<PAGE> 1
THIS INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS ARE NOT AN OFFER
TO SELL SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MARCH 9, 1999
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 27, 1994)
8,700,000 PHONES(SM)
COMCAST CORPORATION
% EXCHANGEABLE EXTENDABLE SUBORDINATED DEBENTURES DUE 2029
(EXCHANGEABLE FOR CASH BASED ON VALUE OF AT&T CORP. COMMON STOCK, MATURITY
SUBJECT TO EXTENSION TO 2059)
------------------------
We have summarized below the terms of the Debentures we are offering, which
we refer to as the PHONES. For more detail, you should read "Description of
PHONES" in this prospectus supplement.
- PRINCIPAL AMOUNT OF PHONES. Each PHONES is being issued in an original
principal amount of $ , the last reported sale price of one share of
AT&T common stock as reported on the New York Stock Exchange on March ,
1999. The minimum amount payable upon redemption or maturity of a PHONES,
which we call the contingent principal amount, will initially be equal to
the original principal amount. The contingent principal amount will be
reduced if AT&T increases its quarterly dividend or if there are special
distributions on or in respect of the AT&T common stock.
- EXCHANGEABILITY. Each PHONES is exchangeable, at your option, at any
time following March , 2000 for an amount of cash, which we refer to as
the early exchange ratio, equal to 95% of the market value of a share of
AT&T common stock and any other publicly traded equity securities that
may be distributed on or in respect of the AT&T common stock (or into
which any such securities may be converted or exchanged). We refer to
these securities collectively as the reference shares. If certain
dilutive or anti-dilutive events occur with respect to those securities,
the number and type of those securities that will be used to calculate
the amount you will receive upon exchange, redemption or maturity of a
PHONES will be adjusted to reflect these events.
- QUARTERLY INTEREST PAYMENTS. We will pay interest on each PHONES
quarterly in an amount equal to $ , or % of the original principal
amount, plus the amount of the cash dividend paid on the reference
shares. We will also pay to holders of PHONES, as additional interest,
the cash value of any property distributed on the reference shares (other
than additional reference shares). We may, at our option, defer the
payment of interest, other than additional interest, at any time prior to
maturity for periods not to exceed five years, although this will result
in an increase in the contingent principal amount of the PHONES and an
increase in the early exchange ratio to 100%. During any deferral period,
we may at our option, but are not obligated to, increase the amount of
reference shares you get for each PHONES at an annual rate of %. If we
elect to make this increase, we will be deemed current on that quarterly
payment of interest and the contingent principal amount will not
increase.
- OPTIONAL REDEMPTION OF THE PHONES. We may, at our option, redeem the
PHONES at the redemption prices set forth in this prospectus supplement.
- MATURITY. The PHONES will mature on May 15, 2029, unless the then
current market price of the reference shares is greater than 150% of the
contingent principal amount of the PHONES, in which case the maturity
will be extended to May 15, 2059. If the maturity is extended, the early
exchange ratio will be increased to 100%. At maturity you will be
entitled to receive the higher of the contingent principal amount of the
PHONES and the sum of the current market value of the reference shares on
the maturity date plus any deferred quarterly payments of interest.
- RANKING. The PHONES are unsecured, subordinated obligations of Comcast
Corporation, ranking equally with all of Comcast Corporation's existing
and future subordinated debt and trade obligations. As of December 31,
1998, we had $5.6 billion of debt senior, or effectively senior, to the
PHONES.
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER IN EVALUATING AN INVESTMENT IN THE PHONES.
------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the PHONES or determined that this
prospectus supplement or the prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
PER PHONES TOTAL
---------- ----------
<S> <C> <C>
Public offering price*..................................... $ $
Underwriting commission to be paid by Comcast.............. $ $
Proceeds to Comcast........................................ $ $
</TABLE>
- ---------------
* Plus accrued interest, if any, to the date of delivery
The underwriters may also purchase up to an additional 1,300,000 PHONES at
the public offering price within 30 days from the date of this prospectus
supplement to cover over-allotments.
------------------------
MERRILL LYNCH & CO.
<TABLE>
<S> <C> <C>
CREDIT SUISSE FIRST BOSTON GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE LAZARD FRERES & CO. LLC
</TABLE>
------------------------
The date of this prospectus supplement is , 1999.
- ---------------
(SM) Service Mark of Merrill Lynch & Co., Inc.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A.................................. S-3
Risk Factors................................................ S-6
Price Range and Dividend History of the AT&T Common Stock... S-9
The Company................................................. S-9
Use of Proceeds............................................. S-10
Ratio of Earnings to Fixed Charges.......................... S-10
Description of PHONES....................................... S-10
Certain United States Federal Income Tax Considerations..... S-16
Underwriting................................................ S-20
Experts..................................................... S-21
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Incorporation of Certain Documents by Reference............. 2
Available Information....................................... 3
The Company................................................. 4
Certain Considerations...................................... 4
Use of Proceeds............................................. 4
Dividend Policy............................................. 5
Ratios of Earnings to Combined Fixed Charges and Preferred
Stock Dividends........................................... 5
Description of Debentures................................... 6
Description of the Preferred Stock.......................... 13
Description of Depositary Shares............................ 14
Description of Common Stock................................. 16
Description of Warrants..................................... 17
United States Taxation...................................... 18
Plan of Distribution........................................ 26
Legal Opinions.............................................. 27
Experts..................................................... 27
</TABLE>
In this prospectus supplement, the "Company," "we," "us" and "our" refer to
Comcast Corporation and its subsidiaries. References to "you" and "your" refers
to prospective investors in the PHONES prior to the sale of the PHONES and to
holders of the PHONES after the sale of the PHONES. "PHONES(SM)" is a service
mark of Merrill Lynch & Co., Inc.
This prospectus supplement, the prospectus and the reports incorporated by
reference into the prospectus that we have filed and will file with the
Securities and Exchange Commission may contain forward looking statements made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. You should be aware that such forward looking statements
involve risks and uncertainties which could cause results in the future to
differ from those expressed in any such forward looking statements made by, or
on behalf of us. The effects of legislative and regulatory changes; the
potential for increased competition; technological changes; the need to generate
substantial growth in the subscriber base by successfully launching, marketing
and providing services in identified markets; pricing pressures which could
affect demand for our services; our ability to expand our distribution; changes
in labor, programming, equipment and capital costs; our continued ability to
create or acquire programming and products that customers will find attractive;
future acquisitions, strategic partnerships and divestitures; general business
and economic conditions; and other risks detailed from time to time in our
periodic reports filed with the Securities and Exchange Commission are factors,
among others, that could cause actual results to differ materially from those
expressed in any forward looking statements.
S-2
<PAGE> 3
SUMMARY INFORMATION -- Q&A
The following information supplements, and should be read together with,
the information contained or incorporated by reference in other parts of this
prospectus supplement and in the accompanying prospectus. This summary
highlights selected information from this prospectus supplement and the
accompanying prospectus to help you understand the PHONES. You should carefully
read this prospectus supplement and the accompanying prospectus to understand
fully the terms of the PHONES, as well as the tax and other considerations that
may be important to you in making a decision about whether to invest in the
PHONES. You should pay special attention to the "Risk Factors" section beginning
on page S-6 of this prospectus supplement and the "Certain Considerations"
section beginning on page 4 of the accompanying prospectus to determine whether
an investment in the PHONES is appropriate for you.
For your convenience, we make reference to specific page numbers in this
prospectus supplement and the accompanying prospectus for more detailed
information on some of the terms and concepts used throughout this prospectus
supplement.
WHAT ARE THE PHONES?
The PHONES are a series of our Subordinated Debentures. Specific features
of the PHONES are described in this prospectus supplement and general terms of
our Subordinated Debentures are described in the accompanying prospectus. For a
brief description of our business, see "The Company" on page S-9.
WHAT IS AT&T'S RELATIONSHIP TO THE PHONES?
AT&T Corp. has no obligations whatsoever under the PHONES. We refer to AT&T
Corp., a New York corporation, as AT&T. We refer to AT&T's Common Stock, par
value $1.00 per share, as AT&T common stock and, in describing the PHONES, as
the reference shares. In describing the PHONES, we refer to AT&T and any other
company which may in the future become an issuer of reference shares as the
reference company. The term reference company also includes the issuer of any
other publicly traded equity securities that may be distributed on the AT&T
common stock (or into which any such securities may be converted or exchanged).
WHAT CAN YOU TELL ME ABOUT AT&T?
According to publicly available documents, AT&T provides voice, data and
video telecommunications services to large and small businesses, consumers and
government entities. AT&T is required to file reports and other information with
the Securities and Exchange Commission. Copies of these reports and other
information may be inspected and copied at the SEC offices specified under
"Available Information" in the accompanying prospectus.
This prospectus supplement relates only to the PHONES we are offering and
does not relate to the AT&T common stock or other securities of AT&T. All
disclosures contained in this prospectus supplement regarding AT&T are derived
from the publicly available documents described in the preceding paragraph. We
have not participated in the preparation of AT&T's documents nor made any due
diligence inquiry with respect to the information provided in those documents.
None of the underwriters has made any due diligence inquiry with respect to the
information provided in AT&T's documents in connection with the offering of the
PHONES. Neither we nor any of the underwriters represent that AT&T's publicly
available documents or any other publicly available information regarding AT&T
are accurate or complete. Furthermore, neither we nor any of the underwriters
can provide you with any assurance that all events occurring prior to the date
of this prospectus supplement, including events that would affect the accuracy
or completeness of the publicly available documents described in the preceding
paragraph, that would affect the trading price of the AT&T common stock, and
therefore the issue price of the PHONES, have been publicly disclosed.
Subsequent disclosure of any such events or the disclosure of or failure to
disclose material future events concerning AT&T could affect the trading prices
of the PHONES.
S-3
<PAGE> 4
We, our affiliates and the underwriters do not make any representation to
you as to the performance of AT&T, the AT&T common stock or any other securities
of AT&T.
WHEN WILL I RECEIVE QUARTERLY INTEREST PAYMENTS?
If you purchase the PHONES, you are entitled to receive quarterly interest
payments in an amount equal to $ , or % of the original principal amount,
plus the amount of the quarterly cash dividend paid on the reference shares.
Interest on the PHONES will accrue from the date we issue the PHONES. We
will pay this interest quarterly in arrears on February 15, May 15, August 15
and November 15 of each year, beginning May 15, 1999, but subject to our right
to defer payments of interest. Our payment on May 15, 1999, will equal $
per PHONES, which is calculated to equal an annual rate of % on the original
principal amount from the date of original issuance of the PHONES plus the
quarterly cash dividend paid on the reference shares between February 15 and May
15, 1999.
We will also distribute to you as additional interest, any property
distributed on the reference shares (other than publicly traded equity
securities, which will themselves become reference shares). If any property that
is not publicly traded is distributed on the reference shares, we will pay you
the fair market value of that property as determined in good faith by our board
of directors. We will distribute the property, or the cash value of the
property, to you within 30 days after it is distributed on the reference shares.
WHEN CAN YOU DEFER PAYMENTS OF INTEREST?
We can defer quarterly interest payments on the PHONES as many times as we
want, but only for up to 20 consecutive quarterly periods. We cannot defer
additional interest distributions at any time and we cannot defer quarterly
interest payments if an event of default (see page 11 in the accompanying
prospectus) under the PHONES has occurred and is continuing. A deferral of
interest payments cannot extend, however, beyond the maturity date of the
PHONES.
If we defer quarterly payments of interest, the contingent principal amount
of the PHONES will be increased by the amount of the deferral and the early
exchange ratio will increase to 100%. Once we make all interest payments on the
PHONES, with accrued interest at an annual rate of %, we can again postpone
interest payments on the PHONES so long as no event of default under the PHONES
has occurred and is continuing. During any deferral period, so long as the
current market value of the reference shares exceeds the original principal
amount of the PHONES we may at our option, but are not obligated to, increase
the amount of reference shares you get for each PHONES at an annual rate of %.
If we elect to make this increase, we will be deemed current on that quarterly
payment of interest and will not increase the contingent principal amount.
WHEN WILL THE PHONES MATURE?
The PHONES will mature on May 15, 2029, unless they are previously redeemed
or exchanged or unless their maturity is extended.
The maturity of the PHONES will be automatically extended to May 15, 2059,
if on the date thirty business days prior to May 15, 2029 the current market
value of a reference share is at least 150% of the contingent principal amount
of the PHONES.
DO YOU HAVE THE RIGHT TO REDEEM THE PHONES PRIOR TO THEIR MATURITY?
Yes. We may redeem the PHONES at a redemption price equal to the sum of (a)
$ if we redeem the PHONES prior to May 15, 2000, $ if we redeem the
PHONES prior to May 15, 2001, $ if we redeem the PHONES prior to May 15,
2002, or zero if we redeem the PHONES any time on or after May 15, 2002, and (b)
the higher of the contingent principal amount of the PHONES and the sum of the
current market value of the reference shares at the time of redemption plus any
deferred quarterly payments of
S-4
<PAGE> 5
interest. We, however, may not redeem the PHONES after a record date for
dividends or other distributions on the reference shares and prior to the
payment date for that dividend or other distribution.
WHAT WILL I RECEIVE AT MATURITY?
At maturity you will be entitled to receive the higher of the contingent
principal amount of the PHONES and the sum of the current market value of the
reference shares on the maturity date plus any deferred quarterly payments of
interest.
DO THE PHONES HAVE ANTI-DILUTION PROTECTION FOR CHANGES IN THE REFERENCE SHARES?
Yes. If certain dilutive or anti-dilutive events occur with respect to such
securities, the number and type of such securities that will be used to
calculate the amount you will receive upon exchange, redemption or maturity of
PHONES will be adjusted to reflect such events. These adjustments are described
in this prospectus supplement under "Dilution Adjustments."
WHEN CAN I EXCHANGE THE PHONES FOR CASH?
At any time or from time to time, after March , 2000 (one year from the
date of original issuance), you may exchange your PHONES for an amount of cash
per PHONES equal to (a) 95% of the then current market value of a reference
share or (b) 100% of the exchange market value of a reference share if the
maturity of the PHONES is extended to May 15, 2059 or during a deferral of the
quarterly interest payments on the PHONES.
WILL THE PHONES BE LISTED ON A STOCK EXCHANGE?
We have agreed to use commercially reasonable efforts to have the PHONES
listed on the New York Stock Exchange. We will make a public announcement prior
to the date of listing or on the date we learn that we will be unable to list
the PHONES. You should be aware that the listing of the PHONES will not ensure
that a liquid trading market will be available for the PHONES.
IN WHAT FORM WILL THE PHONES BE ISSUED?
The PHONES will be represented by one or more global securities that will
be deposited with and registered in the name of The Depository Trust Company,
New York, New York or its nominee. This means that you will not receive a
certificate for your PHONES. We expect that the PHONES will be ready for
delivery through DTC on or about March , 1999.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES FOR ME?
The PHONES will be characterized as indebtedness of ours for United States
federal income tax purposes. Accordingly, you will be required to include, in
your income, interest with respect to the PHONES.
Each PHONES will constitute a contingent payment debt instrument. As a
result, you will be required to include amounts in income, as ordinary income,
in advance of the receipt of the cash attributable thereto. The amount of
interest income required to be included by you for each year will be in excess
of the stated interest payment you receive. Any gain recognized by you on the
sale or exchange of a PHONES will be ordinary interest income; any loss will be
ordinary loss to the extent of the interest previously included in income, and
thereafter, capital loss. A summary of the Federal income tax consequences of
the ownership of PHONES is described in this prospectus supplement under
"Certain United States Federal Income Tax Considerations."
S-5
<PAGE> 6
RISK FACTORS
You should consider carefully, in addition to the other information
contained in this prospectus supplement and the prospectus, the following
factors before purchasing the PHONES offered hereby.
RETURN ON PHONES DEPENDS ON AT&T COMMON STOCK
The terms of the PHONES differ from those of ordinary debt securities
because:
- the interest payments on the PHONES may change depending upon the
dividend policy of AT&T or any other reference company,
- the PHONES are exchangeable for cash in an amount based on the then
current market value of the reference shares, and
- the contingent principal amount of the PHONES will decrease if the
dividend rate on the reference shares increases.
Accordingly, the return that a holder of the PHONES will receive is not
comparable to that of an ordinary fixed income debt security issued by us.
The dividend policy of AT&T is entirely outside of our control. You should
not expect that the dividend rate on the AT&T common stock will remain the same
during the period the PHONES are outstanding.
It is impossible to predict whether the price of AT&T common stock will
rise or fall. Trading prices of AT&T common stock will be influenced by AT&T's
operational results and by complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally, the
New York Stock Exchange and the market segments of which AT&T is a part.
We currently hold 26.6 million shares of AT&T common stock. We may hold a
number of shares of AT&T common stock equal to the number of PHONES outstanding
until maturity or redemption of the PHONES and to sell such shares to pay the
amount due upon exchange, maturity or redemption of the PHONES. Although no
assurance can be given that such sales of the AT&T common stock will not
adversely affect the market for the AT&T common stock or the amount due upon
exchange, maturity or redemption, we have no reason to believe that any such
sales will have this effect.
You should read AT&T's publicly available documents for a discussion of the
risks and uncertainties associated with AT&T.
