<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration Number 33-50052
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 18, 1996)
$200,000,000
MCDONALD'S CORPORATION
7 1/2% SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2036
---------------
The 7 1/2% Subordinated Deferrable Interest Debentures due 2036 (the
"Debentures") will mature on September 30, 2036. Interest on the Debentures
will accrue from the date of original issuance and is payable quarterly in
arrears on March 31, June 30, September 30 and December 31, commencing
December 31, 1996. The Debentures will be redeemable at the option of
McDonald's Corporation (the "Company"), in whole or in part, on or after
December 31, 2001, or earlier upon the occurrence of a Tax Event (as
hereinafter defined), at 100% of the principal amount redeemed together with
accrued interest to the redemption date. The Debentures will be issued only in
denominations of $25 and integral multiples thereof. The obligations of the
Company under the Debentures are subordinate in right of payment to Senior
Indebtedness (as hereinafter defined) of the Company. See "Description of
Debentures".
The Debentures will be represented by a global security registered in the
name of a nominee of The Depository Trust Company, as depositary. Beneficial
interests in the Debentures will be shown on, and transfers thereof will be
effected only through, records maintained by The Depository Trust Company and
its participants. Except as described herein, Debentures in definitive form
will not be issued. So long as the Debentures are registered in the name of
The Depository Trust Company or its nominee, the Debentures will trade in The
Depository Trust Company's Same-Day Funds Settlement System and secondary
market trading activity in the Debentures will, therefore, settle in
immediately available funds. All payments of principal and interest on the
global security will be made by the Company in immediately available funds.
See "Description of Debentures--Book-Entry System".
Application will be made to list the Debentures on the New York Stock
Exchange.
---------------
SEE "RISK FACTORS" ON PAGE S-2 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE DEBENTURES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING
AND UNDER WHICH PAYMENT OF INTEREST ON THE DEBENTURES MAY BE DEFERRED AND THE
RELATED FEDERAL INCOME TAX CONSEQUENCES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(2)(4) COMPANY(1)(3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Debenture................... 100% 3.15% 96.85%
- --------------------------------------------------------------------------------
Total........................... $200,000,000 $6,300,000 $193,700,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from November 5, 1996 to date of delivery.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $225,000.
(4) The Underwriting Discount will be 2% of the principal amount of the
Debentures sold to certain institutions. Therefore, to the extent any such
sales are made to such institutions, the actual total Underwriting Discount
will be less than, and the actual total Proceeds to Company will be greater
than, the amounts shown in the table above.
---------------
The Debentures are offered by the several Underwriters, subject to prior
sale, when, as and if issued and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that the
Debentures will be ready for delivery in book-entry form only through the
facilities of The Depository Trust Company on or about November 5, 1996
against payment therefor in immediately available funds.
---------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
---------------
The date of this Prospectus Supplement is October 31, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBENTURES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
RISK FACTORS
In addition to the other information contained in this Prospectus Supplement
and the accompanying Prospectus, prospective purchasers of the Debentures
should carefully consider the following risk factors:
SUBORDINATION OF DEBENTURES
The Debentures will be unsecured obligations of the Company and will be
subordinate to all existing and future Senior Indebtedness of the Company. As
of September 30, 1996, outstanding Senior Indebtedness of the Company
aggregated approximately $4.3 billion. There are no terms of the Debentures or
the Indenture (as hereinafter defined) that limit the Company's ability to
incur additional indebtedness, including indebtedness that ranks senior to or
pari passu with the Debentures. The Debentures also will be effectively
subordinate to all obligations of the Company's subsidiaries. See "Description
of Debentures--Subordination".
COMPANY HAS RIGHT TO DEFER PAYMENT OF INTEREST
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right under the Indenture, upon
prior notice by public announcement given in accordance with New York Stock
Exchange, Inc. ("NYSE") rules (or the rules of any other applicable self-
regulatory organization) at any time during the term of the Debentures, to
extend any interest payment period from time to time for a period not exceeding
20 consecutive quarterly interest payment periods (each, an "Extension
Period"). No interest shall be due and payable during an Extension Period, but
on the Interest Payment Date (as hereinafter defined) occurring at the end of
each Extension Period, the Company shall pay to the holders of record on the
record date for such Interest Payment Date (regardless of who the holders of
record may have been on other dates during the Extension Period) all accrued
but unpaid interest on the Debentures, together with interest thereon,
compounded quarterly at the rate of interest on the Debentures.
Prior to the termination of any Extension Period, the Company may further
extend such Extension Period; provided that such Extension Period, together
with all such previous and further extensions thereof, may not exceed 20
consecutive quarterly interest payment periods. Upon the termination of any
Extension Period and the payment of all interest then due, the Company may
commence a new Extension Period. After prior notice given by public
announcement in accordance with NYSE rules (or the rules of any other
applicable self-regulatory organization), the Company may also prepay at any
time all or a portion of the interest accrued during an Extension Period.
Consequently, there could be multiple Extension Periods of varying lengths
throughout the term of the Debentures. See "Description of Debentures--Option
to Extend Interest Payment Period".
Should the Company exercise its right to defer any payment of interest on the
Debentures by extending the interest payment period, under recently issued
Treasury regulations, each holder of Debentures will accrue income in the form
of original issue discount ("OID") on an economic accrual basis with respect to
its Debentures for United States federal income tax purposes. As a result,
during any Extension Period, each such holder of Debentures will recognize
income for United States federal income tax purposes in advance of the receipt
of cash and will not receive the cash from the Company related to such income
if such holder
S-2
<PAGE>
disposes of its Debentures prior to the Record Date (as hereinafter defined)
for the date on which payments of such amounts are made. In addition, the
market price of the Debentures is likely to be affected. A holder that disposes
of its Debentures during an Extension Period, therefore, might not receive the
same return on its investment as a holder that continues to hold its
Debentures. And, as a result of the existence of the Company's right to defer
interest payments, the market price of the Debentures may be more volatile than
other similar securities where the issuer does not have such right to defer
interest payments. See "Description of Debentures-- Option to Extend Interest
Payment Period" and "Certain United States Federal Income Tax Considerations--
Interest Income and Original Issue Discount".
