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Filed pursuant to Rule 424 (b) (1)
Registration No. 333-58595
PROSPECTUS
LOGO
OFFER TO EXCHANGE ITS 7.15% SENIOR NOTES DUE 2005
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 7.15% SENIOR NOTES DUE 2005
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM., NEW YORK CITY TIME,
ON AUGUST 24, 1998, UNLESS EXTENDED.
CBS Corporation, a Pennsylvania corporation (the "Company") hereby offers
(the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 7.15%
Senior Notes due 2005 (the "Exchange Notes"), registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which this prospectus is a part, for each $1,000 principal amount
of its outstanding 7.15% Senior Notes due 2005 (the "Old Notes"), of which
$500,000,000 principal amount is outstanding. The form and terms of the Exchange
Notes are the same as the form and terms of the Old Notes except that (i) the
Exchange Notes will have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer thereof and (ii)
holders of the Exchange Notes will not be entitled to certain rights of holders
of Old Notes under the Registration Rights Agreement (as defined). The Old Notes
and the Exchange Notes are referred to herein collectively as the "Notes." The
Exchange Notes will evidence the same debt as the Old Notes (which they replace)
and will be issued under and be entitled to the benefits of the Indenture dated
as of May 20, 1998 (the "Indenture") by and between the Company and Citibank,
N.A., as trustee, governing the Notes. See "The Exchange Offer" and "Description
of Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on August 24, 1998,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
The Old Notes were sold by the Company on May 20, 1998 to Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Chase Securities Inc. and J.P. Morgan
Securities Inc. (the "Initial Purchasers") in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchasers subsequently placed the Old Notes
with qualified institutional buyers in reliance on Rule 144A under the
Securities Act. Accordingly, the Old Notes may not be reoffered, resold or
otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Notes are being
offered hereunder in order to satisfy the obligations of the Company under the
Registration Rights Agreement entered into among the Company and the Initial
Purchaser in connection with the Initial Offering. See "The Exchange Offer."
The Notes will mature on May 20, 2005. Interest on the Notes will accrue at
a rate of 7.15% per annum and be payable semi-annually in arrears on each May 20
and November 20, commencing November 20, 1998. The Notes will be redeemable, at
the option of the Company, in whole at any time or in part from time to time, at
a redemption price equal to the greater of (i) 100% of the principal amount of
the Notes to be redeemed and (ii) the sum of the present value of the Remaining
Scheduled Payments (as defined herein) on the Notes to be redeemed, discounted
to the date of redemption, on a semiannual basis, at the Treasury Rate (as
defined herein) plus 25 basis points, plus accrued interest thereon to the date
of redemption. See "Description of Notes -- Optional Redemption."
(Continued on next page)
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SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 22, 1998.
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(cover page continued)
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer -- Resale of the Exchange
Notes." Holders of Old Notes wishing to accept the Exchange Offer must represent
to the Company, as required by the Registration Rights Agreement, that such
conditions have been met. Each broker-dealer (a "Participating Broker-Dealer")
that receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer. Holders of Old Notes not
tendered and accepted in the Exchange Offer will continue to hold such Old Notes
and will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture and with respect to transfer
under the Securities Act. See "The Exchange Offer."
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL OCTOBER 20, 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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(cover page continued)
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM.
EXCEPT AS DESCRIBED UNDER "BOOK-ENTRY; DELIVERY AND FORM," THE COMPANY EXPECTS
THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER WILL BE
REPRESENTED BY A GLOBAL NOTE (AS DEFINED), WHICH WILL BE DEPOSITED WITH, OR ON
BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC") AND REGISTERED IN ITS NAME OR IN
THE NAME OF CEDE & CO., ITS NOMINEE. BENEFICIAL INTERESTS IN THE GLOBAL NOTE
REPRESENTING THE EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED THROUGH, RECORDS MAINTAINED BY DTC AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF THE GLOBAL NOTE, NOTES IN CERTIFICATED FORM WILL BE ISSUED
IN EXCHANGE FOR THE GLOBAL NOTE ONLY UNDER LIMITED CIRCUMSTANCES AS SET FORTH IN
THE INDENTURE. SEE "BOOK-ENTRY; DELIVERY AND FORM."
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE
CONTENTS OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR
SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. THE COMPANY IS
NOT MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE NOTES
REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER APPROPRIATE
LEGAL, INVESTMENT OR SIMILAR LAWS.
------------------------
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), THAT ARE NOT HISTORICAL
FACTS BUT RATHER REFLECT THE COMPANY'S CURRENT EXPECTATIONS CONCERNING FUTURE
RESULTS AND EVENTS. THE WORDS "BELIEVES," "EXPECTS," "INTENDS," "PLANS,"
"ANTICIPATES," "LIKELY," "WILL," AND SIMILAR EXPRESSIONS IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS, UNCERTAINTIES, AND OTHER FACTORS, SOME OF WHICH ARE BEYOND THE COMPANY'S
CONTROL, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
FORECAST OR ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS.
SUCH RISKS, UNCERTAINTIES, AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO: THE
COMPANY'S ABILITY TO DEVELOP AND/OR ACQUIRE TELEVISION PROGRAMMING AND TO
ATTRACT AND RETAIN ADVERTISERS; THE IMPACT OF SIGNIFICANT COMPETITION BOTH FROM
OVER-THE-AIR BROADCAST STATIONS AND FROM ALTERNATIVE ADVERTISING MEDIA SUCH AS
CABLE TELEVISION, WIRELESS CABLE, IN-HOME SATELLITE DISTRIBUTION SERVICES, AND
PAY-PER-VIEW AND HOME VIDEO ENTERTAINMENT SERVICES; THE COMPANY'S ABILITY TO
COMPLETE THE DIVESTITURES OF ITS REMAINING INDUSTRIAL BUSINESSES ON A SCHEDULE
IN ACCORDANCE WITH ITS ANNOUNCED PLANS IN ORDER TO COMPLETE ITS TRANSITION FROM
AN INDUSTRIAL CONGLOMERATE TO A MEDIA COMPANY IN A TIMELY AND COST-EFFECTIVE
MANNER; LITIGATION RELATING TO ITS DISCONTINUED BUSINESSES; THE IMPACT OF NEW
TECHNOLOGIES; CHANGES IN FEDERAL COMMUNICATIONS COMMISSION REGULATIONS; AND SUCH
OTHER COMPETITIVE AND BUSINESS RISKS AS FROM TIME TO TIME MAY BE DETAILED IN THE
COMPANY'S COMMISSION REPORTS.
ALL WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY
ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE FOREGOING CAUTIONARY
STATEMENTS.
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AVAILABLE INFORMATION
The Company is subject to the periodic reporting and other financial
requirements of the Exchange Act, and, in accordance therewith, files reports
and other information with the Commission. Such reports and other information
filed with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates and may also be accessed
electronically by means of the Commission's website at http://www.sec.gov. Such
materials can also be inspected at the offices of the New York Stock Exchange
(the "NYSE"), 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the Exchange
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997, the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998 and the Company's Current Reports on Form 8-K dated January 7, 1998,
February 4, 1998, February 5, 1998, April 30, 1998, June 5, 1998 and June 29,
1998 are incorporated herein by reference. In addition, all documents filed by
the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
Exchange Offer shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide, without charge to each person to whom this
Prospectus has been delivered, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference herein, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference therein). Requests for such copies should be directed to CBS
Corporation, 51 West 52nd Street, New York, New York 10019, Attention: Corporate
Relations, telephone number (212) 975-4321.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes thereto
appearing elsewhere in or incorporated by reference into this Prospectus. In
November 1997, the Company announced the divestiture of its remaining industrial
businesses and expects to complete the sale of these businesses in 1998.
References to discontinued operations and discontinued businesses refer to the
Company's industrial businesses previously divested or expected to be divested
in 1998. To reflect the change in focus of its business operations, the
Company's name was changed from Westinghouse Electric Corporation to CBS
Corporation effective December 1, 1997. Unless the context otherwise requires,
reference to the "Company" herein refers to CBS Corporation and its consolidated
subsidiaries. For purposes of calculating data with respect to segment revenues
and EBITDA (as defined), reference to "Media Revenue" herein refers to revenue
as reported before the elimination of intercompany sales and reference to "Media
EBITDA" herein refers to EBITDA before certain non-allocated corporate overhead
costs, intercompany eliminations, and residual costs of discontinued businesses.
THE COMPANY
The Company is one of the largest radio and television broadcasters in the
United States. The Company operates its four principal businesses through its
Radio, Television Stations, Television Network and Cable Groups. These
businesses provide network television services to affiliated television
stations; operate the Company's non-broadcast television networks; produce news,
sports, and entertainment programming; and own and operate 14 television
broadcast stations and own 173 radio stations. For the twelve months ended March
31, 1998, the Company had $6 billion in revenues and $951 million in EBITDA. As
of June 30, 1998, the Company's equity market capitalization was approximately
$23 billion.
