<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 2, 1996
LOGO $250,000,000
UNUM CORPORATION
MEDIUM-TERM NOTES, SERIES C
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
--------------
The Company may offer from time to time its Medium-Term Notes, Series C (the
"Notes"), due from 9 months or more from the date of issue, as selected by the
purchaser and agreed to by the Company, at an aggregate initial public offering
price not to exceed $250,000,000 or its equivalent in foreign currencies,
currency units or composite currencies.
The Notes may be denominated in U.S. dollars or in such foreign currencies,
currency units or composite currencies as the Company may designate at the time
of offering. The Company will set forth the specific currency, currency unit or
composite currency, interest rate (if any), issue price, and maturity date of
any Note in the related Pricing Supplement to this Prospectus Supplement. Unless
otherwise specified in the applicable Pricing Supplement, Agents will not sell
Notes denominated in other than U.S. dollars or ECUs in, or to residents of, the
country issuing the Specified Currency. See "Description of Notes."
Except as otherwise indicated in the applicable Pricing Supplement, interest
on the Fixed Rate Notes will be payable on each May 15 and November 15 and at
maturity. Interest on 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 the Company specifies a Redemption Commencement Date in the
applicable Pricing Supplement, the Notes will not be redeemable prior to their
Stated Maturity.
The Company will issue the Notes offered hereby in permanent global or
definitive certificated form, as specified in the applicable Pricing Supplement.
A permanent global Note representing Book-Entry Notes will be registered in the
name of, or a nominee of, The Depository Trust Company, which will act as
Depositary. Beneficial interests in Book-Entry Notes will be evidenced only by,
and transfers thereof will be effected only through, records maintained by the
Depositary (with respect to participants' interests) and its participants.
Except as described below under "Description of Notes -- Book-Entry Notes,"
owners of beneficial interests in a permanent 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 Depositary or its nominee. Unless otherwise specified in the applicable
Pricing Supplement, the Notes offered hereby will be issued only in registered
form in denominations of $1,000 and integral multiples thereof, or the
approximate equivalent in the Specified Currency. See "Description of Notes."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY ORADEQUACY OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING
SUPPLEMENT HERETO ORTHE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (2)(3)
-------------- ---------------------- -----------------------------
<S> <C> <C> <C>
Per Note.................................................... 100% .125%-.750% 99.250%-99.875%
Total....................................................... $250,000,000 $312,500-$1,875,000 $248,125,000-$249,687,500
</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 the Agents a commission ranging from .125% to .750%,
depending upon the maturity, of the principal amount of any Note sold
through any such firm as Agent. Commissions and discounts with respect to
Notes with maturities in excess of 30 years will be negotiated between the
Company and such Agent at the time of sale. The Company may also sell Notes
to an Agent as principal for resale to investors and other purchasers at
varying prices related to prevailing market prices at the time of resale to
be determined by such Agent or, if so agreed, at a fixed public offering
price. Unless otherwise specified in the applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a
price equal to 100% of the principal amount thereof less a percentage equal
to the commission applicable to an agency sale of a Note of identical
maturity, and may be resold by such Agent. The Company may also sell Notes
directly to investors on its own behalf, in which case no commission will be
payable. The Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of $287,000 payable by the Company,
including expenses of the Agents to be reimbursed by the Company.
---------------------
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their behalf at negotiated discounts. The Company reserves the
right to sell Notes directly on its own behalf. The Company also reserves the
right to withdraw, cancel, or modify the offering contemplated hereby without
notice. The Company has not established a termination date for the offering of
the Notes. The Company or the Agents may reject any order as a whole or in part.
See "Supplemental Plan of Distribution."
---------------------
GOLDMAN, SACHS & CO. MORGAN STANLEY & CO.
INCORPORATED
The date of this Prospectus Supplement is August 15, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, 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.
--------------
DESCRIPTION OF NOTES
THE FOLLOWING DESCRIPTION OF THE PARTICULAR TERMS OF THE NOTES OFFERED
HEREBY (REFERRED TO IN THE PROSPECTUS AS "SENIOR DEBT SECURITIES") SUPPLEMENTS,
AND TO THE EXTENT INCONSISTENT THEREWITH REPLACES, THE DESCRIPTION OF THE
GENERAL TERMS AND PROVISIONS OF SENIOR DEBT SECURITIES SET FORTH IN THE
PROSPECTUS, TO WHICH DESCRIPTION REFERENCE IS HEREBY MADE.
GENERAL
The Notes constitute a single series for purposes of the Indenture, dated
September 15, 1990 (the "Indenture"), between the Company and The Chase
Manhattan Bank (National Association), succeeded by merger by The Chase
Manhattan Bank (the "Trustee") as trustee, and are limited in amount as set
forth on the cover page of this Prospectus Supplement. For a description of the
rights attaching to different series of Debt Securities under the Indenture, see
"Description of Debt Securities" in the Prospectus.
The Company will at all times have appointed and maintain a Paying Agent
(which may be the Trustee) authorized to pay the principal of (and premium, if
any) or interest on any Notes on the Company's behalf and having an office or
agency (the "Paying Agent Office") in The City of New York, where the Notes may
be presented or surrendered for payment and notices, designations, or requests
in respect of payments with respect to Notes may be served. The Company has
initially appointed the Trustee as the Paying Agent, with its Paying Agent
Office currently at One Chase Manhattan Plaza, New York, New York.
Unless previously redeemed by the Company or repaid by the Company at the
option of the Holder, a Note will mature on the date ("Stated Maturity") from 9
months or more from its date of issue that is specified on its face and in the
applicable Pricing Supplement. The "maturity" of any Note refers herein to the
date on which its principal becomes due and payable, whether at Stated Maturity,
upon redemption by the Company, repayment by the Company at the option of the
Holder, or otherwise.
Each Note will be denominated in a currency, currency unit or composite
currency ("Specified Currency") as specified on its face 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, for ECUs,
Brussels), provided that, at the election of the Holder and in certain
circumstances at the Company's option, payments on Notes denominated in other
than U.S. dollars may be made in U.S. dollars. See "Payment of Principal and
Interest."
Each Note will be represented by either a permanent global Note registered
in the name of, or a nominee of, the Depositary (each such Note represented by a
permanent global Note being referred to below as a "Book-Entry Note") or a
certificate issued in definitive registered form, without coupons, as set forth
in the applicable Pricing Supplement. Except as set forth under "Book-Entry
Notes" below, Book-Entry Notes will not be issuable in certificated form. So
long as the Depositary or its nominee is the registered holder of any permanent
global Note, the Depositary or its nominee, as the case may be, will
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be considered the sole Holder of the Book-Entry Note or Notes represented by
such permanent global Note for all purposes under the Indenture and the Notes.
For a further description of the respective forms, denominations, and transfer
and exchange procedures for any such permanent global Note and the Book-Entry
Notes, refer to "Book-Entry Notes" below and to the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of any Note denominated in U.S. dollars will be $1,000
and integral multiples thereof. 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 sixth Business Day in The City of New York and in the country issuing such
currency (or, for ECUs, Brussels) next preceding the date of issue of such Note,
to U.S. $1,000 (rounded to the nearest 1,000 units of such Specified Currency)
and any greater amount that is an integral multiple of 1,000 units of such
Specified Currency unless specified in the applicable Pricing Supplement.
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.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction. Unless otherwise indicated in the
applicable Pricing Supplement, each Note, except any Zero Coupon Note (as
hereinafter defined), will bear interest at a fixed rate or a rate determined by
reference to one or more of the Commercial Paper Rate, the Prime Rate, LIBOR,
the Treasury Rate, the CD Rate, CMT Rate or the Federal Funds Rate, as adjusted
by the Spread and/or Spread Multiplier, if any, applicable to such Note. See
"Interest Rate." The Notes may be issued as Zero Coupon Notes ("Zero Coupon
Notes"). Zero Coupon Notes will be issued at a discount from the principal
amount payable at maturity thereof, but holders of Zero Coupon Notes will not
receive periodic payments of interest thereon.
The Notes (including any Zero Coupon Note) may be issued with original issue
discount as defined for United States federal income tax purposes. Holders of
Notes issued with original issue discount may be required to include amounts in
gross income for federal income tax purposes in advance of the receipt of the
cash to which such income is attributable. See "United States Taxation" in this
Prospectus Supplement.
The Notes will not be subject to any sinking fund and, unless the Company
specifies an initial date on which a Note may be redeemed by the Company ( a
"Redemption Commencement Date") in the applicable Pricing Supplement, will not
be redeemable before their maturity. If the Company does specify a Redemption
Commencement Date for any Note, the applicable Pricing Supplement will also
specify one or more redemption prices ("Redemption Prices") and the redemption
period or periods ("Redemption Periods") during which such Redemption Prices
shall apply. Unless otherwise specified in the Pricing Supplement, any such Note
shall be redeemable at the Company's option at any time on or after such
specified Redemption Commencement Date at the specified Redemption Price
applicable to the Redemption Period during which such Note is to be redeemed,
together with interest accrued to the date fixed for redemption (the "Redemption
Date").
The Notes (other than Book-Entry Notes) may be presented for registration of
transfer or exchange at the Paying Agent Office in The City of New York. With
respect to transfers of Book-Entry Notes and exchanges of permanent global Notes
representing Book-Entry Notes, see "Description of Notes -- Book-Entry Notes."
The Indenture provisions relating to satisfaction and discharge and legal
and covenant defeasance which are described in the accompanying Prospectus under
"Description of Debt Securities -- Satisfaction and Discharge of Indentures"
will apply to the Notes.
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<PAGE>
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 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 or earlier date of redemption by the Company or repayment
by the Company at the option of the Holder, 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 and/or multiplying by the Spread Multiplier (each
term defined below).
A Floating Rate Note may also have either or both:
(a) a maximum, or ceiling, on the rate of interest that may accrue during
any interest period (a "Maximum Rate"); and
(b) a minimum, or floor, on the rate of interest that may accrue during
any interest period (a "Minimum Rate").
The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as applying to the Interest Rate Basis (as defined below) for
such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as applying to the Interest Rate Basis for such
Note.
"Market Day" means:
(a) with respect to any Note, any Business Day in The City of New York;
and
(b) with respect to any LIBOR Note, any Business Day in The City of New
York which is also a day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market (a "London Business
Day"). "Business Day," as used herein for any particular location, means
each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in such location are authorized or obligated by
law or executive order to close.
"Index Maturity" means, for a Floating Rate Note, the period to maturity of
the interest 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, the Trustee will be the calculation agent (the
"Calculation Agent") for 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 Interest Payment Dates (if other than May 15 and November 15), the Regular
Record Dates (if other than May 1 and November 1), and, if applicable, the
Redemption Commencement Date, Redemption Prices and Redemption Periods relating
to 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 one or more of the following:
(a) the Commercial Paper Rate for "Commercial Paper Rate Notes";
(b) the Prime Rate for "Prime Rate Notes";
(c) LIBOR for "LIBOR Notes";
(d) the Treasury Rate for "Treasury Rate Notes";
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<PAGE>
(e) the CD Rate for "CD Rate Notes";
(f) the CMT Rate for "CMT Rate Notes";
(g) the Federal Funds Rate for "Federal Funds Rate Notes"; or
(h) such other interest rate formula as such Pricing Supplement sets
forth.
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 and/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, and the Interest
Reset Date for such Note.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semi-annually, annually, or otherwise (such period being the
"Interest Reset Period" for such Floating Rate Note, and the first date of each
Interest Reset Period being an "Interest Reset Date"), as specified in the
applicable Pricing Supplement. The Interest Reset Date will be:
(a) for Floating Rate Notes (other than Treasury Rate Notes) that reset
daily, each Business Day;
(b) for Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, the Wednesday of each week;
(c) for Treasury Rate Notes that reset weekly, the Tuesday of each week,
except as provided below;
(d) for Floating Rate Notes that reset monthly, the third Wednesday of
each month;
(e) for Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September and December;
(f) for Floating Rate Notes that reset semi-annually, the third Wednesday
of two months of each year as specified in the applicable Pricing
Supplement;
(g) for Floating Rate Notes that reset annually, the third Wednesday of
one month of each year as specified in the applicable Pricing
Supplement; and
(h) for Floating Rate Notes that reset at intervals other than those
described above, the days specified in the applicable Pricing
Supplement;
PROVIDED, HOWEVER, that the interest rate in effect from the date of issue to
the first Interest Reset Date for a Floating Rate Note will be the initial
Interest Rate (as set forth in the applicable Pricing Supplement).
If any Interest Reset Date for any Floating Rate Note would otherwise be a
day that is not a Market Day for 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 for such Floating Rate Note (except that for 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 CD
Rate Note (the "CD Rate Interest Determination Date"), for a CMT Rate Note (the
"CMT Rate Interest Determination Date") and for a Federal Funds Rate Note (the
"Federal Funds Rate 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 LIBOR Note (the "LIBOR Interest Determination
Date") will be the second London Business 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
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<PAGE>
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 resulting from any calculations referred to in this
Prospectus Supplement 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., 9.876546% (or .09876546) being rounded to
9.87655% (or .0987655)), and all U.S. dollar amounts used in or resulting from
such calculations will be rounded to the nearest cent (with one-half cent being
rounded upwards).
In addition to any maximum interest rate that may apply to a Floating Rate
Note under 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 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 that will become effective on the next Interest Reset Date for
such Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date, or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or the Stated Maturity, as the case may be. The
Calculation Agent's determination of any interest rate will be final and binding
in the absence of manifest error.
