broker
Subsidiary; and, in any such case, such involuntary proceeding or
involuntary petition shall continue undismissed for 60 days, or,
before such 60-day period has elapsed, there shall be entered an
order or decree ordering the relief requested in such involuntary
proceeding or involuntary petition.
(g) The Borrower or the Broker Subsidiary shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of
an order for relief in an involuntary case under such law, or
shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Borrower or Broker Subsidiary or for
any substantial part of its respective properties, or shall make
any general assignment for the benefit of creditors, or shall
fail generally to pay its respective debts as they become due or
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shall take any corporate action in furtherance of any of the
foregoing.
(h) A final judgment or judgments for the payment of money in excess
of $50,000,000 in the aggregate shall be entered against the
Borrower by a court or courts of competent jurisdiction, and the
same shall not be discharged (or provisions shall not be made for
such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the
Borrower shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed
during such appeal.
(i) At any time after a Change in Control, the Borrower fails to
maintain at least one of the following credit ratings for its
Senior Medium-Term Notes, Series A: (a) BBB- (or better) by
Standard & Poor's Rating Group, or (b) Baa3 (or better) by
Moody's Investor Service.
8.2 If an Event of Default occurs and is continuing, then and in
every such case the Bank at its option may terminate the Credit and all
obligations of the Bank to make any further Advances, and declare the principal,
any accrued and unpaid interest, any accrued and unpaid Commitment Fees, or any
other amounts payable under the outstanding Revolving Note, to be due and
payable immediately, by a notice in writing to the Borrower, and upon such
declaration such principal, interest, Commitment Fees, or other amounts payable
hereunder accrued thereon shall become immediately due and payable, together
with any funding losses that may result as a consequence of such declaration,
without presentment, demand, protest or other notice of any kind, all of which
are expressly waived by the Borrower; provided, however, that in the case of any
of the Events of Default specified in subparagraph (f) or (g) of Paragraph 8.1,
automatically without any notice to the Borrower or any other act by the Bank,
the Credit and the Bank's obligations to make any further Advances shall
thereupon terminate and the outstanding principal of the Revolving Note, any
accrued and unpaid interest, any accrued and unpaid Commitment Fees or any other
amounts payable hereunder shall become immediately due and payable, together
with any funding losses that may result as a consequence thereof, without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by the Borrower.
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9. MISCELLANEOUS
9.1 Notices. Any communications between the parties hereto or
-------
notices provided herein shall be effective upon receipt and shall be, unless
otherwise specified, in writing (which may include telex or telecopy
transmission) and shall be given to the Bank at the address specified in
Schedule I hereto and to the Borrower at The Charles Schwab Corporation, Attn:
Treasury Department, 101 Montgomery Street, San Francisco, California 94104, fax
number (415) 667-3155, or to such other address as either party shall hereafter
have indicated to the other party in writing. In the event the Borrower
consents to any assignment by the Bank with respect to this Agreement, upon
receiving written notice from the Bank that such assignment has been effected,
the Borrower thereafter shall give all notices required to be given under this
Agreement to the assignee at the address specified for such assignee by the Bank
or such assignee. Notwithstanding the granting of any participation by the Bank
with respect to this Agreement as permitted by Paragraph 9.4, all notices
required to be given under this Agreement may continue to be given by the
Borrower only to the Bank and shall be effective upon delivery to the Bank as
though no such participation had been granted.
9.2 Waivers. No delay or omission to exercise any right, power or
-------
remedy accruing to the Bank upon any breach or default of the Borrower under
this Agreement shall impair any such right, power or remedy of the Bank, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any amendment,
modification, waiver, permit, consent or approval of any kind or character on
the part of the Bank of any breach or default under this Agreement, or any
waiver on the part of the Bank of any provision or condition of this Agreement,
must be in writing signed by the Bank and shall be effective only to the extent
specifically set forth in writing. All remedies, either under this Agreement or
by law or otherwise afforded to the Bank, shall be cumulative and not
alternative.
9.3 Expenses. The Borrower agrees to pay all reasonable out-of-
--------
pocket expenses of the Bank (including the reasonable fees and expenses of its
counsel) in connection with the negotiation, preparation, execution and delivery
of this Agreement, any amendments or modifications of or supplements to any of
the foregoing and any and all other documents furnished in connection herewith,
as well as, after the occurrence of any event that upon a lapse of time or
notice or both, would become an Event of Default, all costs and expenses
(including reasonable fees and expenses of counsel who may be employees of Bank)
in connection with the enforcement or administration (including, without
limitation, actions taken by the Bank in
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connection with litigation or regulatory proceedings as to which this Agreement
becomes relevant) of, or legal advice in respect to the rights and
responsibilities or the exercise of any right or remedy under, any provision of
this Agreement, the Revolving Note, and any amendments or modifications of or
supplements to any of the foregoing.
9.4 Assignment. Except as hereinafter set forth in this Paragraph
----------
9.4, no rights of the Bank hereunder may be assigned, transferred, sold,
assigned, pledged or otherwise disposed of, and no lien, charge or other
encumbrance may be created or permitted to be created thereon without the prior
written consent of the Borrower.
