<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
CVS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 05-0494040
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
------------------------
ONE CVS DRIVE
WOONSOCKET, RHODE ISLAND 02895
(401) 765-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CHARLES C. CONAWAY
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CVS CORPORATION
ONE CVS DRIVE
WOONSOCKET, RHODE ISLAND 02895
(401) 765-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DEANNA L. KIRKPATRICK, ESQ. ALISA M. SINGER, ESQ. MORTON A. PIERCE, ESQ.
DAVIS POLK & WARDWELL ROSENBERG & LIEBENTRITT, P.C. DEWEY BALLANTINE
450 LEXINGTON AVENUE 2 NORTH RIVERSIDE PLAZA 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10017 SUITE 1600 NEW YORK, NEW YORK 10019
(212) 450-4000 CHICAGO, ILLINOIS 60606 (212) 259-8000
(312) 466-3196
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
PROPOSED
PROPOSED MAXIMUM
NUMBER OF MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SHARES TO OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share.................. 15,841,755 $53.32 $844,682,377 $255,965
==================================================================================================
</TABLE>
(1) Includes 1,341,755 shares as to which the Underwriters have been granted an
option to cover over-allotments.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the average of the reported high and low sales prices on the New York
Stock Exchange on July 15, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
THIS REGISTRATION STATEMENT CONTAINS TWO FORMS OF PROSPECTUS: ONE TO BE
USED IN CONNECTION WITH AN OFFERING IN THE UNITED STATES AND CANADA (THE "U.S.
PROSPECTUS") AND ONE TO BE USED IN A CONCURRENT OFFERING OUTSIDE THE UNITED
STATES AND CANADA (THE "INTERNATIONAL PROSPECTUS"). THE TWO PROSPECTUSES ARE
IDENTICAL EXCEPT FOR THE FRONT AND BACK COVER PAGES, THE INSIDE FRONT COVER PAGE
AND THE SECTIONS ENTITLED "UNDERWRITING" AND "SUBSCRIPTION AND SALE." THE FORM
OF U.S. PROSPECTUS IS INCLUDED HEREIN AND IS FOLLOWED BY THE ALTERNATE PAGES TO
BE USED IN THE INTERNATIONAL PROSPECTUS. EACH OF THE ALTERNATE PAGES FOR THE
INTERNATIONAL PROSPECTUS INCLUDED HEREIN IS LABELED "ALTERNATE INTERNATIONAL
PROSPECTUS PAGE." FINAL FORMS OF EACH PROSPECTUS WILL BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER RULE 424(b).
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED JULY 17, 1997
14,500,000 Shares
CVS LOGO
CVS Corporation
Common Stock
(par value $.01 per share)
------------------
All of the shares of Common Stock, par value $.01 per share (the "Common Stock")
of CVS Corporation, a Delaware corporation ("CVS" or the "Company"), offered
hereby are being sold by the Selling Stockholders named herein under "Selling
Stockholders". The Company will not receive any proceeds from the sale of shares
by the Selling Stockholders and the Company will bear certain expenses relating
to the registration and sale of the shares. Of the 14,500,000 shares of Common
Stock being offered, 12,300,000 shares are initially being offered in the United
States and Canada (the "U.S. Shares") by the U.S. Underwriters (the "U.S.
Offering") and 2,200,000 shares are initially being concurrently offered outside
the United States and Canada by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the U.S. Offering and the
International Offering are identical. The Selling Stockholders received the
shares offered hereby in connection with the merger of CVS and Revco D.S. Inc.
("Revco") which was consummated on May 29, 1997 (the "Merger").
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "CVS." The last reported sale price of the Common Stock on the NYSE
Composite Tape on July 15, 1997 was $52 3/4 per share. See "Price Range of
Common Stock and Dividend Policy."
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 UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds
Price to Discounts and to Selling
Public Commissions Stockholders(1)
---------- ------------- ---------------
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total(2)............................................ $ $ $
</TABLE>
- ---------------
(1) Before deduction of expenses payable by the Selling Stockholders estimated
at $ . The Company will pay expenses related to the Offering
estimated at $ .
(2) The Selling Stockholders have granted the U.S. Underwriters and the Managers
an option, exercisable by Credit Suisse First Boston Corporation for 30 days
from the date of this Prospectus, to purchase a maximum of 1,341,755
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds to
Selling Stockholders will be $ . See "Selling Stockholders."
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if delivered to and accepted by the U.S. Underwriters and subject to their right
to reject orders in whole or in part. It is expected that the U.S. Shares will
be ready for delivery on or about , 1997, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
Prospectus dated , 1997.
<PAGE> 4
[MAP OF CVS STORE LOCATIONS AS OF JUNE 30, 1997]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Securities and Exchange
Commission (the "Commission") are incorporated herein by reference:
SEC FILINGS (FILE NO. 1-1011)
(i) CVS' Annual Report on
Form 10-K.............. Year ended December 31,
1996 (amended by Form
10-K/A filed April 17,
1997)
(ii) CVS' Quarterly Report
on Form 10-Q........... Quarter ended March 31,
1997
(iii) CVS' Current Reports on
Form 8-K............... Filed on October 28, 1996,
February 7, 1997, March 26,
1997, May 30, 1997, July
16, 1997 and July 17, 1997
(iv) The description of the
Common Stock set forth
in CVS' Registration
Statement on Form
8-B.................... Filed on November 4, 1996
(v) The supplemental
consolidated financial
statements of CVS and
related supplemental
schedule and
Management's Discussion
and Analysis of
Financial Condition and
Results of Operations
contained in CVS'
Current Report on Form
8-K..................... Filed July 17, 1997
All documents filed with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the date of this Prospectus and prior to the termination of the
offering shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of filing of such documents. Any statement
contained in any document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus. The Company will provide without charge to
each person, including any beneficial owner, to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any and all of
the documents that have been or may be incorporated by reference herein (other
than exhibits to such documents which are not specifically incorporated by
reference into such documents). Such requests should be directed to Attention:
Nancy R. Christal, Vice President, Investor Relations, CVS Corporation, 670
White Plains Road, Suite 210, Scarsdale, New York 10583, (800) 201-0938.
3
<PAGE> 6
THE COMPANY
GENERAL
CVS is a leader in the chain drug store industry in the United States. As
of June 30, 1997, the Company operated 3,924 stores in 24 states and the
District of Columbia in the Northeast, Mid-Atlantic, Midwest and Southeast
regions, making CVS the largest drug store chain in the nation in terms of store
count. The Company's stores are well positioned, operating in 48 of the top 100
markets in the country. CVS commands the number one or two share position in
approximately 80% of these markets. In addition, CVS is among the industry
leaders in terms of store productivity and operating profit margin.
A primary focus of the Company's operations is its pharmacy business, which
has grown at double digit rates during the past several years and which
represented approximately 51% of 1996 sales as restated for the Merger. In 1996,
after giving effect to the Merger, CVS dispensed over 7% of all prescriptions in
the United States making it the largest drug store chain in terms of
prescriptions filled and pharmacy sales. The Company believes that its pharmacy
operations will continue to represent a growing portion of its sales and
profitability due to (a) the demographic trend toward an aging population, (b)
the continued development of new pharmaceutical products and services, (c) the
continued shift towards managed care and (d) the Company's innovative solutions
approach to attracting and providing services to managed care programs.
In addition to prescription drugs and services, the Company offers a broad
selection of general merchandise, presented in a well-organized fashion, in
stores that are designed to be warm, inviting and easy to shop. Merchandise
categories include, among other things, over-the-counter drugs, greeting cards,
film and photofinishing services, beauty and cosmetics, seasonal merchandise and
convenience foods.
On February 6, 1997, CVS signed a definitive merger agreement (the "Merger
Agreement") to merge with Revco in a stock-for-stock merger valued at
approximately $2.9 billion. CVS also assumed approximately $900 million of Revco
debt as part of the transaction. See "Recent Developments -- Retirement of Revco
Debt Following the Merger." Under the terms of the Merger Agreement, on May 29,
1997, CVS merged with Revco in an exchange of stock that qualified as a pooling
of interests transaction. For each share of Revco common stock held, Revco
shareholders received 0.8842 shares of CVS Common Stock. Unless the context
otherwise indicates, references hereinafter to CVS and the Company refer to CVS
and its subsidiaries, including Revco.
The Company's principal executive offices are located at One CVS Drive,
Woonsocket, Rhode Island 02895, telephone (401) 765-1500.
GROWTH STRATEGIES
The Company focuses on a number of initiatives as part of its strategy to
achieve continued growth and build shareholder value. These initiatives are
directed toward driving top-line revenue growth, improving operating
efficiencies and achieving appropriate returns on capital deployed, and include
the following:
Aggressive Store Development
CVS believes there is substantial opportunity to increase the Company's
sales and earnings through an aggressive store development program primarily in
existing markets. The Company anticipates opening approximately 250 new or
relocated stores in 1997 (of which 56 new and 26 relocated stores had been
opened as of June 28, 1997) and approximately 300 new or relocated stores in
1998. Management anticipates that almost all of the planned store openings will
be based on CVS' 10,125 square foot freestanding store prototype, which includes
a drive-through pharmacy. The Company has targeted square footage growth of
between 4% and 5% annually. See "-- Cautionary Statement Concerning
Forward-Looking Statements."
Management expects that relocations of existing in-line strip center stores
to freestanding locations will account for approximately 50% of store openings
over the next several years. As a result of their more convenient locations and
larger size, relocated stores have historically realized significant improvement
in customer count and revenues, driven largely by increased sales of higher
margin front store merchandise.
4
<PAGE> 7
Management believes that relocations offer a significant future growth
opportunity as currently less than 20% of the Company's stores are in
freestanding locations.
Finally, the Company believes that achieving a critical mass in terms of
store count and locating stores in desirable geographic markets is essential to
competing effectively in the context of the current managed care environment
described more fully below. As a result, management believes that the Company's
store development program is an important element of its ability to maintain its
leadership position in the chain drug store industry.
Integrated Health Care Provider
CVS believes that the growth of its pharmacy business will continue to be
driven by the shift toward managed care plans as a means of controlling
healthcare costs. In 1996, third party pharmacy sales represented approximately
76% of the Company's total pharmacy sales as restated for the Merger. The growth
of managed care has substantially increased the use of prescription drugs, as
managed care providers have (i) made the cost of prescription drugs more
affordable to a greater number of people and (ii) supported prescription drug
therapy as an alternative to more expensive surgery or other forms of treatment.
The Company is committed to being an important part of an integrated healthcare
system that brings together industry participants as partners in an effort to
provide patients with the highest level of service at the lowest possible cost.
As a result, the Company has made investments in store development, technology,
infrastructure and strategic business units to enhance its healthcare
partnerships and allow it to benefit from the growth of managed care.
The Company's advanced client server RX2000 pharmacy computer system,
coupled with one of the industry's largest pharmacy data warehouses, enables CVS
to provide its managed care partners with a high level of information to
evaluate treatment outcomes, thereby increasing their ability to improve patient
care and contain costs. CVS' data warehouse currently maintains information on
20 million patients and 170 million prescriptions, and will be greatly enhanced
when CVS completes the integration of Revco's pharmacy computer system. In
addition, the Company's proprietary Clinical Information Management System
("CIMS") enables CVS' pharmacists to communicate directly with physicians in an
effort to identify and recommend less expensive generic drug substitutes for
patients. Through CIMS, CVS' pharmacists have access to patient histories from
prescription data, medical claims and survey responses.
PharmaCare, the Company's pharmacy benefits management company ("PBM"), was
established in 1994 and offers managed care providers a wide array of
prescription benefits management services, including plan design, claims
processing, generic substitution, formulary management and innovative risk
sharing arrangements. PharmaCare currently manages these services for 1.7
million lives through a network of approximately 40,000 pharmacies nationwide.
The Merger provides PharmaCare with the ability to enhance its service offering
through Revco's advanced mail service facility which provides service to 6.5
million lives.
Effective Execution at Retail
The Company's front-store merchandising strategies are designed to improve
customer satisfaction, selection and convenience, and establish CVS stores as a
destination for a growing number of front-store merchandise categories. CVS'
10,125 square-foot free-standing prototype stores have enabled the Company to
improve store layout, convenience and selection (through the addition of product
categories and the enhancement of assortments within product categories). In
addition, over the past several years, the Company has made significant
investments in systems and technology to more effectively respond to customer
needs, manage inventory and control costs.
Through its point-of-sale scanning technology, CVS has developed an
advanced retail data warehouse of information that has enabled the Company to
adopt a category management approach to front-end merchandising. Through
category management, CVS works in partnership with major suppliers to refine and
tailor assortments within product categories to the specific purchasing
preferences of customers within each market. Category management enables the
Company to analyze the impact of pricing, promotion and mix on a category's
sales and profitability and develop tactical merchandising plans for each
category by market.
5
<PAGE> 8
Among CVS' key destination categories are over-the-counter drugs, greeting
cards, film and photofinishing services, beauty and cosmetics and convenience
foods.
The Company believes that effective category management increases customer
satisfaction and that its category management approach has been a primary factor
in its strong front-store comparable sales gains and improved gross margins. In
addition, the Company believes that its ability to satisfy customers through
category management will be enhanced through its recent implementation of supply
chain management. Supply chain management is designed to more effectively link
CVS' stores and distribution centers with suppliers to speed the delivery of
merchandise to CVS stores in a manner that both reduces out-of-stock positions
and lowers CVS' investment in inventory. The Company expects to see tangible
benefits of its supply chain management project beginning in 1998.
CVS' ability to satisfy customers through advanced merchandising and
product replenishment is supported by the Company's emphasis on maintaining
friendly and helpful associates in CVS stores and throughout the entire CVS
organization. CVS measures customer service continuously in order to identify
and correct service problems quickly. Each CVS store receives a formal customer
evaluation twice a year based upon the Company's mystery shopper program,
customer letters and calls and market research.
EXPECTED BENEFITS OF THE MERGER
The Merger brought together two leading drug store chains that each had
strong operating records. See "Selected Historical Consolidated Financial and
Operating Data." Importantly, the Merger met each of CVS' three criteria for
strategic acquisitions: (i) acquisitions should be accretive to earnings before
one-time charges, (ii) acquisitions should enable CVS to achieve a leadership
position in new markets and (iii) there should exist upside potential to improve
the operations and profitability of an acquired business.
