<PAGE>
As filed with the Securities and Exchange Commission on May 5, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE CHARLES SCHWAB CORPORATION
(Exact name of Registrant as specified in its charter)
<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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
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<S> <C> <C>
Debt Securities(2).................. $750,000,000 $198,000
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) This Registration Statement also relates to offers and sales of Debt
Securities in connection with market-making transactions by and through
Charles Schwab & Co., Inc., an affiliate of the Registrant.
----------------
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.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus statement is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Dated May 5, 2000
$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.
, 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>
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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, which is 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 Current Report on Form 8-K, filed on January 14, 2000; and
. Our Current Report on Form 8-K, filed on February 22, 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>
Year Ended December 31,
------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (unaudited).... 2.2 1.8 1.8 1.9 1.7
Ratio of earnings to fixed charges as adjusted
(unaudited)...................................... 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 on signature page).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
</TABLE>
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 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 4, 2000.
THE CHARLES SCHWAB CORPORATION
By: /s/ David S. Pottruck
-----------------------------------
David S. Pottruck
Co-Chief Executive Officer,
President and Director
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Charles R. Schwab, David S. Pottruck,
Steven L. Scheid and Christopher V. Dodds, his true and lawful attorney-in-fact
and agent, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign and execute on
behalf of the undersigned any and all amendments (including post-effective
amendments) to this Registration Statement (and to any Registration Statement
filed pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection with any such
amendments as fully to all intents and purposes as he might or could do in
person, and hereby does ratify and confirm all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on May 4, 2000.
<TABLE>
<CAPTION>
Name and Signature Title
------------------ -----
<C> <S>
Chairman, Co-Chief Executive
Officer and Director (principal
/s/ Charles R. Schwab executive officer)
- -----------------------------------
Charles R. Schwab
Co-Chief Executive Officer,
President and Director
/s/ David S. Pottruck (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
/s/ Nancy H. Bechtle Director
- ------------------------------------
Nancy H. Bechtle
/s/ C. Preston Butcher Director
- -------------------------------------
C. Preston Butcher
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Name and Signature Title
------------------ -----
<C> <S>
Director
- ---------------------------------------
Donald G. Fisher
/s/ Anthony M. Frank Director
- ---------------------------------------
Anthony M. Frank
Director
- ---------------------------------------
Frank C. Herringer
/s/ Stephen T. Mclin Director
- ---------------------------------------
Stephen T. McLin
/s/ Condoleezza Rice Director
- ---------------------------------------
Condoleezza Rice
/s/ Arun Sarin Director
- ---------------------------------------
Arun Sarin
/s/ George P. Shultz Director
- ---------------------------------------
George P. Shultz
/s/ Roger O. Walther Director
- ---------------------------------------
Roger O. Walther
</TABLE>
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 on signature page).
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
</TABLE>
<PAGE>
EXHIBIT 1.1
THE CHARLES SCHWAB CORPORATION
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
(DEBT SECURITIES)
________ ___, 2000
From time to time, The Charles Schwab Corporation, a Delaware
corporation (the "Company"), may enter into one or more underwriting agreements
that provide for the sale of designated securities to the several underwriters
named therein. The standard provisions set forth herein may be incorporated by
reference in any such underwriting agreement (an "Underwriting Agreement"). The
Underwriting Agreement, including the provisions incorporated therein by
reference, is herein sometimes referred to as this Agreement. Terms defined in
the Underwriting Agreement are used herein as therein defined.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Debt Securities and has filed with, or transmitted for filing to, or shall
promptly hereafter file with or transmit for filing to, the Commission a
prospectus supplement (the "Prospectus Supplement") specifically relating to the
Offered Securities pursuant to Rule 424 under the Securities Act of 1933, as
amended (the "Securities Act"). The term "Registration Statement" means the
registration statement, including the exhibits thereto, as amended to the date
of this Agreement. The term "Basic Prospectus" means the prospectus included in
the Registration Statement. The term "Prospectus" means the Basic Prospectus
together with the Prospectus Supplement. The term "preliminary prospectus"
means a preliminary prospectus supplement specifically relating to the Offered
Securities, together with the Basic Prospectus. As used herein, the terms
"Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in
each case the documents, if any, incorporated by reference therein. The terms
"supplement," "amendment" and "amend" as used herein shall include all documents
deemed to be incorporated by reference in the Prospectus that are filed
subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). If the Company has filed as abbreviated registration statement
to register additional Debt
-1-
<PAGE>
Securities pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
The term "Contract Securities" means the Offered Securities to be
purchased pursuant to the delayed delivery contracts substantially in the form
of Schedule I hereto, with such changes therein as the Company may approve (the
"Delayed Delivery Contracts"). The term "Underwriters' Securities" means the
Offered Securities other than Contract Securities.
1. Representations and Warranties. The Company represents and warrants to
------------------------------
and agrees with each of the Underwriters that:
a. The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect; and no
proceedings for such purpose are pending before or threatened by the Commission.
b. (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder; (ii) each part of
the Registration Statement, when such part became effective, did not contain,
and each such part, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (iii) the Registration Statement and the Prospectus comply, and, as
amended or supplemented, if applicable, will comply in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder and (iv) the Prospectus does not contain and, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 1(b) do not apply (A) to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the Manager
expressly for use therein or (B) 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.
c. The Company is a duly incorporated, validly existing corporation in
good standing under the laws of the State of Delaware, has the
-2-
<PAGE>
corporate power and authority to own its property and conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
d. Each of Schwab Holdings, Inc. ("Holdings"), Charles Schwab & Co.,
Inc. ("Charles Schwab") and each other subsidiary of the Company that is a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the Commission (each, a "Significant Subsidiary" and collectively, the
"Significant Subsidiaries") is a duly incorporated, validly existing corporation
in good standing under the laws of the jurisdiction of its incorporation, has
the corporate power and authority to own its property and conduct its business
as described in the Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
e. This Agreement has been duly authorized, executed and delivered by
the Company.
f. Each of the Senior Debt Indenture dated as of July 15, 1993, as
amended (the "Senior Debt Indenture"), and the Senior Subordinated Debt
Indenture dated as of July 15, 1993, as amended (the "Senior Subordinated Debt
Indenture"), has been duly qualified under the Trust Indenture Act and has been
duly authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer or conveyance, reorganization, moratorium or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited by
equitable principles of general applicability.
g. The Delayed Delivery Contracts have been duly authorized, executed
and delivered by the Company and are valid and binding agreements of the
Company, enforceable in accordance with their respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer or conveyance, reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
-3-
<PAGE>
h. The Offered Securities have been duly authorized and, when executed
and authenticated in accordance with the provisions of the relevant Indenture
and delivered to and paid for by the Underwriters in accordance with the terms
of the Underwriting Agreement, in the case of the Underwriters' Securities, or
by institutional investors in accordance with the terms of the Delayed Delivery
Contracts, in the case of the Contract Securities, will be entitled to the
benefits of the relevant Indenture and will be valid and binding obligations of
the Company, in each case enforceable in accordance with their respective terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer or conveyance, reorganization, moratorium or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration, if any, and the availability of equitable remedies may be limited
by equitable principles of general applicability.
i. The execution and delivery by the Company of, and the performance
by the company of its obligations under, this Agreement, the Senior Debt
Indenture, the Senior Subordinated Debt Indenture, the Offered Securities and
the Delayed Delivery Contracts will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company or Charles
Schwab or any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, the Senior Debt Indenture, the Senior Subordinated Debt
Indenture, the Offered Securities or the Delayed Delivery Contracts, or for the
performance by Charles Schwab of its obligations under this Agreement, except
such as have been obtained, and such as may be required by the securities or
Blue Sky laws of the various states and territories or similar laws in
connection with the offer and sale of the Offered Securities; provided, however,
that no representation is made as to whether the purchase of the Offered
Securities constitutes a "prohibited transaction" under Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of
the Internal Revenue Code of 1986, as amended.
j. There has not occurred any material adverse change, or any
development that 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 (exclusive of any amendments or supplements thereto
effected since the date of the Underwriting Agreement).
-4-
<PAGE>
k. There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described, or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed or incorporated by reference as exhibits to the
Registration Statement that are not described, filed or incorporated as
required.
l. The Company is not an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
m. Each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain or file would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
n. Each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer, investment
adviser or transfer agent, as the case may be, in each jurisdiction wherein the
conduct of its business requires such registration, and each of the Company and
its Significant Subsidiaries is in compliance in all material respects with all
applicable laws, rules, regulations, orders, by-laws and similar requirements in
connection with such registrations, except to the extent that the failure to be
so registered or be in compliance would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.
o. Charles Schwab is a member in good standing of the associations and
exchanges indicated in the Prospectus and is registered as a broker-dealer with
the Commission and in all 50 states, the District of Columbia and Puerto Rico,
except to the extent that the failure to be in good standing or be so registered
would not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
2. Delayed Delivery Contracts. If the Prospectus provides for sales of
--------------------------
Offered Securities pursuant to Delayed Delivery Contracts, the Company hereby
authorizes the Underwriters to solicit offers to purchase Contract Securities on
the terms and subject to the conditions set forth in the Prospectus pursuant to
Delayed Delivery Contracts. Delayed Delivery Contracts may be entered into
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<PAGE>
only with institutional investors approved by the Company. On the Closing Date,
the Company will pay to the Manager as compensation for the accounts of the
Underwriters the commission set forth in the Underwriting Agreement in respect
of the Contract Securities. The Underwriters will not have any responsibility in
respect of the validity or the performance of any Delayed Delivery Contracts.
If the Company executes and delivers Delayed Delivery Contracts with
institutional investors, the aggregate amount of Offered Securities to be
purchased by the several Underwriters shall be reduced by the aggregate amount
of Contract Securities; such reduction shall be applied to the commitment of
each Underwriter pro rata in proportion to the amount of Offered Securities set
forth opposite such Underwriter's name in the Underwriting Agreement, except to
the extent that the Manager determines that such reduction shall be applied in
other proportions and so advises the Company; provided, however, that the total
amount of Offered Securities to be purchased by all Underwriters shall be the
aggregate amount set forth above, less the aggregate amount of Contract
Securities.
3. Public Offering. The Company is advised by the Manager that the
---------------
Underwriters propose to make a public offering of their respective portions of
the Underwriters' Securities as soon after this Agreement has been entered into
as in the Manager's judgment is advisable. The terms of the public offering of
the Underwriters' Securities are set forth in the Prospectus.
4. Purchase and Delivery. Except as otherwise provided in this Section 4,
---------------------
payment for the Underwriters' Securities shall be made to the Company in Federal
or other funds immediately available in New York City at the time and place set
forth in the Underwriting Agreement, upon delivery to the Manager for the
respective accounts of the several Underwriters of the Underwriters' Securities,
registered in such names and in such denominations as the Manager shall request
in writing not less than two full business days prior to the date of delivery,
with any transfer taxes payable in connection with the transfer of the
Underwriters' Securities to the Underwriters duly paid.
