Filed Pursuant to Rule 424(B)(5)
File No. 333-108464
PROSPECTUS SUPPLEMENT
- ---------------------------------------------
(TO PROSPECTUS DATED SEPTEMBER 26, 2003)
$4,000,000,000
TEXTRON FINANCIAL CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
TEXTRON FINANCIAL CANADA FUNDING CORP.
MEDIUM-TERM NOTES, SERIES E-CAD
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------------
We may offer from time to time Medium-Term Notes, Series E of Textron
Financial Corporation and Medium-Term Notes, Series E-CAD of Textron Financial
Canada Funding Corp. fully and unconditionally guaranteed by Textron Financial
Corporation in an aggregate principal amount of up to $4,000,000,000. Any notes
issued by Textron Financial Corporation or Textron Financial Canada Funding
Corp. will reduce the amount available to be issued in the future by itself and
the other issuer. The specific terms of any notes offered will be included in a
pricing supplement. Unless we provide otherwise in the applicable pricing
supplement, the notes offered will have the following general terms:
- The notes will mature in nine months or more from the date of issuance.
- The notes will be senior unsecured obligations of Textron Financial
Corporation or Textron Financial Canada Funding Corp., as applicable.
- The notes will bear interest at a fixed or floating rate or will not bear
any interest. If the notes bear interest at a floating rate, the floating
interest rate formula will be based on one or more indices or formulas
plus or minus a fixed amount or multiplied by a specified percentage.
- The applicable issuer will pay amounts due on the notes in U.S. dollars or
any other consideration described in the applicable pricing supplement.
- We will specify in the applicable pricing supplement whether the notes can
be redeemed or repaid before their maturity and whether they are subject
to mandatory redemption, redemption at our option or repayment at the
option of the holder of the notes.
- Interest on the notes will be payable on the dates provided in this
prospectus supplement or in the applicable pricing supplement.
- The notes will not be listed on any securities exchange.
- The notes issued by Textron Financial Canada Funding Corp. will be fully
and unconditionally guaranteed by Textron Financial Corporation.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE S-3.
----------------------
<Table>
<Caption>
PER NOTE TOTAL
-------- -----
Public offering price....................................... 100% $4,000,000,000
Agents' discount and commissions for Textron Financial...... .125%-.750% $5,000,000-$30,000,000
Proceeds, before expenses, to Textron Financial............. 99.875%-99.250% $3,970,000,000-$3,995,000,000
</Table>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement, the accompanying prospectus or any pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
We may sell notes to the agents referred to below as principals for resale
at varying or fixed offering prices or through any agent as agent using its
reasonable efforts to sell notes on our behalf. We may also sell notes without
the assistance of an agent.
If we sell other securities referred to in the accompanying prospectus, the
amount of notes that we may offer and sell under this prospectus supplement will
be reduced.
----------------------
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
CITIGROUP
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANK SECURITIES
FLEET SECURITIES, INC.
HSBC
JPMORGAN
TOKYO-MITSUBISHI INTERNATIONAL PLC
UBS INVESTMENT BANK
WACHOVIA SECURITIES
----------------------
The date of this prospectus supplement is September 26, 2003.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
Risk Factors................................................ S-3
Important Currency Information.............................. S-6
About this Prospectus Supplement............................ S-6
Use of Proceeds............................................. S-6
Description of the Notes.................................... S-6
Special Provisions Relating to Foreign Currency Notes....... S-32
Certain United States Federal Income Tax Considerations..... S-35
Certain Canadian Federal Income Tax Considerations.......... S-44
Plan of Distribution........................................ S-47
Validity of the Notes....................................... S-48
PROSPECTUS
About this Prospectus....................................... 1
Textron Financial Corporation............................... 1
Textron Financial Canada Funding Corp. ..................... 2
Use of Proceeds............................................. 3
Ratios of Earnings to Fixed Charges......................... 3
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 16
Where You Can Find More Information......................... 17
Legal Opinions.............................................. 18
Experts..................................................... 18
</Table>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. We have not, and the agents have not, authorized any other
person to provide you with different or additional information. If anyone
provides you with different or additional information, you should not rely on
it. We are not, and the agents are not, making an offer to sell these notes in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus supplement, the accompanying
prospectus and any pricing supplement, as well as information we previously
filed with the Securities and Exchange Commission and incorporated by reference,
is accurate only as of its date. Our business, financial condition, results of
operations and prospects may have changed since that date.
In this prospectus supplement, we will refer to Textron Financial
Corporation as "Textron Financial" or "TFC" and Textron Financial Canada Funding
Corp. as "Textron Canada Funding," and to either of Textron Financial or Textron
Canada Funding as an "issuer". Unless the context otherwise requires, we will
use the terms "we," "our," "ourselves" and "us" to mean Textron Financial and
Textron Canada Funding.
References in this prospectus supplement to "agent" or "agents" are to any
or all, respectively, of the agents listed on the cover page of this prospectus
supplement or any other agent appointed by us.
References in this prospectus supplement to "U.S. dollars," "U.S.$," or
"dollar" are to the lawful currency of the United States and to "Canadian
dollars" or "Cdn.$" are to the lawful currency of Canada. In this prospectus
supplement and the prospectus to which it relates, unless otherwise specified,
all dollar amounts are expressed in U.S. dollars.
S-2
RISK FACTORS
Your investment in the notes is subject to certain risks, especially if the
notes involve in some way a foreign currency. This prospectus supplement does
not describe all of the risks of an investment in the notes, whether arising
because the notes are denominated in a currency other than U.S. dollars or
because the return on the notes is linked to one or more interest rates or
currency indices or formulas. Additional risks that we do not know about or that
we view as immaterial may also impair your investment. You should consult your
own financial and legal advisors about the risks entailed by an investment in
the notes and the suitability of your investment in the notes in light of your
particular circumstances. The notes are not an appropriate investment for you if
you are unsophisticated with respect to their significant components. Before
investing in the notes, you should consider carefully, among other factors, the
matters described below.
NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS ARE MORE
VOLATILE THAN CONVENTIONAL DEBT SECURITIES
If you invest in notes indexed to one or more interest rates, currencies or
other indices or formulas, you could be subject to significant risks not
associated with a conventional fixed rate or floating rate debt security. These
risks include fluctuation of the indices or formulas and the possibility that
you will receive a lower, or no, amount of principal, premium or interest. You
may receive payments at different times than you expected. The value of an index
can fluctuate based on a number of interrelated factors, including economic,
financial and political events over which we have no control. In addition, if an
index or formula used to determine any amounts payable in respect of the notes
contains a multiplier or leverage factor, that feature will magnify the effect
of any change in the index or formula. In recent years, values of certain
indices and formulas have been volatile and volatility in those and other
indices and formulas may be expected in the future. You should not view the
historical experience of an index as an indication of its future performance.
NOTES DENOMINATED IN FOREIGN CURRENCIES ARE SUBJECT TO SIGNIFICANT RISKS
ASSOCIATED WITH EXCHANGE RATE FLUCTUATION, FOREIGN EXCHANGE CONTROLS AND OTHER
FACTORS OVER WHICH WE HAVE NO CONTROL
Unless we provide otherwise in the applicable pricing supplement, the
applicable issuer will make payments on foreign currency notes in the relevant
foreign currencies. As discussed below under "Special Provisions Relating to
Foreign Currency Notes -- Payment of Principal, Premium and Interest," any
amounts payable by the applicable issuer in the relevant foreign currency will
be converted by the exchange rate agent named in the applicable pricing
supplement into U.S. dollars for payment to holders of notes, unless we provide
otherwise in the applicable pricing supplement. If you invest in foreign
currency notes or currency indexed notes, your investment will be subject to
significant risks not associated with investments in debt securities denominated
in U.S. dollars or U.S. dollar-based indices. These risks include the
possibility of significant changes in the rate of exchange between the U.S.
dollar and your payment currency and the possibility of the imposition or
modification of foreign exchange controls by either the United States or the
applicable foreign governments. We have no control over the factors that
generally affect these risks, such as economic, financial and political events
and the supply and demand for the applicable currencies. In recent years, rates
of exchange between the U.S. dollar and certain foreign currencies have been
volatile and that volatility may continue in the future. Past fluctuations in
any particular exchange rate are not necessarily indicative, however, of
fluctuations that may occur in the future. Depreciation of your payment currency
would result in a decrease in the U.S. dollar-equivalent yield of your foreign
currency notes or currency indexed notes, in the U.S. dollar-equivalent value of
the principal or any premium payable at maturity of your notes and, generally,
in the U.S. dollar-equivalent market value of your notes. If payments on your
foreign currency notes are determined by reference to a formula containing a
multiplier or leverage factor, the effect of any change in the exchange rates
between the applicable currencies will be magnified. We may further describe the
currency risks with respect to your foreign currency notes or currency indexed
notes in the applicable pricing supplement.
S-3
Governmental exchange controls could affect exchange rates and the
availability of the payment currency for your foreign currency notes on a
required payment date. Even if there are no exchange controls, it is possible
that your payment currency will not be available on a required payment date due
to circumstances beyond our control. In these cases, the applicable issuer will
be allowed to satisfy its obligations in respect of your foreign currency notes
in U.S. dollars. See "Special Provisions Relating to Foreign Currency
Notes -- Payment Currency."
Foreign exchange rates can either float or be fixed by sovereign
governments. Governments, however, often do not voluntarily allow their
currencies to float freely in response to economic forces. Instead, governments
use a variety of techniques, such as intervention by that country's central
bank, or the imposition of regulatory controls or taxes, to affect the exchange
rate of their currencies. Governments may also issue a new currency to replace
an existing currency or alter the exchange rate or relative exchange
characteristics by the devaluation or revaluation of a currency. Thus, an
important risk in purchasing foreign currency notes or currency indexed notes
for U.S. dollar-based investors is that their U.S. dollar-equivalent yields
could be affected by governmental actions that could change or interfere with
currency valuation that was previously freely determined, fluctuations in
response to other market forces and the movement of currencies across borders.
We will make no adjustment or change in the terms of the foreign currency notes
or currency indexed notes if exchange rates become fixed, or if any devaluation
or revaluation or imposition of exchange or other regulatory controls or taxes
occur, or if other developments affecting the U.S. dollar or any applicable
currency occur.
The paying agent on the notes will make all calculations relating to
foreign currency notes or currency indexed notes. The determinations made by the
paying agent will, in the absence of clear error, be binding on holders of the
notes.
Unless we provide otherwise in the applicable pricing supplement, the notes
we issue in Canada will be denominated in Canadian dollars. For notes with a
specified currency other than U.S. dollars we will include in the applicable
pricing supplement information concerning historical exchange rates for that
currency against the U.S. dollar and a brief description of any relevant
exchange controls.
EXCHANGE RATES MAY AFFECT THE VALUE OF A JUDGMENT OF A U.S. COURT INVOLVING
FOREIGN CURRENCY NOTES
The notes issued by Textron Financial will be issued as a series of debt
securities under an indenture, dated as of December 9, 1999, between Textron
Financial and SunTrust Bank, as trustee, as amended or supplemented. The notes
issued by Textron Canada Funding will be issued as a series of debt securities
under an indenture, dated as of November 30, 2001, between Textron Canada
Funding, Textron Financial, as guarantor, and SunTrust Bank, as trustee, as
amended or supplemented. The indentures and the notes, including foreign
currency notes, except to the extent that we specify otherwise in a pricing
supplement, will be governed by, and construed in accordance with, the laws of
the State of New York. As a holder of notes, you may bring an action based upon
an obligation payable in a currency other than U.S. dollars in courts in the
United States. However, courts in the United States have not customarily
rendered judgments for money damages denominated in any currency other than U.S.
dollars. In addition, it is not clear whether in granting such a judgment, the
rate of conversion would be determined with reference to the date of default,
the date judgment is rendered or any other date. The Judiciary Law of the State
of New York provides, however, that an action based upon an obligation payable
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 a rate of
exchange prevailing on the date the judgment or decree is entered. In these
cases, holders of foreign currency notes would bear the risk of exchange rate
fluctuations between the time the dollar amount of the judgment is calculated
and the time U.S. dollars were paid to the holders.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE APPLICABLE
PRICING SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN CURRENCIES OTHER THAN U.S. DOLLARS. WE BELIEVE THAT THESE RISKS
ARE POTENTIALLY TOO VARIABLE TO ASCERTAIN AND DESCRIBE WITH ANY REASONABLE
DEGREE OF CERTAINTY AND THAT PREPARATION OF A LIST OF EVERY POTENTIAL MATERIAL
RISK INCORPORATING EVERY ECONOMIC, FINANCIAL, POLITICAL AND MILITARY
CIRCUMSTANCE, AMONG OTHER THINGS, WOULD BE IMPRACTICAL. YOU
S-4
SHOULD CONSULT YOUR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY
AN INVESTMENT IN NOTES DENOMINATED IN CURRENCIES OTHER THAN U.S. DOLLARS. THESE
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at the option of the applicable issuer or are
subject to mandatory redemption, the applicable issuer may choose to, in the
case of optional redemption, or must, in the case of mandatory redemption,
redeem your notes at times when prevailing interest rates may be relatively low.
Accordingly, you may not be able to reinvest your redemption proceeds in a
comparable security at an effective interest rate as high as that of your notes
being redeemed.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT THE
TRADING VALUE OF YOUR NOTES
Upon issuance, your notes will not have an established trading market. We
cannot assure you that a trading market for your notes will ever develop or be
maintained. Many factors independent of our creditworthiness may affect the
trading market of your notes. These factors include:
- the complexity and volatility of the index or formula applicable to your
notes,
- the method of calculating the principal, premium and interest in respect
of your notes,
- the time remaining to the maturity of your notes,
- the outstanding amount of the notes,
- the redemption features of your notes,
- the amount of other debt securities linked to the index or formula
applicable to your notes, and
- the level, direction and volatility of market interest rates generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market,
and will experience more price volatility. There may be a limited number of
buyers when you decide to sell your notes. This may affect the price you receive
for your notes or your ability to sell your notes at all. You should not
purchase notes unless you understand and know you can bear all of the investment
risks relating to your notes.
OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an assessment of our respective ability to pay our
respective obligations. Consequently, real or anticipated changes in our credit
ratings will generally affect the market value of your notes. Our credit
ratings, however, may not reflect the potential impact of risks related to
structure, market or other factors discussed above on the value of your notes.
ENFORCEMENT OF LIABILITIES WITH RESPECT TO TEXTRON CANADA FUNDING
Textron Canada Funding is a wholly-owned subsidiary of Textron Financial
incorporated under the laws of Nova Scotia. One or more of its directors reside
outside the United States. All or a substantial portion of the assets of these
persons, as well as Textron Canada Funding, are located outside the United
States. Textron Canada Funding has consented to service of process in the United
States with respect to any action that may be brought in connection with its
notes or its indenture, including with respect to violations of U.S. Federal
securities laws with respect to offers and sales of notes. Purchasers of notes
issued by Textron Canada Funding may serve Textron Canada Funding with respect
to any actions by serving Corporation Service Company, 80 State Street, Albany,
New York 12207-2543, its United States agent irrevocably appointed for that
purpose. Textron Canada Funding has been advised by its Nova Scotia counsel that
there is no treaty regarding the recognition and enforcement of judicial
decisions between the United States and Canada. As a result, to enforce a final
judgment against Textron Canada Funding
S-5
obtained in the United States courts, a claimant must bring such final judgment
before a Canadian court. Textron Canada Funding has been advised by its Nova
Scotia counsel that, subject to certain conditions and qualifications, a Nova
Scotia court will normally issue a judgment incorporating the final judgment
rendered by the United States court.
IMPORTANT CURRENCY INFORMATION
You are required to pay for each note in the currency provided for in the
applicable pricing supplement. If you are a prospective purchaser of a note
having a currency other than U.S. dollars, the agents may, in their discretion
and upon your request, arrange for the exchange of U.S. dollars into that
currency to enable you to pay for the notes. Each exchange will be made by the
agent on the terms, conditions, limitations and charges that the agent may from
time to time establish in accordance with its regular foreign exchange practice.
You must pay all costs of this exchange. See "Special Provisions Relating to
Foreign Currency Notes -- Currencies."
ABOUT THIS PROSPECTUS SUPPLEMENT
The notes issued by a particular issuer are a series of the debt securities
of that issuer described in the accompanying prospectus. The following is a
description of the particular terms of the notes. You should read this
prospectus supplement together with the description of the general terms and
provisions of the debt securities set forth in the accompanying prospectus. If
the following description is inconsistent with the description contained in the
accompanying prospectus, then the following description replaces and supersedes
the description contained in the accompanying prospectus.
The pricing supplement for each offering of notes will contain the specific
information and terms for that offering. If any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, is inconsistent with this prospectus supplement or the accompanying
prospectus, you should rely on the information in the pricing supplement. The
pricing supplement may also add, update or change information contained in the
accompanying prospectus and this prospectus supplement. It is important for you
to consider the information contained in the accompanying prospectus, this
prospectus supplement and the applicable pricing supplement in making your
investment decision.
USE OF PROCEEDS
Textron Financial intends to use the net proceeds from the sale of its
notes for general corporate purposes unless otherwise indicated in the
applicable pricing supplement. Textron Canada Funding will lend the net proceeds
from the sale of its notes to Textron Financial or Textron Financial's other
subsidiaries to be used for similar purposes.
DESCRIPTION OF THE NOTES
The notes issued by Textron Financial will be issued under an indenture,
dated as of December 9, 1999, with SunTrust Bank, as trustee, as amended or
supplemented from time to time. The notes issued by Textron Canada Funding will
be issued as a series of debt securities under an indenture, dated as of
November 30, 2001, with Textron Financial, as guarantor, and SunTrust Bank, as
trustee, as amended or supplemented from time to time. Except as noted in this
prospectus supplement or in the accompanying prospectus, the indentures are
identical in all material respects. The term "senior debt securities" as used in
this prospectus supplement refers to all securities issued and issuable from
time to time under the applicable indenture and includes the notes issued by
Textron Financial or Textron Canada Funding, as applicable. The indentures are
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
senior debt securities and the indentures are more fully described in the
accompanying prospectus. The following summary of the material provisions of the
notes and of the indentures is not complete and is qualified in its entirety by
reference to the indentures. The summary does not contain all of the provisions
S-6
that you may want to consider as an investor in the notes. You may wish to
review the indentures. We have filed a copy of the indentures with the SEC as
exhibits to the registration statement of which this prospectus supplement and
the accompanying prospectus are a part. Unless an issuer provides otherwise in
the applicable pricing supplement, the notes will have the terms described
below, except that references to interest payments and interest-related
information do not apply to some original issue discount notes which are notes
issued at prices significantly less than the amount payable on them at maturity.
GENERAL
The notes will be issued as a series of debt securities of that issuer
under the applicable indenture and will initially be limited to an aggregate
principal amount of $4,000,000,000 for both issuers, subject to each issuer's
right to "reopen" that series to issue additional notes. Any notes issued by
Textron Financial or Textron Canada Funding will reduce the amount available to
be issued in the future by itself and the other issuer. Notes issued by Textron
Canada Funding will be fully and unconditionally guaranteed under a guarantee by
Textron Financial of the payment of principal of, and any premium and interest
on, such notes when due, whether at maturity or otherwise. Unless an issuer
provides otherwise in the applicable pricing supplement, all senior debt
securities, including the notes, issued and to be issued under the indentures
(as well as the related guarantee, if applicable) will be the applicable
issuer's (or guarantor's) unsecured general obligations and will rank equally in
right of payment with all of its other unsecured and unsubordinated indebtedness
from time to time outstanding.
Neither indenture limits the aggregate principal amount of senior debt
securities that the applicable issuer may issue. Each issuer may issue senior
debt securities from time to time as a single series or in two or more separate
series up to the aggregate principal amount from time to time as the applicable
issuer may authorize for each series. Each issuer may, from time to time,
without the consent of the holders of the notes, provide for the issuance of
notes or other senior debt securities in addition to the aggregate principal
amount of notes offered by this prospectus supplement. As of June 30, 2003,
Textron Financial had $4.1 billion aggregate principal amount of senior debt
securities issued and outstanding (including $2.1 billion aggregate principal
amount of Textron Financial Corporation Medium Term Notes, Series E issued and
outstanding). As of June 30, 2003, Textron Canada Funding had $82.5 million
aggregate principal amount of senior debt securities outstanding and Cdn.$295
million aggregate principal amount of senior debt securities outstanding, all of
which are guaranteed by Textron Financial.
The notes will be offered on a continuing basis. Interest-bearing notes
will bear interest at either fixed or floating rates as specified in the
applicable pricing supplement. Notes may be issued at significant discounts from
their principal amount payable at maturity, which will be either the stated
maturity date or any date before the stated maturity date on which the principal
or an installment of principal of a note becomes due and payable, whether by the
declaration of acceleration, call for redemption at the option of the applicable
issuer, repayment at the option of the holder or otherwise. The stated maturity
date or this prior date, as the case may be, is referred to as the "maturity
date" with respect to the principal, premium, if any, and interest, payable on
that date. For further information regarding discount notes, see "-- Original
Issue Discount Notes" and "Certain United States Federal Income Tax
Considerations -- Tax Consequences to U.S. Holders."
Unless an issuer provides otherwise in the applicable pricing supplement,
the notes we issue in the United States will be denominated in, and payments in
respect of the notes will be made in, United States dollars. Unless an issuer
provides otherwise in the applicable pricing supplement, the notes Textron
Canada Funding issues in Canada will be denominated in, and payments in respect
of the notes will be made in, Canadian dollars. The notes also may be
denominated in, and payments in respect of the notes may be made in, one or more
foreign or composite currencies. See "Special Provisions Relating to Foreign
Currency Notes -- Payment of Principal, Premium and Interest."
Unless otherwise specified by Textron Canada Funding in the applicable
pricing supplement, all amounts of principal of, and any premium and interest
on, any guaranteed notes issued by Textron Canada Funding outside Canada will be
paid by Textron Canada Funding without deduction or withholding for any taxes,
assessments or other charges imposed by the government of Canada, or the
government of a
S-7
jurisdiction in which a successor to Textron Canada Funding is organized,
subject to certain exceptions. For a discussion of the payment of these taxes,
assessments or charges, please see "Description of Debt Securities -- Payment of
Additional Amounts with Respect to the Guaranteed Debt Securities" in the
accompanying prospectus. In addition, unless otherwise specified in the
applicable pricing supplement, Textron Canada Funding may redeem the guaranteed
notes in the event certain tax events occur, to the extent set forth under
"Description of Debt Securities -- Optional Tax Redemption" in the accompanying
prospectus.