CVS expects that the Merger will be accretive to earnings (before one-time
charges) in the first full year of combined operations, and expects to realize
cost savings of approximately $100 million annually beginning in 1998. The
Company expects to achieve these savings principally through the closing of
Revco's headquarters, economies of scale in advertising, distribution and other
areas, and spreading its investment in information technology over a broader
store base. See "-- Cautionary Statement Concerning Forward-Looking Statements."
The combination added approximately 2,500 new stores in ten new states to
CVS' existing store base and enabled the Company to enter new, high growth
contiguous geographic markets in the Southeast and Midwest, which management
believes will enhance the Company's ability to sustain its long-term growth. The
Company, as of June 30, 1997, had 3,924 stores in 24 states and the District of
Columbia. The Company's stores are well positioned, operating in 48 of the top
100 markets in the country. CVS holds the number one or two share position in
approximately 80% of these markets.
Finally, management believes that the Merger offers significant upside
potential, through the opportunity for CVS to narrow the gap between the
performance level of Revco stores and that of CVS stores. For example, Revco's
sales per square foot have been significantly lower than CVS'. In addition, for
the first half of 1997, Revco's prescriptions filled per store were
approximately 20% lower than CVS' and the increase in Revco's front store
comparable store sales was approximately 400 basis points lower than CVS'. Since
CVS and Revco operate in different markets in terms of population density and
per capita income, the Company does not expect to bring Revco stores up to the
performance level of CVS stores. Management believes however, that it can narrow
the gap significantly. The Merger should also provide significant opportunities
to attract and maintain managed care business. In particular, management
believes that the Merger provides an opportunity to make the Company's
infrastructure more cost efficient due to higher volumes. In addition,
management believes the Company's expanded geographic reach will strengthen its
ability to offer more competitive services to managed care providers.
Management believes that the compatibility of the companies, given their
similarity in store size as well as merchandising strategy, should facilitate
integration of the CVS and Revco businesses.
6
<PAGE> 9
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain
forward-looking statements that are subject to risks and uncertainties.
Forward-looking statements include the information concerning future results of
operations, cost savings and synergies of CVS following the Merger and
concerning the ability of CVS to elevate the performance level of Revco stores
following the Merger and those preceded by, followed by or that otherwise
include the words "believes", "expects", "anticipates", "intends", "estimates"
or similar expressions. For those statements, CVS claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of CVS and could
cause those results to differ materially from those expressed in the
forward-looking statements: materially adverse changes in economic conditions
generally in the markets served by CVS; future regulatory and legislative
actions affecting the industry; competition from other drugstore chains, from
alternative distribution channels such as supermarkets, membership clubs, other
retailers and mail order companies and from other third party plans; and the
continued efforts of HMOs, managed care organizations, PBM companies and other
third party payors to reduce prescription drug costs. The forward looking
statements referred to above are also subject to uncertainties and assumptions
relating to the operations and results of operations of CVS following the
Merger, including: risks relating to CVS' ability to combine the businesses of
two major corporations and maintain current operating performance levels during
the integration period and the challenges inherent in diverting CVS' management
focus and resources from other strategic opportunities and from operational
matters for an extended period of time; CVS' ability to secure suitable new
store locations on favorable lease terms; CVS' ability to attract, hire and
retain suitable pharmacists and management personnel; relationships with
suppliers and CVS' ability to continue to purchase inventory on favorable terms;
and the impact of inflation.
7
<PAGE> 10
RECENT DEVELOPMENTS
SECOND QUARTER EARNINGS
Net sales for the second quarter of 1997 increased 18.2% to $3.2 billion
from sales of $2.7 billion for the second quarter last year. Same store sales,
including CVS' and Revco's results, rose 9.0%. Pharmacy same store sales rose
16.8% for the combined company. Pharmacy sales represented 54% of total sales
for the quarter. Same store sales for CVS alone rose 8.6% in the second quarter,
while Revco same store sales rose 9.5%.
Operating profit, before consideration of the 1997 Second Quarter One-Time
Charge (as defined herein), increased 17.2% to $180.7 million from $154.2
million in the comparable period last year, which excludes the 1996 One-Time
Charge (as defined herein). Earnings from continuing operations, excluding the
1997 Second Quarter One-Time Charge, increased 20.5% to $92.8 million, or $.52
per share, from $77.0 million, or $.44 per share, during the comparable period
in 1996 excluding: (i) the one-time $12.8 million charge pre-tax, $6.5 million
after-tax, or $.04 per share, resulting from the failed acquisition of Revco by
Rite Aid Corporation (the "1996 One-Time Charge") and (ii) a $44.1 million, or
$.27 per share, after-tax gain from the sale of certain shares of TJX Companies,
Inc. After consideration of the after-tax impact of the 1997 Second Quarter
One-Time Charge, the net loss from continuing operations was $230.8 million, or
$1.37 per share.
During the second quarter of 1997, the Company recorded one-time merger
related charges for the following: (i) $411.7 million pre-tax, $278.6 million
after-tax, or $1.63 per share, for merger fees, employee severance associated
with the closing of Revco's headquarters and exit costs associated with certain
store closings and the Revco headquarters; and (ii) $75.0 million pre-tax, $45.0
million after-tax, or $0.26 per share, for inventory markdowns on non-compatible
Revco merchandise. These charges totaling $486.7 million pre-tax, $323.6 million
after-tax, or $1.89 per share, are collectively referred to as the "1997 Second
Quarter One-Time Charge." In addition, the Company recorded an after-tax charge
of $17.1 million, or $.10 per share, related to the early extinguishment of
certain Revco debt assumed as a result of the Merger, as discussed below. This
charge has been classified as an extraordinary item on the Company's
Consolidated Condensed Statement of Operations.
RETIREMENT OF REVCO DEBT FOLLOWING THE MERGER
As a result of the Merger, CVS assumed approximately $900 million of Revco
debt, consisting of approximately $600 million of bank debt and approximately
$300 million of high coupon long-term debt. On May 30, 1997, the Company repaid
the $600 million of debt outstanding under Revco's revolving credit facility,
which was subsequently terminated (the "Bank Debt Repayment"). On June 30, 1997,
the Company redeemed $144,948,000 aggregate principal amount of Revco's 10 1/8%
Senior Notes due June 1, 2002 (the "Debt Redemption") at 105% of the principal
amount thereof plus accrued interest. In addition, on June 25, 1997, the Company
commenced an offer (the "Debt Tender Offer") to purchase for cash $140,000,000
aggregate principal amount of Revco's 9 1/8% Senior Notes due 2000 (the "9 1/8%
Notes"). The Debt Tender Offer expired on July 2, 1997 and $118,798,000
aggregate principal amount of the 9 1/8% Notes was repurchased at an average
price of 104.72% principal amount plus accrued interest. The Company expects to
redeem the remaining 9 1/8% Notes outstanding by January 15, 1998, the first
redemption date, at 103% of principal amount plus accrued interest. The Bank
Debt Repayment, Debt Redemption and Debt Tender Offer were financed with cash on
hand and borrowings under the CVS Corporation Commercial Paper Program and will
reduce the Company's future interest expense.
8
<PAGE> 11
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the NYSE under the symbol "CVS". The table
below sets forth, for the calendar quarters indicated, the reported high and low
sale prices of the Common Stock as reported on the NYSE Composite Transaction
Tape and the cash dividends declared by the Company per share of Common Stock.
In October 1996, CVS distributed 100% of the common stock of Footstar, Inc.
("Footstar"), formerly a wholly owned subsidiary of CVS, in the form of a stock
dividend, to its stockholders. The stock prices shown in the table are actual
trading prices of CVS Common Stock and do not reflect any adjustment for the
trading value of Footstar when it commenced trading on the NYSE on October 16,
1996.
<TABLE>
<CAPTION>
MARKET PRICE CASH
------------- DIVIDENDS
HIGH LOW DECLARED
--- --- ---------
<S> <C> <C> <C>
1995
First Quarter.................................................. $37 1/2 $30 5/8 $0.38
Second Quarter................................................. 39 7/8 33 5/8 0.38
Third Quarter.................................................. 37 1/4 32 3/4 0.38
Fourth Quarter................................................. 37 1/8 28 5/8 0.38
1996
First Quarter.................................................. $36 3/8 $27 1/4 $0.11
Second Quarter................................................. 44 1/2 35 1/4 0.11
Third Quarter.................................................. 46 36 5/8 0.11
Fourth Quarter................................................. 44 3/4 36 3/8 0.11
1997
First Quarter.................................................. $48 $39 $0.11
Second Quarter................................................. 53 3/4 44 1/4 0.11
Third Quarter (through July 15, 1997).......................... 557/16 51 1/2 0.11
</TABLE>
On July 15, 1997, the last reported sale price of the Common Stock was
$52 3/4. As of June 30, 1997, there were approximately 10,475 holders of record
of the Common Stock.
Future dividends on the Common Stock will depend upon the Company's results
of operations, financial condition, capital expenditure program and other
factors, some of which are beyond the Company's control. There can be no
assurance as to whether or when the Company's Board of Directors will change the
current policy regarding dividends.
USE OF PROCEEDS
CVS will not receive any proceeds from the sale of shares by the Selling
Stockholders.
9
<PAGE> 12
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
29, 1997 (i) as restated for the Merger under the pooling of interests method of
accounting and (ii) as adjusted to give effect to the Bank Debt Repayment, Debt
Redemption and Debt Tender Offer. The Bank Debt Repayment, Debt Redemption and
Debt Tender Offer were financed with cash on hand as well as from borrowings
under the CVS Corporation Commercial Paper Program. The table should be read in
conjunction with CVS' supplemental consolidated financial statements and notes
thereto and supplemental Management's Discussion and Analysis of Financial
Condition and Results of Operations incorporated by reference herein.
<TABLE>
<CAPTION>
MARCH 29, 1997
-----------------------------
RESTATED AS ADJUSTED
------------ ------------
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C>
Short-term debt:
Commercial paper.............................................. $ -- $ 537.1
------------ ------------
Total short-term debt...................................... $ -- $ 537.1
------------ ------------
Long-term debt:
Revolving credit facility..................................... 588.7 --
Guaranteed 8.52% ESOP note.................................... 292.1 292.1
9.125% Senior Notes due 2000.................................. 140.0 21.1
10.125% Senior Notes due 2002................................. 144.9 --
Other......................................................... $ 11.8 $ 11.8
------------ ------------
Total long-term debt....................................... $ 1,177.5 $ 325.0
------------ ------------
Shareholders' equity:
Preference stock, $1 par value; 50 million shares authorized;
5.5 million shares issued and outstanding.................. 296.3 296.3
Common stock, $.01 par value; 300 million shares authorized;
172.9 million shares issued and outstanding................ 1.7 1.7
Treasury stock at cost, 5.8 million shares.................... (271.2) (271.2)
Guaranteed ESOP obligation.................................... (292.1) (292.1)
Capital surplus............................................... 900.1 900.1
Retained earnings............................................. 1,658.8 1,658.8
Other......................................................... $ (2.4) $ (2.4)
------------ ------------
Total shareholders' equity................................. $ 2,291.2 $ 2,291.2
------------ ------------
Total capitalization....................................... $ 3,468.7 $ 3,153.3
=========== ===========
</TABLE>
10
<PAGE> 13
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN MILLIONS, EXCEPT OPERATING DATA)
The following tables set forth selected historical consolidated financial
and operating data for CVS and Revco as separate entities prior to the Merger.
The selected historical consolidated financial and operating data for CVS has
been derived from the consolidated financial statements of CVS. The historical
consolidated financial statements of CVS as of and for the three years ended
December 31, 1996 are incorporated herein by reference to CVS' Annual Report on
Form 10-K for the year ended December 31, 1996, as amended by Form 10-K/A filed
April 17, 1997. The historical consolidated financial statements of CVS for the
three years ended December 31, 1996 have been audited by KPMG Peat Marwick LLP,
independent accountants whose audit report is also incorporated herein by
reference. The selected historical consolidated financial and operating data for
CVS should be read in conjunction with the historical consolidated financial
statements and related notes thereto incorporated by reference herein. The
selected historical consolidated financial and operating data for Revco has been
derived from the consolidated financial statements of Revco contained in filings
by Revco with the Commission. The consolidated financial statements of Revco as
of and for the three fiscal years ended June 1, 1996 have been audited by Arthur
Andersen LLP. On May 29, 1997, CVS was merged with Revco. The selected
historical consolidated financial and operating data of CVS and Revco contained
herein is not necessarily indicative of future results of CVS and its
subsidiaries, including Revco, following the Merger. For selected financial data
for CVS and its subsidiaries, including Revco, as restated for the Merger in
accordance with the pooling of interests method of accounting, see "Selected
Supplemental Consolidated Financial Data."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, ---------------------------
-------------------------------------------------------- MARCH 30, MARCH 29,
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CVS
Historical Consolidated Statement of
Operations Data:
Net sales............................ $3,632.1 $3,948.2 $4,330.1 $4,865.0 $5,528.1 $1,258.4 $ 1,515.0
Gross profit......................... 976.8 1,054.1 1,241.9 1,358.6 1,550.0 362.0 431.3
Operating profit(1).................. 134.4 177.1 183.8 8.6 299.6 71.4 94.6
Income (loss) from continuing
operations(1)...................... 65.7 91.9 90.3 (26.5) 239.6 40.6 58.4
Historical Consolidated Operating Data:
Percentage increase in comparable
store sales(2)..................... 6.1% 5.7% 6.1% 8.8% 10.9% 9.1% 15.5%
Operating profit margin(3)........... 5.3% 4.5% 4.2% 4.6% 5.4% 5.7% 6.3%
Number of stores (at period end)..... 1,221 1,284 1,328 1,366 1,408 1,367 1,424
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTY-SIX WEEKS ENDED
-------------------------------------------------------- ---------------------------
MAY 30, MAY 29, MAY 28, JUNE 3, JUNE 1, FEBRUARY 10, FEBRUARY 8,
1992(6) 1993 1994 1995 1996 1996 1997(5)
-------- -------- -------- -------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVCO
Historical Consolidated Statement of
Operations Data:
Net sales............................ $2,086.3 $2,242.1 $2,504.0 $4,431.9 $5,087.7 $3,457.0 $ 3,944.6
Gross profit......................... 625.2 673.8 762.0 1,331.8 1,494.2 1,012.3 1,134.1
Operating profit(4).................. 45.8 76.0 100.5 175.7 206.2 128.3 118.7
Income (loss) from continuing
operations(4)(6)................... (337.6) 14.2 38.7 61.1 76.2 44.6 41.8
Historical Consolidated Operating Data:
Percentage increase in comparable
store sales(2)..................... 9.3% 6.3% 8.5% 9.4% 8.0% 8.3% 7.3%
Operating profit margin(3)........... 2.2% 3.4% 4.0% 4.0% 4.3% 3.7% 3.8%
Number of stores (at period end)..... 1,143 1,190 1,248 2,118 2,184 2,184 2,593
</TABLE>
11
<PAGE> 14
- ---------------
(1) CVS' operating profit was reduced by $59.4 million in 1992 and $215.0
million in 1995 due to realignment charges, restructuring charges and a
change in accounting estimate. These charges also reduced income from
continuing operations by $35.1 million in 1992 and $126.8 million in 1995.
