<PAGE>
As filed with the Securities and Exchange Commission on May 15, 2000
Registration No. 333-36410
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
THE CHARLES SCHWAB CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-3025021
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
120 Kearny Street
San Francisco, CA 94108
(415) 627-7000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
Christopher V. Dodds
Executive Vice President and Chief Financial Officer
THE CHARLES SCHWAB CORPORATION
120 Kearny Street
San Francisco, CA 94108
(415) 627-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
<TABLE>
<S> <C>
LAWRENCE B. RABKIN, ESQ. JOHN M. BRANDOW, ESQ.
HOWARD, RICE, NEMEROVSKI, DAVIS POLK & WARDWELL
CANADY, FALK & RABKIN 450 Lexington Avenue
A Professional Corporation New York, New York 10017
Three Embarcadero Center, 7th Floor (212) 450-4000
San Francisco, CA 94111
(415) 434-1600
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
$750,000,000
THE CHARLES SCHWAB CORPORATION
DEBT SECURITIES
We will provide the specific terms of the debt securities in supplements to
this prospectus. You should carefully read this prospectus and the applicable
prospectus supplement before you invest.
Unless we state otherwise in a prospectus supplement, we will not list any
of these securities on any securities exchange.
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
Our wholly owned subsidiary, Charles Schwab & Co., Inc., may use this
prospectus to make offers and sales of our debt securities in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale or otherwise. Charles Schwab & Co., Inc. has advised us that it
intends to make a market in our debt securities; however, it is not obligated
to do so. Charles Schwab & Co., Inc. may discontinue such market-making
activity at any time, and we cannot assure you of the liquidity of, or trading
market for, our debt securities. Charles Schwab & Co., Inc. may act as
principal or agent in such transactions, as discussed in "Plan of Distribution"
beginning on page 12. This prospectus may not be used to confirm sales of any
debt securities unless it is attached to a prospectus supplement.
May , 2000
<PAGE>
Table of Contents
<TABLE>
<S> <C>
The Charles Schwab Corporation........ 4
Consolidated Ratio of Earnings to
Fixed Charges........................ 4
Use of Proceeds....................... 4
</TABLE>
<TABLE>
<S> <C>
Description of Debt Securities........ 5
Plan of Distribution.................. 12
Legal Matters......................... 14
Experts............................... 14
</TABLE>
----------------
Note Regarding Forward-Looking Statements
This prospectus, including the information incorporated by reference, may
contain "forward-looking statements" within the meaning of Section 27A of the
Securities Act, and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may" and other similar
expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. These forward-looking statements are necessarily
estimates reflecting the best judgment of our senior management. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this prospectus or, in the case of documents
incorporated by reference, as of the date of those documents.
There are a variety of factors and risks that could cause actual results to
differ materially from the anticipated results or other expectations expressed
in the forward-looking statements or that could affect the decision to invest
in our securities, including, but not limited to, those contained in our Annual
Report on Form 10-K for the year ended December 31, 1999, and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000, which are
incorporated into this document by reference.
About This Prospectus
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total amount of
$750,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and the prospectus supplement together with the additional information about us
as described below under the heading "Where You Can Find More Information."
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our SEC file number is
1-9700. Our SEC filings are available to the public through commercial document
retrieval services and over the Internet at the SEC's website at
http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.
We encourage you to review the documents and reports to be filed by us after
the date of this prospectus as required by Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act.
2
<PAGE>
Incorporation of Certain Documents by Reference
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference into this prospectus:
. Our Annual Report on Form 10-K for the year ended December 31, 1999.
.Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
Each future filing we make with the SEC under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act until the later of the date we sell all of the
securities or the date that our subsidiary Charles Schwab & Co., Inc. ceases
offering and/or selling previously issued debt securities shall be incorporated
into this prospectus on the date of filing.
We will furnish without charge to each person to whom this prospectus is
delivered, on the written or oral request of the person, a copy of any or all
of the documents incorporated by reference into this prospectus, except for the
exhibits to such documents. Requests should be made to:
The Charles Schwab Corporation
Investor Relations Department
101 Montgomery Street
San Francisco, California 94104
(415) 636-2787
Any statement contained in a document or information incorporated by
reference into this prospectus will be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any subsequently filed document that also is incorporated by reference,
modifies or supersedes the statement. Any modified or superseded statement
shall not, except as so modified or superseded, constitute a part of this
prospectus. The modification or superseding of a statement does not mean that
the statement, when made, was untrue or misleading.
Our common stock is listed on the New York Stock Exchange under the symbol
"SCH" as well as on the Boston, Cincinnati, Chicago, Pacific and Philadelphia
stock exchanges and a facility of the National Association of Securities
Dealers, Inc.
You should rely only on the information incorporated by reference or
provided in this prospectus or the prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of the debt securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of these documents.
3
<PAGE>
THE CHARLES SCHWAB CORPORATION
The Charles Schwab Corporation, through its subsidiaries, engages in
securities brokerage and related financial services, including retail
brokerage, mutual funds, support services for independent investment managers,
equity securities market making and 401(k) defined contribution plans. Charles
Schwab & Co., Inc., our principal operating subsidiary, provides brokerage and
related investment services nationwide and in Puerto Rico and the U.S. Virgin
Islands. Charles Schwab Europe is our retail securities brokerage firm located
in the United Kingdom. Another of our subsidiaries, Schwab Capital Markets L.P.