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 and/or
Spread Multiplier, if any), and 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, "Commercial
Paper Rate" means, for 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." If such rate is not published before 3:00 p.m., New York City time, on
the relevant Calculation Date, then the Commercial Paper Rate for such Interest
Reset Date shall be the Money Market Yield of such rate on 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
for 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 (which may include the Agents)
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
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fewer than three dealers selected by the Calculation Agent are quoting as
mentioned in this sentence, the Commercial Paper Rate for 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:
<TABLE>
<S> <C>
360 X D
MONEY MARKET YIELD = 100 X -------------
360 - (D X M)
</TABLE>
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 from the Interest Reset Date to but excluding the day that
numerically corresponds to such Interest Rate Date (or, if there is not any such
numerically corresponding day, the last day) in the calendar month that is the
number of months corresponding to the specified Index Maturity after the month
in which such Interest Reset Date falls.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates specified on their faces and in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime
Rate" means, for 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." If such rate is not published before 9:00 a.m., New York City time,
on the relevant Calculation Date, then the Prime Rate for 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 "USPRIME1" on the
Reuters Monitor Money Rates Service (or such other page as may replace the
USPRIME1 page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks) ("Reuters Screen USPRIME1 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 USPRIME1 Page on
such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page on such Prime Rate Interest
Determination Date, the Prime Rate for 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 provided above by the Calculation
Agent are quoting as mentioned in this sentence, the Prime Rate for 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 and/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.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR for
any Interest Reset Date will be determined by the Calculation Agent as follows:
(a) The Calculation Agent will determine either (i) the arithmetic mean
of the offered rates for deposits in U.S. dollars for the period of
the applicable Index Maturity which appear on the Reuters Screen LIBO Page
at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date if at least two such offered rates appear on the Reuters
Screen LIBO Page ("LIBOR Reuters"), or (ii) the rate for deposits in U.S.
dollars for the period of the applicable Index Maturity that appears on the
Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR Interest
Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page" means the
display designated as Page "LIBO" on the Reuters Monitor Money Rate Service
(or such other page as may replace the
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LIBO page on the service for the purpose of displaying London interbank
offered rates of major banks). "Telerate Page 3750" means the display
designated as page "3750" on the Telerate Service (or such other page as may
replace the 3750 page on that service or such other service or services as
may be nominated by the British Bankers' Association for the purpose of
displaying London interbank offered rates for U.S. dollar deposits). 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. If fewer than two offered rates appear on the Reuters Screen LIBO
Page, or if no rate appears on the Telerate Page 3750, as applicable, LIBOR
in respect of that LIBOR Interest Determination Date will be determined as
if the parties had specified the rate described in (b) below.
(b) If fewer than two offered rates appear on the Reuters Screen LIBO
Page or no rate appears on Telerate Page 3750, as applicable, the
Calculation Agent will request the principal London offices of four major
banks in the London interbank market, as selected by the Calculation Agent,
to provide the Calculation Agent with its offered quotations for deposits in
U.S. dollars for the period of the applicable Index Maturity to prime banks
in the London interbank market at approximately 11:00 a.m., London time,
commencing on the second London Business day immediately following such
LIBOR Interest Determination Date and in a principal amount equal to an
amount of not less than U.S.$1 million that is representative of a single
transaction in such market at such time. If at least two quotations are
provided, LIBOR in respect of that LIBOR Interest Determination Date will be
the arithmetic mean of rates quoted by three major banks in The City of New
York selected by the Calculation Agent at approximately 11:00 a.m., New York
City time, commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date for loans in U.S. dollars
to leading European banks, for the period of the applicable Index Maturity
and in a principal amount equal to an amount of not less than U.S. $1
million that is representative for a single transaction in such market at
such time; PROVIDED, HOWEVER, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting rates as mentioned in this
sentence, the rate of interest in effect for the applicable period 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 and/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 indicated in the applicable Pricing Supplement, "Treasury
Rate" means, for 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. If 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 action is held during such week, then the
Treasury Rate shall be the rate set forth in H.15(519) for the relevant Treasury
Interest Determination Date for the specified Index Maturity under the heading
"U.S. Government Securities/Treasury Bills/Secondary Market." If such rate is
not so published by 3:00 p.m., New York City time, on the relevant Calculation
Date, the Treasury Rate for 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
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selected as provided above by the Calculation Agent are quoting as mentioned in
this sentence, the Treasury Rate for 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 and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, for 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)." If such rate is not published before 9:00 a.m., New York City time, on
the relevant Calculation Date, then the CD Rate for 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 for 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 provided above by the
Calculation Agent are quoting as mentioned in this sentence, the CD Rate for
such Interest Reset Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
CMT RATE NOTES
CMT Rate Notes will bear interest at the interest rates (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CMT Rate Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to an Interest
Reset Date For a Floating Rate Note for which the interest rate is determined
with reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the
rate displayed on the Designated CMT Telerate Page under the caption
"...Treasury Constant Maturities...Federal Reserve Board Release H.15...Mondays
Approximately 3:45 P.M.," under the column for the Designated CMT Maturity Index
for (i) if the Designated CMT Telerate Page is 7055, the rate on such CMT Rate
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the week, or the month, as applicable, ended immediately preceding the
week in which the related CMT Rate Interest Determination Date occurs. If such
rate is no longer displayed on the relevant page or is not displayed by 3:00
P.M., New York City time, on the related Calculation Date, then the CMT Rate for
such CMT Rate Interest Determination Date will be such treasury constant
maturity rate for the Designated CMT Maturity Index as published in the relevant
H.15(519). If such rate is no longer published or is not published by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate on such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate on the CMT Rate Interest Determination Date will be calculated by the
Calculation Agent and will be a yield to
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maturity, based on the arithmetic mean of the secondary market closing offer
side prices as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York (which may include the Agent or its
affiliates) selected by the Calculation Agent (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent is unable to obtain three such Treasury
Note quotations, the CMT Rate on such CMT Rate Interest Determination Date will
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from five
such Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for
Treasury Notes with an original maturity of the number of years that is the next
highest to the Designated CMT Maturity Index and a remaining term to maturity
closest to the Designated CMT Maturity Index and in an amount of at least $100
million. If three or four (and not five) of such Reference Dealers are quoting
as described above, then the CMT Rate will be based on the arithmetic mean of
the offer prices obtained and neither the highest nor the lowest of such quotes
will be eliminated; PROVIDED, HOWEVER, that if fewer than three Reference
Dealers so selected by the Calculation Agent are quoting as mentioned herein,
the CMT Rate determined as of such CMT Rate Interest Determination Date will be
the CMT Rate in effect on such CMT Rate Interest Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the Calculation Agent will obtain from five Reference Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable Pricing Supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable Pricing
Supplement, the Designated CMT Maturity Index shall be 2 years.
FEDERAL FUNDS RATE NOTES
Federal Funds Rates Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/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, "Federal
Funds Rate" means, for 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)." If such rate is not published
before 9:00 a.m., New York City time, on the relevant Calculation Date, then the
Federal Funds Rate for 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 for 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
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Funds Interest Determination Date, for the last transaction in overnight Federal
Funds arranged by 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 by the Calculation Agent are quoting as
mentioned in this sentence, the Federal Funds Rate for 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 than U.S.
dollars will nevertheless be made in U.S. dollars:
(a) at the option of the Holders of such Notes under the procedures
described in the two following paragraphs; and
(b) at the Company's option in the case of imposition of exchange
controls or other circumstances beyond the Company's control 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) for any Note denominated in other than U.S. dollars will be
made in U.S. dollars if the registered 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 Paying Agent at the
Paying Agent Office in The City of New York on or before such Regular Record
Date, or the date 15 days before 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 for any Note by a registered
Holder will remain in effect for any further payments of interest and principal
(and premium, if any) on such Note payable to such Holder, unless such request
is revoked on or before the relevant Regular Record Date or the date 15 days
before maturity, as the case may be. 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 to elect to
receive payments in U.S. dollars.
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
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent (as defined below) as of 11:00 a.m., New York City time on
the second Business Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the quoting dealer of the Specified Currency for U.S.
dollars for settlement on such payment date in the aggregate amount of the
Specified Currency payable to all Holders of Notes electing to receive U.S.
dollar payments and at which the applicable dealer commits to execute a
contract. 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
for 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. The Exchange
Rate Agent (the "Exchange Rate Agent") with respect to any Notes denominated in
other than U.S dollars will be specified in the applicable Pricing Supplement.
Interest will be payable to the person in whose name a Note is registered
(which for a permanent global Note representing Book-Entry Notes will be the
Depositary or a nominee of the Depositary) 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 for permanent global Notes representing
Book-Entry Notes, will be the Depositary or a nominee of the Depositary). 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 second such Interest
Payment Date next succeeding its date of issue to the registered owner on the
Regular Record Date relating to
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such second Interest Payment Date. Unless otherwise indicated in the applicable
Pricing Supplement, the "Regular Record Date" for any Floating Rate Note shall
be the date 15 calendar days before each Interest Payment Date, whether or not
such date shall be a Business Day, and the "Regular Record Date" for any Fixed
Rate Note shall be the May 1 and November 1 next preceding the May 15 and
November 15 Interest Payment Dates unless otherwise indicated in the applicable
Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement and except
as provided below, interest will be payable:
(a) for Floating Rate Notes that reset daily, 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);
(b) for Floating Rate Notes that reset weekly, 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);
(c) for Floating Rate Notes that 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);
(d) for Floating Rate Notes that reset quarterly, on the third Wednesday
of March, June, September, and December of each year;
(e) for Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
(f) for Floating Rate Notes that reset annually, on the third Wednesday
of the month specified in the applicable Pricing Supplement; and
(g) for Floating Rate Notes that reset at intervals other than those
described above, on the days specified in the applicable Pricing
Supplement,
each an "Interest Payment Date," and in each case, at maturity. If an Interest
Payment Date (other than at Stated Maturity, a Redemption Date or an Optional
Repayment Date (as defined below under "Repayment at the Option of the Holder"))
with respect to any Floating Rate Note would otherwise fall on a day that is not
a Market Day with respect to such Note (and for any Note denominated in other
than U.S. dollars, a Business Day in the country issuing the Specified Currency
(or, for ECUs, Brussels)), such Interest Payment Date will be on the next
succeeding Market Day (with interest accruing to but excluding 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 (with interest accruing
to but excluding the next preceding Market Day)). If the Stated Maturity,
Redemption Date or Optional Repayment Date of a Floating Rate Note falls on a
day that is not a Market Day (and for any Note denominated in other than U.S.
dollars, a Business Day in the country issuing the Specified Currency (or, for
ECUs, Brussels)), the required payment of principal, premium, if any, and
interest will be made on the next succeeding Market Day as if made on the date
such payment was due, and no interest will accrue on such payment for the period
from and after the Stated Maturity, Redemption Date or Optional Repayment Date,
as the case may be, to the date of such payment on the next succeeding Market
Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payments in respect of Fixed Rates Note and Floating Rate Notes will equal the
amount of interest accrued from and including the immediately preceding Interest
Payment Date in respect of which interest has been paid or duly made available
for payment (or from and including the date of issue, if no interest has been
paid or duly made available for payment) to but excluding the applicable
Interest Payment Date or the Stated Maturity, as the case may be.
For a Floating Rate Note, accrued interest from (and including) the date of
issue or from (and including) the last date to which interest has been paid is
calculated by multiplying the face amount of
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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
(and including) the date of issue, or from (and including) the last date to
which interest has been paid, 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 for 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 for Treasury Rate Notes or CMT Rate Notes. Interest
on Fixed Rate Notes will be computed on the basis of a 360-day year of twelve
30-day months.
A payment on any Fixed Rate Note due on any day that is not a Market Day
(and, for any Note denominated in other than U.S. dollars, a Business Day in the
country issuing the Specified Currency (or, for ECUs, Brussels)) need not be
made on such a day, but may be made on the next succeeding Market 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.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Note (other than a Book-Entry Note) at maturity will be made in
immediately available funds upon surrender of such Note at the Paying Agent
Office in The City of New York, provided that the Note is presented to the
Paying Agent in time for the Paying Agent to make such payments in such funds in
accordance with its normal procedures. Payments of interest on any Note (other
than any Book-Entry Note) other than at maturity will be made by check mailed to
the address of the Person (which, in the case of a permanent global Note
representing Book-Entry Notes, shall be the Depositary) entitled thereto as it
appears in the Security Register or by wire transfer to such account as may have
been appropriately designated by such Person. Payments in respect of Book-Entry
Notes are further discussed under "Book-Entry Notes."
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.
AMORTIZING NOTES
The Company may from time to time offer Notes for which payments of
principal and interest are made over the life of the Notes ("Amortizing Notes").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same date
of issue will be represented by a single permanent global Note. Each permanent
global Note representing Book-Entry Notes will be deposited with, or on behalf
of, The Depository Trust Company, as Depositary (the "Depositary"), located in
the Borough of Manhattan, The City of New York, and will be registered in the
name of the Depositary or a nominee of the Depositary. Currently, the Depositary
will accept the deposit of only permanent global Notes denominated in U.S.
dollars.
Ownership of beneficial interests in a permanent global Note representing
Book-Entry Notes will be limited to institutions that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. In addition, ownership of beneficial interests by
participants in such a permanent global Note will be evidenced only by, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depositary or its nominee for such permanent global Note.
Ownership of beneficial interests in such a permanent global Note by persons
that hold
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through participants will be evidenced only by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in such a permanent global Note.
The Company has been advised by the Depositary that upon the issuance of a
permanent global Note representing Book-Entry Notes, and the deposit of such
permanent global Note with the Depositary, the Depositary will immediately
credit, on its book-entry registration and transfer system, the respective
principal amounts of the Book-Entry Notes represented by such permanent global
Note to the accounts of participants. The accounts to be credited shall be
designated by the soliciting Agent or, to the extent that the Book-Entry Notes
are offered and sold directly, by the Company.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any permanent global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and Holder of the permanent global Note
representing such Book-Entry Notes. Neither the Company, the Trustee, nor any
agent of the Company or the Trustee will have any responsibility or liability
for any aspect of the Depositary's records or any participant's records relating
to or payments made on account of beneficial ownership interests in a permanent
global Note representing such Book-Entry Notes or for maintaining, supervising
or reviewing any of the Depositary's records or any participant's records
relating to such beneficial ownership interests.
The Company has been advised by the Depositary that upon receipt of any
payment of principal of or any premium or interest in respect of a permanent
global Note, the Depositary will immediately credit, on its book-entry
registration and transfer system, accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such permanent global Note as shown on the records of the Depositary.
Payments by participants to owners of beneficial interests in a permanent global
Note held through such participants will be governed by standing instructions
and customary practices, as is now the case with securities held for the
accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
No permanent global Note described above may be transferred except as a
whole by the Depositary for such permanent global Note to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary.
A permanent global Note representing Book-Entry Notes is exchangeable for
definitive Notes registered in the name of, and a transfer of a permanent global
Note may be registered to, any Person other than the Depositary or its nominee,
only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such permanent global Note or if at any
time the Depositary ceases to be a clearing agency registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Company in its sole discretion determines that such permanent
global Note shall be exchangeable for definitive Notes in registered
form; or
(c) any event shall have happened and be continuing that constitutes or,
after notice or lapse of time, or both, would constitute an Event of
Default with respect to the Notes.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount, in
denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in excess
thereof. Such definitive Notes shall be registered in the name or names of
such person or persons as the Depositary shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by the
Depositary from its participants with respect to ownership of beneficial
interests in such permanent global Note.
