<PAGE>
Rule 424(b)(2)
Registration No. 33-65396
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 22, 1993
$800,000,000
[LOGO OF CIGNA CORPORATION APPEARS HERE]
CIGNA CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS TO FIFTY YEARS FROM DATE OF ISSUE
-------------
CIGNA Corporation ("CIGNA" or the "Company") may offer from time to time its
Medium-Term Notes, Series E (the "Notes"), as selected by the purchaser and
agreed to by the Company, in an aggregate principal amount up to $800,000,000
or its equivalent in one or more currencies or composite currencies, subject
to reduction as the result of the sale of other Securities (as defined in the
Prospectus) by the Company. See "Description of Notes". The Notes will be due
nine months to fifty years from the date of issue.
The Notes may be denominated in either U.S. dollars or in such foreign
currencies or composite currencies as set forth in the applicable Pricing
Supplement. The principal amount payable at maturity, or the amount of
interest payable on any interest payment date with respect to the Notes, may
be determined by reference to the price of one or more currencies, composite
currencies, or currency exchange indices or other indices or by other similar
methods or formulas. The specific currency or composite currency, interest
rate or rates (if any), issue price and maturity date of any Note will be set
forth in the related Pricing Supplement to this Prospectus Supplement. Unless
otherwise specified in the applicable Pricing Supplement, Notes denominated in
other than U.S. dollars or ECUs will not be sold in, or to residents of, the
country issuing the Specified Currency. See "Description of Notes".
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each May 1 and November 1 and at
maturity. Interest on the Floating Rate Notes will be payable on the dates
specified therein and in the applicable Pricing Supplement. Zero Coupon Notes
will not bear interest.
Unless otherwise provided in the applicable Pricing Supplement, the Notes
will not be redeemable prior to their Stated Maturity.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
offered hereby will be issued only in global form in minimum denominations of
U.S. $100,000 and in any greater amount that is an integral multiple of $1,000
or the approximate equivalent thereof in the Specified Currency, as specified
in the applicable Pricing Supplement. A Global Note representing Book-Entry
Notes will be registered in the name of The Depository Trust Company, as
Depository (the "Depository") or a nominee thereof. Beneficial interests in
Global Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depository (with respect to its
participants' interests) and its participants. Except as described herein
under "Description of Notes--Book-Entry Procedures", owners of beneficial
interests in a Global Note will not be considered the Holders thereof and will
not be entitled to receive physical delivery of Notes in definitive form, and
no Global Note will be exchangeable except for another Global Note of like
denomination and terms to be registered in the name of the Depository or its
nominee. See "Description of Notes".
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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, ANY PRICING SUPPLEMENT
HERETO OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(2)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Note.......... 100% .125%-.875% 99.875%-99.125%
Total(4).......... $800,000,000 $1,000,000-$7,000,000 $799,000,000-$793,000,000
</TABLE>
- ------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay to each firm listed below (the "Agents") a commission
of from .125% to .875%, depending upon maturity, of the principal amount
of any Note sold through such firm as agent. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Supplemental Plan of
Distribution".
(3) Before deducting estimated expenses (including reimbursement of certain
expenses of the Agents) of $700,000 payable by the Company and assuming
all Notes offered hereby are sold.
(4) Or the equivalent thereof in foreign currencies or composite currencies.
-------------
Offers to purchase the Notes are being solicited, on a reasonable efforts
basis, from time to time by the Agents on behalf of the Company. Notes may also
be sold to each Agent, acting as principal for its own account, at negotiated
discounts. The Company may also sell Notes directly on its own behalf. The
Company reserves the right to withdraw, cancel or modify the offer made hereby
without notice. No termination date for the offering of the Notes has been
established. The Company or the soliciting Agent may reject any offer in whole
or in part. See "Supplemental Plan of Distribution".
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
-------------
The date of this Prospectus Supplement is January 5, 1995
<PAGE>
IN CONNECTION WITH THE DISTRIBUTION OF NOTES THE AGENTS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING THE
MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN ANY OVER-THE-COUNTER
MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
(referred to in the Prospectus as the "Senior Offered Debt Securities")
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of Debt Securities set forth in the
Prospectus, to which description reference is hereby made.
The Company may offer from time to time up to $800,000,000 aggregate
principal amount of the Notes, less an amount equal to the aggregate proceeds
to the Company from the sale of any other Securities (as defined in the
Prospectus) issued from time to time, including any other series of medium-term
notes. The foregoing limit, however, may be increased by the Company if in the
future it determines that it may wish to sell additional Notes. For a
description of the rights attaching to different series of Debt Securities
under the Senior Indenture and the Convertible Subordinated Indenture, see
"Description of Debt Securities", "Senior Debt Securities" and "Convertible
Subordinated Debt Securities" in the Prospectus.
The Notes will constitute a single series for purposes of the Senior
Indenture under which the Notes will be issued.
Unless previously redeemed, a Note will mature on the date ("Stated
Maturity") from nine months to fifty years from its date of issue that is
specified on the face thereof and in the applicable Pricing Supplement or, if
such Note is a Floating Rate Note and such specified date is not a Market Day
(as defined below) with respect to such Note, the next succeeding Market Day
(or, in the case of a LIBOR Note, if such next succeeding Market Day falls in
the next calendar month, the next preceding Market Day).
Notes will be sold in individual issues of Notes having such interest rate or
interest rate formula, if any, Stated Maturity and date of original issuance as
shall be selected by the initial purchasers and agreed to by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
except any Zero Coupon Note or Currency Indexed Note, will bear interest at a
fixed rate or at a rate determined by reference to the Commercial Paper Rate,
the Prime Rate, LIBOR, the Treasury Rate, the CD Rate or the Federal Funds
Rate, as adjusted by the Spread or Spread Multiplier, if any, applicable to
such Note. See "Interest Rate". Zero Coupon Notes will be issued at a discount
from the principal amount payable at the Stated Maturity thereof, but holders
of Zero Coupon Notes will not receive periodic payments of interest thereon.
Each Note will be denominated in either U.S. dollars or such foreign
currencies or composite currencies ("Specified Currency") as specified on the
face thereof and in the applicable Pricing Supplement. Purchasers of the Notes
are required to pay for them by delivery of the requisite amount of the
Specified Currency to an Agent, unless other arrangements have been made.
Unless otherwise specified in the applicable Pricing Supplement, payments on
the Notes will be made in the applicable Specified Currency in the country
issuing the Specified Currency (or, in the case of ECUs, Brussels),
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provided that, at the election of the Holder thereof and in certain
circumstances at the option of the Company, payments on Notes denominated in
other than U.S. dollars may be made in U.S. dollars. See "Payment of Principal
and Interest" and "Foreign Currency Risks".
Each Note will be represented by either a global security (a "Global Note")
registered in the name of the Depository or a nominee thereof (each such Note
represented by a Global Note being herein referred to as a "Book-Entry Note")
or a certificate issued in definitive registered form, without coupons (a
"Certificated Note"), as set forth in the applicable Pricing Supplement. Except
as set forth under "Book-Entry Procedures" below, Book-Entry Notes will not be
issuable in certificated form. So long as the Depository or its nominee is the
registered owner of any Global Note, the Depository or its nominee, as the case
may be, will be considered the sole owner or holder of the Book-Entry Note or
Notes represented by such Global Note for all purposes under the Senior
Indenture and the Book-Entry Notes. See "Book-Entry Procedures".
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of any Note denominated in U.S. dollars will be
$100,000 and in any greater amount that is an integral multiple of $1,000.
Unless otherwise specified in the applicable Pricing Supplement, the authorized
denominations of any Note denominated in other than U.S. dollars will be the
amount of the Specified Currency for such Note equivalent, at the noon buying
rate in The City of New York for cable transfers for such Specified Currency
(the "Exchange Rate") on the first Business Day in The City of New York and the
country issuing such currency (or, in the case of ECUs, Brussels) next
preceding the date on which the Company accepts the offer to purchase such
Note, to U.S. $100,000 (rounded down to an integral multiple of 10,000 units of
such Specified Currency) and any greater amount that is an integral multiple of
10,000 units of such Specified Currency.
The Notes may be issued as Original Issue Discount Notes. An Original Issue
Discount Note is a Note, including any Zero Coupon Note, which is issued at a
price lower than the principal amount thereof and which provides that upon
redemption or acceleration of the maturity thereof, the amount payable to the
Holder of such Note will be determined in accordance with the terms of the
Note, but will be an amount less than the amount payable at the Stated Maturity
of such Note. In addition, United States federal income tax rules with respect
to original issue discount may apply to certain other Notes, whether or not
such Notes are Original Issue Discount Notes. See "United States Taxation --
Original Issue Discount".
The Notes may be issued as Currency Indexed Notes as to which the principal
amount payable at maturity (or premium, if any) and/or the interest thereon may
be determined by reference to the price of one or more specified currencies,
composite currencies, currency exchange indices or other indices or by other
similar methods or formulas. See "Currency Indexed Notes".
The Notes will be subject to defeasance and discharge and to defeasance of
certain obligations and certain events of default as described under "Senior
Debt Securities -- Defeasance" in the Prospectus.
Unless otherwise provided in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund and will not be redeemable prior to
their Stated Maturity. If a Note is redeemable, the applicable Pricing
Supplement will also specify one or more redemption prices (expressed as a
percentage of the principal amount of such Note) ("Redemption Prices") and the
redemption period or periods ("Redemption Periods") during which such
Redemption Prices shall apply. Such Note will be redeemable, on or after a date
to be specified in the applicable Pricing Supplement, in whole or in part in
increments of U.S. $1,000 (provided that any remaining principal amount of such
Note shall be at least U.S. $100,000) at the option of the Company at a
Redemption Price, together with the interest thereon payable to the date fixed
for redemption (the "Redemption Date"), on notice given not more than 60 nor
less than 30 days prior to the Redemption Date. If less than all the Notes of
identical terms
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at any time outstanding are to be redeemed, the Notes to be so redeemed shall
be selected by the Trustee by lot or such other method as the Trustee shall
deem fair and appropriate.
Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of Marine Midland Bank in the Borough of
Manhattan, The City of New York.
INTEREST RATE
Each Note, other than a Zero Coupon Note, will bear interest from its date of
issue or from the most recent Interest Payment Date (or, if such Note is a
Floating Rate Note and the Interest Reset Period is weekly, from the day
following the most recent Regular Record Date) to which interest on such Note
has been paid or duly provided for at the fixed rate per annum, or at the rate
per annum determined pursuant to the interest rate formula, stated therein and
in the applicable Pricing Supplement until the principal thereof is paid or
made available for payment. Interest will be payable on each Interest Payment
Date and at maturity as specified below under "Payment of Principal and
Interest".
Each Note, other than a Zero Coupon Note, will bear interest at either (a) a
fixed rate (a "Fixed Rate Note") or (b) a variable rate determined by reference
to an interest rate formula (a "Floating Rate Note"), which may be adjusted by
adding or subtracting the Spread or multiplying by the Spread Multiplier (each
term as defined below). A Floating Rate Note may also have either or both of
the following: (a) a maximum numerical limitation, or ceiling, on the rate of
interest which may accrue during any interest period (a "Maximum Rate"); and
(b) a minimum numerical limitation, or floor, on the rate of interest which may
accrue during any interest period ( a "Minimum Rate"). The "Spread" is the
number of basis points specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Note and the "Spread Multiplier" is
the percentage specified in the applicable Pricing Supplement as being
applicable to the interest rate for such Note. "Market Day" means (a) with
respect to any Note (other than any LIBOR Note), any Business Day in the City
of New York, and (b) with respect to any LIBOR Note, any such Business Day on
which dealings in deposits in U.S. dollars are transacted in the London
interbank market. "Index Maturity" means, with respect to a Floating Rate Note,
the period to maturity of the instrument or obligation on which the interest
rate formula is based, as specified in the applicable Pricing Supplement.
Unless otherwise provided in the applicable Pricing Supplement, Marine Midland
Bank will be the calculation agent (the "Calculation Agent") with respect to
the Floating Rate Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest Rate Basis for each Floating Rate Note will be: (a) the
Commercial Paper Rate, in which case such Note will be a Commercial Paper Rate
Note; (b) the Prime Rate, in which case such Note will be a Prime Rate Note;
(c) LIBOR, in which case such Note will be a LIBOR Note; (d) the Treasury Rate,
in which case such Note will be a Treasury Rate Note; (e) the CD Rate, in which
case such Note will be a CD Rate Note; (f) the Federal Funds Rate, in which
case such Note will be a Federal Funds Rate Note; or (g) such other interest
rate formula as is set forth in such Pricing Supplement. The applicable Pricing
Supplement for a Floating Rate Note will specify the Interest Rate Basis and,
if applicable, the Calculation Agent, the Index Maturity, the Spread or Spread
Multiplier, the Maximum Rate, the Minimum Rate, the Initial Interest Rate, the
Interest Payment Dates, the Regular Record Dates, the Calculation Date, the
Interest Determination Date, the Interest Reset Dates and the Interest Reset
Period with respect to such Note.