5. Conditions to Closing. The several obligations of the Underwriters
---------------------
hereunder are subject to the following conditions:
a. Subsequent to the execution and delivery of the Underwriting
Agreement and prior to the Closing Date,
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any review
for a possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities by any
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<PAGE>
"nationally recognized statistical rating organization," as such term
is defined for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
that could reasonably be expected to result in a change, in the condition,
financial or otherwise, or in the earnings, business or operations, of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto effected
subsequent to the execution and delivery of the Underwriting Agreement), that,
in the judgment of the Manager, is material and adverse and that makes it, in
the judgment of the Manager, impracticable to market the Offered Securities on
the terms and in the manner contemplated in the Prospectus.
b. The Manager shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Company, to the
effect set forth in clause (a)(i) above and to the effect that the
representations and warranties of the Company contained in this Agreement are
true and correct as of the Closing Date and that the Company has complied with
all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
c. The Manager shall have received on the Closing Date an opinion of
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation,
counsel for the Company, dated the Closing Date, to the effect that:
(i) Charles Schwab is a duly incorporated, validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its property and
conduct its business as described in the Prospectus;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iii) each of the Senior Debt Indenture and the Senior
Subordinated Debt Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized, executed and delivered by the Company and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms except as enforcement thereof (a) may be limited by bankruptcy,
insolvency, fraudulent transfer or conveyance, reorganization, moratorium and
other similar laws or court decisions affecting creditors' rights generally, (b)
is subject to
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<PAGE>
general principles of equity, regardless of whether codified by statute and
regardless of whether enforcement is considered in a proceeding in equity or at
law and (c) is subject to certain additional customary exceptions;
(iv) the Delayed Delivery Contracts have been duly authorized,
executed and delivered by the Company and are valid and binding agreements of
the Company;
(v) the Offered Securities have been duly authorized and
established in conformity with the provisions of the relevant Indenture and if
the Offered Securities are duly executed by the Company and completed and
authenticated by the Trustee in accordance with the terms of the relevant
Indenture and delivered to and paid for by the Underwriters in accordance with
the terms of the Underwriting Agreement, in the case of Underwriters'
Securities, or by institutional investors in accordance with the terms of the
Delayed Delivery Contracts, in the case of the Contract Securities, the Offered
Securities will be entitled to the benefits of the relevant Indenture and will
be, valid and binding obligations of the Company, in each case enforceable in
accordance with their respective terms except as enforcement thereof (a) may be
limited by bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium and other similar laws or court decisions affecting
creditors' rights generally, (b) is subject to general principles of equity,
regardless of whether codified by statute and regardless of whether enforcement
is considered in a proceeding in equity or at law and (c) is subject to certain
additional customary exceptions;
(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the Senior
Debt Indenture, the Senior Subordinated Debt Indenture, the Offered Securities
and the Delayed Delivery Contracts, at the time the Offered Securities were
issued, did not (a) contravene (1) any provision of applicable law (other than
the securities or Blue Sky laws of the various states as to which such counsel
need express no opinion) or (2) the certificate or articles of incorporation or
by-laws of the Company or Charles Schwab, or (b) constitute a default under the
Revolving Credit Facility, consisting of (i) a Credit Agreement (364-Day
Commitment) , between the Company, Bank of America National Trust and Savings
Association, as Administrative Agent, and the banks listed therein, as lenders,
dated as of June 25, 1999, and the Promissory Notes issued pursuant thereto, and
(ii) nine separate but substantially identical Credit Agreements (3-Year
Commitment), between the Company and each of the banks listed in those Credit
Agreements, each dated as of June 26, 1998, as amended, and the Promissory Notes
issued pursuant thereto as amended, and the Revolving Promissory Notes issued
pursuant thereto, or to the best knowledge of such counsel, after reasonable
investigation,
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<PAGE>
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, for which
indebtedness does not in the aggregate exceed $15 million; and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, the Senior Debt Indenture, the Senior Subordinated Debt
Indenture, the Offered Securities or the Delayed Delivery Contracts, or for the
performance by Charles Schwab of its obligations under this Agreement, except
such as are specified and have been obtained or may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Offered Securities; provided, however, that such counsel need
not express an opinion as to whether the purchase of the Offered Securities
constitutes a "prohibited transaction" under Section 406 of the Employee
Retirement income Security Act of 1974, as amended, or Section 4975 of the
Internal Revenue Code of 1986, as amended;
(vii) the statements (1) in the Prospectus under the captions
"Description of Debt Securities," "Plan of Distribution," "Description of
Notes," "Underwriting" and similar captions and (2) in the Registration
Statement under Item 15, in each case insofar as such statements constitute
summaries of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters referred to therein;
and
(viii) such counsel is of the opinion that the statements in the
Prospectus under the caption "Certain United States Federal Income Tax
Consequences" are accurate in all material respects.
The letter containing such opinion shall also contain a statement that
although such counsel is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus and such counsel makes no
representation that it has independently verified the accuracy, completeness or
fairness of such statements (except as to those matters stated in subparagraphs
(F) and (G) above), such counsel has no reason to believe (1) that any
document, if any, filed by the Company pursuant to the Exchange Act and
incorporated by reference in the Prospectus (except for financial statements and
schedules and other financial and statistical data included therein, and except
for any proxy statement of the Company, as to which such counsel need not
express any opinion), did not comply when so filed as to form in all material
respects with the
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<PAGE>
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (2) that (except for financial statements and schedules and other
financial and statistical data as to which such counsel need not express any
belief and except for the part of the Registration Statement that constitutes
the Form T-l heretofore referred to and except for any proxy statement of the
Company) any part of the Registration Statement, when such part became
effective, and, as of the date such opinion is delivered, contains any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, (3)
that the Registration Statement and Prospectus (except for financial statements
and schedules and other financial and statistical data included therein, and
except for any proxy statement of the Company, as to which such counsel need not
express any opinion), do not comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (4) that (except for financial statements and schedules and other
financial and statistical data, as to which such counsel need not express any
belief) the Prospectus as of the date such opinion is delivered contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
d. The Manager shall have received on the Closing Date an opinion of
the Office of General Counsel of the Company, dated the Closing Date, to the
effect that:
(i) the Company is a duly incorporated, validly existing
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole;
(ii) each of the Company's Significant Subsidiaries is a duly
incorporated, validly existing corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and authority to
own its property and conduct its business as described in the Prospectus and is
duly qualified to transact business, and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole;
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<PAGE>
(iii) each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus, as amended or supplemented, except to the extent that the failure to
obtain or file would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(iv) the statements (1) in "Item 3 - Legal Proceedings" of the
Company's most recent annual report on Form 10-K incorporated by reference in
the Prospectus and (2) in "Item 1 - Legal Proceedings" of Part II of the
Company's quarterly reports on Form 10-Q, if any, filed since such annual report
and (3) under the caption "Employment Agreement and Name Assignment" in the
Company's Proxy Statement for its Annual Meeting of Stockholders immediately
succeeding the filing of the Company's most recent annual report on Form 10-K
incorporated by reference in the Prospectus, in each case insofar as such
statements constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly present the information called for with respect to
such legal matters, documents and proceedings and fairly summarize the matters
referred to therein;
(v) after due inquiry, such counsel does not know of any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed or incorporated by
reference as exhibits to the Registration Statement that are not described,
filed or incorporated as required;
(vi) each of the Company and its Significant Subsidiaries 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;
(vii) Charles Schwab is a member in good standing of the
associations and exchanges indicated in the Prospectus and is registered as a
broker-dealer with the Commission and in all 50 states, the District of
Columbia
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<PAGE>
and Puerto Rico, except to the extent that the failure to be so registered or be
in compliance would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(viii) the execution and delivery by the Company of this
Agreement, the Offered Securities and the relevant Indenture and the performance
by the Company of its obligations under this Agreement, the Offered Securities
and the relevant Indenture at the time the Offered Securities were issued did
not violate, to such counsel's best knowledge, after reasonable investigation,
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Company or any subsidiary (except for such contravention
that would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole);
(ix) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus, as then amended or supplemented, and
are not so described or of any statutes or regulations that are required to be
described in the Registration Statement or the Prospectus, as then amended or
supplemented, that are not described as required; and
(x) 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, and no
facts have come to the attention of such counsel to lead them to believe that
(except for financial statements and schedules and other financial and
statistical data, as to which such counsel need not express any belief) the
proxy statement most recently filed pursuant to the Exchange Act by the Company
and incorporated by reference in the Prospectus, when such part of Registration
Statement became effective, and as of the date such opinion is delivered,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
e. The Manager shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, special counsel for the Underwriters, dated the Closing
Date, covering the matters referred to in subparagraphs (ii), (iii), (iv), (v)
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and (vii) (but only as to the statements in the Prospectus under "Description of
Debt Securities," "Plan of Distribution," "Underwriting" and similar captions)
and clauses (2), (3) and (4) of the last subparagraph of paragraph c above.
In giving the opinions referred to in paragraph (c) hereof, Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, may rely on
the opinion of Davis Polk & Wardwell as to any matters governed by the laws of
New York, and in giving the opinion referred to in paragraph (e) hereof, Davis
Polk & Wardwell may rely on the opinion of Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, A Professional Corporation, as to any matters governed by laws of
California. With respect to the last subparagraph of paragraph (c) above,
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A Professional Corporation, may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (but not including documents incorporated therein by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), but are without independent check
or verification, except as specified. With respect to clauses (2), (3) and (4)
of the last subparagraph of paragraph (c) above, Davis Polk & Wardwell may state
that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (but not including documents incorporated therein by
reference) and review and discussion of the contents thereof (including
documents incorporated therein by reference), but are without independent check
or verification, except as specified.
The opinion of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, described in paragraph (c) above shall be rendered to
you at the request of the Company and shall so state therein.
The opinion of the Office of General Counsel of the Company, described
in paragraph (d) above shall be rendered to you at the request of the Company
and shall so state therein.
f. The Manager shall have received on the Closing Date a letter,
dated the Closing Date, in form and substance satisfactory to the Manager, from
the Company's independent auditors, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in or incorporated by reference into the Prospectus, as then amended or
supplemented.
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<PAGE>
6. Covenants of the Company. In further consideration of the agreements of
------------------------
the Underwriters herein contained, the Company covenants as follows:
a. To furnish the Manager, without charge, a signed copy of the
Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and, during the period mentioned in paragraph (c) below, as
many copies of the Prospectus, any documents incorporated by reference therein
and any supplements and amendments thereto or to the Registration Statement as
the Manager may reasonably request.
b. Before amending or supplementing the Registration Statement or the
Prospectus with respect to the Offered Securities, to furnish to the Manager a
copy of each such proposed amendment or supplement and not to file any such
proposed amendment or supplement to which the Manager reasonably objects;
provided, however, that the foregoing requirement shall not apply to any of the
Company's periodic filings with the Commission required to be filed pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, copies of which filings
the Company will cause to be delivered to each Underwriter promptly after being
transmitted for filing with the Commission.
c. If, during such period after the first date of the public offering
of the Offered Securities as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of counsel for
the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with law, forthwith to prepare, file with the Commission and furnish, at
its own expense, to the Underwriters, and to the dealers (whose names and
addresses the Manager will furnish to the Company) to which Offered Securities
may have been sold by the Manager on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the Prospectus so that
the statements in the Prospectus as so amended or supplemented will not, in the
light of the circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will comply
with law.
d. To endeavor to qualify the Offered Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Manager
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<PAGE>
shall reasonably request and to maintain such qualification for as long as the
Manager shall reasonably request.
e. To make generally available to its security holders and to the
Manager as soon as practicable an earning statement covering a twelve month
period beginning on the first day of the first full fiscal quarter after the
date of this Agreement, which earning statement shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder. If such fiscal quarter is the first fiscal quarter of the
Company's fiscal year, such earning statement shall be made available not later
than 90 days after the close of the period covered thereby and in all other
cases shall be made available not later than 45 days after the close of the
period covered thereby.
f. During the period beginning on the date of the Underwriting
Agreement and continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise dispose of any debt securities of the Company or
warrants to purchase debt securities of the Company substantially similar to the
Offered Securities (other than (i) the Offered Securities and (ii) commercial
paper issued in the ordinary course of business), without the prior written
consent of the Manager.
g. Whether or not any sale of Offered Securities is consummated, to
pay all expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation and filing of the Registration
Statement and the Prospectus and all amendments and supplements thereto, (ii)
the preparation, issuance and delivery of the Offered Securities, (iii) the fees
and disbursements of the Company's counsel and accountants and of the Trustee
and its counsel, (iv) the qualification of the Offered Securities under
securities or Blue Sky laws in accordance with the provisions of Section 6(d),
including filing fees and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
any Blue Sky or Legal Investment Memoranda, (v) the printing and delivery to the
Underwriters in quantities as hereinabove stated of copies of the Registration
Statement and all amendments thereto and of the Prospectus and any amendments or
supplements thereto, (vi) any fees charged by rating agencies for the rating of
the Offered Securities, (vii) the fees and expenses, if any, incurred with
respect to any filing with the National Association of Securities Dealers, Inc.
and (viii) all reasonable document production charges and reasonable expenses of
counsel to the Underwriters (but not including their fees for professional
services) in connection with the preparation of this Agreement.
