<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-14141
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 18, 1996)
$300,000,000
McDonald's Corporation
6% RESET PUT SECURITIES (REPSSM) DUE 2012*
----------------
Interest payable June 23 and December 23
----------------
MCDONALD'S CORPORATION (THE "COMPANY") WILL ISSUE THE 6% RESET PUT SECURITIES
DUE 2012 (THE "REPSSM"). THE REPS WILL BE SUBJECT TO MANDATORY REDEMPTION
FROM THE EXISTING HOLDERS ON JUNE 23, 2002 THROUGH EITHER (I) THE EXERCISE
OF THE CALL OPTION (AS DEFINED HEREIN) BY THE CALLHOLDER (AS DEFINED
HEREIN) OR (II) IN THE EVENT THE CALLHOLDER DOES NOT EXERCISE THE CALL
OPTION OR FAILS TO PURCHASE THE REPS PURSUANT TO ITS EXERCISE OF THE
CALL OPTION, THE AUTOMATIC EXERCISE OF THE MANDATORY PUT (AS DEFINED
HEREIN) BY FIRST UNION NATIONAL BANK, AS TRUSTEE (THE "TRUSTEE"), ON
BEHALF OF THE HOLDERS. THE "CALLHOLDER" WILL BE MORGAN STANLEY & CO.
INTERNATIONAL LIMITED. IF THE CALLHOLDER, OR ITS SUCCESSOR OR
ASSIGN PURCHASES THE REPS PURSUANT TO THE CALL OPTION, THE REPS
WILL BE PURCHASED BY THE CALLHOLDER FROM THE HOLDERS THEREOF ON
JUNE 23, 2002 (THE "COUPON RESET DATE") AT 100% OF THE
PRINCIPAL AMOUNT THEREOF AND THE INTEREST RATE ON THE REPS
WILL BE RESET (THE "COUPON RESET RATE") BY THE CALCULATION
AGENT (AS DEFINED HEREIN) EFFECTIVE ON THE COUPON RESET
DATE PURSUANT TO THE COUPON RESET PROCESS (AS DEFINED
HEREIN). IF THE CALLHOLDER FOR ANY REASON FAILS TO
PURCHASE THE REPS ON THE COUPON RESET DATE, THE COMPANY
WILL BE REQUIRED TO REPURCHASE THE PRINCIPAL AMOUNT OF
THE REPS FROM THE HOLDERS THEREOF ON THE COUPON RESET
DATE AT 100% OF THE PRINCIPAL AMOUNT THEREOF. SEE
"DESCRIPTION OF THE REPS--CALL OPTION; MANDATORY
PUT". OWNERSHIP OF THE REPS WILL BE MAINTAINED IN
BOOK-ENTRY FORM BY OR THROUGH THE DEPOSITORY
TRUST COMPANY ("DTC"). INTERESTS IN THE REPS
WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL
BE EFFECTED ONLY THROUGH, THE RECORDS
MAINTAINED BY DTC AND ITS PARTICIPANTS. THE
COMPANY DOES NOT INTEND TO APPLY FOR
LISTING OF ANY OF THE REPS ON ANY
NATIONAL SECURITIES EXCHANGE.
----------------
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 THE DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)(4)
------------ --------------- -----------------
<S> <C> <C> <C>
Per REPS......................... 100.000% .450% 102.465%
Total............................ $300,000,000 $1,350,000 $307,395,000
</TABLE>
- --------
(1) Plus accrued interest, if any, from June 23, 1998.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $175,000.
(4) Represents consideration for the REPS, which includes consideration for
the Call Option.
----------------
* REPS is a service mark of Morgan Stanley Dean Witter & Co.
----------------
The REPS are offered, subject to prior sale, when, as and if issued to and
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 REPS will be made in book-entry form through the
facilities of DTC on or about June 23, 1998, against payment therefor in
immediately available funds.
