PROSPECTUS Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-102884
CVS CORPORATION
OFFER TO EXCHANGE
3 7/8% NOTES DUE NOVEMBER 1, 2007
FOR
3 7/8% EXCHANGE NOTES DUE NOVEMBER 1, 2007
We are offering to exchange up to $300,000,000 of our new 3 7/8%
Exchange Notes due November 1, 2007 for up to $300,000,000 of our existing
3 7/8% Notes due November 1, 2007. The terms of the new notes are identical in
all material respects to the terms of the old notes, except that the new notes
have been registered under the Securities Act, and the transfer restrictions and
registration rights relating to the old notes do not apply to the new notes.
To exchange your old notes for new notes:
o you are required to make the representations described on page
29 to us
o you must complete and send the letter of transmittal that
accompanies this prospectus to the exchange agent, The Bank of
New York, by 5:00 p.m., New York time, on March 25, 2003
o you should read the section called "The Exchange Offer" for
further information on how to exchange your old notes for new
notes
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE ISSUED IN THE EXCHANGE
OFFER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is February 19, 2003
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the U.S. Securities and Exchange Commission. Our SEC
filings are available to the public over the Internet at the SEC's web site 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. In addition, because our common stock is listed on the
New York Stock Exchange, reports and other information concerning CVS can also
be inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005. In addition, our SEC filings, as well as other
Company information, are available via the internet on our corporate web site at
http://www.cvs.com.
This prospectus is a part of a registration statement filed by us with
the SEC under the Securities Act. As allowed by SEC rules, this prospectus does
not contain all of the information that you can find in the registration
statement or the exhibits to the registration statement.
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
includes important business and financial information that is not included in
this document and is an important part of this prospectus, and information that
we file later with the SEC will automatically update and supersede the
information in this prospectus. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act until the termination of the offering under this
prospectus.
(i) CVS' Annual Report on Form 10-K......................................Year ended December 29, 2001
(ii) CVS' Quarterly Report on Form 10-Q........................Quarterly periods ended March 30, 2002,
June 29, 2002 and September 28, 2002
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Nancy R. Christal
Vice President, Investor Relations
CVS Corporation
670 White Plains Road, Suite 210
Scarsdale, New York, 10583
(800) 201-0938
TO OBTAIN TIMELY DELIVERY OF COPIES OF THESE FILINGS, YOU MUST MAKE
YOUR REQUEST NO LATER THAN MARCH 18, 2003.
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CVS CORPORATION
CVS Corporation is a leader in the retail drugstore industry in the
United States with net sales of $22.2 billion in fiscal 2001, making us the
second largest retail drugstore chain based on sales. As of September 28, 2002,
we operated 4,027 retail and specialty pharmacy stores in 32 states and the
District of Columbia, making us the largest retail drugstore chain in the nation
based on store count. At the end of fiscal 2001, we operated in 60 of the top
100 U.S. drugstore markets and held the number one market share in 35 of these
markets, more than any other retail drugstore chain. At the end of fiscal 2001,
we held the number one or number two market share in 73% of the markets in which
we operated. During fiscal 2001, we filled over 309 million prescriptions, or
approximately 11% of the U.S. retail market.
CVS Corporation is a Delaware corporation. Our Store Support Center
(corporate office) is located at One CVS Drive, Woonsocket, Rhode Island 02895,
telephone (401) 765-1500.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Reform Act")
provides a safe harbor for forward-looking statements made by or on behalf of
CVS Corporation. We and our representatives may, from time to time, make written
or verbal forward-looking statements, including statements contained in our
filings with the Securities and Exchange Commission and in our reports to
stockholders. Generally, the inclusion of the words "believe," "expect,"
"intend," "estimate," "anticipate," "will," and similar expressions identify
statements that constitute "forward-looking statements". All statements
addressing operating performance of CVS Corporation or any subsidiary, events,
or developments that we expect or anticipate will occur in the future, including
statements relating to sales growth, earnings or earnings per common share
growth, free cash flow, inventory levels and turn and loss rates, store
development, relocations and new market entries, as well as statements
expressing optimism or pessimism about future operating results or events, are
forward-looking statements within the meaning of the Reform Act. The
forward-looking statements are and will be based upon management's then-current
views and assumptions regarding future events and operating performance, and are
applicable only as of the dates of such statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise. By their nature, all forward-looking
statements involve risks and uncertainties. Actual results may differ materially
from those contemplated by the forward-looking statements for a number of
reasons, including but not limited to:
o The continued efforts of health maintenance organizations,
managed care organizations, pharmacy benefit management
companies and other third party payers to reduce prescription
drug costs and pharmacy reimbursement rates;
o Increased competition from other drugstore chains, from
alternative distribution channels such as supermarkets,
membership clubs, mail order companies, discount retailers and
internet companies (e-commerce) and from other third party
plans, as well as changes in consumer preference or loyalties;
o The continued introduction of successful new prescription
drugs;
o Our ability to generate sufficient cash flows to support
capital expansion, and general operating activities;
o Interest rate fluctuations and changes in capital market
conditions or other events affecting our ability to obtain
necessary financing on favorable terms;
o Our ability to establish effective advertising, marketing and
promotional programs (including pricing strategies and price
reduction programs implemented in response to competitive
pressures and/or to drive demand);
o Our ability to continue to secure suitable new store locations
at acceptable lease terms;
o Our ability to enter new markets successfully;
o Our ability to attract, hire and retain suitable pharmacists
and management personnel;
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o Our ability to achieve cost efficiencies and other benefits
from various operational initiatives and technological
enhancements;
o Litigation risks as well as changes in laws and regulations,
including changes in accounting standards and tax laws,
regulations and applicable rates;
o The creditworthiness of the purchasers of businesses formerly
owned by CVS and whose store leases are guaranteed by CVS;
o Fluctuations in inventory cost, availability and loss levels
and our ability to maintain relationships with suppliers on
favorable terms;
o Our ability to continue to successfully implement and manage
new computer systems and technologies;
o The strength of the economy in general or in the markets
served by CVS, including changes in consumer purchasing power
and/or spending patterns; and
o Other risks and uncertainties detailed from time to time in
our filings with the Securities and Exchange Commission.
The foregoing list is not exhaustive. There can be no assurance that we
have correctly identified and appropriately assessed all factors affecting its
business. Additional risks and uncertainties not presently known to us or that
we currently believe to be immaterial also may adversely impact us. Should any
risks and uncertainties develop into actual events, these developments could
have material adverse effects on our business, financial condition, and results
of operations. For these reasons, you are cautioned not to place undue reliance
on our forward-looking statements.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new
notes. The new notes will be exchanged for old notes as described in this
prospectus upon our receipt of old notes. We will cancel all of the old notes
surrendered in exchange for the new notes.
Our net proceeds from the sale of the old notes were approximately $296
million, after deduction of the initial purchasers' discounts and commissions
and other expenses of the offering. We used those net proceeds to repay
outstanding commercial paper issued as of and subsequent to September 28, 2002.
RECENT DEVELOPMENTS
On February 4, 2003, we issued a press release announcing our financial
results for the fourth quarter and year ended December 28, 2002. Net sales for
the fourth quarter ended December 28, 2002 increased 6.6% to $6.34 billion, up
from $5.95 billion during the fourth quarter of 2001. For the year, net sales
increased 8.7% to $24.18 billion, compared to $22.24 billion in 2001. Same store
sales (sales from stores open more than one year) for the fourth quarter rose
6.7%, while pharmacy same store sales rose 10.9% and front-end same store sales
decreased 0.6%. Same store sales for the year increased 8.4%, while pharmacy
same store sales increased 11.7% and front-end same store sales increased 2.3%.
Total pharmacy sales represented 66.8% of total company sales for the quarter
and 67.6% for the year, while third party prescription sales were 92.5% of
pharmacy sales for the quarter and 92.3% for the year. Net earnings for the
fourth quarter of 2002 increased to $200.1 million or $0.49 per diluted share,
compared with a net loss of $130.2 million or $0.34 per diluted share in the
fourth quarter of 2001. For the year, net earnings increased 73.4% to $716.6
million, or $1.75 per diluted share, compared to net earnings of $413.2 million
or $1.00 per diluted share last year. For the year, we opened 174 new stores,
closed 278 and relocated 92 others. As of December 28, 2002, we operated 4,087
retail and specialty pharmacy stores in 32 states and the District of Columbia.
We also reported in a separate press release on February 4, 2003 that
January sales increased 7.2 % to $1.91 billion, compared to $1.78 billion in the
prior year period. January same store sales rose 5.8% while pharmacy same store
sales increased 8.8% and front-end same store sales decreased 0.4%.
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SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables set forth the selected consolidated financial and
operating data for CVS. The selected consolidated financial and operating data
as of and for the fifty-two week periods ended December 29, 2001 and December
30, 2000, the fifty-three week period ended January 1, 2000 and the fifty-two
week periods ended December 26, 1998, and December 27, 1997 has been derived
from CVS' consolidated financial statements, which have been audited by KPMG
LLP, independent accountants. You should not take historical results as
necessarily indicative of the results that may be expected for any future
period. The selected consolidated financial and operating data as of and for the
nine months ended September 28, 2002 and September 29, 2001 has been derived
from CVS' unaudited consolidated condensed financial statements. The results for
the nine months ended September 28, 2002 are not necessarily indicative of
results that may be expected for the entire fiscal year.
You should read this selected consolidated financial and operating data
in conjunction with CVS' Annual Report on Form 10-K for the fiscal year ended
December 29, 2001 and CVS' Quarterly Report on Form 10-Q for the quarterly
period ended September 28, 2002.
