<PAGE>
RULE NO.424(b)(2)
REGISTRATION NO. 33-60939
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 28, 1995)
$584,662,000
MCDONALD'S CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE FROM NINE MONTHS TO 60 YEARS FROM DATE OF ISSUE
---------------
McDonald's Corporation (the "Company") may from time to time offer its
Medium-Term Notes, Series E (the "Notes") with an aggregate initial public
offering price or purchase price of up to $584,662,000, or the equivalent
thereof in one or more foreign or composite currencies including European
Currency Units ("ECU"), subject to reduction as a result of the sale of other
Debt Securities. In addition to the Notes in registered form ("Registered
Notes") being offered hereby in the United States, the Company may from time
to time offer Notes in bearer form ("Bearer Notes") outside the United States.
A separate Prospectus Supplement will be used for any such offering of Bearer
Notes. Any Bearer Notes sold will reduce correspondingly the principal amount
of Registered Notes that may be sold hereunder. See "Plan of Distribution."
Each Registered Note will mature on any day from nine months to 60 years
from its date of issue and may be subject to redemption at the option of the
Company, or to repayment at the option of the Holder, prior to Stated
Maturity. Each Registered Note will be denominated in the currency designated
by the Company (the "Specified Currency"). See "Important Currency
Information" and "Currency Risks." Each Registered Note will bear interest at
a fixed rate (a "Fixed Rate Note"), which may be zero in the case of certain
Original Issue Discount Notes, or at a floating rate (a "Floating Rate Note")
determined by reference to the CD Rate, the CMT Rate, the Commercial Paper
Rate, the Federal Funds Rate, LIBOR, the Prime Rate, the Treasury Rate or any
other Base Rate, as selected by the initial purchaser and agreed to by the
Company, adjusted by the Spread and/or Spread Multiplier, if any, applicable
to such Note. A Registered Note may be issued as an indexed note (an "Indexed
Note") the interest amount (an "Interest Indexed Note") or principal amount (a
"Principal Indexed Note" and, together with Interest Indexed Notes, "Indexed
Notes") payable at Maturity of which will be determined by reference to a
designated stock, currency, commodity or other index or will otherwise be
determined by application of a formula. See "Description of Registered Notes--
Indexed Notes." The Specified Currency, any applicable interest rate or
interest rate formula, any applicable index formula, reset provisions, Issue
Price, Stated Maturity, any Interest Payment Dates, any redemption and
repayment provisions and certain other terms applicable to each Registered
Note will be established at the date of issue of such Registered Note and set
forth in a pricing supplement to this Prospectus Supplement (a "Pricing
Supplement").
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes, other than in the case of Original Issue Discount Notes,
will be payable each February 15 and August 15 and at Maturity. Interest on
Floating Rate Notes will be payable on the dates determined at the time of
issuance and set forth in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Registered
Notes will be issued only in minimum denominations of $100,000 and any larger
amount that is an integral multiple of $1,000 or, in the case of a Registered
Note having a Specified Currency other than U.S. dollars, in the minimum
denominations set forth in the applicable Pricing Supplement.
Each Registered Note will be represented either by a Global Security
registered in the name of a nominee of The Depository Trust Company, as
Depositary (a "Book-Entry Note"), or by a certificate issued in temporary or
definitive form (a "Certificated Note"), as set forth in the applicable
Pricing Supplement. Beneficial interests in Global Securities representing
Book-Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary's participants. Book-Entry Notes
will not be issuable as Certificated Notes except under the circumstances
described herein.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PRO-
SPECTUS OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<CAPTION>
PRICE TO PUBLIC(1) AGENTS' COMMISSION(2) PROCEEDS TO THE COMPANY(2)(3)
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<S> <C> <C> <C>
Per Note................ 100% .125% to .750% 99.875% to 99.250%
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Total(4)................ $584,662,000 $730,828 to $4,384,965 $583,931,173 to $580,277,035
------------------------------------------------------------------------------------------------
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</TABLE>
(1) The Notes will be issued at 100% of their principal or, in the case of
Principal Indexed Notes, face amount, unless otherwise specified in the
applicable Pricing Supplement.
(2) The Company will pay a commission to Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated or Salomon Brothers Inc or others, each as agent
(collectively the "Agents"), in the form of a discount, ranging from .125%
to .750%, depending upon the Stated Maturity of the Note, of the principal
or, in the case of Principal Indexed Notes, face amount of any Note with a
Stated Maturity of nine months to 30 years sold through such Agent.
Commissions with respect to Notes with Stated Maturities in excess of 30
years which are sold through an Agent will be negotiated between the
Company and such Agent at the time of such sale. The Company may also sell
Notes to any Agent as principal. Unless otherwise indicated in the
applicable Pricing Supplement, any Note sold to an Agent as principal will
be purchased by such Agent at a price to be agreed upon at the time of
sale and may be resold by such Agent to one or more investors or other
purchasers at a fixed public offering price or at varying prices relating
to prevailing market prices at the time or times of resale to be
determined by such Agent.
(3) Before deducting expenses payable by the Company estimated to be $425,000,
including reimbursement of certain of the Agents' expenses.
(4) Or the equivalent thereof in foreign currencies or composite currencies
(including ECU).
---------------
The Registered Notes are being offered on a continuous basis by the Company
through the Agents, which have agreed to use their reasonable best efforts to
solicit orders to purchase Registered Notes. The Company may sell Registered
Notes at a discount to any Agent for its own account or for resale to one or
more investors at a fixed public offering price or at varying prices relating
to prevailing market prices at the time or times of resale, to be determined
by such Agent. The Company also may arrange for such Registered Notes to be
sold through any Agent acting as an underwriter or may sell Registered Notes
directly to investors on its own behalf. It is not currently anticipated that
any Registered Notes will be listed on any securities exchange, and there can
be no assurance that the maximum amount of Registered Notes offered by this
Prospectus Supplement will be sold or that there will be a secondary market
for any Registered Notes. The Company reserves the right to withdraw, cancel
or modify the offer made hereby without notice. The Company or any Agent may
reject any order to purchase Registered Notes, whether or not solicited, in
whole or in part. See "Plan of Distribution."
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
---------------
The date of this Prospectus Supplement is August 4, 1995.
<PAGE>
IMPORTANT CURRENCY INFORMATION
Purchasers are required to pay for each Registered Note in the Specified
Currency for such Note. Currently, there are limited facilities in the United
States for conversion of U.S. dollars into foreign currencies and vice versa.
If requested by a prospective purchaser of a Registered Note denominated in a
Specified Currency other than U.S. dollars, the Agent which solicited the offer
to purchase such Note will use its reasonable best efforts to arrange for the
exchange of U.S. dollars into such Specified Currency to enable the purchaser
to pay for such Note. Such request must be made on or before the fifth Business
Day (as defined below) preceding the date of delivery of such Note or by such
later date as is determined by such Agent. Each such exchange will be made by
the relevant Agent on such terms and subject to such conditions, limitations
and charges as such Agent may from time to time establish in accordance with
its regular foreign exchange practice. All costs of exchange will be borne by
the purchaser.
References herein to "U.S. dollars" or "$" are to the lawful currency of the
United States of America.
CAPITALIZATION OF MCDONALD'S CORPORATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries at March 31, 1995 and as adjusted to give effect to
the issuance on June 13, 1995 of bonds totaling DM125 million and the
application of the proceeds of that issuance.
<TABLE>
<CAPTION>
MARCH 31, 1995
---------------------
AS
OUTSTANDING ADJUSTED
----------- ---------
(IN MILLIONS)
<S> <C> <C>
Short-term debt, including current portion of long-
term debt............................................ $ 499.8 $ 499.8
Long-term debt, less current portion.................. 3,986.4 3,910.3(1)
DM125,000,000 bonds, 3.25% due 2000................... -- 80.9(2)
Shareholders' equity(3)............................... 7,246.6 7,246.6
--------- ---------
Total capitalization(3)(4)............................ $11,732.8 $11,737.6
========= =========
</TABLE>
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(1) Reflects the application of the net proceeds of U.S.$76.1 million from the
issuance of DM125 million bonds.
(2) Principal less unamortized discount translated at June 27, 1995 foreign
exchange rate. There has not been a material change in this rate subsequent
to June 27, 1995.
(3) At March 31, 1995, the Company had 1.25 billion authorized shares of Common
Stock, without par value, of which 830.3 million were issued and 694.8
million were outstanding. In addition, at March 31, 1995 the Company had
165.0 million authorized shares of preferred stock, without par value, of
which 11.2 million were issued and outstanding. There has been no material
change in the consolidated capitalization of the Company since March 31,
1995.
(4) The capitalization table presented above does not reflect the exchange
offer of the Company's Preferred Stock, Series E for 8.35% subordinated
deferrable interest debentures due 2025. The exchange offer was completed
on June 30, 1995 and was effective as of July 1, 1995. The transaction will
be recorded as an increase in debt and a reduction in Shareholders' equity
of approximately $129 million. The transaction has no effect on the
consolidated capitalization of the Company.
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DESCRIPTION OF REGISTERED NOTES
The following description of the particular terms of the Registered Notes (to
the extent not superseded in the applicable Pricing Supplement) supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made.
GENERAL
The Notes are to be issued as a series of Debt Securities under the Indenture
limited to an aggregate initial public offering price or purchase price of
$584,662,000 or the equivalent thereof in one or more foreign or composite
currencies, including ECU, subject to reduction as a result of the sale of
other Debt Securities. The U.S. dollar equivalent of the public offering price
or purchase price of a Registered Note denominated in a Specified Currency
other than U.S. dollars will be determined by an agent designated by the
Company, which initially shall be The First National Bank of Chicago (the
"Paying Agent"), on the basis of the noon buying rate in The City of New York
for cable transfers in foreign currencies as certified for customs purposes by
the Federal Reserve Bank of New York (the "Market Exchange Rate") for such
Specified Currency on the date the Company agrees to sell such Notes; provided,
however, that in the case of ECU, the Market Exchange Rate shall be the rate of
exchange determined by the Commission of the European Communities (or any
successor thereof) as published in the Official Journal of the European
Communities, or any successor publication, on the Business Day immediately
preceding the applicable issue date.
The Notes will consist of Registered Notes and Bearer Notes, each of which
will be offered on a continuous basis. Registered Notes will be issued in fully
registered form only, without coupons. Registered Notes may not be exchanged
for Bearer Notes. A separate Prospectus Supplement will describe the terms of
any such Bearer Notes.
Each Registered Note will be issued initially as either a Book-Entry Note or
a Certificated Note. Except as set forth in the Prospectus under "Description
of Debt Securities--Global Securities," Book-Entry Notes will not be issuable
as Certificated Notes. See "Book-Entry System" below.
Unless otherwise specified in the applicable Pricing Supplement, in the case
of Book-Entry Notes, the authorized denominations of Registered Notes
denominated in U.S. dollars will be $100,000 and any larger amount that is an
integral multiple of $1,000. The authorized denominations of Registered Notes
denominated in a Specified Currency other than U.S. dollars will be set forth
in the applicable Pricing Supplement.
Each Registered Note will mature on any day from nine months to 60 years from
its date of issue, as selected by the purchaser and agreed to by the Company.
Each Registered Note may also be subject to redemption at the option of the
Company or to repayment at the option of the Holder, prior to its Stated
Maturity (as defined below).
The Pricing Supplement relating to a Registered Note will describe the
following terms: (i) the Specified Currency for such Note (and, if the
Specified Currency is other than U.S. dollars, certain other terms relating to
such Note and such Specified Currency, including the authorized denominations
of such Note); (ii) whether such Note is a Fixed Rate Note, a Floating Rate
Note or an Indexed Note; (iii) the price (expressed as a percentage of the
aggregate principal (or, in the case of Principal Indexed Notes, face) amount
thereof) at which such Note will be issued (the "Issue Price"); (iv) the date
on which such Note will be issued (the "Original Issue Date"); (v) the date on
which such Note will mature (the "Stated Maturity"); (vi) if such Note is a
Fixed Rate Note, the rate per annum at which such Note will bear interest, if
any, and the dates on
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which interest will be payable if other than February 15 and August 15; (vii)
if such Note is a Floating Rate Note, the Base Rate, the Initial Interest Rate,
the Interest Reset Period, the Interest Payment Dates, the Index Maturity, the
Maximum Interest Rate, if any, the Minimum Interest Rate, if any, the Spread
and/or Spread Multiplier, if any (all as defined below), and any other terms
relating to the particular method of calculating the interest rate for such
Note; (viii) whether such Note is an Original Issue Discount Note (as defined
below); (ix) if such Note is an Indexed Note, the manner in which the principal
amount of such Note payable at Stated Maturity will be determined; (x) whether
such Note may be redeemed at the option of the Company, or repaid at the option
of the Holder, prior to Stated Maturity as described under "Optional
Redemption, Repayment and Repurchase" below, and, if so, the provisions
relating to such redemption or repayment, including, in the case of an Original
Issue Discount Note or Indexed Note, the information necessary to determine the
amount due upon redemption or repayment; and (xi) any other terms of such Note
not inconsistent with the provisions of the Indenture under which such Note
will be issued.
Except as described herein, the Indenture does not contain any covenants
specifically designed to protect Holders of the Notes against a reduction in
the creditworthiness of the Company in the event of a highly leveraged
transaction or to prohibit other transactions that may adversely affect Holders
of the Notes.
"Business Day" with respect to any Registered Note means any day, other than
a Saturday or Sunday, that is (i) neither a legal holiday nor a day on which
banking institutions are authorized or required by law, regulation or executive
order to close in (a) The City of New York, (b) the City of Chicago or (c) if
the Specified Currency for such Note is other than U.S. dollars, the principal
financial center of the country issuing such Specified Currency (which, in the
case of ECU, shall be Luxembourg); (ii) if the Specified Currency for such Note
is ECU, not a day designated as an ECU Non-Settlement Day by the ECU Banking
Association (or otherwise generally regarded in the ECU interbank market as a
day on which payments in ECU shall not be made) and (iii) if such Note is a
LIBOR Note (as defined below), a London Business Day (as defined below).
"London Business Day" means any day (i) if the Index Currency (as defined
below) is other than ECU, on which dealings in such Index Currency are
transacted in the London interbank market or (ii) if the Index Currency is ECU,
that is not designated as an ECU Non-Settlement Day by the ECU Banking
Association (or otherwise generally regarded in the ECU interbank market as a
day on which payments in ECU shall not be made).
"Maturity," when used with respect to any Note, means the date on which the
principal of such Note or an installment of principal becomes due and payable
as provided therein or in the Indenture, whether at Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Original Issue Discount Note" means (i) a Registered Note, including any
such Registered Note whose interest rate is zero, that has a stated redemption
price at Stated Maturity that exceeds its Issue Price by at least 0.25% of its
aggregate principal amount, multiplied by the number of full years from the
Original Issue Date to the Stated Maturity for such Registered Note and (ii)
any other Registered Note designated by the Company as issued with original
issue discount for United States federal income tax purposes.