----------------
MORGAN STANLEY DEAN WITTER
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
June 18, 1998
<PAGE>
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 ARE 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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE REPS.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
OF THE REPS, AND MAY BID FOR, AND PURCHASE THE REPS IN THE OPEN MARKET. FOR A
DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Use of Proceeds............................................................ S-3
Recent Results of Operations of McDonald's Corporation..................... S-3
Description of the REPS.................................................... S-3
Certain United States Federal Income Tax Consequences...................... S-8
Underwriting............................................................... S-10
Legal Opinions............................................................. S-11
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
McDonald's Corporation..................................................... 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges......................................... 4
Description of Debt Securities............................................. 4
Plan of Distribution....................................................... 10
Legal Matters.............................................................. 11
Experts.................................................................... 11
</TABLE>
S-2
<PAGE>
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the REPS for
general corporate purposes.
RECENT RESULTS OF OPERATIONS OF MCDONALD'S CORPORATION
The Company reported record results for the three months ended March 31,
1998. Net income and net income per diluted common share increased 5% and 8%,
respectively, while systemwide sales and total revenues increased 4% and 7%,
respectively, compared in each case to results for the three months ended
March 31, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED)
---------------------------
1998 1997
------------- -------------
(U.S. DOLLARS IN MILLIONS,
EXCEPT PER COMMON
SHARE AMOUNTS)
<S> <C> <C>
Systemwide sales.............................. $8,169.7 $7,833.1
Total revenues................................ 2,804.9 2,617.6
Net income.................................... 362.2 344.5
Net income per diluted common share........... .52 .48
</TABLE>
DESCRIPTION OF THE REPS
GENERAL
The following description of the particular terms of the REPS offered hereby
supplements the description of the general terms and provisions of the Senior
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
Senior Debt Securities, dated as of October 19, 1996, between the Company and
First Union National Bank, as Trustee (the "Trustee"), and the Supplemental
Indenture No. 3, to be dated as of June 23, 1998, relating to the REPS
(collectively, the "Senior Indenture") do not purport to be complete, use
certain terms defined in the Senior Indenture, and are qualified in their
entirety by express reference to the provisions of the Senior Indenture.
PRINCIPAL AMOUNT, INTEREST AND MATURITY
The REPS will be limited in aggregate principal amount to $300,000,000 and
will be issued as a series of Debt Securities under the Senior Indenture.
The REPS will bear interest at the rate of 6% from June 23, 1998 to but
excluding June 23, 2002 (the "Coupon Reset Date"). Interest on the REPS is
payable semi-annually on June 23 and December 23 of each year, commencing
December 23, 1998 (each an "Interest Payment Date"). Interest will be
calculated based on a 360-day year consisting of twelve 30-day months. On each
Interest Payment Date, interest shall be payable to the persons in whose names
the REPS are registered at the close of business on the relevant Record Dates,
which will be June 15 or December 15 next preceeding the related Interest
Payment Date (each, a "Record Date"). "Business Day" means any day other than
a Saturday, a Sunday, a legal holiday or a day on which banking institutions
in the cities of New York or Chicago are authorized or obligated by law,
executive order or government decree to be closed. If Morgan Stanley & Co.
International Limited, as Callholder (together with its successor or assign,
the "Callholder") elects to purchase the REPS pursuant to the Call Option, the
Calculation Agent will reset the interest rate effective on the Coupon Reset
Date, pursuant to the Coupon Reset Process described below. In such
circumstance, (i) the REPS will be purchased from the holders by the
Callholder, in whole but not in part, at 100% of the principal amount thereof
on the Coupon Reset Date, on the terms and subject to the conditions described
herein (interest accrued to the Coupon Reset Date will be paid by the Company
on such date to holders on the immediately preceding Record Date) and (ii) on
and after the Coupon Reset Date, the REPS will bear interest at the rate
determined by the Calculation Agent in accordance with the procedures set
forth under "--Coupon Reset Process if the REPS are Called" below.
S-3
<PAGE>
FINAL MATURITY DATE
The REPS will mature on June 23, 2012 (the "Final Maturity Date"). On June
23, 2002, however, holders of the REPS will be entitled to receive 100% of the
principal amount thereof (i) from the Callholder if it purchases the REPS
pursuant to the Call Option or (ii) in the event the Callholder does not
exercise the Call Option or fails for any reason to pay the Call Price (as
defined below) to the Trustee when required, from the Company following the
exercise by the Trustee for and on behalf of the holders of the REPS of the
Mandatory Put (as defined below). The Trustee will exercise the Mandatory Put
without the consent of, or notice to, the holders of the REPS.
