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File Pursuant To Rule 424(b)(5)
Registration No. 333-07473
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
SUBJECT TO COMPLETION, DATED JULY 18, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 15, 1996
$200,000,000
CALIBER SYSTEM, INC.
% NOTES DUE , 2006
------------------------
Interest on the Notes is payable on and of each
year, commencing . The Notes are not redeemable prior to
maturity and are not entitled to a sinking fund. The Notes will be represented
by one or more global Notes registered in the name of the nominee of The
Depository Trust Company. Beneficial interests in the global Notes will be shown
on, and transfers thereof will be effected only through, records maintained by
DTC and its participants. Except as described herein, Notes in definitive form
will not be issued. The Notes will be issued in registered form in denominations
of $1,000 and integral multiples thereof. See "Description of Notes".
------------------------
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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT (2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Note.................................... % % %
Total....................................... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $290,000 payable by the Company.
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The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in book-entry form only through the facilities of DTC
in New York, New York, on or about , 1996, against payment therefor in
immediately available funds.
GOLDMAN, SACHS & CO. J.P. MORGAN & CO.
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The date of this Prospectus Supplement is July , 1996.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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THE COMPANY
Caliber System, Inc. (the "Company") (formerly Roadway Services, Inc.), an
Ohio corporation, is engaged through its subsidiaries in a broad range of
transportation, logistics, and related information services. The Company's
operations include a small-package carrier, a superregional freight carrier, a
surface expedited carrier and a contract logistics provider. These operations
provide services and solutions to meet customer requirements based upon shipment
size, distance, time in transit, and distribution needs. The Company conducts
these operations principally through RPS, Inc. ("RPS"), Viking Freight, Inc.
("Viking"), Roberts Express, Inc. ("Roberts") and Caliber Logistics, Inc.
("Caliber Logistics").
USE OF PROCEEDS
The net proceeds received by the Company from the sale of the Notes offered
hereby, estimated at $198,610,000 (after deducting estimated underwriting
discount and expenses payable by the Company in connection with this offering)
will immediately be used to reduce the Company's borrowings against its
outstanding short-term bank loans, which totaled $320 million at July 16, 1996,
and expire at different dates. The borrowings were incurred to finance capital
expenditures, working capital needs and other corporate purposes and the
revolving credit facilities are expected to be available for reborrowing from
time to time by the Company for such purposes. The Company's bank borrowings
outstanding at July 16, 1996 had a weighted average interest rate of 5.68%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the periods indicated.
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24 WEEKS ENDED CALENDAR YEAR
------------------------------- ---------------------------------------------
JUNE 15, 1996 JUNE 17, 1995 1991 1992 1993 1994 1995
------------- ------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Historical 2.76 11.47 32.69 58.77 47.20 38.28 10.39
Pro forma 2.08 9.18 9.18
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For the purpose of determining the ratios of earnings to fixed charges,
earnings represent income (before cumulative effect of accounting changes)
before income taxes, fixed charges (less capitalized interest) and amortization
of capitalized interest. Fixed charges consist of interest on all indebtedness
(including capital lease obligations), capitalized interest, amortization of
debt issue costs and the portion of rental charges considered to be
representative of the interest factor. The pro forma ratio of earnings to fixed
charges gives effect to the change in interest expense assuming the sale of the
Notes.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at June
15, 1996, and as adjusted to give effect to the sale by the Company of the Notes
offered hereby and the application of the estimated net proceeds therefrom
(after estimated underwriters' discount and expenses payable by the Company) as
if such sale and application of proceeds occurred on such date. See "Use of
Proceeds".
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<CAPTION>
AS OF JUNE 15, 1996
(UNAUDITED)
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ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt................................................... $ 284,700 $ 86,090
======= =======
Long-term debt:
Notes offered hereby............................................ $ 0 $ 200,000
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Shareholders' equity:
Serial Preferred stock -- without par value:
Authorized -- 40,000,000 shares
Issued -- none
Common stock -- without par value:
Authorized -- 200,000,000
Issued -- 40,896,414......................................... 39,898 39,898
Additional Capital.............................................. 50,538 50,538
Earnings reinvested in the business............................. 692,537 692,537
Less Common stock held in treasury (1,379,000 shares)........... 51,269 51,269
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Total shareholders' equity................................... 731,704 731,704
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Total capitalization.................................... $ 731,704 $ 931,704
======= =======
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SELECTED FINANCIAL DATA
The following selected consolidated financial information of the Company
for, and as of the end of, each of the five years in the period ended December
31, 1995 has been derived from the consolidated financial statements which have
been audited by Ernst & Young LLP, independent auditors. Selected consolidated
financial information presented for the 12 week and 24 week periods ended June
15, 1996 and June 17, 1995 has been derived from the consolidated interim
financial statements, which have not been audited. In the opinion of management,
such interim financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such
information. The results for any interim period may not be indicative of the
results for a full year. The selected consolidated financial information should
be read in conjunction with the consolidated financial statements and notes
thereto incorporated by reference in the accompanying Prospectus.(1)
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12 WEEKS ENDED 24 WEEKS ENDED
--------------------- --------------------- FOR THE YEAR ENDED DECEMBER 31
JUNE 15 JUNE 17 JUNE 15 JUNE 17 ---------------------------------------------------------
1996 1995 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue................. 615,901 550,779 1,197,975 1,094,248 2,448,172 2,327,523 1,822,490 1,391,898 1,114,179
OPERATING EXPENSES:
Salaries, wages and
benefits............ 241,010 211,890 471,033 422,842 937,972 876,694 677,226 473,711 387,247
Purchased
transportation...... 181,332 151,973 347,823 306,993 694,275 700,016 527,118 432,634 357,818
Operating supplies and
expenses............ 131,535 101,683 242,330 194,192 428,980 362,219 288,089 217,626 164,727
Operating taxes and
licenses............ 13,426 11,371 25,469 22,554 48,282 43,818 36,624 23,330 18,925
Insurance and
claims.............. 13,848 12,477 25,042 24,526 50,552 59,644 44,685 31,667 24,667
Provision for
depreciation........ 33,336 29,646 66,683 57,930 132,383 120,029 97,565 74,599 57,712
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Operating
Expenses.......... 614,487 519,040 1,178,380 1,029,037 2,292,444 2,162,420 1,671,307 1,253,567 1,011,096
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 1,414 31,739 19,595 65,211 155,728 165,103 151,183 138,331 103,083
Income from continuing
operations............ 220 22,357 9,841 43,887 92,409 98,537 91,605 86,495 65,115
Net income (Loss)....... 220 (2,002) 9,841 3,849 (27,205) 19,560 101,204(2) 147,407 127,323
BALANCE SHEET DATA:
Current Assets.......... 441,752 369,722 402,224 346,537 382,965 476,962 347,744
Property and Equipment,
Net................... 913,924 790,097 857,347 706,068 592,942 423,577 373,599
Total Assets............ 1,480,863 1,589,780 1,389,270 1,509,846 1,466,509 1,350,072 1,200,434
Long-term debt.......... 0 0 0 0 0 0 0
Shareholders' equity.... 731,704 993,424 736,301 1,015,394 1,047,151 1,021,360 890,256
STATEMENT OF CASH FLOWS
AND OTHER DATA:
Interest Expense...... 4,015 569 3,800 0 0 0 0
Depreciation and
Amortization........ 67,913 59,235 138,342 122,859 100,318
Purchases of Property
and Equipment, Net.. (122,424) (141,687) (282,019) (223,826) (142,051)
Cash Dividends Paid... (20,725) (27,331) (54,688) (54,613) (52,903)
</TABLE>
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(1)On December 14, 1995, the shareholders of the Company approved the spin-off,
effective January 2, 1996, to the Company's shareholders of approximately 95%
of the stock of its wholly-owned subsidiary, Roadway Express ("REX"), the
Company's national long haul, less-than-truckload motor freight carrier. In
addition, during the last quarter of 1995, the Company exited the air freight
business served by Roadway Global Air ("RGA"), a wholly-owned subsidiary. REX
and RGA have been reflected as discontinued operations in the Company's
financial statements for 1995 and prior years. Statement of cash flows data
for 1992 and 1991 has not been presented.
(2) Net income for 1993 includes a charge of $18.1 million for changes in
accounting for income taxes and retiree medical benefits.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On December 14, 1995, the shareholders of the Company approved the spin-off
to the Company's shareholders of approximately 95% of the stock of its
wholly-owned subsidiary, Roadway Express ("REX"), the Company's national long
haul, less-than-truckload ("LTL") motor freight carrier. In addition, during the
last quarter of 1995, the Company exited the air freight business served by
Roadway Global Air ("RGA"), a wholly-owned subsidiary. REX and RGA have been
reflected as discontinued operations in the Company's financial statements for
1995 and prior years. Therefore, this discussion and analysis refers to only the
continuing businesses of the Company. Additionally, in late 1995, the Company
announced the consolidation of the operations of its four regional freight
carriers into the "new" Viking, a superregional freight carrier.
