<PAGE> 1
FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-88509
PROSPECTUS SUPPLEMENT
---------------------------------------------
(TO PROSPECTUS DATED DECEMBER 1, 1999)
$1,125,000,000
TEXTRON FINANCIAL CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------------
We may offer from time to time our Medium-Term Notes, Series E, in an
aggregate principal amount of up to $1,125,000,000. The specific terms of any
notes offered will be included in a pricing supplement. Unless we provide
otherwise in the applicable pricing supplement, the notes offered will have the
following general terms:
- The notes will mature in nine months or more from the date of issuance.
- The notes will be senior unsecured obligations of Textron Financial
Corporation.
- The notes will bear interest at a fixed or floating rate or will not bear
any interest. If the notes bear interest at a floating rate, the floating
interest rate formula will be based on one or more indices or formulas
plus or minus a fixed amount or multiplied by a specified percentage.
- We will pay amounts due on the notes in U.S. dollars or any other
consideration described in the applicable pricing supplement.
- We will specify in the applicable pricing supplement whether the notes
can be redeemed or repaid before their maturity and whether they are
subject to mandatory redemption, redemption at our option or repayment at
the option of the holder of the notes.
- Interest on the notes will be payable on the dates provided in this
prospectus supplement and in the applicable pricing supplement.
- The notes will not be listed on any securities exchange.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON PAGE S-3.
----------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- -----
<S> <C> <C>
Public offering price.............................. 100% $1,125,000,000
Agents' discount & commissions..................... .125%-.75% $1,406,250-$8,437,500
Proceeds, before expenses, to TFC.................. 99.875%-99.250% $1,123,593,750-$1,116,562,500
</TABLE>
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement, the accompanying prospectus or any pricing supplement is
truthful or complete. Any representation to the contrary is a criminal offense.
We may sell notes to the agents referred to below as principals for resale
at varying or fixed offering prices or through any agent as agent using its
reasonable efforts to sell notes on our behalf. We may also sell notes without
the assistance of an agent.
If we sell other securities referred to in the accompanying prospectus, the
amount of notes that we may offer and sell under this prospectus supplement will
be reduced.
----------------------
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
CHASE SECURITIES INC.
DEUTSCHE BANC ALEX. BROWN
FIRST UNION SECURITIES, INC.
FLEETBOSTON ROBERTSON STEPHENS
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
UBS WARBURG LLC
----------------------
The date of this prospectus supplement is June 28, 2000.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors................................................ S-3
Important Currency Information.............................. S-5
About this Prospectus Supplement............................ S-6
Ratio of Earnings to Fixed Charges.......................... S-6
Use of Proceeds............................................. S-7
Description of the Notes.................................... S-7
Special Provisions Relating to Foreign Currency Notes....... S-30
United States Federal Income Tax Considerations............. S-33
Plan of Distribution........................................ S-41
Validity of the Notes....................................... S-42
PROSPECTUS
About this Prospectus....................................... 1
Textron Financial Corporation............................... 1
Use of Proceeds............................................. 1
Ratio of Earnings to Fixed Charges.......................... 2
Description of Debt Securities.............................. 2
Plan of Distribution........................................ 11
Where You Can Find More Information......................... 12
Legal Opinions.............................................. 12
Experts..................................................... 12
</TABLE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. We have not, and the agents have not, authorized any other
person to provide you with different or additional information. If anyone
provides you with different or additional information, you should not rely on
it. We are not, and the agents are not, making an offer to sell these notes in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus supplement, the accompanying
prospectus and any pricing supplement, as well as information we previously
filed with the Securities and Exchange Commission and incorporated by reference,
is accurate only as of its date. Our business, financial condition, results of
operations and prospects may have changed since that date.
References in this prospectus supplement to "Textron Financial," "TFC,"
"we," "us" and "our" are to Textron Financial Corporation.
References in this prospectus supplement to "agent" or "agents" are to any
or all, respectively, of the agents listed below or any other agent appointed by
us.
S-2
<PAGE> 3
RISK FACTORS
Your investment in the notes is subject to certain risks, especially if the
notes involve in some way a foreign currency. This prospectus supplement does
not describe all of the risks of an investment in the notes, whether arising
because the notes are denominated in a currency other than U.S. dollars or
because the return on the notes is linked to one or more interest rate or
currency indices or formulas. Additional risks that we do not know about or that
we view as immaterial may also impair your investment. You should consult your
own financial and legal advisors about the risks entailed by an investment in
the notes and the suitability of your investment in the notes in light of your
particular circumstances. The notes are not an appropriate investment for you if
you are unsophisticated with respect to their significant components. Before
investing in the notes, you should consider carefully, among other factors, the
matters described below.
NOTES INDEXED TO INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS ARE MORE
VOLATILE THAN CONVENTIONAL DEBT SECURITIES
If you invest in notes indexed to one or more interest rates, currencies or
other indices or formulas, you could be subject to significant risks not
associated with a conventional fixed rate or floating rate debt security. These
risks include fluctuation of the indices or formulas and the possibility that
you will receive a lower, or no, amount of principal, premium or interest. You
may receive payments at different times than you expected. The value of an index
can fluctuate based on a number of interrelated factors, including economic,
financial and political events over which we have no control. In addition, if an
index or formula used to determine any amounts payable in respect of the notes
contains a multiplier or leverage factor, that feature will magnify the effect
of any change in the index or formula. In recent years, values of certain
indices and formulas have been volatile and volatility in those and other
indices and formulas may be expected in the future. You should not view the
historical experience of an index as an indication of its future performance.
NOTES DENOMINATED IN FOREIGN CURRENCIES ARE SUBJECT TO SIGNIFICANT RISKS
ASSOCIATED WITH EXCHANGE RATE FLUCTUATION, FOREIGN EXCHANGE CONTROLS AND OTHER
FACTORS OVER WHICH WE HAVE NO CONTROL
Unless we provide otherwise in the applicable pricing supplement, we will
make payments on foreign currency notes in the relevant foreign currencies. As
discussed below under "Special Provisions Relating to Foreign Currency
Notes -- Payment of Principal, Premium and Interest," any amounts payable by us
in the relevant foreign currency will be converted by the exchange rate agent
named in the applicable pricing supplement into U.S. dollars for payment to
holders of notes, unless we provide otherwise in the applicable pricing
supplement. If you invest in foreign currency notes or currency indexed notes,
your investment will be subject to significant risks not associated with
investments in debt securities denominated in U.S. dollars or U.S. dollar-based
indices. These risks include the possibility of significant changes in the rate
of exchange between the U.S. dollar and your payment currency and the
possibility of the imposition or modification of foreign exchange controls by
either the United States or the applicable foreign governments. We have no
control over the factors that generally affect these risks, such as economic,
financial and political events and the supply and demand for the applicable
currencies. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been volatile and that volatility may continue
in the future. Past fluctuations in any particular exchange rate are not
necessarily indicative, however, of fluctuations that may occur in the future.
Depreciation of your payment currency would result in a decrease in the U.S.
dollar-equivalent yield of your foreign currency notes or currency indexed
notes, in the U.S. dollar-equivalent value of the principal or any premium
payable at maturity of your notes and, generally, in the U.S. dollar-equivalent
market value of your notes. If payments on your foreign currency notes are
determined by reference to a formula containing a multiplier or leverage factor,
the effect of any change in the exchange rates between the applicable currencies
will be magnified. We may further describe the currency risks with respect to
your foreign currency notes or currency indexed notes in the applicable pricing
supplement.
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<PAGE> 4
Governmental exchange controls could affect exchange rates and the
availability of the payment currency for your foreign currency notes on a
required payment date. Even if there are no exchange controls, it is possible
that your payment currency will not be available on a required payment date due
to circumstances beyond our control. In these cases, we will be allowed to
satisfy our obligations in respect of your foreign currency notes in U.S.
dollars. See "Special Provisions Relating to Foreign Currency Notes -- Payment
Currency."
Foreign exchange rates can either float or be fixed by sovereign
governments. Governments, however, often do not voluntarily allow their
currencies to float freely in response to economic forces. Instead, governments
use a variety of techniques, such as intervention by that country's central
bank, or the imposition of regulatory controls or taxes, to affect the exchange
rate of their currencies. Governments may also issue a new currency to replace
an existing currency or alter the exchange rate or relative exchange
characteristics by the devaluation or revaluation of a currency. Thus, an
important risk in purchasing foreign currency notes or currency indexed notes
for U.S. dollar-based investors is that their U.S. dollar-equivalent yields
could be affected by governmental actions that could change or interfere with
currency valuation that was previously freely determined, fluctuations in
response to other market forces and the movement of currencies across borders.
We will make no adjustment or change in the terms of the foreign currency notes
or currency indexed notes if exchange rates become fixed, or if any devaluation
or revaluation or imposition of exchange or other regulatory controls or taxes
occur, or if other developments affecting the U.S. dollar or any applicable
currency occur.
The paying agent on the notes will make all calculations relating to
foreign currency notes or currency indexed notes. The determinations made by the
paying agent will, in the absence of clear error, be binding on holders of the
notes.
On January 1, 1999, Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, Portugal and Spain (the "Participating
States") commenced a new stage of economic and monetary union and introduced a
single currency (the "euro"), which is legal tender in the Participating States
in substitution for the national currencies of those countries. Bills and coins
denominated in euro will be circulated for the first time on January 1, 2002,
and for a three-year transitional period, until December 31, 2001, the current
currencies of the Participating States remain legal tender in those countries as
a subdivision of the euro. The conversion rate between the current currencies of
each Participating State and the euro have been fixed irrevocably by the Council
of European Union on January 1, 1999. The Council of European Union has adopted
regulations providing specific rules for the introduction of the euro.
For notes with a specified currency other than U.S. dollars we will include
in the applicable pricing supplement information concerning historical exchange
rates for that currency against the U.S. dollar and a brief description of any
relevant exchange controls.
EXCHANGE RATES MAY AFFECT THE VALUE OF A JUDGMENT OF A U.S. COURT INVOLVING
FOREIGN CURRENCY NOTES
The notes will be issued as a series of debt securities under an indenture,
dated as of December 9, 1999, between us and SunTrust Bank, as trustee, as
amended or supplemented. The indenture and the notes, including foreign currency
notes, except to the extent that we specify otherwise in a pricing supplement,
will be governed by, and construed in accordance with, the laws of the State of
New York. As a holder of notes, you may bring an action based upon an obligation
payable in a currency other than U.S. dollars in courts in the United States.
However, courts in the United States have not customarily rendered judgments for
money damages denominated in any currency other than U.S. dollars. In addition,
it is not clear whether in granting such a judgment, the rate of conversion
would be determined with reference to the date of default, the date judgment is
rendered or any other date. The Judiciary Law of the State of New York provides,
however, that an action based upon an obligation payable in a currency other
than U.S. dollars will be rendered in the foreign currency of the underlying
obligation and converted into U.S. dollars at a rate of exchange prevailing on
the date the judgment or decree is entered. In these cases,
S-4
<PAGE> 5
holders of foreign currency notes would bear the risk of exchange rate
fluctuations between the time the dollar amount of the judgment is calculated
and the time U.S. dollars were paid to the holders.
THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND THE APPLICABLE
PRICING SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES
DENOMINATED IN CURRENCIES OTHER THAN U.S. DOLLARS. WE BELIEVE THAT THESE RISKS
ARE POTENTIALLY TOO VARIABLE TO ASCERTAIN AND DESCRIBE WITH ANY REASONABLE
DEGREE OF CERTAINTY AND THAT PREPARATION OF A LIST OF EVERY POTENTIAL MATERIAL
RISK INCORPORATING EVERY ECONOMIC, FINANCIAL, POLITICAL AND MILITARY
CIRCUMSTANCE, AMONG OTHER THINGS, WOULD BE IMPRACTICAL. YOU SHOULD CONSULT YOUR
OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN
NOTES DENOMINATED IN CURRENCIES OTHER THAN U.S. DOLLARS. THESE NOTES ARE NOT AN
APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
REDEMPTION MAY ADVERSELY AFFECT YOUR RETURN ON THE NOTES
If your notes are redeemable at our option or are subject to mandatory
redemption, we may choose to, in the case of optional redemption, or must, in
the case of mandatory redemption, redeem your notes at times when prevailing
interest rates may be relatively low. Accordingly, you may not be able to
reinvest your redemption proceeds in a comparable security at an effective
interest rate as high as that of your notes being redeemed.
THERE MAY BE AN UNCERTAIN TRADING MARKET FOR YOUR NOTES; MANY FACTORS AFFECT THE
TRADING VALUE OF YOUR NOTES
Upon issuance, your notes will not have an established trading market. We
cannot assure you that a trading market for your notes will ever develop or be
maintained. Many factors independent of our creditworthiness may affect the
trading market of your notes. These factors include:
- the complexity and volatility of the index or formula applicable to your
notes,
- the method of calculating the principal, premium and interest in respect
of your notes,
- the time remaining to the maturity of your notes,
- the outstanding amount of the notes,
- the redemption features of your notes,
- the amount of other debt securities linked to the index or formula
applicable to your notes, and
- the level, direction and volatility of market interest rates generally.
In addition, because some notes were designed for specific investment
objectives or strategies, these notes will have a more limited trading market,
and will experience more price volatility. There may be a limited number of
buyers when you decide to sell your notes. This may affect the price you receive
for your notes or your ability to sell your notes at all. You should not
purchase notes unless you understand and know you can bear all of the investment
risks relating to your notes.
OUR CREDIT RATINGS MAY NOT REFLECT ALL RISKS OF AN INVESTMENT IN THE NOTES
Our credit ratings are an assessment of our ability to pay our obligations.
Consequently, real or anticipated changes in our credit ratings will generally
affect the market value of your notes. Our credit ratings, however, may not
reflect the potential impact of risks related to structure, market or other
factors discussed above on the value of your notes.
IMPORTANT CURRENCY INFORMATION
You are required to pay for each note in the currency provided for in the
applicable pricing supplement. If you are a prospective purchaser of a note
having a currency other than U.S. dollars, the agents may, in their discretion
and upon your request, arrange for the exchange of U.S. dollars into that
S-5
<PAGE> 6
currency to enable you to pay for the notes. Each exchange will be made by the
agent on the terms, conditions, limitations and charges that the agent may from
time to time establish in accordance with its regular foreign exchange practice.
You must pay all costs of this exchange. See "Special Provisions Relating to
Foreign Currency Notes -- General."
References in this prospectus supplement to "U.S. dollars," "U.S.$," or
"dollar" are to the lawful currency of the United States.
ABOUT THIS PROSPECTUS SUPPLEMENT
The notes are a series of the debt securities described in the attached
prospectus. The following is a description of the particular terms of the notes.
You should read this prospectus supplement together with the description of the
general terms and provisions of the debt securities set forth in the
accompanying prospectus. If the following description is inconsistent with the
description contained in the accompanying prospectus, then the following
description replaces and supersedes the description contained in the
accompanying prospectus.
The pricing supplement for each offering of notes will contain the specific
information and terms for that offering. If any information in the pricing
supplement, including any changes in the method of calculating interest on any
note, is inconsistent with this prospectus supplement or the accompanying
prospectus, you should rely on the information in the pricing supplement. The
pricing supplement may also add, update or change information contained in the
accompanying prospectus and this prospectus supplement. It is important for you
to consider the information contained in the accompanying prospectus, this
prospectus supplement and the applicable pricing supplement in making your
investment decision.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
THREE MONTHS YEARS ENDED
ENDED --------------------------------
MARCH 31, 2000 1999 1998 1997 1996 1995
-------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.55 1.63 1.72 1.70 1.65 1.60
</TABLE>
For these ratios, we calculated earnings by adding the following:
- pre-tax income from continuing operations before adjustment for minority
interests in consolidated subsidiaries or income or loss from investments
that we account for using the equity method of accounting,
- fixed charges,
- amortization of previously capitalized interest,
- distributed income of investments that we account for using the equity
method of accounting, and
- our share of pre-tax losses of investments that we account for using the
equity method of accounting and then subtracting:
-- capitalized interest and
-- minority interests in pre-tax income of subsidiaries that have not
incurred fixed charges.
For this purpose, we calculated fixed charges by adding the following:
- interest expensed and capitalized,
- amortized premiums, discounts and capitalized expenses relating to
indebtedness,
- an estimate of interest included in rental expense, and
- preferred stock dividend requirements, if any, of consolidated
subsidiaries.
S-6
<PAGE> 7
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the notes for general
corporate purposes unless otherwise indicated in the applicable pricing
supplement.
DESCRIPTION OF THE NOTES
The notes will be issued under an indenture, dated as of December 9, 1999,
between us and SunTrust Bank (formerly SunTrust Bank, Atlanta), as trustee, as
amended or supplemented from time to time. The term "senior debt securities" as
used in this prospectus supplement refers to all securities issued and issuable
from time to time under the indenture and includes the notes. The indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
senior debt securities and the indenture are more fully described in the
accompanying prospectus. The following summary of the material provisions of the
notes and of the indenture is not complete and is qualified in its entirety by
reference to the indenture. The summary does not contain all of the provisions
that you may want to consider as an investor in the notes. You may wish to
review the indenture. We have filed a copy of the indenture with the SEC as an
exhibit to the registration statement of which this prospectus supplement and
the accompanying prospectus are a part. Unless we provide otherwise in the
applicable pricing supplement, the notes will have the terms described below,
except that references to interest payments and interest-related information do
not apply to some original issue discount notes which are notes issued at prices
significantly less than the amount payable on them at maturity.
GENERAL
The notes will be issued as a series of debt securities under the indenture
and will initially be limited to an aggregate principal amount of $1,125,000,000
subject to our right to "reopen" that series and to issue additional notes.
Unless we provide otherwise in the applicable pricing supplement, all senior
debt securities, including the notes, issued and to be issued under the
indenture will be our unsecured general obligations and will rank equally in
right of payment with all of our other unsecured and unsubordinated indebtedness
from time to time outstanding.
