RISK FACTORS
You should carefully consider all the information set forth in this prospectus, any accompanying prospectus supplement and the other documents
incorporated by reference herein and therein before deciding to invest in the debt securities. In particular, we urge you to consider carefully the factors set forth under Cautionary Statement Concerning
Forward-Looking
Statements in this prospectus and the risk factors set forth below together with those set forth under Risk Factors in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2016, incorporated by reference herein and any updates thereto in our subsequent SEC filings.
2
THE COMPANY
Introduction
CVS Health, together with
its subsidiaries, is a pharmacy innovation company helping people on their path to better health. At the forefront of a changing health care landscape, we have an unmatched suite of capabilities and the expertise needed to drive innovations that
will help shape the future of health care.
We are currently the only integrated pharmacy health care company with the ability to impact
consumers, payors, and providers with innovative, channel-agnostic solutions. We have a deep understanding of their diverse needs through our unique integrated model, and we are bringing them innovative solutions that help increase access to quality
care, deliver better health outcomes, and lower overall health care costs.
Through nearly 9,700 retail locations, more than 1,100
walk-in
health care clinics, a leading pharmacy benefits manager with nearly 90 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year, expanding
specialty pharmacy services and a leading stand-alone Medicare Part D prescription drug plan, we enable people, businesses, and communities to manage health in more affordable, effective ways. We are delivering break-through products and services,
from advising patients on their medications at our CVS Pharmacy
®
locations, to introducing unique programs to help control costs for our clients at CVS Caremark
®
, to innovating how care is delivered to our patients with complex conditions through CVS Specialty
TM
, to improving pharmacy care for the
senior community through Omnicare
®
, or by expanding access to high-quality,
low-cost
care at CVS MinuteClinic
®
.
We have three reportable segments: Pharmacy Services, Retail/LTC and Corporate.
Pharmacy Services Segment
Our
Pharmacy Services business generates revenue from a full range of pharmacy benefit management (PBM) solutions, including plan design offerings and administration, formulary management, Medicare Part D services, mail order pharmacy,
specialty pharmacy and infusion services, retail pharmacy network management services, prescription management systems, clinical services, disease management services and medical spend management.
Our clients are primarily employers, insurance companies, unions, government employee groups, health plans, Medicare Part D plans, Managed
Medicaid plans, plans offered on the public and private exchanges, other sponsors of health benefit plans, and individuals throughout the United States. A portion of covered lives, primarily within the Managed Medicaid, health plan and employer
markets, have access to our services through public and private exchanges.
As a pharmacy benefits manager, we manage the dispensing of
prescription drugs through our mail order pharmacies, specialty pharmacies, long-term care pharmacies and national network of more than 68,000 retail pharmacies, consisting of approximately 41,000 chain pharmacies (which includes our CVS Pharmacy
®
pharmacies) and 27,000 independent pharmacies, to eligible members in the benefit plans maintained by our clients and utilize our information systems to perform, among other things, safety
checks, drug interaction screenings and
brand-to-generic
substitutions.
Our specialty pharmacies support individuals who require complex and expensive drug therapies. Our specialty operations include mail order and
retail specialty locations. Substantially all of our mail service specialty pharmacies have been accredited by The Joint Commission, which is an independent,
not-for-profit
organization that accredits and certifies health care organizations and programs in the United States. We also offer specialty infusion services and
enteral nutrition services through Coram
®
, as well as health management programs through our Accordant
®
rare disease management
offering. In addition, through our SilverScript Insurance Company subsidiary, we are a national provider of drug benefits to eligible beneficiaries under the federal governments Medicare Part D program.
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The Pharmacy Services Segment operates under the CVS Caremark
®
Pharmacy Services, Caremark
®
, CVS Caremark
TM
, CarePlus CVS Pharmacy
TM
, Accordant
®
, SilverScript
®
,
Coram
®
, CVS Specialty
TM
, NovoLogix
®
, Navarro
®
Health Services and ACS Pharmacy names. As of March 31, 2017, the Pharmacy Services Segment operated 23 retail specialty pharmacy stores, 13 specialty mail order pharmacies, four mail
service dispensing pharmacies, and 84 branches for infusion and enteral services, including approximately 73 ambulatory infusion suites and three centers of excellence, located in 41 states, Puerto Rico and the District of Columbia.
Retail/LTC Segment
Our Retail/LTC
Segment sells prescription drugs and a wide assortment of general merchandise, including
over-the-counter
drugs, beauty products and cosmetics, personal care products,
convenience foods, photo finishing, seasonal merchandise and greeting cards. With the acquisition of Omnicares long-term care (LTC) operations, the Retail/LTC Segment now also includes the distribution of prescription drugs,
related pharmacy consulting and other ancillary services to chronic care facilities and other care settings, as well as commercialization services which are provided under the name
RxCrossroads
®
. Our Retail/LTC Segment derives the majority of its revenues through the sale of prescription drugs, which are dispensed by our more than 32,000 pharmacists.
Our Retail/LTC Segment also provides health care services through our MinuteClinic
®
health care clinics. MinuteClinics are staffed by nurse practitioners and physician assistants who utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions, and
deliver vaccinations.
As of March 31, 2017, our Retail/LTC Segment included 9,676 retail stores (of which 7,948 were the
Companys stores that operated a pharmacy and 1,678 were the Companys pharmacies located within a Target store) located in 49 states, the District of Columbia, Puerto Rico and Brazil operating primarily under the CVS Pharmacy
®
, CVS
®
, CVS Pharmacy y más
®
, Longs Drugs
®
, Navarro Discount Pharmacy
®
and Drogaria Onofre
TM
names, 40 onsite pharmacies
primarily operating under the CarePlus CVS Pharmacy
TM
, CarePlus
®
and CVS Pharmacy
®
names, 1,125 retail health care clinics operating under the MinuteClinic
®
name (of which 1,118 were located in CVS Pharmacy and Target stores), and our online retail websites, CVS.com
®
, Navarro.com
TM
and Onofre.com.br
TM
. LTC operations are comprised of 151 spoke pharmacies
that primarily handle new prescription orders, of which 32 are also hub pharmacies that use proprietary automation to support spoke pharmacies with refill prescriptions. LTC operates primarily under the Omnicare
®
and NeighborCare
®
names.
Corporate
Segment
Our Corporate Segment provides management and administrative services to support the Company. Our Corporate Segment consists
of certain aspects of our executive management, corporate relations, legal, compliance, human resources, information technology and finance departments.