The rate of interest on each Floating Rate Note will be reset weekly,
monthly, quarterly, semi-annually or annually (each an "Interest Reset
Period"), as specified in the applicable Pricing Supplement. The interest reset
date (the "Interest Reset Date") will be, in the case of Floating Rate
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Notes (other than Treasury Rate Notes) which reset weekly, the Wednesday of
each week; in the case of Treasury Rate Notes which reset weekly, the Tuesday
of each week; in the case of Floating Rate Notes which reset monthly, the third
Wednesday of each month; in the case of Floating Rate Notes which reset
quarterly, the third Wednesday of March, June, September and December; in the
case of Floating Rate Notes which reset semi-annually, the third Wednesday of
two months of each year as specified in the applicable Pricing Supplement; and
in the case of Floating Rate Notes which reset annually, the third Wednesday of
one month of each year as specified in the applicable Pricing Supplement;
provided, however, that (a) the interest rate in effect from the date of issue
to but excluding the first Interest Reset Date with respect to a Floating Rate
Note will be the Initial Interest Rate (as set forth in the applicable Pricing
Supplement) and (b) the interest rate in effect for the ten days immediately
prior to maturity of a Note will be that in effect on the tenth day preceding
such maturity. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Market Day with respect to such Floating Rate
Note, the Interest Reset Date for such Floating Rate Note shall be postponed to
the next day that is a Market Day with respect to such Floating Rate Note,
except that in the case of a LIBOR Note, if such Market Day is in the next
succeeding calendar month, such Interest Reset Date shall be the immediately
preceding Market Day.
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a LIBOR Note (the "LIBOR Interest Determination Date"), for a CD Rate Note
(the "CD Rate Interest Determination Date") and for a Federal Funds Rate Note
(the "Federal Funds Interest Determination Date") will be the second Market Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on the Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction date
shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date shall instead be the first Market Day immediately following
such auction date.
All percentages used in or resulting from any calculation of the rate of
interest on Floating Rate Notes will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward (e.g., 9.876545% (or .09876545) will be rounded
upward to 9.87655% (or .0987655)), and all dollar amounts used in or resulting
from such calculation on Floating Rate Notes will be rounded to the nearest
cent (with one-half cent being rounded upward).
In addition to any maximum interest rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on the
Floating Rate Notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States Federal law of
general application. Under present New York law the maximum rate of interest is
25% per annum on a simple interest basis, with certain exceptions. The limit
may not apply to Floating Rate Notes in which U.S. $2,500,000 or more has been
invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date with
respect to such Floating Rate Note. The Calculation Agent's determination of
any interest rate will be final and binding in the absence of manifest error.
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COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement. Unless otherwise indicated in the applicable Pricing Supplement,
the "Calculation Date" pertaining to a Commercial Paper Interest Determination
Date will be the tenth day after such Commercial Paper Interest Determination
Date or, if any such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Reset Date, the Money Market
Yield (calculated as described below) of the per annum rate (quoted on a bank
discount basis) for the relevant Commercial Paper Interest Determination Date
for commercial paper having the specified Index Maturity as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading
"Commercial Paper". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the Commercial
Paper Rate with respect to such Interest Reset Date shall be the Money Market
Yield of the per annum rate (quoted on a bank discount basis) for such
Commercial Paper Interest Determination Date for commercial paper having the
specified Index Maturity as published by the Federal Reserve Bank of New York
in its daily statistical release, "Composite 3:30 P.M. Quotations for U.S.
Government Securities", or any successor publication published by the Federal
Reserve Bank of New York ("Composite Quotations") under the heading "Commercial
Paper". If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the
Commercial Paper Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the Money Market Yield of the
arithmetic mean of the offered per annum rates (quoted on a bank discount
basis), as of 11:00 A.M., New York City time, on such Commercial Paper Interest
Determination Date, of three leading dealers of commercial paper in The City of
New York selected by the Calculation Agent for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bond rating is
"AA", or the equivalent, from a nationally recognized rating agency; provided,
however, that if fewer than three dealers selected as aforesaid by the
Calculation Agent are quoting as mentioned in this sentence, the Commercial
Paper Rate with respect to such Interest Reset Date will be the Commercial
Paper Rate in effect on such Commercial Paper Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
360 X D
Money Market Yield = 100 X ----------------
360 - (D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the period corresponding to the specified Index Maturity.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the Prime Rate Note and
in the applicable Pricing Supplement. Unless otherwise indicated in the
applicable Pricing Supplement, the "Calculation Date" pertaining to a Prime
Rate Interest Determination Date will be the tenth day after such Prime Rate
Interest Determination Date or, if any such day is not a Market Day, the next
succeeding Market Day.
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Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Reset Date, the rate set forth for the
relevant Prime Rate Interest Determination Date in H.15(519) under the heading
"Bank Prime Loan". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the Prime Rate
with respect to such Interest Reset Date will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the display
designated as page "NYMF" on the Reuters Monitor Money Rates Service (or such
other page as may replace the NYMF page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks)
("Reuters Screen NYMF Page") as such bank's prime rate or base lending rate as
in effect for such Prime Rate Interest Determination Date as quoted on the
Reuters Screen NYMF Page on such Prime Rate Interest Determination Date. If
fewer than four such rates appear on the Reuters Screen NYMF Page on such Prime
Rate Interest Determination Date, the Prime Rate with respect to such Interest
Reset Date will be the arithmetic mean of the prime rates or base lending rates
(quoted on the basis of the actual number of days in the year divided by a 360-
day year) as of the close of business on such Prime Rate Interest Determination
Date by three major banks in The City of New York selected by the Calculation
Agent; provided, however, that if fewer than three banks selected as aforesaid
by the Calculation Agent are quoting as mentioned in this sentence, the Prime
Rate with respect to such Interest Reset Date will be the Prime Rate in effect
on such Prime Rate Interest Determination Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any), and will be
payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
The applicable Pricing Supplement will specify whether LIBOR will be
determined on the basis of the rates appearing on the Reuters Screen LIBO Page
("LIBOR Reuters") or the Telerate Screen Page 3750 ("LIBOR Telerate") (each as
defined below). If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable Pricing Supplement, LIBOR will be determined as if LIBOR Telerate
had been specified. LIBOR with respect to any Interest Reset Date will be
determined by the Calculation Agent in accordance with the following
provisions:
(i) On the relevant LIBOR Interest Determination Date, LIBOR will be
determined on the basis of the offered rates for deposits of not less than
U.S. $1,000,000 having the specified Index Maturity commencing on the
second Market Day immediately following such LIBOR Interest Determination
Date, which appear as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date on (a) the Reuters Screen LIBO Page or (b) on the
Telerate Screen Page 3750 (as applicable). If the applicable Pricing
Supplement specifies LIBOR Reuters and if at least two offered rates appear
on the Reuters Screen LIBO Page, LIBOR with respect to such Interest Reset
Date will be the arithmetic mean (rounded to the next higher one hundred-
thousandth of a percentage point) of the offered rates as determined by the
Calculation Agent. If the applicable Pricing Supplement specifies LIBOR
Reuters and if fewer than two offered rates appear on the Reuters Screen
LIBO Page, LIBOR with respect to such Interest Reset Date will be
determined as described in (ii) below. "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that service
for the purpose of displaying London interbank offered rates of major
banks). "Telerate Screen Page 3750" means the display designated as page
"British Bankers Assoc. Interest Settlement Rates" on the Telerate system,
page 3750.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates for the applicable Index Maturity appear on the
Reuters Screen LIBO Page or no rate for the applicable Index Maturity
appears on the Telerate Page, as applicable and as described in (i) above,
LIBOR will be determined on the basis of the rates at approximately 11:00
A.M., London time, on such LIBOR Interest Determination Date at which
deposits in U.S. dollars having the
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specified Index Maturity are offered to prime banks in the London interbank
market by four major banks in the London interbank market selected by the
Calculation Agent commencing on the second Market Day immediately following
such LIBOR Interest Determination Date and in a principal amount equal to
an amount of not less than U.S. $1,000,000 that in the Calculation Agent's
judgment is representative for a single transaction in such market at such
time (a "Representative Amount"). The Calculation Agent will request the
principal London office of each of such banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR with respect to
such Interest Reset Date will be the arithmetic mean of such quotations. If
fewer than two quotations are provided, LIBOR with respect to such Interest
Reset Date will be the arithmetic mean of the rates quoted at approximately
11:00 A.M., New York City time, on such LIBOR Interest Determination Date
by three major banks in The City of New York, selected by the Calculation
Agent, for loans in U.S. dollars to leading European banks having the
specified Index Maturity commencing on the Interest Reset Date and in a
Representative Amount; provided, however, that if fewer than three banks
selected as aforesaid by the Calculation Agent are quoting as mentioned in
this sentence, LIBOR with respect to such Interest Reset Date will be the
LIBOR in effect on such LIBOR Interest Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread or Spread Multiplier, if any) and
will be payable on the dates specified on the face of the Treasury Rate Note
and in the applicable Pricing Supplement. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date" with respect to a
Treasury Interest Determination Date will be the tenth day after such Treasury
Interest Determination Date or, if any such day is not a Market Day, the next
succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Reset Date, the rate for the auction
on the relevant Treasury Interest Determination Date of direct obligations of
the United States ("Treasury bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (Investment)" or, if not so published by 9:00 A.M., New
York City time, on the relevant Calculation Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. In the event that
the results of such auction of Treasury bills having the specified Index
Maturity are not published or reported as provided above by 3:00 P.M., New York
City time, on such Calculation Date, or if no such auction is held during such
week, then the Treasury Rate shall be the rate set forth in H.15(519) for the
relevant Treasury Rate Interest Determination Date for the specified Index
Maturity under the heading "U.S. Government Securities/Treasury Bills/Secondary
Market". In the event such rate is not so published by 3:00 P.M., New York City
time, on the relevant Calculation Date, the Treasury Rate with respect to such
Interest Reset Date shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent, on the basis of a year of
365 or 366 days, as applicable, and applied on a daily basis) of the arithmetic
mean of the secondary market bid rates as of approximately 3:30 P.M., New York
City time, on such Treasury Interest Determination Date, of three primary
United States government securities dealers in The City of New York selected by
the Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as aforesaid by the Calculation Agent are quoting as
mentioned in this sentence, the Treasury Rate with respect to such Interest
Reset Date will be the Treasury Rate in effect on such Treasury Interest
Determination Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of
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the CD Rate Note and in the applicable Pricing Supplement. Unless otherwise
indicated in the applicable Pricing Supplement, the "Calculation Date"
pertaining to a CD Interest Determination Date will be the tenth day after such
CD Interest Determination Date or, if such day is not a Market Day, the next
succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Reset Date, the rate for the relevant CD
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)". In the event that such rate is not published prior to 9:00
A.M., New York City time, on the relevant Calculation Date, then the CD Rate
with respect to such Interest Reset Date shall be the rate on such CD Rate
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in Composite Quotations under the heading
"Certificates of Deposit". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the CD Rate with respect to such Interest Reset Date shall be
calculated by the Calculation Agent and shall be the arithmetic mean of the
secondary market offered rates, as of 10:00 A.M., New York City time, on such
CD Rate Interest Determination Date, of three leading nonbank dealers of
negotiable U.S. dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks with a remaining maturity closest to the specified
Index Maturity in a denomination of U.S. $5,000,000; provided, however, that if
fewer than three dealers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the CD Rate with respect to such
Interest Reset Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates (calculated
with reference to the Federal Funds Rate and the Spread or Spread Multiplier,
if any), and will be payable on the dates, specified on the face of the Federal
Funds Rate Note and in the applicable Pricing Supplement. Unless otherwise
indicated in the applicable Pricing Supplement, the "Calculation Date"
pertaining to a Federal Funds Interest Determination Date will be the tenth day
after such Federal Funds Interest Determination Date or, if such day is not a
Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Reset Date, the rate on the
relevant Federal Funds Interest Determination Date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)". In the
event that such rate is not published prior to 9:00 A.M., New York City time,
on the relevant Calculation Date, then the Federal Funds Rate with respect to
such Interest Reset Date will be the rate on such Federal Funds Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate". If by 3:00 P.M., New York City time, on such
Calculation Date such rate is not published in either H.15(519) or Composite
Quotations, the Federal Funds Rate with respect to such Interest Reset Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean
of the rates, as of 9:00 A.M., New York City time, on such Federal Funds
Interest Determination Date, for the last transaction in overnight Federal
Funds arranged by the three leading brokers of Federal Funds transactions in
The City of New York selected by the Calculation Agent; provided, however, that
if fewer than three brokers selected as aforesaid by the Calculation Agent are
quoting as mentioned in this sentence, the Federal Funds Rate with respect to
such Interest Reset Date will be the Federal Funds Rate in effect on such
Federal Funds Interest Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of (and premium, if any) and interest on all Notes will be made in
the applicable Specified Currency; provided, however, that payments of
principal (and premium, if any) and interest on Notes denominated in other
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than U.S. dollars will nevertheless be made in U.S. dollars (i) at the option
of the Holders thereof under the procedures described in the two following
paragraphs and (ii) at the option of the Company in the case of imposition of
exchange controls or other circumstances beyond the control of the Company as
described in the last paragraph under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) with respect to any Note denominated in other than U.S.
dollars will be made in U.S. dollars if the Holder of such Note on the relevant
Regular Record Date or at maturity, as the case may be, has transmitted a
written request for such payment in U.S. dollars to the Trustee at its
Corporate Trust Office in The City of New York on or prior to such Regular
Record Date or the date 15 days prior to maturity, as the case may be. Such
request may be in writing (mailed or hand delivered) or by cable, telex or
other form of facsimile transmission. Any such request made with respect to any
Note by a Holder will remain in effect with respect to any further payments
with respect to such Note payable to such Holder, unless such request is
revoked (i) with respect to payments of interest, on or prior to the fifth
Business Day after the relevant Regular Record Date and (ii) with respect to
payments of principal (and premium, if any), 10 Business Days prior to
maturity. As used in the preceding sentence "Business Day" means, with respect
to any Book-Entry Note, a day on which the Depository is open for business.
