<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED FEBRUARY 1, 1996
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED FEBRUARY 1, 1996)
20,000,000 PREFERRED SECURITIES
(LOGO)TEXTRON CAPITAL I
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TEXTRON INC.
------------------
The % Trust Preferred Securities (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of
Textron Capital I, a statutory business trust formed under the laws of the State
of Delaware ("Textron Capital" or the "Trust"). Textron Inc., a Delaware
corporation ("Textron" and, together with its subsidiaries, the "Company"), will
directly or indirectly own all the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securities")
representing undivided beneficial interests in the assets of Textron Capital.
Textron Capital exists for the sole purpose of issuing the Preferred Securities
and Common Securities and investing the proceeds thereof in an equivalent amount
of % Junior Subordinated Deferrable Interest Debentures due 2045 (the
"Junior Subordinated Debt Securities") of Textron.
(continued on next page)
SEE "RISK FACTORS" ON PAGE S-6 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES
DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED SECURITIES MAY
BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
SUCH DEFERRAL.
The Preferred Securities have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange, Inc. (the "New York Stock
Exchange"). Trading of the Preferred Securities on the New York Stock Exchange
is expected to commence within a 30-day period after the initial delivery of the
Preferred Securities. See "Underwriting."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
=======================================================================================================
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security............................... $25.00 (3) $25.00
- -------------------------------------------------------------------------------------------------------
Total................................................ $500,000,000 (3) $500,000,000
=======================================================================================================
</TABLE>
(1) Plus accrued distributions, if any, from , 1996.
(2) Textron Capital and Textron have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debt Securities,
Textron has agreed to pay to the Underwriters as compensation
("Underwriters' Compensation") for their arranging the investment therein
of such proceeds $ per Preferred Security (or $ in the
aggregate); provided, that such compensation for sales of 10,000 or more
Preferred Securities to a single purchaser will be $ per
Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate
amount specified in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by Textron are estimated to be
$ .
------------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Preferred Securities will be made only in book-entry form
through the facilities of The Depository Trust Company, on or about
, 1996.
------------------
SMITH BARNEY INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
February , 1996
<PAGE> 2
(continued from previous page)
Upon an event of a default under the Declaration (as defined herein), the
holders of Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears on March 31, June 30, September 30 and December 31 of each
year, commencing March 31, 1996 ("distributions"). The payment of distributions
out of moneys held by Textron Capital and payments on liquidation of Textron
Capital or the redemption of Preferred Securities, as set forth below, are
guaranteed by Textron (the "Guarantee") to the extent described under
"Description of Trust Guarantees" in the accompanying Prospectus. The Guarantee
covers payments of distributions and other payments on the Preferred Securities
only if and to the extent that Textron has made a payment of interest or
principal or other payments on the Junior Subordinated Debt Securities held by
Textron Capital as its sole asset. The Guarantee, when taken together with
Textron's obligations under the indenture pursuant to which the Junior
Subordinated Debt Securities are issued and its obligations under the
Declaration (as defined below), including its liabilities to pay costs,
expenses, debts and liabilities of Textron Capital (other than with respect to
the Trust Securities), provide a full and unconditional guarantee of amounts due
on the Preferred Securities. The obligations of Textron under the Guarantee rank
(i) subordinate and junior in right of payment to all other liabilities of
Textron, (ii) pari passu with the most senior preferred or preference stock now
or hereafter issued by Textron and with any guarantee now or hereafter entered
into by Textron in respect of any preferred or preference stock of any affiliate
of Textron and (iii) senior to Textron's common stock. The obligations of
Textron under the Junior Subordinated Debt Securities are subordinate and junior
in right of payment to all present and future Senior Indebtedness (as defined
herein) of Textron, which aggregated approximately $1,689 million at December
30, 1995, and rank pari passu with obligations to or rights of Textron's other
general unsecured trade creditors, which aggregated approximately $122 million
at December 30, 1995.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities, which will be the sole assets of Textron Capital. As a result, if
principal or interest is not paid on the Junior Subordinated Debt Securities, no
amounts will be paid on the Preferred Securities. If Textron does not make
principal or interest payments on the Junior Subordinated Debt Securities,
Textron Capital will not have sufficient funds to make distributions on the
Preferred Securities, in which event, the Guarantee will not apply to such
distributions until Textron Capital has sufficient funds available therefor.
Textron has the right to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period on the
Junior Subordinated Debt Securities at any time for up to 20 consecutive
quarters (each, an "Extension Period"). If interest payments are so deferred,
distributions will also be deferred. During such Extension Period, distributions
will continue to accrue with interest thereon (to the extent permitted by
applicable law) at an annual rate of % per annum compounded quarterly, and
during any Extension Period, holders of Preferred Securities will be required to
include deferred interest income in their gross income for United States federal
income tax purposes in advance of receipt of the cash distributions with respect
to such deferred interest payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debt Securities.
See "Description of the Junior Subordinated Debt Securities -- Option to Extend
Interest Payment Period," "Risk Factors -- Option to Extend Interest Payment
Period and Defer Payment of Interest" and "United States Federal Income
Taxation -- Original Issue Discount."
The Junior Subordinated Debt Securities are redeemable by Textron, in whole
or in part, from time to time, on or after , 2001, or at any time
in certain circumstances upon the occurrence of a Tax Event (as defined herein).
If Textron redeems Junior Subordinated Debt Securities, Textron Capital must
redeem Trust Securities having an aggregate liquidation amount equal to the
aggregate principal amount of
S-2
<PAGE> 3
the Junior Subordinated Debt Securities so redeemed at $25 per Preferred
Security plus accrued and unpaid distributions thereon (the "Redemption Price")
to the date fixed for redemption. See "Description of the Preferred
Securities -- Mandatory Redemption of Trust Securities." The Preferred
Securities will be redeemed upon maturity of the Junior Subordinated Debt
Securities. The Junior Subordinated Debt Securities mature on ,
2045. In addition, upon the occurrence of a Special Event arising from a change
in law or a change in legal interpretation regarding tax or investment company
matters, unless the Junior Subordinated Debt Securities are redeemed in the
limited circumstances described herein, Textron Capital shall be dissolved, with
the result that the Junior Subordinated Debt Securities will be distributed to
the holders of the Preferred Securities, on a pro rata basis, in lieu of any
cash distribution. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution." In certain circumstances, Textron will have the
right to redeem the Junior Subordinated Debt Securities, which would result in
the redemption by Textron Capital of Trust Securities in the same amount on a
pro rata basis. If the Junior Subordinated Debt Securities are distributed to
the holders of the Preferred Securities, Textron will use its best efforts to
have the Junior Subordinated Debt Securities listed on the New York Stock
Exchange or on such other exchange as the Preferred Securities are then listed.
See "Description of the Preferred Securities -- Special Event Redemption or
Distribution" and "Description of the Junior Subordinated Debt Securities."
In the event of the involuntary or voluntary dissolution, winding up or
termination of Textron Capital, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon (including interest thereon) to the
date of payment, unless, in connection with such dissolution, the Junior
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities -- Liquidation
Distribution Upon Dissolution."
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE> 4
THE COMPANY
Textron, together with its subsidiaries, is a global, multi-industry
company with operations in six business segments: Aircraft, Automotive,
Industrial, Systems and Components, Finance and Paul Revere insurance. The
Company's products and services include Bell helicopters, Cessna aircraft,
Speidel watchbands, Avco Financial Services, E-Z-GO golf cars, Jacobsen lawn and
turf-care equipment and disability insurance provided by The Paul Revere
Corporation.
The Aircraft segment consists of Bell Helicopter ("Bell") and Cessna
Aircraft ("Cessna"). Bell is the world's leader in commercial helicopter
production, both in number and dollar value of units sold. Cessna is the world's
largest designer and manufacturer of light and mid-sized business jets and
single-engine utility turboprop aircraft.
Textron Automotive Company supplies products primarily to automotive
original equipment manufacturers. A full-service global supplier of instrument
panels, exteriors, interiors, lighting and various functional components, the
Company is the leading independent supplier of interior trim components and a
major supplier of exterior trim components for cars and trucks made in North
America.
The Industrial segment is comprised of three major business groups:
fastening systems, golf, lawn and turf-care equipment and diversified products.
The divisions of the Industrial segment sell products to the industrial and
consumer markets under a number of worldwide brand names, including E-Z-GO,
Jacobsen and Speidel.
The divisions of the Systems and Components segment manufacture various
products and components primarily for the commercial aerospace and defense
industries. These products include aircraft structures and controls, smart
weapons, amphibious vehicles, advanced materials and a variety of related
components.
The Company's Finance segment consists of Avco Financial Services ("AFS")
and Textron Financial Corporation ("TFC"). AFS is a multinational consumer
finance company with nearly 1,200 offices serving 1.8 million customers in seven
countries. TFC is a diversified commercial finance company that finances the
sale of Company and third-party products.
The Paul Revere Corporation ("Paul Revere") is the leading provider of
individual non-cancellable disability insurance in North America. Paul Revere
also provides group disability, life and annuity products. Paul Revere is 83
percent owned by Textron and 17 percent publicly owned and traded on the New
York Stock Exchange, Inc. ("PRL").
Textron's corporate office is located at 40 Westminster Street, Providence,
Rhode Island 02903; its telephone number is (401) 421-2800.
RECENT DEVELOPMENTS
On January 25, 1996, the Company announced consolidated results for the
fourth quarter and fiscal year ended December 30, 1995. Revenues for the quarter
were $2.659 billion, as compared with $2.377 billion for the corresponding
period in 1994. Net income for the quarter was $127 million, as compared with
$112 million for the corresponding period in 1994, and earnings per share were
$1.45, as compared with $1.26 per share for the corresponding period in 1994.
Revenues for fiscal year 1995 were $9.973 billion, as compared with fiscal 1994
revenues of $9.683 billion. Net income for fiscal year 1995 was $479 million, as
compared with $433 million for fiscal 1994, and earnings per share were $5.51,
as compared with $4.80 per share for fiscal 1994.
S-4
<PAGE> 5
TEXTRON CAPITAL I
Textron Capital is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of October 3, 1995, executed by
Textron, as sponsor (the "Sponsor"), and the trustees of Textron Capital (the
"Textron Trustees") and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on October 4, 1995. Such declaration
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying Prospectus
form a part. The Declaration will be qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). Upon issuance of
the Preferred Securities, the purchasers thereof will own all of the Preferred
Securities. See "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company." Textron will directly or indirectly
acquire Common Securities in an aggregate liquidation amount equal to 3% of the
total capital of Textron Capital. Textron Capital exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in the Junior Subordinated Debt Securities and (iii) engaging
in only those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Textron Trustees will initially
be three. Two of the Textron Trustees (the "Regular Trustees") will be persons
who are employees or officers of, or who are affiliated with, Textron.
Initially, the Regular Trustees will be Richard A. Watson, Senior Vice President
and Treasurer, and Gregory E. Hudson, Vice President-Taxes, of Textron. The
third trustee will be a financial institution that maintains its principal place
of business in the State of Delaware and is unaffiliated with Textron, which
trustee will serve as property trustee under the Declaration and as indenture
trustee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Institutional Trustee"). Initially, The Chase Manhattan
Bank, N.A., a national banking association, will be the Institutional Trustee
until removed or replaced by the holder of the Common Securities. The Chase
Manhattan Bank, N.A., will also act as indenture trustee under the Guarantee for
the purposes of compliance with the provisions of the Trust Indenture Act (the
"Guarantee Trustee"). See "Description of Trust Guarantees" in the accompanying
Prospectus.
The Institutional Trustee will hold title to the Junior Subordinated Debt
Securities for the benefit of the holders of the Trust Securities and, in its
capacity as the holder, the Institutional Trustee will have the power to
exercise all rights, powers and privileges under the indenture pursuant to which
the Junior Subordinated Debt Securities are issued. In addition, the
Institutional Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Junior Subordinated Debt Securities for the benefit of
the holders of the Trust Securities. The Institutional Trustee will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of the Trust Securities out of funds from the Property Account.
The Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the Preferred Securities. Textron, as the direct or indirect holder of all the
Common Securities, will have the right to appoint, remove or replace any Textron
Trustee and to increase or decrease the number of Textron Trustees; provided,
that (i) the number of Textron Trustees shall be at least two and (ii) at least
one shall be a Regular Trustee. Textron will pay all fees and expenses related
to Textron Capital and the offering of the Trust Securities. See "Description of
the Junior Subordinated Debt Securities -- Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
S-5
<PAGE> 6
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND JUNIOR SUBORDINATED
DEBT SECURITIES
Textron's obligations under the Guarantee rank (i) subordinate and junior
in right of payment to all other liabilities of Textron, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by Textron
and with any guarantee now or hereafter entered into by Textron in respect of
any preferred or preference stock of any affiliate of Textron and (iii) senior
to Textron's common stock. The obligations of Textron under the Junior
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness of Textron and pari passu with
obligations to or rights of Textron's other general unsecured creditors. No
payment of principal (including redemption payments, if any), premium, if any,
or interest on the Junior Subordinated Debt Securities may be made if (i) any
Senior Indebtedness of Textron is not paid when due and any applicable grace
period with respect to such default has ended with such default not having been
cured or waived or ceasing to exist, or (ii) the maturity of any Senior
Indebtedness has been accelerated because of a default. As of December 30, 1995,
Senior Indebtedness aggregated approximately $1,689 million. There are no terms
in the Preferred Securities, the Junior Subordinated Debt Securities or the
Guarantee that limit Textron's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Junior Subordinated Debt
Securities and the Guarantee. See "Description of Trust Guarantees -- Status of
the Trust Guarantees" and "Particular Terms of the Junior Subordinated Debt
Securities" in the accompanying Prospectus, and "Description of the Junior
Subordinated Debt Securities -- Subordination" herein.
STRUCTURAL SUBORDINATION
The Junior Subordinated Debt Securities will be obligations of Textron
exclusively. Since a significant part of Textron's operations are conducted
through subsidiaries, a significant portion of Textron's cash flow and,
consequently, its ability to service debt, including the Junior Subordinated
Debt Securities, is dependent upon the earnings of its subsidiaries and the
transfer of funds by those subsidiaries to Textron in the form of dividends or
other transfers, supplemented with borrowings. Financing for Textron is
conducted through two separate borrowing groups: the Textron Parent Company
Borrowing Group and Textron's finance and insurance subsidiaries. See
"Capitalization of Textron Parent Company Borrowing Group." The amount of the
net assets of Textron's finance and insurance subsidiaries available for cash
dividends and other payments to the Textron Parent Company Borrowing Group is
restricted by the terms of lending agreements and statutory requirements
applicable to insurance companies. See "Capitalization of Textron Parent Company
Borrowing Group."
In addition, creditors of Textron's subsidiaries would be entitled to a
claim on the assets of such subsidiaries prior to any claims by Textron.
Consequently, in the event of a liquidation or reorganization of any subsidiary,
creditors of the subsidiary are likely to be paid in full before any
distribution is made to Textron, except to the extent that Textron itself is
recognized as a creditor of such subsidiary, in which case the claims of Textron
would still be subordinate to any security interest in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by
Textron. As of December 30, 1995, the subsidiaries of the Textron Parent Company
Borrowing Group and Textron's finance and insurance subsidiaries had an
aggregate of $8,560 million of outstanding indebtedness and $8,574 million of
other obligations. See "Textron Inc. Summary Financial Data."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Institutional Trustee will act as indenture trustee under the Guarantee
for the purposes of compliance with the provisions of the
S-6
<PAGE> 7
Trust Indenture Act. The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent Textron Capital has funds available
therefor, (ii) the Redemption Price, including all accrued and unpaid
distributions with respect to Preferred Securities called for redemption by
Textron Capital, to the extent Textron Capital has funds available therefor, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
Textron Capital (other than in connection with the distribution of Junior
Subordinated Debt Securities to the holders of Preferred Securities or a
redemption of all the Preferred Securities), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid distributions on the Preferred
Securities to the date of the payment to the extent Textron Capital has funds
available therefor or (b) the amount of assets of Textron Capital remaining
available for distribution to holders of the Preferred Securities in liquidation
of Textron Capital. The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the Guarantee
Trustee under the Guarantee. If the Guarantee Trustee fails to enforce the
Guarantee, any holder of Preferred Securities may institute a legal proceeding
directly against Textron to enforce the Guarantee Trustee's rights under the
Guarantee without first instituting a legal proceeding against Textron Capital,
the Guarantee Trustee or any other person or entity. Notwithstanding the
foregoing, a holder of Trust Preferred Securities may directly institute a
proceeding against Textron to enforce the right to receive payment under the
Trust Guarantee. If Textron
were to default on its obligation to pay amounts payable on the Junior
Subordinated Debt Securities, Textron Capital would lack available funds for the
payment of distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the Preferred Securities
would not be able to rely upon the Guarantee for payment of such amounts.
Instead, holders of the Preferred Securities would rely on the enforcement (1)
by the Institutional Trustee of its rights as registered holder of the Junior
Subordinated Debt Securities against Textron pursuant to the terms of the Junior
Subordinated Debt Securities or (2) by such holder of its right against Textron
to enforce payments on Junior Subordinated Debt Securities. See "Description of
Trust Guarantees" and "Description of Debt Securities -- Particular Terms of the
Junior Subordinated Debt Securities" in the accompanying Prospectus. The
Declaration provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the Junior
Subordinated Debt Securities against Textron. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Institutional Trustee or to direct the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including the right to direct the Institutional Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debt Securities. If the
Institutional Trustee fails to enforce its rights under the Junior Subordinated
Debt Securities, any holder of Preferred Securities may institute a legal
proceeding directly against Textron to enforce the Institutional Trustee's
rights under the Junior Subordinated Debt Securities without first instituting
any legal proceeding against the Institutional Trustee or any other person or
entity. Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of
Textron to pay interest or principal on the Junior Subordinated Debt Securities
on the date such interest or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Junior Subordinated Debt Securities. In connection with
such Direct Action, Textron will be subrogated to the rights of such holder of
Preferred Securities under the Declaration to the extent of
S-7
<PAGE> 8
any payment made by Textron to such holder of Preferred Securities in such
Direct Action. The holders of Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debt Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Textron has the right under the Indenture (as defined herein) to defer
payments of interest on the Junior Subordinated Debt Securities by extending the
interest payment period from time to time on the Junior Subordinated Debt
Securities for an Extension Period not exceeding 20 consecutive quarterly
interest periods during which no interest shall be due and payable, provided
that no Extension Period may extend beyond the maturity of the Junior
Subordinated Debt Securities. As a consequence of such an extension, quarterly
distributions on the Preferred Securities would be deferred (but despite such
deferral would continue to accrue with interest thereon compounded quarterly) by
Textron Capital during any such extended interest payment period. In the event
that Textron exercises this right to defer interest payments, then, pursuant to
the Indenture, (a) Textron shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payment with respect thereto, and (b) Textron shall not make any
payment of interest, principal (or premium, if any, on) or repay, repurchase or
redeem any debt securities issued by Textron which rank pari passu with or
junior to such Junior Subordinated Debt Securities. The Indenture, however, will
except from the foregoing (i) any stock dividends paid by Textron where the
dividend stock is the same stock as that on which the dividend is being paid and
(ii) any purchases by Textron of its common stock from The Paul Revere
Corporation ("Paul Revere") or its subsidiaries pursuant to the Agreement to
Purchase Stock, dated April 12, 1990, among Textron, The Paul Revere Life
Insurance Company, The Paul Revere Protective Life Insurance Company and The
Paul Revere Variable Annuity Insurance Company, and the Stock Purchase
Agreement, dated as of September 23, 1993, between Textron and Paul Revere
(together, the "Paul Revere Stock Purchase Agreements"). Prior to the
termination of any Extension Period, Textron may further extend such Extension
Period; provided, that such Extension Period, together with all such previous
and further extensions thereof, may not exceed 20 consecutive quarterly interest
periods. Upon the termination of any Extension Period and the payment of all
amounts then due, Textron may commence a new Extension Period, subject to the
above requirements. Textron may also prepay at any time all or any portion of
the interest accrued during an Extension Period. Consequently, there could be
multiple Extension Periods of varying lengths (up to nine Extension Periods of
20 consecutive quarterly interest periods each or more numerous shorter
Extension Periods) throughout the term of the Junior Subordinated Debt
Securities. See "Description of the Preferred Securities -- Distributions" and
"Description of the Junior Subordinated Debt Securities -- Option to Extend
Interest Payment Period."