CVS Health Corporation is a Delaware corporation. Our corporate office is located at One CVS Drive, Woonsocket, Rhode Island 02895, telephone
(401) 765-1500.
Our common stock is listed on the New York Stock Exchange under the trading symbol CVS. General information about CVS Health is available through our website at
http://www.cvshealth.com
. Our financial press releases and filings with the SEC are available free of charge within the Investors section of our website at
http://investors.cvshealth.com
. Our website and the information contained
therein or connected thereto shall not be deemed to be incorporated into this prospectus.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that we
file at the Public Reference Room of the SEC at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains an Internet site at
http://www.sec.gov
that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Interested persons can electronically access our SEC filings, including the Registration Statement and the exhibits and schedules to the Registration Statement, at the SEC website.
The SEC allows us to incorporate by reference the information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and all documents we file pursuant to Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), on or after the date of this prospectus
(including all documents we so file after the date of this Registration Statement and prior to the effectiveness of this Registration Statement) and prior to the termination of the offering under this prospectus and any prospectus supplement (other
than, in each case, documents or information deemed to have been furnished and not filed in accordance with SEC rules), on or after the date of this prospectus until we complete our offerings of the securities registered under this Registration
Statement:
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Annual Report on Form
10-K,
filed with the SEC on February 9, 2017;
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Quarterly Report on Form
10-Q,
filed with the SEC on May 2, 2017;
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Current Report on Form
8-K,
filed with the SEC on March 2, 2017; and
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Definitive Proxy Statement on Schedule 14A, filed with the SEC on March 31, 2017 (portions thereof incorporated by reference in Part III of the Annual Report on Form
10-K
for
the year ended December 31, 2016).
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You may request a copy of any or all of the documents incorporated by reference
into this prospectus at no cost, by writing or telephoning us at the following address:
Nancy R. Christal
Senior Vice President, Investor Relations
CVS Health Corporation
670 White
Plains Road, Suite 210
Scarsdale, New York 10583
(800)
201-0938
investorinfo@cvshealth.com
5
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING
STATEMENTS
This prospectus, prospectus supplements to this prospectus, and
the documents incorporated by reference or deemed to be incorporated by reference herein may contain certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 (the Reform Act). In addition,
the Company and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in the Companys filings with the SEC and in its reports to stockholders, press releases, webcasts,
conference calls, meetings and other communications. Generally, the inclusion of the words believe, expect, intend, estimate, project, anticipate, will,
should and similar expressions identify statements that constitute forward-looking statements. All statements addressing operating performance of CVS Health Corporation or any subsidiary, events or developments that the Company expects
or anticipates will occur in the future, including statements relating to corporate strategy; revenue growth; earnings or earnings per common share growth; adjusted earnings or adjusted earnings per common share growth; free cash flow; debt ratings;
inventory levels; inventory turn and loss rates; store development; relocations and new market entries; retail pharmacy business, sales trends and operations; PBM business, sales trends and operations; specialty pharmacy business, sales trends and
operations; LTC pharmacy business, sales trends and operations; the Companys ability to attract or retain customers and clients; Medicare Part D competitive bidding, enrollment and operations; new product development; and the impact of
industry and regulatory developments, as well as statements expressing optimism or pessimism about future operating results or events, are forward-looking statements within the meaning of the Reform Act.
The forward-looking statements are and will be based upon managements then-current views and assumptions regarding future events and
operating performance, and are applicable only as of the dates of such statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
By their nature, all forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated
by the forward-looking statements for a number of reasons as described in our SEC filings, including those set forth in the Risk Factors section in our Annual Report on Form
10-K
for the year ended
December 31, 2016, and including, but not limited to:
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Risks relating to the health of the economy in general and in the markets we serve, which could impact consumer purchasing power, preferences and/or spending patterns, drug utilization trends, the financial health of
our PBM and LTC clients, retail and specialty pharmacy payors or other payors doing business with us and our ability to secure necessary financing, suitable store locations and sale-leaseback transactions on acceptable terms.
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Efforts to reduce reimbursement levels and alter health care financing practices, including pressure to reduce reimbursement levels for generic drugs.
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The possibility of PBM and LTC client loss and/or the failure to win new PBM and LTC business, including as a result of failure to win renewal of expiring contracts, contract termination rights that may permit clients
to terminate a contract prior to expiration and early or periodic renegotiation of pricing by clients prior to expiration of a contract.
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The possibility of loss of Medicare Part D business and/or failure to obtain new Medicare Part D business, whether as a result of the annual Medicare Part D competitive bidding process or otherwise.
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Risks related to the frequency and rate of the introduction of generic drugs and brand name prescription products.
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Risks of declining gross margins attributable to increased competitive pressures, increased client demand for lower prices, enhanced service offerings and/or higher service levels and market dynamics and, with respect
to the PBM industry, regulatory changes that impact our ability to offer plan sponsors pricing that includes the use of retail differential or spread or the use of maximum allowable cost pricing.
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Regulatory changes, business changes and compliance requirements and restrictions that may be imposed by Centers for Medicare and Medicaid Services (CMS), Office of Inspector General or other government
agencies relating to our participation in Medicare, Medicaid and other federal and state government-funded programs, including sanctions and remedial actions that may be imposed by CMS on our Medicare Part D business.
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Risks and uncertainties related to the timing and scope of reimbursement from Medicare, Medicaid and other government-funded programs, including the possible impact of sequestration, the impact of other federal budget,
debt and deficit negotiations and legislation that could delay or reduce reimbursement from such programs and the impact of any closure, suspension or other changes affecting federal or state government funding or operations.
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Possible changes in industry pricing benchmarks used to establish pricing in many of our PBM and LTC client contracts, pharmaceutical purchasing arrangements, retail network contracts, specialty payor agreements and
other third party payor contracts.
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Efforts to increase reimbursement rates in PBM pharmacy networks and to inhibit the ability of PBMs to audit network pharmacies for fraud, waste and abuse.
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Risks related to increasing oversight of PBM activities by state departments of insurance.