NINE MONTHS ENDED FISCAL YEAR
--------------------- ------------------------------------------------------
2001 2000 1999 1998 1997
IN MILLIONS, EXCEPT PER SHARE AMOUNTS 9/28/02 9/29/01 (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS)
------------ --------- --------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $17,836.7 $16,290.9 $22,241.4 $20,087.5 $18,098.3 $15,273.6 $13,749.6
Gross margin(1).................... 4,456.1 4,283.7 5,691.0 5,361.7 4,861.4 4,129.2 3,718.3
Selling, general & administrative.. 3,353.9 3,100.6 4,256.3 3,761.6 3,448.0 2,949.0 2,776.0
Depreciation and amortization(2)... 230.9 239.5 320.8 296.6 277.9 249.7 238.2
Merger, restructuring and other
nonrecurring charges and (gains).. -- -- 343.3 (19.2) -- 178.6 422.4
Operating profit(3)................ 871.3 943.6 770.6 1,322.7 1,135.5 751.9 281.7
Other expense (income), net........ 38.3 46.9 61.0 79.3 59.1 60.9 44.1
Income tax provision............... 316.5 353.2 296.4 497.4 441.3 306.5 149.2
Earnings from continuing operations
before extraordinary item(4)...... $ 516.5 $ 543.5 $ 413.2 $ 746.0 $ 635.1 $ 384.5 $ 88.4
PER COMMON SHARE DATA:
Earnings from continuing operations
before extraordinary item:(4).....
Basic............................. $ 1.29 $ 1.36 $ 1.02 $ 1.87 $ 1.59 $ 0.96 $ 0.20
Diluted........................... 1.26 1.32 1.00 1.83 1.55 0.95 0.19
Cash dividends per common share.... 0.1725 0.1725 0.230 0.230 0.230 0.225 0.220
OTHER OPERATING DATA:
EBITDA(5).......................... $ 1,102.2 $ 1,183.1 $ 1,091.4 $ 1,619.3 $ 1,413.4 $ 1,001.6 $ 519.9
Ratio of earnings to fixed charges(6) 4.20x 4.39x 3.01x 4.56x 4.88x 3.87x 2.12x
Pharmacy sales as a percentage of
total sales....................... 67.9% 66.5% 66.1% 62.7% 58.7% 57.6% 54.7%
Total same store sales............. 9.0% 9.0% 8.6% 10.9% 12.5% 10.8% 9.7%
Pharmacy same store sales.......... 12.0% 14.1% 13.0% 17.7% 19.4% 16.5% 16.5%
Third party sales as a percentage of
pharmacy sales.................... 92.1% 90.6% 90.9% 89.2% 86.5% 83.7% 80.8%
Number of stores (at end of period) 4,027 4,135 4,191 4,133 4,098 4,122 4,094
BALANCE SHEET:
Total working capital.............. $ 2,416.3 $ 2,400.8 $ 2,344.0 $ 1,972.5 $ 1,718.1 $ 1,215.9 $ 1,043.4
Total assets....................... 9,053.8 8,945.5 8,628.2 7,949.5 7,275.4 6,686.2 5,920.5
Long-term debt..................... 807.7 836.2 810.4 536.8 558.5 275.7 290.4
Total shareholders' equity......... 5,050.9 4,713.0 4,566.9 4,304.6 3,679.7 3,110.6 2,626.5
------------------------
(1) Gross margin includes the pre-tax effect of the following nonrecurring
charges: (i) in 2001, $5.7 million ($3.6 million after-tax) related to
the markdown of certain inventory contained in the stores closing as
part of the 2001 strategic restructuring to its net realizable value,
(ii) in 1998, $10.0 million ($5.9 million after-tax) related to the
markdown of noncompatible Arbor Drugs, Inc. merchandise and (iii) in
1997, $75.0 million ($49.9 million after-tax) related to the markdown
of noncompatible Revco D.S., Inc. merchandise.
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(2) As a result of adopting SFAS No. 142 "Goodwill and Other Intangible
Assets" at the beginning of fiscal 2002, the Company no longer
amortizes goodwill and other indefinite-lived intangible assets.
Goodwill amortization totaled $24.4 million pre-tax ($22.0 million
after-tax) for the nine months ended September 29, 2001.
(3) Operating profit includes the pre-tax effect of the charges discussed
in Note (1) above and the following merger, restructuring, and other
nonrecurring charges and gains: (i) in the fourth quarter of 2001,
$346.8 million ($226.9 million after-tax) related to restructuring and
asset impairment costs associated with the strategic restructuring and
$3.5 million ($2.1 million after-tax) nonrecurring gain resulting from
the net effect of the $50.3 million of settlement proceeds received
from various lawsuits against certain manufacturers of brand name
prescription drugs which was offset by the Company's contribution of
$46.8 million of these settlement proceeds to the CVS Charitable Trust,
Inc. to fund future charitable giving, (ii) in 2000, $19.2 million
($11.5 million after-tax) nonrecurring gain representing partial
payment of our share of the settlement proceeds from a class action
lawsuit against certain manufacturers of brand name prescription drugs,
(iii) in 1998, $147.3 million ($101.3 million after-tax) charge related
to the merger of CVS and Arbor and $31.3 million ($18.4 million
after-tax) of nonrecurring costs incurred in connection with
eliminating Arbor's information technology systems and Revco's
noncompatible store merchandise fixtures and (iv) in 1997, $337.1
million ($229.8 million after-tax) charge related to the merger of CVS
and Revco on May 29, 1997, $54.3 million ($32.0 million after-tax) of
nonrecurring costs incurred in connection with eliminating Revco's
information technology systems and noncompatible store merchandise
fixtures and $31.0 million ($19.1 million after-tax) charge related to
the restructuring of Big B, Inc.
(4) Earnings from continuing operations before extraordinary item and
earnings per common share from continuing operations before
extraordinary item include the after-tax effect of the charges and
gains discussed in Notes (1) and (3) above.
(5) EBITDA is defined as operating profit plus depreciation and
amortization. EBITDA includes the effect of the pre-tax charges
discussed in Notes (1) and (3) above. EBITDA is not a measurement of
financial performance under generally accepted accounting principles
and does not represent cash flow from operations. Accordingly, you
should not regard this figure as an alternative to net income or as an
indicator of our operating performance or as an alternative to cash
flows as a measure of liquidity. We believe that EBITDA is widely used
by analysts, investors and other interested parties in our industry but
is not necessarily comparable with similarly titled measures for other
companies.
(6) For purposes of computing the ratio of earnings to fixed charges,
earnings consist of earnings from continuing operations before income
taxes and extraordinary item and fixed charges (excluding capitalized
interest). Fixed charges consist of interest, capitalized interest and
one-third of rental expense, which is deemed representative of the
interest factor.
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DESCRIPTION OF NOTES
The old notes were issued under an indenture dated as of November 4,
2002 between CVS and The Bank of New York as trustee. The following summary
highlights material terms of the indenture. Because this is a summary, it does
not contain all of the information that is included in the indenture. You should
read the entire indenture, including the definitions of the terms used below. We
define some of the terms used below in the section called "Defined terms"
beginning on page 20. We indicate those terms by placing them in bold the first
time that they are used. The indenture is subject to and governed by the Trust
Indenture Act of 1939, as amended. We have filed a copy of the indenture as an
exhibit to the registration statement to which this prospectus relates. See
"Where You Can Find More Information."
The terms of the new notes are identical in all material respects to
the terms of the old notes, except that the transfer restrictions and
registration rights relating to the old notes do not apply to the new notes. If
we do not complete the exchange offer by June 12, 2003, holders of old notes
that have complied with their obligations under the registration rights
agreement will be entitled to liquidated damages in an amount equal to a rate of
0.5% per year on the notes until the consummation of the exchange offer. For
purposes of this section, "notes" refers to both the old notes and the new
notes.
GENERAL
The notes:
o are unsecured senior obligations;
o mature on November 1, 2007;
o bear interest at the rate of 3 7/8% per year from November 4,
2002, or from the most recent interest payment date to which
interest has been paid or provided for; and
o will not be listed on a national securities exchange.
Because the notes are not secured, your claim against the assets of our
company will be junior to the extent we have granted liens on our assets to the
holders of other indebtedness. In addition, the notes are not guaranteed by any
of our subsidiaries, so you will not have any claim as a creditor against our
subsidiaries, and the claims of creditors, including trade creditors, of our
subsidiaries against our subsidiaries will be senior to your claims against
them. At September 28, 2002:
o we had $16.3 million of SECURED DEBT, including capitalized
leases; and
o we had $4.0 billion of liabilities, including trade payables.
We may, without the consent of the holders of the notes, issue an
unlimited amount of additional notes under the indenture having the same terms
in all respects as the notes, except for possible differences as to payment of
interest on the notes:
(1) scheduled and paid prior to the date of issuance of those
additional notes; or
(2) payable on the first interest payment date following the date
of issuance of those additional notes.
The notes and any additional notes would be treated as a single class for all
purposes under the indenture and will vote together as one class on all matters
with respect to the notes.
The additional notes might be offered with original issue discount
("OID") for U.S. federal income tax purposes. Purchasers of notes after the date
of any such increase will not be able to differentiate between notes sold as
part of the increase and previously issued notes. If notes issued as part of an
increase of the principal amount of the notes are issued with OID, persons that
are subject to U.S. federal income taxation who purchase notes after such an
increase may be required to accrue OID (or greater amounts of OID than they
would otherwise have accrued) with respect to their notes. This may affect the
price of outstanding notes.