PAYMENT OF PRINCIPAL AND INTEREST
The principal of and any premium and interest on each Registered Note are
payable by the Company in the Specified Currency for such Note. If the
Specified Currency for a Registered Note is other than U.S. dollars, the
Company or the Paying Agent will (unless otherwise specified in the applicable
Pricing Supplement) arrange to convert all payments in respect of such Note
into U.S. dollars in the manner described in the following paragraph. The
Holder of a Registered Note denominated in a Specified Currency other than U.S.
dollars may (if the applicable Pricing Supplement and such Note so indicate)
elect to receive all payments in respect of such Note in the Specified Currency
by delivery of a written notice to the Paying Agent not later than fifteen
calendar days prior to the applicable payment date, except under the
circumstances described in "Currency Risks--Payment Currency" below. Such
election will remain in effect until revoked
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<PAGE>
by written notice to the Paying Agent received not later than fifteen calendar
days prior to the applicable payment date.
In the case of a Registered Note denominated in a Specified Currency other
than U.S. dollars, the amount of any U.S. dollar payment in respect of such
Registered Note will be determined by the Paying Agent based on the highest
firm bid quotation expressed in U.S. dollars received by the Paying Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable payment date (or, if no such rate is quoted on such
date, the last preceding date on which such rate was quoted) from three (or, if
three are not available, then two) recognized foreign exchange dealers in The
City of New York (which may include the Agents, or affiliates thereof, or the
Paying Agent) selected by the Paying Agent, for the purchase by the quoting
dealer, for settlement on such payment date, of the aggregate amount of such
Specified Currency payable on such payment date in respect of all Registered
Notes denominated in such Specified Currency. All currency exchange costs will
be borne by the Holders of such Notes by deductions from such U.S. dollar
payments. If no such bid quotations are available, such payments will be made
in such Specified Currency, unless such Specified Currency is unavailable due
to the imposition of exchange controls or to other circumstances beyond the
Company's control, in which case such payments will be made as described under
"Currency Risks--Payment Currency" below.
Unless otherwise specified in the applicable Pricing Supplement, U.S. dollar
payments of interest on Registered Notes (other than interest payable at
Maturity) will be made, except as provided below, by check mailed to the
Registered Holders of such Notes as shown on the Debt Security Register at the
close of business on the related record date (which, in the case of Global
Securities representing Book-Entry Notes, will be a nominee of the Depositary);
provided, however, that in the case of a Registered Note issued between a
record date and the related Interest Payment Date (unless otherwise specified
in the related Pricing Supplement), interest for the period beginning on the
Original Issue Date for such Note and ending on such Interest Payment Date
shall be paid on the next succeeding Interest Payment Date to the Registered
Holder of such Note on the related record date. A Holder of $10,000,000 (or the
equivalent thereof in a Specified Currency other than U.S. dollars) or more in
aggregate principal (or, in the case of Principal Indexed Notes, face) amount
of Registered Notes of like tenor and term shall be entitled to receive such
U.S. dollar payments by wire transfer of immediately available funds, but only
if appropriate wire transfer instructions have been received in writing by the
Paying Agent not later than fifteen calendar days prior to the applicable
Interest Payment Date. Simultaneously with the election by any Holder to
receive payments in a Specified Currency other than U.S. dollars (as provided
above), such Holder shall provide appropriate wire transfer instructions to the
Paying Agent, and all payments to be made in the Specified Currency will be
made by wire transfer in immediately available funds to an account maintained
by the payee with a bank located outside the United States. Unless otherwise
specified in the applicable Pricing Supplement, principal and any premium and
interest payable at the Maturity of a Registered Note will be paid in
immediately available funds upon surrender of such Note at the corporate trust
office or an agency of the Paying Agent, which office or agency is located in
the City of Chicago. The corporate trust office of The First National Bank of
Chicago is located at One First National Bank Plaza, Chicago, Illinois.
Any payment of principal, premium (if any) or interest required to be made in
respect of a Fixed Rate Note on a date that is not a Business Day for such Note
need not be made on such date, but may be made on the next succeeding Business
Day with the same force and effect as if made on such date, and no additional
interest shall accrue as a result of such delayed payment.
Unless otherwise specified in the applicable Pricing Supplement, if the
principal of any Original Issue Discount Note is declared to be due and payable
immediately as described under "Description of Debt Securities--Events of
Default" in the Prospectus, the amount of principal due and payable with
respect to such Note shall be limited to the aggregate principal amount of such
Note multiplied by the sum of its Issue Price (expressed as a percentage of the
aggregate principal amount) plus the original issue discount amortized from the
Original Issue Date to the date of declaration, which amortization shall be
calculated using the
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"interest method" (computed in accordance with generally accepted accounting
principles in effect on the date of declaration).
The record date with respect to any Interest Payment Date for a Floating Rate
Note shall be the date (whether or not a Business Day) fifteen calendar days
immediately preceding such Interest Payment Date, and for a Fixed Rate Note
(unless otherwise specified in the applicable Pricing Supplement) shall be the
February 1 or August 1 (whether or not a Business Day) immediately preceding
such Interest Payment Date or Maturity, as the case may be.
Interest payments in respect of Registered Notes will equal the amount of
interest accrued from and including the immediately preceding Interest Payment
Date in respect of which interest has been paid or duly made available for
payment (or from and including the date of issue, if no interest has been paid
with respect to the applicable Note) to but excluding the related Interest
Payment Date or Maturity, as the case may be.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Original Issue Date at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise set forth in the
applicable Pricing Supplement, interest on each Fixed Rate Note will be payable
semiannually in arrears on each February 15 and August 15 and at maturity. Each
payment of interest in respect of an Interest Payment Date shall include
interest accrued through the day before such Interest Payment Date. Interest on
Fixed Rate Notes will be computed on the basis of a 360-day year of twelve 30-
day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest from its Original Issue Date to
the first Interest Reset Date (as defined below) for such Note at the initial
interest rate set forth on the face thereof and in the applicable Pricing
Supplement (the "Initial Interest Rate"). Thereafter, the interest rate on such
Note for each Interest Reset Period (as defined below) will be determined by
reference to an interest rate basis (the "Base Rate"), plus or minus the
Spread, if any, and/or multiplied by the Spread Multiplier, if any. The
"Spread" is the number of basis points (one basis point equals one one-
hundredth of a percentage point) that may be specified in the applicable
Pricing Supplement as being applicable to such Note, and the "Spread
Multiplier" is the percentage that may be specified in the applicable Pricing
Supplement as being applicable to such Note. The applicable Pricing Supplement
will designate one or more of the following Base Rates as applicable to a
Floating Rate Note: (i) the CD Rate (a "CD Rate Note"), (ii) the CMT Rate (a
"CMT Rate Note"), (iii) the Commercial Paper Rate (a "Commercial Paper Rate
Note"), (iv) the Federal Funds Rate (a "Federal Funds Rate Note"), (v) LIBOR (a
"LIBOR Note"), (vi) the Prime Rate (a "Prime Rate Note"), (vii) the Treasury
Rate (a "Treasury Rate Note") or (viii) such other Base Rate or formula as is
set forth in such Pricing Supplement and in such Note. The "Index Maturity" for
any Note is the period of maturity of the instrument, obligation or index from
which the Base Rate is calculated.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following (in each case expressed as a rate per
annum on a simple interest basis): (i) a maximum limitation, or ceiling, on the
rate at which interest may accrue during any interest period ("Maximum Interest
Rate") and (ii) a minimum limitation, or floor, on the rate at which interest
may accrue during any interest period ("Minimum Interest Rate").
Notwithstanding any Maximum Interest Rate that may be applicable to any
Floating Rate Note, the interest rate on a Floating Rate Note will in no event
be higher than the maximum rate permitted by applicable law, as the same may be
modified by United States law of general application. The Notes will be
governed by the law of the State of New York and, under such law, the maximum
rate of interest, with certain exceptions, is 25% per annum on a simple
interest basis.
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The Company will appoint, and enter into agreements with, agents (each a
"Calculation Agent") to calculate interest rates on Floating Rate Notes. All
determinations of interest rates by the Calculation Agent shall, in the absence
of manifest error, be conclusive for all purposes and binding on Holders of the
Floating Rate Notes. Unless otherwise specified in a Pricing Supplement, the
Paying Agent shall be the Calculation Agent for each Registered Note.
The interest rate on each Floating Rate Note will be reset daily, weekly,
monthly, quarterly, semiannually or annually (such period being the "Interest
Reset Period" for such Note, and the first day of each Interest Reset Period
being an "Interest Reset Date"), as specified in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
the Interest Reset Dates will be, in the case of Floating Rate Notes that reset
daily, each Business Day; in the case of Floating Rate Notes (other than
Treasury Rate Notes) that reset weekly, Wednesday of each week; in the case of
Treasury Rate Notes that reset weekly, Tuesday of each week (except as provided
below under "Treasury Rate Notes"); in the case of Floating Rate Notes that
reset monthly, the third Wednesday of each month; in the case of Floating Rate
Notes that reset quarterly, the third Wednesday of March, June, September and
December of each year; in the case of Floating Rate Notes that reset
semiannually, the third Wednesday of each of the two months of each year
specified in the applicable Pricing Supplement; and, in the case of Floating
Rate Notes that reset annually, the third Wednesday of one month of each year
specified in the applicable Pricing Supplement. If an Interest Reset Date for
any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date shall be postponed to the next succeeding Business
Day, except that, in the case of a LIBOR Note, if such Business Day is in the
next succeeding calendar month, such Interest Reset Date shall be the
immediately preceding Business Day.
Unless otherwise specified in the applicable Pricing Supplement, interest
payable in respect of Floating Rate Notes shall be the accrued interest from
and including the Original Issue Date or the last date to which interest has
been paid or duly provided for, as the case may be, to but excluding the
applicable Interest Payment Date or Maturity, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, with respect
to a Floating Rate Note, accrued interest shall be calculated by multiplying
the principal amount of such Note (or, in the case of an Indexed Note, unless
otherwise specified in the applicable Pricing Supplement, the face amount of
such Indexed Note) by an accrued interest factor. Such accrued interest factor
will be computed by adding the interest factors calculated for each day in the
period for which accrued interest is being calculated. Unless otherwise stated
in the applicable Pricing Supplement, the interest factor (expressed as a
decimal calculated to seven decimal places without rounding) for each such day
shall be computed by dividing the interest rate in effect on such day by 360,
in the case of CD Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate
Notes, LIBOR Notes and Prime Rate Notes, or by the actual number of days in the
year, in the case of Treasury Rate Notes or CMT Rate Notes. For purposes of
making the foregoing calculation, the interest rate in effect on any Interest
Reset Date will be the applicable rate as reset on such date.
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on a
Floating Rate Note will be rounded, if necessary, to the nearest 1/100,000 of
1% (.0000001), with five one-millionths of a percentage point rounded upward,
and all currency amounts used in or resulting from such calculation on Floating
Rate Notes will be rounded to the nearest one-hundredth of a unit (with .005 of
a unit being rounded upward).
Unless otherwise indicated in the applicable Pricing Supplement and except as
provided below, interest will be payable, in the case of Floating Rate Notes
that reset daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Pricing Supplement; in the case of Floating Rate
Notes that reset quarterly, on the third Wednesday of March, June, September,
and December of each year; in the case of Floating Rate Notes that reset
semiannually, on the third Wednesday of each of two months of each year
specified in the applicable Pricing Supplement; and, in the case of Floating
Rate Notes that reset annually, on the third
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Wednesday of one month of each year specified in the applicable Pricing
Supplement (each such day being an "Interest Payment Date") and, in each case,
at Maturity. If an Interest Payment Date (other than at Maturity) with respect
to any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Payment Date shall be postponed to the next succeeding Business
Day, except that, in the case of a LIBOR Note, if such Business Day would fall
in the next succeeding calendar month, such Interest Payment Date shall be the
immediately preceding Business Day.
If the Maturity of a Floating Rate Note falls on a day that is not a Business
Day, the required payment of principal, premium (if any) and/or interest will
be made on the next succeeding Business Day as if made on the date such payment
was due, and no interest shall accrue on such payment for the period from and
after Maturity to the date of such payment on the next succeeding Business Day.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent for such Note will provide to such Holder the interest rate then in
effect, and, if determined, the interest rate that will become effective on the
next Interest Reset Date, with respect to such Floating Rate Note.
"H.15(519)" means the publication entitled "Statistical Release H.15(519),
Selected Interest Rates", or any successor publication, published by the Board
of Governors of the Federal Reserve System. "Composite Quotations" means the
daily statistical release entitled "Composite 3:30 p.m. Quotations for U.S.
Government Securities" published by the Federal Reserve Bank of New York.
CD Rate Notes
Each CD Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CD Rate and the Spread and/or
Spread Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CD
Rate" for each Interest Reset Period, as determined by the Calculation Agent
for such CD Rate Note, shall be the rate as of the second Business Day prior to
the Interest Reset Date for such Interest Reset Period (a "CD Rate
Determination Date") for negotiable certificates of deposit having the Index
Maturity designated in the applicable Pricing Supplement, as published in
H.15(519) under the heading "CDs (Secondary Market)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on
such CD Rate Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "CD Rate" for
such Interest Reset Period will be calculated by the Calculation Agent for such
CD Rate Note and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for such CD
Rate Note for negotiable certificates of deposit of major money market banks
(in the market for negotiable certificates of deposit) with a remaining
maturity closest to the Index Maturity designated in the Pricing Supplement in
a denomination of $5,000,000; provided, however, that if the three dealers
selected as aforesaid by such Calculation Agent are not quoting offered rates
as mentioned in this sentence, the "CD Rate" for such Interest Reset Period
will be the CD Rate in effect on such CD Rate Determination Date, or, if none,
the Initial Interest Rate.
The "Calculation Date" pertaining to any CD Rate Determination Date shall be
the earlier of (i) the tenth calendar day after such CD Rate Determination Date
or, if such day is not a Business Day, the next succeeding Business Day or (ii)
the Business Day immediately preceding the applicable Interest Payment Date or
Maturity, as the case may be.