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A highly competitive business environment, including the uncertain impact of increased consolidation in the PBM industry, the possibility of combinations, joint ventures or other collaboration between PBMs and
retailers, uncertainty concerning the ability of our retail pharmacy business to secure and maintain contractual relationships with PBMs and other payors on acceptable terms, uncertainty concerning the ability of our PBM business to secure and
maintain competitive access, pricing and other contract terms from retail network pharmacies in an environment where some PBM clients are willing to consider adopting narrow or more restricted retail pharmacy networks, and the possibility of our
retail stores or specialty pharmacies being excluded from narrow or restricted networks.
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Our ability to timely identify or effectively respond to changing consumer preferences and spending patterns, an inability to expand the products being purchased by our customers, or the failure or inability to obtain
or offer particular categories of products.
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Risks relating to our ability to secure timely and sufficient access to the products we sell from our domestic and/or international suppliers, including limited distribution drugs.
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Reform of the U.S. health care system, including ongoing implementation of ACA and the possible repeal and replacement of all or parts of ACA, continuing legislative efforts, regulatory changes and judicial
interpretations impacting our health care system and the possibility of shifting political and legislative priorities related to reform of the health care system in the future.
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Risks related to changes in legislation, regulation and government policy (including through the use of Executive Orders) that could significantly impact our business and the health care and retail industries, including
the possibility of major developments in tax policy or trade relations, such as the disallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products.
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Risks relating to any failure to properly maintain our information technology systems, our information security systems and our infrastructure to support our business and to protect the privacy and security of sensitive
customer and business information.
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Risks related to compliance with a broad and complex regulatory framework, including compliance with new and existing federal, state and local laws and regulations relating to health care, network pharmacy reimbursement
and auditing, accounting standards, corporate securities, tax, environmental and other laws and regulations affecting our business.
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Risks related to litigation, government investigations and other legal proceedings as they relate to our business, the pharmacy services, retail pharmacy, LTC pharmacy or retail clinic industries, or to the health care
industry generally.
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The risk that any condition related to the closing of any proposed acquisition may not be satisfied on a timely basis or at all, including the inability to obtain required regulatory approvals of any proposed
acquisition, or on the terms desired or anticipated; the risk that such approvals may result in the imposition of conditions that could adversely affect the resulting combined company or the expected benefits of any proposed transaction; and the
risk that the proposed transactions fail to close for any other reason.
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The possibility that the anticipated synergies and other benefits from any acquisition by us will not be realized, or will not be realized within the expected time periods.
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The risks and uncertainties related to our ability to integrate the operations, products, services and employees of any entities acquired by us and the effect of the potential disruption of managements attention
from ongoing business operations due to any pending acquisitions.
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The accessibility or availability of adequate financing on a timely basis and on reasonable terms.
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Risks related to the outcome of any legal proceedings related to, or involving any entity that is a part of, any proposed acquisition contemplated by us.
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Other risks and uncertainties detailed from time to time in our filings with the SEC.
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The
foregoing list is not exhaustive. There can be no assurance that we have correctly identified and appropriately assessed all factors affecting its business. Additional risks and uncertainties not presently known to us or that we currently believe to
be immaterial also may adversely impact us. Should any risks and uncertainties develop into actual events, these developments could have a material adverse effect on our business, financial condition and results of operations. For these reasons, you
are cautioned not to place undue reliance on our forward-looking statements.
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DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of the debt securities. The debt securities will be either senior debt
securities or subordinated debt securities. The debt securities will be issued under the Senior Indenture, dated as of August 15, 2006 (the senior indenture), or the Subordinated Indenture, dated as of May 25, 2007 (the
subordinated indenture), each between us and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), a national banking association, as trustee. Each of the senior indenture and the
subordinated indenture is referred to as an indenture. When we offer to sell a particular series of debt securities, we will describe the specific terms for the securities in a supplement to this prospectus. The prospectus supplement will also
indicate whether the general terms and provisions described in this prospectus apply to a particular series of debt securities.
We have
summarized certain terms and provisions of the indentures. The summary is not complete and the terms and provisions of the indentures summarized herein may be modified by adding or removing covenants, events of default or other provisions as
reflected in the relevant prospectus supplement for each particular series of debt securities. The indentures have been incorporated by reference as exhibits to the Registration Statement for these securities that we have filed with the SEC. You
should read the indentures for the provisions which may be important to you. The indentures are subject to and governed by the Trust Indenture Act of 1939, as amended (the Trust Indenture Act).
The indentures will not limit the amount of debt securities which we may issue. We may issue debt securities up to an aggregate principal
amount as we may authorize from time to time. The prospectus supplement will describe the terms of any debt securities being offered, including:
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classification as senior or subordinated debt securities;
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ranking of the specific series of debt securities relative to other outstanding indebtedness, including subsidiaries debt;
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if the debt securities are subordinated, the aggregate amount of outstanding indebtedness, as of a recent date, that is senior to the subordinated securities, and any limitation on the issuance of additional senior
indebtedness;
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the designation, aggregate principal amount and authorized denominations;
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the interest rate, if any, and the method for calculating the interest rate;
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the interest payment dates and the record dates for the interest payments;
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any mandatory or optional redemption terms or prepayment, conversion, sinking fund or exchangeability or convertibility provisions;
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the place where we will pay principal and interest;
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if other than denominations of $1,000 or multiples of $1,000, the denominations the debt securities will be issued in;
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the applicability of and additional provisions, if any, relating to the defeasance of the debt securities;
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the currency or currencies, if other than the currency of the United States, in which principal and interest will be paid;
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any United States federal income tax consequences;
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the dates on which premium, if any, will be paid;
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our right, if any, to defer the payment of interest and the maximum length of this deferral period;
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any listing on a securities exchange;
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the initial public offering price; and
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other specific terms, including any additional events of default or covenants.
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Senior Debt
Senior debt securities will rank equally and pari passu with all other unsecured and unsubordinated debt of CVS Health.
Subordinated Debt
Subordinated debt
securities will be subordinate and junior in right of payment, to the extent and in the manner set forth in the subordinated indenture, to all senior indebtedness (as defined in the subordinated indenture) of CVS Health. See the
subordinated indenture, section 1.01.
In general, the holders of all senior indebtedness are first entitled to receive payment of
the full amount unpaid on senior indebtedness before the holders of any of the subordinated debt securities or coupons are entitled to receive a payment on account of the principal or interest on the subordinated debt securities in certain events.