(formerly Mayer & Schweitzer, Inc.), a market maker in Nasdaq and other
securities, provides trade execution services to broker-dealers and
institutional customers. Charles Schwab Investment Management, Inc. is the
investment adviser for our proprietary mutual funds.
We were incorporated in Delaware in November 1986. Charles Schwab & Co.,
Inc. was incorporated in California in 1971 and merged in 1983 with a
subsidiary of BankAmerica Corporation. We acquired Charles Schwab & Co., Inc.
in a management-led leveraged buyout in March 1987 and became a publicly held
company in September 1987. Our principal executive offices are located at 120
Kearny Street, San Francisco, CA 94108 (telephone number (415) 627-7000). Our
website is http://www.schwab.com. This reference to our website address does
not constitute incorporation by reference of the information contained in the
website.
All references to "we," "us," "our" or to "Charles Schwab" in this
prospectus are to The Charles Schwab Corporation.
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table lists our consolidated ratio of earnings to fixed
charges for the periods indicated.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Year Ended December 31,
------------- ------------------------
2000 1999 1999 1998 1997 1996 1995
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges
(unaudited)........................ 2.7 2.3 2.2 1.8 1.8 1.9 1.7
Ratio of earnings to fixed charges
as adjusted (unaudited)............ 12.4 9.5 8.9 6.5 5.9 5.9 5.9
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges:
. earnings consist of earnings before taxes on income and fixed charges;
and
. fixed charges consist of interest expense incurred on payables to
customers, borrowings and one-third of rental expense, which we estimate
is representative of the interest factor.
For the purpose of calculating the ratio of earnings to fixed charges as
adjusted, interest expense incurred on payables to customers is eliminated as a
fixed charge. We consider interest expense incurred in connection with payables
to customers to be an operating expense because such interest is completely
offset by interest revenue on related investments and margin loans.
USE OF PROCEEDS
We will use the net proceeds from the sale of the debt securities for
general corporate purposes, which may include additions to working capital,
investing in or extending credit to subsidiaries, capital expenditures,
repayment of indebtedness or acquisitions. We may provide additional details
relating to the use of net proceeds in the applicable prospectus supplement.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
We may issue either senior debt securities or senior subordinated debt
securities. Senior debt securities and senior subordinated debt securities will
be issued in one or more series under either the senior indenture or the senior
subordinated indenture between us and The Chase Manhattan Bank, formerly
Chemical Bank, as Trustee. In the following discussion, we sometimes refer to
the senior indenture and the senior subordinated indenture as the "indentures."
We are a holding company and we are dependent upon the earnings and cash
flow of our subsidiaries to meet our obligations under the debt securities.
Because the creditors of any of our subsidiaries would generally have a right
to receive payment before we would receive payment from the assets of a
subsidiary, holders of our debt securities will be effectively subordinated to
creditors of our subsidiaries. In addition, the Exchange Act and the rules of
some exchanges and regulatory bodies impose net capital requirements on some of
our subsidiaries that limit their ability to pay dividends and make loans and
advances to us.
This prospectus briefly outlines the provisions of the indentures. The
indentures have been filed as exhibits to the registration statement and you
should read them for provisions that may be important to you. The indentures
are substantially identical except for the subordination and negative pledge
provisions described below.
In the summary below, we have included references to section numbers of the
indentures so that you can easily locate these provisions.
General
The indentures do not limit the amount of additional indebtedness that we
may incur. We may issue debt securities from time to time in one or more series
with the same or various maturities. The debt securities will not be secured by
any of our property or assets.
The prospectus supplement for each series of debt securities that we sell
will contain the specific terms for that series. These terms will include some
or all of the following:
. whether the debt securities are senior or senior subordinated;
. the total principal amount of the debt securities;
. the authorized denominations;
. whether the debt securities will be issued at a discount or a premium
from the stated principal amount and whether the debt securities will be
"original issue discount" securities for U.S. federal income tax
purposes. If we issue original issue discount debt securities, we will
describe the special United States federal income tax and other
considerations in the prospectus supplement. Original issue discount debt
securities are securities that are issued at a substantial discount below
their principal amount because they pay no interest or pay interest that
is below market rates at the time of issuance;
. the date on which principal will be payable and whether the debt
securities will be payable on demand by the holders on any date;
. interest rate or rates or the method by which we will determine the rate
or rates and whether the interest rate or rates are fixed or floating;
. the interest payment dates;
. the place or places where we will make payments on the debt securities;
. any applicable redemption, repayment or sinking fund provisions;
5
<PAGE>
. any applicable United States federal income tax consequences; and
. any other specific terms of the debt securities, including any additional
events of default or covenants, and any terms that may be legally
required or advisable.
Debt securities may be presented for exchange and registration of transfer
in the manner, at the places and subject to the restrictions listed in the debt
securities and the applicable prospectus supplement. Subject to the limitations
provided in the indenture, the services will be provided without charge, other
than any tax or other governmental charges which may be payable.
Global Securities
We may issue debt securities under a book-entry system in the form of one or
more global securities. We will describe the specific terms of the depositary
arrangement for any portion of a series of debt securities represented by a
global security in the prospectus supplement for the series. We anticipate that
the following description will apply to all depositary arrangements.