(2) Comparable store sales data is calculated based on the change in sales
commencing after a new store has been opened twelve months. The first twelve
months a store is open are not included in the comparable store calculation.
Relocations are included in comparable store sales.
(3) Operating profit margin is computed by dividing operating profit, after
adding back the adjustments identified in Note 1 for CVS and in Note 4 for
Revco, by each company's sales for such period.
(4) In 1996, non-recurring charges for Revco reduced operating profit by $12.8
million and income from continuing operations by $6.5 million. For the
thirty-six weeks ended February 8, 1997, non-recurring charges for Revco
related to the restructuring of Big B, Inc. ("Big B") reduced operating
profit by $31.0 million and income from continuing operations by $18.6
million.
(5) On November 15, 1996, Revco acquired Big B, for a purchase price of $423.2
million, including the assumption of $49.3 million of debt. Such acquisition
was accounted for under the purchase method of accounting.
(6) In 1992, Revco implemented "Fresh Start Reporting" upon emerging from
Chapter 11 bankruptcy. A charge of $356.9 million was recorded to adjust
Revco's assets to fair value and to record certain other charges associated
with the reorganization.
12
<PAGE> 15
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth selected consolidated financial data for CVS
and its subsidiaries, as restated for the Merger in accordance with the pooling
of interests method of accounting. The selected supplemental consolidated
financial data has been derived from the supplemental consolidated financial
statements of CVS contained in the Company's Current Report on Form 8-K filed on
July 17, 1997 and incorporated herein by reference. The audited supplemental
consolidated financial statements of the Company for the three years ended
December 31, 1996 have been audited by KPMG Peat Marwick LLP, independent public
accountants, whose audit report, based on their audits and the report of Arthur
Andersen LLP, is also incorporated herein by reference. The supplemental
consolidated financial data of the Company as of and for the quarters ended
March 31, 1997 and 1996 include all adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the operating results
and financial position as of and for such unaudited periods. Such results are
not necessarily indicative of results of the full year. In addition, the
selected supplemental consolidated financial data of CVS contained herein is not
necessarily indicative of future results of CVS and its subsidiaries, including
Revco, following the Merger. In particular, pursuant to an agreement with the
Federal Trade Commission, the Company is required to divest 120 Revco stores,
primarily in the Richmond, Virginia area, of which 114 stores have been divested
as of June 30, 1997. The selected supplemental consolidated financial data
should be read in conjunction with the supplemental consolidated financial
statements and related notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, -----------------------
----------------------------------- MARCH 30, MARCH 29,
1994(1) 1995 1996(3) 1996 1997
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Supplemental Consolidated Statement
of Operations Data:
Net sales.......................... $8,762.0 $9,763.4 $10,944.8 $2,558.2 $3,160.8
Gross margin....................... 2,500.0 2,746.9 3,052.1 736.0 900.1
Operating expenses................. 2,123.7 2,516.2(2) 2,511.3(4) 590.9 739.0 (5)
Operating profit................... 376.3 230.7(2) 540.8(4) 145.1 161.1 (5)
Interest expense, net.............. (85.9) (114.5) (75.7) (19.6) (12.9)
Earnings from continuing operations
before income taxes and
extraordinary item.............. 290.4 116.2(2) 592.1(4) 128.2 148.2 (5)
Net earnings (loss)................ $ 375.7 $ (572.8) $ 176.6 $ 46.0 $ 82.7
======= ======= ======== ======= =======
Preferred dividends, net........... (17.0) (17.0) (14.5) (3.3) (3.5)
Net earnings (loss) available to
common shareholders............. $ 358.7 $ (589.8) $ 162.1 42.7 79.2
======= ======= ======== ======= =======
Net earnings (loss) per common
share........................... $ 2.20 $ (3.59) $ 0.98 $ 0.26 $ 0.47
Dividends per common share......... $ 1.52 $ 1.52 $ 0.44 $ 0.11 $ 0.11
Weighted average common shares
outstanding..................... 163.1 164.4 166.7 165.2 169.3
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
---------------------- MARCH 29,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Supplemental Consolidated Balance Sheet Data:
Net working capital........................................ $ 1,317.7 $ 1,406.1 $1,525.8
Total assets............................................... 6,335.6 5,693.7 5,632.4
Total debt................................................. 1,079.6 1,184.3 1,177.5
Shareholders' equity....................................... 2,392.8 2,196.4 2,291.2
</TABLE>
13
<PAGE> 16
- ---------------
(1) Prior to the Merger, Revco's fiscal year ended on the Saturday closest to
May 31. In recording the business combination, Revco's consolidated
financial statements for the fiscal years ended June 1, 1996 and June 3,
1995 have been restated to a year ended December 31, to conform with CVS'
fiscal years. As permitted by the rules and regulations of the Commission,
Revco's fiscal year ended June 3, 1995 has been combined with CVS' fiscal
year ended December 31, 1994. As a result, the supplemental consolidated
statements of shareholders' equity incorporated herein by reference include
an adjustment in 1995 to reduce the Company's combined retained earnings for
the net earnings of Revco for the five months ended June 3, 1995. Revco's
unaudited results of operations for the five months ended June 3, 1995
included net sales of $2.0 billion and earnings from continuing operations
of $44 million.
(2) Operating profit was reduced by $215.0 million in 1995 due to realignment
charges, restructuring charges and a change in accounting estimate by CVS.
These charges also reduced earnings from continuing operations before income
taxes and extraordinary items by $126.8 million in 1995.
(3) On November 15, 1996 Revco acquired Big B for a purchase price of $423.2
million including the assumption of $49.3 million of debt. Such acquisition
was accounted for under the purchase method of accounting.
(4) In 1996 operating profit was reduced by $12.8 million as a result of
non-recurring charges at Revco. Such charges also reduced earnings from
continuing operations before income taxes and extraordinary items by $6.5
million in 1996.
(5) For the three months ended March 29, 1997 there were non-recurring charges
related to the restructuring of Big B of $31.0 million pre-tax or $18.6
million after tax.
14
<PAGE> 17
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership (as defined in Rule 13d-3 of the Exchange Act) of Common Stock for
each Selling Stockholder as of July 17, 1997, and as adjusted to reflect the
sale of the Common Stock offered hereby.
<TABLE>
<CAPTION>
SHARES TO
BE SOLD IN
THE
OFFERING
---------- SHARES OF COMMON STOCK
SHARES OF COMMON STOCK TO BE BENEFICIALLY
BENEFICIALLY OWNED OWNED
BEFORE THE OFFERING AFTER THE OFFERING(2)
------------------------ -----------------------
NAME OF SELLING STOCKHOLDER NUMBER(1) PERCENTAGE NUMBER PERCENTAGE
- -------------------------------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Zell/Chilmark Fund, L.P............... 11,528,002(3) 6.8.% 10,551,611 976,391 *
General Motors Pension Plans(4)(5).... 1,860,113 1.1 1,702,566 157,547 *
City of Los Angeles Fire and Police
Pension Systems(5).................. 1,051,800 * 962,715 89,085 *
Hughes Pension Plans(5)(6)............ 820,072 * 750,614 69,458 *
Navy Resale and Services Support
Office Retirement Trust(5).......... 275,870 * 252,505 23,365 *
Western Union Telegraph Company
Pension Plan(5)..................... 215,757 * 197,483 18,274 *
Magten Asset Management Corp.......... 90,141(7) * 82,506 7,635 *
---------- --- ---------- --------- ---
15,841,755 9.3% 14,500,000 1,341,755 *
========= ======== ========= ========
---
</TABLE>
- ---------------
* Less than 1%.
(1) The shares of Common Stock shown were issued to the Selling Stockholders in
connection with the Merger.
(2) Assumes there is no exercise of the over-allotment option which the Selling
Stockholders have granted to the Underwriters with respect to 1,341,755
shares of Common Stock.
(3) Does not include 57,041 shares of Common Stock to be distributed to two
limited partners of Zell/Chilmark Fund, L.P. immediately prior to the
Offering.
(4) Includes General Motors Hourly-Rate Employees Pension Plan, General Motors
Retirement Program for Salaried Employees and Frigidaire Special Pension
Plan.
(5) Each of these amounts represents shares of Common Stock held in accounts
managed for the Selling Stockholder by Magten Asset Management Corp.
("Magten") and, accordingly, does not represent any other shares of Common
Stock held by or for the account of the Selling Stockholder.
(6) Includes Hughes Non-Bargaining Retirement Plan and Hughes Bargaining
Retirement Plan.
(7) Includes shares of Common Stock held in accounts (i) managed by Magten on
behalf of various pension and/or profit sharing accounts of Magten or (ii)
beneficially owned or otherwise controlled by Mr. Talton R. Embry, the
President and a director of Magten, as an individual or as a trustee. Does
not include 79,616 shares of Common Stock held in accounts managed by
Magten, which accounts are not participating in the Offering.
In connection with the Merger, the Company and the Selling Stockholders
among others entered into a Registration Rights Agreement dated as of May 29,
1997 (the "Registration Rights Agreement"), a copy of which is included as an
exhibit to the Registration Statement of which this Prospectus is a part.
Pursuant to the Registration Rights Agreement, CVS agreed to use its reasonable
best efforts to cause a registration statement relating to the shares acquired
by the Selling Stockholders in the Merger (the "Shelf Registration Statement")
to be declared effective within 15 days after the first public release by CVS of
the combined financial results of CVS and Revco and generally to keep such Shelf
Registration Statement continuously effective until the earliest of 12 months
(subject to certain extensions) after the date such Shelf Registration Statement
is declared effective, such time as all securities covered by the Registration
Rights Agreement have been sold or disposed of thereunder and such time as all
securities subject to the Registration Rights Agreement shall cease to be so
subject. Pursuant to a letter agreement dated as of June 24, 1997, the Company
and Zell/Chilmark Fund, L.P., on behalf of itself and the other parties to the
Registration Rights Agreement, agreed that in lieu of the Shelf Registration
Statement a registration statement relating to an underwritten offering would be
filed on or about July 17, 1997. Subject to any restrictions contained in the
Underwriting Agreement, the parties to the Registration Rights Agreement may
also request that the Company promptly file a Shelf Registration Statement with
the Commission and use its reasonable best efforts to have such Shelf
Registration Statement declared effective as soon as practicable thereafter. CVS
has
15
<PAGE> 18
agreed to pay any and all expenses incidental to performance of or compliance
with any registration of shares of Common Stock received by the Selling
Stockholders and the other parties to the Registration Rights Agreement in
connection with the Merger, including, without limitation, (i) the fees,
disbursements and expenses of CVS' counsel and accountants (including in
connection with the delivery of opinions and/or comfort letters); (ii) all
expenses, including filing fees, in connection with the preparation, printing
and filing of the registration statement; (iii) the cost of printing or
producing any agreements among underwriters, underwriting agreements, and blue
sky or legal investment memoranda; (iv) the filing fees incidental to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the securities to be disposed of; (v) transfer agents'
and registrars' fees and expenses in connection with such offering; (vi) all
security engraving and security printing expenses; (vii) all fees and expenses
payable in connection with the listing of the shares on any securities exchange
or automated interdealer quotation system on which the Common Stock is then
listed; and (viii) all reasonable fees and expenses of one legal counsel for the
Selling Stockholders, which legal counsel shall be selected by Selling
Stockholders owning a majority of the shares offered hereby; provided that
registration expenses shall exclude (x) all underwriting discounts and
commissions, selling or placement agent or broker fees and commissions, and
transfer taxes, if any, in connection with the sale of any securities, (y) the
fees and expenses of counsel for any Selling Stockholders (other than pursuant
to clause (viii)) and (z) all out-of-pocket costs and expenses of CVS incurred
in connection with the marketing of the shares in connection with any
underwritten offering.
16
<PAGE> 19
DESCRIPTION OF CAPITAL STOCK
The summary of the terms of the capital stock of CVS set forth below does
not purport to be complete and is qualified by reference to the certificate of
incorporation and bylaws of CVS (the "CVS Charter" and the "CVS Bylaws",
respectively).
AUTHORIZED CAPITAL STOCK
Under the CVS Charter, CVS' authorized capital stock consists of
300,000,000 shares of Common Stock, par value $.01 per share, 120,619 shares of
Cumulative Preferred Stock, par value $0.01 per share (the "CVS Preferred
Stock"), and 50,000,000 shares of Preference Stock, par value $1 per share (the
"CVS Preference Stock") (the CVS Preferred Stock and CVS Preference Stock being
referred to herein collectively as "Preferred Stock").
COMMON STOCK
Upon consummation of the Merger, there were 169,592,839 shares of Common
Stock outstanding (excluding 2,664,020 treasury shares). The holders of Common
Stock are entitled to receive ratably, from funds legally available for the
payment thereof, dividends when and as declared by resolution of the Board of
Directors, subject to any preferential dividend rights granted to the holders of
any outstanding Preferred Stock. In the event of liquidation, each share of
Common Stock is entitled to share pro rata in any distribution of CVS' assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share of Common Stock held of record on the
applicable record date on all matters submitted to a vote of stockholders,
including the election of directors. In addition, holders of Series One ESOP
Convertible Preference Stock, $1 par value, of CVS ("CVS ESOP Preference Stock")
are entitled to vote on all matters submitted to a vote of holders of Common
Stock, voting together with the Common Stock as a single class. Each share of
CVS ESOP Preference Stock is entitled to the number of votes equal to the number
of shares of Common Stock into which such share of CVS ESOP Preference Stock
could be converted on the record date for the applicable meeting, which is
currently 1.2 votes (subject to adjustment in the case of certain dilutive
events).