These events include:
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any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings which concern CVS Health or a substantial part of its property; or
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a default having occurred for the payment of principal, premium, if any, or interest on or other monetary amounts due and payable on any senior indebtedness or any other default having occurred concerning any senior
indebtedness, which permits the holder or holders of any senior indebtedness to accelerate the maturity of any senior indebtedness with notice or lapse of time, or both. Such an event of default must have continued beyond the period of grace, if
any, provided for such event of default, and such an event of default shall not have been cured or waived or shall not have ceased to exist.
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If this prospectus is being delivered in connection with a series of subordinated debt securities, the accompanying prospectus supplement or
the information incorporated in this prospectus by reference will set forth the approximate amount of senior indebtedness outstanding as of the end of the most recent fiscal quarter.
Certain Covenants
Restrictions on
Secured Funded Debt
.
The senior indenture provides that we will not, nor will we permit any Restricted Subsidiary to, incur, issue, assume, guarantee or create any Secured Debt, without effectively providing concurrently with the
incurrence, issuance, assumption, guaranty or creation of any such Secured Debt that the debt securities (together with, if we shall so determine, any other of our Indebtedness or such Restricted Subsidiarys Indebtedness then existing or
thereafter created which is not subordinated to the debt securities) will be secured equally and ratably with (or prior to) such Secured Debt, unless, after giving effect thereto, the sum of the aggregate amount of all of our outstanding Secured
Debt and the outstanding Secured Debt of our Restricted Subsidiaries together with all Attributable Debt in respect of sale and leaseback transactions relating to a Principal Property (with the exception of Attributable Debt which is excluded
pursuant to clauses (1) to (8) under Limitation on Sale/Leaseback Transactions below), would not exceed 15% of Consolidated Net Tangible Assets.
This restriction will not apply to, and there will be excluded from Secured Debt in any computation under this restriction and under
Limitation on Sale/Leaseback Transactions below, Indebtedness, secured by:
(1) Liens on property, shares of capital stock or
Indebtedness of any corporation existing at the time such corporation becomes a Subsidiary;
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(2) Liens on property, shares of capital stock or Indebtedness existing at the time of
acquisition thereof or incurred within 360 days of the time of acquisition thereof (including, without limitation, acquisition through merger or consolidation) by us or any Restricted Subsidiary;
(3) Liens on property, shares of capital stock or Indebtedness thereafter acquired (or constructed) by us or any Restricted Subsidiary and
created prior to, at the time of, or within 360 days (or thereafter if such Lien is created pursuant to a binding commitment entered into prior to, at the time of or within 360 days) after such acquisition (including, without limitation,
acquisition through merger or consolidation) (or the completion of such construction or commencement of commercial operation of such property, whichever is later) to secure or provide for the payment of all or any part of the purchase price (or the
construction price) thereof;
(4) Liens in favor of us or any Restricted Subsidiary;
(5) Liens in favor of the United States of America, any State thereof or the District of Columbia or any foreign government, or any agency,
department or other instrumentality thereof, to secure partial, progress, advance or other payments pursuant to any contract or provisions of any statute;
(6) Liens incurred or assumed in connection with the issuance of revenue bonds the interest on which is exempt from federal income taxation
pursuant to Section 103 (b) of the Internal Revenue Code;
(7) Liens securing the performance of any contract or undertaking not
directly or indirectly in connection with the borrowing of money, the obtaining of advances or credit or the securing of Indebtedness, if made and continuing in the ordinary course of business;
(8) Liens incurred (no matter when created) in connection with our or a Restricted Subsidiarys engaging in leveraged or single investor
lease transactions;
provided
,
however
, that the instrument creating or evidencing any borrowings secured by such Lien will provide that such borrowings are payable solely out of the income and proceeds of the property subject to such
Lien and are not a general obligation of ours or of such Restricted Subsidiary;
(9) Liens in favor of a governmental agency to qualify us
or any Restricted Subsidiary to do business, maintain self-insurance or obtain other benefits, or Liens under workers compensation laws, unemployment insurance laws or similar legislation;
(10) Good faith deposits in connection with bids, tenders, contracts or deposits to secure our or any Restricted Subsidiarys public or
statutory obligations, or deposits of cash or obligations of the United States of America to secure surety and appeal bonds to which we or any Restricted Subsidiary are a party or in lieu of such bonds, or pledges or deposits for similar purposes in
the ordinary course of business;
(11) Liens imposed by law, such as laborers or other employees, carriers,
warehousemens, mechanics, materialmens and vendors Liens;
(12) Liens arising out of judgments or awards against
us or any Restricted Subsidiary with respect to which we or such Restricted Subsidiary at the time shall be prosecuting an appeal or proceedings for review or Liens arising out of individual final judgments or awards in amounts of less than
$1,000,000;
provided
that the aggregate amount of all such individual final judgments or awards shall not at any one time exceed $1,000,000;
(13) Liens for taxes, assessments, governmental charges or levies not yet subject to penalties for nonpayment or the amount or validity of
which is being in good faith contested by appropriate proceedings by us or any Restricted Subsidiary, as the case may be;
(14) Minor
survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other
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restrictions or Liens as to the use of real properties, which Liens, exceptions, encumbrances, easements, reservations, rights and restrictions do not, in our opinion, in the aggregate materially
detract from the value of said properties or materially impair their use in the operation of our business and that of our Restricted Subsidiaries;
(15) Liens incurred to finance all or any portion of the cost of construction, alteration or repair of any Principal Property or improvements
thereto created prior to or within 360 days (or thereafter if such Lien is created pursuant to a binding commitment to lend entered into prior to, at the time of, or within 360 days) after completion of such construction, alteration or
repair;
(16) Liens existing on the date of the indenture;
(17) Liens created in connection with a project financed with, and created to secure, a Nonrecourse Obligation; or
(18) Any extension, renewal, refunding or replacement of the foregoing,
provided
that (i) such extension, renewal, refunding or
replacement Lien shall be limited to all or a part of the same property that secured the Lien extended, renewed, refunded or replaced (plus improvements on such property) and (ii) the Funded Debt secured by such Lien at such time is not
increased.
Attributable Debt means, in connection with any sale and leaseback transaction under which either we or any
Restricted Subsidiary are at the time liable as lessee for a term of more than 12 months and at any date as of which the amount thereof is to be determined, the lesser of (A) total net obligations of the lessee for rental payments during
the remaining term of the lease discounted from the respective due dates thereof to such determination date at a rate per annum equivalent to the greater of (i) the weighted average Yield to Maturity (as defined in the senior indenture) of the
debt securities, such average being weighted by the principal amount of each series of the debt securities and (ii) the interest rate inherent in such lease (as determined in good faith by us), both to be compounded
semi-annually
or (B) the sale price for the assets so sold and leased multiplied by a fraction the numerator of which is the remaining portion of the base term of the lease included in such transaction and the
denominator of which is the base term of the lease.