We will register the global securities in the name of a depositary or its
nominee and deposit the global securities with that depositary. Following the
issuance of a global security in registered form, the depositary will credit
the accounts of its participants with the debt securities upon our
instructions. Only persons who hold interests directly or indirectly through
financial institutions that are participants in the depositary can hold
beneficial interests in the global securities. Because the laws of some
jurisdictions require certain types of purchasers to take physical delivery of
securities in definitive form, you may encounter difficulties in your ability
to own, transfer or pledge beneficial interests in a global security.
So long as the depositary or its nominee is the registered owner of a global
security, Charles Schwab and the Trustee will treat the depositary as the sole
owner or holder of the debt securities for purposes of the applicable
indenture. Therefore, except as set forth below, you will not be entitled to
have debt securities registered in your name or to receive physical delivery of
certificates representing the debt securities. Accordingly, you will have to
rely on the procedures of the depositary and the participant in the depositary
through whom you hold your beneficial interest in order to exercise any rights
of a holder. We understand that under existing practices, the depositary acts
upon the instructions of a participant or authorizes the participant to take
any action that the holder is entitled to take.
We will make all payments of principal, premium and interest on the debt
securities to the depositary. We expect that the depositary will then credit
participants' accounts proportionately with these payments on the payment date
and that the participants will in turn credit their customers in accordance
with their customary practices. Neither Charles Schwab nor the Trustee will be
responsible for making any payments to participants or customers of
participants, or for maintaining any records relating to the holdings of
participants and their customers, and you will have to rely on the procedures
of the depositary and its participants.
Global securities are generally not transferable. We will issue physical
certificates to beneficial owners of a global security if:
. the depositary notifies us that it is unwilling or unable to continue as
depositary and we do not appoint a successor within 90 days;
. the depositary ceases to be a clearing agency registered under the
Exchange Act and we do not appoint a successor within 90 days; or
. we decide in our sole discretion that we do not want to have the debt
securities of that series represented by global securities.
6
<PAGE>
Senior Debt
Our senior debt securities will be issued under the senior debt indenture
and will rank equally with all of our other unsecured and unsubordinated debt.
Senior Subordinated Debt
We may issue senior subordinated debt securities under the senior
subordinated debt indenture. Senior subordinated debt securities will be
subordinate and junior in right of payment to all of our "Senior Indebtedness."
The holders of all of our Senior Indebtedness will be entitled to be paid in
full, or we must provide for payment to them, before the holders of any of the
senior subordinated debt securities are entitled to receive any payment in the
event:
. of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings involving
Charles Schwab or a substantial part of our property;
. that we default on the payment of any amount due and payable on any
Senior Indebtedness;
. that an event of default exists, other than a default in the payment of
any amount due and payable, on any Senior Indebtedness that permits the
holder or holders to accelerate the maturity of the Senior Indebtedness
and the event of default continues beyond any grace period without being
cured, waived or ceasing to exist; or
. that the principal of and accrued interest on the senior subordinated
debt securities has been declared due and payable upon an "Event of
Default" and the declaration has not been rescinded and annulled.
Holders of senior subordinated debt would, however, have the right, even if we
have not paid or provided for the payment of the Senior Indebtedness, to accept
a payment in shares of our stock, as we may be reorganized or readjusted, or
securities of the corporation provided for by a plan of reorganization or
readjustment. Any securities received, however, will be subordinated to the
payment of the Senior Indebtedness. (Senior subordinated debt indenture,
Section 13.1).
"Senior Indebtedness" includes the principal of and premium, if any, and
interest on our indebtedness, whether outstanding on the date of the senior
subordinated debt indenture or later created, that is:
. for money that we borrowed, including capitalized lease obligations;
. for money borrowed by others and guaranteed, directly or indirectly, by
us; or
. secured and unsecured purchase money indebtedness or indebtedness secured
by property at the time of our acquisition of the property for the
payment of which we are directly or contingently liable.
Senior Indebtedness also includes all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to the Senior
Indebtedness described in the preceding sentence.
Senior Indebtedness does not include:
. our indebtedness to any of our subsidiaries for money borrowed or
advances from any subsidiary;
. the senior subordinated debt securities; or
. any indebtedness if the terms creating or evidencing the indebtedness
expressly provide that the indebtedness is not superior in right of
payment to the senior subordinated debt securities and/or that the
indebtedness is itself subordinated to any of our other indebtedness.
(Senior subordinated debt indenture, Section 1.1).
7
<PAGE>
Certain Covenants
We are subject to the following restrictions, unless the terms of the debt
securities provide otherwise:
Negative Pledge. As long as any senior debt securities are outstanding, we
will not, and will not permit any of our subsidiaries to, create, assume, incur
or guarantee any indebtedness for borrowed money secured by a pledge, lien or
other encumbrance on the voting securities of Charles Schwab & Co., Inc., Mayer
& Schweitzer, Inc. (now doing business through Schwab Capital Markets L.P.) or
Schwab Holdings, Inc. without securing the senior debt securities to the same
extent. (Senior debt indenture, Section 3.6). Schwab Holdings, Inc. is our
wholly owned subsidiary that owns all of the common stock of Charles Schwab &
Co., Inc. However, the senior debt indenture permits liens on the voting stock
of Charles Schwab & Co., Inc., Mayer & Schweitzer, Inc. and Schwab Holdings,
Inc. without securing the senior debt securities if the liens arise because of:
. claims against us for taxes or other governmental charges that we are
contesting in good faith or that are for less than $1 million;
. legal proceedings that we are contesting in good faith or that involve
claims against us for less than $1 million;
. deposits to secure, or in place of any, surety, appeals or customs bonds;
or
. any other reason if our Board of Directors determines that the lien will
not materially detract from or interfere with the present value or
control by us of the voting stock subject to the lien.