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Commercial Paper Rate Notes
Each Commercial Paper Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Commercial Paper
Rate and the Spread and/or Spread Multiplier, if any, specified in such Note
and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each Interest Reset Period will be determined by
the Calculation Agent for such Commercial Paper Rate Note as of the second
Business Day prior to the Interest Reset Date for such Interest Reset Period (a
"Commercial Paper Rate Determination Date") and shall be the Money Market Yield
(as defined below) on such Commercial Paper Rate Determination Date of the rate
for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement, as such rate shall be published in H.15(519) under the
heading "Commercial Paper". In the event that such rate is not published prior
to 3:00 p.m., New York City time, on the Calculation Date (as defined below)
pertaining to such Commercial Paper Rate Determination Date, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money
Market Yield on such Commercial Paper Rate Determination Date of the rate for
commercial paper of the specified Index Maturity as published in Composite
Quotations under the heading "Commercial Paper". If by 3:00 p.m., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the "Commercial Paper Rate" for such
Interest Reset Period shall be the Money Market Yield of the arithmetic mean of
the offered rates, as of 11:00 a.m., New York City time, on such Commercial
Paper Rate Determination Date of three leading dealers of commercial paper in
The City of New York selected by the Calculation Agent for such Commercial
Paper Rate Note for commercial paper of the specified Index Maturity placed for
an industrial issuer whose bonds are rated "AA" or the equivalent by a
nationally recognized statistical rating agency; provided, however, that if the
three dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the "Commercial Paper Rate" for
such Interest Reset Period will be the Commercial Paper Rate in effect on such
Commercial Paper Rate Determination Date, or, if none, the Initial Interest
Rate.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D X 360
Money Market Yield = ___________________ X 100
360 - (D X M)
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 period for which accrued interest is being
calculated.
The "Calculation Date" pertaining to any Commercial Paper Rate Determination
Date shall be the earlier of (i) the tenth calendar day after such Commercial
Paper Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or Maturity, as the case may be.
Federal Funds Rate Notes
Each Federal Funds Rate Note will bear interest for each Interest Reset
Period at the interest rate calculated with reference to the Federal Funds Rate
and the Spread and/or Spread Multiplier, if any, specified in such Note and in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" for each Interest Reset Period shall be the effective rate on the
second Business Day immediately prior to the Interest Reset Date for such
Interest Reset Period (a "Federal Funds Rate Determination Date") for Federal
Funds as published in H.15(519) under the heading "Federal Funds (Effective)".
In the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Federal
Funds Rate Determination Date, the "Federal Funds Rate" for such Interest Reset
Period shall
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be the rate on such Federal Funds Rate Determination Date as published in
Composite Quotations under the heading "Federal Funds/Effective Rate". If by
3:00 p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the "Federal Funds
Rate" for such Interest Reset Period shall be the arithmetic mean of the rate,
as of 9:00 a.m., New York City time, on the Federal Funds Rate Determination
Date for the last transaction of not less than $5,000,000 in overnight federal
funds arranged by each of three leading brokers of federal funds transactions
in the City of New York selected by the Calculation Agent for such Federal
Funds Rate Note; provided, however, that if the brokers selected as aforesaid
by the Calculation Agent are not quoting as set forth above, the "Federal Funds
Rate" for such Interest Reset Period will be the Federal Funds Rate in effect
on such Federal Funds Rate Determination Date, or, if none, the Initial
Interest Rate.
The "Calculation Date" pertaining to any Federal Funds Rate Determination
Date shall be the earlier of (i) the tenth calendar day after such Federal
Funds Rate Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or Maturity, as the case may be.
LIBOR Notes
Each LIBOR Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to LIBOR and the Spread and/or Spread
Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Reset Period as determined by the Calculation Agent for such
LIBOR Notes shall be as follows:
(i) On the second London Business Day prior to the Interest Reset Date
for such Interest Reset Period (a "LIBOR Interest Determination Date"), the
Calculation Agent for such LIBOR Note will determine (a) if "LIBOR Reuters"
is specified in the applicable Pricing Supplement, the arithmetic mean of
the offered rates (unless the specified Designated LIBOR Page by its terms
provides only for a single rate, in which case such single rate shall be
used) for deposits in the Index Currency having the Index Maturity
designated in the applicable Pricing Supplement, commencing on the second
London Business Day immediately following such LIBOR 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 such LIBOR Interest
Determination Date, if at least two such offered rates appear (unless, as
aforesaid, only a single rate is required) on such Designated LIBOR Page,
or (b) if "LIBOR Telerate" is specified in the applicable Pricing
Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified
as the method for calculating LIBOR, the rate for deposits in the Index
Currency having the Index Maturity designated in the applicable Pricing
Supplement commencing on the second London Business Day immediately
following such LIBOR Interest Determination Date that appears on the
Designated LIBOR Page specified in the applicable Pricing Supplement as of
11:00 a.m., London time, on such LIBOR Interest Determination Date. If
fewer than two such offered rates appear, or if no such rate appears, as
applicable, LIBOR in respect of the related LIBOR Interest Determination
Date will be determined in accordance with the provisions described in
clause (ii) below.
(ii) With respect to a LIBOR Note and an Interest Reset Period to which
this clause (ii) applies, the Calculation Agent will request the principal
London offices of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity designated in the applicable
Pricing Supplement, commencing on the second London Business Day
immediately following such LIBOR Interest Determination Date, to prime
banks in the London interbank market at approximately 11:00 a.m., London
time, on such LIBOR Interest Determination Date and in a principal amount
that is representative for a single transaction in such Index Currency in
such market at such time. If at least two such quotations are provided,
LIBOR determined on such LIBOR Interest Determination Date will be the
arithmetic mean of such quotations. If fewer than two
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quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m., in the applicable Principal Financial Center, on
such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in
the Index Currency to leading European banks, having the Index Maturity
designated in the applicable Pricing Supplement commencing on the second
London Business Day immediately following such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR determined as of such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
"Designated LIBOR Page" means either (a) if "LIBOR Reuters" is specified in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
"Principal Financial Center" will generally be the capital city of the
country of the specified Index Currency, except that with respect to U.S.
dollars, Italian lire and ECU, the Principal Financial Center shall be The City
of New York, Milan and Luxembourg, respectively.
Treasury Rate Notes
Each Treasury Rate Note will bear interest for each Interest Reset Period at
the interest rate calculated with reference to the Treasury Rate and the Spread
and/or Spread Multiplier, if any, specified in such Note and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" for each Interest Reset Period will be the rate for the auction
held on the Treasury Rate Determination Date (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate shall be published in H.15(519) under the heading
"U.S. Government Securities-Treasury bills-auction average (investment)" or, in
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Treasury
Rate Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that
the results of the auction of Treasury bills having the specified Index
Maturity are not published or reported as provided above by 3:00 p.m., New York
City time, on such Calculation Date, or if no such auction is held on such
Treasury Rate Determination Date, then the "Treasury Rate" for such Interest
Reset Period shall be calculated by the Calculation Agent for such Treasury
Rate Note and shall be a yield to maturity (expressed as a bond equivalent on
the basis of a year of 365 or 366 days, as applicable, and applied on a daily
basis) of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by such Calculation Agent for the issue of Treasury
bills with a remaining maturity closest to the specified Index Maturity;
provided, however, that if the dealers selected as aforesaid by such
Calculation Agent are not quoting bid rates as mentioned in this sentence, then
the "Treasury Rate" for such Interest Reset Period will be the Treasury Rate in
effect on such Treasury Rate Determination Date, or, if none, the Initial
Interest Rate.
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The "Treasury Rate Determination Date" for each Interest Reset Period will be
the day of the week in which the Interest Reset Date for such Interest Reset
Period falls on which Treasury bills would normally be auctioned. Treasury
bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction
date shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Note, then such Interest Reset Date shall instead be the Business
Day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination Date
shall be the earlier of (i) the tenth calendar day after such Treasury Rate
Determination Date or, if such a day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or Maturity, as the case may be.
Prime Rate Notes
Each Prime Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the Prime Rate and the Spread and/or
Spread Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" for each Interest Reset Period will be determined by the Calculation
Agent as of the second Business Day prior to the Interest Reset Date for such
Interest Reset Period (a "Prime Rate Determination Date") and shall be the rate
published in H.15(519) under the heading "Bank Prime Loan." In the event that
such rate is not published prior to 9 a.m., New York City time, on the
Calculation Date (as defined below), then the "Prime Rate" for such Interest
Reset Period shall be determined by the Calculation Agent and shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for that Prime Rate Determination Date.
If fewer than four such rates but more than one such rate appear on the Reuters
Screen NYMF Page for the Prime Rate Determination Date, the "Prime Rate" will
be determined by the Calculation Agent and will be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation
Agent on the basis of the rates furnished in The City of New York by the
appropriate number of substitute banks or trust companies organized and doing
business under the laws of the United States, or any State thereof, having
total equity capital of at least U.S. $500,000,000 and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks selected as aforesaid are not quoting as mentioned in this sentence, the
Prime Rate for such Interest Reset Period will be the Prime Rate in effect on
such Prime Rate Determination Date, or, if none, the Initial Interest Rate.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on the
Reuters Monitor Money Rates Service (or such other page as may replace the NYMF
page on that service for the purpose of displaying prime rates or base lending
rates of major United States banks).
The "Calculation Date" pertaining to a Prime Rate Determination Date will be
the earlier of (i) the tenth calendar day after such Prime Rate Determination
Date or, if such day is not a Business Day, the next succeeding Business Day or
(ii) the Business Day immediately preceding the applicable Interest Payment
Date or Maturity, as the case may be.
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CMT Rate Notes
Each CMT Rate Note will bear interest for each Interest Reset Period at the
interest rate calculated with reference to the CMT Rate and the Spread and/or
Spread Multiplier, if any, specified in such Note and in the applicable Pricing
Supplement.
Unless otherwise specified in the applicable Pricing Supplement, the "CMT
Rate" for each Interest Reset Period as determined by the Calculation Agent for
such CMT Rate Note shall be the rate (i) in the case where the Designated CMT
Telerate Page (as defined below) is 7055, as of the second Business Day prior
to the Interest Reset Date for such Interest Reset Period (a "CMT Determination
Date") or (ii) in the case where the Designated CMT Telerate Page is 7052, for
the week or the month, as specified in the applicable Pricing Supplement, ended
immediately preceding the week in which the CMT Determination Date occurs, in
either case, for the Index Maturity specified in the applicable Pricing
Supplement, as displayed on the Designated CMT Telerate Page under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15
. . . Mondays Approximately 3:45 P.M." If such rate is no longer displayed on
the relevant page, or if not displayed by 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such CMT Determination Date,
then the "CMT Rate" for such Interest Reset Period shall be such treasury
constant maturity rate for the Index Maturity specified in the applicable
Pricing Supplement as published in the relevant H.15(519) opposite the caption
"U.S. Government Securities, Treasury Constant Maturities". If such rate is no
longer published, or if not published by 3:00 p.m., New York City time, on the
Calculation Date relating to such CMT Determination Date, then the "CMT Rate"
for such Interest Reset Period shall be such treasury constant maturity rate
for the Index Maturity specified in the applicable Pricing Supplement (or other
United States Treasury rate for such Index Maturity) as may then be published
by either the Board of Governors of the Federal Reserve System or the United
States Department of Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in the relevant H.15(519). If such information is not provided by
3:00 p.m., New York City time, on the Calculation Date relating to such CMT
Determination Date, then the "CMT Rate" for the Interest Reset Period shall be
calculated by the Calculation Agent and will be a yield to maturity, based on
the arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 p.m., New York City time, on the CMT Determination Date
reported, according to their written records, by three leading primary United
States government securities dealers (each, a "Reference Dealer") in The City
of New York (which may include the Agents or their affiliates) selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Index Maturity specified in the applicable Pricing
Supplement and a remaining term to maturity of not less than such Index
Maturity minus one year. If the Calculation Agent cannot obtain three such
Treasury Note quotations, the "CMT Rate" for such Interest Reset Period shall
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on the CMT Determination Date of
three Reference Dealers in The City of New York (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation
(or, in the event of equality, one of the lowest)), for the Treasury Notes with
an original maturity of the number of years that is the next highest to the
Index Maturity specified in the applicable Pricing Supplement and a remaining
term to maturity closest to the Index Maturity specified in the applicable
Pricing Supplement and in an amount of at least $100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
provided, however, that if fewer than three Reference Dealers selected by the
Calculation Agent are quoting as described herein, the "CMT Rate" will be the
CMT Rate in effect on such CMT Determination Date, or, if none, the Initial
Interest Rate. If two Treasury Notes with an original maturity as described in
the second preceding sentence
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have remaining terms to maturity equally close to the Index Maturity specified
in the applicable Pricing Supplement, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Pricing Supplement, the Designated
CMT Telerate Page shall be 7052, for the most recent week.
The "Calculation Date" pertaining to any CMT Determination Date shall be the
earlier of (i) the tenth calendar day after such CMT Determination Date or, if,
such day is not a Business Day, the next succeeding Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date or
Maturity, as the case may be.
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") the principal
amount payable at Stated Maturity of which (the "Indexed Principal Amount") or
the interest amount payable on which is determined by reference to a measure
(the "Index") which will be related to (i) the rate of exchange between the
Specified Currency for such Note and the other currency or composite currency
(the "Indexed Currency") specified in the applicable Pricing Supplement (such
Indexed Notes, "Currency Indexed Notes"); (ii) the difference in the price of a
specified commodity (the "Indexed Commodity") on specified dates (such Indexed
Notes, "Commodity Indexed Notes"), (iii) the difference in the level of a
specified stock index (the "Stock Index"), which may be based on U.S. or
foreign stocks, on specified dates (such Indexed Notes, "Stock Indexed Notes")
or (iv) such other objective price or economic measures as are described in the
applicable Pricing Supplement. The manner of determining the Indexed Principal
Amount of an Indexed Note, and historical and other information concerning the
Indexed Currency, Indexed Commodity, Stock Index or other price or economic
measures used in such determination, will be set forth in the applicable
Pricing Supplement, together with information concerning tax consequences to
the holders of such Indexed Notes.
Unless otherwise specified in the applicable Pricing Supplement, interest on
an Indexed Note will be payable by the Company based on the amount designated
in the applicable Pricing Supplement as the "Face Amount" of such Indexed Note.
The applicable Pricing Supplement will describe whether the principal amount of
the related Indexed Note that would be payable upon redemption or repayment
prior to Stated Maturity will be the Face Amount of such Indexed Note, the
Indexed Principal Amount of such Indexed Note at the time of redemption or
repayment, or another amount described in such Pricing Supplement.
An investment in Indexed Notes entails significant risks that are not
associated with similar investment in a conventional fixed-rate debt security.