Over the past several years, the Company has significantly redefined its
business portfolio. The Company acquired CBS Broadcasting Inc. (formerly CBS
Inc.) in November 1995, Infinity Broadcasting Corporation ("Infinity") in
December 1996, Gaylord Entertainment Company's two major cable networks, The
Nashville Network ("TNN") and Country Music Television ("CMT"), in September
1997, and the radio broadcasting operations of American Radio Systems
Corporation ("American Radio") in June 1998.
BUSINESSES
Radio Group
After the June 1998 American Radio acquisition, the Company owns 173 AM and
FM radio stations in 35 markets. The Company's stations serve diverse target
demographics through a broad range of programming formats such as rock, oldies,
news/talk, adult contemporary, sports/talk, and country, including leading
franchises in news, sports, and personality programming. Following completion of
the divestitures required by the Federal Communications Commission ("FCC") and
the Department of Justice in connection with the American Radio acquisition and
the completion of other pending transactions, the Company will own approximately
165 radio stations; 62 of these radio stations are in the ten largest radio
markets in the United States. The Company believes that its presence in large
markets makes it attractive to advertisers and that the overall diversity of its
stations reduces its dependence on any single station, local economy, format or
advertiser. The Company also has a minority equity investment in and manages
Westwood One Inc., one of the nation's leading producers and distributors of
syndicated and network radio programming.
The Radio Group also includes TDI Worldwide, Inc. ("TDI"), one of the
largest outdoor advertising companies in the United States, operating
approximately 100 franchises, the majority of which are located in major
metropolitan areas. TDI also operates internationally with offices in the United
Kingdom and the Republic of Ireland. TDI sells space on various media, including
buses, trains, train platforms and terminals throughout commuter rail systems
and on billboards and phone kiosks. The Radio Group has among the highest
margins in the industry. Same station revenue growth of 20% in 1997 outpaced the
industry. For the twelve months ended March 31, 1998, the Radio Group accounted
for 25% of Media Revenue and 51% of Media EBITDA.
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Television Stations Group
The Television Stations Group consists of 14 owned and operated television
stations located in seven of the ten largest markets and 11 of the top 20
markets in the United States. The Television Stations Group seeks to develop
strong local franchises in each of its station's respective market. These
stations also provide a significant distribution outlet for the Television
Network, reaching approximately 32% of all television households in the United
States. In addition to CBS Television Network programming, each station provides
local news, public affairs and other programming to its local market. For the
twelve months ended March 31, 1998, the Television Stations Group accounted for
15% of Media Revenue and 37% of Media EBITDA.
Television Network
Through the CBS Television Network, the Company distributes a comprehensive
schedule of news and public affairs broadcasts, entertainment and sports
programming and feature films to more than 200 domestic affiliates and certain
overseas affiliated stations. The domestic affiliates, which include the 14
owned and operated television stations as well as independently owned stations,
serve all 50 states and the District of Columbia and reach over 99% of U.S.
households with televisions. The Television Network is responsible for sales of
advertising time for network broadcasts and related merchandising and sales
promotion activity. The Television Network includes CBS Entertainment, CBS News
and CBS Sports. In January 1998, the National Football League awarded the
Company the rights to broadcast American Football Conference games beginning
with the 1998 season. For the twelve months ended March 31, 1998, the CBS
Television Network accounted for 54% of Media Revenue and 6% of Media EBITDA.
Cable Group
The Cable Group owns and operates the Company's non-broadcast television
networks, including TNN, CMT, Eye on People, TeleNoticias, and two regional
sports networks. These networks are distributed by cable television and other
multichannel technologies. Acquired in 1997, TNN and CMT, reaching more than 71
million and 42 million television households in the United States, respectively,
are leading advertiser-supported cable networks featuring country music,
lifestyle and entertainment programming. For the twelve months ended March 31,
1998, the Cable Group accounted for 6% of Media Revenue and 6% of Media EBITDA.
BUSINESS STRATEGY
Following the divestiture of its remaining industrial businesses, the
Company will have completed its transition from an industrial conglomerate to a
leading media company. The Company's ongoing strategy is to: (i) develop new
revenue opportunities within its existing businesses and markets; (ii) focus on
reducing costs and increasing operating leverage; (iii) leverage the significant
cross promotional opportunities among its businesses; (iv) continue its emphasis
on free cash flow growth; and (v) improve Television Network profitability.
BUSINESS STRENGTHS
Leading Market Position. The Company is one of the largest radio and
television broadcasters in the United States. The CBS Television Network has
been the highest-rated daytime network for the last eight years. The Radio Group
is one of the largest radio and outdoor advertising companies, with operations
in the largest markets in the United States. With same station revenue growth of
20% in 1997, the Radio Group outpaced the industry. The Television Stations
Group is the second largest television station group in terms of household
coverage in the United States.
Strong Revenue and Cash Flow Growth. The Company has generated significant
revenue growth in all its businesses through both internal growth and
acquisitions. This revenue growth, coupled with ongoing cost-reduction
initiatives and modest capital expenditures, generates substantial free cash
flow.
Business Diversification. Following the divestiture of its remaining
industrial businesses, the Company will be a broad-based media company with
interests in radio and television station operations and network and cable
programming. The Company believes that its diversified portfolio of assets and
broad geographical
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coverage reduce the Company's exposure to risks associated with any one business
or region and provide significant cross promotion opportunities among the
Company's businesses.
Experienced and Proven Management. The Company's management team consists
of individuals with significant experience in all aspects of the media business.
Michael Jordan, Chairman and Chief Executive Officer, and Fredric Reynolds,
Chief Financial Officer, have led the Company through the significant
transformation from an industrial conglomerate to a leading media company. Mel
Karmazin, President and Chief Operating Officer, joined the Company following
the acquisition of Infinity in 1996 and provides substantial operating
experience and leadership. Leslie Moonves, President and Chief Executive Officer
of CBS Television, is one of the industry's leaders in television network
programming and management.
RECENT DEVELOPMENTS
Industrial Divestitures. In November 1997, the Company announced a
definitive agreement to sell its power generation business for $1.5 billion in
cash. The power generation sale is scheduled to close in mid-1998. In May 1998,
the Company announced a definitive agreement to sell its process control
division for $265 million in cash and the assumption of pension and other
liabilities. This sale is scheduled to close in the third quarter of 1998. In
June 1998, the Company announced a definitive agreement to sell its nuclear
power and government operations businesses for $238 million in cash and the
assumption of liabilities, commitments and obligations totalling approximately
$950 million. This transaction is expected to close before the end of 1998. See
Note 7 to the Financial Statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 and Note 6 to the Condensed
Consolidated Financial Statements included in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998, which are incorporated herein by
reference.
Media Acquisitions. In June 1998, the Company acquired the radio
broadcasting operations of American Radio for $1.6 billion in cash plus the
assumption of approximately $1 billion of debt.
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THE INITIAL OFFERING
The Initial Offering....... The Old Notes were sold by the Company on May 20,
1998 to the Initial Purchasers pursuant to a
Purchase Agreement dated May 15, 1998 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold all of the Old Notes to
qualified institutional buyers in reliance on Rule
144A under the Securities Act.
Registration Rights
Agreement................ Pursuant to the Purchase Agreement, the Company and
the Initial Purchasers entered into a Registration
Rights Agreement dated as of May 20, 1998 (the
"Registration Rights Agreement"), which grants the
holders of the Old Notes certain exchange and
registration rights. The Exchange Offer is intended
to satisfy such exchange and registration rights
which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities Offered......... $500,000,000 aggregate principal amount of 7.15%
Senior Notes due 2005 of the Company.
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Old Notes that are properly
tendered and accepted. As of the date hereof,
$500,000,000 aggregate principal amount of Old
Notes are outstanding. The Company will issue the
Exchange Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act;
provided, that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate and
has no arrangement or understanding with any person
to participate in the distribution of such Exchange
Notes.
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of
market-making activities or other trading
activities may be a statutory underwriter. Each
Participating Broker-Dealer that receives Exchange
Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-
making activities or other trading activities. The
Company has agreed
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that, for a period of 90 days after the Expiration
Date, it will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the Commission enunciated in no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. Failure to
comply with such requirements in such instance may
result in such holder incurring liability under the
Securities Act for which the holder is not
indemnified by the Company.
Expiration Date............ 5:00 p.m., New York City time, on August 24, 1998
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Exchange Notes and the
Old Notes................ Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the
issuance date of the Exchange Notes. Such interest
will be paid with the first interest payment on the
Exchange Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of
the Exchange Notes.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsimile
thereof (or, in the case of a book-entry transfer,
transmit an Agent's Message (as defined) in lieu
thereof), in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile (or Agent's message), together with the
Old Notes and any other required documentation to
the Exchange Agent (as defined) at the address set
forth herein. By executing the Letter of
Transmittal (or transmitting an Agent's Message),
each holder will represent to the Company that,
among other things, the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such
person is the holder, that neither the holder nor
any such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes and that
neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the
Securities Act, of the Company. See "The Exchange
Offer -- Purpose and Effect of the Exchange Offer"
and "-- Procedures for Tendering."