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Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture, and no permanent global Note representing Book-Entry Notes
shall be exchangeable, except for another permanent global Note of like
denomination and tenor to be registered in the name of the Depositary or its
nominee. Accordingly, each person owning a beneficial interest in such permanent
global Note must rely on the procedures of the Depositary 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.
The Indenture provides that the Depositary, as a Holder, may appoint agents
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 an owner of a beneficial interest in such permanent
global Note desires to give or take any action that a Holder is entitled to give
or take under the Indenture, the Depositary 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.
The Depositary has advised the Company that the Depositary 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 agency"
registered under the Exchange Act. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations, and certain other organizations, some of whom
(or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly.
REGARDING THE PAYING AGENT
The Paying Agent maintains a banking relationship with, and may make loans
to, the Company.
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to Stated Maturity only if one or more optional repayment dates
are specified in the applicable Pricing Supplement ("Optional Repayment Dates").
If so specified, the Notes will be subject to repayment at the option of the
Holders thereof on any Optional Repayment Date in whole or from time to time in
part in increments of $1,000 or such other minimum denomination specified in the
applicable Pricing Supplement (provided that any remaining principal amount
thereof shall be at least $1,000 or such other minimum denomination), at a
repayment price equal to 100% of the unpaid principal amount to be repaid (or,
if this Note is an Original Issue Discount Note, such lesser amount as provided
therein), together with unpaid interest accrued to the date of repayment. For
any Note to be repaid, such Note must be received, together with the form
thereon entitled "Option to Elect Repayment" duly completed, by the Trustee at
its Corporate Trust Office (or such other address of which the Company shall
from time to time notify the Holders) not more than 60 nor less than 30 calendar
days prior to the date of repayment. Exercise of such repayment option by the
Holder will be irrevocable.
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, holders of beneficial
interests ("Beneficial Owners") of a permanent global Note that desire to have
all or any portion of the Book-Entry Notes represented by such permanent global
Note repaid must instruct the participant through which they own their interest
to direct the Depositary to exercise the repayment option on their behalf by
delivering the related permanent global Note and duly completed election form to
the Trustee as aforesaid. In order to ensure that such
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permanent global Note and election form are received by the Trustee on a
particular day, the applicable Beneficial Owner must so instruct the participant
through which it owns its interest before such participant's deadline for
accepting instructions for that day. Different firms may have different
deadlines for accepting instructions from their customers. Accordingly,
Beneficial Owners should consult the participants through which they own their
interest for the respective deadlines for such participants. All instructions
given to participants from Beneficial Owners of permanent global Notes relating
to the option to elect repayment shall be irrevocable. In addition, at the time
such instructions are given, each such Beneficial Owner shall cause the
participant through which it owns its interest to transfer such Beneficial
Owner's interest in the permanent global Note or Notes representing the related
Book-Entry Notes, on the Depositary's records, to the Trustee. See "Book-Entry
Notes."
If applicable, the Company will comply with the requirements of Rule 14c-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
any other securities laws or regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
OPTIONAL REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be redeemable prior to their Stated Maturity. If so specified in the
applicable Pricing Supplement, the Notes will be redeemable at the option of the
Company at any time after the date or dates specified therein. If one or more
such dates are so specified with respect to any Note, 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. Unless otherwise specified in the Pricing Supplement, any
such Note shall be redeemable at the option of the Company at the specified
Redemption Price applicable to the Redemption Period during which such Note is
to be redeemed, together with interest accrued to the Redemption Date.
If so specified in the applicable Pricing Supplement, the Notes will be
redeemable at the Company's option, as a whole or from time to time in part, on
any date prior to their Stated Maturity at a Redemption Price equal to 100% of
the principal amount thereof plus accrued interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date), plus a Make-Whole Premium, if any.
The "Make-Whole Premium" in respect of any Note is intended to be the
amount, if any, which, when added to the then outstanding principal amount of
such Note, would, if invested on the Redemption Date of such Note in U.S.
Treasury securities with maturities equal to the Remaining Life of the Notes,
have a yield to maturity equal to the original yield to maturity of the Notes,
based on the initial public offering price of the Notes set forth in the
applicable Pricing Supplement. The amount of the Make-Whole Premium in respect
of the principal amount of any Note to be redeemed will be the excess, if any,
of (i) the sum of the present values, as of the Redemption Date of such Note, of
(A) the respective interest payments (exclusive of the amount of accrued
interest to the Redemption Date) on such Note that, but for such redemption,
would have been payable on their respective Interest Payment Dates after such
Redemption Date, and (B) the payment of such principal amount that, but for such
redemption, would have been payable on the Stated Maturity over (ii) the amount
of such principal to be redeemed. Such present values will be determined in
accordance with generally accepted principals of financial analysis by
discounting the amounts of such payments of interest and principal from their
respective Stated Maturities to such Redemption Date at a discount rate equal to
the Treasury Yield.
The "Treasury Yield" in respect of any Note to be redeemed shall be
determined as of the date on which notice of redemption of such Note is sent to
the Holder thereof by reference to the most recent Federal Reserve Statistical
Release H.15 (519) (or successor publication) which has become publicly
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available not more than two Business Days prior to such date (or, if such
Statistical Release (or successor publication) is no longer published or no
longer contains the applicable data, to the most recently published issue of THE
WALL STREET JOURNAL (EASTERN EDITION) published not more than two Business Days
prior to such date that contains such data or, if THE WALL STREET JOURNAL
(EASTERN EDITION) is no longer published or no longer contains such data, to any
publicly available source of similar market data), and shall be the most recent
weekly average yield on actively traded U.S. Treasury securities adjusted to a
constant maturity equal to the Remaining Life of the Notes and, if applicable,
converted to a bond equivalent yield basis as described below. The "Remaining
Life of the Notes" shall equal the number of years from the Redemption Date to
the Stated Maturity of the Notes; PROVIDED that if the Remaining Life of the
Notes being redeemed is not equal to the constant maturity of a U.S. Treasury
security for which a weekly average yield is specified in the applicable source,
then the Remaining Life of the Notes shall be rounded to the nearest one-twelfth
of one year and the Treasury Yield shall be obtained by linear interpolation
(computed to the fifth decimal place (one thousandth of a percentage point) and
then rounded to the fourth decimal place (one hundredth of a percentage point)),
after rounding to the nearest one-twelfth of one year, from the weekly average
yields of (a) the actively traded U.S. Treasury security with a maturity closest
to and less than the Remaining Life of the Notes and (b) the actively traded
U.S. Treasury security with a maturity closest to and greater than the Remaining
Life of the Notes, except that if the Remaining Life of the Notes is less than
three months, the weekly average yield on actively traded U.S. Treasury
securities adjusted to a constant maturity of three months shall be used. The
Treasury Yield shall, if expressed on a yield basis other than that equivalent
to a bond equivalent yield basis, be converted to a bond equivalent yield basis
and shall be computed to the fifth decimal place (one thousandth of a percentage
point) and then rounded to the fourth decimal place (one hundredth of a
percentage point).
Notice of redemption will be provided by mailing a notice of such redemption
to each Holder by first class mail, postage prepaid, at least 30 days and not
more than 60 days prior to the date fixed for redemption to the respective
address of each Holder as that address appears in the Security Register.
The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be held
or resold or surrendered to the Trustee for cancellation.
UNITED STATES TAXATION
The following discussion is a summary of the principal United States federal
income tax consequences of ownership and disposition 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 the ownership and disposition
of Notes.
UNITED STATES HOLDERS
PAYMENTS OF INTEREST
Interest on a Note, whether payable in U.S. dollars or a currency, composite
currency or basket of currencies other than U.S. dollars (a "foreign currency"),
other than interest on a "Discount Note" that is
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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 a 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.
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).
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").
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 (x)
the average exchange rate used to accrue interest income, or the exchange rate
as determined under the second method described above if the United States
Holder elects that method, and (y) the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted into U.S.
dollars.
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
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
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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 maturity of more than one
year from their date of issue must, generally, include original issue discount
("OID") in income calculated on a constant-yield method before the receipt of
cash attributable to such income. 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 (as determined above under "Original Issue Discount
- -- General") (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,
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respectively, multiplied by the number of complete years to the Note's 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" and such Note is not
subject to the rules discussed in the following paragraphs. 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 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. 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 (other than a remote or
incidental contingency), the timing and amounts of the payments that comprise
each payment schedule are known as of the issue date and one of such schedules
is significantly more likely than not to occur, the yield and maturity of the
Note are determined by assuming that the payments will be made according to that
payment schedule. If there is no single payment schedule that is significantly
more likely than not to occur (other than because of a mandatory sinking fund),
the Note will be subject to special rules governing contingent payment
obligations that will be discussed in the applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the Holder has an
unconditional option or options that, if exercised, would require payments to be
made on the Note under an alternative payment schedule or schedules, 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. If
both the Company and the Holder have options described in the preceding
sentence, those rules apply to such options in the order in which they may be
exercised. 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 the change in circumstances and solely for
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purposes of determining the amount and accrual of OID, the yield and maturity of
the Note are redetermined by treating the Note as having been retired and
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 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 its cost to the
electing United States Holder, 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 maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) does not provide for stated interest other than 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 0.65 but not more than 1.35, or (b) a
fixed multiple greater than 0.65 but not more than 1.35, increased or decreased
by a fixed rate. If a Note provides for two or more qualified floating rates
that (i) are within 0.25 percent of each other on the issue date or (ii) can
reasonably be expected to have approximately the same values throughout the term
of the Note, the qualified floating rates together constitute a single qualified
floating 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.
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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 objective
financial or economic information that is not within the control of or unique to
the circumstances of the issuer or a related party. 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.
If interest on a Note is stated at a fixed rate for an initial period of one
year or less followed by either a qualified floating rate or an objective rate
for a subsequent period and (i) the fixed rate and the qualified floating rate
or objective have values on the issue date of the Note that do not differ by
more than 0.25 percent or (ii) the value of the qualified floating rate or
objective rate is intended to approximate the fixed rate, the fixed rate and the
qualified floating rate or the objective rate constitute a single qualified
floating rate or objective rate. Under these rules, Commercial Paper Rate Notes,
Prime Rate Notes, LIBOR Notes, Treasury Rate Notes, CD Rate Notes, CMT Rate
Notes and Federal Funds Rate Notes 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 a single objective rate and also does not provide for
interest payable at a 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 substitutes 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 specially
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
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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.
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, amortizable 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 (i) the date payment is received in the case of a cash basis
United States Holder, (ii) the date of disposition in the case of an accrual
basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash
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<PAGE>
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 or with respect certain contingent
payment obligations, 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.
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.
INDEXED NOTES, OTHER NOTES SUBJECT TO THE CONTINGENT PAYMENT RULES AND
AMORTIZING NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes, payments on which are
determined by reference to any index, and with respect to other Notes subject to
the contingent payment rules and any Amortizing Notes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder of a Note who 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 income or
gain from a Note. This discussion assumes that the Note is not subject to the
rules of Section 871(h)(4)(A) of the Code (relating to interest payments that
are determined by reference to the income, profits, changes in the value of
property or other attributes of the debtor or a related party).
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
that 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 (a) the individual did not
actually or constructively own 10% or
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<PAGE>
more of the total combined voting power of all classes of stock of the
Company entitled to vote and (b) 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.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Notes held by a foreign
partnership, that (x) the certification described in clause (i)(c) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for payments
made after December 31, 1997. There can be no assurance that the Proposed
Regulations will be adopted or as to the provisions that they will include if
and when adopted in temporary or final form.
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, 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 is notified by the Service that it has failed to report all interest
and dividends required to be shown on its federal income tax returns.
UNITED STATES ALIEN HOLDERS
Under current law, information reporting on Internal Revenue Service Form
1099 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; provided, the certification described in
clause (i)(c) under "United States Alien Holders" above is received; and
provided further that the payor does not have actual knowledge that the holder
is a United States person. The Company or a paying agent, however, may report
(on Internal Revenue Service Form 1042S) payments of interest (including OID) on
Notes. See the discussion above with respect to the rules under the Proposed
Regulations.
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.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms set forth in the Distribution Agreement, dated August
15, 1996 (the "Distribution Agreement"), the Notes are being offered on a
continuing basis by the Company through agents, including Goldman, Sachs & Co.
and Morgan Stanley & Co. Incorporated (collectively, the "Agents"). Goldman,
Sachs & Co. and Morgan Stanley & Co. Incorporated have agreed to use reasonable
efforts to solicit purchases of the Notes. The Company will have the sole right
to accept offers to purchase Notes and may reject any proposed purchase of Notes
as a whole or in part. The Agents shall have the right, in their discretion
reasonably exercised, to reject any offer to purchase Notes, as a whole or in
part. The Company will pay the Agents a commission of from .125% to .750% of the
principal amount of Notes, depending upon maturity, for sales made through them
as Agents, with commissions with respect to Notes in excess of 30 years to be
negotiated between the Company and the Agents at the time of sale.
S-25
<PAGE>
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page of this Prospectus Supplement in the case of any
such principal transaction in which no other discount is agreed. Such Notes may
be resold at prevailing market prices, or at prices related thereto, at the time
of such resale, as determined by the Agents. The Company reserves the right to
sell Notes directly on its own behalf. No commission will be payable on any
Notes sold directly by the Company.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer may include all or part of the discount to be received
from the Company. Unless otherwise indicated in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a percentage
equal to the commission applicable to any agency sale of a Note of identical
maturity. After the initial public offering of Notes to be resold to investors
and other purchasers on a fixed public offering price basis, the public offering
price, concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse the Agents for
certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
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.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for the Company in the
ordinary course of business.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Kevin J.
Tierney, Senior Vice President, Secretary and General Counsel and Skadden, Arps,
Slate, Meagher & Flom, New York, New York with respect to certain matters of New
York law, and for the Agents by Sullivan & Cromwell, New York, New York. The
opinions of Kevin J. Tierney, Skadden, Arps, Slate, Meagher & Flom and Sullivan
& Cromwell will be based upon, and subject to, certain assumptions as to future
actions required to be taken in connection with the issuance and sale of the
Notes and as to other events that may affect the validity of the Notes but that
cannot be ascertained on the date of such opinions.