The indenture does not limit the aggregate principal amount of senior debt
securities that we may issue. We may issue our senior debt securities from time
to time as a single series or in two or more separate series up to the aggregate
principal amount from time to time as we may authorize for each series. We may,
from time to time, without the consent of the holders of the notes, provide for
the issuance of notes or other senior debt securities in addition to the
$1,125,000,000 aggregate principal amount of notes offered by this prospectus
supplement. As of May 31, 2000, we had $4.9 billion aggregate principal amount
of senior debt securities issued and outstanding.
The notes will be offered on a continuing basis. Interest-bearing notes
will bear interest at either fixed or floating rates as specified in the
applicable pricing supplement. Notes may be issued at significant discounts from
their principal amount payable at maturity, which will be either the stated
maturity date or any date before the stated maturity date on which the principal
or an installment of principal of a note becomes due and payable, whether by the
declaration of acceleration, call for redemption at our option, repayment at the
option of the holder or otherwise. The stated maturity date or this prior date,
as the case may be, is referred to as the "maturity date" with respect to the
principal, premium, if any, and interest, payable on that date. For further
information regarding discount notes, see "-- Original Issue Discount Notes" and
"United States Federal Income Tax Considerations -- Tax Consequences to U.S.
Holders."
Unless we provide otherwise in the applicable pricing supplement, the notes
will be denominated in, and payments in respect of the notes will be made in,
United States dollars. The notes also may be denominated in, and payments in
respect of the notes may be made in, one or more foreign or composite
currencies. See "Special Provisions Relating to Foreign Currency
Notes -- Payment of Principal, Premium and Interest."
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<PAGE> 8
Each fixed rate note will mature on a day nine months or more from the date
of issue, as provided in the applicable pricing supplement, as selected by the
agent and agreed to by us. Each floating rate note will mature on an interest
payment date nine months or more from the date of issue as provided in the
applicable pricing supplement, as selected by the agent and agreed to by us.
Except as provided in the next sentence, in the event that an interest payment
date, maturity date or any date fixed for redemption or repayment of any note is
not a business day, principal, premium, if any, and interest payable on such
interest payment date, maturity date or date fixed for redemption or repayment
will be paid on the next succeeding business day with the same effect as if that
business day were the specified interest payment date, maturity date or date
fixed for redemption or repayment and no interest will accrue for the period
from and after the specified interest payment date, maturity date or date fixed
for redemption or repayment to the next succeeding business day. However, if any
interest payment date for a floating rate note, other than an interest payment
date at maturity, falls on a day that is not a business day, that interest
payment date will be postponed to the next business day and interest will
continue to accrue to the following business day, but in the case of a LIBOR
note, if the next business day is in the following calendar month, the interest
payment date will be the immediately preceding business day.
Unless we provide otherwise in the applicable pricing supplement, the notes
will be issuable only in fully registered book-entry form or certificated form,
without coupons, in denominations of $1,000 and integral multiples of $1,000
above that amount and the minimum denominations of each foreign currency note
will be in at least equivalent amounts in the applicable foreign currency, as
provided in the applicable pricing supplement. Notes in book-entry form may be
transferred or exchanged only through a participating member of The Depository
Trust Company or any other depositary as is identified in an applicable pricing
supplement. See "-- Book-Entry System." Registration of transfer of notes in
certificated form will be made at the corporate trust office of the trustee.
There will be no service charge for any registration of transfer or exchange of
notes, but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with any transfer or exchange, other
than exchanges pursuant to the indenture not involving any transfer.
The pricing supplement relating to a particular issuance of notes will
describe the following terms:
- whether the notes are fixed rate or floating rate notes or will not bear
any interest,
- the price (expressed as a percentage of the aggregate principal amount)
at which the notes will be issued,
- the date on which the notes will be issued,
- the maturity date of the notes,
- if the notes are fixed rate notes, the rate per annum at which the notes
will bear interest,
- if the notes are floating rate notes, the terms of the notes, including
those matters described below under "-- Floating Rate Notes,"
- whether the notes are original issue discount notes and whether they have
been issued with original issue discount for U.S. federal income tax
purposes,
- whether the notes are amortizing notes,
- whether the notes may be redeemed at our option, or repaid at the option
of the holder, prior to maturity as described under "-- Optional
Redemption" and "-- Repayment at the Noteholders' Option; Repurchase"
below and, if so, the provisions relating to that redemption or
repayment, including, in the case of any original issue discount notes,
the information necessary to determine the amount due upon redemption or
repayment,
- whether the notes will be initially represented by a global book-entry
note registered in the name of The Depository Trust Company or another
depositary or a certificate issued in definitive form,
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<PAGE> 9
- any relevant material tax consequences associated with the terms of those
notes which have not been described in "United States Federal Income Tax
Considerations" below,
- whether the notes will be denominated in a currency other than U.S.
dollars,
- the use of proceeds, if materially different from that disclosed in the
accompanying prospectus,
- the identity of any additional agent through or to whom the notes are
being sold,
- the amount of discounts or commissions to be paid to an agent if
different from those specifically set forth in the distribution agreement
which is incorporated by reference as an exhibit to the registration
statement of which this prospectus supplement and the accompanying
prospectus are a part, and
- any other terms of those notes that are not inconsistent with the
provisions of the indenture.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
We will make payments of principal and premium, if any, and interest on
notes in book-entry form through the trustee to the depositary or its nominee.
See "-- Book-Entry System."
In the case of notes in certificated form, we will make payment of
principal, premium, if any, and interest on the maturity of each note in
immediately available funds upon presentation and surrender of the note and, in
the case of any repayment on an optional repayment date, upon submission of a
duly completed election form, at the corporate trust office of the trustee in
the Borough of Manhattan, The City of New York, or at any other place as we may
designate. Payment of interest due at maturity will be made to the person to
whom payment of the principal and premium, if any, of the note in certificated
form will be made.
Unless we provide otherwise in the pricing supplement, we will pay interest
on each certificated note, other than interest payable upon maturity or upon
earlier redemption or repayment, at the corporate trust office of the trustee in
the Borough of Manhattan, The City of New York, or at any other office in the
Borough of Manhattan, The City of New York, as we specify or, at our option, by
check mailed to the address of the person in whose name a certificated note is
registered, as such address appears in the register maintained by the trustee.
However, in the case of a note issued between a regular record date and the
related interest payment date, interest for the period beginning on the original
issue date and ending on the first interest payment date will be paid to the
holder on the next succeeding interest payment date. A holder of $10,000,000 or
more in total principal amount of certificated notes of like tenor and terms
will be entitled to receive interest payments in U.S. dollars by wire transfer
of immediately available funds if appropriate wire transfer instructions have
been received in writing by the trustee not less than 15 days prior to that
interest payment date. Any such wire transfer instructions received by the
trustee will remain in effect until revoked by the holder. In the case of a
global book-entry note, the payment of interest will be made to a nominee of the
depositary.
The interest rates on notes issued in one transaction may be different from
the interest rates applicable to notes issued in another transaction depending
upon, among other things, the aggregate principal amount of notes purchased in
the applicable transaction. We may offer notes with similar variable terms but
different interest rates concurrently at any time. We may also concurrently
offer notes having different variable terms to different investors.
INTEREST AND INTEREST RATES
Unless otherwise specified in an applicable pricing supplement, each
interest-bearing note will bear interest from the date of issue at the rate per
annum or, in the case of a floating rate note, pursuant to the interest rate
formula, stated in the applicable note and in the applicable pricing supplement
until the principal of the note is paid or made available for payment. Interest
payments on fixed rate notes and floating rate notes will equal the amount of
interest accrued from and including the immediately preceding interest payment
date in respect of which interest has been paid or made available for payment or
from
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and including the date of issue, if no interest has been paid or made available
for payment with respect to the note, to, but excluding, the related interest
payment date or maturity, as the case may be.
We will pay interest in arrears on each interest payment date specified in
the applicable pricing supplement on which an installment of interest is due and
payable and at maturity. We will pay interest to the persons or entities in
whose names the notes are registered as of the regular record date. However,
interest that we pay at maturity, if any, will be payable to the persons to whom
the principal will be payable. If any note is originally issued between a
regular record date and the related interest payment date, we will make the
first payment of interest on that note on the interest payment date immediately
following the next succeeding regular record date to the registered holder on
that next succeeding regular record date. Unless we provide otherwise in the
applicable pricing supplement, the regular record date with respect to fixed
rate notes will be the last day of February and August, whether or not a
business day, immediately preceding the related interest payment date and the
regular record date with respect to floating rates notes will be the fifteenth
day, whether or not a business day, immediately preceding the related interest
payment date.
"Business day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York;
provided, however, that, with respect to non-United States dollar-denominated
notes, the day is also not a day on which commercial banks are authorized or
required by law, regulation or executive order to close in the principal
financial center, as defined below, of the country issuing the specified
currency or, if the specified currency is euro, the day is also a day on which
the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open; and provided further that, with respect to floating
rate notes as to which LIBOR is an applicable interest rate basis, the day is
also a London banking day.
"London banking day" means a day on which commercial banks are open for
business, including dealings in the LIBOR currency, as defined below under
"LIBOR Rate Notes," in London.
"Principal financial center" means, unless otherwise specified in the
applicable pricing supplement,
(1) the capital city of the country issuing the specified currency, or
(2) the capital city of the country to which the LIBOR currency
relates,
except, in each case, that with respect to United States dollars, Australian
dollars, Canadian dollars, Deutsche marks, Dutch guilders, Italian lire,
Portuguese escudos, South African rand and Swiss francs, the "principal
financial center" will be The City of New York, Sydney (and solely in the case
of the specified currency, Melbourne), Toronto, Frankfurt, Amsterdam, Milan,
London (solely in the case of the LIBOR currency), Johannesburg and Zurich,
respectively.
FIXED RATE NOTES
Each fixed rate note will bear interest at the annual rate provided in the
note and in the applicable pricing supplement. Unless we provide otherwise in
the applicable pricing supplement, the interest payment dates for the fixed rate
notes will be on March 15 and September 15 of each year. Unless we provide
otherwise in the applicable pricing supplement, interest on fixed rate notes
will be computed and paid on the basis of a 360-day year of twelve 30-day
months.
FLOATING RATE NOTES
Interest on floating rate notes will be determined by reference to the
applicable interest rate basis or interest rate bases, which may be one or more
of the following:
- the CMT rate,
- the CD rate,
- the Commercial Paper rate,
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- the Federal Funds rate,
- LIBOR,
- the Prime rate,
- the Treasury rate, or
- any other interest rate formula described in the applicable pricing
supplement.
TERMS. Each applicable pricing supplement will specify the terms of the
floating rate note being delivered, including the following:
- whether the floating rate note is a regular floating rate note, a
floating rate/fixed rate note or an inverse floating rate note,
- the interest rate basis or bases (the "base rate"),
- the initial interest rate,
- the fixed rate commencement date, if applicable,
- the fixed interest rate, if applicable,
- the interest reset dates,
- the interest payment dates,
- the period to maturity of the instrument or obligation with respect to
which the interest rate basis or bases will be calculated (the "index
maturity"),
- the maximum interest rate and minimum interest rate, if any,
- the number of basis points to be added to or subtracted from the related
interest rate basis or bases (the "spread"),
- the percentage of the related interest rate basis or bases by which the
interest rate basis or bases will be multiplied to determine the
applicable interest rate (the "spread multiplier"),
- if one or more of the specified interest rate bases is LIBOR, the LIBOR
currency, the index maturity and the designated LIBOR page, each as
defined below, and
- if one or more of the specified interest rate bases is the CMT rate, the
CMT Telerate Page and the weekly average or the monthly average.
If we designate the floating rate note as having an addendum attached, the
floating rate note will bear interest in accordance with the terms described in
the addendum and the applicable pricing supplement.
The interest rate borne by the floating rate notes will be determined as
follows:
REGULAR FLOATING RATE NOTE. Unless a floating rate note is designated as a
"floating rate/fixed rate note," an "inverse floating rate note" or as having an
addendum attached or as having "other/additional provisions" apply relating to a
different interest rate formula, the floating rate note will be designated as a
"regular floating rate note" and, except as described below or in an applicable
pricing supplement, will bear interest at the rate determined by reference to
the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Commencing on the first interest reset date, the interest rate of the regular
floating rate note will be reset on each interest reset date. However, the
interest rate for the period from the date of issuance to the first interest
reset date will be the initial interest rate provided in the pricing supplement.
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FLOATING RATE/FIXED RATE NOTE. If a floating rate note is designated as a
"floating rate/fixed rate note," then, except as described below or in the
applicable pricing supplement, it will bear interest at the rate determined by
reference to the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Commencing on the first interest reset date, the interest rate on the
floating rate/fixed rate note will be reset on each interest reset date;
provided, however, that:
- the interest rate for the period from the date of issuance to the first
interest reset date will be the initial interest rate, and
- the interest rate for the period commencing on, and including, the date
on which interest begins to accrue on a fixed rate basis to maturity,
i.e. the fixed rate commencement date, will be the fixed interest rate
provided in the applicable pricing supplement or, if no fixed interest
rate is provided in the applicable pricing supplement, the interest rate
for this period will be the interest rate in effect on the day
immediately preceding the date on which interest begins to accrue on a
fixed rate basis.
INVERSE FLOATING RATE NOTE. If a floating rate note is designated as an
"inverse floating rate note," then, except as described below or in the
applicable pricing supplement, it will bear interest at the fixed interest rate
specified in the applicable pricing supplement minus the rate determined by
reference to the applicable interest rate basis or bases:
- plus or minus the applicable spread, if any, and/or
- multiplied by the applicable spread multiplier, if any.
Unless we provide otherwise in the applicable pricing supplement, the interest
rate will not be less than zero.
Commencing on the first interest reset date, the interest rate on the
inverse floating rate note will be reset as of each interest reset date.
However, the interest rate in effect for the period from the date of issuance to
the first interest reset date will be the initial interest rate.
INTEREST RESET DATES. The rate of interest on each floating rate note will
be reset daily, weekly, monthly, quarterly, semi-annually or annually, as
provided in the applicable pricing supplement (the "interest reset date").
Unless we provide otherwise in the applicable pricing supplement, the interest
reset date will be:
- in the case of floating rate notes which reset daily, each business day,
- in the case of floating rate notes which reset weekly, the Wednesday of
each week, with the exception of weekly reset floating rate notes as to
which the Treasury rate is an applicable interest rate basis, which will
reset the Tuesday of each week, except as described below,
- in the case of floating rate notes which reset monthly, the third
Wednesday of each month,
- in the case of floating rate notes which reset quarterly, the third
Wednesday of March, June, September and December,
- in the case of floating rate notes which reset semi-annually, the third
Wednesday of the two months specified in the applicable pricing
supplement, and
- in the case of floating rate notes which reset annually, the third
Wednesday of the month specified in the applicable pricing supplement;
provided, however, that:
- the interest rate of a floating rate/fixed rate note will not reset after
the applicable fixed rate commencement date,
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- the initial interest rate, which is the interest rate in effect from the
original issue date to, but not including, the first interest reset date,
will be as provided in the applicable pricing supplement,
- if any interest reset date falls on a day that is not a business day, the
applicable interest reset date will be postponed to the next business
day, except, in the case of a LIBOR note, if that business day is in the
following calendar month, the interest reset date will be the immediately
preceding business day, and
- in the case of a floating rate note for which the Treasury rate is an
applicable interest rate basis, if the interest determination date would
otherwise fall on an interest reset date, then the applicable interest
reset date will be postponed to the next succeeding business day.
MAXIMUM AND MINIMUM INTEREST RATES. A floating rate note may also have
either or both of the following:
- a maximum numerical limitation, or ceiling, on the rate at which interest
may accrue during any interest period (a "maximum interest rate"), and
- a minimum numerical limitation, or floor, on the rate at which interest
may accrue during any period (a "minimum interest rate").
The indenture is, and any notes issued under the indenture will be,
governed by and construed in accordance with the laws of the State of New York.
Under present New York law, the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to securities in which
$2,500,000 or more has been invested. While we believe that New York law would
be given effect by a state or federal court sitting outside of New York, state
laws frequently regulate the amount of interest that may be charged to and paid
by a borrower, including, in some cases, corporate borrowers. We suggest that
prospective investors consult their personal advisors with respect to the
applicability of these laws. We have agreed for the benefit of the beneficial
owners of the notes, to the extent permitted by law, not to claim voluntarily
the benefits of any laws concerning usurious rates or interest against a
beneficial owner of the notes.
INTEREST DETERMINATION DATES. The interest rate applicable to each
interest reset period commencing on the related interest reset date will be the
rate determined as of the applicable "interest determination date" and
calculated on or prior to the calculation date, as defined below.
- The interest determination date with respect to a CD rate note, a CMT
rate note and a Commercial Paper rate note will be the second business
day preceding each interest reset date for the related note.
- The interest determination date with respect to a Federal Funds rate note
and a Prime rate note will be the first business day preceding each
interest reset date for the related note.
- The interest determination date with respect to a LIBOR note will be the
second London banking day preceding each interest reset date.
- The interest determination date with respect to a Treasury rate note will
be the day of the week in which that interest reset date falls on which
Treasury bills would normally be auctioned. Treasury bills are normally
sold at auction on Monday of each week. If Monday is a legal holiday, the
auction is normally held on the following Tuesday, but the auction may be
held on the preceding Friday. If, as the result of a legal holiday, an
auction is held on the preceding Friday, that Friday will be the interest
determination date relating to the interest reset date occurring in the
following week.
- The interest determination date relating to a floating rate note with an
interest rate that is determined by reference to two or more interest
rate bases will be the most recent business day which is at least two
business days before the applicable interest reset date for each interest
rate for the applicable floating rate note on which each interest reset
basis is determinable.