Merger, Consolidation, Sale, Lease or Conveyance. As long as any debt
securities are outstanding, we will not be permitted to merge or consolidate
with any other corporation and will not be permitted to sell, lease or convey
all or substantially all our assets to any person, unless:
. we are the continuing corporation or our successor or the person that
acquires or leases all or substantially all of our assets is a
corporation organized under the laws of the United States or one of the
states of the United States or the District of Columbia and the successor
corporation expressly assumes all of our obligations under the applicable
indenture and the related debt securities; and
. immediately after any merger, consolidation, sale, lease or conveyance,
we or our successor is not in default in the performance or observance of
the covenants and conditions of the applicable indenture. (Senior and
senior subordinated debt indentures, Section 9.1).
This covenant would not apply to a recapitalization transaction, a change of
control of Charles Schwab or a highly leveraged transaction unless such
transaction or change of control is structured to include a merger or
consolidation or a sale, lease or conveyance of all or substantially all of our
assets. Except as may be described in the prospectus supplement applicable to a
particular series of debt securities, there are no covenants or other
provisions in the indentures requiring us to repurchase the debt securities or
that would afford holders of debt securities additional protection or economic
benefits in the event of a recapitalization or a change of control of Charles
Schwab or a highly leveraged transaction.
Events of Default
Unless otherwise specified in the applicable prospectus supplement, an Event
of Default will occur for any series of debt securities if:
. we fail to pay when due any principal of that series of debt securities;
. we fail to pay any interest on that series of debt securities within 30
days after the interest is due;
. we fail to cure our default of any other covenant or agreement to which
that series of debt securities is subject within 60 days after we receive
written notice of the default;
. specified events of bankruptcy, insolvency or reorganization occur;
8
<PAGE>
. we fail to pay at maturity, including any applicable grace period, any of
our "Indebtedness" in an amount due and payable at maturity in excess of
$10,000,000 and our failure continues for more than 30 days after we
receive written notice; or
. we default on any of our Indebtedness, the default results in the
acceleration of the Indebtedness in an amount in excess of $10,000,000
and we fail to discharge the Indebtedness or cure the acceleration within
30 days after we receive written notice.
To be valid, the written notice discussed in the preceding bullet points
must be provided to us by the Trustee or the holders of not less than 25% in
aggregate principal amount of the outstanding debt securities affected by the
default.
"Indebtedness" means obligations of, or guaranteed or assumed by, us for
borrowed money or evidenced by bonds, debentures, notes or other similar
instruments, including capitalized lease obligations. Indebtedness does not
include any of our non-recourse obligations or the debt securities of the
applicable series.
If an Event of Default occurs and continues, the Trustee or the holders of
25% of the aggregate principal amount of each affected series of debt
securities, voting together as a single class, may require us to repay
immediately the entire principal of the debt securities of each affected series
and any accrued interest. For example, if an Event of Default relates to our
failure to pay interest on two series of senior debt securities and we have
issued ten series of outstanding senior debt securities, the holders of 25% of
the two affected series, voting together as a single class, would have the
right to require us to immediately repay the senior debt securities that are
part of those two series. However, if the Event of Default were to affect all
ten series such as our failure to pay Indebtedness in excess of $10,000,000 for
over 30 days after we receive written notice, then 25% of all senior debt
securities outstanding under the senior debt indenture, voting together as a
single class, would have the right to require us to immediately repay all
outstanding series of senior debt securities.
The holders of a majority of the aggregate principal amount of the debt
securities of all affected series, voting as one class, can rescind any
acceleration or waive any past default or Event of Default or allow us to not
comply with any provision of the indenture. However, they cannot waive a
default in payment of principal of, premium, if any, or interest on, any of the
debt securities.
Other than its duties in case of a default, the Trustee is not obligated to
exercise any of its rights or powers under the indenture at the request, order
or direction of any holders, unless the holders offer the Trustee reasonable
indemnity. (Senior and senior subordinated debt indentures, Section 6.2). If
they provide this reasonable indemnity, the holders of a majority in principal
amount of all affected series of debt securities, voting as one class, may
direct the time, method and place of conducting any proceeding or any remedy
available to the Trustee, or exercising any power conferred upon the Trustee,
for any series of debt securities. (Senior and senior subordinated debt
indentures, Section 5.9).
A holder of a debt security may not institute any action against us under
the indenture unless:
. the holder gives the Trustee written notice that a default has occurred
and is continuing;
. the holders of at least 25% of the outstanding principal amount of each
affected series request that the Trustee institute the action while
offering the Trustee reasonable indemnity; and
. the Trustee fails to institute the action within 60 days after receiving
the request.
Even if these three conditions are met, the holder may not institute an
action if holders of a majority in principal amount of each affected series
direct the Trustee to take action inconsistent with the request of the holder
desiring to institute action against us. Holders may institute an action for
payment of overdue principal or interest without complying with the preceding
conditions.
We are required to file annually with the Trustee a certificate stating
whether we are in default under any of the provisions of either indenture,
specifying any default that exists. (Senior and senior subordinated debt
indentures, Section 3.5).