S-26
<PAGE>
UNUM CORPORATION
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
-----------------
UNUM Corporation may from time to time offer, together or separately, its
(i) debt securities (the "Debt Securities") which may be either senior debt
securities (the "Senior Debt Securities") or subordinated debt securities (the
"Subordinated Debt Securities"); (ii) shares of its preferred stock, $.10 par
value (the "Preferred Stock"); (iii) shares of its common stock, $.10 par value
(the "Common Stock"); and (iv) warrants to purchase Debt Securities, Preferred
Stock, Common Stock or other securities of the Company as shall be designated by
the Company at the time of offering (the "Warrants"), in amounts, at prices and
on terms to be determined at the time of offering. The Debt Securities,
Preferred Stock, Common Stock and Warrants are collectively called the
"Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will be limited to $500,000,000 aggregate public
offering price (or its equivalent (based on the applicable exchange rate at the
time of sale) in one or more foreign currencies, currency units or composite
currencies as shall be designated by the Company). 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, (i) in the case of Debt Securities,
the specific title, aggregate principal amount, whether such Debt Securities are
Senior Debt Securities or Subordinated Debt Securities, maturity date, initial
public offering or purchase price, interest rate or rates (which may be fixed,
floating or adjustable) and timing of payments thereof, yield, provision for
redemption or sinking fund requirements, if any, currencies of denomination or
currencies otherwise applicable thereto, terms for any conversion or exchange
into Common Stock or other securities or property of the Company, in the case of
Subordinated Debt Securities, any other variable terms, any listing on a
securities exchange and methods of distribution; (ii) 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 Common Stock or
other securities or property of the Company, methods of distribution and the
initial public offering or purchase price and other special terms; (iii) in the
case of Common Stock, the methods of distribution and the public offering or
purchase price; and (iv) in the case of Warrants, the securities of the Company
which are issuable upon exercise of the Warrants, the exercise period, the
methods of distribution, the initial public offering or purchase price and the
exercise price and detachability of such Warrants if issued with other
securities. All or a portion of the Debt Securities of a series may be issuable
in temporary or permanent global form. The Company's Common Stock is listed on
the New York Stock Exchange and the Pacific Stock Exchange under the trading
symbol "UNM." Any Common Stock sold pursuant to a Prospectus Supplement will be
listed on such exchanges, subject to official notice of issuance.
The Debt Securities will be unsecured. Unless otherwise specified in a
Prospectus Supplement, the Senior Debt Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities will be subordinated in right of payment to all Senior
Indebtedness of the Company (as hereinafter defined).
The Prospectus Supplement may contain information concerning certain United
States Federal income tax considerations applicable to the Securities offered
therein.
The Securities may be sold by the Company directly or through agents,
underwriters or dealers, as designated from time to time or through a
combination of such methods. If agents of the Company or any dealers or
underwriters are involved in the sale of the Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers or underwriters
and any applicable commissions or discounts will be set forth in or may be
calculated from the Prospectus Supplement with respect to such Securities. See
"Plan of Distribution."
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
THE DATE OF THIS PROSPECTUS IS AUGUST 2, 1996.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS, DEALERS OR AGENTS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
NORTH CAROLINA
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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following Regional Offices of the Commission: Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Northeast Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549at prescribed rates. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Reports, proxy and information statements and other information
concerning the Company may also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 and the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California 94104, on which
certain of the Company's securities are listed.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby (the "Registration Statement"). 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. Reference is made to the Registration Statement
and to the exhibits relating thereto for further information with respect to the
Company and the Securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995 (except for Items 7 and 8 of Part II and Item 14 of Part IV), Quarterly
Report on Form 10-Q for the three-month period ended March 31, 1996, and Current
Report on Form 8-K dated January 24, 1996, filed by the Company under the
Exchange Act, and the description of the Company's Common Stock and Share
Purchase Rights Plan contained in its Registration Statements filed pursuant to
Section 12 of the Exchange Act and any amendment or report filed for the purpose
of updating those descriptions, are incorporated herein by reference.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of the Securities shall hereby be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein or in
the accompanying Prospectus Supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). Requests for such copies should
be directed to the office of the Secretary, UNUM Corporation, 2211 Congress
Street, Portland, Maine, 04122, telephone number (207) 770-4319.
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<PAGE>
THE COMPANY
UNUM Corporation ("the Company") is a Delaware corporation organized in 1985
as an insurance holding company. The Company and its subsidiaries ("UNUM") are
the leading providers of group long term disability insurance ("group LTD") in
the United States and the United Kingdom. UNUM is also a major provider of
employee benefits, individual disability insurance and special risk reinsurance.
UNUM also markets long term care and retirement income products. UNUM is based
in Portland, Maine and through its affiliates has offices in North America, the
United Kingdom and the Pacific Rim. The Company's principal executive offices
are located at 2211 Congress Street, Portland, Maine 04122 and its telephone
number is (207) 770-2211.
The operations of the following subsidiaries account for substantially all
of UNUM's consolidated assets and revenues: UNUM Life Insurance Company of
America ("UNUM America"), the leading provider of group disability insurance in
the nation and a provider of employee benefits, long term care and retirement
products; First UNUM Life Insurance Company (New York state only) ("First
UNUM"); Commercial Life Insurance Company, a leader in special risk insurance
and professional association insurance marketing; UNUM Limited, the leading
group disability insurance provider in the United Kingdom; Duncanson & Holt,
Inc., a leading accident and health reinsurance underwriting manager; Colonial
Life & Accident Insurance Company ("Colonial"), a leader in payroll-deducted
voluntary employee benefits offered to employees at their worksites; and UNUM
Japan Accident Insurance Company Limited.
BUSINESS SEGMENTS
UNUM reports its operations principally in four business segments:
Disability Insurance, Special Risk Insurance, Colonial Products and Retirement
Products. Corporate includes transactions that are generally non-insurance
related and interest expense on corporate borrowings.
DISABILITY INSURANCE SEGMENT. The Disability Insurance segment, which in
1995 accounted for 60.0% of UNUM's revenues and 56.8% of its income before
income taxes, includes disability products offered in North America, the United
Kingdom and Japan including: group LTD, individual disability, group short term
disability, association group disability, disability reinsurance and long term
care insurance.
Group LTD is the Disability Insurance segment's principal product. UNUM
America and First UNUM target sales of group LTD to executive, administrative
and management personnel, and other professionals. Since 1976, UNUM America and
First UNUM combined have been the United States' leading provider of group LTD
according to EMPLOYEE BENEFIT PLAN REVIEW, a recognized industry publication.
UNUM Limited targets group LTD sales to management personnel, other
professionals, and technical and skilled artisans. UNUM Limited was the leading
provider for 1995 of group LTD insurance in the United Kingdom, as reported by
Employers Re. International.
SPECIAL RISK INSURANCE SEGMENT. The Special Risk Insurance segment in 1995
accounted for 18.2% of UNUM's revenues and 15.8% of its income before income
taxes. The Special Risk Insurance segment includes group life, special risk
accident insurance, non-disability reinsurance operations, reinsurance
underwriting management operations and other special risk insurance products.
COLONIAL PRODUCTS SEGMENT. The Colonial Products segment in 1995 accounted
for 12.8% of UNUM's revenues and 23.0% of its income before income taxes. The
Colonial Products segment includes Colonial and affiliates. Colonial, the
principal subsidiary, markets a broad line of payroll-deducted, voluntary
benefits to employees at their worksites, while focusing on accident and
sickness, cancer and life products.
RETIREMENT PRODUCTS SEGMENT. The Retirement Products segment accounted for
8.7% of UNUM's revenues and 11.9% of its income before income taxes in 1995.
This segment markets and services tax-
3
<PAGE>
sheltered annuities in UNUM America and First UNUM. This segment also includes
guaranteed investment contracts, deposit administration accounts, 401(k) plans,
individual life and group medical insurance, all of which are no longer actively
marketed by UNUM.
RECENT DEVELOPMENTS
During the first quarter of 1996, UNUM America and First UNUM entered into
an agreement for the sale of their respective group tax-sheltered annuity
("TSA") businesses to The Lincoln National Life Insurance Company ("Lincoln
Life"), a part of Lincoln National Corporation, and to a new New York insurance
subsidiary of Lincoln Life. The sale, which is subject to regulatory approvals,
involves approximately 1,700 group contractholders and assets under management
of approximately $3 billion. The agreement initially contemplates the
reinsurance of these contracts under an indemnity reinsurance arrangement. These
contracts will then be reinsured pursuant to an assumption reinsurance
arrangement upon consent of the TSA contractholders and/or participants. The
purchase price (ceding commission) at closing is expected to be approximately
$70 million. It is anticipated that it will take several months to obtain the
necessary approvals and otherwise close the sale. There is no guarantee that the
sale will close.
On February 7, 1996, UNUM announced plans to merge Commercial Life Insurance
Company into UNUM America to accelerate growth of its special risk business,
increase its commitment to the association group business and to improve
operating and capital efficiencies. The merger is expected to become effective
on December 31, 1996, subject to regulatory approvals.
On December 29, 1993, UNUM filed suit in the United States District Court
for the District of Maine, seeking a federal income tax refund. The suit is
based on a claim for a deduction in certain prior tax years, for $652 million in
cash and stock distributed to policyholders in connection with the 1986
conversion of Union Mutual Life Insurance Company to a stock company. UNUM has
fully paid, and provided for in prior years' financial statements, the tax at
issue in this litigation. On May 23, 1996, the District Court issued its
decision that the distribution in question was not a deductible expenditure.
UNUM believes its claims are meritorious, and expects to appeal the decision to
the Court of Appeals for the First Circuit. The ultimate recovery, if any,
cannot be determined at this time.
INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- -----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ---------- ----------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Fixed maturities:
Available for sale......................................... $ 9,135.4 $ 9,135.4 $ 1,640.6 $ 1,640.6
Held to maturity........................................... -- -- 6,227.2 6,168.6
Equity securities available for sale......................... 25.2 25.2 627.9 627.9
Mortgage loans............................................... 1,163.4 1,274.9 1,216.3 1,265.4
Real estate.................................................. 222.2 190.8
Policy loans................................................. 219.2 219.2 201.0 201.0
Other long-term investments.................................. 30.4 38.1
Short-term investments....................................... 896.7 896.7 291.9 291.9
----------- -----------
Total investments...................................... $ 11,692.5 $ 10,433.8
----------- -----------
----------- -----------
</TABLE>
UNUM's investment portfolio is concentrated in investment grade bonds. UNUM
evaluates total expected return after consideration of associated expenses and
losses, within criteria established for each product line. Product line
investment strategies are developed to complement business risks by meeting the
liquidity and solvency requirements of each product. UNUM purchases assets with
maturities, expected cash flows and prepayment conditions that are consistent
with these strategies. The
4
<PAGE>
nature and quality of the types of investments comply with policies established
by management, which are more stringent overall than the statutes and
regulations imposed by the jurisdictions in which UNUM's insurance subsidiaries
are licensed. UNUM's investments are reported in the consolidated financial
statements at net realizable value or net of any applicable allowances for
probable losses.
During the second quarter of 1995, UNUM sold virtually all of the common
stock portfolio of its United States subsidiaries, primarily due to
consideration of statutory capital requirements associated with investment in
common stocks and to increase future investment income. UNUM has reinvested the
proceeds from the sale of the common stock portfolio primarily in investment
grade fixed income assets. Dependent on capital considerations and market
conditions, UNUM may invest in equity securities in the future.
In November 1995, the FASB issued "A Guide to Implementation of Statement
115 on Accounting for Certain Investments in Debt and Equity Securities," which
provided a one-time opportunity to reassess the appropriateness of the
classifications of securities described in FAS 115, and to reclassify fixed
maturities from the held to maturity category without calling into question the
intent to hold other debt securities to maturity in the future. On December 31,
1995, UNUM reassessed its fixed maturity portfolio and, as allowed under the
implementation guidance, reclassified fixed maturities with an amortized cost of
$6,082.8 million and a related net unrealized gain of $393.0 million from the
held to maturity category to available for sale.
At December 31, 1995, the fixed maturity portfolio included $139.4 million
of below investment grade bonds (below "Baa") recorded at fair value, which
represented 1.5% of the fixed maturity portfolio, and had an associated
amortized cost of $133.8 million. At December 31, 1994, the carrying value of
below investment grade bonds included in the fixed maturity portfolio was $193.8
million, which represented 2.5% of the fixed maturity portfolio, and had an
associated market value of $193.4 million. The percentage of mortgage loans
delinquent 60 days or more on a contract delinquency basis was 0.2% and 1.8% at
December 31, 1995, and 1994, respectively.
5
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues
Premiums.................................................. $ 3,018.2 $ 2,721.3 $ 2,474.1 $ 2,142.4 $ 1,938.9
Net investment income (a)................................. 1,031.4 815.8 839.8 850.7 811.6
Fees and other income..................................... 73.3 75.5 83.1 55.4 34.0
---------- ---------- ---------- ---------- ----------
Total revenues.............................................. 4,122.9 3,612.6 3,397.0 3,048.5 2,784.5
Benefits and expenses
Benefits to policyholders................................. 2,493.0 2,239.0 1,775.7 1,532.6 1,387.1
Interest credited......................................... 227.4 242.7 281.0 328.4 357.7
Operating expenses........................................ 728.2 713.0 675.6 590.9 554.8
Commissions............................................... 369.9 355.9 326.8 298.9 258.8
Increase in deferred policy acquisition costs............. (114.7) (155.3) (135.1) (111.7) (104.8)
Interest expense.......................................... 37.2 18.7 12.7 10.9 11.3
---------- ---------- ---------- ---------- ----------
Total benefits and expenses............................. 3,741.0 3,414.0 2,936.7 2,650.0 2,464.9
---------- ---------- ---------- ---------- ----------
Income before income taxes and cumulative effects of
accounting changes......................................... 381.9 198.6 460.3 398.5 319.6
Income taxes................................................ 100.8 43.9 148.3 107.3 74.3
---------- ---------- ---------- ---------- ----------
Income before cumulative effects of accounting changes...... 281.1 154.7 312.0 291.2 245.3
Cumulative effects of accounting changes.................... -- -- (12.1) -- --
---------- ---------- ---------- ---------- ----------
Net Income.............................................. $ 281.1 $ 154.7 $ 299.9 $ 291.2 $ 245.3
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA
(at end of period)
Assets...................................................... $ 14,787.8 $ 13,127.2 $ 12,437.3 $ 11,959.8 $ 11,310.9
Short-term debt............................................. $ 126.5 $ 246.6 $ 110.0 $ 122.7 $ 150.1
Long-term debt.............................................. $ 457.3 $ 182.1 $ 128.6 $ 77.2 $ 51.5
Stockholders' equity........................................ $ 2,302.9 $ 1,915.4 $ 2,102.7 $ 2,010.9 $ 1,755.5
OTHER DATA
Earnings per share.......................................... $ 3.87 $ 2.09 $ 3.81(b) $ 3.71 $ 3.15
Dividends paid per share.................................... $ 1.035 $ 0.92 $ 0.765 $ 0.625 $ 0.49
Book value per share........................................ $ 31.54 $ 26.45 $ 27.67 $ 25.44 $ 22.46
Number of shares (millions):
Shares outstanding........................................ 73.0 72.4 76.0 79.1 78.2
Weighted average shares outstanding....................... 72.7 74.2 78.8 78.5 77.8
Ratio of earnings to fixed charges (c)...................... 9.0 7.7 20.0 19.1 14.0
</TABLE>
- ----------
(a) Net investment income is comprised of investment income (net of expenses)
and net realized investment gains.