Each fixed rate note will mature on a day nine months or more from the date
of issue, as provided in the applicable pricing supplement, as selected by the
agent and agreed to by the applicable issuer. Each floating rate note will
mature on an interest payment date nine months or more from the date of issue as
provided in the applicable pricing supplement, as selected by the agent and
agreed to by the applicable issuer. Except as provided in the next sentence, in
the event that an interest payment date, maturity date or any date fixed for
redemption or repayment of any note is not a business day, principal, premium,
if any, and interest payable on such interest payment date, maturity date or
date fixed for redemption or repayment will be paid on the next succeeding
business day with the same effect as if that business day were the specified
interest payment date, maturity date or date fixed for redemption or repayment
and no interest will accrue for the period from and after the specified interest
payment date, maturity date or date fixed for redemption or repayment to the
next succeeding business day. However, if any interest payment date for a
floating rate note, other than an interest payment date at maturity, falls on a
day that is not a business day, that interest payment date will be postponed to
the next business day and interest will continue to accrue to the following
business day, but in the case of a LIBOR note, if the next business day is in
the following calendar month, the interest payment date will be the immediately
preceding business day.
Unless an issuer provides otherwise in the applicable pricing supplement,
the notes will be issuable only in fully registered book-entry form or
certificated form, without coupons, in denominations of U.S.$1,000 and integral
multiples of U.S.$1,000 above that amount for notes denominated in U.S. dollars
or Cdn.$1,000 and integral multiples of Cdn.$1,000 above that amount for notes
denominated in Canadian dollars and the minimum denominations of each foreign
currency note will be in at least equivalent amounts in the applicable foreign
currency, as provided in the applicable pricing supplement. Notes in book-entry
form may be transferred or exchanged only through a participating member of The
Depository Trust Company, The Canadian Depository for Securities Limited or any
other depositary as is identified in an applicable pricing supplement. See
"-- Book-Entry System." Registration of transfer of notes in certificated form
will be made at the corporate trust office of the trustee. There will be no
service charge for any registration of transfer or exchange of notes, but the
applicable issuer may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with any transfer or exchange,
other than exchanges pursuant to each indenture not involving any transfer.
The pricing supplement relating to a particular issuance of notes will
describe the following terms:
- whether the notes are fixed rate or floating rate notes or will not bear
any interest,
- the price (expressed as a percentage of the aggregate principal amount)
at which the notes will be issued,
- the date on which the notes will be issued,
- the maturity date of the notes,
- if the notes are fixed rate notes, the rate per annum at which the notes
will bear interest,
- if the notes are floating rate notes, the terms of the notes, including
those matters described below under "-- Floating Rate Notes,"
- whether the notes are original issue discount notes and whether they have
been issued with original issue discount for U.S. or Canadian federal
income tax purposes,
S-8
- whether the notes are amortizing notes,
- whether the notes may be redeemed at the option of the applicable issuer,
or repaid at the option of the holder, prior to maturity as described
under "-- Optional Redemption" and "-- Repayment at the Noteholders'
Option; Repurchase" below and, if so, the provisions relating to that
redemption or repayment, including, in the case of any original issue
discount notes, the information necessary to determine the amount due
upon redemption or repayment,
- whether the notes will be initially represented by a global book-entry
note registered in the name of The Depository Trust Company, The Canadian
Depository for Securities Limited or another depositary or a certificate
issued in definitive form,
- any relevant material tax consequences associated with the terms of those
notes which have not been described under "Certain United States Federal
Income Tax Considerations" and "Certain Canadian Federal Income Tax
Considerations" below,
- whether the notes will be denominated in a currency other than U.S.
dollars, if offered in the United States or Canadian dollars, if offered
in Canada,
- the use of proceeds, if materially different from that disclosed in the
accompanying prospectus,
- the identity of any additional agent through or to whom the notes are
being sold,
- the amount of discounts or commissions to be paid to an agent if
different from those specifically set forth in the distribution
agreements which are incorporated by reference as exhibits to the
registration statement of which this prospectus supplement and the
accompanying prospectus are a part, and
- any other terms of those notes that are not inconsistent with the
provisions of the applicable indenture.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
The applicable issuer will make payments of principal and premium, if any,
and interest on notes in book-entry form through the trustee to the depositary
or its nominee. See "-- Book-Entry System."
In the case of notes in certificated form, the applicable issuer will make
payment of principal, premium, if any, and interest on the maturity of each note
in immediately available funds upon presentation and surrender of the note and,
in the case of any repayment on an optional repayment date, upon submission of a
duly completed election form, at the corporate trust office or agency of the
trustee in the Borough of Manhattan, The City of New York, or at any other place
as the applicable issuer may designate. Payment of interest due at maturity will
be made to the person to whom payment of the principal and premium, if any, of
the note in certificated form will be made.
Unless an issuer provides otherwise in the pricing supplement, it will pay
interest on each certificated note, other than interest payable upon maturity or
upon earlier redemption or repayment, at the corporate trust office or agency of
the trustee in the Borough of Manhattan, The City of New York, or at any other
office as the applicable issuer specifies or, at its option, by check mailed to
the address of the person in whose name a certificated note is registered, as
such address appears in the register maintained by the trustee. However, in the
case of a note issued between a regular record date and the related interest
payment date, interest for the period beginning on the original issue date and
ending on the first interest payment date will be paid to the holder on the next
succeeding interest payment date. A holder of U.S.$10,000,000 or more in total
principal amount of certificated notes of like tenor and terms for notes
denominated in U.S. dollars or Cdn.$10,000,000 or more in total principal amount
of certificated notes of like tenor and terms denominated in Canadian dollars
will be entitled to receive interest payments in U.S. or Canadian dollars, as
the case may be, by wire transfer of immediately available funds if appropriate
wire transfer instructions have been received in writing by the trustee not less
than 15 days prior to that interest payment date. Any such wire transfer
instructions received by the trustee will remain in effect until
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revoked by the holder. In the case of a global book-entry note, the payment of
interest will be made to a nominee of the depositary.
The interest rates on notes issued in one transaction may be different from
the interest rates applicable to notes issued in another transaction depending
upon, among other things, the aggregate principal amount of notes purchased in
the applicable transaction. Each issuer may offer notes with similar variable
terms but different interest rates concurrently at any time. Each issuer may
also concurrently offer notes having different variable terms to different
investors.
INTEREST AND INTEREST RATES
Unless otherwise specified in an applicable pricing supplement, each
interest-bearing note will bear interest from the date of issue at the rate per
annum or, in the case of a floating rate note, pursuant to the interest rate
formula, stated in the applicable note and in the applicable pricing supplement
until the principal of the note is paid or made available for payment. Interest
payments on fixed rate notes 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 made available for payment or
from and including the date of issue, if no interest has been paid or made
available for payment with respect to the note, to, but excluding, the related
interest payment date or maturity, as the case may be.
The applicable issuer will pay interest in arrears on each interest payment
date specified in the applicable pricing supplement on which an installment of
interest is due and payable and at maturity. The applicable issuer will pay
interest to the persons or entities in whose names the notes are registered as
of the regular record date. However, interest that the applicable issuer pays at
maturity, if any, will be payable to the persons to whom the principal will be
payable. If any note is originally issued between a regular record date and the
related interest payment date, the applicable issuer will make the first payment
of interest on that note on the interest payment date immediately following the
next succeeding regular record date to the registered holder on that next
succeeding regular record date. Unless we provide otherwise in the applicable
pricing supplement, the regular record date with respect to fixed rate notes
will be the last day of February and August, whether or not a business day,
immediately preceding the related interest payment date and the regular record
date with respect to floating rates notes will be the fifteenth day, whether or
not a business day, immediately preceding the related interest payment date.
"Business day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to non-United States dollar-denominated
notes, the day is also not a day on which commercial banks are authorized or
required by law, regulation or executive order to close in the principal
financial center, as defined below, of the country issuing the specified
currency or, if the specified currency is euro, the day is also a day on which
the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open; and provided further that, with respect to floating
rate notes as to which LIBOR is an applicable interest rate basis, the day is
also a London banking day.
"London banking day" means a day on which commercial banks are open for
business, including dealings in the LIBOR currency, as defined below under
"LIBOR Rate Notes," in London.
"Principal financial center" means, unless otherwise specified in the
applicable pricing supplement,
(1) the capital city of the country issuing the specified currency, or
(2) the capital city of the country to which the LIBOR currency
relates,
except, in each case, that with respect to United States dollars, Australian
dollars, Canadian dollars, Euro, South African rand and Swiss francs, the
"principal financial center" will be The City of New York, Sydney, Toronto,
London (solely in the case of the LIBOR currency), Johannesburg and Zurich,
respectively.
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FIXED RATE NOTES
Each fixed rate note will bear interest at the annual rate provided in the
note and in the applicable pricing supplement. Unless an issuer provides
otherwise in the applicable pricing supplement, the interest payment dates for
the fixed rate notes will be on March 15 and September 15 of each year. Unless
an issuer provides otherwise in the applicable pricing supplement, interest on
fixed rate notes will be computed and paid on the basis of a 360-day year of
twelve 30-day months.
FLOATING RATE NOTES
Interest on floating rate notes will be determined by reference to the
applicable interest rate basis or interest rate bases, which may be one or more
of the following:
- the CMT rate,
- the CD rate,
- the Commercial Paper rate,
- the Federal Funds rate,
- LIBOR,
- the Prime rate,
- the Treasury rate, or
- any other interest rate formula described in the applicable pricing
supplement.
TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including the following:
- whether the floating rate note is a regular floating rate note, a
floating rate/fixed rate note or an inverse floating rate note,
- the interest rate basis or bases (the "base rate"),
- the initial interest rate,
- the fixed rate commencement date, if applicable,
- the fixed interest rate, if applicable,
- the interest reset dates,
- the interest payment dates,
- the period to maturity of the instrument or obligation with respect to
which the interest rate basis or bases will be calculated (the "index
maturity"),
- the maximum interest rate and minimum interest rate, if any,
- the number of basis points to be added to or subtracted from the related
interest rate basis or bases (the "spread"),
- the percentage of the related interest rate basis or bases by which the
interest rate basis or bases will be multiplied to determine the
applicable interest rate (the "spread multiplier"),
- if one or more of the specified interest rate bases is LIBOR, the index
maturity, as defined above, the LIBOR currency and the designated LIBOR
page, both as defined below, and
- if one or more of the specified interest rate bases is the CMT rate, the
CMT Moneyline Telerate Page and the weekly average or the monthly
average.
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If we designate the floating rate note as having an addendum attached, the
floating rate note will bear interest in accordance with the terms described in
the addendum and the applicable pricing supplement.
The interest rate borne by the floating rate notes will be determined as
follows:
REGULAR FLOATING RATE NOTE. Unless a floating rate note is designated as a
"floating rate/fixed rate note," an "inverse floating rate note" or as having an
addendum attached or as having "other/additional provisions" apply relating to a
different interest rate formula, the floating rate note will be designated as a
"regular floating rate note" and, except as described below or in an applicable
pricing supplement, will bear interest at the rate determined by reference to
the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Commencing on the first interest reset date, the interest rate of the regular
floating rate note will be reset on each interest reset date. However, the
interest rate for the period from the date of issuance to the first interest
reset date will be the initial interest rate provided in the pricing supplement.
FLOATING RATE/FIXED RATE NOTE. If a floating rate note is designated as a
"floating rate/fixed rate note," then, except as described below or in the
applicable pricing supplement, it will bear interest at the rate determined by
reference to the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Commencing on the first interest reset date, the interest rate on the
floating rate/fixed rate note will be reset on each interest reset date;
provided, however, that:
- the interest rate for the period from the date of issuance to the first
interest reset date will be the initial interest rate, and
- the interest rate for the period commencing on, and including, the date
on which interest begins to accrue on a fixed rate basis to maturity,
i.e. the fixed rate commencement date, will be the fixed interest rate
provided in the applicable pricing supplement or, if no fixed interest
rate is provided in the applicable pricing supplement, the interest rate
for this period will be the interest rate in effect on the day
immediately preceding the date on which interest begins to accrue on a
fixed rate basis.
INVERSE FLOATING RATE NOTE. If a floating rate note is designated as an
"inverse floating rate note," then, except as described below or in the
applicable pricing supplement, it will bear interest at the fixed interest rate
specified in the applicable pricing supplement minus the rate determined by
reference to the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Unless an issuer provides otherwise in the applicable pricing supplement, the
interest rate will not be less than zero.
Commencing on the first interest reset date, the interest rate on the
inverse floating rate note will be reset as of each interest reset date.
However, the interest rate in effect for the period from the date of issuance to
the first interest reset date will be the initial interest rate.
INTEREST RESET DATES. The rate of interest on each floating rate note will
be reset daily, weekly, monthly, quarterly, semi-annually or annually, as
provided in the applicable pricing supplement (the
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"interest reset date"). Unless an issuer provides otherwise in the applicable
pricing supplement, the interest reset date will be:
- in the case of floating rate notes which reset daily, each business day,
- in the case of floating rate notes which reset weekly, the Wednesday of
each week, with the exception of weekly reset floating rate notes as to
which the Treasury rate is an applicable interest rate basis, which will
reset the Tuesday of each week,
- in the case of floating rate notes which reset monthly, the third
Wednesday of each month,
- in the case of floating rate notes which reset quarterly, the third
Wednesday of March, June, September and December of each year,
- in the case of floating rate notes which reset semi-annually, the third
Wednesday of the two months specified in the applicable pricing
supplement, and
- in the case of floating rate notes which reset annually, the third
Wednesday of the month specified in the applicable pricing supplement;
provided, however, that:
- the interest rate of a floating rate/fixed rate note will not reset after
the applicable fixed rate commencement date,
- the initial interest rate, which is the interest rate in effect from the
original issue date to, but excluding, the first interest reset date,
will be as provided in the applicable pricing supplement, and
- if any interest reset date falls on a day that is not a business day, the
applicable interest reset date will be postponed to the next business
day, except, in the case of a LIBOR note, if that business day is in the
following calendar month, the interest reset date will be the immediately
preceding business day.
MAXIMUM AND MINIMUM INTEREST RATES. A floating rate note may also have
either or both of the following:
- a maximum numerical limitation, or ceiling, on the rate at which interest
may accrue during any interest period (a "maximum interest rate"), and
- a minimum numerical limitation, or floor, on the rate at which interest
may accrue during any period (a "minimum interest rate").
Each indenture is, and any notes issued under each indenture will be,
governed by and construed in accordance with the laws of the State of New York.
Under present New York law, the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to securities in which
$2,500,000 or more has been invested. While we believe that New York law would
be given effect by a state or federal court sitting outside of New York, state
laws frequently regulate the amount of interest that may be charged to and paid
by a borrower, including, in some cases, corporate borrowers. We suggest that
prospective investors consult their personal advisors with respect to the
applicability of these laws. We have agreed for the benefit of the beneficial
owners of the notes, to the extent permitted by law, not to claim voluntarily
the benefits of any laws concerning usurious rates or interest against a
beneficial owner of the notes.
INTEREST DETERMINATION DATES. Unless an issuer provides otherwise in the
applicable pricing supplement, the interest rate applicable to each interest
reset period commencing on the related interest reset date will be the rate
determined as of the applicable "interest determination date" and calculated on
or prior to the calculation date, as defined below.
- The interest determination date with respect to a CD rate note, a CMT
rate note and a Commercial Paper rate note will be the second business
day preceding each interest reset date for the related note.
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- The interest determination date with respect to a Federal Funds rate note
and a Prime rate note will be the first business day preceding each
interest reset date for the related note.
- The interest determination date with respect to a LIBOR note will be the
second London banking day preceding each interest reset date.
- The interest determination date with respect to a Treasury rate note will
be the day of the week in which that interest reset date falls on which
Treasury bills would normally be auctioned. Treasury bills are normally
sold at auction on Monday of each week. If Monday is a legal holiday, the
auction is normally held on the following Tuesday, but the auction may be
held on the preceding Friday. If, as the result of a legal holiday, an
auction is held on the preceding Friday, that Friday will be the interest
determination date relating to the interest reset date occurring in the
following week.
- The interest determination date relating to a floating rate note with an
interest rate that is determined by reference to two or more interest
rate bases will be the most recent business day which is at least two
business days before the applicable interest reset date for each interest
rate for the applicable floating rate note on which each interest reset
basis is determinable.
CALCULATION DATE
Unless an issuer provides otherwise in the applicable pricing supplement,
SunTrust Bank will be the calculation agent, which term includes any successor
calculation agent appointed by the applicable issuer. The calculation agent will
determine for each interest reset date the interest rate in the manner described
in this prospectus supplement. The calculation agent will notify the trustee of
each determination of the interest rate for any floating rate note promptly
after the determination is made. The calculation agent will, upon the request of
the holder of any floating rate note, provide the interest rate then in effect
and, if determined, the interest rate which will become effective on the next
interest reset date for that note.
Unless an issuer provides otherwise in the applicable pricing supplement,
the calculation date relating to any interest determination date will be the
earlier of:
- the tenth day after the applicable interest determination date or, if
that day is not a business day, the following business day, or
- the business day preceding the applicable interest payment date or
maturity date, as the case may be.
INTEREST PAYMENTS
Each applicable pricing supplement will specify the dates on which interest
will be payable. Except as provided below or in the applicable pricing
supplement, interest on floating rate notes will be payable:
- in the case of floating rate notes with a daily, weekly or monthly
interest reset date, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year,
- in the case of floating rate notes with a quarterly interest reset date,
on the third Wednesday of March, June, September and December of each
year,
- in the case of floating rate notes with a semi-annual interest reset
date, on the third Wednesday of the two months of each year specified in
the applicable pricing supplement,
- in the case of floating rate notes with an annual interest reset date, on
the third Wednesday of the month of each year specified in the applicable
pricing supplement, and
- at maturity.
All percentages resulting from any calculation on floating rate notes will
be rounded to the nearest one hundred thousandth of a percentage point, with
five one millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
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amounts used in or resulting from any calculation on floating rate notes will be
rounded to the nearest cent with one half cent being rounded upward.
With respect to each floating rate note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of a note by an accrued interest factor. Unless
otherwise specified in the applicable pricing supplement, the accrued interest
factor is computed by adding together the interest factors calculated for each
day from the original issue date, or from the last date to which interest has
been paid, to the date for which accrued interest is being calculated. Unless
provided otherwise in the applicable pricing supplement:
- in the case of notes for which the interest rate basis is the CD rate,
the Commercial Paper rate, the Federal Funds rate, LIBOR or the Prime
rate, the interest factor for each day will be computed by dividing the
interest rate applicable to each day by 360,
- in the case of notes for which the interest rate basis is the CMT rate or
the Treasury rate, the interest factor for each day will be computed by
dividing the interest rate applicable to each day by the actual number of
days in the year, and
- the interest factor for floating rate notes for which the interest rate
is calculated with reference to two or more interest rate bases will be
calculated in each period in the same manner as if only one of the
applicable interest rate bases applied.
Except as set forth in the applicable pricing supplement, the interest rate
in effect on each day will be:
- if the day is an interest reset date, the interest rate with respect to
the interest determination date relating to that interest reset date, or
- if the day is not an interest reset date, the interest rate with respect
to the interest determination date relating to the immediately preceding
interest reset date
;provided, however, that the interest rate in effect for the period from
the date of issue to the first interest reset date will be the initial interest
rate specified in the applicable pricing supplement.
Unless an issuer provides otherwise in the applicable pricing supplement,
interest rates will be determined by the calculation agent as follows:
CD RATE NOTES. CD rate notes will bear interest at the rates, calculated
with reference to the CD rate and the spread and/or spread multiplier, if any,
specified in the applicable CD rate notes and in any applicable pricing
supplement.
"CD rate" means:
(1) the rate on the applicable interest determination date for
negotiable United States dollar certificates of deposit having the index
maturity specified in the applicable pricing supplement published in
H.15(519) under the heading "CDs (secondary market)," or
(2) if the rate referred to in clause (1) above is not so published by
3:00 P.M., New York City time, on the related calculation date, the rate on
the applicable interest determination date for negotiable United States
dollar certificates of deposit of the index maturity specified in the
applicable pricing supplement as published in H.15 daily update, or other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "CDs (secondary market)," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
on the notes as the arithmetic mean of the secondary market offered rates
as of 10:00 A.M., New York City time, on the applicable interest
determination date, of three leading non-bank dealers in negotiable United
States dollar certificates of deposit in The City of New York (which may
include an agent or its affiliates) selected by the calculation agent for
negotiable United States dollar certificates of deposit of major United
States money market banks with a remaining
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maturity closest to the index maturity specified in the applicable pricing
supplement in an amount that is representative for a single transaction in
that market at that time, or
(4) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3) above, the CD rate in effect on the applicable
interest determination date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 daily update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.federalreserve.gov/releases/h15/update, or any successor site or
publication.
CMT RATE NOTES. CMT rate notes will bear interest at the rates, calculated
with reference to the CMT rate and the spread and/or spread multiplier, if any,
specified in the applicable CMT rate notes and in any applicable pricing
supplement.
