<PAGE> 1
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(5)
(To Prospectus dated July 7, 1997) Registration No: 333-07691
$250,000,000
[FEDEX LOGO]
7.60% NOTES DUE JULY 1, 2097
------------------------
Interest payable January 1 and July 1
------------------------
THE NOTES WILL MATURE ON JULY 1, 2097 AND ARE NOT REDEEMABLE PRIOR TO MATURITY.
UPON THE OCCURRENCE OF A TAX EVENT, AS DEFINED HEREIN, FEDERAL EXPRESS
CORPORATION (THE "CORPORATION") WILL HAVE THE RIGHT TO SHORTEN THE MATURITY OF
THE NOTES TO THE EXTENT REQUIRED SO THAT THE INTEREST PAID ON THE NOTES WILL BE
DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES. PROSPECTIVE INVESTORS SHOULD BE
AWARE THAT THE CORPORATION'S EXERCISE OF ITS RIGHT TO SHORTEN THE MATURITY OF
THE NOTES WILL BE A TAXABLE EVENT TO HOLDERS IF THE NOTES ARE TREATED AS EQUITY
FOR PURPOSES OF FEDERAL INCOME TAXATION BEFORE THE MATURITY IS SHORTENED. SEE
"DESCRIPTION OF NOTES -- SHORTENING MATURITY" IN THIS PROSPECTUS SUPPLEMENT.
THE NOTES WILL BE ISSUED IN THE FORM OF ONE OR MORE GLOBAL SECURITIES (THE
"GLOBAL NOTES") REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE
"DTC") OR ITS NOMINEE. INTEREST IN EACH GLOBAL NOTE WILL BE SHOWN ON, AND
TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY THE DTC
AND ITS PARTICIPANTS. EXCEPT AS PROVIDED HEREIN, NOTES IN CERTIFICATED FORM WILL
NOT BE ISSUED. SETTLEMENT FOR THE NOTES WILL BE MADE IN IMMEDIATELY AVAILABLE
FUNDS. THE NOTES WILL TRADE IN THE DTC'S SAME-DAY FUNDS SETTLEMENT SYSTEM UNTIL
MATURITY, AND SECONDARY MARKET TRADING ACTIVITY FOR THE NOTES WILL THEREFORE
SETTLE IN IMMEDIATELY AVAILABLE FUNDS. ALL PAYMENTS OF PRINCIPAL AND INTEREST ON
THE NOTES WILL BE MADE BY THE CORPORATION IN IMMEDIATELY AVAILABLE FUNDS. SEE
"DESCRIPTION OF DEBT SECURITIES -- BOOK-ENTRY PROCEDURES" IN THE ACCOMPANYING
PROSPECTUS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE 99.735% AND ACCRUED INTEREST
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) CORPORATION(1)(3)
--------- -------------- -----------------
<S> <C> <C> <C>
Per Note....................................... 99.735% 1.125% 98.610%
Total.......................................... $249,337,500 $2,812,500 $246,525,000
</TABLE>
- ---------------
(1) Plus accrued interest from July 1, 1997.
(2) The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
(3) Before deducting expenses payable by the Corporation estimated at
$406,000.
------------------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and are subject to approval of certain legal matters by Brown &
Wood LLP, counsel for the Underwriters. It is expected that delivery of the
Notes in book-entry form will be made through the facilities of the DTC against
payment therefor in immediately available funds on or about July 10, 1997.
------------------------
MORGAN STANLEY DEAN WITTER
J. P. MORGAN & CO.
FIRST CHICAGO CAPITAL MARKETS, INC.
MORGAN KEEGAN & COMPANY, INC.
July 7, 1997
<PAGE> 2
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
CORPORATION OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY,
THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR
IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Federal Express Corporation................................. S-3
Recent Developments......................................... S-3
Use of Proceeds............................................. S-3
Description of Notes........................................ S-3
Underwriting................................................ S-5
Legal Matters............................................... S-6
PROSPECTUS
Available Information....................................... 2
Incorporation of Certain Documents by Reference............. 2
Federal Express Corporation................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Use of Proceeds............................................. 3
Description of Debt Securities.............................. 3
Plan of Distribution........................................ 9
Legal Matters............................................... 10
Experts..................................................... 11
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE> 3
FEDERAL EXPRESS CORPORATION
The Corporation offers a wide range of express services for the
time-definite transportation of documents, packages and freight throughout the
world using an extensive fleet of aircraft and vehicles and leading-edge
information technologies. Corporate headquarters are located at 2005 Corporate
Avenue, Memphis, Tennessee 38132, telephone (901) 369-3600.