(b) Earnings per share before cumulative effects of accounting changes was
$3.96. Effective January 1, 1993, the Company adopted Financial Accounting
Standard No. 106, "Employers' Accounting for Postretirement Benefits Other
than Pensions," which decreased net income by $32.1 million, or $0.40 per
share, and Financial Accounting Standard No. 109, "Accounting for Income
Taxes," which increased net income by $20.0 million, or $0.25 per share.
(c) For purposes of computing the ratio of earnings to fixed charges, earnings
as adjusted consist of income from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense and the
estimated interest portion of rent expense.
6
<PAGE>
SELECTED CONSOLIDATED SEGMENT INCOME STATEMENT DATA OF THE COMPANY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Premiums and other income:
Disability Insurance Segment.............................. $1,879.9 $1,716.2 $1,547.9 $1,339.8 $1,214.6
Special Risk Insurance Segment............................ 702.3 607.1 559.4 432.8 368.5
Colonial Products Segment................................. 475.1 441.3 407.4 371.9 325.4
Retirement Products Segment 34.1 31.4 42.5 52.5 64.4
Corporate................................................. 0.1 0.8 -- 0.8 --
-------- -------- -------- -------- --------
Total premiums and other income......................... 3,091.5 2,796.8 2,557.2 2,197.8 1,972.9
-------- -------- -------- -------- --------
Net investment income: (a)
Disability Insurance Segment.............................. 592.9 400.3 369.8 370.5 333.8
Special Risk Insurance Segment............................ 48.4 40.7 34.8 32.2 26.5
Colonial Products Segment................................. 52.2 32.6 41.4 35.4 38.5
Retirement Products Segment............................... 323.7 338.0 387.6 408.7 411.3
Corporate................................................. 14.2 4.2 6.2 3.9 1.5
-------- -------- -------- -------- --------
Total net investment income............................. 1,031.4 815.8 839.8 850.7 811.6
-------- -------- -------- -------- --------
Total revenues.......................................... 4,122.9 3,612.6 3,397.0 3,048.5 2,784.5
-------- -------- -------- -------- --------
Benefits and expenses:
Disability Insurance Segment.............................. 2,255.8 2,060.3 1,603.6 1,446.6 1,306.4
Special Risk Insurance Segment............................ 690.4 581.9 555.3 418.7 355.2
Colonial Products Segment................................. 439.6 411.2 378.4 346.8 306.4
Retirement Products Segment 312.3 327.4 375.8 427.5 484.4
Corporate................................................. 42.9 33.2 23.6 10.4 12.5
-------- -------- -------- -------- --------
Total benefits and expenses............................. 3,741.0 3,414.0 2,936.7 2,650.0 2,464.9
-------- -------- -------- -------- --------
Income (loss) before income taxes and cumulative effects of
accounting changes:
Disability Insurance Segment.............................. 217.0 56.2 314.1 263.7 242.0
Special Risk Insurance Segment............................ 60.3 65.9 38.9 46.3 39.8
Colonial Products Segment................................. 87.7 62.7 70.4 60.5 57.5
Retirement Products Segment............................... 45.5 42.0 54.3 33.7 (8.7)
Corporate................................................. (28.6) (28.2) (17.4) (5.7) (11.0)
-------- -------- -------- -------- --------
Total income before income taxes and cumulative effects
of accounting changes.................................. 381.9 198.6 460.3 398.5 319.6
-------- -------- -------- -------- --------
Income taxes................................................ 100.8 43.9 148.3 107.3 74.3
-------- -------- -------- -------- --------
Cumulative effects of accounting changes.................... -- -- (12.1)(b) -- --
-------- -------- -------- -------- --------
Net income.............................................. $ 281.1 $ 154.7 $ 299.9 $ 291.2 $ 245.3
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ----------
(a) Net investment income is comprised of investment income (net of expenses)
and net realized investment gains.
(b) Effective January 1, 1993, the Company adopted Financial Accounting Standard
No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions," which decreased net income by $32.1 million, or $0.40 per share,
and Financial Accounting Standard No. 109, "Accounting for Income Taxes,"
which increased net income by $20.0 million, or $0.25 per share.
7
<PAGE>
USE OF PROCEEDS
Except as set forth in a Prospectus Supplement, the Company intends to use
the net proceeds from the sale of the Securities for general corporate purposes,
including working capital, capital expenditures, investment in subsidiaries,
refinancing of debt, possible future business acquisitions and for the
repurchase of its Common Stock. The Company does not have any present plans, and
is not engaged in any negotiations, for the use of any such proceeds, or the
issuance of Common Stock, in any future acquisition. Any proposal to use
proceeds from any offering of Securities in connection with an acquisition will
be disclosed in the Prospectus Supplement relating to such offering.
DESCRIPTION OF DEBT SECURITIES
The following description 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 and
the extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture, dated as of
September 15, 1990 (the "Senior Indenture"), between UNUM Corporation (for
purposes of this "Description of Debt Securities," exclusive of its
subsidiaries, the "Company") and The Chase Manhattan Bank, N.A., as trustee. The
Subordinated Debt Securities are to be issued under a separate Indenture dated
as of May 1, 1995 (the "Subordinated Indenture") between the Company and Mellon
Bank, N.A., as trustee. The Senior Indenture and the Subordinated Indenture are
sometimes referred to collectively as the "Indentures." Copies of the Senior
Indenture and the Subordinated Indenture are filed or incorporated by reference
as exhibits to the Registration Statement of which this Prospectus is a part.
The Chase Manhattan Bank, N.A. and Mellon Bank, N.A. are hereinafter referred to
as the "Trustee." The following summaries of certain provisions of the Senior
Debt Securities, the Subordinated Debt Securities and the Indentures do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Indentures applicable to a particular
series of Debt Securities, including the definitions therein of certain terms.
Wherever particular Sections, Articles or defined terms of the Indentures are
referred to, such Sections, Articles or defined terms are incorporated herein by
reference. Article and Section references used herein are references to the
applicable Indenture. Except as otherwise indicated, the terms of the Senior
Indenture and the Subordinated Indenture are identical. Capitalized terms not
otherwise defined herein shall have the meaning given in the Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and each Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more series. The
Debt Securities will be unsecured. Unless otherwise specified in the Prospectus
Supplement, the Senior Debt Securities when issued will be unsubordinated
obligations of the Company and will rank equally and ratably with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities when issued will be subordinated in right of payment to the prior
payment in full of all Senior Indebtedness (as defined below) of the Company, as
described under "Subordination of Subordinated Debt Securities" and in the
Prospectus Supplement applicable to an offering of Subordinated Debt Securities.
Since the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (including the Holders of Debt Securities), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized.
Reference is made to the Prospectus Supplement relating to the particular
Debt Securities offered thereby (the "Offered Debt Securities") which sets forth
whether the Offered Debt Securities shall be
8
<PAGE>
Senior Debt Securities or Subordinated Debt Securities, and further sets forth
the following terms, where applicable, of the Offered Debt Securities: (1) the
title of the Offered Debt Securities; (2) any limit on their aggregate principal
amount; (3) whether they are to be issuable in temporary or permanent global
form; (4) the price(s) (expressed as a percentage of the aggregate principal
amount thereof) at which they will be issued; (5) the date(s) on which they will
mature; (6) the rate(s) (which may be fixed, floating or adjustable) at which
they will bear interest, if any, and the date from which such interest will
accrue; (7) the dates on which such interest will be payable and the Regular
Record Dates for such Interest Payment Dates; (8) any mandatory or optional
sinking fund or analogous provisions; (9) any index or formula used to determine
the amount of payments of principal of and premium, if any, and interest; (10)
the date, if any, after which and the price(s) at which the Company may redeem
them at its option; (11) the currency or currencies (including composite
currencies) of payment of principal of and premium, if any, and interest thereon
if other than U.S. dollars (the "Specified Currency"); (12) the terms and
conditions, if any, pursuant to which the Subordinated Debt Securities are
convertible into or exchangeable for Common Stock or other securities or
property of the Company; (13) the Person to whom any interest on the Offered
Debt Securities will be payable, if other than the Person in whose name such
Offered Debt Securities are registered on any Regular Record Date; (14) the
place or places where principal of (and premium, if any) and interest, if any,
on Offered Debt Securities will be payable; (15) if other than denominations of
$1,000 and any integral multiple thereof, the denominations in which the Offered
Debt Securities will be issuable; (16) any event or events of default applicable
with respect to the Offered Debt Securities in addition to those provided in the
applicable Indenture; (17) any other covenant or warranty included for the
benefit of the Offered Debt Securities in addition to (and not inconsistent
with) those included in the applicable Indenture for the benefit of Debt
Securities of all series, or any other covenant or warranty included for the
benefit of the Offered Debt Securities in lieu of any covenant or warranty
included in the Indentures for the benefit of Debt Securities of all series or
any provision that any covenant or warranty included in the applicable Indenture
for the benefit of Debt Securities of all series shall not be for the benefit of
the Offered Debt Securities, or any combination of such covenants, warranties or
provisions; and (18) any other terms. (Section 301) Debt Securities may also be
issued under the Indentures upon the exercise of Warrants. See "Description of
Warrants."
The Indentures do not contain any provisions that afford Holders of the Debt
Securities protection in the event of a highly leveraged or similar transaction
involving the Company.
Offered Debt Securities may be issued at a substantial discount to their
principal amount (the "Original Issue Discount Securities"). Certain United
States Federal income tax and other considerations applicable to Original Issue
Discount Securities, and to Offered Debt Securities that are denominated in
other than U.S. dollars, will be described in the applicable Prospectus
Supplement.
The Indentures provide the Company with the ability, in addition to the
ability to issue Offered Debt Securities with terms different from those of Debt
Securities previously issued, to "reopen" a previous issue of a series of Debt
Securities and issue additional Offered Debt Securities of such series. (Section
301)
DENOMINATIONS, REGISTRATION AND TRANSFER
Unless otherwise provided in an applicable Prospectus Supplement with
respect to a series of Offered Debt Securities, Offered Debt Securities
denominated in U.S. dollars will be issued only in denominations of $1,000 or
any integral multiple thereof without coupons. The Prospectus Supplement
relating to a series of Offered Debt Securities denominated in a foreign or
composite currency will specify the denominations thereof. (Section 302) Offered
Debt Securities of any series will be exchangeable for other Offered Debt
Securities of the same series containing identical terms and provisions and of a
like aggregate principal amount and containing identical terms and provisions of
different authorized denominations. (Section 305) Offered Debt Securities may be
issuable under the Indentures in temporary or permanent global form. (Section
202) See "Global Securities."
9
<PAGE>
Unless otherwise indicated in an applicable Prospectus Supplement, the
principal office of the Trustee in The City of New York will be designated as
the Company's Paying Agent for payments with respect to Debt Securities. Any
other Paying Agents in the United States initially designated by the Company for
the Offered Debt Securities will be named in the related Prospectus Supplement.
The Company may at any time designate additional Paying Agents or rescind the
designation of any Paying Agents or approve a change in the office through which
any Paying Agent acts, except that the Company will be required to maintain a
Paying Agent in each Place of Payment for such series. All monies paid by the
Company to a Paying Agent for the payment of principal of and premium, if any,
and interest, if any, on any Debt Security which remains unclaimed at the end of
two years after such principal, premium or interest shall have become due and
payable will be repaid to the Company, and the Holder of such Offered Debt
Security will thereafter look only to the Company for payment thereof. (Section
1003)
GLOBAL SECURITIES
If any Offered Debt Securities are issuable in temporary or permanent global
form, the applicable Prospectus Supplement will describe the circumstances, if
any, under which beneficial owners of interests in any such permanent global
Debt Security may exchange such interests for definitive Offered Debt Securities
of such series and of like tenor and principal amount in any authorized form and
denomination. Principal of and any premium and interest on a permanent global
Debt Security will be payable in the manner described in the applicable
Prospectus Supplement.
CERTAIN COVENANTS IN THE INDENTURES
LIMITATIONS ON SALES OF RESTRICTED SUBSIDIARIES' CAPITAL STOCK. The Company
will not sell, transfer or otherwise dispose of any shares of capital stock of a
Restricted Subsidiary (other than directors' qualifying shares or sales to
Restricted Subsidiaries), and it will not permit any Restricted Subsidiary to
sell, transfer or otherwise dispose of any shares of capital stock of any other
Restricted Subsidiary (other than for directors' qualifying shares or sales or
other transfers to the Company or to a Restricted Subsidiary), unless the entire
capital stock of such Restricted Subsidiary at the time owned by the Company and
its Restricted Subsidiaries shall be disposed of at the same time for a
consideration consisting of cash or other property, which, in the opinion of the
Board of Directors of the Company, is at least equal to the fair value thereof.