CALL OPTION; MANDATORY PUT
(i) Call Option. The initial Callholder will be Morgan Stanley & Co.
International Limited. Pursuant to the terms of the REPS, the Callholder has
the right to purchase the REPS, in whole but not in part, on the Coupon Reset
Date (the "Call Option"), at a price equal to 100% of the principal amount
thereof (the "Call Price"), by giving irrevocable notice to the Trustee (the
"Call Notice"). If the Callholder exercises the Call Option, the Trustee will
send a copy of the Call Notice to the holders as required by the terms of the
REPS. The Callholder will be required to give the Call Notice to the Trustee,
in writing, prior to 4:00 p.m., New York City time, no later than 15 calendar
days prior to the Coupon Reset Date. If the Callholder exercises the Call
Option, (a) not later than 2:00 p.m., New York City time, on the Business Day
prior to the Coupon Reset Date, the Callholder shall pay the amount of the
Call Price in immediately available funds to the Trustee for payment of the
Call Price to the holders of the REPS on the Coupon Reset Date and (b) the
holders of the REPS will be required to deliver the REPS against payment
therefor on the Coupon Reset Date through the facilities of DTC. The
Callholder is not required to exercise the Call Option, and no holder of the
REPS or any interest therein shall have any right or claim against the
Callholder as a result of the Callholder not purchasing the REPS.
The Call Option provides for certain circumstances under which such Call
Option may be terminated. If the Call Option terminates or if the Callholder
fails to pay the Call Price to the Trustee at or prior to the required time,
the Trustee will exercise the Mandatory Put described below. The Trustee will
notify the holders that it has exercised the Mandatory Put as required by the
terms of the Senior Indenture.
(ii) Mandatory Put. If the Call Option is not exercised or if the Callholder
fails for any reason to purchase the REPS on the Coupon Reset Date pursuant to
its exercise of the Call Option, the Trustee will be obligated to exercise on
behalf of the holders the right to require the Company to purchase the REPS,
in whole but not in part (the "Mandatory Put"), on the Coupon Reset Date at a
price equal to 100% of the principal amount thereof (the "Put Price"), plus
accrued but unpaid interest to but excluding the Coupon Reset Date. By its
purchase of the REPS, each holder irrevocably agrees that the Trustee shall
exercise the Mandatory Put for, or on behalf of, the holder of the REPS as
provided herein. If the Trustee exercises the Mandatory Put, then the Company
shall deliver the Put Price in immediately available funds to the Trustee by
no later than 12:00 noon, New York City time, on the Coupon Reset Date and the
holders will be required to deliver the REPS to the Company against payment
therefor on the Coupon Reset Date through the facilities of DTC. No holder of
the REPS or any interest therein has the right to consent or object to the
exercise of the Trustee's duties under the Mandatory Put.
COUPON RESET PROCESS IF THE REPS ARE CALLED
Pursuant to the terms of a calculation agency agreement, Morgan Stanley &
Co. Incorporated has been appointed the calculation agent for the REPS (in its
capacity as calculation agent for the REPS, the "Calculation Agent"). If the
Callholder exercises the Call Option as set forth above, then the following
steps (the "Coupon Reset Process") will be taken in order to determine the
interest rate to be paid on the REPS from and including such Coupon Reset Date
to but excluding the Final Maturity Date (the "Coupon Reset Rate"). The
Company and the Calculation Agent shall use reasonable efforts to cause the
actions contemplated below to be completed in as timely a manner as possible.
S-4
<PAGE>
(a) The Company shall provide the Calculation Agent with (i) a list (the
"Dealer List") no later than five Business Days prior to the Coupon Reset
Date, containing the names and addresses of five dealers, one of which shall
be Morgan Stanley & Co. Incorporated, from which the Company desires the
Calculation Agent to obtain the Bids (as defined below) for the purchase of
the REPS and (ii) such other material reasonably requested by the Calculation
Agent to facilitate a successful Coupon Reset Process.