Holders of Common Stock have no cumulative voting rights or preemptive
rights to purchase or subscribe for any stock or other securities and there are
no conversion rights or redemption rights or sinking fund provisions with
respect to the Common Stock. The outstanding shares of Common Stock are duly
authorized, validly issued, fully paid and nonassessable.
CVS PREFERRED STOCK AND CVS PREFERENCE STOCK
Upon consummation of the Merger, (i) approximately 5.38 million shares of
CVS ESOP Preference Stock were issued and outstanding and (ii) no other shares
of Preferred Stock were issued or outstanding. Under the CVS Charter, the Board
of Directors has the authority, without further stockholder approval but subject
to certain limitations set forth in the CVS Charter, to create one or more
series of Preferred Stock, to issue shares of Preferred Stock in such series up
to the maximum number of shares of the relevant class of Preferred Stock
authorized, and to determine the preferences, rights, privileges and
restrictions of any such series, including the dividend rights, voting rights,
rights and terms of redemption, liquidation preferences, the number of shares
constituting any such series and the designation of such series. Pursuant to
this authority, the Board of Directors could create and issue a series of
preferred stock with rights, privileges or restrictions, and adopt a stockholder
rights plan, having the effect of discriminating against an existing or
prospective holder of such securities as a result of such security holder
beneficially owning or commencing a tender offer for a substantial amount of
Common Stock. One of the effects of authorized but unissued and unreserved
shares of capital stock may be to render more difficult or discourage an attempt
by a potential acquiror to obtain control of CVS by means of a merger, tender
offer, proxy contest or otherwise, and thereby protect the continuity of CVS'
management. The issuance of such shares of capital stock may have the effect of
delaying, deferring or preventing a change in control of CVS without any further
action by the stockholders of CVS. CVS has no present intention to adopt a
shareholder rights plan, but could do so without shareholder approval at any
future time.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services, LLC is the transfer agent and registrar
for the Common Stock.
17
<PAGE> 20
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement"), the
underwriters named below (the "U.S. Underwriters") have severally but not
jointly agreed to purchase from the Selling Stockholders the following
respective numbers of U.S. Shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER U.S. SHARES
------------------------------------------------------------------------- -----------
<S> <C>
Credit Suisse First Boston Corporation...................................
Donaldson, Lufkin & Jenrette Securities Corporation......................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Morgan Stanley & Co. Incorporated........................................
Salomon Brothers Inc.....................................................
-----------
Total.......................................................... 12,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all of the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The Underwriting Agreement provides that, in the event of
a default by a U.S. Underwriter, in certain circumstances the purchase
commitments of the non-defaulting U.S. Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company and the Selling Stockholders have entered into a Subscription
Agreement (the "Subscription Agreement") with the managers of the International
Offering (the "Managers") providing for the concurrent offer and sale of the
International Shares outside the United States and Canada. The closing of the
U.S. Offering is a condition to the closing of the International Offering and
vice versa.
The Selling Stockholders have granted to the U.S. Underwriters and the
Managers an option, exercisable by Credit Suisse First Boston Corporation,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to 1,341,755 additional shares at the public offering
price less the underwriting discounts and commissions, all as set forth on the
cover page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of Common Stock. To the extent such
option is exercised, each U.S. Underwriter and each Manager will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock being sold to the U.S.
Underwriters and the Managers as the number of U.S. Shares set forth next to
such U.S. Underwriter's name in the preceding table and as the number of
International Shares set forth next to such Manager's name in the corresponding
table in the Prospectus relating to the International Offering bears to the sum
of the total number of shares of Common Stock in such tables.
The Company and the Selling Stockholders have been advised by Credit Suisse
First Boston Corporation on behalf of the U.S. Underwriters that the U.S.
Underwriters propose to offer the U.S. Shares in the United States to the public
and in Canada on a private placement basis to certain institutions initially at
the public offering price set forth on the cover page of this Prospectus and,
through the Underwriters, to certain dealers at such price less a concession of
$ per share, and the U.S. Underwriters and such dealers may allow a
discount of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Underwriters. The offering price and the
aggregate underwriting discounts and commissions per share and per share
commission and discount to dealers for the U.S. Offering and the concurrent
International Offering will be identical. Pursuant to an Agreement between the
U.S. Underwriters and Managers (the "Intersyndicate Agreement") relating to the
Offering, changes in the offering price, commission and reallowance to dealers
will be made only upon the mutual agreement of Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters, and Credit Suisse First Boston
(Europe) Limited ("CSFBL"), on behalf of the Managers.
18
<PAGE> 21
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters has
agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the shares of Common Stock to any person outside the United States
and Canada or to any other dealer who does not so agree. Each of the Managers
has agreed that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold and may not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the shares of Common Stock to any person in the United
States and Canada or to any other dealer who does not so agree. The foregoing
limitations do not apply to stabilization transactions or to transactions
between the Underwriters and the Managers pursuant to the Intersyndicate
Agreement. As used herein, "United States" means the United States of America
(including the States and the District of Columbia), its territories,
possessions and other areas subject to its jurisdiction, "Canada" means Canada,
its provinces, territories, possessions and other areas subject to its
jurisdiction, and an offer or sale shall be in the United States or Canada if it
is made to (i) any individual resident in the United States or Canada or (ii)
any corporation, partnership, pension, profit-sharing or other trust or other
entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters, and CSFBL, on behalf of the
Managers, but not exceeding the selling concession applicable to such shares. To
the extent that there are sales between the U.S. Underwriters and the Managers
pursuant to the Intersyndicate Agreement, the number of shares of Common Stock
initially available for sale by the U.S. Underwriters or by the Managers may be
more or less than the amount appearing on the cover page of this Prospectus.
Neither the U.S. Underwriters nor the Managers are obligated to purchase from
the other any unsold shares of Common Stock.
The Company and the Selling Stockholders have agreed that during the period
beginning from the date of the Prospectus (as defined in the Underwriting
Agreement) and continuing to and including the date 90 days after the date of
the Prospectus not to offer, sell, contract to sell, grant any option to
purchase, establish a put equivalent position (as defined in Rule 1a-1(h) under
the Exchange Act), pledge or otherwise dispose of, directly or indirectly, any
shares of Common Stock, or any securities that are substantially similar to the
shares of Common Stock, including but not limited to any securities that are
convertible into or exercisable or exchangeable for, or that represent the right
to receive, shares of Common Stock or any substantially similar securities or,
in the case of the Company publicly disclose the intention to make any such
offer, sale, pledge or disposal, without the prior written consent of Credit
Suisse First Boston Corporation, except (i) for private sales or similar
transfers or distributions so long as the purchaser thereof enters into a
corresponding lockup agreement with Credit Suisse First Boston Corporation for
the then unexpired portion of the 90-day period and (ii) for grants of employee
stock options pursuant to the terms of a plan in effect on the date hereof,
issuance of Common Stock pursuant to the exercise of such options or the
exercise of any other employee stock options outstanding on the date hereof.
The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the U.S.
Underwriters may be required to make in respect thereof.
Credit Suisse First Boston Corporation, on behalf of the U.S. Underwriters
and the Managers, may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim a selling concession from a
syndicate member when the shares of Common Stock originally sold by such
syndicate member are purchased in a syndicate-covering transaction to cover
syndicate short positions. Such stabilizing
19
<PAGE> 22
transactions, syndicate-covering transactions and penalty bids may cause the
price of the Common Stock to be higher than it would be in the absence of such
transactions. These transactions may be effected on the New York Stock Exchange
or otherwise and, if commenced, may be discontinued at any time.
Certain of the U.S. Underwriters and the Managers and their affiliates have
provided from time to time, and expect to provide in the future, various
investment banking and commercial banking services for the Company and the
Selling Stockholders, for which such U.S. Underwriters and Managers have
received and will receive customary fees and commissions.
20
<PAGE> 23
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent and (iii) such purchaser has reviewed
the text above under "Resale Restrictions."
RIGHT OF ACTION FOR ONTARIO PURCHASERS
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the Company's directors and officers as well as the experts and the
Selling Stockholders named herein may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the Company or such persons. All or a substantial
portion of the assets of the Company and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the Company or such persons in Canada or to enforce a judgment obtained in
Canadian courts against the Company of such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to the Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Common Stock should consult their own legal and tax
advisers with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by such purchasers under relevant Canadian
legislation.
21
<PAGE> 24
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
beneficial owner thereof that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a foreign
estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances (including tax consequences applicable to pass-through entities)
and does not address any tax consequences arising under the laws of any state,
local or foreign jurisdiction. Prospective holders should consult their tax
advisors with respect to the particular tax consequences to them of owning and
disposing of Common Stock, including the consequences under the laws of any
state, local or foreign jurisdiction.
Proposed United States Treasury Regulations were issued in April 1996 (the
"Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. It is not
clear whether the Proposed Regulations would be finalized in the current form.
The discussion below is not intended to be a complete discussion of the
provisions of the Proposed Regulations, and prospective investors are urged to
consult their tax advisors with respect to the effect the Proposed Regulations
would have if adopted.
DIVIDENDS
Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax at a rate of
30% of the gross amount of the dividend or such lower rate as may be specified
by an applicable income tax treaty. For purposes of determining whether tax is
to be withheld at a 30% rate or at a reduced rate as specified by an income tax
treaty, in accordance with existing United States Treasury Regulations, the
Company ordinarily will presume that dividends paid to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted.
Under the Proposed Regulations, in the case of dividends paid after
December 31, 1997 (December 31, 1999, in the case of dividends paid to accounts
in existence on or before the date that is 60 days after the Proposed
Regulations are published as final regulations), to obtain a reduced rate of
withholding under a treaty, a Non-U.S. Holder would generally be required to
provide an Internal Revenue Service Form W-8 to the Company or its Paying Agent
certifying such Non-U.S. Holder's entitlement to benefits under a treaty. The
Proposed Regulations would also provide special rules to determine whether, for
purposes of determining the applicability of a tax treaty, dividends paid to a
Non-U.S. Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States or, if a tax treaty applies, are attributable
to a U.S. permanent establishment maintained by the Non-U.S. Holder, if, in each
case, a Form 4224 stating that the dividends are so connected is filed with the
Company or its Paying Agent. Instead, such dividends will be subject to regular
U.S. income tax at the graduated rate in the same manner as if the Non-U.S.
Holder were a U.S. resident. In addition to such graduated tax, a non-U.S.
corporation receiving effectively connected dividends or, if a tax treaty
applies, dividends attributable to a U.S. permanent establishment of the
Non-U.S. Holder, may be subject to a "branch profits tax" which is imposed,
under certain circumstances, at a rate of 30% (or such lower rate as may be
specified by an applicable treaty) of the non-U.S. corporation's effectively
connected earnings and profits, subject to certain adjustments.
22
<PAGE> 25
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
(and no tax will generally be withheld) with respect to gain realized on a sale
or other disposition of Common Stock unless (i) the gain is effectively
connected with a trade or business of such holder in the United States, or, if a
tax treaty applies, attributable to a U.S. permanent establishment of the
Non-U.S. Holder, (ii) in the case of certain Non-U.S. Holders who are
non-resident alien individuals and hold the Common Stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes and the Non-U.S. Holder owned
directly or pursuant to certain attribution rules more than 5% of the Company's
Common Stock (assuming the Common Stock is regularly traded on an established
securities market) at any time within the shorter of the five-year period
preceding such disposition or such holder's holding period. The Company is not,
and does not anticipate becoming, a U.S. real property holding corporation.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a Non-U.S. Holder that are subject to the 30% or reduced
treaty rate of withholding tax previously discussed will be exempt from the U.S.
backup withholding tax. Otherwise, dividends may be subject to backup
withholding imposed at a rate of 31% if the Non-U.S. Holder fails to establish
that it is entitled to an exemption or to provide a correct taxpayer
identification number and certain other information to the Company or its Paying
Agent.
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock paid to or through a U.S. office of a broker unless
the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds if the payment
is made outside the United States through a non-U.S. office of a non-U.S.
broker. However, U.S. information reporting requirements (but not backup
withholding) will apply to a payment of disposition proceeds outside the United
States if the payment is made through an office outside the United States of a
broker that is (i) a U.S. person, (ii) a foreign person which derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) a "controlled foreign corporation" for
U.S. federal income tax purposes, unless the broker maintains documentary
evidence that the holder is a Non-U.S. Holder and that certain conditions are
met, or that the holder otherwise is entitled to an exemption.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-United States Holder would be subject to
backup withholding and information reporting unless the Company receives
certification from the holder of non-U.S. status.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who at the time of death is treated as the
owner of, or has made certain lifetime transfers of, an interest in the Common
Stock will be required to include the value thereof in his gross estate for U.S.
federal estate tax purposes, and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
23
<PAGE> 26
LEGAL MATTERS
The validity of the Common Stock will be passed upon by Davis Polk &
Wardwell, counsel to CVS. Certain legal matters relating to the Offering will be
passed upon for the Selling Stockholders by Rosenberg & Liebentritt, P.C. and
Seward & Kissell and for the Underwriters by Dewey Ballantine. Ms. Sheli
Rosenberg, a director of CVS and an affiliate of Zell/Chilmark Fund, L.P., is a
principal of Rosenberg & Liebentritt, P.C.
EXPERTS
The historical consolidated financial statements of CVS Corporation and its
subsidiaries as of December 31, 1996 and 1995 and for the three years ended
December 31, 1996 and the related consolidated financial statement schedule have
been incorporated by reference in this Registration Statement in reliance upon
the reports of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and given upon the authority of said firm as
experts in accounting and auditing. The supplemental consolidated financial
statements of CVS Corporation and its subsidiaries, including Revco, as of
December 31, 1996 and 1995 and for the three years ended December 31, 1996 and
the related supplemental financial statement schedule have been incorporated by
reference in this Registration Statement in reliance upon the reports of KPMG
Peat Marwick LLP, based on their audits and the reports of other independent
public accountants, namely Arthur Andersen LLP, each of which reports are
incorporated by reference herein, in reliance upon the authority of said firms
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the Commission's
following Regional Offices: Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies of such material
can also be obtained at prescribed rates from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549-1004. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of that site is
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. and reports and other information concerning the Company can also
be inspected at the office of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete and in each instance where such contract or other
document has been filed as an exhibit to the Registration Statement, reference
is made to the exhibit so filed, each such statement being qualified in all
respects by such reference. For further information with respect to the Company
and the securities offered hereby, reference is made to the Registration
Statement and exhibits thereto. The information so omitted, including exhibits,
may be obtained from the Commission at its principal office in Washington, D.C.
upon the payment of the prescribed fees, or may be inspected without charge at
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549-1004.