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CALCULATION DATE
Unless we provide otherwise in the applicable pricing supplement, SunTrust
Bank will be the calculation agent, which term includes any successor
calculation agent appointed by us. The calculation agent will determine for each
interest reset date the interest rate in the manner described in this prospectus
supplement. The calculation agent will notify the trustee of each determination
of the interest rate for any floating rate note promptly after the determination
is made. The calculation agent will, upon the request of the holder of any
floating rate note, provide the interest rate then in effect and, if determined,
the interest rate which will become effective on the next interest reset date
for that note.
Unless we provide otherwise in the applicable pricing supplement, the
calculation date relating to any interest determination date will be the earlier
of:
- the tenth day after the applicable interest determination date or, if
that day is not a business day, the following business day, or
- the business day preceding the applicable interest payment date or
maturity date, as the case may be.
INTEREST PAYMENTS
Each applicable pricing supplement will specify the dates on which interest
will be payable. Except as provided below or in the applicable pricing
supplement, interest on floating rate notes will be payable:
- in the case of floating rate notes with a daily, weekly or monthly
interest reset date, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year,
- in the case of floating rate notes with a quarterly interest reset date,
on the third Wednesday of March, June, September and December of each
year,
- in the case of floating rate notes with a semi-annual interest reset
date, on the third Wednesday of the two months specified in the
applicable pricing supplement,
- in the case of floating rate notes with an annual interest reset date, on
the third Wednesday of the month of each year specified in the applicable
pricing supplement, and
- at maturity.
All percentages resulting from any calculation on floating rate notes will
be rounded to the nearest one hundred thousandth of a percentage point, with
five one millionths of a percentage point rounded upwards. For example,
9.876545%, or .09876545, would be rounded to 9.87655%, or .0987655. All dollar
amounts used in or resulting from any calculation on floating rate notes will be
rounded to the nearest cent with one half cent being rounded upward.
With respect to each floating rate note, accrued interest from the date of
issue or from the last date to which interest has been paid is calculated by
multiplying the face amount of a note by an accrued interest factor. Unless
otherwise specified in the applicable pricing supplement, the accrued interest
factor is computed by adding together the interest factors calculated for each
day from the original issue date, or from the last date to which interest has
been paid, to the date for which accrued interest is being calculated. Unless we
provide otherwise in the applicable pricing supplement:
- In the case of notes for which the interest rate basis is the CD rate,
the Commercial Paper rate, the Federal Funds rate, LIBOR or the Prime
rate, the interest factor for each day will be computed by dividing the
interest rate applicable to each day by 360.
- In the case of notes for which the interest rate basis is the CMT rate or
the Treasury rate, the interest factor for each day will be computed by
dividing the interest rate applicable to each day by the actual number of
days in the year.
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- The interest factor for floating rate notes for which the interest rate
is calculated with reference to two or more interest rate bases will be
calculated in each period in the same manner as if only one of the
applicable interest rate bases applied.
Except as set forth in the applicable pricing supplement, the interest rate
in effect on each day will be:
- if the day is an interest reset date, the interest rate with respect to
the interest determination date relating to that interest reset date, or
- if the day is not an interest reset date, the interest rate with respect
to the interest determination date relating to the immediately preceding
interest reset date; provided, however, that the interest rate in effect
for the period from the date of issue to the first interest reset date
will be the initial interest rate specified in the applicable pricing
supplement.
Interest rates will be determined by the calculation agent as follows:
CD RATE NOTES. CD rate notes will bear interest at the rates, calculated
with reference to the CD rate and the spread and/or spread multiplier, if any,
specified in the applicable CD rate notes and in any applicable pricing
supplement.
"CD rate" means:
(1) the rate on the applicable interest determination date for
negotiable United States dollar certificates of deposit having the index
maturity specified in the applicable pricing supplement published in
H.15(519) under the heading "CDs (secondary market)," or
(2) if the rate referred to in clause (1) above is not so published by
3:00 P.M., New York City time, on the related calculation date, the rate on
the applicable interest determination date for negotiable United States
dollar certificates of deposit of the index maturity specified in the
applicable pricing supplement as published in H.15 daily update, or other
recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "CDs (secondary market)," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
on the notes as the arithmetic mean of the secondary market offered rates
as of 10:00 A.M., New York City time, on the applicable interest
determination date, of three leading non-bank dealers in negotiable United
States dollar certificates of deposit in The City of New York (which may
include an agent or its affiliates) selected by the calculation agent for
negotiable United States dollar certificates of deposit of major United
States money market banks with a remaining maturity closest to the index
maturity specified in the applicable pricing supplement in an amount that
is representative for a single transaction in that market at that time, or
(4) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3) above, the CD rate in effect on the applicable
interest determination date.
"H.15(519)" means the weekly statistical release designated as H.15(519),
or any successor publication, published by the Board of Governors of the Federal
Reserve System.
"H.15 daily update" means the daily update of H.15(519), available through
the world-wide-web site of the Board of Governors of the Federal Reserve System
at http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
CMT RATE NOTES. CMT rate notes will bear interest at the rates, calculated
with reference to the CMT rate and the spread and/or spread multiplier, if any,
specified in the applicable CMT rate notes and in any applicable pricing
supplement.
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"CMT rate" means:
(1) if CMT Telerate Page 7051 is specified in the applicable pricing
supplement:
(a) the percentage equal to the yield for United States Treasury
securities at "constant maturity" having the index maturity specified in
the applicable pricing supplement as published in H.15(519) under the
caption "Treasury Constant Maturities," as the yield is displayed on
Bridge Telerate, Inc. (or any successor service), on page 7051 or any
other page as may replace page 7051 on that service ("Telerate Page
7051"), for the applicable interest determination date, or
(b) if the rate referred to in clause (a) does not appear on
Telerate Page 7051, the percentage equal to the yield for United States
Treasury securities at "constant maturity" having the index maturity
specified in the applicable pricing supplement and for the applicable
interest determination date as published in H.15(519) under the caption
"Treasury Constant Maturities," or
(c) if the rate referred to in clause (b) does not appear in
H.15(519), the rate on the applicable interest determination date for
the period of the index maturity specified in the applicable pricing
supplement as may then be published by either the Federal Reserve System
Board of Governors or the United States Department of the Treasury that
the calculation agent determines to be comparable to the rate which
would otherwise have been published in H.15(519), or
(d) if the rate referred to in clause (c) is not published, the
rate on the applicable interest determination date calculated by the
calculation agent as a yield to maturity based on the arithmetic mean of
the secondary market bid prices at approximately 3:30 P.M., New York
City time, on the applicable interest determination date of three
leading primary United States government securities dealers in The City
of New York, which may include the agents or their affiliates (each, a
"reference dealer"), selected by the calculation agent from five
reference dealers selected by the calculation agent and eliminating the
highest quotation, or, in the event of equality, one of the highest, and
the lowest quotation or, in the event of equality, one of the lowest,
for United States Treasury securities with an original maturity equal to
the index maturity specified in the applicable pricing supplement, a
remaining term to maturity no more than 1 year shorter than the index
maturity specified in the applicable pricing supplement and in a
principal amount that is representative for a single transaction in the
securities in the market at that time, or
(e) if fewer than five but more than two of the prices referred to
in clause (d) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation agent based on
the arithmetic mean of the bid prices obtained and neither the highest
nor the lowest of the quotations shall be eliminated, or
(f) if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the applicable interest determination
date calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable interest
determination date of three reference dealers selected by the
calculation agent from five reference dealers selected by the
calculation agent and eliminating the highest quotation or, in the event
of equality, one of the highest and the lowest quotation or, in the
event of equality, one of the lowest, for United States Treasury
securities with an original maturity greater than the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity closest to the index maturity specified in the applicable
pricing supplement and in a principal amount that is representative for
a single transaction in the securities in the market at that time, or
(g) if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation
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agent based on the arithmetic mean of the bid prices obtained and
neither the highest nor the lowest of the quotations will be eliminated,
or
(h) if fewer than three prices referred to in clause (f) are
provided as requested, the CMT rate in effect on the applicable interest
determination date.
(2) if CMT Telerate Page 7052 is specified in the applicable pricing
supplement:
(a) the percentage equal to the one-week or one-month, as specified
in the applicable pricing supplement, average yield for United States
Treasury securities at "constant maturity" having the index maturity
specified in the applicable pricing supplement as published in H.15(519)
opposite the caption "Treasury Constant Maturities," as the yield is
displayed on Bridge Telerate, Inc., or any successor service, on page
7052 or any other page as may replace that specified page on that
service ("Telerate Page 7052"), for the week or month, as applicable,
ended immediately preceding the week or month, as applicable, in which
the related interest determination date falls, or
(b) if the rate referred to in clause (a) does not appear on
Telerate Page 7052, the percentage equal to the one-week or one-month,
as specified in the applicable pricing supplement, average yield for
United States Treasury securities at "constant maturity" having the
index maturity specified in the applicable pricing supplement and for
the week or month, as applicable, preceding the applicable interest
determination date as published in H.15(519) opposite the caption
"Treasury Constant Maturities," or
(c) if the rate referred to in clause (b) does not appear in
H.15(519), the one-week or one-month, as specified, average yield for
United States Treasury securities at "constant maturity" having the
index maturity specified in the applicable pricing supplement as
otherwise announced by the Federal Reserve Bank of New York for the week
or month, as applicable, ended immediately preceding the week or month,
as applicable, in which the related interest determination date falls,
or
(d) if the Federal Reserve Bank of New York does not publish the
rate referred to in clause (c), the rate on the applicable interest
determination date calculated by the calculation agent as a yield to
maturity based on the arithmetic mean of the secondary market bid prices
at approximately 3:30 P.M., New York City time, on the applicable
interest determination date of three reference dealers selected by the
calculation agent from five reference dealers selected by the
calculation agent and eliminating the highest quotation, or, in the
event of equality, one of the highest, and the lowest quotation or, in
the event of equality, one of the lowest, for United States Treasury
securities with an original maturity equal to the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity no more than 1 year shorter than the index maturity specified
in the applicable pricing supplement and in a principal amount that is
representative for a single transaction in the securities in the market
at that time, or
(e) if fewer than five but more than two of the prices referred to
in clause (d) are provided as requested, the rate on the applicable
interest determination date calculated by the calculation agent based on
the arithmetic mean of the bid prices obtained and neither the highest
nor the lowest of the quotations shall be eliminated, or
(f) if fewer than three prices referred to in clause (d) are
provided as requested, the rate on the applicable interest determination
date calculated by the calculation agent as a yield to maturity based on
the arithmetic mean of the secondary market bid prices as of
approximately 3:30 P.M., New York City time, on the applicable interest
determination date of three reference dealers selected by the
calculation agent from five reference dealers selected by the
calculation agent and eliminating the highest quotation or, in the event
of equality, one of the highest and the lowest quotation or, in the
event of equality, one of the lowest, for United States Treasury
securities with an original maturity greater than the index maturity
specified in the applicable pricing supplement, a remaining term to
maturity closest to the index maturity specified in the
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applicable pricing supplement and in a principal amount that is
representative for a single transaction in the securities in the market
at the time, or
(g) if fewer than five but more than two prices referred to in
clause (f) are provided as requested, the rate will be calculated by the
calculation agent based on the arithmetic mean of the bid prices
obtained and neither the highest nor the lowest of the quotations will
be eliminated, or
(h) if fewer than three prices referred to in clause (f) are
provided as requested, the CMT rate in effect on the applicable interest
determination date.
If two United States Treasury securities with an original maturity
greater than the index maturity specified in the applicable pricing
supplement have remaining terms to maturity equally close to the index
maturity specified in the applicable pricing supplement, the quotes for
the United States Treasury security with the shorter original remaining
term to maturity will be used.
COMMERCIAL PAPER RATE NOTES. Commercial Paper rate notes will bear
interest at the rates, calculated with reference to the Commercial Paper rate
and the spread and/or spread multiplier, if any, specified in the applicable
Commercial Paper rate notes and in any applicable pricing supplement.
"Commercial Paper rate" means:
(1) the money market yield on the applicable interest determination
date of the rate for commercial paper having the index maturity specified
in the applicable pricing supplement published in H.15(519) under the
caption "Commercial Paper-Nonfinancial," or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the money market
yield of the rate on the applicable interest determination date for
commercial paper having the index maturity specified in the applicable
pricing supplement published in H.15 daily update, or other recognized
electronic source used for the purpose of displaying the applicable rate,
under the caption "Commercial Paper-Nonfinancial," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the money market yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on the applicable interest
determination date of three leading dealers of United States dollar
commercial paper in The City of New York, which may include the agent and
its affiliates, selected by the calculation agent for commercial paper
having the index maturity specified in the applicable pricing supplement
placed for industrial issuers whose bond rating is "Aa," or the equivalent,
from a nationally recognized statistical rating organization, or
(4) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (3), the Commercial Paper rate in effect on the
applicable interest determination date.
"Money market yield" means a yield calculated in accordance with the following
formula and expressed as a percentage:
<TABLE>
<S> <C> <C>
D X 360
Money market yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
FEDERAL FUNDS RATE NOTES. Federal Funds rate notes will bear interest at
the rates, calculated with reference to the Federal Funds rate and the spread
and/or spread multiplier, if any, specified in the applicable Federal Funds rate
notes and in any applicable pricing supplement.
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"Federal Funds rate" means:
(1) the rate on the applicable interest determination date for United
States dollar federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," as displayed on Bridge Telerate, Inc. or any
successor service on page 120 or any other page as may replace the
applicable page on that service, "Telerate Page 120," or
(2) if the rate referred to in clause (1) does not appear on Telerate
Page 120 or is not so published by 3:00 P.M., New York City time, on the
related calculation date, the rate on the applicable interest determination
date for United States dollar federal funds published in H.15 daily update,
or other recognized electronic source used for the purpose of displaying
the applicable rate, under the caption "Federal Funds/Effective Rate," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of
United States dollar federal funds transactions in The City of New York,
which may include the agent or its affiliates, selected by the calculation
agent before 9:00 A.M., New York City time, on the applicable interest
determination date, or
(4) if the brokers selected by the calculation agent are not quoting
as mentioned in clause (3), the Federal Funds rate in effect on the
applicable interest determination date.
LIBOR RATE NOTES. LIBOR rate notes will bear interest at the rates,
calculated with reference to LIBOR and the spread and/or spread multiplier, if
any, specified in the applicable LIBOR rate notes and in any applicable pricing
supplement.
"LIBOR" means:
(1) if "LIBOR Telerate" is specified in the applicable pricing
supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified
in the applicable pricing supplement as the method for calculating LIBOR,
LIBOR will be the rate for deposits in the LIBOR currency, as defined
below, having the index maturity specified in the applicable pricing
supplement, commencing on the second London banking day immediately
following that interest determination date that appears on the designated
LIBOR Page as of 11:00 A.M., London time, on the applicable interest
determination date, or
(2) if "LIBOR Reuters" is specified in the applicable pricing
supplement, LIBOR will be the arithmetic mean of the offered rates for
deposits in the LIBOR currency having the index maturity specified in the
applicable pricing supplement, commencing on the second London banking day
immediately following that interest determination date, that appear on the
designated LIBOR page specified in the applicable pricing supplement as of
11:00 A.M., London time, on the applicable interest determination date. If
the designated LIBOR page by its terms provides only for a single rate,
then the single rate will be used, or
(3) with respect to a LIBOR interest determination date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on
the designated LIBOR page as specified in clauses (1) and (2),
respectively, the rate calculated by the calculation agent as the
arithmetic mean of at least two quotations obtained by the calculation
agent after requesting the principal London offices of each of four major
reference banks, which may include affiliates of the agent, in the London
interbank market to provide the calculation agent with its offered
quotation for deposits in the LIBOR currency for the period of the index
maturity specified in the applicable pricing supplement, commencing on the
second London banking day immediately following the applicable interest
determination date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on the applicable interest
determination date and in a principal amount that is
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representative for a single transaction in the applicable LIBOR currency in
that market at that time, or
(4) if fewer than two quotations referred to in clause (3) are so
provided, the rate on the applicable interest determination date calculated
by the calculation agent as the arithmetic mean of the rates quoted at
approximately 11:00 A.M., in the applicable principal financial center(s),
on the applicable interest determination date by three major banks, which
may include affiliates of the agent, in the applicable principal financial
center selected by the calculation agent for loans in the LIBOR currency to
leading European banks, having the index maturity specified in the
applicable pricing supplement and in a principal amount that is
representative for a single transaction in the applicable LIBOR currency in
that market at that time, or
(5) if the banks so selected by the calculation agent are not quoting
as mentioned in clause (4), LIBOR in effect on the applicable interest
determination date.
"LIBOR currency" means the currency specified in the applicable pricing
supplement as to which LIBOR will be calculated or, if no currency is specified
in the applicable pricing supplement, United States dollars.
"Designated LIBOR page" means either:
- if "LIBOR Telerate" is designated in the applicable pricing supplement or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable pricing supplement as the method for calculating LIBOR, the
display on Bridge Telerate, Inc. or any successor service on the page
specified in such pricing supplement or any page as may replace the
specified page on that service for the purpose of displaying the London
interbank rates of major banks for the applicable LIBOR currency, or
- if "LIBOR Reuters" is specified in the applicable pricing supplement, the
display on the Reuters Monitor Money Rates Service or any successor
service on the page specified in the applicable pricing supplement or any
other page as may replace the specified page on that service for the
purpose of displaying the London interbank rates of major banks for the
applicable LIBOR currency.
PRIME RATE NOTES. Prime rate notes will bear interest at the rates,
calculated with reference to the Prime rate and the spread and/or spread
multiplier, if any, specified in the applicable Prime rate notes and any
applicable pricing supplement.