RESULTS OF OPERATIONS
The 12 and 24 Week Periods Ended June 15, 1996 Compared to the 12 and 24
Week Periods Ended June 17, 1995
Consolidated revenue for the second quarter ended June 15, 1996 amounted to
$615.9 million, an increase of $65.1 million or 11.8% over second quarter 1995
revenue of $550.8 million. For the twenty-four weeks constituting the Company's
first half, revenue was $1,198 million, an increase of $103.8 million or 9.5%
from $1,094.2 million for the first half of 1995.
All operating units experienced revenue improvements over second quarter
1995 levels. Revenue for the second quarter at RPS, the Company's small package
carrier, increased to $302.5 million or 3.7% over the second quarter last year.
The increase was primarily attributable to higher package volume from the growth
of its Overnight Ground(SM) product. However, revenues at RPS continue to be
adversely affected by economic pressures in the retail segment. Revenue at
Viking, the Company's emerging superregional carrier, amounted to $226.3 million
for the second quarter, an increase of 17.8% over 1995 levels. Revenues
increased at Viking due to volume growth but were impacted by continued
aggressive discounting in the industry. Second quarter revenues for Caliber
Logistics were up approximately 50% with revenues from Roberts, the Company's
expedited carrier, up 9.2% over second quarter 1995.
Operating expenses for the second quarter 1996 increased $95.4 million or
18.4% over comparable 1995 levels, while first half operating expenses were up
$149.3 million or 14.5% over the same period in 1995. The increase for the
quarter was, in largest part, due to operating expense increases at Viking of
$59.9 million. Besides the expected increases in costs related to revenue
growth, Viking experienced significantly greater expenses associated with
operating inefficiencies and the consolidation of the Company's regional
carriers, and to a lesser extent, higher fuel costs. Viking's rapid revenue
growth resulted in additional expenses for training of new hires, purchased
transportation, equipment rentals and overtime. At the same time, Viking
experienced substantial nonrecurring consolidation costs from the integration of
multiple information systems, re-identification of equipment, merging of
administrative operating systems and the closing of three regional corporate
headquarters. These consolidation costs will continue throughout the second half
with the integration of the Company's former regional carriers into the "new"
Viking expected to be completed by year end.
Operating expenses increased at RPS due primarily to higher business
volumes and fixed costs resulting from RPS's continuing expansion. Higher
business volumes resulted in increased operating expenses at Caliber Logistics
and Roberts.
Operating income for the second quarter and first half declined $30.3
million and $45.6 million, respectively, from comparable 1995 levels. Operating
income at RPS amounted to $24.5 million for
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the second quarter compared to $33.8 million for 1995. This decline in operating
income at RPS was due to lower than expected volume growth, an aggressive
pricing environment and higher fixed costs associated with its continuing
expansion and investments in equipment and technology. Viking's operating loss
for the quarter was $31.2 million compared to an operating loss of $5.5 million
in second quarter 1995. For the first half, Viking's operating loss amounted to
$43.1 million compared to $10.3 million last year. Roberts continues to maintain
excellent margins while Caliber Logistics met its profit objective for the
quarter.
The change in other expense, net for the quarter and first half from
comparable 1995 periods, reflects additional net interest expense of $1.9
million and $3.4 million, respectively and the loss of interest income from
discontinued operations, amounting to $2.3 million and $4.1 million,
respectively.
Income taxes were 42.1% of pre-tax income for the first half 1996 which
approximated the effective tax rate for the year ended December 31, 1995. This
rate exceeded the U.S. federal statutory rate due primarily to state income
taxes and non-deductible operating costs.
The Year Ended December 31, 1995 Compared to the Year Ended December 31,
1994
Consolidated revenue in 1995 amounted to a record $2.45 billion, an
increase of $120.6 million or 5.2% over 1994, when revenues were positively
impacted by the 24-day strike by the Teamsters against most unionized LTL
carriers. Revenue increased in 1995 at all operating units except Roberts. The
largest share of the revenue growth was attributable to RPS which reported
revenue of $1.29 billion, an increase of $77.2 million or 6.3% over 1994. This
increase was a result of growth in package volume and the effects of a rate
increase implemented in early 1995. Caliber Logistics contributed significantly
to the revenue increase due to ongoing expansion of the business, reporting a
45.9% increase in revenue over 1994. Revenues at Viking amounted to $834.1
million or an increase of 3.4% over 1994. This increase was experienced despite
a decline in revenue at Central Freight Lines, Inc. ("Central") of 8.6% due to
the impact of intrastate deregulation in Texas. Overall, revenue fell short of
plan at Viking as a result of the slowing economy and the aggressive discounting
and overcapacity being experienced in the industry. Roberts experienced a
revenue decline of 13.2% due principally to the sluggish economy.
Operating expenses increased $130 million or 6% over 1994. This increase
resulted primarily from higher business volumes at all business units except
Roberts, with RPS and Viking reporting operating expense increases of 5.2% and
8.6%, respectively. Operating supplies and expenses at Viking were impacted by
costs of $6.6 million associated with the consolidation of the Company's
regional carriers and the write-off of $3.1 million of goodwill for Coles
Express as a result of the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." As planned, Viking also incurred
additional costs related to PRISM, a major reengineering and information
technology project that was launched in 1994. Depreciation expense during 1995
at the Company's information and technology unit was $6.7 million lower than
1994 due to certain information processing equipment becoming fully depreciated
in 1994. Insurance and claims related expenses declined $9.1 million in 1995
primarily as a result of on-going claims management and safety-related programs.
Higher than normal operating expenses were incurred in 1994 which included the
effect of a settlement with the IRS related to the classification of certain
drivers at RPS for the years 1985 through 1993 for employment tax purposes. The
net after-tax cost of the settlement amounted to $13.7 million or $.35 per share
in 1994. Also included in 1994 was a charge to operating expenses of $5.8
million related to federal legislation that required the write-off of the
remaining asset values of intrastate operating rights.
Operating income amounted to $155.7 million for 1995 compared to $165.1
million in 1994. Overall operating results were negatively impacted by the
aggressive discounting of freight rates and the effects of the sluggish economy.
The resulting lower-than-planned volumes and higher
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operating expenses negatively impacted margins in 1995, which declined from 7.1%
in 1994 to 6.4% in 1995. RPS was negatively impacted by the economy,
particularly in the retail industry, which affected its rate of growth. Despite
stringent cost controls, operating income was 2% below 1994 before the charge
for the IRS settlement mentioned above. Viking's margins were impacted by the
consolidation costs and the write-off of goodwill, previously mentioned, along
with PRISM project costs, resulting in an operating loss for Viking in 1995 of
$31.5 million compared to an operating profit in 1994 of $9.5 million. Caliber
Logistics experienced improved margins over the prior year. Effective cost
controls at Roberts allowed it to maintain its margins despite a decline in
volume.
LIQUIDITY AND CAPITAL RESOURCES
Early in 1995, the Company entered into two new debt agreements, a $300
million credit agreement and a $25 million revolving line of credit. Interest on
outstanding borrowings is based on variable rates. Borrowings under these
agreements were $197.5 million at December 31, 1995 and $284.7 million at the
end of the second quarter 1996. Net cash provided by operating activities of
$238 million for the year ended December 31, 1995 and $42.5 million for the 24
weeks ended June 15, 1996 was not sufficient to fund net property additions of
$282 million and $122.4 million, respectively, and dividends of $55 million and
$20.7 million, respectively, during such periods, requiring the Company to incur
outside borrowings which increased approximately $87.2 million during the first
half of 1996. Recently, the Company entered into a $30 million short term bank
loan. Funds provided by operations in 1996 will need to be supplemented by
additional borrowings to meet the Company's planned cash requirements. Capital
expenditures are expected to approximate $335 million in 1996. The Company
anticipates that after application of the proceeds from the Notes offered
hereunder, the funds available under its existing credit facilities and cash
flows from operations will be sufficient to fund its projected capital
expenditures and provide adequate levels of working capital and funds for
payment of dividends and interest projected for the next 12 months. Although no
assurances can be given, the Company anticipates that adequate sources of
additional financing will be available at that time. The future amount of cash
dividends is subject to the discretion of the Board of Directors of the Company.
Future dividend decisions will be based on, and affected by, a number of
factors, including future operating results, financial requirements of the
Company and other factors. The impact of inflation on operating expenses has
been moderate in recent years. Most of the Company's operating expenses reflect
current costs.
CURRENT TRENDS AND OUTLOOK
Discounting of rates and the effects of overcapacity in the industry are
expected to continue throughout the remainder of 1996 causing industry margins
to remain under pressure. As a result of the impact of continuing economic
pressure in the retail segment and an aggressive pricing environment, RPS will
not realize targeted goals for double digit growth in revenue or improved
year-over-year operating income during 1996. At Viking, while tactical plans for
managing the rapid growth and associated expenses are being implemented, and
consolidation costs are being incurred for the remainder of the year, it is
expected that operating losses will significantly exceed the Company's earlier
estimate for 1996. As a result of the Company's first half operating results and
expectations for the rest of the year, it is anticipated that earnings from
continuing operations for 1996 will be significantly below those of 1995.