Untendered Old Notes....... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have any
further exchange or registration rights and such
Old Notes
7
<PAGE> 10
will continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Old Notes could be adversely
affected. See "Risk Factors -- Lack of Public
Market; Volatility; Restrictions on Resale."
Consequences of Failure to
Exchange................. The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or
pursuant to some other exemption under the
Securities Act, (iii) outside the United States to
a foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursuant
to an effective registration statement under the
Securities Act. See "The Exchange
Offer -- Consequences of Failure to Exchange."
Shelf Registration
Statement.................. If any holder of the Old Notes (other than any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act) is not eligible under applicable securities
laws to participate in the Exchange Offer, and such
holder has satisfied certain conditions relating to
the provision of information to the Company for use
therein, the Company has agreed to register the Old
Notes on a shelf registration statement (the "Shelf
Registration Statement") and to use its best
efforts to cause it to be declared effective by the
Commission as promptly as practical on or after the
consummation of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Notes held by any such holders.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering its Old Notes, either make appropriate
arrangements to register ownership of the Old Notes
in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Guaranteed Delivery
Procedures................. Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes (or
comply with the procedures for book-entry
transfer), the Letter of Transmittal or any other
documents required by the Letter of Transmittal to
the Exchange Agent (or transmit an Agent's message
in lieu thereof) prior to the Expiration Date must
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
8
<PAGE> 11
Acceptance of Old Notes
and Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Certain U.S. Federal Income
Tax Considerations......... For a discussion of material U.S. federal income
tax considerations relating to the exchange of the
Exchange Notes for the Old Notes, see "Certain U.S.
Federal Income Tax Considerations."
Use of Proceeds............ There will be no cash proceeds to the Company from
the issuance of the Exchange Notes pursuant to the
Exchange Offer. See "Use of Proceeds."
Exchange Agent............. The Exchange Agent is Citibank, N.A. The address
and telephone and facsimile numbers of the Exchange
Agent are set forth under "The Exchange
Offer -- Exchange Agent" and in the Letter of
Transmittal.
9
<PAGE> 12
SUMMARY OF THE TERMS OF THE NOTES
The Exchange Offer applies to the Old Notes. The form and terms of the
Exchange Notes are identical in all material respects to the form and terms of
the Old Notes, except that (i) the Exchange Notes will have been registered
under the Securities Act and, therefore, will not bear legends restricting the
transfer thereof and (ii) holders of the Exchange Notes will not be entitled to
certain rights of holders of Old Notes under the Registration Rights Agreement,
which rights will terminate upon consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Old Notes (which they replace)
and will be issued under and be entitled to the benefits of the Indenture. For
further information and for definitions of certain capitalized terms used below,
see "Description of Notes."
Securities Offered............ $500,000,000 principal amount of 7.15% Senior
Notes due 2005.
Maturity Date................. May 20, 2005.
Interest Payment Dates........ May 20 and November 20 of each year, commencing
November 20, 1998.
Optional Redemption........... The Notes will be redeemable, at the option of
the Company, in whole at any time or in part
from time to time, at a redemption price equal
to the greater of (i) 100% of the principal
amount of the Notes to be redeemed and (ii) the
sum of the present value of the Remaining
Scheduled Payments on the Notes to be redeemed,
discounted to the date of redemption, on a
semiannual basis, at the Treasury Rate plus 25
basis points, plus accrued interest thereon to
the date of redemption. See "Description of
Notes -- Optional Redemption."
Ranking....................... The Notes will be unsecured senior obligations
of the Company, and will rank pari passu in
right of payment with all other existing and
future unsubordinated obligations of the
Company and senior in right of payment to all
existing and future obligations of the Company
expressly subordinated in right of payment to
the Notes. The Notes, however, will be
effectively subordinated to secured
obligations, if any, of the Company with
respect to the assets of the Company securing
such obligations. As of March 31, 1998, on a
pro forma basis after giving effect to the
issuance of the Old Notes and the use of the
net proceeds therefrom, consolidated
indebtedness of the Company would have been
approximately $3.6 billion (excluding $526
million of long-term debt allocated to
discontinued operations), substantially all of
which would have been unsecured senior
indebtedness. In June 1998, in connection with
the acquisition of American Radio, the Company
incurred additional indebtedness. See
"-- Recent Developments -- Media Acquisitions."
Certain Covenants............. The Indenture under which the Notes will be
issued contains covenants, including, but not
limited to, covenants with respect to the
following matters: (i) limitation on liens;
(ii) limitation on sale and leasebacks; and
(iii) limitation on consolidation, merger and
sale of substantially all assets.
Governing Law................. The Indenture and the Notes will be governed by
the laws of the State of New York.
RISK FACTORS
See "Risk Factors" beginning on page 11 for a discussion of certain factors
which should be considered before tendering Old Notes in exchange for Exchange
Notes. The risk factors are generally applicable to the Old Notes as well as the
Exchange Notes.
10
<PAGE> 13
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, the following factors should be carefully considered before
tendering Old Notes in exchange for Exchange Notes. The risk factors set forth
below are generally applicable to the Old Notes as well as the Exchange Notes.
LEVERAGE
The Company has substantial indebtedness which requires the Company to
generate sufficient cash flow for the payment of the principal of and interest
on such indebtedness. The Company is subject to significant interest expense and
principal repayment obligations. As of March 31, 1998, on a pro forma basis
after giving effect to the issuance of the Old Notes and the application of the
net proceeds therefrom, the Company would have total indebtedness of
approximately $3.6 billion (excluding $526 million of long-term debt allocated
to discontinued operations). In June 1998, in connection with the acquisition of
American Radio, the Company incurred additional indebtedness. See
"Summary -- Recent Developments -- Media Acquisitions." As a consequence of the
Company's indebtedness, its ability to obtain additional financing in the future
may be limited.
RANKING OF NOTES
The Notes will be senior obligations of the Company and will rank pari
passu in right of payment to all existing and future unsecured senior
indebtedness of the Company. The Notes are not secured by any assets of the
Company. Accordingly, the Notes will be effectively subordinated to any secured
obligations of the Company to the extent of the value of the assets securing
such obligation. If the Company becomes insolvent or is liquidated, or if
payment under any secured obligation is accelerated, the lenders under such
secured obligation will be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to the terms of the agreement
securing such obligation. Any claims of such lenders with respect to such assets
will be prior to any claim of the holders of the Notes with respect to such
assets. Accordingly, it is possible that there would be no assets remaining from
which claims of the holders of the Notes could be satisfied or if any such
assets remain, such assets might be insufficient to satisfy such claims fully.
RESTRICTIVE COVENANTS
The Company's credit facility, dated as of August 29, 1996, as amended,
among the Company and certain lenders named therein (the "Credit Facility"),
contains various financial and operating covenants which, among other things,
require the maintenance of certain financial ratios. Violation of the covenants
in the Credit Facility or in the indentures governing the Company's
publicly-issued notes and debentures could result in a default under the Credit
Facility which would permit the bank lenders thereunder to (i) restrict the
Company's ability to borrow undrawn funds under the Credit Facility and (ii)
accelerate the maturity of borrowings thereunder.
GOVERNMENT REGULATION
Broadcasting. The domestic broadcasting industry is subject to extensive
federal regulation which, among other things, requires approval by the FCC for
the issuance, renewal, transfer and assignment of broadcasting station operating
licenses, and limits the number of broadcasting properties the Company may own.
The Telecommunications Act of 1996 (the "1996 Act") provides both new
opportunities and potential new competition for broadcasting companies.
The Company's broadcasting business will continue to be dependent upon
maintaining broadcasting licenses issued by the FCC, which are issued for a
maximum term of eight years. There can be no assurance that future renewal
applications will be approved, or that renewals will not include conditions or
qualifications that could adversely affect the Company's operations. The FCC's
approval of the Company's acquisition of Infinity contained a number of
temporary waivers of the FCC's television and radio cross-ownership rules (the
"One-to-a-Market" Rule). These waivers were granted subject to the outcome of
the pending ownership rulemaking in which certain deregulation of the
"One-to-a-Market" Rule has been proposed. In the event that
11
<PAGE> 14
any station divestitures are required at the conclusion of this rulemaking, the
Company would be required to file applications with the FCC for consent to the
necessary divestitures within six months of the rulemaking order. The FCC orders
approving both the CBS Broadcasting Inc. and Infinity acquisitions are subject
to judicial appeals by certain third parties.