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PAYMENT OF PRINCIPAL AND INTEREST
We will pay interest on May 1 and November 1 every year, beginning May
1, 2003, to the person in whose name each note, or any predecessor note, is
registered at the close of business on the April 15 or October 15 preceding the
relevant interest payment date.
Interest on the notes will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
We will pay principal, any premium, and interest on the notes at the
office we maintain in New York City for those purposes, which is currently the
corporate trust office of the trustee, located at 101 Barclay Street in The City
of New York. You may exchange your notes or register any transfer of notes at
that office as well.
OPTIONAL REDEMPTION
We may at any time, at our option, redeem all or any portion of the
notes, at a redemption price plus accrued interest to the date of redemption,
equal to the greater of:
(1) 100% of their principal amount; or
(2) the sum of the present values of the remaining scheduled
payments of principal and interest thereon discounted to the
date of redemption on a semiannual basis, assuming a 360-day
year consisting of twelve 30-day months, at the applicable
TREASURY YIELD plus 0.20%.
HOW THE OPTIONAL REDEMPTION CALCULATION WILL APPLY TO THE NOTES
The present value of the remaining payments, as determined by clause
(2), will increase as interest rates on U.S. Treasury securities decline, since
the interest that we pay to you will be comparatively valuable compared to the
lower interest rates then being paid on comparable securities. The present value
will decline as interest rates increase. We will always pay you at least 100% of
the principal amount of your notes, even if interest rates have dramatically
increased and the present value of the remaining payments is less than that.
However, clause (2) seeks to ensure that you will capture the benefit of the
increased value of your note as interest rates decline by requiring us to pay
you an amount equal to the present value of remaining payments, as determined in
clause (2).
HOW THE OPTIONAL REDEMPTION PAYMENT IN CLAUSE (2) IS CALCULATED
In connection with any redemption date, the "treasury yield" will be an
annual rate equal to the semiannual equivalent yield to maturity of the
comparable U.S. Treasury security. In calculating the yield to maturity of the
comparable U.S. Treasury security, we will assume a price for the comparable
U.S. Treasury security, expressed as a percentage of its principal amount, equal
to the applicable COMPARABLE TREASURY PRICE for that redemption date.
An independent investment banker will select as the comparable U.S.
Treasury security a United States Treasury security that has a maturity
comparable to the remaining term of the notes that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the notes. Credit Suisse First Boston Corporation will act as
the independent investment banker. If that firm is unwilling or unable to select
a comparable U.S. Treasury security, the trustee will appoint another
independent investment banking institution of national standing to act as the
independent investment banker.
NOTICES OF REDEMPTION
Holders of the notes to be redeemed will receive notice of the
redemption by first-class mail at least 30 and not more than 60 days prior to
the date fixed for redemption.
NO REDEMPTION AT HOLDER'S OPTION
The notes are not redeemable at the holder's option.
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RESTRICTIVE COVENANTS
SUMMARY OF THE PRINCIPAL RESTRICTIVE COVENANTS
The indenture governing the notes limits the ability of CVS and its
RESTRICTED SUBSIDIARIES to:
o secure debt with security interests on our PRINCIPAL PROPERTY
or securities of our restricted subsidiaries unless the notes
are equally and ratably secured; or
o engage in sale and leaseback transactions with respect to our
principal property, as we describe below.
You should read the sections called "--Detailed explanation of the
restrictions on secured debt" and "--Detailed explanation of limitation on
sale/leaseback transactions" below, for a more detailed explanation of these
covenants and the exceptions to them.
Our "principal property" includes:
o any real and tangible property owned and operated, currently
or in the future, by CVS or any of our restricted subsidiaries
that constitute a part of any store, warehouse or distribution
center located within the United States of America or its
territories or possessions;
o but excluding, current assets, motor vehicles, mobile
materials-handling equipment and other rolling stock, cash
registers and other point-of-sale recording devices, and
related equipment and data processing and other office
equipment;
o the net book value of which (including leasehold improvements
and store fixtures constituting a part of that store,
warehouse or distribution center) as of the date on which the
determination is being made is more than 1.0% of our
CONSOLIDATED NET TANGIBLE ASSETS.
As of the date of this prospectus, none of our stores falls within this
definition of principal property.
All of our SUBSIDIARIES are currently restricted subsidiaries. However,
our board of directors may designate any of our subsidiaries as an "UNRESTRICTED
SUBSIDIARY" and therefore not subject to the covenants. However, our board may
not:
o designate as an unrestricted subsidiary any subsidiary that
owns any principal property or any stock of a restricted
subsidiary;
o continue the designation of any subsidiary as an unrestricted
subsidiary at any time that it owns any principal property; or
o cause or permit any restricted subsidiary to transfer or
otherwise dispose of any principal property to any
unrestricted subsidiary, unless
(1) that unrestricted subsidiary will be redesignated as
a restricted subsidiary, and
(2) any pledge, mortgage, security interest or other lien
arising in connection with any INDEBTEDNESS of that
unrestricted subsidiary does not extend to any
principal property, except if the existence of that
pledge, mortgage, security interest or other lien
would otherwise be permitted under the indenture.
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THERE ARE MANY TRANSACTIONS NOT RESTRICTED BY THE INDENTURE
The indenture does not contain any provisions that would:
o limit our ability to incur indebtedness;
o require the maintenance of financial ratios or specified
levels of net worth or liquidity;
o afford holders of the notes protection in the event of a
highly leveraged transaction, change in credit rating or other
similar occurrence;
o require us to repurchase or redeem or otherwise modify the
terms of any of the notes upon a change in control or other
event involving us which may adversely affect the
creditworthiness of the notes; or
o limit our ability to pay dividends to our shareholders.
DETAILED EXPLANATION OF THE RESTRICTIONS ON SECURED DEBT
We will not, and we will not permit any of our restricted subsidiaries
to, incur, issue, assume, guarantee or create any secured debt, unless we
provide that the notes, together with, if we so choose, any other indebtedness
of CVS or the applicable restricted subsidiary which is not subordinated to the
notes, whether then existing or thereafter created, will be secured equally and
ratably with, or prior to, that secured debt, unless after taking into account
the proposed secured debt, the sum of:
o the aggregate amount of all outstanding secured debt of CVS
and our restricted subsidiaries; plus
o all ATTRIBUTABLE DEBT in respect of sale and leaseback
transactions relating to a principal property, with the
exception of attributable debt which is excluded as provided
by clauses (1) to (8) described under "Detailed explanation of
limitations on sale/leaseback transactions" below,
would not exceed 15% of consolidated net tangible assets.
This restriction will not apply to, and there will be excluded from
secured debt in any computation under this restriction and under "Detailed
explanation of limitation on sale/leaseback transactions" below, indebtedness,
secured by:
(1) LIENS on property, shares of capital stock or indebtedness of
any corporation existing at the time that corporation becomes
a subsidiary;
(2) liens on property, shares of capital stock or indebtedness if
those liens
o existed at the time of acquisition, including,
without limitation, by way of merger or
consolidation, of that property, shares of capital
stock or indebtedness or
o were incurred within 360 days of the time of that
acquisition by CVS or any restricted subsidiary;
(3) liens on property, shares of capital stock or indebtedness
acquired or constructed by CVS or any restricted subsidiary
and created
(a) prior to, at the time of, or within 360 days after,
o that acquisition, including, without
limitation, acquisition through merger or
consolidation, or
o the completion of construction or
commencement of commercial operation of that
property,
whichever is later or
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(b) thereafter, if the lien is provided for by a binding
commitment entered into prior to, at the time of or
within 360 days after the acquisition, completion of
construction or commencement of commercial operation
referred to in clause (a),
to secure or provide for the payment of all or any part of the
purchase price or the construction price of that property,
capital stock or indebtedness;
(4) liens in favor of CVS or any restricted subsidiary;
(5) liens in favor of the United States of America, any State or
the District of Columbia or any foreign government, or any
agency, department or other instrumentality of the United
States of America, any State or the District of Columbia, to
secure partial, progress, advance or other payments as
provided by any contract or provisions of any statute;
(6) liens incurred or assumed in connection with the issuance of
revenue bonds the interest on which is exempt from Federal
income taxation as provided by Section 103(b) of the Internal
Revenue Code;
(7) liens securing the performance of any contract or undertaking
not directly or indirectly in connection with the borrowing of
money, the obtaining of advances or credit or the securing of
indebtedness, if made and continuing in the ordinary course of
business;
(8) liens incurred, no matter when created, in connection with
CVS's or a restricted subsidiary's engaging in leveraged or
single-investor lease transactions; PROVIDED, HOWEVER, that
the instrument creating or evidencing any borrowings secured
by that lien will provide that those borrowings are payable
solely out of the income and proceeds of the property subject
to that lien and are not a general obligation of CVS or that
restricted subsidiary;
(9) liens in favor of a governmental agency to qualify CVS or any
restricted subsidiary to do business, maintain self insurance
or obtain other benefits, or liens under workers' compensation
laws, unemployment insurance laws or similar legislation;
(10) good faith deposits in connection with bids, tenders,
contracts or deposits to secure public or statutory
obligations of CVS or any restricted subsidiary, or deposits
of cash or obligations of the United States of America to
secure surety and appeal bonds to which CVS or any restricted
subsidiary is a party or in lieu of those bonds, or pledges or
deposits for similar purposes in the ordinary course of
business;
(11) liens imposed by law, including laborers' or other employees',
carriers', warehousemen's, mechanics', materialmen's and
vendors' liens;
(12) liens arising out of judgments or awards against CVS or any
restricted subsidiary with respect to which CVS or that
restricted subsidiary at the time shall be prosecuting an
appeal or proceedings for review or liens arising out of
individual final judgments or awards in amounts of less than
$1,000,000; PROVIDED THAT the aggregate amount of all those
individual final judgments or awards shall not at any one time
exceed $1,000,000;
(13) liens for taxes, assessments, governmental charges or levies
not yet subject to penalties for nonpayment or the amount or
validity of which is being in good faith contested by
appropriate proceedings by CVS or any restricted subsidiary,
as the case may be;
(14) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way,
sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions or
liens as to the use of real properties, which liens,
exceptions, encumbrances, easements, reservations, rights and
restrictions do not, in the opinion of CVS, in the aggregate
materially detract from the value of said properties or
materially impair their use in the operation of the business
of CVS and its restricted subsidiaries;
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(15) liens incurred to finance all or any portion of the cost of
construction, alteration or repair of any principal property
or improvements thereto created
(a) prior to or within 360 days after completion of that
construction, alteration or repair; or
(b) thereafter, if that lien is created as provided by a
binding commitment to lend entered into prior to, at
the time of, or within 360 days after completion of
that construction, alteration or repair;
(16) liens existing on the date of the indenture;
(17) liens created in connection with a project financed with, and
created to secure, a NONRECOURSE OBLIGATION; or
(18) any extension, renewal, refunding or replacement of the
foregoing, PROVIDED that
(a) the extension, renewal, refunding or replacement lien
shall be limited to all or a part of the same
property that secured the lien extended, renewed,
refunded or replaced, plus improvements on that
property, and
(b) the FUNDED DEBT secured by that lien is not
increased.