Indexation of the interest rate of such a Note may result in an interest rate
that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be
paid. Indexation of the principal of and/or premium on such a Note may result
in an amount of principal and/or premium payable in respect thereof that is
less than the original purchase price of such Note if allowed pursuant to the
terms thereof, including the possibility that no such amount will be paid. The
secondary market for such Notes will be affected by a number of factors,
independent of the credit worthiness of the Company and the value of the
Indexed Currency, the Indexed Commodity or the Stock Index, including the
volatility of the Indexed Currency, the Indexed Commodity or the Stock Index,
the time remaining to the maturity of such Notes, the amount outstanding of
such Notes and market interest rates. The value of the Indexed Currency, the
Indexed Commodity or the Stock Index depends on a number of interrelated
factors, including economic, financial and political events, over which the
Company has no control. Additionally, if the formula used to determine the
amount of principal, premium and/or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the Indexed
Currency, the Indexed Commodity or the Stock Index will be increased. The
historical experience of the relevant Indexed Currency, Indexed Commodity or
Stock Index should not be
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taken as an indication of future performance of such Indexed Currency, Indexed
Commodity or Stock Index during the term of any Indexed Note. The credit
ratings assigned to the Company's medium-term note program are a reflection of
the Company's credit status and are in no way a reflection of the potential
impact of the factors discussed above, or any other factors, on the market
value of Indexed Notes. Accordingly, prospective investors should consult their
own financial and legal advisors as to the risks entailed by an investment in
Indexed Notes and the suitability of such Notes in light of such prospective
investors' particular circumstances.
BOOK-ENTRY SYSTEM
Upon issuance, all Notes having the same Original Issue Date and otherwise
identical terms will be represented by a single Global Security. Each Global
Security representing Book-Entry Notes will be deposited with, or on behalf of,
The Depository Trust Company, New York, New York (the "Depositary"), and
registered in the name of a nominee of the Depositary. Book-Entry Notes will
not be exchangeable for Certificated Notes and, except under the limited
circumstances described in the Prospectus under "Description of Debt
Securities--Global Securities", will not otherwise be issuable as Certificated
Notes.
The Depositary has advised the Company and the Agents as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Agents), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
A further description of the Depositary's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities--Global Securities". The Depositary has
confirmed to the Company, the Agents and the Trustee that it intends to follow
such procedures.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to any Registered Note, including the
determination of a Base Rate, the calculation of the interest rate applicable
to a Floating Rate Note, and the specification of one or more Base Rates, the
Interest Payment Dates, the Stated Maturity or any other variable term relating
thereto, may be modified as specified under "Other Provisions" on the face of
such Note or in an Addendum relating thereto, if so specified on the face of
such Note and in the applicable Pricing Supplement.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further
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information concerning additional terms and provisions of Amortizing Notes will
be specified in the applicable Pricing Supplement. A table setting forth
repayment information in respect of each Amortizing Note will be included in
the applicable Pricing Supplement and set forth in each such Note.
OPTIONAL REDEMPTION, REPAYMENT AND REPURCHASE
The Pricing Supplement relating to each Registered Note will indicate either
that such Note cannot be redeemed prior to Stated Maturity or that such Note
will be redeemable at the option of the Company, in whole or in part, and the
date or dates (each an "Optional Redemption Date") on which such Note may be
redeemed and the price (the "Redemption Price") at which (together with accrued
interest to such Optional Redemption Date) such Note may be redeemed on each
such Optional Redemption Date. The Company may exercise such option with
respect to a Registered Note by notifying the Trustee and the Paying Agent for
such Note at least 45 days prior to any Optional Redemption Date. At least 30
but not more than 60 days prior to the Optional Redemption Date, the Trustee
shall mail notice or cause the Paying Agent to mail notice of such redemption,
first class, postage prepaid, to the record Holder of such Registered Note. In
the event of redemption of a Registered Note in part only, a new Note or Notes
for the unredeemed portion thereof shall be issued to the Holder thereof upon
the cancellation thereof. Unless otherwise specified in the applicable Pricing
Supplement, the Registered Notes will not be subject to any sinking fund.
The Pricing Supplement relating to each Registered Note will also indicate
whether the Holder of such Note will have the option to elect repayment of such
Note by the Company prior to its Stated Maturity, and, if so, such Pricing
Supplement will specify the date or dates on which such Note may be repaid
(each an "Optional Repayment Date") and the price (the "Optional Repayment
Price") at which (together with accrued interest to such Optional Repayment
Date) such Note may be repaid on each such Optional Repayment Date.
In order for a Registered Note to be repaid, the Paying Agent for such
Registered Note must receive, at least 30 but not more than 45 days prior to an
Optional Repayment Date (i) such Registered Note with the form entitled "Option
to Elect Repayment" on the reverse thereof duly completed, or (ii) a telegram,
telex, facsimile transmission or letter from a member of a national securities
exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States setting forth the name of
the Holder of such Registered Note, the principal amount of such Registered
Note to be repaid, the certificate number or a description of the tenor and
terms of such Registered Note, a statement that the option to elect repayment
is being exercised thereby and a guarantee that the Registered Note to be
repaid with the form entitled "Option to Elect Repayment" on the reverse of the
Registered Note duly completed will be received by such Paying Agent not later
than five Business Days after the date of such telegram, telex, facsimile
transmission or letter. If the procedure described in clause (ii) of the
preceding sentence is followed, then such Registered Note and form duly
completed must be received by such Paying Agent by such fifth Business Day. Any
tender of a Registered Note by the Holder for repayment shall be irrevocable.
The repayment option may be exercised by the Holder of a Registered Note for
less than the entire principal amount of such Note, provided that the principal
amount of such Note remaining outstanding after repayment is an authorized
denomination. Upon such partial repayment, such Registered Note shall be
cancelled and a new Note or Notes for the remaining principal amount thereof
shall be issued in the name of the Holder of such repaid Note.
If a Registered Note is represented by a Global Security, the Depositary's
nominee will be the Holder of such Note and therefore will be the only entity
that can exercise a right to repayment. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to
a particular Registered Note, the beneficial owner of such Note must instruct
the broker or other direct or indirect participant through which such
beneficial owner holds an interest in such Note to notify the Depositary of its
desire to exercise a right to repayment. Cut-off times for accepting
instructions from their customers are established on an individual basis by
each such broker or participant and, accordingly, each beneficial owner should
consult the broker or such participant through which such beneficial owner
holds an interest in a Registered
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Note in order to ascertain the cut-off time by which such an instruction must
be given in order for timely notice to be delivered to the Depositary.
Notwithstanding anything in this Prospectus Supplement to the contrary, if a
Registered Note is an Original Issue Discount Note (other than an Indexed
Note), the amount payable on such Note in the event of redemption or repayment
prior to its Stated Maturity shall be the Amortized Face Amount of such Note as
of the date of redemption or the date of repayment, as the case may be. The
"Amortized Face Amount" of an Original Issue Discount Note shall be the amount
equal to (i) the Issue Price set forth in the applicable Pricing Supplement
plus (ii) that portion of the difference between the Issue Price and the
principal amount of such Note that has accrued at the Yield to Maturity set
forth in the Pricing Supplement (computed in accordance with generally accepted
United States bond yield computation principles) by such date of redemption or
repayment, but in no event shall the Amortized Face Amount of an Original Issue
Discount Note exceed its principal amount.
The Company may at any time purchase Registered Notes at any price in the
open market or otherwise. Registered Notes so purchased by the Company may, at
the discretion of the Company, be held or resold or surrendered to the Trustee
for cancellation.
CURRENCY RISKS
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in a Registered Note having a Specified Currency other than
U.S. dollars entails significant risks that are not associated with a similar
investment in a security denominated in U.S. dollars. Such risks include,
without limitation, the possibility of significant changes in rates of exchange
between the U.S. dollar and such Specified Currency and the possibility of the
imposition or modification of foreign exchange controls with respect to such
Specified Currency by either the United States or foreign governments. Such
risks generally depend on factors over which the Company has no control, such
as economic and political events and the supply of and demand for the relevant
currencies. In recent years, rates of exchange between the U.S. dollar and
certain currencies have been highly volatile, and such volatility may occur in
the future. Fluctuations in any particular exchange rate that have occurred in
the past, however, are not necessarily indicative of fluctuations in the rate
that may occur during the term of any Registered Note. Depreciation of the
Specified Currency for a Registered Note against the U.S. dollar would result
in a decrease in the effective yield of such Note (on a U.S. dollar basis)
below its coupon rate and, in certain circumstances, could result in a loss to
the investor on a U.S. dollar basis.
Governments have from time to time imposed, and may in the future impose,
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency for making payments in respect of Registered Notes
denominated in such currency. At present, the Company has identified the
following currencies in which payments of principal, premium and/or interest on
Registered Notes may be made: Australian dollars, Canadian dollars, Danish
kroner, Italian lire, Japanese yen, New Zealand dollars, U.S. dollars and ECU.
However, the Company may determine at any time to issue Registered Notes with
Specified Currencies other than those listed. There can be no assurances that
exchange controls will not restrict or prohibit payments of principal, premium
and/or interest in any Specified Currency. Even if there are no actual exchange
controls, it is possible that, on a payment date with respect to any particular
Registered Note, the currency in which amounts then due in respect of such Note
are payable would not be available to the Company. In that event, the Company
will pay such amounts in the manner set forth under "Description of Registered
Notes--Payment of Principal and Interest" above.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL THE RISKS OF AN INVESTMENT IN REGISTERED NOTES DENOMINATED IN A CURRENCY
OTHER THAN U.S. DOLLARS. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY
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AN INVESTMENT IN REGISTERED NOTES DENOMINATED IN A CURRENCY OTHER THAN U.S.
DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR PERSONS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
The information set forth in this Prospectus Supplement is directed to
prospective purchasers of Registered Notes who are United States residents, and
the Company disclaims any responsibility to advise prospective purchasers who
are residents of countries other than the United States with respect to any
matters that may affect the purchase or holding of, or receipt of payments of
principal, premium and/or interest in respect of, Registered Notes. Such
persons should consult their own legal and financial advisors with regard to
such matters.
Any Pricing Supplement relating to Registered Notes having a Specified
Currency other than U.S. dollars will contain information concerning historical
exchange rates for such currency against the U.S. dollar, a brief description
of such currency and any exchange controls affecting such currency, and any
other required information concerning such currency.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a Registered Note is
required to be made in a Specified Currency other than U.S. dollars and such
currency is unavailable to the Company due to the imposition of exchange
controls or other circumstances beyond the Company's control or is no longer
used by the government of the country issuing such currency or for the
settlement of transactions by public institutions of or within the
international banking community, then all payments in respect of such Note
shall be made in U.S. dollars until such currency is again available to the
Company or so used. The amounts so payable on any date in such currency shall
be converted into U.S. dollars on the basis of the most recently available
Market Exchange Rate for such currency or as otherwise indicated in the
applicable Pricing Supplement. Any payment in respect of such Note made under
such circumstances in U.S. dollars will not constitute an Event of Default
under the Indenture under which such Note shall have been issued.
Notwithstanding the foregoing, if a Specified Currency is unavailable to the
Company solely because it is no longer lawful in the country of issue to make
the relevant payment in that currency because that currency has been replaced
by the ECU or other currency of the European Union pursuant to the Treaty
establishing the European Community, the amounts so payable in respect of such
Note shall, beginning with the date such replacement becomes effective, be made
in ECU or such other currency; the amounts so payable on any date shall be
converted into ECU or such other currency on the basis of the conversion rate
officially in effect in the European Union on the effective date of such
replacement.
If payment in respect of a Registered Note is required to be made in ECU and
ECU are unavailable to the Company due to the imposition of exchange controls
or other circumstances beyond the Company's control or are no longer used in
the European Monetary System, then all payments in respect of such Note shall
be made in U.S. dollars until ECU are again available to the Company or so
used. The amount of each payment in U.S. dollars shall be computed on the basis
of the equivalent of the ECU in U.S. dollars, determined as described below, as
of the second Business Day prior to the date on which such payment is due.
The equivalent of the ECU in U.S. dollars as of any date (the "Day of
Valuation") shall be determined by the Paying Agent on the following basis. The
component currencies of the ECU for this purpose (the "Components") shall be
the currency amounts that were components of the ECU as of the last date on
which the ECU was used in the European Monetary System. The equivalent of the
ECU in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the Components. The U.S. dollar equivalent of each of the
Components shall be determined by the Paying Agent on the basis of the most
recently available Market Exchange Rates for such Components or as otherwise
indicated in the applicable Pricing Supplement.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If
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two or more component currencies are consolidated into a single currency, the
amounts of those currencies as Components shall be replaced by an amount in
such single currency equal to the sum of the amounts of the consolidated
component currencies expressed in such single currency. If any component
currency is divided into two or more currencies, the amount of that currency as
a Component shall be replaced by amounts of such two or more currencies, each
of which shall be equal to the amount of the former component currency divided
by the number of currencies into which that currency was divided.
All determinations referred to above made by the Paying Agent shall be at its
sole discretion and shall, in the absence of manifest error, be conclusive for
all purposes and binding on holders of Registered Notes.
FOREIGN CURRENCY JUDGMENTS
The Notes will be governed by and construed in accordance with the law of the
State of New York. Courts in the United States customarily have not rendered
judgments for money damages denominated in any currency other than the U.S.
dollar. A 1987 amendment to the Judiciary Law of the State of New York
provides, however, that an action based upon an obligation denominated in a
currency other than U.S. dollars will be rendered in the foreign currency of
the underlying obligation and converted into U.S. dollars at the rate of
exchange prevailing on the date of the entry of the judgment or decree.
UNITED STATES TAX CONSIDERATIONS
The following is a summary of certain United States federal income tax
considerations that may be relevant to a Holder of a Registered Note that is a
U.S. Person (as defined in the Prospectus) or that otherwise is subject to
United States federal income taxation on a net income basis in respect of a
Registered Note (a "United States holder"). This summary is based on laws,
regulations, rulings and decisions now in effect, all of which are subject to
change which change could apply retroactively and could affect the continued
validity of this summary. This summary deals only with United States holders
that will hold Registered Notes as capital assets, and does not address tax
considerations applicable to investors that may be subject to special tax
rules, such as banks, insurance companies, dealers in securities or currencies,
persons that will hold Registered Notes as part of an integrated investment
(including a "straddle"), tax exempt organizations or persons that have a
"functional currency" other than the U.S. dollar.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Registered Notes, including the application to
their particular situation of the tax considerations discussed below, as well
as the application of state, local or other tax laws.
PAYMENTS OR ACCRUALS OF INTEREST
Payments of or accruals of "qualified stated interest" (as defined below
under "Original Issue Discount") on a Registered Note will be taxable to a
United States holder as ordinary interest income at the time that such amounts
are accrued or received (in accordance with the United States holder's method
of tax accounting). If a United States holder elects to receive payments of
interest pursuant to the terms of a Registered Note in a currency or currency
unit other than U.S. dollars (a "foreign currency"), the amount of interest
income realized by the United States holder will be the U.S. dollar value of
the foreign currency payment based on the exchange rate in effect on the date
of receipt regardless of whether the payment in fact is converted into U.S.
dollars. In the case of an accrual basis United States holder, the amount of
interest income will be based on the average exchange rate in effect during the
interest accrual period (or with respect to an interest accrual period that
spans two taxable years, at the average exchange rate for the partial period
within the taxable year). Alternatively, such United States holder may elect to
translate all interest income on foreign currency-denominated Registered Notes
at the spot rate on the last day of the accrual period (or the last day of the
taxable year, in the case of an accrual period that spans more than one taxable
year) or on the date the interest payment is received if such date is within
five business days of the end of the accrual
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period. A United States holder that makes such an election must apply it
consistently to all debt instruments from year to year and cannot change the
election without the consent of the Internal Revenue Service (the "IRS"). A
United States holder that uses the accrual method of accounting for tax
purposes will recognize foreign currency gain or loss, as the case may be, on
the receipt of a foreign currency interest payment if the exchange rate in
effect on the date the payment is received differs from the rate applicable to
a previous accrual of that interest income. This foreign currency gain or loss
will be treated as ordinary income or loss but generally will not be treated as
an adjustment to interest income received on the Registered Note.