RPS reached its goal of opening 32 new terminals by the end of June,
allowing it to effectively serve 100% of the U.S. population. In addition, RPS
will continue to invest in state-of-the-art package handling equipment and
technology and plans to increase its penetration of the overnight ground
delivery market. The Company will direct significant resources to meet customer
requirements for blended transportation, logistics and related information
services, even at the expense of short-term profits. The Company will continue
to strengthen the respective operating units for customers who want special
services and products.
The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current
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expectations due to a number of factors, including general economic conditions;
competitive initiatives and pricing pressures; availability and cost of capital;
shifts in market demand; weather conditions; the performance and needs of
industries served by the Company's businesses; actual future costs of operating
expenses such as fuel and related taxes; self-insurance claims and employee
wages and benefits; actual costs of continuing investments in technology; the
timing and amount of capital expenditures; and the actual costs and effects of
the continuing consolidation of the regional carriers.
BUSINESS OF CALIBER
INTRODUCTION
Caliber System, Inc., an Ohio corporation, is engaged through its
subsidiaries in a broad range of transportation, logistics, and related
information services. The Company's operations include a small-package carrier,
superregional freight carrier, a surface expedited carrier and a contract
logistics provider. These operations provide services and solutions to meet
customer requirements based upon shipment size, distance, time in transit, and
distribution needs. The Company conducts these operations principally through
RPS, Viking, Roberts and Caliber Logistics.
STRATEGY
The transportation, intermodal and logistics marketplace continues to
experience rapid change in response to demands for quality and time based
management. The Company's business strategy is to provide blended
transportation, logistics and information solutions that encompass multiple
service channels: small-package (RPS); regional and national freight (Viking);
logistics (Caliber Logistics); and expedited, critical or time-definite shipment
(Roberts). Each operating unit also serves customers who prefer to work with the
Company's individual carriers for specific services and products. By offering a
broad range of transportation, logistics and related information services, the
Company is positioned to take advantage of changing distribution trends as more
customers embrace the concept of a single source provider.
This strategy includes the continuing improvement of information services
to customers, an increasingly important component of transportation and
logistics services. Each of the above subsidiaries provides shipment tracking
and related information systems to assist customers in achieving the lowest
total delivered cost of their products.
BUSINESSES
RPS, Inc.
RPS, Caliber's largest operating unit, is the second-largest ground small
package carrier in the United States. RPS serves customers in the small-package
market in North America and between North America and Europe, focusing primarily
on the business-to-business delivery of packages weighing up to 150 pounds. RPS
provides service to 100% of the United States, and, through RPS, Ltd., its
subsidiary, to 100% of Canada. Additionally, RPS provides service to Mexico
through an arrangement with another transportation provider. RPS service extends
to 27 European countries through an arrangement with General Parcel Logistics,
GmbH. RPS also offers service offshore to Puerto Rico, Alaska and Hawaii via a
ground/air network operation in cooperation with other transportation providers.
RPS provides other specialized transportation services to meet specific customer
requirements in the small-package market. RPS conducts its operations primarily
with 8,100 owner-operated vehicles and, in addition, owns over 7,700 trailers.
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Viking Freight, Inc.
Viking is a superregional freight carrier, formed by the consolidation of
the Company's four regional carrier businesses, with regional coverage
throughout the country. Viking's primary business consists of handling shipments
weighing less than 10,000 pounds each. Most of its customers' shipments require
less than the full cargo and/or weight capacity of a trailer and are more
efficiently transported by sharing trailer capacity with other shipments. Viking
operates a dedicated trucking network principally serving its core geographic
markets with next-day and second-day freight service. In addition,
transcontinental service is provided to meet specific customer requirements.
With 217 strategically located terminals and a fleet of over 20,000 trucks,
tractors and trailers, Viking serves 91% of the U.S. population in all 50 states
and Puerto Rico; it also serves Canada through an arrangement with Interlink
Freight Systems, Inc.
Roberts Express, Inc.
Roberts is the largest surface expedited carrier in North America,
providing critical needs shipping and transportation for emergency shipments.
Roberts also provides similar service in Europe. Utilizing over 2,000 vehicles,
Roberts delivers shipments within 15 minutes of the promised delivery time in
96% of all cases. In addition to time-critical delivery, Roberts offers White
Glove Services, requiring specially equipped vehicles and highly trained teams
to handle such items as electronics, medical equipment, radioactive materials,
pressurized gases, trade show exhibits and works of art. Roberts transports
freight by utilizing independent owner-operators.
Caliber Logistics, Inc.
Caliber Logistics is a contract logistics provider with expertise across
the entire supply chain, from inbound materials management through distribution
to the final consumer. Services provided include transportation management,
dedicated transportation, warehouse operations and management, just-in-time
delivery programs (including light assembly and manufacturing), customer order
processing, returnable container management, freight bill payment and auditing
and other management services outsourced by its customers.
COMPETITION
RPS competes in the small package market, which is dominated by UPS, the
world's largest package carrier. Competition for high volume, profitable
shipping business focuses largely on providing economical pricing and dependable
service.
Viking operates in the extremely competitive LTL marketplace. High levels
of competition and periodic industry overcapacity continue to result in
aggressive discounting and narrow margins. Viking competes with regional LTL
carriers, with national LTL carriers, small package carriers, private carriage,
freight forwarders, railroads and airlines. Competition for freight is based
primarily on price and service.
Roberts competes principally with companies that specialize in critical
time or needs shipments. Competition is based primarily on meeting exacting
service requirements. Roberts competes by providing extremely reliable, fast
delivery of shipments at competitive prices.
Caliber Logistics operates in a relatively new business area and further
competition is expected from existing competitors and new entrants. Competition
for the provision of logistics services is vigorous.
GOVERNMENT REGULATION
The operations of the Company's subsidiaries in interstate commerce are
currently regulated by the Department of Transportation ("DOT") and Federal
Highway Administration, which retain
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limited oversight authority over motor carriers. Federal legislation has been
enacted that preempted regulation by the states of price, routes and service in
intrastate freight transportation.
The Company's subsidiaries, like other interstate motor carriers, are
subject to certain DOT safety requirements governing interstate operations. In
addition, vehicle weight and dimensions remain subject to both Federal and state
regulations. More restrictive limitations on vehicle weight and size, or on
trailer length or configuration, could adversely affect the profitability of
these subsidiaries.
The Company and its subsidiaries are subject to Federal, state and local
environmental laws and regulations relating to, among other things, contingency
planning for spills of petroleum products and the disposal of waste oil.
Additionally, the Company and its subsidiaries are subject to significant
regulations dealing with underground fuel storage tanks and has environmental
management programs to conform with these regulations. The Company's
subsidiaries store fuel for trucks and tractors in approximately 119 underground
tanks located in 22 states.
CYCLICALITY
The trucking and shipping industries are affected directly by the state of
the overall economy. Seasonal fluctuations affect tonnage, revenues, and
earnings. Normally, the fall of each year is the busiest shipping period for
each of the Company's operating subsidiaries; the months of December and January
of each year are the slowest. Shipment levels, operating costs and earnings can
also be adversely affected by inclement weather.
EMPLOYEES
The Company and its subsidiaries employ approximately 27,100 persons (on a
full time equivalent basis) and utilize the services of approximately 10,700
independent contractors.
PROPERTIES
Caliber System, Inc.
The corporate offices of the Company and its information systems
subsidiary, Caliber Technology, Inc., are located in Akron, Ohio in leased
facilities. Limited additional corporate office space is located in nearby
leased facilities.
RPS, Inc.
As of June 15, 1996, RPS operated 370 terminals, including 26 hub
facilities. Twelve of the terminals, including three hub facilities, are
operated by RPS, Ltd., RPS' Canadian subsidiary. The 26 hub facilities are
strategically located to cover the geographic area served by RPS.
RPS' corporate offices and data center are located in an approximately
350,000 square foot building owned by a subsidiary of the Company in the
Pittsburgh, Pennsylvania area.
Viking Freight, Inc.
As of June 15, 1996, Viking operated 217 terminals. The largest terminal
facility, located in Dallas, Texas, has 525 loading spaces and is owned by
Viking. Viking's general offices are located in leased facilities in San Jose,
California.
Roberts Express, Inc.
Roberts' general offices are located in Akron, Ohio in owned facilities.
Roberts does not use any terminal facilities in its business.
Caliber Logistics, Inc.
Caliber Logistics' general offices are located in Hudson, Ohio in leased
facilities.
S-10
<PAGE> 11
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as the "Debt Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Debt Securities set forth in the Prospectus, to
which description reference is hereby made. The following description is
qualified in its entirety by reference to the detailed provisions of the Notes
and the Indenture referred to below.
GENERAL
The Notes are to be issued under an Indenture dated as of ,
1996 (the "Indenture"), which is more fully described in the accompanying
Prospectus.
The Notes will be limited to $200,000,000 aggregate principal amount and
will mature on , 2006. The Notes will bear interest at the rate
per annum shown on the cover of this Prospectus Supplement from ,
1996 or from the most recent Interest Payment Date to which interest has been
paid or provided for, payable semiannually on and of each year,
commencing , 199 , to the Person in whose name Notes are registered at
the close of business on the or , as the case may be, next
preceding such Interest Payment Date.