Antitrust. The Company may in the future acquire additional radio or
television stations and other media-related and outdoor advertising properties,
many of which are likely to require antitrust review by the Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") prior to such acquisition.
There can be no assurance that the Antitrust Division or the FTC will not seek
to bar the Company from acquiring additional radio or television stations or
other media-related and outdoor advertising properties.
NEW TECHNOLOGIES
Developments in radio technology could affect competition in the radio
marketplace. New radio technology, known as digital audio broadcasting, can
provide the sound quality of compact discs, which is significantly higher than
that now provided by radio stations and networks using analog technology.
Current and future technological developments may affect competition within
the television marketplace. Developments in advanced digital technology may
enable competitors to provide high definition pictures and sound qualitatively
superior to what television stations now provide. Developing technology to
compress digital signals may also permit the same broadcast or cable channel or
satellite transponder to carry multiple video and data services, and could
result in an expanded field of competing services.
COMPETITION
The broadcast environment is highly competitive. The Company competes for
audiences, advertising and program distribution rights with other broadcast
television networks, television stations, cable networks and radio stations as
well as other media, including satellite television services, pay-per-view and
home video entertainment services and newspapers. In addition, the CBS
Television Network competes with other television networks to secure
affiliations with independently owned television stations in markets across the
country which are necessary to ensure effective distribution of network
programming to a nationwide audience.
RETAINED LIABILITIES OF DISCONTINUED BUSINESSES
Liabilities for certain of the Company's environmental matters as well as
certain litigation matters, although arising from discontinued businesses, are
expected to be retained by the Company following the divestiture of the
remaining industrial businesses. These liabilities include environmental
obligations that are not related to active properties of operating businesses,
accrued product liability claims for divested businesses, liabilities associated
with asbestos claims, and general litigation claims not involving active
businesses. Accrued liabilities associated with these matters, which have been
separately presented as retained liabilities of discontinued businesses, totaled
$945 million at March 31, 1998, including amounts related to previously
discontinued businesses of CBS Broadcasting Inc. A separate asset of $241
million has been recorded for amounts recoverable from insurance carriers under
previous settlement arrangements.
IMPACT OF YEAR 2000
The Company is addressing the issues associated with its existing computer
systems and their ability to operate effectively as the year 2000 approaches.
These issues involve computer programs and applications that were written using
two digits rather than four to identify the applicable year, and could result in
system failures or miscalculations. Both internal and external resources are
being utilized to address these matters throughout the Company. For the media
businesses, the assessment and planning phases of the project are essentially
complete. The Company believes that, based on available information, its year
2000 transition will not have a material adverse effect on its business,
operations, or financial results; provided, however, that the full impact is
uncertain and no assurances can be given as to the ultimate effect on the
Company.
12
<PAGE> 15
For the businesses that the Company expects to divest in 1998, the
assessment phase of the project is complete and the planning phase is well under
way. These matters are not anticipated to materially affect the disposition of
the businesses or the sale proceeds.
ABSENCE OF PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for Exchange Notes by
holders who are entitled to participate in the Exchange Offer. The market for
Old Notes not tendered for exchange in the Exchange Offer is likely to be more
limited than the existing market for such Notes. The holders of Old Notes (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who are not eligible to participate in the
Exchange Offer are entitled to certain registration rights, and the Company is
required to filed a Shelf Registration Statement (as defined) with respect to
such Old Notes. The Exchange Notes will constitute a new issue of securities
with no established trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or seek the admission thereof
to trading in the National Association of Securities Dealers Automated Quotation
System. The Initial Purchasers have advised the Company that they currently
intend to make a market in the Exchange Notes, but they are not obligated to do
so and may discontinue such market-making at any time. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act and may be limited during the Exchange Offer and the
pendency of any Shelf Registration Statement. Accordingly, no assurance can be
given that an active public or other market will develop for the Exchange Notes
or as to the liquidity of the trading market for the Exchange Notes. If a
trading market does not develop or is not maintained, holders of Exchange Notes
may experience difficulty in reselling the Exchange Notes or may be unable to
sell them at all. If a market for the Exchange Notes develops, any such market
making may be discontinued at any time.
FAILURE TO EXCHANGE OLD NOTES
Exchange Notes will be issued in exchange for Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal (or Agent's Message) and all other required
documentation. Therefore, holders of Old Notes desiring to tender such Old Notes
in exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange. Old Notes that are not tendered or are tendered but not accepted
will, following consummation of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof and, upon consummation of the
Exchange Offer, certain registration rights under the Registration Rights
Agreement will terminate. In addition, any holder of Old Notes who tenders in
the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes may be deemed to have received restricted securities, and if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each Participating Broker-Dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or any other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
To the extent that Old Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Old Notes could be
adversely affected. See "The Exchange Offer."
13
<PAGE> 16
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the Exchange
Notes offered hereby. In consideration for issuing the Exchange Notes
contemplated in this Prospectus, the Company will receive Old Notes in like
principal amount, the form and terms of which are the same as the forms and
terms of the Exchange Notes (which replace the Old Notes), except as otherwise
described herein. The Old Notes surrendered in exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase or decrease in the indebtedness
of the Company. As such, no effect has been given to the Exchange Offer in the
capitalization table. The net proceeds to the Company from the sale of the Old
Notes was approximately $493 million after underwriting discounts and expenses.
The Company used the net proceeds from the sale of the Old Notes was to repay a
portion of indebtedness outstanding under the Credit Facility. As of March 31,
1998, the Company had an aggregate of $1.4 billion outstanding under the Credit
Facility, excluding $384 million allocated to discontinued operations. In June
1998, in connection with the acquisition of American Radio, the Company incurred
additional indebtedness. See "Summary -- Recent Developments -- Media
Acquisitions." The Credit Facility expires on August 29, 2001. The average
interest rate on borrowings outstanding as of March 31, 1998 was 6.4%. Amounts
repaid under the Credit Facility as a result of the sale of the Old Notes may be
re-borrowed.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998, after giving effect to the issuance of the Old Notes and the
application of the net proceeds therefrom. This information should be read in
conjunction with the unaudited condensed consolidated financial statements of
the Company, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" incorporated by
reference in this Prospectus. (In millions).
<TABLE>
<S> <C>
Cash and cash equivalents................................... $ 72
=======
Short-term debt............................................. $ 128
Long-term debt (including current portion)(a)(b):
Credit Facility........................................... 788
7.15% Senior Notes due 2005............................... 500
8 3/8% Notes due 2002..................................... 348
7 7/8% Debentures due 2023................................ 325
6 7/8% Notes due 2003..................................... 275
8 5/8% Debentures due 2012................................ 273
8 7/8% Notes due 2001..................................... 250
8 7/8% Notes due 2014..................................... 150
7 5/8% Notes due 2002..................................... 150
7 3/4% Notes due 1999..................................... 125
7 1/8% Notes due 2023..................................... 97
8 7/8% Debentures due 2022................................ 92
Medium-Term Notes due through 2001........................ 47
Other..................................................... 50
-------
Total long-term debt.............................. 3,470
Shareholders' equity:
Common Stock, $1.00 par value (1,100 million shares
authorized and
723 million shares issued)............................. 723
Capital in excess of par value............................ 7,288
Common stock held in treasury, at cost.................... (540)
Retained earnings......................................... 1,468
Accumulated other comprehensive loss...................... (779)
-------
Total shareholders' equity........................... 8,160
-------
Total capitalization.............................. $11,758
=======
</TABLE>
- ---------------
(a) Amounts herein exclude $526 million of long-term debt allocated to
discontinued operations.
(b) In June 1998, in connection with the acquisition of American Radio, the
Company incurred additional indebtedness. See "Summary -- Recent
Developments -- Media Acquisitions."