RECENT DEVELOPMENTS
Net income for the quarter ended May 31, 1997 was $132.6 million, a 15%
increase over last year's fourth quarter net income of $115.4 million. Earnings
per share for the fourth quarter rose to $1.14 per share from $1.01 per share
last year. Revenues for the quarter were $3,068.3 million, 12% higher than last
year's $2,737.7 million. Operating income increased to $251.3 million from
$225.7 million, and pretax income rose to $230.6 million from $202.5 million a
year ago.
International operating income for the fourth quarter was $59.4 million on
international segment revenues of $854.9 million. In last year's fourth quarter,
the international segment reported operating income of $37.2 million on revenues
of $745.3 million. U.S. domestic operating income was $191.9 million on revenues
of $2,213.4 million, compared to operating income of $188.5 million on revenues
of $1,992.4 million in last year's fourth quarter.
For fiscal 1997, revenues were $11,519.8 million, a 12% increase over last
year's $10,273.6 million. Fiscal 1997 net income was $361.2 million or $3.12 per
share. Fiscal 1996 net income was $307.8 million or $2.69 per share. Fiscal 1997
operating income for the Corporation's international segment was $141 million on
international revenues of $3,197.7 million compared to international operating
income of $81.6 million in fiscal 1996 on revenues of $2,807.3 million. U.S.
domestic operating income for the year was $558 million on U.S. domestic
revenues of $8,322.1 million compared to U.S. domestic operating income of
$542.2 million in fiscal 1996 on revenues of $7,466.3 million.
USE OF PROCEEDS
The Corporation expects to use the net proceeds of the sale of the Notes
for general corporate purposes and to repay commercial paper issued by the
Corporation within the past year for working capital purposes. The commercial
paper was issued at interest rates ranging from 5.65% to 5.87% with maturities
ranging from July 7, 1997 to July 14, 1997.
DESCRIPTION OF NOTES
The Notes are to be issued under the Indenture, dated as of July 1, 1996,
as amended or supplemented (the "Indenture"), between the Corporation and The
First National Bank of Chicago, as trustee (the "Trustee"), which Indenture is
more fully described in the Prospectus. The following description of the
particular terms of the Notes offered hereby supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of Debt Securities set forth in the Prospectus under the caption
"Description of Debt Securities." Whenever particular defined terms of the
Indenture are referred to, such defined terms are incorporated herein by
reference.
GENERAL
The Notes will mature on July 1, 2097 and will be limited to $250,000,000
aggregate principal amount. Each Note will bear interest at the rate per annum
stated on the cover page hereof from July 1, 1997 or from the most recent
Interest Payment Date (as defined below) to which interest has been paid,
payable on each January 1 and July 1 (each, an "Interest Payment Date"),
commencing January 1, 1998 to the person in whose name the Note (or any
predecessor Note) is registered at the close of business on the next preceding
December 15 and June 15, respectively.
S-3
<PAGE> 4
The Notes will be unsecured obligations of the Corporation and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Corporation.
The defeasance and covenant defeasance provisions of the Indenture
described under "Description of Debt Securities -- Defeasance and Covenant
Defeasance" in the Prospectus will apply to the Notes.
The Notes may not be redeemed by the Corporation prior to maturity and are
not subject to a sinking fund.
The Notes will be denominated in United States dollars and issued in fully
registered form without coupons in denominations of $1,000 and any integral
multiples thereof. The Notes will be issued in book-entry form only, except as
otherwise provided in the Prospectus. See "Description of Debt
Securities -- Book-Entry Procedures" in the Prospectus.
SHORTENING MATURITY
The Corporation intends to deduct interest paid on the Notes for federal
income tax purposes. However, there have been proposed tax law changes over the
past year that, among other things, would have prohibited an issuer from
deducting interest payments on debt instruments with a maturity of more than 40
years. While none of these proposals have become law, there can be no assurance
that similar legislation affecting the Corporation's ability to deduct interest
paid on the Notes will not be enacted in the future or that any such legislation
would not have a retroactive effective date.
Upon the occurrence of a Tax Event, as defined below, the Corporation will
have the right to shorten the maturity of the Notes to the extent required, in
the opinion of a nationally recognized independent tax counsel experienced in
such matters, so that, after such shortening of the maturity, interest paid on
the Notes will be deductible for federal income tax purposes.
If the maturity of the Notes is shortened on the occurrence of a Tax Event,
the Corporation will mail a notice to each holder of record of the Notes by
first-class mail not more than 60 days after the occurrence of such Tax Event,
stating the new maturity date of the Notes. Such notice will be effective
immediately upon mailing.
The Corporation believes that the Notes constitute indebtedness for federal
income tax purposes under current law and that the shortening of the maturity of
the Notes will not be a taxable event to holders. Prospective investors should
be aware, however, that the shortening of the maturity of the Notes will be a
taxable event to holders if the Notes are treated as equity for purposes of
federal income taxation before the maturity is shortened.