EFFECT OF FLUCTUATIONS IN AT&T COMMON STOCK ON OUR REPORTED EARNINGS (LOSS)
Applicable accounting rules require us to record any increase or decrease
in the market value of the PHONES that result from changes in the market value
of AT&T common stock to our statement of operations. Any increase or decrease in
the market value of the PHONES will be recorded as subtractions from, or
additions to, our reported net income. A significant increase in the market
value of AT&T common stock would significantly decrease our reported net income.
Similarly, a significant decrease in the market value of AT&T common stock would
significantly increase our reported net income. These increases and decreases in
reported investment income in our statement of operations will be non-cash in
nature and will be reflected on our balance sheet as increases and decreases in
long-term debt or other long-term liabilities.
We currently record our investment in the AT&T common stock at its market
value. Although we are not required to do so under the indenture, while the
PHONES remain outstanding we may hold shares of AT&T common stock at least equal
to the number of PHONES outstanding. If we do so, changes in the market value of
these shares of AT&T common stock would approximately offset any changes in
long-term debt or other long-term liabilities, resulting in no material effect
on our reported stockholders' equity.
We anticipate providing supplemental disclosure regarding our results of
operations without giving effect to changes in our reported results of
operations caused by fluctuations in the market value of AT&T common
S-6
<PAGE> 7
stock. We cannot anticipate, however, the effect our results of operations may
have on the market price of the PHONES or on our ability to secure additional
financing in the future.
LACK OF AFFILIATION BETWEEN COMCAST AND AT&T
We are not affiliated with AT&T, other than as a holder of the AT&T common
stock, and as of the date of this prospectus supplement we do not have any
material non-public information concerning AT&T. Although we have no knowledge
that any of the corporate events described below under "-- Dilution of the AT&T
common stock" are currently being contemplated by AT&T, such corporate events
are beyond our ability to control and are difficult to predict. Although we have
no reason to believe the information concerning AT&T included or referred to
herein is not reliable, neither we nor any of the underwriters warrant that
there have not occurred events, not yet publicly disclosed by AT&T, that would
affect either the accuracy or completeness of the information concerning AT&T
included or referred to in this prospectus supplement. See "What can you tell me
about AT&T?" in the "Summary Information -- Q&A" section of this prospectus
supplement. AT&T is not involved in the offering of the PHONES and has no
obligations with respect to the PHONES, including any obligation to take our
interests (other than as a holder of the AT&T common stock) or of holders of the
PHONES into consideration for any reason or under any circumstance. AT&T will
not receive any of the proceeds of the offering of the PHONES and is not
responsible for, and has not participated in, determining the timing of, prices
for or quantities of the PHONES offered hereby. AT&T is not involved with the
administration, marketing or trading of the PHONES nor in the preparation of
this prospectus supplement and has no obligations with respect to the amount to
be paid to holders of the PHONES upon exchange. Holders of the PHONES will not
be entitled to any rights, including voting rights or any cash dividends, other
than indirectly to the extent the payment of dividends affects the interest rate
and principal amount of the PHONES, with respect to the AT&T common stock.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET FOR THE PHONES
Although we will apply for the PHONES to be listed on the New York Stock
Exchange, we cannot predict how the PHONES will trade in the secondary market or
whether such market will be liquid or illiquid. If trading of the PHONES is
suspended for any reason, pricing information for the PHONES may be more
difficult to obtain, and the liquidity and market prices of the PHONES may be
adversely affected.
THE EXCHANGE RATE WILL NOT ADJUST FOR SOME DILUTIVE TRANSACTIONS INVOLVING THE
REFERENCE SHARES
If certain dilutive or anti-dilutive events occur with respect to the
reference shares, the number and type of such securities that will be used to
calculate the amount you will receive upon exchange of a PHONES will be adjusted
to reflect such events. See "Description of PHONES -- Dilution Adjustments" in
this prospectus supplement. These adjustments will not take into account certain
other events, such as offerings of the AT&T common stock for cash, or business
acquisitions by AT&T with the AT&T common stock that may adversely affect the
price of the AT&T common stock and may adversely affect the trading price of and
market value of the PHONES. We cannot assure you that AT&T will not make
offerings of the AT&T common stock or other equity securities or such business
acquisitions in the future.
FACTORS AFFECTING OUR FUTURE OPERATIONS
The cable communications industry and the provision of programming content
may be affected by, among other things:
- changes in laws and regulations,
- changes in the competitive environment,
- changes in technology,
- franchise related matters,
S-7
<PAGE> 8
- market conditions that may adversely affect the availability of debt and
equity financing for working capital, capital expenditures or other
purposes,
- demand for the programming content we distribute or the willingness of
other video program providers to carry our content, and
- general economic conditions.
ABSENCE OF COVENANT PROTECTION; NO SECURITY INTEREST IN AT&T COMMON STOCK;
SUBORDINATION
The indenture will not limit our ability to incur additional indebtedness,
or to grant liens on assets to secure indebtedness, to pay dividends or to
repurchase shares of capital stock. The Indenture does not contain any
provisions specifically intended to protect holders of the PHONES in the event
of a future highly leveraged transaction involving us.
The PHONES are subordinated obligations of Comcast Corporation and are not
secured by any of our assets, including the shares of AT&T common stock that we
currently own.
Our obligations under the PHONES are subordinated. The subordination
provisions in the Indenture provide that we may not make payment on the PHONES
upon the default in payment in respect of our indebtedness ranking senior to the
PHONES. At December 31, 1998, we had $5.6 billion of indebtedness ranking senior
to the PHONES, including indebtedness of our subsidiaries which ranks
effectively senior to the PHONES. The holders of approximately $1.1 billion of
such indebtedness are also entitled to block payments to holders of PHONES,
including distribution and payments upon exchange, if certain other events of
default occur under the instruments governing this indebtedness.
COMPETITION
AT&T recently acquired Tele-Communications, Inc. which is in the business
of construction, acquisition, ownership and operation of cable television
systems. In the future, we and AT&T may compete, directly or indirectly. There
can be no assurance that any competition between us and AT&T would not adversely
affect the price of AT&T common stock, the price of the PHONES or our financial
results.
OTHER CONSIDERATIONS INCLUDING TAX CONSIDERATIONS
It is suggested that if you are considering purchasing the PHONES, you
should reach an investment decision only after consulting with your advisors as
to the suitability of an investment in the PHONES in light of your particular
circumstances. You should also consider the tax consequences of investing in the
PHONES. You will be required to include amounts in income, as ordinary income,
in advance of the receipt of the cash attributable thereto. The amount of
interest income required to be included by you for each year will be in excess
of the stated interest payment you receive. See "Certain United States Federal
Income Tax Considerations" in this prospectus supplement.
S-8
<PAGE> 9
PRICE RANGE AND DIVIDEND HISTORY OF THE AT&T COMMON STOCK
AT&T common stock is listed and traded on the NYSE under the symbol "T".
The following table sets forth, for the calendar quarters indicated (ended
March 31, June 30, September 30 and December 31), the range of high and low
sales prices of AT&T common stock as reported on the NYSE Composite Tape and the
regular quarterly dividend paid in each calendar quarter.
<TABLE>
<CAPTION>
AT&T
COMMON STOCK
------------------------------
QUARTERLY
HIGH LOW DIVIDEND
---- --- ---------
<S> <C> <C> <C>
1997:
First quarter............................................. 42 5/8 34 1/8 0.33
Second quarter............................................ 38 1/2 30 3/4 0.33
Third quarter............................................. 46 1/8 34 0.33
Fourth quarter............................................ 64 43 0.33
1998:
First quarter............................................. 68 1/2 57 3/8 0.33
Second quarter............................................ 67 3/8 56 1/8 0.33
Third quarter............................................. 61 3/8 48 3/8 0.33
Fourth quarter............................................ 79 56 3/16 0.33
1999:
First quarter (through March 8)........................... 96 1/8 76 1/2 0.33
</TABLE>
The quarterly dividends described above do not include the dividend, in the
form of shares of NCR Corporation, paid by AT&T in January 1997.
See the cover of this prospectus supplement for the last reported sales
price of AT&T common stock on the NYSE as of a recent date.
THE COMPANY
We are principally engaged both in developing, managing and operating
hybrid fiber-coaxial broadband cable communications networks and in providing
programming content, primarily through QVC, our electronic retailing subsidiary.
We are currently the fourth-largest cable communications system operator in the
United States and are in the process of implementing high-speed Internet access
service and digital video applications to enhance the products available on our
cable networks.
Our consolidated cable operations served approximately 4.5 million
subscribers and passed approximately 7.4 million homes in the United States as
of December 31, 1998. We own interests in other cable communications companies
serving more than 237,000 subscribers. We expect to complete transactions in
1999 that will give us an ownership and management interest in cable systems
which, upon closing of certain pending transactions, will serve approximately
1.1 million subscribers.
We provide programming content through our majority-owned subsidiaries,
QVC, Inc. and E! Entertainment Television, Inc., and through other programming
investments, including Comcast SportsNet, The Golf Channel, Speedvision and
Outdoor Life. Through QVC, we market a wide variety of products directly to
consumers primarily on merchandise-focused television programs. As of December
31, 1998, QVC was available, on a full and part-time basis, to over 70 million
homes in the United States, over 7.3 million homes in the United Kingdom and
Ireland and over 14 million homes in Germany.
We are a Pennsylvania corporation that was organized in 1969. We have our
principal executive offices at 1500 Market Street, Philadelphia, PA 19102-2148.
Our telephone number is (215) 665-1700. We also have a world wide web site at
http://www.comcast.com. The information posted on our web site is not
incorporated into this prospectus supplement.
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USE OF PROCEEDS
We estimate that the net proceeds from the offering will be $ ($ if
the underwriters exercise their over-allotment option in full). We will use the
proceeds for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
In the table below, earnings consist of income (loss) before extraordinary
items, income tax expense, equity in net losses of affiliates and fixed charges.
Fixed charges consist of interest expense and capitalized interest.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................ 5.54x 1.45x 1.45x 1.48x --(1)
</TABLE>
- ---------------
(1) Earnings were insufficient to cover Fixed Charges by $6.4 million for the
year ended December 31, 1994.
DESCRIPTION OF PHONES
GENERAL
The following description of the PHONES (referred to as the "Subordinated
Debentures" in the accompanying prospectus) supplements and, to the extent
inconsistent with, supersedes the general terms of the Debentures and
Subordinated Debentures in the accompanying prospectus. The terms of the PHONES
include those stated in the indenture under which the PHONES will be issued and
those made part of that indenture by reference to the Trust Indenture Act of
1939, as amended. The PHONES are subject to all such terms, and you should read
the indenture and the Trust Indenture Act for a statement of them. Although we
have summarized certain provisions of the indenture below, this summary is not
complete and is qualified in its entirety by reference to the indenture. A copy
of the proposed form of indenture has been filed as an exhibit to the
Registration Statement we have filed with the SEC that provides for the offering
of the Subordinated Debentures.
The indenture does not limit the aggregate principal amount of indebtedness
which may be issued under it and provides that debt securities may be issued
thereunder from time to time in one or more series. The PHONES constitute a
separate series under the indenture.
The PHONES will be unsecured, subordinated obligations of Comcast
Corporation limited to 8,700,000 PHONES (10,000,000 PHONES if the Underwriters
exercise their over-allotment option in full) and will mature on May 15, 2029,
unless extended as described below. The principal amount of each PHONES will be
payable at the office of the Paying Agent, initially the Trustee, in the Borough
of Manhattan, The City of New York, and any other office of the Paying Agent
maintained for such purpose.
INTEREST
We will make quarterly interest payments on the PHONES in an amount equal
to $ , or % of the original principal amount, plus the amount of the
quarterly cash dividend paid on the reference shares.
Interest on the PHONES will accrue from the date we issue the PHONES. We
will pay this interest quarterly in arrears on February 15, May 15, August 15
and November 15 of each year, beginning May 15, 1999, but subject to our right
to defer quarterly payments of interest. Our payment on May 15, 1999, will equal
$ per PHONES, which is calculated to equal an annual rate of % on the
original principal amount from the date of original issuance of the PHONES plus
the quarterly cash dividend paid on the reference shares between February 15 and
May 15, 1999.
We will also distribute, as additional interest on the PHONES, any property
distributed on or with respect to the reference shares (other than publicly
traded equity securities, which will themselves become
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reference shares). If any property that is not publicly traded is distributed on
the reference shares, we will pay you the fair market value of that property as
determined in good faith by our board of directors. We will distribute the
property, or the cash value of the property, to you within 30 days after it is
distributed on the reference shares.
If interest is payable on a date that is not a Business Day (as defined at
the end of this paragraph), payment will be made on the next Business Day (and
without any interest or other payment in respect of such delay). However, if the
next Business Day is in the next calendar year, payment of interest will be made
on the preceding Business Day. A "Business Day" means each day except Saturday,
Sunday and any day on which banking institutions in The City of New York are
authorized or required by law to close.
Principal, premium, if any, and interest on the PHONES will be payable at
the office or agency we maintain for such purpose within The City and State of
New York or, at our option, payment of interest may be made by check mailed to
the holders of the PHONES at their respective addresses set forth in the
register of holders of PHONES; provided that all payments with respect to
PHONES, the holders of which have given wire transfer instructions, on or prior
to the relevant record date, to the paying agent, will be required to be made by
wire transfer of immediately available funds to the accounts specified by such
holders. Until we otherwise designate, our office or agency in New York will be
the office of the Trustee maintained for such purpose. The PHONES will be issued
in denominations of one PHONES and integral multiples thereof.
DEFERRAL OF INTEREST PAYMENTS
If no event of default has occurred and is continuing under the PHONES, we
can, on one or more occasions, defer quarterly interest payments on the PHONES
for up to 20 consecutive quarterly periods. A deferral of interest payments
cannot extend, however, beyond the maturity date of the PHONES. We cannot defer
distributions of additional interest.
If we defer quarterly payments of interest, the contingent principal amount
of the PHONES will be increased by the amount of the deferral and the early
exchange ratio will increase to 100%. Once we make all interest payments on the
PHONES, with accrued interest at an annual rate of %, we can again postpone
interest payments on the PHONES so long as no event of default under the PHONES
has occurred and is continuing. During any deferral period, we may at our
option, but are not obligated to, increase the amount of reference shares you
get for each PHONES by an annual rate of %. If we elect to make this increase,
we will be deemed current on our quarterly payments of interest.
We will give the Trustee notice if we decide to defer interest payments on
the PHONES. We will give that notice one Business Day before the earlier of:
- the next date interest on the PHONES is payable; or
- the date we are required to give notice to the NYSE (or any other
applicable self-regulatory organization) or to holders of the PHONES of
the record date or the date any distribution is payable.
We have no current intention of deferring interest payments on the PHONES.
PRINCIPAL AMOUNT
The original principal amount per PHONES initially will be equal to the
purchase price thereof, or $ . The minimum amount payable upon redemption or
maturity of a PHONES (the "contingent principal amount") will initially be equal
to the original principal amount. The contingent principal amount will be
reduced on a quarterly basis to the extent necessary so that the yield to the
date of computation (including all quarterly interest payments and the fair
market value of any additional interest payments) does not exceed %. If such
adjustments result in a reduction of the contingent principal amount to zero, it
will not be readjusted thereafter and will remain zero.
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EXCHANGE OPTION
You may at any time after March , 2000 (one year from the date of
original issuance) exchange a PHONES for an amount of cash equal to 95% (which
we refer to as the "early exchange ratio") of the exchange market value of one
reference share. If the maturity of the PHONES is extended to May 15, 2059, then
you may exchange a PHONES at any time following May 15, 2029 for an amount of
cash equal to the exchange market value of one reference share. We will pay you
the amount due upon exchange as soon as reasonably practicable after you deliver
an exchange notice to the Trustee, but in no event earlier than three Trading
Days after the date of such notice or later than ten Trading Days after the date
of such notice.
"Exchange market value" means the Closing Price (as defined below) on the
Trading Day (as defined below) following the date you deliver an exchange notice
to the Trustee, unless more than 1,000,000 PHONES have been delivered for
exchange on such date. If more than 1,000,000 PHONES have been delivered for
exchange, then the exchange market value shall be the average Closing Price on
the five Trading Days following such date.
You may exercise such right as follows:
- complete and manually sign an exchange notice in the form available from
the Trustee and deliver such notice to the Trustee at the office
maintained by the Trustee for such purpose,
- surrender the PHONES to the Trustee,
- if required, furnish appropriate endorsements and transfer documents, and
- if required, pay all transfer or similar taxes.
Pursuant to the Indenture, the date on which all of the foregoing
requirements have been satisfied is the redemption date with respect to the
PHONES delivered for exchange.
We currently hold 26.6 million shares of AT&T common stock. We may hold a
number of shares of AT&T common stock equal to the number of PHONES outstanding
until maturity or redemption of the PHONES and to sell such shares to pay the
amount due upon exchange, maturity or redemption of the PHONES. Although no
assurance can be given that such sales of the AT&T common stock will not
adversely affect the market for the AT&T common stock or the amount due upon
exchange, maturity or redemption, we have no reason to believe that any such
sales will have this effect.
REDEMPTION
We may redeem the PHONES at a redemption price equal to the sum of (a)
$ if we redeem the PHONES prior to May 15, 2000, $ if we redeem the
PHONES prior to May 15, 2001, $ if we redeem the PHONES prior to May 15,
2002, or zero if we redeem the PHONES any time on or after May 15, 2002, and (b)
the higher of the contingent principal amount of the PHONES and the sum of the
current market value of the reference shares plus any deferred quarterly
payments of interest. We, however, may not redeem the PHONES after a record date
for dividends or other distributions on the reference shares and prior to the
payment date for that dividend on other distributions.
