EXHIBIT 1(B)
McDonald's Corporation
U.S.$1,000,000,000
Medium-Term Notes, Series F
Due from 1 Year to 60 Years from Date of Issue
U.S. DISTRIBUTION AGREEMENT
July __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower, World Financial Center
23rd Floor
New York, New York 10281
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
J.P. Morgan Securities, Inc.
60 Wall Street
New York, New York 10260
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, New York 10020
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
McDonald's Corporation, a Delaware corporation (the "Company"),
confirms its agreement with you with respect to the issue and sale by the
Company of its Medium-Term Notes, Series F due from 1 to 60 years from date of
issue having an aggregate initial public offering price or purchase price of up
to U.S.$1,000,000,000 or its equivalent in foreign currencies, including the
Euro, or any composite currency (the "Notes").
The Notes are to be issued under an indenture dated as of October 19,
1996 between the Company and First Union National Bank (the "Trustee") and any
indentures supplemental thereto (collectively, the "Indenture"), will be issued
in fully registered definitive form in denominations of $1,000 and integral
multiples of $1,000 in excess thereof (or in such other denominations as shall
be provided in a supplement to the Basic Prospectus referred to below). Notes
may bear interest at fixed or floating rates or rates determined by reference to
a designated index or by application of a formula, in any case to be provided in
a supplement to the Basic Prospectus referred to below, and may, whether or not
bearing interest, be issued with original issue discount. The Notes may be
issued in amounts denominated in United States dollars or in amounts denominated
in foreign currencies, including the Euro, or any composite currency. References
herein to amounts stated in United States dollars shall be deemed to refer to
the equivalent amount of foreign currency or composite currency to the extent
applicable.
Subject to the terms and conditions stated herein and subject to the
reservation by the Company of the right to sell Notes directly to investors on
its own behalf or through other agents, dealers or underwriters, the Company
hereby appoints each of you (individually as "Agent" and collectively the
"Agents") as an agent for the purpose of soliciting offers to purchase the Notes
from the Company by others and agrees that if and whenever the Company
determines to sell Notes directly to an Agent as principal for resale to others
it will enter into a Terms Agreement relating to such sale in accordance with
the provisions of Section 2(b) hereof. On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, each Agent agrees, severally but not jointly, to use its reasonable best
efforts to solicit offers to purchase Notes upon terms acceptable to the Company
at such times and in such amounts as the Company shall from time to time
specify. In acting under this Agreement and in connection with the sale of any
Notes by the Company (other than Notes sold to an Agent as principal pursuant to
a Terms Agreement), each Agent is acting solely as agent of the Company and does
not assume any obligation towards or relationship of agency or trust with any
purchaser of the Notes.
1. Representations and Warranties. The Company represents and
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warrants to each Agent as follows :
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act") (File
No. 333- ) which has become effective, for the registration under
the Securities Act of the offering
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of the Notes. Such registration statement meets the requirements
set forth in Rule 415(a)(1)(x) under the Securities Act and
complies in all other material respects with said Rule. The
Indenture is duly qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the Company has
duly authorized the issuance of the Notes. The Company proposes
to file with the Commission from time to time, pursuant to Rule
424(b)(2) or (b)(5) under the Securities Act, supplements to the
form of prospectus included in registration statement File No.
333- relating to the Notes and the plan of distribution
thereof or, if the Company elects to rely on Rule 434 under the
Securities Act, a Term Sheet (as such term is hereinafter
defined) relating to the Notes that shall contain such
information as is required or permitted by Rules 434 and 424(b)
under the Securities Act. The registration statement
File No. 333- , including the exhibits thereto, is
hereinafter called the "Registration Statement"; the prospectus
(including the supplement thereto relating to the Notes) in the
form in which it appears in registration statement File No. 333-
is hereinafter called the "Basic Prospectus"; and such
supplemented form of prospectus, in the form in which it shall be
filed with the Commission pursuant to Rule 424(b)(2) or (b)(5)
(including the Basic Prospectus as so supplemented) or (ii) if
the Company elects to rely on Rule 434 under the Securities Act,
in the form of the Term Sheet as first filed with the Commission
pursuant to Rule 424(b)(7) (together with the Basic Prospectus),
is hereinafter called the "Prospectus". Any abbreviated term
sheet that satisfies the requirements of Rule 434 under the
Securities Act is hereinafter called the "Term Sheet". Any
reference herein to the Registration Statement, Basic Prospectus
or Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12
of Form S-3 which were filed under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), on or before the date of
this Agreement, or the issue date of any Basic Prospectus or
Prospectus, as the case may be; and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Basic Prospectus or any Prospectus
shall be deemed to refer to and include the filing of any
document under the Exchange Act after the date of this Agreement,
or the issue date of any Basic Prospectus or any Prospectus, as
the case may be, and deemed to be incorporated therein by
reference.
(b) As of the date hereof, when the Prospectus is first filed
pursuant to Rule 424(b) under the Securities Act, when, prior to
the Commencement Date (as hereinafter defined), any amendment to
the Registration Statement becomes effective (including the
filing of any document incorporated by reference in the
Registration Statement), when any supplement to the Prospectus is
filed with the Commission, on the Commencement Date and on each
Settlement Date (as hereinafter defined), (i) the Registration
Statement, as amended as of any such time, the Prospectus, as
amended or supplemented as of any such
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time, and the Indenture will comply in all material respects with
the applicable requirements of the Securities Act, the Trust
Indenture Act and the Exchange Act and the respective rules and
regulations thereunder and (ii) neither the Registration
Statement, as amended as of any such time, nor the Prospectus, as
amended or supplemented as of any such time, will contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading; provided, however, that
the Company makes no representations or warranties as to (i) that
part of the Registration Statement which shall constitute the
Statement of Eligibility (Form T-1) under the Trust Indenture Act
of the Trustee; (ii) information, if any, contained in the
Registration Statement or Prospectus relating to The Depository
Trust Company and its book-entry system; or (iii) the information
contained in or omitted from the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of any Agent specifically
for use in connection with the preparation of the Registration
Statement and the Prospectus.
(c) The financial statements of the Company and its consolidated
subsidiaries included in the Registration Statement fairly
present the financial condition of the Company and its
consolidated subsidiaries as of the dates indicated and the
results of operations and cash flow for the periods therein
specified; and said financial statements have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved, except as
otherwise stated therein. As used herein, "consolidated
subsidiaries" means each subsidiary of the Company which is
included in the consolidated financial statements of the Company
contained in its Annual Report to shareholders for 1997 in
accordance with the consolidation policies set forth therein or
which would have been so included if it had been a subsidiary of
the Company as of the date of such consolidated financial
statements, and each other subsidiary of the Company which is
included in consolidated financial statements of the Company
prepared from time to time thereafter.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and prior
to the Commencement Date, except as set forth or contemplated in
the Prospectus, (i) neither the Company nor any of its
consolidated subsidiaries has entered into any transaction not in
the ordinary course of business which is material to the Company
and its consolidated subsidiaries, considered as a whole; (ii)
there has been no material adverse change in the properties,
business, financial condition or results of operations of the
Company and its consolidated subsidiaries, considered as a whole;
and (iii) no legal or governmental
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proceeding, which has or will have materially affected the
Company or any of its consolidated subsidiaries, considered as a
whole, or the transactions contemplated by this Agreement, has
been or will have been instituted or threatened.