"Tax Event" means that the Corporation has received an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that on or after the date of the issuance of the Notes, as a result of
(a) any amendment to, clarification of, or change (including any announced
prospective change) in laws, or any regulations thereunder, of the United
States; (b) any judicial decision, official administrative pronouncement,
ruling, regulatory procedure, notice or announcement, including any notice or
announcement of intent to adopt such procedures or regulations (an
"Administrative Action"); or (c) any amendment to, clarification of, or change
in the official position or the interpretation of such Administrative Action or
judicial decision that differs from the theretofore generally accepted position,
in each case, on or after the date of the issuance of the Notes, such change in
tax law creates a more than insubstantial risk that interest paid by the
Corporation on the Notes is not, or will not be, deductible, in whole or in
part, by the Corporation for purposes of federal income tax.
TRUSTEE
The First National Bank of Chicago, an affiliate of one of the
Underwriters, is the trustee under the Indenture.
S-4
<PAGE> 5
UNDERWRITING
Under the terms and subject to the conditions contained in the underwriting
agreement (the "Underwriting Agreement") among the Corporation and Morgan
Stanley & Co. Incorporated, J. P. Morgan Securities Inc., First Chicago Capital
Markets, Inc. and Morgan Keegan & Company, Inc. (the "Underwriters") relating to
the Notes, the Underwriters have severally agreed to purchase, and the
Corporation has agreed to sell to them severally, the respective principal
amounts of Notes set forth opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF NOTES
---- ----------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $100,000,000
J.P. Morgan Securities Inc. ................................ 100,000,000
First Chicago Capital Markets, Inc. ........................ 25,000,000
Morgan Keegan & Company, Inc. .............................. 25,000,000
------------
Total............................................. $250,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all of the Notes
if any are taken.
The Underwriters have advised the Corporation that they propose initially
to offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .675% of the principal amount of the Notes.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of .250% of the principal amount of the Notes to certain other dealers.
After the initial public offering, the public offering price, concession and
discount may be changed.
The Notes are a new issue of securities with no established trading market.
The Corporation does not intend to apply for the listing of the Notes on a
national securities exchange, but has been advised by the Underwriters that they
presently intend to make a market in the Notes, as permitted by applicable laws
and regulations. No Underwriter is obligated, however, to make a market in the
Notes, and any such market-making may be discontinued at any time at the sole
discretion of such Underwriter. Accordingly, no assurance can be given as to the
liquidity of the trading market for the Notes.
In order to facilitate the offering of the Notes, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the Notes. Specifically, the Underwriters may overallot in connection with the
offering, creating a short position in the Notes for their own account. In
addition, to cover overallotments or to stabilize the price of the Notes, the
Underwriters may bid for, and purchase, the Notes in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the Notes in the offering, if the
syndicate repurchases previously distributed Notes in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end any of these activities at any time.
The Underwriting Agreement provides that the Corporation will reimburse the
Underwriters for all expenses and indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
Each of the Underwriters and certain of its affiliates have performed, and
may in the future perform, commercial banking and investment banking services
for the Corporation in the ordinary course of business.
S-5
<PAGE> 6
LEGAL MATTERS
The validity of the Notes will be passed upon for the Corporation by George
W. Hearn, Vice President -- Law of the Corporation, and for the Underwriters by
Brown & Wood LLP, New York, New York. At July 3, 1997 Mr. Hearn owned 2,000
shares of the Corporation's common stock and had been granted options to
purchase 27,750 shares of such common stock. Of the options granted, zero were
vested at such date.
S-6
<PAGE> 7
PROSPECTUS
[FEDEX LOGO]
DEBT SECURITIES
------------------------
Up to $258,033,000 aggregate principal amount of Federal Express
Corporation (the "Corporation") unsecured debt securities (the "Debt
Securities") (or the equivalent thereof in foreign currency) may be offered for
sale from time to time pursuant to this Prospectus and one or more Prospectus
Supplements. The Debt Securities may be offered in one or more series in
amounts, at prices and on terms to be determined at the time of sale. The Debt
Securities will be unsecured obligations of the Corporation and will rank on a
parity with all other unsecured and unsubordinated indebtedness of the
Corporation.
When a particular series or issue of Debt Securities is offered (the
"Offered Debt Securities"), a supplement to this Prospectus (the "Prospectus
Supplement") will be delivered with this Prospectus setting forth with respect
to the offered securities: (i) the terms of any Offered Debt Securities
including the specific designation, aggregate principal amount, denominations,
purchase price, currency, maturity, rate (which may be fixed or variable) and
time of payment of interest (if any), redemption terms and the other terms in
connection with the offering and sale of the Offered Debt Securities; and (ii)
any initial public offering price, the net proceeds to the Corporation and the
other specific terms of the Offered Debt Securities.