The "current market value" (other than in the case of a Rollover Offering,
which is described below) is defined as the average Closing Price per reference
share on the twenty Trading Days immediately prior to (but not including) the
fifth Business Day preceding the redemption date; provided, however, that for
purposes of determining the payment required upon a redemption in connection
with a Rollover Offering, "current market value" means the Closing Price per
reference share on the Trading Day immediately preceding the date that the
Rollover Offering is priced (the "Pricing Date") or, if the Rollover Offering is
priced after 4:00 p.m., New York City Time, on the Pricing Date, the Closing
Price per share on the Pricing Date except that if there is not a Trading Day
immediately preceding the Pricing Date or (where pricing occurs after 4:00 p.m.,
New York City Time, on the Pricing Date) if the Pricing Date is not a Trading
Day, "current market value" means the market value per reference share as of the
redemption date as determined by a nationally recognized independent investment
banking firm retained by the Company. "Rollover Offering" means an offering or
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refinancing of the PHONES or sale of the reference shares effected not earlier
than May 15, 2002 by means of a completed public offering or offerings (which
may include one or more exchange offers) by us. The Trustee will notify you of
any election to redeem your PHONES in connection with a Rollover Offering not
less than 30 nor more than 90 days prior to the redemption date.
The "Closing Price" of any security on any date of determination means the
closing sale price (or, if no Closing Price is reported, the last reported sale
price) of such security (regular way) on the NYSE on such date or, if such
security is not listed for trading on the NYSE on any such date, as reported in
the composite transactions for the principal United States securities exchange
on which such security is so listed, or if such security is not so listed on a
United States national or regional securities exchange, as reported by the
NASDAQ National Market, or if such security is not so reported, the last quoted
bid price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization. For purposes of determining
the redemption price, the Closing Price of any security on any day prior to any
"ex-dividend" date occurring during the relevant five Trading Day period for any
dividend paid or to be paid with respect to such security shall be reduced by
the amount of such dividend.
A "Trading Day" is defined as a day on which the security, the Closing
Price of which is being determined, (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the national
or regional securities exchange or association or over-the-counter market that
is the primary market for the trading of such security.
We will give you 20 Business Days notice before any redemption of PHONES
and will irrevocably deposit with the Trustee sufficient funds to pay the
redemption amount for the PHONES being redeemed. Distributions to be paid on or
before the redemption date for any PHONES called for redemption will be payable
to the holders on the record dates for the related dates of distribution.
Once notice of redemption is given and funds are irrevocably deposited,
interest on the PHONES will cease to accrue and all rights of the holders of the
PHONES called for redemption will cease, except for the right of holders to
receive the redemption amount (but without interest on such redemption amount).
If any redemption date is not a Business Day, then the redemption amount
will be payable on the next Business Day (and without any interest or other
payment in respect of any such delay). However, if the next Business Day is in
the next calendar year, the redemption amount will be payable on the preceding
Business Day.
If payment of the redemption amount for any PHONES called for redemption is
improperly withheld or refused and not paid by us, interest on the PHONES will
continue to accrue at an annual rate of % from the original redemption date
scheduled to the actual date of payment. In this case, the actual payment date
will be the redemption date for purposes of calculating the redemption amount.
In compliance with applicable law (including the United States federal
securities laws), we and our affiliates may, at any time, purchase outstanding
PHONES by tender, in the open market, or by private agreement.
SUBORDINATION
The PHONES are unsecured and are junior in right of payment to all our
Senior Indebtedness (as we define below). This means that no payment on the
Subordinated Notes may be made if:
- any of our Senior Indebtedness is not paid when due, any applicable grace
period with respect to any such non-payment default has ended and such
default has not been cured or waived or ceased to exist; or
- if the maturity of any of our Senior Indebtedness has been accelerated
because of a default.
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In addition, the holders of certain Senior Indebtedness may block payments
on the PHONES, including distributions and payments on exchange, upon the
occurrence of other defaults under the instrument pursuant to which such Senior
Indebtedness was issued.
On any distribution of our assets to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
premium, if any, and interest due or to become due on, all our Senior
Indebtedness must be paid in full before the holders of the PHONES are entitled
to receive or retain any payment. Once such Senior Indebtedness has been paid in
full, the holders of the PHONES will assume the rights of the holders of our
Senior Indebtedness to receive any remaining payments or distributions
applicable to Senior Indebtedness until all amounts owing on the PHONES are paid
in full.
SENIOR INDEBTEDNESS MEANS:
- principal, premium and interest on:
(1) indebtedness for money borrowed by Comcast Corporation;
(2) indebtedness for money borrowed by another person, in which
Comcast Corporation has an equity interest or has the right to
purchase an equity interest, and guaranteed directly or indirectly
by Comcast Corporation; or
(3) indebtedness constituting purchase money indebtedness for which
Comcast Corporation is directly or contingently liable;
- any obligation to purchase or guarantee indebtedness of, to supply funds
to or invest in, another person in which Comcast Corporation has an
equity interest or has the right to purchase an equity interest;
- any obligation of Comcast Corporation to any person in respect of surety
or similar bonds issued by such person in connection with entering into,
renewing or extending any cable television franchise granted by a
governmental authority or any construction in respect of any cable
television system by Comcast Corporation or any other person in which
Comcast Corporation has an equity interest or has the right to purchase
an equity interest; and
- all renewals, extensions or refundings of any such obligations,
indebtedness and guarantees.
Senior Indebtedness does not include any indebtedness that is by its terms
junior or equal with the PHONES. The PHONES rank equally with all existing and
future subordinated debt and trade obligations of Comcast.
The PHONES do not limit our ability or that of our subsidiaries to incur
additional indebtedness, including indebtedness that ranks senior in priority of
payment to the PHONES. As of December 31, 1998, the total amount of Senior
Indebtedness of Comcast and the total amount of indebtedness of Comcast's
consolidated subsidiaries that would have effectively ranked senior to the
PHONES would have been approximately $5.6 billion.
DILUTION ADJUSTMENTS
For purposes hereof "reference company" means AT&T and any other issuer of
a reference share. A "reference share" means, collectively (A) one share of AT&T
common stock and (B) each share of publicly traded equity securities received by
a holder of a reference share in respect of such share of the AT&T common stock
or other reference shares (either directly or as the result of successive
applications of this paragraph) upon the following events: (i) the distribution
on or in respect of a reference share in reference shares, (ii) the combination
of reference shares into a smaller number of shares or other units, (iii) the
subdivision of outstanding shares or other units of reference shares, (iv) the
conversion or reclassification of reference shares by issuance or exchange of
other securities, (v) any consolidation or merger of a reference company, or any
surviving entity or subsequent surviving entity of a reference company (a
"reference company successor"), with or into another entity (other than a merger
or consolidation in which the reference company
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is the continuing corporation and in which the reference company common stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the reference company or another
corporation), (vi) any statutory exchange of securities of reference company or
any reference company successor with another corporation (other than in
connection with a merger or acquisition and other than a statutory exchange of
securities in which the reference company is the continuing corporation and in
which the reference company common stock outstanding immediately prior to the
statutory exchange is not exchanged for cash, securities or other property of
the reference company or another corporation), and (vii) any liquidation,
dissolution or winding up of the reference company or any reference company
successor. As described above under "Interest," we will pay as additional
interest to holders of the PHONES any property received in distribution on a
reference share, unless it is also a reference share, in which case it shall
become part of a reference share. Upon any distribution of fractional shares or
units of securities, other than fractional reference shares, we will pay the
holders cash in lieu of distribution such fractional shares or other units.
During the pendency of a bona fide tender offer for more than 50% of the
reference shares, the early exchange ratio will increase to 100%. No other
adjustments will be made in the case of a tender or exchange offer for all or
any portion of the reference shares.
BOOK-ENTRY-ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The PHONES will be represented by one or more global securities that will
be deposited with and registered in the name of DTC or its nominee. This means
that we will not issue certificates to you for the PHONES. Each global security
will be issued to DTC which will keep a computerized record of its participants
(for example, a broker) whose clients have purchased the PHONES. Each
participant will then keep a record of its clients. Unless it is exchanged in
whole or in part for a certificated security, a global security may not be
transferred. However, DTC, its nominees and their successors may transfer a
global security as a whole to one another.
Beneficial interests in a global security will be shown on, and transfers
of the global security will be made only through, records maintained by DTC and
its participants. DTC has provided us with the following information: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds securities that its participants ("direct participants") deposit
with DTC. DTC also records the settlement among direct participants of
securities transactions, such as transfers and pledges, in deposited securities
through computerized records for direct participants' accounts. This eliminates
the need to exchange certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
direct participant. The rules that apply to DTC and its participants are on file
with the SEC.
DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc.
When you purchase PHONES through the DTC system, the purchases must be made
by or through a direct participant, who will receive credit for the PHONES on
DTC's records. Since you do not actually own the PHONES, you are the beneficial
owner. Your ownership interest will only be recorded on the direct (or indirect)
participants' records. DTC has no knowledge of your individual ownership of the
PHONES. DTC's records only show the identity of the direct participants and the
amount of the PHONES held by or through them. You will not receive a written
confirmation of your purchase or sale or any periodic account statement directly
from DTC. You will receive these from your direct (or indirect) participant. As
a result, the direct (or indirect) participants are responsible for keeping
accurate account of the holdings of their customers like you.
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Payments on the PHONES will be wired to DTC's nominee. We will treat DTC's
nominee as the owner of each global security for all purposes. Accordingly, we,
the Trustee and any paying agent will have no direct responsibility or liability
to pay amounts due on the global security to you or any other beneficial owners
in the global security.
Any redemption notices will be sent by us directly to DTC, who will in turn
inform the direct participants, who will then contact you as a beneficial
holder. If less than all of the PHONES are being redeemed, DTC's practice is to
choose by lot the amount of the interest of each direct participant to be
redeemed. The direct participant will then use an appropriate method to allocate
the redemption among its beneficial holders, like you.
It is DTC's current practice, upon receipt of any payment of distributions
or liquidation amount, to credit direct participants' accounts on the payment
date based on their holdings of beneficial interests in the global securities as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to direct participants whose accounts are credited
with PHONES on a record date, by using an omnibus proxy. Payments by
participants to owners of beneficial interests in the global securities, and
voting by participants, will be based on the customary practices between the
participants and owners of beneficial interests, as is the case with PHONES held
for the account of customers registered in "street name." However, payments will
be the responsibility of the participants and not of DTC, us or the Trustee.
PHONES represented by a global security will be exchangeable for
certificated securities with the same terms in authorized denominations only if:
- DTC is unwilling or unable to continue as depositary or if DTC ceases to
be a clearing agency registered under applicable law and a successor
depositary is not appointed by us within 90 days; or
- we decide to discontinue use of the system of book-entry transfer through
DTC (or any successor depositary).
If the book-entry-only system is discontinued, the Trustee will keep the
registration books for the PHONES at its corporate office and follow the
practices and procedures discussed below.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Davis Polk & Wardwell, tax counsel to the Company, the
following describes the material United States federal income tax consequences
of the acquisition, ownership, exchange and disposition of PHONES to an initial
holder purchasing PHONES at the "Issue Price." The "Issue Price" is the first
price to the public at which a substantial amount of the PHONES is sold
(excluding sales to bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers). This
summary is based upon the United States Internal Revenue Code of 1986, as
amended (the "Code"), administrative pronouncements, judicial decisions, and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of this prospectus supplement may affect the tax consequences
described herein, possibly with retroactive effect. This summary deals only with
PHONES that are held as capital assets within the meaning of Section 1221 of the
Code, and does not address tax considerations applicable to holders that may be
subject to special tax rules, such as dealers or traders in securities,
financial institutions, tax-exempt entities, holders that hold PHONES as a part
of a hedging transaction, straddle, conversion transaction or other integrated
transaction, or U.S. Holders (as defined below) whose functional currency is not
the United States dollar.
THE DISCUSSION SET OUT BELOW IS INTENDED ONLY AS A SUMMARY OF CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PHONES.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE PHONES, INCLUDING THE APPLICATION TO THEIR
PARTICULAR SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL AS THE
APPLICATION OF STATE, LOCAL OR FOREIGN TAX LAWS.
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"U.S. Holder" means a beneficial owner of PHONES that is, for United States
federal income tax purposes, an individual citizen or resident of the United
States, a corporation created or organized in or under the laws of the United
States or any political subdivision thereof, or an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source. "Non-U.S. Holder" means a beneficial owner that is, for United States
federal income tax purposes, a nonresident alien individual, a foreign
corporation, or a nonresident alien fiduciary of a foreign estate or trust.
TAX CONSEQUENCES TO U.S. HOLDERS
Interest Accrual on the PHONES. For U.S. federal income tax purposes, the
PHONES will be subject to Treasury Regulations relating to contingent payment
debt instruments (the "Contingent Payment Debt Regulations"). Under the
Contingent Payment Debt Regulations, a U.S. Holder will be required to accrue
interest income on the PHONES (in amounts described in the succeeding paragraph)
regardless of whether such U.S. Holder uses the cash or accrual method of tax
accounting. As a result, a U.S. Holder will be required to include interest in
taxable income each year in excess of the stated interest received in that year.
Under the Contingent Payment Debt Regulations, for each accrual period
prior to and including the maturity date (or, if applicable, the extended
maturity date) of the PHONES, the amount of interest that accrues, as original
issue discount, on PHONES equals the product of (i) the "Adjusted Issue Price"
(as of the beginning of the accrual period) and (ii) the "Comparable Yield"
(adjusted for the length of the accrual period). This amount is ratably
allocated to each day in the accrual period and is includable as ordinary
interest income by a U.S. Holder for each day in the accrual period on which the
U.S. Holder holds the PHONES. The Adjusted Issue Price is the Issue Price of the
PHONES, increased by any interest previously accrued and decreased by the amount
of any Projected Payments (as defined in the succeeding paragraph) with respect
to the PHONES. The Comparable Yield is the annual yield we would pay, as of the
issue date, on a fixed-rate debenture with no exchange right or other contingent
payment but with terms and conditions otherwise comparable to those of the
PHONES. Amounts treated as interest under the Contingent Payment Debt
Regulations are treated as original issue discount for all purposes of the Code.
We have determined that the Comparable Yield is %, compounded
quarterly. Under the Contingent Payment Debt Regulations, we are required,
solely for U.S. federal income tax purposes, to provide a schedule (the
"Schedule") of the projected amounts of payments (the "Projected Payments") on
the PHONES. The Schedule must produce the Comparable Yield. Based on our
determination of the Comparable Yield, the Schedule for the PHONES (assuming a
principal amount of $ or with respect to each integral multiple
thereof) consists of payments of stated interest equal to $ on all interest
payment dates and payment of a projected amount at the extended maturity date of
the PHONES in 2059 (excluding the stated interest on the PHONES payable on such
date), equal to $ . For U.S. federal income tax purposes, a U.S. Holder
is required to use the Comparable Yield and the Schedule in determining its
interest accruals and adjustments thereof in respect of the PHONES, unless such
U.S. Holder timely discloses and justifies the use of other estimates to the
Internal Revenue Service (the "IRS").
THE COMPARABLE YIELD AND THE SCHEDULE ARE NOT PROVIDED FOR ANY PURPOSE
OTHER THAN THE DETERMINATION OF HOLDERS' INTEREST ACCRUALS AND ADJUSTMENTS
THEREOF IN RESPECT OF THE PHONES FOR U.S. FEDERAL INCOME TAX PURPOSES AND DO NOT
CONSTITUTE A REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE ON THE PHONES.
Adjustments to Interest Accruals. If, during any taxable year, the sum of
any actual payments with respect to PHONES for that taxable year (including, in
the case of the taxable year which includes the maturity date (or, if
applicable, the extended maturity date) of the PHONES, the amount of cash
received at maturity) exceeds the total amount of Projected Payments for that
taxable year, the difference will produce a "Net Positive Adjustment" under the
Contingent Payment Debt Regulations, which will be treated as additional
interest for the taxable year. For this purpose, the payments in a taxable year
include the fair market value of property received in that year. If the actual
amount received in a taxable year is less than the amount of Projected Payments
for that taxable year, the difference will produce a "Net Negative Adjustment"
under
S-17
<PAGE> 18
the Contingent Payment Debt Regulations, which will (i) reduce the U.S. Holder's
interest income for that taxable year and (ii) to the extent of any excess after
the application of (i), give rise to an ordinary loss to the extent of the U.S.
Holder's interest income on the PHONES during prior taxable years (reduced to
the extent such interest was offset by prior Net Negative Adjustments).
Sale or Exchange of the PHONES. Upon the sale, exchange or retirement of
PHONES (including, for instance, an exchange at the U.S. Holder's option for
cash determined by reference to the value of AT&T common stock or the redemption
of PHONES by us) prior to the maturity date (or, if applicable, the extended
maturity date), the U.S. Holder will recognize gain or loss equal to the
difference between the amount realized and the U.S. Holder's "Adjusted Basis."
The Adjusted Basis will be the U.S. Holder's original basis in the PHONES,
increased by the interest income previously included by the U.S. Holder with
respect to the PHONES (determined without regard to any adjustments described in
the preceding paragraph) and decreased by the amount of all prior Projected
Payments with respect to the PHONES. Any gain upon sale or exchange of the
PHONES will be ordinary interest income; any loss will be ordinary loss to the
extent of the interest previously included in income by the U.S. Holder with
respect to the PHONES, and thereafter, capital loss. The distinction between
capital loss and ordinary loss is potentially significant in several respects.