Holders of Notes denominated in other than U.S. dollars whose Notes are
registered in the name of a broker or nominee should contact such broker or
nominee to determine whether and how an election to receive payments in U.S.
dollars may be made.
The U.S. dollar amount to be received by a Holder of a Note denominated in
other than U.S. dollars who elects to receive payment in U.S. dollars will be
determined by the Exchange Rate Agent based on the quotation for the relevant
Specified Currency appearing at approximately 11:00 A.M., New York City time,
on the second Business Day next preceding the applicable payment date in
Reuters Real Time Date Feed (or if such service is not available, such other
service furnished from time to time by Reuters or, if Reuters does not furnish
such service, Telerate, as the Exchange Rate Agent (as defined below) deems
appropriate), bid by one of at least three recognized foreign exchange dealers
agreed to by the Company and the Exchange Rate Agent (one of which may be the
Exchange Rate Agent) which will yield the largest number of U.S. dollars upon
conversion from such Specified Currency. If three such bid quotations are not
available on the second Business Day preceding the date of payment of principal
(and premium, if any) or interest with respect to any Note, such payment will
be made in the Specified Currency. All currency exchange costs associated with
any payment in U.S. dollars on any such Note will be borne by the holder
thereof by deductions from such payment. Unless otherwise provided in the
applicable Pricing Supplement, Marine Midland Bank will be the Exchange Rate
Agent (the "Exchange Rate Agent") with respect to the Notes.
Interest will be payable to the person in whose name a Note is registered
(which in the case of Global Notes representing Book-Entry Notes will be the
Depository or a nominee of the Depository) at the close of business on the
Regular Record Date next preceding each Interest Payment Date; provided,
however, that interest payable at maturity will be payable to the person to
whom principal shall be payable (which in the case of Global Notes representing
Book-Entry Notes will be the Depository or a nominee of the Depository). The
first payment of interest on any Note originally issued between a Regular
Record Date and an Interest Payment Date will be made on the Interest Payment
Date following the next succeeding Regular Record Date to the registered owner
on such next succeeding Regular Record Date. Unless otherwise indicated in the
applicable Pricing Supplement, the "Regular Record Date" with respect to any
Floating Rate Note shall be the date 15 calendar days prior to each Interest
Payment Date, whether or not such date shall be a Business Day, and the
"Regular Record Date" with respect to any Fixed Rate Note shall be the April 15
and October 15 next preceding the May 1 and November 1 Interest Payment Dates.
"Interest Payment Date" means the date specified in a Note as the fixed date on
which any instalment of interest thereon is due and payable.
Unless otherwise indicated in the applicable Pricing Supplement and except as
provided below, interest will be payable, in the case of Floating Rate Notes
which reset weekly, on the third Wednesday
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of March, June, September and December of each year; in the case of Floating
Rate Notes which reset monthly, on the third Wednesday of each month or on the
third Wednesday of March, June, September and December of each year (as
indicated in the applicable Pricing Supplement); in the case of Floating Rate
Notes which reset quarterly, on the third Wednesday of March, June, September
and December of each year; in the case of Floating Rate Notes which reset semi-
annually, on the third Wednesday of the two months of each year specified in
the applicable Pricing Supplement; and in the case of Floating Rate Notes which
reset annually, on the third Wednesday of the month specified in the applicable
Pricing Supplement (each an "Interest Payment Date"), and in each case, at
maturity. If an Interest Payment Date with respect to any Floating Rate Note
would otherwise fall on a day that is not a Market Day with respect to such
Note, such Interest Payment Date will be the next succeeding Market Day (or, in
the case of a LIBOR Note, if such day falls in the next calendar month, the
next preceding Market Day).
Payments of interest on any Fixed Rate Note or Floating Rate Note will
include interest accrued to but excluding any Interest Payment Date or
maturity; provided, however, that if the Interest Reset Dates with respect to
any Floating Rate Note are weekly, interest payable on such Note on any
Interest Payment Date, other than interest payable on the date on which
principal on any such Note is payable, will include interest accrued to but
excluding the day following the next preceding Regular Record Date.
With respect to a Floating Rate Note, accrued interest from the date of issue
or from the last date to which interest has been paid is calculated by
multiplying the face amount of such Floating Rate Note by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to but excluding the date for which accrued interest is
being calculated. The interest factor (expressed as a decimal) for each such
day is computed by dividing the interest rate (expressed as a decimal)
applicable to such date by 360, in the case of Commercial Paper Rate Notes,
Prime Rate Notes, LIBOR Notes, CD Rate Notes or Federal Funds Rate Notes, or by
the actual number of days in the year, in the case of Treasury Rate Notes.
Interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
Any payment on any Note due on any day which is not a Business Day need not
be made on such day, but may be made on the next succeeding Business Day with
the same force and effect as if made on the due date, and no interest shall
accrue for the period from and after such date. As used herein unless otherwise
specified, "Business Day" means any day, other than a Saturday or Sunday, that
is not a day on which banking institutions are authorized or required by law or
regulation to close in the City of New York and (i) with respect to Notes
denominated in a Specified Currency other than U.S. dollars or ECUs, in the
principal financial center in the country issuing the Specified Currency, (ii)
with respect to Notes denominated in ECUs, Brussels, and (iii) with respect to
LIBOR Notes, London.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Note at maturity to be made in U.S. dollars will be made in
immediately available funds upon surrender of such Note at the Corporate Trust
Office of Marine Midland Bank in the Borough of Manhattan, The City of New York
(or at such other place as the Company may determine), provided that the Note
is presented to the Trustee in time for the Trustee to make such payments in
such funds in accordance with its normal procedures. Payments of interest with
respect to Notes to be made in U.S. dollars other than at maturity will be
made, at the option of the Company, by check mailed to the address of the
Person entitled thereto as it appears in the Security Register or by wire
transfer to such account as may have been appropriately designated in writing
no later than the relevant Regular Record Date to the Trustee by such Person.
The total amount of any principal, premium, if any, and interest due on any
Global Note representing one or more Book-Entry Notes on any Interest Payment
Date or at maturity will be made available to the Trustee on such date. As soon
as possible thereafter, the Trustee will make such
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payments to The Depository Trust Company, New York, New York (the
"Depository"). The Depository will allocate such payments to each Book-Entry
Note represented by such Global Note and make payments to the owners or holders
thereof in accordance with its existing operating procedures. Neither the
Company nor the Trustee shall have any responsibility or liability for such
payments by the Depository. So long as the Depository or its nominee is the
registered owner of any Global Note, the Depository or its nominee, as the case
may be, will be considered the sole owner or holder of the Book-Entry Note or
Notes represented by such Global Note for all purposes under the Indenture and
the Book-Entry Notes. The Company understands, however, that under existing
industry practice, the Depository will authorize the persons on whose behalf it
holds a Global Note to exercise certain rights of holders of Securities. See
"Book-Entry Procedures".
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and principal (and premium, if any) with respect to any Note to be
paid in a Specified Currency other than U.S. dollars will be made by wire
transfer to such account designated by the Holder with a bank located in the
country issuing the Specified Currency (or, with respect to Notes denominated
in ECUs, Brussels) or other jurisdiction, in each case, acceptable to the
Company and the Trustee, as shall have been designated in writing by the Holder
of such Note with respect to payments of interest, on or prior to the fifth
Business Day after the relevant Regular Record Date and with respect to
payments of principal (and premium, if any), 10 Business Days prior to
maturity, provided that, in the case of payment of principal of (and premium,
if any) and any interest due at maturity, the Note is presented to the Trustee
in time for the Trustee to make such payments in such funds in accordance with
its normal procedures. As used in the preceding sentence "Business Day" means,
with respect to any Book-Entry Note, a day on which the Depository is open for
business. Such designation shall be made by filing the appropriate information
with the Trustee at its Corporate Trust Office in The City of New York, and,
unless revoked in writing, any such designation made with respect to any Note
by a Holder will remain in effect with respect to any further payments with
respect to such Note payable to such Holder. If a payment with respect to any
such Note cannot be made by wire transfer because the required designation has
not been received by the Trustee on or before the requisite date or for any
other reason, a notice will be mailed to the Holder at its registered address
requesting a designation pursuant to which such wire transfer can be made and,
upon the Trustee's receipt of such a designation, such payment will be made
within five Business Days of such receipt. If appropriate wire transfer
instructions are not so received, interest payments (other than interest
payable at maturity) may be made by check payable in such Specified Currency
mailed to the address of the person entitled thereto as such address shall
appear in the Security Register. The Company will pay any administrative costs
imposed by banks in connection with making payments by wire transfer, but any
tax, assessment or governmental charge imposed upon payments will be borne by
the Holders of the Notes in respect of which payments are made.
If the principal of (and premium, if any) or interest on any Note is payable
in other than U.S. dollars and such Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the control
of the Company, the Company will be entitled to satisfy its obligations to
Holders of the Notes by making such payment in U.S. dollars on the basis of the
most recently available Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture.
BOOK-ENTRY PROCEDURES
Upon issuance, all Book-Entry Notes bearing interest (if any) at the same
rate or pursuant to the same formula, having the same date of issuance,
redemption provisions, if any, Specified Currency, Stated Maturity and other
terms will be represented by a single Global Note. Each such Global Note will
be deposited with, or on behalf of, the Depository and will be registered in
the name of the Depository or a nominee thereof.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing
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agency" registered under the Securities and Exchange Act of 1934 (the "1934
Act"). The Depository was created to hold securities of its participants
(defined below) and to facilitate the clearance and settlement 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 Depository's participants include
securities brokers and dealers (including the Agents), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own the Depository. Access to the Depository 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.
Upon the issuance of a Global Note, the Depository for such Global Note or
its nominee will credit the accounts of persons held with it with the
respective principal or face amounts of the Book-Entry Notes represented by
such Global Note. Such accounts shall be designated by the Agents with respect
to Book-Entry Notes or by the Company if such Notes are offered and sold
directly by the Company. Ownership of beneficial interests in the Book-Entry
Notes will be limited to Persons that have accounts with the Depository
("participants") or Persons that may hold interests through participants. The
Depository has advised the Company that upon the issuance of the Global Notes
representing the Book-Entry Notes, the Depository will credit, on its book-
entry registration and transfer system, the participants' accounts with the
respective principal amounts of the Book-Entry Notes beneficially owned by such
participants. Ownership of beneficial interests in such Global Notes will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the Depository (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 jurisdictions may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, transfer or pledge beneficial interests in Global Notes.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, the Depository or its nominee, as the case may be, will be
considered the sole owner or holder of the Book-Entry Notes represented by such
Global Note for the purposes of receiving payments on the Notes, receiving
notices and for all other purposes under the Indenture. Except as provided
below, owners of beneficial interests in a Global Note will not be entitled to
have the Book-Entry Notes represented by such Global Notes registered in their
names, will not receive or be entitled to receive physical delivery of the
Book-Entry Notes in definitive form and will not be considered the owners or
Holders thereof under the Indenture. Accordingly, each Person owning a
beneficial interest in a Global Note must rely on the procedures of the
Depository and, if such Person is not a participant, on the procedures of the
participant through which such Person owns its interest, to exercise any rights
of a Holder under the Indenture. Under the Indenture the Depository may grant
proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a Holder is entitled to give or take under the Indenture. The Company
understands that under existing industry practices, in the event that the
Company requests any action of Holders or that an owner of a beneficial
interest in such a Global Note desires to give or take any action which a
Holder is entitled to give or take under the Indenture, the Depository would
authorize the participants holding the relevant beneficial interests to give or
take such action, and such participants would authorize beneficial owners
owning through such participants to give or take such action or would otherwise
act upon the instructions of beneficial owners owning through them.
Payment of principal of, and interest on, Book-Entry Notes represented by any
such Global Note will be made to the Depository or its nominee, as the case may
be, as the sole registered owner and the sole Holder of the Book-Entry Notes
represented thereby for all purposes under the Indenture. None of the Company,
the Trustee or any other agent of the Company or agent of the Trustee will have
any responsibility or liability for any aspect of the Depository's records
relating to or payments made on account of beneficial ownership interests in a
Global Note representing any Book-Entry Notes or for
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maintaining, supervising or reviewing any of the Depository's records relating
to such beneficial ownership interests. The Company has been advised by the
Depository that upon receipt of any payment of principal of or any premium or
interest on any Global Note, the Depository will immediately credit, on its
book-entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of such Global Note shown on the records of the
Depository. Payments by participants to owners of beneficial interests in a
Global Note will be governed by standing customer 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 sole
responsibility of such participants.
A Global Note may not be transferred except as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository
or another nominee of the Depository. If (x) the Depository notifies the
Company that it is unwilling or unable to continue as Depository for a Global
Note or if at any time the Depository ceases to be a clearing agency registered
under the 1934 Act, (y) the Company executes and delivers to the Trustee a
Company Order to the effect that a Global Note shall be exchangeable or (z)
there shall have occurred and be continuing an Event of Default with respect to
the Book-Entry Notes represented by such Global Note, such Global Notes will be
exchangeable for Certificated Securities in definitive form of like tenor in an
equal aggregate principal amount. Certificated Securities issued pursuant to
the preceding sentence shall be issued in denominations of $1,000 and integral
multiples in excess thereof and shall be registered in such name or names as
the Depository shall instruct the Trustee. It is expected that such
instructions may be based upon directions received by the Depository from
participants with respect to ownership of beneficial interests in such Global
Notes. Subject to the foregoing, a Global Note is not exchangeable except for a
Global Note of like denomination to be registered in the name of the Depository
or its nominee.