(Section 1006)
For purposes of the Indentures, "Restricted Subsidiary" means each of UNUM
Life Insurance Company of America, First UNUM Life Insurance Company, and
Colonial Companies, Inc., as well as any successor to all or a principal part of
the business of any such subsidiary, any subsidiary which owns or holds capital
stock of any such subsidiary and any other subsidiary which the Company's Board
of Directors designates as a Restricted Subsidiary. (Section 101) The Restricted
Subsidiaries accounted for approximately 90% of the consolidated revenues of the
Company during 1995 and approximately 91% of the consolidated assets of the
Company at December 31, 1995.
LIMITATIONS ON LIENS ON RESTRICTED SUBSIDIARIES' CAPITAL STOCK.
The Company will not, and it will not permit any Restricted Subsidiary at
any time directly or indirectly to, create, assume, incur, or permit to exist
any indebtedness secured by a pledge, lien, or other encumbrance on the capital
stock of any Restricted Subsidiary without making effective provision whereby
the Debt Securities then outstanding (and, if the Company so elects, any other
indebtedness ranking on a parity with the Debt Securities) shall be equally and
ratably secured with such secured indebtedness so long as such other
indebtedness shall be secured. (Section 1007)
CONVERSION RIGHTS
The terms on which Subordinated Debt Securities of any series are
convertible into or exchangeable for Common Stock or other securities or
property of the Company will be set forth in the Prospectus Supplement relating
thereto. Such terms shall include provisions as to whether conversion or
exchange is mandatory, at the option of the Holder or at the option of the
Company, and may include provisions
10
<PAGE>
pursuant to which the number of shares of Common Stock or other securities of
the Company to be received by the Holders of Subordinated Debt Securities would
be calculated according to the market price of Common Stock or other securities
of the Company as of a time stated in the Prospectus Supplement. The conversion
price of any Subordinated Debt Securities of any series that is convertible into
Common Stock of the Company may be adjusted for any stock dividends, stock
splits, reclassification, combinations or similar transactions, as set forth in
the applicable Prospectus Supplement. (Article Fourteen).
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Indebtedness. 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, debt restructuring or similar proceedings in connection
with any insolvency or bankruptcy proceeding of the Company, the Holders of
Senior Indebtedness will first be entitled to receive payment in full of
principal of (and premium, if any) and interest, if any, on such Senior
Indebtedness before the Holders of the Subordinated Debt Securities will be
entitled to receive or retain any payment in respect of the principal of (and
premium, if any) or interest, if any, on the Subordinated Debt Securities.
(Section 1302)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company may recover less, ratably, than Holders of Senior
Indebtedness and may recover more, ratably, than the Holders of the Subordinated
Debt Securities.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the Holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full of all
amounts due thereon before the Holders of the Subordinated Debt Securities will
be entitled to receive any payment upon the principal of (or premium, if any) or
interest, if any, on the Subordinated Debt Securities. (Section 1303)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the 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
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default. (Section 1304) For
purposes of the subordination provisions, the payment, issuance and delivery of
cash, property or securities (other than stock and certain subordinated
securities of the Company) upon conversion of a Subordinated Debt Security will
be deemed to constitute payment on account of the principal of such Subordinated
Debt Security.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior to
the Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities constitute Senior Indebtedness under the
Subordinated Indenture.
"Senior Indebtedness" is defined to include all amounts due on and
obligations in connection with any of the following, whether outstanding at the
date of execution of the Subordinated Indenture or thereafter incurred or
created:
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company for money borrowed, or evidenced by bonds, debentures,
notes or similar instruments;
11
<PAGE>
(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Company with respect to letters of credit, bankers'
acceptances issued for the account of the Company or with respect to interest
rate protection agreements or currency exchange or purchase agreements;
(c) obligations and liabilities (contingent or otherwise) in respect of
leases by the Company as lessee which, in conformity with generally accepted
accounting principles, are accounted for as capitalized lease obligations on the
balance sheet of the Company;
(d) all direct or indirect guarantees or similar agreements in respect of,
and obligations or liabilities (contingent or otherwise) to purchase or
otherwise acquire or otherwise to assure a creditor against loss of the Company
in respect of, indebtedness, obligations or liabilities of another Person
described in clauses (a) through (c);
(e) any indebtedness described in clauses (a) through (d) secured by any
mortgage, pledge, lien or other encumbrance existing on property which is owned
or held by the Company, regardless of whether the indebtedness secured thereby
shall have been assumed by the Company; and
(f) any and all deferrals, renewals, extensions and refundings of, or
amendments, modifications or supplements to, any indebtedness, obligation or
liability of the kind described in clauses (a) through (e); unless in any case
in the instrument creating or evidencing such indebtedness, obligation,
liability, guaranty, assumption, deferral, renewal, extension or refunding, it
is provided that such indebtedness, obligation, liability, guaranty, assumption,
deferral, renewal, extension or refunding involved is not senior in right of
payment to the Subordinated Debt Securities or that such indebtedness is PARI
PASSU with or junior to the Subordinated Debt Securities. (Section 101)
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of Outstanding Debt
Securities, may consolidate or merge with or into any Person, or transfer or
lease its assets substantially as an entirety to any Person, or may acquire or
lease the assets of any Person, provided that: (a) the successor formed by such
consolidation or into which the Company is merged or 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 the applicable Indenture; (b) after giving effect
to the transaction, no Event of Default (and no event which, after notice or
lapse of time or both, would become an Event of Default) shall have happened and
be continuing; and (c) certain other conditions are met. (Article Eight)
EVENTS OF DEFAULT
Under the Indentures, the following will be Events of Default with respect
to Debt Securities of a particular series: (a) the Company defaults in the
payment of interest on any Debt Security of that series when due and payable and
the Default continues for a period of 30 days; (b) the Company defaults in the
payment of any principal of and premium, if any, on any Debt Security of that
series when due and payable at maturity, upon redemption or otherwise, or in the
deposit of any sinking fund payment when due by the terms of a Debt Security of
that series; (c) the Company fails to comply with or perform any of its other
agreements, covenants or warranties in the Debt Securities of that series or the
Indenture in respect of Debt Securities of that series and the Default continues
for 60 days after written notice as provided in the applicable Indenture; (d)
there shall be a default by the Company or any Restricted Subsidiary under any
(i) debt for money borrowed (including Debt Securities of any series other than
that series), (ii) mortgage, indenture or other instrument under which there may
be issued or may be secured or evidenced any indebtedness for money borrowed,
(iii) guarantee of payment for money borrowed or (iv) debt evidenced by bonds,
debentures, notes or other similar instruments (excluding trade accounts payable
or accrued liabilities arising in the normal course of business which are not
overdue by more
12
<PAGE>
than 90 days or which are being contested in good faith) and such default shall
result in such indebtedness becoming due prior to its stated maturity; PROVIDED,
HOWEVER, a default shall exist under this clause (d) only if all such defaults
relate to such indebtedness or such guarantees with an aggregate principal
amount in excess of $5,000,000, the acceleration of which has not been rescinded
or annulled within 10 days after written notice as provided in the applicable
Indenture; (e) certain events of bankruptcy, insolvency or reorganization of the
Company or any Restricted Subsidiary; and (f) any other Event of Default
provided with respect to Debt Securities of that series. (Section 501) The
applicable Trustee or the Holders of at least 25% in principal amount of the
Outstanding Debt Securities of that series (each series acting as a separate
class) may declare all unpaid principal of and accrued interest (or such lesser
amount as may be provided for in the Debt Securities of that series) on all then
Outstanding Debt Securities of that series to be due and payable immediately if
an Event of Default (other than one in (e) above) with respect to Debt
Securities of such series shall occur and be continuing at the time of
declaration. If an Event of Default as specified in (e) above occurs, all unpaid
principal and accrued interest (or such lesser amount as may be provided for in
the Debt Securities of that series) shall IPSO FACTO become and be immediately
due and payable without any other declaration or act on the part of the Trustee
or any Holder. (Section 502)
At any time after a declaration of acceleration has been made with respect
to Debt Securities of any series, the Holders of a majority in principal amount
of the Outstanding Debt Securities of that series may rescind any declaration of
acceleration with respect to the Debt Securities of that series and its
consequences, (a) if the rescission would not conflict with any judgment or
decree; (b) if all existing Events of Defaults with respect to Debt Securities
of that series have been cured or waived except non-payment of principal or
interest on Debt Securities of that series that has become due solely because of
the acceleration; and (c) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed therefore in such
Debt Securities has been paid. (Section 502) Any Event of Default with respect
to Debt Securities of any series may be waived by the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series, except in a
case of failure to pay principal or premium, if any, or interest on, or deposit
of any sinking fund payment with respect to, any Debt Security of that series
for which payment or deposit had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the consent of
the Holder of each Outstanding Debt Security of such series affected. (Section
504)
If any event which is, or after notice or lapse of time or both would become
an Event of Default (a "Default") occurs with respect to Debt Securities of any
series and it is known to the applicable Trustee, the Trustee shall mail to
Holders of Debt Securities of that series a notice of Default within 90 days
after it occurs unless such Default shall have been cured or waived, PROVIDED
that except in the case of a Default in the payment of the principal of or
premium, if any, or interest on, any Debt Security of any series or in the
making of any sinking fund payment payable with respect to Debt Securities of
any series, the Trustee may withhold the notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that withholding
the notice is in the interests of Holders of Debt Securities of that series and
PROVIDED, FURTHER, that in the case of any Default of the character specified in
clause (c) under "Events of Default" with respect to Debt Securities of any
series, no notice to Holders shall be given until at least 30 days after the
occurrence thereof. (Section 602)
Reference is made to the Prospectus Supplement relating to any series of
Debt Securities which are Original Issue Discount Securities for the particular
provisions relating to the principal amount of such Original Issue Discount
Securities due upon the occurrence of any Event of Default and the continuation
thereof.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Debt Securities of such series,
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PROVIDED that the Trustee may refuse to follow any directions that conflict with
any law or the Indenture, are unduly prejudicial to the rights of other Holders
of that series, or would involve the Trustee in personal liability. (Section
505)
In case an Event of Default shall occur and be continuing, the Trustee shall
exercise such of its rights and powers under the applicable Indenture and use
the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of his own affairs.
(Section 601) Before proceeding to exercise any right or power under the
applicable Indenture at the direction of such Holders, the Trustee will be
entitled to receive from such Holders security or indemnity satisfactory to it
against the costs, expenses and liabilities which might be incurred by it in
complying with any such direction. (Section 603)
MODIFICATION AND WAIVER
With certain exceptions, modification or amendment of the Indentures or the
rights of Holders of the Debt Securities of any series may be effected by the
Company and the Trustee with the consent of the Holders of at least 66 2/3% in
principal amount of the Outstanding Debt Securities of each series affected
thereby, PROVIDED that no such modification or amendment may, without the
written consent of the Holder of each Outstanding Debt Security 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 interest on, any Debt Security or any premium payable upon the
redemption thereof or reduce the amount of principal of an Original Issue
Discount Security which could be declared due and payable upon an acceleration;
(c) change the Place of Payment or coin or currency of any payment of principal,
any premium or interest on any Debt Security; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Debt Security;
(e) reduce the percentage in principal amount of the Outstanding Debt Securities
of any series, the consent of whose Holders is required to approve any
supplemental indenture, to waive compliance with certain provisions of the
applicable Indenture or certain defaults thereunder and their consequences, or
to reduce quorum or voting requirements applicable to meetings of Holders; (f)
in the case of Subordinated Debt Securities, adversely change the right to
convert or exchange, including decreasing the conversion rate or increasing the
conversion price of such Subordinated Debt Securities; (g) in the case of the
Subordinated Indenture, modify the subordination provisions in a manner adverse
to the Holders of any Subordinated Debt Securities; or (h) modify the foregoing
requirements in (a) through (g) above, requiring the consent of each Holder of
each Outstanding Debt Security affected thereby, or the percentage of such
Holders required to waive past defaults, or the percentage of such Holders that
may rescind an acceleration, except to increase any such percentage, and except
to provide that other provisions of the Indentures cannot be modified or waived
without the consent of the Holder of each Outstanding Debt Security affected
thereby. (Section 902) Except with respect to certain fundamental provisions,
the Holders of at least a majority in principal amount of Outstanding Debt
Securities of any series may, with respect to such series, waive past defaults
under the Indentures and waive compliance by the Company with certain provisions
of the Indentures. (Section 513)
SATISFACTION AND DISCHARGE OF INDENTURES
The Indentures generally provide that the Company may terminate certain of
its obligations under the Debt Securities of any series and under the Indentures
(with respect to such series) if (i) all the Debt Securities of such series
previously authenticated and delivered (other than lost, destroyed or stolen
Debt Securities that have been replaced or paid or for whose payment money has
been deposited in trust) have been delivered to the Trustee for cancellation and
the Company has paid all sums payable by it thereunder, (ii) such Debt
Securities of such series have matured or will mature within one year or all of
them are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption and the Company
irrevocably deposits with the Trustee money or U.S. Government Obligations
sufficient to pay principal of, premium, if any, and interest on the Outstanding
Debt Securities of such series that are due or will become due upon redemption
or maturity, as the case
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may be, and to pay all other sums payable by it thereunder or (iii) upon
compliance with certain conditions specified in the Indentures, 123 days after
the Company makes the deposit with the Trustee of money or U.S. Government
Obligations specified in clause (ii). In such case, Holders of the Debt
Securities must look to the deposited money for payment. (Section 401)
The Indentures further provide that if the Company has made the election
provided by clause (iii) above, it may elect either (a) to defease and be
discharged from any and all obligations with respect to the Debt Securities of
such series, except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities, and to hold moneys for payment in trust ("legal defeasance") or (b)
to be released from its obligations with respect to the Debt Securities of such
series under the covenant default (except with respect to the covenant to pay
principal and interest) and cross-acceleration provisions under "Events of
Default" and from the restrictions described under certain covenants in the
Indentures, including "Limitations on Sales of Restricted Subsidiaries' Capital
Stock" and "Limitations on Liens on Restricted Subsidiaries' Capital Stock,"
and, in the case of Subordinated Debt Securities, the provisions described under
"Subordination of Subordinated Debt Securities" ("covenant defeasance"). As a
condition to legal defeasance or covenant defeasance, the Company must deliver
to the Trustee an opinion of counsel (as specified in the Indentures) to the
effect that the Holders of the Debt Securities of such series will not recognize
income, gain or loss for United States Federal income tax purposes as a result
of such legal defeasance or covenant defeasance and will be subject to United
States Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance or covenant
defeasance had not occurred. In the case of legal defeasance under clause (a) or
covenant defeasance under clause (b) above, a ruling of the Internal Revenue
Service may be delivered in lieu of such opinion. (Section 401)
Under current United States Federal income tax law, legal defeasance would
likely be treated as a taxable exchange of such Debt Securities for interests in
the defeasance trust. As a consequence, a Holder would recognize gain or loss
equal to the difference between the Holder's tax basis for such Debt Securities
and the value of the Holder's interest in the defeasance trust, and thereafter
would be required to include in income its share of the income, gain and loss of
the defeasance trust. Under current Federal income tax law, covenant defeasance
would likely not be treated as a taxable exchange of such Debt Securities.