For example, limitations apply to a U.S. Holder's ability to offset capital
losses against ordinary income.
Extension of Maturity. An extension of the maturity date of the PHONES
will not result in a taxable event to U.S. Holders.
Backup Withholding. Certain noncorporate U.S. Holders may be subject to
backup withholding at a rate of 31% on payments of principal, premium, if any,
and interest (including original issue discount) on, and the proceeds of
disposition of, the PHONES. Backup withholding will apply only if the U.S.
Holder (i) fails to furnish its Taxpayer Identification Number ("TIN") which,
for an individual, would be his or her Social Security number, (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that it has failed to properly
report payments of interest and dividends or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that it is subject to backup withholding
for failure to report interest and dividend payments. U.S. Holders should
consult their tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption if
applicable.
The amount of any backup withholding from a payment to a U.S. Holder will
be allowed as a credit against such U.S. Holder's U.S. federal income tax
liability and may entitle such U.S. Holder to a refund; provided that the
required information is furnished to the IRS.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Withholding. Under present United States federal income tax law, and
subject to the discussion below concerning backup withholding, payments of
principal, premium (if any) and interest (including original issue discount) on
the PHONES by us or any paying agent to any Non-U.S. Holder, and gain realized
on the sale or exchange of such PHONES by a Non-U.S. Holder will be exempt from
United States federal income or withholding tax (such exemption from withholding
tax, the "Portfolio Interest Exemption"), provided that: (i) such Non-U.S.
Holder does not own, actually or constructively, 10 percent or more of the total
combined voting power of all classes of our stock entitled to vote, is not a
controlled foreign corporation related, directly or indirectly, to us through
stock ownership, and is not a bank receiving interest described in Section
881(c)(3)(A) of the Code; (ii) the statement requirement set forth in Section
871(h) or Section 881(c) of the Code has been fulfilled with respect to the
beneficial owner, as discussed below; (iii) such Non-U.S. Holder is not an
individual who is present in the United States for 183 days or more in the
taxable year of disposition, or such individual does not have a "tax home" (as
defined in Section 911(d)(3) of the Code) or an office or other fixed place of
business in the United States; (iv) such payments and gain are not effectively
connected with the conduct by such Non-U.S. Holder of a trade or business in the
United States and (v) the AT&T common stock continues to be actively traded
within the meaning of Section 871(h)(4)(C)(v)(I) of the Code (which, for these
purposes and subject to certain exceptions, includes trading on the NYSE).
S-18
<PAGE> 19
The statement requirement referred to in the preceding paragraph will be
fulfilled if the beneficial owner of a PHONES certifies on IRS Form W-8, under
penalties of perjury, that it is not a United States person and provides its
name and address, and (i) such beneficial owner files such Form W-8 with the
withholding agent or (ii), in the case of a PHONES held by a securities clearing
organization, bank or other financial institution holding customers' securities
in the ordinary course of its trade or business holding the PHONES on behalf of
the beneficial owner, such financial institution files with the withholding
agent a statement that it has received the Form W-8 from the Holder and
furnishes the withholding agent with a copy thereof. With respect to PHONES held
by a foreign partnership, under current law, the Form W-8 may be provided by the
foreign partnership. However, unless a foreign partnership has entered into a
withholding agreement with the IRS, for interest (including original issue
discount) and disposition proceeds paid with respect to a PHONES after December
31, 1999, the foreign partnership will be required (and may be permitted
earlier), in addition to providing an intermediary Form W-8, to attach an
appropriate certification by each partner. Prospective investors, including
foreign partnerships and their partners, should consult their tax advisers
regarding possible additional reporting requirements.
If a Non-U.S. Holder of the PHONES is engaged in a trade or business in the
United States, and if interest on the PHONES is effectively connected with the
conduct of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will generally be subject
to regular U.S. federal income tax on interest and on any gain realized on the
sale or exchange of the PHONES in the same manner as if it were a U.S. Holder.
In lieu of the certificate described in the preceding paragraph, such a Non-U.S.
Holder will be required to provide to the withholding agent a properly executed
IRS Form 4224 (or successor form) in order to claim an exemption from
withholding tax. In addition, if such a Non-U.S. Holder is a foreign
corporation, such Holder may be subject to a branch profits tax equal to 30% (or
such lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments.
Estate Tax. Under Section 2105(b) of the Code, the PHONES held by an
individual who is a Non-U.S. Holder at the time of his death will not be subject
to U.S. federal estate tax as a result of such individual's death, provided that
(i) the individual does not own, actually or constructively, 10 percent or more
of the total combined voting power of all classes of our stock entitled to vote
and (ii) at the time of such individual's death, payments with respect to such
PHONES would not have been effectively connected with the conduct by such
individual of a trade or business in the United States.
Backup Withholding and Information Reporting. Backup withholding (at the
rate of 31%) will not apply to payments made by us or a paying agent on the
PHONES if the certifications required by Sections 871(h) and 881(c) are
received, provided in each case that we or such paying agent, as the case may
be, does not have actual knowledge (and, with respect to payments made after
December 31, 1999, does not have reason to know) that the payee is a United
States person.
Interest on the PHONES that is beneficially owned by a Non-U.S. Holder will
be reported annually on IRS Form 1042-S, which must be filed with the IRS and
furnished to such Non-U.S. Holder. Non-U.S. Holders of PHONES should consult
their tax advisers regarding the application of information reporting and backup
withholding in their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if available. Any
amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such Non-U.S. Holder's
U.S. federal income tax liability and may entitle such Non-U.S. Holder to a
refund, provided that the required information is furnished to the IRS.
S-19
<PAGE> 20
UNDERWRITING
GENERAL
Based on the terms and conditions of a purchase agreement, we have agreed
to sell to each of the underwriters named below, and each of the underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as the
representative has severally agreed to purchase, the number of PHONES set forth
opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
PHONES
UNDERWRITERS ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Credit Suisse First Boston Corporation......................
Goldman, Sachs & Co. .......................................
Salomon Smith Barney Inc. ..................................
Bear, Stearns & Co. Inc. ...................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Lazard Freres & Co. LLC.....................................
---------
Total.......................................... 8,700,000
=========
</TABLE>
The underwriters are obligated to purchase all of the PHONES, if any PHONES
are purchased.
We have agreed with the underwriters to indemnify them against certain
civil liabilities, including liabilities under the Securities Act of 1933, or to
contribute with respect to payments which the underwriters may be required to
make.
The underwriters have in the past and may in the future engage in
transactions with, or perform services for, us or our subsidiaries in the
ordinary course of their businesses.
We will pay all of our expenses, estimated to be $450,000, associated with
the offer and sale of the PHONES.
COMMISSIONS AND DISCOUNTS
The underwriters will offer the PHONES directly to the public at
$ per PHONES. The underwriters may also offer the PHONES to certain
securities dealers at the above mentioned offering price less a concession of
$ per PHONES. The underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per PHONES to certain brokers and
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The representative has advised us that it intends to make a market in the
PHONES; however, it is not obligated to do so and may discontinue market making
at any time without notice. We can not give any assurance about the liquidity of
the trading market for the PHONES.
OVER-ALLOTMENT OPTION
The underwriters have an option to purchase up to 1,300,000 additional
PHONES at the public offering price to cover over-allotments. The underwriters
can exercise this option for a period of 30 days after the date of this
prospectus supplement. If the underwriters exercise this option, each
underwriter will have a firm commitment, subject to some conditions, to purchase
approximately the same percentage of any additional PHONES as the percentage of
the PHONES initially offered that such underwriter has agreed to purchase.
NEW YORK STOCK EXCHANGE LISTING
Before this offering, there has been no established public trading market
for the PHONES. We will use commercially reasonable efforts to list the PHONES
on the NYSE. In order to meet all of the requirements for listing the PHONES on
the NYSE, the underwriters have agreed to sell the PHONES to a minimum of 400
beneficial holders. The representative has advised us that it intends to make a
market in the PHONES prior to the commencement of trading on the NYSE. However,
the representatives is not obligated to do so
S-20
<PAGE> 21
and may discontinue market making at any time without notice. We can not give
any assurance about the liquidity of the trading market for the PHONES or as to
our ability to have the PHONES listed on the NYSE.
NO SALES OF SIMILAR SECURITIES
We have agreed that for 45 calendar days after the date of this prospectus
supplement we will not directly or indirectly offer, sell, offer to sell, grant
any option for the sale of or otherwise dispose of any PHONES, any securities
convertible into or exchangeable for the PHONES or any equity securities
substantially similar to the PHONES without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated.
PRICE STABILIZATION AND SHORT POSITIONS
In connection with the sale of the PHONES, SEC rules permit the
underwriters to engage in transactions that stabilize the price of the PHONES.
These transactions may include purchases for the purpose of fixing or
maintaining the price of the PHONES. The underwriters may also engage in
transactions with respect to the AT&T common stock for the purpose of
stabilizing the price of the PHONES.
The underwriters may create a short position in the PHONES in connection
with the offering. That means they may sell a larger number of the PHONES than
is shown on the cover page of the prospectus supplement. If they create a short
position, the underwriters may purchase PHONES in the open market to reduce the
short position.
If the underwriters purchase the PHONES to stabilize the price or to reduce
their short position, the price of the PHONES could be higher than it might be
if they had not made such purchases. The underwriters make no representation or
prediction about any effect that these purchases may have on the price of the
PHONES.
The underwriters may suspend any of these activities at any time.
PENALTY BIDS
The representative also may impose a penalty bid on certain underwriters
and selling group members. This means that, if the representative purchases
PHONES in the open market to reduce the underwriters' short position or to
stabilize the price of the PHONES, it may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those PHONES
as part of this offering.
LEGAL MATTERS
The legality of the PHONES will be passed upon for us by Arthur R. Block,
Esquire, our Senior Deputy General Counsel. Certain legal matters with respect
to the PHONES will be passed upon for us by Davis Polk & Wardwell and for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The financial statements and the related financial statement schedule of
Comcast Corporation and subsidiaries as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, included in the
Annual Report on Form 10-K of the Company and incorporated by reference in the
accompanying prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. The financial statements
of QVC, Inc. and subsidiaries, as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, included as an exhibit to
the Annual Report on Form 10-K of the Company and incorporated by reference in
the accompanying prospectus, have been audited by KPMG LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
S-21
<PAGE> 22
PROSPECTUS
COMCAST(R) CORPORATION
[COMCAST LOGO]
SENIOR DEBENTURES, SENIOR SUBORDINATED DEBENTURES,
SUBORDINATED DEBENTURES, PREFERRED STOCK, CLASS A SPECIAL COMMON STOCK,
CLASS A COMMON STOCK AND WARRANTS
------------------------------
Comcast Corporation (the "Company") may offer and issue from time to time
(i) its senior debentures ("Senior Debentures"), senior subordinated debentures
("Senior Subordinated Debentures"), and subordinated debentures ("Subordinated
Debentures") (collectively, the "Debentures"), (ii) shares of its Preferred
Stock, no par value, which may be represented by depositary shares as described
herein (the "Preferred Stock"), (iii) shares of its Class A Special Common
Stock, par value $1.00 per share (the "Class A Special Common Stock"), (iv)
shares of its Class A Common Stock, par value $1.00 per share (the "Class A
Common Stock") or (v) Warrants to purchase Debentures, Preferred Stock, Class A
Special Common Stock or Class A Common Stock or other securities or rights (the
"Warrants"). The Debentures, Preferred Stock, Class A Special Common Stock,
Class A Common Stock and Warrants are herein collectively referred to as the
"Securities". The Securities may be offered in one or more separate classes or
series, in amounts, at prices and on terms to be determined by market conditions
at the time of sale and to be set forth in a supplement or supplements to this
Prospectus (a "Prospectus Supplement"). Any Securities may be offered with other
Securities or separately. Securities may be sold for U.S. dollars, foreign
currency or currency units; amounts payable with respect to any Securities may
likewise be payable in U.S. dollars, foreign currency or currency units -- in
each case, as the Company designates. Debentures and Preferred Stock may be
convertible and/or exchangeable for Securities or other securities or rights.
Certain terms of any Debentures in respect of which this Prospectus is being
delivered will be set forth in the accompanying Prospectus Supplement including,
where applicable, the specific designation (including whether senior, senior
subordinated or subordinated and whether or not convertible and/or
exchangeable), aggregate principal amount, purchase price, maturity, interest
rate and time of payment of interest (if any), terms (if any) for the
redemption, conversion or exchange thereof, listing (if any) on a securities
exchange and any other specific terms of the Debentures. Certain terms of any
Preferred Stock in respect of which this Prospectus is being delivered will be
set forth in the accompanying Prospectus Supplement, including the specific
designation, number of shares, purchase price and the rights, preferences and
privileges thereof and any qualifications or restrictions thereon (including
dividends, liquidation value, voting rights, terms for the redemption,
conversion or exchange thereof and any other specific terms of the Preferred
Stock), listing (if any) on a securities exchange and whether the Company has
elected to offer the Preferred Stock in the form of depositary shares. Certain
terms of any Warrants in respect of which this Prospectus is being delivered
will be set forth in the accompanying Prospectus Supplement, including the
specific designation, the number, purchase price and terms thereof, any listing
of the Warrants or the underlying securities on a securities exchange and any
other terms in connection with the offering, sale and exercise of the Warrants,
as well as the terms on which and the securities for which such Warrants may be
exercised.
See "Certain Considerations" for information that should be considered by
prospective investors.
The Securities may be sold on a negotiated or competitive bid basis to or
through underwriters or dealers designated from time to time or to other
purchasers directly or through agents designated from time to time. Certain
terms of the offering and sale of the Securities, including, where applicable,
the names of the underwriters, dealers or agents, if any, the principal amount
or number of shares or Warrants to be purchased, the purchase price of the
Securities and the proceeds to the Company from such sale, and any applicable
commissions, discounts and other items constituting compensation of such
underwriters, dealers or agents, will also be set forth in the accompanying
Prospectus Supplement.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY 27, 1994
<PAGE> 23
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Securities and Exchange Commission (the "Commission") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"):
1. Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1992, including Exhibit 28(1) thereto.
2. Quarterly Reports of the Company on Form 10-Q for the quarters ended
March 31, 1993, June 30, 1993 and September 30, 1993.
3. Current Reports of the Company on Form 8-K filed on January 15, 1993,
September 15, 1993 and November 15, 1993.
4. Description of the Company's Class A Special Common Stock contained
in a Registration Statement of the Company on Form 8-A dated November
4, 1986.
5. Description of the Company's Class A Common Stock contained in a
Registration Statement of the Company on Form 8-A dated April 14,
1973.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein or in a supplement or
amendment hereto (or in any subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed to constitute a part
hereof except as so modified or superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
herein by reference, other than exhibits to such documents unless specifically
incorporated by reference into the information that the prospectus incorporates.
Such written requests should be addressed as follows:
Comcast Corporation
1234 Market Street
Philadelphia, Pennsylvania 19107-3723
Attention: John R. Alchin, Senior Vice President and
Treasurer
2
<PAGE> 24
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy and information statements
and other information with the Commission. Such reports, proxy and information
statements and other information can 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, and at the Commission's Regional Offices
located at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7
World Trade Center, New York, New York 10048, and copies of such materials can
be obtained from the Public Reference Section of the Commission, Washington,
D.C. 20549, at prescribed rates.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933 (the "Securities Act"). This Prospectus omits certain
of the information contained in the Registration Statement in accordance with
the rules and regulations of the Commission. Reference is hereby made to the
Registration Statement and related exhibits for further information with respect
to the Company and the Securities. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
3
<PAGE> 25
THE COMPANY
The Company is principally engaged in the development, management and
operation of cable and cellular communications systems. The Company's
consolidated and affiliated cable operations served more than 2,645,000
subscribers and passed approximately 4,280,000 homes at September 30, 1993. In
addition, the Company owns 19.9% of Heritage Communications, Inc., a cable
communications company serving approximately 1,000,000 subscribers and passing
approximately 1,700,000 homes, and 40% of Garden State Cablevision L.P. ("Garden
State"), a cable communications company serving approximately 190,000
subscribers and passing approximately 283,000 homes. The Company operates
cellular telephone systems pursuant to licenses granted by the Federal
Communications Commission ("FCC") for geographic markets in portions of
Pennsylvania, New Jersey, Delaware and Illinois. The portion of the total
population in the localities served by these cellular systems attributable to
the Company's ownership interests is approximately 7,400,000 (based upon the
1993 Rand McNally Commercial Atlas and Marketing Guide).
The Company, organized in 1969 under the laws of the Commonwealth of
Pennsylvania, has its principal executive offices at 1234 Market Street,
Philadelphia, Pennsylvania, 19107-3723 (215-665-1700).
CERTAIN CONSIDERATIONS
Recent and Anticipated Losses; Increasing Negative Book Value. In recent
years, the Company has experienced significant growth, principally through
acquisitions. The effect of these acquisitions on the Company's results of
operations has been and will be to increase significantly the Company's service
income and expenses and is expected to result in substantial losses for the
foreseeable future. Losses before extraordinary items and the cumulative effect
of accounting changes in 1990, 1991 and 1992 and for the nine months ended
September 30, 1992 and 1993, were $178,406,000, $155,572,000, $217,935,000,
$129,307,000 and $76,640,000, respectively. As a result of these losses and the
effects of extraordinary items and the cumulative effect of accounting changes,
the Company had a negative book value at September 30, 1993 of $853,008,000. It
is anticipated that this negative book value will increase in future periods. It
is not expected that the negative book value will significantly affect the way
that the Company does business or its ability to obtain financing.