Should Textron exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities will
continue to accrue income (as original issue discount ("OID")) in respect of the
deferred interest allocable to its Preferred Securities for United States
federal income tax purposes, which will be allocated but not distributed, to
holders of record of Preferred Securities. As a result, each such holder of
Preferred Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash and will not receive the cash from
Textron Capital related to such income if such holder disposes of its Preferred
Securities prior to the record date for the date on which distributions of such
amounts are made. Textron has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Junior Subordinated Debt Securities. However, should Textron determine to
exercise such right in the future, the market price of the Preferred Securities
is likely to be affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of Textron's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Junior Subordinated Debt Securities) may be
more volatile than other securities on which OID accrues that do not have such
rights. See "United States Federal Income Taxation -- Original Issue Discount."
S-8
<PAGE> 9
PROPOSED TAX LEGISLATION
On December 7, 1995, as part of President Clinton's Seven-Year Balanced
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that would treat certain debt instruments issued on or after
December 7, 1995, including debt instruments such as the Junior Subordinated
Debt Securities, as equity for United States federal income tax purposes. On
December 19, 1995, the Treasury Department issued a press release stating its
intention to include as part of the Proposed Legislation transition relief for
debt instruments issued pursuant to a registration statement filed with the
Securities and Exchange Commission (the "SEC") on or before December 7, 1995, to
the extent of the aggregate amount of such debt instruments described in the
registration statement or in contemporaneous documents of the issuer. Based on
the Treasury Department's statement regarding transitional relief, it is
expected that the Proposed Legislation, if enacted without substantial
modification, would not apply to the Junior Subordinated Debt Securities because
the Junior Subordinated Debt Securities are being issued pursuant to a shelf
registration statement containing a form of prospectus supplement filed with the
SEC prior to December 7, 1995 and the aggregate amount of the Junior
Subordinated Debt Securities to be sold will not exceed the maximum aggregate
amount evidenced in contemporaneous documents of Textron. There can be no
assurances, however, that the Proposed Legislation, if enacted, will include
transition relief applicable to the Junior Subordinated Debt Securities or that
other legislation enacted after the date hereof will not otherwise adversely
affect the tax treatment of the Junior Subordinated Debt Securities. If
legislation is enacted that adversely affects the tax treatment of the Junior
Subordinated Debt Securities, such legislation could result in the distribution
of the Junior Subordinated Debt Securities to holders of the Trust Securities
or, in certain limited circumstances, the redemption of such securities by
Textron. See "Description of Preferred Securities -- Special Event Redemption or
Distribution."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, Textron Capital shall be dissolved,
except in the limited circumstance described below, with the result that the
Junior Subordinated Debt Securities would be distributed to the holders of the
Trust Securities in connection with the liquidation of Textron Capital. In
certain circumstances in connection with a Tax Event, Textron shall have the
right to redeem the Junior Subordinated Debt Securities, in whole or in part, in
lieu of a distribution of the Junior Subordinated Debt Securities by Textron
Capital, in which event Textron Capital will redeem the Trust Securities on a
pro rata basis to the same extent as the Junior Subordinated Debt Securities are
redeemed by Textron. See "Description of the Preferred Securities -- Special
Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debt Securities upon the dissolution of Textron Capital
would not be a taxable event to holders of the Preferred Securities. Upon the
occurrence of a Special Event, however, a dissolution of Textron Capital in
which holders of the Preferred Securities receive cash would be a taxable event
to such holders. See "United States Federal Income Taxation -- Receipt of Junior
Subordinated Debt Securities or Cash Upon Liquidation of Textron Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of Textron
Capital were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Junior Subordinated Debt Securities that a holder of Preferred
Securities may receive on dissolution and liquidation of Textron Capital, may
trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby. Because holders of Preferred Securities may
receive Junior Subordinated Debt Securities upon the occurrence of a Special
Event, prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Junior Subordinated Debt Securities and
should carefully review all the information regarding the Junior Subordinated
Debt Securities contained herein and in the accompanying Prospectus. See
"Description of the Preferred Securities -- Special Event Redemption or
Distribution" and "Description of the Junior Subordinated Debt
Securities -- General."
S-9
<PAGE> 10
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will
not be entitled to vote to appoint, remove or replace, or to increase or
decrease the number of, Textron Trustees, which voting rights are vested
exclusively in the holder of the Common Securities. See "Description of
Preferred Securities -- Voting Rights."
TRADING PRICE
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debt Securities. A holder who disposes of its Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Junior Subordinated Debt Securities
to the date of disposition in income as ordinary income (i.e., OID), and to add
such amount to its adjusted tax basis in its pro rata share of the underlying
Junior Subordinated Debt Securities deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest), a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
See "United States Federal Income Taxation -- Original Issue Discount" and "
- -- Sales of Preferred Securities."
S-10
<PAGE> 11
TEXTRON INC.
SUMMARY FINANCIAL DATA
The following table sets forth selected historical financial data with
respect to the Company for the periods indicated. The selected historical
financial data for each of the five years in the period ended December 31, 1994,
are derived from the consolidated financial statements of the Company, which
statements have been audited by Ernst & Young LLP, independent auditors. See
"Experts" in the accompanying Prospectus. The selected historical financial data
for the nine months ended September 30, 1995 and October 1, 1994 are derived
from the unaudited consolidated financial statements of the Company for such
periods and, in the opinion of management, include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations for these periods. Operating
results for the nine months ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the entire year ending
December 30, 1995. The selected historical financial data should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and the Quarterly Report on Form 10-Q for the nine months
ended September 30, 1995, which are incorporated by reference into this
Prospectus Supplement. See "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------- YEAR
SEPT. 30, OCT. 1, --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Sales.............................. $ 4,763 $ 5,084 $ 6,678 $ 6,271 $ 5,616 $ 5,211 $ 5,470
Interest, discount and service
charges.......................... 1,165 981 1,333 1,260 1,273 1,184 1,139
Insurance premiums................. 1,036 908 1,233 1,137 1,094 1,073 975
Investment income (including net
realized investment gains)....... 350 333 439 410 365 372 333
------ ------ ------ ------ ------ ------ ------
Total revenues................. 7,314 7,306 9,683 9,078 8,348 7,840 7,917
------ ------ ------ ------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales...................... 3,905 4,241 5,514 5,210 4,560 4,185 4,425
Selling and administrative......... 1,137 1,115 1,489 1,438 1,402 1,330 1,289
Interest........................... 609 489 665 668 743 754 775
Provision for losses on collection
of finance receivables, less
recoveries....................... 120 117 162 153 160 135 123
Insurance benefits and increase in
policy liabilities............... 844 724 992 850 824 812 720
Amortization of insurance policy
acquisition costs................ 101 81 107 143 132 129 126
------ ------ ------ ------ ------ ------ ------
Total costs and expenses....... 6,716 6,767 8,929 8,462 7,821 7,345 7,458
------ ------ ------ ------ ------ ------ ------
Income before income taxes......... 598 539 754 616 527 495 459
Income taxes....................... (236) (207) (308) (234) (203) (195) (176)
Elimination of minority interest in
net income of Paul Revere........ (10) (11) (13) (3) -- -- --
------ ------ ------ ------ ------ ------ ------
Income before cumulative effect of
changes in accounting
principles....................... 352 321 433 379 324 300 283
Cumulative effect of changes in
accounting principles, net of
income taxes..................... -- -- -- -- (679) -- --
------ ------ ------ ------ ------ ------ ------
Net income (loss).................. $ 352 $ 321 $ 433 $ 379 $ (355) $ 300 $ 283
====== ====== ====== ====== ====== ====== ======
FINANCIAL POSITION
Total assets....................... $ 22,712 $ 20,737 $ 20,925 $ 19,658 $ 18,367 $ 15,737 $ 14,892
Debt:
Textron Parent Company Borrowing
Group.......................... $ 1,669 $ 1,851 $ 1,582 $ 2,025 $ 2,283 $ 1,820 $ 1,925
Finance and insurance
subsidiaries................... $ 8,536 $ 7,252 $ 7,782 $ 6,847 $ 6,440 $ 5,664 $ 5,319
Shareholders' equity............... $ 3,226 $ 2,995 $ 2,882 $ 2,780 $ 2,488 $ 2,928 $ 2,662
------ ------ ------ ------ ------ ------ ------
OTHER DATA
Capital expenditures............... $ 197 $ 198 $ 302 $ 252 $ 217 $ 156 $ 191
Depreciation....................... $ 154 $ 163 $ 212 $ 206 $ 199 $ 182 $ 179
</TABLE>
S-11
<PAGE> 12
TEXTRON INC.
SUMMARY FINANCIAL DATA -- (CONTINUED)
ADDITIONAL INFORMATION ON INVENTORIES
Textron uses the program method of accounting for its subcontract work in
connection with a commercial aircraft program, wherein it is producing wing
components for aircraft being manufactured by Airbus Industrie, a consortium of
aircraft manufacturers. The program method -- which, while not codified in
authoritative literature and used by few public companies (mainly commercial
airframe manufacturers), has evolved in practice (with origins prior to the
issuance in 1981 of Statement of Position 81-1, "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts," an updated
codification of contract accounting, which Textron follows with respect to
contracts other than those under the Airbus program) -- consists of estimating
the entire quantity of units to be produced over the life of the program and the
related revenues, costs, and profits to be realized and recognizing those
profits throughout that period. As sales are recorded, cost of sales is
determined on a program-average method and is computed as a percentage of the
sale price of the units being sold under the program. The program method has
been used by Textron in accounting for this program since the criteria required
for its use are present -- that is, (a) at the beginning of the program (in
1988) Textron did not yet have firm orders that would, by themselves, recover
all of the initial investment in design, development, tooling, and early
production effort and (b) Textron has the ability to make reasonably dependable
estimates of the number of units to be produced, the period of time over which
they will be delivered, and the associated costs and selling prices.
Textron does not use the program method of accounting in connection with
any of its government contracts.
Inventories include $176 million at December 30, 1994, $162 million at
January 1, 1994, and $117 million at January 2, 1993 of unamortized tooling and
deferred learning costs related to Textron's subcontract work under the Airbus
A330/340 program. Textron has been using a program size of 400 aircraft in
accounting for this program since its inception. It had firm orders as of the
end of 1994 from its two customers under the program, both of which are members
of the consortium producing the aircraft and each of which is producing
different sections of the wings for the aircraft, covering 150 and 207 sets of
wing components, respectively; the corresponding orders as of the end of 1993
and 1992 were 114 and 157, respectively, and 78 and 157, respectively. (Airbus
Industrie had firm orders as of the end of 1994 for 263 A330/340s.) Textron has
delivered 120 units to one customer and 106 units to the other customer through
the end of 1994; deliveries in 1994 were 36 and 42 units, in 1993 were 33 and 30
units, and in 1992 were 26 and 24 units. Current customer delivery schedules
call for completion of deliveries of the 400 units in the year 2001.
The portion of the unamortized tooling and deferred learning costs that
would not be absorbed in cost of sales based on firm orders to Textron at
December 30, 1994 -- that is, assuming the aircraft program were to be canceled
after Textron completed deliveries under those orders -- was $157 million (the
corresponding amounts at the end of 1993 and 1992 were $185 million and $191
million, respectively). Textron continues to believe that in view of the orders
to date and outlook for the aircraft in the marketplace and the customer
contractual arrangements that exist on this program, it will recover all such
costs.
S-12
<PAGE> 13
CAPITALIZATION OF TEXTRON PARENT COMPANY BORROWING GROUP
The following table sets forth the unaudited summary capitalization at
September 30, 1995 of the Textron Parent Company Borrowing Group, and is
adjusted to reflect the application of the estimated net proceeds from the sale
of Preferred Securities. See "Use of Proceeds." The table should be read in
conjunction with Textron Inc.'s consolidated financial statements and notes
thereto and other financial data incorporated by reference herein. See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1995
---------------------------
ACTUAL AS ADJUSTED(1)
------ --------------
(IN MILLIONS)
<S> <C> <C>
DEBT:(2)(3)
Short-term borrowings............................................ $ 50 $ 50
Long-term borrowings............................................. 1,619 1,135
------ ------
Total debt............................................... 1,669 1,185
------ ------
TEXTRON-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARY TRUST HOLDING SOLELY SUBORDINATED DEBT
SECURITIES(4).................................................... -- 484
SHAREHOLDERS' EQUITY:
Preferred stock.................................................. 15 15
Common stock..................................................... 12 12
Capital surplus.................................................. 738 738
Retained earnings................................................ 2,771 2,771
Other............................................................ 42 42
------ ------
3,578 3,578
Less cost of treasury shares............................. 352 352
------ ------
Total shareholders' equity............................... 3,226 3,226
------ ------
Total capitalization..................................... $4,895 $4,895
====== ======
<FN>
- ---------------
(1) Adjusted for the sale of 20,000,000 Preferred Securities, the application of
the estimated net proceeds to the purchase of Junior Subordinated Debt
Securities of Textron and the application by Textron of the estimated net
proceeds of Junior Subordinated Debt Securities for the purpose set forth
under "Use of Proceeds."
(2) Textron consists of two borrowing groups -- the Textron Parent Company
Borrowing Group and its finance and insurance subsidiaries. This framework
is designed to enhance the borrowing power of the total company by
separating borrowing oriented units of a specialized business nature such as
financial services. The finance and insurance subsidiaries finance their
respective operations by borrowing from their own group of external
creditors.
(3) The amount of the net assets of Textron's finance and insurance subsidiaries
available for cash dividends and other payments to the Textron Parent
Company Borrowing Group is restricted by the terms of lending agreements and
insurance statutory requirements. As of December 31, 1994, approximately
$245 million of their net assets of $2.2 billion was available to be
transferred to the Textron Parent Company Borrowing Group pursuant to these
restrictions. AFS' and TFC's loan agreements also contain various
restrictive provisions regarding additional debt, the creation of liens or
guarantees and the making of investments.
(4) As described in this Prospectus Supplement, the sole asset of the Trust will
be $ principal amount of % Junior Subordinated Deferrable
Interest Debentures due 2045 of Textron.
</TABLE>
S-13
<PAGE> 14
TEXTRON INC.
RATIO OF INCOME TO FIXED CHARGES
<TABLE>
The following table sets forth unaudited ratios of income to fixed charges
of Textron for the periods indicated.
<CAPTION>
NINE MONTHS ENDED
--------------------- YEAR
SEPT. 30, OCT. 1, --------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Textron Parent Company Borrowing
Group(a)(b)(c)(d)(f).................. 3.02 2.52 2.80 2.07 1.88 1.95 2.06
Textron Inc. including all
majority-owned
subsidiaries(d)(e)(f)................. 1.91 2.00 2.04 1.86 1.67 1.62 1.56
<FN>
- ---------------
(a) The Textron Parent Company Borrowing Group consists of all Textron entities
other than its finance and insurance subsidiaries.
(b) For the purpose of calculating the ratio of income to fixed charges for the
Textron Parent Company Borrowing Group, "income" consists of income before
income taxes, excluding the equity in the undistributed pre-tax income of
the finance and insurance subsidiaries, and fixed charges. "Fixed charges"
include interest expense (including interest unrelated to borrowings
(principally interest accretion) of $26 million and $27 million for the nine
months ended September 30, 1995 and October 1, 1994, respectively, and $37
million in 1994, $37 million in 1993, $36 million in 1992, $27 million in
1991, and $26 million in 1990) and one-third of rental expense (which is
deemed representative of the interest factor in rental expense), excluding
interest and rental expense of the finance and insurance subsidiaries.
(c) Income for the Textron Parent Company Borrowing Group in 1990 includes an
extraordinary dividend of $50 million from Textron's finance and insurance
subsidiaries.
(d) Income in 1992 excludes the cumulative effect of changes in accounting
principles.
(e) For the purpose of calculating the ratio of income to fixed charges for
Textron Inc. including all majority-owned subsidiaries, "income" consists of
income before income taxes, including income of the finance and insurance
subsidiaries after elimination of minority interest in pretax income of Paul
Revere, and fixed charges. "Fixed charges" include interest expense
(including interest unrelated to borrowings (principally interest accretion)
of $26 million and $27 million for the nine months ended September 30, 1995
and October 1, 1994, respectively, and $37 million in 1994, $37 million in
1993, $36 million in 1992, $27 million in 1991, and $26 million in 1990) and
one-third of rental expense (which is deemed representative of the interest
factor in rental expense), including interest and rental expense of the
finance and insurance subsidiaries.
(f) The ratio of income to combined fixed charges and preferred stock dividends
for the Textron Parent Company Borrowing Group and Textron Inc. including
all majority-owned subsidiaries is not materially different from the amounts
reported above.
</TABLE>
ACCOUNTING TREATMENT
The financial statements of Textron Capital will be reflected in Textron's
consolidated financial statements with the Preferred Securities shown as
Company-Obligated Mandatorily Redeemable Preferred Securities of the Trust
Holding Solely $ Principal Amount of % Junior Subordinated
Deferrable Interest Debentures due 2045 of Textron.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will be
invested by Textron Capital in Junior Subordinated Debt Securities of Textron
issued pursuant to the Indenture therefor described herein and will be used by
Textron for repayment of long-term borrowings and, ultimately, for general
corporate purposes, which may include capital expenditures, investments in
subsidiaries, working capital, repayment of loans under bank credit agreements,
repurchases of outstanding common shares under Textron's repurchase program and
other business opportunities.
S-14
<PAGE> 15
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, The Chase Manhattan Bank, N.A., will
act as indenture trustee under the Declaration for purposes of compliance with
the provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. The following summary of the material
terms and provisions of the Preferred Securities does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the
Declaration (a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part), the Trust Act and the
Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of
Textron Capital the Trust Securities, which represent undivided beneficial
interests in the assets of Textron Capital. All of the Common Securities will be
owned, directly or indirectly, by Textron. The Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with the Preferred
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Declaration does not permit the issuance by
Textron Capital of any securities other than the Trust Securities or the
incurrence of any indebtedness by Textron Capital. Pursuant to the Declaration,
the Institutional Trustee will own the Junior Subordinated Debt Securities
purchased by Textron Capital for the benefit of the holders of the Trust
Securities. The payment of distributions out of money held by Textron Capital,
and payments upon redemption of the Preferred Securities or liquidation of
Textron Capital, are guaranteed by Textron to the extent described under
"Description of Trust Guarantees" in the accompanying Prospectus. The Guarantee
will be held by The Chase Manhattan Bank, N.A., the Guarantee Trustee, for the
benefit of the holders of the Preferred Securities. The Guarantee does not cover
payment of distributions when Textron Capital does not have sufficient available
funds to pay such distributions. In such event, the remedy of a holder of
Preferred Securities is to vote to direct the Institutional Trustee to enforce
the Institutional Trustee's rights under the Junior Subordinated Debt
Securities. See "Description of the Preferred Securities -- Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will bear interest thereon at
the rate per annum of % thereof compounded quarterly. The term "distribution"
as used herein includes any such interest payable unless otherwise stated. The
amount of distributions payable for any period will be computed on the basis of
a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from , 1996, and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing March 31, 1996,
when, as and if available for payment, distributions will be made by the
Institutional Trustee, except as otherwise described below.