Interest will be payable on the Debt Securities of each series on the dates
and at the rates per annum set forth for such Debt Securities in the applicable
Prospectus Supplement. Principal will be payable on the Debt Securities of each
series in scheduled amounts and on specified dates as set forth in the
applicable Prospectus Supplement. The Debt Securities will be issued in
registered form only and, unless otherwise specified in the applicable
Prospectus Supplement, in accordance with a book-entry system.
The Debt Securities may be sold on a negotiated or competitive bid basis to
or through underwriters or dealers or directly to other purchasers or through
agents. See "Plan of Distribution." The Prospectus Supplement relating to each
offering will set forth the names of any underwriters, dealers or agents
involved in the sale of the Debt Securities in connection with which this
Prospectus is being delivered, the amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters, dealers or
agents.
Prior to their issuance there will have been no market for the Debt
Securities of any series and there can be no assurance that one will develop.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any series of Debt
Securities on a national securities exchange.
This Prospectus may not be used to consummate sales of any Debt Securities
unless accompanied by the Prospectus Supplement applicable to the Debt
Securities being sold.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 7, 1997.
<PAGE> 8
AVAILABLE INFORMATION
Federal Express Corporation (the "Corporation") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Corporation with the Commission can be inspected, and copies may be obtained at
prescribed rates, at the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following Regional
Offices of the Commission: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York Regional Office, 7 World
Trade Center, New York, New York 10048. Such material can also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. and inspected and copied at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits, herein referred to as the
"Registration Statement") filed by the Corporation under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus does not contain all of
the information included in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Corporation and the
securities offered hereby.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference and made a
part hereof.
1. The Corporation's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996 filed August 9, 1996.
2. The Corporation's Quarterly Reports on Form 10-Q for the fiscal quarters
ended August 31, 1996, November 30, 1996 and February 28, 1997,
respectively, filed October 10, 1996, January 14, 1996 and April 11,
1997, respectively.
3. The Corporation's Current Reports on Form 8-K dated June 5, 1996, June
7, 1996, August 16, 1996, October 17, 1996, March 4, 1997, May 12, 1997,
May 22, 1997, June 11, 1997 and June 30, 1997 filed June 10, 1996, June
21, 1996, August 28, 1996, October 22, 1996, April 21, 1997, May 14,
1997, June 2, 1997, June 19, 1997 and July 7, 1997, respectively.
All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering made by this Prospectus shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Corporation will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all documents incorporated by reference
in this Prospectus, without exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests
2
<PAGE> 9
for such copies should be directed to: Rebecca M. Halvorson, Managing
Director -- Investor Relations, Federal Express Corporation, by mail at Box 727,
Memphis, Tennessee 38194-1854 or by telephone at (901) 395-3468.
FEDERAL EXPRESS CORPORATION
The Corporation offers a wide range of express services for the
time-definite transportation of documents, packages and freight throughout the
world using an extensive fleet of aircraft and vehicles and leading-edge
information technologies. Corporate headquarters are located at 2005 Corporate
Avenue, Memphis, Tennessee 38132, telephone (901) 369-3600.
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
--------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges(a)......................... 1.4x 1.7x 2.0x 1.9x 2.0x
</TABLE>
- ---------------
(a) Earnings included in the calculation of the ratio of earnings to fixed
charges represent income before income taxes plus fixed charges (other than
capitalized interest). Fixed charges include interest expense, capitalized
interest, amortization of debt issuance costs and a portion of rent expense
representative of interest.
As a result of an offering of Debt Securities, the Corporation may be more
highly leveraged than currently reflected in this table.
USE OF PROCEEDS
Unless otherwise set forth in a Prospectus Supplement, the net proceeds
from the sale of the Debt Securities will be added to the general funds of the
Corporation and used for general corporate purposes.
DESCRIPTION OF DEBT SECURITIES
The discussion that follows is a summary and does not purport to be
complete. The summary includes descriptions of the material terms of the
Indenture (defined herein) and the Debt Securities, the form of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. For the Debt Securities offered pursuant to this Prospectus and any
Prospectus Supplement, this summary will be qualified in its entirety by the
detailed information appearing in such Prospectus Supplement, as well as by the
form of the Debt Securities of each series offered thereby and the Indenture.
This summary makes use of terms defined in and is qualified in its entirety by
reference to the Indenture.