15
<PAGE> 18
SELECTED FINANCIAL AND OPERATING DATA
The selected consolidated historical financial data presented below have
been derived from and should be read in conjunction with the Company's audited
consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, which are incorporated herein by reference. The Company's historical
financial data include the results of the following acquired entities subsequent
to their respective dates of acquisition: TNN and CMT from September 30, 1997;
Infinity from December 31, 1996; and CBS Broadcasting Inc. from November 24,
1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................... $ 1,949 $ 1,326 $ 5,363 $ 4,143 $ 1,074 $ 744 $ 684
Operating expenses................ (1,645) (1,240) (4,526) (3,696) (820) (477) (603)
Depreciation and amortization..... (130) (105) (445) (279) (57) (41) (34)
Residual costs of discontinued
businesses...................... (38) (35) (143) (114) (37) (75) (1)
------- ------- ------- ------- ------- ------- -------
Operating profit.................. 136 (54) 249 54 160 151 46
Other income (expense), net....... 5 41 78 55 152 (131) 35
Interest expense.................. (75) (101) (386) (401) (184) (26) (55)
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes
and minority interest........... 66 (114) (59) (292) 128 (6) 26
Income tax (expense) benefit...... (47) 22 (73) 71 (75) 1 43
Income (loss) from discontinued
operations...................... -- (60) 680 409 (57) 58 (388)
Net income (loss)................. 19 (151) 549 95 (10) 48 (329)
OTHER FINANCIAL DATA (CONTINUING
OPERATIONS):
EBITDA(a)......................... $ 271 $ 92 $ 772 $ 388 $ 369 $ 61 $ 115
Capital expenditures.............. 18 21 121 93 32 37 23
Ratio of earnings to fixed
charges(b)...................... 1.8x (b) (b) (b) 1.6x (b) 1.5x
Ratio of EBITDA to interest
expense......................... 3.6x (c) 2.0x 1.0x 2.0x 2.3x 2.1x
Ratio of total long-term debt to
EBITDA.......................... (d) (d) 4.2x 13.3x 19.6x 30.6x 16.2x
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets...................... $17,121 $17,373 $16,715 $17,052 $14,258 $ 6,948 $ 7,624
Total long-term debt(e)........... 3,430 6,126 3,236 5,147 7,222 1,865 1,868
Shareholders' equity.............. 8,160 5,595 8,080 5,731 1,453 1,789 1,078
SELECTED OPERATING DATA:
Number of owned & operated radio
stations........................ 75 81 76 79 39 16 14
Number of owned & operated TV
stations........................ 14 14 14 14 15 5 5
</TABLE>
- ---------------
(a) EBITDA represents income before interest, income taxes, depreciation and
amortization. EBITDA is not intended to represent cash flow or any other
measure of performance reported in accordance with generally accepted
accounting principles. The Company uses EBITDA as a key internal performance
measure and has included EBITDA as it understands that EBITDA is used by
certain investors as one measure of a company's ability to service its debt.
(b) For purposes of determining the ratio of earnings to fixed charges,
"earnings" consist of income before income taxes and fixed charges, and
fixed charges consist of interest (including capitalized interest) on all
indebtedness, amortization of deferred financing costs and that portion of
rental expenses that management believes to be representative of interest.
Additional income before income taxes and minority interest necessary to
attain a ratio of 1.0x for the three months ended March 31, 1997 and the
years ended December 31, 1997, 1996 and 1994 would be $116 million,
$68 million, $302 million and $3 million, respectively.
(c) Additional EBITDA necessary to attain a ratio of 1.0x for the three months
ended March 31, 1997 would be $9.0 million.
(d) Not meaningful.
(e) Excludes the current portion of long-term debt and long-term debt allocated
to discontinued operations.
16
<PAGE> 19
DESCRIPTION OF NOTES
The Exchange Notes offered hereby will be issued as a separate series under
the Indenture (the "Indenture") dated as of May 20, 1998 between the Company and
Citibank, N.A., as trustee (the "Trustee"). The form and terms of the Exchange
Notes are the same as the form and terms of the Old Notes (which they replace)
except that (i) the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Old Notes under the Registration Rights Agreement,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange Offer is consummated. The Old
Notes issued in the Initial Offering and the Exchange Notes offered hereby are
referred to collectively as the "Notes."
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
For definitions of certain capitalized terms used in the following summary, see
"-- Certain Definitions."
GENERAL
Principal of and interest on the Notes will be payable, and the Notes will
be exchangeable and transferable, at the office or agency of the Company in The
City of New York maintained for such purposes (which initially will be the
corporate trust office of the Trustee); provided, however, that, at the option
of the Company, interest may be paid by check mailed to the address of the
Person entitled thereto as such address shall appear on the security register.
The Notes will be issued only in registered form without coupons and only in
denominations of $1,000 and any integral multiple thereof. No service charge
will be made for any registration of transfer or exchange or redemption of
Notes, except in certain circumstances for any tax or other governmental charge
that may be imposed in connection therewith. The Notes will rank equally with
all other unsecured and unsubordinated debt of the Company.
TERMS OF THE NOTES
The Notes will mature on May 20, 2005, will be limited to $500,000,000
aggregate principal amount and will be unsecured senior obligations of the
Company. Each Note will bear interest at a rate of 7.15% per annum from May 20,
1998 or from the most recent interest payment date to which interest has been
paid or duly provided for, payable on November 20, 1998 and semi-annually
thereafter on May 20 and November 20 of each year until the principal thereof is
paid or duly provided for to the Person in whose name such Note (or any
predecessor Note) is registered at the close of business on the May 1 or
November 1 next preceding such interest payment date. Interest will be computed
on the basis of a 360-day year comprised of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Company, in whole at any
time or in part from time to time, on at least 30 but not more than 60 days
prior notice mailed to DTC, at a redemption price equal to the greater of (i)
100% of the principal amount of the Notes to be redeemed and (ii) the sum of the
present value of the Remaining Scheduled Payments on the Notes to be redeemed
discounted to the date of redemption, on a semiannual basis, at the Treasury
Rate plus 25 basis points, plus accrued interest thereon to the date of
redemption. Interest on the Notes shall be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
If money sufficient to pay the redemption price of and accrued interest on
all Notes (or portions thereof) to be redeemed on the redemption date is
deposited with the Trustee on or before the redemption date and
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certain other conditions are satisfied, on and after such date, interest will
cease to accrue on the Notes (or such portions thereof) called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed 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. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such redemption date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such redemption
date.
"Reference Treasury Dealer" means each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Chase Securities Inc., and J.P. Morgan Securities Inc. and
their respective successors and, at the option of the Company, additional
Primary Treasury Dealers; provided, however, that if any of the foregoing shall
cease to be a primary U.S. Government securities dealer in The City of New York
(a "Primary Treasury Dealer"), the Company shall substitute therefor another
Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to any Note, the
remaining scheduled payments of the principal thereof to be redeemed and
interest thereon that would be due after the related redemption date but for
such redemption; provided, however, that, if such redemption date is not an
interest payment date with respect to such Note, the amount of the next
succeeding scheduled interest payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date.
CERTAIN COVENANTS
The covenants summarized below will be applicable (unless waived or
amended) so long as any of the Notes are outstanding.
Limitation on Liens
The Company will not itself, and will not permit any Restricted Subsidiary
to, incur, issue, assume or guarantee any Debt secured by a Mortgage on any
Restricted Property, or by any shares of stock of a Restricted Subsidiary,
without effectively providing concurrently with the incurrence, issuance,
assumption or guarantee of such secured Debt that the Notes (together with, if
the Company shall so determine, any other indebtedness of or guaranteed by the
Company or such Restricted Subsidiary then existing or thereafter created
ranking on a parity with the Notes) shall be secured equally and ratably with
(or prior to) such secured Debt, so long as such Debt shall be so secured,
unless, after giving effect thereto, the aggregate principal amount of all such
secured Debt (excluding any Debt secured by Mortgages permitted by clauses (a)
through (h) below), plus all Attributable Debt of the Company and its Restricted
Subsidiaries in respect
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of sale and lease-back transactions (as defined under "Limitation on Sale and
Lease-Backs") involving Restricted Property, but excluding any Attributable Debt
in respect of any such sale and lease-back transaction the proceeds of which
have been applied in the manner set forth in clause (b) under "Limitation on
Sale and Lease-Backs" would not exceed 10% of the Consolidated Adjusted Book
Capitalization as determined on the basis of the most recent quarterly
consolidated balance sheet of the Company; provided, however, that such
restrictions shall not apply to (a) Mortgages existing on the date of the
Indenture; (b) Mortgages on property of, or on any shares of stock or
indebtedness of, any corporation existing at the time such corporation becomes a
Subsidiary; (c) Mortgages on property of, or on any shares of stock or
indebtedness of any corporation existing at the time such corporation is merged
with or consolidated with the Company or a Restricted Subsidiary or at the time
of a sale, lease or other disposition of the properties of a corporation as an
entirety or substantially as an entirety to the Company or a Restricted
Subsidiary; (d) Mortgages on property existing at the time of the acquisition
thereof or to secure the payment of all or any part of the purchase price or
construction cost thereof or to secure any indebtedness incurred prior to, at
the time of or within six months after, the acquisition or completion of such
property for the purpose of financing all or any part of the purchase price or
construction cost thereof; (e) Mortgages to secure all or part of the cost of
repairing, altering, constructing, improving or developing such property as is,
in the opinion of the Board of Directors of the Company, substantially
unimproved or to secure indebtedness incurred for the purpose of financing any
such cost; (f) Mortgages in favor of the Company or any Restricted Subsidiary;
(g) Mortgages on capital stock issued by, or partnership or other similar
interests in, any Subsidiary provided that the Debt secured by such Mortgage is
also secured by Mortgages which if incurred by the Company or a Restricted
Subsidiary would be covered by clause (d) or (e) of this paragraph on property
of such Subsidiary constituting at least 80% of the book value of its tangible
assets; or (h) any extension, renewal or replacement (or successive extensions,
renewals or replacements) as a whole or in part, of any Mortgage referred to in
the foregoing clauses (a) through (g) inclusive; provided that such extension,
renewal or replacement Mortgage shall be limited to all or part of the same
property that secured the Mortgage extended, renewed or replaced (plus
improvements on such property).