Consolidated Net Tangible Assets means, at any date, the total assets
appearing on our and our Restricted Subsidiaries most recent consolidated balance sheet as at the end of our fiscal quarter ending not more than 135 days prior to such date, prepared in accordance with generally accepted accounting
principles in the United States of America (GAAP), less (i) all current liabilities (due within one year) as shown on such balance sheet, (ii) investments in and advances to Unrestricted Subsidiaries and (iii) Intangible
Assets and liabilities relating thereto.
Funded Debt means (i) any of our Indebtedness or Indebtedness of a Restricted
Subsidiary maturing more than 12 months after the time of computation thereof, (ii) guarantees of Funded Debt or of dividends of others (except guarantees in connection with the sale or discount of accounts receivable, trade acceptances
and other paper arising in the ordinary course of business), (iii) in the case of any Restricted Subsidiary, all preferred stock having mandatory redemption provisions of such Restricted Subsidiary as reflected on such Restricted
Subsidiarys balance sheet prepared in accordance with GAAP, and (iv) all Capital Lease Obligations (as defined in the senior indenture).
Indebtedness means, at any date, without duplication, all of our obligations for borrowed money or obligations for borrowed money
of a Restricted Subsidiary.
Intangible Assets means, at any date, the value, as shown on or reflected in our and our
Restricted Subsidiaries most recent consolidated balance sheet as at the end of our fiscal quarter ending not more than 135 days prior to such date, prepared in accordance with GAAP, of: (i) all trade names, trademarks, licenses,
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patents, copyrights, service marks, goodwill and other like intangibles; (ii) organizational and development costs; (iii) deferred charges (other than prepaid items, such as insurance,
taxes, interest, commissions, rents, pensions, compensation and similar items and tangible assets being amortized); and (iv) unamortized debt discount and expense, less unamortized premium.
Liens means such pledges, mortgages, security interests and other liens on any Principal Property of ours or of a Restricted
Subsidiary which secure Secured Debt.
Nonrecourse Obligation means indebtedness or lease payment obligations substantially
related to (i) the acquisition of assets not previously owned by us or any Restricted Subsidiary or (ii) the financing of a project involving the development or expansion of our or any Restricted Subsidiarys properties, as to which
the obligee with respect to such indebtedness or obligation has no recourse to us or any Restricted Subsidiary or any of our or any of our Subsidiaries assets other than the assets which were acquired with the proceeds of such transaction or
the project financed with the proceeds of such transaction (and the proceeds thereof).
Principal Property means real and
tangible property owned and operated now or hereafter by us or any Restricted Subsidiary constituting a part of any store, warehouse or, distribution center located within the United States of America or its territories or possessions (excluding
current assets, motor vehicles, mobile materials handling equipment and other rolling stock, cash registers and other
point-of-sale
recording devices and related
equipment and data processing and other office equipment), the net book value of which (including leasehold improvements and store fixtures constituting a part of such store, warehouse or distribution center) as of the date on which the
determination is being made is more than 1.0% of Consolidated Net Tangible Assets. As of the date of this prospectus, none of our stores constitutes a Principal Property.
Restricted Subsidiary means each Subsidiary other than Unrestricted Subsidiaries.
Secured Debt means Funded Debt which is secured by any pledge of, or mortgage, security interest or other lien on any
(i) Principal Property (whether owned on the date of the senior indenture or thereafter acquired or created), (ii) shares of stock owned by us or a Subsidiary in a Restricted Subsidiary or (iii) Indebtedness of a Restricted
Subsidiary.
Subsidiary means any corporation of which at least a majority of the outstanding stock, which under ordinary
circumstances (not dependent upon the happening of a contingency) has voting power to elect a majority of the board of directors of such corporation (or similar management body), is owned directly or indirectly by us or by one or more of our
Subsidiaries, or by us and one or more Subsidiaries.
Unrestricted Subsidiary means Subsidiaries designated as Unrestricted
Subsidiaries from time to time by our Board of Directors;
provided
,
however
, that our Board of Directors (i) will not designate as an Unrestricted Subsidiary any of our Subsidiaries that owns any Principal Property or any stock of
a Restricted Subsidiary, (ii) will not continue the designation of any of our Subsidiaries as an Unrestricted Subsidiary at any time that such Subsidiary owns any Principal Property, and (iii) will not, nor will it cause or permit any
Restricted Subsidiary to, transfer or otherwise dispose of any Principal Property to any Unrestricted Subsidiary (unless such Unrestricted Subsidiary will in connection therewith be redesignated as a Restricted Subsidiary and any pledge, mortgage,
security interest or other lien arising in connection with any Indebtedness of such Unrestricted Subsidiary so redesignated does not extend to such Principal Property (unless the existence of such pledge, mortgage, security interest or other lien
would otherwise be permitted under the senior indenture)).
Limitation on Sale/Leaseback Transactions
.
The senior indenture
provides that we will not, nor will we permit any Restricted Subsidiary to, enter into any arrangement with any person providing for the leasing by us or any Restricted Subsidiary of any of our or any Restricted Subsidiarys Principal Property
(which lease is required by GAAP to be capitalized on the balance sheet of such lessee), which Principal Property has been or is to be sold or transferred by us or such Restricted Subsidiary to such person (a sale and leaseback
transaction)
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unless, after giving effect thereto, the aggregate amount of all Attributable Debt with respect to all such sale and leaseback transactions plus all Secured Debt (with the exception of Funded
Debt secured by Liens which is excluded pursuant to clauses (1) to (18) under Restrictions on Secured Funded Debt above) would not exceed 15% of Consolidated Net Tangible Assets.