The Company realized operating income before depreciation and amortization
(generally referred to in the Company's industries as "operating cash flow") of
$271,167,000, $309,250,000, $397,153,000, $282,936,000 and $460,246,000 for the
years ended December 31, 1990, 1991 and 1992, and for the nine months ended
September 30, 1992 and 1993, respectively. As a result of the Company's
operating income before depreciation and amortization, its existing cash
balances, lines of credit and other financing resources, the Company believes
that it will meet its current and long-term liquidity and capital requirements,
including meeting its fixed charges.
Factors Affecting Future Operations. The cable communications and cellular
telephone industries, as well as the Company's future operations, may be
affected by, among other things, (i) changes in government law and regulation,
(ii) changes in the competitive environment generally, (iii) changes in
technology, and (iv) market conditions that may adversely affect the
availability of debt and equity financing.
USE OF PROCEEDS
Except as may otherwise be set forth in the Prospectus Supplement, the net
proceeds from the sale of the Securities offered hereby will be used for working
capital and general corporate purposes. Pending such application of the
proceeds, the Company will invest the proceeds of this offering in certificates
of deposit, United States government securities or certain other interest
bearing securities.
4
<PAGE> 26
DIVIDEND POLICY
The Company began paying quarterly dividends on its Class A Common Stock in
1977. Since 1978, the Company has paid equal dividends on both the Class A
Common Stock and the Class B Common Stock. Since December 1986, when the Class A
Special Common Stock was issued, the Company has paid equal dividends on shares
of all classes of its Common Stock. Since 1991, the Company has paid dividends
aggregating $.14 per year per share of its Class A, Class A Special and Class B
Common Stocks.
It is the intention of the Board of Directors to continue to pay regular
quarterly dividends on shares of all classes of its Common Stock; however, the
declaration and payment of future dividends on the Common Stock and any
preferred stock subsequently issued and their amounts will be determined by the
Board of Directors from time to time based upon the earnings, financial
condition and capital needs of the Company and other factors.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's historical ratio of earnings
to combined fixed charges and preferred stock dividends (1):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------- ----------------------------------
1988 1989 1990 1991 1992 1992 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
combined fixed charges and
preferred stock dividends
(2)....................... --(3) --(3) --(3) --(3) --(3) --(3) --(3)
</TABLE>
- ------------------
(1) The Company currently has no shares of preferred stock outstanding.
(2) For the purposes of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends, earnings consist of net earnings
before income taxes, extraordinary items, cumulative effect of accounting
changes, equity in net losses of affiliates and fixed charges. Fixed charges
consist of interest expense, preferred stock dividend requirements of a
subsidiary to an affiliate and capitalized interest.
(3) Earnings as defined in Note 2 were inadequate to cover combined fixed
charges and preferred stock dividends for these periods. The amount of the
coverage deficiency was $33,887,000, $75,454,000, $103,292,000, $59,408,000
and $99,629,000 for the years ended December 31, 1988, 1989, 1990, 1991 and
1992, respectively, and $62,265,000 and $41,812,000 for the nine months
ended September 30, 1992 and 1993, respectively.
5
<PAGE> 27
DESCRIPTION OF DEBENTURES
The Company may offer under this Prospectus Senior Debentures, Senior
Subordinated Debentures and Subordinated Debentures, any of which Debentures may
be issued as convertible and/or exchangeable Debentures.
The Debentures will represent unsecured general obligations of the Company,
unless otherwise provided in the Prospectus Supplement. The Senior Debentures
will be senior to all subordinated indebtedness of the Company, and pari passu
with other unsecured, unsubordinated indebtedness of the Company. The Senior
Subordinated Debentures will be subordinate in right of payment to the Senior
Debentures and to certain other debt obligations of the Company, pari passu with
certain other senior subordinated indebtedness of the Company and senior to
certain subordinated indebtedness of the Company. The Subordinated Debentures
will be subordinate in right of payment to the Senior Debentures, the Senior
Subordinated Debentures and to certain other debt obligations of the Company and
pari passu with certain other subordinated indebtedness of the Company.
Substantially all of the Company's operations are conducted through
subsidiaries and any right of the Company to receive assets of any of its
subsidiaries upon liquidation or recapitalization of any such subsidiaries (and
the consequent right of the Debentureholders to participate in those assets)
will be subject to the claims of such subsidiaries' creditors. Even in the event
that the Company is recognized as a creditor of a subsidiary, the Company's
claims would still be subject to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that of the
Company. The Company's ability to service its indebtedness, including the
Debentures, is dependent primarily upon the receipt of funds from its
subsidiaries. The subsidiaries are separate legal entities and have no
obligation to pay any amounts due pursuant to the Debentures. Certain legal,
contractual and business considerations limit the Company's ability to receive
funds from its subsidiaries in the form of loans, dividends, management fees or
otherwise.
The Senior Debentures will be issued under an Indenture to be executed by
the Company and Morgan Guaranty Trust Company of New York, as Trustee (the
"Senior Indenture"); the Senior Subordinated Debentures will be issued under an
Indenture between the Company and Morgan Guaranty Trust Company of New York, as
Trustee (the "Senior Subordinated Indenture") dated as of October 17, 1991 as
amended; and the Subordinated Debentures will be issued under an Indenture
between the Company and Bankers Trust Company, as Trustee (the "Subordinated
Indenture") dated as of February 20, 1991 as amended. In this Prospectus, the
Senior Indenture, the Senior Subordinated Indenture and the Subordinated
Indenture are sometimes collectively referred to as the Indentures and the
Trustee under the Senior Indenture, the Trustee under the Senior Subordinated
Indenture and the Trustee under the Subordinated Indenture are sometimes
collectively referred to as the Trustees and individually as a Trustee. The
following summary of certain provisions of the Indentures does not purport to be
complete and is subject to, and qualified in its entirety by, reference to all
the provisions of the Indentures, including the definitions therein of certain
terms. Wherever particular sections or defined terms of the Indentures are
referred to, it is intended that such sections or defined terms shall be
incorporated herein by reference. As used in the Indentures and in this section,
the term the "Company" means Comcast Corporation without reference to its
consolidated subsidiaries.
GENERAL
The Indentures do not limit the aggregate principal amount of Debentures
which may be issued thereunder and provide that Debentures may be issued in one
or more series, in such form or forms, with such terms and up to the aggregate
principal amount authorized from time to time by the Company. (Sections 2.1; 2.2
of the Indentures). Unless otherwise provided in the Prospectus Supplement, the
Debentures may be presented for registration of transfer and exchange and for
payment or, if applicable, for conversion and/or exchange at the office of the
applicable Trustee, unless the Company appoints a different office or agency for
such purpose. (Section 4.2 of the Indentures). At the option of the Company, the
payment of interest may also be made by check mailed
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<PAGE> 28
to the address of the person entitled thereto as it appears in the Debenture
register. (Section 4.1 of the Indentures).
The applicable Prospectus Supplement will describe the following terms of
any Debentures (the "Offered Debentures") in respect of which this Prospectus is
being delivered (to the extent applicable to the Offered Debentures): (1) the
designation (including whether they are Senior Debentures, Senior Subordinated
Debentures or Subordinated Debentures and whether such Debentures are
convertible and/or exchangeable), aggregate principal amount and authorized
denominations, if other than denominations of $1,000 and any integral multiple
thereof, of the Offered Debentures; (2) the percentage of the principal amount
at which such Offered Debentures will be issued; (3) the date or dates (and
whether fixed or extendable) on which the principal of the Offered Debentures is
payable or the method of determination thereof; (4) the rate or rates at which
the Offered Debentures will bear interest, if any, the method of calculating
such rates, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable and the record dates for
the determination of Debentureholders to whom interest will be payable; (5) the
place or places where the principal of, premium, if any, and interest, if any,
on the Offered Debentures will be payable; (6) any provisions relating to the
issuance of the Offered Debentures at an original issue discount; (7) the price
or prices at which, the period or periods within which, and the terms and
conditions upon which the Offered Debentures may be redeemed, in whole or in
part, at the option of the Company, pursuant to any sinking fund or otherwise
(including the form or method of payment if other than in cash, which may
include securities of other issuers); (8) the obligation, if any, of the Company
to redeem, repay or purchase the Offered Debentures pursuant to any mandatory
redemption, sinking fund or analogous provisions or at the option of the
Debentureholder and the price or prices at which, the period or periods within
which and the terms and conditions upon which the Offered Debentures will be
redeemed, repaid or purchased, in whole or in part, pursuant to any such
obligation (including the form or method of payment if other than in cash, which
may include securities of other issuers), and any provisions for the remarketing
of such Debentures; (9) if other than the principal amount thereof, the portion
of the principal amount of the Offered Debentures which will be payable upon
declaration of acceleration of the maturity thereof or provable in bankruptcy;
(10) any Events of Default in addition to or in lieu of those described herein
and remedies therefor; (11) whether the Offered Debentures are convertible or
exchangeable and, if so, the securities or rights into which the Offered
Debentures are convertible or exchangeable (which may include other Debentures,
Preferred Stock, Class A Common Stock, Class A Special Common Stock or other
securities or rights of the Company (including rights to receive payment in cash
or securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or exchangeable for securities of other
issuers or a combination of the foregoing) and the terms and conditions upon
which such conversion or exchange will be effected including the initial
conversion or exchange price or rate, the conversion or exchange period and any
other provision in addition to or in lieu of those described herein; (12) any
trustees, authenticating or paying agents, transfer agents or registrars or any
other agents with respect to the Offered Debentures; (13) the currency or
currencies, including composite currencies, in which the Offered Debentures will
be denominated if other than the currency of the United States of America; (14)
if other than the coin or currency in which the Offered Debentures are
denominated, the coin or currency in which payment of the principal of, premium,
if any, or interest on the Offered Debentures will be payable; (15) if the
principal of, premium, if any, or interest on the Offered Debentures are to be
payable, at the election of the Company or a holder thereof, in a coin or
currency other than that in which the Offered Debentures are denominated, the
period or periods within which, and terms and conditions upon which, such
election may be made; (16) if the amount of payments of principal of, premium,
if any, and interest on the Offered Debentures may be determined with reference
to the value, rate or price of one or more specified commodities, currencies or
indices, the manner in which such amounts shall be determined; (17) whether and
under what circumstances the Company will pay additional amounts on the Offered
Debentures held by a person who is not a United States of America person in
respect of any tax, assessment or governmental charge withheld or deducted and,
if so, whether the Company will have the option to redeem such Debentures rather
than pay such additional amounts; (18) if receipt of
7
<PAGE> 29
certain certificates or other documents or satisfaction of other conditions will
be necessary for any purpose, including, without limitation, as a condition to
the issuance of the Offered Debentures in definitive form (whether upon original
issue or upon exchange of a temporary Debenture), the form and terms of such
certificates, documents or conditions; (19) any other affirmative or negative
covenants with respect to the Offered Debentures; (20) whether the Offered
Debentures will be issued in whole or in part in the form of one or more Global
Debentures and, in such case, the Depositary therefor and the circumstances
under which any Global Debenture may be exchanged for Offered Debentures
registered in the name of, and under which any transfer of such Global Debenture
may be registered in the name of, any person other than the Depositary; and (21)
any other specific terms of the Offered Debentures. (Section 2.2 of the
Indentures).
The Debentures will be exchangeable or transferable without charge
therefor, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Sections 2.6;
2.10 of the Indentures).
Debentures may be issued and sold at a substantial discount below their
principal amount or their redemption value. (Section 2.2 of the Indentures). If
so issued, special federal income tax and other considerations applicable
thereto, other than those described herein, will be described in the Prospectus
Supplement relating thereto.
SUBORDINATION
The Subordinated Debentures will be subordinated and subject, to the extent
and in the manner set forth in the Subordinated Indenture, in right of payment
to the prior payment in full of all Senior Indebtedness as defined in the
Subordinated Indenture. (Section 3.1 of the Subordinated Indenture). Senior
Indebtedness is defined in the Subordinated Indenture as (a) the principal of
and premium, if any, and interest on: (i) all indebtedness for money borrowed by
the Company, whether outstanding on the date of the Indenture or thereafter
created or incurred (other than the indebtedness with which the Subordinated
Debentures will be pari passu, as described below); (ii) all indebtedness for
money borrowed by another person, in which the Company has an equity interest or
has the right to purchase an equity interest, and guaranteed directly or
indirectly by the Company (whether such guarantee is outstanding on the date of
the Indenture or thereafter created or incurred); and (iii) all indebtedness
constituting purchase money indebtedness (as defined) for the payment of which
the Company is directly or contingently liable (whether outstanding on the date
of the Indenture or thereafter created or incurred); (b) any obligation to
purchase or guarantee indebtedness of, to supply funds to or invest in, another
person in which the Company has an equity interest or has the right to purchase
an equity interest (whether such obligation is outstanding on the date of the
Indenture or is thereafter created or incurred); (c) any obligation of the
Company to any person in respect of surety or similar bonds issued by such
person in connection with entering into, renewing or extending any cable
television franchise granted by a governmental authority or any construction in
respect of any cable television system by the Company or any other person in
which the Company has an equity interest or has the right to purchase an equity
interest; and (d) all renewals, extensions or refundings of any such
obligations, indebtedness and guarantees; provided, however, that Senior
Indebtedness shall not include (i) indebtedness with which the Subordinated
Debentures will rank pari passu (as described below); or (ii) any obligation,
indebtedness or guarantee which is created or evidenced by an instrument the
terms of which expressly provide that such obligation, indebtedness or guarantee
is subordinate to all other indebtedness of the Company or is not superior in
right of payment or performance to the Subordinated Debentures, or that such
obligation, indebtedness or guarantee is subordinate to senior indebtedness and
senior indebtedness is defined in such instrument in substantially the same
manner as senior indebtedness is defined in the indentures for the 7%
Convertible Subordinated Debentures Due 2014 and the Zero Coupon Convertible
Subordinated Notes Due 1995, unless the definition of senior indebtedness
expressly provides that such obligation, indebtedness or guarantee is not
subordinate to the Subordinated Debentures or is superior in right of payment or
performance to the Subordinated Debentures. (Section 1.1 of the Subordinated
Indenture). As of September 30, 1993, there were no 7% Convertible Subordinated
Debentures Due 2014 outstanding.
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<PAGE> 30
The Senior Subordinated Debentures will be subordinated and subject, to the
extent and in the manner set forth in the Senior Subordinated Indenture, in
right of payment to the prior payment in full of all Senior Indebtedness as
defined in the Senior Subordinated Indenture. (Section 3.1 of the Senior
Subordinated Indenture). Senior Indebtedness is defined in the Senior
Subordinated Indenture in the same manner as Senior Indebtedness is defined in
the Subordinated Indenture except that Senior Indebtedness as defined in the
Senior Subordinated Indenture does not include: (i) indebtedness with which the
Senior Subordinated Debentures will rank pari passu (as described below); or
(ii) any obligation, indebtedness or guarantee which is created or evidenced by
an instrument the terms of which expressly provide that such obligation,
indebtedness or guarantee is subordinate to all other indebtedness of the
Company or is not superior in right of payment or performance to the Senior
Subordinated Debentures or that such obligation, indebtedness or guarantee is
subordinate to senior indebtedness and senior indebtedness is defined in such
instrument in substantially the same manner as senior indebtedness is defined in
the indentures for the 11 7/8% Senior Subordinated Debentures Due 2004, the
11 3/4% Senior Subordinated Debentures Due 2006, the 7% Convertible Subordinated
Debentures Due 2014, the 2 3/4% Convertible Subordinated Debentures due 2003 and
the Zero Coupon Convertible Subordinated Notes Due 1995, unless the definition
of senior indebtedness expressly provides that such obligation, indebtedness or
guarantee is not subordinate to the Senior Subordinated Debentures or is
superior in right of payment or performance to the Senior Subordinated
Debentures. (Section 1.1 of the Senior Subordinated Indenture). As of September
30, 1993, there were no 11 3/4% Senior Subordinated Debentures Due 2006, 7%
Convertible Subordinated Debentures Due 2014 or 2 3/4% Convertible Subordinated
Debentures Due 2003 outstanding.
The Senior Subordinated Debentures shall rank pari passu with the 11 7/8%
Senior Subordinated Debentures Due 2004, the 10 1/4% Senior Subordinated
Debentures Due 2001, the 10 5/8% Senior Subordinated Debentures Due 2012 and the
9 1/2% Senior Subordinated Debentures Due 2008. The Subordinated Debentures
shall rank pari passu with the 7% Convertible Subordinated Debentures Due 2001,
the Zero Coupon Convertible Subordinated Notes Due 1995, the 3 3/8%/5 1/2%
Step-up Convertible Subordinated Debentures Due 2005 and the 1 1/8% Discount
Convertible Subordinated Debentures Due 2007.
At September 30, 1993, and as adjusted to account for the subsequent
issuance of the 1 1/8% Discount Convertible Subordinated Debentures Due 2007,
the Company had approximately $4.8 billion of Senior Indebtedness and other
indebtedness to which the Subordinated Debentures may be effectively
subordinated and approximately $4.0 billion of Senior Indebtedness and other
indebtedness to which the Senior Subordinated Debentures may be effectively
subordinated. There is no limitation in the Indentures on the incurrence of
additional Senior Indebtedness.