DETAILED EXPLANATION OF LIMITATION ON SALE/LEASEBACK TRANSACTIONS
We will not, and we will not permit any restricted subsidiary to, enter
into any arrangement with any person providing for the leasing by CVS or any
restricted subsidiary of any principal property of CVS or any restricted
subsidiary:
o if the lease is required by GAAP to be capitalized on the
balance sheet of the lessee; and
o if the principal property has been or is to be sold or
transferred by CVS or that restricted subsidiary to that
person
unless, after taking into account the proposed sale and leaseback, the aggregate
amount of all attributable debt with respect to all sale and leaseback
transactions as described above PLUS all secured debt, other than funded debt
which is excluded as provided by clauses (1) to (18) described under "Detailed
explanation of the restrictions on secured debt" above, would not exceed 15% of
consolidated net tangible assets.
This covenant will not apply to, and there will be excluded from
attributable debt in any computation under this restriction or under "Detailed
explanation of the restrictions on secured debt" above, attributable debt with
respect to any sale and leaseback transaction if:
(1) CVS or a restricted subsidiary is permitted to create funded
debt secured by a lien as provided by clauses (1) to (18)
inclusive described under "Detailed explanation of the
restrictions on secured debt" above on the principal property
to be leased, in an amount equal to the attributable debt with
respect to that sale and leaseback transaction, without
equally and ratably securing the notes;
(2) the property leased as provided by that arrangement
(a) is sold for a price at least equal to that property's
fair market value, as determined by the chief
executive officer, the president, the chief financial
officer, the treasurer or the controller of CVS, and
(b) within 360 days after the sale, CVS or a restricted
subsidiary, shall apply the proceeds to the
retirement of indebtedness or funded debt of CVS or
any restricted subsidiary, other than indebtedness or
funded debt owned by CVS or any restricted
subsidiary.
However, no retirement referred to in this clause (2) may be
effected by payment at maturity or by any mandatory sinking
fund payment provision of indebtedness;
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(3) CVS or a restricted subsidiary applies the net proceeds of the
sale or transfer of the leased principal property to the
purchase of assets and the cost of construction of assets
within 360 days prior or subsequent to that sale or transfer;
(4) the effective date of the arrangement or the purchaser's
commitment therefore is within 36 months prior or subsequent
to
o the acquisition of the principal property, including,
without limitation, acquisition by merger or
consolidation, or
o the completion of construction and commencement of
operation of the principal property, which, in the
case of a retail store, is the date of opening to the
public,
whichever is later;
(5) the lease in the sale and leaseback transaction is for a term,
including renewals, of not more than three years;
(6) the sale and leaseback transaction is entered into between CVS
and a restricted subsidiary or between restricted
subsidiaries;
(7) the lease secures or relates to industrial revenue or
pollution control bonds; or
(8) the lease payment is created in connection with a project
financed with, and the obligation constitutes, a nonrecourse
obligation.
MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS
CVS will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets as an entirety or substantially as an entirety in one transaction or
a series of related transactions to, any person other than to a restricted
subsidiary, or permit any person to merge with or into CVS, unless:
(1) either (a) CVS shall be the continuing person or
(b) the person, if other than CVS, formed by that
consolidation or into which CVS is merged or that
acquired or leased the property and assets of CVS
shall
o be a corporation organized and validly
existing under the laws of the United States
of America or any jurisdiction inside the
United States of America and
o expressly assume, by a supplemental
indenture, executed and delivered to the
trustee, all of the obligations of CVS under
the notes and the indenture, and
CVS shall have delivered to the trustee an opinion of
counsel stating that:
o the consolidation, merger or transfer and
the supplemental indenture complies with
this provision;
o all conditions precedent provided for in the
indenture relating to that transaction have
been complied with;
o the supplemental indenture constitutes the
legal valid and binding obligation of CVS or
the successor, enforceable against that
entity in accordance with its terms, subject
to customary exceptions; and
(2) CVS shall have delivered to the trustee an officers' certificate to
the effect that immediately after, and taking into account, that
transaction, no default shall have occurred and be continuing.
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The indenture does not restrict, or require us to redeem or permit
holders to cause a redemption of notes in the event of:
(1) a consolidation, merger, sale of assets or other similar
transaction that may adversely affect the creditworthiness of
CVS or its successor or combined entity;
(2) a change in control of CVS; or
(3) a highly leveraged transaction involving CVS, whether or not
involving a change in control.
Accordingly, you will not have protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction
involving CVS that may adversely affect the holders of notes. The existing
protective covenants applicable to the notes would continue to apply to CVS, or
its successor, in the event of such a transaction but may not prevent that
transaction from taking place.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The following events are considered events of default:
(1) CVS defaults in the payment of all or any part of the
principal of the notes when the same becomes due and payable;
(2) CVS defaults in the payment of any interest on the notes when
the same becomes due and payable, and that default continues
for a period of 30 days;
(3) CVS defaults in the performance of or breaches any other
covenant or agreement of CVS in the indenture and that default
or breach continues for a period of 60 consecutive days after
written notice of that default or breach has been given to CVS
by the trustee or to CVS and the trustee by the holders of 25%
or more in aggregate principal amount of the notes;
(4) events of bankruptcy or insolvency with respect to CVS;
(5) (a) an event of default as defined in any one or more
indentures or instruments evidencing or under which
CVS has outstanding an aggregate of at least
$25,000,000 aggregate principal amount of
indebtedness for borrowed money, shall happen and be
continuing;
(b) that indebtedness shall have been accelerated so that
it shall be or become due and payable prior to the
date on which the same would otherwise have become
due and payable; and
(c) that acceleration shall not be rescinded or annulled
within ten days after notice of that acceleration
shall have been given to CVS by the trustee, or to
CVS and the trustee by the holders of at least 25% in
aggregate principal amount of the notes at the time
outstanding; or
(6) (a) failure by CVS to make any payment at maturity,
including any applicable grace period, in respect of
at least $25,000,000 aggregate principal amount of
indebtedness for borrowed money; and
(b) that failure shall have continued for a period of ten
days after notice of that failure shall have been
given to CVS by the trustee, or to CVS and the
trustee by the holders of at least 25% in aggregate
principal amount of the notes at the time
outstanding.
If an event of default occurs and is continuing, then, either the
trustee or the holders of not less than 25% in aggregate principal amount of the
notes then outstanding by notice in writing to CVS, and to the trustee if given
by holders, may declare the entire principal amount of all notes, and accrued
and unpaid interest, to be due and payable immediately. Upon this declaration,
the principal of and interest on the notes shall become immediately due and
payable.
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If an event of default described in clause (4) occurs and is
continuing, then the principal amount of all the notes then outstanding and
accrued and unpaid interest shall be and become immediately due and payable,
without any notice or other action by any holder or the trustee to the full
extent permitted by applicable law.
If an event of default described in clause (5) or (6) occurs and is
continuing, if the acceleration of other indebtedness or failure to pay other
indebtedness shall be remedied or cured by CVS or waived by the holders of that
indebtedness, then the event of default under that clause shall automatically be
remedied, cured or waived without further action upon the part of either the
trustee or any of the holders.
HOLDERS OF A MAJORITY IN PRINCIPAL AMOUNT OF THE NOTES MAY CONTROL REMEDIES UPON
AN EVENT OF DEFAULT AND WAIVERS OF AN EVENT OF DEFAULT
Subject to provisions in the indenture for the indemnification of the
trustee and other limitations described in the indenture, the holders of at
least a majority in aggregate principal amount of the outstanding notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee by the indenture. However, the trustee may refuse to follow any
direction that conflicts with law or the indenture; may involve the trustee in
personal liability; or the trustee determines in good faith may be unduly
prejudicial to the rights of holders not joining in the giving of that
direction.
In addition, the trustee may take any other action it believes is
proper that is not inconsistent with any directions received from holders of
notes as provided by this paragraph.