"CMT rate" means:
(1) if CMT Moneyline Telerate Page 7051 is specified in the applicable
pricing supplement:
(a) the percentage equal to the yield for United States Treasury
securities at "constant maturity" having the index maturity specified in
the applicable pricing supplement as published in H.15(519) under the
caption "Treasury Constant Maturities," as the yield is displayed on
Moneyline Telerate (or any successor service), on page 7051 or any other
page as may replace page 7051 on that service ("Moneyline Telerate Page
7051"), for the applicable interest determination date, or
(b) if the rate referred to in clause (a) does not appear on
Moneyline Telerate Page 7051, the percentage equal to the yield for
United States Treasury securities at "constant maturity" having the
index maturity specified in the applicable pricing supplement and for
the applicable interest determination date as published in H.15(519)
under the caption "Treasury Constant Maturities," or
(c) if the rate referred to in clause (b) does not appear in
H.15(519), the rate on the applicable interest determination date for
the period of the index maturity specified in the applicable pricing
supplement as may then be published by either the Federal Reserve System
Board of Governors or the United States Department of the Treasury that
the calculation agent determines to be comparable to the rate which
would otherwise have been published in H.15(519), or
(d) if the rate referred to in clause (c) is not published, the
rate on the applicable interest determination date calculated by the
calculation agent as a yield to maturity based on the arithmetic mean of
the secondary market bid prices at approximately 3:30 P.M., New York
City time, on the applicable interest determination date of three
leading primary United States government securities dealers in The City
of New York, which may include the agents or their affiliates (each, a
"reference dealer"), selected by the calculation agent from five
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 United States Treasury securities with an original maturity equal to
the index maturity specified in the applicable pricing supplement, a
remaining term to maturity no more than 1 year shorter than the index
maturity specified in the applicable pricing supplement and in a
principal amount that is representative for a single transaction in the
securities in the market at that time, or
(e) if fewer than five but more than two of the prices referred to
in clause (d) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation
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agent based on the arithmetic mean of the bid prices obtained and
neither the highest nor the lowest of the quotations shall be
eliminated, or
(f) if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the applicable interest determination
date calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable interest
determination date of three reference dealers selected by the
calculation agent from five 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 United States Treasury
securities with an original maturity greater than the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity closest to the index maturity specified in the applicable
pricing supplement and in a principal amount that is representative for
a single transaction in the securities in the market at that time, or
(g) if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation agent based on
the arithmetic mean of the bid prices obtained and neither the highest
nor the lowest of the quotations will be eliminated, or
(h) if fewer than three prices referred to in clause (f) are
provided as requested, the CMT rate in effect on the applicable interest
determination date.
(2) if CMT Moneyline Telerate Page 7052 is specified in the applicable
pricing supplement:
(a) the percentage equal to the one-week or one-month, as specified
in the applicable pricing supplement, average yield for United States
Treasury securities at "constant maturity" having the index maturity
specified in the applicable pricing supplement as published in H.15(519)
opposite the caption "Treasury Constant Maturities," as the yield is
displayed on Moneyline Telerate, or any successor service, on page 7052
or any other page as may replace that specified page on that service
("Moneyline Telerate Page 7052"), for the week or month, as applicable,
ended immediately preceding the week or month, as applicable, in which
the related interest determination date falls, or
(b) if the rate referred to in clause (a) does not appear on
Moneyline Telerate Page 7052, the percentage equal to the one-week or
one-month, as specified in the applicable pricing supplement, average
yield for United States Treasury securities at "constant maturity"
having the index maturity specified in the applicable pricing supplement
and for the week or month, as applicable, preceding the applicable
interest determination date as published in H.15(519) opposite the
caption "Treasury Constant Maturities," or
(c) if the rate referred to in clause (b) does not appear in
H.15(519), the one-week or one-month, as specified, average yield for
United States Treasury securities at "constant maturity" having the
index maturity specified in the applicable pricing supplement as
otherwise announced by the Federal Reserve Bank of New York for the week
or month, as applicable, ended immediately preceding the week or month,
as applicable, in which the related interest determination date falls,
or
(d) if the Federal Reserve Bank of New York does not publish the
rate referred to in clause (c), the rate on the applicable interest
determination date calculated by the calculation agent as a yield to
maturity based on the arithmetic mean of the secondary market bid prices
at approximately 3:30 P.M., New York City time, on the applicable
interest determination date of three reference dealers selected by the
calculation agent from five 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 United States Treasury
securities with an original maturity equal to the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity no more than 1 year shorter than
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the index maturity specified in the applicable pricing supplement and in
a principal amount that is representative for a single transaction in
the securities in the market at that time, or
(e) if fewer than five but more than two of the prices referred to
in clause (d) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation agent based on
the arithmetic mean of the bid prices obtained and neither the highest
nor the lowest of the quotations shall be eliminated, or
(f) if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the applicable interest determination
date calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable interest
determination date of three reference dealers selected by the
calculation agent from five 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 United States Treasury
securities with an original maturity greater than the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity closest to the index maturity specified in the applicable
pricing supplement and in a principal amount that is representative for
a single transaction in the securities in the market at the time, or
(g) if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate will be calculated by the
calculation agent based on the arithmetic mean of the bid prices
obtained and neither the highest nor the lowest of the quotations will
be eliminated, or
(h) if fewer than three prices referred to in clause (f) are
provided as requested, the CMT rate in effect on the applicable interest
determination date.
If two United States Treasury securities with an original maturity
greater than the index maturity specified in the applicable pricing
supplement have remaining terms to maturity equally close to the index
maturity specified in the applicable pricing supplement, the quotes for
the United States Treasury security with the shorter original remaining
term to maturity will be used.
COMMERCIAL PAPER RATE NOTES. Commercial Paper rate notes will bear
interest at the rates, calculated with reference to the Commercial Paper rate
and the spread and/or spread multiplier, if any, specified in the applicable
Commercial Paper rate notes and in any applicable pricing supplement.
"Commercial Paper rate" means:
(1) the money market yield, as defined below, on the applicable
interest determination date of the rate for commercial paper having the
index maturity specified in the applicable pricing supplement published in
H.15(519) under the caption "Commercial Paper-Nonfinancial," or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the money market
yield of the rate on the applicable interest determination date for
commercial paper having the index maturity specified in the applicable
pricing supplement published in H.15 daily update, or other recognized
electronic source used for the purpose of displaying the applicable rate,
under the caption "Commercial Paper-Nonfinancial," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the money market yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on the applicable interest
determination date of three leading dealers of United States dollar
commercial paper in The City of New York, which may include the agent and
its affiliates, selected by the calculation agent for commercial paper
having the index maturity specified in the applicable pricing supplement
placed for industrial issuers whose bond rating is "Aa," or the equivalent,
from a nationally recognized statistical rating organization, or
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(4) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3), the Commercial Paper rate in effect on the
applicable interest determination date.
"Money market yield" means a yield calculated in accordance with the following
formula and expressed as a percentage:
<Table>
D X 360
Money market yield = ------------- X 100
360 - (D X M)
</Table>
where "D" refers to the applicable 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 interest period for which interest is being calculated.
FEDERAL FUNDS RATE NOTES. Federal Funds rate notes will bear interest at
the rates, calculated with reference to the Federal Funds rate and the spread
and/or spread multiplier, if any, specified in the applicable Federal Funds rate
notes and in any applicable pricing supplement.
"Federal Funds rate" means:
(1) the rate on the applicable interest determination date for United
States dollar federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," as displayed on Moneyline Telerate or any
successor service on page 120 or any other page as may replace the
applicable page on that service, "Moneyline Telerate Page 120," or
(2) if the rate referred to in clause (1) does not appear on Moneyline
Telerate Page 120 or is not so published by 3:00 P.M., New York City time,
on the related calculation date, the rate on the applicable interest
determination date for United States dollar federal funds published in H.15
daily update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "Federal Funds
(Effective)," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of
United States dollar federal funds transactions in The City of New York,
which may include the agent or its affiliates, selected by the calculation
agent before 9:00 A.M., New York City time, on the applicable interest
determination date, or
(4) if the brokers selected by the calculation agent are not quoting
as mentioned in clause (3), the Federal Funds rate in effect on the
applicable interest determination date.
LIBOR RATE NOTES. LIBOR rate notes will bear interest at the rates,
calculated with reference to LIBOR and the spread and/or spread multiplier, if
any, specified in the applicable LIBOR rate notes and in any applicable pricing
supplement.
"LIBOR" means:
(1) if "LIBOR Moneyline Telerate" is specified in the applicable
pricing supplement or if neither "LIBOR Reuters" nor "LIBOR Moneyline
Telerate" is specified in the applicable pricing supplement as the method
for calculating LIBOR, LIBOR will be the rate for deposits in the LIBOR
currency, as defined below, having the index maturity specified in the
applicable pricing supplement, commencing on the second London banking day
immediately following that interest determination date that appears on the
designated LIBOR Page as of 11:00 A.M., London time, on the applicable
interest determination date, or
(2) if "LIBOR Reuters" is specified in the applicable pricing
supplement, LIBOR will be the arithmetic mean of the offered rates for
deposits in the LIBOR currency having the index maturity specified in the
applicable pricing supplement, commencing on the second London banking day
immediately following that interest determination date, that appear on the
designated LIBOR page
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specified in the applicable pricing supplement as of 11:00 A.M., London
time, on the applicable interest determination date. If the designated
LIBOR page by its terms provides only for a single rate, then the single
rate will be used, or
(3) with respect to a LIBOR interest determination date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the designated LIBOR page as specified in clauses (1) and (2),
respectively, the rate calculated by the calculation agent as the
arithmetic mean of at least two quotations obtained by the calculation
agent after requesting the principal London offices of each of four major
reference banks, which may include affiliates of the agent, in the London
interbank market to provide the calculation agent with its offered
quotation for deposits in the LIBOR currency for the period of the index
maturity specified in the applicable pricing supplement, commencing on the
second London banking day immediately following the applicable interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on the applicable interest
determination date and in a principal amount that is representative for a
single transaction in the applicable LIBOR currency in that market at that
time, or
(4) if fewer than two quotations referred to in clause (3) are so
provided, the rate on the applicable interest determination date calculated
by the calculation agent as the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable principal financial center(s),
on the applicable interest determination date by three major banks, which
may include affiliates of the agent, in the applicable principal financial
center selected by the calculation agent for loans in the LIBOR currency to
leading European banks, having the index maturity specified in the
applicable pricing supplement and in a principal amount that is
representative for a single transaction in the applicable LIBOR currency in
that market at that time, or
(5) if the banks so selected by the calculation agent are not quoting
as mentioned in clause (4), LIBOR in effect on the applicable interest
determination date.
"LIBOR currency" means the currency specified in the applicable pricing
supplement as to which LIBOR will be calculated or, if no currency is specified
in the applicable pricing supplement, United States dollars.
"Designated LIBOR page" means either:
- if "LIBOR Moneyline Telerate" is designated in the applicable pricing
supplement or neither "LIBOR Reuters" nor "LIBOR Moneyline Telerate" is
specified in the applicable pricing supplement as the method for
calculating LIBOR, the display on Moneyline Telerate or any successor
service on the page specified in such pricing supplement or any page as
may replace the specified page on that service for the purpose of
displaying the London interbank rates of major banks for the applicable
LIBOR currency, or
- if "LIBOR Reuters" is specified in the applicable pricing supplement, the
display on the Reuters Monitor Money Rates Service or any successor
service on the page specified in the applicable pricing supplement or any
other page as may replace the specified page on that service for the
purpose of displaying the London interbank rates of major banks for the
applicable LIBOR currency.
PRIME RATE NOTES. Prime rate notes will bear interest at the rates,
calculated with reference to the Prime rate and the spread and/or spread
multiplier, if any, specified in the applicable Prime rate notes and any
applicable pricing supplement.
"Prime rate" means:
(1) the rate on the applicable interest determination date as
published in H.15(519) under the caption "Bank Prime Loan," or
(2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date published in
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H.15 daily update, or such other recognized electronic source used for the
purpose of displaying the applicable rate under the caption "Bank Prime
Loan," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
particular interest determination date calculated by the calculation agent
as the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the Reuters Screen US PRIME 1 Page, as defined below,
as the particular bank's prime rate or base lending rate as of 11:00 A.M.,
New York City time, on the applicable interest determination date, or
(4) if fewer than four rates described in clause (3) are so published
by 3:00 P.M., New York City time, on the related calculation date as shown
on the Reuters Screen US PRIME 1 Page, the rate on the applicable interest
determination date calculated by the calculation agent as 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 the applicable interest determination date by three major
banks, which may include affiliates of the agent, in The City of New York
selected by the calculation agent, or
(5) if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the Prime rate in effect on the applicable
interest determination date.
"Reuters Screen US Prime 1 Page" means the display on the Reuters Monitor Money
Rates Service or any successor service on the "US PRIME 1 Page" or other page as
may replace the US PRIME 1 Page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks.
TREASURY RATE NOTES. Treasury rate notes will bear interest at the rates,
calculated with reference to the Treasury rate and the spread and/or spread
multiplier, if any, specified in the applicable Treasury rate notes and in any
applicable pricing supplement.
"Treasury rate" means:
(1) the rate from the auction held on the applicable interest
determination date (the "auction") of direct obligations of the United
States ("treasury bills") having the index maturity specified in the
applicable pricing supplement under the caption "INVESTMENT RATE" on the
display on Moneyline Telerate or any successor service on page 56 or any
other page as may replace page 56 on that service, "Moneyline Telerate Page
56," or page 57 or any other page as may replace page 57 on that service,
"Moneyline Telerate Page 57," or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the bond
equivalent yield, as defined below, of the rate for the applicable treasury
bills as published in H.15 daily update, or other recognized electronic
source used for the purpose of displaying the applicable rate, under the
caption "U.S. Government Securities/Treasury Bills/Auction High," or
(3) if the rate described in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the bond
equivalent yield of the auction rate of the applicable treasury bills
announced by the United States Department of the Treasury, or
(4) if the rate referred to in clause (3) is not announced by the
United States Department of the Treasury, or if the Auction is not held,
the bond equivalent yield of the rate on the applicable interest
determination date of treasury bills having the index maturity specified in
the applicable pricing supplement published in H.15(519) under the caption
"U.S. Government Securities/Treasury Bills/Secondary Market," or
(5) if the rate referred to in clause (4) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date of the applicable treasury bills as
published in H.15 daily update, or other recognized electronic source used
for the
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purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market," or
(6) if the rate referred to in clause (5) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the bond equivalent yield of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on the
applicable interest determination date, of three primary United States
government securities dealers, which may include the agent or its
affiliates, selected by the calculation agent, for the issue of treasury
bills with a remaining maturity closest to the index maturity specified in
the applicable pricing supplement, or
(7) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (6), the Treasury rate in effect on the applicable
interest determination date.
"Bond equivalent yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<Table>
D X N
Bond equivalent yield = ------------- X 100
360 - (D X M)
</Table>
where "D" refers to the applicable per annum rate for treasury bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the interest period
for which interest is being calculated.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of notes, including the
determination of one or more interest rate bases, the specification of one or
more interest rate bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions, or any other matters relating to
the applicable notes, may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an addendum relating to
the applicable notes, if so specified on the face of the applicable notes and in
the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
Original issue discount notes are notes issued at a discount from the
principal amount payable at maturity and which may be considered to be issued
with original issue discount which must be included in income for U.S. federal
income tax purposes at a constant rate. Unless an issuer provides otherwise in
the applicable pricing supplement, if the principal of any original issue
discount note becomes due prior to its maturity either as a result of
acceleration caused by an event of default or through redemption, the amount of
principal due and payable on the note will be limited to (1) the issue price of
the note plus, (2) in the case of a redemption, any premium provided in the
applicable pricing supplement, plus (3) the original issue discount amortized
from the original issue date to the date of acceleration or redemption. This
amortization will be calculated using the "constant yield method," computed in
accordance with the rules under the Internal Revenue Code of 1986 and the
regulations thereunder in effect on the date of the acceleration or redemption.
Original issue discount notes may pay no interest currently or may bear interest
at a rate that at the time of issuance is below market rates. Additional
considerations relating to any original issue discount notes will be described
in the applicable pricing supplement. For further information regarding the
federal income tax implications for U.S. holders of discount notes, see "Certain
United States Federal Income Tax Considerations -- Tax Consequences to U.S.
Holders."
AMORTIZING NOTES
We may offer, from time to time, amortizing notes with the amount of
principal and interest payable in installments over the term of these notes.
Unless an issuer provides otherwise in the applicable pricing
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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 and then to the reduction of
the unpaid principal amount. Further information concerning additional terms and
provisions of the amortizing notes will be provided in the applicable pricing
supplement, including a table setting forth repayment information for the
amortizing notes.
OPTIONAL REDEMPTION
Unless an issuer provides otherwise in the applicable pricing supplement:
- the notes will not be subject to any sinking fund, and
- the applicable issuer cannot at its option redeem the notes prior to
maturity.
If the pricing supplement provides that the applicable issuer may redeem the
notes at its option, the applicable pricing supplement will indicate the terms
on which the notes will be redeemable. The pricing supplement will also
indicate:
- the initial redemption date from which the notes may be redeemed, and
- the redemption price at which, together with accrued interest to the
initial redemption date, the notes may be redeemed.
Unless an issuer provides otherwise in the applicable pricing supplement,
the redemption price will be an amount equal to the initial redemption
percentage provided in the applicable pricing supplement multiplied by the
unpaid principal amount of the notes to be redeemed. The initial redemption
percentage will decline at each anniversary of the initial redemption date by a
percentage specified in the applicable pricing supplement of the principal
amount to be redeemed until the redemption price is 100% of the principal amount
to be redeemed.
Unless otherwise specified in the applicable pricing supplement, notice of
redemption will be provided by mailing a notice of the 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 address of each holder set forth
in the applicable issuer's books. Unless an issuer provides otherwise in the
applicable pricing supplement, the applicable issuer may exercise its option to
redeem the notes in whole or in part in increments of $1,000 or any other
integral multiple of an authorized denomination specified in the applicable
pricing supplement (provided that any remaining principal amount thereof shall
be at least $1,000 or other minimum authorized denomination applicable thereto).
In the event of redemption of a note in part only, the applicable issuer will
issue a new note for the unredeemed portion of the note to the holder of the
note upon the cancellation of the note.
Whenever less than all of the notes of like tenor and terms are to be
redeemed, the notes to be redeemed will be selected by the trustee by a method
the trustee finds appropriate and fair.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
Unless an issuer provides otherwise in the applicable pricing supplement,
the notes will not be repayable at the option of the holder. If applicable, the
pricing supplement relating to a particular issuance of notes will indicate that
those notes may be repayable at the option of the holder on a date or dates
provided prior to the maturity date and, unless provided otherwise in the
applicable pricing supplement, at a price equal to 100% of the principal amount
of the notes, together with accrued interest to the date of repayment. The
pricing supplement will also indicate the other terms applicable to any
repayment at the option of a holder.
In order for notes to be repaid, the trustee must receive at least 30 days
but not more than 60 days before the optional repayment date:
- in the case of a note in certificated form, the note and the form on the
reverse side of the note entitled "Option to Elect Repayment" duly
completed, or
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- in the case of a note in book-entry form, instructions to that effect
from the applicable beneficial owner of the global security representing
the notes to the depositary and forwarded by the depositary to the
trustee.
Exercise of the repayment option by the holder of a note will be
irrevocable. The repayment option may be exercised by the holder of a note for
less than the entire principal amount of the note in increments of $1,000 or any
integral multiples of an authorized denomination specified in the applicable
pricing supplement but in that event the principal amount of the note remaining
outstanding after repayment must be an authorized denomination. If a note is
partially repaid, the note will be canceled and the applicable issuer will issue
a new note for the remaining principal amount in the name of the holder of the
repaid note.
If a note is represented by a book-entry note, the depository or its
nominee will be the holder of the note and, therefore, will be the only entity
that can exercise a right to repayment. In order to ensure that the depository
or its nominee will timely exercise a right to repayment relating to a
particular note, the beneficial owner of the note must instruct the broker or
other participant through which it holds an interest in the note to notify the
depository or its nominee of its desire to exercise a right to repayment.
Different firms have different deadlines for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other participant through which it holds an interest in a note to ascertain the
cut-off time by which an instruction must be given for delivery of timely notice
to the depository or its nominee. All instructions given to participants from
beneficial owners of notes in book-entry form relating to the option to elect
repayment will be irrevocable. In addition, at the time instructions are given,
each beneficial owner will cause the participant through which it owns its
interest to transfer its interest in the global security or securities
representing the related notes in book-entry form, on the depositary's records,
to the trustee. See " -- Book-Entry System."
If applicable, the applicable issuer will comply with the requirements of
Section 14(e) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder and any other securities laws or regulations in connection with any
repayment.
Each issuer may at any time purchase its notes at any price in the open
market or otherwise. Notes purchased by that issuer may, at its discretion, be
held, resold or surrendered to the registrar for cancellation.
RENEWABLE NOTES
Each issuer may issue renewable notes, which are notes that will
automatically renew at their maturity date unless the holder of the renewable
note elects to terminate the automatic extension feature by giving notice in the
manner described in the related pricing supplement.
The holder of the renewable note must give notice of termination at least
15, but not more than 30, days prior to the renewal date. The holder of a
renewable note may terminate the automatic extension for less than all of the
holder's renewable notes only if the terms of the note as described in the
related pricing supplement specifically permit partial termination. An election
to terminate the automatic extension of any portion of the renewable note is not
revocable and will be binding on the holder of the note. If the holder elects to
terminate the automatic extension of the maturity of the note, the holder will
become entitled to the principal and interest accrued up to the renewal date.
The related pricing supplement will identify a final maturity date beyond which
the maturity date cannot be renewed.
If a note is represented by a book-entry note, the depositary or its
nominee will be the holder of the note and therefore will be the only entity
that can exercise a right to terminate the automatic extension of a note. In
order to ensure that the depositary or its nominee will timely exercise a right
to terminate the automatic extension provisions of a particular note, the
beneficial owner of the note must instruct the broker or other participant
through which it holds an interest in the note to notify the depositary or its
nominee of its desire to terminate the automatic extension of the note.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should
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consult the broker or other participant through which it holds an interest in a
note to ascertain the cut-off time by which an instruction must be given for
delivery of timely notice to the depositary or its nominee.
EXTENDIBLE NOTES
Each issuer may issue notes whose stated maturity date may be extended at
its option, an "extendible note," for one or more whole year periods, each an
"extension period," up to but not beyond a final maturity date described in the
related pricing supplement.
The applicable issuer may exercise its option to extend the extendible note
by notifying the trustee (or any duly appointed paying agent) prior to the then
effective maturity date. If the applicable issuer elects to extend the
extendible note, the trustee (or paying agent) will mail (at least 40 days prior
to the maturity date) to the registered holder of the extendible note a notice
("extension notice") informing the holder of its election, the new maturity date
and any updated terms. Upon the mailing of the extension notice, the maturity of
such note will be extended automatically as set forth in the extension notice.
In connection with the extension of an extendible note, the applicable
issuer may, at its option, establish a higher interest rate, in the case of a
fixed rate note, or a higher spread and/or spread multiplier, in the case of a
floating rate note, for the extension period by mailing or causing the
applicable trustee (or paying agent) to mail notice of that higher interest rate
or higher spread and/or spread multiplier to the holder of the note. The notice
will be irrevocable.