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<PAGE>
7. Indemnification and Contribution.
--------------------------------
a. The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls such Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred by any
Underwriter or any such controlling person in connection with investigating or
defending any such action or claim) caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
any amendment thereof, any preliminary prospectus or the Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through the
Manager expressly for use therein, provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Offered Securities, or any
person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished to such Underwriter
any such amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Offered
Securities to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities.
b. Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through the
Manager expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.
c. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which
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<PAGE>
indemnity may be sought pursuant to either paragraph (a) or (b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Manager, in the case of parties indemnified
pursuant to paragraph (a) above, and by the Company, in the case of parties
indemnified pursuant to paragraph (b) above. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
-17-
<PAGE>
d. To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 8 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Offered Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other hand
in connection with the offering of the Offered Securities shall be deemed to be
in the same respective proportions as the net proceeds from the offering of such
Offered Securities (before deducting expenses) received by the Company and the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus Supplement,
bear to the aggregate public offering price of the Offered Securities. The
relative fault of the Company on the one hand and of the Underwriters on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
e. The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) above. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Offered
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of
-18-
<PAGE>
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 7 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
8. Termination. This Agreement shall be subject to termination, by notice
-----------
given by the Manager to the Company, if (a) after the execution and delivery of
the Underwriting Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange or the National
Association of Securities Dealers, Inc., (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in the judgment of
the Manager, is material and adverse and (b) in the case of any of the events
specified in clauses (a)(i) through (iv), such event, singly or together with
any other such event, makes it, in the judgment of the Manager, impracticable to
market the Offered Securities on the terms and in the manner contemplated in the
Prospectus.
9. Defaulting Underwriters. If, on the Closing Date, any one or more of
-----------------------
the Underwriters shall fail or refuse to purchase Underwriters' Securities that
it has or they have agreed to purchase on such date, and the aggregate amount of
Underwriters' Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate amount of the Underwriters' Securities to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that the
amount of Underwriters' Securities set forth opposite their respective names in
the Underwriting Agreement bears to the aggregate amount of Underwriters'
Securities set forth opposite the names of all such non-defaulting Underwriters,
or in such other proportions as the Manager may specify, to purchase the
Underwriters' Securities which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date; provided that in no event
shall the amount of Underwriters' Securities that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such amount of Underwriters' Securities
without the written consent of such Underwriter. If, on the Closing Date, any
Underwriter
-19-
<PAGE>
or Underwriters shall fail or refuse to purchase Underwriters' Securities and
the aggregate amount of Underwriters' Securities with respect to which such
default occurs is more than one-tenth of the aggregate amount of Underwriters'
Securities to be purchased on such date, and arrangements satisfactory to the
Manager and the Company for the purchase of such Underwriters' Securities are
not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any nondefaulting Underwriter or the Company.
In any such case either the Manager or the Company shall have the right to
postpone the Closing Date but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering of the Offered Securities.
10. Representations and Indemnities to Survive. The respective indemnity
------------------------------------------
and contribution agreements and the representations, warranties and other
statements of the Company, its officers and the Underwriters set forth in this
Agreement will remain in full force and effect, regardless of any termination of
this Agreement, any investigation made by or on behalf of any Underwriter or the
Company or any of the officers, directors or controlling persons referred to in
Section 7 and delivery of and payment for the Offered Securities.
11. Successors. This Agreement will 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 7, and no
other person will have any right or obligation hereunder.
12. Counterparts. The Underwriting Agreement may be signed in any number
------------
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the internal laws of the State of New York.
-20-
<PAGE>
14. Headings. The headings of the sections of this Agreement have been
--------
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
-21-
<PAGE>
UNDERWRITING AGREEMENT
_____________, 2000
THE CHARLES SCHWAB CORPORATION
101 Montgomery Street
San Francisco, California 94104
Ladies and Gentlemen:
We (the "Manager") are acting on behalf of the underwriter or
underwriters (including ourselves) named below (such underwriter or underwriters
being herein called the "Underwriters"), and we understand that The Charles
Schwab Corporation, a Delaware corporation (the "Company"), proposes to issue
and sell [Currency and Principal Amount] aggregate initial offering price of
[Full title of Debt Securities] (the "Debt Securities") (The Debt Securities are
also referred to herein as the "Offered Securities"). The Debt Securities will
be issued pursuant to the provisions of a [Senior/Subordinated] Indenture dated
as of July 15, 1993, as amended, (the "[Senior/Subordinated] Debt Indenture")
between the Company and The Chase Manhattan Bank (formerly Chemical Bank), as
Trustee (the "Trustee").
Subject to the terms and conditions set forth or incorporated by
reference herein, the Company hereby agrees to sell and the Underwriters agree
to purchase, severally and not jointly, the respective principal amounts of Debt
Securities set forth below opposite their names at a purchase price of _____% of
the principal amount of Debt Securities[, plus accrued interest, if any, from
[Date of Offered Securities] to the date of payment and delivery]/1/.
<TABLE>
<CAPTION>
Principal Amount of
Name Debt Securities
---- -------------------
<S> <C>
[Insert syndicate list]
Total: ___________________
</TABLE>
- --------------
/1/ To be added only if the transaction does not close flat.
-1-
<PAGE>
[The principal amount of Debt Securities to be purchased by the several
Underwriters shall be reduced by the aggregate principal amount of Debt
Securities sold pursuant to delayed delivery contracts.]/2/
The Underwriters will pay for the Offered Securities [(less any Offered
Securities sold pursuant to delayed delivery contracts)]/3/ upon delivery
thereof at [office] at ______ a.m. (New York time) on ___________, 200_, or at
such other time, not later than 5:00 p.m. (New York time) on __________, 200_,
as shall be designated by the Manager. The time and date of such payment and
delivery are hereinafter referred to as the Closing Date.
The Offered Securities shall have the terms set forth in the Prospectus
dated ___________, 200_, and the Prospectus Supplement dated ____________ 200_,
including the following:
Terms of Debt Securities:
Maturity Date: __________, ____
Interest Rate:
Redemption Provisions:
Interest Payment Dates: ____________ and
____________________ commencing
____________ __, ________)]
[(Interest accrues from
__________ --, ___)]
Form and Denomination:
Ranking: The Debt Securities will be [Senior/ Subordinated] indebtedness of the
Company issued under the [Senior/ Subordinated] Indenture dated as of
July 15, 1993, as amended, between the Company and The Chase Manhattan
Bank (formerly Chemical Bank), as trustee.
- ------------------
/2/ To be added only if delayed delivery contracts are contemplated.
/3/ To be added only if the transaction does not close flat.
-2-
<PAGE>
[Other Terms:]
[The commission to be paid to the Underwriters in respect of the Offered
Securities purchased pursuant to delayed delivery contracts arranged by the
Underwriters shall be __% of the principal amount of the Debt Securities so
purchased.]/4/
All provisions contained in the document entitled The Charles Schwab
Corporation Underwriting Agreement Standard Provisions (Debt Securities), dated
___________, 2000, a copy of which is attached, hereto, are herein incorporated
by reference in their entirety and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein, except that (i) if any term defined in such document is otherwise
defined herein, the definition set forth herein shall control, (ii) all
references in such document to a type of security that is not an Offered
Security shall not be deemed to be a part of this Agreement and (iii) all
references in such document to a type of agreement that has not been entered
into in connection with the transactions contemplated hereby shall not be deemed
to be a part of this Agreement.
- ----------
/4/ To be added only if delayed delivery contracts are contemplated.
-3-
<PAGE>
[SIGNATURE PAGE WHERE MORGAN STANLEY & CO.
INCORPORATED OR MORGAN STANLEY & CO. INTERNATIONAL
LIMITED IS A CO-LEAD MANAGER]
Please confirm your agreement by having an authorized officer sign a
copy of this Agreement in the space set forth below.
Very truly yours,
[MORGAN STANLEY & CO. INCORPORATED]
[MORGAN STANLEY & CO. INTERNATIONAL LIMITED]
[CHARLES SCHWAB & CO., INC.]
[Name of Other Lead Managers]
On behalf of themselves and the other Underwriters
named herein
By: [MORGAN STANLEY & CO.
INCORPORATED]
[MORGAN STANLEY & CO.
INTERNATIONAL LIMITED]
By:
-----------------------------------------------
Name:
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By:
---------------------------------
Name:
Title:
-4-
<PAGE>
[SIGNATURE PAGE WHERE MORGAN STANLEY & CO.
INCORPORATED OR MORGAN STANLEY & CO. INTERNATIONAL
LIMITED IS SOLE MANAGER]
Please confirm your agreement by having an authorized officer sign a
copy of this Agreement in the space set forth below.
Very truly yours,
[MORGAN STANLEY & CO. INCORPORATED]
[MORGAN STANLEY & CO. INTERNATIONAL
LIMITED]
acting severally on behalf of itself and the several
Underwriters named herein
By:
------------------------------------------
Name:
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By:
-------------------------------
Name:
Title:
-5-
<PAGE>
Schedule I
DELAYED DELIVERY CONTRACT
_________, 200_
Dear Sirs:
The undersigned hereby agrees to purchase from The Charles Schwab
Corporation, a Delaware corporation (the "Company"), and the Company agrees to
sell to the undersigned the Company's securities described in Schedule A annexed
hereto (the "Securities"), offered by the Company's Prospectus dated ______ ,
200_, and Prospectus Supplement dated ________, 200_, receipt of copies of which
is hereby acknowledged, at a purchase price stated in Schedule A and on the
further terms and conditions set forth in this Agreement. The undersigned does
not contemplate selling Securities prior to making payment therefor.
The undersigned will purchase from the Company Securities in the
principal amount and numbers on the delivery dates set forth in Schedule A.
Each such date on which Securities are to be purchased hereunder is hereinafter
referred to as a "Delivery Date."
Payment for the Securities that the undersigned has agreed to purchase
on each Delivery Date shall be made to the Company in Federal or other funds
immediately available in New York City on the Delivery Date, upon delivery to
the undersigned of the Securities to be purchased by the undersigned on the
Delivery Date, in such denominations and registered in such names as the
undersigned may designate by written or telegraphic communication addressed to
the Company not less than five full business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for the Securities on the Delivery Date shall be subject to the conditions that
(1) the purchase of Securities to be made by the undersigned shall not at the
time of delivery be prohibited under the laws of the jurisdiction to which the
undersigned is subject and (2) the Company shall have sold, and delivery shall
have taken place to the underwriters (the "Underwriters") named in the
Prospectus Supplement referred to above, such part of the Securities as is to be
sold to them. Promptly after completion of sale and delivery to the
underwriters, the Company will mail or deliver to the undersigned at its address
set forth below notice to such
-1-
<PAGE>
effect, accompanied by a copy of the opinion of counsel for the Company
delivered to the Underwriters in connection therewith.