(b) Within one Business Day following receipt by the Calculation Agent of
the Dealer List, the Calculation Agent shall provide to each dealer ("Dealer")
on the Dealer List (i) a copy of this Prospectus Supplement and the
accompanying Prospectus, (ii) a copy of the form of the REPS and (iii) a
written request that each such Dealer submit a Bid to the Calculation Agent by
12:00 noon, New York City time, on the third Business Day prior to the Coupon
Reset Date (a "Bid Date"). "Bid" means an irrevocable written offer given by a
Dealer for the purchase of all of the REPS, settling on the Coupon Reset Date,
and shall be quoted by such Dealer as a stated yield to maturity on the REPS
("Yield to Maturity"). Each Dealer will also be provided with (i) the name of
the Company, (ii) an estimate of the Purchase Price (as defined below) (which
shall be stated as a U.S. dollar amount and be calculated by the Calculation
Agent in accordance with clause (c) below), (iii) the principal amount and
maturity date of the REPS and (iv) the method by which interest will be
calculated on the REPS.
(c) The purchase price to be paid by any Dealer for the REPS (the "Purchase
Price"), which shall be stated as a U.S. dollar amount and be calculated by
the Calculation Agent in accordance with this clause (c), will be equal to (i)
the total principal amount of the REPS, plus (ii) a premium (the "REPS
Premium") which shall be equal to the excess, if any, on the Coupon Reset Date
of (A) the discounted present value to the Coupon Reset Date of a bond with a
maturity of June 23, 2012, which has an interest rate of 5.51%, semi-annual
interest payments on each June 23 and December 23, commencing December 23,
2002, and a principal amount equal to $300,000,000, and assuming a discount
rate equal to the Treasury Rate over (B) $300,000,000. The "Treasury Rate" for
the REPS means the per annum rate equal to the offer side yield to maturity of
the current-on-the-run ten-year United States Treasury security per Telerate
page 500 (or any successor or substitute page as may replace such page on such
service) at 11:00 a.m., New York City time, on the Bid Date (or such other
date or time that may be agreed upon by the Company and the Calculation Agent)
or, if such rate does not appear on Telerate page 500 (or any successor or
substitute page as may replace such page on such service) at such time, the
rate on GovPx End-of-Day Pricing at 3:00 p.m. on the Bid Date (or such other
date or time that may be agreed upon by the Company and the Calculation
Agent).
(d) The Calculation Agent will immediately notify the Company of (i) the
names of each of the Dealers from whom the Calculation Agent received Bids on
the Bid Date, (ii) the Bid submitted by each such Dealer and (iii) the
Purchase Price as determined pursuant to clause (c) hereof. Unless the Call
Option has terminated, the Calculation Agent will thereafter select from the
Bids received the Bid with the lowest Yield to Maturity (the "Selected Bid")
and set the Coupon Reset Rate equal to the interest rate which would amortize
the REPS Premium fully over the term of the REPS at the Yield to Maturity
indicated by the Selected Bid; provided, however, that if the Calculation
Agent has not received a timely Bid from a Dealer, the Selected Bid will be
the lowest of all Bids received by such time and provided, further, that if
any two or more of the lowest Bids submitted are equivalent, the Company will
in its sole discretion select any of such equivalent Bids (and such selected
Bid will be the Selected Bid). In all cases, Morgan Stanley & Co.
Incorporated, in its capacity as dealer will have the right to match the Bid
with the lowest Yield to Maturity, whereupon the Morgan Stanley & Co.
Incorporated Bid will become the Selected Bid.
(e) Immediately after calculating the Coupon Reset Rate, the Calculation
Agent will provide written notice to the Company and the Trustee, setting
forth the Coupon Reset Rate. The Coupon Reset Rate for the REPS will be
effective from and including the Coupon Reset Date.
(f) The Callholder will sell the REPS to the Dealer that made the Selected
Bid at the Purchase Price, such sale to be settled on the Coupon Reset Date in
immediately available funds.