Textron has the right under the Indenture to defer payments of interest on
the Junior Subordinated Debt Securities by extending the interest payment period
from time to time on the Junior Subordinated Debt Securities for an Extension
Period not exceeding 20 consecutive quarterly interest periods during which no
interest shall be due and payable, provided that no Extension Period may extend
beyond the maturity of the Junior Subordinated Debt Securities. As a consequence
of such extension, quarterly distributions on the Preferred Securities would be
deferred (though such distributions would continue to accrue with interest
thereon compounded quarterly, since interest would continue to accrue on the
Junior Subordinated Debt Securities) during any such extended interest payment
period. In the event that Textron exercises this right, then, pursuant to the
Indenture, (a) Textron shall not declare or pay any dividend on, make any
distributions
S-15
<PAGE> 16
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payment with respect
thereto, and (b) Textron shall not make any payment of interest, principal (or
premium, if any, on) or repay, repurchase or redeem any debt securities issued
by Textron which rank pari passu with or junior to such Junior Subordinated Debt
Securities. The Indenture, however, will except from the foregoing (i) any stock
dividends paid by Textron where the dividend stock is the same stock as that on
which the dividend is being paid and (ii) any purchases by Textron of its common
stock from Paul Revere or its subsidiaries pursuant to the Paul Revere Stock
Purchase Agreements. Prior to the termination of any Extension Period, Textron
may further extend such Extension Period; provided, that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
20 consecutive quarterly interest periods. Upon the termination of any Extension
Period and the payment of all amounts then due, Textron may commence a new
Extension Period, subject to the above requirements. Textron may also prepay at
any time all or any portion of the interest accrued during an Extension Period.
Consequently, there could be multiple Extension Periods of varying lengths (up
to nine Extension Periods of 20 consecutive quarterly interest periods each or
more numerous shorter Extension Periods) throughout the term of the Junior
Subordinated Debt Securities. See "Description of the Junior Subordinated Debt
Securities -- Interest" and " -- Option to Extend Interest Payment Period." If
distributions are deferred, the deferred distributions and accrued interest
thereon shall be paid to holders of record of the Preferred Securities as they
appear on the books and records of Textron Capital on the record date next
following the termination of such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that Textron Capital has funds available for the payment of such
distributions in the Property Account. Textron Capital's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from Textron on the Junior Subordinated Debt Securities. See
"Description of the Junior Subordinated Debt Securities." The payment of
distributions out of moneys held by Textron Capital is guaranteed by Textron to
the extent set forth under "Description of Trust Guarantees" in the accompanying
Prospectus.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of Textron Capital on the
relevant record dates, which, as long as the Preferred Securities remain in
book-entry only form, will be one Business Day prior to the relevant payment
dates. Such distributions will be paid through the Institutional Trustee who
will hold amounts received in respect of the Junior Subordinated Debt Securities
in the Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "Book-Entry Only
Issuance -- The Depository Trust Company" below. In the event that the Preferred
Securities do not continue to remain in book-entry only form, the Regular
Trustees shall have the right to select relevant record dates, which shall be
more than one Business Day prior to the relevant payment dates. In the event
that any date on which distributions are to be made on the Preferred Securities
is not a Business Day, then payment of the distributions payable on such date
will be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such record date. A "Business Day" shall mean any day other
than Saturday, Sunday or any other day on which banking institutions in New York
City (in the State of New York) are permitted or required by any applicable law
to close.
MANDATORY REDEMPTION OF TRUST SECURITIES
The Junior Subordinated Debt Securities will mature on , 2045,
and may be redeemed, in whole or in part, at any time on or after ,
2001, or at any time in certain circumstances upon the occurrence of a Tax Event
(as described under "Special Event Redemption or Distribution" below). See
"Description of the Junior Subordinated Debt Securities -- Optional Redemption."
Upon the repayment of the Junior Subordinated Debt Securities, whether at
maturity or upon redemption (either at the option of Textron or pursuant to a
Tax Event), the proceeds from such repayment or payment shall simultaneously be
applied to redeem Trust Securities having an aggregate liquidation amount equal
to the aggregate principal
S-16
<PAGE> 17
amount of the Junior Subordinated Debt Securities so repaid or redeemed at the
Redemption Price; PROVIDED, that holders of Trust Securities shall be given not
less than 30 nor more than 60 days notice of such redemption. In the event that
fewer than all of the outstanding Preferred Securities are to be redeemed, the
Preferred Securities will be redeemed PRO RATA as described under "Book-Entry
Only Issuance -- The Depository Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after such date), in either case after the date
of this Prospectus Supplement, there is more than an insubstantial risk that (i)
Textron Capital would be subject to United States federal income tax with
respect to income accrued or received on the Junior Subordinated Debt
Securities, (ii) interest payable to Textron Capital on the Junior Subordinated
Debt Securities would not be deductible by Textron for United States federal
income tax purposes or (iii) Textron Capital would be subject to more than a DE
MINIMIS amount of other taxes, duties or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel to the effect
that, as a result of the occurrence of a change in law or regulation or a
written change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in 1940 Act Law"), there is more than an insubstantial risk that Textron Capital
is or will be considered an "investment company" which is required to be
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which Change in 1940 Act Law becomes effective on or after the date of
this Prospectus Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, Textron Capital
shall, except in the limited circumstances described below, be dissolved with
the result that the Junior Subordinated Debt Securities with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities,
would be distributed to the holders of the Trust Securities in liquidation of
such holders' interests in Textron Capital on a PRO RATA basis within 90 days
following the occurrence of such Special Event; PROVIDED, HOWEVER, that in the
case of the occurrence of a Tax Event, such dissolution and distribution shall
be conditioned on the Regular Trustees' receipt of an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that the holders of the Trust
Securities will not recognize any gain or loss for United States federal income
tax purposes as a result of such dissolution and distribution of Junior
Subordinated Debt Securities and, PROVIDED, FURTHER, that, if at the time there
is available to Textron Capital the opportunity to eliminate, within such 90 day
period, the Special Event by taking some ministerial action, such as filing a
form or making an election, or pursuing some other similar reasonable measure,
which has no adverse effect on Textron Capital, Textron or the holders of the
Trust Securities, Textron Capital will pursue such measure in lieu of
dissolution. Furthermore, if in the case of the occurrence of a Tax Event, (i)
Textron has received an opinion (a "Redemption Tax Opinion") of nationally
recognized independent tax counsel experienced in such matters that, as a result
of a Tax Event, there is more than an insubstantial risk that Textron would be
precluded from deducting the interest on the Junior Subordinated Debt Securities
for United States federal income tax purposes, even after the Junior
Subordinated Debt Securities were distributed to the holders of Trust Securities
in liquidation of such holders' interests in Textron Capital as described above,
or (ii) the Regular Trustees shall have been informed by such tax counsel that
it cannot deliver a No Recognition Opinion to Textron Capital, Textron shall
have the right, upon not less than 30 nor
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more than 60 days notice, to redeem the Junior Subordinated Debt Securities, in
whole or in part, for cash within 90 days following the occurrence of such Tax
Event, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debt Securities so redeemed shall be redeemed by Textron Capital at
the Redemption Price on a PRO RATA basis; PROVIDED, HOWEVER, that if at the time
there is available to Textron or Textron Capital the opportunity to eliminate,
within such 90 day period, the Tax Event by taking some ministerial action, such
as filing a form or making an election or pursuing some other similar reasonable
measure that has no adverse effect on Textron Capital, Textron or the holders of
the Trust Securities, Textron or Textron Capital will pursue such measure in
lieu of redemption.
If the Junior Subordinated Debt Securities are distributed to the holders
of the Preferred Securities, Textron will use its best efforts to cause the
Junior Subordinated Debt Securities to be listed on the New York Stock Exchange
or on such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debt Securities
upon dissolution of Textron Capital, (i) the Preferred Securities will no longer
be deemed to be outstanding, (ii) the securities depositary or its nominee, as
the record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debt Securities
to be delivered upon such distribution, and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent Junior Subordinated Debt Securities having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on such Preferred Securities until
such certificates are presented to Textron or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of
Textron Capital were to occur. Accordingly, the Preferred Securities that an
investor may purchase, whether pursuant to the offer made hereby or in the
secondary market, or the Junior Subordinated Debt Securities that an investor
may receive if a dissolution and liquidation of Textron Capital were to occur,
may trade at a discount to the price that the investor paid to purchase the
Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Textron Capital may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
If Textron Capital gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, provided that Textron has paid to the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debt Securities, Textron
Capital will irrevocably deposit with the Depositary funds sufficient to pay the
applicable Redemption Price and will give the Depositary irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Preferred Securities. See "Book-Entry Only Issuance -- The Depository Trust
Company." If notice of redemption shall have been given and funds deposited as
required, then, immediately prior to the close of business on the date of such
deposit, distributions will cease to accrue and all rights of holders of such
Preferred Securities so called for redemption will cease, except the right of
the holders of such Preferred Securities to receive the Redemption Price but
without interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (without any interest or other payment in respect of any
such delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that payment of the Redemption Price in respect of Preferred Securities is
improperly withheld or refused and not paid either by Textron Capital, or by
Textron pursuant to the Guarantee, distributions on such Preferred Securities
will continue to accrue at the then
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applicable rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for
redemption for purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed pro rata as
described below under "Book-Entry Only Issuance -- The Depository Trust
Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), Textron or its subsidiaries may at any
time, and from time to time, purchase outstanding Preferred Securities by
tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of Textron Capital (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive out of the
assets of Textron Capital, after satisfaction of liabilities to creditors,
distributions in an amount equal to the aggregate of the stated liquidation
amount of $25 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Junior Subordinated Debt Securities in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of, with an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Preferred Securities have been distributed on a pro rata basis to the holders of
the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because Textron Capital has insufficient assets available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by Textron Capital on the Preferred Securities shall be paid on a pro rata
basis. The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution pro rata with the holders of the
Preferred Securities, except that if a Declaration Event of Default has occurred
and is continuing, the Preferred Securities shall have a preference over the
Common Securities with regard to such distributions.
Pursuant to the Declaration, Textron Capital shall terminate (i) on
, 2051, the expiration of the term of the Trust, (ii) upon the
bankruptcy of Textron or the holder of the Common Securities, (iii) upon the
filing of a certificate of dissolution or its equivalent with respect to the
holder of the Common Securities or Textron, the filing of a certificate of
cancellation with respect to Textron Capital, or the revocation of the charter
of the holder of the Common Securities or Textron and the expiration of 90 days
after the date of revocation without a reinstatement thereof, (iv) upon the
distribution of Junior Subordinated Debt Securities upon the occurrence of a
Special Event, (v) upon the entry of a decree of a judicial dissolution of the
holder of the Common Securities, Textron or Textron Capital, or (vi) upon the
redemption of all the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities and only the holders
of the Preferred Securities will have the right to direct the Institutional
Trustee with respect to certain matters under the Declaration, and therefore the
Indenture.
If the Property Trustee fails to enforce its rights under the Junior
Subordinated Debt Securities, any holder of Preferred Securities may institute a
legal proceeding against Textron to enforce the Property Trustee's rights under
the Subordinated Debt Securities. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of Textron to pay
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interest or principal on the Junior Subordinated Debt Securities on the date
such interest or principal is otherwise payable (or in the case of redemption,
the redemption date), then a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder directly of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Junior Subordinated Debt Securities. In connection with such Direct Action,
Textron will be subrogated to the rights of such holder of Preferred Securities
under the Declaration to the extent of any payment made by Textron to such
holder of Preferred Securities in such Direct Action. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debt Securities.
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debt Securities will have
the right under the Indenture to declare the principal of and interest on the
Junior Subordinated Debt Securities to be immediately due and payable. Textron
and Textron Capital are each required to file annually with the Institutional
Trustee an officers' certificate as to its compliance with all conditions and
covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under "Description of Trust Guarantees -- Modification of Trust Guarantees;
Assignment" in the accompanying Prospectus, and as otherwise required by law and
the Declaration, the holders of the Preferred Securities will have no voting
rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debt Securities, to (i) exercise
the remedies available under the Indenture with respect to the Junior
Subordinated Debt Securities, (ii) waive any past Indenture Event of Default
that is waivable under Section 5.13 of the Base Indenture (as defined herein),
or (iii) exercise any right to rescind or annul a declaration that the principal
of all the Junior Subordinated Debt Securities shall be due and payable;
provided, however, that, where a consent or action under the Indenture would
require the consent or act of holders of more than a majority in principal
amount of the Junior Subordinated Debt Securities (a "Super-Majority") affected
thereby, only the holders of at least such Super-Majority in aggregate
liquidation amount of the Preferred Securities may direct the Institutional
Trustee to give such consent or take such action. If the Institutional Trustee
fails to enforce its rights under the Junior Subordinated Debt Securities, any
record holder of Preferred Securities may, after such holder's written request
to the Institutional Trustee to enforce such rights, institute a legal
proceeding directly against Textron to enforce the Institutional Trustee's
rights under the Junior Subordinated Debt Securities without first instituting
any legal proceeding against the Institutional Trustee or any other person or
entity. The Institutional Trustee shall notify all holders of the Preferred
Securities of any notice of default received from the Indenture Trustee with
respect to the Junior Subordinated Debt Securities. Such notice shall state that
such Indenture Event of Default also constitutes a Declaration Event of Default.
Except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the Institutional Trustee shall not take any of the
actions described in clauses (i), (ii) or (iii) above unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of such action, Textron Capital will not fail to be classified as a grantor
trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Junior Subordinated Debt Securities, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture, the
Institutional Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a majority in liquidation amount of the Trust Securities voting
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together as a single class; provided, however, that where a consent under the
Indenture would require the consent of a Super Majority, the Institutional
Trustee may only give such consent at the direction of the holders of at least
the proportion in liquidation amount of the Trust Securities which the relevant
Super Majority represents of the aggregate principal amount of the Junior
Subordinated Debt Securities outstanding. The Institutional Trustee shall be
under no obligation to take any such action in accordance with the directions of
the holders of the Trust Securities unless the Institutional Trustee has
obtained an opinion of tax counsel to the affect that for the purposes of United
States federal income tax Textron Capital will not be classified as other than a
grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or pursuant
to written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for Textron Capital to
redeem and cancel Preferred Securities or distribute Junior Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by Textron or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Textron, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if such Preferred Securities
were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "-- Book-Entry Only Issuance -- The
Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or
remove the Textron Trustees, who may be appointed, removed or replaced solely by
Textron as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees otherwise
propose to effect, (i) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or
termination of Textron Capital other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
provided, that, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of a majority in liquidation amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause Textron
Capital to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of
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the Institutional Trustee or (iii) cause Textron Capital to be deemed an
"investment company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Textron Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. Textron Capital may, with the consent of the Regular Trustees
and without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of Textron Capital under the Trust
Securities or (y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) Textron expressly acknowledges a trustee of such
successor entity possessing the same powers and duties as the Institutional
Trustee, in its capacity as the holder of the Junior Subordinated Debt
Securities, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (vi) such successor entity
has a purpose identical to that of Textron Capital, (vii) prior to such merger,
consolidation, amalgamation or replacement, Textron has received an opinion of a
nationally recognized independent counsel to Textron Capital experienced in such
matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), and (B) following such merger, consolidation,
amalgamation or replacement, neither Textron Capital nor such successor entity
will be required to register as an investment company under the 1940 Act and
(viii) Textron guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee and the
Common Securities Guarantee. Notwithstanding the foregoing, Textron Capital
shall not, except with the consent of holders of 100% in liquidation amount of
the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause Textron Capital or the Successor
Entity to be classified as other than a grantor trust for United States federal
income tax purposes.
BOOK-ENTRY ONLY ISSUANCE-THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Preferred
Securities as represented by a global certificate.
DTC 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, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with
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DTC. DTC 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 include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Preferred Securities, except in the event that
use of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities 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 DTC 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
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to Textron Capital as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co. consenting
or voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy). Textron and Textron Capital believe that the arrangements
among DTC, Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in Textron
Capital.
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
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 account of customers in bearer form or registered in "street name,"
and such payments will be the responsibility of such Participant and not of DTC,
Textron Capital or Textron, subject to any statutory or regulatory requirements
to the contrary that may be in effect from time to time. Payment of
distributions to DTC is the responsibility of Textron Capital, disbursement of
such payments
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to Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
Textron Capital. Under such circumstances, in the event that a successor
securities depositary is not obtained, Preferred Securities certificates are
required to be printed and delivered. Additionally, the Regular Trustees (with
the consent of Textron) may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the Preferred Securities. In that event, certificates for the Preferred
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Textron and Textron Capital believe to be
reliable, but neither Textron nor Textron Capital takes responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with
respect to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provisions, the Institutional Trustee is
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The holders of Preferred Securities will not be
required to offer such indemnity in the event such holders, by exercising their
voting rights, direct the Institutional Trustee to take any action following a
Declaration Event of Default.
PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions would apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of Textron Capital, but upon payment (with the giving of
such indemnity as Textron Capital or Textron may require) in respect of any tax
or other government charges that may be imposed in relation to it.
Textron Capital will not be required to register or cause to be registered
the transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate Textron Capital
in such a way so that Textron Capital will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a grantor
trust for United States federal income tax purposes. Textron is authorized and
directed to conduct its affairs so that the Junior Subordinated Debt Securities
will be treated as indebtedness of Textron for United States federal income tax
purposes. In this connection, Textron and the Regular Trustees are authorized to
take any action, not inconsistent with applicable law, the certificate of trust
of Textron Capital or the certificate of incorporation of Textron, that each of
Textron and the Regular Trustees determine in their discretion to be necessary
or desirable to achieve such end, as long as such action does not adversely
affect the interests of the holders of the Preferred Securities or vary the
terms thereof.
Holders of the Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Junior
Subordinated Debt Securities in which Textron Capital will invest the proceeds
from the issuance and sale of the Trust Securities. This description supplements
the description of the general terms and provisions of the Junior Subordinated
Debt Securities set forth in the accompanying Prospectus under the caption
"Description of Debt Securities." The following description does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
the description in the accompanying Prospectus and the Junior Subordinated
Indenture, dated as of , 1996, (the "Base Indenture") between
Textron and The Chase Manhattan Bank, N.A., as Trustee (the "Indenture
Trustee"), as supplemented by a First Supplemental Indenture, dated as of
, 1996 (the Base Indenture, as so supplemented, is hereinafter
referred to as the "Indenture"), the forms of which are filed as Exhibits to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus form a part. Certain capitalized terms used herein are defined in the
Indenture.
Under certain circumstances involving the dissolution of Textron Capital
following the occurrence of a Special Event, Junior Subordinated Debt Securities
may be distributed to the holders of the Trust Securities in liquidation of
Textron Capital. See "Description of the Preferred Securities -- Special Event
Redemption or Distribution."
If the Junior Subordinated Debt Securities are distributed to the holders
of the Preferred Securities, Textron will use its best efforts to have the
Junior Subordinated Debt Securities listed on the New York Stock Exchange or on
such other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
GENERAL
The Junior Subordinated Debt Securities will be issued as unsecured debt
under the Indenture. The Junior Subordinated Debt Securities will be limited in
aggregate principal amount to approximately $ , such amount being the
sum of the aggregate stated liquidation of the Preferred Securities and the
capital contributed by Textron in exchange for the Common Securities (the
"Textron Payment").