Failure to take delivery of and make payment for Securities by any
purchaser under any other Delayed Delivery Contract shall not relieve the
undersigned of its obligations under this agreement.
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
If this Agreement is acceptable to the Company, it is requested that the
Company sign the form of acceptance below and mail or deliver one of the
counterparts hereof to the undersigned at its address set forth below. This
will become a binding agreement, as of the date first above written, between the
Company and the undersigned when such counterpart is so mailed or delivered.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York.
Yours very truly,
---------------------------------
(Purchaser)
By
-------------------------------
---------------------------------
(Title)
---------------------------------
---------------------------------
(Address)
Accepted:
The Charles Schwab Corporation
By:
----------------------------
-2-
<PAGE>
PURCHASER-- PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone and department of the representative of the
Purchaser with whom details of delivery on the Delivery Date may be discussed is
as follows: (Please print.)
<TABLE>
<CAPTION>
Telephone No.
Name Including Area Code Department
---- ------------------- ----------
<S> <C> <C>
- ------------------------ --------------------------- ---------------------------
</TABLE>
-3-
<PAGE>
SCHEDULE A
Securities:
- ----------
Principal Amounts or Numbers to be Purchased:
- --------------------------------------------
Purchase Price:
- --------------
Delivery Dates:
- --------------
-4-
<PAGE>
EXHIBIT 1.2
THE CHARLES SCHWAB CORPORATION
MEDIUM TERM NOTES
DISTRIBUTION AGREEMENT
_______ __, 2000
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Credit Suisse First Boston Corporation
11 Madison Avenue
New York, New York 10010
Charles Schwab & Co., Inc.
101 Montgomery Street
San Francisco, California 94104
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, as amended (the
"Senior Debt Indenture") between the Company and The Chase Manhattan Bank
(formerly Chemical Bank), as trustee (the "Trustee"). The Senior Subordinated
Notes will be issued pursuant to the provisions of a senior subordinated
indenture dated as of July 15, 1993, as amended (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.
<PAGE>
Subject to the terms and conditions stated herein, and subject to the
reservation by the Company of the right to appoint additional Agents that 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"), Credit Suisse First Boston Corporation ("CS
First Boston"), and Charles Schwab & Co., Inc. ("Charles Schwab") (individually,
an "Agent" and collectively, the "Agents") as its exclusive agents for the
purpose of soliciting and receiving offers to purchase Notes from the Company by
others and, on the basis of the representations and warranties herein contained,
but subject to the terms and conditions herein set forth, each Agent agrees to
use reasonable efforts to solicit and receive offers to purchase Notes upon
terms acceptable to the Company at such times and in such amounts as the Company
shall from time to time specify. In addition, any Agent may also purchase Notes
as principal pursuant to the terms of a terms agreement relating to such sale (a
"Terms Agreement") in accordance with the provisions of Section 2(b) hereof.
Each Agent acknowledges that, in the case of any sale of Notes by the Company
not resulting from a solicitation made or an offer to purchase received by such
Agent, or arising in connection with a purchase by such Agent as principal, no
commission shall be payable to such Agent with respect to such sale. Each Agent
further acknowledges that in acting under this Agreement and in connection with
the sale of any Notes by the Company (other than Notes sold to such Agent as
principal), such Agent is acting solely as agent of the Company and does not
assume any obligation towards or relationship of agency or trust with any
purchaser of Notes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, and may in the
future file one or more additional registration statements, in each case
including a prospectus, relating to the Notes. The term "Registration
Statement," as used herein, means, at any time, such of the foregoing
registration statements, including the 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
2
<PAGE>
to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"),
then any reference herein to the term "Registration Statement" shall be deemed
to include such Rule 462 Registration Statement.
1. Representations and Warranties. The Company represents and warrants
------------------------------
to and agrees with each Agent as of the Commencement Date (as hereinafter
defined), as of each date on which an Agent solicits offers to purchase Notes,
as of each date on which the Company accepts an offer to purchase Notes
(including any purchase by an Agent pursuant to a Terms Agreement), as of each
date the Company issues and delivers Notes, and as of each date the Registration
Statement or the Basic Prospectus is amended or supplemented, as follows (it
being understood that such representations, warranties and agreements shall be
deemed to relate to the Registration Statement, the Basic Prospectus and the
Prospectus, each as amended or supplemented to each such date):
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission 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.
3
<PAGE>
(c) The Company is a duly incorporated, validly existing corporation in
good standing under the laws of the State of Delaware, has the corporate power
and authority to own its property and conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(d) Each of Schwab Holdings, Inc. ("Holdings"), Charles Schwab, and each
other subsidiary of the Company that is a "significant subsidiary" within the
meaning of Rule 1-02 of Regulation S-X of the Commission (each, a "Significant
Subsidiary" and collectively, the "Significant Subsidiaries") is a duly
incorporated, validly existing corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and authority to
own 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, fraudulent transfer or conveyance, reorganization, moratorium 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, fraudulent transfer or conveyance, reorganization,
moratorium 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
4
<PAGE>
any applicable Terms Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Company or Charles
Schwab or any agreement or other instrument binding upon the Company or any of
its subsidiaries that is material to the Company and its subsidiaries, taken as
a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, the Notes, the Indentures 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 and territories in connection with the offer and sale of the
Notes; provided, however, that no representation is made as to whether the
purchase of the Notes constitutes a "prohibited transaction" under Section 406
of the Employee Retirement Income Security Act of 1974, as amended, or Section
4975 of the Internal Revenue Code of 1986, as amended.
(i) There has not occurred any material adverse change, or any
development which could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business
or operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus.
(j) There are no legal or governmental proceedings pending or threatened
to which the Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus and are
not so described or any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the Prospectus or
to be filed or incorporated by reference as exhibits to the Registration
Statement that are not described, filed or incorporated as required.
(k) The Company is not an "investment company" as such term is defined
in the Investment Company Act of 1940, as amended.
(l) Each of the Company and its Significant Subsidiaries has all
necessary consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory organizations and
all courts and other tribunals, to own, lease, license and use its properties
and assets and to conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain or file would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(m) Each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer, investment
adviser, or transfer agent, as the case may be, in each jurisdiction wherein the
conduct of its business requires such registration, and each of the Company and
its Significant Subsidiaries is in compliance in all material respects with all
applicable laws, rules, regulations, orders, by-
5
<PAGE>
laws and similar requirements in connection with such registrations, except to
the extent that the failure to be so registered or be in compliance would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.
(n) Charles Schwab is a member in good standing of the associations and
exchanges indicated in the Prospectus and is registered as a broker-dealer with
the Commission and in all 50 states, the District of Columbia and Puerto Rico,
except to the extent that the failure to be in good standing or be so registered
would not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
2. Solicitations as Agent; Purchases as Principal.
----------------------------------------------
(a) Solicitations as Agent. In connection with an Agent's actions as
----------------------
agent hereunder, such Agent agrees to use reasonable efforts to solicit offers
to purchase Notes upon the terms and conditions set forth in the Prospectus as
then amended or supplemented.
The Company reserves the right, in its sole discretion, to instruct the
Agents to suspend at any time, for any period of time or permanently, the
solicitation of offers to purchase Notes. Upon receipt of at least one business
day's prior notice from the Company, the Agents will forthwith suspend
solicitations of offers to purchase Notes from the Company until such time as
the Company has advised the Agents that such solicitation may be resumed. While
such solicitation is suspended, the Company shall not be required to deliver any
certificates, opinions or letters in accordance with Sections 5(a), 5(b) and
5(c). If the Registration Statement or Prospectus is amended or supplemented
during the period of suspension (other than by an amendment or supplement
providing solely for a change in the interest rates, redemption provisions,
amortization schedules or maturities offered on the Notes or for a change the
Agents deem to be immaterial), no Agent shall be required to resume soliciting
offers to purchase Notes until the Company has delivered such certificates,
opinions and letters as such Agent may request.
The Company agrees to pay to each Agent, as consideration for the sale
of each Note resulting from a solicitation made or an offer to purchase received
by such Agent, a commission in the form of a discount from the purchase price of
such Note equal to the percentage set forth below of the purchase price of such
Note:
<TABLE>
<CAPTION>
Term of Note Commission Rate
------------ ---------------
<S> <C>
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%
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
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%
</TABLE>
Each Agent shall communicate to the Company, orally or in writing, each
offer to purchase Notes received by such Agent as agent that in its judgment
should be considered by the Company. The Company shall have the sole right to
accept offers to purchase Notes and may reject any offer in whole or in part.
Each Agent shall have the right to reject any offer to purchase Notes that it
considers to be unacceptable, and any such rejection shall not be deemed a
breach of its agreements contained herein. The procedural details relating to
the issue and delivery of Notes sold by the Agents as agents and the payment
therefor shall be as set forth in the Administrative Procedures (as hereinafter
defined).
(b) Purchases as Principal. Each sale of Notes to an Agent as principal
----------------------
shall be made in accordance with the terms of this Agreement. In connection
with each such sale, the Company will enter into a Terms Agreement that will
provide for the sale of such Notes to and the purchase thereof by such Agent.
Each Terms Agreement will take the form of either (i) a written agreement
between such Agent and the Company, which may be substantially in the form of
Exhibit A hereto (a "Written Terms Agreement") or (ii) an oral agreement between
such Agent and the Company, 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."
7
<PAGE>
Unless otherwise specified in a Terms Agreement, if an Agent is
purchasing Notes as principal such Agent may resell such Notes to other dealers.
Any such sales may be at a discount, which shall not exceed the amount set forth
in the Prospectus Supplement relating to such Notes.
(c) Administrative Procedures. The Agents and the Company agree to
-------------------------
perform their respective duties and obligations specifically provided to be
performed in the Medium-Term Notes, Series A, Administrative Procedures
(attached hereto as Exhibit B) (the "Administrative Procedures"), as amended
from time to time. The Administrative Procedures may be amended only by written
agreement of the Company and the Agents.
(d) Delivery. The documents required to be delivered by Section 4 of
--------
this Agreement as a condition precedent to each Agent's obligation to begin
soliciting offers to purchase Notes as an agent of the Company shall be
delivered at the office of Howard, Rice, Nemerovski, Canady, Falk & Rabkin, A
Professional Corporation, counsel for the Company, not later than 1:00 p.m.,
California time, on the date hereof, or at such other time and/or place as the
Agents and the Company may agree upon in writing, but in no event later than the
day prior to the earlier of (i) the date on which the Agents begin soliciting
offers to purchase Notes or (ii) the first date on which the Company accepts any
offer by an Agent to purchase Notes pursuant to a Terms Agreement. The date of
delivery of such documents is referred to herein as the "Commencement Date."
(e) Obligations Several. The Company acknowledges that the obligations
-------------------
of the Agents under this Agreement are several and not joint.
3. Agreements. The Company agrees with each Agent that:
----------
(a) Prior to the termination of the offering of the Notes pursuant to
this Agreement or any Terms Agreement, the Company will not file any Prospectus
Supplement relating to the Notes or any amendment to the Registration Statement
unless the Company has previously furnished to the Agents copies thereof for
their review and will not file any such proposed supplement or amendment to
which the Agents reasonably object; provided, however, that (i) the foregoing
-------- -------
requirement shall not apply to any of the Company's periodic filings with the
Commission required to be filed pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, copies of which filings the Company will cause to be delivered
to the Agents promptly after being transmitted for filing with the Commission
and (ii) any Prospectus Supplement that merely sets forth the terms or a
description of particular Notes shall only be reviewed and approved by the Agent
or Agents offering such Notes. Subject to the foregoing sentence, the Company
will promptly cause each Prospectus Supplement to be filed with or transmitted
for filing to the Commission in accordance with Rule 424(b) under the Securities
Act. The Company will promptly advise the Agents (i) of the filing of any
amendment or supplement to the Basic Prospectus (except that notice of the
filing of an amendment or supplement to the Basic Prospectus that merely sets
forth the terms or a description of particular Notes shall only be given to the
Agent or Agents offering such Notes), (ii) of
8
<PAGE>
the filing and effectiveness of any amendment to the Registration Statement,
(iii) of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Basic Prospectus or for any
additional information, (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (v) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Notes for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Company will use reasonable efforts to
prevent the issuance of any such stop order or notice of suspension of
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof. If the Basic Prospectus is amended or supplemented as a result of the
filing under the Exchange Act of any document incorporated by reference in the
Prospectus, no Agent shall be obligated to solicit offers to purchase Notes so
long as it is not reasonably satisfied with such document.