(e) The consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result
in a breach of any of the terms and provisions of, or constitute
a default under, the Restated Certificate of Incorporation or By-
Laws of the Company as presently in effect.
(f) The Securities have been duly and validly authorized and, when
issued, authenticated and delivered against payment therefor in
accordance with the terms of the Indenture and this Agreement,
will constitute valid and legally binding obligations of the
Company entitled to the benefits of the Indenture, except as
enforcement thereof may be limited by applicable bankruptcy,
insolvency, moratorium and other laws affecting the
enforceability of creditors' rights and general principles of
equity, and will conform to the description thereof contained in
the Prospectus. The Indenture has been duly authorized by the
Company and will be a valid and legal instrument enforceable in
accordance with its terms, except as enforcement thereof may be
limited by applicable bankruptcy, insolvency, moratorium and
other laws affecting the enforceability of creditors' rights and
general principles of equity. The Indenture is duly qualified
under the Trust Indenture Act.
2. Solicitations as Agent; Purchases as Principal.
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(a) Solicitations as Agent. On the basis of the representations and
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warranties herein contained, but subject to the terms and
conditions herein set forth, each Agent will use its reasonable
best efforts to solicit, as agent, offers to purchase the Notes
upon the terms and conditions set forth in the Prospectus as then
amended or supplemented; provided, however, that each Agent
hereby represents and agrees that it will not make any
representations or use any information other than that set forth
in the Prospectus (as then amended or supplemented) or solicit
any offer to purchase the Notes other than by means of such
Prospectus as then amended or supplemented.
The Company reserves the right, in its sole discretion, to
instruct the Agents to suspend at any time, for any period of
time or permanently, the solicitation, as agent, of offers to
purchase the Notes. Upon receipt of notice from the Company, each
Agent will forthwith suspend solicitations, as agent, of offers
to purchase Notes from the Company until such time as the Company
has advised the Agents that such solicitation may be resumed.
During the period of time that this Agreement is suspended the
Company shall not be required to deliver any certificates,
opinions or letters in accordance with Sections 3(i), (j)
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and (k) hereof; provided, however, that no Agent shall be
required to resume soliciting offers to purchase Notes until the
Company has delivered such certificates, opinions or letters as
requested by such Agent if any of the events described in Section
3(i), (j) or (k) hereof have occurred during the period of
suspension.
The Company agrees to pay each Agent, as consideration for the
sale of any Notes resulting from a solicitation made by it as
agent, a commission in the form of a discount from the principal
amount of each Note sold by the Company hereunder as a result of
such solicitation. With respect to Notes with a term of one year
to 30 years, such commission will be equal to the following
percentage of the principal amount of such Note:
and with respect to Notes with a term in excess of 30 years such
commission will be negotiated between the Company and the
applicable Agent at the time of sale. The Agents may reallow any
portion of the commission payable pursuant hereto to dealers or
purchasers in connection with the offer and sale of any Notes.
The Agents are authorized to solicit offers to purchase Notes
only in the minimum principal amount of $1,000 or any amount in
excess thereof that is a whole multiple of $1,000 (or in such
other minimum purchase amounts and multiples thereof as are
described in a supplement to the Basic Prospectus). Each Agent
shall communicate to the Company, orally or in writing, each
offer to purchase Notes received by it as agent which in its
judgment should be considered by the Company. The Company shall
have the
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sole right to accept offers to purchase Notes and may reject any
offer in whole or in part. Each Agent shall have the right to
reject any offer to purchase Notes that it considers to be
unacceptable, and any such rejection shall not be deemed a breach
of its agreements contained herein.
(b) Purchases as Principal. Each sale of Notes to an Agent as
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principal shall be made in accordance with the terms of this
Agreement and a separate agreement which will provide for the
sale of such Notes to such Agent and the purchase and re-offering
thereof by such Agent. Each such separate agreement (which may
initially be an oral agreement, to be subsequently confirmed in
writing) is herein referred to as a "Terms Agreement". Unless the
context otherwise requires, each reference contained herein to
"this Agreement" shall be deemed to include any applicable Terms
Agreement between the Company and an Agent. Each such Terms
Agreement, whether oral or in writing, shall be with respect to
such information (as applicable) as is specified in Exhibit A
hereto. An Agent's commitment to purchase Notes pursuant to any
Terms Agreement shall be deemed to have been made on the basis of
the representations and warranties of the Company herein
contained and shall be subject to the terms and conditions herein
set forth. Each Terms Agreement shall specify the principal
amount of Notes to be purchased pursuant thereto, the maturity
date thereof, the price to be paid to the Company for such Notes,
the time and place of delivery of and payment for such Notes (the
"Settlement Date") and any other relevant terms. An Agent may
utilize a selling or dealer group in connection with the resale
of the Notes purchased. Such Terms Agreement shall also specify
any requirements for officers' certificates, opinions of counsel
and letters from the independent auditors of the Company pursuant
to Sections 3 and 4 hereof.
(c) Procedures. Each Agent and the Company agree to perform the
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respective duties and obligations specifically provided to be
performed in the Medium-Term Notes Administrative Procedures
(attached hereto as Exhibit B) (the "Procedures"), as amended
from time to time. The Procedures may be amended only by written
agreement of the Company and each Agent; provided that with
respect to any single issuance of Notes, the Procedures may be
modified by written agreement of the Company and the Agents
soliciting as agents the purchase of such Notes (or purchasing as
principal such Notes pursuant to a Terms Agreement).
(d) Delivery. The documents required to be delivered by Section 4 of
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this Agreement shall be delivered at the office of Gardner,
Carton & Douglas, counsel to the Agents, at 321 North Clark
Street, Quaker Tower, Chicago, Illinois 60610, not later than
5:00 p.m. Chicago time, on the date hereof, or at such other time
and/or place as each Agent and the Company may agree upon in
writing (the "Commencement Date").
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3. Agreements. The Company agrees with each Agent that:
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(a) Prior to the termination of the offering of the Notes pursuant to
this Agreement, the Company will not file any amendment to the
Registration Statement or supplement (including the Prospectus)
to the Basic Prospectus relating to the Notes unless the Company
has previously furnished to each Agent (or, in the case of
Prospectus Supplements setting out only the interest rate,
maturity and other terms of Notes ("Pricing Supplements"), the
Agent that has solicited the applicable offer of Notes), a copy
thereof for its review and will not file any such proposed
amendment or supplement to which any Agent (or, in the case of
Pricing Supplements, the Agent that has solicited the applicable
offer of Notes) reasonably objects; provided, however, that the
foregoing requirement shall not apply to any of the Company's
periodic filings with the Commission required to be filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
or to any Pricing Supplement applicable to Notes sold by the
Company directly to investors on its own behalf; and provided
further that without the consent of, but after consultation with,
the Agents, including the furnishing of drafts thereof, the
Company may file any such proposed amendment or Prospectus
Supplement which in the opinion of its counsel it is required by
law to file. Subject to the foregoing sentence, the Company will
promptly cause each Prospectus Supplement to be mailed to the
Commission for filing pursuant to Rule 424 and/or Rule 434 under
the Securities Act. The Company will promptly advise each Agent
(i) when the Prospectus and any supplement to the Basic
Prospectus shall have been filed pursuant to Rule 424 and/or Rule
434 under the Securities Act; (ii) when any amendment to the
Registration Statement relating to the Notes shall have become
effective; (iii) of any request by the Commission for any
amendment of the Registration Statement or any amendment of or
supplement to the Prospectus or for any additional information;
(iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose;
and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose. The Company will use its best
efforts to prevent the issuance of any such stop order and, if
issued, to obtain as soon as possible the withdrawal thereof. If
the Company files any amendment to the Registration Statement or
any supplement to the Basic Prospectus or the Prospectus, which
filing does not require the consent of the Agents, the Company
will provide each Agent with a copy of such document promptly
after the filing thereof, and no Agent shall be obligated to
solicit offers for the purchase of Notes so long as it is not
reasonably satisfied with such document.