This covenant will not apply to, and there will be excluded from Attributable Debt in any computation under this restriction or under
Restrictions on Secured Funded Debt above, Attributable Debt with respect to any sale and leaseback transaction if:
(1) We or
a Restricted Subsidiary are permitted to create Funded Debt secured by a Lien pursuant to clauses (1) to (18) inclusive under Restrictions on Secured Funded Debt above on the Principal Property to be leased, in an amount equal
to the Attributable Debt with respect to such sale and leaseback transaction, without equally and ratably securing the debt securities;
(2) The property leased pursuant to such arrangement is sold for a price at least equal to such propertys fair market value (as
determined by our Chief Executive Officer, President, Chief Financial Officer, Treasurer or Controller) and we or a Restricted Subsidiary, within 360 days after the sale or transfer shall have been made by us or a Restricted Subsidiary, shall
apply the proceeds thereof to the retirement of our or any Restricted Subsidiarys Indebtedness or Funded Debt (other than Indebtedness or Funded Debt owned by us or any Restricted Subsidiary);
provided
,
however
, that no
retirement referred to in this clause (2) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment provision of Indebtedness or Funded Debt;
(3) We or a Restricted Subsidiary apply the net proceeds of the sale or transfer of the Principal Property leased pursuant to such transaction
to the purchase of assets (and the cost of construction thereof) within 360 days prior or subsequent to such sale or transfer;
(4)
The effective date of any such arrangement or the purchasers commitment therefor is within 36 months prior or subsequent to the acquisition of the Principal Property (including, without limitation, acquisition by merger or consolidation)
or the completion of construction and commencement of operation thereof (which, in the case of a retail store, is the date of opening to the public), whichever is later;
(5) The lease in such sale and leaseback transaction is for a term, including renewals, of not more than three years;
(6) The sale and leaseback transaction is entered into between us and a Restricted Subsidiary or between Restricted Subsidiaries;
(7) The lease secures or relates to industrial revenue or pollution control bonds; or
(8) The lease payment is created in connection with a project financed with, and such obligation constitutes, a Nonrecourse Obligation.
Merger, Consolidation and Disposition of Assets
Each indenture provides that we shall not consolidate with, merge with or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of our property and assets (as an entirety or substantially as an entirety in one transaction or a series of related transactions) to, any Person (as defined in the indentures) (other than a consolidation with or merger with or
into a Restricted Subsidiary or a sale, conveyance, transfer, lease or other disposition to a Restricted Subsidiary) or permit any Person to merge with or into us unless: (a) either (i) we shall be the continuing Person or (ii) the
Person (if other than us) formed by such consolidation or into which we are merged or that acquired or leased such of our property and assets shall be a corporation
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organized and validly existing under the laws of the United States of America or any jurisdiction thereof and shall expressly assume, by a supplemental indenture, executed and delivered to the
trustee, all of our obligations under each series of the debt securities and the indenture, and we shall have delivered to the trustee an opinion of counsel stating that such consolidation, merger or transfer and such supplemental indenture complies
with this provision and that all conditions precedent provided for in the indenture relating to such transaction have been complied with and that such supplemental indenture constitutes an obligation that is legal, valid and binding for us or such
successor enforceable against such entity in accordance with its terms, subject to customary exceptions; and (b) we shall have delivered to the trustee an officers certificate to the effect that immediately after giving effect to such
transaction, no Default (as defined in the indentures) shall have occurred and be continuing and an opinion of counsel as to the matters set forth in paragraph (a) above.
The indentures do not restrict, or require us to redeem or permit holders of any series of the debt securities to cause a redemption of the
debt securities of that series in the event of, (i) a consolidation, merger, sale of assets or other similar transaction that may adversely affect our creditworthiness or the creditworthiness of our successor or combined entity, (ii) a
change in control of the Company or (iii) a highly leveraged transaction involving us, whether or not involving a change in control. Accordingly, the holders of the debt securities would not have protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar transaction involving us that may adversely affect the holders of debt securities. The existing protective covenants applicable to the debt securities would continue to apply to us, or
our successor, in the event of such a transaction initiated or supported by us, our management, or any of our affiliates or their management, but may not prevent such a transaction from taking place.
Events of Default, Waiver and Notice
Event of Default with respect to a series of senior debt securities is defined in the senior indenture to be if:
(1) We default in the payment of all or any part of the principal of such series of the debt securities when the same becomes due and payable
at maturity, upon acceleration, redemption or mandatory repurchase, including as a sinking fund installment, or otherwise;
(2) We default
in the payment of any interest on such series of the debt securities when the same becomes due and payable, and such default continues for a period of 30 days;
(3) We default in the performance of or breach any of our other covenants or agreements in the senior indenture and such default or breach
continues for a period of 60 consecutive days after written notice thereof has been given to us by the trustee or to us and the trustee by the holders of 25% or more in aggregate principal amount of the affected series of the debt securities;
(4) An involuntary case or other proceeding shall be commenced against us with respect to us or our debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any substantial part of our property and assets, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against us under any bankruptcy, insolvency or other similar law now or hereafter in effect;
(5) We (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under any such law, (ii) consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of us or
for all or substantially all of our property and assets or (iii) effect any general assignment for the benefit of creditors;
(6) An
event of default as defined in any one or more indentures or instruments evidencing or under which we have at the date of the senior indenture or shall thereafter have outstanding an aggregate of at least
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$50,000,000 aggregate principal amount of indebtedness for borrowed money, shall happen and be continuing and such indebtedness shall have been accelerated so that the same shall be or become due
and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten days after notice thereof shall have been given to us by the trustee (if such event
be known to it), or to us and the trustee by the holders of at least 25% in aggregate principal amount of the outstanding debt securities of such series;
provided
that if such event of default under such indentures or instruments shall be
remedied or cured by us or waived by the holders of such indebtedness, then the Event of Default under the senior indenture by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the
part of either the trustee or any of the holders of such series; or
(7) Failure by us to make any payment at maturity, including any
applicable grace period, in respect of at least $50,000,000 aggregate principal amount of indebtedness for borrowed money and such failure shall have continued for a period of ten days after notice thereof shall have been given to us by the
trustee (if such event be known to it), or to us and the trustee by the holders of at least 25% in aggregate principal amount of the outstanding debt securities of such series;
provided
that if such failure shall be remedied or cured by us or
waived by the holders of such indebtedness, then the Event of Default under the senior indenture by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the trustee
or any of the holders of such series.
Event of Default with respect to a series of subordinated debt securities is defined in
the subordinated indenture to include the events described in clauses (1), (2), (4) and (5) above.