Subject to various provisions in the indenture, the holders of at least
a majority in principal amount of the outstanding notes, by notice to the
trustee, may waive an existing default or event of default and its consequences,
except:
o a default in the payment of principal of or interest on any
note as specified in clauses (a) or (b) of "--Events of
Default"; or
o in respect of a covenant or provision of the indenture which
cannot be modified or amended without the consent of the
holder of each outstanding note affected.
Upon any waiver, the default shall cease to exist, and any event of default
arising therefrom shall automatically be cured, for every purpose of the
indenture; but no waiver shall extend to any subsequent or other default or
event of default or impair any right consequent thereto.
No holder of any notes may institute any proceeding, judicial or
otherwise, with respect to the indenture or the notes, or for the appointment of
a receiver or trustee, or for any other remedy under the indenture, unless:
(1) that holder has previously given to the trustee written notice
of a continuing event of default;
(2) the holders of at least 25% in aggregate principal amount of
outstanding notes shall have made written request to the
trustee to institute proceedings in respect of that event of
default in its own name as trustee under the indenture;
(3) that holder or holders have offered to the trustee indemnity
reasonably satisfactory to the trustee against any costs,
liabilities or expenses to be incurred in compliance with that
request;
(4) the trustee for 60 days after its receipt of the notice,
request and offer of indemnity has failed to institute that
proceeding; and
(5) during that 60-day period, the holders of a majority in
aggregate principal amount of the outstanding notes have not
given the trustee a direction that is inconsistent with that
written request.
A holder may not use the indenture to prejudice the rights of another holder or
to obtain a preference or priority over any other holder.
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However, notwithstanding any of the provisions described above, the
right of any holder of a note to receive payment of principal, premium, if any,
and interest on or after their respective due dates or to bring suit for the
enforcement of any of those payments on or after those dates, may not be
impaired or affected without the consent of that holder.
INFORMATION
Whether or not required by the rules and regulations of the SEC, we
have agreed that, so long as any notes are outstanding, we will furnish to the
trustee, within 15 days after we are or would have been required to file with
the SEC, and to furnish to the holders of the notes thereafter:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms
10-Q and 10-K if we were required to file those Forms,
including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by our certified
independent accountants, and
(2) all current reports that would be required to be filed with
the SEC on Form 8-K if we were required to file those reports.
In addition, whether or not required by the rules and regulations of
the SEC, at any time after we file a registration statement with respect to an
exchange offer or a registration statement permitting resales of the notes, we
will file a copy of all that information and reports with the SEC for public
availability and make that information available to securities analysts and
prospective investors upon request.
In addition, we have agreed that, for so long as any notes remain
outstanding, we will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered by Rule 144A(d)(4) under the Securities Act. Requests should be
directed to the address referred to under "Where You Can Find More Information."
Under Rule 144A(d)(4), we are not required to deliver any information so long as
we continue to be a reporting company under the Exchange Act.
We will be required to file with the trustee annually, within four
months of the end of each fiscal year, a certificate as to the compliance with
all conditions and covenants of the indenture.
DISCHARGE OF THE NOTES
We may terminate our obligations under the notes and the indenture if:
(1) all notes previously authenticated and delivered, other than
notes that were mutilated or lost, have been delivered to the
trustee for cancellation and we have paid all sums payable by
us under the indenture; or
(2) (a) the notes mature within one year or all of them are
to be called for redemption within one year under
arrangements satisfactory to the trustee for giving
the notice of redemption;
(b) we irrevocably deposit in trust with the trustee, as
trust funds solely for the benefit of the holders of
the notes for that purpose, money or U.S. government
obligations or a combination sufficient, without
consideration of any reinvestment, to pay the
principal of and interest on the notes to maturity or
redemption, as relevant, and to pay all other sums
payable by us under the indenture; and
(c) we deliver to the trustee an officers' certificate
and an opinion of counsel, stating that we have
complied with all conditions necessary to terminate
our obligations under the notes and the indenture.
If all notes previously authenticated and delivered have been cancelled
as provided in clause (1), the only obligations we will continue to have under
the indenture will be to compensate and indemnify the trustee.
16
If we have complied with the requirements of clause (2), the only
obligations we will continue to have under the indenture until the notes are no
longer outstanding, will be to:
o maintain an office or agency in respect of the notes;
o have moneys held for payment in trust, although the indenture
permits us to recover from the trustee moneys held in trust if
those moneys have been unclaimed for two years;
o register the transfer or exchange of the notes;
o deliver notes for replacement or to be canceled;
o compensate and indemnify the trustee; and
o appoint a successor trustee.
DEFEASANCE
We:
(1) will be considered to have paid and will be discharged from
all obligations in respect of the notes, and the provisions of
the indenture will, except as noted below, no longer be in
effect with respect to the notes; or
(2) need not comply with any specific covenant which may be
defeased under the indenture, and our non-compliance will not
be an event of default under clause (c) of "--Events of
Default"
if we satisfy the following conditions:
(a) we irrevocably deposit in trust with the trustee as
trust funds solely for the benefit of the holders of
the notes, for payment of the principal of and
interest on the notes, money or U.S. government
obligations or a combination sufficient, without
consideration of any reinvestment, to pay and
discharge the principal of and accrued interest on
the outstanding notes to maturity or to a specific
redemption date, if we make irrevocable arrangements
satisfactory to the trustee to ensure that the
redemption will occur on that date;
(b) the deposit will not result in a breach or violation
of, or constitute a default under, the indenture or
any other material agreement or instrument to which
we are a party or by which we are bound;
(c) no default with respect to the notes has occurred and
is continuing on the date of that deposit;
(d) we deliver to the trustee an opinion of counsel (or
direct ruling of the Internal Revenue Service to the
same effect) that
(1) the holders of the notes will not recognize
income, gain or loss for Federal income tax
purposes as a result of our election to
defease the notes and will be subject to
Federal income tax on the same amount, in
the same manner and at the same times as
would have been the case if that deposit and
defeasance had not occurred; and
(2) the holders of the notes have a valid
security interest in the trust funds; and
(e) we deliver to the trustee an officers' certificate
and an opinion of counsel, stating that we have
complied with all conditions.
In the case of legal defeasance under clause (1) above, the opinion of
counsel referred to in clause (d)(1) above may be replaced by a ruling directed
to the trustee received from the Internal Revenue Service to the same effect.
If we select the covenant defeasance option under clause (2) above, we
will continue to be bound by all of the other terms of the indenture other than
the specified covenant(s) that is defeased.
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After the notes are no longer outstanding, the only obligations we will
have under the indenture will be to compensate and indemnify the trustee, and we
will have the right to recover excess money held by the trustee.
MODIFICATION AND WAIVER
AMENDMENTS WITHOUT THE CONSENT OF ANY HOLDER
CVS and the trustee may amend or supplement the indenture or the notes
without notice to or the consent of any holder:
(1) to cure any ambiguity, defect or inconsistency in the
indenture; PROVIDED that those amendments or supplements do
not materially and adversely affect the interests of the
holders;
(2) to comply with the provisions of the indenture in connection
with a consolidation or merger of CVS or the sale, conveyance,
transfer, lease or other disposal of all or substantially all
of the property and assets of CVS;
(3) to comply with any requirements of the SEC in connection with
the qualification of the indenture under the Trust Indenture
Act;
(4) to evidence and provide for the acceptance of appointment
under the indenture by a successor trustee; or
(5) to make any change that does not materially and adversely
affect the rights of any holder.
AMENDMENTS WITH THE CONSENT OF THE HOLDERS
MAJORITY CONSENT IS USUALLY SUFFICIENT
CVS and the trustee may amend the indenture and the outstanding notes
with the written consent of the holders of a majority in principal amount of the
notes then outstanding, and the holders of a majority in principal amount of the
outstanding notes by written notice to the trustee may waive future compliance
by CVS with any provision of the indenture or the notes.
THE FOLLOWING PROVISIONS REQUIRE THE CONSENT OF ALL HOLDERS AFFECTED
THEREBY
Notwithstanding the preceding paragraphs, without the consent of each
holder affected thereby, an amendment or waiver may not:
(1) extend the STATED MATURITY of the principal of, or any
installment of interest on, that holder's notes, or reduce the
principal of or the rate of interest on the notes, or any
premium payable with respect to the notes;
(2) change any place or currency of payment where any note or any
premium or interest is payable;
(3) impair the right to institute suit for the enforcement of any
payment on or after the due date therefore;
(4) reduce the percentage in principal amount of outstanding notes
the consent of whose holders is required for any supplemental
indenture, for any waiver of compliance with the provisions of
the indenture or defaults and the consequences of those
defaults established in the indenture;
(5) waive a default in the payment of principal of or interest on
any note of a holder; or
(6) modify this provision of the indenture, except to increase any
percentage or to provide that other provisions of the
indenture cannot be modified or waived without the consent of
the holder of each outstanding note thereunder affected
thereby.
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The consent of any holder need not approve the particular form of any
proposed amendment, supplement or waiver, so long as the consent approves the
substance of the amendment. After an amendment, supplement or waiver becomes
effective, we will give to the holders affected thereby a notice briefly
describing the amendment, supplement or waiver. We will mail supplemental
indentures to holders upon request. Any failure of CVS to mail that notice, or
any defect therein, shall not, however, in any way impair or affect the validity
of any supplemental indenture or waiver.
GOVERNING LAW
The indenture and the notes will be governed by the laws of the State
of New York.