PURCHASE, SALE AND RETIREMENT OF REGISTERED NOTES
A United States holder's tax basis in a Registered Note generally will equal
the cost of such Note to such holder, increased by any amounts includible in
income by such holder as original issue discount and market discount and
reduced by any amortized premium (each as described below) and any payments
other than qualified stated interest made on such Note. In the case of a
Registered Note denominated in a currency other than the U.S. dollar (a
"Foreign Currency Registered Note"), the cost of such Note to a United States
holder will be the U.S. dollar value of the foreign currency purchase price on
the date of purchase calculated at the exchange rate in effect on the date of
purchase. In the case of a Foreign Currency Registered Note that is traded on
an established securities market, a cash-basis United States holder (or, if it
so elects, an accrual-basis United States holder) will determine the U.S.
dollar value of the cost of such Foreign Currency Registered Note by
translating the amount paid at the spot rate of exchange on the settlement date
of the purchase. The amount of any subsequent adjustments to a United States
holder's tax basis in a Registered Note in respect of foreign currency-
denominated original issue discount, market discount and premium will be
determined in the manner described below for such adjustments. The conversion
of U.S. dollars to a foreign currency and the immediate use of that currency to
purchase a Registered Note generally will not result in taxable gain or loss
for a United States holder.
Upon the sale, exchange or retirement of a Registered Note, a United States
holder generally will recognize gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (less any accrued
qualified stated interest, which will be taxable as such) and the United States
holder's tax basis in the Registered Note. If a United States holder elects to
receive foreign currency in respect of the sale, exchange or retirement of a
Foreign Currency Registered Note, the amount realized generally will be the
dollar value of the foreign currency received calculated at the exchange rate
in effect on the date the Foreign Currency Registered Note is disposed of or
retired. In the case of a Foreign Currency Registered Note that is traded on an
established securities market, a cash-basis United States holder (or, if it so
elects, an accrual-basis United States holder) will determine the U.S. dollar
value of the amount realized by translating such amount at the spot rate of
exchange on the settlement date of the sale, exchange or retirement.
The election available to accrual-basis United States holders in respect of
the purchase and sale of Foreign Currency Registered Notes traded on an
established securities market, which is discussed in the two preceding
paragraphs, must be applied consistently to all debt instruments from year to
year and cannot be changed without the consent of the IRS.
Except as discussed below with respect to market discount and foreign
currency gain or loss, gain or loss recognized by a United States holder on the
sale, exchange or retirement of a Registered Note generally will be long-term
capital gain or loss if the United States holder has held the Note for more
than one year at the time of disposition. The Internal Revenue Code of 1986, as
amended (the "Code"), provides preferential treatment under certain
circumstances for net long-term capital gains realized by individual investors.
The ability of United States holders to offset capital losses against ordinary
income is limited.
Notwithstanding the foregoing, gain or loss recognized by a United States
holder on the sale, exchange or retirement of a Foreign Currency Registered
Note generally will be treated as ordinary income or loss to the extent that
the gain or loss is attributable to changes in exchange rates during the period
in which such
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holder held such Note. This foreign currency gain or loss will not be treated
as an adjustment to interest income on the Note.
ORIGINAL ISSUE DISCOUNT
United States holders of Original Issue Discount Notes generally will be
subject to the special tax accounting rules for original issue discount
obligations provided by the Code and certain Treasury regulations thereunder
(the "OID Regulations"). United States holders of such Notes should be aware
that, as described in greater detail below, they generally must include
original issue discount in ordinary gross income for United States federal
income tax purposes as it accrues, in advance of the receipt of cash
attributable to that income.
Registered Notes issued with original issue discount for U.S. tax purposes
include (i) any Registered Note where the difference between (x) the first
price at which a substantial amount of the Registered Notes that are part of
the same issue is sold for money (other than to an underwriter, placement agent
or wholesaler) (the "Issue Price") and (y) the stated redemption price at
maturity of the Registered Note is at least 0.25% of that stated redemption
price multiplied by the number of full years from the issue date of the
Registered Note until its maturity and (ii) any other Registered Notes
designated by the Company as issued with original issue discount for U.S.
federal income tax purposes. All such Registered Notes are referred to herein
as Discount Notes. The stated redemption price at maturity of a Discount Note
is the total of all payments to be made under the Discount Note other than
payments of "qualified stated interest." The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments issued by the Company) at least annually
during the entire term of a Discount Note at a single fixed rate of interest
or, subject to certain conditions, based on one or more interest indices.
In general, each United States holder of a Discount Note having a maturity in
excess of one year, whether such United States holder uses the cash or the
accrual method of tax accounting, will be required to include in ordinary gross
income the sum of the "daily portions" of original issue discount on that Note
for all days during the taxable year that the United States holder owns the
Note. The daily portions of original issue discount on a Discount Note are
determined by allocating to each day in any accrual period a ratable portion of
the original issue discount allocable to that accrual period. Accrual periods
may be any length and may vary in length over the term of a Discount Note,
provided that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs on the final day or on the first day of
an accrual period. In the case of an initial holder, the amount of original
issue discount on a Discount Note allocable to each accrual period is
determined by (i) multiplying the "adjusted issue price" (as defined below) of
the Note at the beginning of the accrual period by a fraction, the numerator of
which is the annual yield to maturity of the Note and the denominator of which
is the number of accrual periods in a year and (ii) subtracting from that
product the amount (if any) payable as qualified stated interest allocable to
that accrual period. In the case of a Discount Note that is a Floating Rate
Note, both the "annual yield to maturity" and the "qualified stated interest"
will be determined for these purposes as though the Note will bear interest in
all periods at a fixed rate generally equal to the rate that would be
applicable to interest payments on the Note on its date of issue or, in the
case of certain Floating Rate Notes, the rate that reflects the yield that is
reasonably expected for the Note. (Additional rules may apply if interest on a
Floating Rate Note is based on more than one interest index.) The "adjusted
issue price" of a Discount Note at the beginning of any accrual period will
generally be the sum of its Issue Price (including accrued interest, if any)
and the amount of original issue discount allocable to all prior accrual
periods, reduced by the amount of all payments other than qualified stated
interest payments (if any) made with respect to such Note in all prior accrual
periods. All payments on a Discount Note (other than qualified stated interest)
will generally be viewed first as payments of previously accrued original issue
discount (to the extent thereof), with payments considered made from the
earliest accrual periods first, and then as a payment of principal. The "annual
yield to maturity" of a Note is the discount rate (appropriately adjusted to
reflect the length of accrual periods) that causes the present value on the
issue date of all payments on the Note to equal the Issue Price. As a result of
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this "constant yield" method of including original issue discount income, the
amounts so includible in gross income by a United States holder in respect of a
Discount Note denominated in U.S. dollars are lesser in the early years and
greater in the later years than amounts that would be includible on a straight-
line basis.
A United States holder generally may make an irrevocable election to include
in its income its entire return on a Note (i.e., the excess of all remaining
payments to be received on the Note, including payments of qualified stated
interest, over the amount paid by such United States holder for such Note)
under the constant yield method described above. For Notes purchased at a
premium or bearing market discount in the hands of the United States holder,
the United States holder making such election will also be deemed to have made
the election (discussed below in "Premium and Market Discount") to amortize
premium or to accrue market discount in income currently on a constant yield
basis.
In the case of a Discount Note that is also a Foreign Currency Registered
Note, a United States holder should determine the U.S. dollar amount includible
as original issue discount for each accrual period by (i) calculating the
amount of original issue discount allocable to each accrual period in the
foreign currency using the constant yield method described above, and (ii)
translating the foreign currency amount so received at the average exchange
rate in effect during that accrual period (or, with respect to an interest
accrual period that spans two taxable years, at the average exchange rate for
the partial period within the United States holder's taxable year).
Alternatively, such holder may translate the foreign currency amount so derived
at the spot rate of exchange on the last day of the accrual period (or the last
day of the taxable year, in the case of an accrual period that includes more
than one taxable year) provided that the United States holder has made an
election as described under "Payments of Interest" above. Because exchange
rates may fluctuate, a United States holder of a Discount Note that is also a
Foreign Currency Registered Note may recognize a different amount of original
issue discount income in each accrual period than would the holder of an
otherwise similar Discount Note denominated in U.S. dollars. Upon the receipt
of an amount attributable to original issue discount (whether in connection
with a payment of an amount that is not qualified stated interest or the sale
or retirement of the Discount Note), a United States holder will recognize
ordinary income or loss measured by the difference between the amount received
(translated into U.S. dollars at the exchange rate in effect on the date of
receipt or on the date of disposition of the Discount Note, as the case may be)
and the amount accrued (using the exchange rate applicable to such previous
accrual).
A subsequent United States holder of a Discount Note that purchases the Note
at a cost less than its remaining redemption amount (as defined below) also
generally will be required to include in gross income the daily portions of
original issue discount, calculated as described above. However, if the
subsequent United States holder acquires the Discount Note at a price greater
than its adjusted issue price, the subsequent United States holder may reduce
its periodic inclusions of original issue discount income to reflect the
premium paid over the adjusted issue price. The "remaining redemption amount"
for a Discount Note is the total of all future payments to be made on the Note
other than payments of qualified stated interest.
Certain of the Discount Notes may be redeemed prior to their Maturity Date,
either at the option of the Company or at the option of the holder. Discount
Notes containing such features may be subject to rules that differ from the
general rules discussed above. Investors that purchase Discount Notes with such
features should carefully examine the applicable Pricing Supplement and should
consult their own tax advisers with respect to such features since the tax
consequences with respect to original issue discount will depend, in part, on
the particular terms and features of the purchased Discount Notes.
SHORT-TERM NOTES
The rules set forth above will also generally apply to Discount Notes having
maturities of not more than one year ("Short-Term Notes"), but with certain
modifications.
First, the OID Regulations provide that no payments of interest on a Short-
Term Note will be considered to be qualified stated interest, but rather treat
such interest payments as part of the Short-Term Note's stated
S-22
<PAGE>
redemption price at maturity, thereby giving rise to original issue discount.
Thus, all Short-Term Notes will be Discount Notes. Except as noted below, a
cash-basis United States holder of a Short-Term Note that does not identify the
Short-Term Note as part of a hedging transaction will generally not be required
to accrue original issue discount currently, but such United States holder will
be required to treat any gain realized on a sale, exchange or retirement of the
Short-Term Note as ordinary income to the extent such gain does not exceed the
original issue discount accrued with respect to the Short-Term Note during the
period the United States holder held the Short-Term Note. Such a United States
holder may not be allowed to deduct all of the interest paid or accrued on any
indebtedness incurred or maintained to purchase or carry such Note until the
Maturity of the Note or its earlier disposition in a taxable transaction.
Notwithstanding the foregoing, a cash-basis United States holder of a Short-
Term Note may elect to accrue original issue discount into income on a current
basis (in which case the limitation on the deductibility of interest described
above will not apply). A United States holder using the accrual method of tax
accounting and certain cash method United States holders (including banks,
securities dealers, regulated investment companies and certain trust funds)
generally will be required to include original issue discount on a Short-Term
Note in gross income on a current basis. Original issue discount will be
treated as accruing for these purposes on a ratable basis or, at the election
of the United States holder, on a constant yield basis based on daily
compounding.
Second, any United States holder of a Short-Term Note (whether a cash- or
accrual-basis holder) can elect to accrue the "acquisition discount," if any,
with respect to the Note on a current basis. Acquisition discount is the excess
of the remaining redemption amount of the Note at the time of acquisition over
the purchase price. Acquisition discount will be treated as accruing ratably
or, at the election of the holder, under a constant yield method based on daily
compounding. If the election to accrue acquisition discount is made, the
original issue discount rules will not apply with respect to the Short-Term
Note.
Finally, the market discount rules described below will not apply to Short-
Term Notes.
As described above, certain of the Registered Notes may be subject to special
redemption features. These features may affect the determination of whether a
Registered Note has a maturity of not more than one year and thus is a Short-
Term Note. Investors that purchase Registered Notes with such features should
carefully examine the applicable Pricing Supplement, and should consult their
own tax advisers with respect to such features.
PREMIUM AND MARKET DISCOUNT
A United States holder of a Registered Note that purchases the Note at a cost
greater than its principal amount will be considered to have purchased the Note
at a premium, and may elect to amortize such premium as an offset to interest
income, using a constant yield method, over the remaining term of the Notes.
Such election, once made, generally applies to all debt instruments held or
subsequently acquired by such United States holder during or after the first
taxable year to which the election applies and may not be revoked without the
consent of the IRS. A United States holder that elects to amortize such premium
must reduce its tax basis in a Registered Note by the amount of the premium
amortized during its holding period. Discount Notes purchased at a premium will
not be subject to the original issue discount rules described above. In the
case of a premium in respect of a Foreign Currency Registered Note, a United
States holder should calculate that amortization of the premium in the foreign
currency. Amortization deductions attributable to a period reduce interest
payments in respect of that period, and therefore are translated into U.S.
dollars at the rate used by the United States holder for such interest
payments. Exchange gain or loss will be realized with respect to amortized
premium on a Foreign Currency Note based on the difference between the exchange
rate computed as described above and the exchange rate on the date on which the
United States holder acquired the Note. With respect to a United States holder
that does not elect to amortize premium, the amount of premium will be included
in the United States holder's tax basis when the Note matures or is disposed of
by the United States holder. Therefore, a United States holder that does not
elect to amortize such premium will generally be required to treat the premium
as capital loss when the Note matures.
S-23
<PAGE>
If a United States holder of a Registered Note purchases such Note at a
price that is lower than its remaining redemption amount, or in the case of a
Discount Note, its adjusted issue price, by 0.25% or more of its remaining
redemption amount, (or adjusted issue price) multiplied by the number of
remaining whole years to maturity, the Registered Note will be considered to
bear "market discount" in the hands of such United States holder. In such
case, gain realized by the United States holder on the disposition of the
Registered Note generally will be treated as ordinary interest income to the
extent of the market discount that accrued on such Note while held by such
United States holder. In addition, such United States holder could be required
to defer the deduction of a portion of the interest paid on any indebtedness
incurred or continued to purchase or carry the Registered Note. In general
terms, market discount on a Registered Note will be treated as accruing
ratably over the term of such Note, or, at the election of such United States
holder, under a constant yield method. Market discount on a Foreign Currency
Note will be accrued by a United States holder in the Specified Currency. The
amount includible in income by a United States holder in respect of such
accrued market discount will be the U.S. dollar value of the amount accrued,
generally calculated at the exchange rate in effect on the date that the Note
is disposed of by the United States holder.