24
<PAGE> 27
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER 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 THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
Recent Developments................... 8
Price Range of Common Stock and
Dividend Policy..................... 9
Use of Proceeds....................... 9
Capitalization........................ 10
Selected Historical Consolidated
Financial and Operating Data........ 11
Selected Supplemental Consolidated
Financial Data...................... 13
Selling Stockholders.................. 15
Description of Capital Stock.......... 17
Underwriting.......................... 18
Notice to Canadian Residents.......... 21
Certain U.S. Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 22
Legal Matters......................... 24
Experts............................... 24
Available Information................. 24
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
14,500,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INC
- ------------------------------------------------------
<PAGE> 28
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
SUBJECT TO COMPLETION, DATED JULY 17, 1997
14,500,000 Shares
CVS LOGO
CVS Corporation
Common Stock
(par value $.01 per share)
------------------
All of the shares of common stock, par value $.01 per share (the "Common Stock")
of CVS Corporation, a Delaware corporation ("CVS" or the "Company"), offered
hereby are being sold by the Selling Stockholders named herein under "Selling
Stockholders". The Company will not receive any proceeds from the sale of shares
by the Selling Stockholders and the Company will bear certain expenses relating
to the registration and sale of the shares. Of the 14,500,000 shares of Common
Stock being offered, 2,200,000 shares are initially being offered outside the
United States and Canada (the "International Shares") by the Managers (the
"International Offering") and 12,300,000 shares are initially being concurrently
offered in the United States and Canada (the "U.S. Shares") by the U.S.
Underwriters (the "U.S. Offering" and, together with the International Offering,
the "Offering"). The offering price and underwriting discounts and commissions
of the International Offering and the U.S. Offering are identical. The Selling
Stockholders received the shares offered hereby in connection with the merger of
CVS and Revco D.S. Inc. ("Revco") which was consummated on May 29, 1997 (the
"Merger").
The Common Stock is listed on the New York Stock Exchange (the "NYSE") under the
symbol "CVS." The last reported sale of the Common Stock on the NYSE Composite
Tape on July 15, 1997 was $52 3/4 per share. See "Price Range of Common Stock
and Dividend Policy."
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 UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds
Price to Discounts and to Selling
Public Commissions Stockholders(1)
-------- ------------- ---------------
<S> <C> <C> <C>
Per Share............................................... $ $ $
Total(2)................................................ $ $ $
</TABLE>
- ---------------
(1) Before deduction of expenses payable by the Selling Stockholders estimated
at $ . The Company will pay expenses related to the Offering
estimated at $ .
(2) The Selling Stockholders have granted the Managers and the U.S. Underwriters
an option, exercisable by Credit Suisse First Boston Corporation for 30 days
from the date of this Prospectus, to purchase a maximum of 1,341,755
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $ ,
Underwriting Discounts and Commissions will be $ and Proceeds to
Selling Stockholders will be $ . See "Selling Stockholders."
The International Shares are offered by the several Managers when, as and
if delivered to and accepted by the Managers and subject to their right to
reject orders in whole or in part. It is expected that the International Shares
will be ready for delivery on or about , 1997, against payment in
immediately available funds.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH INTERNATIONAL
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER SALOMON BROTHERS INTERNATIONAL LIMITED
Prospectus dated , 1997.
<PAGE> 29
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
[Map of CVS store locations as of June 30, 1997]
------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION ON BEHALF OF THE U.S. UNDERWRITERS
AND THE MANAGERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR
OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING
OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT COVERING TRANSACTIONS
AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "SUBSCRIPTION AND
SALE".
2
<PAGE> 30
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
SUBSCRIPTION AND SALE
Under the terms and subject to the conditions contained in a Subscription
Agreement dated , 1997 (the "Subscription Agreement"), the
institutions named below (the "Managers") have severally but not jointly agreed
to purchase from the Selling Stockholders the following respective numbers of
International Shares:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER INTERNATIONAL SHARES
- ---------------------------------------------------------------------------- --------------------
<S> <C>
Credit Suisse First Boston (Europe) Limited.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........................
Merrill Lynch International.................................................
Morgan Stanley & Co. International Limited..................................
Salomon Brothers International Limited......................................
--------------------
Total..................................................................... 2,200,000
==============
</TABLE>
The Subscription Agreement provides that the obligations of the Managers
are subject to certain conditions precedent and that the Managers will be
obligated to purchase all of the International Shares offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased. The Subscription Agreement provides that, in the event of a default
by a Manager, in certain circumstances the purchase commitments of the
non-defaulting Managers may be increased or the Subscription Agreement may be
terminated.
The Company and the Selling Stockholders have entered into an Underwriting
Agreement with the underwriters of the U.S. Offering (the "U.S. Underwriters")
providing for the concurrent offer and sale of the U.S. Shares in the United
States and Canada. The closing of the U.S. Offering is a condition to the
closing of the International Offering and vice versa.
The Selling Stockholders have granted to the Managers and the U.S.
Underwriters an option, exercisable by Credit Suisse First Boston Corporation,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to 1,341,755 additional shares at the public offering
price less the underwriting discounts and commissions, all as set forth on the
cover page of this Prospectus. Such option may be exercised only to cover
over-allotments in the sale of the shares of Common Stock. To the extent such
option is exercised, each Manager and each U.S. Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Common Stock being sold to the Managers
and the U.S. Underwriters as the number of International Shares set forth next
to such Manager's name in the preceding table and as the number of U.S. Shares
set forth next to such U.S. Underwriter's name in the corresponding table in the
Prospectus relating to the U.S. Offering bears to the sum of the total number of
shares of Common Stock in such tables.
The Company and the Selling Stockholders have been advised by Credit Suisse
First Boston (Europe) Limited, on behalf of the Managers, that the Managers
propose to offer the International Shares outside the United States and Canada
to the public initially at the public offering price set forth on the cover page
of this Prospectus and, through the Managers, to certain dealers at such price
less a concession of $ per share, and the Managers and such dealers may
allow a discount of $ per share on sales to certain other dealers.
After the initial public offering, the public offering price and concession and
discount to dealers may be changed by the Managers. The offering price and the
aggregate underwriting discounts and commissions per share and per share
commission and discount to dealers for the International Offering and the
concurrent U.S. Offering will be identical. Pursuant to an Agreement between the
U.S. Underwriters and Managers (the "Intersyndicate Agreement") relating to the
Offering, changes in the offering price, commission and reallowance to dealers
will be made only upon the mutual agreement of Credit Suisse First Boston
(Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters.
18
<PAGE> 31
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of the International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the shares of Common Stock to any person in the United States or
Canada or to any other dealer who does not so agree. Each of the U.S.
Underwriters has agreed that, as part of the distribution of the U.S. Shares and
subject to certain exceptions, it has not offered or sold and may not offer or
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the shares of Common Stock to any person outside the
United States and Canada or to any other dealer who does not so agree. The
foregoing limitations do not apply to stabilization transactions or to
transactions between the Managers and the U.S. Underwriters pursuant to the
Intersyndicate Agreement. As used herein, "United States" means the United
States of America (including the States and the District of Columbia), its
territories, possessions and other areas subject to its jurisdiction, "Canada"
means Canada, its provinces, territories, possessions and other areas subject to
its jurisdiction, and an offer or sale shall be in the United States or Canada
if it is made to (i) any individual resident in the United States or Canada or
(ii) any corporation, partnership, pension, profit-sharing or other trust or
other entity (including any such entity acting as an investment adviser with
discretionary authority) whose office most directly involved with the purchase
is located in the United States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price less such amount agreed upon by Credit Suisse First Boston
(Europe) Limited, on behalf of the Managers, and Credit Suisse First Boston, on
behalf of the U.S. Underwriters, but not exceeding the selling concession
applicable to such shares. To the extent that there are sales between the
Managers and the U.S. Underwriters pursuant to the Intersyndicate Agreement, the
number of shares of Common Stock initially available for sale by the Managers or
by the U.S. Underwriters may be more or less than the amount appearing on the
cover page of this Prospectus. Neither the Managers or the U.S. Underwriters are
obligated to purchase from the other any unsold shares of Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that (i) it has not offered or sold, and prior to the date six months
after the date of issue of shares of Common Stock will not offer or sell any
shares of Common Stock to persons in the United Kingdom, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act of 1986 with respect to
anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue and pass on in the United Kingdom any document received
by it in connection with the issue of the shares of Common Stock to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person
to whom such document may otherwise lawfully be issued or passed on.
The Company and the Selling Stockholders have agreed that during the period
beginning from the date of the Prospectus (as defined in the Subscription
Agreement) and continuing to and including the date 90 days after the date of
the Prospectus not to offer, sell, contract to sell, grant any option to
purchase, establish a put equivalent position (as defined in Rule 1a-1(h) under
the Exchange Act), pledge or otherwise dispose of, directly or indirectly, any
shares of Common Stock, or any securities that are substantially similar to the
Common Stock, including but not limited to any securities that are convertible
into or exercisable or exchangeable for, or that represent the right to receive,
Common Stock or any substantially similar securities or, in the case of the
Company publicly disclose the intention to make any such offer, sale, pledge or
disposal, without the prior written consent of Credit Suisse First Boston
Corporation, except (i) for private sales or similar transfers or distributions
so long as the purchaser thereof enters into a corresponding lockup agreement
with Credit Suisse First Boston Corporation for the then unexpired portion of
the 90-day period and (ii) for
19
<PAGE> 32
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
grants of employee stock options pursuant to the terms of a plan in effect on
the date hereof, issuance of Common Stock pursuant to the exercise of such
options or the exercise of any other employee stock options outstanding on the
date hereof.
The Company and the Selling Stockholders have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, including civil
liabilities under the Securities Act, or contribute to payments which the
Managers may be required to make in respect thereof.
Credit Suisse First Boston Corporation on behalf of the U.S. Underwriters
and the Managers may engage in over-allotment, stabilizing transactions,
syndicate-covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate-covering
transactions involve purchases of the Common Stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Underwriter to reclaim a selling concession from a
syndicate member when the shares of Common Stock originally sold by such
syndicate member are purchased in a syndicate-covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate-covering
transactions and penalty bids may cause the price of the Common Stock to be
higher than it would be in the absence of such transactions. These transactions
may be effected on the New York Stock Exchange or otherwise and, if commenced,
may be discontinued at any time.
Certain of the Managers and the U.S. Underwriters and their affiliates have
provided from time to time, and expect to provide in the future, various
investment banking and commercial banking services for the Company and the
Selling Stockholders, for which such Managers and U.S. Underwriters have
received and will receive customary fees and commissions.
20
<PAGE> 33
[ALTERNATE INTERNATIONAL PROSPECTUS PAGE]
- ------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY MANAGER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER 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 THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
Recent Developments................... 8
Price Range of Common Stock and
Dividend Policy..................... 9
Use of Proceeds....................... 9
Capitalization........................ 10
Selected Historical Consolidated
Financial and Operating Data........ 11
Selected Supplemental Consolidated
Financial Data...................... 13
Selling Stockholders.................. 15
Description of Capital Stock.......... 17
Subscription and Sale................. 18
Notice to Canadian Residents.......... 21
Certain U.S. Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 22
Legal Matters......................... 24
Experts............................... 24
Available Information................. 24
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
CVS LOGO
14,500,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY DEAN WITTER
SALOMON BROTHERS INTERNATIONAL
LIMITED
- ------------------------------------------------------
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the Offering. All of such expenses except the Securities and Exchange
Commission registration fee and the NASD filing fee are estimated:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $255,965
Blue sky fees and expenses............................................ 5,000
NASD filing fee....................................................... 30,500
Printing expense...................................................... 100,000
Accounting fees and expenses.......................................... 80,000
Legal fees and expenses............................................... *(1)
Miscellaneous......................................................... *
--------
Total............................................................ $ *
========
</TABLE>
- ---------------
* To be completed by amendent.
(1) $ of which will be paid by the Selling Stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Exculpation. Section 102(b)(7) of the Delaware Law permits a corporation
to include in its certificate of incorporation a provision eliminating or
limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision may not eliminate or limit the liability of a
director for any breach of the director's duty of loyalty to the corporation or
its stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for the payment of
unlawful dividends, or for any transaction from which the director derived an
improper personal benefit.
The CVS Charter limits the personal liability of a director to CVS and its
stockholders for monetary damages for a breach of fiduciary duty as a director
to the fullest extent permitted by law.
Indemnification. Section 145 of the Delaware Law permits a corporation to
indemnify any of its directors or officers who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person is or was a director or officer of the corporation,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe that such person's conduct was unlawful. In
a derivative action, i.e., one by or in the right of a corporation, the
corporation is permitted to indemnify directors and officers against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection with the defense or settlement of an action or suit if they acted in
good faith and in a manner that they reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification shall
be made if such person shall have been adjudged liable to the corporation,
unless and only to the extent that the court in which the action or suit was
brought shall determine upon application that the defendant directors or
officers are fairly and reasonably entitled to indemnity for such expenses
despite such adjudication of liability.
The CVS Charter provides for indemnification of directors and officers of
CVS against liability they may incur in their capacities as such to the fullest
extent permitted under the Delaware Law.
Insurance. CVS has in effect Directors and Officers Liability Insurance
with a limit of $100,000,000 and pension trust liability insurance with a limit
of $50,000,000. This insurance was purchased in layers from National Union Fire
Insurance Company of Pittsburgh, Pennsylvania; Federal Insurance Company of
Warren,
II-1
<PAGE> 35
New Jersey; Royal Indemnity Company of Charlotte, North Carolina; Columbia
Casualty Insurance Company of Chicago, Illinois; St. Paul Surplus Lines Company
of St. Paul, Minnesota; and Reliance Insurance Company of Philadelphia,
Pennsylvania. The pension trust liability insurance covers actions of directors
and officers as well as other employees with fiduciary responsibilities under
ERISA.