The Notes will not be redeemable prior to their maturity and will not be
entitled to the benefit of any sinking fund.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered global
notes (collectively, the "Global Notes") which will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York (the "Depositary")
and registered in the name of the Depositary's nominee. The provisions set forth
under "Descriptions of Debt Securities -- Global Securities" in the accompanying
Prospectus will be applicable to the Notes. Ownership of interests in such
Global Notes will be shown on, and transfer thereof will be effected only
through, records maintained by the Depositary or its nominee for such Global
Notes and on the records of the participants. Except as described under
"Description of Debt Securities -- Global Securities" in the Prospectus, owners
of beneficial interests in the Global Notes will not be entitled to receive
Notes in definitive form and will not be considered the holders of Notes.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. The Depositary was created to hold securities of
institutions that have accounts with the Depositary or its nominee
("participants") and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. The Depositary
agrees with and represents to its participants that it will administer its
book-entry system in accordance with its rules and bylaws and requirements of
law.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole owner and holder of the related Notes for all
purposes of such Notes and for all purposes under the Indenture. Accordingly,
each person owning a beneficial interest in the Global Notes must rely on the
S-11
<PAGE> 12
procedures of the Depositary and, if such person is not a participant, on the
procedures of the participant through which such person owns its interests, to
exercise any rights of a holder of Notes under the Indenture or the Global
Notes. The Company understands that under existing industry practice, in the
event the Company requests any action of holders of Notes or an owner of a
beneficial interest in the Global Notes desires to take any action that the
Depositary, as the holder of the Global Notes, is entitled to take, the
Depositary would authorize the participants to take such action, and that the
participants would authorize beneficial owners owning through such participants
to take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Notes registered in the name of or held by the Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner and holder of the Global Notes.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of the Global Notes, will credit immediately
participants' accounts with payment in amounts proportionate to their respective
beneficial interests in the principal amount of the Global Notes as shown on the
records of the Depositary. The Company also expects that payments by
participants to owners of beneficial interests in the Global Notes held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility of
such participants. None of the Company, the Trustee or any agent of the Company
or the Trustee will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Notes for any Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depositary and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 13 of the Indenture relating to defeasance and
covenant defeasance as described under "Description of Debt
Securities -- Defeasance and Covenant Defeasance" set forth in the Prospectus
will apply to the Notes.
S-12
<PAGE> 13
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
and the Pricing Agreement, the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
UNDERWRITER NOTES
--------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co.................................................. $100,000,000
J.P. Morgan Securities Inc........................................... 100,000,000
------------
Total........................................................... $200,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement and the
Pricing Agreement, the Underwriters are committed to take and pay for all of the
Notes, if any are taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus Supplement and in part to certain securities dealers at such price
less a concession of % of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Company has agreed to indemnify each Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
In the ordinary course of their business, the Underwriters and their
respective affiliates have engaged, or may in the future engage, in investment
or commercial banking transactions with the Company and affiliates of the
Company.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the
Company by Jones, Day, Reavis & Pogue, Cleveland, Ohio, and for the Underwriters
by Sullivan & Cromwell, New York, New York. Joseph C. Weinstein, Deputy General
Counsel of the Company, will also pass upon certain matters in connection with
the issuance, sale and delivery of the Notes. Sullivan & Cromwell will rely as
to all matters of Ohio law upon the opinion of Jones, Day, Reavis & Pogue.
S-13
<PAGE> 14
$400,000,000
CALIBER SYSTEM, INC.
DEBT SECURITIES
------------------
Caliber System, Inc. (the "Company") may from time to time offer Debt
Securities consisting of debentures, notes and/or other unsecured evidences of
indebtedness in one or more series at an aggregate initial offering price not to
exceed $400,000,000 or its equivalent in any other currency or composite
currency. The Debt Securities may be offered as separate series in amounts, at
prices and on terms to be determined at the time of sale. The accompanying
Prospectus Supplement sets forth with regard to the series of Debt Securities in
respect of which this Prospectus is being delivered the title, aggregate
principal amount, denominations (which may be in United States dollars, in any
other currency or in a composite currency), maturity, rate (which may be fixed
or variable) and time of payment of any interest, any terms for redemption at
the option of the Company or the holder, any terms for sinking fund payments,
any listing on a securities exchange, the initial public offering price and any
other terms relating to such series of Debt Securities or their offering and
sale.
The Company may sell Debt Securities to or through underwriters, and also
may sell Debt Securities directly to other purchasers or through agents. See
"Plan of Distribution". The accompanying Prospectus Supplement sets forth the
names of any underwriters or agents involved in the sale of the Debt Securities
in respect of which this Prospectus is being delivered, the principal amounts,
if any, to be purchased by underwriters and the compensation, if any, of such
underwriters or agents.
------------------
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.
------------------
The date of this Prospectus is July 15, 1996.
<PAGE> 15
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Commission's Regional Offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Company's Common Stock is listed on the New York Stock
Exchange. Reports, proxy statements and other information concerning the Company
may also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Debt Securities offered hereby. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement and the exhibits thereto which may
be inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies thereof may be obtained from the
Commission upon payment of the prescribed fees.
------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission pursuant to
Section 13 of the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995;
2. Quarterly Report on Form 10-Q for the period ended March 23, 1996, as
amended;
3. Quarterly Report on Form 10-Q for the period ended June 15, 1996;
4. Current Report on Form 8-K filed with the Commission on January 18,
1996; and
5. Current Report on Form 8-K filed with the Commission on July 1, 1996.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such documents which are not specifically incorporated
by reference in such documents). Requests should be directed to Secretary,
Caliber System, Inc., 3560 W. Market Street, P.O. Box 5459, Akron, Ohio
44334-0459, telephone number (330) 665-5646. Unless otherwise indicated,
currency amounts in this Prospectus and any Prospectus Supplement are stated in
United States dollars ("$" or "dollars").
------------------
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Debt Securities offered hereby 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 herein
or in a document all or any portion of which is 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
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
2
<PAGE> 16
THE COMPANY
Caliber System, Inc. (formerly Roadway Services, Inc.), an Ohio
Corporation, is engaged through its subsidiaries in a broad range of
transportation, logistics, and related information services. The Company's
operations include a small-package carrier, superregional freight carrier, a
surface expedited carrier and a contract logistics provider. These operations
provide services and solutions to meet customer requirements based upon shipment
size, distance, time in transit, and distribution needs. The Company conducts
these operations principally through RPS, Inc. ("RPS"), Viking Freight, Inc.
("Viking"), Roberts Express, Inc. ("Roberts") and Caliber Logistics, Inc.
("Caliber Logistics", formerly Roadway Logistics Systems, Inc.).
RPS, Caliber's largest operating unit, is the second-largest ground small
package carrier in the United States. RPS serves customers in the small-package
market in North America and between North America and Europe, focusing primarily
on the business-to-business delivery of packages weighing up to 150 pounds. RPS
provides service to 100% of the United States, and, through RPS, Ltd., its
subsidiary, to 100% of Canada. Additionally, RPS provides service to Mexico
through an arrangement with another transportation provider. RPS service extends
to 27 European countries through an arrangement with General Parcel Logistics,
GmbH. RPS also offers service offshore to Puerto Rico, Alaska and Hawaii via a
ground/air network operation in cooperation with other transportation providers.
RPS provides other specialized transportation services to meet specific customer
requirements in the small-package market. RPS conducts its operations primarily
with 8,100 owner-operated vehicles and, in addition, owns over 7,700 trailers.
Competition focuses largely on providing dependable service and economical
pricing.
Viking is a superregional freight carrier, formed by the consolidation of
the Company's four regional carrier businesses, with regional coverage
throughout the country. Viking's primary business consists of handling shipments
weighing less than 10,000 pounds each. Most of its customers' shipments require
less than the full cargo and/or weight capacity of a trailer and are more
efficiently transported by sharing trailer capacity with other shipments. Viking
operates a dedicated trucking network principally serving its core geographic
markets with next-day and second-day freight service. In addition,
transcontinental service is provided to meet specific customer requirements.
With 217 strategically located terminals and a fleet of over 20,000 trucks,
tractors and trailers, Viking serves 91% of the U.S. population in all 50 states
and Puerto Rico; it also serves Canada through an arrangement with Interlink
Freight Systems, Inc. Viking competes primarily with other regional freight
carriers and, to a lesser extent, with national freight and small package
carriers.
Roberts is the largest surface expedited carrier in North America,
providing critical needs shipping and transportation for emergency shipments.
Roberts also provides similar service in Europe. Utilizing over 2,000 vehicles,
Roberts delivers shipments within 15 minutes of the promised delivery time in
96% of all cases. In addition to time-critical delivery, Roberts offers White
Glove Services, requiring specially equipped vehicles and highly trained teams
to handle such items as electronics, medical equipment, radioactive materials,
pressurized gases, trade show exhibits and works of art. Roberts transports
freight by utilizing independent owner-operators.