If an Event of Default
occurs and is continuing with respect to a series of the debt securities, then, and in each and every such case, either the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding debt securities of such series
by notice in writing to us (and to the trustee if given by holders), may declare the entire outstanding principal amount of the debt securities of such series, and the interest accrued thereon, if any, to be due and payable immediately, and upon any
such declaration the same shall become immediately due and payable. If an Event of Default described in clauses (4) or (5) occurs and is continuing with respect to a series of the debt securities, then the principal amount of all the debt
securities of such series then outstanding and interest accrued thereon, if any, shall be and become immediately due and payable, without any notice or other action by any holder of debt securities of such series or the trustee to the full extent
permitted by applicable law.
Subject to provisions in the indenture for the indemnification of the trustee and certain other limitations,
the holders of at least a majority in aggregate principal amount of the outstanding debt securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee by the indenture with respect to the debt securities of such series;
provided
that the trustee may refuse to follow any direction that conflicts with law or the indenture, that may involve the trustee in
personal liability, or that the trustee determines in good faith may be unduly prejudicial to the rights of holders of the debt securities of such series not joining in the giving of such direction; and
provided further
that the trustee may
take any other action it deems proper that is not inconsistent with any directions received from holders of debt securities of such series pursuant to this paragraph.
Subject to various provisions in the indenture, the holders of at least a majority in principal amount of the outstanding debt securities of
any series, by notice to the trustee, may waive an existing Default or Event of Default with respect to such series and its consequences, except a Default in the payment of principal of or interest on any debt security of such series as specified in
clauses (1) or (2) of the first paragraph of this section or in respect of a covenant or provision of the indenture which cannot be modified or amended without the consent of the holder of each outstanding debt security of such series
affected. Upon any such waiver, such Default shall cease to exist with respect to such series, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of the indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent thereto.
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Each indenture provides that no holder of debt securities of any series may institute any
proceeding, judicial or otherwise, with respect to the indenture or the debt securities of such series, or for the appointment of a receiver or trustee, or for any other remedy under the indenture, unless: (i) such holder has previously given
to the trustee written notice of a continuing Event of Default; (ii) the holders of at least 25% in aggregate principal amount of outstanding debt securities of such series shall have made written request to the trustee to institute proceedings
in respect of such Event of Default in its own name as trustee under the indenture; (iii) such holder or holders have offered to the trustee indemnity reasonably satisfactory to the trustee against any costs, liabilities or expenses to be
incurred in compliance with such request; (iv) the trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (v) during such
60-day
period, the holders of a majority in aggregate principal amount of the outstanding debt securities of such series have not given the trustee a direction that is inconsistent with such written request. A
holder of debt securities of any series may not use the indenture to prejudice the rights of another holder of such series or to obtain a preference or priority over such other holder.
Information
Each indenture provides that
we shall file with the trustee and transmit to holders of the debt securities such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the time and in the manner provided
pursuant to such Act.
The Company will be required to file with the trustee annually, within four months of the end of each fiscal
year of the Company, a certificate as to the compliance with all conditions and covenants of the indenture.
Discharge and Defeasance of Debt
Securities and Covenants
Each indenture provides that we may terminate our obligations under any series of debt securities if:
(i) all debt securities of such series previously authenticated and delivered, with certain exceptions, have been delivered to the trustee for cancellation and we have paid all sums payable by us with respect to that series of debt securities
under the indenture; or (ii) (a) the debt securities of such series mature within one year or all of them are to be called for redemption within one year under arrangements satisfactory to the trustee for giving the notice of redemption,
(b) we irrevocably deposit in trust with the trustee, as trust funds solely for the benefit of the holders of the debt securities of such series for that purpose, money or U.S. government obligations or a combination thereof sufficient (unless
such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the trustee), without consideration of any reinvestment, to pay the
principal of and interest on the debt securities of such series to maturity or redemption, as the case may be, and to pay all other sums payable by us under the indenture, and (c) we deliver to the trustee an officers certificate and an
opinion of counsel, in each case stating that all conditions precedent provided for in the indenture relating to the satisfaction and discharge of our obligations under the indenture with respect to the debt securities of such series have been
complied with. The following obligations will survive until the debt securities of such series are no longer outstanding: our obligations to execute and deliver the debt securities of such series for authentication, to set the terms of the debt
securities of such series, to maintain an office or agency in respect of the debt securities of such series, to have moneys held for payment in trust, to register the transfer or exchange of the debt securities of such series, to compensate and
indemnify the trustee and to appoint a successor trustee, and our right to recover excess money held by the trustee. Thereafter, only our obligations to compensate and indemnify the trustee, and our right to recover excess money held by the trustee
shall survive.
Each indenture provides that we (i) will be deemed to have paid and will be discharged from any and all obligations
in respect of the debt securities of such series, and the provisions of the indenture will, except as noted below, no longer be in effect with respect to the debt securities of such series (legal defeasance) or (ii) may omit to
comply with other specific covenants relating to the debt securities of such series in the indenture, and with respect to the senior indenture, such omission shall be deemed not to be an Event of Default
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under clause (3) of the first paragraph of Events of Default, Waiver and Notice (covenant defeasance);
provided
that the following conditions shall have been
satisfied: (a) we have irrevocably deposited in trust with the trustee as trust funds solely for the benefit of the holders of the debt securities of such series, for payment of the principal of and interest on the debt securities of such
series, money or U.S. government obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification
thereof delivered to the trustee) without consideration of any reinvestment and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the trustee, to pay and discharge the principal of and
accrued interest on the outstanding debt securities of such series to maturity or earlier redemption (irrevocably provided for under arrangements satisfactory to the trustee), as the case may be; (b) such deposit will not result in a breach or
violation of, or constitute a default under, the indenture or any other material agreement or instrument to which we are a party or by which we are bound; (c) no Default with respect to the debt securities of such series shall have occurred and
be continuing on the date of such deposit; (d) we shall have delivered to the trustee an opinion of counsel that (1) the holders of the debt securities of such series will not recognize income, gain or loss for federal income tax purposes
as a result of our exercise of our option under this provision of the indenture and will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had
not occurred and (2) the holders of the debt securities of such series have a valid security interest in the trust funds, and (e) we have delivered to the trustee an officers certificate and an opinion of counsel, in each case
stating that all conditions precedent provided for in the indenture relating to the defeasance contemplated have been complied with. In the case of legal defeasance under clause (i) above, the opinion of counsel referred to in
clause (d) (1) above may be replaced by a ruling directed to the trustee received from the Internal Revenue Service to the same effect. Notwithstanding legal or covenant defeasance, the following obligations will survive until the debt
securities of such series are no longer outstanding: our obligations to execute and deliver the debt securities of such series for authentication, to set the terms of the debt securities of such series, to maintain an office or agency in respect of
the debt securities of such series, to have moneys held for payment in trust, to register the transfer or exchange of the debt securities of such series, to compensate and indemnify the trustee and to appoint a successor trustee, and our right to
recover excess money held by the trustee. Thereafter, only our obligations to compensate and indemnify the trustee, and our right to recover excess money held by the trustee shall survive.