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations issued on or after December 7, 1995. On March 29, 1996, Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer issued a joint statement (the "Joint Statement")
indicating their intent that the Proposed Legislation, if adopted by either of
the tax-writing committees of Congress, would have an effective date that is no
earlier than the date of "appropriate Congressional action." Based upon both
the Proposed Legislation and the Joint Statement, it is expected that if the
Proposed Legislation were to be enacted, such legislation would not apply to
the Debentures. There can be no assurance, however, that the Proposed
Legislation, if enacted, or that any other legislation enacted after the date
hereof will not otherwise adversely affect the ability of the Company to deduct
the interest payable on the Debentures. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of Debentures--Redemption"
and "Certain United States Federal Income Tax Considerations--Proposed Tax
Legislation".
TRADING PRICE
Should the Company exercise its option to defer any payment of interest on
the Debentures, the Debentures may trade at a price that does not fully reflect
the value of accrued but unpaid interest. In the event of such a deferral, a
holder of Debentures who disposes of them between Record Dates for payments
thereon will be required to include in income as ordinary income accrued but
unpaid interest on the Debentures as OID to the date of disposition on an
economic accrual basis, and to add such amount to its adjusted tax basis in the
Debentures. To the extent the selling price is less than such holder's adjusted
tax basis (which will include, in the form of OID, all accrued but unpaid
interest), such holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Description of Debentures--
Option to Extend Interest Payment Period" and "Certain United States Federal
Income Tax Considerations--Interest Income and Original Issue Discount".
LISTING AND TRADING OF DEBENTURES
The Debentures constitute a new series of securities with no established
trading market. While an application will be made to list the Debentures on the
NYSE, there can be no assurance that an active market for the Debentures will
develop or be sustained in the future on such exchange. Although the
Underwriters have indicated to the Company that they intend to make a market in
the Debentures as permitted by applicable laws and regulations, they are not
obligated to do so and may discontinue any such market making activities at any
time without notice. Accordingly, no assurance can be given as to the liquidity
of, or trading in, the Debentures.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Debentures
for general corporate purposes.
S-3
<PAGE>
RECENT RESULTS OF OPERATIONS OF MCDONALD'S CORPORATION
The Company reported record net income, total revenues and systemwide sales
for the nine months ended September 30, 1996. Net income and net income per
common share increased 10% and 12%, respectively, while systemwide sales and
total revenues increased 6% and 9%, respectively, compared in each case to
results for the nine months ended September 30, 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
-------------------
1996 1995
--------- ---------
(U.S. DOLLARS IN
MILLIONS, EXCEPT
PER COMMON
SHARE AMOUNTS)
<S> <C> <C>
Systemwide sales...................................... $23,527.6 $22,179.5
Total revenues........................................ 7,864.9 7,209.0
Net income............................................ 1,162.6 1,060.5
Net income per common share........................... 1.63 1.46
</TABLE>
DESCRIPTION OF DEBENTURES
GENERAL
The following description of the particular terms of the Debentures offered
hereby supplements the description of the general terms and provisions of the
Subordinated Debt Securities set forth in the Prospectus under "Description of
Debt Securities", to which description reference is hereby made. The following
brief summaries of certain provisions contained in the Indenture relating to
Subordinated Debt Securities, dated as of October 18, 1996, between the Company
and First Union National Bank, as Trustee (the "Trustee"), and the Supplemental
Indenture No. 1, to be dated as of November 5, 1996, relating to the Debentures
(collectively, the "Indenture") do not purport to be complete, use certain
terms defined in the Indenture, and are qualified in their entirety by express
reference to the provisions of the Indenture.
The Debentures will be unsecured, subordinated obligations of the Company.
The Debentures will be represented by a global security and will be available
in minimum denominations of $25 and integral multiples thereof.
The Indenture does not contain any provisions that would limit the ability of
the Company to incur additional indebtedness or that would afford holders of
the Debentures protection in the event of a highly leveraged or similar
transaction involving the Company.
PRINCIPAL AMOUNT, INTEREST AND MATURITY
The Debentures will be limited in aggregate principal amount to $200,000,000.
The Debentures will mature on September 30, 2036, and will bear interest at
the rate per annum shown on the cover page of this Prospectus Supplement from
the date on which the Debentures are originally issued until the principal
amount thereof becomes due and payable. Interest will be payable quarterly, in
arrears, on each March 31, June 30, September 30 and December 31, (each, an
"Interest Payment Date") commencing December 31, 1996. Interest (other than
interest payable on redemption or maturity) will be payable to the persons in
whose names the Debentures are registered at the close of business on the
relevant regular Record Dates, which will be the March 15, June 15, September
15 or December 15 next preceding an Interest Payment Date (each, a "Record
Date"). Interest payable on redemption or maturity will be payable to the
person to whom the principal is paid. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
S-4
<PAGE>
REDEMPTION
The Debentures may, at the option of the Company, be redeemed in whole or
from time to time in part, on at least 30 days' and not more than 60 days'
notice, at any time on or after December 31, 2001, or at any time upon the
occurrence of a Tax Event, at a redemption price equal to 100% of the principal
amount of the Debentures redeemed, together with accrued but unpaid interest to
the date of redemption.
"Tax Event" means that the Company shall have received an opinion of
independent tax counsel (a "Tax Opinion") to the effect that, as a result of
(a) any amendment to, or change (including any announced prospective change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein or (b) any
amendment to or change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the publication of
any judicial decision or regulatory determination on or after the date of this
Prospectus Supplement), in either case on or after the date of this Prospectus
Supplement, there is more than an insubstantial risk that interest payable on
the Debentures would not be deductible, in whole or in part, by the Company for
United States federal income tax purposes.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest on
the Debentures, the Company shall have the right, upon prior notice by public
announcement given in accordance with NYSE rules (which require, among other
things, immediate release to the wire services and the press and prior
notification to the NYSE if such release is made shortly before opening or
during market hours) or the rules of any other applicable self-regulatory
organization, at any time during the term of the Debentures, prior to an
Interest Payment Date, to extend the interest payment period from time to time
to another Interest Payment Date by one or more quarterly periods, not to
exceed 20 consecutive quarterly interest payment periods from the last Interest
Payment Date to which interest was paid in full; provided that during any such
Extension Period, the Company shall not declare or pay any dividend on, or
repurchase, redeem or otherwise acquire any of its capital stock. No interest
shall be due and payable during an Extension Period, but on the Interest
Payment Date occurring at the end of each Extension Period the Company shall
pay to the holders of record on the Record Date for such Interest Payment Date
(regardless of who the holders of record may have been on other dates during
the Extension Period) all accrued but unpaid interest on the Debentures,
together with interest thereon. Interest will continue to accrue on the
Debentures during an Extension Period and will compound quarterly, at the rate
of interest specified for the Debentures, to the extent permitted by applicable
law. Prior to the termination of any Extension Period, the Company may pay all
or any portion of the interest accrued on the Debentures on any Interest
Payment Date to holders of record on the Record Date for such Interest Payment
Date or from time to time further extend the interest payment period; provided
that any such Extension Period together with all such previous and further
extensions thereof may not exceed 20 consecutive quarterly interest payment
periods. If the Company shall elect to pay all of the interest accrued on the
Debentures on an Interest Payment Date during an Extension Period, such
Extension Period shall automatically terminate on such Interest Payment Date.