Caliber Logistics is a contract logistics provider with expertise across
the entire supply chain, from inbound materials management through distribution
to the final consumer. Services provided include transportation management,
dedicated transportation, warehouse operations and management, just-in-time
delivery programs (including light assembly and manufacturing), customer order
processing, returnable container management, freight bill payment and auditing
and other management services outsourced by its customers.
3
<PAGE> 17
USE OF PROCEEDS
Caliber intends to use the net proceeds from the sale of the Debt
Securities offered hereby for working capital and general corporate purposes,
which may include the reduction of short-term borrowings. Further information
concerning the use of proceeds from the sale of any Debt Securities may be
included in the Prospectus Supplement relating to such Debt Securities.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges for
the periods indicated.
<TABLE>
<CAPTION>
24 WEEKS ENDED CALENDAR YEAR
------------------------------- ---------------------------------------------
JUNE 15, 1996 JUNE 17, 1995 1991 1992 1993 1994 1995
------------- ------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Historical 2.76 11.47 32.69 58.77 47.20 38.28 10.39
Pro forma 2.03 9.18 9.18
</TABLE>
For the purpose of determining the ratios of earnings to fixed charges,
earnings represent income (before cumulative effect of accounting changes)
before income taxes, fixed charges (less capitalized interest) and amortization
of capitalized interest. Fixed charges consist of interest on all indebtedness
(including capital lease obligations), capitalized interest, amortization of
debt issue costs and the portion of rental charges considered to be
representative of the interest factor. The pro forma ratio of earnings to fixed
charges gives effect to the change in interest expense assuming the sale of the
Debt Securities.
DESCRIPTION OF DEBT SECURITIES
The Securities are to be issued under an Indenture (the "Indenture"),
between the Company and Chemical Bank, as Trustee (the "Trustee"), a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Securities may be issued from time to time in one or
more series. The particular terms of each series, or of Securities forming a
part of a series, which are offered by a Prospectus Supplement will be described
in such Prospectus Supplement.
The following summaries of certain provisions of the Indenture do not
purport to be complete and are subject, and are qualified in their entirety by
reference, to all the provisions of the Indenture, including the definitions
therein of certain terms, and, with respect to any particular Securities, to the
description of the terms thereof included in the Prospectus Supplement relating
thereto. Wherever particular Sections or defined terms of the Indenture are
referred to herein or in a Prospectus Supplement, such Sections or defined terms
are incorporated by reference herein or therein, as the case may be.
The Company is a holding company and derives its operating income and cash
flow from its subsidiaries. The Company must rely entirely upon distributions
from its subsidiaries to generate the funds necessary to meet its obligations,
including the payment of principal of and any premium and interest on the
Securities. The ability of the Company's subsidiaries to make such payments will
be subject to, among other things, applicable state laws and any restrictions
that may be contained in credit agreements or other financing arrangements
entered into by such subsidiaries. Because claims of creditors of the Company's
subsidiaries will generally have priority as to the assets of such subsidiaries
over the claims of the Company and the holders of the Company's indebtedness,
including the Securities, the Securities effectively will be subordinated to all
indebtedness of the Company's subsidiaries. The Indenture does not restrict the
ability of these subsidiaries to incur indebtedness. As of June 15, 1996, the
total amount of outstanding indebtedness of these subsidiaries was approximately
$6 million.
GENERAL
The Indenture will provide that Securities in separate series may be issued
thereunder from time to time without limitation as to aggregate principal
amount. The Company may specify a maximum aggregate principal amount for the
Securities of any series. (Section 301) The Securities are to have
4
<PAGE> 18
such terms and provisions which are not inconsistent with the Indenture,
including as to maturity, principal and interest, as the Company may determine.
The Securities will be unsecured obligations of the Company and will rank on a
parity with all other unsecured and unsubordinated indebtedness of the Company.
The applicable Prospectus Supplement will set forth the price or prices at
which the Securities to be offered will be issued and will describe the
following terms of such Securities: (1) the title of such Securities; (2) any
limit on the aggregate principal amount of such Securities or the series of
which they are a part; (3) the date or dates on which the principal of any of
such Securities will be payable; (4) the rate or rates at which any of such
Securities will bear interest, if any, the date or dates from which any such
interest will accrue, the Interest Payment Dates on which any such interest will
be payable and the Regular Record Date for any such interest payable on any
Interest Payment Date; (5) the place or places where the principal of and any
premium and interest on any of such Securities will be payable; (6) the period
or periods within which, the price or prices at which and the terms and
conditions on which any of such Securities may be redeemed, in whole or in part,
at the option of the Company; (7) the obligation, if any, of the Company to
redeem or purchase any of such Securities pursuant to any sinking fund or
analogous provision or at the option of the Holder thereof, and the period or
periods within which, the price or prices at which and the terms and conditions
on which any of such Securities will be redeemed or purchased, in whole or in
part, pursuant to any such obligation; (8) the denominations in which any of
such Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (9) if the amount of principal of or any premium or
interest on any of such Securities may be determined with reference to an index
or one or more securities, currencies or other reference or pursuant to a
formula, the manner in which such amounts will be determined; (10) if other than
the currency of the United States of America, the currency, currencies or
currency units in which the principal of or any premium or interest on any of
such Securities will be payable (and the manner in which the equivalent of the
principal amount thereof in the currency of the United States of America is to
be determined for any purpose, including for the purpose of determining the
principal amount deemed to be Outstanding at any time); (11) if the principal of
or any premium or interest on any of such Securities is to be payable, at the
election of the Company or the Holder thereof, in one or more currencies or
currency-units other than those in which such Securities are stated to be
payable, the currency, currencies or currency units in which payment of any such
amount as to which such election is made will be payable, the periods within
which and the terms and conditions upon which such election is to be made and
the amount so payable (or the manner in which such amount is to be determined);
(12) if other than the entire principal amount thereof, the portion of the
principal amount of any of such Securities which will be payable upon
declaration of acceleration of the Maturity thereof; (13) if the principal
amount payable at the Stated Maturity of any of such Securities will not be
determinable as of any one or more dates prior to the Stated Maturity, the
amount which will be deemed to be such principal amount as of any such date for
any purpose, including the principal amount thereof which will be due and
payable upon any Maturity other than the Stated Maturity or which will be deemed
to be Outstanding as of any such date (or, in any such case, the manner in which
such deemed principal amount is to be determined); (14) if applicable, that such
Securities, in whole or any specified part, are defeasible pursuant to the
provisions of the Indenture described under "Defeasance and Covenant
Defeasance -- Defeasance and Discharge" or "Defeasance and Covenant
Defeasance -- Defeasance of Certain Covenants", or under both such captions;
(15) whether any of such Securities will be issuable in whole or in part in the
form of one or more Global Securities and, if so, the respective Depositaries
for such Global Securities, the form of any legend or legends to be borne by any
such Global Security in addition to or in lieu of the legend referred to under
"Global Securities" and, if different from those described under such caption,
any circumstances under which any such Global Security may be exchanged in whole
or in part for Securities registered, and any transfer of such Global Security
in whole or in part may be registered, in the names of Persons other than the
Depositary for such Global Security or its nominee; (16) any addition to or
change in the Events of Default applicable to any of such Securities and any
change in the right of the Trustee or the Holders to declare the principal
amount of any of such Securities due and payable; (17) any addition to or change
in the covenants in the Indenture described under "Restrictive Covenants"
applicable to any of such
5
<PAGE> 19
Securities; and (18) any other terms of such Securities not inconsistent with
the provisions of the Indenture. (Section 301)
Securities, including Original Issue Discount Securities, may be sold at a
substantial discount below their principal amount. Certain special United States
federal income tax considerations (if any) applicable to Securities sold at an
original issue discount may be described in the applicable Prospectus
Supplement. In addition, certain special United States federal income tax or
other considerations (if any) applicable to any Securities which are denominated
in a currency or currency unit other than United States dollars may be described
in the applicable Prospectus Supplement.
FORM, EXCHANGE AND TRANSFER
The Securities of each series will be issuable only in fully registered
form, without coupons, and, unless otherwise specified in the applicable
Prospectus Supplement, only in denominations of $1,000 and integral multiples
thereof. (Section 302)
At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Securities of each series will be
exchangeable for other Securities of the same series of any authorized
denomination and of a like tenor and aggregate principal amount. (Section 305)
Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Securities may be presented for exchange as provided above or
for registration of transfer (duly endorsed or with the form of transfer
endorsed thereon duly executed) at the office of the Security Registrar or at
the office of any transfer agent designated by the Company for such purpose. No
service charge will be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. Such transfer
or exchange will be effected upon the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. The Company has appointed the Trustee as Security
Registrar. Any transfer agent (in addition to the Security Registrar) initially
designated by the Company for any Securities will be named in the applicable
Prospectus Supplement. (Section 305) The Company may at any time designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except
that the Company will be required to maintain a transfer agent in each Place of
Payment for the Securities of each series. (Section 1002)
If the Securities of any series (or of any series and specified terms) are
to be redeemed in part, the Company will not be required to (i) issue, register
the transfer of or exchange any Security of that series (or of that series and
specified terms, as the case may be) during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
Security that may be selected for redemption and ending at the close of business
on the day of such mailing or (ii) register the transfer of or exchange any
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any such Security being redeemed in part. (Section 305)
GLOBAL SECURITIES
Some or all of the Securities of any series may be represented, in whole or
in part, by one or more Global Securities which will have an aggregate principal
amount equal to that of the Securities represented thereby. Each Global Security
will be registered in the name of a Depositary or a nominee thereof identified
in the applicable Prospectus Supplement, will be deposited with such Depositary
or nominee or a custodian therefor and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof referred to below
and any such other matters as may be provided for pursuant to the Indenture.