Revco Directors and Officers. The Merger Agreement provides that CVS will
cause Revco and its Subsidiaries to indemnify (including the payment of
reasonable fees and expenses of legal counsel) the current or former directors
or officers of Revco to the fullest extent permitted by law for damages and
liabilities arising out of facts and circumstances occurring at or prior to the
Merger. The Merger Agreement also provides that for a period of six years after
the Merger CVS will cause to be maintained in effect Revco's existing policies
of directors' and officers' liability insurance as in effect on February 6, 1997
(provided that CVS may substitute policies with reputable and financially sound
carriers having at least the same coverage and amounts and containing terms and
conditions that are no less advantageous) with respect to facts or circumstances
occurring at or prior to the Merger; provided that if the annual premium for
such insurance during such six-year period exceeds 200% of the annual premiums
paid by Revco as of February 6, 1997 for such insurance (such 200% amount, the
"Maximum Premium") then CVS will cause Revco to provide the most advantageous
directors' and officers' insurance coverage then available for an annual premium
equal to the Maximum Premium.
ITEM 16. EXHIBITS
See index to exhibits at E-1.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 36
Pursuant to the requirements of the Securities Act of 1933, CVS Corporation
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Woonsocket, state of Rhode Island, on July 17, 1997.
CVS CORPORATION
/s/ CHARLES C. CONAWAY
By:.................................
CHARLES C. CONAWAY
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
The registrant and each person whose signature appears below constitutes
and appoints Charles C. Conaway, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign and file (i) any and all
amendments (including post-effective amendments) to this registration statement,
with all exhibits thereto, and other documents in connection therewith, and (ii)
a registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<S> <C> <C>
/s/ STANLEY P. GOLDSTEIN Chairman of the Board, Chief July 17, 1997
........................................ Executive Officer and
STANLEY P. GOLDSTEIN Director (Principal
Executive Officer)
/s/ CHARLES C. CONAWAY Executive Vice President and July 17, 1997
........................................ Chief Financial Officer
CHARLES C. CONAWAY (Principal Financial and
Accounting Officer)
/s/ ALLAN J. BLOOSTEIN Director July 17, 1997
........................................
ALLAN J. BLOOSTEIN
/s/ W. DON CORNWELL Director July 17, 1997
........................................
W. DON CORNWELL
/s/ THOMAS P. GERRITY Director July 17, 1997
........................................
THOMAS P. GERRITY
/s/ WILLIAM H. JOYCE Director July 17, 1997
........................................
WILLIAM H. JOYCE
/s/ TERRY R. LAUTENBACH Director July 17, 1997
........................................
TERRY R. LAUTENBACH
/s/ TERRENCE MURRAY Director July 17, 1997
........................................
TERRENCE MURRAY
/s/ SHELI Z. ROSENBERG Director July 17, 1997
........................................
SHELI Z. ROSENBERG
</TABLE>
II-3
<PAGE> 37
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ ------------------
<S> <C> <C>
/s/ THOMAS M. RYAN Vice Chairman of the Board, July 17, 1997
........................................ Chief Operating Officer and
THOMAS M. RYAN Director
/s/ IVAN G. SEIDENBERG Director July 17, 1997
........................................
IVAN G. SEIDENBERG
/s/ PATRICIA CARRY STEWART Director July 17, 1997
........................................
PATRICIA CARRY STEWART
/s/ THOMAS O. THORSEN Director July 17, 1997
........................................
THOMAS O. THORSEN
/s/ M. CABELL WOODWARD, JR. Director July 17, 1997
........................................
M. CABELL WOODWARD, JR.
</TABLE>
II-4
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------------
<C> <S> <C>
1.1 Agreement and Plan of Merger dated as of February 6, 1997, as
amended on March 19, 1997, among the Registrant, Revco D.S., Inc.,
and North Acquisition Corp. (incorporated by reference to Annex A
of the Joint Proxy Statement/Prospectus contained in Amendment No.
1 to the Registration Statement No. 333-24163 dated April 17,
1997)
1.2 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K (the "CVS 1996 Form 10-K")
for the year ended December 31, 1996).
3.2 By-Laws of CVS Corporation (incorporated by reference to Exhibit
3.2 to the CVS 1996 Form 10-K)
4.1 Specimen Common Stock certificate (incorporated by reference to
Exhibit 4-1 to the Registrant's Registration Statement on Form 8-B
dated November 4, 1996)
4.2 Registration Rights Agreement dated as of May 29, 1997
4.3 Letter Agreement under the Registration Rights Agreement dated
June 24, 1997
5.1 Opinion of Davis Polk & Wardwell regarding the validity of the
securities being registered*
8.1 Opinion of Davis Polk & Wardwell regarding certain tax matters.*
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Davis Polk & Wardwell (contained in the Opinion of
Counsel filed as Exhibits 5.1 and 8.1 hereto)
24.1 Power of Attorney (included on signature page)
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of May 29, 1997 among CVS Corporation, a
Delaware corporation (the "Issuer"), and the Holders as defined herein.
W I T N E S S E T H:
WHEREAS, this Agreement is being entered into in connection with
the closing under the Merger Agreement referred to below;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representation, warranties, covenants and agreements contained herein,
the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. Terms defined in the Agreement and
Plan of Merger dated as of February 6, 1997 among the Issuer, Revco D.S., Inc.,
a Delaware corporation, and North Acquisition Corp., a Delaware corporation, are
used herein as defined therein. In addition, the following terms, as used
herein, shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission or
any successor governmental body or agency.
"Common Stock" means the common stock, par value $.01 per
share, of the Issuer.
"Demand Registration" has the meaning ascribed thereto in
Section 2.02(a)(i).
"Demand Request" has the meaning ascribed thereto in
Section 2.02(a).
"Disadvantageous Condition" has the meaning ascribed thereto in
Section 2.04.
"Holder" means a person who owns Registrable Securities and is
either (i) an Investor or (ii) a Person that (A) has agreed to be bound by the
terms of this Agreement as if such Person were an Investor and (B) is (1) upon
the death of any Investor, the executor of the estate of such Investor or such
Investor's heirs, devisees, legatees or assigns, (2) upon the disability of any
Investor, any guardian or conservator of such Investor or (3) a general or
limited partner of Zell/Chilmark that has received Registrable Securities
pursuant to the distribution to such partners of Registrable Securities in
accordance with the agreement of limited partnership governing the rights of
such partners.
<PAGE> 2
"Holders' Agent" means each of Magten, the Zell Holders' Agent
and each Revco Individual Holder, as the case may be.
"Investor" means each Person listed on Schedule I hereto.
"Magten" means Magten Asset Management Corporation.
"Permitted Holder" means each of (i) the Zell Holders' Agent (or
one representative of the Zell Holders that (x) is designated by Zell Holders
that hold a majority of the Registrable Securities proposed to be sold by Zell
Holders in the applicable offering and (y) is reasonably acceptable to the
Issuer), (ii) Magten and (iii) one representative of the Revco Individual
Holders that is reasonably acceptable to the Issuer, as the case may be.
"1933 Act" means the Securities Act of 1933, as amended.
"Registrable Securities" means Common Stock acquired by the
Holders pursuant to the Merger (and any shares of stock or other securities into
which or for which such Common Stock may hereafter be changed, converted or
exchanged and any other shares or securities issued to Holders of such Common
Stock (or such shares of stock or other securities into which or for which such
shares are so changed, converted or exchanged) upon any reclassification, share
combination, share subdivision, share dividend, share exchange, merger,
consolidation or similar transaction or event). As to any particular Registrable
Securities, such Registrable Securities shall cease to be Registrable Securities
as soon as (i) such Registrable Securities have been sold or otherwise disposed
of pursuant to a registration statement that was filed with the Commission in
accordance with this Agreement and declared effective under the 1933 Act, (ii)
based on an opinion of counsel or a no-action letter of the Commission, in
either case reasonably acceptable to the Issuer (and, in the case of Registrable
Securities held by a Zell Holder, reasonably acceptable to the Zell Holders'
Agent), such Registrable Securities are eligible for immediate sale pursuant to
Rule 144 or Rule 145 (whether or not subject to applicable volume limitations
thereunder), provided that, notwithstanding such opinion or no-action letter,
prior to the Shelf Termination Date (determined disregarding clause (c) of the
definition of Shelf Termination Date in Section 2.01) (x) no Registrable
Securities held by a Zell Holder shall cease to be Registrable Securities unless
all Registrable Securities held by all Zell Holders could then be sold in a
single transaction (assuming for these purposes the aggregation of all such
Registrable Securities of all Zell Holders) without violation of applicable Rule
144 volume limitations and (y) no Registrable Securities held by Magten shall
cease to be Registrable Securities unless all Registrable Securities held by
Magten could then be sold in a single transaction without violation of
applicable Rule 144 volume limitations, (iii) they shall have been otherwise
sold, transferred or disposed of by a Holder to any Person that is not a Holder,
or (iv) they shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article II, including, without limitation, (i) the fees, disbursements and
expenses of the Issuer's counsel and accountants (including in connection with
the delivery of opinions and/or comfort letters) in connection with this
Agreement and the performance of the Issuer's obligations hereunder; (ii) all
expenses, including filing fees, in connection with the preparation, printing
and filing of one or more registration statements hereunder; (iii) the cost of
printing or producing any agreements among underwriters, underwriting
agreements, and blue sky or legal investment memoranda; (iv) the filing fees
incident to securing any required review by the National Association of
Page=2
<PAGE> 3
Securities Dealers, Inc. of the terms of the sale of the securities to be
disposed of; (v) transfer agents' and registrars' fees and expenses in
connection with such offering; (vi) all security engraving and security printing
expenses; (vii) all fees and expenses payable in connection with the listing of
the Registrable Securities on any securities exchange or automated interdealer
quotation system on which the Common Stock is then listed; and (viii) all
reasonable fees and expenses of one legal counsel for the Holders in connection
with each of the Required Shelf Registration and the Demand Registration, which
legal counsel shall be selected by Holders owning a majority of the Registrable
Securities then being registered; provided that Registration Expenses shall
exclude (x) all underwriting discounts and commissions, selling or placement
agent or broker fees and commissions, and transfer taxes, if any, in connection
with the sale of any securities, (y) the fees and expenses of counsel for any
Holder (other than pursuant to clause (viii)) and (z) all costs and expenses of
the Issuer incurred as contemplated in Section 2.06(g).
"Required Shelf Registration" has the meaning ascribed thereto
in Section 2.01.
"Revco Individual Holder" means each Holder that immediately
prior to the Effective Time was an officer or director of Revco and each
transferee thereof (contemplated in the definition of "Holder") that is a
Holder.
"Rule 144" means Rule 144 (or any successor rule to similar
effect) promulgated under the 1933 Act.
"Rule 145" means Rule 145 (or any successor rule to similar
effect) promulgated under the 1933 Act.
"Rule 415 Offering" means an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule to similar effect) promulgated
under the 1933 Act.
"Selling Holder" means any Holder who sells Registrable
Securities pursuant to a public offering registered hereunder.
"Shelf Registration" means the registration under the 1933 Act
of a Rule 415 Offering.
"Shelf Registration Statement" means a registration statement
intended to effect a Shelf Registration.
"Zell Holder" means Zell/Chilmark, any Affiliate of
Zell/Chilmark that is a Holder, and each partner of Zell/Chilmark referred to in
clause (C) of the definition of "Holder."
"Zell Holders' Agent" has the meaning ascribed thereto in
Section 3.11.
Section 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Appendix A, and
references to the parties shall mean the parties to this Agreement.
ARTICLE 2
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Registration Rights
Section 2.01. Shelf Registration. If requested by any Holder, as
soon as practicable (but in any event not more than 10 days) after the date of
this Agreement, the Issuer shall prepare and file with the Commission a Shelf
Registration Statement on an appropriate form that shall include all Registrable
Securities, and may include securities of the Company for sale for the Company's
own account (the "Required Shelf Registration"). The Issuer shall use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective within 15 days after the public release by the Issuer of the
financial results of the Issuer and Revco referred to in Section 5.20 of the
Merger Agreement. Notwithstanding anything else contained in this Agreement, the
Issuer shall only be obligated to keep such Shelf Registration Statement
effective until the earliest of (a) 12 months after the date such Shelf
Registration Statement has been declared effective, provided that such 12-month
period shall be extended by (i) the length of any period during which the Issuer
delays in maintaining the Shelf Registration Statement current pursuant to
Section 2.04, (ii) the length of any period (in which such Shelf Registration
Statement is required to be effective hereunder) during which such Shelf
Registration Statement is not maintained effective, and (iii) such number of
days that equals the number of days elapsing from (x) the date the written
notice contemplated by Section 2.06 (e) below is given by the Issuer to (y) the
date on which the Issuer delivers to the Holders of Registrable Securities the
supplement or amendment contemplated by Section 2.06 (e) below, (b) such time as
all Registrable Securities have been sold or disposed of thereunder or sold,
transferred or otherwise disposed of to a person that is not a Holder and (c)
such time as all securities that were Registrable Securities on the date hereof
have ceased to be Registrable Securities (the earliest of (a), (b) and (c) being
the "Shelf Termination Date"). The Required Shelf Registration shall not be
counted as a Demand Registration for purposes of Section 2.02 of this Agreement.
Section 2.02. Demand Registration. (a) Upon written notice to
the Issuer from one or more Holders at any time after the Shelf Termination Date
(but not later than the date that is 180 days after the Shelf Termination Date)
(the "Demand Request") requesting that the Issuer effect the registration under
the 1933 Act of any or all of the Registrable Securities held by such requesting
Holders, which notice shall specify the intended method or methods of
disposition of such Registrable Securities, the Issuer shall prepare and, within
60 days after such request, file with the Commission a registration statement
with respect to such Registrable Securities and thereafter use its reasonable
best efforts to cause such registration statement to be declared effective under
the 1933 Act for purposes of dispositions in accordance with the intended method
or methods of disposition stated in such request. Notwithstanding any other
provision of this Agreement to the contrary:
(i) the Holders may collectively exercise their rights to
request registration under this Section 2.02(a) on not more than one occasion
(such registration being referred to herein as the "Demand Registration");
(ii) the Issuer shall not be required to effect the Demand
Registration hereunder unless the aggregate number of Registrable Securities to
be registered pursuant to the Demand Registration is equal to or more than
3,000,000 shares;
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(iii) the method of disposition requested by Holders in
connection with any Demand Registration may not, without the Issuer's written
consent, be a Rule 415 Offering; and
(iv) the Issuer shall not be required to effect the Demand
Registration hereunder if all securities that were Registrable Securities on the
date hereof have ceased to be Registrable Securities.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a Demand Registration requested by Holders pursuant to this Section
2.02 shall not be deemed to have been effected, and, therefore, not requested
and the rights of each Holder shall be deemed not to have been exercised for
purposes of paragraph (a) above, if such Demand Registration has not become
effective under the 1933 Act or if such Demand Registration, after it became
effective under the 1933 Act, was not maintained effective under the 1933 Act
(other than as a result of any stop order, injunction or other order or
requirement of the Commission or other government agency or court solely on the
account of a material misrepresentation or omission of a Holder) for at least 30
days (or such shorter period ending when all the Registrable Securities covered
thereby have been disposed of pursuant thereto) and, as a result thereof, the
Registrable Securities requested to be registered cannot be distributed in
accordance with the plan of distribution set forth in the related registration
statement. So long as a Demand Request is made by the Holders within the 180-day
period referred to in Section 2.02(a), the Holders shall not lose their right to
their Demand Registration under Section 2.02 if the Demand Registration related
to such Demand Request is delayed or not effected in the circumstances set forth
in this clause (b).