(a) Transfers to Affiliated Entities and Federal Reserve Banks. The
Bank shall have the right at any time and from time to time, to
transfer any loan hereunder to any Federal Reserve Bank or to any
parent, subsidiary, affiliate, branch or other related office of
the Bank which is not engaged in the securities brokerage
business or the investment advisory business, and to grant
participations hereunder to any such Federal Reserve Bank,
parent, subsidiary, affiliate, branch or other related office of
the Bank. In no event shall any such transferee or participant
be considered a party to the Agreement, and Bank shall continue
to service any loan transferred pursuant to this Paragraph 9.4(a)
and shall remain liable for the performance of all of its
obligations under this Agreement. Notwithstanding any such
transfer or grant of a participation, Borrower shall continue to
make payments required under this Agreement to Bank unless and
until otherwise notified in writing by Bank, and Bank agrees to
indemnify and hold Borrower harmless from and against any claims
by any transferee or participant arising out of any payment made
to Bank in accordance with this Paragraph 9.4(a).
(b) Transfers to Unrelated Entities. Subject to the provisions of
this Paragraph 9.4(b), the Bank may at any time sell to one or
more unrelated financial institutions not engaged in the
securities brokerage business or the investment advisory business
(each a "Participant") participating interests in any Advance,
the Revolving Note, the Bank's Credit hereunder or any other
interest of the Bank hereunder. In the event of any such sale by
the Bank to a Participant, the Bank's obligations under this
Agreement shall remain unchanged, the Bank shall remain solely
responsible for the performance hereof, the Bank shall
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remain the holder of the Revolving Note for all purposes under
this Agreement, and the Borrower shall continue to deal solely
and directly with the Bank in connection with the Bank's rights
and obligations under this Agreement. Any agreement pursuant to
which Bank may grant a participation shall provide that the Bank
shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to declare an acceleration or default
hereunder and the right to approve any amendment, modification or
waiver of any provision of this Agreement.
The Borrower may not assign this Agreement or any of its rights
hereunder without the prior written consent of the Bank.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the Bank and the Borrower and their respective successors and
assigns, and the term "Borrower" as used in this Agreement shall include the
Borrower and all such successors and assigns.
9.5 Confidentiality. Bank agrees to hold any confidential
---------------
information that it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure: (a) to legal counsel and accountants for
Borrower or Bank; (b) to other professional advisors to Borrower or Bank,
provided that the recipient has delivered to the Bank a written confidentiality
agreement substantially similar to this Paragraph 9.5; (c) to regulatory
officials having jurisdiction over Bank; (d) as required by applicable law or
legal process or in connection with any legal proceeding in which Bank and
Borrower are adverse parties; and (e) to another financial institution in
connection with a disposition or proposed disposition to that financial
institution of all or part of Bank's interests hereunder or a participation
interest in the Revolving Note, each in accordance with Paragraph 9.4 hereof,
provided that the recipient has delivered to Bank a written confidentiality
agreement substantially similar to this Paragraph 9.5. Bank further agrees that
it will not use such confidential information in any activity or for any purpose
other than the administration of credit facilities extended to Borrower and its
Subsidiaries and, without limitation, will take such steps as are reasonably
appropriate to preclude access to any such confidential information to be
obtained by any person employed by Bank, or by an affiliate of Bank, who is not
involved in the administration of credit facilities extended to Borrower and its
Subsidiaries. For purposes of the foregoing, "confidential information" shall
mean any information respecting Borrower or its Subsidiaries reasonably
specified by Borrower as confidential, other than (i) information filed with any
----------
governmental agency and available to the public, (ii) information published in
any public medium from a source other than, directly or indirectly, Bank, and
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(iii) information disclosed by Borrower to any person not associated with
Borrower without a written confidentiality agreement substantially similar to
this Paragraph 9.5. Certain of the confidential information pursuant to this
Agreement is or may be valuable proprietary information that constitutes a trade
secret of Borrower or its Subsidiaries; neither the provision of such
confidential information to Bank or the limited disclosures thereof permitted by
this Paragraph 9.5 shall affect the status of any such confidential information
as a trade secret of Borrower and its Subsidiaries. Bank, and each other person
who agrees to be bound by this Paragraph 9.5, acknowledges that any breach of
the agreements contained in this Paragraph 9.5 would result in losses that could
not be reasonably or adequately compensated by money damages. Accordingly, if
Bank or any such other person breaches its obligations hereunder, Bank or such
other person recognizes and consents to the right of Borrower, Intermediate
Parent, and/or Broker Subsidiary to seek injunctive relief to compel such Bank
or other Person to abide by the terms of this Paragraph 9.5.
9.6 Waiver of Jury Trial. The Borrower waives any right it may have
--------------------
to trial by jury in any action or proceeding to enforce or defend any rights or
remedies arising under this Agreement and the Revolving Note.
9.7 Entire Agreement. This instrument and the exhibits hereto embody
----------------
the entire agreement with respect to the subject matter hereof between the
Borrower and the Bank.