The Mortgage of any Restricted Property of the Company or a Restricted
Subsidiary in favor of the United States of America or any department, agency or
instrumentality thereof to secure partial, progress, advance or other payments
by the Company or any Subsidiary pursuant to the provisions of any contract or
statute shall not be deemed to create indebtedness secured by a Mortgage within
the meaning of the preceding paragraph.
Limitation on Sale and Lease-Backs
The Company will not itself, and will not permit any Restricted Subsidiary
to, enter into any arrangements with any bank, insurance company or other lender
or investor (not including the Company or any Restricted Subsidiary), or to
which any such lender or investor is a party providing for the leasing by the
Company or such Restricted Subsidiary for a period, including renewals, in
excess of three years of any Restricted Property which has been owned for more
than six months by the Company or such Restricted Subsidiary and which has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such lender or investor or to any person to whom funds have been or are to be
advanced by such lender or investor on the security of such Restricted Property
(a "sale and lease-back transaction") unless either (a) the Company or such
Restricted Subsidiary could, under the restrictions described under "Limitation
on Liens" above, create Debt secured by a Mortgage on the Restricted Property to
be leased in an amount equal to the Attributable Debt with respect to such sale
and lease-back transaction without equally and ratably securing the Notes; or
(b) the Company, within six months after the sale or transfer shall have been
made, applies an amount equal to the greater of (i) the net proceeds of the sale
of the Restricted Property leased pursuant to such arrangement or (ii) the fair
market value of the Restricted Property so leased at the time of entering into
such arrangement (as determined by the Board of Directors of the Company) to the
retirement of Funded Debt of the Company ranking on a parity with the Notes
(except that no retirement referred to in this clause (b) may be effected by
payment at maturity or pursuant to any mandatory sinking fund or prepayment
provision).
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Other than the restrictions on liens and sale and lease-back transactions
described above, the Indenture and the Notes will not contain any covenants or
other provisions designed to afford holders of the Notes protection in the event
of a highly leveraged transaction involving the Company.
CERTAIN DEFINITIONS
Certain terms defined in Section 1.1 of the Indenture are summarized below.
"Attributable Debt" means, as to any particular lease, the total net amount
of rent (discounted from the due dates thereof at the weighted average Yield to
Maturity of the Notes outstanding under the Indenture, such average being
weighted by the principal amount of the Notes) required to be paid by the lessee
during the remaining term thereof, excluding amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates
and similar charges. In the case of any lease which is terminable by the lessee
upon the payment of a penalty, such rent will also include the amount of such
penalty, but no rent will be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated. In the case of
any lease under which the amount of rent is indeterminable (e.g., where rent is
based on sales or profits), the net amount of rent required to be paid will be
the amount of rent paid during the preceding fiscal year.
"Consolidated Adjusted Book Capitalization" means, as to any Person, the
Consolidated Total Debt of such Person plus its shareholders' equity and any
Preferred Stock or other capital stock classified under generally accepted
accounting principles (as in effect on the date of the Indenture) as being
subject to redemption and not included in its shareholders' equity, plus
minority interests in its Subsidiaries.
"Consolidated Total Debt" means as to any Person, the total Debt of such
Person and its Subsidiaries computed and consolidated in accordance with
generally accepted accounting principles (as in effect on the date of the
Indenture).
"Debt" means (i) all obligations represented by notes, bonds, debentures or
similar evidences of indebtedness; (ii) all indebtedness for borrowed money or
for the deferred purchase price of property or services other than, in the case
of any deferred purchase price, on normal trade terms; and (iii) all rental
obligations as lessee under leases which shall have been or should be, in
accordance with generally accepted accounting principles (as in effect on the
date of the Indenture), recorded as capital leases.
"Funded Debt" means all indebtedness for borrowed money having a maturity
of more than 12 months from the date as of which the amount thereof is to be
determined or having a maturity of less than 12 months but by its terms being
renewable or extendable beyond 12 months from such date at the option of the
borrower.
"Mortgage" means any mortgage, pledge, lien, encumbrance, charge or
security interest of any kind.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" means as to any Person, capital stock of such Person that
has a preference as to dividends or upon liquidation over the common stock of
such Person.
"Restricted Property" means all land, buildings, machinery and equipment
and leasehold interests and improvements which would be reflected on a
consolidated balance sheet of the Company and its consolidated Subsidiaries
prepared in accordance with generally accepted accounting principles (as in
effect on the date of the Indenture), excluding (i) all such property located
outside the United States; (ii) all rights, contracts and other intangible
assets of any nature whatsoever; (iii) all inventories, other current assets and
films, programs and film and program rights; and (iv) the real property
comprising the Company's headquarters building on West 52nd Street, New York,
New York, and the real property comprising the studio facilities in Studio City,
California, owned by Radford Studio Center Inc.
"Restricted Subsidiary" means any Subsidiary other than (i) a Subsidiary
substantially all the tangible properties of which are located, or substantially
all the operations of which are located or conducted, outside
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the United States; (ii) a Subsidiary the principal business of which consists of
one or more of the following: (A) investing in, developing or otherwise dealing
in or with real estate or providing services directly related thereto, (B)
financing, including without limitation, lending on the security of, purchasing
or discounting (with or without recourse), receivables, leases, obligations or
other claims arising from or in connection with the purchase or sale of products
or services or (C) leasing any form of property; or (iii) a Subsidiary the
consolidated assets of which do not include Restricted Property.
"Subsidiary" of any specified corporation means any corporation at least a
majority of whose outstanding voting stock shall at the time be owned, directly
or indirectly, by the specified corporation or by one or more of its
Subsidiaries, or both.
"Yield to Maturity" means the yield to maturity on the Notes, calculated at
the time of issuance of the Notes, or if applicable, at the most recent
redetermination of interest on the Notes, in accordance with accepted financial
practice.
EVENTS OF DEFAULT; WAIVER AND NOTICE THEREOF
An Event of Default is defined in the Indenture as being any one of the
following events: (a) default for 30 days in payment of any interest on the
Notes; (b) default in payment of principal of or any premium on the Notes at
maturity; (c) default by the Company in the performance of any other covenant or
warranty contained in the Indenture in respect of the Notes which shall not have
been remedied for a period of 90 days after notice is given as specified in the
Indenture; and (d) certain events of bankruptcy, insolvency and reorganization
of the Company.
The Indenture provides that if an Event of Default described in clause (a),
(b) or (c) above shall have occurred and be continuing with respect to the
Notes, either the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare the principal of all
the Notes and the interest accrued thereon, if any, to be due and payable
immediately, but upon certain conditions such declarations may be annulled and
past defaults (except for defaults in the payment of principal of, any premium
or any interest on, the Notes and in compliance with certain covenants) may be
waived by the holders of a majority in aggregate principal amount of the Notes
then outstanding. If an Event of Default specified in clause (d) above occurs
and is continuing, then the principal of and accrued interest on all outstanding
Notes shall automatically become and be immediately due and payable without any
other act on the part of the Trustee or any holder of Notes.
Under the Indenture, the Trustee must give notice to the holders of the
Notes known to it within 90 days after such a default occurs, unless such
default shall have been cured or waived; provided that in the case of a default
described in clause (c) above, no such notice shall be given until at least 90
days after such default occurs and provided further that, except in the case of
default in the payment of principal of or any interest on any of the Notes, the
Trustee shall be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interests of the
holders of the Notes. For the purpose of this paragraph, the term default
includes the events specified above without notice or grace periods.
No holder of the Notes may institute any action under the Indenture unless
(a) such holder shall have given the Trustee written notice of a continuing
Event of Default; (b) the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding shall have requested the Trustee to
institute proceedings in respect of such Event of Default; (c) such holder or
holders shall have offered the Trustee such indemnity as the Trustee may
require; (d) the Trustee shall have failed to institute an action for 60 days
thereafter; and (e) no inconsistent direction shall have been given to the
Trustee during such 60-day period by the holders of a majority in aggregate
principal amount of the Notes.
The holders of a majority in aggregate principal amount of the Notes then
outstanding will have the right, subject to certain limitations, to 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 with
respect to the Notes. The Indenture provides that, in case an Event of Default
shall occur and be continuing, the Trustee, in exercising its rights and powers
under the Indenture, will be required to use the degree of care of a prudent
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person in the conduct of such person's own affairs. The Indenture further
provides that the Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties under the Indenture.