THE TRUSTEE
We and our subsidiaries maintain ordinary banking and trust
relationships with The Bank of New York, which is the trustee for the notes, and
its affiliates. The Bank of New York also acts as the registrar and transfer
agent for our common stock.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the new notes will be issued in fully
registered form, without interest coupons. Except as described below, the new
notes will be deposited with, or on behalf of, The Depository Trust Company, New
York, New York, and registered in the name of Cede & Co. as DTC's nominee, in
the form of a global note.
THE GLOBAL NOTE. CVS expects that in accordance with procedures
established by DTC:
(1) upon deposit of the global note, DTC or its custodian will
credit on its internal system interests in the global notes to
the accounts of persons, or "participants", who have accounts
with DTC;
(2) holders of the notes that are not participants in DTC will
have their ownership interests reflected on the records of
their participant.
Any transfer of ownership interests held by a participant will be made
through records maintained by DTC or its nominee, and transfers of interests
held indirectly through participants will be made through the records of
participants. You will not be able to own an interest in the global note unless
you are a participant or hold an interest through a participant.
So long as DTC or its nominee is the registered owner or holder of the
new notes, DTC or its nominee will be considered the sole owner or holder of the
new notes represented by the global note for all purposes under the indenture.
You will not be able to transfer your interest in the global note except in
accordance with DTC's procedures, in addition to those provided for under the
indenture with respect to the new notes.
We will make payments on the global note to DTC or its nominee, as the
registered owner of the note. Neither CVS, the trustee nor any paying agent
under the indenture will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the global note or for maintaining, supervising or reviewing any
records relating to beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
principal of or premium and interest on the global note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global note as
shown on the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global note held through
them will be governed by standing instructions and customary practice as is now
the case with securities held for the account of customers registered in the
names of nominees for those customers. Such payments will be the responsibility
of the participants.
19
Transfers between participants in DTC will be effected in accordance
with DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated note for any reason, including to
sell new notes to persons in states which require physical delivery of the new
notes or to pledge them, the holder must transfer its interest in the global
note in accordance with the normal procedures of DTC and with the procedures set
forth in the indenture.
DTC has advised us that DTC will take any action permitted to be taken
by a holder of new notes only at the direction of one or more participants to
whose account at DTC interests in the global note are credited and only in
respect of that portion of the aggregate principal amount of new notes as to
which the participant or participants has or have given such direction. However,
if there is an event of default under the indenture, DTC will exchange the
global note for certificated notes, which it will distribute to its
participants.
DTC has advised us that it is a limited purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a "clearing corporation" within the meaning of the Uniform Commercial Code, and
a "clearing agency" registered in accordance with the provisions of Section 17A
of the Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and other organizations. Indirect access to
the DTC system is available to others, including banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the global notes among participants, it is
under no obligation to perform these procedures, and these procedures may be
discontinued at any time. Neither CVS nor the trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED NOTES. Interests in the global notes will be exchangeable
or transferable, as the case may be, for certificated notes if:
(1) DTC notifies us that it is unwilling or unable to continue as
depositary for the global notes, or DTC ceases to be a
"clearing agency" registered under the Exchange Act, and a
successor depositary is not appointed by CVS within 90 days;
or
(2) CVS in its discretion at any time determines not to have all
the notes represented by the global notes; or
(3) an event of default has occurred and is continuing with
respect to the new notes.
Upon the occurrence of any of the events described in the preceding
sentence, CVS will cause the appropriate certificated notes to be delivered.
DEFINED TERMS
The following terms referred to in this "Description of Notes" are
defined in the indenture as follows:
"ATTRIBUTABLE DEBT" means, in connection with any sale and leaseback
transaction under which either CVS or any restricted subsidiary is at the time
liable as lessee for a term of more than 12 months and at any date as of which
the amount thereof is to be determined, the lesser of:
(1) total net obligations of the lessee for rental payments during
the remaining term of the lease discounted from the respective
due dates of the payments to the determination date at a
yearly rate equivalent to the greater of
(a) the weighted average yield to maturity of the notes,
the average being weighted by the principal amount of
the notes and
(b) the interest rate inherent in the lease, as
determined in good faith by CVS, both to be
compounded semi-annually; or
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(2) the sale price for the assets so sold and leased multiplied by
a fraction the numerator of which is the remaining portion of
the base term of the lease included in the transaction and the
denominator of which is the base term of the lease.
"CAPITAL LEASE OBLIGATIONS" means with respect to any person any
obligation which is required to be classified and accounted for as a capital
lease on the face of a balance sheet of such person prepared in accordance with
GAAP.
"COMPARABLE TREASURY PRICE" means, in connection with any redemption
date applicable to the notes;
(1) the average of the applicable REFERENCE DEALER QUOTATIONS for
that redemption date, after excluding the highest and lowest
applicable reference dealer quotations; or
(2) if the trustee obtains fewer than four reference dealer
quotations, the average of all quotations.
"CONSOLIDATED NET TANGIBLE ASSETS" means, at any date:
(1) the total assets appearing on the most recent consolidated
balance sheet of CVS and its restricted subsidiaries as at the
end of the fiscal quarter of CVS ending not more than 135 days
prior to the date, prepared in accordance with U.S. generally
accepted accounting principles, less
(2) all current liabilities due within one year as shown on that
balance sheet,
(3) investments in and advances to unrestricted subsidiaries, and
(4) INTANGIBLE ASSETS and liabilities relating thereto.
"FUNDED DEBT" means:
(1) any indebtedness of CVS or a restricted subsidiary maturing
more than 12 months after the time of computation;
(2) guarantees of funded debt or of dividends of others, except
guarantees in connection with the sale or discount of accounts
receivable, trade acceptances and other paper arising in the
ordinary course of business;
(3) in the case of any restricted subsidiary, all of its preferred
stock having mandatory redemption provisions as reflected on
its balance sheet prepared in accordance with U.S. generally
accepted accounting principles; and
(4) all CAPITAL LEASE OBLIGATIONS.
"INDEBTEDNESS" means, at any date, without duplication, all obligations
for borrowed money of CVS or a restricted subsidiary.
"INTANGIBLE ASSETS" means, at any date, the value, as shown on or
reflected in the most recent consolidated balance sheet of CVS and its
restricted subsidiaries as at the end of the fiscal quarter of CVS ending not
more than 135 days prior to the date, prepared in accordance with generally
accepted accounting principles, of:
(1) all trade names, trademarks, licenses, patents, copyrights,
service marks, goodwill and other like intangibles;
(2) organizational and development costs;
(3) deferred charges, other than prepaid items, including
insurance, taxes, interest, commissions, rents, pensions,
compensation and similar items and tangible assets being
amortized; and
(4) unamortized debt discount and expense, less unamortized
premium.
21
"LIENS" means pledges, mortgages, security interests and other liens on
any principal property of CVS or a restricted subsidiary which secure secured
debt.
"NONRECOURSE OBLIGATION" means indebtedness or lease payment
obligations substantially related to:
(1) the acquisition of assets not previously owned by CVS or any
restricted subsidiary; or
(2) the financing of a project involving the development or
expansion of properties of CVS or any restricted subsidiary,
as to which the obligee with respect to the indebtedness or obligation has no
recourse to CVS or any restricted subsidiary or any assets of CVS or any
subsidiary other than the assets which were acquired with the proceeds of the
transaction or the project financed with the proceeds of the transaction and the
proceeds of that asset or project.
"PRINCIPAL PROPERTY" is defined in the section called "Restrictive
Covenants--Summary of the principal restrictive covenants."
"REFERENCE DEALER QUOTATIONS" means, with respect to each reference
dealer and any redemption date for the notes, the average, as determined by the
trustee, of the bid and asked prices for the comparable U.S. Treasury security
for the notes, expressed in each case as a percentage of its principal amount,
quoted in writing to the trustee by that reference dealer at 5:00 p.m., New York
City time, on the third business day preceding the redemption date. Credit
Suisse First Boston Corporation will be a reference dealer but, if it ceases to
be a primary U.S. Government securities dealer in New York City, CVS will
substitute another primary U.S. Government securities dealer to act as a
reference dealer.
"RESTRICTED SUBSIDIARY" is any subsidiary other than an unrestricted
subsidiary.
"SECURED DEBT" means funded debt which is secured by any pledge of, or
mortgage, security interest or other lien on any:
(1) principal property, whether owned on the date of the indenture
or thereafter acquired or created;
(2) shares of stock owned by CVS or a subsidiary in a restricted
subsidiary; or
(3) indebtedness of a restricted subsidiary.
"STATED MATURITY" of a security means the date specified in that
security as the fixed date on which the principal of that security is due and
payable, including pursuant to any mandatory redemption provision but excluding
any provision providing for the repurchase of such security at the option of the
holder upon the happening of any contingency, unless that contingency has
occurred.
"SUBSIDIARY" means any corporation of which at least a majority of the
outstanding stock, which, under ordinary circumstances not dependent upon the
happening of a contingency, has voting power to elect a majority of the board of
directors of that corporation or similar management body, is owned directly or
indirectly by CVS and/or by one or more subsidiaries of CVS.
"TREASURY YIELD" is defined in the section called "Optional
Redemption--How the optional redemption payment in clause (2) is calculated."
"UNRESTRICTED SUBSIDIARY" is defined in the section called "Restrictive
Covenants--Summary of the principal restrictive covenants."
22
THE EXCHANGE OFFER
In a registration rights agreement between CVS and the initial
purchasers of the old notes, we agreed:
(1) to file a registration statement on or prior to 90 days after
the closing of the offering of the old notes with respect to
an offer to exchange the old notes for a new issue of notes,
with terms substantially the same as of the old notes but
registered under the Securities Act;
(2) to use our best efforts to cause the registration statement to
be declared effective by the SEC on or prior to 180 days after
the closing of the old notes offering; and
(3) to use our best efforts to consummate the exchange offer and
issue the new notes within 30 business days after the
registration statement is declared effective.