"Prime rate" means:
(1) the rate on the applicable interest determination date as
published in H.15(519) under the caption "Bank Prime Loan," or
(2) if the rate referred to in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date published in H.15 daily update, or
such other recognized electronic source used for the purpose of displaying
the applicable rate under the caption "Bank Prime Loan," or
(3) if the rate referred to in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
particular interest determination date calculated by the calculation agent
as the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the Reuters Screen US PRIME 1 Page as the particular
bank's prime rate or base lending rate as of 11:00 A.M., New York City
time, on the applicable interest determination date, or
(4) if fewer than four rates described in clause (3) are so published
by 3:00 P.M., New York City time, on the related calculation date as shown
on the Reuters Screen US PRIME 1 Page, the rate on the applicable interest
determination date calculated by the calculation agent as the arithmetic
mean of the prime rates or base lending rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close
of business on the applicable interest determination
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date by three major banks, which may include affiliates of the agent, in
The City of New York selected by the calculation agent, or
(5) if the banks selected by the calculation agent are not quoting as
mentioned in clause (4), the Prime rate in effect on the applicable
interest determination date.
"Reuters Screen US Prime 1 Page" means the display on the Reuters Monitor Money
Rates Service or any successor service on the "US PRIME 1 Page" or other page as
may replace the US PRIME 1 Page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks.
TREASURY RATE NOTES. Treasury rate notes will bear interest at the rates,
calculated with reference to the Treasury rate and the spread and/or spread
multiplier, if any, specified in the applicable Treasury rate notes and in any
applicable pricing supplement.
"Treasury rate" means:
(1) the rate from the auction held on the applicable interest
determination date (the "auction") of direct obligations of the United
States ("treasury bills") having the index maturity specified in the
applicable pricing supplement under the caption "Investment Rate" on the
display on Bridge Telerate, Inc. or any successor service on page 56 or any
other page as may replace page 56 on that service, "Telerate Page 56," or
page 57 or any other page as may replace page 57 on that service, "Telerate
Page 57," or
(2) if the rate described in clause (1) is not so published by 3:00
P.M., New York City time, on the related calculation date, the bond
equivalent yield of the rate for the applicable treasury bills as published
in H.15 daily update, or other recognized electronic source used for the
purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Auction High," or
(3) if the rate described in clause (2) is not so published by 3:00
P.M., New York City time, on the related calculation date, the bond
equivalent yield of the auction rate of the applicable treasury bills
announced by the United States Department of the Treasury, or
(4) if the rate referred to in clause (3) is not announced by the
United States Department of the Treasury, or if the Auction is not held,
the bond equivalent yield of the rate on the applicable interest
determination date of treasury bills having the index maturity specified in
the applicable pricing supplement published in H.15(519) under the caption
"U.S. Government Securities/Treasury Bills/Secondary Market," or
(5) if the rate referred to in clause (4) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date of the applicable treasury bills as
published in H.15 daily update, or other recognized electronic source used
for the purpose of displaying the applicable rate, under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market," or
(6) if the rate referred to in clause (5) is not so published by 3:00
P.M., New York City time, on the related calculation date, the rate on the
applicable interest determination date calculated by the calculation agent
as the bond equivalent yield of the arithmetic mean of the secondary market
bid rates, as of approximately 3:30 P.M., New York City time, on the
applicable interest determination date, of three primary United States
government securities dealers, which may include the agent or its
affiliates, selected by the calculation agent, for the issue of treasury
bills with a remaining maturity closest to the index maturity specified in
the applicable pricing supplement, or
(7) if the dealers selected by the calculation agent are not quoting
as mentioned in clause (6), the Treasury rate in effect on the applicable
interest determination date.
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"Bond equivalent yield" means a yield calculated in accordance with the
following formula and expressed as a percentage:
<TABLE>
<S> <C> <C>
D X N
Bond equivalent yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for treasury bills quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366, as the
case may be, and "M" refers to the actual number of days in the interest period
for which interest is being calculated.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of notes, including the
determination of one or more interest rate bases, the specification of one or
more interest rate bases, the calculation of the interest rate applicable to a
floating rate note, the applicable interest payment dates, the stated maturity
date, any redemption or repayment provisions, or any other matters relating to
the applicable notes, may be modified by the terms as specified under "Other
Provisions" on the face of the applicable notes or in an addendum relating to
the applicable notes, if so specified on the face of the applicable notes and in
the applicable pricing supplement.
ORIGINAL ISSUE DISCOUNT NOTES
Original issue discount notes are notes issued at a discount from the
principal amount payable at maturity and which may be considered to be issued
with original issue discount which must be included in income for U.S. federal
income tax purposes at a constant rate. Unless we provide otherwise in the
applicable pricing supplement, if the principal of any original issue discount
note becomes due prior to its maturity either as a result of acceleration caused
by an event of default or through redemption, the amount of principal due and
payable on the note will be limited to (1) the issue price of the note plus, (2)
in the case of a redemption, any premium provided in the applicable pricing
supplement, plus (3) the original issue discount amortized from the original
issue date to the date of acceleration or redemption. This amortization will be
calculated using the "constant yield method," computed in accordance with the
rules under the Internal Revenue Code of 1986 and the regulations thereunder in
effect on the date of the acceleration or redemption. Original issue discount
notes may pay no interest currently or may bear interest at a rate that at the
time of issuance is below market rates. Additional considerations relating to
any original issue discount notes will be described in the applicable pricing
supplement. For further information regarding the federal income tax
implications for U.S. holders of discount notes, see "United States Federal
Income Tax Considerations -- Tax Consequences to U.S. Holders."
AMORTIZING NOTES
We may offer, from time to time, amortizing notes with the amount of
principal and interest payable in installments over the term of these notes.
Unless we provide otherwise in the applicable pricing supplement, interest on
each amortizing note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to amortizing notes will be applied first
to interest due and payable and then to the reduction of the unpaid principal
amount. Further information concerning additional terms and provisions of the
amortizing notes will be provided in the applicable pricing supplement,
including a table setting forth repayment information for the amortizing notes.
OPTIONAL REDEMPTION
Unless we provide otherwise in the applicable pricing supplement:
- the notes will not be subject to any sinking fund, and
- we cannot at our option redeem the notes prior to maturity.
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If the pricing supplement provides that we may redeem the notes, it will
indicate the terms on which the notes will be redeemable at our option. The
pricing supplement will also indicate:
- the initial redemption date from which the notes may be redeemed, and
- the redemption price at which, together with accrued interest to the
initial redemption date, the notes may be redeemed.
Unless we provide otherwise in the applicable pricing supplement, the
redemption price will be an amount equal to the initial redemption percentage
provided in the applicable pricing supplement multiplied by the unpaid principal
amount of the notes to be redeemed. The initial redemption percentage will
decline at each anniversary of the initial redemption date by a percentage
specified in the applicable pricing supplement of the principal amount to be
redeemed until the redemption price is 100% of the principal amount to be
redeemed.
Unless otherwise specified in the applicable pricing supplement, notice of
redemption will be provided by mailing a notice of the redemption to each holder
by first class mail, postage prepaid, at least 30 days and not more than 60 days
prior to the date fixed for redemption to the address of each holder set forth
in our books. Unless we provide otherwise in the applicable pricing supplement,
we may exercise our option to redeem the notes in whole or in part in increments
of $1,000 or any other integral multiple of an authorized denomination specified
in the applicable pricing supplement (provided that any remaining principal
amount thereof shall be at least $1,000 or other minimum authorized denomination
applicable thereto). In the event of redemption of a note in part only, we will
issue a new note for the unredeemed portion of the note to the holder of the
note upon the cancellation of the note.
Whenever less than all of the notes of like tenor and terms are to be
redeemed, the notes to be redeemed will be selected by the trustee by a method
the trustee finds appropriate and fair.
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
Unless we provide otherwise in the applicable pricing supplement, the notes
will not be repayable at the option of the holder. If applicable, the pricing
supplement relating to a particular issuance of notes will indicate that those
notes may be repayable at the option of the holder on a date or dates provided
prior to the maturity date and, unless we provide otherwise in the applicable
pricing supplement, at a price equal to 100% of the principal amount of the
notes, together with accrued interest to the date of repayment. The pricing
supplement will also indicate the other terms applicable to any repayment at the
option of a holder.
In order for notes to be repaid, the trustee must receive at least 30 days
but not more than 60 days before the optional repayment date:
- in the case of a note in certificated form, the note and the form on the
reverse side of the note entitled "Option to Elect Repayment" duly
completed, or
- in the case of a note in book-entry form, instructions to that effect
from the applicable beneficial owner of the global security representing
the notes to the depositary and forwarded by the depositary to the
trustee.
Exercise of the repayment option by the holder of a note will be
irrevocable. The repayment option may be exercised by the holder of a note for
less than the entire principal amount of the note in increments of $1,000 or any
integral multiples of an authorized denomination specified in the applicable
pricing supplement but in that event the principal amount of the note remaining
outstanding after repayment must be an authorized denomination. If a note is
partially repaid, the note will be canceled and we will issue a new note for the
remaining principal amount in the name of the holder of the repaid note.
If a note is represented by a book-entry note held through The Depository
Trust Company, The Depository Trust Company's nominee will be the holder of the
note and, therefore, will be the only entity that can exercise a right to
repayment. In order to ensure that The Depository Trust Company's nominee will
timely exercise a right to repayment relating to a particular note, the
beneficial owner of the note must
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instruct the broker or other direct or indirect participant through which it
holds an interest in the note to notify The Depository Trust Company of its
desire to exercise a right to repayment. Different firms have different
deadlines for accepting instructions from their customers. Accordingly, each
beneficial owner should consult the broker or other direct or indirect
participant through which it holds an interest in a note in order to find out
the deadlines for giving instructions in order for the broker or participant to
deliver timely notice to The Depository Trust Company. All instructions given to
participants from beneficial owners of notes in book-entry form relating to the
option to elect repayment will be irrevocable. In addition, at the time
instructions are given, each beneficial owner will cause the participant through
which it owns its interest to transfer its interest in the global security or
securities representing the related notes in book-entry form, on the
depositary's records, to the trustee. See " -- Book-Entry System."
If applicable, we will comply with the requirements of Section 14(e) of the
Securities Exchange Act of 1934 and the rules promulgated thereunder and any
other securities laws or regulations in connection with any repayment.
We may at any time purchase notes at any price in the open market or
otherwise. Notes purchased by us may, at our discretion, be held, resold or
surrendered to the registrar for cancellation.
RENEWABLE NOTES
We may issue renewable notes, which are notes that will automatically renew
at their maturity date unless the holder of the renewable note elects to
terminate the automatic extension feature by giving notice in the manner
described in the related pricing supplement.
The holder of the renewable note must give notice of termination at least
15, but not more than 30, days prior to the renewal date. The holder of a
renewable note may terminate the automatic extension for less than all of the
holder's renewable notes only if the terms of the note as described in the
related pricing supplement specifically permit partial termination. An election
to terminate the automatic extension of any portion of the renewable note is not
revocable and will be binding on the holder of the note. If the holder elects to
terminate the automatic extension of the maturity of the note, the holder will
become entitled to the principal and interest accrued up to the renewal date.
The related pricing supplement will identify a final maturity date beyond which
the maturity date cannot be renewed.
If a note is represented by a global note, a "global note," the depositary
or its nominee will be the holder of the note and therefore will be the only
entity that can exercise a right to terminate the automatic extension of a note.
In order to ensure that the depositary or its nominee will timely exercise a
right to terminate the automatic extension provisions of a particular note, the
beneficial owner of the note must instruct the broker or other participant
through which it holds an interest in the note to notify the depositary of its
desire to terminate the automatic extension of the note. Different firms have
different cut-off times for accepting instructions from their customers and,
accordingly, each beneficial owner should consult the broker or other
participant through which it holds an interest in a note to ascertain the
cut-off time by which an instruction must be given for delivery of timely notice
to the depositary or its nominee.
EXTENDIBLE NOTES
We may issue notes whose stated maturity date may be extended at our
option, an "extendible note," for one or more whole year periods, each an
"extension period," up to but not beyond a final maturity date described in the
related pricing supplement.
We may exercise our option to extend the extendible note by notifying the
applicable trustee (or any duly appointed paying agent) prior to the then
effective maturity date. If we elect to extend the extendible note, the trustee
(or paying agent) will mail (at least 40 days prior to the maturity date) to the
registered holder of the extendible note a notice ("extension notice") informing
the holder of our election, the new maturity date and any updated terms. Upon
the mailing of the extension notice, the maturity of such note will be extended
automatically as set forth in the extension notice.
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In connection with the extension of an extendible note, we may, at our
option, establish a higher interest rate, in the case of a fixed rate note, or a
higher spread and/or spread multiplier, in the case of a floating rate note, for
the extension period by mailing or causing the applicable trustee (or paying
agent) to mail notice of that higher interest rate or higher spread and/or
spread multiplier to the holder of the note. The notice will be irrevocable.
If we elect to extend the maturity of an extendible note, the holder of the
note will have the option to instead elect repayment of the note by us on the
then effective maturity date. In order for an extendible note to be so repaid on
the maturity date, we must receive, prior to the maturity date:
- the note with the form "Option to Elect Repayment" on the reverse of the
note duly completed, or
- a telegram, telex, facsimile transmission or a letter from a member of a
national securities exchange or the National Association of Securities
Dealers, Inc., the "NASD," or a commercial bank or trust company in the
United States setting forth the name of the holder of the note, the
principal amount of the note, the principal amount of the note to be
repaid, the certificate number or a description of the tenor and terms of
the note, a statement that the option to elect repayment is being
exercised and a guarantee that the note to be repaid, together with the
duly completed form entitled "Option to Elect Repayment" on the reverse
of the note, will be received by the applicable trustee (or paying agent)
not later than the fifth business day after the date of the telegram,
telex, facsimile transmission or letter; provided, however, that the
telegram, telex, facsimile transmission or letter will only be effective
if the applicable trustee (or paying agent) receives the note and form
duly completed by that fifth business day. The option may be exercised by
the holder of an extendible note for less than the aggregate principal
amount of the note then outstanding if the principal amount of the note
remaining outstanding after repayment is an authorized denomination.
A holder who has tendered an extendible note for repayment may, by written
notice to us, revoke the tender until 3:00 pm New York City time on the 15th day
preceding the then effective maturity date.
If a note is represented by a global note, the depositary or its nominee
will be the holder of that note and therefore will be the only entity that can
exercise a right to repayment. To ensure that the depositary or its nominee
timely exercises a right to repayment with respect to a particular note, the
beneficial owner of that note must instruct the broker or other participant
through which it holds an interest in the note to notify the depositary of its
desire to exercise a right to repayment. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other participant through which it
holds an interest in a note to determine the cut-off time by which an
instruction must be given for timely notice to be delivered to the depositary or
its nominee.
FUNGIBLE NOTES
We also have the ability under the indenture to "reopen" a previously
issued tranche of notes and issue additional notes of such tranche or establish
additional terms of such tranche to the extent permitted under the indenture. We
may also issue notes with the same terms as previously issued notes.
INDEXED NOTES
We may from time to time offer "indexed notes" with the amount of
principal, premium and/or interest payable in respect thereof to be determined
with reference to the price or prices of specified commodities or stocks, to the
exchange rate of one or more designated currencies relative to an indexed
currency or to other items, in each case as specified in the applicable pricing
supplement. In certain cases, holders of indexed notes may receive a principal
payment on the maturity date that is greater than or less than the principal
amount of such indexed notes depending upon the relative value on the maturity
date of the specified indexed item. Information as to the method for determining
the amount of principal, premium, if any, and/or interest, if any, payable in
respect of indexed notes, certain historical information
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<PAGE> 26
with respect to the specified indexed item and any material tax considerations
associated with an investment in indexed notes will be specified in the
applicable pricing supplement.
BOOK-ENTRY SYSTEM
Description of the Global Notes
Upon issuance, all notes in book-entry form having the same date of issue,
interest rate or formula, maturity and redemption and/or repayment provisions,
if any, and otherwise having identical terms and provisions will be represented
by one or more fully registered global notes. Each global note will be deposited
with, or on behalf of, The Depository Trust Company (the "Depository" or "DTC")
as depositary and will be registered in the name of the Depository or a nominee
of the Depository. Unless and until it is exchanged in whole or in part for
notes in certificated form, no global note may be transferred except as a whole
by (1) the Depository to a nominee of the Depository, (2) by a nominee of the
Depository to the Depository or to another nominee of the Depository or (3) by
the Depository or any of its nominees to a successor of the Depository or a
nominee of the successor.
DTC Procedures
The following is based on information furnished by the Depository:
The Depository will act as securities depositary for the notes in
book-entry form. The notes in book-entry form will be issued as fully registered
securities registered in the name of Cede & Co., the Depository's partnership
nominee. One fully registered global note will be issued for each issue of notes
in book-entry form, each in the aggregate principal amount of the issue, and
will be deposited with the depositary. If, however, the aggregate principal
amount of any issue exceeds $400,000,000, one global note will be issued with
respect to each $400,000,000 of principal amount and an additional global note
will be issued with respect to any remaining principal amount of the issue.
The Depository is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. The Depository holds securities that its participating
members, referred to as participants, deposit with the Depository. The
Depository also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants of the Depository include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. The
Depository is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the Depository's system is
also available to others such as securities brokers and dealers, banks and trust
companies, referred to as indirect participants, that clear through or maintain
a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to the Depository and its participants are on
file with the SEC.
Purchasers of notes in book-entry form under the Depository's system must
be made by or through direct participants, which will receive a credit for those
notes in book-entry form on the Depository's records. The ownership interest of
each actual purchaser of each note in book-entry form represented by a global
note is, in turn, to be recorded on the records of direct participants and
indirect participants. Beneficial owners in book-entry form will not receive
written confirmation from the Depository of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the direct
participants or indirect participants through which the beneficial owner entered
into the transaction. Transfers of ownership interests in a global note
representing notes in book entry form are to be accomplished by entries made on
the books of participants acting on behalf of beneficial owners. Beneficial
owners of a global note
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representing notes in book-entry form will not receive notes in certificated
form representing their ownership interests therein, except in the event that
use of the book-entry system for such notes is discontinued.