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(b) The Company will prepare and file with the Commission, promptly
upon the request of any Agent, any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of
counsel for the Agents, may be necessary to enable the several
Agents to continue to solicit offers to purchase the Notes, and
the Company will use its best efforts to cause any such
amendments to become effective and any such supplements to be
filed with the Commission and approved for use by the Agents as
promptly as possible. If, at any time when a prospectus relating
to the Notes is required to be delivered under the Securities
Act, any event relating to or affecting the Company occurs as a
result of which the Registration Statement or the Prospectus as
then amended or supplemented would include an untrue statement of
a material fact, or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary
at any time to amend or supplement the Registration Statement or
the Prospectus, as then amended or supplemented, to comply with
the Securities Act or the Exchange Act or the respective rules
thereunder, the Company will promptly notify each Agent to
suspend solicitation of offers to purchase Notes and, if so
notified by the Company, each Agent shall forthwith suspend such
solicitation and cease using the Prospectus as then amended or
supplemented; and if the Company shall decide to amend or
supplement the Registration Statement or Prospectus as then
amended or supplemented, it will so advise each Agent promptly by
telephone (with confirmation in writing) and will prepare and
cause to be filed promptly with the Commission an amendment or
supplement to the Registration Statement or Prospectus as then
amended or supplemented which will include a description of such
facts or events and/or will correct such statement or omission or
effect such compliance and will supply such amended or
supplemented Registration Statement or Prospectus to each Agent
in such quantities as it may reasonably request; and, if such
amendment or supplement and any documents, certificates and
opinions furnished to an Agent pursuant to paragraph (f) below in
connection with the preparation or filing of such amendment or
supplement, are satisfactory in all respects to such Agent, upon
the filing of such amendment or supplement with the Commission or
effectiveness of an amendment to the Registration Statement such
Agent will resume to solicitation of offers to purchase Notes
hereunder. Notwithstanding any other provision of this Section
3(b), until the distribution of any Notes any Agent may own as
principal has been completed, if any event occurs or condition
exists as a result of which it is necessary to amend or
supplement the Registration Statement or Prospectus to make the
information therein comply with the Securities Act or the rules
thereunder or complete or accurate in all material respects, the
Company agrees to provide such Agent with immediate notice by
telephone (with confirmation in writing) to cease sales of any
Notes, and the Company will forthwith prepare and
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furnish, at its own expense, any amendments or supplements to the
Registration Statement or Prospectus, satisfactory in all
respects to such Agent, in such quantities as it may reasonably
request. If such amendment or supplement and any documents,
certificates and opinions furnished to an Agent pursuant to
paragraph (f) below in connection with the preparation and filing
of such amendment or supplement are satisfactory in all respects
to such Agent, upon the filing of such amendment or supplement to
the Registration Statement or Prospectus such Agent may resume
its resale of the Notes as principal.
(c) As soon as practicable, but not later than 90 days after the end
of the 12-month period beginning at the end of the current fiscal
quarter of the Company, the Company will make generally available
to its security holders and each Agent an earnings statement
covering a period of at least 12 months beginning not earlier
than said effective date which shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 under the
Securities Act, and, not later than 45 days after the end of the
12-month period beginning at the end of each fiscal quarter of
the Company (other than the last fiscal quarter of any fiscal
year) during which the effective date of any post-effective
amendment to the Registration Statement occurs, not later than 90
days after the end of the fiscal year beginning at the end of
each last fiscal quarter of any fiscal year of the Company during
which the effective date of any post-effective amendment to the
Registration Statement occurs, and not later than 90 days after
the end of each fiscal year of the Company during which any Notes
were issued, the Company will make generally available to its
securityholders an earnings statement covering such 12-month
period or such fiscal year, as the case may be, that will satisfy
the provisions of such Section 11(a) and Rule 158.
(d) The Company will furnish to each Agent, without charge, three
conformed copies of the Registration Statement including exhibits
and materials, if any, incorporated by reference therein and,
during the period mentioned in Section 3(b) above, as many copies
of the Prospectus, any documents incorporated by reference
therein and any supplements and amendments thereto as any Agent
may reasonably request.
(e) The Company will furnish such information and execute such
instruments as may be required to qualify the Notes for offer and
sale under the securities or blue sky laws of such jurisdictions
within the United States as any Agent shall designate, will
continue such qualifications in effect so long as required for
distribution and will arrange for the determination of the
legality of the Notes for purchase by institutional investors.
The Company shall not be required to register or qualify as a
foreign corporation nor, except as to matters and transactions
relating to the offer and sale of the Notes, to consent to
service of process in any jurisdiction. The Company or its
designated agent shall submit
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such reports or information as may be required from time to time
by applicable law, regulations and guidelines promulgated by
Japanese governmental and regulatory authorities in the case of
the issue and purchase of, and for so long as there are
outstanding any, Notes denominated in Japanese yen.
(f) During the term of this Agreement, the Company shall furnish to
each Agent such certificates of officers of the Company relating
to the business, operations and affairs of the Company and its
subsidiaries, the Registration Statement, the Basic Prospectus,
any amendments or supplements thereto, the Indenture, the Notes,
this Agreement, the Procedures, any Terms Agreement and the
performance by the Company of its obligations hereunder as such
Agent may from time to time reasonably request.
(g) The Company will, whether or not any sale of Notes is
consummated, pay all expenses incident to the performance of its
obligations under this Agreement, including: (i) the preparation
and filing of the Registration Statement and all amendments
thereto; (ii) the preparation, issuance and delivery of the
Notes; (iii) the fees and disbursements of the Company's
accountants and of the Trustee and Paying Agent and their
respective counsel; (iv) the qualification of the Notes under
securities laws in accordance with the provisions of Section 3(e)
hereof, including filing fees and the reasonable fees and
disbursements of counsel to the Agents in connection therewith
and in connection with the preparation of any Blue Sky
Memorandum; (v) the printing and delivery to the Agents in
quantities as hereinabove stated of copies of the Registration
Statement and all amendments thereto, and of the Basic Prospectus
and any amendments or supplements thereto (including Pricing
Supplements); (vi) the printing and delivery to the Agents of
copies of the Indenture and any Blue Sky Memorandum; and (vii)
any fees charged by rating agencies for the rating of the Notes.
The Company will also, whether or not any sale of the Notes is
consummated, reimburse the Agents promptly upon receipt of an
invoice therefor for the reasonable fees of their counsel, as
agreed by the Company and the Agents, incurred in connection with
the preparation of this Agreement and the offering and sale of
the Notes as well as any reasonable disbursements and out-of-
pocket expenses incurred by such counsel, as agreed by the
Company and the Agents.