Notwithstanding any provision of the Indenture or any Security described
herein, no Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary for such Global
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Security or any nominee of such Depositary unless (i) the Depositary has
notified the Company that it is unwilling or unable to continue as Depositary
for such Global Security or has ceased to be qualified to act as such as
required by the Indenture, (ii) there shall have occurred and be continuing an
Event of Default with respect to the Securities represented by such Global
Security or (iii) there shall exist such circumstances, if any, in addition to
or in lieu of those described above as may be described in the applicable
Prospectus Supplement. All securities issued in exchange for a Global Security
or any portion thereof will be registered in such names as the Depositary may
direct. (Sections 204 and 305)
As long as the Depositary, or its nominee, is the registered Holder of a
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner and Holder of such Global Security and the Securities
represented thereby for all purposes under the Securities and the Indenture.
Except in the limited circumstances referred to above, owners of beneficial
interests in a Global Security will not be entitled to have such Global Security
or any Securities represented thereby registered in their names, will not
receive or be entitled to receive physical delivery of certificated Securities
in exchange therefor and will not be considered to be the owners or Holders of
such Global Security or any Securities represented thereby for any purpose under
the Securities or the Indenture. All payments of principal of and any premium
and interest on a Global Security will be made to the Depositary or its nominee,
as the case may be, as the Holder thereof. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a Global Security.
Ownership of beneficial interests in a Global Security will be limited to
institutions that have accounts with the Depositary or its nominee
("participants") and to persons that may hold beneficial interests through
participants. In connection with the issuance of any Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of Securities represented by the Global Security to
the accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by the Depositary (with
respect to participants' interests) or any such participant (with respect to
interests of persons held by such participants on their behalf). Payments,
transfers, exchanges and others matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary from time to time. None of the Company, the Trustee or any agent of
the Company or the Trustee will have any responsibility or liability for any
aspect of the Depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a Global Security, or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
Beneficial interests in a Global Security, will trade in the Depositary's
same-day funds settlement system, in which secondary market trading activity in
those beneficial interests would be required by the Depositary to settle in
immediately available funds. Also, settlement for purchases of beneficial
interests in a Global Security upon the original issuance thereof will be
required to be made in immediately available funds.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of interest on a Security on any Interest Payment Date will be made to the
Person in whose name such Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest. (Section 307)
Unless otherwise indicated in the applicable Prospectus Supplement,
principal of and any premium and interest on the Securities of a particular
series will be payable at the office of such Paying Agent or Paying Agents as
the Company may designate for such purpose from time to time, except that at the
option of the Company payment of any interest may be made by check mailed to the
address of the Person entitled thereto as such address appears in the Security
Register. Unless otherwise indicated in the applicable Prospectus Supplement,
the corporate trust office of the Trustee in The City of New York
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will be designated as the Company's sole Paying Agent for payments with respect
to Securities of each series. Any other Paying Agents initially designated by
the Company for the Securities of a particular series will be named in the
applicable Prospectus Supplement. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent or
approve a change in the office through which any Paying Agent acts, except that
the Company will be required to maintain a Paying Agent in each Place of Payment
for the Securities of a particular series. (Section 1002)
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Security which remain unclaimed
at the end of two years after such principal, premium or interest has become due
and payable will be repaid to the Company, and the Holder of such Security
thereafter may look only to the Company for payment thereof. (Section 1003)
RESTRICTIVE COVENANTS
Limitation on Liens
The Company will not, and will not permit any Subsidiary of the Company to,
Incur any Lien on property or assets owned on or acquired after the date of the
Indenture to secure Debt without making, or causing such Subsidiary to make,
effective provision for securing the Securities (and, if the Company may so
determine, any other Debt of the Company which is not subordinated in right of
payment to the Securities or any Debt of such Subsidiary) (x) equally and
ratably with such Debt as to such property or assets for so long as such Debt
will be so secured or (y) in the event such Debt is subordinated in right of
payment to the Securities, prior to such Debt as to such property for so long as
such Debt will be so secured. (Section 1008)
The foregoing restrictions will not apply to Liens existing on the date of
the Indenture or to: (i) Liens securing only the Securities; (ii) Liens in favor
of only the Company; (iii) any Lien on property of a Person existing immediately
prior to the time such Person is merged with or into or consolidated with the
Company or any Subsidiary of the Company or otherwise becomes a Subsidiary of
the Company (provided that such Lien is not Incurred in anticipation of the
financing of such transaction and does not extend beyond the property subject
thereto, or secure any Debt that is not secured thereby, immediately prior to
such transaction); (iv) any Lien on property existing immediately prior to the
time of acquisition thereof (provided that such Lien is not Incurred in
anticipation of the financing of such acquisition and does not extend beyond the
property subject thereto, or secure any Debt that is not secured thereby,
immediately prior to such acquisition); (v) any Lien to secure Debt Incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction or improvement of the property subject to such Lien; provided,
however, that (a) the principal amount of any Debt secured by such Lien does not
exceed 100% of such purchase price or cost and (b) such Lien does not extend to
or cover any other property other than such item of property and any
improvements on such item; (vi) Liens on property of the Company or any
Subsidiary in favor of the United States of America, any state thereof, or any
instrumentality of either, to secure certain payments pursuant to any contract
or statute; (vii) Liens for taxes or assessments or other governmental charges
or levies which are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as may be required in accordance with generally
accepted accounting principles has been made; (viii) Liens to secure obligations
under workmen's compensation laws or similar legislation, including Liens with
respect to judgments which are not currently dischargeable; (ix) Liens Incurred
to secure the performance of statutory obligations, surety or appeal bonds,
performance or return-of-money bonds or other obligations of a like nature
Incurred in the ordinary course of business; (x) Liens to secure industrial
revenue or development bonds; (xi) Liens to secure Debt Incurred to extend,
renew, refinance or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, Debt secured by any Lien referred to in the
foregoing Clauses (i) to (x) so long as such Lien does not extend to any other
property and the Debt so secured is not increased; (xii) any Lien securing Debt
owing by the Company to a Wholly Owned Subsidiary; provided, however, that for
purposes of this covenant and the covenant described under "Limitation on Sale
and Leaseback Transactions", upon either (a) the transfer or other disposition
of any Debt secured by a Lien so
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permitted to a Person other than another Wholly Owned Subsidiary of the Company
or (b) the issuance (other than directors' qualifying shares), sale, lease,
transfer or other disposition of shares of Capital Stock of or other ownership
interest in any such Wholly Owned Subsidiary to a Person other than the Company
or another Wholly Owned Subsidiary of the Company, the provisions described in
this Clause (xii) shall no longer be applicable to such Lien and such Lien shall
be subject (if otherwise subject) to the requirements of this covenant without
regard to this Clause (xii); and (xiii) any Lien in favor of the Trustee in
respect of expenses incurred or services rendered in connection with the
Indenture. (Section 1008)
In addition to the foregoing, the Company and its Subsidiaries may, without
equally and ratably securing the Securities, Incur a Lien to secure Debt or
enter into a Sale and Leaseback Transaction if, after giving effect thereto, the
sum of: (i) the amount of all Debt secured by all Liens entered into after the
date of the Indenture and otherwise prohibited by the Indenture and (ii) the
Attributable Value of Sale and Leaseback Transactions entered into after the
date of the Indenture and otherwise prohibited by the Indenture does not exceed
10% of Consolidated Net Tangible Assets; provided, however, that such percentage
will be increased to 15% in the event the Company or any Subsidiary of the
Company enters into a Sale and Leaseback Transaction in respect of RPS, Inc.'s
headquarters facilities after the date of the Indenture; provided further,
however, that if such Sale and Leaseback Transaction entered into by the Company
or any Subsidiary of the Company is terminated or reaches its stated maturity,
such percentage will revert to 10% of Consolidated Net Tangible Assets. (Section
1008)
Limitation on Sale and Leaseback Transactions
The Company will not, and will not permit any Subsidiary of the Company to,
enter into any Sale and Leaseback Transaction (except for a period not exceeding
18 months) unless (i) the Company or such Subsidiary would be entitled to enter
into such Sale and Leaseback Transaction pursuant to the provisions described in
the third paragraph under "Limitation on Liens" without equally and ratably
securing the Securities; or (ii) the Company or a Subsidiary applies or commits
to apply, within 90 days after the sale or transfer, an amount equal to the Net
Available Proceeds of the sale pursuant to the Sale and Leaseback Transaction to
the redemption of Securities or, to the extent Securities are not then
redeemable, to the retirement of Securities, of other Company Debt which is pari
passu to the Securities or of Subsidiary Debt or, to the extent there is no such
Company Debt or Subsidiary Debt, to the retirement of other Company Debt. In
lieu of applying all or any part of such amount to the redemption of Securities,
the Company may deliver to the Trustee Securities for cancellation and thereby
reduce the amount to be applied to the redemption of Securities by an amount
equivalent to the aggregate principal amount of Securities delivered. Securities
redeemed or delivered, or otherwise retired, pursuant to the provision described
above may not be used as credits against any sinking fund obligations. (Section
1009)
Certain Definitions. The Indenture will include, among others, the following
definitions:
"Asset Disposition" by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Subsidiaries (including
a consolidation, merger or other sale of any such Subsidiary with, into or to
another Person in a transaction in which such Subsidiary ceases to be a
Subsidiary, but excluding a disposition by a Subsidiary of such Person to such
Person or a Wholly Owned Subsidiary of such Person or by such Person to a Wholly
Owned Subsidiary of such Person) of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Subsidiary of
such Person, (ii) substantially all of the assets representing a division or
line of business of such Person or any of its Subsidiaries or (iii) other assets
or rights of such Person or any of its Subsidiaries outside of the ordinary
course of business.