(b) If, at any time when a prospectus relating to the Notes is required
to be delivered under the Securities Act, any event occurs or condition exists
as a result of which the Prospectus, as then amended or supplemented, would
include an untrue statement of a material fact, or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
when the Prospectus, as then amended or supplemented, is delivered to a
purchaser, not misleading, or if, in the opinion of the Agents or in the opinion
of the Company, it is necessary at any time to amend or supplement the
Prospectus, as then amended or supplemented, to comply with applicable law, the
Company will immediately notify the Agents by telephone (with confirmation in
writing) to suspend solicitation of offers to purchase Notes and, if so notified
by the Company, the Agents shall forthwith suspend such solicitation and cease
using the Prospectus, as then amended or supplemented. If the Company shall
decide to amend or supplement the Registration Statement or Prospectus, as then
amended or supplemented, it shall so advise the Agents promptly by telephone
(with confirmation in writing) and, at its expense, shall prepare and cause to
be filed promptly with the Commission an amendment or supplement to the
Registration Statement or Prospectus, as then amended or supplemented,
satisfactory in all respects to the Agents, that will correct such statement or
omission or effect such compliance and will supply such amended or supplemented
Prospectus to the Agents in such quantities as they may reasonably request. If
any documents, certificates, opinions and letters furnished to the Agents
pursuant to paragraph (f) below and Sections 5(a), 5(b) and 5(c) in connection
with the preparation and filing of such amendment or supplement are satisfactory
in all respects to the Agents, upon the filing with the Commission of such
amendment or supplement to the Prospectus or upon the effectiveness of an
amendment to the Registration Statement, the Agents will resume the solicitation
of offers to purchase Notes hereunder. Notwithstanding any other provision of
this Section 3(b), until 180 days after the date any Agent has purchased Notes
as principal from the Company, if any event described above in this paragraph
(b) occurs, the Company will, at its own expense, forthwith prepare and cause to
be filed promptly with the Commission an amendment or supplement to the
Registration Statement or Prospectus, as then amended or supplemented,
satisfactory in all respects to
9
<PAGE>
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 conformed
copy of the Registration Statement, including exhibits and all amendments
thereto, and as many copies of the Prospectus, any documents incorporated by
reference therein and any supplements and amendments thereto as such Agent may
reasonably request.
(e) The Company will endeavor to qualify the Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions as the Agents shall
reasonably request and to maintain such qualification for as long as the Agents
shall reasonably request.
(f) The Company shall furnish to the Agents such relevant documents and
certificates of officers of the Company relating to the business, operations and
affairs of the Company, the Registration Statement, the Basic Prospectus, any
amendments or supplements thereto, the Indentures, the Notes, this Agreement,
the Administrative Procedures, any Terms Agreement and the performance by the
Company of its obligations hereunder or thereunder as the Agents may from time
to time reasonably request.
(g) The Company shall notify the Agents promptly in writing of any
downgrading, or of its receipt of any notice of any intended or potential
downgrading or of any review for possible change that does not indicate the
direction of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act.
(h) The Company will, whether or not any sale of Notes is consummated,
pay all expenses incident to the performance of its obligations under this
Agreement and any Terms Agreement, including: (i) the preparation and filing of
the Registration Statement and the Prospectus and all amendments and supplements
thereto, (ii) the
10
<PAGE>
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.
(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
11
<PAGE>
offer to purchase was made, that, in the judgment of the relevant Agent,
is material and adverse and that makes it, in the judgment of such
Agent, impracticable to market the Notes on the terms and in the manner
contemplated by the Prospectus, as so amended or supplemented;
(ii) there shall not have occurred any (A) suspension or material
limitation of trading generally on or by, as the case may be, the New
York Stock Exchange, the American Stock Exchange or the National
Association of Securities Dealers, Inc., (B) suspension of trading of
any securities of the Company on any exchange or in any over-the-counter
market, (C) declaration of a general moratorium on commercial banking
activities in New York by either Federal or New York State authorities
or (D) any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in the judgment of the
relevant Agent, is material and adverse and, in the case of any of the
events described in clauses (ii)(A) through (D), such event, singly or
together with any other such event, makes it, in the judgment of such
Agent, impracticable to market the Notes on the terms and in the manner
contemplated by the Prospectus, as amended or supplemented at the time
of such solicitation or at the time such offer to purchase was made; and
(iii) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction of
the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act;
(A) except, in each case described in paragraph (i), (ii) or (iii) above, as
disclosed to the relevant Agent in writing by the Company prior to such
solicitation or, in the case of a purchase of Notes, as disclosed to the
relevant Agent before the offer to purchase such Notes was made or (B) unless in
each case described in (ii) above, the relevant event shall have occurred and
been known to the relevant Agent before such solicitation or, in the case of a
purchase of Notes, before the offer to purchase such Notes was made.
(b) On the Commencement Date and, if called for by any Terms Agreement,
on the corresponding Settlement Date, the relevant Agents shall have received:
(i) The opinion, dated as of such date, of Howard, Rice, Nemerovski,
Canady, Falk & Rabkin, A Professional Corporation, counsel for the
Company, to the effect that:
(A) Charles Schwab is a duly incorporated, validly existing
corporation in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own its
12
<PAGE>
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 or court
decisions 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 and established in
conformity with the provisions of the relevant Indenture and, if such
Note is duly executed by the Company and completed and authenticated
by the Trustee in accordance with the terms of the relevant Indenture
and delivered to and duly 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 or other
similar laws or court decisions affecting creditors' rights generally,
(b) is subject to general principles of equity, regardless of whether
codified by statute and regardless of whether enforcement is
considered in a proceeding in equity or at law, and (c) is subject to
certain additional customary exceptions;
(E) (1) the execution and delivery by the Company of this Agreement,
the Indentures and any applicable Written Terms Agreement, and the
performance by the Company of its obligations under this Agreement,
the Indentures and any applicable Terms Agreement, as of the
Commencement Date (or Settlement Date, if applicable) did not
contravene, and (2) the execution and delivery by the Company of the
Notes, assuming such Notes were executed, issued and delivered in
accordance with this Agreement and the Indentures as of the
Commencement Date (or Settlement Date, if applicable) would not
contravene, (a) any provision of applicable law (other than the
securities or Blue Sky laws of the various states as to which such
counsel need express no opinion), or (b) the certificate or articles
of incorporation or by-
13
<PAGE>
laws of the Company or Charles Schwab, or constitute a default under
the Revolving Credit Facility, consisting of (i) a Credit Agreement
(364-Day Commitment), between the Company, Bank of America National
Trust and Savings Association, as Administrative Agent, and the banks
listed therein, as lenders, dated as of June 25, 1999, and the
Promissory Notes issued pursuant thereto, and (ii) nine separate but
substantially identical Credit Agreement (3-Year Commitment), between
the Company and each of the banks listed in those Credit Agreements,
each 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 for which
indebtedness 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; provided, however, that such
counsel need not express an opinion as to whether the purchase of the
Notes 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 that the statements in the
Prospectus, as amended or supplemented, under the caption "Certain
14
<PAGE>
United States Federal Income Tax Consequences" are accurate in all
material respects.
The letter containing such opinion shall also contain a statement
that although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus and
such counsel makes no representation that it has independently verified
the accuracy, completeness or fairness of such statements (except as to
those matters stated in subparagraphs (F) and (G) above), such counsel
has no reason to believe (1) that any 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), did not comply 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)
that (except for the financial statements and schedules and other
financial and statistical data as to which such counsel need not express
any belief, 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
amended, if applicable, as of the date such opinion is delivered
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (3) 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) do
not comply as to form in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder
and (4) that (except for the 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 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.
15
<PAGE>
(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
effect on the Company and its subsidiaries, taken as a whole;
(B) each of 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
16
<PAGE>
information called for with respect to such legal matters, documents
and proceedings and fairly summarize the matters referred to therein;
(E) after due inquiry, such counsel does not know of any contracts
or other documents that are required to be described in the
Registration Statement or the Prospectus, as then amended or
supplemented, or to be filed or incorporated by reference as exhibits
to such Registration Statement that are not described, filed or
incorporated as required;
(F) each of the Company and its Significant Subsidiaries is duly
registered as a broker-dealer, municipal securities broker or dealer,
investment adviser, or transfer agent, as the case may be, in each
jurisdiction wherein the conduct of its business requires such
registration, and each of the Company and its Significant Subsidiaries
is in compliance in all material respects with all applicable laws,
rules, regulations, orders, by-laws and similar requirements in
connection with such registrations, except to the extent that the
failure to be so registered or be in compliance would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(G) Charles Schwab is a member in good standing of the associations
and exchanges indicated in the Prospectus, as then amended or
supplemented, and is registered as a broker-dealer with the Commission
and in all 50 states, the District of Columbia and Puerto Rico, except
to the extent that the failure to be in good standing or be so
registered would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; and
(H) (1) the execution and delivery by the Company of the
Agreement, the Indentures and any applicable Written Terms Agreement,
and the performance by the Company of its obligations under the
Agreement, the Indentures and any applicable Terms Agreement, as of
the Commencement Date (or Settlement Date, if applicable), did not
violate, and (2) the execution and delivery by the Company of the
Notes, assuming such Notes were executed, issued and delivered in
accordance with this Agreement and the Indentures as of the
Commencement Date (or Settlement Date, if applicable), would not
violate, to such counsel's best knowledge, after reasonable
investigation, any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any subsidiary
(except for such contravention that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole).
(I) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the
17
<PAGE>
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 and (2) no facts
have come to the attention of such counsel to lead them to believe
that (except for the 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.
(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 the last subparagraph of
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 the last subparagraph 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
18
<PAGE>
by reference), but are without independent check or verification, except
as specified. With respect to clauses (2), (3) and (4) of the last
subparagraph 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 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.
------------------------------------
19
<PAGE>
(a) Each time the Registration Statement or Prospectus is amended or
supplemented (other than by an amendment or supplement providing solely for a
change in the interest rates, redemption provisions, amortization schedules or
maturities offered on the Notes or for a change the Agents deem to be
immaterial), the Company will deliver or cause to be delivered forthwith to each
Agent a certificate signed by an executive officer of the Company, dated the
date of such amendment or supplement, as the case may be, in form reasonably
satisfactory to the Agents, of the same tenor as the certificate referred to in
Section 4(c) relating to the Registration Statement or the Prospectus as amended
or supplemented to the time of delivery of such certificate.