(h) Each acceptance by the Company of an offer for the purchase of
Notes solicited by an Agent, and each sale of Notes to an Agent
pursuant to a Terms Agreement, shall be deemed to be an
affirmation that the representations and warranties of the
Company contained in this Agreement and in any certificate
theretofore delivered to such Agent pursuant hereto are true and
correct in all
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material respects at the time of such acceptance or sale, as the
case may be, and an undertaking that such representations and
warranties will be true and correct in all material respects at
the time of delivery to the purchaser or his agent or to such
Agent, of the Notes relating to such acceptance or sale, as the
case may be, as though made at and as of each such time (and it
is understood that such representations and warranties shall
relate to the Registration Statement and the Basic Prospectus as
amended and supplemented to each such time).
(i) Each time the Registration Statement or the Basic Prospectus is
amended or supplemented (other than by a Pricing Supplement or an
amendment or supplement providing for a change deemed immaterial
in the reasonable opinion of the Agents), if so requested by any
Agent, and each time the Company sells Notes to an Agent pursuant
to a Terms Agreement, the Company will deliver or cause to be
delivered forthwith to the relevant Agent or Agents a certificate
of the Company signed by the President or a Vice President and
the Chief Financial Officer of the Company or its Treasurer,
dated the date of the effectiveness of such amendment or filing
or supplement or sale, as the case may be, in form reasonably
satisfactory to such Agent or Agents, of the same tenor as the
certificate referred to in Section 4(e) hereof relating to the
Registration Statement and the Basic Prospectus as amended and
supplemented to the time of delivery of such certificate.
(j) Each time the Registration Statement or the Basic Prospectus is
amended or supplemented, if in the reasonable judgment of any
Agent (or, in the case of a Pricing Supplement, in the reasonable
judgment of the Agent that has solicited the offer to purchase
the relevant Notes) the information contained in the amendment or
supplement is of such nature that an opinion of counsel should be
furnished, and each time the Company sells Notes to an Agent
pursuant to a Terms Agreement, if so indicated in the applicable
Terms Agreement, the Company shall furnish or cause to be
furnished forthwith to such Agent a written opinion of counsel of
the Company. Any such opinion shall be dated the date of such
amendment or supplement or the date of such sale, as the case may
be, shall be in a form satisfactory to such Agent and shall be of
the same tenor as the opinion referred to in Section 4(d)(i)
hereof but modified to relate to the Registration Statement and
the Basic Prospectus as amended and supplemented to the time of
delivery of such opinion. In lieu of such opinion, counsel last
furnishing such an opinion to such Agent may furnish to such
Agent a letter to the effect that it may rely on such last
opinion to the same extent as though it were dated the date of
such letter (except that statements in such last opinion will be
deemed to relate to the Registration Statement and the Basic
Prospectus as amended and supplemented to the time of delivery of
such letter).
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(k) Each time that the Registration Statement or the Basic Prospectus
is amended or supplemented to set forth amended or supplemental
financial information or such amended or supplemental information
is incorporated by reference in the Registration Statement or the
Basic Prospectus, if so requested by any Agent, or each time the
Company sells Notes to an Agent pursuant to a Terms Agreement, if
so indicated in the applicable Terms Agreement, the Company shall
cause its independent auditors forthwith to furnish each Agent or
such Agent, as appropriate, with a letter, dated the date of the
effectiveness of such amendment or the date of filing of such
supplement, or the date of such sale, as the case may be, in a
form satisfactory to the recipient, of the same tenor as the
letter referred to in Section 4(f) hereof, with regard to the
amended or supplemental financial information included or
incorporated by reference in the Registration Statement and the
Basic Prospectus, as amended or supplemented to the date of such
letter.
(l) Between the date of any Terms Agreement and the Settlement Date,
or such later date as may be specified in such Terms Agreement,
with respect to such Terms Agreement, the Company will not,
without the prior consent of the Agent which is a party to such
Terms Agreement, offer, sell, contract to sell or otherwise
dispose of any debt securities of the Company substantially
similar in currency, maturity and other material terms to the
Notes, other than (i) the Notes that are to be sold pursuant to
such Terms Agreement; (ii) debt securities issued for
consideration other than cash; and (iii) commercial paper in the
ordinary course of business, except as may otherwise be provided
in any such Term Agreement.
(m) The Company will not issue any Notes except as have been duly
authorized by all necessary corporate action on the part of the
Company.
(n) The Company will not issue any Notes directly to investors or
through other agents, dealers or underwriters except in
accordance with applicable law.
4. Conditions of the Ob1igations of the Agents. The obligations of
-------------------------------------------
each Agent to solicit offers to purchase the Notes as agent of the Company and
to purchase Notes as principal pursuant to any Terms Agreement will be subject
to the accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of the Company's officers made in each
certificate furnished pursuant to the provisions hereof, to the performance by
the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued,
and no proceedings for that purpose shall have been instituted or
shall be pending, or, to the knowledge of the Company, shall be
contemplated by the Commission.
13
(b) No event, nor any material adverse change in the condition of the
Company, financial or otherwise, shall have occurred, nor shall
any event exist, which makes untrue or incorrect any material
statement or information contained in the Registration Statement
or the Prospectus or which is not reflected in the Registration
Statement or the Prospectus, but should be reflected therein in
order to make the statements or information contained therein not
misleading.
(c) No Agent shall have advised the Company that the Registration
Statement or any prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact which, in the
opinion of counsel for the Agents, is material, or omits to state
a fact which, in the opinion of such counsel, is material and is
required to be stated therein or is necessary to make the
statements therein not misleading.
(d) At the Commencement Date, such Agent shall have received, and at
each Settlement Date with respect to any applicable Terms
Agreement to which such Agent is a party, if called for by such
Terms Agreement, such Agent shall have received:
(i) The opinion, dated as of such date, of Gloria Santona, Vice
President, Deputy General Counsel and Secretary, or a Vice
President and Assistant General Counsel of the Company, to
the effect that:
(A) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the
laws of the State of Delaware with corporate power and
authority to own its properties and conduct its
business as set forth in the Prospectus.
(B) The Indenture has been duly authorized, executed and
delivered by the Company and the Trustee, is duly
qualified under the Trust Indenture Act, and is a valid
and legally binding obligation of the Company
enforceable in accordance with its terms, except as
enforcement thereof may be limited by applicable
bankruptcy, insolvency, moratorium and other laws
affecting the enforceability of creditors' rights and
general principles of equity.
(C) The Notes have been duly and validly authorized by all
necessary corporate action and, when duly executed on
behalf of the Company, duly authenticated by the
Trustee or the Trustee's authenticating agent, and duly
delivered to the several purchasers thereof against
payment therefor in accordance with the provisions of
this Agreement, will constitute legal, valid and
binding obligations of the Company enforceable in
accordance with their terms and entitled to all the
benefits of the Indenture, except as
14
enforcement thereof may be limited by applicable
bankruptcy, insolvency, moratorium and other laws
affecting the enforceability of creditors' rights and
general principles of equity.