If the applicable issuer elects to extend the maturity of an extendible
note, the holder of the note will have the option to instead elect repayment of
the note by the applicable issuer on the then effective maturity date. In order
for an extendible note to be so repaid on the maturity date, the applicable
issuer must receive, prior to the maturity date, unless an issuer provides
otherwise in the applicable pricing supplement, a telegram, telex, facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. (the "NASD") or a commercial
bank or trust company in the United States (or, in respect of notes issued in
Canada, from a stock exchange, chartered bank or trust company in Canada)
setting forth the name of the holder of the note, the principal amount of the
note, the principal amount of the note to be repaid, the certificate number or a
description of the tenor and terms of the note, a statement that the option to
elect repayment is being exercised and a guarantee that the note to be repaid,
together with the duly completed form entitled "Option to Elect Repayment" on
the reverse of the note, will be received by the applicable trustee (or paying
agent) not later than the fifth business day after the date of the telegram,
telex, facsimile transmission or letter; provided, however, that the telegram,
telex, facsimile transmission or letter will only be effective if the trustee
(or paying agent) receives the note and form duly completed by that fifth
business day.
The option may be exercised by the holder of an extendible note for less
than the aggregate principal amount of the note then outstanding if the
principal amount of the note remaining outstanding after repayment is an
authorized denomination.
A holder who has tendered an extendible note for repayment may, by written
notice to the applicable issuer, revoke the tender until 3:00 pm New York City
time on the 15th day preceding the then effective maturity date.
If a note is represented by a book-entry note, the depositary or its
nominee will be the holder of that note and therefore will be the only entity
that can exercise a right to repayment. To ensure that the depositary or its
nominee timely exercises a right to repayment with respect to a particular note,
the beneficial owner of that note must instruct the broker or other participant
through which it holds an interest in the note to notify the depositary of its
desire to exercise a right to repayment. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other participant through which it
holds an interest in a note to determine the cut-off time by which an
instruction must be given for timely notice to be delivered to the depositary or
its nominee.
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INDEXED NOTES
We may from time to time offer "indexed notes" with the amount of
principal, premium and/or interest payable in respect thereof to be determined
with reference to the price or prices of specified commodities or stocks, to the
exchange rate of one or more designated currencies relative to an indexed
currency or to other items, in each case as specified in the applicable pricing
supplement. In certain cases, holders of indexed notes may receive a principal
payment on the maturity date that is greater than or less than the principal
amount of such indexed notes depending upon the relative value on the maturity
date of the specified indexed item. Information as to the method for determining
the amount of principal, premium, if any, and/or interest, if any, payable in
respect of indexed notes, certain historical information with respect to the
specified indexed item and any material tax considerations associated with an
investment in indexed notes will be specified in the applicable pricing
supplement.
BOOK-ENTRY SYSTEM
Description of the Global Notes
Upon issuance, all notes in book-entry form having the same date of issue,
interest rate or formula, maturity and redemption and/or repayment provisions,
if any, and otherwise having identical terms and provisions will be represented
by one or more fully registered global notes. Each global note issued in the
United States will be deposited with, or on behalf of, The Depository Trust
Company (the "Depository" or "DTC") as depositary and will be registered in the
name of the Depository or a nominee of the Depository. Each global note issued
in Canada will be deposited with, or on behalf of, The Canadian Depository for
Securities Limited ("CDS") as depositary and will be registered in the name of
CDS or a nominee of CDS. Unless and until it is exchanged in whole or in part
for notes in certificated form, no global note may be transferred except as a
whole by (1) the Depository or CDS to a nominee of the Depository or CDS, as
applicable; (2) by a nominee of the Depository or CDS to the Depository or CDS
or to another nominee of the Depository or CDS, as applicable; or (3) by the
Depository or CDS or any of its nominees to a successor of the Depository or
CDS, as applicable or a nominee of the successor.
DTC Procedures
The following is based on information furnished by the Depository:
The Depository will act as securities depositary for the notes issued in
the United States in book-entry form. The notes issued in the United States in
book-entry form will be issued as fully registered securities registered in the
name of Cede & Co., the Depository's partnership nominee. One fully registered
global note will be issued for each issue of notes in book-entry form, each in
the aggregate principal amount of the issue, and will be deposited with the
depositary. If, however, the aggregate principal amount of any issue exceeds
$500,000,000, one global note will be issued with respect to each $500,000,000
of principal amount and an additional global note will be issued with respect to
any remaining principal amount of the issue.
The Depository is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depository holds securities that its participating
members, referred to as participants, deposit with the Depository. The
Depository also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants of the Depository include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. The
Depository is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the NASD. Access to
the Depository's system is also available to others such as securities brokers
and dealers, banks and trust companies, referred to as indirect participants,
that clear
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through or maintain a custodial relationship with a direct participant, either
directly or indirectly. The rules applicable to the Depository and its
participants are on file with the SEC.
Purchasers of notes in book-entry form under the Depository's system must
be made by or through direct participants, which will receive a credit for those
notes in book-entry form on the Depository's records. The ownership interest of
each actual purchaser of each note in book-entry form represented by a global
note is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from the Depository of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in a global note
representing notes in book entry form are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners of a global note representing notes in book-entry form will not receive
notes in certificated form representing their ownership interests therein,
except in the event that use of the book-entry system for such notes is
discontinued.
To facilitate subsequent transfers, all global notes representing notes in
book-entry form that are deposited with, or on behalf of, the Depository are
registered in the name of the Depository's nominee, Cede & Co. The deposit of
global notes with, or on behalf of, the Depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The Depository has
no knowledge of the actual beneficial owners of the global notes representing
the notes in book-entry form; the Depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depository to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depository nor Cede & Co. will consent or vote with respect to
the global notes representing the notes in book-entry form. Under its usual
procedures, the Depository mails an omnibus proxy to us as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in book entry
form are credited on the applicable record date.
The applicable issuer will make principal, premium, if any, and/or interest
payments on the global notes representing the notes in book-entry form in
immediately available funds to the Depository. The Depository's practice is to
credit direct participants' accounts on the applicable payment date in
accordance with their respective holdings shown on its records unless the
Depository has reason to believe that it will not receive payment on the
applicable payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of the applicable participant and
not of the Depository, the trustee or the applicable issuer, subject to any
statutory or regulatory requirements as may be in effect from time to time. The
applicable issuer and the trustee are responsible for the payment of principal,
premium, if any, and/or interest to the Depository. The Depository is
responsible for disbursement of payments to direct participants. The direct
participants and indirect participants are responsible for the disbursement of
payments to the beneficial owners.
If applicable, redemption notices will be sent to Cede & Co. If less than
all of the notes in book-entry form of like tenor and terms are being redeemed,
the Depository's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.
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A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by the issuer of such notes, through its
participant, to the trustee, and will effect delivery of the applicable notes in
book-entry form by causing the direct participant to transfer the participant's
interest in the global notes in book-entry form, on the Depository's records, to
the trustee.
The Depository may discontinue providing its services as securities
depositary with respect to the notes in book-entry form at any time by giving
reasonable notice to us or the trustee. In the event that a successor securities
depositary is not obtained, notes in certificated form are required to be
printed and delivered.
The applicable issuer may decide to discontinue use of the system of
book-entry transfers through the Depository or a successor securities
depositary. In that event, notes in certificated form will be printed and
delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
global notes.
So long as the Depository, or its nominee, is the registered owner of a
global note, the Depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by that global note
for all purposes under the applicable indenture. Except as provided below,
beneficial owners of a global note will not be entitled to have the notes
represented by a global note registered in their names, will not receive or be
entitled to receive physical delivery of the notes in definitive form and will
not be considered the owners or holders thereof under the applicable indenture.
Accordingly, each person owning a beneficial interest in a global note must rely
on the procedures of the Depository or any successor depositary and, if that
person is not a participant, on the procedures of the participant through which
that person owns its interest, to exercise any rights of a holder under the
applicable indenture. We understand that under existing industry practices, if
the applicable issuer requests any action of holders or if an owner of a
beneficial interest in a global note desires to give or take any action which a
holder is entitled to give or take under the applicable indenture, the
Depository would authorize the participants holding the relevant beneficial
interests to give or take the desired action, and the participants would
authorize beneficial owners owning through the participants to give or take the
desired action or would otherwise act upon the instructions of beneficial
owners.
The information in this section concerning the Depository and the
Depository's system has been obtained from sources that we believe to be
reliable, but we take no responsibility for the accuracy of the information.
Clearstream, Luxembourg and Euroclear Bank Systems
Investors in notes may elect to hold interests in book-entry notes through
Clearstream Banking, societe anonyme ("Clearstream, Luxembourg") or Euroclear
Bank S.A./N.V., as operator for the Euroclear system ("Euroclear") if they are
participants of these systems, or indirectly through organizations which are
participants in these systems. Clearstream, Luxembourg and Euroclear will hold
interests on behalf of their participants through customers' securities accounts
in Clearstream, Luxembourg's and Euroclear's names on the books of their
respective depositaries, which in turn will hold these interests in customers'
securities accounts in the depositaries' names on the books of DTC. Citibank,
N.A. will act as U.S. depositary for Clearstream, Luxembourg and The JPMorgan
Chase Bank will act as U.S. depositary for Euroclear.
Clearstream, Luxembourg advises that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream, Luxembourg holds
securities for its participating organizations ("Clearstream, Luxembourg
participants") and facilitates the clearance and settlement of securities
transactions between Clearstream, Luxembourg participants through electronic
book-entry changes in accounts of Clearstream, Luxembourg participants, thereby
eliminating the need for physical movement of certificates. Clearstream,
Luxembourg provides to Clearstream, Luxembourg participants, among other
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things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic markets in several countries.
As a professional depositary, Clearstream, Luxembourg is subject to regulation
by the Luxembourg Monetary Institute. Clearstream, Luxembourg participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the agents or their affiliates.
Indirect access to Clearstream, Luxembourg is also available to others, such as
banks, brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Clearstream, Luxembourg participant either
directly or indirectly.
Distributions with respect to the notes held beneficially through
Clearstream, Luxembourg will be credited to cash accounts of its participants in
accordance with its rules and procedures, to the extent received by the U.S.
depositary for Clearstream, Luxembourg.
Euroclear advises that the Euroclear system was created in 1968 to hold
securities for its participants and to clear and settle transactions between its
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear
provides various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries. The Euroclear system is
operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the agents or their
affiliates. Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
The Euroclear Operator was granted a banking license by the Belgian Banking
and Finance Commission in 2000, authorizing it to carry out banking activities
on a global basis. It took over operation of the Euroclear system from the
Brussels, Belgium office of Morgan Guaranty Trust Company of New York on
December 31, 2000.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to notes held beneficially through Euroclear
will be credited to the cash accounts of Euroclear participants in accordance
with the Terms and Conditions, to the extent received by the U.S. depositary for
Euroclear.
Exchange for Notes in Certificated Form
If:
- DTC notifies the applicable issuer that it is unwilling or unable to
continue as a clearing system in connection with a global note or DTC
ceases to be a clearing agency registered under the Exchange Act, and in
each case we do not appoint a successor clearing system within 90 days
after receiving such notice from DTC or on becoming aware that DTC is no
longer so registered,
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- the applicable issuer executes and delivers to the trustee a company
order to the effect that the global notes shall be exchangeable, or
- a default or an event of default has occurred and is continuing with
respect to the notes,
then the global note or global notes will be exchangeable for notes in
certificated form of like tenor and of an equal aggregate principal amount. The
certificated notes will be registered in the name or names as DTC instructs the
trustee. It is expected that instructions may be based upon directions received
by DTC from participants with respect to ownership of beneficial interests in
global notes.
CDS Procedures
The notes issued in Canada will initially be represented by one or more
global notes in definitive, fully registered form without interest coupons. The
global notes issued in Canada will be held by, or on behalf of, CDS as
depositary and registered in the name of CDS or its nominee, CDS & Co., except
in certain circumstances described below. Direct and indirect participants in
CDS, including DTC on behalf of its accountholders, will record beneficial
ownership of the notes by their respective accountholders. Ownership of
beneficial interests in the global notes will be shown on, and transfers of
their ownership may be effected only through, records maintained by CDS or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as CDS or its nominee is the registered owner or holder of the
global notes, CDS or such nominee, as the case may be, will be considered the
sole owner or holder of the notes represented by such global notes for all
purposes (except for matters relating to any applicable withholding taxes) under
the applicable indenture and the notes. No beneficial owner of an interest in
the global notes will be able to transfer that interest except in accordance
with CDS's applicable procedures, in addition to those provided for under the
applicable indenture.
Except in the limited circumstances described below under "-- Certificated
Notes in Canada," owners of beneficial interests in the global notes will not be
entitled to receive physical delivery of certificated notes.
Payments of the principal, premium, if any, and interest on the global
notes will be made to CDS or its nominee, as the case may be, as the registered
owner of the global notes. Although the applicable issuer will make all payments
of principal, premium, if any, and interest on any Canadian dollar denominated
notes in Canadian dollars, holders of notes held through DTC will receive such
payments in U.S. dollars, except as set forth below. Canadian dollar payments
received by CDS will be exchanged into U.S. dollars and paid directly to DTC in
accordance with procedures established from time to time by CDS and DTC. All
costs of conversion will be borne by holders of notes held through DTC who
receive payments in U.S. dollars. Holders of notes held through DTC may elect,
through procedures established from time to time by DTC and its participants, to
receive Canadian dollar payments, in which case such Canadian dollar amounts
will be transferred directly to Canadian dollar accounts designated by such
holders to DTC. None of Textron Canada Funding, Textron Financial, the trustee
or any paying agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial funding
ownership interests in the global notes or for maintaining, supervising or
reviewing any records relating to such funding beneficial ownership interests.
We expect that CDS or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the global notes, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global notes as
shown on the records of CDS or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global notes held through
such participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
S-30
Transfers between CDS participants will be effected in the ordinary way in
accordance with CDS rules and will be settled in same-day funds.
The policies of CDS and DTC will govern payments, transfers, exchange and
other matters relating to your interest in the global notes. We have obtained
the foregoing information from sources we believe to be reliable, including from
CDS and DTC. CDS and DTC are under no obligation to perform or continue to
perform the procedures described above, and they may modify or discontinue them
at any time. None of Textron Canada Funding, Textron Financial, the trustee, any
paying agent or any transfer agent will have any responsibility for the
performance by CDS or DTC or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Notes in Canada
Under the terms of the applicable indenture, owners of notes will receive
certificated notes with the TFC guarantee (if applicable) endorsed thereon:
- if CDS notifies the applicable issuer that it is unwilling or unable to
continue to act as depositary or CDS ceases to be registered as a
clearing agency under the Securities Act (Ontario) and equivalent
legislation in other provinces and any other applicable statute or
regulation and in each case a successor depositary is not appointed by
the applicable issuer within 90 days;
- if at any time the applicable issuer in its sole discretion determines
that the global notes should be exchanged for certificated notes; or
- if an event of default (as defined in the applicable indenture) with
respect to the notes has occurred and is continuing.
In any such instance, an owner of a beneficial interest in a global note
will be entitled to have notes equal in principal amount to such beneficial
interest registered in its name and will be entitled to physical delivery of
certificated notes with the TFC guarantee (if applicable) endorsed thereon in
accordance with the relevant provisions of the notes, the applicable indenture
and the rules and procedures of CDS. Notes denominated in Canadian dollars in
certificated form will be issued in denominations of Cdn.$1,000 and integral
multiples of Cdn.$1,000 and will be issued in registered form only, without
coupons. Holders of interests in the global notes that receive certificated
notes in such circumstances may receive notes with the TFC guarantee (if
applicable) endorsed thereon, in accordance with the relevant provisions of the
notes, the applicable indenture, and the rules and procedures of CDS and DTC, as
applicable.
We will maintain in the Borough of Manhattan, the City of New York (or
elsewhere, as we may specify), one or more offices or agencies where notes may
be presented for payment and may be transferred or exchanged. No service charge
will be made for any registration of transfer or exchange of certificated notes,
but we may require payment of a sum sufficient to cover any tax or governmental
charge payable in connection with that registration.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
The applicable issuer will make initial settlement for the notes in
immediately available funds. Secondary market trading with respect to notes
issued in the United States between DTC participants will occur in the ordinary
way in accordance with DTC's rules and will be settled in immediately available
funds using DTC's same-day funds settlement system. Secondary market trading
with respect to notes issued in the United States between Euroclear Bank
participants and/or Clearstream, Luxembourg participants will occur in the
ordinary way in accordance with the applicable rules and operating procedures of
Euroclear Bank and Clearstream, Luxembourg and will be settled using the
procedures applicable to conventional eurobonds in immediately available funds.
Cross-market transfers with respect to notes issued in the United States
between persons holding directly or indirectly through DTC, on the one hand, and
directly or indirectly through Euroclear Bank or Clearstream, Luxembourg
participants, on the other, will be effected by DTC in accordance with DTC's
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rules on behalf of the relevant European international clearing system by its
U.S. depositary. However, these cross-market transactions will require delivery
of instructions to the relevant European international clearing system by the
counterparty in that system in accordance with its rules and procedures and
within its established deadlines in European time. The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its U.S. depositary to take action to
effect final settlement on its behalf by delivering or receiving notes to or
from DTC, and making or receiving payment in accordance with normal procedures
for same-day funds settlement applicable to DTC. Euroclear Bank participants and
Clearstream, Luxembourg participants may not deliver instructions directly to
their respective U.S. depositaries.
Because of time-zone differences, credits of notes received in Euroclear
Bank or Clearstream, Luxembourg as a result of a transaction with DTC's
participant will be made during subsequent securities settlement processing and
dated the business day following the DTC settlement date. These credits or any
transactions in the notes settled during this processing will be reported to the
relevant Euroclear Bank or Clearstream, Luxembourg participants on such business
day. Cash received in Euroclear Bank or Clearstream, Luxembourg as a result of
sales of notes by or through a Euroclear Bank participant or a Clearstream,
Luxembourg participant to a DTC participant will be received with value on the
DTC settlement date but will be available in the relevant Euroclear Bank or
Clearstream, Luxembourg cash account only as of the business day following
settlement in DTC.
Although DTC, Euroclear Bank and Clearstream, Luxembourg have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Euroclear Bank and Clearstream, Luxembourg, they are under
no obligation to perform or continue to perform such procedures and such
procedures may be changed or discontinued at any time.
GOVERNING LAW AND JUDGMENTS
The indentures and notes will be governed by and construed in accordance
with the laws of the State of New York.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless an issuer indicates otherwise in the applicable pricing supplement,
the notes issued in the United States will be denominated in U.S. dollars, the
applicable issuer will make payments of principal, premium, if any, and interest
on the notes in U.S. dollars and you must pay the purchase price of the notes in
U.S. dollars in immediately available funds. If any of the notes issued in the
United States ("foreign currency notes") are to be denominated or payable in a
currency or basket of currencies other than U.S. dollars (or, if that currency
is not at the time of the purchase or payment legal tender for the payment of
public and private debts of the country issuing that currency or, in the case of
euro, in the member states of the European Union that have adopted the single
currency in accordance with the Treaty Establishing the European Community, as
amended by the Treaty on European Union, the currency which is then legal tender
in the related country or in the adopting member states of the European Union,
as the case may be) (a "specified currency"), the following provisions will
apply in addition to, and to the extent inconsistent therewith will replace, the
description of general terms and provisions relating to notes issued in the
United States set forth in the accompanying prospectus and elsewhere in this
prospectus supplement.
A pricing supplement with respect to any foreign currency note (which may
include information with respect to applicable current foreign exchange
controls), is a part of this prospectus and the accompanying prospectus
supplement. Any information we provide you concerning exchange rates is provided
as a matter of information only and you should not regard it as indicative of
the range of or trends in fluctuations in currency exchange rates that may occur
in the future. The information set forth in this prospectus supplement is
directed to prospective purchasers who are United States residents and, with
respect to
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foreign currency notes, is by necessity incomplete. We and the agents disclaim
any responsibility to advise prospective purchasers who are residents of
countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
premium, if any, and interest, if any, on, their foreign currency notes.
CURRENCIES
We may offer foreign currency notes denominated and/or payable in a
specified currency or specified currencies. Unless an issuer indicates otherwise
in the applicable pricing supplement, you are required to pay for foreign
currency notes in the specified currency. At the present time, there are limited
facilities in the United States for conversion of U.S. dollars into specified
currencies and vice versa, and banks may elect not to offer non-U.S. dollar
checking or savings account facilities in the United States. However, at your
request, on or prior to the fifth business day preceding the date of delivery of
the foreign currency notes, or by such other day as determined by the agent who
presents the offer to purchase foreign currency notes to us, that agent may be
prepared to arrange for the conversion of U.S. dollars into the applicable
specified currency set forth in the applicable pricing supplement to enable the
purchasers to pay for the foreign currency notes. Each such conversion will be
made by the agent or agents on the terms and subject to the conditions,
limitations and charges as the agent may from time to time establish in
accordance with their regular foreign exchange practices. If you purchase
foreign currency notes you will pay all costs of exchange.
The applicable pricing supplement will set forth information about the
specified currency in which a particular foreign currency note is denominated
and/or payable, including historical exchange rates and a description of the
currency and any exchange controls, and, in the case of a basket of currencies,
will include a description of that basket and a description of provisions for
payment in the event that currency basket is no longer used for the purposes for
which it was established.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
The applicable issuer will pay the principal of, premium, if any, and/or
interest on foreign currency notes in the specified currency. Currently, banks
do not generally offer non-U.S. dollar denominated account facilities in their
offices in the United States, although they are permitted to do so. Accordingly,
if you are a holder of foreign currency notes you will be paid in U.S. dollars
converted from the specified currency unless you elect to be paid in the
specified currency or unless the applicable pricing supplement provides
otherwise.