If the Calculation Agent determines that (i) since the Call Notice, an Event
of Default has occurred and is continuing under Section 6.01(a), (b), (d), (e)
or (f) of the Senior Indenture (in such event, termination is at the
Callholder's option) or under Section 6.01(g) or (h) of the Senior Indenture
(in such event, termination is
S-5
<PAGE>
automatic), (ii) following the Call Notice, the Callholder fails to pay the
Call Price by 2:00 p.m., New York City time, on the Business Day prior to the
Coupon Reset Date due to the occurrence of a Market Disruption Event (as
defined below) or (iii) following the Call Notice, less than two Dealers have
provided Bids in a timely manner substantially as provided above, the Call
Option will be automatically revoked, and the Trustee will exercise the
Mandatory Put on behalf of the holders. "Market Disruption Event" will mean
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange, Inc. or the establishment
of minimum prices on such exchange; (ii) a general moratorium on commercial
banking activities declared by either federal or New York State authorities;
(iii) any material adverse change in the existing financial, political or
economic conditions in the United States of America; (iv) an outbreak or
escalation of major hostilities involving the United States of America or a
declaration of a national emergency or war by the United States of America; or
(v) any material disruption of the United States government securities market,
United States corporate bond market or United States federal wire system;
provided, in each case, that in the judgment of the Calculation Agent the
effect of the foregoing makes it impracticable to conduct the Coupon Reset
Process.
The calculation agency agreement provides that the Calculation Agent may
resign at any time, such resignation to be effective ten Business Days after
the delivery to the Company and the Trustee of notice of such resignation or
may be removed by the Company under certain circumstances. In either case, the
Company may appoint a successor Calculation Agent.
The Calculation Agent, in its individual capacity, may buy, sell, hold and
deal in the REPS and may exercise any vote or join in any action which any
holder of the REPS may be entitled to exercise or take as if it were not the
Calculation Agent. The Calculation Agent, in its individual capacity, may also
engage in any transaction with the Company and any of its affiliates as if it
were not the Calculation Agent.
BOOK-ENTRY SYSTEM
The REPS will be represented by one or more Global Securities registered in
the name of Cede & Co., the nominee of DTC. DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC holds securities that its
participants (the "Direct Participants") deposit with DTC. DTC also
facilitates the settlement among Direct Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Direct Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly (the "Indirect Participants," and together with the
Direct Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of the REPS within DTC's system must be made by or through Direct
Participants, which will receive a credit for the REPS on DTC's records. The
ownership interest of each actual purchaser of the REPS (a "Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' respective
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the REPS are to be accomplished by entries made on the
books
S-6
<PAGE>
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in REPS except
in the event that use of the book-entry system for the REPS is discontinued.
To facilitate subsequent transfers, all REPS deposited by Direct
Participants with DTC will be registered in the name of Cede & Co. The deposit
of the REPS with DTC and their registration in the name of Cede & Co. effect
no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the REPS; DTC's records reflect only the identity of the
Direct Participants to whose accounts such REPS are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If fewer than all of the REPS
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the REPS.
Under its usual procedures, DTC mails an omnibus proxy (an "Omnibus Proxy") to
the Participants as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the REPS are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal, redemption premium, if any, and interest payments on the REPS
will be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the relevant payment date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payment on such payment date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as
is the case with securities for the accounts of customers in bearer form or
registered in "street-name," and will be the responsibility of such
Participant and not of DTC, the Underwriters, or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal, redemption premium, if any, and interest to DTC is the
responsibility of the Company or the Paying Agent. Disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants. Global Securities will settle in immediately available
funds in the secondary trading market. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading
activity in the REPS.
DTC may discontinue providing its services as securities depositary with
respect to the REPS at any time by giving reasonable notice to the Company.
Under such circumstances and in the event that a successor securities
depositary is not obtained, REPS certificates in registered form are required
to be printed and delivered. In addition, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor securities depositary). In that event, REPS certificates in
registered form will be printed and delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of
the records of DTC, its nominee or any Direct or Indirect Participant with
respect to any ownership interest in the REPS, or with respect to payments to
or providing of notice for the Direct Participants, the Indirect Participants
or the Beneficial Owners.
GOVERNING LAW
The Senior Indenture and the REPS are governed by and construed and enforced
in accordance with the internal laws of the State of Illinois.