9.8 Counterparts. This Agreement may be executed in as many
------------
counterparts as may be deemed necessary or convenient, and by the different
parties hereto on separate counterparts each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instrument.
9.9 Governing Law. This Agreement and the Revolving Note shall be
-------------
deemed to be contracts under, and for all purposes shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
California.
9.10 Notice of Modification of Borrowing Agreements. The Borrower
----------------------------------------------
shall give prior notice to the Bank of any proposed modification in the terms of
any of the Borrowing Agreements and hereby agrees, should the Bank so request,
to make identical modifications in the terms of this Agreement.
-34-
<PAGE>
9.11 No Priority. Nothing in this Agreement is intended, or
-----------------
shall be interpreted, to create any priority of any of the banks listed on
Schedule I over any other of such banks with respect to their rights under the
Borrowing Agreements.
9.12 Headings. All headings in this Agreement are for convenience of
--------
reference only and shall not be construed to limit or interpret the provisions
they introduce.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
Bank: Borrower:
[NAME OF BANK] THE CHARLES SCHWAB
CORPORATION
By By /s/ Joseph R. Martinetto
--------------------------------------- -------------------------------
Its Joseph R. Martinetto
-------------------------------------- Senior Vice President and
Treasurer
-35-
<PAGE>
SCHEDULE OF CREDIT AGREEMENTS OMITTED
The following are the banks that are each signatories to separate but
substantially identical credit agreements that materially differ only with
respect to (i) the bank involved and (ii) the amount of the bank's commitment.
Bank of America NT&SA
By /s/ Steven W. Kastenholz
-------------------------
Its Managing Director
-----------------
Bank of New York
By /s/ Mark J. Rogers
-------------------
Its Vice President
--------------
The Chase Manhattan Bank
By /s/ Robert J. Gould
--------------------
Its Managing Director
-----------------
Citicorp USA, Inc.
By /s/ Kelly Hebert
-----------------
Its Attorney-in-fact
----------------
The First National Bank of Chicago
By /s/ Jeanne M. Madej
--------------------
Its Assistant Vice President
------------------------
-36-
<PAGE>
First Tennessee Bank National Association
By /s/ Victor Notaro
-----------------
Its Vice President
-----------------
Norwest Bank Minnesota, N.A.
By /s/ Janet M. Klein
------------------
Its Vice President
-----------------
PNC Bank
By /s/ Philip Jackson
------------------
Its Senior Vice President
------------------------
NationsBank, N.A.
By /s/ Kenneth Ricciardi
---------------------
Its Senior Vice President
------------------------
Union Bank of Switzerland
By /s/ Virginia M. Loebel
----------------------
Its Managing Director
--------------------
By /s/ Vincent Piazza
-------------------
Its Assistant Treasurer
----------------------
-37-
<PAGE>
SCHEDULE I
TO CREDIT AGREEMENT (3-YEAR COMMITMENT) DATED AS OF JUNE 26, 1998 BETWEEN
THE CHARLES SCHWAB CORPORATION AND THE BANKS LISTED BELOW
(Dollars in Millions)
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Bank of America NT&SA $ 25
Attn: Steven W. Kastenholz, Managing Director
231 South LaSalle Street
Chicago, IL 60697
Bank of New York 25
Attn: Mark Rogers, Vice President
One Wall Street, First Floor
New York, NY 10286
Chase Manhattan Bank 17.5
Broker Dealer Division
Attn: Robert J. Gould, Managing Director
One Chase Plaza, 21st Floor
New York, NY 10081
Citicorp USA, Inc. 25
Attn: Michael Mauerstein, Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
The First National Bank of Chicago 17.5
Attn: Denise de Diego, Senior Vice President
153 West 51st Street, Suite 4000
New York, NY 10019
First Tennessee Bank National Association 10
Attn: Victor Notaro, Vice President
165 Madison Avenue
Main Office, 9th Floor
Memphis, TN 38103
Norwest Bank Minnesota, N.A. 10
Attn: Bradley A. Hardy, Vice President
6th and Marquette
Minneapolis, MN 55479-0085
PNC Bank 25
Attn: Philip Jackson, Senior Vice President
1600 Market Street, 21st Floor
Philadelphia, PA 19101
NationsBank, N.A. 10
Attn: Kenneth Ricciardi, Senior Vice President
55 Broadway, 4th Floor
New York, NY 10006
</TABLE>
-38-
<PAGE>
<TABLE>
<S> <C>
Union Bank of Switzerland 10
New York Branch
Attn: Virginia Loebel, Managing Director
299 Park Avenue
New York, NY 10171-0026
</TABLE>
-39-
<PAGE>
EXHIBIT A
REVOLVING NOTE
Date:
$____________________
For value received, the undersigned The Charles Schwab Corporation
("Schwab") hereby promises to pay to the order of ________________ (the "Bank")
at ______________, the principal amount of each Advance made by the Bank to
Schwab under the terms of a Credit Agreement (3-Year Commitment) between Schwab
and the Bank, dated as of June 26, 1998, as amended from time to time (the
"Credit Agreement"), as shown in the schedule attached hereto and any
continuation thereof, on the last day of the Interest Period (as defined in the
Credit Agreement) for such Advance. The undersigned also promises to pay
interest on the unpaid principal amount of each Advance from the date of such
Advance until such principal amount is paid, at the rates per annum, and payable
at such times, as are specified in the Credit Agreement. This Note shall be
subject to the Credit Agreement, and all principal and interest payable
hereunder shall be due and payable in accordance with the terms of the Credit
Agreement. Terms defined in the Credit Agreement are used herein with the same
meanings.