Upon the termination of any Extension Period and the payment of all amounts of
interest then due, the Company may commence a new Extension Period, subject to
the above requirements. Consequently, there could be multiple Extension Periods
of varying lengths throughout the term of the Debentures. The Company currently
believes that the likelihood of its exercising the right to extend any
quarterly interest payment period on the Debentures is remote.
The Company has no current intention of exercising its right to extend any
interest payment period. However, in the event the Company determines to extend
an interest payment period, or in the event the Company thereafter extends an
Extension Period or prepays interest accrued during an Extension Period as
described above, the market price of the Debentures is likely to be adversely
affected. In addition, as a result of such right, the market price of the
Debentures may be more volatile than other debt instruments where the issuer
does not have such right. A holder that disposes of its Debentures during an
Extension Period, therefore, may not receive the same return on its investment
as a holder that continues to hold its Debentures.
S-5
<PAGE>
The Company shall cause the Trustee to give holders of the Debentures prior
notice, by public announcement given in accordance with NYSE rules (or the
rules of any other applicable self-regulatory organization) and by mail to all
such holders, of (i) the Company's election to initiate an Extension Period and
the duration thereof, (ii) the Company's election to extend any Extension
Period beyond the Interest Payment Date on which such Extension Period is then
scheduled to terminate, and the duration of such extension, and (iii) the
Company's election to make a full or partial payment of interest accrued on the
Debentures on any Interest Payment Date during any Extension Period and the
amount of such payment. In no event shall such notice be given less than five
Business Days prior to the March 15, June 15, September 15 or December 15 next
preceding the applicable Interest Payment Date.
BOOK-ENTRY SYSTEM
The Debentures will be represented by a global security (the "Global
Security"). The Global Security will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of a
nominee of the Depositary. Except under circumstances described below, the
Debentures will not be issuable in definitive form.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons designated
by the Underwriters with the respective principal amounts of the Debentures
represented by the Global Security. Ownership of beneficial interests in the
Global Security will be limited to persons that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. Owners of a beneficial interest in the Global Security
will be shown on, and the transfer of that beneficial interest will only be
effected through, records maintained by the Depositary or its nominee (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons other than participants). The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability to transfer beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Debentures represented by the Global
Security for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in the Global Security will not be entitled to have
Debentures represented by the Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debentures in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Principal and interest payments on Debentures represented by the Global
Security registered in the name of the Depositary or its nominee will be made
to the Depositary or its nominee, as the case may be, as the registered owner
of the Global Security. None of the Company, the Trustee, any paying agent or
the registrar for the Debentures will have any responsibility or liability for
any aspect of the Depositary's records or any participant's records relating
to, or payments made on account of, beneficial interests in the Global Security
or for maintaining, supervising or reviewing any Depositary's records or any
participant's records relating to such beneficial interests.
The Company expects that the Depositary for the Debentures or its nominee,
upon receipt of any payment of principal or interest, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
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.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, the Company will issue Debentures in definitive form in
S-6
<PAGE>
exchange for the entire Global Security. In addition, the Company may at any
time and in its sole discretion determine not to have the Debentures
represented by the Global Security and, in such event, will issue Debentures in
definitive form in exchange for the entire Global Security. In any such
instance, an owner of a beneficial interest in the Global Security will be
entitled to physical delivery in definitive form of Debentures represented by
the Global Security equal in principal amount to such beneficial interest and
to have such Debentures registered in its name. Debentures so issued in
definitive form will be issued as registered Debentures in denominations of $25
and integral multiples thereof, unless otherwise specified by the Company.
The Depositary has advised the Company and the Underwriters 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, banks, trust
companies, clearing corporations and certain other organizations, some of which
(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.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Debentures will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global Security
will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the
Debentures will trade in the Depositary's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the Debentures will
therefore be required by the Depositary to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Debentures.
SUBORDINATION
The Debentures are subordinated in right of payment, to the extent and in the
manner set forth in the Indenture, to all indebtedness for borrowed money of
the Company, whether now outstanding or hereafter incurred, which is not by its
terms subordinate to other indebtedness of the Company; provided, however, that
Senior Indebtedness shall not include amounts owed to trade creditors in the
ordinary course of business (the "Senior Indebtedness"). At September 30, 1996,
the aggregate Senior Indebtedness of the Company was approximately $4.3
billion. In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or its property, and, except as
otherwise provided in the Indenture, in the event of any proceedings for
voluntary liquidation, dissolution or other winding up of the Company, whether
or not involving insolvency or bankruptcy proceedings, all principal, premium,
if any, and interest on the Senior Indebtedness will be paid in full before any
payment is made by the Company on the Debentures. In the event that pursuant to
the terms of the Indenture any Debenture of any series is declared due and
payable because of the occurrence of an Event of Default, as provided in the
Indenture, and the previous sentence is not applicable, the holders of the
Debentures of such series shall be entitled to payment from the Company only
after the Senior Indebtedness outstanding at the time such Debenture so becomes
due and payable because of such Event of Default shall first have been paid in
full or such payment shall have been provided for.