S-7
<PAGE>
THE TRUSTEE
First Union National Bank is the Trustee under the Senior Indenture. First
Union National Bank is also Trustee under Indentures dated as of March 1, 1987
relating to Senior Debt Securities and October 18, 1996 relating to
Subordinated Debt Securities of the Company. Currently, the Company has
outstanding $400,000,000 in principal amount of Senior Debt Securities which
were previously issued pursuant to the Senior Indenture.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the REPS is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, Internal Revenue Service ("IRS") rulings and pronouncements and
administrative and judicial decisions currently in effect, all of which are
subject to change (possibly with retroactive effect) or possible differing
interpretations. This summary deals only with REPS acquired at their initial
offering and held as capital assets (within the meaning of section 1221 of the
Code) and does not purport to deal with persons in special tax situations,
such as persons exempt from United States federal income tax, financial
institutions, insurance companies, regulated investment companies, real estate
investment trusts, dealers in securities or currencies, securities or
commodities traders who elect to account for their investment on a mark-to-
market basis, persons holding REPS as a hedge against currency risk or as a
position in a "straddle" or conversion transaction, or persons whose
functional currency is not the U.S. dollar.
PROSPECTIVE INVESTORS CONSIDERING THE PURCHASE OF THE REPS SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE REPS ARISING UNDER THE LAWS OF
ANY OTHER TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a holder of REPS that is an
individual who is a citizen or resident of the United States, a United States
domestic corporation or any other person that is subject to United States
federal income tax on a net income basis in respect of its investment in the
REPS. As used herein, the term "non-U.S. Holder" means a holder of REPS that
is a nonresident alien individual or other foreign person.
In the opinion of special United States tax counsel to the Company, Cleary,
Gottlieb, Steen & Hamilton, although there is no authority on point
characterizing instruments such as the REPS, and the matter is not free from
doubt, the REPS should be treated as fixed rate debt instruments that mature
on the Coupon Reset Date. Under this characterization, each U.S. Holder should
include in income the interest paid or accrued on the REPS in accordance with
the U.S. Holder's usual method of accounting. Upon the sale, exchange,
redemption or other disposition by a holder of the REPS, the U.S. Holder
should recognize capital gain or loss equal to the difference between the
amount realized from the disposition of the REPS (exclusive of amounts
attributable to accrued interest not previously included in income, which will
be taxable as ordinary income) and the U.S. Holder's adjusted tax basis in the
REPS at that time. A U.S. Holder's adjusted tax basis in the REPS generally
will equal the holder's purchase price for such REPS. In the case of a U.S.
Holder who is an individual and certain other non-corporate taxpayers, any
capital gain recognized on the disposition of the REPS will generally be
subject to United States federal income tax at a stated maximum rate of (i)
20%, if the U.S. Holder's holding period in the REPS was more than 18 months
at the time of such sale, exchange, redemption or other disposition, or (ii)
28%, if the U.S. Holder's holding period in such REPS was more than one year,
but not more than 18 months, at the time of such sale, exchange, redemption,
or other disposition. The ability to use capital losses to offset ordinary
income in determining taxable income is generally limited.
Notwithstanding the foregoing, the IRS or a court may conclude that the REPS
should be treated as maturing on the Final Maturity Date rather than the
Coupon Reset Date and that the issue price of the REPS should include the
value of the Call Option. In the event the REPS were treated as maturing on
the Final Maturity Date for United States federal income tax purposes, because
of the Coupon Reset Process, the REPS would be
S-8
<PAGE>
treated as having contingent interest under the Code. In such event, under
Treasury regulations governing debt instruments that provide for contingent
payments (the "Contingent Payment Regulations"), the Company would be required
to calculate an estimated yield at which the Company would issue a debt
instrument with terms and conditions similar to the REPS (other than terms and
conditions relating to the Coupon Reset Process), taking into account
available hedges of the REPS. A U.S. Holder would be required to include in
income original issue discount in an amount equal to the product of the
adjusted issue price of the REPS at the beginning of each interest accrual
period and the estimated yield of the REPS. In general, for these purposes, a
REPS' adjusted issue price would equal the REPS' issue price increased by the
interest previously accrued on the REPS, and reduced by all payments made on
the REPS. As a result of the application of the Contingent Payment
Regulations, it is likely that a U.S. Holder would be required to include
interest in income in excess of actual cash payments received for certain
taxable years.