Principal and interest payments shall be in money of the United States
of America, lawful at such times for the satisfaction of public and private
debts, and shall be in immediately available funds.
Schwab promises to pay costs of collection, including reasonable
attorney's fees, if default is made in the payment of this Note.
The terms and provisions of this Note shall be governed by the
applicable laws of the State of California.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed by its officers or employees thereunto duly authorized and directed by
appropriate corporate authority.
The Charles Schwab Corporation
By: _________________________________
Joseph R. Martinetto
Senior Vice President and Treasurer
-40-
<PAGE>
EXHIBIT B
CONFIRMING BANK AGREEMENT
This Agreement is entered into as of June 26, 1998 between The Charles
Schwab Corporation (the "Borrower") and Citibank, N.A. (the "Confirming Bank").
WHEREAS, under the terms of separate substantially similar Credit
Agreements (3-Year Commitment) (the "Credit Agreements") between the Borrower
and each of the banks (the "Banks") set forth on Schedule I hereto, the Banks
have severally agreed to lend certain amounts to the Borrower on a revolving
credit loan basis through June 22, 2001 and maturing no later than September 21,
2001 (as such dates may be extended from time to time pursuant to Paragraph 2.11
of each of the Credit Agreements);
WHEREAS, the Borrower desires the Confirming Bank to calculate the
basis for the rates of interest to be borne by certain of the loans which may be
made by the Banks to the Borrower under the Credit Agreements:
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. Terms defined in the Credit Agreements shall bear the same
meanings herein unless the context otherwise requires.
2. Upon the terms and subject to the conditions hereinafter
mentioned, the Confirming Bank shall determine the CD Rate (including the
Assessment Rate and the CD Rate Reserve Percentage), the Eurodollar Rate
(including the Eurodollar Rate Reserve Percentage) or the Reference Rate which
is to serve as the basis for the interest rate of certain loans made under any
of the Credit Agreements.
3. Simultaneously with the giving of a Borrowing Advice, to any of
the Banks, the Borrower shall give to the Confirming Bank notice of such
Borrowing Advice (such notice being hereinafter referred to as a "Rate Request")
which shall specify the Bank to which such Borrowing Advice was given and the
principal amount, the Interest Period, and the basis for interest calculation
referred to therein.
4. (a) Upon receipt by the Confirming Bank of a Rate Request
relating to an Interest Period for which the interest calculation is to be based
on the Eurodollar Rate, the Confirming Bank, as soon as practicable, shall (i)
calculate the Eurodollar Rate Reserve Percentage for such Interest Period, which
shall be the percentage (expressed as a decimal) that is in effect on the first
day of such Interest Period, as prescribed by the Board of Governors of the U.S.
Federal Reserve System (or any successor), for determining the reserve
requirements to be maintained by the Bank under Regulation D (or any successor
regulation thereof) as amended to the date hereof (including such reserve
requirements as become applicable to the Bank
-41-
<PAGE>
pursuant to phase-in or other similar requirements of Regulation D at any time
subsequent to the date hereof) in respect of "Eurocurrency liabilities" (as
defined in Regulation D), (ii) (aa) if there appear on the Reuters Screen LIBO
Page as at 11:00 A.M. (London time) two Eurodollar Banking Days prior to the
commencement of the relevant Interest Period at least two rates at which
deposits of U.S. dollars for the selected Interest Period are offered, identify
such offered rates and calculate the Eurodollar Rate to be the arithmetic mean
(adjusted upward, if necessary, to the nearest 1/16 of 1%) of such offered rates
or (bb) if fewer than two offered rates appear, obtain from each of the
Eurodollar Rate Reference Banks information with respect to the average rate per
annum (adjusted upward, if necessary, to the nearest 1/16 of 1%) at which
deposits of U.S. dollars for the selected Interest Period and in the amount
specified in the Rate Request are offered in immediately available funds to such
Eurodollar Rate Reference Bank (without giving effect to reserve requirements
described in the Eurodollar Rate Reserve Percentage section of the Credit
Agreement) in the London interbank market as at 11:00 a.m. (London time) two
Banking Days prior to the commencement of the relevant Interest Period and shall
determine the Eurodollar Rate for the relevant Interest Period to be the average
of the rates so obtained, adjusted upward, if necessary, to the nearest 1/16 of
1%, and (iii) determine the Eurodollar Rate for the relevant Interest Period to
be (aa) the applicable rate obtained pursuant to paragraph 4(a)(ii)(aa) or (bb)
hereof, divided by a percentage (expressed as a decimal) equal to 1.00 minus the
Eurodollar Rate Reserve Percentage. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurodollar
Rate Reserve Percentage.