To facilitate subsequent transfers, all global notes representing notes in
book-entry form that are deposited with, or on behalf of, the Depository are
registered in the name of the Depository's nominee, Cede & Co. The deposit of
global notes with, or on behalf of, the Depository and their registration in the
name of Cede & Co. effect no change in beneficial ownership. The Depository has
no knowledge of the actual beneficial owners of the global notes representing
the notes in book-entry form; the Depository's records reflect only the identity
of the direct participants to whose accounts such notes in book-entry form are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by the Depository to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depository nor Cede & Co. will consent or vote with respect to
the global notes representing the notes in book-entry form. Under its usual
procedures, the Depository mails an omnibus proxy to us as soon as possible
after the applicable record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants, identified in a
listing attached to the omnibus proxy, to whose accounts the notes in book entry
form are credited on the applicable record date.
We will make principal, premium, if any, and/or interest payments on the
global notes representing the notes in book-entry form in immediately available
funds to the Depository. The Depository's practice is to credit direct
participants' accounts on the applicable payment date in accordance with their
respective holdings shown on its records unless the Depository has reason to
believe that it will not receive payment on the applicable payment date.
Payments by participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of the applicable participant and not of the
Depository, the trustee or us, subject to any statutory or regulatory
requirements as may be in effect from time to time. We and the trustee are
responsible for the payment of principal, premium, if any, and/or interest to
the Depository. The Depository is responsible for disbursement of payments to
direct participants. The direct participants and indirect participants are
responsible for the disbursement of payments to the beneficial owners.
If applicable, redemption notices will be sent to Cede & Co. If less than
all of the notes in book-entry form of like tenor and terms are being redeemed,
the Depository's practice is to determine by lot the amount of the interest of
each direct participant in the issue to be redeemed.
A beneficial owner will give notice of any option to elect to have its
notes in book-entry form repaid by us, through its participant, to the trustee,
and will effect delivery of the applicable notes in book-entry form by causing
the direct participant to transfer the participant's interest in the global
notes in book-entry form, on the Depository's records, to the trustee.
The Depository may discontinue providing its services as securities
depositary with respect to the notes in book-entry form at any time by giving
reasonable notice to us or the trustee. In the event that a successor securities
depositary is not obtained, notes in certificated form are required to be
printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through the Depository or a successor securities depositary. In that event,
notes in certificated form will be printed and delivered.
The laws of some states may require that certain purchasers of securities
take physical delivery of securities in definitive form. Such limits and such
laws may impair the ability to own, transfer or pledge beneficial interests in
global notes.
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So long as the Depository, or its nominee, is the registered owner of a
global note, the Depository or its nominee, as the case may be, will be
considered the sole owner or holder of the notes represented by that global note
for all purposes under the indenture. Except as provided below, beneficial
owners of a global note will not be entitled to have the notes represented by a
global note registered in their names, will not receive or be entitled to
receive physical delivery of the notes in definitive form and will not be
considered the owners or holders thereof under the indenture. Accordingly, each
person owning a beneficial interest in a global note must rely on the procedures
of the Depository or any successor depositary and, if that person is not a
participant, on the procedures of the participant through which that person owns
its interest, to exercise any rights of a holder under the indenture. We
understand that under existing industry practices, if we request any action of
holders or if an owner of a beneficial interest in a global note desires to give
or take any action which a holder is entitled to give or take under the
indenture, the Depository would authorize the participants holding the relevant
beneficial interests to give or take the desired action, and the participants
would authorize beneficial owners owning through the participants to give or
take the desired action or would otherwise act upon the instructions of
beneficial owners.
The information in this section concerning the Depository and the
Depository's system has been obtained from sources that we believe to be
reliable, but we take no responsibility for the accuracy of the information.
Clearstream Luxembourg and Euroclear Systems
Investors in notes may elect to hold interests in book-entry notes through
Clearstream Banking, societe anonyme ("Clearstream Luxembourg") or Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear") if they are participants of these systems, or
indirectly through organizations which are participants in these systems.
Clearstream Luxembourg and Euroclear will hold interests on behalf of their
participants through customers' securities accounts in Clearstream Luxembourg's
and Euroclear's names on the books of their respective depositaries, which in
turn will hold these interests in customers' securities accounts in the
depositaries' names on the books of The Depository Trust Company. Citibank, N.A.
will act as U.S. depositary for Clearstream Luxembourg and The Chase Manhattan
Bank will act as U.S. depositary for Euroclear.
Clearstream Luxembourg advises that it is incorporated under the laws of
Luxembourg as a professional depositary. Clearstream Luxembourg holds securities
for its participating organizations ("Clearstream Luxembourg participants") and
facilitates the clearance and settlement of securities transactions between
Clearstream Luxembourg participants through electronic book-entry changes in
accounts of Clearstream Luxembourg participants, thereby eliminating the need
for physical movement of certificates. Clearstream Luxembourg provides to
Clearstream Luxembourg participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream Luxembourg
interfaces with domestic markets in several countries. As a professional
depositary, Clearstream Luxembourg is subject to regulation by the Luxembourg
Monetary Institute. Clearstream Luxembourg participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the agents or their affiliates. Indirect access to
Clearstream Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through, or maintain a custodial
relationship with, a Clearstream Luxembourg participant either directly or
indirectly.
Distributions with respect to the notes held beneficially through
Clearstream Luxembourg will be credited to cash accounts of its participants in
accordance with its rules and procedures, to the extent received by the U.S.
depositary for Clearstream Luxembourg.
Euroclear advises that it was created in 1968 to hold securities for its
participants and to clear and settle transactions between its participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear provides
various other services, including securities
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lending and borrowing and interfaces with domestic markets in several countries.
Euroclear is operated by the Brussels, Belgium office of Morgan Guaranty Trust
Company of New York (the "Euroclear Operator"), under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the agents or their
affiliates. Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants, and has no record of or relationship with persons
holding through Euroclear participants.
Distributions with respect to notes held beneficially through Euroclear
will be credited to the cash accounts of Euroclear participants in accordance
with the Terms and Conditions, to the extent received by the U.S. depositary for
Euroclear.
Exchange for Notes in Certificated Form
If:
- DTC notifies us that it is unwilling or unable to continue as a clearing
system in connection with a global note or DTC ceases to be a clearing
agency registered under the Exchange Act, and in each case we do not
appoint a successor clearing system within 90 days after receiving such
notice from DTC or on becoming aware that DTC is no longer so registered,
- we execute and deliver to the trustee a company order to the effect that
the global notes shall be exchangeable, or
- a default or an event of default has occurred and is continuing with
respect to the notes,
then the global note or global notes will be exchangeable for notes in
certificated form of like tenor and of an equal aggregate principal amount. The
certificated notes will be registered in the name or names as DTC instructs the
trustee. It is expected that instructions may be based upon directions received
by DTC from participants with respect to ownership of beneficial interests in
global notes.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
We will make initial settlement for the notes in immediately available
funds. Secondary market trading between DTC participants will occur in the
ordinary way in accordance with DTC's rules and will be settled in immediately
available funds using DTC's same-day funds settlement system. Secondary market
trading between Euroclear participants and/or Clearstream Luxembourg
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Euroclear and
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Clearstream Luxembourg and will be settled using the procedures applicable to
conventional eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Euroclear or
Clearstream Luxembourg participants, on the other, will be effected by DTC in
accordance with DTC's rules on behalf of the relevant European international
clearing system by its U.S. depositary. However, these cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its rules
and procedures and within its established deadlines in European time. The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its U.S. depositary to take
action to effect final settlement on its behalf by delivering or receiving notes
to or from DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream Luxembourg participants may not deliver
instructions directly to their respective U.S. depositaries.
Because of time-zone differences, credits of notes received in Euroclear or
Clearstream Luxembourg as a result of a transaction with DTC's participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. These credits or any
transactions in the notes settled during this processing will be reported to the
relevant Euroclear or Clearstream Luxembourg participants on such business day.
Cash received in Euroclear or Clearstream Luxembourg as a result of sales of
notes by or through a Euroclear participant or a Clearstream Luxembourg
participant to a DTC participant will be received with value on the DTC
settlement date but will be available in the relevant Euroclear or Clearstream
Luxembourg cash account only as of the business day following settlement in DTC.
Although DTC, Euroclear and Clearstream Luxembourg have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Euroclear and Clearstream Luxembourg, they are under no
obligation to perform or continue to perform such procedures and such procedures
may be changed or discontinued at any time.
GOVERNING LAW AND JUDGMENTS
The indenture and notes will be governed by and construed in accordance
with the laws of the State of New York.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless we indicate otherwise in the applicable pricing supplement, we will
denominate the notes in U.S. dollars, we will make payments of principal,
premium, if any, and interest on the notes in U.S. dollars and you must pay the
purchase price of the notes in U.S. dollars in immediately available funds. If
any of the notes ("foreign currency notes") are to be denominated or payable in
a currency or basket of currencies other than U.S. dollars (or, if that currency
is not at the time of the purchase or payment legal tender for the payment of
public and private debts of the country issuing that currency or, in the case of
euro, in the member states of the European Union that have adopted the single
currency in accordance with the Treaty Establishing the European Community, as
amended by the Treaty on European Union, the currency which is then legal tender
in the related country or in the adopting member states of the European Union,
as the case may be) (a "specified currency"), the following provisions will
apply in addition to, and to the extent inconsistent therewith will replace, the
description of general terms and provisions of notes set forth in the
accompanying prospectus and elsewhere in this prospectus supplement.
A pricing supplement with respect to any foreign currency note, (which may
include information with respect to applicable current foreign exchange
controls), is a part of this prospectus and the accompanying prospectus
supplement. Any information we provide you concerning exchange rates is provided
as a matter
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of information only and you should not regard it as indicative of the range of
or trends in fluctuations in currency exchange rates that may occur in the
future. The information set forth in this prospectus supplement is directed to
prospective purchasers who are United States residents and, with respect to
foreign currency notes, is by necessity incomplete. We and the agents disclaim
any responsibility to advise prospective purchasers who are residents of
countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
premium, if any, and interest, if any, on, their foreign currency notes.
CURRENCIES
We may offer foreign currency notes denominated and/or payable in a
specified currency or specified currencies. Unless we indicate otherwise in the
applicable pricing supplement, you are required to pay for foreign currency
notes in the specified currency. At the present time, there are limited
facilities in the United States for conversion of U.S. dollars into specified
currencies and vice versa, and banks may elect not to offer non-U.S. dollar
checking or savings account facilities in the United States. However, at your
request, on or prior to the fifth business day preceding the date of delivery of
the foreign currency notes, or by such other day as determined by the agent who
presents the offer to purchase foreign currency notes to us, that agent may be
prepared to arrange for the conversion of U.S. dollars into the applicable
specified currency set forth in the applicable pricing supplement to enable the
purchasers to pay for the foreign currency notes. Each such conversion will be
made by the agent or agents on the terms and subject to the conditions,
limitations and charges as the agent may from time to time establish in
accordance with their regular foreign exchange practices. If you purchase
foreign currency notes you will pay all costs of exchange.
The applicable pricing supplement will set forth information about the
specified currency in which a particular foreign currency note is denominated
and/or payable, including historical exchange rates and a description of the
currency and any exchange controls, and, in the case of a basket of currencies,
will include a description of that basket and a description of provisions for
payment in the event that currency basket is no longer used for the purposes for
which it was established.
PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST
We will pay the principal of, premium, if any, and/or interest on foreign
currency notes in the specified currency. Currently, banks do not generally
offer non-U.S. dollar denominated account facilities in their offices in the
United States, although they are permitted to do so. Accordingly, if you are a
holder of foreign currency notes you will be paid in U.S. dollars converted from
the specified currency unless you elect to be paid in the specified currency or
unless the applicable pricing supplement provides otherwise.
We will base U.S. dollar amounts that we owe to holders of foreign currency
notes on the highest bid quotation received by the exchange rate agent specified
in the applicable pricing supplement in The City of New York at approximately
11:00 A.M., New York City time, on the second business day preceding the
applicable payment date. The exchange rate agent will obtain that highest quote
by asking three recognized foreign exchange dealers approved by us (one of whom
may be the exchange rate agent) for their bid quotations for the purchase of the
specified currency in exchange for U.S. dollars for settlement on the relevant
payment date, in the aggregate amount of the specified currency payable to all
holders of foreign currency notes scheduled to receive U.S. dollar payments, and
at which the applicable dealer commits to execute a contract. If three such bid
quotations are not available, we will make payments in the specified currency.
All currency exchange costs will be borne by the holders of foreign currency
notes by deductions from such payments.
Unless we indicate otherwise in the applicable pricing supplement, as a
holder of foreign currency notes you may elect to receive payment of the
principal of, premium, if any, and/or interest on the foreign currency notes in
the specified currency by transmitting a written request for such payment to the
corporate trust office of the trustee in the Borough of Manhattan, The City of
New York, at least fifteen days prior to the applicable interest payment date or
maturity, as the case may be. You may make this
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request in writing (mailed or hand delivered) or sent by facsimile transmission.
As a holder of a foreign currency note you may elect to receive all or a
specified portion of all future payments in the specified currency for all
payments of principal, premium, if any, and/or interest and need not file a
separate election for each payment. Your election will remain in effect until
revoked by written notice to the trustee, but written notice of any such
revocation must be received by the trustee at least fifteen days prior to the
applicable interest payment date or maturity, as the case may be. If your
foreign currency notes are held in the name of a broker or nominee, you should
contact your broker or nominee to determine whether and how you may elect to
receive payments in the specified currency.
If a note is represented by a global note, DTC or its nominee will be the
holder of the note and will be entitled to all payments on the note. Although
DTC can hold notes denominated in foreign currencies, all payments to DTC will
be made in U.S. dollars. Accordingly, a beneficial owner of the related global
note who elects to receive payments of principal, premium, if any, and/or
interest in the specified currency must notify the participant through which it
owns its interest on or prior to the applicable regular record date, in the case
of a payment of interest, or at least fifteen days prior to maturity, in the
case of a payment of principal and/or premium, of that beneficial owner's
election. The participant must notify DTC of that election on or prior to the
third business day after the regular record date or at least twelve days prior
to maturity, as the case may be. DTC will notify the trustee of the election on
or prior to the fifth business day after the regular record date or at least ten
days prior to maturity, as the case may be. If the participant receives complete
instructions from the beneficial owner and those instructions are forwarded by
the participant to DTC, and by DTC to the trustee, on or prior to such dates,
then the beneficial owner will receive payments in the specified currency. For
more information about global notes, see "Description of the Notes -- Book-Entry
System."
We will pay principal, any premium and/or interest on foreign currency
notes to be paid in U.S. dollars in the manner specified in the accompanying
prospectus and this prospectus supplement with respect to notes denominated in
U.S. dollars. See "Description of the Notes -- Payment of Principal, Premium and
Interest." Unless otherwise specified in the applicable pricing supplement, we
will pay interest on foreign currency notes in the specified currency on an
interest payment date other than the maturity date by check mailed on the
relevant interest payment date to the persons entitled thereto as their
addresses shall appear in the security register. We will pay the principal of
foreign currency notes, together with any premium and any interest accrued and
unpaid thereon, due at maturity in the specified currency by wire transfer of
immediately available funds to an account with a bank designated at least
fifteen days prior to the maturity date by the applicable registered holder,
provided the particular bank has appropriate facilities to make these payments
upon surrender of the notes at the corporate trust office of the trustee in the
Borough of Manhattan, The City of New York, in time for the trustee to make
these payments in the specified currency in accordance with its normal
procedures.
PAYMENT CURRENCY
If a specified currency is not available for the payment of principal,
premium or interest with respect to a foreign currency note due to the
imposition of exchange controls or other circumstances beyond our control, we
will be entitled to satisfy our obligations to holders of foreign currency notes
by making that payment in U.S. dollars on the basis of the noon buying rate in
The City of New York for cable transfers of the specified currency as certified
for customs purposes (or, if not so certified, as otherwise determined) by the
Federal Reserve Bank of New York (the "market exchange rate") as computed by the
exchange rate agent on the second business day prior to the particular payment
or if the market exchange rate is not then available, on the basis of the most
recently available market exchange rate on or before the date that payment is
due, or as otherwise indicated in an applicable pricing supplement. Any payment
made under such circumstances in U.S. dollars where the required payment is in a
specified currency will not constitute a default under the indenture with
respect to the notes.
All determinations referred to above made by the exchange rate agent will
be at its sole discretion and will, in the absence of manifest error, be
conclusive for all purposes and binding on the holders of the foreign currency
notes.
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As indicated above, if you invest in foreign currency notes or currency
indexed notes your investment will be subject to substantial risks, the extent
and nature of which change continuously. As with any investment that you make in
a security, you should consult your own financial and legal advisors as to the
risks entailed in an investment in foreign currency notes or currency indexed
notes. Such notes are not an appropriate investment for you if you are
unsophisticated with respect to foreign currency matters.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This section summarizes the material U.S. tax consequences to holders of
notes. The discussion is limited in the following ways:
- The discussion only covers you if you buy your notes in the initial
offering.
- The discussion only covers you if you hold your notes as a capital asset
(that is, for investment purposes), and if you do not have a special tax
status (for example, you are not a financial institution, insurance
company, dealer in securities or foreign currencies or regulated
investment company).
- The discussion does not cover tax consequences that depend upon your
particular tax situation (for example, if you hold the notes as a hedge
against currency risks or as a position in a straddle for tax purposes)
in addition to your ownership of notes.
- The discussion does not cover federal tax law other than income tax law
and does not cover state, local or foreign income tax or other tax law.
- The discussion does not cover every type of note that we might issue. If
we intend to issue a note of a type not described in this summary, we
will provide additional tax information in the applicable pricing
supplement.
- The discussion does not apply to you if you are a non-U.S. holder (as
defined below) of notes and if you (a) own 10% or more of our voting
stock, (b) are a "controlled foreign corporation" with respect to us, or
(c) are a bank receiving interest in the ordinary course of its business.
- We have not requested a ruling from the IRS on the tax consequences of
purchasing, owning or disposing of the notes. As a result, the IRS could
disagree with portions of this discussion.