In addition, if the REPS were treated as contingent payment obligations, the
character of any gain or loss from the sale or exchange of the REPS (including
a sale pursuant to the mandatory tender on the Coupon Reset Date) by a U.S.
Holder will differ from that discussed above. Any such taxable gain generally
would be treated as ordinary income. Any such taxable loss generally would be
ordinary to the extent of previously accrued original issue discount, and any
excess would generally be treated as capital loss. If the REPS were considered
to mature on the Final Maturity Date, it is possible that U.S. Holders of REPS
also may be considered to have entered into a "straddle" for United States
federal income tax purposes as a result of the Call Option, in which case a
U.S. Holder's capital loss described in the preceding sentence would be short-
term capital loss and the U.S. Holder would be required to capitalize interest
expense on certain indebtedness incurred to purchase or carry the REPS.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on the REPS, unless such payments are effectively
connected with the conduct of a trade or business in the United States by the
non-U.S. Holder or such non-U.S. Holder is a direct or indirect 10% or greater
shareholder of the Company or a controlled foreign corporation related to the
Company. To qualify for the exemption from taxation, the last United States
payor in the chain of payment prior to payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the beneficial owner of the REPS under penalties of
perjury, (ii) certifies that such owner is not a U.S. Holder and (iii)
provides the name and address of the beneficial owner. The statement may be on
an IRS Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If a REPS is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to United States federal
income taxes on any amount which constitutes gain upon retirement or
disposition of a REPS, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may apply, as a result of which such gain may be
subject to United States federal income tax, and a non-U.S. Holder should
consult its tax advisor in this regard.
The REPS will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the
Company or, at the time of such individual's death, payments in respect of the
REPS would have been effectively connected with the conduct by such individual
of a trade or business in the United States.
S-9
<PAGE>
If interest or other payments received by a non-U.S. Holder with respect to
the REPS (including proceeds from the disposition of the REPS) are effectively
connected with the conduct by the non-U.S. Holder of a trade or business
within the United States (or the non-U.S. Holder is otherwise subject to
United States federal income taxation on a net income basis with respect to
such Holder's ownership of the REPS), such non-U.S. Holder will generally be
subject to the rules described above under "U.S. Holders" (subject to any
modification provided under an applicable income tax treaty).
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the REPS to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the
required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the REPS to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the certification procedures described above under
"Non-U.S. Holders" would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a REPS to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-
U.S. Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-
U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status normally would be made on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
FINAL WITHHOLDING REGULATIONS
The Treasury Department recently issued final Treasury regulations (the
"Final Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The Final
Regulations attempt to unify certification requirements and modify reliance
standards. The Final Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the Final
Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the principal
amount of the REPS set forth opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
NAME REPS
---- ------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $ 60,000,000
Goldman, Sachs & Co......................................... 60,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................... 60,000,000
J.P. Morgan Securities Inc.................................. 60,000,000
Salomon Brothers Inc........................................ 60,000,000
------------
Total................................................... $300,000,000
============
</TABLE>
S-10
<PAGE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the REPS
offered hereby if any REPS are purchased.
The Underwriters propose initially to offer the REPS to the public at the
public offering price set forth on the cover page and to certain dealers at
such price less a concession not in excess of .30% of the principal amount of
the REPS. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of the principal amount of the REPS to certain other
dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company does not intend to apply for listing of any of the REPS on a
national securities exchange, but has been advised by the Underwriters that
they presently intend to make a market in the REPS, as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in the REPS 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 REPS.
In order to facilitate the offering of the REPS, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the prices of the
REPS. Specifically, the Underwriters may overallot in connection with the
offering, creating a short position in the REPS for their own account. In
addition, to cover overallotments or to stabilize the price of the REPS, the
Underwriters may bid for, and purchase, the REPS in the open market. Finally,
the underwriting syndicate may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the REPS in the offering, if the
syndicate repurchases previously distributed REPS in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market prices of the REPS above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended, or contribute to payments which the
Underwriters may be required to make in respect thereof.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and may in the future engage,
in commercial and investment banking transactions with the Company.