No payment on account of the principal of, premium, if any, or interest on
the Senior Subordinated Debentures or Subordinated Debentures may be made, if,
at the time of such payment or immediately after giving effect thereto, there
exists a default in payment of the principal of, premium, if any, or interest on
any Senior Indebtedness (as defined in the Senior Subordinated Indenture or
Subordinated Indenture, as applicable), whether at expressed maturity,
acceleration thereof or otherwise, except as otherwise provided in the
applicable Indenture. (Section 3.2 of the Senior Subordinated and Subordinated
Indentures). Upon any payment or distribution of assets of the Company of any
kind or character, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
in bankruptcy, insolvency or receivership, or upon an assignment for the benefit
of creditors or any other marshalling of the assets and liabilities of the
Company or otherwise, all principal of, premium, if any, and interest due on all
Senior Indebtedness (including any outstanding Senior Debentures and, in the
case of the Subordinated Debentures, any outstanding Senior Subordinated
Indebtedness) must be paid or provided for in full before the holders of the
Senior Subordinated or Subordinated Debentures are entitled to receive or retain
any payment (Section 3.2 of the Senior Subordinated and Subordinated
Indentures). Subject to the payment in full of all Senior Indebtedness (as
defined in the Senior Subordinated Indenture or the Subordinated Indenture, as
the case may be), the holders of the Senior Subordinated Debentures or
Subordinated Debentures, as applicable, will be subrogated to the rights of the
holders of Senior
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<PAGE> 31
Indebtedness (as respectively defined) to receive payments or distributions of
assets of the Company applicable to Senior Indebtedness until the Senior
Subordinated or Subordinated Debentures are paid in full. (Section 3.2 of the
Senior Subordinated and Subordinated Indentures). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Company may recover more, ratably, than the holders of
the Senior Subordinated or Subordinated Debentures.
CONVERTIBLE DEBENTURES
The terms, if any, on which Offered Debentures may be (mandatorily or
otherwise) exchanged for or converted into other Debentures or shares of
Preferred Stock, Class A Common Stock or Class A Special Common Stock or other
securities or rights of the Company (including rights to receive payments in
cash or securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or securities of other issuers or any
combination of the foregoing will be set forth in the Prospectus Supplement for
such Offered Debentures.
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to Offered Debentures that may be exchanged for or
converted into stock of any class of the Company ("Capital Stock"):
The holder of any Debentures convertible into capital stock will have the
right exercisable at any time during the time period specified in the Prospectus
Supplement, unless previously redeemed by the Company, to convert such
Debentures into shares of capital stock (which may include Preferred Stock,
Class A Common Stock or Class A Special Common Stock) as specified in the
Prospectus Supplement, at the conversion rate for each $1,000 principal amount
of Debentures set forth in the Prospectus Supplement, subject to adjustment of
$1,000. (Section 13.2 of the Indentures). In the case of Debentures called for
redemption, conversion rights will expire at the close of business on the date
fixed for the redemption as may be specified in the Prospectus Supplement,
except that in the case of redemption at the option of the Debentureholder, if
applicable, such right will terminate upon receipt of written notice of the
exercise of such option. (Section 13.2 of the Indentures).
In certain events, the conversion rate will be subject to adjustment as set
forth in the Indentures. Such events include the issuance of shares of any class
of Capital Stock of the Company as a dividend on the class of Capital Stock into
which the Debentures of such series are convertible; subdivisions, combinations
and reclassifications of the class of Capital Stock into which Debentures of
such series are convertible; the issuance to all holders of the class of Capital
Stock into which Debentures of such series are convertible of rights or warrants
entitling the Debentureholders (for a period not exceeding 45 days) to subscribe
for or purchase shares of such class of Capital Stock at a price per share less
than the current market price per share of such class of Capital Stock (as
defined in the Indentures); and the distribution to all holders of the class of
Capital Stock into which Debentures of such series are convertible of evidences
of indebtedness of the Company or of assets (excluding cash dividends paid from
retained earnings and dividends payable in Capital Stock for which adjustment is
made as referred to above) or subscription rights or warrants (other than those
referred to above). No adjustment of the conversion rate will be required unless
an adjustment would require a cumulative increase or decrease of at least 1% in
such rate. (Section 13.5 of the Indentures). Fractional shares of Capital Stock
will not be issued upon conversion but, in lieu thereof, the Company will pay a
cash adjustment. Convertible Debentures surrendered for conversion between the
record date for an interest payment, if any, and the interest payment date
(except convertible Debentures called for redemption on a redemption date during
such period) must be accompanied by payment of an amount equal to the interest
thereon which the registered holder is to receive. (Article 13 of the
Indentures).
MODIFICATION OF THE INDENTURES
Modifications of any Indenture with respect to the Debentures of any series
may be made by the Company and the applicable Trustee with the consent of the
holders of not less than 66 2/3% in aggregate principal amount of outstanding
Debentures of such series; provided that no such modification may, without the
consent of the holder of each Debenture of such series affected thereby, (1)
extend the time or times of payment of the principal of, premium, if any, or
interest on, any
10
<PAGE> 32
Debentures; (2) reduce the principal amount of, premium, if any, or the rate of
interest on any Debentures (and/or such other amount or amounts as any
Debentures or supplemental indentures with respect thereto may provide to be due
and payable upon declaration of acceleration of the maturity thereof); (3)
change the currency of payment of principal of, premium, if any, or the interest
on any Debenture; (4) reduce any amount payable on redemption thereof, (5) alter
or impair the right to convert or exchange the Debentures at the rate and upon
the terms provided in the Indenture; (6) alter or impair the right to require
redemption at the option of the holder; or (7) reduce the percentage of
Debentures of any series, the vote of the holders of which is necessary to
modify the Indenture. (Section 12.2 of the Indentures).
Modifications of any Indenture with respect to the Debentures of any series
may be made by the Company and the Trustee without the consent of the
Debentureholders: (a) to add to the covenants and agreements of the Company or
to surrender any right or power reserved to or conferred upon the Company in the
Indenture; (b) to cure any ambiguity or to cure, correct or supplement any
defect or inconsistent provision contained in the Indenture; (c) to make such
provisions in regard to matters arising under the Indenture which may be
necessary or desirable, or otherwise change the Indenture in any manner, which
shall not adversely affect the interests of the Debentureholders of any series;
(d) to evidence the succession of another corporation to the Company and the
assumption by the successor corporation of the covenants, agreements and
obligations of the Company pursuant to the Indenture and to provide for the
adjustment of conversion rights pursuant to Section 13.7 upon consolidation,
merger, sale or conveyance of the Company; (e) to establish the form or terms of
the Debentures of any series as permitted by the Indenture; (f) to change or
eliminate any of the provisions of the Indenture, provided that any such change
or elimination shall become effective only when there is no Debenture
outstanding of any series created prior thereto which is entitled to the benefit
of such provision; (g) to add or change any of the provisions of the Indenture
to such extent as shall be necessary to permit or facilitate the issuance of
Debentures in bearer form or to provide for uncertificated Debentures (so long
as any "registration-required obligation" within the meaning of Section
163(f)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), is in
registered form for purposes of the Code); (h) to amend or supplement any
provision contained in the Indenture, which was required to be contained in the
Indenture in order for the Indenture to be qualified under the Trust Indenture
Act of 1939, if the Trust Indenture Act of 1939 or regulations thereunder change
what is so required to be included in qualified indentures, in any manner not
inconsistent with what then may be required for such qualification; (i) to add
any additional events of default; (j) to convey, transfer, assign, mortgage or
pledge to the Trustee as security for the Debentures of one or more series any
property or assets; or (k) to add to or change any of the provisions of the
Indenture as contemplated in Section 11.7(b) relating to successor trustees.
(Section 12.1 of the Indentures).
DEFAULTS AND NOTICE
The following are to be Events of Default with respect to Debentures of any
series, unless it is either inapplicable to a particular series or is
specifically deleted or modified for Debentures of a particular series, as
described in the Prospectus Supplement: (1) failure to pay the principal of, or
premium, if any, on any Debenture of such series when due and payable (whether
at maturity, by call for redemption, through any mandatory sinking fund, by
redemption at the option of the holder, by declaration of acceleration or
otherwise, and, with respect to Debentures issued pursuant to the Senior
Subordinated Indenture and the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions of such Indentures); (2) failure to
make a payment of any interest on any Debenture of such series when due,
continued for 30 days (with respect to Debentures issued pursuant to the Senior
Subordinated Indenture and the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions of such Indentures); (3) failure of
the Company to perform or observe any other covenants or agreements of the
Company in the Indenture or in the Debentures of such series (other than
agreements or covenants included in the Indentures solely for the benefit of a
series of Debentures other than that series), continued for 90 days after
written notice; (4) certain events of bankruptcy, insolvency or reorganization
of the Company; and (5) as to Senior Subordinated and Subordinated Debentures,
an event of default under any Senior Indebtedness (as
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<PAGE> 33
respectively defined) that has resulted in the acceleration of such indebtedness
prior to the expressed maturity thereof, which acceleration has not been
rescinded or annulled within 30 business days after written notice and which
acceleration is not contested by the Company in good faith. If an Event of
Default with respect to Debentures of any series shall happen and be continuing,
the Trustee or the holders of not less than 25% in aggregate principal amount of
the then outstanding Debentures of such series may declare the principal amount
(or, if the Debentures of such series are issued at an original issue discount,
such portion of the principal amount as may be specified in the terms of the
Debentures of such series) of all Debentures of such series and/or such other
amount or amounts as the Debentures or supplemental indenture with respect to
such series may provide, to be due and payable immediately. (Section 7.1 of the
Indentures).
The Indentures provide that the Trustee will, within 90 days after the
occurrence of a default, give to holders of Debentures of any series notice of
all uncured defaults with respect to such series known to it; provided, however,
that, except in the case of a default that results from the failure to make any
payment of the principal of, premium, if any, or interest on the Debentures of
any series, or in the payment of any mandatory sinking fund installment with
respect to Debentures of such series, the Trustee may withhold such notice if it
in good faith determines that the withholding of such notice is in the interest
of the holders of Debentures of such series. (Section 11.3 of the Indentures).
The Indentures contain a provision entitling the Trustee to be indemnified
by holders of Debentures before proceeding to exercise any trust or power under
the Indentures at the request of such holders. (Section 11.1 of the Indentures).
The Indentures provide that the holders of a majority in aggregate principal
amount of the then outstanding Debentures of any series may direct the time,
method and place of conducting any proceedings for any remedy available to the
Trustee or of exercising any trust or power conferred upon the Trustee with
respect to the Debentures of such series, provided, however, that the Trustee
may decline to follow any such direction if, among other reasons, the Trustee
determines in good faith that the actions or proceedings as directed may not
lawfully be taken, would involve the Trustee in personal liability or would be
unduly prejudicial to the holders of the Debentures of such series not joining
in such direction. (Section 7.6 of the Indentures). The right of a holder to
institute a proceeding with respect to the Indenture is subject to certain
conditions precedent including, without limitation, that the holders of a
majority in aggregate principal amount of the Debentures of such series then
outstanding make a written request upon the Trustee to exercise its powers under
the Indenture, indemnify the Trustee and afford the Trustee reasonable
opportunity to act but the holder has an absolute right to receipt of the
principal of, premium, if any, and interest when due, to require conversion or
exchange of Debentures if the Indentures provide for convertibility or
exchangeability, at the option of the holder and to institute suit for the
enforcement thereof. (Section 7.7 of the Indentures).
CONCERNING THE TRUSTEES
Bankers Trust Company is the trustee under the Subordinated Indenture
pursuant to which the Company's 7% Convertible Subordinated Debentures Due 2001,
the Company's 3 3/8%/5 1/2% Step-up Convertible Subordinated Debentures Due 2005
and the Company's 1 1/8% Discount Convertible Subordinated Debentures Due 2007
have been issued. Bankers Trust Company is also the trustee under indentures
with respect to the Company's 10% Subordinated Debentures Due 2003 and the
Company's Zero Coupon Convertible Subordinated Notes Due 1995. Morgan Guaranty
Trust Company of New York is the trustee under the indenture with respect to the
Company's 11 7/8% Senior Subordinated Debentures Due 2004 and under the Senior
Subordinated Indenture pursuant to which the Company's 10 1/4% Senior
Subordinated Debentures Due 2001, the Company's 10 5/8% Senior Subordinated
Debentures Due 2012 and the Company's 9 1/2% Senior Subordinated Debentures Due
2008 have been issued.
REPORTS TO HOLDERS OF DEBENTURES
The Company intends to furnish to holders of Debentures all quarterly and
annual reports which it furnishes to holders of the Company's Common Stock.
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DESCRIPTION OF PREFERRED STOCK
The Board of Directors of the Company is authorized to issue in one or more
series up to a maximum of 20,000,000 shares of preferred stock, without par
value. The shares can be issued with such designations, preferences,
qualifications, privileges, limitations, restrictions, options, conversion or
exchange rights and other special or relative rights as the Board of Directors
shall from time to time fix by resolution. The dividend, voting, conversion,
exchange, repurchase and redemption rights, if applicable, the liquidation
preference, and other specific terms of each series of the Preferred Stock will
be set forth in the Prospectus Supplement. The Company currently has no shares
of preferred stock outstanding.
The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered (to
the extent applicable to such Preferred Stock): (1) the specific designation,
number of shares, seniority and purchase price; (2) any liquidation preference
per share; (3) any date of maturity; (4) any redemption, repayment or sinking
fund provisions; (5) any dividend rate or rates and the dates on which any such
dividends will be payable (or the method by which such rates or dates will be
determined); (6) any voting rights; (7) if other than the currency of the United
States of America, the currency or currencies including composite currencies in
which such Preferred Stock is denominated and/or in which payments will or may
be payable; (8) the method by which amounts in respect of such Preferred Stock
may be calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (9) whether the Preferred Stock is
convertible or exchangeable and, if so, the securities or rights into which such
Preferred Stock is convertible or exchangeable (which may include other
Preferred Stock, Debentures, Class A Common Stock, Class A Special Common Stock
or other securities or rights of the Company (including rights to receive
payment in cash or securities based on the value, rate or price of one or more
specified commodities, currencies or indices) or securities of other issuers or
a combination of the foregoing), and the terms and conditions upon which such
conversions or exchanges will be effected including the initial conversion or
exchange prices or rates, the conversion or exchange period and any other
related provisions; (10) the place or places where dividends and other payments
on the Preferred Stock will be payable; and (11) any additional voting,
dividend, liquidation, redemption and other rights, preferences, privileges,
limitations and restrictions.
As described under "Description of Depositary Shares," the Company may, at
its option, elect to offer depositary shares ("Depositary Shares") evidenced by
depositary receipts ("Depositary Receipts"), each representing an interest (to
be specified in the Prospectus Supplement relating to the particular series of
the Preferred Stock) in a share of the particular series of the Preferred Stock
issued and deposited with a Depositary (as defined below).
All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. The Company has been advised that the Preferred Stock will be
exempt from existing Pennsylvania personal property tax.
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DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts does not purport to be complete and is subject
to, and qualified in its entirety by reference to, the form of Deposit Agreement
and form of Depositary Receipts relating to each series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to have shares of Preferred Stock be
represented by Depositary Shares. The shares of any series of the Preferred
Stock underlying the Depositary Shares will be deposited under a separate
deposit agreement (the "Deposit Agreement") between the Company and a bank or
trust company selected by the Company (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name and
address of the Depositary. Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to the applicable
interest in the number of shares of Preferred Stock underlying such Depositary
Share, to all the rights and preferences of the Preferred Stock underlying such
Depositary Share (including dividend, voting, redemption, conversion, exchange
and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement, each of which will represent the applicable
interest in a number of shares of a particular series of the Preferred Stock
described in the applicable Prospectus Supplement.
Unless otherwise specified in the Prospectus Supplement, a holder of
Depositary Shares is not entitled to receive the shares of Preferred Stock
underlying the Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares representing such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto or the Depositary may, with the approval of the Company, sell
such property and distribute the net proceeds from such sale to such holders.
The Deposit Agreement also contains provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
Preferred Stock shall be made available to holders of Depositary Shares.
CONVERSION AND EXCHANGE
If any Preferred Stock underlying the Depositary Shares is subject to
provisions relating to its conversion or exchange as set forth in the Prospectus
Supplement relating thereto, each record holder of Depositary Shares will have
the right or obligation to convert or exchange such Depositary Shares pursuant
to the terms thereof.
REDEMPTION OF DEPOSITARY SHARES
If Preferred Stock underlying the Depositary Shares is subject to
redemption, the Depositary Shares will be redeemed from the proceeds received by
the Depositary resulting from the redemption, in whole or in part, of the
Preferred Stock held by the Depositary. The redemption price per Depositary
Share will be equal to the aggregate redemption price payable with respect to
the number of shares of Preferred Stock underlying the Depositary Shares.
Whenever the Company redeems Preferred Stock from the Depositary, the Depositary
will redeem as of the same redemption date a
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proportionate number of Depositary Shares representing the shares of Preferred
Stock that were redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Company.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
redemption price payable upon such redemption. Any funds deposited by the
Company with the Depositary for any Depositary Shares which the holders thereof
fail to redeem shall be returned to the Company after a period of two years from
the date such funds are so deposited.