9
<PAGE>
Discharge, Defeasance and Covenant Defeasance
When we use the term defeasance, we mean discharge from some or all of our
obligations under the indenture. If we deposit with the Trustee sufficient cash
or U.S. government securities to pay the principal, interest, any premium and
all of our other potential future obligations on the debt securities of a
particular series, then at our option:
. we will be discharged from our obligations for the series of debt
securities; or
. we will no longer be under any obligation to comply with the restrictive
covenants contained in the indenture, and the Events of Default relating
to failures to comply with covenants will no longer apply to us.
If we are discharged from our obligations, the holders of the debt
securities of the affected series will not be entitled to the benefits of the
indenture except for registration of transfer and exchange of debt securities
and replacement of lost, stolen or mutilated debt securities. Instead, the
holders will only be able to rely on the deposited funds or obligations for
payment.
We must deliver to the Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of the debt
securities to recognize income, gain or loss for federal income tax purposes.
We must also deliver a ruling to the same effect received from or published by
the United States Internal Revenue Service if we are to be discharged from our
obligations.
For the senior subordinated debt, we must also deliver to the Trustee an
opinion of counsel to the effect that:
. other holders of senior indebtedness will have no rights to the funds
deposited with the Trustee; and
. after the 91st day following the deposit, none of our other creditors
would have claims on the funds deposited with the Trustee under
bankruptcy or similar laws affecting creditors' rights. However, if a
court rules that the funds deposited with the Trustee remain our
property, then the Trustee and holders of the senior subordinated debt
securities would have some rights as secured creditors over the funds
deposited with the Trustee.
For the senior subordinated debt, we may not discharge our obligations in
the ways described in this section if something may prevent us from making
payments of principal, interest and premium, if any, on the securities from the
date we make the deposit establishing the trust fund to the 91st day after that
date.
Modification of the Indentures
Without the consent of the holders of debt securities, we and the Trustee
may enter into supplemental indentures to:
. secure any debt securities;
. document that a successor corporation has assumed our obligations;
. add covenants for the protection of the holders of debt securities;
. cure any ambiguity or correct any inconsistency in the indentures;
. establish the forms or terms of debt securities of any series; or
. document the appointment of a successor trustee. (Senior and senior
subordinated debt indentures, Section 8.1).
10
<PAGE>
If the holders of a majority in principal amount of all affected series
consent, we and the Trustee may add to, change or eliminate any of the
provisions of an indenture or modify in any way the rights of holders of the
affected series. However, each affected holder must consent before we can:
. extend the stated maturity of the principal;
. reduce the amount of the principal;
. reduce the rate or extend the time of payment of interest;
. reduce any amount payable on redemption;
. impair the right to sue to enforce any payment on any debt security when
due; or
. reduce the percentage in principal amount required to consent to any of
the foregoing actions. (Senior and senior subordinated debt indentures,
Section 8.2).
We may not amend the senior subordinated debt indenture to alter the
subordination of any outstanding senior subordinated debt securities without
the consent of each holder of Senior Indebtedness then outstanding that would
be negatively affected. (Senior subordinated debt indenture, Section 8.6).
Governing Law
The laws of the State of California will govern the indentures and the
securities. (Senior and Senior subordinated debt indentures, Section 11.8).
Concerning the Trustee
Under the Trust Indenture Act of 1939, if a default occurs under the debt
securities issued under the senior debt indenture or the debt securities issued
under the senior subordinated debt indenture, The Chase Manhattan Bank would be
required to resign as Trustee on one of the indentures within 90 days after the
default unless we cure the default or the default is waived or otherwise
eliminated.
The Chase Manhattan Bank has loaned money to us and provided other services
to us in the past and may do so in the future as a part of its regular
business.
11
<PAGE>
PLAN OF DISTRIBUTION
We may sell our debt securities through agents, underwriters, dealers or
directly to purchasers.
Agents
Agents which we designate may solicit offers to purchase our debt
securities.
. We will name any agent involved in offering or selling our debt
securities, and any commissions that we will pay to the agent, in our
prospectus supplement.
. Unless we indicate otherwise in our prospectus supplement, our agents
will act on a reasonable efforts basis for the period of their
appointment.
. Our agents may be deemed to be underwriters under the Securities Act of
any of our debt securities that they offer or sell.
Underwriters
We may use an underwriter or underwriters in the offer or sale of our debt
securities.
. If we use an underwriter or underwriters, we will execute an underwriting
agreement with the underwriter or underwriters at the time that we reach
an agreement for the sale of our debt securities.
. We will indicate in the prospectus supplement the names of the specific
managing underwriter or underwriters, as well as any other underwriters,
and the terms of the transactions, including the compensation the
underwriters and dealers will receive.
. The underwriters will use our prospectus supplement to sell our debt
securities.
Dealers
We may use a dealer to sell our debt securities.
. If we use a dealer, we, as principal, will sell our debt securities to
the dealer.
. The dealer will then sell our debt securities to the public at varying
prices that the dealer will determine at the time it sells our debt
securities.
. We will include in our prospectus supplement the name of the dealer and
the terms of our transactions with the dealer.
Indemnification
We are required to indemnify agents, underwriters and dealers against some
liabilities. Agents, underwriters and dealers may be our customers, perform
services for us or do business with us in other ways.
Delayed Delivery Contracts
We may authorize our agents and underwriters to solicit offers by certain
institutions to purchase our debt securities at the public offering price under
delayed delivery contracts.