Except as otherwise indicated below or as described in the applicable
Prospectus Supplement, the following summary will apply to the Debt Securities
and the Indenture. Additional provisions with respect to the Indenture and the
Debt Securities relating to any particular offering of Debt Securities will be
described in the applicable Prospectus Supplement. To the extent that any
provision in any Prospectus Supplement is inconsistent with any provision of
this summary, the provision of such Prospectus Supplement will control.
GENERAL
The Debt Securities are to be issued under an Indenture, dated as of July
1, 1996 (the "Indenture"), between the Corporation and The First National Bank
of Chicago, as trustee (the
3
<PAGE> 10
"Trustee"). The Indenture does not limit the aggregate amount of Debt Securities
which may be issued thereunder and provides that Debt Securities may be issued
thereunder in one or more series.
The Debt Securities will be unsecured obligations of the Corporation and
will rank on a parity with all other unsecured and unsubordinated indebtedness
of the Corporation.
The Indenture does not contain any debt covenants or provisions which would
afford the holders of the Debt Securities protection in the event of a highly
leveraged transaction. Other indebtedness of the Corporation ranking pari passu
with the Debt Securities have covenants that would afford those holders
privileges in the event of a change in control of the Corporation.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities for the following terms of such Debt Securities:
(1) the title of such Debt Securities and the series in which such Debt
Securities will be included;
(2) the authorized denominations and aggregate principal amount of such
Debt Securities;
(3) whether the Debt Securities are to be issuable in global or
certificated form;
(4) the date or dates on which such Debt Securities will mature;
(5) the rate or rates (which may be fixed or variable) per annum at which
such Debt Securities will bear interest, if any, and if such rate is
variable, the manner of calculation thereof and the date from which
interest will accrue;
(6) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable;
(7) the dates on which such interest will be payable and the corresponding
record dates;
(8) any mandatory or optional sinking fund or purchase fund or analogous
provisions;
(9) the terms and conditions upon which such Debt Securities may be
redeemed, if any, and any redemption price;
(10) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to
Section 502 of the Indenture;
(11) provisions, if any, for the defeasance of such Debt Securities;
(12) the currency in which payments of principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable;
(13) whether Additional Amounts are payable with respect to any Debt
Securities;
(14) any additional Events of Default or covenants applicable to such
series; and
(15) any other terms of such series (which terms shall not be inconsistent
with the Indenture). (Indenture, Section 301)
If a Prospectus Supplement specifies that a series of Debt Securities is
denominated in a currency or currency unit other than United States dollars,
such Prospectus Supplement shall also specify the denomination in which such
Debt Securities will be issued and the currency in which the principal, premium,
if any, and interest, if any, on such Debt Securities will be payable, which may
be United States dollars based upon the exchange rate for such other currency
unit existing on or about the time a payment is due. (Indenture, Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
all outstanding Debt Securities will be exchangeable and transfers thereof will
be registrable, and principal of, premium, if
4
<PAGE> 11
any, and interest, if any, on all Debt Securities will be payable, at the
corporate trust office of the Trustee at One First National Plaza, Chicago,
Illinois; provided that payment of interest may, at the option of the
Corporation, be made by check mailed to the address of the person entitled
thereto as it appears in the Security Register or by transfer to an account
maintained by the payee with a bank located in the United States. (Indenture,
Sections 301, 307 and 1002)
Unless otherwise indicated in the Prospectus Supplement relating thereto,
all Debt Securities will be issued only in fully registered form without coupons
in denominations of $1,000 and any integral multiples thereof. No service charge
will be made for any registration of transfer or exchange of any Debt
Securities, but the Corporation may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
(Indenture, Section 305) The Indenture provides that the Debt Securities may be
issuable in permanent global form. (Indenture, Section 203)
The Corporation's right and the rights of its creditors, including the
Holders of any Debt Securities, to participate in the assets of any subsidiary
upon its liquidation or recapitalization would be subject to the prior claims of
such subsidiary's creditors, except to the extent that the Corporation may
itself be a creditor with recognized claims against such subsidiary. The
Indenture does not limit the amount of secured or unsecured indebtedness which
may be incurred by the Corporation or its subsidiaries.
Some of the Debt Securities may be issued as discounted Debt Securities
(bearing no interest or interest at a rate which at the time of issuance is
below market rates) to be sold at a substantial discount below their stated
principal amount.
Certain federal income tax consequences and special considerations
applicable to any such securities will be described in the applicable Prospectus
Supplement.
BOOK-ENTRY PROCEDURES
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be subject to the provisions described below. Upon
issuance, each Series of Debt Securities 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 "DTC"), and registered in its name
or in the name of CEDE & Co. ("Cede"), its nominee. No Holder will be entitled
to receive a note in certificated form, except as set forth below.