Modification and Waiver
Each indenture
provides that we and the trustee may amend or supplement the indenture or any series of the debt securities without notice to or the consent of any holder of such series:
(1) to cure any ambiguity, defect or inconsistency in the indenture;
provided
that such amendments or supplements shall not materially
and adversely affect the interests of the holders of debt securities of such series;
(2) to provide for the assumption of our obligations
to the holders of the debt securities of such series in connection with a consolidation or merger of our company or the sale, conveyance, transfer, lease or other disposal of all or substantially all of our property and assets;
(3) to comply with any requirements of the SEC in connection with the qualification of the indenture under the Trust Indenture Act;
(4) to evidence and provide for the acceptance of appointment under the indenture by a successor trustee; and
(5) to make any change that does not materially and adversely affect the rights of any holder of debt securities of such series,
provided
that any change to conform the terms of the debt securities to the indenture and to the Description of Debt Securities contained in this prospectus or prospectus supplement relating to the debt securities shall not be deemed to be
adverse to any holder of such debt securities.
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Each indenture also contains provisions whereby we and the trustee, subject to certain
conditions, may amend the indenture and the outstanding debt securities of such series with the written consent of the holders of a majority in principal amount of the debt securities of such series then outstanding, and the holders of a majority in
principal amount of the outstanding debt securities of any series may waive future compliance by us with any provision of the indenture or the debt securities of such series.
Notwithstanding the foregoing provisions, without the consent of each holder of a series of the debt securities affected thereby, an amendment
or waiver may not:
(1) extend the stated maturity of the principal of, or any installment of interest on, such holders debt
securities, or reduce the principal thereof or the rate of interest thereon, or any premium payable with respect thereto, or change any place or currency of payment where any debt security of that series or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such payment on or after the due date therefor;
(2) reduce the
percentage in principal amount of outstanding debt securities of that series the consent of whose holders is required for any such supplemental indenture, for any waiver of compliance with certain provisions of the indenture or certain Defaults and
their consequences provided for in the indenture;
(3) waive a Default in the payment of principal of or interest on any debt security of
that series of such holder; or
(4) modify any of the provisions of this provision of the indenture, except to increase any such
percentage or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each outstanding debt security of that series thereunder affected thereby.
It shall not be necessary for the consent of any holder under this provision of the indenture to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this section of the indenture becomes effective, we shall give to the holders of the series of
the debt securities affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure by us to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental
indenture or waiver.
Governing Law
Each indenture and the debt securities will be governed by the laws of the State of New York.
The Trustee
We maintain ordinary banking
and trust relationships with The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), a national banking association, and its affiliates.
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FORMS OF SECURITIES
We will issue the debt securities in the form of one or more fully global securities that will be deposited with a depositary or its custodian
identified in the applicable prospectus supplement and registered in the name of that depositary or its nominee. One or more global securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate
principal or face amount of the securities to be represented by global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a global security may not be transferred except as a whole by and among the
depositary for the global security, the nominees of the depositary or any successors of the depositary or those nominees.
If not
described below, any specific terms of the depositary arrangement with respect to any securities to be represented by a global security will be described in the prospectus supplement relating to those securities. We anticipate that the following
provisions will apply to all depositary arrangements.
Ownership of beneficial interests in a global security will be limited to persons,
called participants, that have accounts with the depositary or persons that may hold interests through participants. Upon the issuance of a global security, the depositary will credit, on its
book-entry
registration and transfer system, the participants accounts with the respective principal or face amounts of the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of the
securities will designate the accounts to be credited. Ownership of beneficial interests in a global security will be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with respect
to interests of participants, and on the records of participants, with respect to interests of persons holding through participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities in
definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in global securities.
So long as the
depositary, or its nominee, is the registered owner of a global security, that depositary or its nominee, as the case may be, will be considered the sole owner or holder of the securities represented by the global security for all purposes under the
applicable indenture. Except as described below, owners of beneficial interests in a global security will not be entitled to have the securities represented by the global security registered in their names, will not receive or be entitled to receive
physical delivery of the securities in definitive form and will not be considered the owners or holders of the securities under the applicable indenture. Accordingly, each person owning a beneficial interest in a global security must rely on the
procedures of the depositary for that global security and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture. We
understand that under existing industry practices, if we request any action of holders or if an owner of a beneficial interest in a global security desires to give or take any action that a holder is entitled to give or take under the applicable
indenture, the depositary for the global security would authorize the participants holding the relevant beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to give or take that
action or would otherwise act upon the instructions of beneficial owners holding through them.
Principal, premium, if any, and interest
payments on debt securities, represented by a global security registered in the name of a depositary or its nominee will be made to the depositary or its nominee, as the case may be, as the registered owner of the global security. None of CVS
Health, the trustee, or any other agent of CVS Health or agent of the trustee will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership interests in the global security or
for maintaining, supervising or reviewing any records relating to those beneficial ownership interests.
We expect that the depositary for
any of the securities represented by a global security, upon receipt of any payment of principal, premium or interest or to holders on that global security, will immediately credit participants accounts in amounts proportionate to their
respective beneficial interests in that global security as
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shown on the records of the depositary. We also expect that payments by participants to owners of beneficial interests in a global security held through participants will be governed by standing
customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of those participants.
If the depositary for any of these securities represented by a global security is at any time unwilling or unable to continue as depositary or
ceases to be a clearing agency registered under the Exchange Act, and a successor depositary registered as a clearing agency under the Exchange Act is not appointed by us within 90 days, we will issue securities in definitive form in exchange
for the global security that had been held by the depositary. Any securities issued in definitive form in exchange for a global security will be registered in the name or names that the depositary gives to the relevant trustee, or other relevant
agent of ours or theirs. It is expected that the depositarys instructions will be based upon directions received by the depositary from participants with respect to ownership of beneficial interests in the global security that had been held by
the depositary.
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