S-7
<PAGE>
The Debentures will be effectively subordinated to all obligations of the
Company's subsidiaries. There is no restriction under the Indenture on the
creation of additional indebtedness, including Senior Indebtedness, by the
Company, including indebtedness owed by the Company to subsidiaries.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following is a general summary of the material United States federal
income tax considerations relevant to the purchase, ownership and disposition
of the Debentures and represents the opinion of Paul J. Schaffhausen, Assistant
Vice President and Federal Tax Counsel to the Company, insofar as it relates to
matters of law or legal conclusions. Unless otherwise stated, this summary
deals only with Debentures held as capital assets by holders who purchase the
Debentures upon original issuance. It does not deal with special classes of
holders such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, persons that have a functional currency other than the
U.S. Dollar or persons that will hold the Debentures as part of an integrated
transaction (including a "straddle") consisting of the Debentures and one or
more other positions or as other than a capital asset. Further, it does not
include any description of any alternative minimum tax considerations or the
tax laws of any state or local government or of any foreign government that may
be applicable to the Debentures. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury regulations thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change, possibly on a retroactive basis. Persons
considering the purchase, ownership or disposition of the Debentures should
consult their own tax advisors concerning the United States federal, state,
local and foreign tax consequences of such purchase, ownership and disposition
in light of such persons' particular circumstances.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Recently adopted Treasury regulations (the "Regulations") generally provide
that stated interest on a debt instrument issued on or after August 13, 1996,
is not "qualified stated interest" and, therefore, will give rise to OID unless
such interest is unconditionally payable in cash or in property (other than
debt instruments of the issuer) at least annually at a single fixed rate.
Interest is considered to be unconditionally payable only if reasonable legal
remedies exist to compel timely payment or the debt instrument otherwise
provides terms and conditions that make the likelihood of late payment (other
than late payment that occurs within a reasonable grace period) or non-payment
a "remote contingency."
The Company has the right under the terms of the Debentures to defer any
interest payment from time to time for a period not exceeding 20 consecutive
quarterly interest payment periods. Unless the likelihood of exercise of such
right is remote, the Debentures would be issued with OID. During any Extension
Period the terms of the Debentures provide that the Company shall not declare
or pay any dividend on, or repurchase, redeem or otherwise acquire any of its
capital stock. See "Description of Debentures--Option to Extend Interest
Payment Period". The Company currently believes that the adverse impact that
the imposition of such restrictions would have on the Company make the
likelihood of its exercising its right to defer remote.
Based on the foregoing, the Company believes that the stated interest on the
Debentures should be considered unconditionally payable for purposes of the
Regulations and that Debentures should not be considered to be issued with OID
at the time of their original issuance. Accordingly, a holder of the Debentures
should include in gross income the interest on the Debentures in accordance
with such holder's regular method of tax accounting. There can be no assurance,
however, that the IRS will agree with such determination.
Under the Regulations, if the Company exercised its option to defer any
payment of interest, the Debentures would at that time be treated as issued
with OID and all interest thereafter payable will be treated as OID as long as
the Debentures remain outstanding. In such event, a holder will be required to
include in
S-8
<PAGE>
gross income as OID an amount equal to the interest accrued during each
calendar quarter in an Extension Period on an economic accrual basis regardless
of such holder's regular method of tax accounting. As a result, during any
period in which the Company has elected to extend the interest payment period a
holder will be required to include OID in gross income prior to the receipt of
a corresponding cash payment.
SALE, EXCHANGE AND REDEMPTION OF DEBENTURES
Upon the sale, exchange or redemption of the Debentures, a holder will
recognize gain or loss equal to the difference between its adjusted tax basis
in the Debentures and the amount realized on the sale, exchange or redemption
of such Debentures. Assuming that the Company does not exercise its option to
defer payment of interest on the Debentures, a holder's adjusted tax basis in
the Debentures generally will be their initial purchase price. If the
Debentures are deemed to be issued with OID as a result of the Company's
deferral of any interest payment, a holder's adjusted tax basis in the
Debentures generally will be its initial purchase price increased by OID
previously includible in such holder's gross income to the date of disposition
and decreased by payments received on the Debentures since and including the
first day of the first Extension Period. Such gain or loss generally will be
capital gain or loss (except to the extent of any accrued interest required to
be included in gross income) and generally will be long-term capital gain or
loss if the Debentures have been held for more than one year.
Should the Company exercise its option to defer any payment of interest on
the Debentures, the Debentures may trade at a price that does not accurately
reflect the value of accrued but unpaid interest. In the event of such a
deferral, a holder who disposes of the Debentures between Record Dates for
payments of interest will be required to include in income as ordinary income
accrued but unpaid interest on the Debentures on an economic accrual basis to
the date of disposition and to add such amounts to its adjusted tax basis. To
the extent the selling price is less than the holder's adjusted tax basis, such
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income like the interest
(including OID) on the Debentures for United States federal income tax
purposes.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation that
would, among other things, generally deny corporate issuers a deduction for
interest on certain debt obligations issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and
House Ways and Means Committee Chairman Bill Archer issued the Joint Statement
indicating their intent that the Proposed Legislation, if adopted by either of
the tax-writing committees of Congress, would have an effective date that is no
earlier than the date of "appropriate Congressional action." Based upon both
the Proposed Legislation and the Joint Statement, it is expected that if the
Proposed Legislation were to be enacted, such legislation would not apply to
the Debentures. There can be no assurance, however, that the Proposed
Legislation, if enacted, or that any other legislation enacted after the date
hereof will not otherwise adversely affect the ability of the Company to deduct
the interest payable on the Debentures. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of Debentures--Redemption".
NON-UNITED STATES HOLDERS
For purposes of this discussion, a "Non-United States Holder" means any
person who, for United States federal income tax purposes, is not (a) a citizen
or resident of the United States, (b) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof or (c) a domestic trust or estate.
Subject to the discussion of backup withholding below, payments of principal
and interest (including OID) on a Debenture by the Company or its agent (in its
capacity as such) to a beneficial owner that is a Non-United States Holder will
not be subject to United States federal withholding tax; provided that (a) such
holder does not actually or constructively own 10% or more of the total
combined voting power of all classes
S-9
<PAGE>
of stock of the Company entitled to vote, (b) such holder is not a controlled
foreign corporation that is related to the Company actually or constructively
through stock ownership and (c) either (1) the beneficial owner certifies to
the Company or its agent, under penalties of perjury, that it is a Non-United
States Holder and provides its name and address on Form W-8 or its equivalent
or (2) a qualifying securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business and that holds the Debentures certifies to the Company or its
agent under penalties of perjury that such statement has been received from the
beneficial owner by it or by a qualifying intermediary and it furnishes to the
payor a copy thereof.