Purchasers of such Debt Securities should consult their tax advisors with
respect to the more particular tax consequences to them of such legal defeasance
and covenant defeasance, including the applicability and effect of United States
Federal income and other tax law.
The Company may exercise its legal defeasance option with respect to the
Debt Securities of such series, notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its legal defeasance
option, payment of such Debt Securities may not be accelerated because of an
Event of Default. If the Company exercises its covenant defeasance option,
payment of such Debt Securities may not be accelerated because of the covenant
default (except with respect to the covenant to pay principal and interest) and
cross-acceleration provisions or certain of the covenants, including those noted
under clause (b) above. However, if such an acceleration were to occur because
of other defaults, the realizable value at the acceleration date of the money
and U.S. Government Obligations in the defeasance trust could be less than the
principal and interest then due on such Debt Securities, because the required
deposit in the defeasance trust is based upon scheduled cash flows rather than
market value, which will vary depending upon interest rates and other factors.
(Section 401)
The term "U.S. Government Obligations" is defined to mean direct obligations
of the United States for the payment of which its full faith and credit is
pledged, or obligations of a person controlled or supervised by and acting as an
agency or instrumentality of the United States and the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States which, in either case, are not callable or redeemable at the option of
the issuer thereof, and shall also include a depositary receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act) as custodian with
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respect to any such U.S. Government Obligations or a specific payment of
principal of or interest on any such U.S. Government Obligations held by such
custodian for the account of the holder of such depositary receipt, PROVIDED
that (except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depositary receipt from
any amount received by the custodian in respect of the U.S. Government
Obligations or the specific payment of principal of or interest on the U.S.
Government Obligations evidenced by such depositary receipt. (Section 101)
CONCERNING THE TRUSTEES
The Company maintains banking relationships in the ordinary course of
business with The Chase Manhattan Bank, N.A. and Mellon Bank, N.A. In addition,
Mellon Bank, N.A. is a participant in the Company's $500 million revolving
credit facility entered into as of December 13, 1994.
DESCRIPTION OF CAPITAL STOCK
The following descriptions and the descriptions contained in "Description of
Preferred Stock" and "Description of Common Stock" are summaries, and reference
is herein made to the detailed provisions of the following documents, copies of
which are filed as exhibits to the Registration Statement: (i) the Company's
Certificate of Incorporation, as amended (the "Certificate of Incorporation");
(ii) the Company's By-Laws (the "By-Laws"); and (iii) the Rights Agreement
between the Company and First Chicago Trust Company of New York, as Rights Agent
(the "Rights Agreement"), pursuant to which shares of Junior Participating
Preferred Stock, Series A ("Junior Participating Preferred Stock") are issuable.
The authorized capital stock of the Company consists of: (i) 120,000,000
shares of Common Stock, par value $0.10 per share, and (ii) 10,000,000 shares of
Preferred Stock, par value $0.10 per share, of which 1,000,000 are designated as
Junior Participating Preferred Stock.
As of March 31, 1996, there were outstanding: (a) 73,274,752 shares of
Common Stock (as well as the same number of rights to purchase shares of Junior
Participating Preferred Stock, pursuant to the Rights Agreement) and (b)
employee stock options to purchase an aggregate of 5,835,464 shares of Common
Stock.
DESCRIPTION OF PREFERRED STOCK
The following description sets forth certain general terms and provisions of
the Preferred Stock to which any Prospectus Supplement may relate. Certain other
terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. If so indicated in the Prospectus
Supplement, the terms of any such series may differ from the terms set forth
below. The description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's
Certificate of Incorporation and the certificate of designation relating to each
such series of Preferred Stock, which will be filed with the Commission in
connection with the offering of such series of Preferred Stock.
GENERAL
Under the Company's Certificate of Incorporation, the Board of Directors is
authorized to fix and determine the terms, limitations and relative rights and
preferences of any class of preferred stock, including, without limitation, any
voting rights thereof, to divide and issue any of the classes of preferred stock
in series, and to fix and determine the variations among series to the extent
permitted by law. The Company has authorized 1,000,000 shares of Junior
Participating Preferred Stock for issuance upon
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exercise of certain preferred share purchase rights associated with each share
of outstanding Common Stock as provided in the Rights Agreement. See
"Description of Common Stock--Share Purchase Rights Plan,--Description of Junior
Participating Preferred Stock."
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of Preferred Stock. Reference is made
to the Prospectus Supplement relating to a particular series of Preferred Stock
offered thereby for specific terms including: (1) the designation and the number
of shares offered; (2) the amount of liquidation preference per share; (3) the
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends will be payable, whether
such dividends will be cumulative or noncumulative and, if cumulative, the dates
from which dividends will commence to cumulate; (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.
The Preferred Stock offered hereby will be issued in one or more series. The
holders of Preferred Stock will have no preemptive rights. Any shares of
Preferred Stock sold hereunder will be fully paid and nonassessable upon
issuance against full payment of the purchase price therefor. Unless otherwise
specified in the Prospectus Supplement relating to a particular series of
Preferred Stock, each series of Preferred Stock will rank on a parity as to
dividends and liquidation rights in all respects with each other series of
Preferred Stock (other than the Junior Participating Preferred Stock).
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Different series of the Preferred Stock may be entitled to dividends at
different rates or based upon different methods of determination. Such rate may
be fixed or variable or both. Each such dividend will be payable to the holders
of record as they appear on the stock books of the Company on such record dates
as will be fixed by the Board of Directors of the Company or a duly authorized
committee thereof. Dividends on any series of the Preferred Stock may be
cumulative or noncumulative, as provided in the Prospectus Supplement relating
thereto.
RIGHTS UPON LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Common
Stock or any other class of stock ranking junior to such series of the Preferred
Stock upon liquidation, liquidating distributions in the amount set forth in the
Prospectus Supplement relating to such series of Preferred Stock plus an amount
equal to accrued and unpaid dividends for the then current dividend period and,
if such series of the Preferred Stock is cumulative, for all dividend periods
prior thereto, all as set forth in the Prospectus Supplement with respect to
such shares.
REDEMPTION
The terms, if any, on which shares of a series of Preferred Stock may be
subject to optional or mandatory redemption, in whole or in part, will be set
forth in the Prospectus Supplement relating to such series.
CONVERSION
The terms, if any, on which shares of any series of Preferred Stock are
convertible into Common Stock will be set forth in the Prospectus Supplement
relating thereto. Such terms may include provisions
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for conversion, either mandatory, at the option of the holder, or at the option
of the Company, in which case the number of shares of Common Stock to be
received by the holders of Preferred Stock would be calculated as of a time and
in the manner stated in the Prospectus Supplement.
TRANSFER AGENT AND REGISTRAR
The transfer agent, registrar and dividend disbursement agent for the
Preferred Stock will be designated in the applicable Prospectus Supplement. The
registrar for shares of Preferred Stock will send notices to shareholders of any
meetings at which holders of the Preferred Stock have the right to elect
directors of the Company or to vote on any other matter.
VOTING RIGHTS
The holders of Preferred Stock of a series offered hereby will not be
entitled to vote except as indicated in the Prospectus Supplement relating to
such series of Preferred Stock or as required by applicable law.
DESCRIPTION OF COMMON STOCK
GENERAL
Subject to the rights of the holders of any shares of the Company's
Preferred Stock which may at the time be outstanding, holders of Common Stock
are entitled to such dividends as the Board of Directors may declare out of
funds legally available therefor. The holders of Common Stock will possess
exclusive voting rights in the Company, except to the extent the Board of
Directors specifies voting power with respect to any Preferred Stock issued.
Except as hereinafter described, holders of Common Stock are entitled to one
vote for each share of Common Stock, but will not have any right to cumulate
votes in the election of directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of Common Stock are entitled to receive,
after payment of all of the Company's debts and liabilities and of all sums to
which holders of any Preferred Stock may be entitled, the distribution of any
remaining assets of the Company. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any shares which may be issued.
Any shares of Common Stock sold hereunder will be fully paid and non-assessable
upon issuance against full payment of the purchase price therefor. First Chicago
Trust Company of New York is the transfer agent for the Common Stock. The Common
Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange
under the symbol "UNM."
CERTAIN PROVISIONS
The provisions of the Company's Certificate of Incorporation and By-Laws
which are summarized below may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in such stockholder's best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders.
CLASSIFIED BOARD. The Board of Directors is divided into three classes that
are elected for staggered three-year terms. A director may be removed by the
stockholders, but only for cause, and only by the affirmative vote of the
holders, voting as a single class, of 80% or more of the total number of votes
entitled to be cast by all holders of the voting stock which shall include all
capital stock of the Company which by its terms may vote on all matters
submitted to stockholders of the Company generally.
ISSUANCE OF PREFERRED STOCK. Pursuant to the Certificate of Incorporation,
the Board of Directors by resolution may establish one or more series of
Preferred Stock having such number of shares, designation, relative voting
rights, dividend rates, liquidation and other rights, preferences and
limitations as may be fixed by the Board of Directors without any further
stockholder approval. Such rights, preferences, privileges and limitations as
may be established could have the effect of impeding or discouraging the
acquisition of control of the Company.
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BUSINESS COMBINATIONS. In addition, the Certificate of Incorporation and
By-Laws of the Company contain supermajority voting provisions relating to the
approval of business combinations with certain stockholders. Pursuant to the
Company's Certificate of Incorporation, any Business Combination (as defined
therein, which term includes a merger, sale of all or substantially all its
assets, the adoption of a plan of liquidation and similar extraordinary
corporate transactions) with (i) any person (other than the Company, its
subsidiaries, certain employee benefit plans of the Company and the trustees of
such plans) who is the beneficial owner of 10% or more of the UNUM Voting Stock
(as defined below) or (ii) any person who is an Affiliate or Associate (as
defined in Rule 12b-2 of the Exchange Act) of the Company and who was the
beneficial owner of 10% or more of the UNUM Voting Stock at any time in the two
years prior to the date in question (each such person, a "UNUM Interested
Stockholder") must be approved by a supermajority vote, unless the Business
Combination has been approved by the vote of a majority of the Continuing
Directors (as defined below) of the Company's Board of Directors. "UNUM Voting
Stock" means all capital stock of the Company which by its terms may vote on all
matters submitted to stockholders of the Company generally. "Continuing
Director" means any Board of Directors member who while serving as a Board of
Directors member is not an Affiliate or Associate or representative of the UNUM
Interested Stockholder and who was a Board of Directors member before the UNUM
Interested Stockholder became such and includes certain successors to such Board
of Directors members. The required supermajority vote consists of the
affirmative vote of the holders of (i) 80% or more of the UNUM Voting Stock,
voting together as a single class, and (ii) at least a majority of the shares of
UNUM Voting Stock not held by the UNUM Interested Stockholder, voting together
as a single class.
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION. Under the Certificate of
Incorporation, the amendment of, repeal of or adoption of any provision
inconsistent with certain provisions of the Certificate of Incorporation
relating to (i) the election of the Board of Directors, its powers and related
matters requires the affirmative vote of the holders of at least 80% of the
outstanding UNUM Voting Stock, voting together as a single class, and (ii)
Business Combinations with UNUM Interested Stockholders and the required votes
for amendments of the Certificate of Incorporation requires the affirmative vote
of the holders specified in clause (i) above and the affirmative vote of the
holders of at least a majority of the outstanding UNUM Voting Stock which is not
beneficially owned by any UNUM Interested Stockholder, voting together as a
single class. The above supermajority voting requirements do not apply to any
amendment, repeal or adoption recommended by the Board of Directors of the
Company if a majority of the Board of Directors of the Company then in office
consists of persons who would be eligible to serve as Continuing Directors.
AMENDMENTS TO THE BY-LAWS. The Certificate of Incorporation provides that
the By-Laws may be amended by the affirmative vote of a majority of directors
present at a meeting of the Board of Directors at which a quorum is present or
by the affirmative vote of the holders of at least 80% of all outstanding UNUM
Voting Stock, voting together as a single class.
STOCKHOLDER PROPOSAL PROCEDURES. The By-Laws require any stockholder who
wants to present a proposal for action by the stockholders at an annual meeting
to deliver a written notice to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company, not less than 60 days nor more than
90 days prior to the date of the annual meeting, unless less than 75 days'
notice or prior public disclosure of the date of such meeting has been given or
made to the stockholders, in which case a stockholder's notice must be received
no later than the close of business on the 15th day following the day on which
such notice was mailed or such disclosure was made.
SHARE PURCHASE RIGHTS PLAN
On March 13, 1992, the Board of Directors of the Company adopted a
stockholder rights plan and declared a dividend distribution of one right (a
"Right") for each outstanding share of Common Stock to
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stockholders of record at the close of business on March 23, 1992. Each Right
entitles the registered holder to purchase from the Company a unit consisting of
one one-hundredth of a share (a "Unit") of Junior Participating Preferred Stock,
at a purchase price of $150 per Unit, subject to adjustment (the "Purchase
Price"). The terms of the Junior Participating Preferred Stock are such that one
Unit is essentially equivalent to one share of Common Stock. The description and
terms of the Rights are set forth in a Rights Agreement, dated as of March 13,
1992 and amended as of June 19, 1996 (as amended, the "Rights Agreement"),
between the Company and First Chicago Trust Company of New York, as rights agent
(the "Rights Agent").