. If we use delayed delivery contracts, we will disclose that we are using
them in our prospectus supplement and will tell you when we will demand
payment and delivery of the debt securities under the delayed delivery
contracts.
. These delayed delivery contracts will be subject only to the conditions
contained in the prospectus supplement.
. We will indicate in our prospectus supplement the commission that
underwriters and agents soliciting purchases of our debt securities under
delayed contracts will be entitled to receive.
12
<PAGE>
Stabilization Transactions
In order to facilitate the offering of the debt securities, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the debt securities.
. They may overallot in connection with the offering, creating a short
position in the debt securities for their own accounts.
. To cover overallotments or to stabilize the price of the debt securities,
they may bid for, and purchase, the debt securities in the open market.
. In any offering of the debt securities through a syndicate of
underwriters, the underwriting syndicate may reclaim selling concessions
allowed to an underwriter or a dealer for distributing the debt
securities in the offering if the syndicate repurchases previously
distributed debt securities to cover syndicate short positions, in
stabilization transactions or otherwise.
Any of these activities may stabilize or maintain the market price of the
debt securities above independent market levels. The underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Remarketing
One or more firms may remarket the debt securities.
. The firms may include Morgan Stanley & Co., Incorporated, Goldman, Sachs
& Co., Credit Suisse First Boston Corporation and Charles Schwab & Co.,
Inc., acting as principals for their own accounts or as our agents.
. We will include in the prospectus supplement the name of any remarketing
firm, the terms of its agreement with us and its compensation.
. We may indemnify remarketing firms against some liabilities. Remarketing
firms may be our customers, perform services for us or do business with
us in other ways.
Miscellaneous
Any underwriter, agent or dealer that we use in the initial offering of debt
securities will not confirm sales to any account over which it exercises
discretionary authority without the prior specific written approval of its
customer.
Charles Schwab & Co., Inc. is a wholly owned subsidiary of The Charles
Schwab Corporation. If Charles Schwab & Co., Inc. participates in the
distribution of our securities, we will conduct the offering in accordance with
Section 2720 of the NASD Conduct Rules.
13
<PAGE>
LEGAL MATTERS
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation,
will pass on the legality of the debt securities. Directors of that firm
beneficially own an aggregate of less than 1% of our common stock.
Davis Polk & Wardwell will pass on specified legal matters relating to the
debt securities on behalf of dealers, underwriters or agents.
EXPERTS
The audited consolidated financial statements and the related consolidated
financial statement schedules of The Charles Schwab Corporation and
subsidiaries as of December 31, 1999 and 1998 and for each of the three years
in the period ended December 31, 1999 incorporated in this prospectus by
reference from The Charles Schwab Corporation's Annual Report on Form 10-K for
the year ended December 31, 1999 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated by
reference in this prospectus, and have been so incorporated in reliance upon
the reports of Deloitte & Touche LLP given upon their authority as experts in
accounting and auditing. Their report on the consolidated financial statements
expresses an unqualified opinion and includes an explanatory paragraph related
to an accounting change to conform with Statement of Position 98-1.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................... $198,000
NASD fee........................................................... 75,500
Printing and engraving expenses.................................... 25,000
Accountants' fees and expenses..................................... 10,000
Legal fees and expenses............................................ 120,000
Fees and expenses for qualification under state securities laws.... 5,000
Trustee's fees and expenses........................................ 1,000
Rating agency fees................................................. 490,000
Miscellaneous...................................................... 2,500
--------
Total............................................................ $927,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Our Fourth Restated Certificate of Incorporation provides that, pursuant to
Delaware law, our directors will not be personally liable to us or our
stockholders for monetary damages arising from a breach or alleged breach of a
director's fiduciary duty, with specific exceptions. The exceptions relate to
(i) any breach of the director's duty of loyalty to us or our stockholders,
(ii) acts or omissions that are not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) approval by a director of
certain unlawful dividend payments, distributions or stock redemptions or
repurchases or (iv) engaging in a transaction from which a director derives an
improper personal benefit. Among the types of breaches for which directors will
not be liable are those resulting from negligent or grossly negligent behavior.
Our Second Restated Bylaws also provide for the indemnification of both our
directors and officers within the limitations permitted by Delaware law.
Section 145 of the Delaware General Corporation Law authorizes indemnification
of directors and officers for actions taken in good faith and in a manner such
person reasonably believed to be in, or not opposed to, our best interests.
This provision is sufficiently broad to permit indemnification under certain
circumstances for liabilities (and for reimbursement of expenses incurred)
arising under the Securities Act of 1933, as amended. We have entered into
indemnity agreements with our directors that contain provisions that are in
some respects broader than the specified indemnification provisions contained
in Delaware law.
We have obtained directors' and officers' liability and corporate
reimbursement insurance covering all of our officers and directors and the
officers and directors of our subsidiaries and providing for the reimbursement
of amounts paid by us or our subsidiaries to directors and officers pursuant to
indemnification agreements, subject to certain deductibles and coinsurance
provisions.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
1.2* Form of Distribution Agreement.
4.1 Form of Senior Debt Indenture filed on July 12, 1993, as Exhibit 4.1
to the Company's Registration Statement on Form S-3 (registration
number 33-65342) and incorporated herein by reference.
4.2 Form of Senior Subordinated Debt Indenture filed on July 1, 1993, as
Exhibit 4.2 to the Company's Registration Statement on Form S-3
(registration number 33-65342) and incorporated herein by reference.