This discussion is based on the laws, regulations, rulings and decisions
now in effect. Changes in the law (or possible differing interpretations) may
affect the tax treatment of the notes, possibly with a retroactive effect.
If you are considering buying notes, we suggest that you consult your tax
advisor about the tax consequences of acquiring, holding or disposing of the
notes in your particular situation.
TAX CONSEQUENCES TO U.S. HOLDERS
This section applies to you if you are a "U.S. holder." A "U.S. holder" is
a beneficial holder of a note that is for U.S. federal income tax purposes:
- an individual U.S. citizen or resident alien;
- a corporation, partnership, or entity taxable as a corporation or
partnership, that was created or organized in or under U.S. law (federal,
state or the District of Columbia);
- an estate whose income is subject to U.S. federal income tax regardless
of it source;
- a trust, if a U.S. court is able to exercise primary jurisdiction over
the administration of the trust and one or more U.S. persons has the
authority to control all substantial decisions over the trust, and
certain trusts in existence on August 20, 1996; or
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- any holder of a note whose income or gain in respect to its investment in
such note is effectively connected with the conduct of a U.S. trade or
business.
If a partnership holds notes, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding notes, we suggest
that you consult your tax advisor.
Payments of Interest
The tax treatment of interest paid on the notes generally depends upon
whether the interest is "qualified stated interest."
"Qualified stated interest" is any interest that meets all of the following
conditions:
- is payable at least once each year,
- is payable over the entire term of the note,
- is payable at a single fixed rate or under a single formula, and
- is payable in respect of a note that has a maturity of more than one year
from its issue date.
If any interest on a note is qualified stated interest, then
- if you are a cash method taxpayer, you must report that interest in your
income when you receive it, or
- if you are an accrual method taxpayer, you must report that interest in
your income as it accrues.
If any interest on a note is not qualified stated interest, it is generally
subject to the rules for original issue discount ("OID") described below.
Determining Amount of OID
Notes that are issued at prices less than their "stated redemption price at
maturity" ("discount notes") are generally subject to additional tax rules. The
amount of OID on a discount note is generally determined as follows:
- The amount of OID on a note is the stated redemption price at maturity of
the note minus the "issue price" of the note. If this amount is negative,
there is no OID.
- The "stated redemption price at maturity" of a note is the total amount
of all principal and interest payments to be made on the note, other than
qualified stated interest. In a typical case where all interest is
qualified stated interest, the stated redemption price at maturity of a
note is the same as its principal amount.
- The "issue price" of a note is the first price at which a substantial
amount of the notes are sold to the public.
- If the OID on a discount note is de minimis, it is disregarded and not
treated as OID. In general, OID is considered de minimis if the amount of
OID is less than the following items multiplied together: (a) .25% (1/4
of 1%), (b) the number of full years from the issue date to the maturity
date and (c) the stated redemption price at maturity.
Accrual of OID Into Income
Discount notes have the following consequences:
- A holder must include an allocable amount of OID in income as ordinary
income over the period the holder holds the discount note.
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- All holders of discount notes, even those on the cash method of
accounting, must include OID in income as the OID accrues on the discount
notes. This means that holders are required to report OID in income for
federal income tax purposes before they receive the cash that corresponds
to that income.
- OID accrues on a discount note on a "constant yield" method. This method
takes into account the compounding of interest. Under this method, the
accrual of OID on a discount note, combined with the inclusion into
income of any qualified stated interest on the discount note, will result
in the holder being taxable at approximately a constant percentage of the
unrecovered investment in the note.
- The accruals of OID on a discount note will generally be less in the
early years and more in the later years.
- If any of the interest paid on the discount note is not qualified stated
interest, that interest is taxed solely as OID. It is not separately
taxed when it is paid to the holder.
- Your tax basis in the discount note is initially your cost in that note.
It increases by any OID you report as income. It decreases by any
principal or interest payments you receive on the discount note that are
not qualified stated interest.
Notes Subject to Additional Tax Rules
Additional or different tax rules apply to particular types of notes that
we may issue. We will discuss these additional or different tax rules in the
applicable pricing supplement.
SHORT-TERM NOTES: We may issue notes with a fixed maturity of one year or
less. These are referred to as "short-term notes."
- The amount of OID is calculated in the same manner as described above
except that no interest on a short-term note is qualified stated
interest.
- Certain elections apply to the method of accrual of OID on short-term
notes over the life of the notes.
- Accrual method taxpayers and certain other holders, such as banks and
securities dealers, must include OID in income as it accrues.
- If you are a cash method taxpayer not subject to the accrual rule
described above, you generally do not include OID with respect to a
short-term note in income until you actually receive payments on the
note. Alternatively, you can elect to include OID in income as it accrues
on a straight-line basis unless an election is made to accrue under a
constant yield method.
- Two special rules apply if you are a cash method taxpayer and do not
include OID in income as it accrues. First, if you sell the note, or it
is paid at maturity, and you have a taxable gain, then the gain is
ordinary income to the extent of the accrued OID on the note at the time
of the sale that you have not yet taken into income. Second, if you
borrow money (or do not repay outstanding debt) to acquire or hold the
note, then while you hold the note you cannot deduct any interest on the
borrowing that corresponds to accrued OID on the note until you include
the accrued OID in your income.
FLOATING RATE NOTES: Floating rate notes are subject to special OID rules.
- All stated interest on a floating rate note that is unconditionally
payable in cash or property (other than debt instruments of the issuer)
at least annually is generally treated as qualified stated interest if
such floating rate note (a) has an issue price that does not exceed the
total noncontingent principal payments due under the floating rate note
by more than a specified de minimis amount and (b) provides for stated
interest, paid or compounded at least annually, at current values of (i)
one or more qualified floating rates, (ii) a single fixed rate and one or
more qualified floating
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rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate. Generally, a qualified
floating rate is any variable rate where variations in the value of such rate
can reasonably be expected to measure contemporaneous variations in the
cost of borrowing.
- Although a multiple of a qualified floating rate will generally not
itself constitute a qualified floating rate, a variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater
than 0.65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate
and a fixed multiple that is greater than 0.65 but not more than 1.35,
increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the Treasury Regulations promulgated
under the OID provisions of the Internal Revenue Code (the "OID
Regulations"), two or more qualified floating rates that can reasonably
be expected to have approximately the same values throughout the term of
the variable note (e.g., two or more qualified floating rates with values
within 25 basis points of each other as determined on the variable note's
issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise
constitute a qualified floating rate but which is subject to one or more
restrictions such as a maximum numerical limitation (i.e., a cap) or a
minimum numerical limitation (i.e., a floor) may, under certain
circumstances, fail to be treated as a qualified floating rate under the
OID Regulations unless such cap or floor is fixed throughout the term of
the note.
- An objective rate is a rate that (a) is not itself a qualified floating
rate, (b) is determined using a single fixed formula and (c) is based on
objective financial or economic information that is not within the
control of the issuer (or a related party) and is not unique to the
circumstances of the issuer (or a related party), such as dividends,
profits, or the value of the issuer's stock (although a rate does not
fail to be an objective rate merely because it is based on the credit
quality of the issuer).
- The amount of qualified stated interest and the amount of original issue
discount, if any, that accrues during an accrual period on such a
floating rate note will then be calculated under the rules applicable to
fixed rate debt instruments by assuming that the floating rate is a fixed
rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value, as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or (ii) in the case of
an objective rate (other than a qualified inverse floating rate), a fixed
rate reflecting the floating rate note's reasonably expected yield. The
qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual
period pursuant to the foregoing rules.
- If the note has more than one formula for interest rates, it is possible
that the combination of interest rates might create OID. We suggest that
you consult your tax advisor concerning the OID accruals on such a note.
FOREIGN CURRENCY NOTES: A foreign currency note is a note denominated in a
currency other than U.S. dollars. Special tax rules apply to these notes:
Payments of Interest in a Foreign Currency
- If you are a cash method taxpayer, you will be taxed on the U.S. dollar
value of any foreign currency you receive as interest. The dollar value
will be determined as of the date when you receive the payments.
- If you are an accrual method taxpayer, you must report interest income as
it accrues. You can use the average foreign currency exchange rate during
the relevant interest accrual period (or, if that period spans two
taxable years, during the portion of the interest accrual period in the
relevant taxable year). In this case, you will make an adjustment upon
receipt of the foreign currency to reflect actual exchange rates at that
time. Certain alternative elections may also be available. We
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suggest that you consult your tax advisor with respect to the
consequences to you of making the above described election. An accrual
method taxpayer will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest
income on the date such income is received. The amount of ordinary income
or loss recognized will equal the difference, if any, between the U.S.
dollar value of the foreign currency payment received (determined on the
date such payment is received) in respect of such accrual period and the
U.S. dollar value of interest income that has accrued during such accrual
period (as determined above).
OID on Foreign Currency Notes
- Any OID on foreign currency notes will be determined in the relevant
foreign currency. All holders must accrue OID in the same manner that an
accrual basis holder accrues interest income on a foreign currency note.
The amount of foreign currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received
attributable to the discount (either upon payment, maturity or an earlier
disposition), as translated into U.S. dollars at the rate of exchange on
the date of such receipt, with the amount of original issue discount
accrued, as translated above.
Purchase, Sale and Retirement of Foreign Currency Notes
- If you purchase a note with previously owned foreign currency, you will
recognize ordinary income or loss in an amount equal to the difference,
if any, between your tax basis in the foreign currency and the U.S.
dollar fair market value, determined on the date of purchase, of the
foreign currency used to purchase the note.
- Except as discussed above with respect to short-term notes, upon the
sale, exchange or retirement of a note, you will recognize taxable gain
or loss equal to the difference between the amount realized on the sale,
exchange or retirement and your adjusted tax basis in the note. Such gain
or loss generally will be capital gain or loss (except to the extent of
any accrued market discount not previously included in your income) and
will be long-term capital gain or loss if at the time of sale, exchange
or retirement you have held the note for more than one year. To the
extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described above in "-- Payments of
Interest in a Foreign Currency."
- Your initial tax basis in a foreign currency note is the amount of U.S.
dollars you pay for the note (or, if you pay in foreign currency, the
U.S. dollar value of that foreign currency on the purchase date).
Adjustments are made to reflect OID and other items as described above.
- If you collect foreign currency upon the retirement of the note, or if
you sell or exchange the note for foreign currency, your gain or loss
will be based on the U.S. dollar value of the foreign currency you
receive. For a publicly traded foreign currency note, this value is
determined for cash basis taxpayers on the settlement date for the sale
of the note, and for accrual basis taxpayers on the trade date for the
sale (although such taxpayers can also elect the settlement date). You
will then have a tax basis in the foreign currency equal to the value
reported on the sale.
- Any gain or loss on the sale or retirement of a note will be ordinary
income or loss to the extent it arises from currency fluctuations between
your purchase date and sale date and will be recognized only to the
extent of the total gain or loss you realize on the sale, exchange or
retirement of the note.
Any gain or loss on the sale of foreign currency will also be ordinary
income or loss.
Premium and Market Discount on Foreign Currency Notes
Market discount on a foreign currency note is determined in units of the
foreign currency. Accrued market discount taken into account upon the receipt of
any partial principal payment or upon the sale,
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<PAGE> 38
exchange, retirement or other disposition of the note (other than accrued market
discount required to be taken into account currently) is translated into U.S.
dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss). Accrued market
discount currently includible in income for any accrual period is translated
into U.S. dollars on the basis of the average exchange rate in effect during
such accrual period, and the exchange gain or loss is determined upon the
receipt of any partial principal payment or upon the sale, exchange, retirement
or other disposition of the note in the manner used by accrual method taxpayers
with respect to computation of exchange gain or loss on accrued interest on
foreign currency notes.
Amortizable bond premium is determined in the relevant foreign currency and
reduces interest income in units of the foreign currency. Although not entirely
clear, a U.S. holder should recognize exchange gain or loss equal to the
difference between the U.S. dollar value of the bond premium amortized with
respect to a period, determined on the date the interest attributable to such
period is received, and the U.S. dollar value of the bond premium determined on
the date of the acquisition of the note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any foreign currency received as
interest or on the sale, exchange or retirement of a note equal to the U.S.
dollar value of such foreign currency as of the time the interest is received or
of the time of the sale, exchange or retirement. Any gain or loss realized by a
U.S. Holder on a sale or other disposition of foreign currency (including its
exchange for U.S. dollars or its use to purchase notes) will be ordinary income
or loss.
OTHER CATEGORIES OF NOTES: Additional rules may apply to certain other
categories of notes. The applicable pricing supplement may describe these rules.
In addition, we suggest that you consult your tax advisor in these situations.
These categories of notes include:
- notes with contingent payments,
- notes which we may be required by the holder to redeem prior to their
maturity,
- notes that are callable by us before their maturity, other than typical
calls at a premium, and
- notes that are extendable at our option or the option of the holder.
Accrual Election
You may generally elect to be taxed on the income from the note in a
different manner than described above. Under the election:
- No interest is qualified stated interest.
- You include amounts in income as they accrue to you in accordance with
the constant yield method, based on the compounding of interest. The
accrual of income takes into account stated interest, OID (including de
minimis OID), market discount, and premium.
- Your tax basis is increased by all accruals of income and decreased by
all payments you receive on the note.
Sale or Retirement of Notes
On your sale or retirement of your note:
- You will have taxable gain or loss equal to the difference between the
amount received by you and your tax basis in the note. Your tax basis in
the note is generally your cost, subject to certain adjustments.
- Your gain or loss will generally be capital gain or loss and will be long
term capital gain or loss if you held the note for more than one year.
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<PAGE> 39
- If (a) you purchased the note with de minimis OID, (b) you did not make
the election to accrue all OID into income, and (c) you receive the
principal amount of the note upon the sale or retirement, then you will
generally have capital gain equal to the amount of the de minimis OID.
- If you sell the note between interest payment dates, a portion of the
amount you receive reflects interest that has accrued on the note but has
not yet been paid by the sale date. That amount is treated as ordinary
interest income and not as sale proceeds.
- All or part of your gain may be ordinary income rather than capital gain
in certain cases. These cases include sales of short-term notes, notes
with market discount, notes with contingent payments or foreign currency
notes.
Premium and Discount
Additional special rules apply in the following situations involving
discount or premium:
- If you buy a note in the initial offering for more than its stated
redemption price at maturity, the excess amount you pay will be
"amortizable bond premium." You can generally elect to use bond premium
to reduce your taxable interest income over the life of your note.
- Similarly, if a note has OID and you buy it in the initial offering for
more than the issue price and less than its stated redemption price at
maturity, the excess (up to the total amount of OID) is called
"acquisition premium." The amount of OID you are required to include in
income will be reduced by the amount of acquisition premium over the life
of the note.
- If you buy a note in the initial offering for less than the issue price,
special rules concerning "market discount" may apply.
- Generally, if the market discount rules apply, you will be required to
(i) treat as ordinary income payments made with respect to (other than
payments of qualified stated interest), or gain realized on, the sale,
exchange, retirement or other disposition of a note to the extent of the
accrued market discount not previously included in income and (ii) defer
the deduction of all or a portion of the interest paid or accrued on any
indebtedness incurred or maintained to purchase or carry a note with
market discount until the maturity of the note or certain earlier
dispositions. Market discount will be considered to accrue ratably during
the period from the date of acquisition to the maturity date of the note,
unless you elect to accrue market discount on the basis of semiannual
compounding.
- Alternatively, you may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding
basis). Generally, such currently included market discount is treated as
ordinary interest income. Such an election will apply to all debt
instruments you acquired on or after the first day of the first taxable
year to which such election applies and may be revoked only with the
consent of the IRS.
Appropriate adjustments to tax basis are made in these situations. We
suggest that holders in these situations consult their tax advisors.
Information Reporting and Backup Withholding
Under the tax rules concerning information reporting to the IRS:
- Assuming you hold your notes through a broker or other securities
intermediary, the intermediary must provide information to the IRS
concerning interest, OID and retirement proceeds on your notes, unless an
exemption applies.
- Similarly, unless an exemption applies, you must provide the intermediary
with your taxpayer identification number for the intermediary's use in
reporting information to the IRS. If you are an individual, this is your
social security number. You are also required to comply with other IRS
requirements concerning information reporting.
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- If you are subject to these requirements but do not comply, the
intermediary must withhold 31% of all amounts payable to you on the notes
(including principal payments). If the intermediary withholds payments,
you may use the withheld amount as a credit against your federal income
tax liability.
- All individual U.S. holders are subject to these requirements. Some U.S.
holders, including all corporations, tax-exempt organizations and
individual retirement accounts, are exempt from these requirements.
TAX CONSEQUENCES TO NON-U.S. HOLDERS
This section applies to you if you are a "non-U.S. holder." A "non-U.S.
holder" is any holder other than a U.S. holder. Generally, a non-U.S. holder is
not subject to U.S. federal income taxes on payments of principal, premium or
interest (including OID) on a note unless such holder is:
- a direct or indirect 10% or greater shareholder of the issuer of the
notes,
- a controlled foreign corporation related to us, or
- a bank receiving interest described in Section 881(c)(3)(A) of the
Internal Revenue Code.
Withholding Taxes
Generally, payments of principal and interest on the notes will not be
subject to U.S. withholding taxes.
However, for the exemption from withholding taxes to apply to you, you must
meet one of the following requirements:
- The last U.S. payor in the chain of payment prior to payment to a
non-U.S. holder is provided with your name, address, and a signed
statement that you are the beneficial owner of the note and are not a
U.S. holder. This statement is generally made on Form W-8 or Form W-8BEN.
- You or your agent claim an exemption from withholding tax under an
applicable tax treaty. This claim is generally made on Form 1001 or Form
W-8BEN.
- You or your agent claim an exemption from withholding tax on the ground
that the income is effectively connected with the conduct of a trade or
business in the U.S. This claim is generally made on Form 4224 or Form
W-8ECI.
We suggest that you consult your tax advisor about the specific methods for
satisfying these requirements. These procedures will change on January 1, 2001.