In the event that (x) fewer than two offered rates appear on the
Reuters Screen LIBO Page as described above and fewer than two Eurodollar Rate
Reference Banks shall have provided information with respect to such offered
rates to the Confirming Bank, or (y) the Confirming Bank shall have determined
(which determination shall be conclusive and binding upon the Borrower and the
Banks) that by reason of changes affecting the London interbank market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for the
relevant Interest Period, the Confirming Bank shall notify the Borrower and the
Bank specified in the Rate Request of such fact as soon as possible (and provide
information concerning the basis for any such determination described in (y)
above).
(b) As soon as possible after the determination of the Eurodollar
Rate, the Confirming Bank shall forthwith notify the Borrower and the Bank
specified in the Rate Request of such determination by telephone, confirmed by
written or telegraphic communication. The Confirming Bank shall simultaneously
notify the Borrower and the Bank as to which of the Eurodollar Rate Reference
Banks supplied information used in determining the Eurodollar Rate and the
information supplied by each such bank.
5. (a) Upon receipt by the Confirming Bank of a Rate Request
relating to an Interest Period for which the interest calculation is to be based
on the CD Rate, the Confirming Bank, as soon as practicable, shall:
(i) estimate the Assessment Rate for such Interest Period,
which shall be the assessment rate per annum (adjusted upward, if necessary,
-42-
<PAGE>
to the nearest 1/100 of 1%) on the first day of such Interest Period for
determining the then current annual assessment payable by the Bank specified in
the Rate Request to the Federal Deposit Insurance Corporation (or any successor
thereto) for such Corporation's (or such successor's) insuring U.S. dollar
deposits of the Bank specified in the Rate Request in the United States;
(ii) calculate the CD Rate Reserve Percentage for such Interest
Period, which shall be the percentage (expressed as a decimal) that is in effect
on the first day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor), for determining the
maximum reserve requirements (including, without limitation, supplemental,
marginal and emergency reserves) for a bank with deposits exceeding five billion
dollars that is a member of the Federal Reserve System, in respect of new non-
personal time deposits in U.S. dollars in the United States in the amount
specified in the Rate Request having a maturity comparable to such Interest
Period (such bank's reserve ratio on such time deposits in effect on June __,
1998 was 0%);
(iii) obtain (aa) from each of the CD Reference Banks information
with respect to the average rate per annum (adjusted upward, if necessary, to
the nearest 1/16 of 1%) at which bids are received by each such CD Reference
Bank for its certificates of deposit for the selected Interest Period and in
the amount specified in the Rate Request as at 11:00 a.m., New York City time
(or as soon as practicable thereafter), on the first day of the relevant
Interest Period from two or more New York City certificate of deposit dealers
of recognized standing selected by the Confirming Bank for the purchase at
face value of such certificates of deposit, and calculate the applicable rate
to be the arithmetic mean (adjusted upward, if necessary, to the nearest 1/16
of 1%) of the average rates per annum of the CD Reference Banks, or (bb) in
the event the Confirming Bank cannot, without undue effort, obtain rates from
such CD Reference Banks the certificate of deposit rate as reported for the
date of the Borrowing Advice, in "Federal Reserve Statistical Release--
Selected Interest Rates--H.15 (519)" published by the Board of Governors of
the Federal Reserve System, or any successor publication, under the caption
"CDs (Secondary Market)" having a maturity most closely approximating the
conclusion of the Interest Period; and
(iv) determine the CD Rate for the relevant Interest Period to be the
sum of (aa) the Assessment Rate for such Interest Period, plus (bb) the
applicable rate obtained pursuant to paragraph 5(a) (iii)(aa) or (bb) hereof
(adjusted upward, if necessary, to the nearest 1/16 of 1%) divided by a
percentage (expressed as a decimal) equal to 1.00 minus the CD Rate Reserve
Percentage. The CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate and the CD Rate Reserve
Percentage.
In the event that (x) fewer than two CD Reference Banks shall have
provided information with respect to such offered rates to the Confirming Bank,
or (y) the Confirming Bank shall have determined (which determination shall be
conclusive and binding upon the Borrower and the Banks) that by reason of
changes affecting the New York City certificate of deposit market, adequate and
reasonable means do not exist for ascertaining the CD Rate for the relevant
Interest Period, the
-43-
<PAGE>
Confirming Bank shall notify the Borrower and the Bank specified in the Rate
Request of such fact as soon as possible (and provide information concerning the
basis for any such determination described in (y) above).
(b) As soon as possible after the determination of the CD Rate or any
adjustment of the CD Rate, the Confirming Bank shall forthwith notify the
Borrower and the Bank specified in the Rate Request of such determination by
telephone, confirmed by written or telegraphic communication. The Confirming
Bank shall simultaneously notify the Borrower and the Bank as to which of the CD
Reference Banks supplied information used in determining the CD Rate and the
information supplied by each such Bank.