The applicable issuer will base U.S. dollar amounts that it owes to holders
of foreign currency notes on the highest bid quotation received by the exchange
rate agent specified in the applicable pricing supplement in The City of New
York at approximately 11:00 A.M., New York City time, on the second business day
preceding the applicable payment date. The exchange rate agent will obtain that
highest quote by asking three recognized foreign exchange dealers approved by
the applicable issuer (one of whom may be the exchange rate agent) for their bid
quotations for the purchase of the specified currency in exchange for U.S.
dollars for settlement on the relevant payment date, in the aggregate amount of
the specified currency payable to all holders of foreign currency notes
scheduled 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,
the applicable issuer will make payments in the specified currency. All currency
exchange costs will be borne by the holders of foreign currency notes by
deductions from such payments.
Unless an issuer indicates otherwise in the applicable pricing supplement,
as a holder of foreign currency notes you may elect to receive payment of the
principal of, premium, if any, and/or interest on the foreign currency notes in
the specified currency by transmitting a written request for such payment to the
corporate trust office on agency of the trustee in the Borough of Manhattan, The
City of New York, at least fifteen days prior to the applicable interest payment
date or maturity, as the case may be. You may make this request in writing
(mailed or hand delivered) or sent by facsimile transmission. As a holder of a
foreign currency note you may elect to receive all or a specified portion of all
future payments in the
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specified currency for all payments of principal, premium, if any, and/or
interest and need not file a separate election for each payment. Your election
will remain in effect until revoked by written notice to the trustee, but
written notice of any such revocation must be received by the trustee at least
fifteen days prior to the applicable interest payment date or maturity, as the
case may be. If your foreign currency notes are held in the name of a broker or
nominee, you should contact your broker or nominee to determine whether and how
you may elect to receive payments in the specified currency.
If a note is represented by a global note, DTC or its nominee will be the
holder of the note and will be entitled to all payments on the note. Although
DTC can hold notes denominated in foreign currencies, all payments to DTC will
be made in U.S. dollars. Accordingly, a beneficial owner of the related global
note who elects to receive payments of principal, premium, if any, and/or
interest in the specified currency must notify the participant through which it
owns its interest on or prior to the applicable regular record date, in the case
of a payment of interest, or at least fifteen days prior to maturity, in the
case of a payment of principal and/or premium, of that beneficial owner's
election. The participant must notify DTC of that election on or prior to the
third business day after the regular record date or at least twelve days prior
to maturity, as the case may be. DTC will notify the trustee of the election on
or prior to the fifth business day after the regular record date or at least ten
days prior to maturity, as the case may be. If the participant receives complete
instructions from the beneficial owner and those instructions are forwarded by
the participant to DTC, and by DTC to the trustee, on or prior to such dates,
then the beneficial owner will receive payments in the specified currency. For
more information about global notes, see "Description of the Notes -- Book-Entry
System."
The applicable issuer will pay principal, any premium and/or interest on
foreign currency notes to be paid in U.S. dollars in the manner specified in the
accompanying prospectus and this prospectus supplement with respect to notes
denominated in U.S. dollars. See "Description of the Notes -- Payment of
Principal, Premium and Interest." Unless otherwise specified in the applicable
pricing supplement, the applicable issuer will pay interest on foreign currency
notes in the specified currency on an interest payment date other than the
maturity date by check mailed on the relevant interest payment date to the
persons entitled thereto as their addresses shall appear in the security
register. The applicable issuer will pay the principal of foreign currency
notes, together with any premium and any interest accrued and unpaid thereon,
due at maturity in the specified currency by wire transfer of immediately
available funds to an account with a bank designated at least fifteen days prior
to the maturity date by the applicable registered holder, provided the
particular bank has appropriate facilities to make these payments upon surrender
of the notes at the corporate trust office or agency of the trustee in the
Borough of Manhattan, The City of New York, in time for the trustee to make
these payments in the specified currency in accordance with its normal
procedures.
PAYMENT CURRENCY
If a specified currency is not available for the payment of principal,
premium or interest with respect to a foreign currency note due to the
imposition of exchange controls or other circumstances beyond our control, the
applicable issuer will be entitled to satisfy its obligations to holders of
foreign currency notes by making that payment in U.S. dollars on the basis of
the noon buying rate in The City of New York for cable transfers of the
specified currency as certified for customs purposes (or, if not so certified,
as otherwise determined) by the Federal Reserve Bank of New York (the "market
exchange rate") as computed by the exchange rate agent on the second business
day prior to the particular payment or if the market exchange rate is not then
available, on the basis of the most recently available market exchange rate on
or before the date that payment is due, or as otherwise indicated in an
applicable pricing supplement. Any payment made under such circumstances in U.S.
dollars where the required payment is in a specified currency will not
constitute a default under the applicable indenture with respect to the notes.
All determinations referred to above made by the exchange rate agent will
be at its sole discretion and will, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the foreign currency
notes.
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As indicated above, if you invest in foreign currency notes or currency
indexed notes your investment will be subject to substantial risks, the extent
and nature of which change continuously. As with any investment that you make in
a security, you should consult your own financial and legal advisors as to the
risks entailed in an investment in foreign currency notes or currency indexed
notes. Such notes are not an appropriate investment for you if you are
unsophisticated with respect to foreign currency matters.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This section summarizes certain of the U.S. federal income tax consequences
to holders of notes. The discussion is limited in the following ways:
- The discussion only covers you if you buy your notes in the initial
offering.
- The discussion only covers you if you hold your notes as a capital asset
(that is, for investment purposes), and if you do not have a special tax
status (for example, you are not a financial institution, insurance
company, dealer in securities or foreign currencies or regulated
investment company).
- The discussion does not cover tax consequences that depend upon your
particular tax situation (for example, if you hold the notes as a hedge
against currency risks or as a position in a straddle for tax purposes)
in addition to your ownership of notes.
- The discussion does not cover federal tax law other than income tax law
and does not cover state, local or foreign income tax or other tax law.
- This discussion does not address the tax consequences applicable to
holders that are treated as partnerships or other passthrough entities
for U.S. federal income tax purposes, or to persons who hold notes
through a partnership or other passthrough entity. If you are a
partnership or other passthrough entity, or a holder of an interest in a
partnership or other passthrough entity, holding notes we suggest you
consult your tax advisor.
- The discussion does not cover every type of note that we might issue. If
we intend to issue a note of a type not described in this summary, we
will provide additional tax information in the applicable pricing
supplement.
- Except as discussed below, the discussion does not apply to you if you
are a non-U.S. holder (as defined below).
- We have not requested a ruling from the Internal Revenue Service (the
"IRS") on the tax consequences of purchasing, owning or disposing of the
notes. As a result, the IRS could disagree with portions of this
discussion.
This discussion is based on existing and generally applicable U.S. federal
income tax authorities including the Internal Revenue Code of 1986, as amended
(the "Code"), and Treasury regulations, rulings and decisions now in effect.
Changes in these authorities (or possible differing interpretations) may affect
the tax treatment of the notes, possibly with a retroactive effect.
IF YOU ARE CONSIDERING BUYING NOTES, WE SUGGEST THAT YOU CONSULT YOUR TAX
ADVISOR ABOUT THE TAX CONSEQUENCES OF ACQUIRING, HOLDING OR DISPOSING OF THE
NOTES IN YOUR PARTICULAR SITUATION.
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TAX CONSEQUENCES TO U.S. HOLDERS
This section applies to you if you are a "U.S. Holder." A "U.S. Holder" is
a beneficial holder of a note that is for U.S. federal income tax purposes:
- an individual U.S. citizen or resident alien;
- a corporation, or entity taxable as a corporation, that was created or
organized in or under U.S. law (federal, state or the District of
Columbia);
- an estate whose income is subject to U.S. federal income tax regardless
of it source; or
- a trust, if a U.S. court is able to exercise primary jurisdiction over
the administration of the trust and one or more U.S. persons has the
authority to control all substantial decisions over the trust, and
certain trusts in existence on August 20, 1996 that have elected to be
treated as U.S. persons.
Payments of Interest
The tax treatment of interest paid on the notes generally depends upon
whether the interest is "qualified stated interest."
"Qualified stated interest" is generally any stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a single fixed rate.
If any interest on a note is qualified stated interest, then
- if you are a cash method taxpayer, you must report that interest in your
income when you receive it, or
- if you are an accrual method taxpayer, you must report that interest in
your income as it accrues.
If any interest on a note is not qualified stated interest, it is generally
subject to the rules for original issue discount ("OID") described below.
Determining Amount of OID
Notes that are issued at prices less than their "stated redemption price at
maturity" ("discount notes") are generally subject to additional tax rules. The
amount of OID on a discount note is generally determined as follows:
- The amount of OID on a note is the stated redemption price at maturity of
the note minus the "issue price" of the note. If this amount is negative,
there is no OID.
- The "stated redemption price at maturity" of a note is the total amount
of all principal and interest payments to be made on the note, other than
qualified stated interest. In a typical case where all interest is
qualified stated interest, the stated redemption price at maturity of a
note is the same as its principal amount.
- The "issue price" of a note is the first price at which a substantial
amount of the notes are sold to the public.
- If the OID on a discount note is de minimis, it is disregarded and not
treated as OID. In general, OID is considered de minimis if the amount of
OID is less than the following items multiplied together: (a) .25% (1/4
of 1%), (b) the number of full years from the issue date to the maturity
date and (c) the stated redemption price at maturity.
Accrual of OID Into Income
Discount notes have the following consequences:
- A U.S. Holder must include an allocable amount of OID in income as
ordinary income over the period the holder holds the discount note.
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- All U.S. Holders of discount notes, even those on the cash method of
accounting, must include OID in income as the OID accrues on the discount
notes. This means that U.S. Holders are required to report OID in income
for federal income tax purposes before they receive the cash that
corresponds to that income.
- OID accrues on a discount note on a "constant yield" method. This method
takes into account the compounding of interest. Under this method, the
accrual of OID on a discount note, combined with the inclusion into
income of any qualified stated interest on the discount note, will result
in the holder being taxable at approximately a constant percentage of the
unrecovered investment in the note.
- The accruals of OID on a discount note will generally be less in the
early years and more in the later years.
- If any of the interest paid on the discount note is not qualified stated
interest, that interest is taxed solely as OID. It is not separately
taxed when it is paid to the holder.
- Your adjusted tax basis in the discount note is initially your cost in
that note. It increases by any OID you report as income. It decreases by
any principal or interest payments you receive on the discount note that
are not qualified stated interest.
Notes Subject to Additional Tax Rules
Additional or different tax rules apply to particular types of notes that
we may issue. We will discuss these additional or different tax rules in the
applicable pricing supplement.
SHORT-TERM NOTES: We may issue notes with a fixed maturity of one year or
less. These are referred to as "short-term notes."
- The amount of OID is calculated in the same manner as described above
except that no interest on a short-term note is qualified stated
interest.
- Certain elections apply to the method of accrual of OID on short-term
notes over the life of the notes.
- Accrual method taxpayers and certain other holders, such as banks and
securities dealers, must include OID in income as it accrues.
- If you are a cash method taxpayer not subject to the accrual rule
described above, you generally do not include OID with respect to a
short-term note in income until you actually receive payments on the
note. Alternatively, you can elect to include OID in income as it accrues
on a straight-line basis unless an election is made to accrue under a
constant yield method.
- Two special rules apply if you are a cash method taxpayer and do not
include OID in income as it accrues. First, if you sell the note, or it
is paid at maturity, and you have a taxable gain, then the gain is
ordinary income to the extent of the accrued OID on the note at the time
of the sale that you have not yet taken into income. Second, if you
borrow money (or do not repay outstanding debt) to acquire or hold the
note, then while you hold the note you cannot deduct any interest on the
borrowing that corresponds to accrued OID on the note until you include
the accrued OID in your income.
FLOATING RATE NOTES: Floating rate notes are subject to special OID rules.
- All stated interest on a floating rate note that is unconditionally
payable in cash or property (other than debt instruments of the issuer)
at least annually is generally treated as qualified stated interest if
such floating rate note (a) has an issue price that does not exceed the
total noncontingent principal payments due under the floating rate note
by more than a specified de minimis amount and (b) provides for stated
interest, paid or compounded at least annually, at current values of (i)
one or more qualified floating rates, (ii) a single fixed rate and one or
more qualified floating
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rates, (iii) a single objective rate, or (iv) a single fixed rate and a
single objective rate that is a qualified inverse floating rate.
Generally, a qualified floating rate is any variable rate where
variations in the value of such rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds in
a currency in which the note is dominated.
- Although a multiple of a qualified floating rate will generally not
itself constitute a qualified floating rate, a variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater
than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate
and a fixed multiple that is greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the Treasury Regulations promulgated
under the OID provisions of the Internal Revenue Code (the "OID
Regulations"), two or more qualified floating rates that can reasonably
be expected to have approximately the same values throughout the term of
the variable note (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the variable note's
issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise
constitute a qualified floating rate but which is subject to one or more
restrictions such as a maximum numerical limitation (i.e., a cap) or a
minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the
OID Regulations unless such cap or floor is fixed throughout the term of
the note or is not reasonably expected to affect significantly the yield
on the note.
- An objective rate is a rate that (a) is not itself a qualified floating
rate, (b) is determined using a single fixed formula and (c) is based on
objective financial or economic information that is not within the
control of the issuer (or a related party) and is not unique to the
circumstances of the issuer (or a related party), such as dividends,
profits, or the value of the issuer's stock (although a rate does not
fail to be an objective rate merely because it is based on the credit
quality of the issuer).
- The amount of qualified stated interest and the amount of original issue
discount, if any, that accrues during an accrual period on such a
floating rate note will then be calculated under the rules applicable to
fixed rate debt instruments by assuming that the floating rate is a fixed
rate equal to (i) 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 (ii) in the case of
an objective rate (other than a qualified inverse floating rate), a fixed
rate reflecting the floating rate note's reasonably expected yield. The
qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual
period pursuant to the foregoing rules.
- If the note has more than one formula for interest rates, it is possible
that the combination of interest rates might create OID. We suggest that
you consult your tax advisor concerning the OID accruals on such a note.
FOREIGN CURRENCY NOTES: A foreign currency note is a note denominated in a
currency other than U.S. dollars. Special tax rules apply to these notes:
Payments of Interest in a Foreign Currency
- If you are a cash method taxpayer, you will be taxed on the U.S. dollar
value of any foreign currency you receive as interest (other than OID or
market discount) regardless of whether the payment is in fact converted
to U.S. dollars at that time. The dollar value will be determined as of
the date when you receive the payments.
- If you are an accrual method taxpayer, you must report interest income as
it accrues. You can use the average foreign currency exchange rate during
the relevant interest accrual period (or, if that period spans two
taxable years, during the portion of the interest accrual period in the
relevant
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taxable year). In this case, you will make an adjustment upon receipt of
the foreign currency to reflect actual exchange rates at that time.
Certain alternative elections may also be available. We suggest that you
consult your tax advisor with respect to such elections and the
consequences to you of making these elections. An accrual method taxpayer
will recognize exchange gain or loss (which will be treated as ordinary
income or loss) with respect to accrued interest income on the date such
income is received. The amount of ordinary income or loss recognized will
equal the difference, if any, between the U.S. dollar value of the
foreign currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as
determined above).
OID on Foreign Currency Notes
- Any OID on foreign currency notes will be determined in the relevant
foreign currency. All holders must accrue OID in the same manner that an
accrual basis holder accrues interest income on a foreign currency note.
The amount of foreign currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on
the date of such receipt, with the amount of original issue discount
accrued, as translated above.
Purchase, Sale and Retirement of Foreign Currency Notes
- If you purchase a note with previously owned foreign currency, you will
recognize ordinary income or loss in an amount equal to the difference,
if any, between your adjusted tax basis in the foreign currency and the
U.S. dollar fair market value, determined on the date of purchase, of the
foreign currency used to purchase the note.
- Except as discussed above with respect to short-term notes, upon the
sale, exchange or retirement of a note, you will recognize taxable gain
or loss equal to the difference between the amount realized on the sale,
exchange or retirement and your adjusted tax basis in the note. Such gain
or loss generally will be capital gain or loss (except to the extent of
any accrued market discount not previously included in your income) and
will be long-term capital gain or loss if at the time of sale, exchange
or retirement you have held the note for more than one year. To the
extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income (to
the extent not previously taken into income under the accrual method),
with exchange gain or loss computed as described above in "-- Payments of
Interest in a Foreign Currency."
- Your initial tax basis in a foreign currency note is the amount of U.S.
dollars you pay for the note (or, if you pay in foreign currency, the
U.S. dollar value of that foreign currency on the purchase date),
increased by the amounts of any market discount or OID previously
included in income by you with respect to the foreign currency note and
reduced by any amortized acquisition or other premium and any principal
payments received by you. The amount of any subsequent adjustments to
your adjusted tax basis will be the U.S. dollar value of the foreign
currency amount of the adjustment, determined on the date of the
adjustment.
- If you collect foreign currency upon the retirement of the note, or if
you sell or exchange the note for foreign currency, your gain or loss
will be based on the U.S. dollar value of the foreign currency on the
date payment is received or the foreign currency note is disposed of (or
deemed disposed of as a result of a material change in the terms of the
foreign currency note), depending on the U.S. Holder's method of
accounting. For a foreign currency note traded on an established
securities market, this value is determined for cash basis taxpayers on
the settlement date for the sale of the note, and for accrual basis
taxpayers on the trade date for the sale (although such accrual method
taxpayers can also elect the settlement date). You will then have an
adjusted tax basis in the foreign currency equal to the U.S. dollar value
reported on the sale.
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- Any gain or loss on the sale, exchange or retirement of a note will be
ordinary income or loss to the extent it arises from currency
fluctuations between your purchase date and disposition date and will be
recognized only to the extent of the total gain or loss you realize on
the sale, exchange or retirement of the note.
Premium and Market Discount on Foreign Currency Notes
Market discount on a foreign currency note is determined in units of the
foreign currency. Accrued market discount taken into account upon the receipt of
any partial principal payment or upon the sale, exchange or retirement of a
foreign currency note (other than accrued market discount required to be taken
into account currently) is translated into U.S. dollars at the exchange rate on
such disposition date (and no part of such accrued market discount is treated as
exchange gain or loss). Accrued market discount currently includible in income
for any accrual period is translated into U.S. dollars on the basis of the
average exchange rate in effect during such accrual period, and the exchange
gain or loss is determined upon the receipt of any partial principal payment or
upon the sale, exchange or retirement of a foreign currency note in the manner
used by accrual method taxpayers with respect to computation of exchange gain or
loss on accrued interest on foreign currency notes.
Amortizable bond premium is determined in the relevant foreign currency and
reduces interest income in units of the foreign currency. Although not entirely
clear, a U.S. Holder should recognize exchange gain or loss equal to the
difference between the U.S. dollar value of the bond premium amortized with
respect to a period, determined on the date the interest attributable to such
period is received, and the U.S. dollar value of the bond premium determined on
the date of the acquisition of a foreign currency note.
Exchange of Foreign Currencies
A U.S. Holder will have an adjusted tax basis in any foreign currency
received as interest or on the sale, exchange or retirement of a foreign
currency note equal to the U.S. dollar value of such foreign currency,
determined at the time the interest is received or of the time of the sale,
exchange or retirement. Any gain or loss realized by a U.S. Holder on a sale or
other disposition of foreign currency (including its exchange for U.S. dollars
or its use to purchase notes) will be ordinary income or loss.
OTHER CATEGORIES OF NOTES: Additional rules may apply to certain other
categories of notes. The applicable pricing supplement may describe these rules.
In addition, we suggest that you consult your tax advisor in these situations.
These categories of notes include:
- notes with contingent payments,
- notes which the applicable issuer may be required by the holder to redeem
prior to their maturity,
- notes that are callable by the applicable issuer before their maturity,
other than typical calls at a premium, and
- notes that are extendable at the option of the applicable issuer or the
option of the holder.
Accrual Election
You may generally elect to be taxed on the income from a note in a
different manner than described above. Under the election:
- No interest is qualified stated interest.
- You include amounts in income as they accrue to you in accordance with
the constant yield method, based on the compounding of interest. The
accrual of income takes into account all interest (including stated
interest, OID (including de minimis OID), market discount, and unstated
interest, as adjusted by any amortizable bond premium or acquisition
premium).
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- Your adjusted tax basis is increased by all accruals of income and
decreased by all payments you receive on the note.
Sale, Exchange or Retirement of Notes
On your sale, exchange or retirement of your note:
- You will have taxable gain or loss equal to the difference between the
amount realized by you and your adjusted tax basis in the note. A U.S.
Holder's adjusted tax basis in a note generally will equal the U.S.
Holder's initial investment in the note increased by any OID included in
income (and accrued market discount, if any, if the U.S. Holder has
included that market discount in income) and decreased by the amount of
any payments, other than qualified stated interest payments, received and
amortizable bond premium taken with respect to the note.
- Your gain or loss will generally be capital gain or loss and will be long
term capital gain or loss if you held the note for more than one year.
Non-corporate taxpayers are subject to reduced maximum rates on long-term
capital gains and are generally subject to tax at ordinary income rates
on net short-term capital gains. The deductibility of capital losses is
subject to certain limitations. U.S. Holders should consult their own tax
advisors concerning these tax law provisions.
- If you sell the note between interest payment dates, a portion of the
amount you receive reflects interest that has accrued on the note but has
not yet been paid by the sale date. That amount is treated as ordinary
interest income and not as sale proceeds.
- All or part of your gain may be ordinary income rather than capital gain
in certain cases. These cases include sales of short-term notes, notes
with market discount, notes with contingent payments or foreign currency
notes. U.S. Holders should consult their own tax advisors concerning
these tax law provisions.
Premium and Discount
Additional special rules apply in the following situations involving
discount or premium:
- If you buy a note in the initial offering for more than its stated
redemption price at maturity, the excess amount you pay will be
"amortizable bond premium." A U.S. Holder may elect to amortize the
premium using a constant yield method over the remaining term of the note
and may offset interest otherwise required to be included in respect of
the note during any taxable year by the amortized amount of the excess
for the taxable year. However, if the note may be optionally redeemed
after the U.S. Holder acquires it at a price in excess of its stated
redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later
in the term of the note. Any election to amortize bond premium applies to
all taxable debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which the election applies and may
be revoked only with the consent of the IRS.
- Similarly, if a note has OID and you buy it in the initial offering for
more than the issue price and less than its stated redemption price at
maturity, the excess (up to the total amount of OID) is called
"acquisition premium." The amount of OID you are required to include in
income will be reduced by the amount of acquisition premium over the life
of the note.