Specifically, after December 31, 2000, the IRS Forms W-8, 1001 and 4224 will no
longer be valid. In addition, a claim for exemption will not be valid if the
person receiving the applicable form has actual knowledge that the statements on
the form are false.
Even if you comply with these conditions, withholding tax might arise if
the amount of interest payable on a note is based on our earnings or on other
attributes of ours. If this exception applies, we will provide additional
information in the applicable pricing supplement.
Sale or Retirement of Notes
If you sell a note or it is redeemed, you will generally not be subject to
federal income tax on any ensuing gain unless one of the following applies:
- You are an individual, you are present in the U.S. for at least 183 days
during the year in which you dispose of the note, and certain other
conditions are satisfied.
- The gain represents accrued interest or OID, in which case the rules for
interest would apply.
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Estate Taxes
If you are an individual, your notes will not be subject to U.S. estate tax
when you die. However, this rule only applies if, at your death, payments on the
notes were not connected to a trade or business that you were conducting in the
U.S. and you were not a direct or indirect 10% or greater shareholder of the
issuer of the notes.
Information Reporting and Backup Withholding
U.S. rules concerning information reporting and backup withholding are
described above. These rules apply to non-U.S. holders as follows:
- Principal and interest payments you receive will be automatically exempt
from the usual rules if you provide the tax certifications needed to
avoid withholding tax on interest, as described above. The exemption does
not apply if the recipient of the applicable form knows that the form is
false. In addition, interest payments made to you will be reported to the
IRS on Form 1042-S.
- Sale proceeds you receive on a sale of your notes through a broker may be
subject to information reporting and/or backup withholding if you are not
eligible for an exemption. In particular, information reporting and
backup withholding may apply if you use the U.S. office of a broker, and
information reporting (but not backup withholding) may apply if you use
the foreign office of a broker that has certain connections to the U.S.
We strongly suggest that you consult your tax advisor concerning
information reporting and backup withholding on a sale.
PLAN OF DISTRIBUTION
We are offering the notes on a continuing basis for sale to or through
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities
LLC, Banc One Capital Markets, Inc., Barclays Capital Inc., Chase Securities
Inc., Deutsche Bank Securities Inc., First Union Securities, Inc., FleetBoston
Robertson Stephens Inc., J.P. Morgan Securities Inc., Salomon Smith Barney Inc.
and UBS Warburg LLC (the "agents"). The agents, individually or in a syndicate,
may purchase notes, as principal, from us from time to time for resale to
investors and other purchasers at varying prices relating to prevailing market
prices at the time of resale as determined by the applicable agent or, if so
specified in the applicable pricing supplement, for resale at a fixed offering
price. However, we may agree with an agent for that agent to utilize its
reasonable efforts on an agency basis on our behalf to solicit offers to
purchase notes at 100% of the principal amount thereof, unless otherwise
specified in the applicable pricing supplement. We will pay a commission to an
agent, ranging from .125% to .750% of the principal amount of each note,
depending upon its stated maturity, sold through that agent as our agent. We
will negotiate commissions with respect to notes with stated maturities in
excess of 30 years that are sold through an agent as our agent at the time of
the related sale. In addition, we estimate that our expenses incurred in
connection with the offering and sale of the notes, including reimbursement of
certain of the agents' expenses, will total approximately $500,000.
Unless otherwise specified in the applicable pricing supplement, any note
sold to an agent as principal will be purchased by that agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a note of
identical maturity. An agent may sell notes it has purchased from us as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with that purchase. An agent may allow, and
dealers may reallow, a discount to certain other dealers. After the initial
offering of notes, the offering price (in the case of notes to be resold on a
fixed offering price basis), the concession and the reallowance may be changed.
We reserve the right to withdraw, cancel or modify the offer made hereby
without notice and may reject offers in whole or in part (whether placed
directly by us or through an agent). Each agent will have the right, in its
discretion reasonably exercised, to reject in whole or in part any offer to
purchase notes received by it on an agency basis.
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Unless otherwise specified in the applicable pricing supplement, you will
be required to pay the purchase price of your notes in immediately available
funds in the specified currency in The City of New York on the date of
settlement. See "Special Provisions Relating to Foreign Currency Notes."
Upon issuance, the notes will not have an established trading market. The
notes will not be listed on any securities exchange. The agents may from time to
time purchase and sell notes in the secondary market, but the agents are not
obligated to do so, and there can be no assurance that a secondary market for
the notes will develop or that there will be liquidity in the secondary market
if one develops. From time to time, the agents may make a market in the notes,
but the agents are not obligated to do so and may discontinue any market-making
activity at any time.
In connection with an offering of notes purchased by one or more agents as
principal on a fixed offering price basis, the applicable agents will be
permitted to engage in certain transactions that stabilize the price of notes.
These transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of notes. If those agents create a short
position in notes, i.e., if they sell notes in an amount exceeding the amount
referred to in the applicable pricing supplement, they may reduce that short
position by purchasing notes in the open market. In general, purchases of notes
for the purpose of stabilization or to reduce a short position could cause the
price of notes to be higher than it might be in the absence of these types of
purchases.
Neither we nor any agent makes any representation or prediction as to the
direction or magnitude of any effect that the transactions described in the
immediately preceding paragraph may have on the price of notes. In addition,
neither we nor any agent makes any representation that the agents will engage in
any such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). We have agreed to
indemnify the agents against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the agents may be required to
make in respect thereof.
In the ordinary course of its business, the agents and their affiliates
have engaged, and may in the future engage, in investment and commercial banking
transactions with us and certain of our affiliates.
From time to time, we may sell other securities referred to in the
accompanying prospectus, and the amount of notes offered hereby may be reduced
as a result of these sales.
VALIDITY OF THE NOTES
Edwards & Angell, LLP will issue an opinion about the validity of the notes
for us. Brown & Wood LLP will pass on certain matters for the agents.
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PROSPECTUS
TFC TEXTRON LOGO
TEXTRON FINANCIAL CORPORATION
40 WESTMINSTER STREET
P.O. BOX 6687
PROVIDENCE, RHODE ISLAND 02940-6687
(401) 621-4200
$3,000,000,000
DEBT SECURITIES
----------------------
WE WILL PROVIDE SPECIFIED TERMS OF THESE SECURITIES
IN SUPPLEMENTS TO THIS PROSPECTUS.
YOU SHOULD READ THIS PROSPECTUS AND ANY SUPPLEMENT
CAREFULLY BEFORE YOU INVEST.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated December 1, 1999
<PAGE> 44
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About this Prospectus....................................... 1
Textron Financial Corporation............................... 1
Use of Proceeds............................................. 1
Ratio of Earnings to Fixed Charges.......................... 2
Description of Debt Securities.............................. 2
Plan of Distribution........................................ 11
Where You Can Find More Information......................... 12
Legal Opinions.............................................. 12
Experts..................................................... 12
</TABLE>
i
<PAGE> 45
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. Under this shelf registration process,
we may sell any combination of the debt securities described in this prospectus
in one or more offerings up to a total maximum offering price of $3,000,000,000.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of the
securities offered. Each prospectus supplement may also add to or update or
change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading WHERE YOU CAN FIND MORE INFORMATION.
TEXTRON FINANCIAL CORPORATION
We were incorporated in the State of Delaware in 1962. Our executive office
is at 40 Westminster Street, Providence, Rhode Island. Our telephone number is
401-621-4200. We are a diversified commercial finance company offering term
loans and leases for equipment, revolving credit arrangements and, other
specialty financial products. Our finance transactions involve many industries,
including aircraft, golf, timeshare resorts, transportation, machine tool, and
automotive service and repair. Our other financial services and products include
transaction syndications, equipment appraisal and management, portfolio
servicing and insurance brokerage. We are a wholly-owned subsidiary of Textron
Inc., a multi-industry company with market-leading operations in aircraft,
automotive, industrial and finance.
We entered into a Support Agreement dated as of May 25, 1994 with Textron
Inc. The Support Agreement requires Textron Inc. to pay us, quarterly, an amount
sufficient to provide that pre-tax earnings, before extraordinary items and
fixed charges, will not be less than 125% of our fixed charges. Fixed charges
for purposes of the Support Agreement include interest on indebtedness and
amortization of debt discount. Textron Inc. was not required to make any
payments under the Support Agreement for the nine months ended September 30,
1999, or for the years ended 1998, 1997, 1996, 1995 and 1994, when our fixed
charge coverage ratios were 170%, 173%, 171%, 165%, 160% and 172%, respectively.
In addition, Textron Inc. has agreed to maintain our consolidated shareholders'
equity at an amount not less than $200 million. Under the terms of the Support
Agreement, we agree with Textron Inc. that one hundred percent (100%) of our
issued and outstanding common stock will be owned by Textron Inc. or a
corporation controlled by, controlling, or under common control with, Textron
Inc. The Support Agreement is not a guarantee by Textron Inc. of the payment of
interest or principal of any obligation, indebtedness or liability by us,
including the debt securities offered hereby, to any person. However, the
Support Agreement does contain provisions protecting our investors from the
termination of the Support Agreement and entitling them to enforce its
provisions against Textron Inc. As a result, if Textron Inc. does not comply
with its obligations under the Support Agreement, holders of our debt securities
and other creditors could bring an action against Textron Inc. to compel Textron
Inc. to comply with its obligations.
USE OF PROCEEDS
We will use the net proceeds from the sale of the debt securities that we
offer for sale by this prospectus for the purpose that we specify in the
prospectus supplement for those debt securities. Those purposes may include
repayment of debt, origination of loan and lease financings, acquisition of
finance portfolios and businesses and other general corporate purposes.
<PAGE> 46
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
YEARS ENDED
NINE MONTHS ENDED --------------------------------
SEPTEMBER 30, 1999 1998 1997 1996 1995 1994
------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1.69 1.72 1.70 1.65 1.60 1.72
</TABLE>
For these ratios, we calculated earnings by adding the following:
- pre-tax income from continuing operations before adjustment for minority
interests in consolidated subsidiaries or income or loss from investments
that we account for using the equity method of accounting;
- fixed charges;
- amortization of previously capitalized interest;
- distributed income of investments that we account for using the equity
method of accounting; and
- our share of pre-tax losses of investments that we account for using the
equity method of accounting and then subtracting:
-- capitalized interest and
-- minority interests in pre-tax income of subsidiaries that have not
incurred fixed charges.
For this purpose, we calculated fixed charges by adding the following:
- interest expensed and capitalized;
- amortized premiums, discounts and capitalized expenses relating to
indebtedness;
- an estimate of interest included in rental expense; and
- preferred stock dividend requirements, if any, of consolidated
subsidiaries.
DESCRIPTION OF DEBT SECURITIES
We will issue the debt securities under an indenture between us and
SunTrust Bank, Atlanta, as trustee.
We have summarized below provisions of the indenture and the Trust
Indenture Act of 1939. The summary does not contain all of the provisions that
you may want to consider as an investor in the debt securities. You may wish to
review the indenture. We have filed a copy of the indenture with the SEC.
GENERAL
The indenture does not limit the amount of debt securities that we may
issue under it. In addition, the indenture does not limit the amount of any
other debt that we may issue under other financing documents.
We are allowed under the indenture to issue debt securities in one or more
series. We will include in the prospectus supplement for a series of debt
securities being offered specific terms of the debt securities. These terms will
include some or all of the following:
- the title of the debt securities;
- the total principal amount and the permitted denominations of the debt
securities;
- the currency or currencies in which the principal of and any interest on
the debt securities will be payable;
- the date on which the debt securities will be payable;
- the interest rate, if any, for the debt securities or the method that
will be used to determine the interest rate;
- the places where principal and any interest will be payable;
2
<PAGE> 47
- any mandatory or optional repayment or redemption provisions; and
- any other terms of the debt securities.
We are allowed under the indenture to issue debt securities of a single
series at various times, with different maturity dates and redemption and
repayment provisions, if any, and different interest rates. We will specify in
the prospectus supplement the persons to whom and the manner in which any
interest will be payable.
The debt securities will be unsecured, unsubordinated indebtedness of our
company. The debt securities will rank equally with all of our other unsecured
and unsubordinated indebtedness.
We will issue the debt securities in the denominations that we set forth in
the applicable prospectus supplement. The trustee will register the debt
securities in the names of the holders of the debt securities. We will maintain
an office or agency where holders of the debt securities may present the debt
securities for payment, transfer or exchange. We will not charge any service
charge for any transfer or exchange of the debt securities, but we may require a
payment sufficient to cover any tax or other governmental charge payable on the
debt securities.
We may sell some of the debt securities at a substantial discount below
their stated principal amount and we may provide for the payment of no interest
or interest at a rate which at the time of issuance is below market rates. We
will describe the U.S. federal income tax consequences and other special
considerations applicable to any discounted debt securities in the prospectus
supplement relating to the discounted debt securities.
BOOK-ENTRY PROCEDURES
We may issue the debt securities in the form of one or more book-entry
certificates registered in the name of a depositary or a nominee of a
depositary. Unless we otherwise state in the applicable prospectus supplement,
the depositary will be The Depository Trust Company. The Depository Trust
Company has informed us that its nominee will be Cede & Co., who will be the
initial registered holder of any series of debt securities that are issued in
book-entry form.
If we use the book-entry only form, we will not issue certificates to
individual holders of the debt securities, except as set forth below or in the
applicable prospectus supplement. The Depository Trust Company and its
participating organizations will only show beneficial interests in book-entry
securities on and transfers of book-entry securities through the records that it
and its participating organizations maintain. In addition, if holders of debt
securities issued in book-entry form want to take any action, they must instruct
the participating organization through which they hold the debt securities. The
participating organization then must instruct The Depository Trust Company or
Cede & Co., as the registered holder of the debt securities, to take action.
The Depository Trust Company has provided us with the following
information. The Depository Trust Company is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the United States Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered under Section 17A of
the Securities Exchange Act of 1934. The Depository Trust Company holds
securities that its participating organizations, or direct participants, deposit
with it. The Depository Trust Company also facilitates the clearance and
settlement of securities transactions among direct participants through
electronic book-entries. This eliminates the need for physical exchange of
certificates. Direct participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Other
organizations, including banks, brokers, dealers and trust companies that work
with a direct participant also use The Depository Trust Company's book-entry
system. The rules that apply to The Depository Trust Company and its
participants are on file with the SEC.
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If anyone wishes to purchase, sell or otherwise transfer debt securities
issued in book-entry form, they must do it through a direct or indirect
participant. Holders will not be recognized as registered holders of the debt
securities and, thus, will be permitted to exercise their rights only indirectly
through and subject to the procedures of participants and, if applicable,
indirect participants.
The absence of physical certificates may limit the ability of a holder to
pledge debt securities issued in book-entry form to persons or entities that do
not participate in The Depository Trust Company system, or to otherwise act with
respect to the debt securities.
The Depository Trust Company has advised us that it will only take an
action that the indenture permits a registered holder of any debt securities to
take if a participant directs it to do so.
Debt securities represented by a book-entry security will be exchangeable
for debt securities in definitive form with the same terms only if:
- The Depository Trust Company notifies us that it is unwilling or unable
to continue as depositary or The Depository Trust Company ceases to be a
clearing agency registered under applicable law and we do not appoint a
new depositary within 90 days;
- we determine that the book-entry security is now exchangeable for debt
securities in definitive form; or
- an event of default has occurred and is continuing with respect to the
debt securities.
If any of these events occur, The Depository Trust Company will generally notify
all direct participants of the availability of definitive debt securities.
Except as we describe in this section, a book-entry security may not be
transferred except as a whole by The Depository Trust Company to its nominee or
by its nominee to The Depository Trust Company or another of its nominees or to
a successor depositary appointed by us.
CERTAIN COVENANTS
We must comply with the covenants which are contained in the indenture
described below. However, the covenants may not ensure that the holders of debt
securities will receive payments of principal and interest on the debt
securities when due in the event of a highly leveraged or similar transaction
involving our company. These types of transactions would include a leveraged
buyout or a change of control of our company. Also, the covenants will not limit
the amount of debt we may incur or the amount of dividends we may pay to our
shareholder.