6. (a) Upon receipt by the Confirming Bank of a Rate Request
relating to an Interest Period for which the interest calculation is to be based
on the Reference Rate, the Confirming Bank shall:
(i) determine, on a daily basis during such Interest Period, the
higher of (a) the highest per annum rate of interest (adjusted upward, if
necessary, to the nearest 1/16 of 1%) publicly announced by any Reference Rate
Reference Bank as its "prime rate," "prime commercial lending rate," "reference
rate," or "base rate," as the case may be, and (b) the highest per annum Federal
Funds Effective Rate available to any Reference Rate Reference Bank, plus 1/2 of
1%;
(ii) on the last day of each month falling within such Interest
Period, determine the Reference Rate for the applicable portion of each month
then ending, which shall be equal to the arithmetic mean of the daily rates of
interest with the rate on each day being equal to the rate determined under (i)
above.
(b) At 10:00 a.m. on the first day of the month following each month
for which the Reference Rate has been determined, the Confirming Bank shall
notify the Borrower and the Bank specified in the Rate Request of such
determination by telephone, confirmed by written or telegraphic communication.
The Confirming Bank shall immediately notify the Borrower and the Bank as to
which of the Reference Rate Reference Banks supplied information used in
determining the Reference Rate and the information supplied by each such bank.
7. The determination of the Eurodollar Rate, the CD Rate or the
Reference Rate by the Confirming Bank shall be final and binding in the absence
of manifest error.
8. The Confirming Bank accepts its obligations herein set forth,
upon the terms and conditions hereof, including the following, to all of which
the Borrower agrees:
(a) The Confirming Bank shall be entitled to the compensation to be
agreed upon with the Borrower for all services rendered by the Confirming Bank,
and the Borrower agrees promptly to pay such compensation and to reimburse the
Confirming Bank for the reasonable out-of-pocket expenses (including reasonable
counsel fees) incurred by it in connection with the services
-44-
<PAGE>
rendered by it hereunder. The Borrower also agrees to indemnify the Confirming
Bank for, and to hold it harmless against, any loss, liability or expense
(including the costs and expenses of defending against any claim of liability)
incurred without gross negligence or willful misconduct, arising out of or in
connection with its acting as Confirming Bank hereunder.
(b) In acting under this Agreement, the Confirming Bank does not
assume any obligation or relationship of agency or trust for or with any of the
Banks.
(c) The Confirming Bank shall be protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or
anything suffered by it in reliance upon any notice (including any Rate
Request), direction, certificate, affidavit, statement or other paper or
document reasonably believed by such Confirming Bank to be genuine and to have
been passed or signed by the proper parties. Under all circumstances, the
Confirming Bank's maximum liability for any error or omission in the performance
of its rate determination and notification obligations under this Agreement
shall be the difference between (1) any erroneous rate it determined and/or
provided notification of in response to a Rate Request from the Borrower, and
(2) the corresponding actual rate it should have determined and/or provided
notification of pursuant to the provisions of this Agreement.
(d) The Confirming Bank, its officers, directors and employees may
engage or be interested in any financial or other transaction with the Borrower
(including the lending of moneys to the Borrower under one of the Borrowing
Agreements), and may act on, or as depositary, trustee or agent for, any
committee or body of holders of notes or other obligations of the Borrower, as
freely as if it were not the Confirming Bank.
(e) The Confirming Bank shall be obligated to perform such duties and
only such duties as are herein specifically set forth, and no implied duties or
obligations shall be read into this Agreement against the Confirming Bank.
(f) The Confirming Bank may consult with counsel satisfactory to it
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, omitted to be taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel.
(g) Any written order, certificate, notice (including any Rate
Request), request, direction, or other communication, from the Borrower made or
given under any provision of this Agreement shall be sufficient if signed by a
person authorized to execute and deliver a Borrowing Advice.
9. (a) The Confirming Bank may at any time resign as such Confirming
Bank by giving written notice to the Borrower and the Banks of such intention on
its part, specifying the date on which its desired resignation shall become
effective; provided, however, that no such resignation shall become effective
until a successor Confirming Bank is selected by the Borrower. The Confirming
Bank may be
-45-
<PAGE>
removed at any time by the filing with it of an instrument in writing signed on
behalf of the Borrower and specifying such removal and the date when it is
intended to become effective. Such resignation or removal shall take effect
upon the date of the appointment by the Borrower, as hereinafter provided, of a
successor Confirming Bank (which shall be acceptable to the Banks) and the
acceptance of such appointment by such successor Confirming Bank. Upon its
resignation or removal, the Confirming Bank shall be entitled to the payment by
the Borrower of its compensation for the services rendered hereunder and to the
reimbursement of all out-of-pocket expenses, including reasonable fees of
counsel, incurred in connection with the services rendered hereunder by the
Confirming Bank.