The registration rights agreement provides that, in the event we fail
to file the registration statement within 90 days after the closing date or
consummate the exchange offer within 220 days, we will be required to pay
additional interest on the old notes over and above the regular interest on the
notes. Once we complete this exchange offer, we will no longer be required to
pay additional interest on the old notes.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old notes in any jurisdiction in which the exchange
offer or acceptance of the exchange offer would violate the securities or blue
sky laws of that jurisdiction.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
This prospectus and the accompanying letter of transmittal contain the
terms and conditions of the exchange offer. Upon the terms and subject to the
conditions included in this prospectus and in the accompanying letter of
transmittal, which together are the exchange offer, we will accept for exchange
old notes which are properly tendered on or prior to the expiration date, unless
you have previously withdrawn them.
o When you tender to us old notes as provided below, our
acceptance of the old notes will constitute a binding
agreement between you and us upon the terms and subject to the
conditions in this prospectus and in the accompanying letter
of transmittal.
o For each $1,000 principal amount of old notes surrendered to
us in the exchange offer, we will give you $1,000 principal
amount of new notes.
o We will keep the exchange offer open for not less than 30
days, or longer if required by applicable law, after the date
that we first mail notice of the exchange offer to the holders
of the old notes. We are sending this prospectus, together
with the letter of transmittal, on or about the date of this
prospectus to all of the registered holders of old notes at
their addresses listed in the trustee's security register with
respect to old notes.
o The exchange offer expires at 5:00 p.m., New York City time,
on March 25, 2003; PROVIDED, HOWEVER, that we, in our sole
discretion, may extend the period of time for which the
exchange offer is open. The term "EXPIRATION DATE" means March
25, 2003 or, if extended by us, the latest time and date to
which the exchange offer is extended.
o As of the date of this prospectus, $300,000,000 in aggregate
principal amount of the old notes were outstanding. The
exchange offer is not conditioned upon any minimum principal
amount of old notes being tendered.
o Our obligation to accept old notes for exchange in the
exchange offer is subject to the conditions that we describe
in the section called "Conditions to the Exchange Offer"
below.
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o We expressly reserve the right, at any time, to extend the
period of time during which the exchange offer is open, and
thereby delay acceptance of any old notes, by giving oral or
written notice of an extension to the exchange agent and
notice of that extension to the holders as described below.
During any extension, all old notes previously tendered will
remain subject to the exchange offer unless withdrawal rights
are exercised. Any old notes not accepted for exchange for any
reason will be returned without expense to the tendering
holder as promptly as practicable after the expiration or
termination of the exchange offer.
o We expressly reserve the right to amend or terminate the
exchange offer, and not to accept for exchange any old notes
that we have not yet accepted for exchange, if any of the
conditions of the exchange offer specified below under
"Conditions to the Exchange Offer" are not satisfied.
o We will give oral or written notice of any extension,
amendment, termination or non-acceptance described above to
holders of the old notes as promptly as practicable. If we
extend the expiration date, we will give notice by means of a
press release or other public announcement no later than 9:00
a.m., New York City time, on the business day after the
previously scheduled expiration date. Without limiting the
manner in which we may choose to make any public announcement
and subject to applicable law, we will have no obligation to
publish, advertise or otherwise communicate any public
announcement other than by issuing a release to the Dow Jones
News Service.
o Holders of old notes do not have any appraisal or dissenters'
rights in connection with the exchange offer.
o Old notes which are not tendered for exchange or are tendered
but not accepted in connection with the exchange offer will
remain outstanding and be entitled to the benefits of the
indenture, but will not be entitled to any further
registration rights under the registration rights agreement.
o We intend to conduct the exchange offer in accordance with the
applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder.
o By executing, or otherwise becoming bound by, the letter of
transmittal, you will be making the representations described
below to us. See "--Resales of the New Notes."
IMPORTANT RULES CONCERNING THE EXCHANGE OFFER
You should note that:
o All questions as to the validity, form, eligibility, time of
receipt and acceptance of old notes tendered for exchange will
be determined by CVS in its sole discretion, which
determination shall be final and binding.
o We reserve the absolute right to reject any and all tenders of
any particular old notes not properly tendered or to not
accept any particular old notes which acceptance might, in our
judgment or the judgment of our counsel, be unlawful.
o We also reserve the absolute right to waive any defects or
irregularities or conditions of the exchange offer as to any
particular old notes either before or after the expiration
date, including the right to waive the ineligibility of any
holder who seeks to tender old notes in the exchange offer.
Unless we agree to waive any defect or irregularity in
connection with the tender of old notes for exchange, you must
cure any defect or irregularity within any reasonable period
of time as we shall determine.
o Our interpretation of the terms and conditions of the exchange
offer as to any particular old notes either before or after
the expiration date shall be final and binding on all parties.
o Neither CVS, the exchange agent nor any other person shall be
under any duty to give notification of any defect or
irregularity with respect to any tender of old notes for
exchange, nor shall any of them incur any liability for
failure to give any notification.
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PROCEDURES FOR TENDERING OLD NOTES
WHAT TO SUBMIT AND HOW
If you, as the registered holder of an old note, wish to tender your
old notes for exchange in the exchange offer, you must transmit a properly
completed and duly executed letter of transmittal to The Bank of New York at the
address set forth below under "Exchange Agent" on or prior to the expiration
date.
In addition,
(1) certificates for old notes must be received by the exchange
agent along with the letter of transmittal, OR
(2) a timely confirmation of a book-entry transfer of old notes,
if such procedure is available, into the exchange agent's
account at DTC using the procedure for book-entry transfer
described below, must be received by the exchange agent prior
to the expiration date, OR
(3) you must comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND NOTICES
OF GUARANTEED DELIVERY IS AT YOUR ELECTION AND RISK. IF DELIVERY IS BY MAIL, WE
RECOMMEND THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED,
BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO CVS.
HOW TO SIGN YOUR LETTER OF TRANSMITTAL AND OTHER DOCUMENTS
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the old notes being surrendered for
exchange are tendered:
(1) by a registered holder of the old notes who has not completed
the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the letter of transmittal; or
(2) for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, the guarantees must be by any of
the following eligible institutions:
o a firm which is a member of a registered national securities
exchange or a member of the National Association of Securities
Dealers, Inc.; or
o a commercial bank or trust company having an office or
correspondent in the United States
If the letter of transmittal is signed by a person or persons other
than the registered holder or holders of old notes, the old notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders that appear on
the old notes and with the signature guaranteed.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, the person should so indicate when signing and, unless waived by CVS,
proper evidence satisfactory to CVS of its authority to so act must be
submitted.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Once all of the conditions to the exchange offer are satisfied or
waived, we will accept, promptly after the expiration date, all old notes
properly tendered and will issue the new notes promptly after acceptance of the
old notes. See "Conditions to the Exchange Offer" below. For purposes of the
exchange offer, our giving of oral or written notice of our acceptance to the
exchange agent will be considered our acceptance of the exchange offer.
25
In all cases, we will issue new notes in exchange for old notes that
are accepted for exchange only after timely receipt by the exchange agent of:
o certificates for old notes, OR
o a timely book-entry confirmation of transfer of old notes into
the exchange agent's account at DTC using the book-entry
transfer procedures described below, AND
o a properly completed and duly executed letter of transmittal.
If we do not accept any tendered old notes for any reason included in
the terms and conditions of the exchange offer or if you submit certificates
representing old notes in a greater principal amount than you wish to exchange,
we will return any unaccepted or non-exchanged old notes without expense to the
tendering holder or, in the case of old notes tendered by book-entry transfer
into the exchange agent's account at DTC using the book-entry transfer
procedures described below, non-exchanged old notes will be credited to an
account maintained with DTC as promptly as practicable after the expiration or
termination of the exchange offer.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the old notes at DTC for purposes of the exchange offer promptly
after the date of this prospectus. Any financial institution that is a
participant in DTC's systems may make book-entry delivery of old notes by
causing DTC to transfer old notes into the exchange agent's account in
accordance with DTC's Automated Tender Offer Program procedures for transfer.
However, the exchange for the old notes so tendered will only be made after
timely confirmation of book-entry transfer of old notes into the exchange
agent's account, and timely receipt by the exchange agent of an agent's message,
transmitted by DTC and received by the exchange agent and forming a part of a
book-entry confirmation. The agent's message must state that DTC has received an
express acknowledgment from the participant tendering old notes that are the
subject of that book-entry confirmation that the participant has received and
agrees to be bound by the terms of the letter of transmittal, and that we may
enforce the agreement against that participant.
Although delivery of old notes may be effected through book-entry
transfer into the exchange agent's account at DTC, the letter of transmittal, or
a facsimile copy, properly completed and duly executed, with any required
signature guarantees, must in any case be delivered to and received by the
exchange agent at its address listed under "--Exchange Agent" on or prior to the
expiration date.
If your old notes are held through DTC, you must complete a form called
"instructions to registered holder and/or book-entry participant," which will
instruct the DTC participant through whom you hold your notes of your intention
to tender your old notes or not tender your old notes. Please note that delivery
of documents to DTC in accordance with its procedures does not constitute
delivery to the exchange agent and we will not be able to accept your tender of
notes until the exchange agent receives a letter of transmittal and a book-entry
confirmation from DTC with respect to your notes. A copy of that form is
available from the exchange agent.