VOTING
Upon receipt of notice of any meeting or action in lieu of any meeting at
which the holders of any shares of Preferred Stock underlying the Depositary
Shares are entitled to vote, the Depositary will mail the information contained
in such notice to the record holders of the Depositary Shares relating to such
Preferred Stock. Each record holder of such Depositary Shares on the record date
(which will be the same date as the record date for the Preferred Stock) will be
entitled to instruct the Depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying such holder's
Depositary Shares. The Depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying such Depositary Shares in
accordance with such instructions, and the Company will agree to take all action
which may be deemed necessary by the Depositary in order to enable the
Depositary to do so.
AMENDMENT OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary, provided, however, that any amendment
which materially and adversely alters the rights of the existing holders of
Depositary Shares will not be effective unless such amendment has been approved
by at least a majority of the Depositary Shares then outstanding.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and any exchange or redemption of the Preferred Stock. Holders
of Depositary Shares will pay all other transfer and other taxes and
governmental charges, and, in addition, such other charges as are expressly
provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS
The Company, or at the option of the Company, the Depositary, will forward
to the holders of Depositary Shares all reports and communications from the
Company which the Company is required to furnish to the holders of Preferred
Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Share or Preferred
Stock unless satisfactory indemnity has been furnished. The Company and the
Depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Shares or other persons believed to be competent and on documents
believed to be genuine.
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RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE
DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary will be appointed by the Company within 60 days after delivery of the
notice of resignation or removal. The Deposit Agreement may be terminated at the
direction of the Company or by the Depositary if a period of 90 days shall have
expired after the Depositary has delivered to the Company written notice of its
election to resign and a successor depositary shall not have been appointed.
Upon termination of the Deposit Agreement, the Depositary will discontinue the
transfer of Depositary Receipts, will suspend the distribution of dividends to
the holders thereof, and will not give any further notices (other than notice of
such termination) or perform any further acts under the Deposit Agreement except
that the Depositary will continue to deliver Preferred Stock certificates,
together with such dividends and distributions and the net proceeds of any sales
of rights, preferences, privileges or other property in exchange for Depositary
Receipts surrendered. Upon request of the Company, the Depositary shall deliver
all books, records, certificates evidencing Preferred Stock, Depositary Receipts
and other documents relating to the subject matter of the Depositary Agreement
to the Company.
DESCRIPTION OF COMMON STOCK
The statements made under this caption include summaries of certain
provisions contained in the Company's Articles of Incorporation and By-Laws.
These statements do not purport to be complete and are qualified in their
entirety by reference to such Articles of Incorporation and By-Laws.
The Company has three classes of Common Stock outstanding: Class A Special
Common Stock, $1.00 par value per share; Class A Common Stock, $1.00 par value
per share; and Class B Common Stock, $1.00 par value per share. There are
currently 350,000,000 shares of Class A Special Common Stock, 200,000,000 shares
of Class A Common Stock and 50,000,000 shares of Class B Common Stock
authorized. At September 30, 1993, there were 98,416,602 shares of Class A
Special Common Stock, 38,903,012 shares of Class A Common Stock and 8,786,250
shares of Class B Common Stock outstanding.
DIVIDENDS
Subject to the preferential rights of any preferred stock then outstanding,
the holders of Class A Special Common Stock, Class A Common Stock and Class B
Common Stock are entitled to receive pro rata per share such cash dividends as
from time to time may be declared by the Company's Board of Directors out of
funds legally available therefor. Each class of the Company's Common Stock is to
receive dividends, as declared, on an equal basis per share.
Stock dividends on, and stock splits of, any class of Common Stock shall
not be paid or issued unless paid or issued on all classes of Common Stock, in
which case they are to be paid or issued only in shares of that class or in
shares of either Class A Common Stock or Class A Special Common Stock.
VOTING RIGHTS
The holders of the Class A Special Common Stock are not entitled to vote in
the election of directors or otherwise, except where class voting is required by
applicable law or the Company's Articles of Incorporation, in which case, each
holder of Class A Special Common Stock shall be entitled to one vote per share.
Each holder of Class A Common Stock has one vote per share and each holder of
Class B Common Stock has 15 votes per share. The Articles of Incorporation
provide that the Class A Special Common Stock, the Class A Common Stock and the
Class B Common Stock vote as separate classes on certain amendments to the
Articles of Incorporation regarding conversion rights of the Class B Common
Stock and as required by applicable law. Under applicable law, holders of Class
A
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Special Common Stock have voting rights in the event of certain amendments to
the Articles of Incorporation and certain mergers and other fundamental
corporate changes. In all other instances, including the election of directors,
the Class A Common Stock and the Class B Common Stock vote as one class. Neither
the holders of Class A Common Stock nor the holders of Class B Common Stock have
cumulative voting rights.
PRINCIPAL SHAREHOLDER
Sural Corporation ("Sural") is the sole owner of all of the outstanding
shares of the Company's Class B Common Stock (8,786,250 shares outstanding at
September 30, 1993). As of such date, Sural also owns 1,845,037 shares of the
Class A Common Stock and 86 shares of the Class A Special Common Stock. Based
upon the number of shares of both classes of voting Common Stock outstanding at
September 30, 1993, Sural is entitled to cast approximately 78% of the votes
which all shareholders are entitled to cast. Ralph J. Roberts, the Chairman of
the Board of Directors of the Company, controls Sural and, in addition, at
September 30, 1993, was the beneficial owner of 769,729 shares of the Class A
Special Common Stock and 363,282 shares of the Class A Common Stock, excluding
shares issuable upon the exercise of options. In addition, as of such date, Mr.
Roberts also held options to purchase 438,750 shares of Class B Common Stock and
2,230,519 shares of Class A Special Common Stock.
CONVERSION OF CLASS B COMMON STOCK
The Class B Common Stock is convertible share for share into either the
Class A Common Stock or the Class A Special Common Stock.
PREFERENCE ON LIQUIDATION
In the event of the liquidation, dissolution or winding up, either
voluntary or involuntary, of the Company, the holders of Class A Special Common
Stock, Class A Common Stock and Class B Common Stock are entitled to receive,
subject to any liquidation preference of any preferred stock then outstanding,
the remaining assets, if any, of the Company in proportion to the number of
shares held by them without regard to class.
MISCELLANEOUS
The holders of Class A Special Common Stock, Class A Common Stock and Class
B Common Stock do not have any preemptive rights, except that if the right to
subscribe to stock, options or warrants to purchase stock is offered or granted
to all holders of Class A Special Common Stock or Class A Common Stock, parallel
rights must be given to all holders of Class B Common Stock. All shares of Class
A Special Common Stock, Class A Common Stock and Class B Common Stock presently
outstanding are, and all shares of the Class A Special Common Stock and Class A
Common Stock offered hereby, or issuable upon conversion, exchange or exercise
of Securities, will, when issued, be, fully paid and non-assessable. The Company
has been advised that the Class A Special Common Stock and Class A Common Stock
are exempt from existing Pennsylvania personal property tax.
The transfer agent and registrar for the Company's Class A Special Common
Stock and Class A Common Stock is The Bank of New York, One Wall Street, New
York, New York 10286.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants to purchase Securities or other securities
or rights of the Company (including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies or indices) or securities of other issuers or any
combination of the foregoing. Warrants may be issued independently or together
with any Securities and may be attached to or separate from such Securities.
Each series of Warrants will be issued under a
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separate warrant agreement (each a "Warrant Agreement") to be entered into
between the Company and a warrant agent ("Warrant Agent"). The following sets
forth certain general terms and provisions of the Warrants offered hereby.
Further terms of the Warrants and the applicable Warrant Agreement are set forth
in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms of
any Warrants in respect of which this Prospectus is being delivered: (1) the
title of such Warrants; (2) the aggregate number of such Warrants; (3) the price
or prices at which such Warrants will be issued; (4) the currency or currencies,
including composite currencies, in which the price of such Warrants may be
payable; (5) the Securities or other securities or rights of the Company
(including rights to receive payment in cash or securities based on the value,
rate or price of one or more specified commodities, currencies or indices) or
securities of other issuers or any combination of the foregoing purchasable upon
exercise of such Warrants; (6) the price at which and the currency or
currencies, including composite currencies, in which the Securities purchasable
upon exercise of such Warrants may be purchased; (7) the date on which the right
to exercise such Warrants shall commence and the date on which such right shall
expire; (8) if applicable, the minimum or maximum amount of such Warrants which
may be exercised at any one time; (9) if applicable, the designation and terms
of the Securities with which such Warrants are issued and the number of such
Warrants issued with each such Security; (10) if applicable, the date on and
after which such Warrants and the related Securities will be separately
transferable; (11) information with respect to book-entry procedures, if any;
(12) if applicable, a discussion of certain United States Federal income tax
considerations; and (13) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
UNITED STATES TAXATION
The following summary describes certain United States federal income tax
consequences to initial holders of ownership and disposition of the Securities
held as capital assets within the meaning of Section 1221 of the Code. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, including proposed regulations
concerning the treatment of debt instruments issued with original issue discount
(the "Proposed Regulations") changes to any of which subsequent to the date of
this Prospectus may affect the tax consequences described herein. Although the
Proposed Regulations, by their terms, do not apply to debt instruments issued
prior to or within 60 days after they are published in final form, they
represent the only current administrative guidance on certain issues affecting
the appropriate tax treatment of the Debentures. It is possible that different
rules will be contained in subsequent proposed, temporary or final regulations.
This summary does not discuss all of the tax consequences that may be relevant
to a holder in light of his particular circumstances or to holders subject to
special rules, such as certain financial institutions, insurance companies,
dealers in securities or foreign currencies, persons holding any such securities
as a hedge against, or which are hedged against, currency risks, or United
States Holders whose functional currency (as defined in Code Section 985) is not
the U.S. dollar. Persons considering the purchase of Securities should consult
their tax advisors with regard to the application of the United States federal
income tax laws to their particular situations as well as any tax consequences
arising under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of
Securities that is for United States federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or (iii) an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
As used herein, the term "United States Alien Holder" means a holder of
Securities that is, for United States federal income tax purposes, (i) a
nonresident alien individual, (ii) a foreign corporation, (iii) a nonresident
alien fiduciary of a foreign estate or trust or (iv) a foreign partnership one
or
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more of the members of which is, for United States federal income tax purposes,
a nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest payments under the Debentures (including payments received on the
sale, exchange or retirement of Debentures attributable to accrued but unpaid
interest) will generally be taxable to a United States Holder as ordinary
interest income at the time it accrues or is received (or is made available for
payment, if earlier) in accordance with the United States Holder's method of
accounting for federal income tax purposes. Special rules governing the
treatment of interest paid with respect to Original Issue Discount Debentures
(as defined below), including certain Contingent Payment Debentures (as defined
below), Debentures having a maximum or minimum interest rate limitation,
Debentures that are denominated, or provide for payments in or indexed to a
foreign currency ("Foreign Currency Debentures") and Debentures providing for
payments of principal or interest linked to commodity prices, equity indices or
other factors are described under "Original Issue Discount Debentures" and
"Foreign Currency Debentures, Indexed Debentures and Debentures Linked to
Commodity Prices, Equity Indices or Other Factors," below. Holders intending to
purchase such Debentures should refer to the discussion relating to taxation in
the applicable Prospectus Supplement.
SALE, EXCHANGE OR RETIREMENT OF DEBENTURES
Upon the sale, exchange or retirement of a Debenture, a United States
Holder will recognize taxable gain or loss equal to the difference between the
amount realized on the sale, exchange or retirement (not including any amount
attributable to accrued but unpaid interest) and such Holder's adjusted tax
basis in the Debenture. A United States Holder's adjusted tax basis in a
Debenture will equal the cost of the Debenture to such Holder, increased by the
amounts of any original issue discount previously included in income by the
Holder with respect to such Debenture and reduced by any amortized premium and
any principal payments received by the Holder and, in the case of an Original
Issue Discount Debenture, by the amounts of any other payments that do not
constitute "qualified stated interest" (as defined below).
Gain or loss realized on the sale, exchange or retirement of a Debenture
generally will be capital gain or loss (except in the case of a short-term
Original Issue Discount Debenture (as defined below), to the extent of any
original issue discount not previously included in the Holder's taxable income),
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Debenture has been held for more than one year. See "Original
Issue Discount Debentures" below. Under current law, the excess of net long-term
capital gains over net short-term capital losses is taxed at a lower rate than
ordinary income for certain noncorporate taxpayers. The distinction between
capital gain or loss and ordinary income or loss is also relevant for purposes
of, among other things, limitations on the deductibility of capital losses.
Notwithstanding the foregoing, gain or loss realized upon the sale, exchange or
retirement of a Foreign Currency Debenture that is attributable to fluctuations
in currency exchange rates will be ordinary income or loss which will not be
treated as interest income or expense. In addition, under Code Sections 165(j)
and 1287(a), a United States Holder of a Bearer Debenture or coupon generally
will not be entitled to deduct any loss on such Bearer Debenture or coupon and
must treat as ordinary income any gain realized on the sale or other disposition
(including the receipt of principal) of such Bearer Debenture or coupon.
CONVERSION OF DEBENTURES
The Holder of a Debenture convertible into shares of Preferred Stock, Class
A Common Stock or Class A Special Common Stock or a combination of these will
recognize no gain or loss on the conversion of the Debentures into such stock
(except possibly to the extent such stock discharges accrued, but unpaid,
interest) and will have an adjusted tax basis in such stock equal to the
Holder's
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adjusted tax basis in the Debenture at the time of the conversion. If the
Debentures are convertible into a combination of Preferred Stock, Class A Common
Stock and Class A Special Common Stock, the Holder's adjusted tax basis in the
Debenture at the time of conversion will be allocated to the Preferred Stock,
Class A Common Stock and Class A Special Common Stock in proportion to their
respective fair market values on the date of conversion. The holding period for
such stock will include the holding period for the converted Debenture, except
that the holding period of such stock allocable to accrued original issue
discount (or possibly in the case of stock allocable to accrued, but unpaid,
interest), if any, may commence on the day following the date of conversion.
Gain or loss will be recognized upon the receipt of cash paid in lieu of
fractional shares of such stock to the extent of the difference between the
amount of cash received and the amount of tax basis allocable to the fractional
shares redeemed. The gain or loss generally will be treated as capital in nature
provided the Debenture is held as a capital asset on the date of conversion.
If at any time there is a change in the conversion rate or the securities
issuable upon conversion under the anti-dilution provisions of the Indenture
(other than to take account of a stock dividend or stock split), such change may
be treated pursuant to Section 305 of the Code as a constructive distribution of
stock to Holders of the Debentures at the time and if so the value of such
change would be taxable as a dividend to the extent of the current and
accumulated earnings and profits of the Company.
ORIGINAL ISSUE DISCOUNT DEBENTURES
Under the Code, a Debenture which is issued for an amount less than its
stated redemption price at maturity will generally be considered to have been
issued at an original issue discount for federal income tax purposes (an
"Original Issue Discount Debenture"). The stated redemption price at maturity of
a Debenture will equal the sum of all payments required under the Debenture
other than certain contingent payments and payments of "qualified stated
interest" (defined as a series of payments in cash or property (other than debt
instruments of the issuer) unconditionally payable at least annually during the
entire term of the Debenture and equal to the outstanding principal balance of
the Debenture multiplied by a single fixed rate of interest, or a single
qualified floating rate of interest, a single fixed rate followed by a single
qualified floating rate, a single qualified floating rate followed by a second
qualified floating rate, a single rate based on one or more qualified floating
rates or a single rate based on the price of actively traded property or an
index of the prices of such property, other than foreign currency). Special
rules may apply if a floating rate Debenture is subject to a cap (or a floor)
that is very likely to cause the interest rate in one or more accrual periods,
known as of the issue date, to be significantly less (or more) than the overall
expected return on such floating rate Debenture.
If the difference between a Debenture's stated redemption price at maturity
and its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of
the stated redemption price at maturity multiplied by the number of complete
years to maturity, then the Debenture will not be considered to have original
issue discount.
United States Holders of Original Issue Discount Debentures will be
required to include any payments of qualified stated interest in income at the
time they are accrued or received (or made available for payment, if earlier),
in accordance with the Holder's method of accounting for federal income tax
purposes. United States Holders of Original Issue Discount Debentures that
mature more than one year from their date of issuance will be required to
include original issue discount in income for federal income tax purposes as it
accrues (regardless of their general accounting methods), in accordance with a
constant yield method based on a compounding of interest at the end of each
accrual period. Under this method, United States Holders of Original Issue
Discount Debentures generally will be required to include in income increasingly
greater amounts of original issue discount in successive accrual periods.
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In the case of certain Debentures providing for variable or contingent
interest that is not qualified stated interest, the Proposed Regulations provide
that such Debentures ("Contingent Payment Debentures") will be treated as
Original Issue Discount Debentures. Variable or contingent interest payments on
Contingent Payment Debentures (other than payments of qualified stated interest)
will generally be treated as contingent interest payments includible in income
as the amount of such payments becomes fixed. If such payments are not due
within six months of the date their amount becomes fixed, the right to receive
such payments will be includible in income when their amount becomes fixed at a
discounted values determined under Code Section 1274, and the remaining portion
of such payments will be includible in income as original issue discount over
the period between the date on which the payments are fixed and the date on
which payment is due. If a Contingent Payment Debenture does not provide for
fixed and unconditional payments at least equal to the issue price of the
Debenture, a portion of any variable or contingent payments due prior to
maturity may be treated as a payment of principal.
Holders purchasing Contingent Payment Debentures should carefully examine
the applicable Prospectus Supplement as it relates to the particular terms of
the Debentures being offered, and they should consult their tax advisors as to
the federal income tax consequences of purchasing, holding and disposing of
Contingent Payment Debentures with such terms, as the tax consequences will
depend, in part, on the particular terms of the purchased Debentures.