(c) The Issuer shall have the right to cause the registration of
additional equity securities for sale for the account of the Issuer in the
registration of Registrable Securities requested by the Holders pursuant to
Section 2.02(a) above; provided that if such Holders are advised in writing
(with a copy to the Issuer) by the lead or managing underwriter referred to in
Section 2.03(b) that, in such underwriter's good faith view, all or a part of
such Registrable Securities and additional equity securities cannot be sold and
the inclusion of such Registrable Securities and additional equity securities in
such registration would be likely to have an adverse effect on the price, timing
or distribution of the offering and sale of the Registrable Securities and
additional equity securities then contemplated, then the number of securities
that can, in the good faith view of such underwriter, be sold in such offering
without so adversely affecting such offering shall be allocated pro rata among
the requesting Holders and the Issuer on the basis of the relative number
requested to be included therein by the Issuer and each such Holder (in which
case Section 2.02(a)(ii) shall be disregarded for purposes of such Demand
Registration); provided that in the event such a pro rata allocation shall be
made in connection with the Demand Request, the remaining Holders shall be
entitled to request one additional Demand Registration (without needing to make
a Demand Request therefor within the 180-day period referred to in Section
2.02(a) and disregarding Section 2.02(a)(ii) for purposes of such additional
Demand Registration); provided further that in conection with such additional
Demand Registration, if any, the Issuer may not include additional securities
therein for its own account if such inclusion would result in any reduction in
the Registrable Securities proposed to be sold therein by the Holders. The
Holders of the Registrable Securities to be offered pursuant to paragraph (a)
above may require that any such additional equity securities be included by the
Issuer in the
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offering proposed by such Holders on the same conditions as the Registrable
Securities that are included therein.
(d) Within 7 days after delivery of a Demand Request by a
Holder, the Issuer shall provide a written notice to each Holder (or, if so
requested by the Issuer after appropriate notice to the Zell Holders' Agent by
the Issuer, the Zell Holders' Agent shall provide written notice to each Zell
Holder), advising such Holder of its right to include any or all of the
Registrable Securities held by such Holder for sale pursuant to the Demand
Registration and advising such Holder of procedures to enable such Holder to
elect to so include Registrable Securities for sale in the Demand Registration.
Any Holder may, within 7 days of delivery to such Holder of a notice pursuant to
this Section 2.02(d), elect to so include Registrable Securities in the Demand
Registration by written notice to such effect to the Issuer specifying the
number of Registrable Securities desired to be so included by such Holder.
Section 2.03. Other Matters In Connection With Registrations.
(a) Each Zell Holder shall keep the Zell Holders' Agent informed promptly (x) of
the name, address and other contact information of such Zell Holder, (y) of the
number of Registrable Securities held from time-to-time by such Zell Holder, and
(z) of each sale, transfer or other disposition of Registrable Securities
(including the number of shares sold) by each such Zell Holder. Each Holders'
Agent shall keep the Issuer informed promptly (x) of the name, address and other
contact information of each Holder for whom such Holders' Agent is acting as
agent hereunder (or, of itself, in the case of each Revco Individual Holder),
(y) of the number of Registrable Securities held from time-to-time by each such
Holder, and (z) of each sale, transfer or other disposition of Registrable
Securities (including the number of shares sold) by each such Holder.
(b) In the event that any public offering pursuant to this
Agreement shall involve, in whole or in part, an underwritten offering, the
Issuer shall have the right to designate an underwriter or underwriters as the
lead or managing underwriters of such underwritten offering who shall be
reasonably acceptable to Holders owning a majority of the Registrable Securities
proposed to be sold therein.
Section 2.04. Certain Delay Rights. Notwithstanding any other
provision of this Agreement to the contrary, if at any time while the Required
Shelf Registration is effective the Issuer provides written notice to each
Holder (whether by notice directly to such Holder or through the Holders' Agent
acting as agent for such Holder hereunder) that in the Issuer's good faith and
reasonable judgment it would be materially disadvantageous to the Issuer
(because the sale of Registrable Securities covered by such registration
statement or the disclosure of information therein or in any related prospectus
or prospectus supplement would materially interfere with any acquisition,
financing or other material event or transaction in connection with which a
registration of securities under the 1933 Act for the account of the Issuer is
then intended or the public disclosure of which at the time would be materially
prejudicial to the Issuer) (a "Disadvantageous Condition") for sales of
Registrable Securities thereunder to then be permitted, and setting forth the
general reasons for such judgment, the Issuer may refrain from maintaining
current the prospectus contained in the Shelf Registration Statement until such
Disadvantageous Condition no longer exists (notice of which the Issuer shall
promptly deliver to each Holder (directly or through the applicable Holders'
Agent)). Furthermore, notwithstanding anything else contained in this Agreement,
with respect to any registration
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statement filed, or to be filed, pursuant to Section 2.02, if the Issuer
provides written notice to each Holder (whether by notice directly to such
Holder or through the Holders' Agent acting as agent for such Holder hereunder)
that in the Issuer's good faith and reasonable judgment it would be materially
disadvantageous to the Issuer (because of a Disadvantageous Condition) for such
a registration statement to be maintained effective, or to be filed and become
effective, and setting forth the general reasons for such judgment, the Issuer
shall be entitled to cause such registration statement to be withdrawn or the
effectiveness of such registration statement terminated, or, in the event no
registration statement has yet been filed, shall be entitled not to file any
such registration statement, until such Disadvantageous Condition no longer
exists Holder (notice of which the Issuer shall promptly deliver to each Holder
(directly or through the applicable Holders' Agent)). With respect to each
Holder, upon the receipt by such Holder of any such notice of a Disadvantageous
Condition (directly from the Issuer or through the applicable Holders' Agent)
(i) in connection with the Required Shelf Registration , such Holder shall
forthwith discontinue use of the prospectus and any prospectus supplement under
such registration statement and shall suspend sales of Registrable Securities
until such Disadvantageous Condition no longer exists and (ii) in connection
with the Required Shelf Registration or the Demand Registration, as applicable,
if so directed by the Issuer by notice as aforesaid, such Holder will deliver to
the Issuer all copies, other than permanent file copies then in such Holder's
possession, of the prospectus and prospectus supplements then covering such
Registrable Securities at the time of receipt of such notice as aforesaid.
Notwithstanding anything else contained in this Agreement, (x) neither the
filing nor the effectiveness of any registration statement under Section 2.02
may be delayed for more than a total of 60 days pursuant to this Section 2.04
and (y) the maintaining current of a prospectus (and the suspension of sales of
Registrable Securities) in connection with the Required Shelf Registration may
not be delayed under this Section 2.04 for more than a total of 60 days in any
six-month period.
Section 2.05. Expenses. Except as provided herein, the Issuer
shall pay all Registration Expenses with respect to each registration hereunder.
Notwithstanding the foregoing, each Holder and the Issuer shall be responsible
for its own internal administrative and similar costs, which shall not
constitute Registration Expenses, each Holder shall be responsible for the legal
fees and expenses of its own counsel (except as provided in clause (viii) of the
definition of Registration Expenses), (iii) each Holder shall be responsible for
all underwriting discount and commissions, selling or placement agent or broker
fees and commissions, and transfer taxes, if any, in connection with the sale of
securities by such Holder, and (iv) the Holders shall be jointly and severally
responsible for all out-of-pocket costs and expenses of the Issuer and its
officers and employees incurred in connection with providing the assistance
and/or attending analyst or investor presentations or any "road show" undertaken
in connection with the registration and/or marketing of any Registrable
Securities as contemplated in Section 2.06(g).
Section 2.06. Registration and Qualification. If and whenever
the Issuer is required to effect the registration of any Registrable Securities
under the 1933 Act as provided in Sections 2.01 or 2.02, the Issuer shall as
promptly as practicable (but subject to the provisions of Sections 2.01 and
2.02):
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(a) prepare, file and cause to become effective a registration
statement under the 1933 Act relating to the Registrable Securities to be
offered in accordance with the intended method of disposition thereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities (i) in the case of the Required Shelf Registration,
until the Shelf Termination Date and (ii) in the case of the Demand
Registration, until the earlier of such time as all Registrable Securities
proposed to be sold therein have been disposed of in accordance with the
intended methods of disposition set forth in such registration statement and the
expiration of 30 days after such registration statement becomes effective;
provided, that such 30-day period shall be extended for such number of days that
equals the number of days elapsing from (x) the date the written notice
contemplated by paragraph (e) below is given by the Issuer to (y) the date on
which the Issuer delivers to the Holders of Registrable Securities the
supplement or amendment contemplated by paragraph (e) below;
(c) furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus),
in conformity with the requirements of the 1933 Act, and such documents
incorporated by reference in such registration statement or prospectus, as the
Holders of Registrable Securities or such underwriter may reasonably request;
(d) furnish to any underwriter of such Registrable Securities an
opinion of counsel for the Issuer and a "cold comfort" letter signed by the
independent public accountants who have audited the financial statements of the
Issuer included in the applicable registration statement, in each such case
covering substantially such matters with respect to such registration statement
(and the prospectus included therein) and the related offering as are
customarily covered in opinions of issuer's counsel with respect thereto and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities and such other matters as such underwriters may reasonably
request;
(e) promptly notify the Selling Holders in writing (i) at any
time when a prospectus relating to a registration pursuant to Section 2.01 or
2.02 is required to be delivered under the 1933 Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) of any request by the Commission or any other
regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to such
offering, and in either such case, at the request of the Selling Holders prepare
and furnish to the Selling Holders a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material
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fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading;
(f) use its reasonable best efforts to list all such Registrable
Securities covered by such registration on each securities exchange and
automated inter-dealer quotation system on which the Common Stock is then
listed;
(g) use reasonable efforts to assist the Holders in the
marketing of Common Stock in connection with up to two underwritten offerings
hereunder (including, to the extent reasonably consistent with work commitments,
using reasonable efforts to have officers of the Issuer attend "road shows" and
analyst or investor presentations scheduled in connection with such
registration), with all out-of-pocket costs and expenses incurred by the Issuer
or such officers in connection with such attendance or assistance to be paid by
the Holders as provided in Section 2.05; and
(h) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Sections 2.01 or 2.02 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
Section 2.07. Underwriting; Due Diligence. (a) If requested by
the underwriters for any underwritten offering of Registrable Securities
pursuant to a registration requested under this Article II, the Issuer shall
enter into an underwriting agreement with such underwriters for such offering,
which agreement will contain such representations and warranties by the Issuer
and such other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnification and contribution provisions substantially to the
effect and to the extent provided in Section 2.08, and agreements as to the
provision of opinions of counsel and accountants' letters to the effect and to
the extent provided in Section 2.06(d). Such underwriting agreement shall also
contain such representations and warranties by such Selling Holders and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnification and contribution provisions substantially to the
effect and to the extent provided in Section 2.08.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the 1933 Act
pursuant to this Article II, the Issuer shall give the Permitted Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants (the identity and number of whom shall be reasonably
acceptable to the Issuer), such reasonable and customary access to its books,
records and properties and such opportunities to discuss the business and
affairs of the Issuer with its officers and the independent public accountants
who have certified the financial statements of the Issuer as shall be necessary,
in the opinion of such Holders and such underwriters or their respective
counsel, to conduct a reasonable investigation within the meaning of the 1933
Act; provided that the foregoing shall not require the Issuer to provide access
to (or copies of) any competitively sensitive information relating to the Issuer
or its Subsidiaries or their respective businesses; provided further that (i)
each Holder and the underwriters and their respective counsel and
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accountants shall have entered into a confidentiality agreement reasonably
acceptable to the Issuer and (ii) the Permitted Holders and the underwriters and
their respective counsel and accountants shall use their reasonable best efforts
to minimize the disruption to the Issuer's business and coordinate any such
investigation of the books, records and properties of the Issuer and any such
discussions with the Issuer's officers and accountants so that all such
investigations occur at the same time and all such discussions occur at the same
time.
Section 2.08. Indemnification and Contribution. (a) The Issuer
agrees to indemnify and hold harmless each Selling Holder and each person, if
any, who controls each Selling Holder within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any amendment
thereof, any preliminary prospectus or prospectus (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto) relating
to the Registrable Securities, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished to the
Issuer in writing by a Selling Holder expressly for use therein. The Issuer also
agrees to indemnify any underwriter of the Registrable Securities so offered and
each person, if any, who controls such underwriter on substantially the same
basis as that of the indemnification by the Issuer of the Selling Holder
provided in this Section 2.08(a).
(b) Each Selling Holder agrees to indemnify and hold harmless
the Issuer, its directors, the officers who sign any registration statement and
each person, if any who controls the Issuer within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or any amendment
thereof, any preliminary prospectus or prospectus (as amended or supplemented if
the Issuer shall have furnished any amendments or supplements thereto) relating
to the Registrable Securities, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only with reference to information
furnished in writing by a Selling Holder (or any representative thereof)
expressly for use in a registration statement, any preliminary prospectus,
prospectus or any amendments or supplements thereto. Each Selling Holder also
agrees to indemnify any underwriter of the Registrable Securities so offered and
each person, if any, who controls such underwriter on substantially the same
basis as that of the indemnification by such Selling Holder of the Issuer
provided in this Section 2.08(b).