The Company must furnish to the Trustee within 120 days after the end of
each fiscal year a statement to the effect that a review of the activities of
the Company during such year and of its performance under the Indenture and the
terms of the Notes has been made and, to the best of the knowledge of the
signatory of such statement based on such review, the Company is not in default
in the performance and observance of the terms of the Indenture or, if the
Company is in default, specifying such default.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that the Company may not consolidate or merge with
any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless (a) the successor shall be
organized and existing under the laws of the United States or any State thereof
or the District of Columbia, and shall expressly assume by a supplemental
indenture the due and punctual payment of the principal of and any premium or
any interest on the Notes and the performance of every covenant in the Indenture
on the part of the Company to be performed or observed; (b) immediately after
giving effect to such transaction, no Event of Default and no event which after
notice or lapse of time or both, would become an Event of Default shall have
happened and be continuing; and (c) the Company shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
such consolidation, merger, conveyance or transfer and such supplemental
indenture comply with the foregoing provisions relating to such transaction. In
case of any such consolidation, merger, conveyance or transfer, such successor
will succeed to and be substituted for the Company as obligor on the Notes, with
the same effect as if it had been named in the Indenture as the Company.
MODIFICATION OF THE INDENTURE
With certain exceptions, the Indenture or the rights of the holders of the
Notes may be modified by the Company and the Trustee with the consent of the
holders of a majority in aggregate principal amount of the Notes affected by
such modification then outstanding, but no such modification may be made which
would (a) change the maturity of any payment of principal of or any premium or
any installment of interest on the Notes, reduce the principal amount thereof or
the interest or any premium thereon, change the method of computing the amount
of principal thereof or interest thereon on any date, change any place of
payment where, or the coin or currency in which, the Notes or any premium or
interest thereon is payable or impair the right to institute suit for the
enforcement of any such payment on or after the maturity thereof (or, in the
case of redemption or repayment, on or after the redemption date or the
repayment date, as the case may be); (b) reduce the percentage in principal
amount of the outstanding Notes, the consent of whose holders is required for
any such modification or the consent of whose holders is required for any waiver
of compliance with certain provisions of the Indenture or certain defaults
thereunder and their consequences provided for in the Indenture; or (c) modify
any of the provisions of certain sections of the Indenture, including the
provisions summarized in this paragraph, except to increase any such percentage
or to provide that certain other provisions of the Indenture cannot be modified
or waived without the consent of the holder of each outstanding Note affected
thereby.
DEFEASANCE OF NOTES AND CERTAIN COVENANTS
The Company, at its option, either (a) will be discharged from any and all
obligations with respect to the Notes (except for certain obligations to
register the transfer or exchange of the Notes, replace stolen, lost or
mutilated Notes, maintain paying agencies and hold moneys for payment in trust)
or (b) will cease to be under any obligation to comply with certain restrictive
covenants of the Indenture (as described under "Certain Covenants" and
"Consolidation, Merger, Sale or Conveyance") with respect to the Notes, upon the
deposit with the Trustee, in trust, of money or the equivalent in United States
Treasury Securities or securities of United States government agencies backed by
the full faith and credit of the United States, or a combination thereof, which
through the payment of interest thereon and principal thereof in accordance with
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their terms will provide money in an amount sufficient to pay all the principal
of and interest on the Notes on the dates such payments are due in accordance
with the terms of the Notes. To exercise any such option, no Event of Default or
event which with notice or lapse of time would become an Event of Default with
respect to the Notes shall have occurred and be continuing. The Company is
required to deliver to the Trustee an opinion of counsel to the effect that the
deposit and related defeasance would not cause the holders of the Notes to
recognize income, gain or loss for Federal income tax purposes and, in the case
of a discharge pursuant to clause (a), accompanied by a ruling to such effect
from the United States Internal Revenue Service.
BOOK-ENTRY; DELIVERY AND FORM
Notes initially will be represented by a single, permanent global note in
definitive, fully registered book-entry form for the Notes (a "Global Security")
which will be registered in the name of a nominee of DTC and deposited on behalf
of purchasers of the Notes represented thereby with a custodian for DTC for
credit to the respective accounts of the purchasers (or to such other accounts
as they may direct) at DTC.
The Global Security. The Company expects that pursuant to procedures
established by DTC (a) upon deposit of the Global Security, DTC or its custodian
will credit on its internal system portions of the Global Security which shall
be comprised of the corresponding respective amounts of the Global Security to
the respective accounts of persons who have accounts with such depositary and
(b) ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its nominee
(with respect to interests of Participants (as defined below)) and the records
of Participants (with respect to interests of persons other than Participants).
Qualified institutional buyers (as defined in Rule 144A under the Securities
Act) ("QIBs") may hold their interests in the Global Security directly through
DTC if they are persons who have accounts with DTC ("Participants") in such
system, or indirectly through organizations which are Participants in such
system.
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
such Notes represented by the Global Security for all purposes under the
Indenture and under the Notes represented thereby. No beneficial owner of an
interest in the Global Security will be able to transfer such interest except in
accordance with the applicable procedures of DTC in addition to those provided
for under the Indenture.
Payments of the principal of and interest on the Notes represented by the
Global Security will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or 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 Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of and interest (including Additional Interest) on the Notes
represented by the Global Security, will credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the Global Security as shown in the records of DTC or its nominee. The Company
also expects that payments by Participants to owners of beneficial interests in
the Global Security held through such Participants will be governed by standing
instructions and customary practice as is now the case with security held for
the accounts of customers registered in the names of nominees for such
customers. Such payment will be the responsibility of such Participants.
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 security for any reason, including
to sell Notes to persons in states which require physical delivery of such
security or to pledge such security, such holder must transfer its interest in
the Global Security in accordance with the normal procedures of DTC and in
accordance with the procedures set forth in the Indenture.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more
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Participants to whose account the DTC interests in the Global Security are
credited and only in respect of the aggregate principal amount as to which such
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
Security for certificated security, which it will distribute to its
Participants.
DTC has advised the Company as follows: DTC 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 pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold security
for its Participants and facilitates the clearance and settlement of security
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include security brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly ("Indirect Participants").
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests among Participants of
DTC, Euroclear and Cedel, they are under no obligation to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Company nor the Trustee will have any responsibility for the performance by DTC,
Euroclear or Cedel or their respective direct or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Certificated Securities. Interests in the Global Security will be
exchanged for certificated securities if (i) DTC notifies the Company that it is
unwilling or unable to continue as depositary for the Global Security, or DTC
ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by the Company within 40 days, or (ii) an
Event of Default has occurred and is continuing with respect to the Notes. Upon
the occurrence of any of the events described in the preceding sentence, the
Company will cause the appropriate certificated securities to be delivered.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 20, 1998 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities. As a condition to the Purchase Agreement, the
Company and the Initial Purchasers entered into the Registration Rights
Agreement on May 20, 1998, the date of the Initial Offering (the "Issue Date").
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will file the Exchange Offer Registration Statement with the Commission on or
prior to 60 days after the Issue Date, (ii) unless the Exchange Offer would not
be permitted by applicable law or Commission policy, the Company will use its
best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 150 days after the Issue Date and
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its best
efforts to issue, on or prior to 45 days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, Exchange
Notes in exchange for all Notes tendered prior thereto in the Exchange Offer.
The Exchange Offer is being made to satisfy certain of the contractual
obligations of the Company under the Registration Rights Agreement and the
Purchase Agreement.
If the Company fails to issue Exchange Notes in exchange for all Notes
properly tendered and not withdrawn in the Exchange Offer within 45 days of the
effective date of the Exchange Offer Registration Statement (a "Registration
Default"), then the Company shall pay as liquidated damages additional interest
("Additional Interest") on the Notes as to which the Registration Default exists
as set forth herein. If a Registration Default exists with respect to the Notes,
the interest rate on such Notes will increase, with respect to the first 90-day
period (or portion thereof) while a Registration Default is continuing
immediately following the occurrence of such Registration Default, .25% per
annum, such interest rate increasing by an additional .25% per annum at the
beginning of each subsequent 90-day period (or portion thereof) while a
Registration Default is continuing until all Registration Defaults have been
cured, up to a maximum rate of Additional Interest of 1.00% per annum. Upon the
issuance of Exchange Notes in exchange for all Notes properly tendered and not
withdrawn in the Exchange Offer, Additional Interest as a result of the
Registration Default shall cease to accrue (but any accrued amount shall be
payable) and the interest rate on the Notes will revert to the original rate.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy, (ii) the Exchange Offer is not for any other reason consummated within
180 days after the Issue Date, (iii) any holder of Notes notifies the Company
within a specified time period that (a) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (b) due to a change in law or
policy it may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and the prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such holder or (c) it is a broker-dealer and owns Notes acquired
directly from the Company or an affiliate of the Company, or (iv) the holders of
a majority in aggregate principal amount of the Notes may not resell the
Exchange Notes acquired by them in the Exchange Offer to the public without
restriction under the Securities Act and without restriction under applicable
blue sky or state securities laws, the Company will file with the Commission a
shelf registration statement to cover resales of the Transfer Restricted Notes
(as defined herein) by the holders hereto. The Company will use its best efforts
to cause the applicable registration statement to be declared effective as
promptly as possible by the Commission.