(b) In case at any time the Confirming Bank shall resign, or shall be
removed, or shall become incapable of acting, or shall be adjudged bankrupt or
insolvent, or shall file a voluntary petition in bankruptcy or make an
assignment for the benefit of its creditors or consent to the appointment of a
conservator, liquidator or receiver of all or any substantial part of its
property, or shall admit in writing its inability to pay or meet its debts as
they mature or shall suspend payment thereof, or if an order of any court shall
be entered approving any petition filed by or against the Confirming Bank under
the provisions of any applicable bankruptcy or insolvency law, or if a
liquidator or receiver of it or of all or any substantial part of its property
shall be appointed, or if any public officer shall take charge or control of it
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, a successor Confirming Bank (which shall be acceptable to the
Banks) may be appointed by the Borrower by an instrument in writing, filed with
the successor Confirming Bank. Upon the appointment as aforesaid of a successor
Confirming Bank and acceptance by it of such appointment, the Confirming Bank so
superseded shall cease, if not previously disqualified by operation of law, to
be such Confirming Bank hereunder.
(c) Any successor Confirming Bank appointed hereunder shall execute,
acknowledge and deliver to its predecessor and to the Borrower (which shall
deliver a copy of same to the Banks) an instrument accepting such appointment
hereunder, and thereupon such successor Confirming Bank, without any further
act, deed or conveyance, shall become vested with all the authority, rights,
powers, trusts, immunities, duties and obligations of such predecessor with like
effect as if originally named as such Confirming Bank hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obliged to transfer and deliver, and such successor Confirming
Bank shall be entitled to receive, copies of any relevant information maintained
by such predecessor Confirming Bank.
(d) Any corporation or bank into which the Confirming Bank may be
merged or converted, or any corporation or bank with which the Confirming Bank
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Confirming Bank shall be a party, or
any corporation or bank to which the Confirming Bank shall sell or otherwise
transfer all or substantially all the assets and business of such Confirming
Bank, shall, to the extent permitted by applicable law and provided that it
shall be qualified as aforesaid, be the successor Confirming Bank under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto. Notice
-46-
<PAGE>
of any such merger, conversion, consolidation or sale shall forthwith be given
to the Borrower and to each of the Banks.
10. The Borrower undertakes that, so long as any Revolving Note is
outstanding under any of the Credit Agreements, there shall at all times be two
Eurodollar Rate Reference Banks, two CD Reference Banks, and two Reference Rate
Reference Banks. The initial Eurodollar Rate Reference Banks, CD Reference
Banks and Reference Rate Reference Banks shall be those stated in the Credit
Agreements.
If any Reference Bank (i.e., any Eurodollar Rate Reference Bank, any
CD Reference Bank or any Reference Rate Reference Bank) or office thereof is
later unable or unwilling to act as such, the Borrower will appoint another
leading bank or office thereof (independent of the Borrower and acceptable to
the Banks) engaged in business in the appropriate market for determination of
applicable rates to replace such Reference Bank in such capacity. The Borrower
shall notify the Confirming Bank and each of the Banks forthwith upon any change
in the identity of any of the Reference Banks. Pending receipt of any such
notification the Confirming Bank shall be entitled to assume that the Reference
Banks are those named in the Credit Agreement as modified by changes of which
notification has already been received by the Confirming Bank.
11. Except where telephonic instructions or notices are authorized
herein to be given, all notices, demands, instructions and other communications
required or permitted to be given or made upon any party hereto shall be in
writing and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt request, or by prepaid Telex, TWX or
telegram (with messenger delivery specified in the case of a telegram), or by
telecopier, and shall be deemed to be given for purposes of this Agreement on
the day that such writing is delivered to the intended recipient thereof in
accordance with the provisions of this paragraph. Unless otherwise specified in
a notice sent or delivered in accordance with the foregoing provisions of this
paragraph, notices, demands, instructions and other communications in writing
shall be given to or made upon the respective parties hereto at their respective
addresses (or to their respective Telex, TWX or telecopier numbers) indicated
below, and, in the case of telephonic instructions or notices, by calling the
telephone number or numbers indicated for such party below:
If to the Borrower: The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Attn: Treasurer
Telephone: (415) 627-7000
FAX: (415) 667-3155
-47-
<PAGE>
If to the Confirming Bank: Citibank, N.A.
Attn: Michael Mauerstein
Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
Telephone: (212) 559-6985
FAX: (212) 371-6309
If to any of the Banks: To the respective address, telephone number or telex
number set forth opposite the name of such Bank on
Schedule I hereto.
12. Schedule I hereto may be amended from time to time by the
Borrower by the Borrower's delivery to the Confirming Bank of a new Schedule I.
Each such new Schedule I delivered by the Borrower to the Confirming Bank shall
replace and supersede the then-existing Schedule I, and any such newly delivered
Schedule I shall be the Schedule I referred to in this Agreement. Each such
newly delivered Schedule I shall include all of the then-existing Credit
Agreements between the Borrower and any Bank having substantially similar terms
to the Credit Agreements listed on the original Schedule I hereto.
13. This Agreement shall be deemed to be a contract under, and for
all purposes shall be governed by and construed and interpreted in accordance
with, the laws of the State of California.