The Junior Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debt
Securities will mature and become due and payable, together with any accrued and
unpaid interest thereon including Compound Interest (as defined herein) and
Additional Interest (as defined herein), if any, on , 2045.
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in Textron
Capital, such Junior Subordinated Debt Securities will initially be issued in
the form of one or more Global Securities (as defined under "Book-Entry and
Settlement" below). As described herein, under certain limited circumstances,
Junior Subordinated Debt Securities may be issued in certificated form in
exchange for a Global Security. See "Book-Entry and Settlement" below. In the
event that Junior Subordinated Debt Securities are issued in certificated form,
such Junior Subordinated Debt Securities will be in denominations of $25 and
integral multiples thereof and may be transferred or exchanged at the offices
described below. Payments on Junior Subordinated Debt Securities issued as a
Global Security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a Paying Agent for the Junior Subordinated Debt
Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable and Junior Subordinated
Debt Securities will be exchangeable for Junior Subordinated Debt Securities of
other denominations of a like aggregate principal amount at the corporate trust
office of the Indenture Trustee in New York, New York; provided, that payment of
interest may be made at the option of Textron by check mailed to the address of
the persons entitled thereto.
There are no covenants or provisions in the Indenture which would afford
the holders of the Junior Subordinated Debt Securities protection in the event
of a highly leveraged transaction, reorganization, restructuring, merger or
similar transaction involving Textron that may adversely affect such holders.
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SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of
Textron. No payment of principal (including redemption payments), premium, if
any, or interest on the Junior Subordinated Debt Securities may be made if (i)
any Senior Indebtedness of Textron is not paid when due, (ii) any applicable
grace period with respect to such default has ended and such default has not
been cured or waived or ceased to exist, or (iii) the maturity of any Senior
Indebtedness of Textron has been accelerated because of a default. Upon any
distribution of assets of Textron to creditors upon any dissolution, winding-up,
liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due or to become due on all Senior Indebtedness of
Textron must be paid in full before the holders of Junior Subordinated Debt
Securities are entitled to receive or retain any payment. Upon satisfaction of
all claims of all Senior Indebtedness then outstanding, the rights of the
holders of the Junior Subordinated Debt Securities will be subrogated to the
rights of the holders of Senior Indebtedness of Textron to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Junior Subordinated Debt Securities are paid in full.
The term "Senior Indebtedness" means, with respect to Textron, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor, for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such obligor for the
reimbursement on any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction, (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons for the payment of which
such obligor is responsible or liable as obligor, guarantor or otherwise and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Junior Subordinated Debt Securities and (2) any indebtedness between or among
such obligor or its affiliates, including all other debt securities and
guarantees in respect of those debt securities, issued to (a) any other Textron
Trust or a trustee of such trust and (b) any other trust, or a trustee of such
trust, partnership or other entity affiliated with Textron that is a financing
vehicle of Textron (a "financing entity") in connection with the issuance by
such financial entity of Preferred Securities or other securities that rank pari
passu with, or junior to, the Preferred Securities. Such Senior Indebtedness
shall continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by Textron. As of December 30, 1995, Senior Indebtedness of
Textron aggregated approximately $1,689 million.
OPTIONAL REDEMPTION
Textron shall have the right to redeem the Junior Subordinated Debt
Securities, in whole or in part, from time to time, on or after ,
2001, or at any time in certain circumstances upon the occurrence of a Tax Event
as described under "Description of the Preferred Securities -- Special Event
Redemption or Distribution," upon not less than 30 nor more than 60 days notice,
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Junior Subordinated Debt Securities would
result in the delisting of the Preferred Securities, Textron may only redeem the
Junior Subordinated Debt Securities in whole.
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PROPOSED TAX LEGISLATION
On December 7, 1995, as part of President Clinton's Seven-Year Balanced
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that would treat certain debt instruments issued on or after
December 7, 1995, including debt instruments such as the Junior Subordinated
Debt Securities, as equity for United States federal income tax purposes. On
December 19, 1995, the Treasury Department issued a press release stating its
intention to include as part of the Proposed Legislation transition relief for
debt instruments issued pursuant to a registration statement filed with the SEC
on or before December 7, 1995, to the extent of the aggregate amount of such
debt instruments described in the registration statement or in contemporaneous
documents of the issuer. Based on the Treasury Department's statement regarding
transitional relief, it is expected that the Proposed Legislation, if enacted
without substantial modification, would not apply to the Junior Subordinated
Debt Securities because the Junior Subordinated Debt Securities are being issued
pursuant to a shelf registration statement containing a form of prospectus
supplement filed with the SEC prior to December 7, 1995 and the aggregate amount
of the Junior Subordinated Debt Securities to be sold will not exceed the
maximum aggregate amount evidenced in contemporaneous documents of Textron.
There can be no assurances, however, that the Proposed Legislation, if enacted,
will include transition relief applicable to the Junior Subordinated Debt
Securities or that other legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Junior Subordinated Debt
Securities. If legislation is enacted that adversely affects the tax treatment
of the Junior Subordinated Debt Securities, such legislation could result in the
distribution of the Junior Subordinated Debt Securities to holders of the Trust
Securities or, in certain limited circumstances, the redemption of such
securities by Textron. See "Description of Preferred Securities -- Special Event
Redemption or Distribution."
INTEREST
Each Junior Subordinated Debt Security shall bear interest at the rate of
% per annum from the original date of issuance, payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year (each an
"Interest Payment Date"), commencing March 31, 1996, to the person in whose name
such Junior Subordinated Debt Security is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Junior Subordinated Debt Securities
shall not continue to remain in book-entry only form, Textron shall have the
right to select record dates, which shall be more than one Business Day prior to
the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Junior
Subordinated Debt Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Textron shall have the right at any time, and from time to time, during the
term of the Junior Subordinated Debt Securities, to defer payments of interest
by extending the interest payment period for a period not exceeding 20
consecutive quarters, at the end of which Extension Period, Textron shall pay
all interest then accrued and unpaid (including any Additional Interest, as
herein defined) together with interest thereon compounded quarterly at the rate
specified for the Junior Subordinated Debt Securities to the extent permitted by
applicable law ("Compound Interest"); provided, that during any such Extension
Period, (a) Textron will not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payment with respect thereto, and (b) Textron shall not make any
payment of interest, principal (or premium, if any, on) or repay, repurchase or
redeem any debt securities issued by Textron which rank pari
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passu with or junior to such Junior Subordinated Debt Securities. The Indenture,
however, will except from the foregoing (i) any stock dividends paid by Textron
where the dividend stock is the same stock as that on which the dividend is
being paid and (ii) any purchases by Textron of its common stock from Paul
Revere or its subsidiaries pursuant to the Paul Revere Stock Purchase
Agreements. Prior to the termination of any Extension Period, Textron may
further defer payments of interest by extending such Extension Period; provided,
however, that such Extension Period, including all such previous and further
extensions, may not exceed 20 consecutive quarterly interest periods. Upon the
termination of any Extension Period and the payment of all amounts then due,
Textron may commence a new Extension Period, subject to the terms set forth in
this section. No interest during an Extension Period, except at the end thereof,
shall be due and payable. Textron has no present intention of exercising its
right to defer payments of interest by extending the interest payment period on
the Junior Subordinated Debt Securities. If the Institutional Trustee shall be
the sole holder of the Junior Subordinated Debt Securities, Textron shall give
the Regular Trustees and the Institutional Trustee notice of its selection of
such Extension Period one Business Day prior to the earlier of (i) the date
distributions on the Preferred Securities are payable or (ii) the date the
Regular Trustees are required to give notice to the New York Stock Exchange (or
other applicable self-regulatory organization) or to holders of the Preferred
Securities of the record date or the date such distribution is payable. The
Regular Trustees shall give notice of Textron's selection of such Extension
Period to the holders of the Preferred Securities. If the Institutional Trustee
shall not be the sole holder of the Junior Subordinated Debt Securities, Textron
shall give the holders of the Junior Subordinated Debt Securities notice of its
selection of such Extension Period ten Business Days prior to the earlier of (i)
the Interest Payment Date or (ii) the date upon which Textron is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Junior Subordinated Debt Securities of the
record or payment date of such related interest payment.
ADDITIONAL INTEREST
If at any time Textron Capital shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, Textron will pay as additional interest ("Additional Interest") such
additional amounts as shall be required so that the net amounts received and
retained by Textron Capital after paying any such taxes, duties, assessments or
other governmental charges will be not less than the amounts Textron Capital
would have received had no such taxes, duties, assessments or other governmental
charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debt Securities,
will have the right to declare the principal of and the interest on the Junior
Subordinated Debt Securities (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debt Securities. See "Description of Debt
Securities -- Events of Default" and " -- Particular Terms of the Junior
Subordinated Debt Securities" in the accompanying Prospectus for a description
of the Events of Default. An Indenture Event of Default also constitutes a
Declaration Event of Default. The holders of Preferred Securities in certain
circumstances have the right to direct the Institutional Trustee to exercise its
rights as the holder of the Junior Subordinated Debt Securities. See
"Description of the Preferred Securities -- Declaration Events of Default" and
" -- Voting Rights."
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of Textron to pay
interest or principal on the Junior Subordinated Debt Securities on the date
such interest or principal is otherwise payable, Textron acknowledges that, in
such event, a holder of Preferred Securities may institute a Direct Action for
payment on or after the respective due date specified in the Junior Subordinated
Debt Securities. Notwithstanding any payments made to such holder of Preferred
Securities by Textron in connection with a Direct Action, Textron shall remain
obligated to pay the principal
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of or interest on the Junior Subordinated Debt Securities held by Textron
Capital or the Property Trustee of Textron Capital, and Textron shall be
subrogated to the rights of the holder of such Preferred Securities with respect
to payments on the Preferred Securities to the extent of any payments made by
the Company to such holder in any Direct Action. The holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debt Securities.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Textron
Capital as a result of the occurrence of a Special Event, the Junior
Subordinated Debt Securities will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debt Securities represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debt Securities in definitive form. The Global Securities described above may
not be transferred except by the depositary to a nominee of the depositary or by
a nominee of the depositary to the depositary or another nominee of the
depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debt Securities in definitive form and will not be considered the
Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debt
Securities shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the depositary or if such person
is not a Participant, on the procedures of the Participant through which such
person owns its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in Textron
Capital, DTC will act as securities depositary for the Junior Subordinated Debt
Securities. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company." As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. Textron
may appoint a successor to DTC or any successor depositary in the event DTC or
such successor depositary is unable or unwilling to continue as a depository for
the Global Securities.
None of Textron, Textron Capital, the Indenture Trustee, any paying agent
and any other agent of Textron or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Junior Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies Textron that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor
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depositary shall have been appointed, (iii) Textron, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Junior Subordinated
Debt Securities. Any Global Security that is exchangeable pursuant to the
preceding sentence shall be exchangeable for Junior Subordinated Debt Securities
registered in such names as the depositary shall direct. It is expected that
such instructions will be based upon directions received by the depositary from
its Participants with respect to ownership of beneficial interests in such
Global Security.
MISCELLANEOUS
The Indenture will provide that Textron will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Junior Subordinated
Debt Securities, (ii) the organization, maintenance and dissolution of Textron
Capital, (iii) the retention of the Textron Trustees and (iv) the enforcement by
the Institutional Trustee of the rights of the holders of the Preferred
Securities. The payment of such fees and expenses will be fully and
unconditionally guaranteed by Textron.
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Textron Capital is to
issue the Trust Securities evidencing undivided beneficial interests in the
assets of Textron Capital, and to invest the proceeds from such issuance and
sale in the Junior Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Junior Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) Textron shall pay all, and Textron Capital shall not be
obligated to pay, directly or indirectly, all costs, expenses, debt and
obligations of Textron Capital other than with respect to the Trust Securities;
and (iv) the Declaration further provides that the Textron Trustees shall not
cause or permit Textron Capital to, among other things, engage in any activity
that is not consistent with the purposes of Textron Capital.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by Textron as and to the extent set forth under
"Description of Trust Guarantees" in the accompanying Prospectus. If Textron
does not make interest payments on the Junior Subordinated Debt Securities
purchased by Textron Capital, it is expected that Textron Capital will not have
sufficient funds to pay distributions on the Preferred Securities. The Guarantee
is a full and unconditional guarantee from the time of its issuance but does not
apply to any payment of distributions unless and until Textron Capital has
sufficient funds for the payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that Textron has made a payment
of interest or principal on the Junior Subordinated Debt Securities held by
Textron Capital as its sole asset. The Guarantee, when taken together with
Textron's obligations under the Junior Subordinated Debt Securities and the
Indenture and its obligations under the Declaration, including its obligations
to pay costs, expenses, debts and liabilities of Textron Capital (other than
with respect to the Trust Securities), provide a full and unconditional
guarantee of amounts on the Preferred Securities.
If Textron fails to make interest or other payments on the Junior
Subordinated Debt Securities when due (taking account of any Extension Period),
the Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities -- Book Entry Only Issuance -- The Depository Trust Company" and
" -- Voting Rights," may direct the Institutional Trustee to enforce its rights
under the Junior Subordinated Debt Securities. If the Institutional Trustee
fails to
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enforce its rights under the Junior Subordinated Debt Securities, any holder of
Preferred Securities may institute a legal proceeding against Textron to enforce
the Institutional Trustee's rights under the Junior Subordinated Debt Securities
without first instituting any legal proceeding against the Institutional Trustee
or any other person or entity. Notwithstanding the foregoing, if a Declaration
Event of Default has occurred and is continuing and such event is attributable
to the failure of Textron to pay interest or principal on the Junior
Subordinated Debt Securities on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then a holder of
Preferred Securities may institute a Direct Action for payment on or after the
respective due date specified in the Junior Subordinated Debt Securities. In
connection with such Direct Action, Textron will be subrogated to the rights of
such holder of Preferred Securities under the Declaration to the extent of any
payment made by Textron to such holder of Preferred Securities in such Direct
Action. Textron, under the Guarantee, acknowledges that the Guarantee Trustee
shall enforce the Guarantee on behalf of the holders of the Preferred
Securities. If Textron fails to make payments under the Guarantee, the Guarantee
provides a mechanism whereby the holders of the Preferred Securities may direct
the Guarantee Trustee to enforce its rights thereunder. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities may institute
a legal proceeding directly against Textron to enforce the Guarantee Trustee's
rights under the Guarantee without first instituting a legal proceeding against
Textron Capital, the Guarantee Trustee, or any other person or entity.
Textron and Textron Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by Textron of payments due on the Preferred Securities. See
"Description of Trust Guarantees -- General" in the accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In the opinion of Skadden, Arps, Slate, Meagher & Flom, special tax counsel
to Textron and Textron Capital, the following is a summary of the material
United States federal income tax consequences of the purchase, ownership and
disposition of Preferred Securities. Unless otherwise stated, this summary deals
only with Preferred Securities held as capital assets by holders who purchase
the Preferred Securities upon original issuance ("Initial Holders"). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, persons that have a
functional currency other than the U.S. Dollar or persons that will hold the
Preferred Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. Further, it does not include any
description of any alternative minimum tax consequences or the tax laws of any
state or local government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Junior Subordinated Debt Securities,
Skadden, Arps, Slate, Meagher & Flom, special tax counsel to Textron and Textron
Capital, will render its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Junior Subordinated Debt Securities held by Textron Capital
will be classified for United States federal income tax purposes as indebtedness
of Textron.
CLASSIFICATION OF TEXTRON CAPITAL
In connection with the issuance of the Preferred Securities, Skadden, Arps,
Slate, Meagher & Flom, special tax counsel to Textron and Textron Capital, will
render its opinion generally to the effect that, under
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then current law and assuming full compliance with the terms of the Declaration
and the Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, Textron Capital will be classified for
United States federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Preferred Securities generally will be
considered the owner of an undivided interest in the Junior Subordinated Debt
Securities, and each holder will be required to include in its gross income any
OID accrued with respect to its allocable share of those Junior Subordinated
Debt Securities.
ORIGINAL ISSUE DISCOUNT
Because Textron has the option, under the terms of the Junior Subordinated
Debt Securities, to defer payments of interest by extending interest payment
periods for up to 20 quarters, all of the stated interest payments on the Junior
Subordinated Debt Securities will treated as "original issue discount." However,
if the "issue price" of the Junior Subordinated Debt Securities for federal
income tax purposes is higher or lower than their $25 principal amount, the
total amount of OID reportable by any holder may differ from the amount of
stated interest. Holders of debt instruments issued with OID must include that
discount in income on an economic accrual basis before the receipt of cash
attributable to the interest, regardless of their method of tax accounting.
Generally, all of a holder's taxable interest income with respect to the Junior
Subordinated Debt Securities will be accounted for as OID, and actual
distributions of stated interest will not be reported as taxable income. The
amount of OID that accrues in any month will approximately equal the amount of
the interest that accrues on the Junior Subordinated Debt Securities in that
month at the stated interest rate unless the "issue price" is higher or lower
than $25. In the event that the interest payment period is extended, holders
will accrue OID on a current basis in an aggregate amount approximately equal to
the amount of the interest payment due at the end of the extended interest
payment period (including Compound Interest) on an economic accrual basis over
the length of the extended interest period and any holders who dispose of
Preferred Securities prior to the record date for the payment of interest
following such extended interest payment period will not receive from Textron
Capital any cash related thereto.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Junior Subordinated
Debt Securities with market discount or acquisition premium as such phrases are
defined for United States federal income tax purposes. Such holders are advised
to consult their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF
TEXTRON CAPITAL
Under certain circumstances, as described under the caption "Description of
the Preferred Securities -- Special Event Redemption or Distribution," Junior
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities and in liquidation of Textron Capital. Under current law,
such a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive an
aggregate tax basis in the Junior Subordinated Debt Securities equal to such
holder's aggregate tax basis in its Preferred Securities. A holder's holding
period in the Junior Subordinated Debt Securities so received in liquidation of
Textron Capital would include the period during which the Preferred Securities
were held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debt Securities may be redeemed
for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and
S-32
<PAGE> 33
a holder could recognize gain or loss as if it sold such redeemed Preferred
Securities for cash. See "United States Federal Income Taxation -- Sales of
Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will be considered to have
disposed of all or part of its pro rata share of the Junior Subordinated Debt
Securities, and will recognize gain or loss equal to the difference between its
adjusted tax basis in the Preferred Securities and the amount realized on the
sale of such Preferred Securities. A holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
OID previously includible in such holder's gross income to the date of
disposition and decreased by payments received on the Preferred Securities. Such
gain or loss generally will be a capital gain or loss (except to the extent of
any accrued market discount with respect to such holder's pro rata share of the
Junior Subordinated Debt Securities not previously included in income -- see
"Market Discount and Bond Premium" above) and generally will be a long-term
capital gain or loss if the Preferred Securities have been held for more than
one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debt Securities. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated Debt
Securities to the date of disposition in income as ordinary income, and to add
such amount to his adjusted tax basis in his pro rata share of the underlying
Junior Subordinated Debt Securities deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest) a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On December 7, 1995, as part of President Clinton's Seven-Year Balanced
Budget Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") that would treat certain debt instruments issued on or after
December 7, 1995, including debt instruments such as the Junior Subordinated
Debt Securities, as equity for United States federal income tax purposes. On
December 19, 1995, the Treasury Department issued a press release stating its
intention to include as part of the Proposed Legislation transition relief for
debt instruments issued pursuant to a registration statement filed with the SEC
on or before December 7, 1995, to the extent of the aggregate amount of such
debt instruments described in the registration statement or in contemporaneous
documents of the issuer. Based on the Treasury Department's statement regarding
transitional relief, it is expected that the Proposed Legislation, if enacted
without substantial modifications, would not apply to the Junior Subordinated
Debt Securities because the Junior Subordinated Debt Securities are being issued
pursuant to a shelf registration statement containing a form of prospectus
supplement filed with the SEC prior to December 7, 1995 and the aggregate amount
of the Junior Subordinated Debt Securities to be sold will not exceed the
maximum aggregate amount evidenced in contemporaneous documents of Textron.