- If you buy a note in the initial offering for less than the issue price,
special rules concerning "market discount" may apply.
- Generally, if the market discount rules apply, you will be required to
(i) treat as ordinary income payments made with respect to (other than
payments of qualified stated interest), or gain realized on, the sale,
exchange or retirement of a note to the extent of the accrued market
discount not previously included in income and (ii) defer the deduction
of all or a portion of the interest paid or accrued on any indebtedness
incurred or maintained to purchase or carry a note with market discount
until the maturity of the note or certain earlier dispositions. Market
discount will be
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considered to accrue ratably during the period from the date of
acquisition to the maturity date of the note, unless you elect to accrue
market discount on the basis of semiannual compounding.
- Alternatively, you may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding
basis). Generally, such currently included market discount is treated as
ordinary interest income. Such an election will apply to all debt
instruments you acquired on or after the first day of the first taxable
year to which such election applies and may be revoked only with the
consent of the IRS.
Appropriate adjustments to a note's adjusted tax basis are made in these
situations. We suggest that U.S. Holders in these situations consult their tax
advisors.
Tax Return Disclosure Regulations
Pursuant to recently enacted Treasury regulations (the "Disclosure
Regulations"), any taxpayer that has participated in a "reportable transaction"
and who is required to file a U.S. federal income tax return must generally
attach a disclosure statement disclosing such taxpayer's participation in the
reportable transaction to the taxpayer's tax return for each taxable year for
which the taxpayer participates in the reportable transaction. The Disclosure
Regulations provide that, in addition to certain other transactions, a "loss
transaction" constitutes a reportable transaction. A loss transaction is any
transaction resulting in, or reasonably expected to result in, the taxpayer
claiming a loss under Section 165 of the Code in an amount equal to or in excess
of certain threshold amounts. If the loss arises with respect to a Section 988
transaction, as defined in Section 988(c)(1) of the Code relating to foreign
currency transactions, the applicable threshold amount is $50,000 in any single
taxable year in the case of individuals or trusts, whether or not the loss flows
through from an S corporation or partnership. Higher threshold amounts apply to
individuals and trusts for loss transactions that are not Section 988
transactions. Higher threshold amounts also apply depending upon the taxpayer's
status as a corporation, partnership, or S corporation, as well as certain other
factors. It is important to note, however, that the Disclosure Regulations
provide that the fact that a transaction is a reportable transaction shall not
affect the legal determination of whether the taxpayer's treatment of the
transaction is proper. U.S. Holders should consult their tax advisors concerning
the disclosure requirements under the Disclosure Regulations with respect to the
notes.
Information Reporting and Backup Withholding
Under the tax rules concerning information reporting to the IRS:
- Assuming you hold your notes through a broker or other securities
intermediary, the intermediary must provide information to the IRS
concerning interest, OID and retirement proceeds on your notes, unless an
exemption applies.
- Similarly, unless an exemption applies, you must provide the intermediary
with your taxpayer identification number for the intermediary's use in
reporting information to the IRS. If you are an individual, this is your
social security number. You are also required to comply with other IRS
requirements concerning information reporting.
- If you are subject to these requirements but do not comply, the
intermediary must withhold at a rate of 28% of all amounts payable to you
on the notes (including principal payments). If the intermediary
withholds payments, you may use the withheld amount as a credit against
your federal income tax liability.
- All individual U.S. Holders are subject to these requirements. Some U.S.
Holders, including all corporations, tax-exempt organizations and
individual retirement accounts, are generally exempt from these
requirements.
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Certain Tax Consequences With Respect to Debt Securities of Textron Canada
Funding
Interest payments made by Textron Canada Funding may be subject to Canadian
withholding tax. The withholding tax rate with respect to a U.S. Holder may
depend on whether such U.S. Holder is entitled to the benefits of the United
States-Canada tax treaty (the "Tax Treaty"). Certain U.S. Holders (such as
limited liability companies) are not treated as United States persons for
purposes of the Tax Treaty and are subject to withholding tax at a higher rate.
U.S. Holders should consult with their tax advisors as to whether the benefits
of the Tax Treaty are applicable to their particular circumstances.
As discussed under "Description of Debt Securities -- Payment of Additional
Amounts with Respect to the Guaranteed Debt Securities" in the accompanying
prospectus, certain notes issued by Textron Canada Funding will provide that the
holders of such notes will be entitled to additional interest payments when
certain payments to such holder are subject to withholding or deductions for
certain taxes. Such additional interest should be taxed as interest in
accordance with such holder's method of accounting. U.S. Holders should consult
with their tax advisors regarding the tax consequences of these additional
interest payments.
If Canadian withholding taxes are imposed on interest payments on the debt
securities issued by Textron Canada Funding, a U.S. Holder may be eligible for a
United States foreign tax credit with respect to such taxes. A U.S. Holder that
does not claim a foreign tax credit may be entitled to a deduction for United
States federal income tax purposes with respect to any such Canadian withholding
taxes.
The calculation of foreign tax credits or deductions involves the
application of complex rules that depend on a holder's particular circumstances.
Accordingly, U.S. Holders are urged to consult their tax advisors regarding the
credibility or deductibility of such taxes. For a discussion of the Canadian
income tax considerations, see "Certain Canadian Federal Income Tax
Considerations."
TAX CONSEQUENCES TO NON-U.S. HOLDERS
Subject to the discussion below concerning backup withholding and assuming
that a Non-U.S. Holder's income and gains in respect of a note are not
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business in the U.S., payments of interest on a note to the Non-U.S. Holder will
not be subject to U.S. federal income or withholding tax, provided that: (i)
such holder does not own, directly, indirectly or constructively, 10% or more of
the total combined voting power of all classes of our stock entitled to vote;
(ii) such holder is not, for U.S. federal income tax purposes, a "controlled
foreign corporation" related, directly or indirectly, to us through stock
ownership; (iii) such holder is not a bank receiving interest described in
Section 881(c)(3)(A) of the Code; and (iv) certain certification requirements
under Section 871(h) or 881(c) of the Code and Treasury regulations thereunder
(as described below) are met (the "Portfolio Interest Exemption").
Payments of interest on a note that do not satisfy all of the foregoing
requirements generally are subject to U.S. federal withholding tax at a rate of
30% (or a lower applicable treaty rate, provided certain certification
requirements are met). Except to the extent otherwise provided under an
applicable tax treaty, a Non-U.S. Holder generally will be subject to U.S.
federal income tax in the same manner as a U.S. Holder with respect to interest
on a note if such interest is effectively-connected with a U.S. trade or
business conducted by the Non-U.S. Holder. Under certain circumstances,
effectively connected interest income received by a corporate Non-U.S. Holder
may also be subject to an additional branch profits tax at a rate of 30% (or a
lower applicable treaty rate, provided certain certification requirements are
met). Subject to the discussion of backup withholding below, such effectively
connected interest income generally will be exempt from U.S. federal withholding
tax requirements if the Non-U.S. Holder delivers an IRS Form W-8ECI to the
payor.
In general, subject to the discussion of backup withholding below, a
Non-U.S. Holder will not be subject to U.S. federal income or withholding tax on
the receipt of payments of principal on a note or on any gain recognized on the
sale, exchange or retirement of the note, unless: (i) in the case of gain, such
holder is an individual who is present in the U.S. for 183 or more days in the
taxable year of disposition
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and certain other conditions are met; (ii) such holder is subject to the
provisions of the U.S. federal tax law applicable to certain U.S. expatriates;
or (iii) the gain is effectively connected with the conduct of a U.S. trade or
business by the Non-U.S. Holder (and, if a tax treaty applies, is attributable
to a U.S. permanent establishment of such holder).
Under Sections 871(h) and 881(c) of the Code and the Treasury regulations
thereunder, in order to obtain the exemption from U.S. federal withholding tax
described in first paragraph above, either (i) the Non-U.S. Holder must provide
its name and address, and certify, under penalties of perjury, that it is a
Non-U.S. Holder; or (ii) 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 on behalf
of the Non-U.S. Holder must certify, under penalties of perjury, that such
certificate has been received from such holder by it or by a Financial
Institution between it and such holder and must furnish the payor with a copy
thereof. Under Treasury regulations, the foregoing certification may be provided
by such holder of a note on IRS From W-8BEN, W-8IMY or W-8EXP, as applicable.
Even if you comply with the certification requirements discussed above, a
withholding tax may arise if the amount of interest payable on a note is based
on our earnings or on other attributes of ours. If this exception applies, the
issuer will provide additional information in the applicable pricing supplement.
Estate Taxes
If you are an individual, your notes generally will not be subject to U.S.
estate tax when you die provided that, at the time of your death, interest on
the note qualifies under the Portfolio Interest Exemption discussed above and
such payments were not effectively connected to a U.S. trade or business that
you were conducting in the U.S.
Backup Withholding and Information Reporting
In the case of a Non-U.S. Holder, under currently applicable Treasury
regulations, backup withholding and information reporting will not apply to
payments of principal or interest on a note if the Non-U.S. Holder certifies as
to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the payor does not have actual knowledge that such
holder is a U.S. Holder that is not an exempt recipient or that the conditions
of any other exemptions are not in fact satisfied. For this purpose, the
certification required by Section 871(h) and 881(c) of the Code and Treasury
regulations thereunder (as described above under "Tax Consequences to Non-U.S.
Holders") may be used by the Non-U.S. Holder. Non-U.S. Holders should consult
their tax advisors regarding the application of backup withholding and
information reporting in their particular situations, the availability of an
exemption, and the procedure for obtaining such an exemption, if available. Any
amount withheld under the backup withholding rules generally will be allowed as
a credit against a Non-U.S. Holder's U.S. federal income tax liability, provided
that the required information is timely furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. YOU SHOULD
CONSULT YOUR OWN TAX ADVISOR REGARDING THE PARTICULAR UNITED STATES FEDERAL,
STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING
OF THE NOTES, INCLUDING THE CONSEQUENCES OF ANY CHANGE OR PROPOSED CHANGE IN
APPLICABLE LAWS.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This section summarizes the material Canadian federal income tax
considerations under the Income Tax Act (Canada) (the "Canadian Tax Act")
applicable to a "Non-Canadian holder" of notes issued by Textron Canada Funding.
This discussion is based on advice from Osler, Hoskin & Harcourt LLP, our
Canadian tax counsel. For purposes of this summary, a Non-Canadian holder is a
beneficial owner of a
S-44
note that buys such note in an initial offering pursuant to the terms of this
prospectus supplement and the applicable pricing supplement and who, at all
relevant times, for purposes of the Canadian Tax Act:
- is not (and is not deemed to be) a resident of Canada,
- deals at arm's length with Textron Canada Funding, and
- holds the note as capital property and does not use or hold and is not
deemed to use or hold the note in, or in the course of, carrying on
business in Canada.
Special rules not discussed in this summary may apply to a person who carries on
an insurance business in Canada and elsewhere. Under the Canadian Tax Act,
certain persons, including "financial institutions" as defined for these
purposes, will generally be precluded from treating notes as capital property.
This summary is based on the current provisions of the Canadian Tax Act,
the regulations thereunder and the Tax Treaty, proposed amendments to the
Canadian Tax Act and the regulations (the "Proposed Amendments") publicly
announced by or on behalf of the Minister of Finance (Canada) prior to the date
hereof and counsel's understanding of the current published administrative
practices and policies of the Canada Customs and Revenue Agency (the "CCRA").
This summary is not exhaustive of all possible income tax consequences and,
except for the Proposed Amendments, does not otherwise take into account or
anticipate any other changes in law or in the administrative and assessing
practices of the CCRA, whether by legislative, governmental or judicial action,
nor does it take into account provincial, territorial or non-Canadian income tax
considerations. Subsequent changes to the Canadian Tax Act and the regulations
thereunder, the Tax Treaty, the Proposed Amendments, the case law and the Canada
Customs and Revenue Agency's administrative policies subsequent to the date of
this prospectus supplement may have a material effect on the Canadian federal
income tax consequences to a Non-Canadian holder, and also on this summary.
This summary does not discuss all of the Canadian federal tax
considerations that may be relevant to a Non-Canadian holder in light of the
holder's particular circumstances. It is of a general nature only and is not,
and should not be construed to be, advice to any particular holder of notes.
Prospective purchasers of notes should consult their own tax advisors with
regard to the application of the Canadian federal tax laws to their particular
situation, as well as any tax consequences arising under the laws of any
provincial or non-Canadian taxing jurisdiction.
CANADIAN WITHHOLDING TAX
Subject to the application of certain exemptions as discussed below, any
amount paid or credited, or deemed to be paid or credited, by Textron Canada
Funding as, on account of or in lieu of payment of, or in satisfaction of
interest on a note to a Non-Canadian holder will generally be subject to a 25%
non-resident withholding tax. The rate of such tax may be reduced through the
application of international tax treaties or conventions to which Canada is a
party, usually to a rate of 10% or 15%. In the case of a Non-Canadian holder
that is a beneficial owner of interest in a note that is a resident of the
United States for purposes of the Tax Treaty, the applicable rate is 10%.
Interest on a note that is paid or credited, or deemed to be paid or
credited by Textron Canada Funding to a Non-Resident Holder will be exempt from
Canadian non-resident withholding tax provided:
(a) none of the interest is contingent or dependent on the use of or
production from property in Canada or is computed by reference to revenue,
profit, cash flow, commodity price or an other similar criterion, or by
reference to dividends paid or payable to shareholders of any class of
shares of the capital stock of a corporation; and
(b) either:
(i) the note is issued under terms and conditions and in
circumstances whereby Textron Canada Funding may not be required to
repay more than 25% of the principal amount of the Textron Canada
Funding debt obligation represented by such notes within five years from
the
S-45
date of issue of such obligation except in certain circumstances
including default (a "5-Year Note") (for this purpose, where a note is
issued as part of a number of notes that comprise a single debt issuance
of obligations that are identical in respect of all rights attaching
thereto except as regards the principal amount thereof, then Textron
Canada Funding may not be required to repay more that 25% of the total
of the principal amount of those notes within five years from the date
of issue of the debt issuance); or
(ii) the Non-Resident holder is a person to whom a certificate of
exemption has been issued under subsection 212(14) of the Canadian Tax
Act and which certificate is in force on the date such interest is paid
or credited.
Interest on a note that is paid or credited, or deemed to be paid or
credited, to a Non-Resident holder entitled to benefits under the Tax Treaty
will also be exempt from Canadian non-resident withholding tax provided that at
the time the interest is so paid or credited such Non-Resident holder is a
trust, company, organization or other arrangement described in Article XXI(2) of
Tax Treaty and such income is not income of the trust, company or other
arrangement from carrying on a trade or business.
The pricing supplement with respect to a particular issuance of notes will
describe whether interest paid or credited or deemed to be paid or credited
thereon will be exempt from Canadian federal withholding tax.
When a note is issued to a Non-Resident holder at a discount, the
difference between the issue price and the amount payable to the Non-Resident
holder on maturity will, in certain circumstances, be considered to be received
as interest rather than as principal for purposes of the Canadian Tax Act.
Similarly, when a Non-Resident holder assigns or otherwise transfers a note
(other than a 5-Year Note) to a person resident in or deemed to be resident in
Canada for purposes of the Canadian Tax Act, any amount by which the transfer or
assignment price exceeds the issue price of the note shall in certain
circumstances be deemed to be a payment of interest to the Non-Resident holder
for purposes of the Tax Act. In addition, any amount of interest accrued and
unpaid on such a note at the time of such assignment or transfer shall in
certain circumstances be deemed to have been paid to the Non-Resident holder for
purposes of the Canadian Tax Act. In any of these circumstances, the comments
made herein regarding Canadian withholding tax on interest will apply.
OTHER TAXES
Other than in the circumstances described above, no taxes on income
(included taxable capital gains) will be payable by a Non-Resident holder in
respect of the acquisition, ownership or disposition of a note.
S-46
PLAN OF DISTRIBUTION
We are offering the notes in the United States on a continuing basis for
sale to or through Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of
America Securities LLC, Banc One Capital Markets, Inc., Barclays Capital Inc.,
Citigroup Global Markets Inc., Credit Suisse First Boston LLC, Deutsche Bank
Securities Inc., Fleet Securities, Inc., HSBC Securities (USA) Inc., J.P. Morgan
Securities Inc., Tokyo-Mitsubishi International plc, UBS Securities LLC and
Wachovia Capital Markets, LLC (the "U.S. agents") and Textron Canada Funding is
offering notes in Canada on a continuing basis for sale to or through RBC
Dominion Securities Inc., BMO Nesbitt Burns Inc. and Scotia Capital Inc. (the
"Canadian agents" and, together with the U.S. agents, the "agents"). The agents,
individually or in a syndicate, may purchase notes, as principal, from us from
time to time for resale to investors and other purchasers at varying prices
relating to prevailing market prices at the time of resale as determined by the
applicable agent or, if so specified in the applicable pricing supplement, for
resale at a fixed offering price. However, we may agree with an agent for that
agent to utilize its reasonable efforts on an agency basis on our behalf to
solicit offers to purchase notes at 100% of the principal amount thereof, unless
otherwise specified in the applicable pricing supplement. We will pay a
commission to an agent, ranging from .125% to .750% of the principal amount of
each note, depending upon its stated maturity, sold through that agent as our
agent. We will negotiate commissions with respect to notes with stated
maturities in excess of 30 years that are sold through an agent as our agent at
the time of the related sale. In addition, we estimate that our expenses
incurred in connection with the offering and sale of the notes, including
reimbursement of certain of the agents' expenses, will total approximately
$1,300,000.
Unless otherwise specified in the applicable pricing supplement, any note
sold to an agent as principal will be purchased by that agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a note of
identical maturity. An agent may sell notes it has purchased from us as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with that purchase. An agent may allow, and
dealers may reallow, a discount to certain other dealers. After the initial
offering of notes, the offering price (in the case of notes to be resold on a
fixed offering price basis), the concession and the reallowance may be changed.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may reject offers in whole or in part (whether placed
directly by us or through an agent). Each agent will have the right, in its
discretion reasonably exercised, to reject in whole or in part any offer to
purchase notes received by it on an agency basis.
Unless otherwise specified in the applicable pricing supplement, you will
be required to pay the purchase price of your notes in immediately available
funds in the specified currency in The City of New York on the date of
settlement. See "Special Provisions Relating to Foreign Currency Notes."
Upon issuance, the notes will not have an established trading market. The
notes will not be listed on any securities exchange. The agents may from time to
time purchase and sell notes in the secondary market, but the agents are not
obligated to do so, and there can be no assurance that a secondary market for
the notes will develop or that there will be liquidity in the secondary market
if one develops. From time to time, the agents may make a market in the notes,
but the agents are not obligated to do so and may discontinue any market-making
activity at any time.
In connection with an offering of notes purchased by one or more agents as
principal on a fixed offering price basis, the applicable agents will be
permitted to engage in certain transactions that stabilize the price of notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of notes. If those agents create a short
position in notes, i.e., if they sell notes in an amount exceeding the amount
referred to in the applicable pricing supplement, they may reduce that short
position by purchasing notes in the open market. In general, purchases of notes
for the purpose of stabilization or to reduce a short position could cause the
price of notes to be higher than it might be in the absence of these types of
purchases.
S-47
Neither we nor any agent makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of notes. In addition,
neither we nor any agent makes any representation that the agents will engage in
any such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We have agreed to
indemnify the agents against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the agents may be required to
make in respect thereof.
In the ordinary course of their business, the agents and their affiliates
have engaged, and may in the future engage, in investment and commercial banking
transactions with us and certain of our affiliates, for which they receive
customary fees and expenses.
From time to time, we may sell other securities referred to in the
accompanying prospectus, and the amount of notes offered hereby may be reduced
as a result of these sales.
VALIDITY OF THE NOTES
Edwards & Angell, LLP, Providence, Rhode Island, will issue an opinion
about the validity of the notes and the TFC guarantee for Textron Financial.
Edwards & Angell, LLP and Stewart McKelvey Stirling Scales, Halifax, Nova
Scotia, will issue opinions about the validity of the notes for Textron Canada
Funding. Certain matters relating to Ontario law and Canadian federal income tax
matters will be passed upon for Textron Financial and Textron Canada Funding by
Osler, Hoskin & Harcourt LLP, Toronto, Canada. Sidley Austin Brown & Wood LLP,
New York, New York, will pass on certain matters for the agents in respect of
the notes being offered in the United States and Torys LLP will pass on certain
matters for the agents in respect of the notes being offered in Canada.
S-48
PROSPECTUS
$4,000,000,000
TFC TEXTRON LOGO
TEXTRON FINANCIAL CORPORATION
DEBT SECURITIES OF TEXTRON FINANCIAL CORPORATION
TEXTRON FINANCIAL CANADA FUNDING CORP.
GUARANTEED DEBT SECURITIES OF
TEXTRON FINANCIAL CANADA FUNDING CORP.
-------------------------
WE WILL PROVIDE SPECIFIED TERMS OF THESE SECURITIES IN SUPPLEMENTS TO THIS
PROSPECTUS.
YOU SHOULD READ THIS PROSPECTUS AND ANY SUPPLEMENT CAREFULLY BEFORE YOU
INVEST.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated September 26, 2003.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
About this Prospectus............... 1
Textron Financial Corporation....... 1
Textron Financial Canada Funding
Corp.............................. 2
Use of Proceeds..................... 3
Ratios of Earnings to Fixed
Charges........................... 3
</Table>
<Table>
<Caption>
PAGE
Description of Debt Securities...... 4
Plan of Distribution................ 16
Where You Can Find More
Information......................... 17
Legal Opinions...................... 18
Experts............................. 18
</Table>
i
ABOUT THIS PROSPECTUS
This prospectus is part of a joint registration statement that we filed
with the SEC using a "shelf" registration process. Under this shelf registration
process, we may sell any combination of the debt securities of Textron Financial
Corporation (the "TFC debt securities") and the debt securities of Textron
Financial Canada Funding Corp. (the "guaranteed debt securities"), which are
fully and unconditionally guaranteed by Textron Financial Corporation (the "TFC
guarantee") as described in this prospectus and the other prospectus included in
the registration statement. Textron Financial Corporation and Textron Financial
Canada Funding Corp. may issue up to an aggregate of $4,000,000,000 of debt
securities and guaranteed debt securities under this prospectus and the other
prospectus included in the registration statement. Any debt securities issued by
Textron Financial Corporation or any guaranteed debt securities issued by
Textron Financial Canada Funding Corp. will reduce the amount available to be
issued in the future by itself and the other issuer under the registration
statement. Unless the context otherwise requires, we will refer to the TFC debt
securities to be issued by Textron Financial and the guaranteed debt securities
to be issued by Textron Canada Funding as the "securities" or the "debt
securities".