14. This Agreement may be executed in as many counterparts as may be
deemed necessary or convenient, and by the parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
CITIBANK, N.A. THE CHARLES SCHWAB CORPORATION
By:_______________________ By:________________________________
Joseph R. Martinetto
Its:______________________ Senior Vice President and Treasurer
-48-
<PAGE>
SCHEDULE I
TO CONFIRMING BANK AGREEMENT DATED AS OF JUNE 26, 1998 BETWEEN
THE CHARLES SCHWAB CORPORATION AND CITIBANK, N.A.
(Dollars in Millions)
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Bank of America NT&SA $ 25
Attn: Steven W. Kastenholz, Managing Director
231 South LaSalle Street
Chicago, IL 60697
Bank of New York 25
Attn: Mark Rogers, Vice President
One Wall Street, First Floor
New York, NY 10286
Chase Manhattan Bank 17.5
Broker Dealer Division
Attn: Robert J. Gould, Managing Director
One Chase Plaza, 21st Floor
New York, NY 10081
Citicorp USA, Inc. 25
Attn: Michael Mauerstein, Managing Director
399 Park Avenue, 12th Floor, Zone 10
New York, NY 10043
The First National Bank of Chicago 17.5
Attn: Denise de Diego, Senior Vice President
153 West 51st Street, Suite 4000
New York, NY 10019
First Tennessee Bank National Association 10
Attn: Victor Notaro, Vice President
165 Madison Avenue
Main Office, 9th Floor
Memphis, TN 38103
Norwest Bank Minnesota, N.A. 10
Attn: Bradley A. Hardy, Vice President
6th and Marquette
Minneapolis, MN 55479-0085
PNC Bank 25
Attn: Philip Jackson, Senior Vice President
1600 Market Street, 21st Floor
Philadelphia, PA 19101
NationsBank, N.A. 10
Attn: Kenneth Ricciardi, Senior Vice President
55 Broadway, 4th Floor
New York, NY 10006
</TABLE>
-49-
<PAGE>
<TABLE>
<S> <C>
Union Bank of Switzerland 10
New York Branch
Attn: Virginia Loebel, Managing Director
299 Park Avenue
New York, NY 10171-0026
</TABLE>
-50-
<PAGE>
EXHIBIT C
BORROWING ADVICE
1. This Borrowing Advice is executed and delivered by The Charles
Schwab Corporation ("Borrower") to [Bank] pursuant to that certain Credit
Agreement (3-Year Commitment) dated as of June 26, 1998, entered into by
Borrower and [Bank] (the "Credit Agreement"). Terms defined in the Credit
Agreement and not otherwise defined herein are used herein as defined in the
Credit Agreement.
2. Borrower hereby requests that [Bank] make an Advance for the
account of Borrower (at _______________, Account No. ________________) pursuant
to Paragraph 2.2 of the Credit Agreement as follows:
(a) Amount of Advance: _________________
(b) Date of Advance: _________________
(c) Type of Advance (check one only):
________ Reference Rate with ____ - day Interest Period
________ CD Rate with _________- day Interest Period
________ Eurodollar Rate with ________- day Interest Period
3. Following this request for Advance, the aggregate outstanding
amount of all Advances the Revolving Note will not exceed the Credit amount.
4. This Borrowing Advice is executed on ______________ by the
Borrower.
BORROWER:
THE CHARLES SCHWAB CORPORATION
a Delaware Corporation
By ___________________________
[Printed Name and Title]
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EXHIBIT D
COMMITMENT AND TERMINATION DATE EXTENSION REQUEST
[Date]
[Bank name and Address]
Reference is made to that certain Credit Agreement (3-Year Commitment)
dated as of June 26, 1998 ("Credit Agreement") entered into by The Charles
Schwab Corporation ("Borrower") and [Bank] ("Bank"). Terms defined in the
Credit Agreement and not otherwise defined herein are used herein as defined in
the Credit Agreement.
Pursuant to Paragraph 2.11 of the Credit Agreement, Borrower hereby
requests Bank to agree to the extension of Bank's Commitment presently in
effect, in the amount of $[specify amount of existing Commitment], and the
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Termination Date presently in effect for an additional 364 days.
Bank's execution of a copy of this letter in the space provided below
and the transmission of such executed copy to Borrower shall constitute Lender's
acceptance of Borrower's request and Lender's agreement to the 364-day extension
sought herein. More specifically, upon the execution of a copy of this letter
by Bank and the transmission thereof to Borrower within 15 days after Bank's
receipt of this letter, (1) the Termination Date as defined in Paragraph 2.11 of
the Credit Agreement shall be extended 364 days and deemed changed to
_____________, and (2) all other dates appearing in the Credit Agreement that
are referred to in Paragraph 2.11 of the Credit Agreement shall correspondingly
be extended 364 days.
This Commitment and Termination Date Extension Request is executed by
Borrower on ____________________.
BORROWER:
THE CHARLES SCHWAB CORPORATION
a Delaware Corporation
By ___________________________
[Printed Name and Title]
ACCEPTED AND AGREED:
[BANK]
By _____________________________
[Printed Name and Title]
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