A United States holder may elect to include market discount in gross income
currently as it accrues (on either a ratable or constant yield basis), in lieu
of treating a portion of any gain realized on a sale of a Note as ordinary
income. If a United States holder elects to include market discount on a
current basis, the interest deduction deferral rule described above will not
apply. Such election, once made, applies to all market discount debt
instruments acquired by the United States holder on or after the first day of
the first taxable year to which such election applies, and may not be revoked
without the consent of the IRS. Any accrued market discount on a Foreign
Currency Registered Note that is currently includible in income will be
translated into U.S. dollars at the average exchange rate for the accrual
period (or portion thereof within the United States holder's taxable year).
INDEXED NOTES AND OTHER CONTINGENT PAYMENT NOTES
The tax treatment of a United States holder of an Indexed Note will depend
on factors including the specific index or indices used to determine indexed
payments on the Note and the amount and timing of any noncontingent payments
of principal and interest. Tax considerations relevant to holders of Indexed
Notes and other Notes providing for contingent payments will be discussed in
the applicable Pricing Supplement.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Paying Agent will be required to file information returns with the IRS
with respect to payments made to certain United States holders of Notes. In
addition, certain United States holders may be subject to a 31 percent backup
withholding tax in respect of such payments if they do not provide their
taxpayer identification numbers to the Paying Agent. Persons holding Notes who
are not United States holders may be required to comply with applicable
certification procedures to establish that they are not United States holders
in order to avoid the application of such information reporting requirements
and backup withholding tax.
PLAN OF DISTRIBUTION
The Registered Notes are being offered on a continuous basis by the Company
through the Agents, which have agreed to use their reasonable best efforts to
solicit orders to purchase Registered Notes. Initial purchasers may propose
certain terms of the Registered Notes, but the Company will have the right to
accept orders to purchase Registered Notes and may reject proposed purchases
in whole or in part. The Agents shall have the right, in their discretion
reasonably exercised, to reject any proposed purchase of Registered Notes in
whole or in part. The Company will pay any Agent a commission of from .125% to
.750% of the principal amount of Registered Notes with a Stated Maturity of
nine months to 30 years sold through it, depending upon Stated Maturity.
Commissions with respect to Notes with Stated Maturities in excess of 30 years
which are sold through an Agent will be negotiated between the Company and
such Agent at the time of such sale.
S-24
<PAGE>
The Company may arrange for Registered Notes to be sold through any Agent
acting as underwriter or may sell Registered Notes directly to investors on its
own behalf. In the case of sales made directly by the Company, no commission or
discount in lieu thereof will be paid or allowed. The Company also may sell
Registered Notes to any Agent as principal for its own account at a price to be
agreed upon at the time of sale. Such Notes may be resold by such Agent to one
or more investors at a fixed public offering price or at prevailing market
prices, or at prices related thereto, at the time of such resale, as determined
by such Agent. Unless otherwise specified in the applicable Pricing Supplement,
any Registered Note sold to an Agent as principal will be purchased by such
agent at a price equal to 100% of the principal amount thereof less a
percentage of the principal amount equal to the commission applicable to an
agency sale (as described below) of a Note of identical maturity.
Any Agent may sell Registered Notes it has purchased from the Company as
principal to other dealers for resale to investors and other purchasers, and
may allow any portion of the discount received in connection with such purchase
from the Company to such dealers. After the initial public offering of
Registered Notes, the public offering price (in the case of Registered Notes to
be resold at a fixed public offering price), the concession and the discount
may be changed.
No Registered Note will have an established trading market when issued. The
Registered Notes will not be listed on any securities exchange. The Agents may
make a market in the Registered Notes, but the Agents are not obligated to do
so and may discontinue any market-making at any time without notice. There can
be no assurance of a secondary market for any Registered Notes, or that any
Registered Notes will be sold.
The Agents, whether acting as agent or principal, may be deemed to be
"underwriters" within the meaning of the Securities Act. The Company has agreed
to indemnify the Agents against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments that the Agents may be
required to make in respect thereof.
The Registered Notes have not been and will not be registered under the
Securities and Exchange Law of Japan. The Company and the Agents will agree not
to offer or sell any Registered Note directly or indirectly in Japan or to
residents of Japan or for the benefit of any Japanese person (which term as
used herein means any person resident in Japan, including any corporation or
other entity organized under the laws of Japan) or to others for reoffering or
resale directly or indirectly in Japan or to any Japanese person except in
accordance with applicable laws, regulations and ministerial guidelines of
Japan, if any, taken as a whole.
In addition to the Registered Notes being offered through the Agents as
described herein, Bearer Notes that may have terms identical or similar to the
terms of the Registered Notes may be concurrently offered by the Company on a
continuous basis outside the United States (as defined in the Prospectus)
pursuant to a distribution agreement with affiliates of the Agents. Pursuant to
such distribution agreement, such affiliates may also purchase Bearer Notes as
principal for their own accounts or for resale, and the Company may make direct
sales of Bearer Notes on its own behalf. Any Bearer Notes so offered and sold
will reduce correspondingly the maximum aggregate principal amount of
Registered Notes that may be offered by this Prospectus Supplement and the
accompanying Prospectus.
In the ordinary course of their respective businesses, affiliates of J.P.
Morgan Securities Inc. have engaged, and may in the future engage, in normal
commercial banking transactions with the Company and certain of its
subsidiaries.
S-25
<PAGE>
PROSPECTUS
$584,662,000
MCDONALD'S CORPORATION
DEBT SECURITIES
McDonald's Corporation (the "Company") intends to issue from time to time in
one or more series its unsecured debt securities ("Debt Securities") with an
aggregate initial public offering price or purchase price of up to
$584,662,000, or the equivalent thereof in one or more foreign or composite
currencies, including the European Currency Unit ("ECU"). Debt Securities of
each series will be offered on terms to be determined at the time of sale. Debt
Securities may be sold for U.S. dollars or for one or more foreign or composite
currencies, and the principal of, premium, if any, and any interest on Debt
Securities may be payable in U.S. dollars or in one or more foreign or
composite currencies. Debt Securities of a series may be issuable as individual
securities in registered form without coupons ("Registered Securities"), in
bearer form with or without coupons attached ("Bearer Securities") or as one or
more global securities in registered or bearer form (each a "Global Security").
The specific designation, aggregate principal (or, if principal payable is
determined by reference to an index, face) amount, the currency in which the
principal, premium, if any, and any interest are payable, the rate (or method
of calculation) and the time and place of payment of any interest, authorized
denominations, maturity, offering price, any redemption terms and any other
specific terms of the Debt Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (as
supplemented with respect to Notes of any series by any pricing supplement
relating thereto, a "Prospectus Supplement").
The Debt Securities may be sold by the Company directly, through agents
designated from time to time, through dealers or one or more underwriters, or
through a syndicate of underwriters managed by one or more underwriters. If
underwriters or agents are involved in any offering of Debt Securities, the
names of the underwriters or agents will be set forth in the applicable
Prospectus Supplement. If an underwriter, agent or dealer is involved in any
offering of Debt Securities, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from the
information set forth in, the applicable Prospectus Supplement, and the net
proceeds to the Company from such offering will be the public offering price of
such Debt Securities less such discount, in the case of an offering through an
underwriter, or the purchase price of such Debt Securities less such
commission, in the case of an offering through an agent, and less, in each
case, the other expenses of the Company associated with the issuance and
distribution of such Debt Securities. See "Plan of Distribution" for specific
details.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES 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 28, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: New York Regional Office, Seven World Trade Center,
13th Floor, New York, New York 10048 and Chicago Regional Office, 500 W.
Madison Street, Suite 1400, Chicago, Illinois 60661; and copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange and Chicago Stock Exchange. The Company
is not required to, and will not, provide an annual report or any other
periodic report to any holder of its debt securities unless specifically
requested by such holder.
The Company has filed with the Commission a Registration Statement on Form S-
3 (such Registration Statement, together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the Debt Securities. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted from this Prospectus
in accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
A Company franchisee provides food services exclusively to United States
government personnel stationed at the United States naval station in Guantanamo
Bay, Cuba. This statement is made pursuant to the disclosure requirements of
Florida law and is accurate as of the date of this Prospectus. Investors may
obtain current information by contacting the Florida Department of Banking and
Finance, The Capitol, Tallahassee, Florida 32399-0350, telephone: (904) 488-
9805.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission (File No. 1-5231)
pursuant to the Exchange Act and are incorporated herein by reference and made
a part of this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as amended by the Company's Form 10-K/A filed on
June 27, 1995; and
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the Debt Securities shall be deemed to be incorporated herein
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, in the
accompanying Prospectus Supplement, in an applicable Pricing Supplement 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
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon request, a copy of any or all of the documents
described above, other than certain exhibits to such documents. Written or
telephone requests should be directed to: McDonald's Shareholder Services,
McDonald's Corporation, Kroc Drive, Oak Brook, Illinois 60521, (708) 575-7428.
----------------
References herein to "U.S. dollars", "dollars" or "$" are to the lawful
currency of the United States of America.
2
<PAGE>
MCDONALD'S CORPORATION
McDonald's Corporation and its subsidiaries develop, operate, franchise and
service a worldwide system of restaurants which prepare, assemble, package and
sell a limited menu of value-priced foods. These restaurants are operated by
the Company and its subsidiaries or, under the terms of franchise agreements,
by franchisees who are independent third parties, or by affiliates operating
under joint venture agreements between the Company or its subsidiaries and
local businesspeople.
McDonald's restaurants offer a substantially uniform menu consisting of
hamburgers and cheeseburgers, including the Big Mac and Quarter Pounder with
Cheese sandwiches, the Filet-O-Fish, McGrilled Chicken and McChicken
sandwiches, french fries, Chicken McNuggets, salads, shakes, sundaes and cones
made with low fat frozen yogurt, pies, cookies and a limited number of soft
drinks and other beverages. In addition, the restaurants sell a variety of
products during limited promotional time periods. McDonald's restaurants
operating in the United States are open during breakfast hours and offer a full
breakfast menu including the Egg McMuffin and the Sausage McMuffin with Egg
sandwiches, hotcakes and sausage; three varieties of biscuit sandwiches; Apple-
Bran muffins; and cereals. McDonald's restaurants in many countries around the
world offer many of these same products as well as other products and limited
breakfast menus. The Company tests new products on an ongoing basis.
McDonald's restaurants are located in all fifty of the United States and the
District of Columbia, and in many foreign locations, principally Japan, Canada,
Germany, England, Australia and France. At March 31, 1995, there were 15,370
restaurants worldwide, of which 9,795 were located in the United States and
5,575 in 78 other countries. An additional 327 restaurants were under
construction at March 31, 1995, including 228 outside the United States.
At March 31, 1995, 68% of McDonald's restaurants were operated by independent
franchisees, 21% were operated by the Company and its subsidiaries and 11% were
operated by affiliates (entities in which the Company and/or its subsidiaries
have an equity interest of 50% or less and in which the remaining equity
interest generally is owned by a local resident).
The Company's principal executive offices are located at One McDonald's
Plaza, Oak Brook, Illinois 60521, telephone: (708) 575-3000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Debt
Securities for general corporate purposes, which may include debt refinancings
and capital expenditures such as the acquisition and development of McDonald's
restaurants. Specific allocations of net proceeds for such purposes have not
been made at this time. The amount and timing of any such debt refinancings or
capital expenditures will depend upon the Company's requirements and the
availability of other funds to the Company.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------- ------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges........... 4.66 4.70 5.26 4.86 3.96 3.53 3.48
</TABLE>
The ratios of earnings to fixed charges shown above have been computed on a
total enterprise basis. Earnings represent income before provision for income
taxes and fixed charges. Fixed charges consist of interest on all indebtedness,
amortization of debt issuance costs and discount or premium relating to any
indebtedness, and such portion of rental charges (after reduction for related
sublease income) considered to be representative of the interest component in
the particular case.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture dated as of March 1,
1987, and any indentures supplemental thereto (collectively, the "Indenture"),
between the Company and First Fidelity Bank, National Association (formerly
Fidelity Bank, National Association), as Trustee (the "Trustee"). The following
statements with respect to the Debt Securities are summaries of the detailed
provisions of the Indenture, a copy of which is filed as an exhibit to the
Registration Statement. References in italics are to sections of the Indenture.
Wherever particular provisions of the Indenture are referred to, such
provisions are incorporated by reference as a part of the statements made, and
the statements are qualified in their entirety by such reference. As used under
this caption, the term "Debt Securities" includes the debt securities being
offered by this Prospectus and all other debt securities issued from time to
time by the Company under the Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company, ranking
equally with all other unsecured and unsubordinated indebtedness for borrowed
money of the Company. Certain unsecured obligations of the Company may,
however, under certain circumstances, become secured by mortgages pursuant to
negative pledge covenants applicable to such obligations while the Debt
Securities remain unsecured.