There can be no assurances, however, that the Proposed Legislation, if enacted,
will include transition relief applicable to the Junior Subordinated Debt
Securities or that other legislation enacted after the date hereof will not
otherwise adversely affect the tax treatment of the Junior Subordinated Debt
Securities. If legislation is enacted that adversely affects the tax treatment
of the Junior Subordinated Debt Securities, such legislation could result in the
distribution of the Junior Subordinated Debt Securities to holders of the Trust
Securities or, in certain limited circumstances, the redemption of such
securities by Textron. See "Description of Preferred Securities -- Special Event
Redemption or Distribution."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
S-33
<PAGE> 34
Under present United States federal income tax law: (i) payments by Textron
Capital or any of its paying agents to any holder of a Preferred Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Preferred Security does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of Textron entitled to vote,
(b) the beneficial owner of the Preferred Security is not a controlled foreign
corporation that is related to Textron through stock ownership, and (c) either
(A) the beneficial owner of the Preferred Security certifies to Textron Capital
or its agent, under penalties of perjury, that it is not a United States holder
and provides its name and address or (B) a securities clearing organization,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and holds
the Preferred Security in such capacity, certifies to Textron Capital or its
agent, under penalties of perjury, that such statement has been received from
the beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes Textron Capital or its agent with a copy thereof;
and (ii) a United States Alien Holder of a Preferred Security will not be
subject to United States federal withholding tax on any gain realized upon the
sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which forms should be
mailed to holders of Preferred Securities by January 31 following each calendar
year.
Textron Capital will be obligated to report annually to Cede & Co., as
holder of record of the Preferred Securities, the OID related to the Junior
Subordinated Debt Securities that accrued during the year. Textron Capital
currently intends to report such information on Form 1099 prior to January 31
following each calendar year even though Textron Capital is not legally required
to report to record holders until April 15 following each calendar year. The
Underwriters have indicated to Textron Capital that, to the extent that they
hold Preferred Securities as nominees for beneficial holders, they currently
expect to report to such beneficial holders on Forms 1099 by January 31
following each calendar year. Under current law, holders of Preferred Securities
who hold as nominees for beneficial holders will not have any obligation to
report information regarding the beneficial holders to Textron Capital. Textron
Capital, moreover, will not have any obligation to report to beneficial holders
who are not also record holders. Thus, beneficial holders of Preferred
Securities who hold their Preferred Securities through the Underwriters will
receive Forms 1099 reflecting the income on their Preferred Securities from such
nominee holders rather than Textron Capital.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the holder's United States federal income tax, provided the
required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
S-34
<PAGE> 35
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated , 1996, each Underwriter named below has severally agreed to
purchase from the Trust, and the Trust has agreed to sell to such Underwriter,
the number of Preferred Securities set forth opposite the name of such
Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Smith Barney Inc. ..................................................
Dean Witter Reynolds Inc............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................
PaineWebber Incorporated............................................
Prudential Securities Incorporated..................................
----------
Total..................................................... 20,000,000
==========
</TABLE>
The Underwriters are obligated to take and pay for the total number of
Preferred Securities offered hereby if any such Preferred Securities are
purchased. In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Underwriters have advised the Trust that they propose initially to
offer the Preferred Securities to the public at the Initial Public Offering
Price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at a price that represents a concession not in excess of per
Preferred Security, provided that such concession for sales of 10,000 or more
Preferred Securities to a single purchaser will not be in excess of per
Preferred Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of per Preferred Security to certain other
dealers. After the Preferred Securities are released for sale to the public, the
public offering price and such concessions may be changed by the Underwriters.
The Underwriters have in the past provided, and may in the future provide,
investment banking services to the Company.
The Underwriting Agreement provides that the Trust and Textron will
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and to make certain
contributions in respect thereof.
The Trust and Textron have agreed, during the period beginning on the date
of the Underwriting Agreement and continuing to and including the date that is
days after the closing date for the purchase of the Preferred Securities, not
to offer, sell, contract to sell or otherwise dispose of any preferred
securities, any preferred stock or any other securities (including any backup
undertakings) of Textron or Preferred Securities of the Trust, in each case that
are substantially similar to the Preferred Securities, or any securities
convertible into or exchangeable for the Preferred Securities or such
substantially similar securities of either the Trust or Textron, without the
prior written consent of Smith Barney Inc.
LEGAL MATTERS
The validity of the Junior Subordinated Debt Securities, the Guarantee and
certain matters relating thereto will be passed upon on behalf of Textron by
Michael D. Cahn, Assistant General Counsel -- Corporate of Textron. The validity
of the Preferred Securities and certain matters relating thereto will be passed
upon on behalf of Textron Capital by Skadden, Arps, Slate, Meagher & Flom, New
York, New York. Certain legal matters will be passed upon for the Underwriters
by Davis Polk & Wardwell, New York, New York. Certain United States federal
income taxation matters will be passed upon for Textron and Textron Capital by
Skadden, Arps, Slate, Meagher & Flom, New York, New York.
S-35
<PAGE> 36
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 37
SUBJECT TO COMPLETION, DATED JANUARY 31, 1996
PROSPECTUS
$1,010,985,000
TEXTRON INC.
SENIOR DEBT SECURITIES, SUBORDINATED DEBT
SECURITIES AND JUNIOR SUBORDINATED DEBT SECURITIES
------------------------
TEXTRON CAPITAL I
TEXTRON CAPITAL II
TEXTRON CAPITAL III
TEXTRON FINANCE, L.P.
PREFERRED SECURITIES GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TEXTRON INC.
------------------------
Textron Inc. ("Textron"), a Delaware corporation, may offer, from time to
time, its (i) unsecured senior debt securities (the "Senior Debt Securities"),
(ii) unsecured subordinated debt securities (the "Subordinated Debt Securities")
or (iii) unsecured junior subordinated debt securities (the "Junior Subordinated
Debt Securities"), each consisting of debentures, notes or other evidences of
indebtedness (item (i), (ii) or (iii) above being referred to herein as the
"Debt Securities"), or any combination of the foregoing, in each case in one or
more series and in amounts, at prices and on terms to be determined at or prior
to the time of any such offering. Textron's obligations under the Subordinated
Debt Securities and the Junior Subordinated Debt Securities will be subordinate
and junior in right of payment to certain other senior indebtedness of Textron
as described herein or as may be described in an accompanying Prospectus
Supplement (the "Prospectus Supplement").
Textron Capital I, Textron Capital II and Textron Capital III (each, a
"Textron Trust" and, together, the "Textron Trusts"), each a statutory business
trust formed under the laws of the State of Delaware, may offer, from time to
time, preferred securities, representing undivided beneficial interests in the
assets of the respective Textron Trust ("Trust Preferred Securities") with the
payment of periodic cash distributions ("distributions") and payments on
liquidation, redemption or otherwise of such Trust Preferred Securities
guaranteed (each, a "Trust Guarantee") on a subordinated basis by Textron to the
extent described herein. See "Description of Trust Guarantees." Textron Finance,
L.P. ("Textron Partnership"), a limited partnership formed under the laws of the
State of Delaware, may offer, from time to time, its preferred securities
("Partnership Preferred Securities") in one or more series with the payment of
distributions and payments on liquidation, redemption or otherwise guaranteed
(the "Partnership Guarantee") on a subordinated basis by Textron to the extent
described herein. See "Description of Partnership Guarantee." Textron's
obligations under the Trust Guarantees will rank pari passu with its obligations
under the Partnership Guarantee and the senior most preferred or preference
stock of Textron. See "Description of Trust Guarantees -- Status of Trust
Guarantees" and "Description of Partnership Guarantee -- Status of Partnership
Guarantee." Junior Subordinated Debt Securities may be issued and sold from time
to time in one or more series by Textron to (i) a Textron Trust, or a trustee of
such trust, in connection with the investment of the proceeds from the offering
of Trust Preferred Securities, (ii) Textron Partnership in connection with the
investment of the proceeds from the offering of Partnership Preferred Securities
or (iii) other purchasers, including the general public.
Specific terms of the Debt Securities of any series, the Trust Preferred
Securities of any Textron Trust or the Partnership Preferred Securities in
respect of which this Prospectus is being delivered (the "Offered Securities")
will be set forth in a Prospectus Supplement with respect to such Offered
Securities, which will describe, without limitation and where applicable, the
following: (i) in the case of Debt Securities, the specific designation,
aggregate principal amount, denomination, maturity, premium, if any, redemption
or sinking fund provisions, if any, interest rate (which may be fixed or
variable), if any, the time and method of calculating interest payments, if any,
dates on which premium, if any, and interest, if any, will be payable, the
currency in which principal of, premium, if any, and interest, if any, on the
Debt Securities will be payable, the right of Textron, if any, to defer payment
of interest on the Junior Subordinated Debt Securities and the maximum length of
such deferral period, the initial public offering price, subordination terms,
and any listing on a securities exchange and other specific terms of the
offering of Debt Securities, and (ii) in the case of Trust Preferred Securities
and Partnership Preferred Securities (collectively, the "Preferred Securities"),
the designation, number of securities, liquidation preference per security,
initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, any redemption or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase a specific series of Junior Subordinated
Debt Securities of Textron. If so specified in the applicable Prospectus
Supplement, Offered Securities may be issued in whole or in part in the form of
one or more temporary or permanent global securities.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$1,010,985,000 (or (i) its equivalent (based on the applicable exchange rate at
the time of sale) if Debt Securities are issued with principal amounts
denominated in one or more foreign currencies or currency units as shall be
designated by Textron, or (ii) such greater amount, if Debt Securities are
issued at an original issue discount, as shall result in aggregate proceeds of
$1,010,985,000). Any Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States federal
income tax considerations, if applicable, to the Offered Securities.
Textron, any of the Textron Trusts or Textron Partnership may sell the
Offered Securities directly, through agents designated from time to time or
through underwriters or dealers. See "Plan of Distribution." If any agents of
Textron, each of the Textron Trusts or Textron Partnership or any underwriters
or dealers are involved in the sale of the Offered Securities, the names of such
agents, underwriters or dealers and any applicable commissions and discounts
will be set forth in any related Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF
INSURANCE RULED UPON THE ACCURACY OR THE ADEQUACY OF
THIS DOCUMENT.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS FEBRUARY 1, 1996.
<PAGE> 38
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TEXTRON, ANY OF THE TEXTRON TRUSTS
OR TEXTRON PARTNERSHIP, OR ANY UNDERWRITER, AGENT OR DEALER. NEITHER THE
DELIVERY OF THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF TEXTRON, ANY OF THE TEXTRON TRUSTS OR TEXTRON
PARTNERSHIP SINCE THE DATE THEREOF. THIS PROSPECTUS AND ANY PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
------------------------
AVAILABLE INFORMATION
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by Textron, each of the Textron Trusts and Textron Partnership
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Reference is made
to such Registration Statement and to the exhibits relating thereto for further
information with respect to Textron, the Textron Trusts, Textron Partnership and
the Offered Securities. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission or incorporated by reference herein are not
necessarily complete, and, in each instance, reference is made to the copy of
such document so filed for a more complete description of the matter involved.
Each such statement is qualified in its entirety by such reference.
Textron is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information concerning
Textron can be inspected and copied at prescribed rates at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following Regional Offices of the Commission: 7 World
Trade Center, New York, New York 10048; and Citicorp Center, 500 W. Madison St.,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information can also be inspected at the office of the New York Stock
Exchange, Inc. on which Textron common stock is traded, at 20 Broad Street, New
York, New York 10005.
No separate financial statements of the Textron Trusts or Textron
Partnership have been included or incorporated by reference herein. Textron does
not consider that such financial statements would be material to holders of the
Preferred Securities because (i) all of the voting securities of the Textron
Trusts and Textron Partnership will be owned, directly or indirectly, by
Textron, a reporting company under the Exchange Act, (ii) the Textron Trusts and
Textron Partnership have no independent operations but exist for the sole
purpose of issuing securities representing undivided beneficial interests in
their respective assets and investing the proceeds thereof in Junior
Subordinated Debt Securities issued by Textron, (iii) the obligations of the
Textron Trusts under the Trust Preferred Securities are fully and
unconditionally guaranteed by Textron to the extent that the respective Textron
Trust has funds available to meet such obligations, and (iv) the obligations of
Textron Partnership under the Partnership Preferred Securities are fully and
unconditionally guaranteed by Textron to the extent Textron Partnership has
funds legally available to meet such obligations. See "Description of Debt
Securities," "Description of Trust Guarantees" and "Description of Partnership
Guarantee."
2
<PAGE> 39
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Textron (File No. 1-5480) with the
Commission pursuant to the Exchange Act are incorporated by reference herein and
made a part hereof:
(a) Annual Report on Form 10-K for the fiscal year ended December 31, 1994;
(b) Quarterly Reports on Form 10-Q for the fiscal quarters ended April 1,
July 1 and September 30, 1995; and
(c) Current Report on Form 8-K dated February 1, 1996.
All documents filed by Textron pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Offered Securities pursuant hereto shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
or in any Prospectus Supplement shall be deemed to be modified or superseded for
purposes of this Prospectus, or in any Prospectus Supplement, to the extent that
a statement contained herein or therein (or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein or
therein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus or any Prospectus Supplement.
Textron undertakes to provide, without charge, to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
such person, a copy of any or all of the foregoing documents incorporated herein
by reference, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents. Such requests should
be directed to: Corporate Communications Department, Textron Inc., 40
Westminster Street, Providence, Rhode Island 02903, telephone (401) 421-2800.
3
<PAGE> 40
TEXTRON INC.
Textron is a global, multi-industry company with operations in six business
segments: Aircraft, Automotive, Industrial, Systems and Components, Finance and
Paul Revere insurance. Textron's products and services include Bell helicopters,
Cessna aircraft, Speidel watchbands, Avco Financial Services, E-Z-GO golf cars,
Jacobsen lawn and turf-care equipment and disability insurance provided by The
Paul Revere Corporation.
Textron's corporate office is located at 40 Westminster Street, Providence,
Rhode Island 02903; its telephone number is (401) 421-2800.
TEXTRON TRUSTS
Each of the Textron Trusts is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust (the "Declaration") executed
by Textron, as sponsor for such trust (the "Sponsor"), and the trustees of such
trusts and (ii) the filing of a certificate of trust with the Secretary of State
of the State of Delaware on October 4, 1995. Each of the Textron Trusts exists
for the exclusive purposes of (i) issuing the Trust Preferred Securities and
common securities representing undivided beneficial interests in the assets of
the Trust (the "Trust Common Securities" and, together with the Trust Preferred
Securities, the "Trust Securities"), (ii) investing the gross proceeds from the
sale of the Trust Securities in the Junior Subordinated Debt Securities and
(iii) engaging in only those other activities necessary or incidental thereto.
All of the Trust Common Securities will be directly or indirectly owned by
Textron. The Trust Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Trust Preferred Securities, except that, upon an
event of default under the Declaration, the rights of the holders of the Trust
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Trust Preferred Securities. Textron will directly or indirectly
acquire Trust Common Securities in an aggregate liquidation amount equal to at
least 3% of the total capital of each Textron Trust.
Each Textron Trust has a term of approximately 55 years but may terminate
earlier, as provided in each Declaration. Each Textron Trust's business and
affairs will be conducted by the trustees (the "Textron Trustees") appointed by
Textron as the direct or indirect holder of all the Trust Common Securities. The
holder of the Trust Common Securities will be entitled to appoint, remove or
replace any of, or increase or reduce the number of, the Textron Trustees of the
Textron Trusts. The duties and obligations of the Textron Trustees shall be
governed by the Declaration of such Textron Trust. Each Textron Trust will have
two Textron Trustees (the "Regular Trustees") who are employees or officers of
or who are affiliated with Textron. One Textron Trustee of each Textron Trust
will be a financial institution that is not affiliated with Textron and has a
specified minimum amount of aggregate capital, surplus, and undivided profits of
not less than $50,000,000, which shall act as property trustee and as indenture
trustee for the purposes of compliance with the provisions of Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the terms set
forth in a Prospectus Supplement (the "Institutional Trustee"). In addition,
unless the Institutional Trustee maintains a principal place of business in the
State of Delaware and otherwise meets the requirements of applicable law, one
Textron Trustee of each Textron Trust will have a principal place of business or
reside in the State of Delaware (the "Delaware Trustee"). Textron will pay all
fees and expenses related to the Textron Trusts and the offering of the Trust
Securities.
The office of the Delaware Trustee for each of the Textron Trusts is The
Chase Manhattan Bank (USA), 802 Delaware Avenue, Wilmington, Delaware 19801. The
address for each Textron Trust is c/o Textron, the Sponsor of the Textron
Trusts, at Textron's corporate headquarters located 40 Westminster Street,
Providence, Rhode Island 02903, telephone (401) 421-2800.
TEXTRON FINANCE, L.P.
Textron Partnership is a limited partnership formed under the laws of the
State of Delaware. Textron Partnership exists for the sole purpose of issuing
its partnership interests and investing the net proceeds thereof
4
<PAGE> 41
in Junior Subordinated Debt Securities. All of its partnership interests, as of
the date hereof, are beneficially owned, directly or indirectly, by Textron.
Textron is the sole general partner in Textron Partnership (the "General
Partner"). Textron Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of Textron ("Textron Holdings"), is, as of the date hereof, the sole
limited partner in Textron Partnership. Upon the issuance of Partnership
Preferred Securities, which securities represent limited partner interests in
Textron Partnership, Textron Holdings will remain as a limited partner, but will
have no interest in the profits and dividends or in the assets of Textron
Partnership. Textron Partnership has a term of approximately 99 years, unless
earlier dissolved. Textron Partnership's office in the State of Delaware is c/o
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, telephone: (302) 658-7581. All of
Textron Partnership's business and affairs will be conducted by Textron, as
General Partner. The business address of Textron Partnership is c/o Textron
Inc., 40 Westminster Street, Providence, Rhode Island 02903, telephone number
(401) 421-2800.
USE OF PROCEEDS
The proceeds from the sale by each Textron Trust of its Trust Preferred
Securities and the proceeds from the sale by Textron Partnership of its
Partnership Preferred Securities will be invested in the Junior Subordinated
Debt Securities of Textron. Except as may otherwise be described in the
Prospectus Supplement relating to a series of Senior Debt Securities,
Subordinated Debt Securities or Junior Subordinated Debt Securities, Textron
intends to use the net proceeds from the sale of such series of Senior Debt
Securities, Subordinated Debt Securities or Junior Subordinated Debt Securities
for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in the Prospectus Supplement relating to
such Debt Securities.