(b) Each time the Company furnishes a certificate pursuant to Section
5(a), the Company will furnish or cause 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 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
20
<PAGE>
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 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
21
<PAGE>
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 6 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein in
connection with any offering of Notes, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and each Agent on the other hand from the offering of such Notes or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and each Agent on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and each Agent on the other hand in
connection with the offering of such Notes shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such Notes
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by each Agent in respect thereof. The relative fault
of the 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
22
<PAGE>
the losses, claims, damages and liabilities referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6, no Agent shall be required to
contribute any amount in excess of the amount by which the total price at which
the Notes referred to in paragraph (d) above that were offered and sold to the
public through such Agent exceeds the amount of any damages that such Agent has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
7. Position of the Agents. In acting under this Agreement and in
----------------------
connection with the sale of any Notes by the Company (other than Notes sold to
an Agent as principal pursuant to a Terms Agreement), each Agent is acting
solely as agent of the Company and does not assume any obligation towards or
relationship of agency or trust with any purchaser of Notes. An Agent shall
make reasonable efforts to assist the Company in obtaining performance by each
purchaser whose 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
23
<PAGE>
any Terms Agreement will remain in full force and effect, regardless of any
termination of this Agreement or any such Terms Agreement, any investigation
made by or on behalf of an Agent or the Company or any of the officers,
directors or controlling persons referred to in Section 6 and delivery of and
payment for the Notes.
10. Notices. All communications hereunder will be in writing and
-------
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, 29th 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 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), if sent to Charles Schwab, will be mailed, delivered or
telefaxed and confirmed to Charles Schwab at 120-30, 101 Montgomery Street, San
Francisco, California 94104, Attention: Chief Financial Officer (telefax number:
415-636-5436) or, if sent to the Company, will be mailed, delivered or telefaxed
and confirmed to the Company at 120-30, 101 Montgomery Street, San Francisco,
California 94104, Attention: Chief Financial Officer (telefax number: 415-636-
5436).
11. Successors. This Agreement and any Terms Agreement will inure to
----------
the benefit of and be binding upon the parties hereto and their respective
successors and the officers, directors and controlling persons referred to in
Section 6 and the purchasers of Notes (to the extent expressly provided in
Section 4), and no other person will have any right or obligation hereunder.
12. Amendments. This Agreement may be amended or supplemented if, but
----------
only if, such amendment or supplement is in writing and is signed by the Company
and each Agent; provided that the Company may from time to time, on seven days
--------
prior written notice to the Agents but without the consent of any Agent, amend
this Agreement to add as a party hereto one or more additional firms registered
under the Exchange Act, whereupon each such firm shall become an Agent hereunder
on the same terms and conditions as the other Agents that are parties hereto.
The Agents shall sign any amendment or supplement giving effect to the addition
of any such firm as an Agent under this Agreement.
13. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the internal laws of the State of New York.
24
<PAGE>
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.
25
<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
Name: Christopher V. Dodds
Title: Executive Vice President,
Chief Financial Officer
The foregoing Agreement
is hereby confirmed
and accepted as of the
date first above written.
MORGAN STANLEY & CO. INCORPORATED
By
----------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By
----------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By
----------------------------------
Name:
Title:
CHARLES SCHWAB & CO., INC.
By
----------------------------------
Name: Christopher V. Dodds
Title: Executive Vice President, Chief Financial Officer
26
<PAGE>
EXHIBIT A
THE CHARLES SCHWAB CORPORATION
MEDIUM-TERM NOTES, SERIES A
TERMS AGREEMENT
_________________, 200_
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, California 94104
Attention:
Re: Distribution Agreement dated _______ __, 2000
(the "Distribution Agreement")
-------------------------------------------------
We agree to purchase your Medium-Term Notes, Series A, having the
following terms:
[We agree to purchase, severally and not jointly, the principal
amount of Notes set forth below opposite our names:
Principal Amount
Name of Notes
---- ------------
Morgan Stanley & Co.
Incorporated
Goldman, Sachs & Co.
Credit Suisse First Boston
Corporation
Charles Schwab & Co., Inc.
Total....$
===============
The Notes shall have the following terms:]*
__________________________
* Delete if the transaction will not be syndicated.
<PAGE>
<TABLE>
<CAPTION>
All Notes: Fixed Rate Notes: Floating Notes:
- --------- ----------------- ---------------
<S> <C> <C>
Principal Interest Base Rate:
Amount: Rate:
Purchase Index Amortization Maturity:
Price: Schedule:
Price to Spread (Plus or Multiplier:
Public: Minus):
Settlement Applicability of Annual Initial Interest
Date and Time: Spread Payments: Rate:
Place of Interest Payment Interest Reset
Delivery: Date(s): Dates:
Original Issue Interest Payment Maximum Interest
Date: Period: Rate:
Interest Accrual Minimum Interest
Date: Rate:
Maturity Calculation Agent:
Date:
Optional Repayment LIBOR
Date(s): Reuters/Telerate:
Optional Redemption
Date:
Initial Redemption
Date:
Initial Redemption
Percentage
Reduction:
Annual Redemption
Percentage
Reduction:
</TABLE>
2
<PAGE>
Ranking:
Other Terms:
The provisions of Sections 1, 2(b) and 2(c) and 3 through 6, 9, 10, 11
and 14 of the Distribution Agreement and the related definitions are
incorporated by reference herein and shall be deemed to have the same force and
effect as if set forth in full herein.
[If on the Settlement Date any one or more of the Agents shall fail or
refuse to purchase Notes that it has or they have agreed to purchase on such
date, and the aggregate amount of Notes which such defaulting Agent or Agents
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate amount of the Notes to be purchased on such date, the other Agents
shall be obligated severally in the proportions that the amount of Notes set
forth opposite their respective names above bears to the aggregate amount of
Notes set forth opposite the names of all such non-defaulting Agents, or in such
other proportions as _______________ may specify, to purchase the Notes which
such defaulting Agent or Agents agreed but failed or refused to purchase on such
date; provided that in no event shall the amount of Notes that any Agent has
--------
agreed to purchase pursuant to this Agreement be increased pursuant to this
paragraph by an amount in excess of one-ninth of such amount of Notes without
the written consent of such Agent. If on the Settlement Date any Agent or
Agents shall fail or refuse to purchase Notes and the aggregate amount of Notes
with respect to which such default occurs is more than one-tenth of the
aggregate amount of Notes to be purchased on such date, and arrangements
satisfactory to _______________ and the Company for the purchase of such Notes
are not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Agent or the Company. In
any such case either _______________ or the Company shall have the right to
postpone the Settlement Date but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Agent from
liability in respect of any default of such Agent under this Agreement.]**
This Agreement is subject to termination on the terms incorporated by
reference herein. If this Agreement is so terminated, the provisions of
Sections 3(h), 6, 9, 11 and 14 of the Distribution Agreement shall survive for
the purposes of this Agreement.
______________________________
** Delete if the transaction will not be syndicated.
3
<PAGE>
The following information, opinions, certificates, letters and
documents referred to in Section 4 of the Distribution Agreement will be
required: ________________
[NAME OF RELEVANT AGENT(S)]
By ______________________________
Title:
Accepted:
THE CHARLES SCHWAB CORPORATION
By ___________________________
Title:
4
<PAGE>
EXHIBIT B
---------
THE CHARLES SCHWAB CORPORATION
MEDIUM-TERM NOTES, SERIES A
ADMINISTRATIVE PROCEDURES
_________________________________
Explained below are the administrative procedures and specific terms
of the offering of Medium-Term Notes, Series A (the "Notes"), on a continuous
basis by The Charles Schwab Corporation (the "Company") pursuant to the
Distribution Agreement, dated as of ______ __, 2000 (the "Distribution
Agreement") among the Company and Morgan Stanley & Co. Incorporated, Goldman,
Sachs & Co., Credit Suisse First Boston Corporation, and Charles Schwab & Co.,
Inc. (the "Agents"). The Notes may be issued as senior indebtedness (the
"Senior Notes") or senior subordinated indebtedness (the "Senior Subordinated
Notes") of the Company, and as used herein the term "Notes" includes the Senior
Notes and the Senior Subordinated Notes. The Senior Notes will be issued
pursuant to the provisions of a senior indenture dated as of July 15, 1993, as
amended (the "Senior Debt Indenture"), between the Company and The Chase
Manhattan Bank (formerly Chemical Bank) ("Chase"), as trustee. The Senior
Subordinated Notes will be issued pursuant to the provisions of a senior
subordinated indenture dated as of July 15, 1993, as amended (the "Senior
Subordinated Debt Indenture"), between the Company and Chase, as trustee. The
Senior Debt Indenture and the Senior Subordinated Debt Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures." In the Distribution Agreement, the Agents have agreed to use
reasonable efforts to solicit purchases of the Notes, and the administrative
procedures explained below will govern the issuance and settlement of any Notes
sold through the Agents, as agents of the Company. An Agent, as principal, may
also purchase Notes for its own account, and in connection with such purchase
the Company and such Agent will enter into a terms agreement (a "Terms
Agreement"), as contemplated by the Distribution Agreement. The administrative
procedures explained below will govern the issuance and settlement of any Notes
purchased by an Agent, as principal, unless otherwise specified in the
applicable Terms Agreement.
Chase will be the Registrar, Calculation Agent, Authenticating Agent
and Paying Agent for both the Senior Notes and the Senior Subordinated Notes and
will perform the duties specified herein. Each Note will be represented by
either a Global Security (as defined below) delivered to Chase, as custodian for
The Depository Trust Company ("DTC"), and recorded in
<PAGE>
the book-entry system maintained by DTC (a "Book-Entry Note") or a certificate
delivered to the holder thereof or a person designated by such holder (a
"Certificated Note"). Except as set forth in the Indentures, an owner of a Book-
Entry Note will not be entitled to receive a Certificated Note.
Book-Entry Notes, which may be payable only in U.S. dollars, will be
issued in accordance with the administrative procedures set forth in Part I
hereof as they may subsequently be amended as the result of changes in DTC'S
operating procedures. Certificated Notes will be issued in accordance with the
administrative procedures set forth in Part II hereof. Unless otherwise defined
herein, terms defined in the Indentures, the Notes or any Prospectus Supplement
relating to the Notes shall be used herein as therein defined.
The Company will advise the Agents in writing of the employees of the
Company with whom the Agents are to communicate regarding offers to purchase
Notes and the related settlement details.
PART I: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, Chase will perform the
custodial, document control and administrative functions described below, in
accordance with its respective obligations under a Letter of Representation from
the Company and Chase to DTC, dated as of August 3, 1993 (the "Letter of
Representation"), as amended, and a Medium-Term Note Certificate Agreement
between Chase and DTC, dated as of December 2, 1988 (the "MTN Certificate
Agreement") , and its obligations as a participant in DTC, including DTC's Same-
Day Funds Settlement System ("SDFS").
Issuance: On any date of settlement (as defined under
"Settlement" below) for one or more Book-Entry Notes,
the Company will issue a single global security in
fully registered form without coupons (a "Global
Security") representing up to U.S. $200,000,000
principal amount of all such Notes that have the same
Original Issue Date, Maturity Date and other terms.
Each Global Security will be dated and issued as of the
date of its authentication by Chase. Each Global
Security will bear an "Interest Accrual Date," which
will be (i) with respect to an original Global Security
(or any portion thereof), its original issuance date
and (ii) with respect to any Global Security (or any
portion thereof) issued subsequently upon exchange of a
Global Security, or in lieu of a destroyed, lost or
stolen Global Security, the most recent Interest
Payment Date to which interest has been paid or duly
provided for on the predecessor Global Security or
Securities (or if no such payment or provision has been
made, the original issuance date of the predecessor
Global Security), regardless of the date of
authentication of such subsequently issued Global
Security.
2
<PAGE>
Book-Entry Notes may be payable only in U.S. dollars.
No Global Security will represent any Certificated
Note.
Denominations: Book-Entry Notes will be issued in principal amounts of
U.S. $1,000 or any amount in excess thereof that is an
integral multiple of U.S. $1,000. Global Securities
will be denominated in principal amounts not in excess
of U.S. $200,000,000. If one or more Book-Entry Notes
having an aggregate principal amount in excess of
$200,000,000 would, but for the preceding sentence, be
represented by a single Global Security, then one
Global Security will be issued to represent each U.S.