In general, a cash method United States Holder of an Original Issue
Discount Debenture that matures one year or less from its date of issuance (a
"short-term Original Issue Discount Debenture") is not required to accrue
original issue discount for United States Federal income tax purposes unless it
elects to do so. Holders who make such an election, Holders who report income
for federal income tax purposes on the accrual method and certain other Holders,
including banks and dealers in securities, are required to include original
issue discount in income on such short-term Original Issue Discount Debentures
as it accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of Holders who are not required or who do not elect to
include original issue discount in income currently, any gain realized on the
sale, exchange or retirement of the short-term Original Issue Discount Debenture
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis (or, if elected, according to a constant yield method
based on daily compounding) through the date of sale, exchange or retirement. In
addition, such Holders will be required to defer deductions for any interest
paid on indebtedness incurred to purchase or carry short-term Original Issue
Discount Debentures in an amount not exceeding the deferred interest income,
until such deferred interest income is recognized.
Certain of the Original Issue Discount Debentures may be redeemed prior to
maturity. Original Issue Discount Debentures containing such a feature may be
subject to rules that differ from the general rules discussed above. Purchasers
of Original Issue Discount Debentures with such a feature should carefully
examine the applicable Prospectus Supplement and should consult their tax
advisors with respect to such a feature since the tax consequences with respect
to original issue discount will depend, in part, on the particular terms and the
particular features of the purchased Debenture.
If a United States Holder purchases a Debenture for an amount that is
greater than the amount payable at maturity, such Holder will be considered to
have purchased such Debenture with "amortizable bond premium" equal in amount to
such excess, and may elect (in accordance with applicable Code provisions) to
amortize such premium, using a constant yield method based on a compounding of
interest at the end of each accrual period, over the remaining term of the
Debenture (where such Debenture is not optionally redeemable prior to its
maturity date). If such Debenture may be optionally redeemed prior to maturity,
the amount of amortizable bond premium is determined with reference to either
the amount payable on maturity or, if it results in a smaller premium
attributable to the period to the earlier redemption date, with reference to the
amount payable on the earlier redemption date. A Holder who elects to amortize
bond premium must reduce his tax basis in the Debenture by the amount of the
premium amortized in any year. An election to amortize bond
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<PAGE> 43
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service.
Under the Proposed Regulations, which are not yet effective, a Holder that
uses an accrual method of accounting may elect to include in gross income its
entire return on a Debenture (i.e., the excess of all payments to be received on
the Debenture over the amount paid for the Debenture by such Holder) in
accordance with a constant yield method based on the compounding of interest at
the end of each accrual period. Such an election for a Debenture with
amortizable bond premium will result in a deemed election to amortize bond
premium for all of the Holder's debt instruments with amortizable bond premium
and may be revoked only with the permission of the Internal Revenue Service with
respect to debt instruments acquired after revocation.
Finally, this discussion does not apply in the case of any Original Issue
Discount Debentures which qualify as "applicable high-yield discount
obligations" under Section 163(i) of the Code. United States Holders of Original
Issue Discount Debentures which are "applicable high-yield discount obligations"
may be subject to special rules which will be set forth in an applicable
Prospectus Supplement. United States Holders should consult their own tax
advisors as to the federal income tax consequences of holding such obligations.
The Company will file with the Internal Revenue Service such information
regarding the original issue discount that applicable Treasury regulations
require.
FOREIGN CURRENCY DEBENTURES, INDEXED DEBENTURES AND DEBENTURES LINKED TO
COMMODITY PRICES, EQUITY INDICES OR OTHER FACTORS
The United States federal income tax consequences to a Holder of the
ownership and disposition of Foreign Currency Debentures, indexed Debentures or
Debentures linked to commodity prices, equity indices or other factors
(including Debentures exchangeable for property other than stock of the Company)
may differ materially from those described herein, depending on the exact terms
of such Debentures. Holders intending to purchase such Debentures should refer
to the discussion relating to taxation in the applicable Prospectus Supplement.
PAYMENTS OF DIVIDENDS
Distributions by the Company with respect to shares of the Class A Special
Common Stock, Class A Common Stock or Preferred Stock (other than certain pro
rata distributions of shares or rights with respect to shares) generally will
constitute dividends for U.S. federal income tax purposes to the extent that
such distributions are paid out of the Company's current and accumulated
earnings and profits, as determined under U.S. federal tax principles, and may
be eligible for the 70% dividends received deduction allowed to corporate
shareholders.
Prospective investors should consider the effect of (i) Section 246A of the
Code, which reduces the dividends-received deduction allowed to a corporate
shareholder which has incurred indebtedness that is "directly attributable" to
an investment in portfolio stock; (ii) Section 246(c) of the Code, which
disallows the dividends-received deduction, among other things, in respect of
any share of stock that is held for 45 days or less; (iii) Section 1059 of the
Code, which, under certain circumstances, reduces the basis of stock for the
purposes of calculating gain or loss in a subsequent disposition by the portion
of any "extraordinary dividend" that is eligible for the dividends-received
deduction; and (iv) the corporate alternative minimum tax, which generally
includes the amount of a corporate holder's dividends received deduction in the
computation of alternative minimum taxable income. To the extent, if any, that
the amount of any distribution by the Company exceeds the Company's current and
accumulated earnings and profits as determined under U.S. federal income tax
principles, such excess will be treated first as a tax-free return of the
Holder's tax basis in the shares and thereafter as capital gain.
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<PAGE> 44
GAIN OR LOSS ON DISPOSITION OF EQUITY SECURITIES
United States Holders generally will recognize capital gain or loss upon
the sale, exchange or other disposition of shares of Preferred Stock, Class A
Special Common Stock, Class A Common Stock, or Warrants equal to the difference
between the amount realized on the sale, exchange or other disposition and such
Holder's adjusted tax basis in such securities. In the case of a redemption of
stock by the Company, however, gain or loss will be capital only if the
redemption falls within one of the categories enumerated in Section 302(b) of
the Code.
WARRANTS
As a general rule, no gain or loss will be recognized to a United States
Holder on the exercise of a Warrant to purchase securities. The tax basis of
securities so acquired will be equal to the sum of the Holder's adjusted tax
basis in the exercised Warrant and the exercise price, but the holding period of
such securities will not include the holding period of the Warrant exercised.
Under Section 305 of the Code, adjustments to the exercise price of
Warrants to purchase equity securities which occur under certain circumstances,
or the failure to make such adjustments, may result in a deemed dividend to
Holders.
Upon expiration of a Warrant, a United States Holder will recognize a loss
equal to such Holder's tax basis in the Warrant. If the securities issuable upon
exercise of the Warrant would have been a capital asset of the Holder if
acquired by the Holder, such loss will be a capital loss.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, a 31% backup
withholding tax and information reporting requirements apply to certain payments
of dividends, principal, premium and interest (including original issue
discount) made to, and to the proceeds of sale of securities by, certain
noncorporate United States persons.
In the case of a United States Holder, backup withholding will apply only
if the Holder (i) fails to furnish his Taxpayer Identification Number ("TIN"),
(ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue
Service that he has failed to properly report payments of interest and dividends
or (iv) under certain circumstances, fails to certify that he is not subject to
backup withholding. United States Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
Holder will be allowed as a credit against such Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussions below concerning FIRPTA and backup withholding:
(a) a United States Alien Holder of Securities will not be subject to
United States federal income tax on gain realized on the sale, exchange or
other disposition of Securities (including the receipt of cash in lieu of
fractional shares upon conversion of a Security) unless (i) such Holder is
an individual who is present in the United States for a period or periods
aggregating 183 days or more in the taxable year of disposition, and
certain other conditions are met, or (ii) the gain is effectively connected
with a trade or business of the Holder in the United States or, if a tax
treaty applies, is attributable to a United States permanent establishment
of the Holder;
(b) payments of principal, interest (including original issue
discount, if any) and premium on the Debentures to any United States Alien
Holder will not be subject to United States federal withholding tax
provided that, in the case of interest, (i) such Holder does not own,
actually or
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<PAGE> 45
constructively, 10 percent or more of the total combined voting power of
all classes of stock of the Company entitled to vote, is not a controlled
foreign corporation related, directly or indirectly, to the Company through
stock ownership, and is not a bank receiving interest described in Section
881(c)(3)(A) of the Code and (ii) if the Debenture is a Registered
Debenture, the beneficial owner thereof fulfills the statement requirement
set forth in Section 871(h) or Section 881(c) of the Code;
(c) dividends paid on shares of Preferred Stock, Class A Common Stock
or Class A Special Common Stock to a United States Alien Holder will be
subject to withholding tax at a rate of 30% or such lower rate as may be
provided by an applicable tax treaty; and
(d) no United States Federal income tax will be imposed upon the
exercise of a Warrant or the conversion of a Security into shares of
Preferred Stock, Class A Common Stock or Class A Special Common Stock,
subject, with respect to the receipt of cash in lieu of fractional shares
by certain Holders, to the limitation described in clause (a) above;
(e) a Debenture or coupon held by an individual who at the time of his
death is not a citizen or resident of the United States will not be subject
to United States Federal estate tax as a result of such individual's death,
provided that (i) the individual does not own, actually or constructively,
10 percent or more of the total combined voting power of all classes of
stock of the Company entitled to vote and, (ii) at the time of such
individual's death, payments with respect to such Debenture or coupon would
not have been effectively connected to the conduct by such individual of a
trade or business in the United States;
(f) shares of Preferred Stock, Class A Special Common Stock, Class A
Common Stock, or Warrants held by an individual at the time of his death
(or theretofore transferred subject to certain retained rights or powers)
may be subject to United States federal estate tax unless otherwise
provided by an applicable tax treaty.
Sections 871(h) and 881(c) of the Code require that, in order to obtain the
portfolio interest exemption from withholding tax described in paragraph (b)
above in the case of a Registered Debenture, either the beneficial owner of the
Debenture or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business (a "Financial Institution") and that is holding the Debenture on
behalf of such beneficial owner, files a statement with the withholding agent to
the effect that the beneficial owner of the Debenture is not a United States
Holder. Under temporary United States Treasury Regulations, such requirement
will be fulfilled if the beneficial owner of a Debenture certifies on Internal
Revenue Service Form W-8, under penalties of perjury, that it is not a United
States Holder and provides its name and address, and any Financial Institution
holding the Debenture on behalf of the beneficial owner, files a statement with
the withholding agent to the effect that it has received such a statement from
the Holder (and furnishes the withholding agent with a copy thereof).
If a United States Alien Holder of Securities is engaged in a trade or
business in the United States, and if interest (including original issue
discount) or dividends on such Securities is effectively connected with the
conduct of such trade or business, the United States Alien Holder, although
exempt from the withholding tax discussed in paragraphs (b) and (c) above, will
generally be subject to regular United States income tax on interest (including
any original issue discount) or dividends on such Securities and on any gain
realized on the sale, exchange or other disposition of such Securities in the
same manner as if it were a United States Holder. See "Tax Consequences to
United States Holders" above. Such a Holder will be required to provide to the
Company a properly executed Internal Revenue Service Form 4224 in order to claim
an exemption from withholding tax. In addition, if such United States Alien
Holder is a foreign corporation, it may be subject to a branch profits tax equal
to 30% of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments. For purposes of the branch profits tax, interest
(including original issue discount) on dividends on and any gain recognized on
the sale, exchange or other disposition of a Debenture or shares of Class A
Common Stock, Class A Special Common Stock or Preferred Stock or Warrants will
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<PAGE> 46
be included in the earnings and profits of such United States Alien Holder if
such income is effectively connected with the conduct by the United States Alien
Holder of a trade or business in the United States.
CERTAIN FIRPTA CONSIDERATIONS
Under the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), foreign persons generally are subject to United States federal
income tax on capital gain realized on the disposition of any interest (other
than solely as a creditor) in a corporation that is a United States real
property holding corporation (a "USRPHC"). For this purpose, a foreign person is
defined as any Holder who is a foreign corporation (other than certain foreign
corporations that elect to be treated as domestic corporations), a non-resident
alien individual, a non-resident fiduciary of a foreign estate or trust, or a
foreign partnership. Under FIRPTA, a corporation is a USRPHC if the fair market
value of the United States real property interests held by the corporation is 50
percent or more of the aggregate fair market value of the corporation's real
property interests and other assets used or held for use in the corporation's
trade or business, excluding assets held for future business needs.
The discussion of the U.S. federal tax consequences to United States Alien
Holders set forth above assumes that none of the Securities will be considered
interests in a USRPHC. No opinion is expressed as to whether the Company is
currently or will become a USRPHC. If the Company were treated as a USRPHC,
United States Alien Holders could be subject to United States federal income tax
on gain or income, if any, realized on the sale or other disposition of
convertible Debentures, Preferred Stock, Class A Common Stock, Class A Special
Common Stock, or Warrants. However, gain realized on a disposition of stock in a
USRPHC by a Holder that is not deemed to own more than five percent of such
stock during the shorter of the five-year period preceding such disposition or
such Holder's holding period will not be subject to United States federal income
tax provided that such stock is "regularly traded on an established securities
market" (within the meaning of section 897(c)(3) of the Code) at the time of
disposition.
The transferee of an interest in a USRPHC is under a duty to withhold
(generally at a rate of 10% of the amount realized by the transferor) if the
transferor is a foreign person. Accordingly, if the Company were to determine
that it may be or may have been a USRPHC, in the case of conversion, redemption
or repurchase of any Debenture convertible into stock of the Company, or of
Preferred Stock, Class A Special Common Stock, Class A Common Stock, or Warrants
to purchase any such Securities, the Company intends to withhold to the extent
required in the case of a foreign transferor unless the Holder furnishes to the
Company a certification that (i) states that the Holder is not a foreign holder,
(ii) sets forth such person's name, identifying number and home address (in the
case of an individual) or office address (in the case of an entity), and (iii)
is signed under penalties of perjury. Any amount withheld pursuant to these
rules will be creditable against such foreign person's United States federal
income tax liability and may entitle such person to a refund, provided that the
required information is furnished to the IRS.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Alien Holders of Securities should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Any amounts withheld
from a payment to a Holder under the backup withholding rules will be allowed as
a credit against such Holder's United States Federal income tax liability and
may entitle such Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
PURCHASER OF SECURITIES SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE
TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF SUCH
SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF
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<PAGE> 47
STATE, LOCAL AND FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
PROSPECTIVE PURCHASERS SHOULD ALSO CAREFULLY REVIEW EACH PROSPECTUS SUPPLEMENT
FOR ADDITIONAL AND/OR UPDATED INFORMATION REGARDING THE TAX CONSEQUENCES OF THE
SECURITIES DESCRIBED THEREIN.
PLAN OF DISTRIBUTION
The Company may sell Securities on a negotiated or competitive bid basis to
or through underwriters or dealers, and also may sell Securities directly to
other purchasers or through agents. Any such underwriter, dealer or agent
involved in the offer and sale of Securities, and any applicable commissions,
discounts and other items constituting compensation to such underwriters, dealer
or agent, will be set forth in the Prospectus Supplement.
The distribution of Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Unless otherwise indicated in a Prospectus Supplement, the obligations of
any underwriters to purchase Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all of the
applicable Securities if any are purchased. If a dealer is utilized in the sale,
the Company will sell the Securities to the dealer as principal. The dealer may
then resell the Securities to the public at varying prices to be determined by
such dealer at the time of resale.
Offers to purchase Securities may be solicited by the Company or agents
designated by the Company from time to time. Unless otherwise indicated in a
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment.
Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters as that term is defined in the
Securities Act of 1933 (the "Securities Act"), and any discounts or commissions
received by them from the Company and any profits on the resale of the
Securities by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain specified institutions to
purchase Securities from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. Institutions with whom
such contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions but shall in all cases be subject
to the approval of the Company. Such contracts will be subject only to those
conditions set forth in the Prospectus Supplement and the Prospectus Supplement
will set forth the commission payable for solicitation of such contracts.
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<PAGE> 48
LEGAL OPINIONS
The legality of the securities offered hereby will be passed upon for the
Company by Arthur R. Block, Esquire, Deputy General Counsel of the Company, and
for any underwriters or agents by Latham & Watkins, Chicago, Illinois.
EXPERTS
The consolidated financial statements of Comcast Corporation and
subsidiaries incorporated in this prospectus by reference from the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 have been
audited by Deloitte & Touche, independent auditors, as stated in their report
which is incorporated herein by reference, and has been so incorporated in
reliance upon the report of such firm as experts in accounting and auditing.
The consolidated financial statements and schedules of Storer
Communications, Inc. and subsidiaries as of December 31, 1992 and 1991 and for
each of the years in the three year period ended December 31, 1992, included as
an exhibit to the Annual Report on Form 10-K of Comcast Corporation for the
fiscal year ended December 31, 1992 and incorporated by reference in this
Prospectus have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in auditing and accounting.
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8,700,000 PHONES(SM)
COMCAST(R)
[COMCAST LOGO]
% EXCHANGEABLE EXTENDABLE SUBORDINATED DEBENTURES DUE 2029
(EXCHANGEABLE FOR CASH BASED ON VALUE OF AT&T CORP. COMMON STOCK, MATURITY
SUBJECT TO EXTENSION TO 2059)
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
LAZARD FRERES & CO. LLC
, 1999
(SM) Service Mark of Merrill Lynch & Co., Inc.
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