"Attributable Value" means, as to any particular lease under which any
Person is at the time liable other than a Capital Lease Obligation, and at any
date as of which the amount thereof is to be determined, the total net amount of
rent required to be paid by such Person under such lease during the
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initial term thereof as determined in accordance with generally accepted
accounting principles, discounted from the last date of such initial term to the
date of determination at a rate per annum equal to the discount rate which would
be applicable to a Capital Lease Obligation with like term in accordance with
generally accepted accounting principles. The net amount of rent required to be
paid under any such lease for any such period shall be the aggregate amount of
rent payable by the lessee with respect to such period after excluding amounts
required to be paid on account of insurance, taxes, assessments, utility,
operating and labor costs and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall
also include the amount of such penalty, but no rent shall be considered as
required to be paid under such lease subsequent to the first date upon which it
may be so terminated. "Attributable Value" means, as to a Capital Lease
Obligation under which any Person is at the time liable and at any date as of
which the amount thereof is to be determined, the capitalized amount thereof
that would appear on the face of a balance sheet of such Person in accordance
with generally accepted accounting principles.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock of
such Person.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as consolidated persons in such Person's financial
statements in accordance with generally accepted accounting principles
consistently applied.
"Consolidated Net Tangible Assets" of any Person means the sum of the
Tangible Assets of such Person after eliminating inter-company items, determined
on a consolidated basis in accordance with generally accepted accounting
principles, including appropriate deductions for any minority interest in
Tangible Assets of such Person's Subsidiaries; provided, however, that, with
respect to the Company, no effect will be given to any adjustments following the
date of the Indenture to the accounting books and records of the Company in
accordance with Accounting Principles Board Opinions Nos. 16 and 17 (or
successor opinions thereto) or otherwise resulting from the acquisition of
control of the Company by another Person.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Redeemable Stock of
such Person at the time of determination, and (vii) every obligation of the type
referred to in Clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise.
"Guaranty" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of such
Person, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of)
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any security for the payment of such Debt, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment
of such Debt or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt (and "Guaranteed", "Guaranteeing"
and "Guarantor" shall have meanings correlative to the foregoing); provided,
however, that the Guaranty by any Person shall not include endorsements by such
Person for collection or deposit, in either case in the ordinary course of
business.
"Incur" means, with respect to any Debt, Lien or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt, Lien or other
obligation, or to have any of its property become subject to such Debt, Lien or
other obligation, or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt, Lien or other obligation
on the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable"
and "Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall not
be deemed an Incurrence of such Debt.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, installment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Debt or other obligations relating to such properties or assets or
received in any other noncash form) therefrom by such Person, net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
Incurred and all federal, state, provincial, foreign and local taxes required to
be accrued as a liability as a consequence of such Asset Disposition, (ii) all
payments made by such Person or its Subsidiaries on any Debt which is secured by
such assets in accordance with the terms of any Lien upon or with respect to
such assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law be repaid out
of the proceeds from such Asset Disposition, and (iii) all distributions and
other payments made to minority interest holders in Subsidiaries of such Person
or joint ventures as a result of such Asset Disposition.
"pari passu", when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that each such Debt (a)
either (i) is not subordinated in right of payment to any other Debt of such
Person or (ii) is subordinated in right of payment to the same Debt of such
Person as is the other and is so subordinated to the same extent and (b) is not
subordinated in right of payment to the other or to any Debt of such Person as
to which the other is not so subordinated.
"Redeemable Stock" of any Person means any equity security of or other
ownership interest in such Person that by its terms or otherwise is required to
be redeemed prior to the final Stated Maturity of the Securities or is
redeemable at the option of the holder thereof at any time prior to the final
Stated Maturity of the Securities.
"Sale and Leaseback Transaction" of any Person means an arrangement with
any lender or investor or to which such lender or investor is a party providing
for the leasing by such Person of any property or asset of such Person which has
been or is being sold or transferred by such Person more than 180 days after the
acquisition thereof or the completion of construction or commencement of
operation thereof to such lender or investor or to any person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property or asset. The stated maturity of such arrangement shall be the date of
the last payment of rent or any other amount due under such arrangement prior to
the first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
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"Significant Subsidiary" means, at any time, any Subsidiary that would be a
"Significant Subsidiary" at such time, as such term is defined in Regulation S-X
promulgated by the Commission as in effect at such time.
"Subsidiary" of any Person means (i) a corporation more than 50% of the
outstanding Voting Stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person and
one or more Subsidiaries of such Person or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries of such Person,
directly or indirectly, has at least a majority ownership and power to direct
the policies, management and affairs thereof. References to any "Subsidiary"
mean a Subsidiary of the Company unless the context requires otherwise.
"Tangible Assets" of any Person means, at any date, the gross book value as
shown by the accounting books and records of such Person of all its property
both real and personal, less (i) the net book value of all its licenses,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
non-compete agreements, organizational expenses and other like intangibles, (ii)
unamortized Debt discount and expense, (iii) all reserves for depreciation,
obsolescence, depletion and amortization of its properties and (iv) all other
proper reserves which in accordance with generally accepted accounting
principles should be provided in connection with the business conducted by such
Person; provided, however, that, with respect to the Company and its
Consolidated Subsidiaries no effect will be given to adjustments following the
date of the Indenture to the accounting books and records of the Company and its
Consolidated Subsidiaries in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting
from the acquisition of control of the Company by another Person.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock of or other ownership interest in which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person. References to
any "Wholly Owned Subsidiary" mean a Wholly Owned Subsidiary of the Company
unless the context requires otherwise. (Section 101)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any Person (a
"successor Person"), and may not permit any Person to merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to, the
Company, unless (i) the successor Person (if any) is a corporation, partnership,
trust, limited liability company or other entity organized and validly existing
under the laws of any domestic jurisdiction and assumes the Company's
obligations on the Securities and under the Indenture, (ii) immediately after
giving effect to the transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, (iii) if, as a result of the transaction, property
of the Company would become subject to a Lien that would not be permitted under
the limitation on Liens described above under "Restrictive Covenants", the
Company takes such steps as shall be necessary to secure the Securities equally
and ratably with (or prior to) the Debt secured by such Lien and (iv) certain
other conditions are met. (Section 801)
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to Securities of any series: (a) failure to pay principal
of or any premium on any Security of that series when due; (b) failure to pay
any interest on any Securities of that series when due, continued for 30 days;
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(c) failure to deposit any sinking fund payment, when due, in respect of any
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture solely
for the benefit of a series other than that series), continued for 60 days after
written notice has been given by the Trustee, or the Holders of at least 10% in
principal amount of the Outstanding Securities of that series, as provided in
the Indenture; (e) a default or defaults under any note(s) or other evidence(s)
of Debt, or any instrument(s) under which there may be issued or by which there
may be secured or evidenced any Debt, of the Company or any Subsidiary having a
principal amount outstanding, individually or in the aggregate, of at least
$10,000,000, and whether existing on or created after the date of the Indenture,
which default or defaults constitute a failure to pay any portion of the
principal of such Debt when due (after the expiration of any applicable grace
period) or have resulted in acceleration of the Debt, without such Debt having
been discharged or such acceleration having been rescinded or annulled within 10
days after written notice has been given by the Trustee, or the Holders of at
least 10% in principal amount of the Outstanding Securities of that series, as
provided in the Indenture; and (f) certain events in bankruptcy, insolvency or
reorganization of the Company or any Significant Subsidiary. Other Events of
Default may apply with respect to the Securities of a particular series, as
indicated in the applicable Prospectus Supplement. (Section 501)
If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Securities of any series at the time Outstanding
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities of that series by
notice as provided in the Indenture may declare the principal amount of the
Securities of that series (or, in the case of any Security that is an Original
Issue Discount Security or the principal amount of which is not then
determinable, such portion of the principal amount of such Security, or such
other amount in lieu of such principal amount, as may be specified in the terms
of such Security) to be due and payable immediately. If an Event of Default
described in clause (f) above with respect to the Securities of any series at
the time Outstanding shall occur, the principal amount of all the Securities of
that series (or, in the case of any such Original Issue Discount Security or
other Security, such specified amount) will automatically, and without any
action by the Trustee or any Holder, become immediately due and payable. After
any such acceleration, but before a judgment or decree based on acceleration,
the Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series may, under certain circumstances, rescind and annul
such acceleration if all Events of Default, other than the non-payment of
accelerated principal (or other specified amount), have been cured or waived as
provided in the Indenture. (Section 502) For information as to waiver of
defaults, see "Modification and Waiver".