If a beneficial owner of a Debenture who is a Non-United States Holder is
engaged in a trade or business within the United States and interest (including
OID) on the Debenture is effectively connected with the conduct of such trade
or business, such beneficial owner will be subject to United States federal
income tax on such interest (including OID) at ordinary United States federal
income tax rates on a net basis (in which case the branch profits tax may also
apply if the holder is a foreign corporation).
Subject to the discussion of backup withholding below, any capital gain
realized upon a sale, exchange or redemption of the Debentures by a beneficial
owner who is a Non-United States Holder ordinarily will not be subject to
United States federal income tax unless (a) such gain is effectively connected
with a trade or business conducted by such Non-United States Holder within the
United States (in which case the branch profits tax may also apply if the
holder is a foreign corporation) or (b) in the case of a Non-United States
Holder who is an individual, such holder is present in the United States for a
period or periods aggregating 183 days or more in the taxable year of the sale,
exchange or redemption and certain other conditions are met.
Debentures beneficially owned by an individual who at the time of death is
neither a citizen nor a resident of the United States will not be subject to
United States federal estate tax as a result of such individual's death,
provided that (a) such holder did not at the time of death actually or
constructively own 10% or more of the combined voting power of all classes of
stock of the Company and (b) at the time of death the income from the
Debentures would not have been effectively connected with the conduct by such
individual of a trade or business within the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A holder of Debentures may be subject to backup withholding at a rate of 31%
with respect to interest (including OID) on, or the proceeds of a sale,
exchange or redemption of such Debentures as the case may be, unless (a) such
holder is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable backup withholding rules. Generally,
interest on the Debentures will be reported to holders on IRS Form 1099, which
forms should be mailed to holders of Debentures by January 31 following each
calendar year.
Information reporting on IRS Form 1099 and backup withholding at a rate of
31% will not apply to payments of principal and interest (including OID) made
by the Company or a paying agent to a Non-United States Holder of a Debenture
if the certification described in (c)(1) or (c)(2) in the second paragraph
under "Non-United States Holders" above is received. However, interest
(including OID) on a Debenture owned by a Non-United States Holder will be
required to be reported annually on IRS Form 1042S.
Payments of the proceeds from the sale by a Non-United States Holder of
Debentures made to or through a foreign office of a broker will not be subject
to information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States
federal income tax purposes or a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three-year period, information reporting may apply to such payments.
Payments of the proceeds of the sale of Debentures to or through the United
States office of a broker is subject
S-10
<PAGE>
to information reporting and backup withholding unless the holder certifies as
to its Non-United States Holder status or otherwise establishes an exemption
from information reporting and backup withholding.
GOVERNING LAW
The Indenture and the Debentures are governed by and construed and enforced
in accordance with, the internal laws of the State of Illinois.
THE TRUSTEE
First Union National Bank is the Trustee under the Indenture. First Union
National Bank, is also Trustee under Indentures dated as of March 1, 1987 and
October 19, 1996 relating to certain Senior Indebtedness of the Company.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the principal amount
of Debentures set forth opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................... $ 22,500,000
Goldman, Sachs & Co......................................... 21,875,000
J.P. Morgan Securities Inc.................................. 21,875,000
Morgan Stanley & Co. Incorporated........................... 21,875,000
PaineWebber Incorporated.................................... 21,875,000
Prudential Securities Incorporated.......................... 21,875,000
Salomon Brothers Inc........................................ 21,875,000
Smith Barney Inc............................................ 21,875,000
Bear, Stearns & Co. Inc..................................... 1,625,000
Alex. Brown & Sons Incorporated............................. 1,625,000
Cowen & Company............................................. 1,625,000
Dain Bosworth Incorporated.................................. 1,625,000
Dillon, Read & Co. Inc...................................... 1,625,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,625,000
A.G. Edwards & Sons, Inc.................................... 1,625,000
EVEREN Securities, Inc...................................... 1,625,000
Montgomery Securities....................................... 1,625,000
The Ohio Company............................................ 1,625,000
Oppenheimer & Co., Inc...................................... 1,625,000
Piper Jaffray Inc........................................... 1,625,000
Raymond James & Associates, Inc............................. 1,625,000
Tucker Anthony Incorporated................................. 1,625,000
Wheat, First Securities, Inc................................ 1,625,000
------------
Total.................................................. $200,000,000
============
</TABLE>
S-11
<PAGE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Debentures
offered hereby if any Debentures are purchased.
The Underwriters propose initially to offer the Debentures to the public at
the public offering price set forth on the cover page and to certain dealers at
such price less a concession not in excess of 2% of the principal amount of
Debentures. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of 1.6% of the principal amount of Debentures to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Debentures are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Debentures but are not obligated to do so and may
discontinue any market making at any time without notice. Application will be
made to list the Debentures on the New York Stock Exchange. There can be no
assurance of a secondary market for any Debenture.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended, or contribute to payments which the
Underwriters may be required to make in respect thereof.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and may in the future engage,
in commercial and investment banking transactions with the Company.
LEGAL OPINIONS
The legality of the Debentures is being passed upon for the Company by Gloria
Santona, Vice President, Associate General Counsel and Secretary of the
Company, and for the Underwriters by Gardner, Carton & Douglas, Quaker Tower,
321 North Clark Street, Chicago, Illinois 60610. Mr. Paul J. Schaffhausen,
Assistant Vice President and Federal Tax Counsel to the Company, has passed
upon certain United States federal income tax considerations with respect to
the Debentures. Ms. Santona and Mr. Schaffhausen are full-time employees of the
Company and own shares of the Company's Common Stock directly and as
participants in various employee benefit plans. Ms. Santona and Mr.
Schaffhausen also hold options to purchase shares of the Company's Common
Stock.