Limitations on Liens
We will not directly or indirectly, and will not allow any Subsidiary to,
create, assume or incur any Lien on any of the properties and assets of our
company or any Subsidiary unless we grant to the holders of the outstanding debt
securities a Lien on the same property or assets that is equal in seniority to
the Lien. However, we will not be required to grant a Lien as security to the
holders of the outstanding debt securities if our company or any Subsidiary
merely:
- leases property to others in the ordinary course of business, or leases
or subleases property that is not necessary in the operation of its
business;
- creates, assumes or incurs any Lien if (1) the Lien secures indebtedness
for borrowed money which was used to finance the acquisition of the
property that is subject to the Lien and (2) the Lien is created at the
same time as our company or the Subsidiary acquired the property or
within 90 days after the acquisition;
- assumes:
-- any Lien existing on any asset of any Person at the time the Person
becomes a Subsidiary that is not created in contemplation of the
event;
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-- any Lien on any asset of any Person existing at the time the Person
merges or consolidates with or into our company or a Subsidiary that
is not created in contemplation of the merger or consolidation; and
-- any Lien existing on any asset prior to the time our company or a
Subsidiary acquires the asset if the Lien is not created in
contemplation of the acquisition;
- makes any deposit with or gives any form of security to any governmental
agency or similar body in order to enable our company or any Subsidiary
to:
-- maintain self-insurance;
-- participate in any fund in connection with workmen's compensation,
unemployment insurance, old-age pensions, or other social security;
-- share in any privileges or other benefits available to corporations
participating in any arrangement described above; or
-- for any other purpose at any time required by law or regulation in
order to transact business or exercise any privilege or license;
- deposits assets of our company or any Subsidiary with any surety company
or clerk of any court, or in escrow, as collateral in connection with any
bond on appeal by our company or any Subsidiary from any judgment or
decree against it, or in connection with any other judicial proceedings
by or against our company or any Subsidiary;
- incurs upon any of its property or assets:
-- Liens for taxes or other governmental charges which are not yet due
or are payable without penalty or which our company or any Subsidiary
is contesting in good faith and for which our company or the
Subsidiary has set aside adequate reserves on our company's or the
Subsidiary's books, as long as foreclosure or similar proceedings
have not been started;
-- the Liens of any judgment, if the judgment has not remained
undischarged, or unstayed on appeal or otherwise, for more than six
months;
-- undetermined Liens or charges incident to construction;
-- materialmen's, mechanics', workmen's, repairmen's or other similar
Liens arising in the ordinary course of business in respect of
obligations which are not yet due or which our company or such
Subsidiary is contesting in good faith, or deposits to obtain the
release of these Liens; or
-- any encumbrances consisting of zoning restrictions, licenses,
easements and restrictions on the use of real property and minor
defects and irregularities in the title, which do not materially
impair our company's or the Subsidiary's use of the property or
decrease the value of the property for the purpose of our or any
Subsidiary's business;
- creates other Liens arising in the ordinary course of its business which:
-- do not secure Debt;
-- do not secure any obligation in an amount exceeding $5,000,000; and
-- do not in the aggregate materially detract from the value of its
property or assets or materially impair the use in the operation of
its business;
- creates Liens not otherwise permitted securing Debt in an aggregate
principal amount at any time outstanding not to exceed 15% of
Consolidated Net Tangible Assets;
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- creates in favor of any lender or holder of commercial paper of our
company or any of our Subsidiaries in the ordinary course of business a
banker's lien or right to offset amounts deposited with the lender or
holder of commercial paper;
- creates or assumes Liens securing debt that a Subsidiary owes to our
company or another Subsidiary;
- creates, assumes or incurs any Lien upon any of its properties or assets
in connection with the sale, transfer or other disposition of the
properties or assets:
-- in connection with the securitization or other asset-based financing;
-- to a real estate investment trust or similar entity; or
-- in connection with any transaction similar to the transactions
referred to in the immediately preceding clauses;
provided, however, that any sale, transfer or disposition must be for
valid consideration and must not benefit directly or indirectly any
holder of any outstanding obligation or indebtedness of our company more
than any other holder if that outstanding obligation or indebtedness did
not previously benefit from a Lien; and
- causes or allows any extension, renewal or replacement of any Lien
referred to above, as long as:
-- we or any Subsidiary do not increase the principal amount of the
obligations and indebtedness secured by the Lien, except that:
- the amount of obligations or indebtedness secured by extensions,
renewals or replacements of Liens on property acquired as a result
of defaults on receivables may exceed the principal amount prior to
the extension, renewal or replacement; and
- the amount of obligations secured by extensions, renewals or
replacements of Liens on property may exceed the amount of the
obligations prior to the extension, renewal or replacement if the
value of the property has increased and the loan to value ratio of
the refinanced obligations does not exceed the loan to value ratio
of the obligations relating to the original Lien; and
-- the extension, renewal or replacement of any Lien is limited to that
portion of the property which secured the Lien that is extended,
renewed or replaced plus improvements on the property.
Certain Definitions
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any particular time, the
aggregate amount of assets after deducting (a) all current liabilities,
excluding any liability that by its terms is extendable or renewable at the
option of the obligor to a time more than 12 months after the time the amount
thereof is computed, and (b) all goodwill, excess of cost over assets acquired,
patents, copyrights, trademarks, tradenames and other like intangibles, all as
shown in our company's and our subsidiaries' most recent consolidated financial
statements prepared in accordance with generally accepted accounting principles.
"DEBT" of any Person means at any date, without duplication:
- all obligations of the Person for borrowed money;
- all obligations of the Person evidenced by bonds, debentures, notes or
other similar instruments;
- all obligations of the Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the
ordinary course of business;
- all obligations of the Person as lessee which the Person capitalizes in
accordance with generally accepted accounting principles;
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- all Debt of others secured by a Lien on any asset of the Person, whether
or not the Debt is assumed by the Person; and
- all Debt of others that the Person guarantees.
However, "Debt" of our company or a Subsidiary will not include
Non-recourse Debt.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation or encumbrance of any kind on the
asset. However, "Lien" does not mean security interests under Article 9 of the
Uniform Commercial Code, or any successor provision, on sales of accounts or
chattel paper. For the purposes of the debt securities, our company or any
Subsidiary will be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to the asset.
"NON-RECOURSE DEBT" of our company or a Subsidiary means any obligations
for borrowed money of our company or a Subsidiary that (1) are secured by
specific assets, (2) are not reflected in the balance sheet of our company or a
Subsidiary in accordance with generally accepted accounting principles and (3)
are issued under instruments which limit the recourse against the obligor to the
specific assets. In the case of all Non-recourse Debt incurred after the date of
the indenture, if under applicable law, a holder of the obligation could ever
become entitled to recourse against the obligor under applicable bankruptcy law,
the instrument must also contain a provision that:
- the holder's recourse claim in respect of the obligation will be
subordinate and junior to all Debt evidenced by the debt securities of
any series; and
- the holder of the obligation cannot receive any payment in respect of any
obligation, other than the proceeds of the specific assets that secures
the obligation, until we have paid all debt securities of any series in
full or have provided funds for their payment.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"SUBSIDIARY" means at any date any entity in which we directly or
indirectly own or control securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions.
MERGER AND CONSOLIDATION
We may consolidate or merge with or into any other Person and may transfer
or lease all or substantially all of our property to any Person only if:
- the Person formed by or resulting from the consolidation or merger, or
which will receive the property enters into a supplemental indenture in
which it
-- assumes the due and punctual payment of the principal, premium, and
interest on the debt securities; and
-- agrees to perform and observe each agreement or covenant under the
debt securities and the indenture; and
- immediately after giving effect to the consolidation, merger, transfer or
lease of property discussed above, no Event of Default and no event
which, after notice or lapse of time or both, would become an Event of
Default will have occurred and is continuing.
Any transfer described above, but not a lease, will concurrently release us from
further obligations under the debt securities and the indenture.
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EVENTS OF DEFAULT, WAIVER AND NOTICE
The following will be "Events of Default" for any series of debt
securities:
- our failure to pay any interest or any additional amounts on any series
of debt securities when due and which remains unpaid for a period of 30
days;
- our failure to pay the principal or any premium on any series of debt
securities when due;
- our failure to perform, or our breaching, any covenant or warranty of our
company contained in any series of debt securities or the indenture which
remains unremedied 90 days after the holders of at least 25% in aggregate
principal amount of any series of debt securities then outstanding
provide written notice of our failure to us;
- if any event of default under any mortgage, indenture or instrument
occurs and results in debt in excess of $50,000,000 of our company
becoming or being declared due prior to the date on which it would
otherwise become due, and the acceleration is not annulled, or the debt
is not discharged, within 30 days after the holders of at least 25% in
aggregate principal amount of any series of debt securities then
outstanding provide to us written notice of the event of default;
- the Support Agreement ceases to be in full force and effect for any
reason or is amended or modified in any manner unless
-- prior to its termination or amendment, Standard & Poor's Corporation,
Moody's Investor Service and any other nationally recognized
statistical rating organization then rating securities of our company,
confirm they will not downgrade or place on what is commonly referred
to as a "watch list" for possible downgrading any of our securities as
a result of the termination or amendment of the Support Agreement; or
-- if the termination or amendment is as a result of another Person's
assumption of the debt securities under the provisions described in
"Merger and Consolidation" above, the senior debt securities of the
Person assuming the debt securities are rated by Standard & Poor's
Corporation or Moody's Investor Service immediately following the
assumption at a rating equal to or greater than the rating assigned to
securities of our company by each rating agency;
- Textron Inc., our company or any "significant subsidiary," as defined in
Section 1.02(w) of Regulation S-X of the Securities Act, or any successor
provision thereto, of our company:
-- commences or consents to a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy or similar law or seeking the
appointment of a trustee or other similar official of it or any
substantial part of its property;
-- makes a general assignment for the benefit of creditors;
-- fails generally or admits its inability to pay its debts as they
become due; or
-- takes any corporate action to authorize any of the foregoing;
- an involuntary case or other proceeding (1) is commenced against Textron
Inc., our company or any significant subsidiary of our company seeking
liquidation or other relief with respect to its or our debts under any
bankruptcy or other similar law or seeking the appointment of a trustee
or other similar official and (2) is not dismissed or stayed within 60
days; or
- an order for relief is entered against Textron Inc., our company or any
significant subsidiary of our company under the Federal bankruptcy laws.
In case an Event of Default other than one described in the last two
bullet-points above occurs and is continuing with respect to a particular series
of debt securities, then the holders of at least 25% in aggregate principal
amount of that particular series of debt securities then outstanding may declare
the principal of all outstanding debt securities of that particular series to be
immediately due and payable. If
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an Event of Default described in the last two bullet-points occurs and is
continuing with respect to a particular series of debt securities, the principal
of all outstanding debt securities of that particular series will automatically
become due and payable. Upon any acceleration, any premium and interest on the
debt securities so accelerated will also become immediately due and payable. At
any time after an acceleration but before the holders of debt securities obtain
a judgment or decree for payment of money due, the holders of a majority in
aggregate principal amount of outstanding debt securities may rescind and annul
the acceleration and its consequences, provided all required payments, other
than as a result of the acceleration, shall have been made and all Events of
Default are cured or waived.
The holders of a majority in aggregate principal amount of any series of
outstanding debt securities may waive, on behalf of all of the holders of that
series, any Event of Default and its consequences or past defaults, except a
default in the payment of the principal of, or premium, if any, or interest, if
any, on, debt securities of that particular series or a default under a covenant
or agreement that cannot be modified without the consent of the holder of each
debt security that is affected.
If a default or an Event of Default occurs and continues for any series of
debt securities, the holders of at least a majority in aggregate principal
amount then outstanding for any series of debt securities may direct the time,
method and place of conducting any proceeding or remedy available to the
trustee, or exercising any power given to the trustee under the indenture for
that series of debt securities.
The trustee does not have to exercise any of its rights or powers under the
indenture at the direction of any holders of debt securities unless the holders
offer the trustee reasonable security or indemnity against expenses and
liabilities.
We must file with the trustee annually a written statement regarding the
presence or absence of certain defaults.
DEFEASANCE
Defeasance and Discharge
The indenture provides that we will be discharged from all
non-administrative obligations in respect of the debt securities of any series
if we deposit with the trustee, in trust, money and/or U.S. government
obligations which will provide enough money to pay the principal and interest on
the debt securities of the series on the stated due dates of these payments in
accordance with the terms of the indenture and the debt securities of that
series.
We may establish this trust only if, among other things, we deliver to the
trustee an opinion of counsel stating that the holders of the debt securities of
the series will not recognize income, gain or loss for federal income tax
purposes as a result of the defeasance and will be subject to federal income tax
on the same amount and in the same manner and at the same times as would have
been the case if the defeasance had not occurred.
Defeasance of Limitations on Liens Covenant and Related Events of Default
The indenture provides that we may be released from our obligation to
comply with the restrictive covenant regarding limitations on Liens and we would
no longer trigger Events of Default under the indenture and the debt securities
of a series with respect to this covenant, if we deposit with the trustee, in
trust, money and/or U.S. government obligations which, through the payment of
interest and principal thereon, will provide enough money to pay the principal
and interest on the debt securities of that series on the stated due dates of
these payments in accordance with the terms of the indenture and the debt
securities of that series. Our other obligations under the indenture and the
debt securities of that series and other Events of Default would remain in full
force and effect.
We may establish this trust only if, among other things, we deliver to the
trustee an opinion of counsel stating that the holders of the debt securities of
the series will not recognize income, gain or loss for federal income tax
purposes as a result of the defeasance of the covenant and Events of Default
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described above and will be subject to federal income tax on the same amounts
and in the same manner and at the same times as would have been the case if the
defeasance had not occurred.
If we exercise the option described in this section and the debt securities
of the series are declared due and payable because of the occurrence of any
Event of Default, other than the Event of Default described above in the third
bullet point under "Events of Default", the amount of money and U.S. government
obligations on deposit with the trustee will be sufficient to pay amounts due on
the debt securities of that series at the time of their stated maturity but may
not be sufficient to pay amounts due on the debt securities of that series at
the time of the acceleration resulting from the Event of Default.
CHANGES TO THE INDENTURE
Under the indenture, we may modify our rights and obligations and the
rights of the holders of debt securities with the consent of the holders of at
least a majority of the principal amount of the outstanding debt securities of
all series issued under the indenture affected by the modification. However, we
are required to get the consent of the holder of each debt security affected to
make the following modifications of the debt securities:
- an extension of the fixed maturity of any debt security;
- a reduction of the principal amount payable on any debt security;
- a reduction in the rate of interest, or change in the calculation of
interest, payable on any debt security;
- change any obligation to pay any additional amounts or reduce any
additional amounts payable on any debt security;
- a change in currency in which payments are made;
- an extension of the time of payment of interest;
- a modification that affects adversely any right of a holder of a debt
security to repayment;
- a reduction in the principal amount of an original issue discount debt
security due and payable upon acceleration of the maturity;
- a reduction in the portion of the principal amount of a debt security
payable in bankruptcy;
- a reduction in amounts payable upon redemption;
- a reduction in the rate of interest payable on overdue amounts;
- a modification that impairs the right of any holder of any debt security
to institute suit for the enforcement of any required payment on the debt
security on or after the fixed maturity of the debt security; and
- a reduction in the percentage of holders of the outstanding debt
securities of each series required to consent to any modification
discussed above.
Under the indenture, we can make modifications to the indenture with the
consent of the trustee but without the consent of any holders of debt securities
to evidence our merger or the replacement of the trustee and for other purposes
set forth in the indenture.
CONCERNING THE TRUSTEE
We enter into a variety of banking transactions with the trustee in the
ordinary course of our business.
GOVERNING LAW
The debt securities and the indenture will be governed by, and construed in
accordance with, the laws of the State of New York, without regard to conflict
of law principles.
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PLAN OF DISTRIBUTION
We may sell the debt securities described in this prospectus:
- to or through underwriters or dealers;
- directly to one or more purchasers; or
- through agents.
BY UNDERWRITERS
If we use underwriters in the sale, the underwriters will acquire debt
securities for their own account. The underwriters may resell the debt
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject
to certain conditions. The underwriters may from time to time modify any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers.
DIRECT SALES
We may directly sell debt securities of any series. In this case, no
underwriters or agents would be involved.
BY AGENTS
We may sell debt securities of any series through agents that we designate.
The agents will agree to use their reasonable best efforts to solicit purchases
for the period of their appointment.
GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of
the debt securities may be underwriters, as defined in the Securities Act of
1933, and any discounts, concessions or commissions that we pay them and any
profit on their resale of the debt securities offered by this prospectus may be
treated as underwriting discounts, concessions and commissions under the
Securities Act. We will identify any underwriters or agents and describe their
compensation in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents who
participate in the sale of debt securities to indemnify them against certain
civil liabilities, including liabilities under the Securities Act, or to
contribute with respect to payments which the underwriters, dealers or agents
may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
The debt securities of a series, when first issued, will have no
established trading market. Any underwriters or agents to or through whom we
sell debt securities of a series for public offering and sale may make a market
in the debt securities, but will not be obligated to do so and could stop doing
so at any time without notice. We cannot assure you that a market for any series
of debt securities we issue will exist.
If we indicate in a prospectus supplement, we will authorize underwriters
or our agents to solicit offers by certain institutional investors to purchase
debt securities from us which will be paid for and delivered on a future date
specified in the prospectus supplement. The obligations of any purchasers under
these delayed delivery and payment arrangements will not be subject to any
conditions except that the purchase at delivery must not be prohibited under the
laws of any jurisdiction in the United States to which the institutional
investor is subject.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 (File No. 333-88509)
with the SEC under the Securities Act of 1933, covering the debt securities to
be offered from time to time by this prospectus. This prospectus does not
contain all of the information included in the registration statement.
We also have filed a registration statement on Form 10 (File No.
0-27559)with the SEC under the Securities Exchange Act of 1934. We will file
annual, quarterly and special reports, and other information with the SEC. Our
parent company, Textron Inc., also files annual, quarterly and special reports,
and other information with the SEC. Textron Inc.'s and our SEC filings are
available to the public over the Internet from the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file, or Textron
Inc. files, at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms and their copy charges.
The SEC allows us to "incorporate by reference" in this prospectus the
information in documents we file with it. This means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this
prospectus, and information in documents that we file later with the SEC will
automatically update and supersede information contained in documents filed
earlier with the SEC or contained in this prospectus. We incorporate by
reference in this prospectus the Form 10 and any future filings that we may make
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we, or our agents, sell all of the securities that
may be offered by this prospectus.
You may request a copy of these documents at no cost to you by writing or
telephoning us at the following address:
Textron Financial Corporation
40 Westminster Street
P.O. Box 6687
Providence, Rhode Island 02940-6687
Attention: Brian F. Lynn
(401) 621-4200
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of the securities described in this prospectus in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of those documents.
LEGAL OPINIONS
White & Case LLP will issue for us an opinion about the legality of the
debt securities.
Any underwriters will be advised about the validity of the debt securities
by their own legal counsel.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements for the year ended January 2, 1999 as set forth in their
report included in our registration statement on Form 10, and which is
incorporated by reference in this prospectus. Our consolidated financial
statements are incorporated by reference in reliance on their reports, given on
their authority as experts in accounting and auditing.
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$1,125,000,000
TFC TEXTRON LOGO
TEXTRON FINANCIAL CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
MERRILL LYNCH & CO.
BANC OF AMERICA SECURITIES LLC
BANC ONE CAPITAL MARKETS, INC.
BARCLAYS CAPITAL
CHASE SECURITIES INC.
DEUTSCHE BANC ALEX.BROWN
FIRST UNION SECURITIES, INC.
FLEETBOSTON ROBERTSON STEPHENS
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
UBS WARBURG LLC
JUNE 28, 2000
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