<PAGE>
Filed Pursuant to Rule 424 B 2
File Number 333-14141
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 18, 1996)
$150,000,000
McDonald's Corporation
7.31% SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2027
---------------
Interest payable March 15 and September 15
---------------
THE 7.31% SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE 2027 (THE
"DEBENTURES") WILL MATURE ON SEPTEMBER 15, 2027. INTEREST ON THE DEBENTURES
WILL ACCRUE FROM THE DATE OF ORIGINAL ISSUANCE AND IS PAYABLE SEMI-
ANNUALLY IN ARREARS ON MARCH 15 AND SEPTEMBER 15, COMMENCING MARCH 15,
1998. THE DEBENTURES WILL BE REDEEMABLE AT THE OPTION OF MCDONALD'S
CORPORATION (THE "COMPANY"), (I) IN WHOLE OR IN PART, ON OR AFTER
SEPTEMBER 15, 2007, AT 100% OF THE PRINCIPAL AMOUNT REDEEMED
TOGETHER WITH ACCRUED INTEREST TO THE REDEMPTION DATE, OR (II) IN
WHOLE BUT NOT IN PART, AT ANY TIME UPON THE OCCURRENCE OF A TAX
EVENT (AS HEREINAFTER DEFINED) AT THE REDEMPTION PRICE SET
FORTH HEREIN. THE DEBENTURES WILL BE ISSUED ONLY IN
DENOMINATIONS OF $1,000 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.
---------------
PRICE 100% AND ACCRUED INTEREST, IF ANY
---------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS(2) COMPANY(1)(3)
------------ -------------- -------------
<S> <C> <C> <C>
Per Debenture........................ 100.000% .875% 99.125%
Total................................ $150,000,000 $1,312,500 $148,687,500
</TABLE>
- -------
(1)Plus accrued interest, if any, from September 24, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deduction of expenses payable by the Company estimated at
$175,000.
---------------
The Debentures are offered, subject to prior sale, when, as and if accepted
by the Underwriters and subject to approval of certain legal matters by
Gardner, Carton & Douglas, counsel for the Underwriters. It is expected that
delivery of the Debentures will be made on or about September 24, 1997 in
book-entry form only through the facilities of The Depository Trust Company
against payment therefor in immediately available funds.
---------------
MORGAN STANLEY DEAN WITTER
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
September 19, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE DEBENTURES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
----------------
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.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors........................ S-2
Use of Proceeds..................... S-4
Recent Results of Operations of
McDonald's Corporation............. S-4
Description of Debentures........... S-4
Certain United States Federal Income
Tax Considerations................. S-9
Underwriting........................ S-12
Legal Opinions...................... S-13
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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.................................................. 10
Legal Matters......................................................... 11
Experts............................................................... 11
</TABLE>
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 June 30, 1997, outstanding Senior Indebtedness of the Company aggregated
approximately $4.0 billion. There are no terms of the Debentures or the
Subordinated 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 Subordinated
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
S-2
<PAGE>
self-regulatory organization) and by mail to all holders of the Debentures at
any time during the term of the Debentures, to extend any interest payment
period from time to time for a period not exceeding 10 consecutive semi-annual
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 (as hereinafter
defined) 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 semi-annually 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 10
consecutive semi-annual 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 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 disposes of its Debentures prior to the Record Date 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".
FEDERAL TAX CHANGES
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 August 5, 1997, President
Clinton signed into law the Taxpayer Relief Act of 1997 (the "Act"), which did
not contain the Proposed Legislation. However, there can be no assurance that
future tax law changes will not 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. Upon the occurrence of a Tax Event,
the Debentures may be subject to redemption. See "Description of Debentures--
Redemption" and "Certain United States Federal Income Tax Considerations--
Federal Tax Changes".
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
S-3
<PAGE>
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.
RECENT RESULTS OF OPERATIONS OF MCDONALD'S CORPORATION
The Company reported record net income, total revenues and systemwide sales
for the six months ended June 30, 1997. Net income and net income per common
share increased 8% and 10%, respectively, while both systemwide sales and
total revenues increased 7%, compared in each case to results for the six
months ended June 30, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED)
-------------------
1997 1996
--------- ---------
(U.S. DOLLARS IN
MILLIONS, EXCEPT
PER COMMON
SHARE AMOUNTS)
<S> <C> <C>
Systemwide sales...................................... $16,308.2 $15,241.5
Total revenues........................................ 5,450.2 5,091.1
Net income............................................ 782.7 722.0
Net income per common share........................... 1.11 1.01
</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. 3, to be dated as of September 24, 1997, relating
to the Debentures (collectively, the "Subordinated Indenture") do not purport
to be complete, use certain terms defined in the Subordinated Indenture, and
are qualified in their entirety by express reference to the provisions of the
Subordinated Indenture.
S-4
<PAGE>
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 $1,000 and integral multiples thereof.
The Subordinated 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
$150,000,000.
The Debentures will mature on September 15, 2027, 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 semi-
annually, in arrears, on each March 15 and September 15, commencing March 15,
1998 (each, an "Interest Payment Date"). 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 1 or September 1 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.
REDEMPTION
The Debentures may, at the option of the Company, be redeemed (i) 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 September 15, 2007, 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 or (ii) in whole
but not in part, on at least 30 days' and not more than 60 days' notice at any
time upon the occurrence of a Tax Event, at a redemption price equal to the
Make-Whole Amount for the Debentures together with accrued but unpaid interest
to the date of redemption.
