-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DGHpU2rCsTqXiPIKIp8uWYyS5GF/RUAS30qlbIgcnS01XuXFN80JtBslcUf3VvFP avCo5s7aPNFU0m79+PxNiw== 0000929624-00-000631.txt : 20000508 0000929624-00-000631.hdr.sgml : 20000508 ACCESSION NUMBER: 0000929624-00-000631 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHWAB CHARLES CORP CENTRAL INDEX KEY: 0000316709 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 943025021 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-36410 FILM NUMBER: 620777 BUSINESS ADDRESS: STREET 1: 120 KEARNEY STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94108 BUSINESS PHONE: 4156277000 MAIL ADDRESS: STREET 1: 101 MONTGOMERY ST CITY: SAN FRANCISCO STATE: CA ZIP: 94104 S-3 1 FORM S-3 As filed with the Securities and Exchange Commission on May 5, 2000 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- THE CHARLES SCHWAB CORPORATION (Exact name of Registrant as specified in its charter) Delaware 94-3025021 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.)
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: 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
---------------- 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. [_] ---------------- CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Proposed Maximum Title of Each Class of Aggregate Amount of Securities to be Registered Offering Price(1) Registration Fee - -------------------------------------------------------------------------------- Debt Securities(2).................. $750,000,000 $198,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +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 Table of Contents The Charles Schwab Corporation........ 4 Consolidated Ratio of Earnings to Fixed Charges........................ 4 Use of Proceeds....................... 4
Description of Debt Securities........ 5 Plan of Distribution.................. 12 Legal Matters......................... 14 Experts............................... 14
---------------- 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 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 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.
Year Ended December 31, ------------------------ 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- 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
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 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 . 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 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 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 . 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 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 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 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 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 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 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. 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 ========
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 Item 16. Exhibits.
Exhibit Number Description ------- ----------- 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.
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 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 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.
Name and Signature Title ------------------ ----- 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
II-4
Name and Signature Title ------------------ ----- 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
II-5 Index to Exhibits
Exhibit Number Description ------- ----------- 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.
EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 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- 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- 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- 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- 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 -5- 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 -6- "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 -7- 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, -8- 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 -9- 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; -10- (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 -11- 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) -12- 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. -13- 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 -14- 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. -15- 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 -16- 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- 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- 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- 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- 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- 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/.
Principal Amount of Name Debt Securities ---- ------------------- [Insert syndicate list] Total: ___________________
- -------------- /1/ To be added only if the transaction does not close flat. -1- [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- [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- [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- [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- 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- 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- PURCHASER-- PLEASE COMPLETE AT TIME OF SIGNING The name and telephone and department of the representative of the Purchaser with whom details of delivery on the Delivery Date may be discussed is as follows: (Please print.)
Telephone No. Name Including Area Code Department ---- ------------------- ---------- - ------------------------ --------------------------- ---------------------------
-3- SCHEDULE A Securities: - ---------- Principal Amounts or Numbers to be Purchased: - -------------------------------------------- Purchase Price: - -------------- Delivery Dates: - -------------- -4- EX-1.2 3 FORM OF DISTRIBUTION AGREEMENT 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. 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 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 (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 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 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:
Term of Note Commission Rate ------------ --------------- From 9 months to less than 12 months .125% From 12 months to less than 18 months .150% From 18 months to less than 2 years .200% From 2 years to less than 3 years .250% From 3 years to less than 4 years .350%
6 From 4 years to less than 5 years .450% From 5 years to less than 6 years .500% From 6 years to less than 7 years .550% From 7 years to less than 10 years .600% From 10 years to less than 15 years .625% From 15 years to less than 20 years .700% From 20 years to 30 years .750% More than 30 years .875%
Each Agent shall communicate to the Company, orally or in writing, each offer to purchase Notes received by such Agent as agent that in its judgment should be considered by the Company. The Company shall have the sole right to accept offers to purchase Notes and may reject any offer in whole or in part. Each Agent shall have the right to reject any offer to purchase Notes that it considers to be unacceptable, and any such rejection shall not be deemed a breach of its agreements contained herein. The procedural details relating to the issue and delivery of Notes sold by the Agents as agents and the payment therefor shall be as set forth in the Administrative Procedures (as hereinafter defined). (b) Purchases as Principal. Each sale of Notes to an Agent as principal ---------------------- shall be made in accordance with the terms of this Agreement. In connection with each such sale, the Company will enter into a Terms Agreement that will provide for the sale of such Notes to and the purchase thereof by such Agent. Each Terms Agreement will take the form of either (i) a written agreement between such Agent and the Company, which may be substantially in the form of Exhibit A hereto (a "Written Terms Agreement") or (ii) an oral agreement between such Agent and the Company, 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 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 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 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 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 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 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 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 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 (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 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 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 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 (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 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 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 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 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 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 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 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.
All Notes: Fixed Rate Notes: Floating Notes: - --------- ----------------- --------------- 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:
2 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 EX-5.1 4 OPINION OF HOWARD RICE NEMEROVSKI CANADY ET AL 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 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 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 EX-12.1 5 COMPUTATION OF CONSOLIDATED RATIOS OF EARNIGS EXHIBIT 12.1 THE CHARLES SCHWAB CORPORATION Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in thousands, unaudited)
Year Ended December 31, 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- 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 ==========================================================================================================================
* 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. EX-23.1 6 INDEPENDENT AUDITORS' CONSENT 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 EX-25.1 7 FORM T-1 STATEMENT OF ELIGIBILITY 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) ------------------------------------------------------ ================================================================================ 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 - 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 - 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.
Dollar Amounts ASSETS in Millions 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 ========
- 4 - LIABILITIES
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 ========
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- -----END PRIVACY-ENHANCED MESSAGE-----