DTC has advised the Corporation that DTC is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended. DTC holds securities for its
participants ("DTC Participants") and facilitates the clearance and settlement
of securities transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations. Access to DTC's book-entry system is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Holders that are not DTC Participants but desire to purchase, sell or
otherwise transfer ownership of, or other interests, in Debt Securities may do
so only through DTC Participants. In addition, Holders will receive all
distributions of principal and interest from the Trustee through the DTC
Participants. Under the rules, regulations and procedures creating and affecting
DTC and its operation, DTC is required to make book-entry transfers of Debt
Securities among DTC Participants on whose behalf it acts and to receive and
transmit distributions of principal of, and interest on, the Debt Securities.
Under the book-entry system, Holders may experience some delay in receipt of
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payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC, and DTC in turn will forward the payments to the appropriate
DTC Participants.
Distributions by DTC Participants to Holders will be the responsibility of
such DTC Participants and will be made in accordance with customary industry
practices. Accordingly, although Holders will not have possession of the Debt
Securities, the rules of DTC provide a mechanism by which participants will
receive payments and will be able to transfer their interests. Although the DTC
Participants are expected to convey the rights represented by their interests in
any global security to the related Holders, because DTC can only act on behalf
of DTC Participants, the ability of Holders to pledge Debt Securities to persons
or entities that are not DTC Participants or to otherwise act with respect to
such Debt Securities, may be limited due to the lack of physical certificates
for such Debt Securities.
None of the Corporation, the Trustee or any other agent of the Corporation
or the Trustee will have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Debt Securities or for supervising or reviewing any records
relating to such beneficial ownership interests. Since the only "Holder" will be
Cede, as nominee of DTC, Holders will not be recognized by the Trustee as
Holders, as such term is used in the Indenture, and Holders will be permitted to
exercise the rights of Holders only indirectly through DTC and DTC Participants.
DTC has advised the Corporation that it will take any action permitted to be
taken by a Holder under the Indenture and any Prospectus Supplement only at the
direction of one or more DTC Participants to whose accounts with DTC the related
Debt Securities are credited.
Same-Day Settlement and Payment. All payments made by the Corporation to
the Trustee will be in immediately available funds and will be passed through to
DTC in immediately available funds.
The Debt Securities will trade in DTC's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the Debt Securities
will be required by DTC to settle in immediately available funds. No assurance
can be given as to the effect, if any, of settlement in immediately available
funds on trading activity in the Debt Securities.
Certificated Form. The Debt Securities will be issued in fully registered,
certificated form to Holders, or their nominees, rather than to DTC or its
nominee, only if DTC advises the Trustee in writing that it is no longer
willing, able or eligible to discharge properly its responsibilities as
depository with respect to the Debt Securities and the Corporation is unable to
locate a qualified successor or if the Corporation, at its option, elects to
terminate the book-entry system through DTC. In such event, the Trustee will
notify all Holders through DTC Participants of the availability of such
certificated Debt Securities. Upon surrender by DTC of the definitive global
note representing the series of Debt Securities and receipt of instructions for
reregistration, the Trustee will reissue the Debt Securities in certificated
form to Holders or their nominees. (Indenture, Section 305)
Debt Securities in certificated form will be freely transferable and
exchangeable at the office of the Trustee upon compliance with the requirements
set forth in the Indenture. No service charge will be imposed for any
registration of transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge may be required. (Indenture, Section 305)
MERGER AND CONSOLIDATION
The Indenture does not prevent any consolidation or merger of the
Corporation with or into any other Person, or successive consolidations or
mergers in which the Corporation or its successor or successors may be a party,
or any conveyance, transfer or lease of the property of the Corporation as an
entirety or substantially as an entirety, to any Person, unless:
(i) in case the Corporation shall consolidate with or merge into another
Corporation or convey, transfer or lease its properties and assets as,
or substantially as, an entirety to any Person, the Corporation formed
by such consolidation or into which the Corporation is merged or the
Person which acquires by conveyance, transfer, or lease the properties
and assets of
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the Corporation, as, or substantially as, an entirety shall be a
Corporation organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and
shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (and premium, if any),
interest on and any Additional Amounts with respect to all the
Securities and the performance of every covenant of the Indenture
on the part of the Corporation to be performed or observed;
(ii) immediately after giving effect to such transaction, no Event of
Default, or event which after notice or lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing;
and
(iii) the Corporation shall have delivered to the Trustee an Officer's
Certificate or an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and such
supplemental indenture comply with the Indenture and that all
conditions precedent therein provided for relating to such
transaction have been complied with. (Indenture, Section 801)
Upon compliance with such provisions by a successor corporation or Person,
the Corporation (except in the case of a lease) would be relieved of its
obligations and covenants under the Indenture and the Debt Securities.