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
shall have offered to the Trustee reasonable indemnity. (Section 603) Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Outstanding Securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee with respect to the Securities of that series.
(Section 512)
No Holder of a Security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Securities of that series, (ii) the Holders of at least 25%
in aggregate principal amount of the Outstanding Securities of that series have
made written request, and such Holder or Holders have offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee and (iii) the
Trustee has failed to institute such proceeding, and has not received from the
Holders of a majority in aggregate principal amount of the Outstanding
Securities of that series a direction inconsistent with such request, within 60
days after such notice, request and offer. (Section 507) However, such
limitations do not apply to a suit instituted by a Holder of a Security for the
enforcement of payment of the principal of or any
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premium or interest on such Security on or after the applicable due date
specified in such Security. (Section 508)
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the performance or observance of any of the terms, provisions
and conditions of the Indenture and, if so, specifying all such known defaults.
(Section 1004)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, (b) reduce the
principal amount of, or any premium or interest on, any Security, (c) reduce the
amount of principal of an Original Issue Discount Security or any other Security
payable upon acceleration of the Maturity thereof, (d) change the place or
currency of payment of principal of, or any premium or interest on, any
Security, (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Security, (f) reduce the percentage in
principal amount of Outstanding Securities of any series, the consent of whose
Holders is required for modification or amendment of the Indenture, (g) reduce
the percentage in principal amount of Outstanding Securities of any series
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults or (h) modify such provisions with respect to
modification and waiver. (Section 902)
The Holders of a majority in principal amount of the Outstanding Securities
of any series may waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1010) The Holders of a majority in
principal amount of the Outstanding Securities of any series may waive any past
default under the Indenture, except a default in the payment of principal,
premium or interest and certain covenants and provisions of the Indenture which
cannot be amended without the consent of the Holder of each Outstanding Security
of such series affected. (Section 513)
The Indenture will provide that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken any
direction, notice, consent, waiver or other action under the Indenture as of any
date, (i) the principal amount of an Original Issue Discount Security that will
be deemed to be Outstanding will be the amount of the principal thereof that
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date, (ii) if, as of such date, the principal amount payable at
the Stated Maturity of a Security is not determinable (for example, because it
is based on an index), the principal amount of such Security deemed to be
Outstanding as of such date will be an amount determined in the manner
prescribed for such Security and (iii) the principal amount of a Security
denominated in one or more foreign currencies or currency units that will be
deemed to be Outstanding will be the U.S. dollar equivalent, determined as of
such date in the manner prescribed for such Security, of the principal amount of
such Security (or, in the case of a Security described in clause (i) or (ii)
above, of the amount described in such clause). Certain Securities, including
those for whose payment or redemption money has been deposited or set aside in
trust for the Holders and those that have been fully defeased pursuant to
Section 1302, will not be deemed to be Outstanding. (Section 101)
Except in certain limited circumstances, the Company will be entitled to
set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any direction,
notice, consent, waiver or other action under the Indenture, in the manner and
subject to the limitations provided in the Indenture. In certain limited
circumstances, the Trustee will be entitled to set a record date for action by
Holders. If a record date is set for any action to be taken by Holders of a
particular series, such action may be taken only by persons who are Holders of
Outstanding Securities of that series on the record date. To be effective, such
action must be taken by Holders of the requisite
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<PAGE> 28
principal amount of such Securities within a specified period following the
record date. For any particular record date, this period will be 180 days or
such other period as may be specified by the Company (or the Trustee, if it sets
the record date), and may be shortened or lengthened (but not beyond 180 days)
from time to time. (Section 104)
DEFEASANCE AND COVENANT DEFEASANCE
If and to the extent indicated in the applicable Prospectus Supplement, the
Company may elect, at its option at any time, to have the provisions of Section
1302, relating to defeasance and discharge of indebtedness, or Section 1303,
relating to defeasance of certain restrictive covenants in the Indenture,
applied to the Securities of any series, or to any specified part of a series.
(Section 1301)
Defeasance and Discharge
The Indenture will provide that, upon the Company's exercise of its option
(if any) to have Section 1302 applied to any Securities, the Company will be
discharged from all its obligations with respect to such Securities (except for
certain obligations to exchange or register the transfer of Securities, to
replace stolen, lost or mutilated Securities, to maintain paying agencies and to
hold moneys for payment in trust) upon the deposit in trust for the benefit of
the Holders of such Securities of money or U.S. Government Obligations, or both,
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on such Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Securities. Such defeasance or discharge may occur only if, among other
things, the Company has delivered to the Trustee an Opinion of Counsel to the
effect that the Company has received from, or there has been published by, the
United States Internal Revenue Service a ruling, or there has been a change in
tax law, in either case to the effect that Holders of such Securities will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge were not to occur. (Sections 1302
and 1304)
Defeasance of Certain Covenants
The Indenture will provide that, upon the Company's exercise of its option
(if any) to have Section 1303 applied to any Securities, the Company may omit to
comply with certain restrictive covenants, including those described under
"Restrictive Covenants" and in Clause (iii) under "Consolidation, Merger and
Sale of Assets" and any that may be described in the applicable Prospectus
Supplement, and the occurrence of certain Events of Default, which are described
above in clause (d) (with respect to such restrictive covenants) and clause (e)
under "Events of Default" and any that may be described in the applicable
Prospectus Supplement, will be deemed not to be or result in an Event of
Default, in each case with respect to such Securities. The Company, in order to
exercise such option, will be required to deposit, in trust for the benefit of
the Holders of such Securities, money or U.S. Government Obligations, or both,
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an amount sufficient to pay
the principal of and any premium and interest on such Securities on the
respective Stated Maturities in accordance with the terms of the Indenture and
such Securities. The Company will also be required, among other things, to
deliver to the Trustee an Opinion of Counsel to the effect that Holders of such
Securities will not recognize gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain obligations and will be subject
to federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and defeasance were not to
occur. In the event the Company exercised this option with respect to any
Securities and such Securities were declared due and payable because of the
occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust would be sufficient to pay amounts due on such
Securities at the time of their respective Stated Maturities but may not be
sufficient to pay amounts due on such Securities upon
15
<PAGE> 29
any acceleration resulting from such Event of Default. In such case, the Company
would remain liable for such payments. (Sections 1303 and 1304)
NOTICES
Notices to Holders of Securities will be given by mail to the addresses of
such Holders as they may appear in the Security Register. (Sections 101 and 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Security is registered as the absolute owner
thereof (whether or not such Security may be overdue) for the purpose of making
payment and for all other purposes. (Section 308)
GOVERNING LAW
The Indenture and the Securities will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112)
REGARDING THE TRUSTEE
The Company maintains ordinary banking relationships with the Trustee and
its affiliates and a number of other banks. The Trustee and its affiliates along
with a number of other banks have extended credit facilities to the Company.
Upon the occurrence of an Event of Default, or an event which, after notice or
lapse of time or both, would become an Event of Default, the Trustee may be
deemed to have a conflicting interest with respect to the Securities for the
purposes of the Trust Indenture Act of 1939 and, accordingly, may be required to
resign as Trustee under the Indenture. In that event, the Company would be
required to appoint a successor Trustee.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters and also
may sell Debt Securities directly to other purchasers or through agents.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities for whom
they may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company and any profit on the
resale of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the Prospectus Supplement.
Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Debt Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
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<PAGE> 30
EXPERTS
The financial statements of the Company, incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities offered hereby will be passed upon for
the Company by Jones, Day, Reavis & Pogue, Cleveland, Ohio, and may be passed
upon for any underwriters by Sullivan & Cromwell, New York, New York. Joseph C.
Weinstein, Deputy General Counsel of the Company, will pass upon certain matters
in connection with the issuance, sale and delivery of the Debt Securities.
Sullivan & Cromwell will rely as to all matters of Ohio law upon the opinion of
Jones, Day, Reavis & Pogue.
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<PAGE> 31
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company............................ S-2
Use of Proceeds........................ S-2
Ratios of Earnings to Fixed Charges.... S-2
Capitalization......................... S-3
Selected Financial Data................ S-4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... S-5
Business of Caliber.................... S-8
Description of Notes................... S-11
Underwriting........................... S-13
Validity of Notes...................... S-13
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Company............................ 3
Use of Proceeds........................ 4
Ratios of Earnings to Fixed Charges.... 4
Description of Debt Securities......... 4
Plan of Distribution................... 16
Experts................................ 17
Validity of Debt Securities............ 17
</TABLE>
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$200,000,000
CALIBER SYSTEM, INC.
% NOTES
DUE , 2006
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LOGO
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GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
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