CURRENCY INDEXED NOTES
Notes may be issued as Currency Indexed Notes, as to which the principal
amount payable at maturity (or premium, if any) and/or the interest thereon, or
both, may be determined by reference to the price of one or more specified
currencies, composite currencies or currency exchange indices or other indices
or by other similar methods or formulas. A Pricing Supplement relating to such
Currency Indexed Notes will describe, as applicable, the method by which the
amount of interest payable and/or the amount of principal payable at maturity
in respect of such Currency Indexed Note will be determined, certain special
tax consequences to holders of such Notes, certain risks associated with an
investment in such Notes and other information relating to such Notes.
Unless otherwise specified in the applicable Pricing Supplement and the
Notes, (a) for the purpose of determining whether Holders of the requisite
principal amount of outstanding Notes have made a demand or given a notice or
waiver or taken any other action, the outstanding principal amount of Currency
Indexed Notes will be deemed to be the face amount thereof and (b) in the event
of an acceleration of the maturity of a Currency Indexed Note, the principal
amount payable to the Holder of such Note upon acceleration will be the
principal amount determined by reference to the formula by which the principal
amount of such Note would be determined on the Stated Maturity thereof, as if
the date of acceleration were the maturity of the Note.
An investment in Currency Indexed Notes entails significant risks that are
not associated with similar investments in a conventional fixed rate debt
security. If the interest rate of a Note is so indexed it may result in an
interest rate that is less than that payable on a conventional fixed rate debt
security issued at the same time, including the possibility that no interest
will be paid, and, if the principal amount of a Note is so indexed, the
principal amount payable at maturity may be less than the original purchase
price of such Note if allowed pursuant to the terms of such Note, including the
possibility that no principal will be paid. The secondary market for such Notes
will be affected by a number of factors,
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independent of the creditworthiness of the issuer and the value of the
applicable currency, composite currency or currency index, including the
volatility of the applicable currency, composite currency or currency index,
the time remaining to the Stated Maturity of such Notes, the amount outstanding
of such Notes and market interest rates. The value of the applicable currency,
composite currency or currency index depends on a number of interrelated
factors, including economic, financial and political events, over which the
Company has no control. Additionally, if the formula used to determine the
principal amount or interest payable with respect to such Notes contains a
multiple or leverage factor, the effect of any change in the applicable
currency, composite currency or currency index will be increased. The
historical experience of the relevant currencies, composite currency or
currency indices should not be taken as an indication of future performance of
such currencies, composite currency or currency indices during the term of any
Indexed Note. The credit ratings assigned to the Notes are a reflection of the
Company's credit status and, in no way are a reflection of the potential impact
of the factors discussed above or any other factors, on the market value of the
Notes. Accordingly, prospective investors should consult their own financial
and legal advisors as to the risks entailed by an investment in such Notes and
the suitability of such Notes in light of their particular circumstances.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income tax
consequences of ownership of Notes. It deals only with Notes held as capital
assets by initial purchasers, and not with special classes of holders, such as
dealers in securities or currencies, banks, tax-exempt organizations, life
insurance companies, persons that hold Notes that are a hedge or that are
hedged against currency risks or that are part of a straddle or conversion
transaction or persons whose functional currency is not the U.S. dollar.
Moreover, the summary deals only with Notes that are due to mature 30 years or
less from the date on which they are issued. The United States federal income
tax consequences of ownership of Notes that are due to mature more than 30
years from their date of issue will be discussed in an applicable Pricing
Supplement. The summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions, all as currently
in effect and all subject to change at any time, perhaps with retroactive
effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Notes.
UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest on a Note, whether payable in U.S. dollars or a Specified Currency
other than U.S. dollars (a "foreign currency"), other than interest on a
"Discount Note" that is not "qualified stated interest" (each as defined below
under "Original Issue Discount -- General"), will be taxable to a United States
Holder as ordinary income at the time it is received or accrued, depending on
the holder's method of accounting for tax purposes. A United States Holder is a
beneficial owner who or that is (i) a citizen or resident of the United States,
(ii) a domestic corporation or (iii) otherwise subject to United States federal
income taxation on a net income basis in respect of the Note.
If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United States
Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
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An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the part of the
period within the taxable year). Upon receipt of the interest payment
(including a payment attributable to accrued but unpaid interest upon the sale
or retirement of a Note) denominated in, or determined by reference to, a
foreign currency, the United States Holder will recognize ordinary income or
loss measured by the difference between the average exchange rate used to
accrue interest income and the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars.
Under the second method, the United States Holder may elect to determine the
amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such accrued interest into U.S. dollars at the exchange rate
in effect on the day of actual receipt. Any such election will apply to all
debt instruments held by the United States Holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the United
States Holder, and will be irrevocable without the consent of the Internal
Revenue Service (the "Service").
ORIGINAL ISSUE DISCOUNT
General. A Note, other than a Note with a term of one year or less (a "short-
term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part
is sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during
some periods) applied to the outstanding principal amount of the Note. Special
rules for "Variable Rate Notes" (as defined below under "Original Issue
Discount -- Variable Rate Notes") are described below under "Original Issue
Discount -- Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
Stated Maturity (the "de minimis amount"), then such excess, if any,
constitutes "de minimis original issue discount" and the Note is not a Discount
Note. Unless the election described below under "Election to Treat All Interest
as Original Issue Discount" is made, a United States Holder of a Note with de
minimis original issue discount must include such de minimis original issue
discount in income as stated principal payments on the Note are made. The
includible amount with respect to each such payment will equal the product of
the total amount of the Note's de minimis original issue discount and a
fraction, the numerator of which is the amount of the principal payment made
and the denominator of which is the stated principal amount of the Note.
United States Holders of Discount Notes having a Stated Maturity of more than
one year from their date of issue must include original issue discount ("OID")
in income calculated on a constant-yield method before the receipt of cash
attributable to such income, and generally will have to include in
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income increasingly greater amounts of OID over the life of the Note. The
amount of OID includible in income by a United States Holder of a Discount Note
is the sum of the daily portions of OID with respect to the Discount Note for
each day during the taxable year or portion of the taxable year on which the
United States Holder holds such Discount Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. Accrual periods with
respect to a Note may be of any length selected by the United States Holder and
may vary in length over the term of the Note as long as (i) no accrual period
is longer than one year and (ii) each scheduled payment of interest or
principal on the Note occurs on either the final or first day of an accrual
period. The amount of OID allocable to an accrual period equals the excess of
(a) the product of the Discount Note's adjusted issue price at the beginning of
the accrual period and such Note's yield to maturity (determined on the basis
of compounding at the close of each accrual period and properly adjusted for
the length of the accrual period) over (b) the sum of the payments of qualified
stated interest on the Note allocable to the accrual period. The "adjusted
issue price" of a Discount Note at the beginning of any accrual period is the
issue price of the Note increased by (x) the amount of accrued OID for each
prior accrual period and decreased by (y) the amount of any payments previously
made on the Note that were not qualified stated interest payments. For purposes
of determining the amount of OID allocable to an accrual period, if an interval
between payments of qualified stated interest on the Note contains more than
one accrual period, the amount of qualified stated interest payable at the end
of the interval (including any qualified stated interest that is payable on the
first day of the accrual period immediately following the interval) is
allocated pro rata on the basis of relative lengths to each accrual period in
the interval, and the adjusted issue price at the beginning of each accrual
period in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the accrual period but that
is not payable until the end of the interval. The amount of OID allocable to an
initial short accrual period may be computed using any reasonable method if all
other accrual periods other than a final short accrual period are of equal
length. The amount of OID allocable to the final accrual period is the
difference between (x) the amount payable at the maturity of the Note (other
than any payment of qualified stated interest) and (y) the Note's adjusted
issue price as of the beginning of the final accrual period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount less than or equal to the sum of all amounts payable on the Note after
the purchase date other than payments of qualified stated interest but in
excess of its adjusted issue price (any such excess being "acquisition
premium") and that does not make the election described below under "Election
to Treat All Interest as Original Issue Discount" is permitted to reduce the
daily portions of OID by a fraction, the numerator of which is the excess of
the United States Holder's adjusted basis in the Note immediately after its
purchase over the adjusted issue price of the Note, and the denominator of
which is the excess of the sum of all amounts payable on the Note after the
purchase date, other than payments of qualified stated interest, over the
Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount --General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Note's "revised issue price" exceeds the amount for which the United
States Holder purchased the Note by at least 1/4 of 1 percent of such Note's
stated redemption price at maturity or revised issue price, respectively,
multiplied by the number of complete years to the Note's Stated Maturity. If
such excess is not sufficient to cause the Note to be a Market Discount Note,
then such excess constitutes "de minimis market discount". The Code provides
that, for these purposes, the "revised issue price" of a Note generally equals
its issue price, increased by the amount of any OID that has accrued on the
Note.
Any gain recognized on the maturity or disposition of a Market Discount Note
will be treated as ordinary income to the extent that such gain does not exceed
the accrued market discount on such
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Note. Alternatively, a United States Holder of a Market Discount Note may elect
to include market discount in income currently over the life of the Note. Such
an election shall apply to all debt instruments with market discount acquired
by the electing United States Holder on or after the first day of the first
taxable year to which the election applies. This election may not be revoked
without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on
a constant-yield method. Such an election shall apply only to the Note with
respect to which it is made and may not be revoked without the consent of the
Service. A United States Holder of a Market Discount Note that does not elect
to include market discount in income currently generally will be required to
defer deductions for interest on borrowings allocable to such Note in an amount
not exceeding the accrued market discount on such Note until the maturity or
disposition of such Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase price
of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within one year of the Note's
issue date and (iii) the payment will equal or exceed the amount of pre-
issuance accrued interest, then the United States Holder may elect to decrease
the issue price of the Note by the amount of pre-issuance accrued interest. In
that event, a portion of the first stated interest payment will be treated as a
return of the excluded pre-issuance accrued interest and not as an amount
payable on the Note.
Notes Subject to Contingencies Including Optional Redemption. In general, if
a Note provides for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies and the timing and
amounts of the payments that comprise each payment schedule are known as of the
issue date, the yield and maturity of the Note are determined by assuming that
the payments will be made according to the Note's stated payment schedule. If,
however, based on all the facts and circumstances as of the issue date, it is
more likely than not that the Note's stated payment schedule will not occur,
then, in general, the yield and maturity of the Note are computed based on the
payment schedule most likely to occur.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company has an unconditional
option or options to redeem a Note, or the Holder has an unconditional option
or options to cause a Note to be repurchased, prior to the Note's Stated
Maturity, then (i) in the case of an option or options of the Company, the
Company will be deemed to exercise or not exercise an option or combination of
options in the manner that minimizes the yield on the Note and (ii) in the case
of an option or options of the Holder, the Holder will be deemed to exercise or
not exercise an option or combination of options in the manner that maximizes
the yield on the Note. For purposes of those calculations, the yield on the
Note is determined by using any date on which the Note may be redeemed or
repurchased as the maturity date and the amount payable on such date in
accordance with the terms of the Note as the principal amount payable at
maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the
Note is repaid as a result of a change in circumstances and solely for purposes
of the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described
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above under the heading "Original Issue Discount -- General", with the
modifications described below. For purposes of this election, interest includes
stated interest, OID, de minimis original issue discount, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium (described below under "Notes Purchased at a Premium") or
acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked
without the consent of the Service. If this election is made with respect to a
Note with amortizable bond premium, then the electing United States Holder will
be deemed to have elected to apply amortizable bond premium against interest
with respect to all debt instruments with amortizable bond premium (other than
debt instruments the interest on which is excludible from gross income) held by
the electing United States Holder as of the beginning of the taxable year in
which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
If the election to apply the constant-yield method to all interest on a Note
is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such United States Holder.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an issue
price that does not exceed the total noncontingent principal payments by more
than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to Stated Maturity from the issue
date and (z) .015, or (2) 15 percent of the total noncontingent principal
payments, and (ii) provides for stated interest compounded or paid at least
annually at (1) one or more "qualified floating rates", (2) a single fixed rate
and one or more qualified floating rates, (3) a single "objective rate" or (4)
a single fixed rate and a single objective rate that is a "qualified inverse
floating rate".
A qualified floating rate or objective rate in effect at any time during the
term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no
earlier than 3 months prior to the first day on which that value is in effect
and no later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the value
of the rate can reasonably be expected to measure contemporaneous variations in
the cost of newly borrowed funds in the currency in which the Note is
denominated or (ii) it is equal to the product of such a rate and either (a) a
fixed multiple that is greater than zero but not more than 1.35, or (b) a fixed
multiple greater than zero but not more than 1.35, increased or decreased by a
fixed rate. A rate is not a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the Note or are not reasonably expected to significantly affect the yield on
the Note.