GUARANTEED DELIVERY PROCEDURES
If you are a registered holder of old notes and you want to tender your
old notes but your old notes are not immediately available, or time will not
permit your old notes to reach the exchange agent before the expiration date, or
the procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if
(1) the tender is made through an eligible institution,
(2) prior to the expiration date, the exchange agent receives, by
facsimile transmission, mail or hand delivery, from that
eligible institution a properly completed and duly executed
letter of transmittal, or a facsimile copy, and notice of
guaranteed delivery, substantially in the form provided by us,
stating:
o the name and address of the holder of old notes,
o the amount of old notes tendered,
26
o the tender is being made by delivering that notice
and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of
the notice of guaranteed delivery, the certificates
of all physically tendered old notes, in proper form
for transfer, or a book-entry confirmation, as the
case may be, will be deposited by that eligible
institution with the exchange agent; and
(3) the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation, as the
case may be, are received by the exchange agent within three
New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
You can withdraw your tender of old notes at any time on or prior to
the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must
be received by the exchange agent at one of the addresses listed below under
"Exchange Agent." Any notice of withdrawal must specify:
o the name of the person having tendered the old notes to be
withdrawn;
o the old notes to be withdrawn;
o the principal amount of the old notes to be withdrawn;
o if certificates for old notes have been delivered to the
exchange agent, the name in which the old notes are
registered, if different from that of the withdrawing holder;
o if certificates for old notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release
of those certificates, you must also submit the serial numbers
of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an eligible
institution unless you are an eligible institution; and
o if old notes have been tendered using the procedure for
book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be
credited with the withdrawn old notes and otherwise comply
with the procedures of that facility.
Please note that all questions as to the validity, form, eligibility
and time of receipt of notices of withdrawal will be determined by us, and our
determination shall be final and binding on all parties. Any old notes so
withdrawn will be considered not to have been validly tendered for exchange for
purposes of the exchange offer.
If you have properly withdrawn old notes and wish to re-tender them,
you may do so by following one of the procedures described under "Procedures for
Tendering Old Notes" above at any time on or prior to the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the exchange offer, we will not
be required to accept for exchange, or to issue new notes in exchange for, any
old notes and may terminate or amend the exchange offer, if at any time before
the acceptance of old notes for exchange or the exchange of the new notes for
old notes, that acceptance or issuance would violate applicable law or any
interpretation of the staff of the SEC.
That condition is for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to that condition. Our failure at
any time to exercise the foregoing rights shall not be considered a waiver by us
of that right. Our rights described in the prior paragraph are ongoing rights
which we may assert at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered,
and no new notes will be issued in exchange for any old notes, if at that time
any stop order shall be threatened or in effect with respect to the exchange
offer to which this prospectus relates or the qualification of the indenture
under the Trust Indenture Act.
27
EXCHANGE AGENT
The Bank of New York has been appointed as the exchange agent for the
exchange offer. All executed letters of transmittal should be directed to the
exchange agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this prospectus or of the
letter of transmittal and requests for notices of guaranteed delivery should be
directed to the exchange agent, addressed as follows:
Deliver To:
BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York, Exchange Agent
Re-organization Unit
101 Barclay Street
Floor 7 East
New York New York 10286
Attention: Kin Lau
BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York, Exchange Agent
101 Barclay Street
Floor 7 East
New York New York 10286
Attention: Kin Lau
FACSIMILE TRANSMISSIONS:
(212) 298-1915
TO CONFIRM BY TELEPHONE
OR FOR INFORMATION:
(212) 815-3750
DELIVERY TO AN ADDRESS OTHER THAN AS LISTED ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS LISTED ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by our officers,
regular employees and affiliates. We will not pay any additional compensation to
any of our officers and employees who engage in soliciting tenders. We will not
make any payment to brokers, dealers, or others soliciting acceptances of the
exchange offer. However, we will pay the exchange agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection with the exchange offer.
The estimated cash expenses to be incurred in connection with the
exchange offer, including legal, accounting, SEC filing, printing and exchange
agent expenses, will be paid by us and are estimated in the aggregate to be
$200,000.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct us to register new notes in the name of, or request that old notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
28
RESALE OF THE NEW NOTES
Under existing interpretations of the staff of the SEC contained in
several no-action letters to third parties, the new notes would in general be
freely transferable after the exchange offer without further registration under
the Securities Act. The relevant no-action letters include the EXXON CAPITAL
HOLDINGS CORPORATION letter, which was made available by the SEC on May 13,
1988, and the MORGAN STANLEY & CO. INCORPORATED letter, made available on June
5, 1991.
However, any purchaser of old notes who is an "affiliate" of CVS or who
intends to participate in the exchange offer for the purpose of distributing the
new notes:
(1) will not be able to rely on the interpretation of the staff of
the SEC;
(2) will not be able to tender its old notes in the exchange
offer; and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale
or transfer of the notes unless that sale or transfer is made
using an exemption from those requirements.
By executing, or otherwise becoming bound by, the Letter of Transmittal
each holder of the old notes will represent that:
(1) it is not our "affiliate";
(2) any new notes to be received by it were acquired in the
ordinary course of its business; and
(3) it has no arrangement with any person to participate in the
"distribution," within the meaning of the Securities Act, of
the new notes.
In addition, in connection with any resales of new notes, any broker-dealer
participating in the exchange offer who acquired notes for its own account as a
result of market-making or other trading activities must deliver a prospectus
meeting the requirements of the Securities Act. The SEC has taken the position
in the SHEARMAN & STERLING no-action letter, which it made available on July 2,
1993, that participating broker-dealers may fulfill their prospectus delivery
requirements with respect to the new notes, other than a resale of an unsold
allotment from the original sale of the old notes, with the prospectus contained
in the exchange offer registration statement. Under the registration rights
agreement, we are required to allow participating broker-dealers and other
persons, if any, subject to similar prospectus delivery requirements to use this
prospectus as it may be amended or supplemented from time to time, in connection
with the resale of new notes.
MATERIAL UNITED STATES TAX CONSEQUENCES OF THE EXCHANGE OFFER
In the opinion of Davis Polk & Wardwell, the exchange of old notes for
new notes in the exchange offer will not result in any United States federal
income tax consequences to holders. When a holder exchanges an old note for a
new note in the exchange offer, the holder will have the same adjusted basis and
holding period in the new note as in the old note immediately before the
exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where old notes
were acquired as a result of market-making activities or other trading
activities. We have agreed that, for a period of 135 days after the expiration
date, we will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any resale of new notes received by it
in exchange for old notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers.
29
New notes received by broker-dealers for their own account in the
exchange offer may be sold from time to time in one or more transactions,
including:
o in the over-the-counter market;
o in negotiated transactions;
o through the writing of options on the new notes; or
o a combination of those methods of resale,
at market prices prevailing at the time of resale, at prices related to
prevailing market prices or negotiated prices.
Any resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any broker-dealer or the purchasers of any new notes.
Any broker-dealer that resells new notes that were received by it for
its own account in the exchange offer and any broker or dealer that participates
in a distribution of those new notes may be considered to be an "underwriter"
within the meaning of the Securities Act. Any profit on any resale of those new
notes and any commission or concessions received by any of those persons may be
considered to be underwriting compensation under the Securities Act. The letter
of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be considered to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 135 days after the expiration date, we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests those documents in the letter
of transmittal. We have agreed to pay all expenses incident to the exchange
offer, including the expenses of one counsel for the holders of the notes, other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of the notes, including any broker-dealers, against some liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Davis Polk & Wardwell will opine for us on whether the new notes are
valid and binding obligations of CVS.
INDEPENDENT PUBLIC ACCOUNTANTS
The historical consolidated financial statements of CVS Corporation and
its subsidiaries as of December 29, 2001 and December 30, 2000 and for the
fifty-two week periods ended December 29, 2001 and December 30, 2000, and the
fifty-three week period ended January 1, 2000 and the related consolidated
financial statement schedules have been incorporated by reference in this
prospectus in reliance upon the reports of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and given upon the
authority of said firm as experts in accounting and auditing.
With respect to the unaudited interim financial information for the
periods ended March 30, 2002 and March 31, 2001, June 29, 2002 and June 30,
2001, and September 28, 2002 and September 29, 2001 incorporated by reference
herein, the independent accountants have reported that they applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports included in the Company's quarterly
report on Form 10-Q for the thirteen week periods ended March 30, 2002 and March
31, 2001, the thirteen and twenty-six week periods ended June 29, 2002 and June
30, 2001, and the thirteen and thirty-nine weeks periods ended September 28,
2002 and September 29, 2001, and incorporated by reference herein, states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. The accountants are not subject to the liability provisions
of Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of a registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act of 1933.
30
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THOSE DOCUMENTS.
TABLE OF CONTENTS
PAGE
Where You Can Find More Information................................ 2
CVS Corporation.................................................... 3
Cautionary Statement Concerning Forward-Looking
Statements...................................................... 3
Use of Proceeds.................................................... 4
Recent Developments................................................ 4
Selected Consolidated Financial Data............................... 5
Description of Notes............................................... 7
The Exchange Offer................................................. 23
Material United States Tax Consequences of the
Exchange Offer.................................................. 29
Plan of Distribution............................................... 29
Legal Matters...................................................... 30
Independent Public Accountants..................................... 30
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$300,000,000
CVS
CORPORATION
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[CVS LOGO]
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3 7/8% EXCHANGE NOTES DUE
NOVEMBER 1, 2007
PROSPECTUS
FEBRUARY 19, 2003
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