$200,000,000 principal amount of such Book-Entry Note
or Notes and an additional Global Security will be
issued to represent any remaining principal amount of
such Book-Entry Note or Notes. In such a case, each of
the Global Securities representing such Book-Entry Note
or Notes shall be assigned the same CUSIP number.
Preparation If any offer to purchase a Book-Entry Note is accepted
of Pricing by or on behalf of the Company, the Company will
Supplement: prepare a pricing supplement (a "Pricing Supplement")
reflecting the terms of such Note. The Company (i) will
arrange to file 10 copies (or, if participating in the
Commission's Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR"), such number of copies as is
required by the rules and regulations of the Commission
governing EDGAR filings then in effect) of such Pricing
Supplement with the Commission in accordance with the
applicable paragraph of Rule 424(b) under the Act, (ii)
will, as soon as possible and in any event not later
than 11:00 A.M. on the Business Day following the trade
date, deliver the number of copies of such Pricing
Supplement to the relevant Agent at the address listed
below as such Agent shall request and (iii) will, on
the relevant Agent's behalf, promptly file five copies
of such Pricing Supplement with the National
Association of Securities Dealers, Inc. (the "NASD").
The relevant Agent will cause such Pricing Supplement
to be delivered to the purchaser of the Note.
Pricing Supplements shall be delivered as follows:
If to Morgan Stanley & Co. Incorporated, at:
Morgan Stanley & Co.
Incorporated 1585 Broadway, 2nd Floor
New York, New York 10036
3
<PAGE>
Attn.: Medium-Term Note Trading Desk
Telephone: (212) 761-1322
Telecopier: (212) 761-8846
If to Goldman, Sachs & Co., at:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Credit Department -Medium Term Notes
Telephone: (212) 902-3589
Telecopier: (212) 357-8680
If to Credit Suisse First Boston Corporation, at:
Credit Suisse First Boston Corporation
11 Madison Avenue, 5th Floor
New York, NY 10010
Attn: Helena Wilner
Telephone: (212) 325-7198
Telecopier: (212) 325-8183
In each instance that a Pricing Supplement is prepared,
the relevant Agent will affix the Pricing Supplement to
Prospectuses prior to their use. Outdated Pricing
Supplements, and the Prospectuses to which they are
attached (other than those retained for files), will be
destroyed.
Settlement: The receipt by the Company of immediately available
funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Security
representing such Note shall constitute "settlement"
with respect to such Note. All offers accepted by the
Company will be settled on the third Business Day next
succeeding the date of acceptance pursuant to the
timetable for settlement set forth below, unless the
Company and the purchaser agree to settlement on another
day, which shall be no earlier than the next Business
Day.
Settlement Procedures with regard to each Book-Entry Note sold by
Procedures: the Company to or through an Agent (unless otherwise
specified pursuant to a Terms Agreement and reasonably
acceptable to Chase) shall be as follows:
A. The relevant Agent will advise the Company by
telephone that such Note is a Book-Entry Note and
4
<PAGE>
of the following settlement information:
1. Principal amount.
2. Maturity Date.
3. In the case of a Fixed Rate Book-Entry Note, the
Interest Rate, whether such Note will pay interest
annually or semiannually and whether such Note is
an Amortizing Note, and, if so, the amortization
schedule, or, in the case of a Floating Rate Book-
Entry Note, the Initial Interest Rate (if known at
such time), Interest Payment Date(s), Interest
Payment Period, Calculation Agent, Base Rate (and,
if LIBOR, Reuters or Telerate), Index Maturity,
Interest Reset Period, Initial Interest Reset
Date, Interest Reset Dates, Spread or Spread
Multiplier (if any), Minimum Interest Rate (if
any) and Maximum Interest Rate (if any).
4. Redemption or repayment provisions (if any).
5. Ranking.
6. Settlement date and time (Original Issue Date).
7. Interest Accrual Date.
8. Price.
9. Agent's commission (if any) determined as provided
in the Distribution Agreement.
10. Any other applicable terms.
B. The Company will advise Chase by telephone or electronic
transmission (confirmed in writing at any time on the
same date) of the information set forth in Settlement
Procedure "A" above and of the name of the applicable
Agent. The Company will then assign a CUSIP number to the
Global Security representing such Note and will notify
Chase and the relevant Agent of such CUSIP number by
5
<PAGE>
telephone as soon as practicable.
C. Chase will enter a pending deposit message through DTC's
Participant Terminal System, providing the following
settlement information to DTC, the relevant Agent and
Standard & Poor's Corporation:
1. The information set forth in Settlement Procedure
"A".
2. The Initial Interest Payment Date for such Note, the
number of days by which such date succeeds the
related DTC Record Date (which in the case of
Floating Rate Notes which reset daily or weekly,
shall be the date five calendar days immediately
preceding the applicable Interest Payment Date and,
in the case of all other Notes, shall be the Record
Date as defined in the Note) and, if known, the
amount of interest payable on such Initial Interest
Payment Date.
3. The CUSIP number of the Global Security representing
such Note.
4. Whether such Global Security will represent any other
Book-Entry Note (to the extent known at such time).
5. Whether such Note is an Amortizing Note (by an
appropriate notation in the comments field of DTC's
Participant Terminal System).
6. The number of Participant accounts to be maintained
by DTC on behalf of the relevant Agent and Chase.
D. Chase will complete and authenticate the Global Security
representing such Note.
E. DTC will credit such Note to Chase's participant
account at DTC.
F. Chase will enter an SDFS deliver order through DTC's
Participant Terminal System instructing
6
<PAGE>
DTC to (i) debit such Note to Chase's participant account
and credit such Note to the relevant Agent's participant
account and (ii) debit such Agent's settlement account
and credit Chase's settlement account for an amount equal
to the price of such Note less such Agent's commission
(if any). The entry of such a deliver order shall
constitute a representation and warranty by Chase to DTC
that (a) the Global Security representing such Book-Entry
Note has been issued and authenticated and (b) Chase is
holding such Global Security pursuant to the MTN
Certificate Agreement.
G. Unless the relevant Agent is the end purchaser of such
Note, such Agent will enter an SDFS deliver order through
DTC's Participant Terminal System instructing DTC (i) to
debit such Note to such Agent's participant account and
credit such Note to the participant accounts of the
Participants with respect to such Note and (ii) to debit
the settlement accounts of such Participants and credit
the settlement account of such Agent for an amount equal
to the price of such Note.
H. Transfers of funds in accordance with SDFS deliver orders
described in Settlement Procedures "F" and "G" will be
settled in accordance with SDFS operating procedures in
effect on the settlement date.
I. Chase will credit to the account of the Company
maintained at Citibank, N.A., New York, New York, in
immediately available funds, the amount transferred to
Chase in accordance with Settlement Procedure "F".
J. Unless the relevant Agent is the end purchaser of such
Note, such Agent will confirm the purchase of such Note
to the purchaser either by transmitting to the
Participants with respect to such Note a confirmation
order or orders through DTC's institutional delivery
system or by mailing a written confirmation to such
purchaser.
K. Monthly, Chase will send to the Company a statement
setting forth the principal amount of Notes outstanding
as of that date under the
7
<PAGE>
Indentures and setting forth a brief description
of any sales of which the Company has advised
Chase that have not yet been settled.
Settlement For sales by the Company of Book-Entry Notes to or
Procedures through an Agent (unless otherwise specified pursuant
Timetable: to a Terms Agreement and reasonably acceptable to Chase)
for settlement on the first Business Day after the sale
date, Settlement Procedures "A" through "J" set forth
above shall be completed as soon as possible but not
later than the respective times in New York City set
forth below:
Settlement
Procedure Time
---------- ----
A 11:00 A.M. on the sale date
B 2:00 Noon on the sale date
C 2:00 P.M. on the sale date
D 9:00 A.M. on settlement date
E 10:00 A.M. on settlement date
F-G 2:00 P.M. on settlement date
H 4:45 P.M. on settlement date
I--J 5:00 P.M. on settlement date
If a sale is to be settled more than one Business Day
after the sale date, Settlement Procedures "A", "B"
and "C" shall be completed as soon as practicable but
no later than 11:00 A.M., 12:00 and 2:00 P.M.,
respectively, on the first Business Day after the sale
date. If the Initial Interest Rate for a Floating Rate
Book-Entry Note has not been determined at the time
that Settlement Procedure "A" is completed, Settlement
Procedures "B" and "C" shall be completed as soon as
such rate has been determined but no later than 12:00
and 2:00 P.M., respectively, on the first Business Day
before the settlement date. Settlement Procedure "H"
is subject to extension in accordance with any
extension of Fedwire closing deadlines and in the
other events specified in the SDFS operating
procedures in effect on the settlement date.
If settlement of a Book-Entry Note is rescheduled or
cancelled, Chase, after receiving notice from the
Company or the relevant Agent no later than 12:00 Noon
on the Business Day immediately preceding the
scheduled settlement date, will deliver to DTC,
through DTC's Participant Terminal System, a
cancellation message to such effect by no later than
2:00 P.M. on the Business Day
8
<PAGE>
immediately preceding the scheduled settlement date.
Failure to If Chase fails to enter an SDFS deliver order with
Settle: respect to a Book-Entry Note pursuant to Settlement
Procedure "F", Chase may deliver to DTC, through DTC's
Participant Terminal System, as soon as practicable
a withdrawal message instructing DTC to debit such
Note to Chase's participant account, provided that
Chase's participant account contains a principal
amount of the Global Security representing such Note
that is at least equal to the principal amount to be
debited. If a withdrawal message is processed with
respect to all the Book-Entry Notes represented by a
Global Security, Chase will mark such Global Security
"cancelled," make appropriate entries in Chase's
records and send such cancelled Global Security to the
Company. The CUSIP number assigned to such Global
Security shall, in accordance with the procedures of
the CUSIP Service Bureau of Standard & Poor's
Corporation, be cancelled and not immediately
reassigned. If a withdrawal message is processed with
respect to one or more, but not all, of the Book-Entry
Notes represented by a Global Security, Chase will
exchange such Global Security for two Global
Securities, one of which shall represent such Book-
Entry Note or Notes and shall be cancelled immediately
after issuance and the other of which shall represent
the remaining Book-Entry Notes previously represented
by the surrendered Global Security and shall bear the
CUSIP number of the surrendered Global Security.
If the purchase price for any Book-Entry Note is not
timely paid to the Participants with respect to such
Note by the beneficial purchaser thereof (or a person,
including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in
turn, the relevant Agent may enter SDFS deliver orders
through DTC's Participant Terminal System reversing
the orders entered pursuant to Settlement Procedures
"F" and "G", respectively. Upon receipt of notice of
such event, Chase will deliver the withdrawal message
and take the related actions described in the
preceding paragraph.
Notwithstanding the foregoing, upon any failure to
settle with respect to a Book-Entry Note, DTC may take
any actions in accordance with its SDFS operating
procedures then in effect.
9
<PAGE>
In the event of a failure to settle with respect to
one or more, but not all, of the Book-Entry Notes to
have been represented by a Global Security, Chase will
provide, in accordance with Settlement Procedures "D"
and "F", for the authentication and issuance of a
Global Security representing the Book-Entry Notes to
be represented by such Global Security and will make
appropriate entries in its records.
10
<PAGE>
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
Chase will serve as Registrar in connection with the Certificated Notes.
Issuance: Each Certificated Note will be dated and issued
as of the date of its authentication by Chase.