An "objective rate" is a rate, other than a qualified floating rate, that is
determined using a single, fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more actively traded items of personal
property other than stock or debt of the issuer or a related party,
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or (iv) a combination of objective rates. A variable rate is not an objective
rate, however, if it is reasonably expected that the average value of the rate
during the first half of the Note's term will be either significantly less than
or significantly greater than the average value of the rate during the final
half of the Note's term. An objective rate is a "qualified inverse floating
rate" if (i) the rate is equal to a fixed rate minus a qualified floating rate,
and (ii) the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed funds. Under
these rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes,
Treasury Rate Notes, CD Rate Notes, and Federal Funds Rate Notes, other than
certain Notes subject to Maximum Rate caps or Minimum Rate floors, will
generally be treated as Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate, all stated interest on the Note is
qualified stated interest and the amount of OID, if any, is determined by
using, in the case of a qualified floating rate or qualified inverse floating
rate, the value as of the issue date of the qualified floating rate or
qualified inverse floating rate, or, in the case of any other objective rate, a
fixed rate that reflects the yield reasonably expected for the Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate, or at a single fixed rate (other
than at a single fixed rate for an initial period), the amount of interest and
OID accruals on the Note are generally determined by (i) determining a fixed
rate substitute for each variable rate provided under the Variable Rate Note
(generally, the value of each variable rate as of the issue date or, in the
case of an objective rate that is not a qualified inverse floating rate, a rate
that reflects the reasonably expected yield on the Note), (ii) constructing the
equivalent fixed rate debt instrument (using the fixed rate substitute
described above), (iii) determining the amount of qualified stated interest and
OID with respect to the equivalent fixed rate debt instrument, and (iv) making
the appropriate adjustments for actual variable rates during the applicable
accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the
Variable Rate Note as of the issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate) rather than
the fixed rate.
Short-Term Notes. In general, an individual or other cash basis United States
Holder of a short-term Note is not required to accrue OID (as specifically
defined below for the purposes of this paragraph) for United States federal
income tax purposes unless it elects to do so (but may be required to include
any stated interest in income as the interest is received). Accrual basis
United States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities, common trust funds,
United States Holders who hold Notes as part of certain identified hedging
transactions, certain pass-through entities and cash basis United States
Holders who so elect, are required to accrue OID on short-term Notes on either
a straight-line basis or under the constant-yield method (based on daily
compounding), at the election of the United States Holder. In the case of a
United States Holder not required and not electing to include OID in income
currently, any gain realized on the sale or retirement of the short-term Note
will be ordinary income to the extent of the OID accrued on a straight-line
basis (unless an election is made to accrue the OID under the constant-yield
method) through the date of sale or retirement. United States Holders who are
not required and do not elect to accrue OID on short-term Notes will be
required to defer deductions for interest on borrowings allocable to short-term
Notes in an amount not exceeding the deferred income until the deferred income
is realized.
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For purposes of determining the amount of OID subject to these rules, all
interest payments on a short-term Note, including stated interest, are included
in the short-term Note's stated redemption price at maturity.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in, or determined by reference to, a foreign currency
will be determined in the foreign currency and then translated into U.S.
dollars in the same manner as stated interest accrued by an accrual basis
United States Holder, as described under "Payments of Interest". Upon receipt
of an amount attributable to OID (whether in connection with a payment of
interest or the sale or retirement of a Note), a United States Holder may
recognize ordinary income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to, a foreign currency, bond premium will be computed
in units of foreign currency, and amortizable bond premium will reduce interest
income in units of the foreign currency. At the time amortized bond premium
offsets interest income, exchange gain or loss (taxable as ordinary income or
loss) is realized measured by the difference between exchange rates at that
time and at the time of the acquisition of the Notes. Any election to amortize
bond premium shall apply to all bonds (other than bonds the interest on which
is excludible from gross income) held by the United States Holder at the
beginning of the first taxable year to which the election applies or thereafter
acquired by the United States Holder, and is irrevocable without the consent of
the Service. See also "Original Issue Discount -- Election to Treat All
Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S.
dollar cost of a Note purchased with a foreign currency will generally be the
U.S. dollar value of the purchase price on the date of purchase or, in the case
of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on the
settlement date for the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in foreign currency will be the U.S. dollar value
of such amount on the date of sale or retirement or, in the case of Notes
traded on an established securities market, as defined in the applicable
Treasury Regulations, sold by a cash basis United States Holder (or an accrual
basis United States Holder that so elects), on the settlement date for the
sale. Except to the extent described above under "Original Issue Discount --
Short-Term Notes" or "Original Issue Discount -- Market Discount" or described
in the next succeeding paragraph or attributable to accrued but unpaid
interest, gain or loss recognized on the sale or retirement of a Note will be
capital gain or loss and will be long-term capital gain or loss if the Note was
held for more than one year.
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Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or retirement
of a Note will have a tax basis equal to its U.S. dollar value at the time such
interest is received or at the time of such sale or retirement. Foreign
currency that is purchased will generally have a tax basis equal to the U.S.
dollar value of the foreign currency on the date of purchase. Any gain or loss
recognized on a sale or other disposition of a foreign currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
CURRENCY INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Currency Indexed Notes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any holder
who or that is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a Note.
Under present United States federal income and estate tax law and subject to
the discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest (including OID)
by the Company or any of its paying agents to any holder of a Note who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax if, in the case of interest or OID, (a) the
beneficial owner of the Note does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the beneficial owner of the Note is not a
controlled foreign corporation that is related to the Company through stock
ownership, and (c) either (A) the beneficial owner of the Note certifies to
the Company or its agent, under penalties of perjury, that it is not a
United States Holder and provides its name and address or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Note certifies to the Company or its
agent under penalties of perjury that such statement has been received from
the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof;
(ii) a United States Alien Holder of a Note will not be subject to United
States federal withholding tax on any gain realized on the sale or exchange
of a Note; and
(iii) a Note held by an individual who at death is not a citizen or
resident of the United States will not be includible in the individual's
gross estate for purposes of the United States federal estate tax as a
result of the individual's death if the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and the income on the Note
would not have been effectively connected with a United States trade or
business of the individual at the individual's death.
BACKUP WITHHOLDING AND INFORMATION REPORTING
UNITED STATES HOLDERS
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to,
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and to the accrual of OID on a Discount Note with respect to, non-corporate
United States Holders, and "backup withholding" at a rate of 31% will apply to
such payments and to payments of OID if the United States Holder fails to
provide an accurate taxpayer identification number or to report all interest
and dividends required to be shown on its federal income tax returns.
UNITED STATES ALIEN HOLDERS
Information reporting and backup withholding will not apply to payments of
principal, premium (if any) and interest (including OID) made by the Company or
a paying agent to a United States Alien Holder on a Note if the certification
described in clause (i) (c) under "United States Alien Holders" above is
received, provided that the payor does not have actual knowledge that the
holder is a United States person.
Payments of the proceeds from the sale by a United States Alien Holder of a
Note made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States tax
purposes or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting may apply to such payments. Payments of the
proceeds from the sale of a Note to or through the United States office of a
broker is subject to information reporting and backup withholding unless the
holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
FOREIGN CURRENCY RISKS
An investment in Notes that are denominated in other than U.S. dollars
entails significant risks that are not associated with a similar investment in
a security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies or composite currencies and the
possibility of the imposition or modification of foreign exchange controls by
either the U.S. or foreign governments. Such risks depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between the U.S. dollar and certain foreign currencies have been
highly volatile and such volatility may be expected in the future. Fluctuations
in any particular exchange rate that have occurred in the past are not
necessarily indicative, however, of fluctuations in the rate that may occur
during the term of any Note. Depreciation of the Specified Currency other than
the U.S. dollars against the U.S. dollar would result in a decrease in the
effective yield of such Note below its coupon rate, and in certain
circumstances could result in a loss to the investor on a U.S. dollar basis.
Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's maturity. Even if there are no
actual exchange controls, it is possible that the Specified Currency for any
particular Note would not be available at such Note's maturity. In that event,
the Company will repay in U.S. dollars on the basis of the most recently
available Exchange Rate. See "Description of Notes -- Payment of Principal and
Interest".
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED PROSPECTUS AND PRICING SUPPLEMENT
DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN THE NOTES DENOMINATED IN
OTHER THAN U.S. DOLLARS. PROSPECTUS INVESTORS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN THE
NOTES DENOMINATED IN OTHER THAN U.S. DOLLARS. NOTES DENOMINATED IN OTHER THAN
U.S. DOLLARS ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
S-23
<PAGE>
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. In addition, banks
generally do not offer non-U.S. dollar denominated checking or savings account
facilities in the United States. Accordingly, payments on Notes made in a
Specified Currency other than U.S. dollars will be made from an account with a
bank located in the country issuing the Specified Currency (or, with respect to
Notes denominated in ECUs, Brussels). See "Description of Notes -- Payment of
Principal and Interest".
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in other than U.S. dollars or ECUs will not be sold in, or to
residents of, the country issuing the Specified Currency in which particular
Notes are denominated. The information set forth in this Prospectus Supplement
is directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of
and interest on the Notes. Such persons should consult their own financial and
legal advisors with regard to such matters.
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on the Notes were commenced in a
court in the United States, it is likely that such court would grant judgment
relating to the Notes only in U.S. dollars. It is not clear, however, whether,
in granting such judgment, the rate of conversion into U.S. dollars would be
determined with reference to the date of default, the date judgment is rendered
or some other date. New York statutory law provides, however, that a court
shall render a judgment in the foreign currency of the underlying obligation
and that the judgment shall be converted into U.S. dollars at the rate of
exchange prevailing on the date of the entry of the judgment.
With respect to any Note denominated in other than U.S. dollars, a Currency
Supplement with respect to the applicable Specified Currency (which supplement
shall include information with respect to applicable current foreign exchange
controls, if any) shall be attached to this Prospectus Supplement. The
information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement,
dated January 5, 1995, the Notes are being offered from time to time by the
Company through Goldman, Sachs & Co., CS First Boston Corporation, J.P. Morgan
Securities Inc. and Morgan Stanley & Co. Incorporated, as Agents, each of
which, acting individually, is authorized to solicit purchases of the Notes.
The Company will have the sole right to accept offers to purchase Notes and may
reject any offer in whole or in part. Each Agent will have the right, in its
reasonable discretion, to reject any offer to purchase through it in whole or
in part. The Company will pay each Agent a commission ranging from .125% to
.875%, depending upon maturity, of the principal amount of any Note sold
through such Agent. Unless otherwise agreed, in the case of sales through
Agents, delivery of Notes will be made against payment therefor in immediately
available funds on the fifth business day after acceptance by the Company of an
offer to purchase such Notes.
The Company reserves the right to sell Notes directly on its own behalf in
those jurisdictions where it is authorized to do so. No commission will be
payable on any sales made directly by the Company. The Company may also sell
Notes to an Agent as principal for its own account at a discount to be agreed
upon at the time of sale.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act").
S-24
<PAGE>
Notes may also be sold to dealers who may resell to investors at the price to
the public set forth herein. Such dealers also may receive compensation in the
form of discounts, concessions, or commissions from the Agents. Such dealers
may be deemed to be "underwriters" within the meaning of the Act.
The Company has agreed to indemnify each Agent against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, and will
reimburse the Agents for certain expenses.
From time to time, the Agents perform investment banking services for the
Company or its subsidiaries. In the ordinary course of their respective
businesses, affiliates of J.P. Morgan Securities Inc. have engaged, and may in
the future engage, in normal commercial banking transactions with the Company
and certain of its subsidiaries.
See "Plan of Distribution" in the Prospectus.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Thomas J.
Wagner, Esq., Executive Vice President and General Counsel for the Company, and
for the Agents by Sullivan & Cromwell, New York, New York. The opinions of Mr.
Wagner and Sullivan & Cromwell will be conditioned upon, and subject to certain
assumptions regarding, future action required to be taken by the Company and
the Trustee in connection with the issuance and sale of any particular Note,
the specific terms of Notes and other matters which may affect the validity of
Notes but which cannot be ascertained on the date of such opinions. Mr. Wagner
is the beneficial owner of 9,779 shares of Common Stock and holds options to
acquire 10,480 shares which are exercisable within 60 days.
S-25
<PAGE>
(LOGO OF CIGNA APPEARS HERE)
CIGNA CORPORATION
DEBT SECURITIES, PREFERRED STOCK
AND COMMON STOCK
-----------
CIGNA Corporation ("CIGNA" or the "Company") may from time to time offer,
together or separately, its Debt Securities consisting of debentures, notes
and/or other unsecured evidences of indebtedness; shares of its Preferred
Stock, par value $1.00 per share; and shares of its Common Stock, par value
$1.00 per share. The Debt Securities, Preferred Stock and Common Stock are
collectively called the "Securities". The Securities offered pursuant to this
Prospectus may be issued in one or more series or issuances at an aggregate
initial offering price not to exceed $900,000,000 (or its equivalent based on
the applicable exchange rate at the time of sale in one or more foreign
currencies, composite currencies or in amounts determined by reference to an
index as shall be designated by the Company). The Debt Securities may be
convertible subordinated Debt Securities which, unless previously redeemed or
otherwise purchased or acquired, will be convertible at any time during the
specified conversion period into shares of the Company's Common Stock, par
value $1.00 per share, or may be senior Debt Securities which will not be
convertible. The Debt Securities may be offered as separate series in amounts,
at prices and on terms to be determined at the time of sale. Certain specific
terms of the particular Securities in respect of which this Prospectus is being
delivered are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement"), including, where applicable, in the case of Debt
Securities, the title, aggregate principal amount, denominations (which may be
in United States dollars or in any other currency, in composite currencies or
in amounts determined by reference to an index), 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 terms for conversion or exchange into other securities, any
listing on a securities exchange and the initial public offering price and any
other terms, in the case of Preferred Stock, the specific title, the aggregate
amount, any dividend (including the method of calculating payment of
dividends), liquidation, redemption, voting and other rights, any terms for any
conversion or exchange into other securities, the initial public offering price
and any other terms. The Company's Common Stock is listed on the New York,
Pacific and Philadelphia Stock Exchanges under the trading symbol "CI". Any
Common Stock sold pursuant to a Prospectus Supplement will be listed on such
exchanges, subject to official notice of issuance.