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<PAGE> 28
For purposes of the foregoing, "Transfer Restricted Notes" means each Note
until (i) the date on which such Note has been exchanged by a person other than
a broker-dealer referred to in (ii) below for an Exchange Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a
Note for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, as amended or supplemented, (iii) the date on which such Note has
been effectively registered under the Securities Act and disposed of in
accordance with the shelf registration statement, (iv) the date on which such
Note is eligible for distribution to the public pursuant to Rule 144(k) under
the Securities Act (or any similar provision then in force, but not Rule 144A
under the Securities Act), (v) the date on which such Note shall have been
otherwise transferred by the holder thereof and a new Note not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such Note shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(vi) such Note ceases to be outstanding.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Old Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old
Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a different CUSIP
Number from the Old Notes, (ii) the Exchange Notes have been registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof and (iii) the holders of the Exchange Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Notes in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
will terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $500,000,000
aggregate principal amount of Old Notes were outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Pennsylvania Business Corporation Law or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
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<PAGE> 29
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
August 24, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
Any such extension, delay in acceptance, termination or amendment will be
followed promptly by oral (confirmed in writing) or written notice thereof to
the Exchange Agent and by making a public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make any public announcement and subject to applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a press release to an appropriate news
agency.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on November 20, 1998. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 20 and
November 20, commencing on November 20, 1998.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
For a holder to validly tender Old Notes pursuant to the Exchange Offer, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee, or (in the case of a book-entry
transfer) an Agent's Message in lieu of the Letter of Transmittal, and any other
required documents must be received by the Exchange Agent at the address set
forth under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date. In addition, prior to 5:00 p.m., New York City time, on the
Expiration Date, either (a) certificates for tendered Old Notes must be received
by the Exchange Agent at such address or (b) such Old Notes must be transferred
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such tender received by the Exchange Agent, including an Agent's
Message if the tendering holder has not delivered a Letter of Transmittal). The
term "Agent's Message" means a message, transmitted by the book-entry transfer
facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that the Book-Entry Transfer Facility has received an
express acknowledgment from the tendering participant that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce such Letter of Transmittal against such participant.
By tendering, each holder of Old Notes will represent to the Company that,
among other things, (i) the Exchange Notes to be acquired by such holder of Old
Notes in connection with the Exchange Offer are being acquired by such holder in
the ordinary course of business of such holder, (ii) such holder is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iii) except as otherwise disclosed in writing, such holder is
not an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company, and (iv) such holder
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<PAGE> 30
acknowledges and agrees that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the Exchange Notes acquired by such
person and cannot rely on the position of the Staff of the Commission set forth
in the no-action letters that are discussed under "Resale of the Exchange
Notes." In addition, by accepting the Exchange Offer, such holder will (i)
represent and warrant that, if such holder is a Participating Broker-Dealer,
such Participating Broker-Dealer acquired the Old Notes for its own account as a
result of market-making activities or other trading activities and has not
entered into any arrangement or understanding with the Company or any
"affiliate" of the Company (within the meaning of Rule 405 under the Securities
Act) to distribute the Exchange Notes to be received in the Exchange Offer, and
(ii) acknowledges that, by receiving Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired as a result of
market-making activities or other trading activities, such Participating
Broker-Dealer will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes.
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a recognized participant in the Securities
Transfer Agent Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchange Medallion Program (each a "Medallion
Signature Guarantor"), unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of a member firm of a registered national securities exchange, a member
of the NASD or a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes
with the signature thereon guaranteed by a Medallion Signature Guarantor.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Old Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution
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<PAGE> 31
that is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, an appropriate Letter of Transmittal properly completed and duly
executed with any required signature guarantee (or, in the case of book-entry
transfer, an Agent's Message in lieu thereof) and all other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Old Notes.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Old Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Old Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Old Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal (or, in the case of book-entry transfer, an Agent's Message) or any
other required documents to the Exchange Agent or (iii) who cannot complete the
procedures for book-entry transfer (including delivery of an Agent's Message),
prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution (i) an Agent's Message with respect to guaranteed
delivery that is accepted by the Company, or (ii) a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate number(s) of such Old Notes and the principal amount of Old
Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's
Message), as well as the certificate(s) representing all tendered Old Notes
in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within three New York Stock Exchange
trading days after the Expiration Date.
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<PAGE> 32
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a letter or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number(s)
and principal amount of such Old Notes, or, in the case of Old Notes transferred
by book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes into the name of the
person withdrawing the tender and (iv) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and return
all tendered Old Notes to the tendering holders, (ii) extend the Exchange Offer
and retain all Old Notes tendered prior to the expiration of the Exchange Offer,
subject, however, to the rights of holders to withdraw such Old Notes (see
"-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
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EXCHANGE AGENT
Citibank, N.A. has been appointed as Exchange Agent for the Exchange Offer.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed
Delivery should be directed to the Exchange Agent addressed as follows:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Distributions, Inc. c/o Citicorp Data Distributions, Inc. Corporate Trust Window
P.O. Box 7072 404 Sette Drive 111 Wall Street, 5th Floor
Paramus, New Jersey 07653 Paramus, New Jersey 07652 New York, New York 10043
Facsimile for Eligible Institutions:
(201) 262-3240
Facsimile Confirmation Only:
(800) 422-2077
For Information:
(800) 422-2077
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates or their agents.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, 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 therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is the original principal amount, plus accretion thereon, as
reflected in the Company's accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. Certain expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A, to
a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Company), (iii) outside
the United States to a foreign person in a transaction meeting the requirements
of Rule 904 under the Securities Act, or (iv) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States.
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<PAGE> 34
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder or other person who receives Exchange Notes,
whether or not such person is the holder (other than a person that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old Notes in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the Exchange Notes, such holder cannot rely
on the position of the staff of the Commission enunciated in such no-action
letters or any similar interpretive letters, and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Further, each Participating Broker-Dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. For a description of
the procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, insofar as it describes statements of law or
legal conclusions, fairly describes the material U.S. federal income tax
consequences expected to result to holders whose Old Notes are exchanged for
Exchange Notes in the Exchange Offer. This discussion is based on the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements and
conditions set forth herein. Any such changes or interpretations may or may not
be retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules not
discussed below.
For U.S. federal income tax purposes, the exchange of Old Notes for
Exchange Notes pursuant to the Exchange Offer will not be treated as a taxable
transaction for federal income tax purposes. As a result, there will be no
federal income tax consequences to holders exchanging Old Notes for Exchange
Notes pursuant to the Exchange Offer. A holder will have the same adjusted basis
and holding period in the Exchange Notes as it had in the Old Notes immediately
before the exchange.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE,
REGULATIONS, TREASURY REGULATIONS, RULING AND JUDICIAL DECISIONS NOW IN EFFECT,
ALL OF WHICH ARE SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED
RETROACTIVELY IN A MANNER THAT COULD ADVERSELY AFFECT HOLDERS EXCHANGING NOTES.
EACH HOLDER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO IT, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS, OF EXCHANGING OLD NOTES FOR EXCHANGE NOTES PURSUANT TO THE
EXCHANGE OFFER.
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<PAGE> 35
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of 90 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
October 20, 1998 (90 days after the commencement of the Exchange Offer), all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such 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 such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed 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 Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
LEGAL MATTERS
The validity of the Notes being offered hereby are being passed upon for
the Company by Louis J. Briskman, Esq., Executive Vice President and General
Counsel of the Company. Certain other matters in connection with the Exchange
Offer are being passed upon for the Company by Weil Gotshal & Manges LLP, New
York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and December 31, 1996 and for the years then ended and as of December 31,
1995 and for the year then ended, have been audited by KPMG Peat Marwick LLP and
PricewaterhouseCoopers LLP, independent certified public accountants,
respectively, as stated in their reports appearing elsewhere, and incorporated
by reference herein.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION CONTAINED
IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information............... 2
Documents Incorporated by
Reference......................... 2
Summary............................. 3
Risk Factors........................ 11
Use of Proceeds..................... 14
Capitalization...................... 15
Selected Financial and Operating
Data.............................. 16
Description of Notes................ 17
Book-Entry; Delivery and Form....... 23
The Exchange Offer.................. 25
Certain U.S. Federal Income Tax
Considerations.................... 32
Plan of Distribution................ 33
Legal Matters....................... 33
Experts............................. 33
</TABLE>
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
- ---------------------------------------------------
$500,000,000
LOGO
7.15% SENIOR NOTES DUE 2005
---------------------------------
PROSPECTUS
---------------------------------
JULY 22, 1998
---------------------------------------------------
---------------------------------------------------