Each Certificated Note will bear an Original
Issue Date, which will be (i) with respect to
an original Certificated Note (or any portion
thereof), its original issuance date (which
will be the settlement date) and (ii) with
respect to any Certificated Note (or portion
thereof) issued subsequently upon transfer or
exchange of a Certificated Note or in lieu of a
destroyed, lost or stolen Certificated Note,
the original issuance date of the predecessor
Certificated Note, regardless of the date of
authentication of such subsequently issued
Certificated Note.
Preparation If any offer to purchase a Certificated Note
of Pricing Supplement: is accepted by or on behalf of the Company,
the Company will prepare a Pricing Supplement
reflecting the terms of such Note. The Company
(i) will arrange to file 10 copies (or, if
participating in EDGAR, such number of copies
as is required by the rules and regulations of
the Commission governing EDGAR filings then in
effect) of such Pricing Supplement with the
Commission in accordance with the applicable
paragraph of Rule 424(b) under the Act, (ii)
will, as soon as possible and in any event not
later than 11:00 A.M. on the Business Day
following the trade date, deliver the number of
copies of such Pricing Supplement to the
relevant Agent at the address set-forth above
as such Agent shall request and (iii) will, on
the relevant Agent's behalf, promptly file five
copies of such Pricing Supplement with the
NASD. The relevant Agent will cause such
Pricing Supplement to be delivered to the
purchaser of the Note.
In each instance that a Pricing Supplement is
prepared, the relevant Agent will affix the
Pricing Supplement to Prospectuses prior to
their use. Outdated Pricing Supplements, and
the Prospectuses to which they are attached
(other than those retained for files), will be
destroyed.
Settlement: The receipt by the Company of immediately
available funds in exchange for an
authenticated Certificated Note delivered to
the relevant Agent and such Agent's delivery of
such Note against receipt of immediately
available funds
11
<PAGE>
shall constitute "settlement" with respect to
such Note. All offers accepted by the Company
will be settled on or before the third Business
Day next succeeding the date of acceptance
pursuant to the timetable for settlement set
forth below, unless the Company and the
purchaser agree to settlement on another date.
Settlement Settlement Procedures with regard to each
Procedures: Certificated Note sold by the Company to or
through an Agent (unless otherwise specified
pursuant to a Terms Agreement and reasonably
acceptable to Chase) shall be as follows:
A. The relevant Agent will advise the Company
by telephone that such Note is a
Certificated Note and of the following
settlement information:
1. Name in which such Note is to be
registered ("Registered Owner").
2. Address of the Registered Owner and
address for payment of principal and
interest.
3. Taxpayer identification number of the
Registered Owner (if available).
4. Principal amount.
5. Maturity Date.
6. In the case of a Fixed Rate
Certificated Note, the Interest Rate,
whether such Note will pay interest
annually or semiannually and whether
such Note is an Amortizing Note and,
if so, the amortization schedule, or,
in the case of a Floating Rate
Certificated Note, the Initial
Interest Rate (if known at such time),
Interest Payment Date(s), Interest
Payment Period, Calculation Agent,
Base Rate (and, if LIBOR, Reuters or
Telerate), Index Maturity, Interest
Reset Period, Initial Interest Reset
Date, Interest Reset Dates, Spread or
Spread Multiplier (if any), Minimum
Interest Rate (if any) and Maximum
Interest Rate (if any).
12
<PAGE>
7. Redemption or repayment provisions
(if any).
8. Ranking.
9. Settlement date and time (Original
Issue Date).
10. Interest Accrual Date.
11. Price.
12. Agent's commission (if any)
determined as provided in the
Distribution Agreement.
13. Denominations.
14. Any other applicable terms.
B. The Company will advise Chase by telephone
or electronic transmission (confirmed in
writing at any time on the same date) of
the information set forth in Settlement
Procedure "A" above and of the name of the
applicable Agent.
C. The Company will have delivered to Chase a
pre-printed four-ply packet for such Note,
which packet will contain the following
documents in forms that have been approved
by the Company, the relevant Agent and
Chase:
1. Note with customer confirmation.
2. Stub One - For Chase.
3. Stub Two - For the relevant Agent.
4. Stub Three - For the Company.
D. Chase will complete such Note and
authenticate such Note and deliver it
(with the confirmation) and Stubs One and
Two to the relevant Agent at the address
set-forth below, and such Agent will
acknowledge receipt of the Note by
stamping or otherwise marking Stub One and
returning it to Chase. In the event that
the instructions given by such Agent for
payment to the account of the Company are
revoked, the Company will as
13
<PAGE>
promptly as possible wire transfer to the
account of such Agent an amount of
immediately available funds equal to the
amount of such payment made.
Certificated Notes shall be delivered as follows:
If to Morgan Stanley & Co. Incorporated, at:
Bank of New York
Dealer Clearance Department
1 Wall Street, 3rd Floor
New York, New York 10005
Attn: For the Account of
Morgan Stanley & Co. Incorporated
If to Goldman, Sachs & Co., at:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Corporate Bond Operations
Telephone: (212) 902-5836
If to Credit Suisse First Boston Corporation, at:
Credit Suisse First Boston Corporation
11 Madison Avenue, 5th Floor
New York, NY 10010
Attn: Helena Wilner
Telephone: (212) 325-7198
Telecopier:(212) 325-8183
If to Charles Schwab & Co., Inc., at:
The Charles Schwab Corporation
101 Montgomery Street
San Francisco, CA 94104
Attn: Christopher V. Dodds
Telephone: (415) 627-7000
Telecopier: (415) 627-8188
E. Unless the relevant Agent is the end purchaser
of such Note, such Agent will deliver such Note
(with confirmation) to the customer against
payment in immediately available funds. Such
Agent will obtain the acknowledgment of receipt
of such Note by retaining Stub Two.
14
<PAGE>
F. Chase will send Stub Three to the Company by
first-class mail. Periodically, Chase will also
send to the Company a statement setting forth
the principal amount of the Notes outstanding
as of that date under each Indenture and
setting forth a brief description of any sales
of which the Company has advised Chase that
have not yet been settled.
Settlement For sales by the Company of Certificated Notes
Procedures to or through an Agent (unless otherwise
Timetable: specified pursuant to a Terms Agreement and
reasonably acceptable to Chase), Settlement
Procedures "A" through "F" set forth above shall be
completed on or before the respective times in New
York City set forth below:
Settlement
Procedure Time
--------- ----
A 2:00 P.M. on day before settlement date
B 3:00 P.M. on day before settlement date
C-D 2:15 P.M. on settlement date
E 3:00 P.M. on settlement date
F 5:00 P.M. on settlement date
Failure If a purchaser fails to accept delivery of
to Settle: and make payment for any Certificated Note, the
relevant Agent will notify the Company and Chase by
telephone and return such Note to Chase. Upon
receipt of such notice, the Company will
immediately wire transfer to the account of such
Agent an amount equal to the amount previously
credited thereto in respect of such Note. Such wire
transfer will be made on the settlement date, if
possible, and in any event not later than the
Business Day following the settlement date. If the
failure shall have occurred for any reason other
than a default by such Agent in the performance of
its obligations hereunder and under the
Distribution Agreement, then the Company will
reimburse such Agent or Chase, as appropriate, on
an equitable basis for its loss of the use of the
funds during the period when they were credited to
the account of the Company. Immediately upon
receipt of the Certificated Note in respect of
which such failure occurred, Chase will mark such
Note "cancelled," make appropriate entries in
Chase's records and send such Note to the Company.
15
<PAGE>
Exhibit 5.1
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN
A Professional Corporation
Three Embarcadero Center
San Francisco, CA 94111
(415) 434-1600
May 5, 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>
Year Ended December 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings before taxes on income $ 971,239 $ 576,544 $ 447,247 $394,063 $277,104
- --------------------------------------------------------------------------------------------------------------------------
Fixed charges
Interest expense - customer 688,503 579,930 480,988 368,462 321,225
Interest expense - other 79,900 71,951 65,495 57,410 35,998
Interest portion of rental expense 43,417 32,326 26,045 23,051 20,810
- --------------------------------------------------------------------------------------------------------------------------
Total fixed charges(A) 811,820 684,207 572,528 448,923 378,033
- --------------------------------------------------------------------------------------------------------------------------
Earnings before taxes on income and fixed charges (B) $1,783,059 $1,260,751 $1,019,775 $842,986 $655,137
==========================================================================================================================
Ratio of earnings to fixed charges (B) / (A)* 2.2 1.8 1.8 1.9 1.7
==========================================================================================================================
Ratio of earnings to fixed charges excluding
customer interest expense** 8.9 6.5 5.9 5.9 5.9
==========================================================================================================================
</TABLE>
* The rtio 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 Registration Statement 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 5, 2000
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
The Charles Schwab Corporation
(Exact name of obligor as specified in its charter)
Delaware 94-3025021
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
120 Kearny Street
San Francisco, CA 94104
(Address of principal executive offices) (Zip Code)
--------------------------------------------
Debt Securities
(Title of the indenture securities)
------------------------------------------------------
================================================================================
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-76439, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference. On July 14, 1996, in connection with
the merger of Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 5th day of April, 2000.
THE CHASE MANHATTAN BANK
By /s/ P. Morabito
------------------------
P. Morabito
Vice President
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1999, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Millions
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...... $ 13,271
Interest-bearing balances............................. 30,165
Securities:........................................
Held to maturity securities............................. 724
Available for sale securities........................... 54,770
Federal funds sold and securities purchased under
agreements to resell.................................. 26,694
Loans and lease financing receivables:
Loans and leases, net of unearned income..... $132,814
Less: Allowance for loan and lease losses.... 2,254
Less: Allocated transfer risk reserve........ 0
--------
Loans and leases, net of unearned income,
allowance, and reserve................................ 130,560
Trading Assets.......................................... 53,619
Premises and fixed assets (including capitalized
leases)............................................... 3,359
Other real estate owned................................. 29
Investments in unconsolidated subsidiaries and
associated companies.................................. 186
Customers' liability to this bank on acceptances
outstanding........................................... 608
Intangible assets....................................... 3,659
Other assets............................................ 14,554
--------
TOTAL ASSETS............................................ $332,198
========
</TABLE>
- 4 -
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
Deposits
In domestic offices.............................................. $102,421
Noninterest-bearing ..................................... $41,580
Interest-bearing ........................................ 60,841
In foreign offices, Edge and Agreement subsidiaries and IBF's.... 108,233
Noninterest-bearing ....................................... $ 6,061
Interest-bearing ........................................ 102,172
Federal funds purchased and securities sold under agreements
to repurchase.................................................... 47,425
Demand notes issued to the U.S. Treasury........................... 100
Trading liabilities................................................ 33,626
Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases):
With a remaining maturity of one year or less.................... 3,964
With a remaining maturity of more than one year through
three years................................................. 14
With a remaining maturity of more than three years.......... 99
Bank's liability on acceptances executed and outstanding 608
Subordinated notes and debentures.................................. 5,430
Other liabilities.................................................. 11,886
TOTAL LIABILITIES.................................................. 313,806
EQUITY CAPITAL
Perpetual preferred stock and related surplus 0
Common stock....................................................... 1,211
Surplus (exclude all surplus related to preferred stock).......... 11,066
Undivided profits and capital reserves............................. 7,376
Net unrealized holding gains (losses) on available-for-sale
securities ..................................................... (1,277)
Accumulated net gains (losses) on cash flow hedges................. 0
Cumulative foreign currency translation adjustments................ 16
TOTAL EQUITY CAPITAL............................................... 18,392
--------
TOTAL LIABILITIES AND EQUITY CAPITAL............................... $332,198
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WILLIAM B. HARRISON, JR. )
HELENE L. KAPLAN ) DIRECTORS
HENRY B. SCHACHT )
-5-