The Company may sell Securities to or through underwriters, directly to other
purchasers or through agents. The Prospectus Supplement sets forth the names of
any underwriters or agents involved in the sale of the Securities in respect of
which this Prospectus is being delivered, the proposed 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 December 22, 1993.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at: Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Northwestern Atrium Center, 500 West Madison, Suite
1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New
York, New York 10048; and copies of such material can be obtained from the
Public Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such reports, proxy statements
and other information can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005; the Pacific
Stock Exchange, Inc., 115 Sansome Street, San Francisco, California 94104; and
the Philadelphia Stock Exchange, Inc., 1900 Market Street, 2nd Floor,
Philadelphia, Pennsylvania 19103.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the
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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the 1934 Act (File No. 1-8323) are incorporated by reference
herein: (1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992; (2) the Company's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, June 30 and September 30, 1993; and (3) the
Company's Current Reports on Form 8-K dated January 21, February 16, March 4,
March 31, May 3, August 2, November 1, November 19, December 14 and December
21, 1993. All reports subsequently filed by the Company pursuant to Section
13(a) or 13(c) of the 1934 Act, all definitive proxy or information statements
subsequently filed by the Company pursuant to Section 14 of the 1934 Act and
all reports subsequently filed pursuant to Section 15(d) of the 1934 Act prior
to the termination of this offering will be deemed to be incorporated herein
by reference and to be part hereof from the respective dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, on the
request of such person, a copy of any and all of the documents incorporated
herein by reference (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference into such documents).
Written or oral requests for such copies should be directed to CIGNA
Corporation, Shareholder Services Department, Two Liberty Place, 1601 Chestnut
Street, P.O. Box 7716, Philadelphia, Pennsylvania 19192-2378 (telephone (215)
761-3517).
2
<PAGE>
THE COMPANY
With shareholders' equity of $5.6 billion and assets of $82 billion as of
September 30, 1993, CIGNA Corporation and its subsidiaries constitute one of
the largest investor-owned insurance organizations in the United States and
one of the principal United States companies in the financial services
industry, in each case measured by total assets and revenues. Unless the
context otherwise indicates, the term "the Company," when used herein, refers
to one or more of CIGNA Corporation and its consolidated subsidiaries.
Although CIGNA Corporation is not itself an insurance company, its
subsidiaries are major providers of group life and health insurance, managed
care products and services, retirement products and services, individual
financial services, property and casualty insurance and asset management. The
Company is one of the largest international insurance organizations based in
the United States, measured by international revenues, and the largest
investor-owned health maintenance organization in the United States, measured
by number of enrollees. The Company's major insurance subsidiaries,
Connecticut General Life Insurance Company ("CG Life") and Insurance Company
of North America ("ICNA"), are among the oldest insurance companies in the
United States, with ICNA tracing its origins to 1792 and CG Life to 1865.
The principal executive offices of the Company are located at One Liberty
Place, 1650 Market Street, P.O. Box 7716, Philadelphia, Pennsylvania, 19192-
1550; its telephone number is (215) 761-1000.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges is incorporated by
reference to Exhibit 12 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 and to Exhibit 12 to the Company's
quarterly report on Form 10-Q for the fiscal quarter ended September 30, 1993,
both incorporated by reference herein.
USE OF PROCEEDS
Except as may otherwise be set forth in the Prospectus Supplement, the net
proceeds from the sale of the Securities offered hereby will be added to the
Company's general funds and used for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities"),
including the nature of any variations from the following general provisions
applicable to such Offered Debt Securities, will be described in the
Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities may be offered as Convertible Subordinated Debt
Securities which, unless previously redeemed or otherwise purchased or
acquired, will be convertible at any time during the specified conversion
period into shares of the Company's Common Stock, par value $1.00 per share,
or as Senior Debt Securities which will not be convertible. The Senior Debt
Securities are to be issued under an Indenture (the "Senior Indenture"),
between the Company and Marine Midland Bank, N.A., as Trustee (the "Senior
Trustee"), a copy of the form of which Senior Indenture is filed as an exhibit
to the Registration Statement. The Convertible Subordinated Debt Securities
are to be issued under an
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<PAGE>
Indenture (the "Convertible Subordinated Indenture," each of the Senior
Indenture and the Convertible Subordinated Indenture being herein referred to
individually as an "Indenture" and collectively as the "Indentures") to be
entered into by the Company and Marine Midland Bank, N.A., as Trustee (the
"Convertible Subordinated Trustee," each of the Senior Trustee and the
Convertible Subordinated Trustee being herein referred to individually as a
"Trustee" and collectively as the "Trustees"), a copy of the form of which
Convertible Subordinated Indenture is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indentures do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the applicable Indenture,
including the definitions therein of certain terms. Wherever particular
provisions or defined terms of the Indentures are referred to, such provisions
or defined terms are incorporated herein by reference. Certain defined terms
in the Indentures are capitalized herein. Unless specifically noted, the
references below to provisions, defined terms or sections of the Indentures
refer to both the Senior Indenture and the Convertible Subordinated Indenture.
GENERAL
The Indentures do not limit the amount of debentures, notes or other
evidences of indebtedness which may be issued thereunder (such securities
issued under either Indenture being herein referred to as the "Debt
Securities"). The Indentures provide that Debt Securities may be issued from
time to time in one or more series. The Debt Securities will be unsecured
obligations of the Company. The Senior Debt Securities will rank pari passu
with one another and with all other unsecured and unsubordinated debt of the
Company and will not be convertible. The Convertible Subordinated Debt
Securities will rank pari passu with one another and with the Company's 8.20%
Convertible Subordinated Debentures due July 10, 2010, will be subordinated to
all Senior Indebtedness of the Company as described below under "Convertible
Subordinated Debt Securities--Subordination" and will be convertible into the
Common Stock of the Company as described below under "Convertible Subordinated
Debt Securities--Conversion Rights."
The Prospectus Supplement relating to the Offered Debt Securities will state
whether the Offered Debt Securities are Senior Debt Securities or Convertible
Subordinated Debt Securities and will describe the following terms, where
applicable, of the Offered Debt Securities: (1) the title of the Offered Debt
Securities; (2) any limit on the aggregate principal amount of the Offered
Debt Securities; (3) the date or dates (or manner of determining the same) on
which the principal of the Offered Debt Securities is payable; (4) the rate or
rates (or manner of determining the same) at which the Offered Debt Securities
will bear interest, if any, the date or dates from which such interest will
accrue, the Interest Payment Dates on which such interest will be payable and
the Regular Record Date for the interest payable on any Interest Payment Date;
(5) if other than as set forth in this Prospectus, the place or places where
the principal of (and premium, if any) and interest on the Offered Debt
Securities will be payable; (6) the period or periods within which, the price
or prices at which, and the terms and conditions upon which the Offered Debt
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 the Offered
Debt Securities pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof, and the period or periods within which, the price
or prices at which and the terms and conditions upon which the Offered Debt
Securities will be redeemed or purchased, in whole or in part, pursuant to
such obligation; (8) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which the Offered Debt Securities will
be issuable; (9) if other than the principal amount thereof, the portion of
the principal amount of the Offered Debt Securities which will be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(10) if other than the currency of the United States of America, the currency
or currencies, including composite currencies, in which payment of the
principal of (and premium, if any) and interest on the Offered Debt Securities
will be payable; (11) if the amount of payments of principal of (and premium,
if any) or interest on the Offered Debt Securities may be determined with
reference to an index, the manner in which such amounts will be determined;
and (12) any other terms of the Offered Debt Securities. Additionally, the
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<PAGE>
Prospectus Supplement with respect to any Convertible Subordinated Offered
Debt Securities will set forth the Initial Conversion Price, the Initial
Conversion Date and the Final Conversion Date therefor and any other terms
relating to the conversion thereof into Common Stock of the Company. The
Prospectus Supplement with respect to any Senior Offered Debt Securities will
describe the application, if any, of Section 403 or Section 1007 of the Senior
Indenture thereto. (Section 301).
Unless otherwise indicated in the Prospectus Supplement, principal of and
premium, if any, and interest, if any, on the Offered Debt Securities will be
payable, transfers of the Offered Debt Securities will be registrable, and
Convertible Subordinated Offered Debt Securities may be surrendered for
conversion, at Marine Midland Bank, N.A., 140 Broadway, New York, New York
10015, provided that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register. (Sections 301, 305, 307 and 1002).
In any case where the date on which the principal of and premium, if any,
and interest, if any, on the Offered Debt Securities is payable, or which is
the last day any Convertible Subordinated Offered Debt Securities may be
converted, is not a Business Day at any Place of Payment for such Offered Debt
Securities, or at any place where Convertible Subordinated Offered Debt
Securities may be surrendered for conversion, then (notwithstanding any other
provision of the applicable Indenture or of such Offered Debt Securities)
payment of such principal, premium or interest, or conversion of such
Convertible Subordinated Offered Debt Securities, need not be made at such
Place of Payment, or place where Convertible Subordinated Offered Debt
Securities may be surrendered for conversion, on such date, but may be made on
the next succeeding Business Day at such Place of Payment, or place where
Convertible Subordinated Offered Debt Securities may be surrendered for
conversion, provided that no interest shall accrue for the period from and
after the date on which such principal, premium or interest is payable.
(Section 113).
Unless otherwise indicated in the Prospectus Supplement, the Offered Debt
Securities will be issued only in fully registered form without coupons in
denominations of $1,000 or any integral multiple thereof. (Section 302). No
service charge will be made for any registration of transfer or exchange of
Offered Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. (Section 305).
Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be sold at a substantial discount below their principal
amount. If such Securities are issued, the material federal income tax and
other considerations applicable thereto will be described in the Prospectus
Supplement relating to any Original Issue Discount Securities.
EVENTS OF DEFAULT
The following are Events of Default under each Indenture with respect to
Debt Securities of any series issued under such Indenture: (a) failure to pay
principal of or premium, if any, on any Debt Security of that series when due;
(b) failure to pay any interest on any Debt Security of that series when due,
continued for 30 days; (c) failure to deposit any sinking fund payment, when
due, in respect of any Debt Security of that series; (d) failure to perform
any other covenant of the Company in such Indenture (other than a covenant
included in such Indenture solely for the benefit of series of Debt Securities
other than that series), continued for 90 days after written notice as
provided in such Indenture; (e) the acceleration, or failure to pay at
maturity (including any applicable grace period), of any indebtedness for
money borrowed by the Company exceeding $20,000,000 in principal amount, which
acceleration or failure to pay is not rescinded or annulled or indebtedness
paid within 15 days after the date on which written notice thereof shall have
first been given to the Company as provided in such Indenture; (f) certain
events in bankruptcy, insolvency or reorganization in respect of the Company;
and (g) any other Event of Default provided with respect to Debt Securities of
that series. (Section 501).
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<PAGE>
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee for such Debt
Securities or the Holders of at least 25 percent in principal amount of the
Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment
or decree based on acceleration has been obtained, the Holders of a majority
in principal amount of the Outstanding Debt Securities of that series may,
under certain circumstances, rescind and annul such acceleration. (Section
502). For information as to waiver of defaults, see "Modification and Waiver."
Neither Trustee will be under any obligation, subject to the duty of each
Trustee during default to act with the required standard of care, to exercise
any of its rights or powers under the Indenture to which such Trustee is a
party at the request or direction of any of the Holders of Debt Securities
issued under such Indenture, unless such Holders shall have offered to such
Trustee reasonable security or indemnity. Subject to such provisions for
indemnification of the applicable Trustee, the Holders of a majority in
principal amount of the Outstanding Debt Securities of any series will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to such Trustee, or exercising any trust or power
conferred on such Trustee, with respect to the Debt Securities of that series.
The Company will furnish to each Trustee annually a certificate as to
compliance with all conditions and covenants under the Indenture to which such
Trustee is a party.
MODIFICATION AND WAIVER
Modifications and amendments of either Indenture may be made by the Company
and the Trustee under such Indenture with the consent of the Holders of not
less than 66 2/3 percent in principal amount of the Outstanding Debt
Securities of each series issued under such Indenture affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Debt
Security issued under such Indenture affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of principal of or interest
on, any Debt Security, (b) reduce the principal amount of, or the premium, if
any, or the rate of interest on, any Debt Security, (c) reduce the amount of
principal of an Original Issue Discount Security payable upon acceleration of
the Maturity thereof, (d) change the place or currency of payment of principal
of, or premium, if any, or the rate of interest on, any Debt Security, (e)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security, (f) adversely affect the right to convert
any Convertible Subordinated Debt Security or modify the provisions of the
Convertible Subordinated Indenture with respect to the subordination of the
Convertible Subordinated Debt Securities in a manner adverse to the Holders
thereof, or (g) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, or the percentage of Holders the consent of which is
required for modification or amendment of the Indenture for such Debt
Securities or for waiver of compliance with certain provisions of such
Indenture or for waiver of certain defaults. (Section 902).
Each Indenture provides that the Holders of a majority in principal amount
of the Outstanding Debt Securities of any series may, on behalf of the Holders
of all Debt Securities of that series, waive any past default under such
Indenture with respect to that series, except a default in the payment of the
principal of or premium, if any, or interest on any Debt Security of that
series or in respect of a provision which under such Indenture cannot be
modified or amended without the consent of the Holder of each Outstanding Debt
Security of that series affected. (Section 513).