(c) Each party indemnified under paragraph (a) or (b) above
shall, promptly after receipt of notice of a claim or action against such
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indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the claim or action; provided that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party on account of the indemnity agreement
contained in paragraph (a) or (b) above except to the extent that the
indemnifying party was actually prejudiced by such failure, and in no event
shall such failure relieve the indemnifying party from any other liability that
it may have to such indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall have notified the
indemnifying party thereof, unless based on the written advice of counsel to
such indemnified party a conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate therein, and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section 2.08 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof. Any indemnifying party
against whom indemnity may be sought under this Section 2.08 shall not be liable
to indemnify an indemnified party if such indemnified party settles such claim
or action without the consent of the indemnifying party. The indemnifying party
may not agree to any settlement of any such claim or action, other than solely
for monetary damages for which the indemnifying party shall be responsible
hereunder, the result of which any remedy or relief shall be applied to or
against the indemnified party, without the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld. In any
action hereunder as to which the indemnifying party has assumed the defense
thereof, the indemnified party shall continue to be entitled to participate in
the defense thereof, with counsel of its own choice, but the indemnifying party
shall not be obligated hereunder to reimburse the indemnified party for the
costs thereof.
(d) If the indemnification provided for in this Section 2.08
shall for any reason be unavailable (other than in accordance with its terms) to
an indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, cost, claim or damage (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Issuer on the one hand and the Selling Holders on the other hand from the
offering of the Registrable Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party or parties on the
one hand and of the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Issuer on the one hand and the Selling Holders
on the other hand in connection with the offering of the Registrable Securities
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Registrable Securities (before deducting expenses)
received by the Issuer and the Selling Holders, respectively, bear to the
aggregate public offering price of the Registrable Securities. The relative
fault of the Issuer on the one hand and the Selling Holders on the other hand
shall be
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determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuer or a Selling
Holder and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by an indemnified party as a result of the loss, cost, claim, damage or
liability, or action in respect thereof, referred to above in this paragraph (d)
shall be deemed to include, for purposes of this paragraph (d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. The Issuer and the Selling
Holders agree that it would not be just and equitable if contribution pursuant
to this Section 2.08 were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding any other provision of this
Section 2.08, no Selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities of such Selling Holder were offered to the public exceeds the amount
of any damages which such Selling Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the parties under this Section 2.08 shall
be in addition to any liability which any party may otherwise have to any other
party.
Section 2.09. Holdback Agreement. If the Demand Registration
pursuant to this Article II shall be in connection with an underwritten public
offering of Registrable Securities, each Selling Holder agrees not to effect any
sale or distribution, including any sale under Rule 144, of any equity security
of the Issuer (otherwise than through the registered public offering then being
made), within 7 days prior to or 60 days (or such lesser period as the lead or
managing underwriters may permit) after the effective date of the applicable
registration statement.
ARTICLE 3
Miscellaneous
Section 3.01. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
Section 3.02. Assignment. No party may assign any of its
rights or obligations hereunder by operation of law or otherwise without
the prior written consent of the other parties.
Section 3.03 Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
Issuer and Holders representing a majority of the Registrable Securities then
held by all Holders.
Page=12
<PAGE> 13
Section 3.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if given) by hand delivery or telecopy, or
by any courier service, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties at the
address or telecopy number set forth on the signature pages hereto (unless such
contact information in the case of the Holders is updated pursuant to Section
2.03(a)).
Section 3.05. Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
Section 3.06. No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
Section 3.07. No Third Party Beneficiaries. This Agreement is
not intended to be for the benefit of, and shall not be enforceable by, any
Person who or which is not a party hereto.
Section 3.08. Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of New
York, without giving effect to the principles of conflicts of law thereof.
Section 3.09. Jurisdiction. Each party hereby irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York or any state court sitting in the City of New
York, Borough of Manhattan in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action, suit or
proceeding shall be brought only in such courts (and waives any objection based
on forum non conveniens or any other objection to venue therein); provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section 3.09 and shall not be deemed to be a general submission to the
jurisdiction of said Courts or in the State of New York other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
Section 3.10. Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 3.11. Zell Holders' Agent. Each Zell Holder hereby
appoints Zell/Chilmark Fund. L.P. as its agent and attorney-in-fact (the "Zell
Holders' Agent") for purposes of the delivery and receipt of all notices and
requests pursuant to this Agreement. The Issuer may give
Page=13
<PAGE> 14
notice to any Zell Holder hereunder by giving such notice directly to such Zell
Holder. Alternatively, the Issuer may request that the Zell Holders' Agent
deliver to each Zell Holder any notice given by the Issuer hereunder, in which
event the Zell Holders' Agent will promptly so give such notice to each Zell
Holder. Prompt delivery by the Zell Holders' Agent to the Zell Holders will be
deemed satisfied if delivery is made to the Zell Holders, in accordance with
Section 3.04, not later than the third business day after actual receipt of the
applicable notice or document by the Zell Holders' Agent from the Issuer.
Notwithstanding anything else contained herein, the Zell Holders' Agent will not
be liable or responsible to any Person should any Zell Holder fail to act in
accordance with any notice so given to such Zell Holder hereunder.
Section 3.12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Issuer and the Holders have caused this
Agreement to be duly executed as of the day and year first above written.
CVS CORPORATION
By: /s/ Thomas M. Ryan
---------------------------------------
Name: Thomas M. Ryan
Title: Vice Chairman and Chief
Operating Officer
Holders
- -------
ZELL/CHILMARK FUND, L.P.
By: ZC Limited Partnership, general partner
By: ZC Partnerships, general partner
By: ZC Inc., a partner
By: /s/ Sheli Z. Rosenberg
---------------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
Address: Equity Group Investments, Inc.
2 North Riverside Plaza
Suite 600
Chicago, IL 60606
MAGTEN ASSET MANAGEMENT
CORPORATION
By: /s/ Talton R. Embry
---------------------------------------
Name: Talton R. Embry
Page=14
<PAGE> 15
Title: Chairman
Address: 35 East 21st Street
New York, NY 10010
/s/ Sheli Z. Rosenberg
---------------------------------------
Name: Sheli Z. Rosenberg
Address: Equity Group Investments, Inc.
2 North Riverside Plaza
Suite 600
Chicago, IL 60606
/s/ Sam Zell
---------------------------------------
Name: Sam Zell
Address: Equity Group Investments, Inc.
2 North Riverside Plaza
Suite 600
Chicago, IL 60606
/s/ Carl A. Bellini
---------------------------------------
Name: Carl A. Bellini
Address: P.O. Box 153
Bath, Ohio 44210
/s/ Livio M. Borghese
---------------------------------------
Name: Livio M. Borghese
Address: Luma Corp.
Borghese Investments
745 Fifth Avenue, Suite 1400
New York, NY 10151
/s/ William H. Campbell
---------------------------------------
Name: William H. Campbell
Address: The University of North
Carolina at Chapel Hill
101 Beard Hall
South Columbia Street
Chapel Hill, NC 27599
/s/ Rod Dammeyer
---------------------------------------
Name: Rod Dammeyer
Address: Equity Group Investments, Inc.
Two North Riverside Plaza
Suite 600
Chicago, IL 60606
Page=15
<PAGE> 16
/s/ Talton R. Embry
---------------------------------------
Name: Talton R. Embry
Address: Magten Asset Management
Corporation
35 East 21st Street
New York, NY 10010
/s/ Ben Evans
---------------------------------------
Name: Ben Evans
Address: Ernst & Young
787 7th Avenue
7th Floor
New York, NY 10019
/s/ John V. Guttag
---------------------------------------
Name: John V. Guttag
Address: Massachusetts Institute of
Technology
545 Technology Square
Cambridge, MA 02139
/s/ D. Dwayne Hoven
---------------------------------------
Name: D. Dwayne Hoven
Address: 802 South Ride
Tallahassee, FL 32303
/s/ Walter B. Rheinhold
---------------------------------------
Name: Walter B. Rheinhold
Address: Varco International, Inc.
743 North Eckhoff Street
Orange, CA 92668
/s/ Thomas O. Thorsen
---------------------------------------
Name: Thomas O. Thorsen
Address: P.O. Box 764
Center Harbor, NH 03226
/s/ James P. Mastrian
---------------------------------------
Name: James P. Mastrian
Address: 60 East Juniper Lane
Moreland Hills, OH 44022
Page=16
<PAGE> 1
EXHIBIT 4.3
CVS Corporation
One CVS Drive
Woonsocket, RI 02895
As of
June 24, 1997
Ms. Sheli Rosenberg
Zell/Chilmark Fund, L.P.
2 North Riverside Plaza
Chicago, Illinois 60606
Dear Sheli:
This letter is in reference to the Registration Rights Agreement dated
as of May 29, 1997 (the "RRA") entered into in connection with the CVS/Revco
merger transaction completed on that date. Capitalized terms (not otherwise
defined herein) are used in this letter as defined in the RRA.
As you know, we have been discussing the mutual desirability of
marketing the CVS shares received by you (and the other Holders) in the merger
in an organized, co-ordinated manner through a secondary underwritten offering
(the "Proposed Offering"). We plan to file, on or about July 17, 1997, a
registration statement on Form S-3 under the Securities Act of 1933 relating to
the Proposed Offering. If the registration statement is not reviewed by the
Commission, subject to market conditions, CS First Boston (lead underwriter for
the Proposed Offering) expects that the Proposed Offering will be priced on or
about July 24, 1997. If the registration statement is reviewed, we expect that,
subject to market conditions, the Proposed Offering will be priced in
mid-August. All Holders will be invited to sell Registrable Securities in the
Proposed Offering.
As discussed with you, CVS management will actively participate to
assist the marketing effort, and we look forward to executing a mutually
beneficial offering.
In light of the Proposed Offering, we confirm that we will not be
filing the Required Shelf Registration at this time (as would otherwise be
required under Section 2.01 of the RRA). Sections 2.03, 2.05, 2.06, 2.07 and
2.08 and Articles 1 and 3 of the RRA will apply to the Proposed Offering and the
related registration
<PAGE> 2
(as if the registration were under Section 2.02 of the RRA), provided that the
Proposed Offering shall not be deemed to be the Demand Registration contemplated
by said Section 2.02.
Subject to any restrictions contained in the underwriting agreement
relating to the Proposed Offering, you may after the date hereof request that we
file the Required Shelf Registration promptly with the Commission, and upon such
request we shall use our reasonable best efforts to have the Shelf Registration
Statement declared effective by the Commission as soon as practicable after such
shelf filing. Upon such request in accordance with the preceding sentence,
nothing in this letter will affect the rights of Holders with respect to the
Required Shelf Registration in accordance with the RRA. In addition, nothing in
this letter will affect the rights of Holders to the Demand Registration in
accordance with the RRA (it being understood that if the Holders waive their
rights to the Required Shelf Registration, then the Shelf Termination Date will
be deemed to have occurred on the date of such waiver).
In addition, we confirm that this letter agreement (being executed by
the Issuer and a Holder representing a majority of the Registrable Securities)
hereby effects the following amendments to the RRA:
(i) Clause (ii)(B)(3) of the definition of "Holder" in Section
1.01 of the RRA is hereby amended by (1) adding the expression "(x)"
immediately after the "(3)" and before "a" in such clause and (2)
adding the following at the end of such clause prior to the period: "or
(y) an individual that has a direct or indirect equity interest in a
general partner or limited partner of Zell/Chilmark and has received
Registrable Securities directly or indirectly from Zell/Chilmark".
(ii) The definition of "Zell Holder" in Section 1.01 of the
RRA is hereby amended and restated in its entirety as follows:
"Zell Holder" means Zell/Chilmark, any Affiliate of
Zell/Chilmark that is a Holder, each partner of Zell/Chilmark
referred to in clause (ii)(B)(3)(x) of the definition of
"Holder", and each individual referred to in clause
(ii)(B)(3)(y) of the definition of "Holder".
(iii) The definition of "Registrable Securities" in Section
1.01 of the RRA is hereby amended by adding the following new sentence
at the end of such definition: "For purposes of the proviso to clause
(ii) of the preceding sentence, Common Stock held by individuals
referred to in
2
<PAGE> 3
clause (ii)(B)(3)(y) of the definition of "Holder" will be disregarded,
and such individuals will be deemed not to be Zell Holders, for
purposes of the determination under clause (x) of such proviso of
whether all Registrable Securities held by all Zell Holders could at
the time in question be sold without violation of applicable Rule 144
volume limitations."
Subject to the foregoing, the RRA will remain unchanged and in full
force and effect.
Please confirm that the foregoing reflects our agreement by executing a
copy of this letter in the space indicated below and faxing it to me at 401-762-
3012.
Very truly yours,
Chuck Conaway
Executive Vice President and
Chief Financial Officer
Accepted and Agreed to:
Zell/Chilmark Fund, L.P.
By: ZC Limited Partnership, general partner
By: ZC Partnership, general partner
By: ZC, Inc., a partner
By:
----------------------------------
Name: Sheli Z. Rosenberg
Title: Vice President
3
<PAGE> 1
EXHIBIT 23.1
[KPMG PEAT MARWICK LETTERHEAD LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
Board of Directors
CVS Corporation
We hereby consent to the incorporation by reference in this registration
statement on Form S-3 of our reports dated February 6, 1997 appearing and
incorporated by reference in the Annual Report on Form 10-K of CVS Corporation
for the year ended December 31, 1996.
Our reports dated July 16, 1997 which are based on our audits and the
report of other auditors, contain an explanatory paragraph that states that the
supplemental consolidated financial statements give retroactive effect to the
merger of CVS Corporation and Revco D.S., Inc. on May 29, 1997, which has been
accounted for as a pooling-of-interests as described in Note 1 to the
supplemental consolidated financial statements. Generally accepted accounting
principles proscribe giving effect to a consummated business combination
accounted for by the pooling-of-interests method in financial statements that do
not extend through the date of consummation. Those financial statements do not
extend through the date of consummation. However, they will become the
historical financial statements of CVS Corporation after financial statements
covering the date of consummation of the business combination are issued.
Our reports dated July 16, 1997 are based on our audits and the reports of
other auditors.
We hereby consent to the incorporation by reference in this registration
statement on Form S-3 of our reports dated July 16, 1997 appearing in the
Current Report on Form 8-K.
We consent to the reference to our firm under the headings "Selected
Historical Consolidated Financial and Operating Data", "Selected Supplemental
Consolidated Financial Data" and "Experts" in the Registration Statement on Form
S-3.
/s/ KPMG PEAT MARWICK LLP
Providence, Rhode Island
July 16, 1997
<PAGE> 1
EXHIBIT 23.2
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-3 registration statement of our reports dated July
15, 1997 and July 25, 1995 included in CVS Corporation's Form 8-K dated July 17,
1997 and to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Cleveland, Ohio
July 15, 1997