S-12
<PAGE>
PROSPECTUS
MCDONALD'S CORPORATION
DEBT SECURITIES
McDonald's Corporation (the "Company") intends to issue from time to time in
one or more series its debt securities ("Debt Securities") which may be either
senior debt securities (the "Senior Debt Securities") or subordinated debt
securities (the "Subordinated Debt Securities") with an aggregate initial
public offering price or purchase price of up to $1,200,000,000, 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, or as one or more global securities in registered form.
The specific designation and classification as Senior Debt Securities or
Subordinated Debt Securities of the Company, 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 (a "Prospectus Supplement").
The Debt Securities will be unsecured. Unless otherwise specified in a
Prospectus Supplement, the Senior Debt Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities will be subordinated to all Senior Indebtedness of
the Company (as hereinafter defined).
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 SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPEC-
TUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is October 18, 1996.
<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 (herein, together with all amendments and exhibits, referred to as 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 number (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, 1995, as amended by the Company's Form 10-K/A Amendment
No. 1 dated June 27, 1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, and June 30, 1996; and
(c) The Company's Current Reports on Form 8-K dated January 25, April 22,
July 18, 1996 and October 7, 1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities shall be
deemed to be incorporated herein by reference and made a part of this
Prospectus from the respective dates 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 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, (630) 623-7428.
----------------
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 arrangements,
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, Quarter Pounder with
Cheese and Arch Deluxe sandwiches, the Fish Filet Deluxe, Grilled Chicken
Deluxe and Crispy Chicken Deluxe sandwiches, french fries, Chicken McNuggets,
salads, milk shakes, sundaes and cones, 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 June 30, 1996, there were 17,420
traditional restaurants worldwide, of which 10,524 were located in the United
States and 6,896 in 93 other countries. An additional 542 traditional
restaurants were under construction at June 30, 1996, including 389 outside the
United States.
At June 30, 1996, 66% of McDonald's traditional restaurants were operated by
independent franchisees, 21% were operated by the Company and its subsidiaries
and 13% 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: (630) 623-3000.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, which may include refinancing of debt, capital
expenditures such as the acquisition and development of McDonald's restaurants
and the purchase of common stock of the Company under the Company's ongoing
share repurchase program. Specific allocations of the proceeds for such
purposes have not been made at this time.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------- ------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges......... 5.12 5.03 5.20 5.26 4.86 3.96 3.53
</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, fixed charges related to redeemable preferred stock and such
portion of rental charges (after reduction for related sublease income)
considered to be representative of the interest component in the particular
case.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may not apply to the
Debt Securities so offered will be described in the Prospectus Supplement
relating to such Debt Securities.
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and First Union National
Bank, as Trustee (the "Trustee"). The Subordinated Debt Securities are to be
issued under a separate Indenture (the "Subordinated Indenture") to be entered
into between the Company and the Trustee. The Senior Indenture and the
Subordinated Indenture are sometimes collectively referred to as the
"Indentures." Copies of the Senior Indenture and the Subordinated Indenture are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. The following summaries of certain provisions of the Senior Debt
Securities, Subordinated Debt Securities and Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures applicable to a particular series of
Debt Securities, including the definitions therein of certain terms. Wherever
particular Sections, Articles or defined terms of the Indentures are referred
to, such Sections, Articles or defined terms are incorporated herein by
reference, and the statements made herein are qualified in their entirety by
such reference. Article and Section references used herein are references to
the applicable Indenture. Except as otherwise indicated, the terms of the
Senior Indenture and the Subordinated Indenture are identical. Capitalized
terms not otherwise defined herein shall have the meaning given to them in the
Indentures to which they relate. 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
Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and each Indenture provides that Debt Securities
may be issued thereunder from time to time in one or more series. The Debt
Securities will be unsecured. Unless otherwise specified in the Prospectus
Supplement, the Senior Debt Securities when issued will be unsubordinated
obligations of the Company and will rank equally and ratably 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 Senior Debt Securities
remain unsecured. The Subordinated Debt Securities when issued will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness (as defined below) of the Company, as described under
"Subordination of Subordinated Debt Securities" and in the Prospectus
Supplement applicable to an offering of Subordinated Debt Securities.
4
<PAGE>
Reference is made to the Prospectus Supplement related to the series of Debt
Securities being offered thereby (the "Offered Debt Securities"), which sets
forth whether the Offered Debt Securities shall be Senior Debt Securities or
Subordinated Debt Securities, and further sets forth the following terms, where
applicable: (i) the title of the Offered Debt Securities; (ii) the limit, if
any, upon the aggregate principal amount of the Offered Debt Securities; (iii)
the date or dates on which the principal and premium, if any, of the Offered
Debt Securities is payable; (iv) the rate or rates or the method of
determination thereof, at which the Offered 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, the record dates for
the interest payable on such interest payment dates; (v) whether the Offered
Debt Securities are to be issued as Original Issue Discount Securities (as
defined below) and the amount of discount with which the Offered Debt
Securities will be issued; (vi) the place or places where the principal of, and
premium, if any, and any interest on the Offered 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 the Offered 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, purchase or repay the Offered Debt Securities pursuant to any sinking
fund or analogous provisions or at the option of a Holder and the price or
prices at which and the period or periods within which and the terms and
conditions upon which the Offered 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 the Offered Debt Securities will be issuable; (x) if other than the
principal amount, the portion of the principal amount of the Offered Debt
Securities which will be payable upon declaration of acceleration of the
maturity thereof pursuant to the Indenture; (xi) any non-application of,
addition to, or change in any of the Events of Default provided for with
respect to the Offered Debt Securities and remedies with respect thereto; (xii)
if the Offered Debt Securities are non-interest bearing, the "stated
intervals"; (xiii) the currency or currencies in which payments on the Offered
Debt Securities are payable; and (xiv) any other terms of the Offered Debt
Securities not inconsistent with the provisions of the applicable Indenture.
(Section 2.02)
If the principal of (and premium, if any) or any interest on the Offered Debt
Securities is payable in a foreign or composite currency, the restrictions,
elections, federal income tax consequences, specific terms and other
information with respect to the Offered Debt Securities and such currency will
be described in the Prospectus Supplement relating thereto.
One or more series of Offered 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"). One or more series of Offered Debt Securities may be variable
rate debt securities that may be exchangeable for fixed rate debt securities.