(D) The Indenture and the Notes conform as to legal matters
with the statements concerning them made in the
Prospectus, and such statements accurately set forth
the provisions thereof required to be set forth in the
Prospectus.
(E) This Agreement (and, if the opinion is being given
pursuant to Section 3(j) hereof on account of the
Company having entered into a Terms Agreement, the
applicable Terms Agreement) has been duly authorized,
executed and delivered by the Company.
(F) (1) The Registration Statement and any amendments
thereto have become effective under the Securities Act,
and, to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the
Registration Statement, as amended, has been issued and
no proceedings for that purpose have been instituted or
are pending or contemplated under the Securities Act;
(2) the Registration Statement, the Prospectus, and
each amendment thereof or supplement thereto (except
for financial statements or other financial data
included therein, as to which such counsel need express
no opinion) comply as to form in all material respects
with the requirements of the Securities Act and the
Exchange Act and the respective rules thereunder; (3)
such counsel has no reason to believe that either the
Registration Statement or the Prospectus or any such
amendment or supplement, contains any untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading; the descriptions in
the Registration Statement and Prospectus of statutes,
legal and governmental proceedings and contracts and
other documents are accurate and fairly present the
information required to be shown; and (4) such counsel
does not know of any legal or governmental proceedings
required to be described in the Prospectus which are
not so described as required nor of any contracts or
other documents which are required to be described in
the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement which
are not described and filed as required.
(G) The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated
and the fulfillment of the terms hereof will not result
in any breach of any of the terms and
15
provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement
or instrument to which, to the knowledge of such
counsel, the Company is a party, or the Restated
Certificate of Incorporation or By-Laws of the Company
as presently in effect or, to the knowledge of such
counsel, any order, rule or regulation applicable to
the Company of any court or any federal or state
regulatory body or administrative agency or other
governmental body having jurisdiction over the Company
or its properties.
(H) No authorization, approval, consent or other action of
any governmental authority or agency is required in
connection with the sale of the Notes as contemplated
by this Agreement, except such as may be required under
the Securities Act or under state securities or blue
sky laws.
It is understood that such counsel may limit his or her
opinion to the laws of the United States of America, the
laws of the State of Illinois, and the General Corporation
Law of the State of Delaware.
The opinions set forth in paragraphs (i)(B) and (i)(C) above
may be further limited by inclusion of a statement to the
effect that insofar as such opinions relate to Notes
denominated in a currency other than United States dollars,
the effective enforcement of a foreign currency claim in the
federal or state courts of the State of New York may be
limited by requirements that a claim (or a foreign currency
judgment in respect of such a claim) be converted into
United States dollars at the rate of exchange prevailing on
the judgment date.
(ii) The opinion dated as of such date, of Gardner, Carton
& Douglas, counsel to you, covering the matters in
paragraphs (i)(B), (i)(C), (i)(D), (i)(E) and
(i)(F)(3) above, provided that with respect to
paragraph (i)(F)(3) above, such counsel may state that
their belief is based upon their participation in the
preparation of the Registration Statement and the
Prospectus and any amendments or supplements thereto
(other than documents incorporated by reference) and
review and discussion of the contents thereof
(including documents incorporated by reference) but is
without independent check or verification except as
specified.
(e) On the Commencement Date, and at each Settlement Date with
respect to any Terms Agreement to which such Agent is a
party, the Company shall have furnished to such Agent, a
certificate of the Company, signed by the President or a
Vice President, and the Chief Financial Officer of the
Company or its Treasurer, dated as of the Commencement Date
or such Settlement Date, to the effect that:
16
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on
and as of the date of such certificate, and the Company has
complied in all material respects with all the agreements
and satisfied in all material respects all the conditions
on its part to be performed or satisfied at or prior to the
date of such certificate;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or, to
the signer's knowledge, are contemplated under the
Securities Act; and
(iii) the signers of the certificate have carefully examined the
Registration Statement and the Prospectus; neither the
Registration Statement, the Prospectus nor any amendment or
supplement thereto includes, as of the date of such
certificate, any untrue statement of a material fact or
omits, as of such date, to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading; since the latest respective dates
as of which information is given in the Registration
Statement, there has been no material adverse change in the
financial position, business or results of operations of
the Company and its consolidated subsidiaries, considered
as a whole, except as set forth in or contemplated by the
Prospectus; and since the effective date of the
Registration Statement, as amended, no event has occurred
which is required to be set forth in the Prospectus which
has not been so set forth.
(f) On the Commencement Date, and at each Settlement Date with
respect to any Terms Agreement to which such Agent is a party, if
called for by such Terms Agreement, the Company's independent
auditors shall have furnished to such Agent, a letter or letters,
dated as of the Commencement Date or such Settlement Date, in
form and substance satisfactory to it, confirming that they are
independent auditors within the meaning of the Securities Act and
the respective applicable published rules and regulations
thereunder and containing statements and information of the type
ordinarily included in "comfort letters" to underwriters with
respect to the financial statements and certain financial
information contained or incorporated by reference in the
Registration Statement and the Prospectus as then amended or
supplemented.
(g) On the Commencement Date and at each Settlement Date with respect
to any Terms Agreement to which such Agent is a party, the
Company shall have furnished to such Agent such appropriate
further certificates and documents as it may reasonably request.
17
5. Indemnification and Contribution.
--------------------------------
(a) The Company will indemnify and hold harmless each Agent and each
person, if any, who controls such Agent within the meaning of the
Securities Act or the Exchange Act against any losses, claims,
damages or liabilities, joint or several, to which such Agent or
such controlling person may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or any amendment thereof, the Basic
Prospectus or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse each Agent and each such
controlling person for any legal or other expenses reasonably
incurred by such Agent or such controlling person in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by an Agent
specifically for use in the preparation thereof; and provided,
further, that the foregoing indemnification with respect to the
Basic Prospectus or the Prospectus shall not inure to the benefit
of any Agent (or any person controlling such Agent) from whom the
person asserting any such loss, claim, damage or liability
purchased the Securities, if such Agent, if acting as principal
in the sale of the Notes to such person or as agent in such sale
having solicited such person, failed to send or give copies of
the Prospectus, as amended or supplemented, excluding documents
incorporated therein by reference, to such person at or prior to
the written confirmation of the sale of such Notes to such person
in any case where such delivery is required by the Securities Act
and the untrue statement or omission of a material fact contained
in the Basic Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented). This indemnity agreement
will be in addition to any liability which the Company may
otherwise have.