Initially, the Rights are attached to all outstanding Common Stock
certificates, and no separate certificates evidencing Rights ("Rights
Certificates") are distributed. The Rights will separate from the Common Stock
and a "Distribution Date" will occur upon the earlier of (i) ten (10) days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding shares of
Common Stock, except for persons or a group of affiliated or associated persons
who become the beneficial owner of 10% or more of the outstanding shares of
Common Stock solely as a result of a reduction in the number of shares of Common
Stock outstanding due to a repurchase of shares by the Company unless such
person or group thereafter acquires additional shares representing 1% or more of
the outstanding Common Stock (the "Stock Acquisition Date") or (ii) ten (10)
business days (or such later date as may be determined by the Board of
Directors) following the announcement of a tender offer or exchange offer that
would result in a person or group beneficially owning 10% or more of such
outstanding shares of Common Stock. However, if the Board of Directors of the
Company determines that any person who would otherwise be an Acquiring Person
has become such inadvertently, then such person will not become an Acquiring
Person if certain conditions are satisfied, including divestiture by such person
of beneficial ownership of the shares of Common Stock that would have otherwise
caused such person to become an Acquiring Person.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after March 23, 1992
contain a notation incorporating the Rights Agreement by reference, and (iii)
the surrender for transfer of any certificates for Common Stock outstanding will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificates. The Rights are not exercisable until the
Distribution Date and will expire at the close of business on March 13, 2002,
unless earlier redeemed by the Company as described below (the "Expiration
Date").
In the event that (i) a Person becomes an Acquiring Person (except pursuant
to an offer for all outstanding shares of Common Stock which at least a majority
of the members of the Board of Directors who are not officers of the Company and
who are not representatives, nominees, affiliates or associates of an Acquiring
Person determine to be fair to and otherwise in the best interests of the
Company and its stockholders (a "Fair Offer")) or (ii) an Acquiring Person or
any of its affiliates or associates shall merge into or otherwise combine with
the Company in a transaction in which the Company is the surviving corporation
and the Common Stock remains outstanding and unchanged, each holder of a Right
will thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company or a
reduction in the Purchase Price) having a value equal to two times the exercise
price of the Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by an Acquiring Person or an associate or affiliate of an
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of any of the events set forth in this paragraph until
such time as the Rights are no longer redeemable by the Company as set forth
below.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation
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(other than a merger described in the preceding paragraph or a merger which
follows, and is at the same price as, a Fair Offer), or (ii) 50% or more of
UNUM's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have become null and void as set forth above)
shall thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the preceding paragraph are
referred to as the "Triggering Events."
At any time after there is an Acquiring Person and prior to the acquisition
by such Acquiring Person of 50% or more of the outstanding Common Stock, the
Board of Directors may exchange the Rights (other than Rights owned by the
Acquiring Person which have become null and void), in whole or in part, at an
exchange ratio of one share of Common Stock or one Unit of Junior Participating
Preferred Stock (or a share or unit of another series of the Company's preferred
stock having equivalent rights, preferences and privileges) per Right (subject
to adjustment).
At any time until ten (10) days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"), which is payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors. Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
The Purchase Price payable, and the number of shares of Junior Participating
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. Stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) or for common stock of the
acquiring company as set forth above.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner which causes the Rights to become exercisable unless the offer is
conditioned on substantially all the Rights being acquired. This potential
dilution may have the effect of delaying, deferring or discouraging attempts to
acquire control of the Company which are not approved by the Company's Board of
Directors. However, the Rights should not interfere with any merger or other
business combination approved by the Company's Board of Directors.
DESCRIPTION OF JUNIOR PARTICIPATING PREFERRED STOCK
GENERAL. In connection with the Rights Agreement, 1,000,000 shares of
Junior Participating Preferred Stock have been reserved and authorized for
issuance by the Board of Directors of the Company. No shares of Junior
Participating Preferred Stock are outstanding as of the date of this Prospectus.
The following statements with respect to the Junior Participating Preferred
Stock do not purport to be complete and are subject to the detailed provisions
of the Certificate of Incorporation and the certificate of designation relating
to the Junior Participating Preferred Stock (the "Certificate of Designation"),
which are filed as exhibits to the Registration Statement of which this
Prospectus is a part.
RANKING. The Junior Participating Preferred Stock shall rank junior to all
other series of the Company's Preferred Stock as to the payment of dividends and
the distribution of assets, unless the terms of any such series shall provide
otherwise.
DIVIDENDS AND DISTRIBUTIONS. Subject to the prior and superior rights of
the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Junior Participating Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for
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<PAGE>
that purpose, quarterly dividends payable in cash on the 19th day of February,
May, August and November in each year (each such date being referred to herein
as "Quarterly Dividend Payment Date") commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Junior Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $5.00 or (b) (subject to adjustment
upon certain dilutive events) 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, since
the immediately preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first issuance of any share
or fraction of a share of Junior Participating Preferred Stock.
The Company shall declare a dividend or distribution on the Junior
Participating Preferred Stock immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in shares of
Common Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $5.00 per share on the Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
VOTING RIGHTS. The holders of shares of Junior Participating Preferred
Stock shall have the following voting rights: (a) subject to adjustment upon
certain dilutive events, each share of Junior Participating Preferred Stock
shall entitle the holder thereof to 100 votes on all matters submitted to a vote
of the stockholders of the Company; (b) except as otherwise provided by the
Certificate of Designation or by law, the holders of shares of Junior
Participating Preferred Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of stockholders of
the Company; and (c) if at any time dividends on any Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Junior
Participating Preferred Stock then outstanding shall have been declared and paid
or set apart for payment. During each default period, all holders of Preferred
Stock (including holders of the Junior Participating Preferred Stock) with
dividends in arrears in an amount equal to six (6) quarterly dividends thereon,
voting as a class, irrespective of series, shall have the right to elect two (2)
Directors, until the expiration of a default period.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Company, no distribution shall be
made to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Junior
Participating Preferred Stock shall have received $250 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation Preference,
no additional distributions shall be made to the holders of shares of Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted to reflect such events as
stock splits, stock dividends and recapitalizations with respect to the Common
Stock) (such number in clause (ii) immediately above being referred to as the
"Adjustment Number"). Following the payment of the full amount of the Series A
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Junior Participating Preferred Stock and Common Stock, respectively,
holders of Junior Participating Preferred Stock and
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<PAGE>
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to one (1) with respect to such Preferred Stock and Common Stock, on a
per share basis, respectively.
In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case, the shares of Junior
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to adjustment upon certain dilutive
events) equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged.
REDEMPTION. The outstanding shares of Junior Participating Preferred Stock
may be redeemed at the option of the Board of Directors in whole, but not in
part, at any time, or from time to time, at a cash price per share equal to 105
percent of (i) the product of the Adjustment Number times the Average Market
Value (as such term is hereinafter defined) of the Common Stock, plus (ii) all
dividends which on the redemption date have accrued on the shares to be redeemed
and have not been paid, or declared and a sum sufficient for the payment thereof
set apart, without interest. The "Average Market Value" is the average of the
closing sale prices of the Common Stock during the 30-day period immediately
preceding the date before the redemption date on the Composite Tape for New York
Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Exchange Act, on which such stock is listed, or, if such stock is not listed
on any such exchange, the average of the closing sale prices with respect to a
share of Common Stock during such 30-day period, as quoted on the National
Association of Securities Dealers, Inc. Automated Quotations System or any
system then in use, or, if no such quotations are available, the fair market
value of the Common Stock as determined by the Board of Directors in good faith.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities, Preferred Stock, Common Stock or other securities of the Company.
Warrants may be issued independently or together with any such securities of the
Company and may be attached to or separate from such securities of the Company.
The Warrants are to be issued under warrant agreements (each a "Warrant
Agreement") to be entered into between the Company and a bank or trust company,
as warrant agent (the "Warrant Agent"), all as shall be set forth in the
Prospectus Supplement relating to Warrants being offered pursuant thereto.
WARRANTS
The applicable Prospectus Supplement will describe the terms of Warrants
offered thereby, the Warrant Agreement relating to such Warrants and the warrant
certificates representing such Warrants, including the following: (1) the title
of such Warrants; (2) the securities of the Company for which such Warrants are
exercisable; (3) the aggregate number of such Warrants; (4) the price or prices
at which such Warrants will be issued; (5) the currency or currencies, including
composite currencies or currency units, in which the price of such Warrants may
be payable; (6) the procedures and conditions relating to
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the exercise of such Warrants; (7) the designation and terms of any related
securities of the Company with which such Warrants are issued, and the number of
such Warrants issued with each such security; (8) the date, if any, on and after
which such Warrants and the related securities of the Company will be separately
transferable; (9) the date on which the right to exercise such Warrants shall
commence, and the date on which such right shall expire; (10) the maximum or
minimum number of such Warrants which may be exercised at any time; (11) a
discussion of material United States Federal income tax considerations, if any;
(12) any other terms of such Warrants and terms, procedures and limitations
relating to the exercise of such Warrants; and (13) the terms of the securities
of the Company purchasable upon exercise of such Warrants.
Warrant certificates will be exchanged for new warrant certificates of
different denominations, and Warrants may be exercised at the corporate trust
office of the Warrant Agent or any other office indicated in the Prospectus
Supplement. Prior to the exercise of their Warrants, holders of Warrants
exercisable for Debt Securities will not have any of the rights of holders of
the Debt Securities purchasable upon such exercise and will not be entitled to
payments of principal (or premium, if any) or interest, if any, on the Debt
Securities purchasable upon such exercise. Prior to the exercise of their
Warrants for shares of Preferred Stock or Common Stock, holders of such Warrants
will not have any rights of holders of the Preferred Stock or Common Stock
purchasable upon such exercise and will not be entitled to dividend payments, if
any, or voting rights of the Preferred Stock or Common Stock purchasable upon
such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder of Warrants to purchase for cash such
principal amount or such number of securities of the Company at such exercise
price as shall in each case be set forth in, or be determinable as set forth in,
the Prospectus Supplement relating to the Warrants offered thereby. After the
close of business on the expiration date, unexercised Warrants will become void.
Warrants may be exercised as set forth in the Prospectus Supplement relating
to the Warrants offered thereby. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the Warrant Agent or any other office indicated in the Prospectus Supplement,
the Company will, as soon as practicable, forward the securities purchasable
upon such exercise. If less than all of the Warrants represented by such warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining Warrants.
FOREIGN CURRENCY RISKS
GENERAL
EXCHANGE RATES AND EXCHANGE CONTROLS. An investment in Debt Securities
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 generally 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 to continue 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 Debt Security.
Depreciation of the Specified Currency other than U.S. dollars against the U.S.
dollar would result in a decrease in the effective yield of such Debt Security
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 that could affect exchange rates as well as the availability
of a specified foreign currency at a Debt Security's
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<PAGE>
maturity. Even if there are no actual exchange controls, it is possible that the
Specified Currency for any particular Debt Security would not be available at
such Debt Security's maturity. In that event, the Company will repay such Debt
Security at maturity in U.S. dollars on the basis of the most recently available
Exchange Rate.
This Prospectus does not describe all the risks of an investment in Debt
Securities denominated in other than U.S. dollars. Prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in Debt Securities denominated in other than U.S. dollars. Debt
Securities denominated in other than U.S. dollars are not an appropriate
investment for investors who are unsophisticated about foreign currency
transactions.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into certain foreign currencies, and vice versa.
Unless otherwise specified in the Prospectus Supplement, Debt Securities
denominated in other than U.S. dollars or European currency units will not be
sold in, or to residents of, the country issuing the Specified Currency in which
particular Debt Securities are denominated. The information set forth in this
Prospectus 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 as to any
matters that may affect the purchase, holding, or receipt of payments of
principal of and interest on the Debt Securities. Such persons should consult
their own financial and legal advisors with regard to such matters.
GOVERNING LAW AND JUDGMENTS. The Debt Securities will be governed by and
construed in accordance with the laws of the State of New York. Under the
Judiciary Law of the State of New York, a judgment in an action based upon an
obligation denominated in a currency other than U.S. dollars will be rendered in
the foreign currency of the underlying obligation and converted into U.S.
dollars at the rate of exchange prevailing on the date of the entry of the
judgment or decree.
EXCHANGE RATE AND CONTROLS FOR SPECIFIED CURRENCIES
For any Debt Security denominated in other than U.S. dollars, the Prospectus
Supplement relating to such Debt Securities will contain information concerning
exchange rates. The information concerning exchange rates will be furnished as a
matter of information only and should not be regarded as indicative of the rate
of or trends in future fluctuations in currency exchange rates.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents.
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, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of 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
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the Prospectus
Supplement.
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<PAGE>
Each series of Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange and the Pacific Stock Exchange. Any Common Stock sold pursuant to a
Prospectus Supplement will be listed on such exchanges, subject to official
notice of issuance. The Company may elect to list any series of Debt Securities,
Preferred Stock or Warrants on an exchange, but is not obligated to do so. It is
possible that one or more underwriters may make a market in a series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Securities.
Under agreements the Company may enter into, underwriters, dealers, and
agents who participate in the distribution of Securities maybe entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Company in the ordinary course of
business.
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 THE SECURITIES
The validity of the Securities will be passed upon for the Company by
Skadden, Arps, Slate, Meagher & Flom, New York, New York. The validity of the
Securities in connection with any offering thereof will be passed upon for the
Company by Kevin J. Tierney, Senior Vice President, Secretary and General
Counsel of the Company and by Skadden, Arps, Slate, Meagher & Flom, New York,
New York with respect to certain matters of New York law, and for the
underwriters or agents by Sullivan & Cromwell, New York, New York. Mr. Tierney
owns less than one percent of the Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1995, have been incorporated herein by reference in reliance upon the report
of Coopers & Lybrand L.L.P, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN ANY
PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR THE PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED,
OR INCORPORATED BY REFERENCE, HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Description of Notes............................... S-2
United States Taxation............................. S-17
Supplemental Plan of Distribution.................. S-25
Validity of Notes.................................. S-26
PROSPECTUS
Available Information.............................. 2
Incorporation of Certain Documents by Reference.... 2
The Company........................................ 3
Selected Consolidated Financial Data of the
Company........................................... 6
Selected Consolidated Segment Income Statement Data
of the Company.................................... 7
Use of Proceeds.................................... 8
Description of Debt Securities..................... 8
Description of Capital Stock....................... 16
Description of Preferred Stock..................... 16
Description of Common Stock........................ 18
Description of Warrants............................ 23
Foreign Currency Risks............................. 24
Plan of Distribution............................... 25
Validity of the Securities......................... 26
Experts............................................ 26
</TABLE>
$250,000,000
UNUM CORPORATION
MEDIUM-TERM NOTES,
SERIES C
DUE FROM 9 MONTHS OR MORE
FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
[LOGO]
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