The Debt Securities may be issued, from time to time, in one or more
series, and will constitute either Senior Debt Securities, Subordinated Debt
Securities or Junior Subordinated Debt Securities. The Senior Debt Securities
may be issued under an Indenture, dated as of April 15, 1987, between Textron
and Chemical Bank (as successor to Manufacturers Hanover Trust Company), as
trustee (the "Senior Debt Trustee"), as supplemented by the First Supplemental
Senior Indenture, dated as of March 15, 1988, and a Second Supplemental Senior
Indenture, each between Textron and the Senior Debt Trustee (the "Senior
Indenture"). The Subordinated Debt Securities may be issued under an Indenture,
dated as of May 1, 1985, between Textron and The Chase Manhattan Bank, N.A., as
trustee (the "Subordinated Debt Trustee"), as supplemented by the First
Supplemental Subordinated Indenture, dated as of December 18, 1986, and a Second
Supplemental Subordinated Indenture, each between Textron and the Subordinated
Debt Trustee (the "Subordinated Indenture"). The Junior Subordinated Debt
Securities may be issued under an Indenture (the "Junior Subordinated
Indenture") between Textron and The Chase Manhattan Bank, N.A., as trustee (the
"Junior Subordinated Debt Trustee").
The following summaries of certain provisions of the Debt Securities, and
the Senior Indenture, the Subordinated Indenture and the Junior Subordinated
Indenture (each individually, an "Indenture" and collectively, the
"Indentures"), do not purport to be complete and are subject to, and are
qualified in their entirety by express reference to, all of the provisions of
the Indentures, including the definitions therein of certain terms, copies
and/or forms of which are filed or incorporated by reference as exhibits to the
Registration Statement. The Senior Debt Trustee, the Subordinated Debt Trustee
and the Junior Subordinated Debt Trustee are each referred to herein as a "Debt
Trustee." All article and section references appearing herein are to articles
and sections of the Indentures, unless otherwise indicated, and capitalized
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terms which are not otherwise defined in this Prospectus shall have the meanings
specified in the Indentures to which they relate.
TERMS APPLICABLE TO SENIOR DEBT SECURITIES, SUBORDINATED DEBT SECURITIES AND
JUNIOR SUBORDINATED DEBT SECURITIES
GENERAL. The Debt Securities will be direct, unsecured obligations of
Textron. No Indenture limits the amount of Debt Securities which may be issued
thereunder, and each provides that Debt Securities may be issued thereunder in
series up to the aggregate principal amount which may be authorized from time to
time by the Board of Directors. (Senior Indenture and Subordinated Indenture,
sec. 301; Junior Subordinated Indenture, sec. 3.1)
Reference is made to the Prospectus Supplement which accompanies this
Prospectus for the following terms and other information with respect to the
Debt Securities being offered thereby: (i) the designation, priority, aggregate
principal amount, authorized denominations and the currency or currency units
for which Debt Securities may be purchased or in which such Debt Securities may
be denominated and/or the currency or currency units in which principal of,
premium, if any, and/or interest, if any, on such Debt Securities will be
payable and whether Textron or the Holders of any such Debt Securities may elect
to receive payments in respect of such Debt Securities in a currency or currency
units other than that in which such Debt Securities are stated to be payable;
(ii) the percentage of their principal amount at which such Debt Securities will
be issued; (iii) the date on which such Debt Securities will mature; (iv) the
rate per annum at which such Debt Securities will bear interest or the method of
determination of such rate; (v) the dates on which such interest will be
payable; (vi) the rights, if any, to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period, and the
maximum duration of such extensions; (vii) the place or places where payments on
such Debt Securities shall be made; (viii) any redemption terms or sinking fund
provisions; (ix) the terms of subordination of Debt Securities of that series;
(x) whether Debt Securities will be issued in fully registered form without
coupons attached, in bearer form with or without coupons, or both; (xi) whether
Debt Securities issued in fully registered form will be represented by either a
global security delivered to a depositary and recorded in a book-entry system
maintained by such depositary or by a certificate delivered to the Holder; (xii)
the restrictions, if any, applicable to the exchange of Debt Securities of a
series of one form for another of such series and to the offer, sale and
delivery of the Debt Securities; (xiii) whether and under what circumstances
Textron will pay additional amounts in the event of certain developments with
respect to United States withholding tax or information reporting laws; or (xiv)
other specific terms.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons, will be
exchangeable for other Debt Securities of the same series, registered in the
same name, for a like aggregate principal amount in authorized denominations,
and will be transferable at any time or from time to time at the Corporate Trust
Office of the respective Debt Trustee or at any other office or agency of
Textron maintained for that purpose. No charge will be made to the Holder for
any such exchange or transfer except for any tax or governmental charge
incidental thereto.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing interest at a rate which at the
time of issuance is below market rates. Federal income tax consequences and
special considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
If a Prospectus Supplement specifies that Debt Securities are denominated
in a currency other than United States dollars, such Prospectus Supplement shall
also specify the currency in which the principal, premium, if any, and interest
on such Debt Securities will be payable, which may be United States dollars
based upon the exchange rate for such other currency existing on or about the
time a payment is due.
Unless otherwise described in the Prospectus Supplement accompanying this
Prospectus, there are no covenants or provisions contained in any of the
Indentures which afford the Holders of the Debt Securities protection in the
event of a highly leveraged transaction involving Textron.
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CONSOLIDATION, MERGER AND SALE OF ASSETS. Each Indenture provides that
Textron will not consolidate with or merge into any other corporation or convey,
transfer or lease its assets substantially as an entirety unless (a) the
successor is a corporation organized in the United States and expressly assumes
the due and punctual payment of the principal of (and premium, if any) and
interest on all Debt Securities issued thereunder and the performance of every
other covenant of the respective Indenture on the part of Textron and (b)
immediately thereafter no Event of Default and no event which, after notice or
lapse of time, or both, would become an Event of Default, shall have happened
and be continuing. Upon any such consolidation, merger, conveyance or transfer,
the successor corporation shall succeed to and be substituted for Textron under
the respective Indenture and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under the respective Indenture and
Debt Securities. (Article Eight)
EVENTS OF DEFAULT. Each Indenture provides that the following are Events
of Default thereunder with respect to any series of Senior, Subordinated or
Junior Subordinated Debt Securities, as the case may be: (a) default in the
payment of the principal of (or premium, if any, on) any Debt Security of such
series at its Maturity; (b) default in making a sinking fund payment, if any,
when and as the same shall be due and payable by the terms of the Debt
Securities of such series; (c) default for 30 days in the payment of any
installment of interest on any Debt Security of such series; (d) default for 90
days after written notice in the performance of any other covenant in respect of
the Debt Securities of such series contained in the respective Indenture; (e)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of Textron or its property; and (f) any
other Event of Default provided in the applicable resolution of the Board of
Directors or supplemental indenture under which such series of Debt Securities
is issued. (Senior Indenture and Subordinated Indenture, Section 501; Junior
Subordinated Indenture, Section 5.1) An Event of Default with respect to a
particular series of Debt Securities issued under any Indenture does not
necessarily constitute an Event of Default with respect to any other series of
Debt Securities issued thereunder. The applicable Debt Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except in the payment of principal, premium or interest)
if it considers such withholding to be in the interests of such Holders. (Senior
Indenture and Subordinated Indenture, Section 602; Junior Subordinated
Indenture, Section 6.2)
If an Event of Default with respect to any series of Debt Securities shall
have occurred and be continuing, the applicable Debt Trustee or the Holders of
25% in aggregate principal amount of the Debt Securities of such series may
declare the principal, or in the case of discounted Debt Securities, such
portion thereof as may be described in the Prospectus Supplement accompanying
this Prospectus, of all the Debt Securities of such series to be due and payable
immediately. (Senior Indenture and Subordinated Indenture, Section 502; Junior
Subordinated Indenture, Section 5.2)
Each Indenture contains a provision entitling the respective Debt Trustee
to be indemnified by the Holders before proceeding to exercise any right or
power under such Indenture at the request of any of the Holders. (Senior
Indenture and Subordinated Indenture, Section 603; Junior Subordinated
Indenture, Section 6.3) Each Indenture provides that the Holders of a majority
in principal amount of the Outstanding Debt Securities of any series thereunder
may direct the time, method and place of conducting any proceeding for any
remedy available to the applicable Debt Trustee or exercising any trust or
power conferred upon such Debt Trustee, with respect to the Debt Securities of
such series. (Senior Indenture and Subordinated Indenture, Section 512; Junior
Subordinated Indenture, Section 5.12) The right of a Holder to institute a
proceeding with respect to an Indenture is subject to certain conditions
precedent including notice and indemnity to the applicable Debt Trustee, but
the Holder has an absolute right to receipt of principal, premium, if any, and
interest at the respective Stated Maturities (or, in the case of redemption, on
the Redemption Date) or to institute suit for the enforcement thereof. (Senior
Indenture and Subordinated Indenture, Sections 507 and 508; Junior Subordinated
Indenture, Sections 5.7 and 5.8)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series under any of the Indentures may on
behalf of the Holders of all the Debt Securities of such series waive any past
defaults except (a) a default in payment of the principal of (or premium, if
any) or interest, if any, on any Debt Security of such series and (b) a default
in respect of a covenant or provision of the respective Indenture which cannot
be amended or modified without the consent of the Holder of each Debt Security
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affected; PROVIDED, HOWEVER, that with respect to Junior Subordinated Debt
Securities, if the Junior Subordinated Debt Securities of such series are held
by a Textron Trust or a trustee of such trust or by Textron Partnership, such
waiver or modification to such waiver shall not be effective until the holders
of a majority in liquidation preference of Trust Securities of the applicable
Textron Trust or of the applicable series of Partnership Preferred Securities,
as the case may be, shall have consented to such waiver or modification to such
waiver; PROVIDED FURTHER, that if the consent of the Holder of each Outstanding
Junior Subordinated Debt Security is required, such waiver shall not be
effective until each holder of the Trust Securities of the applicable Textron
Trust or of the applicable series of Partnership Preferred Securities, as the
case may be, shall have consented to such waiver. (Senior Indenture and
Subordinated Indenture, sec. 513; Junior Subordinated Indenture, sec. 5.13)
Each Indenture requires Textron to furnish to the applicable Debt Trustee
an annual statement as to defaults, if any, by Textron under such Indenture.
(Senior Indenture, sec. 1006; Subordinated Indenture, sec. 1004; Junior
Subordinated Indenture, sec. 10.4)
Modifications and Amendments. Modifications and amendments of each
Indenture may be made by Textron and the respective Debt Trustee with the
consent of the Holders of a majority in principal amount of the Debt Securities
at the time Outstanding of each series which is affected thereby, PROVIDED that
no such modification or amendment may, without the consent of the Holder of each
Debt Security affected thereby: (i) modify the terms of payment of principal,
premium, if any, or interest; or (ii) reduce the percentage of Holders of Debt
Securities necessary to modify or amend the applicable Indenture or waive
compliance by Textron with any covenant or past default or in the case of Senior
Debt Securities reduce quorum or voting requirements for meetings of Holders
PROVIDED, FURTHER, that with respect to Junior Subordinated Debt Securities, if
the Junior Subordinated Debt Securities of such series are held by a Textron
Trust or a trustee of such trust or by Textron Partnership, such supplemental
indenture shall not be effective until the holders of a majority in liquidation
preference of Trust Securities of the applicable Textron Trust or of the
applicable series of Partnership Preferred Securities, as the case may be, shall
have consented to such supplemental indenture; PROVIDED FURTHER, that if the
consent of the Holder of each Outstanding Junior Subordinated Debt Security is
required, such supplemental indenture shall not be effective until each holder
of the Trust Securities of the applicable Textron Trust or of the applicable
series of Partnership Preferred Securities, as the case may be, shall have
consented to such supplemental indenture. (Senior Indenture and Subordinated
Indenture, sec. 902; Junior Subordinated Indenture, sec. 9.2)
Discharge and Defeasance. Textron may discharge all of its obligations
(except those set forth below) to holders of any series of Debt Securities
issued under any Indenture, which Debt Securities have not already been
delivered to the applicable Debt Trustee for cancellation and which either have
become due and payable or are by their terms due and payable within one year (or
are to be called for redemption within one year) by depositing with the
applicable Debt Trustee an amount certified to be sufficient to pay when due the
principal of and premium, if any, and interest, if any, on all outstanding Debt
Securities of such series and to make any mandatory sinking fund payments
thereon when due. (Senior Indenture and Subordinated Indenture, sec. 401; Junior
Subordinated Indenture, sec. 4.1)
Unless otherwise specified in the applicable Prospectus Supplement with
respect to the Debt Securities of a series, Textron, at its option, (i) will be
discharged from any and all obligations in respect of the Debt Securities of
such series, other than with respect to Junior Subordinated Debt Securities
issued in connection with Trust Preferred Securities (except for certain
obligations to register the transfer or exchange of Debt Securities of such
series, to replace mutilated, defaced, destroyed, lost or stolen Debt Securities
of such series, and to maintain Paying Agents and hold moneys for payment in
trust) or (ii) need not comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Debt Securities of that
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenant and clause (f) of the
"Events of Default" above shall no longer be an Event of Default if, in either
case, Textron deposits with the Debt Trustee, in trust, money or U.S. Government
Obligations that through the payment of interest thereon and principal thereof
in accordance with their terms will provide money in an amount sufficient to pay
all the principal of (and premium, if any) and any interest on the Debt
Securities of such series on the dates such payments are due (which may include
one or more redemption
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dates designated by Textron) in accordance with the terms of such Debt
Securities. Such a trust may only be established, if, among other things,
Textron shall have delivered an Opinion of Counsel, which, in the case of a
discharge pursuant to clause (i), must be based upon a ruling or administrative
pronouncement of the Internal Revenue Service, to the effect that the Holders of
the Debt Securities will not recognize gain or loss for Federal income tax
purposes as a result of such deposit or defeasance and will be subject to
Federal income tax in the same manner as if such defeasance had not occurred.
(Senior Indenture and Subordinated Indenture, sec.sec. 402, 403 and 404; Junior
Subordinated Indenture, sec.sec. 4.2, 4.3 and 4.4) In the event Textron omits to
comply with its remaining obligations under the applicable Indenture after a
defeasance of such Indenture with respect to the Debt Securities of any series
as described under clause (ii) above and the Debt Securities of such series are
declared due and payable because of the occurrence of any undefeased Event of
Default, the amount of money and U.S. Government Obligations on deposit with the
Debt Trustee may be insufficient to pay amounts due on the Debt Securities of
such series at the time of the acceleration resulting from such Event of
Default. However, Textron will remain liable in respect of such payments.
Concerning the Debt Trustees. Each of the Senior Debt Trustee, the
Subordinated Debt Trustee and the Junior Subordinated Debt Trustee have extended
substantial credit facilities (the borrowings under which constitute Senior
Indebtedness) to Textron. Textron and certain of its subsidiaries also maintain
bank accounts, borrow money and have other customary banking or investment
banking relationships with each Debt Trustee in the ordinary course of business.
Global Securities. Each Indenture provides that the registered Debt
Securities of a series may be issued in the form of one or more fully registered
Global Securities (a "Registered Global Security") that will be deposited with a
depositary (a "Depositary") or with a nominee for a Depositary identified in the
Prospectus Supplement relating to such series and registered in the name of the
Depositary or a nominee thereof. (Senior Indenture and Subordinated Indenture,
sec. 301; Junior Subordinated Indenture, sec. 3.1) In such case, one or more
Registered Global Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
outstanding registered Debt Securities of the series to be represented by such
Registered Global Security or Securities. Unless and until it is exchanged in
whole for Debt Securities in definitive registered form, a Registered Global
Security may not be transferred except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or a
nominee of such successor. The Depositary currently accepts only debt securities
that are payable in U.S. dollars.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such series.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the Depositary
for such Registered Global Security will credit, on its book-entry registration
and transfer system, the participants' accounts with the respective principal
amounts of the Debt Securities represented by such Registered Global Security
beneficially owned by such participants. The accounts to be credited shall be
designated by any dealers, underwriters or agents participating in the
distribution of such Debt Securities. Ownership of beneficial interests in such
Registered Global Security will be shown on, and the transfer of such ownership
interests will be effected only through records maintained by the Depositary for
such Registered Global Security (with respect to interests of participants) and
on the records of participants (with respect to interests of persons holding
through participants). The laws of some states may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the registered owner of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debt Securities represented by such Registered Global Security for all
purposes under
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the applicable Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the Debt
Securities represented by such Registered Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such Debt
Securities in definitive form and will not be considered the owners or holders
thereof under the Indenture. Accordingly, each person owning a beneficial
interest in a Registered Global Security must rely on the procedures of the
Depositary for such Registered Global Security and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the applicable Indenture.
Textron understands that under existing industry practices, if Textron requests
any action of holders or if an owner of a beneficial interest in a Registered
Global Security desires to give or take any action which a holder is entitled to
give or take under the applicable Indenture, the Depositary for such Registered
Global Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners holding
through them.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
Textron, the applicable Debt Trustee or any other agent of Textron or agent of
the Debt Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
Textron expects that the Depositary for any Debt Securities represented by
a Registered Global Security, upon receipt of any payment of principal, premium
or interest in respect of such Registered Global Security, will immediately
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in such Registered Global Security as shown on
the records of such Depositary. Textron also expects that payments by
participants to owners of beneficial interests in such Registered Global
Security held through such participants will be governed by standing customer
instructions and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered
Global Security is at any time unwilling or unable to continue as Depositary or
ceases to be a clearing agency registered under the Exchange Act, and a
successor Depositary registered as a clearing agency under the Exchange Act is
not appointed by Textron within 90 days, Textron will issue such Debt Securities
in definitive form in exchange for such Registered Global Security. In addition,
Textron may at any time and in its sole discretion determine not to have any of
the Debt Securities of a series represented by one or more Registered Global
Securities and, in such event, will issue Debt Securities of such series in
definitive form in exchange for all of the Registered Global Security or
Securities representing such Debt Securities. Any Debt Securities issued in
definitive form in exchange for a Registered Global Security will be registered
in such name or names as the Depositary shall instruct the relevant Trustee. It
is expected that such instructions will be based upon directions received by the
Depositary from participants with respect to ownership of beneficial interests
in such Registered Global Security.
The Debt Securities of a series may also be issued in the form of one or
more bearer global Securities (a "Bearer Global Security") that will be
deposited with a common depositary for Euro-clear and Cedel Bank, societe
anonyme, or with a nominee for such depositary identified in the Prospectus
Supplement relating to such series. The specific terms and procedures, including
the specific terms of the depositary arrangement, with respect to any portion of
a series of Debt Securities to be represented by a Bearer Global Security will
be described in the Prospectus Supplement relating to such series.
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PARTICULAR TERMS OF THE SENIOR DEBT SECURITIES
RANKING OF SENIOR DEBT SECURITIES. The Senior Debt Securities will
constitute part of the senior debt of Textron and rank equally with all other
unsecured debt of Textron except subordinated debt.
LIMITATION UPON MORTGAGES. The Senior Indenture prohibits Textron and its
Restricted Subsidiaries from issuing, assuming or guaranteeing any mortgage,
security interest, pledge, lien or other encumbrance ("mortgages") upon any
Principal Property of Textron or any Restricted Subsidiary or upon any shares of
stock or indebtedness of any Restricted Subsidiary without equally and ratably
securing the Senior Debt Securities. The foregoing restriction, however, will
not apply to: (a) mortgages on property, shares of stock or indebtedness of any
corporation existing at the time such corporation becomes a Restricted
Subsidiary; (b) mortgages on property existing at the time of acquisition of
such property by Textron or a Restricted Subsidiary, or mortgages to secure the
payment of all or any part of the purchase price of such property upon the
acquisition thereof or to secure indebtedness incurred prior to, at the time of,
or within 180 days after, the acquisition thereof for the purpose of financing
all or any part of the purchase price thereof, or mortgages to secure the cost
of improvements to such acquired property; (c) mortgages to secure indebtedness
of a Restricted Subsidiary owing to Textron or another Restricted Subsidiary;
(d) mortgages existing at the date of the Senior Indenture; (e) mortgages on
property of a corporation existing at the time such corporation is merged into
or consolidated with Textron or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of a corporation as an
entirety or substantially as an entirety to Textron or a Restricted Subsidiary;
(f) certain mortgages in favor of governmental entities; or (g) extensions,
renewals or replacements of any mortgage referred to in the foregoing clauses
(a) through (f). (Section 1004)
Notwithstanding the restrictions outlined in the preceding paragraph,
Textron or any Restricted Subsidiary will be permitted to issue, assume or
guarantee any mortgage without equally and ratably securing the Senior Debt
Securities, provided that after giving effect thereto, the aggregate amount of
all debt so secured by mortgages (not including mortgages permitted under
clauses (a) through (g) above) does not exceed 10% of the shareholders' equity
of Textron and its consolidated Subsidiaries computed in accordance with
generally accepted accounting principles as set forth on the most recent
consolidated balance sheet of Textron and its consolidated Subsidiaries.