(b) Each Agent severally agrees to indemnify and hold harmless the
Company, each person, if any, who controls the Company either
within the meaning of the Securities Act or the Exchange Act,
each of its directors and each of its officers who has signed the
Registration Statement, against any losses, claims, damages or
liabilities to which the Company, any such controlling person or
any such director or officer may become subject, under the
Securities Act, the Exchange Act, or otherwise, to the same
extent as the foregoing indemnity
18
from the Company to each Agent, but only with reference to
written information relating to such Agent furnished to the
Company specifically for use in the preparation of the documents
referred to in the foregoing indemnity. The Company acknowledges
that the statements set forth under the heading "Plan of
Distribution" (exclusive of the sixth paragraph thereof) in the
Prospectus Supplement dated __________, 1998 relating to the
Notes constitute the only information furnished in writing by or
on behalf of any Agent for inclusion in the Prospectus, and the
Agents confirm that such statements are correct. This indemnity
agreement will be in addition to any liability which each such
Agent may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section, notify the
indemnifying party in writing of the commencement thereof, but
the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party
otherwise than under this Section. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that
if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are
different from or in addition to those available to the
indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon
receipt by such indemnified party of notice from the indemnifying
party of its election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying
party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof
unless (i) the indemnified party shall have employed such counsel
in connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel,
approved by the applicable Agent in the case of subparagraph (a),
representing the indemnified parties under subparagraph (a) or
(b), as the case may be, who are parties to such action); (ii)
the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the
indemnified
19
party within a reasonable time after notice of commencement of
the action; or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of
the indemnifying party; provided further, that, with respect to
legal and other expenses incurred by an indemnified party for
which an indemnifying party shall be liable hereunder, all such
legal fees and expenses shall be reimbursed by the indemnifying
party as they are incurred.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in
paragraph (a) of this Section is due in accordance with its terms
but is for any reason held by a court to be unavailable from the
Company on grounds of policy or otherwise, the Company and each
Agent participating in the offering of Notes that gave rise to
the losses, claims, damages or liabilities (a "Relevant Agent")
for which contribution is sought shall severally contribute to
the aggregate of such losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
connection with investigating or defending same) in such
proportion so that each Relevant Agent is responsible for that
portion represented by the percentage that the commission rate
paid to such Relevant Agent on the sale of Notes sold through it
bears to the sum of such commission rate and the purchase price
of such Notes sold through such Relevant Agent, and the Company
is responsible for the balance; provided, however, that (i) in no
case shall any such Relevant Agent be responsible for any amount
in excess of the commission rate paid to such Relevant Agent in
connection with the sale of such Notes; and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section, each person who
controls an Agent within the meaning of either the Securities Act
or the Exchange Act shall have the same rights to contribution as
such Agent, and each person who controls the Company within the
meaning of either the Securities Act or the Exchange Act, each
officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to
clause (i) of this paragraph (d). Any party entitled to
contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against
another party or parties under this paragraph (d), notify such
party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any
other obligation it or they may have hereunder or otherwise than
under this paragraph (d).
20
6. Restrictions on Offers and Sales of Registered Notes. Each Agent
----------------------------------------------------
represents and agrees that it has not offered or sold and agrees that it will
not offer or sell any Note directly or indirectly in Japan or to residents of
Japan or for the benefit of any Japanese person (which term as used herein means
any person resident in Japan, including any corporation or other entity
organized under the laws of Japan) or to others for reoffering or resale
directly or indirectly in Japan or to any Japanese person except under
circumstances that will result in compliance with any applicable laws,
regulations and ministerial guidelines of Japan taken as a whole. Furthermore,
in connection with the issuance of Notes denominated in Japanese yen, the
Company and each Agent agree to comply with all applicable laws, regulations and
guidelines as amended from time to time of the Japanese governmental and
regulatory authorities.
7. Position of the Agents. In soliciting offers to purchase the Notes,
----------------------
each Agent is acting solely as agent for the Company, and not as principal.
Each Agent shall make reasonable efforts to assist the Company in obtaining
performance by each purchaser whose offer to purchase Notes has been solicited
by it and accepted by the Company, but no Agent shall have any liability to the
Company in the event any such purchase is not consummated for any reason. Under
no circumstances will any Agent be obligated to purchase any Notes for its own
account other than pursuant to, and subject to the conditions set forth in, any
Terms Agreement.
8. Termination. This Agreement may be terminated at any time either
-----------
(a) by the Company as to any Agent or (b) by any Agent, insofar as this
Agreement relates to such Agent, upon the giving of written notice of such
termination to the other parties hereto. In the event of such termination with
respect to any Agent, this Agreement shall remain in full force and effect with
respect to any Agent as to which such termination has not occurred. Any Terms
Agreement may be terminated, immediately upon notice to the Company, at any time
prior to the Settlement Date relating to a Terms Agreement if (i) trading in the
Company's common stock shall have been suspended by the Commission on the New
York Stock Exchange for a period of 24 hours or more or trading in the
securities generally on the New York Stock Exchange shall have been suspended or
materially limited, in either case to such a degree as would in the reasonable
judgment of the Agent which is party to such Agreement adversely affect the
market for the Notes; (ii) a general moratorium on commercial banking activities
in the State of New York or the United States shall have been declared by
Federal authorities; or (iii) there has occurred any material outbreak, or
material escalation, of hostilities involving the United States or other
national or international calamity or crisis, of such magnitude and severity in
its effect on the financial markets of the United States, in your reasonable
judgment, as to prevent or materially impair the marketing, or enforcement of
contracts for sale, of the Notes. In the event of termination of this Agreement
or any Terms Agreement, no party shall have any liability to the other parties
hereto, except (1) as provided in the first two sentences of the third paragraph
of Section 2(a) (with respect to any commissions earned by the Agents but not
yet paid by the Company at the time of such termination), Section 3(g), Section
5 and Section 9; and (2) if, at the time of termination, an Agent shall own any
Notes purchased pursuant to a Terms Agreement entered into prior to the
termination of this Agreement with the intention of reselling them or an offer
to purchase any Notes has been accepted by the Company but the time of delivery
to the purchaser or its agent of such Notes has not occurred, as provided in
Sections 3(b) through 3(e),
21
3(h) through 3(k) and 3(n) hereof; provided that the exception set forth in
clause (2) of this sentence shall be of no further force or effect immediately
after the earlier of (i) resale or delivery, as the case may be, of the Notes
referred to in such clause; and (ii) in the case of Notes purchased pursuant to
a Terms Agreement entered into prior to the termination of this Agreement, a
date 270 calendar days from the date of such termination. The provisions of the
last sentence of Section 3(e) and each of Sections 3(g), 5 and 9 hereof shall
survive the termination or cancellation of any Terms Agreement.
9. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties and indemnities of the Company or its
officers and each Agent set forth in or made pursuant to this Agreement or any
Terms Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Agent or the Company or any of the
officers, directors or controlling persons referred to in Section 5 hereof, and
will survive delivery of and payment for the Notes.
10. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and shall be mailed, delivered or sent by facsimile
transmission and confirmed as follows:
(i) if to Merrill Lynch, Pierce, Fenner & Smith Incorporated at
Merrill Lynch & Co., Merrill Lynch World Headquarters, North
Tower, World Financial Center, 10th Floor, New York, New York
10281, Attention: MTN Product Management;
(ii) if to Goldman, Sachs & Co., at 85 Broad Street, New York, New
York 10004, Attention: Medium-Term Note Trading Department;
(iii) if to J.P. Morgan Securities Inc., at 60 Wall Street, 3rd Floor,
New York, New York 10260, Attention: MTN Desk;
(iv) if to Morgan Stanley & Co. Incorporated, at 1585 Broadway, 2nd
Floor, New York, New York 10036, Attention: Medium-Term Note
Trading Desk;
(v) if to Salomon Brothers Inc, at 7 World Trade Center, New York,
New York 10048, Attention: Medium-Term Note Department; and
(vi) if to the Company, at One McDonald's Plaza, Oak Brook, Illinois
60523, Attention: Treasurer, with a copy to the Controller;
or at such other address as any party may notify to the other parties hereto
from time to time.