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of the
securities offered. Each prospectus supplement may also add to, update, or
change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information".
In this prospectus, we will refer to Textron Financial Corporation as
"Textron Financial" and Textron Financial Canada Funding Corp. as "Textron
Canada Funding." Unless the context otherwise requires, we will use the terms
"we," "our," "ourselves" and "us" to mean Textron Financial and Textron Canada
Funding. In addition, we will use the term "issuer" when referring to the
particular company that issues a particular debt security or series of debt
securities.
TEXTRON FINANCIAL CORPORATION
Textron Financial was incorporated in the State of Delaware in 1962. Its
executive office is at 40 Westminster Street, Providence, Rhode Island, and its
telephone number is 401-621-4200.
Textron Financial is a diversified commercial finance company with
operations in six segments:
- Aircraft Finance, providing financing for new and used Cessna business
jets and piston-engine airplanes, Bell helicopters and other general
aviation aircraft;
- Asset-Based Lending, involving two types of lending primarily secured by
accounts receivable and inventory: general purpose asset-based lending,
which provides asset-based loans to smaller middle-market companies that
manufacture or distribute finished goods, and specialty asset-based
lending, which factors freight bills and utility service receivables and
extends asset-based loans to small niche-orientated finance companies;
- Distribution Finance, offering inventory finance programs for dealers of
Textron, Inc. manufactured products and for dealers of a variety of other
household, housing, leisure, agricultural and technology products;
- Golf Finance, making mortgage loans for the acquisition and refinancing
of golf courses, and providing term financing for E-Z-GO golf cars and
Textron Turf Care equipment;
1
- Resort Finance, extending loans to developers of vacation interval
resorts and recreational and residential land lots, secured primarily by
notes receivable and interval and land lot inventory; and
- Structured Capital, engaging in tax-orientated, long-term leases of
large-ticket equipment and real estate, primarily with investment grade
lessees.
Textron Financial's other financial services and products include
transaction syndication, equipment appraisal and disposition, insurance
brokerage and portfolio servicing. Some of these ancillary services are offered
through Textron Financial subsidiaries, Asset Control LLC and TBS Business
Services, Inc.
Textron Financial is a subsidiary of Textron Inc., a global, multi-industry
company with operations in five business segments -- Bell, Cessna, Fastening
Systems, Industrial and Finance. Textron Inc.'s products include: light and
mid-size business jets, turboprop and piston-powered aircraft, commercial and
military helicopters, engineered fastening systems, wire and cable installation
and maintenance tools, golf cars and utility vehicles, turf-care equipment,
aerospace and defense systems, plastic fuel tanks, industrial pumps and gears
and other industrial products. At December 28, 2002, 46% of Textron Financial's
total managed finance receivables were associated in some manner with Textron or
Textron's products, and approximately 50% of those receivables were either
direct Textron obligations or related to the financing of new Textron products.
Textron Financial entered into a Support Agreement dated as of May 25, 1994
with Textron Inc. The Support Agreement requires Textron Inc. to pay Textron
Financial, quarterly, an amount sufficient to provide that pre-tax earnings,
before extraordinary items and fixed charges, will not be less than 125% of
Textron Financial's fixed charges. Fixed charges for purposes of the Support
Agreement include interest on indebtedness and amortization of debt discount.
Textron Inc. was not required to make any payments under the Support Agreement
for the six months ended June 30, 2003, or for the years ended 2002, 2001, 2000,
1999 and 1998, when Textron Financial's fixed charge coverage ratios were 154%,
161%, 171%, 158%, 163% and 172% respectively. In addition, Textron Inc. has
agreed to maintain Textron Financial's consolidated shareholders' equity at an
amount not less than $200 million. Under the terms of the Support Agreement,
Textron Financial has agreed with Textron Inc. that one hundred percent (100%)
of Textron Financial's issued and outstanding common stock will be owned by
Textron Inc. or a corporation controlled by, controlling, or under common
control with, Textron Inc. The Support Agreement is not a guarantee by Textron
Inc. of the payment of interest or principal of any obligation, indebtedness or
liability by Textron Financial, including the debt securities or the TFC
guarantees in respect of the guaranteed debt securities offered hereby, to any
person. However, the Support Agreement does contain provisions protecting
Textron Financial's investors from the termination of the Support Agreement and
entitling them to enforce its provisions against Textron Inc. As a result, if
Textron Inc. does not comply with its obligations under the Support Agreement,
holders of TFC debt securities and holders of guaranteed debt securities could
bring an action against Textron Inc. to compel Textron Inc. to comply with its
obligations.
TEXTRON FINANCIAL CANADA FUNDING CORP.
Textron Canada Funding is one of Textron Financial's wholly-owned
subsidiaries, incorporated under the laws of the Province of Nova Scotia, as an
unlimited liability company, solely for the purpose of raising capital to meet
Textron Financial's financing needs and those of Textron Financial's
subsidiaries. Textron Canada Funding's registered office is located at Suite
800, 1959 Upper Water Street, P.O. Box 997, Halifax, Nova Scotia, Canada B3J
2X2. Its principal executive offices are located at 40 Westminster Street,
Providence, Rhode Island, and its telephone number is 401-621-4200.
2
Pursuant to rules promulgated by the SEC, we are not required to include
separate financial statements of Textron Canada Funding in this prospectus
because:
- - all of the voting rights of Textron Canada Funding are owned by Textron
Financial, which files periodic and other reports with the SEC pursuant to the
Securities Exchange Act of 1934;
- - Textron Canada Funding does not have operations, revenues or cash flows other
than those related to the issuance, administration and repayment of the
guaranteed debt securities and any other securities guaranteed by Textron
Financial; and
- - Textron Financial fully and unconditionally guarantees the payment of Textron
Canada Funding's guaranteed debt securities.
USE OF PROCEEDS
Textron Financial and Textron Canada Funding will use the net proceeds from
the sale of the debt securities that they offer for sale by this prospectus for
the purposes that they specify in the prospectus supplement for those debt
securities. Those purposes may include, in the case of Textron Financial,
repayment of debt, origination of loan and lease financings, acquisition of
finance portfolios and businesses and other general corporate purposes. Unless
otherwise indicated in the applicable prospectus supplement, Textron Canada
Funding will lend the net proceeds from the sale of its notes to Textron
Financial or Textron Financial's other subsidiaries to be used for similar
purposes.
RATIOS OF EARNINGS TO FIXED CHARGES
Textron Financial's ratios of earnings to fixed charges for each of the
periods indicated were as follows:
<Table>
<Caption>
SIX MONTHS ENDED YEARS ENDED
JUNE 30, 2003 2002 2001 2000 1999 1998
- ---------------- ----- ----- ----- ----- -----
1.54x 1.61x 1.71x 1.58x 1.63x 1.72x
</Table>
For these ratios, Textron Financial calculated earnings by adding the following:
- pre-tax income from continuing operations before adjustment for minority
interests in consolidated subsidiaries or income or loss from investments
that Textron Financial accounts for using the equity method of
accounting;
- fixed charges;
- amortization of previously capitalized interest;
- distributed income of investments that Textron Financial accounts for
using the equity method of accounting; and
- Textron Financial's share of pre-tax losses of investments that Textron
Financial accounts for using the equity method of accounting and then
subtracting:
-- capitalized interest and
-- minority interests in pre-tax income of subsidiaries that have not
incurred fixed charges.
For this purpose, Textron Financial calculated fixed charges by adding the
following:
- interest expensed and capitalized;
- amortized premiums, discounts and capitalized expenses relating to
indebtedness;
- an estimate of interest included in rental expense; and
- preferred stock dividend requirements, if any, of consolidated
subsidiaries.
3
DESCRIPTION OF DEBT SECURITIES
Textron Financial will issue the TFC debt securities under an indenture
with SunTrust Bank, as trustee. Textron Canada Funding will issue the guaranteed
debt securities under an indenture with Textron Financial, as guarantor, and
SunTrust Bank, as trustee.
We have summarized below provisions of the indentures. The summary does not
contain all of the provisions that you may want to consider as an investor in
the debt securities. You may wish to review the indentures and the Trust
Indenture Act of 1939 as it applies to the indentures. We have filed a copy of
each indenture with the SEC.
GENERAL
Neither of the indentures limits the amount of debt securities that the
applicable issuer may issue under it. In addition, the indentures do not limit
the amount of any other debt that the applicable issuer may issue under other
financing documents.
Each issuer is allowed under its indenture to issue debt securities in one
or more series. We will include in the prospectus supplement for a series of
debt securities being offered specific terms of the debt securities. These terms
will include some or all of the following:
- the title of the debt securities and whether the debt securities will be
debt securities of Textron Financial or guaranteed debt securities of
Textron Canada Funding;
- the total principal amount and the permitted denominations of the debt
securities;
- the currency or currencies in which the principal of and any interest on
the debt securities will be payable;
- the date on which the debt securities will be payable;
- the interest rate, if any, for the debt securities or the method that
will be used to determine the interest rate;
- the places where principal and any interest will be payable;
- any mandatory or optional repayment or redemption provisions; and
- any other terms of the debt securities.
Each issuer is allowed under its respective indenture to issue debt
securities of a single series from time to time, with different maturity dates
and redemption and repayment provisions, if any, and different interest rates.
We will specify in the prospectus supplement the persons to whom and the manner
in which any interest will be payable.
The TFC debt securities and the guaranteed debt securities will be
unsecured, unsubordinated indebtedness of the applicable issuer. The TFC debt
securities and the guaranteed debt securities will rank equally with all other
unsecured and unsubordinated indebtedness of the applicable issuer from time to
time outstanding.
We will issue the debt securities in the denominations that we set forth in
the applicable prospectus supplement. The trustee will register the debt
securities in the names of the holders of the debt securities. Each issuer will
maintain an office or agency where holders of the debt securities may present
the debt securities for payment, transfer or exchange. We will not charge any
service charge for any transfer or
4
exchange of the debt securities, but we may require a payment sufficient to
cover any tax or other governmental charge payable on the debt securities.
Each issuer may sell some of its debt securities at a substantial discount
below their stated principal amount and we may provide for the payment of no
interest or interest at a rate which at the time of issuance is below market
rates. We will describe the U.S. federal income tax consequences and, in the
case of debt securities issued in Canada, Canadian federal income tax
consequences, and other special considerations applicable to any discounted debt
securities in the prospectus supplement relating to the discounted debt
securities.
FULL AND UNCONDITIONAL GUARANTEE OF DEBT SECURITIES OF TEXTRON CANADA FUNDING
All guaranteed debt securities issued by Textron Canada Funding will be
fully and unconditionally guaranteed under a guarantee by Textron Financial of
the payment of principal of, and any premium and interest on, including any
additional amounts payable by Textron Canada Funding as described under
"Description of Debt Securities -- Payment of Additional Amounts with Respect to
the Guaranteed Debt Securities," the guaranteed debt securities when due,
whether at maturity or otherwise. Under the terms of the full and unconditional
guarantee, holders of the guaranteed debt securities will not be required to
exercise their remedies against Textron Canada Funding before they proceed
directly against Textron Financial. In addition, the holders of guaranteed debt
securities are entitled to enforce the provisions of the Support Agreement
against Textron Inc. See "Textron Financial Corporation."
BOOK-ENTRY PROCEDURES
We may issue the debt securities in the form of one or more book-entry
certificates registered in the name of a depositary or a nominee of a
depositary. Unless we otherwise state in the applicable prospectus supplement,
the depositary for debt securities issued in the United States will be The
Depository Trust Company. The Depository Trust Company has informed us that its
nominee will be Cede & Co., who will be the initial registered holder of any
series of debt securities issued in the United States that are issued in
book-entry form. The depositary for debt securities issued in Canada will be The
Canadian Depository for Securities Limited, which will be described in the
applicable prospectus supplement.
We will not issue certificates to individual holders of the debt
securities, except as set forth below or in the applicable prospectus
supplement. The Depository Trust Company and its participating organizations
will only show beneficial interests in book-entry securities on and transfers of
book-entry securities through the records that it and its participating
organizations maintain. In addition, if holders of debt securities issued in
book-entry form want to take any action, they must instruct the participating
organization through which they hold the debt securities. The participating
organization then must instruct The Depository Trust Company or Cede & Co., as
the registered holder of the debt securities, to take action.
The Depository Trust Company has provided us with the following
information. The Depository Trust Company is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the United States Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered under Section 17A of
the Securities Exchange Act of 1934. The Depository Trust Company holds
securities that its participating organizations, or direct participants, deposit
with it. The Depository Trust Company also facilitates the clearance and
settlement of securities transactions among direct participants through
electronic book-entries. This eliminates the need for physical exchange of
certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Other
organizations, including banks, brokers, dealers and trust companies that work
with a direct participant also use The Depository Trust
5
Company's book-entry system. The rules that apply to The Depository Trust
Company and its participants are on file with the SEC.
If anyone wishes to purchase, sell or otherwise transfer debt securities
issued in book-entry form, they must do it through a direct or indirect
participant. Holders will not be recognized as registered holders of the debt
securities and, thus, will be permitted to exercise their rights only indirectly
through and subject to the procedures of participants and, if applicable,
indirect participants.
The absence of physical certificates may limit the ability of a holder to
pledge debt securities issued in book-entry form to persons or entities that do
not participate in The Depository Trust Company system, or to otherwise act with
respect to the debt securities.
The Depository Trust Company has advised us that it will only take an
action that the indenture permits a registered holder of any debt securities to
take if a participant directs it to do so.
Debt securities represented by a book-entry security will be exchangeable
for debt securities in definitive form with the same terms only if:
- The Depository Trust Company notifies the applicable issuer that it is
unwilling or unable to continue as depositary or The Depository Trust
Company ceases to be a clearing agency registered under applicable law
and the applicable issuer does not appoint a new depositary within 90
days;
- the applicable issuer determines that the book-entry security is now
exchangeable for debt securities in definitive form; or
- an event of default has occurred and is continuing with respect to the
debt securities.
If any of these events occur, The Depository Trust Company will generally notify
all direct participants of the availability of definitive debt securities.
Except as we describe in this section, a book-entry security may not be
transferred except as a whole by The Depository Trust Company to its nominee or
by its nominee to The Depository Trust Company or another of its nominees or to
a successor depositary appointed by us.
FURTHER ISSUANCES
We have the ability under each indenture to "reopen" a previously issued
series of debt securities and issue additional debt securities of such series or
establish additional terms of such series to the extent permitted under the
applicable indenture. We may also issue debt securities with the same terms as
previously issued debt securities.
CERTAIN COVENANTS
The applicable issuer must comply with the covenants which are contained in
the indentures described below. However, the covenants may not ensure that the
holders of debt securities will receive payments of principal and interest on
the debt securities when due in the event of a highly leveraged or similar
transaction involving the applicable issuer. These types of transactions would
include a leveraged buyout or a change of control of the applicable issuer.
Also, the covenants will not limit the amount of debt the applicable issuer may
incur or the amount of dividends it may pay to its shareholder.
Except as noted below, the covenants contained in each indenture are
identical in all material respects.
6
LIMITATIONS ON LIENS
Textron Financial under its indenture and Textron Financial as guarantor
under the indenture applicable to the guaranteed debt securities will agree not
to, directly or indirectly, and will not allow any Subsidiary (as defined below)
of it to, create, assume or incur any Lien (as defined below) on any of its
properties and assets or any Subsidiary unless it grants to the holders of its
outstanding debt securities or the beneficiaries of Textron Financial's
guarantee, as applicable, a Lien on the same property or assets that is equal in
seniority to the Lien. However, Textron Financial will not be required to grant
a Lien as security to the holders of its outstanding debt securities or the
beneficiaries of Textron Financial's guarantee if it or any of its Subsidiaries
merely:
- leases property to others in the ordinary course of business, or leases
or subleases property that is not necessary in the operation of its
business;
- creates, assumes or incurs any Lien if (1) the Lien secures indebtedness
for borrowed money which was used to finance the acquisition of the
property that is subject to the Lien and (2) the Lien is created at the
same time as Textron Financial or its Subsidiary acquired the property or
within 90 days after the acquisition;
- assumes:
-- any Lien existing on any asset of any Person (as defined below) at
the time the Person becomes a Subsidiary that is not created in
contemplation of the event;
-- any Lien on any asset of any Person existing at the time the Person
merges or consolidates with or into Textron Financial or a Subsidiary
that is not created in contemplation of the merger or consolidation;
and
-- any Lien existing on any asset prior to the time Textron Financial or
a Subsidiary acquires the asset if the Lien is not created in
contemplation of the acquisition;
- makes any deposit with or gives any form of security to any governmental
agency or similar body in order to enable Textron Financial or any of its
Subsidiaries to:
-- maintain self-insurance;
-- participate in any fund in connection with workmen's compensation,
unemployment insurance, old-age pensions, or other social security;
-- share in any privileges or other benefits available to corporations
participating in any arrangement described above; or
-- for any other purpose at any time required by law or regulation in
order to transact business or exercise any privilege or license;
- deposits assets of Textron Financial or any of its Subsidiaries with any
surety company or clerk of any court, or in escrow, as collateral in
connection with any bond on appeal by Textron Financial or any of its
Subsidiaries from any judgment or decree against it, or in connection
with any other judicial proceedings by or against Textron Financial or
any of its Subsidiaries;
- incurs upon any of Textron Financial's property or assets:
-- Liens for taxes or other governmental charges which are not yet due
or are payable without penalty or which Textron Financial or any of
its Subsidiaries is contesting in good faith and for which Textron
Financial or its Subsidiary has set aside adequate reserves on its
books or its Subsidiary's books, as long as foreclosure or similar
proceedings have not been started;
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-- the Liens of any judgment, if the judgment has not remained
undischarged, or unstayed on appeal or otherwise, for more than six
months;
-- undetermined Liens or charges incident to construction;
-- materialmen's, mechanics', workmen's, repairmen's or other similar
Liens arising in the ordinary course of business in respect of
obligations which are not yet due or which Textron Financial or such
Subsidiary is contesting in good faith, or deposits to obtain the
release of these Liens; or
-- any encumbrances consisting of zoning restrictions, licenses,
easements and restrictions on the use of real property and minor
defects and irregularities in the title, which do not materially
impair Textron Financial's or any of its Subsidiaries' use of the
property or decrease the value of the property for the purpose of
Textron Financial's or any Subsidiary's business;
- creates other Liens arising in the ordinary course of Textron Financial's
business which:
-- do not secure Debt (as defined below);
-- do not secure any obligation in an amount exceeding $5,000,000; and
-- do not in the aggregate materially detract from the value of Textron
Financial's property or assets or materially impair the use in the
operation of its business;
- creates Liens not otherwise permitted securing Debt in an aggregate
principal amount at any time outstanding not to exceed 15% of Textron
Financial's Consolidated Net Tangible Assets (as defined below);
- creates in favor of any lender or holder of commercial paper of Textron
Financial or any of its Subsidiaries in the ordinary course of business a
banker's lien or right to offset amounts deposited with the lender or
holder of commercial paper;
- creates or assumes Liens securing debt that a Subsidiary owes to Textron
Financial or another Subsidiary;
- creates, assumes or incurs any Lien upon any of Textron Financial's
properties or assets in connection with the sale, transfer or other
disposition of the properties or assets:
-- in connection with a securitization or other asset-based financing;
-- to a real estate investment trust or similar entity; or
-- in connection with any transaction similar to the transactions
referred to in the immediately preceding clauses;
provided, however, that any sale, transfer or disposition must be for
valid consideration and must not benefit directly or indirectly any
holder of any outstanding obligation or indebtedness of Textron Financial
or any of its subsidiaries more than any other holder if that outstanding
obligation or indebtedness did not previously benefit from a Lien; and
- causes or allows any extension, renewal or replacement of any Lien
referred to above, as long as:
-- Textron Financial or any of its Subsidiaries does not increase the
principal amount of the obligations and indebtedness secured by the
Lien, except that:
- the amount of obligations or indebtedness secured by extensions,
renewals or replacements of Liens on property acquired as a result
of defaults on receivables may exceed the principal amount prior to
the extension, renewal or replacement; and
8
- the amount of obligations secured by extensions, renewals or
replacements of Liens on property may exceed the amount of the
obligations prior to the extension, renewal or replacement if the
value of the property has increased and the loan to value ratio of
the refinanced obligations does not exceed the loan to value ratio
of the obligations relating to the original Lien; and
-- the extension, renewal or replacement of any Lien is limited to that
portion of the property which secured the Lien that is extended,
renewed or replaced plus improvements on the property.
CERTAIN DEFINITIONS
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any particular time, the
aggregate amount of assets after deducting (a) all current liabilities,
excluding any liability that by its terms is extendable or renewable at the
option of the obligor to a time more than 12 months after the time the amount
thereof is computed, and (b) all goodwill, excess of cost over assets acquired,
patents, copyrights, trademarks, tradenames and other like intangibles, all as
shown in Textron Financial's and its subsidiaries' most recent consolidated
financial statements prepared in accordance with generally accepted accounting
principles.
"DEBT" of any Person means at any date, without duplication:
- all obligations of the Person for borrowed money;
- all obligations of the Person evidenced by bonds, debentures, notes or
other similar instruments;
- all obligations of the Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the
ordinary course of business;
- all obligations of the Person as lessee which the Person capitalizes in
accordance with generally accepted accounting principles;
- all Debt of others secured by a Lien on any asset of the Person, whether
or not the Debt is assumed by the Person; and
- all Debt of others that the Person guarantees.
However, "Debt" of Textron Financial or a Subsidiary will not include
Non-recourse Debt.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation or encumbrance of any kind on the
asset. However, "Lien" does not mean security interests under Article 9 of the
Uniform Commercial Code, or any successor provision, or under the Personal
Property Security Act (Ontario) and its equivalent in other provinces, or any
successor to such legislation on sales of accounts or chattel paper. For the
purposes of the debt securities, Textron Financial or any Subsidiary will be
deemed to own, subject to a Lien, any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to the
asset.