(Indenture, Section 802)
MODIFICATION, AMENDMENT AND WAIVER
Modifications and amendments of the Indenture may be made by the
Corporation and the Trustee with the consent of the Holders of a majority in
principal amount of each series of Debt Securities to be affected if less than
all series are to be affected by such modification; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
debt security affected thereby:
(a) change the Stated Maturity of the principal of, or any installment of
interest on, any such debt security;
(b) reduce the principal amount of, rate of interest on, or premium payable
upon the redemption of, any such debt security;
(c) change any place of payment where, or the currency in which, any debt
security or the interest or any premium thereon is payable;
(d) impair the right to institute suit for the enforcement of any payment
on or with respect to any such debt security on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the
Redemption Date); or
(e) reduce the percentage in principal amount of outstanding Debt
Securities the consent of whose Holders is required for modification or
amendment of the Indenture, for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults.
(Indenture, Section 902)
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
such series waive any past default under the Indenture and its consequences,
except a default in the payment of the principal, premium, if any, or interest
on any Debt Securities or in respect of a covenant or provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each outstanding debt security affected. (Indenture, Section 513)
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EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture with respect to
each series of Debt Securities:
(a) default for more than 30 days in the payment of any interest on any
debt security of such series;
(b) default in the payment of principal of, or premium, if any, on, any
debt security of such series at its Maturity;
(c) default in the performance, or breach, of any other covenant of the
Corporation in the Indenture for more than 60 days after written notice
as provided in the Indenture;
(d) default in the deposit of any sinking fund payment when and as due by
the terms of a Debt Security of such series; and
(e) certain events in bankruptcy, insolvency or reorganization in respect
of the Corporation. (Indenture, Section 501)
If an Event of Default with respect to all Debt Securities of any series
occurs and is continuing, then and in every such case the Trustee or the Holders
of not less than 50% in aggregate principal amount of the outstanding Debt
Securities of such series may, by a notice in writing to the Corporation (and to
the Trustee if given by Holders), declare to be due and payable immediately the
principal amount of all Debt Securities of such series. However, at any time
after such a declaration of acceleration with respect to the Debt Securities of
such series has been made, but before the Stated Maturity thereof, the Holders
of a majority in principal amount of the outstanding Debt Securities of such
series may, subject to certain conditions, rescind and annul such acceleration
if all Events of Default with respect to the Debt Securities of such series,
other than the nonpayment of accelerated principal, have been cured or waived as
provided in the Indenture. (Indenture, Section 502) For information as to waiver
of defaults, see "Modification and Waiver."
Subject to the duties of the Trustee, if an Event of Default with respect
to the Debt Securities of any series occurs and is continuing, the Indenture
provides that the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
Holders of the Debt Securities of such series, unless such Holders offer to the
Trustee reasonable indemnity. (Indenture, Sections 601 and 603) Subject to such
provision for indemnity, certain conditions and certain other rights of the
Trustee, the Holders of a majority in principal amount of the outstanding Debt
Securities of such series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the Debt
Securities of such series. (Indenture, Section 512)
No Holder of any debt security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder unless such Holder has previously given to the Trustee written notice
of a continuing Event of Default, and unless the Holders of at least 50% in
principal amount of the outstanding Debt Securities of such series has made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as trustee, and the Trustee has not received from the Holders of
a majority in principal amount of the outstanding Debt Securities of such series
a direction inconsistent with such request and the Trustee has failed to
institute such proceeding within 60 days. (Indenture, Section 507) However, the
Holder of any debt security of such series will have an absolute right to
receive payment of the principal of (and premium, if any, on) and interest on
such debt security on or after the respective Stated Maturities expressed in
such debt security (or, in the case of redemption, on the Redemption Date) and
to institute suit for the enforcement of any such payment. (Indenture, Section
508)
The Indenture requires the Corporation to furnish to the Trustee annually a
statement as to the absence of certain defaults under the Indenture. (Indenture,
Section 1005) The Indenture provides
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that the Trustee may withhold notice to the Holders of Debt Securities of any
default (except as to payment of principal or interest with respect to such Debt
Securities) if it considers such withholding to be in the interest of the
Holders of such Debt Securities. (Indenture, Section 602)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series, that the Corporation may elect either (A) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B)(i) to
be released from its obligations with respect to such Debt Securities under
Sections 801 (consolidation, merger and sale of assets) and 1005 (certificates
of compliance) and (ii) that Section 501(3) (as to Sections 801 and 1005),
501(5), 501(6) and 501(7) (if Section 501(7) is specified in the Prospectus
Supplement), as described in the last three clauses of the first sentence under
"Events of Default" above, shall not be deemed to be events of default under the
Indenture with respect to such series ("covenant defeasance"), upon the deposit
with the Trustee (or other qualifying trustee), in trust for such purpose, of
money, or Government Obligations which through the payment of principal and
interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of (and premium, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
In the case of defeasance or covenant defeasance, the holders of such Debt
Securities are entitled to receive payments in respect of such Debt Securities
solely from such trust. Such a trust may only be established if, among other
things, the Corporation has delivered to the Trustee an Opinion of Counsel (as
specified in the Indenture) to the effect that the holders of such Debt
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same time as would have been the case if such defeasance or covenant defeasance
had not occurred. Such Opinion of Counsel, in the case of defeasance under
clause (A) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable federal income tax law occurring after
the date of the Indenture. (Indenture, Article Thirteen)
CONCERNING THE TRUSTEE
The Trustee acts as trustee under other indentures with respect to other
indebtedness of the Corporation which ranks pari passu with the Debt Securities.