Reference is made to the Prospectus Supplement for the terms of the series of
Debt Securities being offered thereby, including, where applicable: (i) the
title of such Debt Securities; (ii) the limit, if any, upon the aggregate
principal amount of such Debt Securities; (iii) the date or dates on which the
principal and premium, if any, of such Debt Securities is or are payable; (iv)
the rate or rates and/or the method of determination thereof, at which such
Debt Securities will bear interest, if any; the date or dates from which such
interest will accrue; the interest payment dates on which such interest will be
payable; and, in the case of Registered Securities, the record dates for the
interest payable on such interest payment dates; (v) whether such Debt
Securities are to be issued as Original Issue Discount Securities (as defined
below) and the amount of discount with which such Debt Securities will be
issued; (vi) the place or places where the principal of, and premium, if any,
and any interest on such Debt Securities will be payable; (vii) the price or
prices at which, the period or periods within which and the terms and
conditions upon which such Debt Securities may be redeemed in whole or in part,
at the option of the Company, pursuant to any sinking fund or otherwise; (viii)
the obligation, if any, of the Company to redeem or purchase such Debt
Securities pursuant to any sinking fund or analogous provisions or at the
option of a Holder and the price or prices at which, the period or periods
within which and the terms and conditions upon which such Debt Securities will
be redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation; (ix) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which such Debt Securities will be
issuable; (x) if other than the principal amount, the portion of the principal
amount of such Debt Securities which will be payable upon declaration of
acceleration of the maturity thereof pursuant to the Indenture; (xi) if other
than U.S. dollars, the coin, currency or currencies in which payment of the
principal of (and premium, if any) and interest, if any, on such Debt
Securities will be payable; (xii) if the principal of (and premium, if any) or
interest, if any, on such Debt Securities are to be payable, at the election of
the Company or a Holder, in a coin, currency or currencies other than that in
which the Debt Securities are stated to be payable, the period or periods
within which, and the terms and conditions upon which, such election may be
made; (xiii) if the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference to
an index based on a coin or currency or currencies other than that in which the
Debt Securities are stated to be payable, the manner in which such amount will
be determined; (xiv) any additional Events of Default provided for with respect
to such Debt Securities; (xv) provisions, if any, for the defeasance of such
Debt Securities; (xvi) whether such Debt Securities are to be issued in
registered or bearer form, with or without coupons; (xvii) whether such Debt
Securities are to be issued in whole or in part in the form of one or more
Global Securities and, if so, the identity of the Depositary (as defined below)
for such Global Security or Securities; (xviii) if any Debt Securities of the
series are to be issued as Bearer Securities or as one or more Global Debt
Securities
4
<PAGE>
representing individual Bearer Securities of the series; and (xix) any other
terms of such Debt Securities not inconsistent with the provisions of the
Indenture. (Section 2.02)
If Bearer Securities are issued, certain special considerations applicable to
such Bearer Securities, including limitations on their issuance, will be
described in the Prospectus Supplement relating thereto.
If the principal of (and premium, if any) or any interest on Debt Securities
of any series are payable in a foreign or composite currency, the restrictions,
elections, federal income tax consequences, specific terms and other
information with respect to such Debt Securities and such currency will be
described in the Prospectus Supplement relating thereto.
One or more series of Debt Securities may be sold at a discount below their
stated principal amount, bearing no interest or interest at a rate that at the
time of issuance is below market rates ("Original Issue Discount Securities").
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on Registered Securities
will be payable at the corporate trust office of the Trustee at Broad and
Walnut Streets, Philadelphia, Pennsylvania 19019; provided, however, that
payment of interest on Registered Securities may be made at the option of the
Company by check mailed to the Registered Holders thereof or, if so provided in
the applicable Prospectus Supplement, at the option of the Registered Holder by
wire transfer to an account designated by such Registered Holder. Provisions
with respect to the payment of principal of (and premium, if any) and any
interest on Bearer Securities or Global Securities will be set forth in the
applicable Prospectus Supplement. (Sections 2.02 and 4.01)
Unless otherwise provided in the applicable Prospectus Supplement, Registered
Securities may be transferred or exchanged at the office or agency maintained
by the Company for such purpose, subject to the limitations provided in the
Indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. (Section 2.05) Bearer
Securities will be transferable by delivery. Provisions with respect to the
exchange of Bearer Securities will be described in the applicable Prospectus
Supplement.
All moneys paid by the Company to the Trustee for the payment of principal of
(and premium, if any) or any interest on any Debt Security that remains
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company on demand, and
the Registered Holder of such Debt Security or any coupon appertaining thereto
will thereafter look only to the Company for payment thereof. (Section 12.05)
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the form
of one or more Global Securities that will be deposited with, or on behalf of,
a depositary (the "Depositary") identified in the Prospectus Supplement
relating to such series. Global Securities may be issued in either registered
or bearer form and in either temporary or definitive form. Unless and until it
is exchanged in whole or in part for individual Debt Securities, a Global
Security may not be transferred except as a whole by the Depositary for such
Global Security to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor of such Depositary or a nominee
of such successor. (Sections 2.03 and 2.05)
The specific terms of the depositary arrangement with respect to any Debt
Securities of a series will be described in the Prospectus Supplement relating
to such series. The Company anticipates that the following provisions will
apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal (or, if the amount of principal payable is
5
<PAGE>
determined by reference to an index (a "Principal Indexed Security"), face)
amounts of the individual Debt Securities represented by such Global Security
to the accounts of institutions that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by the
underwriters of such Debt Securities or, if such Debt Securities are offered
and sold directly by the Company or through one or more agents, by the Company
or such agent or agents. Ownership of beneficial interests in a Global Security
will be limited to participants or persons that may hold beneficial interests
through participants. Ownership of beneficial interests in a Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary for such Global Security (with
respect to participants' interests) and by participants or persons that hold
through participants (with respect to beneficial owners' interests). The laws
of some states require that certain purchasers of securities take physical
delivery of such securities. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the owner
of such Global Security, such Depositary or such nominee, as the case may be,
will be considered the Holder of the individual Debt Securities represented by
such Global Security for all purposes under the Indenture governing such Debt
Securities. Except as set forth below, owners of beneficial interests in a
Global Security will not be entitled to have any of the individual Debt
Securities represented by such Global Security registered in their names, will
not receive or be entitled to receive physical delivery of any such Debt
Securities and will not be considered the Holders thereof under the Indenture
governing such Debt Securities.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities" below, payments of principal of (and premium, if any) and
any interest on the Debt Securities represented by a Global Security will be
made to the Depositary or its nominee, as the case may be, as the Holder of
such Global Security. None of the Company, the Trustee, any paying agent or
transfer agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. (Section 8.03)
The Company expects that the Depositary for Debt Securities of a series, upon
receipt of any payment of principal of (and premium, if any) or interest on a
definitive Global Security representing any of such Debt Securities, will
credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal (or, in
the case of a Principal Indexed Security, face) amount of such Global Security
as shown on the records of such Depositary. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such participants. Receipt by owners of
beneficial interests in a temporary Global Security of payments of principal of
(and premium, if any) or interest on such Global Security will be subject to
the restrictions discussed under "Limitations on Issuance of Bearer Securities"
below.
If a Depositary of Debt Securities of a series is at any time unwilling or
unable to continue as Depositary and a successor Depositary is not appointed by
the Company within ninety days, the Company will issue individual Debt
Securities of such series in exchange for the Global Security or Securities
representing such Debt Securities. In addition, the Company may at any time and
in its sole discretion determine not to have any Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue
individual Debt Securities of such series in exchange for the Global Security
or Securities representing such series of Debt Securities. (Section 2.05)
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Security representing
Debt Securities of such series may, on terms acceptable to the Company and the
Depositary for such Global Security, receive individual Debt Securities in
exchange for such beneficial interest. In any such instance, an owner of a
beneficial interest in a Global Security will be entitled to physical delivery
of individual Debt Securities of the series represented by such Global Security
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equal in principal (or, in the case of a Principal Indexed Security, face)
amount to such beneficial interest and to have such Debt Securities registered
in its name (if the Debt Securities of such series are issuable as Registered
Securities). Individual Debt Securities of such series so issued will be issued
(a) in registered form in authorized denominations if the Debt Securities of
such series are issuable as Registered Securities, (b) in bearer form in
authorized denominations, with or without coupons attached, if the Debt
Securities of such series are issuable as Bearer Securities or (c) as either
Registered or Bearer Securities, if the Debt Securities of such series are
issuable in either form (Section 2.05). See, however, "Limitations on Issuance
of Bearer Securities" below for a description of certain restrictions on the
issuance of individual Bearer Securities in exchange for beneficial interests
in a Global Security.
CERTAIN COVENANTS OF THE COMPANY UNDER THE INDENTURE
The Indenture contains certain covenants described below which are applicable
to the Company with respect to any and all series of Debt Securities issued
thereunder. Specific covenants, if any, peculiar to a particular series of Debt
Securities to be offered hereby will be described in the Prospectus Supplement
relating thereto.
The Section 4.11 Covenant. The Company has agreed that (A) after the date of
the Indenture neither the Company nor any Restricted Subsidiary will create,
incur or assume any Real Property Mortgage, other than an Excepted Mortgage, as
security for Indebtedness of the Company or any subsidiary unless the Debt
Securities are equally and ratably secured with such Indebtedness, and (B) if
any Negative Pledge Mortgage is created, incurred or assumed by the Company or
any Restricted Subsidiary, the Company will, unless the "Section 4.11 Ratio" is
satisfied, if required by the Trustee, within 60 days deliver First Mortgages
on parcels of Real Property having a net book value of at least 125% of the
then unpaid principal amount of Debt Securities. The "Section 4.11 Ratio" is
satisfied if, after giving effect to the delivery of a Negative Pledge
Mortgage, the sum of (1) the unpaid principal amount of all Indebtedness of the
Company secured by Real Property Mortgages executed and delivered or assumed
after December 15, 1977 (other than those Excepted Mortgages listed in clauses
(ii), (iii), (iv) and (v) of the definition of Excepted Mortgage set forth
below) and (2) the unpaid principal amount of Funded Debt of Restricted
Subsidiaries incurred after December 15, 1977, does not exceed the greater of
$250,000,000 or 15% of Consolidated Capitalization. (Section 4.11)
The term "Consolidated Capitalization" means the total assets of the Company
and its Restricted Subsidiaries determined on a consolidated basis (but
exclusive of investments in, and loans and advances to, Unrestricted
Subsidiaries) less the total current liabilities of the Company and its
Restricted Subsidiaries determined on a consolidated basis. (Section 1.01)
The term "Excepted Mortgage" means any Real Property Mortgage which:
(i) secures Negative Pledge Debt;
(ii) is assumed or given in favor of the seller of Real Property when the
Company or any Restricted Subsidiary (or any predecessor thereof) acquires
(or acquired, in the case of such a predecessor) the Real Property;
(iii) must be created, incurred or assumed to permit the Company or any
Restricted Subsidiary to perform or comply with any contract or subcontract
made by it with, or at the request of, the United States of America, the
District of Columbia, any state or territory of the United States of
America, any political subdivision thereof, or any agency, department or
instrumentality of any thereof;
(iv) is a "Refunding Mortgage", that is, it secures Indebtedness
("Refunding Indebtedness") created, incurred or assumed in connection with
any extension, renewal, replacement or refunding of any Indebtedness
("Refunded Indebtedness") secured by any Real Property Mortgage; provided
that the Refunding Indebtedness shall not exceed the Refunded Indebtedness
and that the Refunding Mortgage shall not create a mortgage on any Real
Property other than that which secured the Refunded Indebtedness;
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(v) is a "Replacement Mortgage", that is, it is given in replacement of
another Real Property Mortgage ("Replaced Mortgage") to secure the same
Indebtedness; provided that the net book value of the Real Property covered
by the Replacement Mortgage does not exceed the net book value of the Real
Property covered by the Replaced Mortgage; or
(vi) secures Indebtedness (other than Indebtedness secured by an Excepted
Mortgage described under any other clause of this definition of "Excepted
Mortgage") which is created, incurred or assumed subsequent to December 15,
1977 if, immediately after giving effect thereto, the Section 4.11 Ratio is
satisfied. (Section 4.11)
The term "First Mortgages" means mortgages in recordable form securing the
Debt Securities and naming the Trustee as mortgagee, beneficiary, grantee or
secured party. First Mortgages shall be in form reasonably acceptable to the
Trustee and shall afford a first lien (except for encumbrances permitted by the
Indenture) on Real Property. At all times when First Mortgages are to be
delivered to or held by the Trustee pursuant to the Indenture, no less than 50%
of the net book value of the Real Property subject to such First Mortgages
shall be attributable to Real Property consisting of land, and buildings and
improvements located on land, owned in fee simple by the Company and/or its
subsidiaries, and up to 50% of the net book value of the Real Property subject
to such First Mortgages may be attributable to other Real Property. (Section
1.01)
The term "Funded Debt" means Indebtedness, whether secured or unsecured, if
such Indebtedness by its terms matures at, or is extendable or renewable at the
option of the obligor to, a date more than 12 months after the date of
determination of such Indebtedness. (Section 1.01)
The term "Funded Debt of Restricted Subsidiaries" means, at the date of
determination, the aggregate of Funded Debt of all Restricted Subsidiaries
other than Funded Debt:
(a) of any Restricted Subsidiary which is a guarantor of the Debt
Securities ("Guarantor")*, pursuant to a guaranty delivered to the Trustee
on or prior to such date of determination, provided such Funded Debt is not
secured by a Real Property Mortgage;
(b) which constitutes subordinated debt of Restricted Subsidiaries which,
if guaranteed by the Company or any Guarantor, is guaranteed solely
pursuant to a subordinated guaranty; or
(c) of Restricted Subsidiaries which have been acquired by the Company
after December 15, 1977, provided that such Funded Debt (i) is not
guaranteed by the Company or any Guarantor, (ii) is guaranteed pursuant to
a subordinated guaranty, or (iii) is Funded Debt of a Restricted Subsidiary
which was acquired by the Company not more than 60 days prior to such date
of determination. (Section 1.01)
The term "Indebtedness" means any and all obligations (other than obligations
of the Company to any Restricted Subsidiary or of any Restricted Subsidiary to
the Company or to any other Restricted Subsidiary and other than deferred
income taxes, security deposits by lessees and interim loans for construction)
incurred either for money borrowed or in connection with the acquisition of any
or all stock or assets of a corporation or other entity (whether by purchase,
merger or otherwise). (Section 1.01)
The term "Lease" means an original lease, a sublease or any lease under and
subsequent to a sublease. (Section 1.01)
The term "Mortgages" shall mean mortgages, deeds of trust, deeds to secure
debt and other similar instruments pursuant to which a lien on Real Property is
created in favor of, or title to Real Property is held by or transferred to a
Person for the benefit of, a Person as security for Indebtedness. (Section
1.01)
The term "Negative Pledge Debt" means Indebtedness of the Company or any
Restricted Subsidiary which (a) is not secured by a Real Property Mortgage on
the date of the Indenture or on the date of issuance
--------
* The Company is not obligated to cause any Restricted Subsidiary to become a
Guarantor, and does not presently intend to do so.
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of such Indebtedness, and (b) is issued pursuant to an instrument which
requires the Company, on the occurrence or nonoccurrence of an event specified
therein, to secure such Indebtedness with a Real Property Mortgage. (Section
4.11)
The term "Negative Pledge Mortgage" means any Real Property Mortgage
delivered to secure Negative Pledge Debt pursuant to one of the requirements
referred to in the definition of Negative Pledge Debt. (Section 4.11)
The term "Real Property" means land, Leases, buildings and improvements on
owned or leased land or leased premises, either owned in fee simple or leased
by the Company or one of its subsidiaries. (Section 1.01)
The term "Real Property Mortgage" shall mean a Mortgage upon or affecting
Real Property. (Section 1.01)
The term "Restricted Subsidiary" means any subsidiary which has not been
designated as an Unrestricted Subsidiary by the Company. The Company may
designate an Unrestricted Subsidiary as a Restricted Subsidiary at any time so
long as such subsidiary has not been a Restricted Subsidiary within 12 months
prior to such designation as a Restricted Subsidiary; provided, however, that
such change of designation does not result in an Event of Default under the
Indenture or an event which after notice or lapse of time, or both, would
constitute an Event of Default under the Indenture. (Section 1.01)
The term "Unrestricted Subsidiary" means any subsidiary which has been
designated an Unrestricted Subsidiary by the Company. The Company may designate
a Restricted Subsidiary as an Unrestricted Subsidiary at any time so long as
(i) such subsidiary has not been an Unrestricted Subsidiary within 12 months
prior to such designation as an Unrestricted Subsidiary, (ii) such change of
designation does not result in an Event of Default under the Indenture or an
event which after notice or lapse of time, or both, would constitute an Event
of Default under the Indenture, and (iii) such subsidiary does not own any real
property in the United States which is primarily used for the operation of a
McDonald's restaurant. (Section 1.01)
Other Covenants. The Indenture contains certain other covenants applicable
to all series of Debt Securities issued thereunder, including covenants
respecting the payment of taxes, maintenance of properties and other matters.