4.3 Form of Supplemental Indenture to Senior Debt Indenture filed on April
29, 1999, as Exhibit 4.3 to the Company's Registration Statement on
Form S-3 (registration number 333-77381) and incorporated herein by
reference.
4.4 Form of Supplemental Indenture to Senior Subordinated Debt Indenture
filed on April 29, 1999, as Exhibit 4.4 to the Company's Registration
Statement on Form S-3 (registration number 333-77381) and incorporated
herein by reference.
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
12.1 Computation of Consolidated Ratio of Earnings to Fixed Charges.
23.1 Independent Auditors' Consent.
23.2 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
24.1* Power of Attorney (included as part of the signature page to the
original Registration Statement).
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
</TABLE>
- --------
* Filed previously.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of a prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in the Registration
Statement;
II-2
<PAGE>
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of any employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, State of California on
May 15, 2000.
THE CHARLES SCHWAB CORPORATION
By:
/s/ Christopher V. Dodds
-----------------------------------
Christopher V. Dodds
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on May 15, 2000.
<TABLE>
<CAPTION>
Name and Signature Title
------------------ -----
<C> <S>
Chairman, Co-Chief Executive
Officer and Director (principal
* executive officer)
- -----------------------------------
Charles R. Schwab
Co-Chief Executive Officer,
President and Director
* (principal executive officer)
- -----------------------------------
David S. Pottruck
Executive Vice President and
Chief Financial Officer
(principal financial and
/s/ CHRISTOPHER V. DODDS accounting officer)
- -----------------------------------
Christopher V. Dodds
* Director
- -----------------------------------
Nancy H. Bechtle
* Director
- -----------------------------------
C. Preston Butcher
Director
- -----------------------------------
Donald G. Fisher
* Director
- -----------------------------------
Anthony M. Frank
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Name and Signature Title
------------------ -----
<C> <S>
Director
- -----------------------------------
Frank C. Herringer
* Director
- -----------------------------------
Stephen T. McLin
* Director
- -----------------------------------
Condoleezza Rice
* Director
- -----------------------------------
Arun Sarin
* Director
- -----------------------------------
George P. Shultz
* Director
- -----------------------------------
Roger O. Walther
</TABLE>
*By: /s/ Christopher V. Dodds
----------------------------------
Christopher V. Dodds
Attorney-in-fact
II-5
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
1.2* Form of Distribution Agreement.
4.1 Form of Senior Debt Indenture filed on July 12, 1993, as Exhibit 4.1
to the Company's Registration Statement on Form S-3 (registration
number 33-65342) and incorporated herein by reference.
4.2 Form of Senior Subordinated Debt Indenture filed on July 1, 1993, as
Exhibit 4.2 to the Company's Registration Statement on Form S-3
(registration number 33-65342) and incorporated herein by reference.
4.3 Form of Supplemental Indenture to Senior Debt Indenture filed on April
29, 1999, as Exhibit 4.3 to the Company's Registration Statement on
Form S-3 (registration number 333-77381) and incorporated herein by
reference.
4.4 Form of Supplemental Indenture to Senior Subordinated Debt Indenture
filed on April 29, 1999, as Exhibit 4.4 to the Company's Registration
Statement on Form S-3 (registration number 333-77381) and incorporated
herein by reference.
5.1 Opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation.
12.1 Computation of Consolidated Ratio of Earnings to Fixed Charges.
23.1 Independent Auditors' Consent.
23.2 Consent of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation (included in Exhibit 5.1).
24.1* Power of Attorney (included as part of the signature page to the
original Registration Statement).
25.1* Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
</TABLE>
- --------
* Filed previously.
<PAGE>
Exhibit 5.1
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN
A Professional Corporation
Three Embarcadero Center
San Francisco, CA 94111
(415) 434-1600
May 15, 2000
The Charles Schwab Corporation
120 Kearny Street
San Francisco, CA 94108
Dear Ladies and Gentlemen:
You have requested our opinion as counsel for The Charles Schwab
Corporation, a Delaware corporation (the "Company"), in connection with the
registration under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, and the public offering by the Company, of
up to $750,000,000 of debt securities (the "Debt Securities").
We have examined the Company's Registration Statement on Form S-3 in
the form to be filed with the Securities and Exchange Commission on the date of
this opinion (the "Registration Statement"). We further have examined the
Certificate of Incorporation of the Company as certified by the Secretary of
State of the State of Delaware, the Bylaws of the Company and the Senior
Indenture and Senior Subordinated Indenture entered into as of July 15, 1993,
and supplemented on June 29, 1999, by and between the Company and The Chase
Manhattan Bank (formerly Chemical Bank) as trustee (each, an "Indenture"). In
addition, we have examined such corporate records, certificates and other
documents (of which we are aware) and such questions of law as we have
considered necessary or appropriate for the purposes of this opinion.
Based on the foregoing examination, we are of the opinion that the
issuance of the Debt Securities has been duly authorized by appropriate
corporate action of the Company, and when the Debt Securities have been duly
established, completed, executed, authenticated and delivered in accordance with
the relevant Indenture and sold as described in the Registration Statement, any
amendment thereto, the prospectus and
<PAGE>
supplement thereto, the Debt Securities will be legal, valid and binding
obligations of the Company entitled to the benefits of such Indenture.