The "Make-Whole Amount" will be equal to the greater of (i) 100% of the
principal amount of the Debentures and (ii) the sum of the present value of
the principal amount of the Debentures discounted from September 15, 2007 to
the date of redemption, together with the present values of scheduled payments
of interest for the period from the date of redemption to September 15, 2007
(the "Remaining Life"), discounted from September 15, 2007 to the date of
redemption. Discounting in each case shall be on a semi-annual basis (assuming
a 360-day year consisting of 30-day months) at the Treasury Rate plus 62.5
basis points.
"Treasury Rate", as of any date it is calculated, means (i) the yield, under
the heading which represents the average for the week immediately prior to the
calculation date, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication which is published weekly
by the Federal Reserve and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities", for the maturity corresponding to the
Remaining Life (provided that if all such maturities are either more than
three months greater than or more than three months less than the Remaining
Life, yields for the two published maturities most closely corresponding to
the Remaining Life shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (ii) if such release (or any successor
release) is not published during the week preceding the calculation date or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price for such date of
redemption.
S-5
<PAGE>
"Comparable Treasury Issue" means with respect to any date of redemption the
United States Treasury security selected by a Reference Treasury Dealer as
having a maturity comparable to the Remaining Life that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of maturity comparable to the
Remaining Life. If no United States Treasury security has a maturity which is
within a period from three months before to three months after September 15,
2007, the two most closely corresponding United States Treasury securities
shall be used as the Comparable Treasury Issue, and the Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the nearest
month, using such securities.
"Reference Treasury Dealer" means a primary U.S. Government securities
dealer in New York City selected by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means (i) the average of five Reference Treasury
Dealer Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (ii) if the Trustee
obtains fewer than five such Reference Treasury Dealer Quotations, the average
of all such quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any date of redemption, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New
York City time, on the third business day preceding such 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 and by mail to all holders of the Debentures, 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 semi-annual periods, not to exceed 10 consecutive semi-annual
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 (except for dividends or
distributions in shares of its capital stock or rights to acquire shares of
its capital stock), or repurchase, redeem or otherwise acquire any of its
capital stock (except by conversion into or exchange for shares of its capital
stock or for a redemption, purchase or other acquisition of shares of its
capital stock made for the purpose of any employee incentive plan or benefit
plan of the Company or any of its affiliates). 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 semi-annually, 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
S-6
<PAGE>
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 10 consecutive semi-
annual 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 semi-annual 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.
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 1 or September 1 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 Subordinated 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 Subordinated Indenture.
S-7
<PAGE>
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 or is no longer eligible 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 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 $1,000 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.
S-8
<PAGE>
SUBORDINATION
The Debentures are subordinated in right of payment, to the extent and in
the manner set forth in the Subordinated 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 June 30, 1997, the aggregate Senior Indebtedness of the
Company was approximately $4.0 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 Debentures. In the event that pursuant to the terms of the
Subordinated Indenture any Debenture 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
Debentures 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.
The Debentures will be effectively subordinated to all obligations of the
Company's subsidiaries. There is no restriction under the Subordinated
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. 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
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".
S-9
<PAGE>
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 10 consecutive
semi-annual 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 (except for dividends or distributions in
shares of its capital stock or rights to acquire shares of its capital stock),
or, with certain exceptions, 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 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 12 months. If the
Debentures have been held for more than 18 months, any such gain or loss will
be taken into account in determining a holder's adjusted net capital gain,
which is subject to a reduced maximum rate of federal income tax under the
Act.
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.
FEDERAL TAX CHANGES
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
August 5, 1997, President Clinton signed into law the Act which did not
contain the Proposed
S-10
<PAGE>
Legislation. However, there can be no assurance that future tax law changes
will not 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. Upon the occurrence of a Tax Event, the Debentures may be
subject to redemption. 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 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
S-11
<PAGE>
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 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 Subordinated 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 Subordinated 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
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amounts of Debentures set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 30,000,000
J.P. Morgan Securities Inc.................................. 30,000,000
Goldman, Sachs & Co......................................... 30,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................... 30,000,000
Salomon Brothers Inc........................................ 30,000,000
------------
Total.................................................. $150,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Debentures are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are committed to take and pay for all the
Debentures if any are taken.
S-12
<PAGE>
The Underwriters propose initially to offer part of the Debentures directly
to the public at the public offering price set forth on the cover page hereof
and part to certain dealers at a price that represents a concession not in
excess of .50% of the principal amount of the Debentures. Any Underwriter may
allow, and such dealers may reallow, a concession not in excess of .25% of the
principal amount of the Debentures to certain other dealers. After the initial
offering of the Debentures, the offering price and other selling terms may from
time to time be varied by the Underwriters.
In order to facilitate the offering of the Debentures, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Debentures. Specifically, the Underwriters may overallot in connection
with the offering, creating a short position in the Debentures for their own
account. In addition, to cover overallotments or to stabilize the price of the
Debentures, the Underwriters may bid for, and purchase, the Debentures in the
open market. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the
Debentures in the offering, if the syndicate repurchases previously distributed
Debentures in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Debentures above independent market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
Application will be made to list the Debentures on the New York Stock
Exchange. The Company has been advised by the Underwriters that they currently
intend to make a market in the Debentures as permitted by applicable laws and
regulations. The Underwriters are not obligated, however, to make a market in
the Debentures and any such market making may be discontinued at any time at
the sole discretion of the Underwriters. Accordingly, no assurance can be given
as to the liquidity of, or trading markets for, the Debentures.
LEGAL OPINIONS
The legality of the Debentures is being passed upon for the Company by Gloria
Santona, Vice President, Deputy General Counsel and Secretary of the Company,
and for the Underwriters by Gardner, Carton & Douglas, Quaker Tower, 321 North
Clark Street, Chicago, Illinois 60610. 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.
S-13
<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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION 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.
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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)
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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 which
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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.
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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 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)
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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 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.
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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 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.
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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.
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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