"NON-RECOURSE DEBT" of Textron Financial or a Subsidiary means any
obligations for borrowed money of Textron Financial or a Subsidiary that (1) are
secured by specific assets, (2) are not reflected in the balance sheet of
Textron Financial or a Subsidiary in accordance with generally accepted
accounting principles and (3) are issued under instruments which limit the
recourse against the obligor to the specific assets. In the case of all
Non-recourse Debt incurred after the date of the applicable indenture, if under
9
applicable law, a holder of the obligation could ever become entitled to
recourse against the obligor under applicable bankruptcy law, the instrument
must also contain a provision that:
- the holder's recourse claim in respect of the obligation will be
subordinate and junior to all Debt evidenced by the debt securities of
any series; and
- the holder of the obligation cannot receive any payment in respect of any
obligation, other than the proceeds of the specific assets that secure
the obligation, until Textron Financial has paid all applicable debt
securities of any series in full or have provided funds for their
payment.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"SUBSIDIARY" means at any date any entity in which Textron Financial,
directly or indirectly, owns or controls securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions.
MERGER AND CONSOLIDATION
Either of the issuers or the guarantor may consolidate or merge with or
into any other Person and may transfer or lease all or substantially all of its
property to any Person only if:
- the Person formed by or resulting from the consolidation or merger, or
which will receive the property, enters into a supplemental indenture in
which it
-- in the case of an issuer, assumes the due and punctual payment of the
principal, premium, and interest on the debt securities of the
applicable issuer; and
-- in the case of an issuer and the guarantor, agrees to perform and
observe each agreement or covenant under the debt securities and the
indenture of the applicable issuer and the guarantor; and
- immediately after giving effect to the consolidation, merger, transfer or
lease of property discussed above, no Event of Default and no event
which, after notice or lapse of time or both, would become an Event of
Default will have occurred and is continuing.
Any transfer described above, other than a lease, will concurrently release the
applicable issuer or guarantor from further obligations under the applicable
debt securities and the applicable indenture.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The following will be "Events of Default" for any series of debt securities
of an issuer:
- the failure of the issuer to pay any interest or any additional amounts
on any debt securities of that series when due, and which remains unpaid
for a period of 30 days;
- the failure of the issuer to pay the principal or any premium on any debt
securities of that series when due;
- the failure of the issuer or, in the case of debt securities issued by
Textron Canada Funding, Textron Financial as guarantor to perform, or the
breach by the issuer of, or in the case of debt securities issued by
Textron Canada Funding, Textron Financial as guarantor of, any covenant
or warranty contained in that series of debt securities or the applicable
indenture relating to that series which remains
10
unremedied 90 days after the holders of at least 25% in aggregate
principal amount of such series then outstanding provide written notice
of the failure or breach to the applicable issuer;
- if any event of default under any mortgage, indenture or instrument
occurs and results in debt of the applicable issuer or, in the case of
debt securities issued by Textron Canada Funding, the guarantor in excess
of $50,000,000 becoming or being declared due prior to the date on which
it would otherwise become due, and the acceleration is not annulled, or
the debt is not discharged, within 30 days after the holders of at least
25% in aggregate principal amount of such series of debt securities then
outstanding provide written notice of the event of default to the
applicable issuer or, if applicable, the guarantor, as the case may be;
- if the Support Agreement ceases to be in full force and effect for any
reason or is amended or modified in any manner unless
-- prior to its termination or amendment, Standard & Poor's Ratings
Services, Moody's Investor Service, Inc. and any other nationally
recognized statistical rating organization then rating securities of
the applicable issuer, confirm they will not downgrade or place on
what is commonly referred to as a "watch list" for possible
downgrading, any of the securities of the applicable issuer or, in the
case of debt securities issued by Textron Canada Funding, of the
guarantor, as a result of the termination or amendment of the Support
Agreement; or
-- if the termination or amendment is as a result of another Person's
assumption of the debt securities or, in the case of debt securities
issued by Textron Canada, the TFC guarantee under the provisions
described in "Merger and Consolidation" above, the senior debt
securities of the Person assuming the debt securities or, in the case
of debt securities issued by Textron Canada Funding, the TFC guarantee
are rated by Standard & Poor's Ratings Services or Moody's Investor
Service, Inc. immediately following the assumption at a rating equal
to or greater than the rating assigned to securities of the applicable
issuer or the guarantor by each rating agency;
- Textron Inc., Textron Financial, Textron Canada Funding (but only if
Textron Canada Funding is the issuer of the debt securities) or any
"significant subsidiary," as defined in Section 1.02(w) of Regulation S-X
of the Securities Act, or any successor provision thereto, of Textron
Financial or, if Textron Canada Funding is the issuer, of Textron Canada
Funding:
-- commences or consents to a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy or similar law or seeking the
appointment of a trustee or other similar official in respect of it
or any substantial part of its property;
-- makes a general assignment for the benefit of creditors;
-- fails generally or admits its inability to pay its debts as they
become due; or
-- takes any corporate action to authorize any of the foregoing;
- an involuntary case or other proceeding (1) is commenced against Textron
Inc., Textron Financial, Textron Canada Funding (but only if Textron
Canada Funding is the issuer of the debt securities) or any significant
subsidiary of Textron Financial or, if Textron Canada Funding is the
issuer, of Textron Canada Funding seeking liquidation or other relief
with respect to its debts under any bankruptcy or other similar law or
seeking the appointment of a trustee or other similar official and (2) is
not dismissed or stayed within 60 days; or
- an order for relief is entered against Textron Inc., Textron Financial,
Textron Canada Funding (but only if Textron Canada Funding is the issuer
of the debt securities) or any significant subsidiary of
11
Textron Financial or, if Textron Canada Funding is the issuer of Textron
Canada Funding under the Federal bankruptcy laws or, in the case of
Textron Canada Funding, under Canadian Federal bankruptcy laws.
In case an Event of Default other than one described in the last three
bullet-points above occurs and is continuing with respect to a particular series
of debt securities, then the holders of at least 25% in aggregate principal
amount of that particular series of debt securities then outstanding may declare
the principal of all outstanding debt securities of that particular series to be
immediately due and payable. If an Event of Default described in the last three
bullet-points occurs and is continuing with respect to a particular series of
debt securities, the principal of all outstanding debt securities of that
particular series will automatically become due and payable. Upon any
acceleration, any premium and interest on the debt securities so accelerated
will also become immediately due and payable. At any time after an acceleration
but before the holders of debt securities obtain a judgment or decree for
payment of money due, the holders of a majority in aggregate principal amount of
outstanding debt securities may rescind and annul the acceleration and its
consequences, provided all required payments, other than as a result of the
acceleration, shall have been made and all Events of Default are cured or
waived.
The holders of a majority in aggregate principal amount of any series of
outstanding debt securities may waive, on behalf of all of the holders of that
series, any Event of Default and its consequences or past defaults, except a
default in the payment of the principal of, or premium, if any, or interest, if
any, on, debt securities of that particular series or a default under a covenant
or agreement that cannot be modified without the consent of the holder of each
debt security that is affected.
If a default or an Event of Default occurs and continues for any series of
debt securities, the holders of at least a majority in aggregate principal
amount then outstanding for any series of debt securities may direct the time,
method and place of conducting any proceeding or remedy available to the
trustee, or exercising any power given to the trustee under the applicable
indenture for that series of debt securities.
The trustee does not have to exercise any of its rights or powers under the
applicable indenture at the direction of any holders of debt securities unless
the holders offer the trustee reasonable security or indemnity against expenses
and liabilities.
We must file with the trustee, annually, a written statement regarding the
presence or absence of certain defaults.
DEFEASANCE
DEFEASANCE AND DISCHARGE
Each indenture provides that the issuer and, if applicable, the guarantor,
will be discharged from all of its non-administrative obligations in respect of
the debt securities of any series if the issuer deposits with the trustee, in
trust, money and/or U.S. government obligations, or in the event of debt
securities denominated in Canadian dollars, Canadian government obligations,
which will provide enough money to pay the principal and interest on the debt
securities of the series on the stated due dates of these payments in accordance
with the terms of the applicable indenture and the debt securities of that
series.
An issuer may establish this trust only if, among other things, it delivers
to the trustee an opinion of counsel stating that the holders of the debt
securities of the series will not recognize income, gain or loss for federal
income tax purposes as a result of the defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if the defeasance had not occurred.
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DEFEASANCE OF LIMITATIONS ON LIENS COVENANT AND RELATED EVENTS OF DEFAULT
Each indenture provides that the issuer and, if applicable, the guarantor,
may be released from its obligation to comply with the restrictive covenant
regarding limitations on Liens and it would no longer trigger Events of Default
under the applicable indenture and the applicable debt securities of a series
with respect to this covenant, if the issuer deposits with the trustee, in
trust, money and/or U.S. government obligations, or in the event of debt
securities denominated in Canadian dollars, Canadian government obligations,
which, through the payment of interest and principal thereon, will provide
enough money to pay the principal and interest on the debt securities of that
series on the stated due dates of these payments in accordance with the terms of
the applicable indenture and the debt securities of that series. The obligations
of each of the issuers and, if applicable, the guarantor, under the respective
indentures and the debt securities of that series and other Events of Default
would remain in full force and effect.
An issuer may establish this trust only if, among other things, it delivers
to the trustee an opinion of counsel stating that the holders of the debt
securities of the series will not recognize income, gain or loss for federal
income tax purposes as a result of the defeasance of the covenant and Events of
Default described above and will be subject to federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if the defeasance had not occurred.
If an issuer exercises the option described in this section and the debt
securities of the series are declared due and payable because of the occurrence
of any Event of Default, the amount of money and U.S. government obligations, or
in the event of debt securities denominated in Canadian dollars, Canadian
government obligations, on deposit with the trustee will be sufficient to pay
amounts due on the debt securities of that series at the time of their stated
maturity but may not be sufficient to pay amounts due on the debt securities of
that series at the time of the acceleration resulting from the Event of Default.
CHANGES TO EACH INDENTURE
Under each indenture, the applicable issuer may modify its rights and
obligations and the rights of the holders of its debt securities with the
consent of the holders of at least a majority of the principal amount of the
outstanding debt securities of all series issued under the applicable indenture
affected by the modification. However, an issuer is required to get the consent
of the holder of each debt security affected to make the following modifications
of the debt securities:
- an extension of the fixed maturity of any debt security;
- a reduction of the principal amount payable on any debt security;
- a reduction in the rate of interest, or change in the calculation of
interest, payable on any debt security;
- a change in any obligation to pay any additional amounts or reduce any
additional amounts payable on any debt security;
- a change in currency in which payments are made;
- an extension of the time of payment of interest;
- a modification that affects adversely any right of a holder of a debt
security to repayment;
- a reduction in the principal amount of an original issue discount debt
security due and payable upon acceleration of the maturity;
- a reduction in the portion of the principal amount of a debt security
payable in bankruptcy;
13
- a reduction in amounts payable upon redemption;
- a reduction in the rate of interest payable on overdue amounts;
- a modification that impairs the right of any holder of any debt security
to institute suit for the enforcement of any required payment on the debt
security on or after the fixed maturity of the debt security;
- a reduction in the percentage of holders of the outstanding debt
securities of each series required to consent to any modification
discussed above; and
- a modification of the terms and conditions of the guarantee by Textron
Financial of the due and punctual payment of principal, premium or
interest on the guaranteed securities in a manner adverse to holders of
the applicable series of debt securities.
Under each indenture, the applicable issuer can make modifications to the
indenture with the consent of the trustee but without the consent of any holders
of debt securities to evidence the merger of the issuer or guarantor or the
replacement of the trustee and for other purposes set forth in the indentures.
PAYMENT OF ADDITIONAL AMOUNTS WITH RESPECT TO THE GUARANTEED DEBT SECURITIES
Unless Textron Canada Funding provides otherwise in the applicable
prospectus supplement, all amounts of principal of, and any premium and interest
on, any guaranteed debt securities issued by Textron Canada Funding outside
Canada will be paid by Textron Canada Funding without deduction or withholding
for any present or future taxes, duties, levies or other governmental charges of
whatever nature in effect on the date of the original issuance of the guaranteed
debt security or imposed or established in the future by or on behalf of the
Government of Canada or of any province or territory of or in Canada or by any
authority or agency of or in Canada having power to tax ("Taxes"). If Textron
Canada Funding is so required to deduct or withhold any Taxes, Textron Canada
Funding shall pay as additional interest any additional amounts necessary to
make the net amount received by the affected holder equal the amount the holders
would have received in the absence of the deduction or withholding. However, no
"additional amounts" will be payable with respect to:
(1) any payment to a holder who is liable for Taxes (a) by reason of
that holder being a person with whom Textron Canada Funding is not dealing
at arm's length for the purposes of the Income Tax Act (Canada) or (b) by
reason of the existence of any present or former connection between that
holder (or between a fiduciary, settlor, beneficiary, member or shareholder
of, or possessor of a power over, such holder or beneficial owner, if that
holder is an estate, trust, partnership, limited liability company or
corporation) and Canada or any province or territory of or in Canada or
agency of or in Canada other than the mere holding of such guaranteed debt
security,
(2) any Tax which would not have been so imposed but for the
presentation by the holder of the guaranteed debt security for payment on a
date more than 10 days after the date on which the payment became due and
payable or the date on which payment thereof is duly provided for,
whichever occurs later;
(3) any estate, inheritance, gift, sales, transfer, personal property
or excise tax or any similar tax, assessment or governmental charge;
(4) any Tax which is payable otherwise than by withholding from
payments in respect of principal of, any premium, or any interest on any
guaranteed debt security;
(5) any Tax imposed as a result of the failure to comply with (a)
certification, information, documentation, reporting or other similar
requirements concerning the nationality, residence, identity
14
or connection with Canada or any province or territory of Canada of the
holder of the guaranteed debt security, if such compliance is required by
statute, or by regulation, as a precondition to relief or exemption from
such Tax or (b) any other certification, information, documentation,
reporting or other similar requirements under Canadian federal or
provincial income tax laws or regulations that would establish entitlement
to otherwise applicable relief or exemption from such Tax, assessment or
other governmental charge;
(6) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of the principal of, any
premium or any interest on any guaranteed debt security, if the payment can
be made without withholding by at least one other paying agent; or
(7) any combination of items (1), (2), (3), (4), (5), or (6).
Furthermore, no additional amounts shall be paid with respect to any
payment on any guaranteed debt security to a holder who is a fiduciary or
partnership or other than the sole beneficial owner of that guaranteed debt
security to the extent that a beneficiary or settlor with respect to that
fiduciary or a member of such partnership or beneficial owner would not have
been entitled to receive the additional amounts had such beneficiary, settlor,
member or beneficial owner been the holder of any such guaranteed debt security.
OPTIONAL TAX REDEMPTION
Unless Textron Canada Funding provides otherwise in the applicable
prospectus supplement, except in the case of guaranteed debt securities that
have a variable rate of interest and that may be redeemed on any interest
payment date, Textron Canada Funding may redeem each series of guaranteed debt
securities at its option in whole but not in part at any time, if:
- Textron Canada Funding would be required to pay additional amounts, as a
result of any change in the tax laws of the Government of Canada or of
any province or territory of or in Canada or by any authority or agency
of or in Canada having power to tax that becomes effective on or after
the date of issuance of that series, as explained above under "Payment of
Additional Amounts with Respect to the Guaranteed Debt Securities," or
- as a result of any change in any treaty affecting taxation to which
Canada, or a jurisdiction in which a successor to Textron Canada Funding
is organized, is a party that becomes effective on or after a date on
which Textron Financial borrows money from Textron Canada Funding,
Textron Financial would be required to deduct or withhold tax on any
payment to Textron Canada Funding to enable it to make any payment of
principal, premium, if any, or interest.
Except in the case of outstanding original issue discount guaranteed debt
securities, which may be redeemed at the redemption price specified by the terms
of that series of guaranteed debt securities, the redemption price will be equal
to the principal amount plus accrued interest to the date of redemption.
In both of these cases, however, Textron Canada Funding will not be
permitted to redeem a series of guaranteed debt securities if it can avoid
either the payment of additional amounts, or deductions or withholding, as the
case may be, by using reasonable measures available to it.
CONCERNING THE TRUSTEE
We enter into a variety of banking transactions with the trustee in the
ordinary course of our business.
15
GOVERNING LAW
The debt securities and the indentures will be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
conflict of law principles.
PLAN OF DISTRIBUTION
We may sell the debt securities described in this prospectus:
- to or through underwriters or dealers;
- through agents; or
- directly to one or more purchasers (except with respect to sales in
Canada).
BY UNDERWRITERS
If we use underwriters in the sale, the underwriters will acquire debt
securities for their own account. The underwriters may resell the debt
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject
to certain conditions. The underwriters may from time to time modify any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers.
BY AGENTS
We may sell debt securities of any series through agents that we designate.
The agents will agree to use their reasonable best efforts to solicit purchases
for the period of their appointment.
DIRECT SALES
We may directly sell debt securities of any series. In this case, no
underwriters or agents would be involved. Direct sales of debt securities will
not occur in Canada.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of
the debt securities may be underwriters, as defined in the Securities Act of
1933, and any discounts, concessions or commissions that we pay them and any
profit on their resale of the debt securities offered by this prospectus may be
treated as underwriting discounts, concessions and commissions under the
Securities Act of 1933. We will identify any underwriters or agents and describe
their compensation in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents who
participate in the sale of debt securities to indemnify them against certain
civil liabilities, including liabilities under the Securities Act of 1933, or to
contribute with respect to payments which the underwriters, dealers or agents
may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
The debt securities of a series, when first issued, will have no
established trading market. Any underwriters or agents to or through whom we
sell debt securities of a series for public offering and sale may make a market
in the debt securities, but will not be obligated to do so and could stop doing
so at
16
any time without notice. We cannot assure you that a market for any series of
debt securities we issue will exist.
If we so indicate in a prospectus supplement, we will authorize
underwriters or our agents to solicit offers by certain institutional investors
to purchase debt securities from us which will be paid for and delivered on a
future date specified in the prospectus supplement. The obligations of any
purchasers under these delayed delivery and payment arrangements will not be
subject to any conditions except that the purchase at delivery must not be
prohibited under the laws of any jurisdiction in the United States or Canada to
which the institutional investor is subject.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 (File No. 333-108464)
with the SEC under the Securities Act of 1933, covering the debt securities to
be offered from time to time by this prospectus. This prospectus does not
contain all of the information included in the registration statement.
Textron Financial also files annual, quarterly and special reports, and
other information with the SEC. Our parent company, Textron Inc., also files
annual, quarterly and special reports, and other information with the SEC.
Textron Inc.'s and Textron Financial's SEC filings are available to the public
over the Internet from the SEC's web site at http://www.sec.gov. You may also
read and copy any document Textron Financial or Textron Inc. filings at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms and their copy charges.
The SEC allows us to "incorporate by reference" in this prospectus the
information in documents Textron Financial files with it. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus, and information in documents that we file later with the SEC will
automatically update and supersede information contained in documents filed
earlier with the SEC or contained in this prospectus. We incorporate by
reference in this prospectus Textron Financial's Annual Report on Form 10-K for
the fiscal year ended December 28, 2002, Textron Financial's quarterly reports
on Form 10-Q for the fiscal quarters ended March 31, 2003 and June 30, 2003,
Textron Financial's current report on Form 8-K filed August 26, 2003 and any
future filings that Textron Financial may make with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we, or
our agents, sell all of the securities that may be offered by this prospectus.
This incorporation by reference shall not be deemed to incorporate by reference
any information furnished pursuant to Item 9 or Item 12 of any current report on
Form 8-K, unless specifically provided in such report or in an applicable
supplement to this prospectus.
You may request a copy of these documents at no cost to you by writing or
telephoning us at the following address:
Textron Financial Corporation
40 Westminster Street
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attention: Treasurer
(401) 621-4200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of the securities described in this prospectus in any country, state or
province where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of those documents.
17
Each of Textron Canada Funding and Textron Financial is a reporting issuer
or has acquired equivalent status in each of the Provinces of Canada where this
prospectus is filed. Pursuant to applicable securities legislation, Textron
Financial is permitted to satisfy the continuous disclosure requirements of
securities legislation in these Provinces essentially by: (i) complying with
applicable requirements of the New York Stock Exchange and U.S. federal
securities laws applicable to it; (ii) filing its continuous disclosure
documents with the securities commissions or similar regulatory authorities in
each of the above Provinces in the manner and in the time required under U.S.
federal securities laws; and (iii) where applicable, sending the continuous
disclosure documents to securityholders of Textron Financial having an address
in any of the above Provinces. Pursuant to relief granted by the securities
commissions or similar regulatory authorities in such Provinces under applicable
securities legislation, Textron Canada Funding satisfies the continuous
disclosure requirements of securities legislation in these Provinces on the
basis of Textron Financial's compliance with the foregoing requirements. Such
continuous disclosure documents are accessible at the website maintained by
Canadian securities regulatory authorities, www.sedar.com.
LEGAL OPINIONS
Edwards & Angell, LLP will issue for us an opinion about the legality of
the TFC debt securities and the Textron Financial guarantee. Edwards & Angell,
LLP and Stewart McKelvey Stirling Scales will issue for us opinions about the
legality of the guaranteed debt securities.
Any underwriters will be advised about the validity of the debt securities
by Sidley Austin Brown & Wood LLP.
EXPERTS
The consolidated financial statements of Textron Financial appearing in
Textron Financial's Annual Report on Form 10-K for the year ended December 28,
2002, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing. Any audited financial statements and schedules that are
incorporated or that are deemed to be incorporated by reference into this
prospectus that are the subject of a report by independent accountants will be
so incorporated by reference in reliance upon such reports and upon the
authority of such firms as experts in accounting and auditing to the extent
covered by consents of these accountants filed with the SEC.
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$4,000,000,000
TFC TEXTRON LOGO
TEXTRON FINANCIAL CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
TEXTRON FINANCIAL CANADA FUNDING CORP.
MEDIUM-TERM NOTES, SERIES E-CAD
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
CITIGROUP
CREDIT SUISSE FIRST BOSTON
DEUTSCHE BANK SECURITIES
FLEET SECURITIES, INC.
HSBC
JPMORGAN
TOKYO-MITSUBISHI INTERNATIONAL PLC
UBS INVESTMENT BANK
WACHOVIA SECURITIES
September 26, 2003
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