11. Successors. This Agreement and any Terms Agreement will inure to
----------
the benefit of and be binding upon the parties hereto and thereto and their
respective successors, assigns, heirs, executors and administrators, and the
officers and directors and controlling
22
persons referred to in Section 5 hereof, and no other person will have any right
or obligation hereunder.
12. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
--------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
* * *
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company and you.
Very truly yours,
McDONALD'S CORPORATION
By:_________________________________
Title: Senior Vice President and
Treasurer
23
The foregoing Agreement is hereby confirmed and accepted as of the
date first written above.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:___________________________
Title:
GOLDMAN, SACHS & CO.
By:___________________________
Title:
MORGAN STANLEY & CO.
INCORPORATED
By:___________________________
Title:
J.P. MORGAN SECURITIES INC.
By:___________________________
Title:
SALOMON BROTHERS INC
By:___________________________
Title:
24
Exhibit A
FORM OF TERMS AGREEMENT
McDonald's Corporation
MEDIUM-TERM NOTES, SERIES F
TERMS AGREEMENT
_______________, 19__
McDonald's Corporation
One McDonald's Plaza
Oak Brook, Illinois 60523
Attention: Treasurer
Re: U.S. Distribution Agreement dated July _____, 1998
The undersigned agrees to purchase the following principal amount of your
Medium-Term Notes: [Currency/Amount]
Initial Public Offering Price:
Stated Maturity:
Purchase Price:
Purchase Date and Time:
Settlement Date and Time:
Place of Delivery:
Form: Book-Entry __________ or
Certificated _____________
Redeemable by Company: ___Yes ___No
A-1
Redemption Price Schedule:
Date Price
---- -----
Repayable at option of Holder: ___Yes ___No
Repayment Price Schedule:
Date Price
---- -----
For Fixed Rate Notes:
Interest Rate:
Interest Payment Dates:
(if other than February 15 and August 15)
Regular Record Dates:
(if other than February 1 and August 1)
For Floating Rate Notes:
Base Rate:
Initial Interest Rate:
Spread:
Spread Multiplier:
Index Maturity:
Interest Reset Period:
Interest Reset Dates:
Interest Payment Dates:
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:
For Indexed Notes:
[specify appropriate terms]
For Original Issue Discount Notes:
[specify appropriate terms]
For Amortizing Notes:
[specify amortization schedule]
(Other terms)
The provisions of Sections 1, 2(b), 2(c), 2(d), 3 through 6 and 8
through 13 of the Distribution Agreement and the related definitions are
incorporated by reference herein and shall be deemed to have the same force and
effect as if set forth in full herein.
A-2
[The certificates referred to in Section 3(i) of the Distribution
Agreement, the opinion referred to in Section 3(j) of the Distribution Agreement
and the auditors' letter referred to in Section 3(k) of the Distribution
Agreement will be required.]
[The following opinions, letters, information, certificates and
documents referred to in Section 4 of the Distribution Agreement will be
required:]
[The lockup period referred to in Section 3(l) of the U.S.
Distribution Agreement shall extend to a date ____ calendar days after the
Settlement Date.]
[NAME OF PURCHASER]
By: _______________________________
Title:
Accepted as of the date written above:
McDONALD'S CORPORATION
By: ______________________________
Title:
A-3
Exhibit B
Medium-Term Note Administrative Procedures
------------------------------------------
Medium-Term Notes, Series F (the "Notes") are to be offered on a continuing
basis by McDonald's Corporation (the "Company"). Each of Merrill Lynch & Co.,
Goldman, Sachs & Co., J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated and Salomon Brothers Inc as agent (each an "Agent"), has agreed to
solicit offers to purchase the Notes and to purchase Notes, as principal, for
its own account. The Notes are being sold pursuant to a U.S. Distribution
Agreement between the Company and the Agents dated July ___, 1998 (the
"Agreement"). The Notes will be in registered form and will be issued under an
Indenture dated as of October 19, 1996, between the Company and First Union
National Bank as trustee (the "Trustee"), and any indenture supplemental
thereto. If any provision of these Administrative Procedures limits or conflicts
with any provision of the form of Note attached to these Administrative
Procedures as Annex I hereto, such provision in the form of Note shall be
controlling. The Notes will constitute part of the senior debt of the Company
and will rank equally with all other unsecured and unsubordinated debt of the
Company.
Each Note will be represented by either a Global Security (as defined
hereinafter) (a "Registered Note") or a certificate delivered to the Holder
thereof or a Person designated by such Holder (a "Certificated Note"). Each
Global Security representing Registered Notes will be delivered to The First
National Bank of Chicago ("First Chicago" or the "DTC Agent"), acting as agent
for The Depository Trust Company or any successor depositary selected by the
Company ("DTC", which term, as used herein, includes any successor depositary
selected by the Company), and will be recorded in the book-entry system
maintained by DTC (a "Book-Entry Note"). Except as set forth in the Basic
Prospectus (as defined in the Agreement), an owner of a Book-Entry Note will not
be entitled to receive a certificate representing such Note.
The procedures to be followed during, and the specific terms of, the
solicitation of orders by the Agents and the sale as a result thereof by the
Company are explained below. Administrative and record-keeping responsibilities
will be handled for the Company by its Treasury Department. The Company will
advise the Agents, the Paying Agent and the Trustee in writing of those persons
handling administrative responsibilities with whom the Agents, the Paying Agent
and the Trustee are to communicate regarding orders to purchase Notes and the
details of their delivery.
Administrative procedures and specific terms of the offering are explained
below. Book-Entry Notes will be issued in accordance with the administrative
procedures set forth in Part I hereof, as adjusted in accordance with changes in
DTC's operating requirements, and Certificated Notes will be issued in
accordance with the administrative procedures set forth in Part II hereof.
Unless otherwise defined herein, terms defined in the Indenture, the Notes or
the Prospectus Supplement relating to the Notes shall be used herein as therein
defined. Notes for which interest is calculated on the basis of a fixed interest
rate, which may be zero, are referred to herein as "Fixed Rate Notes". Notes for
which interest is calculated on the basis of a floating
B-1
interest rate are referred to herein as "Floating Rate Notes". To the extent the
procedures set forth below conflict with the provisions of the Notes, the
Indenture, DTC's operating requirements or the Agreement, the relevant
provisions of the Notes, the Indenture, DTC's operating requirements and the
Agreement shall control.
PART I: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the DTC Agent will
perform the custodial, document control and administrative functions described
below for the Registered Notes. The DTC Agent will perform such functions in
accordance with its respective obligations under a Letter of Representations
from the Company and the DTC Agent to DTC dated as of the date hereof and a
Medium-Term Note Certificate Agreement between First Chicago and DTC, dated May
26, 1989 and as amended to date, and its obligations as a participant in DTC,
including DTC's Same-Day Funds Settlement system ("SDFS").