Federal income tax consequences and other special considerations applicable to
any such series will be described in the Prospectus Supplement relating
thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on the Offered Debt
Securities will be payable at the offices of the Trustee in New York, New York
and Charlotte, North Carolina; provided, however, that payment of interest on
Offered Debt Securities may be made at the option of the Company by check
mailed to the Holders thereof. (Sections 2.02, 4.01 and 4.02) Unless otherwise
provided in the applicable Prospectus Supplement, Offered Debt 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 applicable
Indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. (Section 2.06)
All moneys paid by the Company to the Trustee or a paying agent for the
payment of principal of (and premium, if any) or any interest on any Offered
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 Holder of such Offered Debt Security will
thereafter look only to the Company for payment thereof. (Section 12.05)
5
<PAGE>
GLOBAL SECURITIES
If any Offered Debt Securities are issuable in temporary or permanent global
form, the applicable Prospectus Supplement will describe the circumstances, if
any, under which beneficial owners of interests in any such permanent global
Debt Security may exchange such interests for definitive Offered Debt
Securities of such series and of like tenor and principal amount in any
authorized form and denomination. Principal of and premium and interest on a
permanent global Debt Security will be payable in the manner described in the
applicable Prospectus Supplement. (Section 2.01)
LIMITATION ON LIENS COVENANT IN THE SENIOR INDENTURE
The Senior Indenture contains the covenant described below which is
applicable to the Company with respect to any and all series of Senior Debt
Securities issued thereunder unless otherwise specified in the applicable
Prospectus Supplement. Specific covenants, if any, peculiar to a particular
series of Senior Debt Securities to be offered hereby will be described in the
Prospectus Supplement relating thereto.
Section 4.06 of the Senior Indenture requires that the Company will not, nor
will it permit any Restricted Subsidiary (as hereinafter defined) to issue or
assume any debt for money borrowed (hereinafter in this and the following three
paragraphs referred to as "Debt") if such Debt is secured by a mortgage,
security interest, pledge, lien or other encumbrance (mortgages, security
interests, pledges, liens and other encumbrances being hereinafter called
"mortgage" or "mortgages") upon any Principal Property (as hereinafter defined)
or upon any shares of stock or indebtedness of any Restricted Subsidiary
(whether such Principal Property, shares of stock or indebtedness are now owned
or hereafter acquired) without in any such case effectively providing that the
Senior Debt Securities, and at the Company's option any other indebtedness of
the Company or any Restricted Subsidiary ranking equally with the Senior Debt
Securities, shall be secured equally and ratably with such Debt. The foregoing
restrictions shall not apply to Debt secured by (i) mortgages on property,
shares of stock or indebtedness of any corporation existing at the time such
corporation becomes a Restricted Subsidiary, (ii) mortgages on property
existing at the time of acquisition thereof and certain purchase money
mortgages, (iii) mortgages securing Debt of a Restricted Subsidiary owing to
the Company or another Restricted Subsidiary, (iv) mortgages on property of a
corporation existing at the time such corporation is merged into or
consolidated with the Company or a Restricted Subsidiary or at the time of a
sale, lease or other disposition of the properties of a corporation as an
entirety or substantially as an entirety to the Company or a Restricted
Subsidiary, (v) mortgages in favor of any country or any political subdivision
of any country, or any instrumentality thereof, to secure certain payments
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or any part of the purchase price or the cost of
construction of the property subject to such mortgages, or (vi) any extension,
renewal or replacement (or successive extensions, renewals or replacements), in
whole or in part, of any mortgage referred to in the foregoing clauses (i) to
(v), inclusively. Notwithstanding the above, the Company and one or more
Restricted Subsidiaries may, without securing the Senior Debt Securities, issue
or assume secured Debt which would otherwise be subject to the foregoing
restrictions, provided that after giving effect thereto the aggregate of such
secured Debt then outstanding (not including secured Debt permitted under the
foregoing exceptions) at such time does not exceed 20% of the shareholders'
equity of the Company and its consolidated subsidiaries as of the end of the
preceding fiscal year. The transfer of a Principal Property to a subsidiary or
any third party shall not be restricted. (Section 4.06)
The term "Principal Property" means all real property owned by the Company or
any Restricted Subsidiary which is located within the continental United States
of America and, in the opinion of the Board of Directors of the Company, is of
material importance to the total business conducted by the Company and its
consolidated affiliates as an entity. (Section 1.01)
The term "Subsidiary" means any corporation or other Person of which the
Company, or the Company and one or more Subsidiaries, or any one or more
Subsidiaries, directly or indirectly owns voting securities or other similar
equity interests entitling the owners thereof to elect a majority of the
directors or individuals holding similar positions in other Persons, either at
all times or so long as there is no default or contingency
6
<PAGE>
which permits the owners of any other class or classes of securities or other
interests to vote for the election of one or more directors or individuals
holding similar positions in other Persons, but shall not include any
corporation or other Person with respect to which the Company or any other
Subsidiary has become entitled to elect a majority of the directors or
individuals holding similar positions in other Persons solely due to a default
or other contingency which is temporary in character and has had a continuous
existence of less than one year. (Section 1.01)
The term "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof. (Section 1.01)
The term "Restricted Subsidiary" means any Subsidiary (i) substantially all
the property of which is located within the continental United States of
America, (ii) which owns Principal Property and (iii) in which the Company's
investment, direct or indirect and whether in the form of equity, debt,
advances or otherwise, is in excess of U.S. $1,000,000,000 as shown on the
books of the Company as of the end of the fiscal year immediately preceding the
date of determination; provided, however, that "Restricted Subsidiary" shall
not include any Subsidiary primarily engaged in financing activities, primarily
engaged in the leasing of real property to persons other than the Company and
its Subsidiaries, or which is characterized by the Company as a temporary
investment. (Section 1.01)
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent and in the manner set
forth in the Subordinated Indenture, be subordinate in right of payment to all
indebtedness for borrowed money of the Company, whether now outstanding or
hereafter incurred, which is not by its terms subordinate to other indebtedness
of the Company; provided, however, that Senior Indebtedness shall not include
amounts owed to trade creditors in the ordinary course of business (the "Senior
Indebtedness"). As of June 30, 1996, the aggregate amount of the outstanding
Senior Indebtedness of the Company was approximately $4.1 billion.