In connection with this opinion, we have assumed the following: (a)
the authenticity of the original documents and the genuineness of all
signatures; (b) the conformity to the originals of all documents submitted to us
as copies; (c) the truth, accuracy and completeness of the information,
representations and warranties contained in the instruments, documents, records
and certificates we have reviewed; (d) the due authorization, execution and
delivery on behalf of the respective parties thereto of the documents referred
to herein and, except for the Debt Securities, the legal, valid and binding
nature thereof with respect to such parties; and (e) the absence of any evidence
extrinsic to the provisions of the written agreements between the parties that
the parties intended a meaning contrary to that expressed by those provisions.
We have not independently verified such assumptions.
We express no opinion as to laws other than the substantive laws of
the State of California (without regard to conflicts-of-laws or choice-of-law
principles), the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, in each case to the extent
applicable and not excepted from the scope of the opinions expressed above.
Our opinion that any document is legal, valid and binding is qualified
as to:
(a) the effect of bankruptcy, reorganization, arrangement, fraudulent
transfer or conveyance, moratorium, insolvency or other similar laws or court
decisions relating to or affecting the rights of creditors generally;
(b) equitable principles of general applicability (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, equitable subordination and the possible unavailability of specific
performance or injunctive relief), regardless of whether codified by statutes
and regardless of whether considered in a proceeding in equity or at law or
whether codified by statute;
(c) the effect of Section 1670.5 of the California Civil Code, which
provides that a court may refuse to enforce a contract or limit the application
thereof or any clause thereof which the court finds as a matter of law to have
been unconscionable at the time it was made;
(d) the unenforceability of any indemnity obligation to the extent
that such obligation does not satisfy the requirements of Section 2772, et seq.
-- ---
of the California Civil Code and judicial decisions thereunder or otherwise
violates public policy;
(e) the unenforceability of any provision purporting to require the
award of attorneys' fees, expenses or costs, where such provision does not
satisfy the requirement
2
<PAGE>
of Section 1717, et seq. of the California Civil Code and judicial decisions
-- ---
thereunder or otherwise violates public policy;
(f) limitations imposed by California law and court decisions relating
to the strict enforcement of certain covenants in contracts absent a showing of
damage or increased risk to the party seeking enforcement (such covenants may
include, without limitation, covenants to provide reports or notices and
covenants restricting rights of assignment);
(g) the unenforceability of provisions purporting to waive rights,
claims, demands, liabilities or defenses to obligations, known or unknown,
suspected or unsuspected, where such waivers are contrary to applicable law or
against public policy;
(h) the unenforceability of provisions prohibiting waivers that are
not in writing to the extent that Section 1698 of the California Civil Code
permits oral modifications that have been performed;
(i) the unenforceability, under certain circumstances, of provisions
of agreements to the effect that rights or remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to or with
any other right or remedy, or that the election of some particular remedy or
remedies does not preclude recourse to one or another remedy; and
(j) the unenforceability under certain circumstances of provisions
which purport to govern forum selection or consent to jurisdiction.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever it appears in the
Registration Statement, any amendment thereto, the prospectus and any supplement
thereto.
Very truly yours,
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin
A Professional Corporation
/S/ Lawrence B. Rabkin
--------------------------------
Lawrence B. Rabkin
3
<PAGE>
EXHIBIT 12.1
THE CHARLES SCHWAB CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Year Ended December 31,
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before taxes on income $479,661 $236,092 $ 971,239 $ 576,544 $ 447,247 $394,063 $277,104
- --------------------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest expense - customer 237,290 155,000 688,503 579,930 480,988 368,462 321,225
Interest expense - other 28,719 18,545 79,900 71,951 65,495 57,410 35,998
Interest portion of rental expense 13,437 9,255 43,417 32,326 26,045 23,051 20,810
- --------------------------------------------------------------------------------------------------------------------------------
Total fixed charges(A) 279,446 182,800 811,820 684,207 572,528 448,923 378,033
- --------------------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and
fixed charges (B) $759,107 $418,892 $1,783,059 $1,260,751 $1,019,775 $842,986 $655,137
================================================================================================================================
Ratio of earnings to fixed
charges (B) / (A)* 2.7 2.3 2.2 1.8 1.8 1.9 1.7
================================================================================================================================
Ratio of earnings to fixed charges
excluding customer interest expense** 12.4 9.5 8.9 6.5 5.9 5.9 5.9
================================================================================================================================
</TABLE>
* The ratio of earnings to fixed charges is calculated in a manner consistent
with SEC requirements. For such purposes, "earnings" consist of earnings
before taxes on income and fixed charges. "Fixed charges" consist of
interest expense incurred on payable to customers, borrowings and one-third
of rental expense, which is estimated to be representative of the interest
factor.
** Because interest expense incurred in connection with payable to customer is
completely offset by interest revenue on related investments and margin
loans, the Company considers such interest to be an operating expense.
Accordingly, the ratio of earnings to fixed charges excluding customer
interest expense reflects the elimination of such interest expense as a
fixed charge.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-36410 of The Charles Schwab Corporation on Form
S-3 of our reports dated February 16, 2000, appearing in and incorporated by
reference in the Annual Report on Form 10-K of The Charles Schwab Corporation
for the year ended December 31, 1999, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement. Our report on the consolidated financial statements expresses an
unqualified opinion and includes an explanatory paragraph related to an
accounting change to conform with Statement of Position 98-1.
/s/ Deloitte & Touche LLP
San Francisco, California
May 15, 2000