LEGAL OPINIONS
The legality of the REPS 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. Certain matters relating to
the United States federal income tax consequences of the REPS will be passed
upon for the Company by Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza,
New York, New York 10006, as special United States tax counsel for the
Company.
S-11
<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.
4
<PAGE>
Reference is made to the Prospectus Supplement related to the series of Debt
Securities being offered thereby (the "Offered Debt Securities"), which sets
forth whether the Offered Debt Securities shall be Senior Debt Securities or
Subordinated Debt Securities, and further sets forth the following terms,
where applicable: (i) the title of the Offered Debt Securities; (ii) the
limit, if any, upon the aggregate principal amount of the Offered Debt
Securities; (iii) the date or dates on which the principal and premium, if
any, of the Offered Debt Securities is payable; (iv) the rate or rates or the
method of determination thereof, at which the Offered Debt Securities will
bear interest, if any; the date or dates from which such interest will accrue;
the interest payment dates on which such interest will be payable; and, the
record dates for the interest payable on such interest payment dates; (v)
whether the Offered Debt Securities are to be issued as Original Issue
Discount Securities (as defined below) and the amount of discount with which
the Offered Debt Securities will be issued; (vi) the place or places where the
principal of, and premium, if any, and any interest on the Offered Debt
Securities will be payable; (vii) the price or prices at which, the period or
periods within which and the terms and conditions upon which the Offered Debt
Securities may be redeemed in whole or in part, at the option of the Company,
pursuant to any sinking fund or otherwise; (viii) the obligation, if any, of
the Company to redeem, purchase or repay the Offered Debt Securities pursuant
to any sinking fund or analogous provisions or at the option of a Holder and
the price or prices at which and the period or periods within which and the
terms and conditions upon which the Offered Debt Securities will be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligation; (ix) if
other than denominations of $1,000 and any integral multiple thereof, the
denominations in which the Offered Debt Securities will be issuable; (x) if
other than the principal amount, the portion of the principal amount of the
Offered Debt Securities which will be payable upon declaration of acceleration
of the maturity thereof pursuant to the Indenture; (xi) any non-application
of, addition to, or change in any of the Events of Default provided for with
respect to the Offered Debt Securities and remedies with respect thereto;
(xii) if the Offered Debt Securities are non-interest bearing, the "stated
intervals"; (xiii) the currency or currencies in which payments on the Offered
Debt Securities are payable; and (xiv) any other terms of the Offered Debt
Securities not inconsistent with the provisions of the applicable Indenture.
(Section 2.02)
If the principal of (and premium, if any) or any interest on the Offered
Debt Securities is payable in a foreign or composite currency, the
restrictions, elections, federal income tax consequences, specific terms and
other information with respect to the Offered Debt Securities and such
currency will be described in the Prospectus Supplement relating thereto.
One or more series of Offered Debt Securities may be sold at a discount
below their stated principal amount, bearing no interest or interest at a rate
that at the time of issuance is below market rates ("Original Issue Discount
Securities"). One or more series of Offered Debt Securities may be variable
rate debt securities that may be exchangeable for fixed rate debt securities.
Federal income tax consequences and other special considerations applicable to
any such series will be described in the Prospectus Supplement relating
thereto.
Unless otherwise provided in the applicable Prospectus Supplement, the
principal of (and premium, if any) and any interest on the Offered Debt
Securities will be payable at the offices of the Trustee in New York, New York
and Charlotte, North Carolina; provided, however, that payment of interest on
Offered Debt Securities may be made at the option of the Company by check
mailed to the Holders thereof. (Sections 2.02, 4.01 and 4.02) Unless otherwise
provided in the applicable Prospectus Supplement, Offered Debt Securities may
be transferred or exchanged at the office or agency maintained by the Company
for such purpose, subject to the limitations provided in the applicable
Indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. (Section 2.06)
All moneys paid by the Company to the Trustee or a paying agent for the
payment of principal of (and premium, if any) or any interest on any Offered
Debt Security that remains unclaimed at the end of two years after such
principal, premium or interest shall have become due and payable will be
repaid to the Company on demand, and the Holder of such Offered Debt Security
will thereafter look only to the Company for payment thereof. (Section 12.05)
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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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