The Corporation leases facilities financed with the proceeds of such
indebtedness and the Corporation's obligations under such leases secure payment
of such indebtedness. The Corporation also from time to time borrows from, and
maintains deposit accounts with, the Trustee.
PLAN OF DISTRIBUTION
The Debt Securities may be sold in any of the following ways: (1) through
underwriters or dealers; (2) through agents; or (3) directly to one or more
purchasers (through a specific bidding or auction process or otherwise).
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Corporation or from purchasers of Debt Securities
for whom they may act as
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agents in the form of discounts, concessions or commissions. Underwriters may
sell Debt Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for whom they may act as agents.
If a dealer is utilized to sell the Debt Securities, the Corporation will sell
such Debt Securities to the dealer as principal. The dealer may then resell such
Debt Securities to the public at varying prices to be determined by such dealer
at any time of resale.
Underwriters, dealers and agents that participate in the distribution of
Debt Securities may be deemed to be underwriters, and any discounts or
commissions received by them from the Corporation and any profit on the resale
of Debt Securities by them may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter, dealer or agent
will be identified, and any such compensation received from the Corporation will
be described, in the applicable Prospectus Supplement.
Offers to purchase Debt Securities may be solicited directly and the sale
thereof may be made directly to institutional investors or others, who may be
deemed to be underwriters within the meaning of the Securities Act with respect
to any resale thereof. The terms of any such sales will be described in the
Prospectus Supplement relating thereto, including the terms of any bidding or
auction process.
If so indicated in the Prospectus Supplement, the Corporation will
authorize underwriters, dealers or agents to solicit offers by certain specified
institutions to purchase Debt Securities from the Corporation at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for the solicitation of such contracts.
Under agreements which may be entered into by the Corporation,
underwriters, dealers and agents who participate in the distribution of Debt
Securities may be entitled to indemnification by the Corporation against certain
liabilities, including liabilities under the Securities Act or to contribution
with respect to payments which the agents, underwriters or dealers may be
required to make in respect thereof.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporation does not intend to apply for the listing of any Series of Debt
Securities on a national securities exchange. If the Debt Securities of any
Series are sold to or through underwriters, the underwriters may make a market
in such Debt Securities, as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in such Debt
Securities, and any such market-making could be discontinued at any time at the
sole discretion of the underwriters. Accordingly, no assurance can be given as
to the liquidity of the trading market for the Debt Securities of any Series.
Certain of the underwriters, dealers or agents and their affiliates may be
customers of, engage in transactions with, and perform services for, the
Corporation in the ordinary course of business.
LEGAL MATTERS
Unless otherwise indicated in the Prospectus Supplement relating to the
Offered Securities, the legality of the Debt Securities will be passed upon for
the Corporation by George W. Hearn, Vice President -- Law of the Corporation,
and by counsel for any underwriters, dealers and agents. At July 3, 1997, Mr.
Hearn owned 2,000 shares of the Corporation's common stock and had been granted
options to purchase 27,750 shares of the Corporation's common stock. Of the
options granted, zero were vested at such date.
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EXPERTS
The consolidated financial statements and schedules of the Corporation
included or incorporated by reference in the Corporation's Annual Report on Form
10-K for the year ended May 31, 1996 and incorporated by reference herein, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
With respect to the unaudited interim financial information for the
quarters ended August 31, 1996, November 30, 1996 and February 28, 1997,
included in the Corporation's Quarterly Reports on Form 10-Q for such periods,
which are incorporated by reference in this Prospectus, Arthur Andersen LLP has
applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports thereon state that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their reports on
the unaudited interim financial information because those reports are not
"reports" or a "part" of the Registration Statement, of which this Prospectus is
a part, prepared or certified by the accountants within the meaning of Sections
7 and 11 of the Securities Act.
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