(Section 1004)
LIMITATION UPON SALE AND LEASEBACK TRANSACTIONS. The Senior Indenture
prohibits Textron and its Restricted Subsidiaries from entering into any sale
and leaseback transaction with respect to any Principal Property other than any
such transaction involving a lease for a term of not more than three years or
any such transaction between Textron and a Restricted Subsidiary or between
Restricted Subsidiaries, unless either (a) Textron or such Restricted Subsidiary
would be entitled to incur indebtedness secured by a mortgage on Principal
Property at least equal in amount to the Attributable Debt with respect to such
sale and leaseback transaction, without equally and ratably securing the Senior
Debt Securities, pursuant to the limitation in the Senior Indenture described
above under "Limitation upon Mortgages," or (b) Textron shall apply an amount
equal to the greater of the net proceeds of such sale or the Attributable Debt
with respect to such sale and leaseback transaction to (i) the retirement of
Senior Indebtedness that matures more than twelve months after the creation of
such Senior Indebtedness or (ii) the acquisition, construction, development or
improvement of properties, facilities or equipment which are, or upon such
acquisition, construction, development, or improvement will be, a Principal
Property or a part thereof. (Section 1005)
CERTAIN DEFINITIONS. The term "Attributable Debt" when used in connection
with a sale and leaseback transaction referred to above shall mean the total net
amount of rent (discounted at the rate per annum borne by the Senior Debt
Securities) required to be paid during the remaining term of the applicable
lease. (Section 101)
The term "Principal Property" shall mean any manufacturing plant or
manufacturing facility which is (i) owned by Textron or any Restricted
Subsidiary, (ii) located within the continental United States, and (iii) in the
opinion of the Board of Directors materially important to the total business
conducted by Textron and the Restricted Subsidiaries taken as a whole. (Section
101)
The term "Restricted Subsidiary" shall mean any Subsidiary (i)
substantially all the property of which is located within the continental United
States and (ii) which owns any Principal Property; provided that the
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term "Restricted Subsidiary" shall not include any Subsidiary which is
principally engaged in leasing or in financing receivables, or which is
principally engaged in financing Textron's operations outside the continental
United States. (sec. 101)
The term "Subsidiary" shall mean a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by Textron
or by one or more other Subsidiaries, or by Textron and one or more other
Subsidiaries. (sec. 101)
WAIVER OF CERTAIN COVENANTS. Compliance by Textron with the foregoing and
certain other restrictive covenants may be omitted with respect to the Senior
Debt Securities of any series if before the time for such compliance the Holders
of a majority in principal amount of such series at the time Outstanding shall
waive such compliance. (sec. 1007)
PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES
RANKING OF SUBORDINATED DEBT SECURITIES. The Subordinated Debt Securities
will rank senior to any Junior Subordinated Debt Securities and will be
subordinated and junior in right of payment to any Senior Debt Securities and
certain other indebtedness of Textron to the extent set forth in the Prospectus
Supplement that will accompany this Prospectus.
PARTICULAR TERMS OF THE JUNIOR SUBORDINATED DEBT SECURITIES
GENERAL. Junior Subordinated Debt Securities are issuable in one or more
series pursuant to a resolution of Textron's Board of Directors or established
in one or more indentures supplemental to the Junior Subordinated Indenture
(each, a "Supplemental Indenture"). (sec. 3.1)
RANKING OF JUNIOR SUBORDINATED DEBT SECURITIES. The Junior Subordinated
Debt Securities will be subordinated and junior in right of payment to any
Senior Debt Securities and Subordinated Debt Securities and certain other
indebtedness of Textron to the extent set forth in the Prospectus Supplement
that will accompany this Prospectus.
EVENTS OF DEFAULT. In addition to those Events of Default described above
under "Terms Applicable to Senior Debt Securities, Subordinated Debt Securities
and Junior Subordinated Debt Securities -- Events of Default," the Junior
Subordinated Indenture provides that the following are Events of Default
thereunder with respect to any series of Junior Subordinated Debt Securities:
(a) in the event Junior Subordinated Debt Securities of a series are issued and
sold to a Textron Trust or a trustee of such trust in connection with the
issuance of Trust Securities by such Textron Trust, such Textron Trust shall
have voluntarily or involuntarily dissolved, wound-up its business or otherwise
terminated its existence, except in connection with (i) the distribution of
Junior Subordinated Debt Securities to holders of Trust Securities in
liquidation or redemption of their interests in such Textron Trust upon a
Special Event, (ii) the redemption of all of the outstanding Trust Securities of
such Textron Trust or (iii) certain mergers, consolidations or amalgamations,
each as permitted by the Declaration of such Textron Trust, or (b) in the event
Junior Subordinated Debt Securities of a series are issued and sold to Textron
Partnership in connection with the issuance of Partnership Preferred Securities
by Textron Partnership, Textron Partnership shall have voluntarily or
involuntarily dissolved, wound-up its business or otherwise terminated its
existence, except in connection with (i) the distribution of Junior Subordinated
Debt Securities to holders of Partnership Preferred Securities in liquidation or
redemption of their interests in Textron Partnership, (ii) the redemption of all
of the outstanding Partnership Preferred Securities of Textron Partnership or
(iii) certain mergers, consolidations or amalgamations, each as permitted by the
limited partnership agreement of Textron Partnership. (sec. 5.1)
CERTAIN PROVISIONS APPLICABLE TO TEXTRON TRUSTS. In the event Junior
Subordinated Debt Securities are issued to a Textron Trust (or a trustee of such
trust) in connection with the issuance of Trust Securities by any Textron Trust,
such Junior Subordinated Debt Securities subsequently may be distributed PRO
RATA to the holders of such Trust Securities in connection with the dissolution
of such Textron Trust upon the occurrence of certain events described in the
Prospectus Supplement relating to such Trust Securities. Only one series of
Junior Subordinated Debt Securities will be issued to a Textron Trust, or a
trustee of such trust, in connection
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with the issuance of Trust Securities by such Textron Trust. If Junior
Subordinated Debt Securities are issued to a Textron Trust or a trustee of such
trust in connection with the issuance of Trust Securities by such Textron Trust
and (i) there shall have occurred any event that would constitute an Event of
Default, (ii) Textron shall be in default with respect to its payment of any
obligations under the related Trust Guarantee or Trust Common Guarantee (as
defined below), or (iii) Textron shall have given notice of its election to
defer payments or interest on such Junior Subordinated Debt Securities by
extending the interest payment period as provided in the Junior Subordinated
Indenture and such period, or any extension thereof, shall be continuing, then
(a) Textron will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payment with respect
thereto, and (b) Textron shall not make any payment of interest, principal (or
premium, if any, on) or repay, repurchase or redeem any debt securities issued
by Textron which rank pari passu with or junior to such Junior Subordinated Debt
Securities. The Trust Guarantee or Trust Common Guarantee, however, will except
from the foregoing (i) any stock dividends paid by Textron where the dividend
stock is the same stock as that on which the dividend is being paid and (ii) any
purchases by Textron of its common stock from The Paul Revere Corporation ("Paul
Revere") or its subsidiaries pursuant to the Agreement to Purchase Stock, dated
April 12, 1990, among Textron, The Paul Revere Life Insurance Company, The Paul
Revere Protective Life Insurance Company and The Paul Revere Variable Annuity
Insurance Company, and the Stock Purchase Agreement, dated as of September 23,
1993, between Textron and Paul Revere (together, the "Paul Revere Stock Purchase
Agreements").
In the event Junior Subordinated Debt Securities are issued to a Textron
Trust or a trustee of such trust in connection with the issuance of Trust
Securities of such Textron Trust, for so long as such Trust Securities remain
outstanding, Textron will covenant (i) to directly or indirectly maintain 100%
ownership of the Trust Common Securities of such Textron Trust; PROVIDED,
HOWEVER, that any permitted successor of Textron under the Junior Subordinated
Indenture may succeed to Textron's ownership of such Trust Common Securities
(ii) not voluntarily dissolve, wind-up or terminate such Textron Trust, except
in connection with a distribution of Junior Subordinated Debt Securities upon a
Special Event and in connection with certain mergers, consolidations or
amalgamations permitted by the Declaration of the applicable Textron Trust,
(iii) timely perform its duties as Sponsor of the applicable Textron Trust and
(iv) to use its reasonable efforts to cause such Textron Trust (a) to remain a
statutory business trust, except in connection with the distribution of Junior
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of such Textron Trust, the redemption of all of the Trust Securities of such
Textron Trust, or certain mergers, consolidations or amalgamations, each as
permitted by the Declaration of such Textron Trust, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes. (Section 10.5)
CERTAIN PROVISIONS APPLICABLE TO TEXTRON PARTNERSHIP. In the event Junior
Subordinated Debt Securities are issued to Textron Partnership in connection
with the issuance of a series of Partnership Preferred Securities by Textron
Partnership, such Junior Subordinated Debt Securities subsequently may be
distributed to the holders of such series of Partnership Preferred Securities in
connection with the dissolution of Textron Partnership upon the occurrence of
certain events described in the Prospectus Supplement relating to such series of
Partnership Preferred Securities. If Junior Subordinated Debt Securities are
issued to Textron Partnership in connection with the issuance of Partnership
Preferred Securities by Textron Partnership and (i) there shall have occurred
any event that would constitute an Event of Default, (ii) Textron shall be in
default with respect to its payment of any obligations under the related
Partnership Guarantee (as defined below), or (iii) Textron shall have given
notice of its election to defer payments or interest on such Junior Subordinated
Debt Securities by extending the interest payment period as provided in the
Junior Subordinated Indenture and such period, or any extension thereof, shall
be continuing, then (a) Textron will not declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payment with respect thereto and (b) Textron shall not make any
payment of interest, principal (or premium, if any, on) or repay, repurchase or
redeem any debt securities issued by Textron which rank PARI PASSU with or
junior to such Junior Subordinated Debt Securities. The Partnership Guarantee,
however, will except from the foregoing (i) any stock dividends paid by Textron
where the dividend stock is the same stock as that on which the
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dividend is being paid and (ii) any purchases by Textron of its common stock
from Paul Revere or its subsidiaries pursuant to the Paul Revere Stock Purchase
Agreements.
So long as any Junior Subordinated Debt Securities are held by Textron
Partnership, Textron will covenant that the General Partner shall not (i) direct
the time, method and place of conducting any proceeding for any remedy available
to the Special Representative, or exercising any trust or power conferred on the
Special Representative with respect to the Junior Subordinated Debt Securities,
(ii) waive any past default which is waivable under the Junior Subordinated
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Junior Subordinated Debt Securities shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Junior Subordinated Debt Securities or of the Junior Subordinated Indenture
without, in each case, obtaining the prior approval of the holders of at least a
majority or more of the aggregate liquidation preference of the Partnership
Preferred Securities then outstanding, provided, however, that where a consent
under the Junior Subordinated Debt Securities would require the consent of each
holder affected thereby, no such consent shall be given by the General Partner
without the prior consent of each holder of the Partnership Preferred
Securities. The General Partner shall not revoke any action previously
authorized or approved by a vote of Partnership Preferred Securities without the
approval of the holders of Partnership Preferred Securities representing a
majority or more of the aggregate liquidation preference of the Outstanding
Partnership Preferred Securities. (Section 10.6)
Textron will also covenant (i) to remain the sole direct or indirect
general partner of Textron Partnership and maintain direct or indirect ownership
of 100% of the general partner interests thereof; provided that any permitted
successor of Textron under the Junior Subordinated Indenture may succeed to
duties as General Partner, (ii) to contribute capital to the extent required to
maintain its capital at an amount equal to at least 3% of the total capital
contributions to Textron Partnership, (iii) not to voluntarily dissolve, wind-up
or terminate Textron Partnership, except in connection with the distribution of
Junior Subordinated Debentures upon a Special Event and in connection with the
certain mergers, consolidations or amalgamations permitted by the agreement of
limited partnership of Textron Partnership, (iv) timely perform all of its
duties as General Partner of Textron Partnership and (v) to use its reasonable
efforts to cause Textron Partnership to remain a limited partnership except in
connection with a distribution of Junior Subordinated Debt Securities upon a
Special Event as provided in the limited partnership agreement of Textron
Partnership, the redemption of all Partnership Preferred Securities of the
applicable series and in connection with certain mergers, consolidations or
amalgamations permitted by the limited partnership agreement of Textron
Partnership, and otherwise continue to be treated as a partnership for United
States federal income tax purposes. (Section 10.6)
DESCRIPTION OF TRUST PREFERRED SECURITIES
Each Textron Trust may issue, from time to time, only one series of Trust
Preferred Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Textron Trust authorizes the Regular
Trustees of such Textron Trust to issue on behalf of such Textron Trust one
series of Trust Preferred Securities. The Declaration will be qualified as an
indenture under the Trust Indenture Act. The Trust Preferred Securities will
have such terms, including distributions, redemption, voting, liquidation rights
and such other preferred, deferred or other special rights or such restrictions
as shall be set forth in the Declaration or made part of the Declaration by the
Trust Indenture Act. Reference is made to any Prospectus Supplement relating to
the Trust Preferred Securities of a Textron Trust for specific terms, including
(i) the distinctive designation of such Trust Preferred Securities, (ii) the
number of Trust Preferred Securities issued by such Textron Trust, (iii) the
annual distribution rate (or method of determining such rate) for Trust
Preferred Securities issued by such Textron Trust and the date or dates upon
which such distributions shall be payable, (iv) whether distributions on Trust
Preferred Securities issued by such Textron Trust shall be cumulative, and, in
the case of Trust Preferred Securities having such cumulative distribution
rights, the date or dates or method of determining the date or dates from which
distributions on Trust Preferred Securities issued by such Textron Trust shall
be cumulative, (v) the amount or amounts which shall be paid out of the assets
of such Textron Trust to the Holders of Trust Preferred Securities of such
Textron Trust upon voluntary or involuntary dissolution, winding-up or
termination of such Textron Trust, (vi) the obligation, if any, of such Textron
Trust to purchase or redeem Trust Preferred Securities issued by such Textron
Trust and the price or
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prices at which, the period or periods within which and the terms and conditions
upon which Trust Preferred Securities issued by such Textron Trust shall be
purchased or redeemed, in whole or in part, pursuant to such obligation, (vii)
the voting rights, if any, of Trust Preferred Securities issued by such Textron
Trust in addition to those required by law, including the number of votes per
Trust Preferred Security and any requirement for the approval by the holders of
Trust Preferred Securities, or of Trust Preferred Securities issued by one or
more Textron Trusts, or of both, as a condition to specified action or
amendments to the Declaration of such Textron Trust, and (viii) any other
relevant rights, preferences, privileges, limitations or restrictions of Trust
Preferred Securities issued by such Textron Trust consistent with the
Declaration of such Textron Trust or with applicable law. All Trust Preferred
Securities offered hereby will be guaranteed by Textron to the extent set forth
below under "Description of Trust Guarantees." Certain United States federal
income tax considerations applicable to any offering of Trust Preferred
Securities will be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Trust Preferred Securities, each Textron
Trust will issue one series of Trust Common Securities. The Declaration of each
Textron Trust authorizes the Regular Trustees of such trust to issue on behalf
of such Textron Trust one series of Trust Common Securities having such terms
including distributions, redemption, voting, liquidation rights or such
restrictions as shall be set forth therein. The terms of the Trust Common
Securities issued by such Textron Trust will be substantially identical to the
terms of the Trust Preferred Securities issued by such trust and the Trust
Common Securities will rank pari passu, and payments will be made thereon pro
rata with the Trust Preferred Securities except that, upon an Event of Default
under the Declaration, the rights of the holders of the Trust Common Securities
to payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. Except in certain limited circumstances, the Trust Common
Securities will also carry the right to vote and to appoint, remove or replace
any of the Textron Trustees of such Textron Trust. All of the Trust Common
Securities of a Textron Trust will be directly or indirectly owned by Textron.
DESCRIPTION OF TRUST GUARANTEES
Set forth below is a summary of information concerning the Trust Guarantees
that will be executed and delivered by Textron for the benefit of the holders,
from time to time, of Trust Preferred Securities. Each Trust Guarantee will be
qualified as an indenture under the Trust Indenture Act. The Chase Manhattan
Bank, N.A. will act as indenture trustee under each Trust Guarantee (the "Trust
Preferred Securities Guarantee Trustee"). The terms of each Trust Guarantee will
be those set forth in such Trust Guarantee and those made part of such Trust
Guarantee by the Trust Indenture Act. The summary does not purport to be
complete and is subject in all respects to the provisions of, and is qualified
in its entirety by reference to, the form of Trust Guarantee, which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part,
and the Trust Indenture Act. Each Trust Guarantee will be held by the Trust
Preferred Securities Guarantee Trustee for the benefit of the holders of the
Trust Preferred Securities of a Textron Trust.
GENERAL
Pursuant to and to the extent set forth in each Trust Guarantee, Textron
will irrevocably and unconditionally agree to pay in full to the holders of the
Trust Preferred Securities issued by a Textron Trust (except to the extent paid
by such Textron Trust), as and when due, regardless of any defense, right of
set-off or counterclaim which such Textron Trust may have or assert, the
following payments (the "Trust Guarantee Payments"), without duplication: (i)
any accrued and unpaid distributions that are required to be paid on such Trust
Preferred Securities, to the extent such Textron Trust shall have funds
available therefor, (ii) the redemption price, including all accrued and unpaid
distributions (the "Redemption Price"), to the extent such Textron Trust has
funds available therefor with respect to any Trust Preferred Securities called
for redemption by such Textron Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of such Textron Trust (other than in
connection with the distribution of Junior Subordinated Debt Securities to the
holders of Trust Preferred Securities or the redemption of all of the Trust
Preferred Securities) the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on such Trust Preferred
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Securities to the date of payment to the extent such Textron Trust has funds
available therefor or (b) the amount of assets of such Textron Trust remaining
for distribution to holders of such Trust Preferred Securities in liquidation of
such Textron Trust. Textron's obligation to make a Trust Guarantee Payment may
be satisfied by direct payment of the required amounts by Textron to the holders
of Trust Preferred Securities or by causing such Textron Trust to pay such
amounts to such holders.
Each Trust Guarantee will be a guarantee on a subordinated basis with
respect to the Trust Preferred Securities issued by a Textron Trust from the
time of issuance of such Trust Preferred Securities but will not apply to any
payment of distributions except to the extent such Textron Trust shall have
funds available therefor. If Textron does not make interest payments on the
Junior Subordinated Debt Securities purchased by a Textron Trust, such Textron
Trust will not pay distributions on the Trust Preferred Securities issued by
such Textron Trust and will not have funds available therefor. See "Particular
Terms of the Junior Subordinated Debt Securities." The Trust Guarantee, when
taken together with Textron's obligations under the Subordinated Debt
Securities, the Subordinated Indenture, and the Declaration provide a full and
unconditional guarantee on a subordinated basis by Textron of payments due on
the Trust Preferred Securities.