(Article Four)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than 66 2/3% in principal amount of
the Outstanding Debt Securities of all series issued under the Indenture which
are affected by the modification or amendment (voting as one class), to execute
supplemental indentures modifying the Indenture or any supplemental indenture,
provided that, without the consent of all Holders of then Outstanding Debt
Securities affected, no such modification shall extend the fixed maturity of
any Debt Securities, or reduce the principal amount thereof, or reduce the rate
or extend the time of payment of interest thereon, or reduce any premium
payable upon redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon
acceleration of the Stated Maturity thereof, or change the aforesaid percentage
of Debt Securities, the consent of Holders of which will be required for any
such modification. (Section 10.02) Generally, the principal amount of the Debt
Securities that is deemed "Outstanding" is the principal amount thereof, except
(a) as to Original Issue Discount Securities, it is the portion of the
principal amount thereof that then would be due and payable upon an
acceleration of the Stated Maturity thereof pursuant to an Event of Default;
and (b) as to Debt Securities denominated in a currency other than U.S.
dollars, it is the amount of U.S. dollars that could be obtained for such
principal amount on the basis of the spot rate of exchange for purchasing U.S.
dollars with such currency at or about the date of determination. (Section
1.01)
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EVENTS OF DEFAULT
The Indenture defines an Event of Default with respect to any series of Debt
Securities as being any one of the following events: (a) default for 30 days in
any payment of interest on such series; (b) default in any payment of principal
of (and premium, if any, on) such series when due; (c) default in the payment
of any sinking fund installment when due; (d) default in the performance of a
particular covenant applicable to that series after appropriate notice and
opportunity to cure such default, if any; (e) default for 60 days, after
appropriate notice, in the performance of any other covenants in the Indenture
(other than the Section 4.11 covenant and any other covenant included in the
Indenture solely for the benefit of a series of Debt Securities other than that
series), provided that such default shall not be an Event of Default if it
cannot with due diligence be cured within such 60-day period due to causes
beyond the control of the Company, unless the Company shall fail to proceed
promptly to cure such default and thereafter prosecute the curing of such
default with diligence and continuity; (f) default for 120 days after
appropriate notice in the performance of the Section 4.11 covenant; (g) a
default under any other indenture or instrument (including an Event of Default
with respect to a series of Debt Securities other than that series) under which
the Company has outstanding at the date of such default an aggregate principal
amount of Indebtedness in excess of 15% of Consolidated Capitalization,
provided that such Indebtedness shall have been accelerated so that such
Indebtedness shall be or become due and payable prior to the date on which the
same would otherwise have become due and payable; (h) default in the payment at
the maturity thereof of an aggregate principal amount of Indebtedness
(including such a default with respect to a series of Debt Securities other
than that series) in excess of 15% of Consolidated Capitalization; or (i)
certain events of bankruptcy, insolvency or reorganization. An Event of Default
with respect to a particular series of Debt Securities issued under the
Indenture does not necessarily constitute an Event of Default with respect to
any other series of Debt Securities issued thereunder. In case an Event of
Default under clause (a), (b), (c) or (d) shall occur and be continuing with
respect to any series of Debt Securities, the Trustee or the Holders of not
less than 25% in aggregate principal amount of Debt Securities then Outstanding
of such series may declare the entire principal (or, if the Debt Securities of
such series are Original Issue Discount Securities, the portion of the
principal amount specified in the terms of such series) of such series to be
due and payable. In case an Event of Default under clause (e), (f), (g), (h) or
(i) shall occur and be continuing, the Trustee or Holders of not less than 25%
in aggregate principal amount of all the Outstanding Debt Securities may
declare the entire principal (or, if any Debt Securities are Original Issue
Discount Securities, the portion of the principal amount specified in the terms
thereof) of Outstanding Debt Securities of all series to be due and payable.
Any Event of Default with respect to a particular series of Debt Securities (or
of all the Debt Securities, as the case may be) may be waived by the Holders of
a majority in aggregate principal amount of the Outstanding Debt Securities of
such series (or of all the Outstanding Debt Securities, as the case may be),
except in each case a failure to pay principal or premium, if any, or interest
on such Debt Securities. (Section 6.01; Section 6.06)
The Indenture requires the Company to file with the Trustee an Officers'
Certificate annually as to knowledge of any default under the terms of the
Indenture. (Section 4.06) The Indenture provides that the Trustee may withhold
notice to the Holders of the Debt Securities of any default (except in payment
of principal or premium, if any, or interest) if the Trustee considers it in
the interest of the Holders of the Debt Securities to do so. (Section 6.07)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Indenture provides that the Trustee shall be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of the Holders of the Debt Securities unless such Holders
shall have offered to the Trustee reasonable indemnity. (Sections 6.04, 7.01
and 7.02) Subject to such provisions regarding indemnification of and certain
other rights of the Trustee, the Indenture provides that the Holders of a
majority (voting as one class) in principal amount of the Outstanding Debt
Securities of any or all series affected 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.
(Section 6.06) The Indenture provides that notwithstanding any other provisions
thereof, the right of any Holder to receive
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payment of the principal of (and premium, if any) and interest on the Debt
Securities or to institute suit for the enforcement thereof shall not be
impaired or affected without such Holder's consent. (Section 6.04)
DEFEASANCE
Unless otherwise provided in the Prospectus Supplement with respect to any
series of Debt Securities, the Company, at its option, (a) will be discharged
from any and all obligations in respect of such Debt Securities (except in each
case for certain obligations to register the transfer or exchange of such Debt
Securities, replace stolen, lost or mutilated Debt Securities, maintain paying
agencies and hold moneys for payment in trust) or (b) need not comply with
certain restrictive covenants of the Indenture (including those described under
"Certain Covenants of the Company Under the Indenture" above) and will not be
limited by any restrictions with respect to merger, consolidation or sales of
assets, in each case if the Company deposits with the Trustee, in trust, (x)
money or (y) U.S. Government Obligations or a combination of (x) and (y) which,
through the payment of interest thereon and principal thereof in accordance
with their terms, will provide money in an amount sufficient to pay all the
principal (including any mandatory sinking fund payments) of, if any, and
premium, if any, and interest on, such Debt Securities on the dates such
payments are due in accordance with the terms of such series. (Section 12.02)
In order to avail itself of either of the foregoing options, the Company must
provide to the Trustee an opinion of counsel or a ruling from, or published by,
the Internal Revenue Service, to the effect that Holders of the Debt Securities
of such series will not recognize income, gain or loss for Federal income tax
purposes as a result of the Company's exercise of its option 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 such option had not been
exercised. (Section 12.02) "U.S. Government Obligations" means generally (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America, the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof.
(Section 1.01) In addition, the Company can also obtain a discharge under the
Indenture with respect to all the Debt Securities of a series by depositing
with the Trustee, in trust, funds sufficient to pay at maturity or upon
redemption all of the Debt Securities of such series, provided that all of the
Debt Securities of such series are by their terms to become due and payable
within one year or are to be called for redemption within one year. No such
opinion of counsel or ruling from the Internal Revenue Service is required with
respect to a discharge pursuant to the immediately preceding sentence. In the
event of any discharge of Debt Securities pursuant to the terms of the
Indenture described above, the Holders of such Debt Securities will thereafter
be able to look solely to such trust fund, and not to the Company, for payments
of principal, premium, if any, and interest, if any. (Sections 12.01 and 12.02)
CONCERNING THE TRUSTEE
The Company, its subsidiaries and affiliates maintain banking relationships
(including the extension of credit) in the ordinary course of business with the
Trustee.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with U.S. federal income tax laws and regulations, the Company
and any underwriter, agent or dealer participating in the offering of any
Bearer Security will agree, in connection with the original issuance of such
Bearer Security and during the period of 40 days after the issue date of such
Bearer Security, not to offer, sell or deliver such Bearer Security, directly
or indirectly, to a U.S. Person or to any person within the United States,
except to the extent permitted under U.S. Treasury regulations.
Bearer Securities and any coupons attached thereto will bear a legend to the
following effect: "Any United States Person who holds this obligation will be
subject to limitations under the United States income
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tax laws, including the limitations provided in Sections 165(j) and 1287(a) of
the Internal Revenue Code." The sections referred to in the legend provide
that, with certain exceptions, a United States taxpayer that holds Bearer
Securities will not be allowed to deduct any loss, and will not be eligible for
capital gain treatment with respect to any gain, realized on a sale, exchange,
redemption or other disposition of such Bearer Securities.
As used herein, "United States" means the United States of America and its
possessions, and "U.S. Person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States, or an estate or trust the income of which
is subject to United States federal income taxation regardless of its source.
Pending the availability of a definitive Global Security in bearer form or
individual Bearer Securities, as the case may be, Debt Securities that are
issuable as Bearer Securities may initially be represented by a single
temporary Global Security in bearer form, without interest coupons, to be
deposited with a common depositary in London for Morgan Guaranty Trust Company
of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), and Cedel Bank, societe anonyme ("Cedel") for credit to the
accounts designated by or on behalf of the purchasers thereof. Following the
availability of a definitive Global Security in bearer form, without coupons
attached, or individual Bearer Securities, with or without coupons, and subject
to any further limitations described in the applicable Prospectus Supplement,
the temporary Global Security will be exchangeable for interests in such
definitive Global Security or for such individual Bearer Securities,
respectively, only upon receipt of a Certificate of Non-U.S. Beneficial
Ownership. A "Certificate of Non-U.S. Beneficial Ownership" is a certificate to
the effect that a beneficial interest in a temporary Global Security is owned
by a person that is not a U.S. Person or is owned by or through a financial
institution in compliance with applicable U.S. Treasury regulations. No Bearer
Security will be delivered in or to the United States. If so specified in the
applicable Prospectus Supplement, interest on a temporary Global Security will
be paid to each of Euroclear and Cedel with respect to that portion of such
temporary Global Security held for its account, but only upon receipt as of the
relevant interest payment date of a Certificate of Non-U.S. Beneficial
Ownership.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The applicable Prospectus Supplement will set forth the terms
of the offering of any Debt Securities, including the names of any underwriters
or agents, the purchase price of such Debt Securities and the net proceeds to
the Company from such sale, any underwriting discounts and other items
constituting underwriters' compensation or agents' commission, any initial
public offering price, any discounts or concessions allowed or reallowed or
paid to dealers, any securities exchanges on which such Debt Securities may be
listed and any restrictions on the sale and delivery of Debt Securities in
bearer form.
If underwriters or dealers are used in the sale, Debt Securities will be
acquired by such underwriters or dealers for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Such Debt Securities may be offered to the public either
through underwriting syndicates represented by managing underwriters or by
underwriters without a syndicate. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase such
Debt Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Debt Securities if any
of such Debt Securities are purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Debt Securities may also be sold directly by the Company or through agents
designated by the Company from time to time. Any agent involved in the offer or
sale of Debt Securities will be named, and any
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commissions payable by the Company to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in the applicable
Prospectus Supplement, any such agent will act on a best efforts basis for the
period of its appointment.
Any underwriters, dealers or agents participating in the distribution of Debt
Securities may be deemed to be underwriters and any discounts or commissions
received by them on the sale or resale of Debt Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Company to
indemnification by the Company against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect of
such liabilities. Agents and underwriters may be customers of, engage in
transactions with, or perform services for, the Company or its subsidiaries or
affiliates in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
the Debt Securities being offered hereby from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in the Prospectus Supplement. Each Contract will be for an
amount not less than, and unless the Company otherwise agrees the aggregate
principal (or face) amount of Debt Securities sold pursuant to Contracts shall
be not less nor more than, the respective amounts stated in the Prospectus
Supplement. Institutions with which Contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except that (i) the purchase by
an institution of the Debt Securities covered by its Contract shall not at the
time of delivery be prohibited under the laws of any jurisdiction in the United
States to which such institution is subject, and (ii) if the Debt Securities
being offered hereby are being sold to underwriters, the Company shall have
sold to such underwriters the total principal (or face) amount of such Debt
Securities less the principal amount thereof covered by the Contracts.
LEGAL MATTERS
The legality of the Debt Securities offered hereby will be passed upon for
the Company by Shelby Yastrow, Senior Vice President, General Counsel and
Secretary of the Company. Mr. Yastrow is a full-time employee of the Company
and owns, and holds options to purchase, shares of the Company's Common Stock.
Certain legal matters will be passed on for any underwriters or agents by
Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, New York
10006. From time to time Cleary, Gottlieb, Steen & Hamilton provides legal
services to the Company.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein, and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
13
<PAGE>
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY
ACCOMPANYING PRICING SUPPLEMENT) OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED. THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY ACCOMPANYING PRICING SUPPLE-
MENT) AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OTHER THAN THE SECURITIES OFFERED BY
THIS PROSPECTUS SUPPLEMENT (INCLUDING ANY PRICING SUPPLEMENT) OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES IN ANY JURISDIC-
TION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION
IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT (IN-
CLUDING ANY ACCOMPANYING PRICING SUPPLEMENT) NOR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THEREOF OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SINCE ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Important Currency Information............................................. S-2
Capitalization of McDonald's Corporation................................... S-2
Description of Registered Notes............................................ S-3
Currency Risks............................................................. S-17
United States Tax Considerations........................................... S-19
Plan of Distribution....................................................... S-24
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents By Reference............................ 2
McDonald's Corporation..................................................... 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 3
Description of Debt Securities............................................. 4
Limitations on Issuance of Bearer Securities............................... 11
Plan of Distribution....................................................... 12
Legal Matters.............................................................. 13
Experts.................................................................... 13
</TABLE>
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$584,662,000
MCDONALD'S CORPORATION
MEDIUM-TERM NOTES DUE FROM NINE MONTHS TO 60 YEARS FROM DATE OF ISSUE
[LOGO OF MCDONALD'S CORPORATION APPEARS HERE]
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SALOMON BROTHERS INC
AUGUST 4, 1995
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