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or its property, and, except as
otherwise provided in the Subordinated Indenture, in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of the
Company, whether or not involving insolvency or bankruptcy proceedings, all
principal, premium, if any, and interest on the Senior Indebtedness will be
paid in full before any payment is made by the Company on the Subordinated Debt
Securities. In the event that pursuant to the terms of the Subordinated
Indenture any Subordinated Debt Security of any series is declared due and
payable because of the occurrence of an Event of Default, as provided in the
Subordinated Indenture, and the previous sentence is not applicable, the
Holders of the Subordinated Debt Securities of such series shall be entitled to
payment from the Company only after the Senior Indebtedness outstanding at the
time such Subordinated Debt Security so becomes due and payable because of such
Event of Default shall first have been paid in full or such payment shall have
been provided for. (Section 15.01.)
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Indebtedness, which may include indebtedness that is senior
to the Subordinated Debt Securities, but subordinate to other obligations of
the Company. The Senior Debt Securities constitute Senior Indebtedness under
the Subordinated Indenture.
The Prospectus Supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
EVENTS OF DEFAULT
The Indentures define 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 or premium, if any, on such series when due (and continuance of such default
for a period of 10 days in the case of Subordinated Debt Securities); (c)
default in the payment of any sinking fund
7
<PAGE>
payment when due (and continuance of such default for a period of 10 days in
the case of Subordinated Debt Securities); (d) default for 60 days, after
appropriate notice, in performance of any other covenants in the Indentures
(other than the Section 4.06 covenant in the Senior Indenture and any other
covenant included in the Indentures 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; (e) certain events of
bankruptcy, insolvency or reorganization; or (f) default in the performance of
a particular covenant applicable to that series after appropriate notice and
opportunity to cure such default, if any. The Senior Indenture defines a
default for 120 days after appropriate notice in the performance of the Section
4.06 covenant as an additional Event of Default with respect to the Senior Debt
Securities. An Event of Default with respect to a particular series of Debt
Securities issued under either of the Indentures 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 clauses (a),
(b), (c) or (f) set forth above with respect to the Indentures 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 clauses (d) or
(e) set forth above with respect to the Indentures or with respect to Section
4.06 of the Senior Indenture 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 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 of, or premium, if any, or interest on such
Debt Securities. (Section 6.01; Section 6.07)
Each Indenture requires the Company to file with the Trustee an officers'
certificate annually as to compliance with all conditions and covenants under
the Indenture. (Section 4.05) Subject to the provisions of the Indentures
relating to the duties of the Trustee, each Indenture provides that the Trustee
shall be under no obligation to exercise any of its rights or powers under the
applicable 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 and 7.01) Subject to such provisions for
indemnification and certain other rights of the Trustee, each Indenture
provides that the Holders of a majority (voting as one class) in principal
amount of the Outstanding Debt Securities of each 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 6.07)
MODIFICATION OF THE INDENTURES
Each Indenture provides that the Company and the Trustee may enter into
supplemental indentures without the consent of the Holders of the Debt
Securities to (a) evidence the assumption by a successor corporation of the
obligations of the Company, (b) add covenants for the protection of the Holders
of the Debt Securities, (c) add or change any of the provisions of the
Indenture to permit or facilitate the issuance of Debt Securities of any series
in bearer or coupon form, (d) cure any ambiguity or correct any inconsistency
in such Indenture, (e) establish the form or terms of Debt Securities of any
series as permitted by the terms of the Indenture and (f) evidence the
acceptance of appointment by a successor trustee. (Section 10.01)
Each Indenture contains provisions permitting the Company and the Trustee
thereunder, with the consent of the Holders of not less than 66 2/3% in
aggregate principal amount of the Debt Securities of each series affected by
such supplemental indenture, to execute supplemental indentures adding any
provisions to or changing in any manner or eliminating any of the provisions of
the applicable Indenture or any
8
<PAGE>
supplemental indenture or modifying in any manner the rights of the Holders of
Debt Securities of each such series, provided that no such supplemental
indenture shall, among other things (i) extend the fixed maturity of any Debt
Security, or reduce the principal amount thereof (including in the case of a
discounted Debt Security the amount payable upon acceleration of the maturity
thereof), reduce the rate or extend the time of payment of interest thereon, or
make the principal of, premium, if any, or interest, if any, thereon payable in
any coin or currency other than that provided in the Debt Security, without the
consent of the Holder of each Debt Security so affected or (ii) reduce the
aforesaid percentage of such Debt Securities of any series, the consent of the
Holders of which is required for any supplemental indenture, without the
consent of the Holder of each such Debt Security so affected. (Section 10.02)
DISCHARGE OF INDENTURES
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 monies for payment in trust) or (b) need not comply with certain
restrictive covenants of the Indentures (including that described under
"Limitation on Liens Covenant in the Senior Indenture") 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, and interest, if any, and
premium, if any, 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
Indentures 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 Indentures 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. The Trustee is also trustee under other indentures of the Company
under which certain of the Company's senior and subordinated Debt Securities
have been issued.
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, the purchase
9
<PAGE>
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 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 Gloria Santona, Vice President, Associate General Counsel and
Secretary of the Company. Ms. Santona is a full-time employee of the Company
and owns shares of the Company's Common Stock directly and as a participant in
various employee benefit plans. Ms. Santona also holds options to purchase
shares of the Company's Common Stock.
10
<PAGE>
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, 1995 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.
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NO DEALER, SALESPERSON, OR ANY PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR
AGENT. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS NOT AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors............................................................... S-2
Use of Proceeds............................................................ S-3
Recent Results of Operations of McDonald's Corporation..................... S-4
Description of Debentures.................................................. S-4
Certain United States Federal Income
Tax Considerations........................................................ S-8
Underwriting............................................................... S-11
Legal Opinions............................................................. S-12
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......................................... 4
Description of Debt Securities............................................. 4
Plan of Distribution....................................................... 9
Legal Matters.............................................................. 10
Experts.................................................................... 11
</TABLE>
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$200,000,000
MCDONALD'S
CORPORATION
LOGO
7 1/2% SUBORDINATED DEFERRABLE
INTEREST DEBENTURES DUE 2036
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON BROTHERS INC
SMITH BARNEY INC.
OCTOBER 31, 1996
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