Textron has also agreed to irrevocably and unconditionally guarantee the
obligations of each Textron Trust with respect to the Trust Common Securities
(the "Trust Common Guarantees") to the same extent as the Trust Guarantees,
except that, upon an Event of Default under the Junior Subordinated Indenture,
holders of Trust Preferred Securities of Textron Trust under the Trust Guarantee
shall have priority over holders of Trust Common Securities of such Textron
Trust under the applicable Trust Common Guarantee with respect to distributions
and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF TEXTRON
In each Trust Guarantee, Textron will covenant that, so long as any Trust
Preferred Securities issued by a Textron Trust remain outstanding, if there
shall have occurred any event that would constitute an Event of Default under
such Trust Guarantee or the Declaration of such Textron Trust, then (a) Textron
will not declare or pay any dividend on, make any distributions with respect to,
or redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payment with respect thereto and (b)
Textron shall not make any payment of interest, principal (or premium, if any,
on) or repay, repurchase or redeem any debt securities issued by Textron which
rank pari passu with or junior to such Junior Subordinated Debt Securities. Each
Trust Guarantee, however, will except from the foregoing (i) any stock dividends
paid by Textron where the dividend stock is the same stock as that on which the
dividend is being paid and (ii) any purchases by Textron of its common stock
from Paul Revere or its subsidiaries pursuant to the Paul Revere Stock Purchase
Agreements.
MODIFICATION OF THE TRUST GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), each Trust Guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the outstanding
Trust Preferred Securities issued by a Textron Trust. The manner of obtaining
any such approval of holders of such Trust Preferred Securities will be set
forth in an accompanying Prospectus Supplement. All guarantees and agreements
contained in a Trust Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of Textron and shall inure to the benefit of the
holders of the Trust Preferred Securities of a Textron Trust then outstanding.
EVENTS OF DEFAULT
An Event of Default under the Trust Guarantee will occur upon the failure
of Textron to perform any of its payments or other obligations thereunder. The
holders of a majority in liquidation amount of the Trust Preferred Securities to
which a Trust Guarantee relates have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trust
Preferred Securities Guarantee Trustee in
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respect of the Trust Guarantee or to direct the exercise of any trust or power
conferred upon the Trust Preferred Securities Guarantee Trustee under the Trust
Guarantee.
Notwithstanding the foregoing, any holder of Trust Preferred Securities
relating to such Trust Guarantee may institute a legal proceeding directly
against Textron to enforce such holder's rights under such Trust Guarantee
without first instituting a legal proceeding against a Textron Trust, the Trust
Preferred Securities Guarantee Trustee or any other person or entity.
Textron will be required to provide annually to the Trust Preferred
Securities Guarantee Trustee a statement as to the performance by Textron of
certain of its obligations under each of the Trust Guarantees and as to any
default in such performance.
INFORMATION CONCERNING THE TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE
The Trust Preferred Securities Guarantee Trustee, prior to the occurrence
of a default, undertakes to perform only such duties as are specifically set
forth in the Trust Guarantee and, after default with respect to a Trust
Guarantee, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provision,
the Trust Preferred Securities Guarantee Trustee is under no obligation to
exercise any of the powers vested in it by a Trust Guarantee Agreement at the
request of any holder of Trust Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE TRUST GUARANTEES
Each Trust Guarantee will terminate as to the Trust Preferred Securities
issued by a Textron Trust upon full payment of the Redemption Price of all Trust
Preferred Securities of such Textron Trust, upon distribution of the Junior
Subordinated Debt Securities held by such Textron Trust to the holders of the
Trust Preferred Securities of a Textron Trust or upon full payment of the
amounts payable in accordance with the Declaration of such Textron Trust upon
liquidation of such Textron Trust. Each Trust Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Trust Preferred Securities issued by a Textron Trust must restore payment of
any sums paid under such Trust Preferred Securities or such Trust Guarantee.
STATUS OF THE TRUST GUARANTEES
Each Trust Guarantee will constitute an unsecured obligation of Textron and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Textron, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Textron and with any guarantee now
or hereafter entered into by Textron in respect of any preferred or preference
stock of any affiliate of Textron (including the Partnership Guarantee) and
(iii) senior to Textron's common stock. The terms of the Trust Preferred
Securities provide that each holder of Trust Preferred Securities issued by a
Textron Trust by acceptance thereof agrees to the subordination provisions and
other terms of the applicable Trust Guarantee.
Each Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under a Trust Guarantee
without instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Trust Guarantees will be governed by and construed in accordance with
the law of the State of New York.
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DESCRIPTION OF PARTNERSHIP PREFERRED SECURITIES
Textron Partnership may issue, from time to time, Partnership Preferred
Securities, in one or more series, having terms described in the Prospectus
Supplement relating thereto. The agreement of limited partnership of Textron
Partnership will be amended and restated (as so amended and restated, the
"Limited Partnership Agreement") to authorize the establishment of one or more
series of Partnership Preferred Securities, having such terms, including
dividends, redemption, voting, liquidation rights and such other preferred,
deferred or other special rights or such restrictions as shall be set forth
therein or otherwise established by the General Partner pursuant thereto.
Reference is made to the Prospectus Supplement relating to the Partnership
Preferred Securities of a particular series for specific terms, including (i)
the distinctive designation of such series that shall distinguish it from other
series; (ii) the number of Partnership Preferred Securities included in such
series, which number may be increased or decreased from time to time unless
otherwise provided by the General Partner in creating the series; (iii) the
annual dividend rate (or method of determining such rate) for Partnership
Preferred Securities of such series and the date or dates upon which such
dividends shall be payable; (iv) whether dividends on Partnership Preferred
Securities of such series shall be cumulative, and, in the case of Partnership
Preferred Securities of any series having cumulative dividend rights, the date
or dates or method of determining the date or dates from which dividends on
Partnership Preferred Securities of such series shall be cumulative; (v) the
amount or amounts that shall be paid out of the assets of Textron Partnership to
the holders of Partnership Preferred Securities of such series upon voluntary or
involuntary dissolution, winding-up or termination of Textron Partnership; (vi)
the price or prices at which, the period or periods within which, and the terms
and conditions upon which, Partnership Preferred Securities of such series may
be redeemed or purchased, in whole or in part, at the option of Textron
Partnership or the General Partner; (vii) the obligation, if any, of Textron
Partnership to purchase or redeem Partnership Preferred Securities of such
series and the price or prices at which, the period or periods within which, and
the terms and conditions upon which, Partnership Preferred Securities of such
series shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (viii) the voting rights, if any, of Partnership Preferred
Securities of such series in addition to those required by law, including the
number of votes per Partnership Preferred Security and any requirement for the
approval by the holders of Partnership Preferred Securities, or of Partnership
Preferred Securities of one or more series, or of both, as a condition to
specified action or amendments to the Limited Partnership Agreement; and (ix)
any other relative rights, preferences, privileges, limitations or restrictions
of Preferred Securities of the series not inconsistent with the Limited
Partnership Agreement or with applicable law. All Partnership Preferred
Securities offered hereby will be guaranteed by Textron to the extent set forth
below under "Description of Partnership Guarantee." Any applicable federal
income tax considerations applicable to any offering of Preferred Securities
will be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF PARTNERSHIP GUARANTEE
Set forth below is a summary of information concerning the Partnership
Guarantee that will be executed and delivered by Textron for the benefit of the
holders from time to time of Partnership Preferred Securities. The summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Partnership Guarantee,
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
Pursuant to and to the extent set forth in the Partnership Guarantee,
Textron will irrevocably and unconditionally agree to pay in full to the holders
of the Partnership Preferred Securities of each series (to the extent not paid
by Textron Partnership), as and when due, regardless of any defense, right of
set-off or counterclaim that Textron Partnership may have or assert, the
following payments (the "Partnership Guarantee Payments"), without duplication:
(i) any accrued and unpaid dividends that have theretofore been declared on the
Partnership Preferred Securities of such series, (ii) the redemption price,
including all accrued and unpaid dividends (the "Redemption Price"), with
respect to any Partnership Preferred Securities called for redemption by Textron
Partnership and (iii) upon a liquidation of Textron Partnership, the lesser of
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(a) the aggregate of the liquidation preference and all accrued and unpaid
dividends on the Partnership Preferred Securities of such series to the date of
payment and (b) the amount of assets of Textron Partnership remaining available
for distribution to holders of Partnership Preferred Securities of such series
in liquidation of Textron Partnership, payable in kind. Textron's obligation to
make a Partnership Guarantee Payment may be satisfied by direct payment of the
required amounts by Textron to the holders of Partnership Preferred Securities
or by causing Textron Partnership to pay such amounts to such holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to each series of Partnership Preferred Securities from the time of
issuance of such series of Partnership Preferred Securities, but will not apply
to any payment of dividends unless and until such dividends are declared. If
Textron does not make interest payments on the Junior Subordinated Debt
Securities purchased by Textron Partnership, it is expected that Textron
Partnership will not declare or pay dividends on the Partnership Preferred
Securities. See "Particular Terms of the Junior Subordinated Debt Securities."
Textron, as General Partner, will be required to declare distributions on the
Partnership Preferred Securities in connection with each distribution payment
date to the extent that Textron reasonably anticipates that, at the time of
payment, Textron Partnership has (1) cash on hand sufficient to make such
distribution payments and (2) funds legally available for such distribution
payment. The Partnership Guarantee, when taken together with Textron's
obligations under the Junior Subordinated Debt Securities, the Subordinated
Indenture, the Limited Partnership Agreement and the written action of the
General Partner with respect to the applicable series of Partnership Preferred
Securities will provide a full and unconditional guarantee on a subordinated
basis by Textron of payments due on the Preferred Securities.
CERTAIN COVENANTS OF TEXTRON
In the Partnership Guarantee, Textron will covenant that, so long as any
Partnership Preferred Securities remain outstanding, if at such time Textron
shall be in default with respect to its payment obligations under the
Partnership Guarantee or there shall have occurred any Event of Default under
the Junior Subordinated Indenture, then (a) Textron will not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payment with respect thereto, and (b) Textron shall not
make any payment of interest, principal (or premium, if any, on) or repay,
repurchase or redeem any debt securities issued by Textron which rank pari passu
with or junior to such Junior Subordinated Debt Securities. The Partnership
Guarantee, however, will except from the foregoing (i) any stock dividends paid
by Textron where the dividend stock is the same stock as that on which the
dividend is being paid and (ii) any purchases by Textron of its common stock
from Paul Revere or its subsidiaries pursuant to the Paul Revere Stock Purchase
Agreements.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will be
required), the Partnership Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding Partnership Preferred Securities. The manner of obtaining any such
approval of holders of the Partnership Preferred Securities of each series will
be as set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in the Partnership Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of Textron and shall inure to
the benefit of the holders of the Partnership Preferred Securities then
outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the Partnership Preferred Securities of any series upon full
payment of the Redemption Price of all Partnership Preferred Securities of such
series, and will terminate completely upon full payment of the amounts payable
in accordance with the Limited Partnership Agreement upon liquidation of Textron
Partnership. See "Description of Debt Securities -- Events of Default" and
"Particular Terms of the Junior Subordinated Debt Securities -- Events of
Default" for a description of the events of default and enforcement rights of
the holders of Junior Subordinated Debt Securities. The Partnership Guarantee
will continue to be effective or
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will be reinstated, as the case may be, if at any time any holder of Partnership
Preferred Securities of any series must, in accordance with the Delaware Revised
Uniform Limited Partnership Act (the "Partnership Act"), restore payment of any
sum paid under such series of Partnership Preferred Securities or the
Partnership Guarantee. The Partnership Act provides that a limited partner of a
limited partnership who wrongfully receives a distribution, may be liable to the
limited partnership for the amount of such distribution.
STATUS OF THE PARTNERSHIP GUARANTEE
Textron's obligations under the Partnership Guarantee to make the
Partnership Guarantee Payments will constitute an unsecured obligation of
Textron and will rank (i) subordinate and junior in right of payment to all
other liabilities of Textron, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Textron and with any guarantee now
or hereafter entered into by Textron in respect of any preferred or preference
stock of any affiliate of Textron (including any Trust Guarantee) and (iii)
senior to Textron's common stock. The Limited Partnership Agreement provides
that each holder of Partnership Preferred Securities by acceptance thereof
agrees to the subordination provisions and other terms of the Partnership
Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the guarantee without
first instituting a legal proceeding against any other person or entity). The
Partnership Guarantee will be deposited with the General Partner to be held for
the benefit of the holders of each series of the Partnership Preferred
Securities. In the event of the appointment of a Special Representative to,
among other things, enforce the Partnership Guarantee, the Special
Representative may take possession of the Partnership Guarantee for such
purpose. If no Special Representative has been appointed to enforce the
Partnership Guarantee, the General Partner has the right to enforce the
Partnership Guarantee on behalf of the holders of each series of the Partnership
Preferred Securities. The holders of not less than a majority in aggregate
liquidation preference of the Partnership Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available in respect of the Partnership Guarantee, including the giving of
directions to the General Partner or the Special Representative, as the case may
be. If the General Partner or the Special Representative fails to enforce the
Partnership Guarantee as above provided, any holder of Preferred Securities may
institute a legal proceeding directly against Textron to enforce its rights
under the Partnership Guarantee, without first instituting a legal proceeding
against Textron Partnership or any other person or entity. Notwithstanding the
foregoing, if Textron has failed to make a guarantee payment, a holder of
Partnership Preferred Securities may directly institute a proceeding against
Textron to enforce such payment under the Partnership Guarantee. The Partnership
Guarantee will not be discharged except by payment of the Partnership Guarantee
Payments in full (without duplication of amounts theretofore paid by Textron
Partnership).
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the law of the State of New York.
PLAN OF DISTRIBUTION
Textron may sell any series of Debt Securities and any Textron Trust and
Textron Partnership may sell Preferred Securities in one or more of the
following ways from time to time: (i) to or through underwriters or dealers,
(ii) directly to purchasers, or (iii) through agents. The Prospectus Supplement
with respect to any Offered Securities will set forth (i) the terms of the
offering of the Offered Securities, including the name or names of any
underwriters, dealers or agents, (ii) the purchase price of the Offered
Securities and the proceeds to Textron, Textron Trust or Textron Partnership, as
the case may be, from such sale, (iii) any underwriting discounts and
commissions or agency fees and other items constituting underwriters' or agents'
compensation, (iv) any initial public offering prices, (v) any discounts or
concessions allowed or reallowed or paid to dealers, and (vi) any securities
exchange on which such Offered Securities may be listed. Any initial
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<PAGE> 57
public offering price, discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time 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 Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless otherwise set forth
in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all the
Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, Textron, the
applicable Textron Trust and/or Textron Partnership will sell such Offered
Securities to the dealers as principals. The dealers may then resell such
Offered Securities to the public at varying prices to be determined by such
dealers at the time of resale. The names of the dealers and the terms of the
transaction will be set forth in the Prospectus Supplement relating thereto.
Any series of Debt Securities may be sold from time to time either directly
by Textron or through agents designated by Textron. Any series of Preferred
Securities may be sold from time to time either directly by a Textron Trust
and/or Textron Partnership or by their respective designated agents. Any agent
involved in the offer or sale of the Offered Securities in respect to which this
Prospectus is delivered will be named, and any commissions payable by Textron,
the applicable Textron Trust and/or Textron Partnership to such agent will be
set forth in the Prospectus Supplement relating thereto. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
The Debt Securities may be sold directly by Textron and the Preferred
Securities may be sold directly by a Textron Trust and/or Textron Partnership to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, Textron, the applicable
Textron Trust and/or Textron Partnership will authorize agents, underwriters or
dealers to solicit offers from certain types of institutions to purchase Offered
Securities from Textron, such Textron Trust and/or Textron Partnership at the
public offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts (the "Contracts") providing for payment and delivery on a
specified date or dates in the future. Such Contracts will not be subject to any
conditions except (a) the purchase by an institution of the Offered Securities
covered by its Contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject and (b) if the Offered Securities are being sold to underwriters, the
Company shall have sold to such underwriters the total principal amount of the
Offered Securities less the principal amount thereof covered by the Contracts.
The Prospectus Supplement will set forth the commission payable for solicitation
of such Contracts.
Agents, dealers and underwriters may be entitled, under agreements with
Textron, a Textron Trust and/or Textron Partnership, to indemnification by
Textron, the applicable Textron Trust and/or Textron Partnership against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers or underwriters
may be required to make in respect thereof. Agents, dealers and underwriters may
be customers of, engage in transactions with, or perform services for Textron, a
Textron Trust and/or Textron Partnership in the ordinary course of business.
Each series of Offered Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Offered
Securities are sold for public offering and sale may make a market in such
Offered Securities, but such underwriters will not be obligated to do so and may
discontinue any
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market making at any time without notice. The Offered Securities may or may not
be listed on a national securities exchange. No assurance can be given that
there will be a market for the Offered Securities.
LEGAL OPINIONS
The validity of the Senior Debt Securities, Subordinated Debt Securities,
Junior Subordinated Debt Securities, Trust Guarantees and Partnership Guarantee
and certain legal matters relating thereto will be passed upon for Textron, the
Textron Trusts and Textron Partnership by Michael D. Cahn, Assistant General
Counsel-Corporate of Textron. The validity of the Trust Preferred Securities and
Partnership Preferred Securities and certain legal matters relating thereto will
be passed upon for Textron, the Textron Trusts and Textron Partnership by
Skadden, Arps, Slate, Meagher & Flom, New York, New York.
EXPERTS
The consolidated financial statements and schedules of Textron Inc.
included or incorporated by reference in Textron's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994, incorporated in this Prospectus by
reference, 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 and schedules are, and
consolidated audited financial statements to be included in subsequently filed
documents will be, incorporated herein in reliance upon the reports of Ernst &
Young pertaining to such financial statements (to the extent covered by consents
filed with the Securities and Exchange Commission) given upon the authority of
such firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TEXTRON
INC., TEXTRON CAPITAL I OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF TEXTRON INC. OR TEXTRON CAPITAL
I SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-4
Recent Developments................... S-4
Textron Capital I..................... S-5
Risk Factors.......................... S-6
Textron Inc. Summary Financial Data... S-11
Capitalization of Textron Parent
Company Borrowing Group............. S-13
Textron Inc. Ratio of Income to Fixed
Charges............................. S-14
Accounting Treatment.................. S-14
Use of Proceeds....................... S-14
Description of the Preferred
Securities.......................... S-15
Description of the Junior Subordinated
Debt Securities..................... S-25
Effect of Obligations Under the Junior
Subordinated Debt Securities and the
Guarantee........................... S-30
United States Federal Income
Taxation............................ S-31
Underwriting.......................... S-35
Legal Matters......................... S-35
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 3
Textron Inc. ......................... 4
Textron Trusts........................ 4
Textron Finance, L.P. ................ 4
Use of Proceeds....................... 5
Description of Debt Securities........ 5
Description of Trust Preferred
Securities.......................... 14
Description of Trust Guarantees....... 15
Description of Partnership Preferred
Securities.......................... 18
Description of Partnership
Guarantee........................... 18
Plan of Distribution.................. 20
Legal Opinions........................ 22
Experts............................... 22
</TABLE>
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20,000,000
PREFERRED SECURITIES
TEXTRON CAPITAL I
% TRUST PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TEXTRON INC.
(LOGO)
------------
PROSPECTUS SUPPLEMENT
DATED FEBRUARY , 1996
------------
SMITH BARNEY INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