The Senior Indenture (but not the Convertible Subordinated Indenture)
provides that the Holders of not less than a majority in principal amount of
the Outstanding Senior Debt Securities of any series
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may, on behalf of the Holders of all Senior Debt Securities of that series,
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the Senior Indenture. (Section 1009).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may, without the consent of any Holders of Outstanding Debt
Securities, consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate or merge with or into, or transfer or lease its assets
substantially as an entirety to, the Company, provided that (i) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged, or the Person, if other than a wholly-owned Subsidiary (except for
directors' qualifying shares), which acquires or leases the assets of the
Company substantially as an entirety is organized under the laws of any United
States jurisdiction and assumes the Company's obligations on the Debt
Securities and under each Indenture, and (in the case of the Convertible
Subordinated Indenture) provides for conversion rights for the Convertible
Subordinated Debt Securities, (ii) after giving effect to the transaction, no
Event of Default, and no event related to such transaction which, after notice
or lapse of time or both, would become an Event of Default, shall have
happened and be continuing and (iii) certain other conditions are met.
(Sections 801 and 802).
CONCERNING THE TRUSTEES
The Company and certain of its subsidiaries in the ordinary course of
business maintain general banking relations with Marine Midland Bank, N.A.
Pursuant to the provisions of the Trust Indenture Act of 1939, upon a default
under either the Senior Indenture or the Convertible Subordinated Indenture,
Marine Midland Bank, N.A. may be deemed to have a conflicting interest by
virtue of its acting as both the Senior Trustee and the Convertible
Subordinated Trustee requiring it to resign and be replaced by a successor
trustee in one of such positions.
SENIOR DEBT SECURITIES
The following provisions apply only to Senior Debt Securities and not to
Convertible Subordinated Debt Securities.
BOOK-ENTRY DEBT SECURITIES
The Senior Offered Debt Securities may be issued in the form of one or more
Global Securities that will be deposited with a Depository or its nominee
identified in the Prospectus Supplement relating to such Senior Offered Debt
Securities. In such a case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in definitive registered
form, a Global Security may not be registered for transfer or exchange except
as a whole by the Depository for such Global Security to a nominee of such
Depository and except in the circumstances described in the Prospectus
Supplement relating to such Senior Offered Debt Securities. (Sections 205 and
305).
The specific terms of the depository arrangement with respect to any portion
of a series of Senior Offered Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement relating to such
Senior Offered Debt Securities.
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LIMITATION ON LIENS
The Senior Indenture provides that the Company will not, and will not permit
any Subsidiary, directly or indirectly, to create, issue, assume, incur or
guarantee any indebtedness for money borrowed which is secured by a mortgage,
pledge, lien, security interest or other encumbrance of any nature on any of
the present or future common stock of a Designated Subsidiary (as defined
below) (or any company, other than the Company, having direct or indirect
control of any Designated Subsidiary) unless the Senior Debt Securities and,
if the Company so elects, any other indebtedness of the Company ranking at
least pari passu with the Senior Debt Securities, shall be secured equally and
ratably with, or prior to, such other secured indebtedness for money borrowed
so long as it is outstanding. (Section 1006).
The Company does not believe that the covenant described above will have a
material effect on the Company's or any Subsidiary's ability to conduct its
operations. A similar covenant has appeared in other indentures and agreements
relating to outstanding long-term indebtedness of the Company and guarantees
by the Company of long-term indebtedness of Subsidiaries, and such covenant
has not had a material effect on the operations of the Company or any
Subsidiary. This covenant does not restrict the ability of the Company or any
Subsidiary to mortgage, pledge or grant liens, security interests or other
encumbrances of any nature on any property or assets other than the common
stock of a Designated Subsidiary. The Company believes that this covenant may
provide some benefit to Holders of Senior Debt Securities in the event the
Company or any Subsidiary finds it necessary to obtain financing secured by
the common stock of a Designated Subsidiary.
The term "Designated Subsidiary" means each of CIGNA Property and Casualty
Insurance Company, Connecticut General Life Insurance Company and Insurance
Company of North America, so long as it remains a Subsidiary, or any
Subsidiary which is a successor of such Designated Subsidiary. (Section 101).
DEFEASANCE
Defeasance and Discharge. The Senior Indenture provides, if such provision
is made applicable to the Senior Debt Securities of any series pursuant to
Section 301 of the Senior Indenture, that the Company will be discharged from
any and all obligations in respect of the Senior Debt Securities of such
series (except for certain obligations to register the transfer or exchange of
Senior Debt Securities of such series, to replace stolen, lost or mutilated
Senior Debt Securities of such series, to maintain paying agencies and to hold
monies for payment in trust) upon the deposit with the Senior Trustee, or
another qualified corporate trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect of
such U.S. Government Obligations in accordance with their terms will provide
money in an amount sufficient to pay the principal of and premium, if any, and
each installment of interest on the Senior Debt Securities of such series on
the Stated Maturity of such payments and any mandatory sinking fund payments
or analogous payments applicable to the Senior Debt Securities of such series
on the day on which such payments are due and payable in accordance with the
terms of the Senior Indenture and the Senior Debt Securities of such series.
Such a trust may only be established if, among other things, (i) either (x)
the Company has delivered to the Senior Trustee an Opinion of Counsel to the
effect that since the date of the Senior Indenture there has been a change in
the applicable federal income tax law, including a change in the official
interpretation thereof, or (y) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling, in either case to
the effect that Holders of the Senior Debt Securities of such series will not
recognize income, 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 amounts and in the same manner and at the same times, as would
have been the case if such deposit, defeasance and discharge had not occurred,
and (ii) the Company has delivered to the Senior Trustee an Opinion of Counsel
to the effect that the Senior Debt Securities of such series, if then listed
on the
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New York Stock Exchange, will not be delisted as a result of such deposit,
defeasance and discharge. (Section 403).
Defeasance of Certain Obligations and Certain Events of Default. The Senior
Indenture provides that, if applicable, the Company may omit to comply with
the restrictive covenants in Section 1005 ("Maintenance of Properties") or
Section 1006 ("Limitation on Liens on Common Stock of Designated
Subsidiaries"), and Section 501(4) (described in Clause (d) under "Events of
Default") with respect to Sections 1005 and 1006 and Section 501(5) (described
in Clause (e) under "Events of Default") shall be deemed not to be an Event of
Default under the Senior Indenture with respect to the Senior Debt Securities
of any series, upon the deposit with the Senior Trustee, or another qualified
corporate trustee, in trust, of money and/or U.S. Government Obligations which
through the payment of interest and principal in respect of such U.S.
Government Obligations in accordance with their terms will provide money in an
amount sufficient to pay the principal of and premium, if any, and each
installment of interest on the Senior Debt Securities of such series on the
Stated Maturity of such payments and any mandatory sinking fund payments or
analogous payments applicable to the Senior Debt Securities of such series on
the day on which such payments are due and payable in accordance with the
terms of the Senior Indenture and the Senior Debt Securities of such series.
The obligations of the Company under the Senior Indenture and the Senior Debt
Securities of such series other than with respect to the covenants referred to
above and the Events of Default other than the Events of Default referred to
above shall remain in full force and effect. Such a trust may only be
established if, among other things, the Company has delivered to the Senior
Trustee an Opinion of Counsel to the effect that (i) the Holders of the Senior
Debt Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and Events of Default and will be subject to federal
income tax on the same amounts 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 (ii) the Senior Debt Securities of such series, if then listed on the New
York Stock Exchange, will not be delisted as a result of such deposit and
defeasance. (Section 1007).
In the event the Company exercises its option to omit compliance with
certain covenants of the Senior Indenture with respect to the Senior Debt
Securities of any series as described above and the Senior Debt Securities of
such series are declared due and payable because of the occurrence of any
Event of Default other than an Event of Default described in Clause (d) or (e)
under "Events of Default," the amount of money and U.S. Government Obligations
on deposit with the Senior Trustee, or another qualified corporate trustee,
will be sufficient to pay amounts due on the Senior Debt Securities of such
series at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Senior Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments. If the Company fails to pay such amounts as
and when required by the terms of the Senior Indenture, the Senior Trustee may
institute and prosecute a judicial proceeding for the collection of such
amounts and may enforce any judgment or final decree obtained in such
proceeding. (Section 503).
CONVERTIBLE SUBORDINATED DEBT SECURITIES
The following provisions apply only to Convertible Subordinated Debt
Securities and not to Senior Debt Securities.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Convertible Subordinated Debt Securities will, to the extent set forth in the
Convertible Subordinated Indenture, be subordinated in right of payment to the
prior payment in full of all Senior Indebtedness (as defined below). Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will first
be
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entitled to receive payment in full of all amounts due or to become due
thereon before the Holders of the Convertible Subordinated Debt Securities
will be entitled to receive any payment in respect of the principal of or
premium, if any, or interest on the Convertible Subordinated Debt Securities.
In the event of the acceleration of the maturity of any Convertible
Subordinated Debt Securities, the holders of all Senior Indebtedness will
first be entitled to receive payment in full of all amounts due or to become
due thereon before the Holders of the Convertible Subordinated Debt Securities
will be entitled to receive any payment upon the principal of or premium, if
any, or interest on the Convertible Subordinated Debt Securities. No payments
on account of principal, premium, if any, or interest in respect of the
Convertible Subordinated Debt Securities may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
permitting the holders thereof to accelerate the maturity thereof, or if any
judicial proceeding shall be pending with respect to any such default. For
purposes of the subordination provisions, the payment, issuance or delivery of
cash, property or securities (other than stock, and certain subordinated
securities, of the Company) upon conversion of a Convertible Subordinated Debt
Security will be deemed to constitute payment on account of the principal of
such Convertible Subordinated Debt Security. (Article Thirteen)
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Indebtedness or of the Convertible
Subordinated Debt Securities may recover less, ratably, than holders of Senior
Indebtedness, and may recover more, ratably, than the Holders of the
Convertible Subordinated Debt Securities.
"Senior Indebtedness" is defined to mean the principal of (and premium, if
any) and interest on all indebtedness of the Company (including indebtedness
of others guaranteed by the Company), other than the Convertible Subordinated
Debt Securities and the Company's 8.20% Convertible Subordinated Debentures
due July 10, 2010, whether outstanding on the date of the Convertible
Subordinated Indenture or thereafter created, incurred or assumed, which is:
(i) for money borrowed, (ii) evidenced by a note or similar instrument given
in connection with the acquisition of any businesses, properties or assets of
any kind or (iii) obligations of the Company as lessee under leases required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles or leases of property or assets made as part of any sale
and lease-back transaction to which the Company is a party, including
amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation, unless in any case in the instrument creating or
evidencing any such indebtedness or obligation or pursuant to which the same
is outstanding it is provided that such indebtedness or obligation is not
superior in right of payment to the Convertible Subordinated Debt Securities.
At November 30, 1993, Senior Indebtedness aggregated approximately $1.4
billion. The Company expects from time to time to incur additional
indebtedness constituting Senior Indebtedness. The Convertible Subordinated
Indenture does not prohibit or limit the incurrence of additional Senior
Indebtedness.
CONVERSION RIGHTS
The Convertible Subordinated Debt Securities will be convertible into Common
Stock of the Company prior to redemption during the time period specified in
the Prospectus Supplement with respect thereto, initially at the Initial
Conversion Price therefor specified in such Prospectus Supplement. The right
to convert Convertible Subordinated Debt Securities subject to and called for
redemption will terminate at the close of business on the Redemption Date and
will be lost if not exercised prior to that time. (Section 1401)
The conversion price will be subject to adjustment in certain events,
including (i) dividends (and other distributions) payable in Common Stock on
any class of capital stock of the Company, (ii) the issuance to all holders of
Common Stock of rights or warrants entitling them to subscribe for or
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purchase Common Stock at less than the current market price (as defined),
(iii) subdivisions, combinations and reclassifications of Common Stock, and
(iv) distributions to all holders of Common Stock of evidences of indebtedness
of the Company or assets (including securities, but excluding those dividends,
rights, warrants and distributions referred to above and dividends and
distributions paid in cash out of the retained earnings of the Company). In
addition to the foregoing adjustments, the Company will be permitted to make
such reductions in the conversion price as it considers to be advisable in
order that any event treated for Federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the holders of the Common Stock.
(Section 1404) In case of certain consolidations or mergers to which the
Company is a party or the transfer of substantially all of the assets of the
Company, each Convertible Subordinated Debt Security then outstanding would,
without the consent of any Holders of such Convertible Subordinated Debt
Security, become convertible only into the kind and amount of securities, cash
and other property receivable upon the consolidation, merger or transfer by a
holder of the number of shares of Common Stock into which such Convertible
Subordinated Debt Security might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of Common Stock failed
to exercise any rights of election and received per share the kind and amount
received per share by a plurality of non-electing shares). (Section 1411)
Fractional shares of Common Stock are not to be issued upon conversion, but,
in lieu thereof, the Company will pay a cash adjustment based upon market
price (as determined by the Board of Directors). (Section 1403) Convertible
Subordinated Debt Securities surrendered for conversion during the period from
the close of business on any Regular Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment Date (except
Convertible Subordinated Debt Securities called for redemption on a Redemption
Date within such period) must be accompanied by payment of an amount equal to
the interest thereon which the registered Holder is to receive. If any
Convertible Subordinated Debt Security is converted after any Regular Record
Date and on or prior to the next succeeding Interest Payment Date (other than
any Convertible Subordinated Debt Security whose Maturity is prior to such
Interest Payment Date), interest whose Stated Maturity is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding
such conversion, and such interest (whether or not punctually paid or duly
provided for) shall be paid to the Person in whose name that Convertible
Subordinated Debt Security (or one or more Predecessor Securities) is
registered at the close of business on such Regular Record Date. Except where
Convertible Subordinated Debt Securities surrendered for conversion must be
accompanied by payment as described above, no interest on converted
Convertible Subordinated Debt Securities will be payable by the Company on any
Interest Payment Date subsequent to the date of conversion. No other payment
or adjustment for interest or dividends is to be made upon conversion.
(Sections 307 and 1402)
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
Federal income tax purposes (e.g., distributions of evidences of indebtedness
or assets of the Company, but generally not stock dividends or rights to
subscribe for Common Stock) and, pursuant to the anti-dilution provisions of
the Convertible Subordinated Indenture, the conversion price of the
Convertible Subordinated Debt Securities is reduced, such reduction may be
deemed to be the payment of a taxable dividend to holders of Convertible
Subordinated Debt Securities.
DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock
will be described in the applicable Prospectus Supplement. If so indicated in
a Prospectus Supplement, the terms of any such series may differ from
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the terms set forth below. Certain provisions applicable to the Preferred
Stock are set forth below in "Description of Common Stock."
The summary of terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Certificate of Incorporation
and the certificate of designation relating to each series of the Preferred
Stock (the "Certificate of Designation"), which will be filed as an exhibit to
or incorporated by reference in the Registration Statement of which this
Prospectus is a part at or prior to the time of issuance of such series of the
Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of
25,000,000 shares of preferred stock, par value $1.00 per share. No shares of
preferred stock are outstanding as of the date of this Prospectus, but the
Company has reserved for issuance 2,000,000 shares of its Junior Participating
Preferred Stock, Series D issuable pursuant to the Company's shareholder
rights plan, a description of which has been incorporated by reference herein.
The Company's Preferred Stock may be issued from time to time in one or more
series, without shareholder approval, when authorized by the Board of
Directors. Subject to limitations prescribed by law, the Board of Directors is
authorized to determine the voting powers (if any), designation, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, for each series of
preferred stock that may be issued, and to fix the number of shares of each
such series. Thus, the Board of Directors, without shareholder approval, could
authorize the issuance of preferred stock with voting, conversion and other
rights that could adversely affect the voting power and other rights of
holders of Common Stock or other series of preferred stock or that could have
the effect of delaying, deferring or preventing a change in control of the
Company. For example, the Company could issue a class or classes of preferred
stock the provisions of which would not protect the holders thereof with
respect to redemption premiums in the event of certain mergers or other
changes of control or provide the holders thereof an opportunity to vote as a
class with respect to certain changes of control.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise described in a Prospectus
Supplement relating to a particular series of the Preferred Stock. The
applicable Prospectus Supplement will describe the following terms of the
series of Preferred Stock in respect of which this Prospectus is being
delivered: (1) the designations and stated value per share, if any, of such
Preferred Stock and the number of shares offered; (2) the amount of
liquidation preference per share; (3) the initial public offering price at
which such Preferred Stock will be issued; (4) the dividend rate (or method of
calculation), the dates on which dividends shall be payable and the dates from
which dividends shall commence to cumulate, if any; (5) any redemption or
sinking fund provisions; (6) any conversion or exchange rights; and (7) any
additional voting, dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
GENERAL
The Preferred Stock offered hereby will be issued in one or more series.
Shares of Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. Neither the par value
nor the liquidation preference is indicative of the price at which the
Preferred Stock will actually trade on or after the date of issuance. The
Prospectus Supplement will contain, if applicable, a description of certain
United States Federal income tax consequences relating to the purchase and
ownership of the series of Preferred Stock offered by such Prospectus
Supplement.
RANK
The Preferred Stock shall, with respect to dividend rights and rights upon
liquidation, winding up and dissolution of the Company, rank prior to the
Company's Common Stock and to all other classes
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and series of equity securities of the Company now or hereafter authorized,
issued or outstanding (the Common Stock and such other classes and series of
equity securities collectively may be referred to herein as the "Junior
Stock"), other than any classes or series of equity securities of the Company
ranking on a parity with (the "Parity Stock") or senior to (the "Senior
Stock") the Preferred Stock as to dividend rights and rights upon liquidation,
winding up or dissolution of the Company. The Preferred Stock shall be junior
to all outstanding debt of the Company. The Preferred Stock shall be subject
to creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by the Company's Certificate of Incorporation.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of the Company legally
available for payment, cash dividends, payable at such dates and at such rates
per share per annum as described in the applicable Prospectus Supplement. Such
rate may be fixed or variable or both. Each declared dividend shall be payable
to holders of record as they appear at the close of business on the stock
books of the Company on such record dates, not more than 60 calendar days
preceding the payment dates therefor, as are determined by the Board of
Directors (each of such dates, a "Record Date").
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Stock
are noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend
for such period, whether or not dividends are declared payable on any future
dividend payment dates.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of the Company of any series ranking, as to dividends, on a
parity with or junior to the series of Preferred Stock offered by the
applicable Prospectus Supplement for any period unless full dividends for the
immediately preceding dividend period on such Preferred Stock (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such Preferred Stock are cumulative) have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment. When dividends are not so
paid in full (or a sum sufficient for such full payment is not so set apart)
upon such Preferred Stock and any other preferred stock of the Company ranking
on a parity as to dividends with the Preferred Stock, dividends upon shares of
such Preferred Stock and dividends on such other preferred stock shall be
declared pro rata so that the amount of dividends declared per share on such
Preferred Stock and such other preferred stock shall in all cases bear to each
other the same ratio that accrued dividends for the then-current dividend
period per share on the shares of such Preferred Stock (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such Preferred Stock are cumulative) and accrued dividends,
including required or permitted accumulations, if any, on shares of such other
preferred stock, bear to each other.
CONVERTIBILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock of the Company or another series of Preferred Stock or other securities
of the Company will be set forth in the applicable Prospectus Supplement. See
"Description of Common Stock."
REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the applicable Prospectus Supplement.
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LIQUIDATION
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of a series of Preferred
Stock will be entitled, subject to the rights of creditors, but before any
distribution or payment to the holders of Common Stock or any other security
ranking junior to the Preferred Stock on liquidation, dissolution or winding
up of the Company, to receive an amount per share as set forth in the
applicable Prospectus Supplement plus accrued and unpaid dividends for the
then-current dividend period (including any accumulation in respect of unpaid
dividends for prior dividend periods, if dividends on such series of Preferred
Stock are cumulative). If the amounts available for distribution with respect
to the Preferred Stock and all other outstanding stock of the Company ranking
on a parity with the Preferred Stock upon liquidation are not sufficient to
satisfy the full liquidation rights of all the outstanding Preferred Stock and
stock ranking on a parity therewith, then the holders of each series of such
stock will share ratably in any such distribution of assets in proportion to
the full respective preferential amount (which in the case of preferred stock
may include accumulated dividends) to which they are entitled. After payment
of the full amount of the liquidation preference, the holders of shares of
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
described below or in the applicable Prospectus Supplement and as required by
applicable law. Without the affirmative vote of a majority of the shares of
Preferred Stock then outstanding (voting separately as a class together with
any Parity Stock), the Company may not (i) increase or decrease the aggregate
number of authorized shares of such class, (ii) increase or decrease the par
value of the shares of such class, or (iii) alter or change the powers,
preferences or special rights of the shares of such class so as to affect them
adversely.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement, the
Certificate of Incorporation and in the applicable Certificate of Designation
or as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 200,000,000 shares of Common Stock, par
value $1.00 per share, of which 72,008,415 shares were issued and outstanding
at November 30, 1993. The Common Stock is listed on the New York, Pacific and
Philadelphia Stock Exchanges. The Company will use its best efforts to list on
the New York Stock Exchange any Common Stock to be offered by the Prospectus
Supplement attached hereto.
Holders of Common Stock are entitled to receive such dividends as the Board
of Directors of the Company may from time to time declare. Payment of
dividends on the Common Stock will at all times be subject to, among other
things, prior satisfaction of dividend and sinking fund requirements, if any,
of any series of preferred stock that may then be outstanding, and the
availability of funds to the Company, which in turn may be subject to fixed
payment obligations which the Company may incur in
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the future, and the ability of the Company's insurance subsidiaries to declare
and pay dividends under applicable insurance regulatory requirements. No
shares of preferred stock are outstanding as of the date of this Prospectus.
The Company's Board of Directors is divided into three classes, each elected
for a term of three years. Directors may be removed only for cause. Holders of
Common Stock have one vote per share and have no cumulative voting rights.
Subject to the rights of creditors and the liquidation preferences of holders
of preferred stock, the holders of Common Stock are entitled to share ratably
in the remaining assets of the Company in the event of its voluntary or
involuntary liquidation or dissolution. Holders of Common Stock have no
preemptive rights. All shares of Common Stock presently outstanding are, and
all such shares to be offered by the Prospectus Supplement attached hereto
will be, fully paid and nonassessable.
Under the Company's shareholder rights plan, a Preferred Stock Purchase
Right (a "Right") attaches to each outstanding share of Common Stock. The
Rights trade with the Common Stock until the Rights become exercisable. They
are exercisable only if a party acquires, or announces a tender offer to
acquire, 20% or more of the outstanding Common Stock. Each Right entitles the
shareholder to buy, for a $200 exercise price, 1/100 of a share of Junior
Participating Preferred Stock, Series D, having dividend and voting rights
approximately equal to one share of Common Stock. Under certain circumstances,
including the acquisition of 20% or more of the outstanding Common Stock by an
acquirer, all Rights holders except the acquirer may purchase shares of Common
Stock worth twice the exercise price. If the Company is acquired in a merger
after the acquisition of 20% of outstanding Common Stock, Rights holders may
purchase the acquirer's shares at a similar discount. The Company may redeem
the Rights for five cents each at any time before an acquirer acquires 20% of
its outstanding Common Stock, and thereafter under certain circumstances.
Certain mergers and other business combinations must be approved by holders
of at least 80 percent of the outstanding Common Stock and any preferred stock
entitled to vote generally, voting together as a single class, except where
the transaction is approved by a majority of the Company's Board of Directors,
or certain minimum price criteria and procedural conditions are met as
specified in the Company's Restated Certificate of Incorporation. A similar 80
percent vote of the outstanding Common Stock and any preferred stock entitled
to vote generally, voting together as a single class, is required for the
Company's shareholders to amend, repeal or adopt any charter provision
inconsistent with such provisions or to adopt, amend or repeal the Company's
by-laws. Such provisions could inhibit a change of control in situations that
the Board of Directors determines are not adequate or in the best interests of
shareholders, or that do not meet specified fair price criteria and procedural
conditions. In some circumstances, some or all shareholders could be denied
the opportunity to realize a premium over the then-prevailing market price for
the shares.
The Transfer Agent and Registrar for the Common Stock is First Chicago Trust
Company of New York.
PLAN OF DISTRIBUTION
General. The Company may sell Securities to or through underwriters or
agents, directly to other purchasers, to both investors and dealers through a
specific bidding or auction process or otherwise, or through a combination of
any such methods of sale. If a bidding or auction process is used, it will be
described in the Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
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In connection with the sale of Securities, underwriters may receive
compensation from the Company or from purchasers of Securities for whom they
may act as agents in the form of discounts, concessions or commissions.
Underwriters may sell 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 agent. Underwriters, dealers and agents that participate in the
distribution of 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 Securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933, as amended (the "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 Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Act.
Delayed Delivery Arrangements. If so indicated in the Prospectus Supplement,
the Company will authorize underwriters or other persons acting as the
Company's agents to solicit offers by certain institutions to purchase
Securities from the Company pursuant to contracts providing for payment and
delivery on a future date. Institutions with which such contracts may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and others, but
in all cases such institutions must be approved by the Company. The
obligations of any purchaser under any such contract will be subject to the
condition that the purchase of the Securities shall not at the time of
delivery be prohibited under the laws of the jurisdiction to which such
purchaser is subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
VALIDITY OF SECURITIES
Unless otherwise indicated in a Prospectus Supplement, the validity of the
Securities offered hereby will be passed upon for the Company by Schnader,
Harrison, Segal & Lewis, 1600 Market Street, Philadelphia, Pennsylvania 19103,
and for the underwriters or agents by Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004.
EXPERTS
The consolidated financial statements and financial statement schedules of
CIGNA Corporation as of December 31, 1992 and 1991 and for each of the three
years in the period ended December 31, 1992 incorporated herein by reference
to the Current Report on Form 8-K of the Company dated December 14, 1993 have
been so incorporated in reliance on the reports of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
16
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER
THIS PROSPECTUS SUPPLEMENT NOR THE PROSPECTUS CONSTITUTES AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SE-
CURITIES TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCE 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 AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... S-2
United States Taxation..................................................... S-15
Foreign Currency Risks..................................................... S-23
Supplemental Plan of Distribution.......................................... S-24
Validity of Notes.......................................................... S-25
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Use of Proceeds............................................................ 3
Description of Debt Securities............................................. 3
Senior Debt Securities..................................................... 7
Convertible Subordinated Debt Securities................................... 9
Description of Preferred Stock............................................. 11
Description of Common Stock................................................ 14
Plan of Distribution....................................................... 15
Validity of Securities..................................................... 16
Experts.................................................................... 16
</TABLE>
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$800,000,000
CIGNA CORPORATION
MEDIUM-TERM NOTES, SERIES E
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[LOGO OF CIGNA CORPORATION APPEARS HERE]
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GOLDMAN, SACHS & CO.
CS FIRST BOSTON
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
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