Issuance: On any date of settlement (as defined under
--------
"Settlement" below) for one or more Fixed Rate Book-
Entry Notes, the Company will issue a single global
security in fully registered form without coupons (a
"Global Security") representing up to $200,000,000
principal amount of all such Notes that have the same
interest rate, Stated Maturity and redemption
provisions. On any settlement date for one or more
Floating Rate Book-Entry Notes, the Company will issue
a single Global Security representing up to
$200,000,000 principal amount of all such Notes that
have the same Base Rate, Initial Interest Rate, Index
Maturity, Spread or Spread Multiplier, Interest Reset
Period, Interest Payment Dates, redemption provisions,
Minimum Interest Rate (if any), Maximum Interest Rate
(if any) and Stated Maturity. On any settlement date
for one or more Indexed Book-Entry Notes, the Company
will issue a single Global Security representing up to
$200,000,000 principal amount of all such Notes that
have the same terms (as such terms are identified in
the Pricing Supplement relating to such Notes). Each
Global Security will be dated and issued as of the date
of its authentication by the Trustee for the Registered
Notes represented by such Global Security. No Global
Security will represent (i) more than one of a Fixed
Rate, Floating Rate and Indexed Book-Entry Notes; or
(ii) any Certificated Note.
Identification Numbers: The Company has arranged with the CUSIP Service Bureau
----------------------
of Standard & Poor's (the "CUSIP Service Bureau") for
the
B-2
reservation of a series of CUSIP numbers (including
tranche numbers) for the Registered Notes. Such series
consists of approximately 900 CUSIP numbers and relates
to Global Securities representing Book-Entry Notes and
book-entry medium-term notes issued by the Company with
other series designations. The DTC Agent has obtained
from the CUSIP Service Bureau written lists of such
reserved CUSIP numbers and caused such lists to be
delivered to the DTC Agent and to DTC. The DTC Agent
will assign CUSIP numbers to Global Securities as
described below under Settlement Procedure "B". DTC
will notify the CUSIP Service Bureau periodically of
the CUSIP numbers that the DTC Agent has assigned to
Global Securities. The DTC Agent will notify the
Company at any time when fewer than 100 of the reserved
CUSIP numbers remain unassigned to Global Securities,
and, if it deems necessary, the Company will reserve
additional CUSIP numbers for assignment to Global
Securities. Upon obtaining such additional CUSIP
numbers, the Company shall deliver a list of such
additional CUSIP numbers to the DTC Agent, as needed,
and to DTC.
Registration: Global Securities will be issued only in fully
------------
registered form without coupons and each Global
Security will be registered in the name of CEDE & Co.,
as nominee for DTC, on the securities register for the
Notes (the "Securities Register") maintained under the
Indenture. The beneficial owner of a Book-Entry Note
(or one or more indirect participants in DTC designated
by such owner) will designate one or more direct
participants in DTC (with respect to such Note, the
"Participants") to act as agent or agents for such
owner in connection with the book-entry system
maintained by DTC, and DTC will record in book-entry
form, in accordance with instructions provided by such
Participants, a credit balance with respect to such
beneficial owner in such Note in the account of such
Participants. The ownership interest of such beneficial
owner (or such participants) in such Note will be
recorded through the records of such Participants or
through the separate records of such Participants and
one or more indirect participants in DTC.
Transfers: Transfers of a Book-Entry Note will be accomplished by
---------
book entries made by DTC and, in turn, by Participants
(and in certain cases, one or more indirect
participants in DTC)
B-3
acting on behalf of beneficial transferors and
transferees of such Note.
Exchanges: The DTC Agent may deliver to DTC and the CUSIP Service
---------
Bureau at any time a written notice of consolidation (a
copy of which shall be attached to the resulting Global
Security described below) specifying (i) the CUSIP
numbers of two or more Outstanding Global Securities
that represent (A) Fixed Rate Book-Entry Notes having
the same interest rate, Interest Payment Date,
redemption provisions and Stated Maturity and for which
interest has been paid to the same date; (B) Floating
Rate Book-Entry Notes having the same Base Rate, Index
Maturity, Spread or Spread Multiplier, Interest Reset
Period, Interest Payment Dates, redemption and
repayment provisions, Minimum Interest Rate (if any),
Maximum Interest Rate (if any) and Stated Maturity and
for which interest has been paid to the same date; or
(C) Indexed Book-Entry Notes having the same terms (as
such terms are identified in the Pricing Supplement
relating to such Notes); (ii) a date, occurring at
least 30 days after such written notice is delivered
and at least 30 days before the next Interest Payment
Date for such Book-Entry Notes, on which such Global
Securities shall be exchanged for a single replacement
Global Security; and (iii) a new CUSIP number to be
assigned to such replacement Global Security. Upon
receipt of such a notice, DTC will send to its
participants (including the DTC Agent) a written
reorganization notice to the effect that such exchange
will occur on such date. Prior to the specified
exchange date, the DTC Agent will deliver to the CUSIP
Service Bureau a written notice setting forth such
exchange date and the new CUSIP number and stating
that, as of such exchange date, the CUSIP numbers of
the Global Securities to be exchanged will no longer be
valid. On the specified exchange date, the DTC Agent
will exchange such Global Securities for a single
Global Security bearing the new CUSIP number and the
CUSIP numbers of the exchanged Global Securities will,
in accordance with CUSIP Service Bureau procedures, be
canceled and not immediately reassigned. Upon such
exchange, the DTC Agent will mark the predecessor
Global Security "canceled", make appropriate entries in
the DTC Agent's records and destroy such canceled
Global Security in accordance with the terms of the
Indenture and deliver a certificate of destruction to
the Company. Notwithstanding the foregoing, if the
Global
B-4
Securities to be exchanged exceed $200,000,000 in
aggregate principal amount, one Global Security will be
authenticated and issued to represent each $200,000,000
of principal amount of the exchanged Global Securities
and an additional Global Security will be authenticated
and issued to represent any remaining principal amount
of such Global Securities (see "Denominations" below).
Maturities: Each Book-Entry Note will mature on a date not less than
----------
one year nor more than 60 years after the settlement
date for such Note (the "Stated Maturity"). Unless
otherwise specified in the applicable Pricing
Supplement, a Floating Rate Book-Entry Note will mature
only on an Interest Payment Date for such Note.
Denominations: Book-Entry Notes will be issued in principal amounts of
-------------
$1,000 or any amount in excess thereof that is an
integral multiple of $1,000. If Book-Entry Notes are
denominated in a Specified Currency other than U.S.
dollars, the denominations of such Notes will be
determined pursuant to the provisions of the applicable
Pricing Supplement. Global Securities will be
denominated in principal amounts not in excess of
$200,000,000 (or the equivalent thereof). If one or more
Book-Entry Notes having an aggregate principal amount in
excess of $200,000,000 (or the equivalent thereof)
would, but for the preceding sentence, be represented by
a single Global Security, then one Global Security will
be authenticated and issued to represent each
$200,000,000 principal amount (or the equivalent
thereof) of such Book-Entry Note or Notes and an
additional Global Security will be authenticated and
issued to represent any remaining principal amount of
such Book-Entry Note or Notes. In such a case, each of
the Global Securities representing such Book-Entry Note
or Notes shall be assigned the same CUSIP number.
Interest: General. Unless otherwise indicated in the applicable
-------- -------
Pricing Supplement, interest, if any, on each Book-Entry
Note will accrue from the Original Issue Date (or such
other date on which interest otherwise begins to accrue
(if different than the Original Issue Date)) of the
Global Security representing such Book-Entry Note or
from the last day to which interest has been paid
thereon or duly provided for and will be calculated and
paid in the manner described in such Book-
B-5
Entry Note and in the applicable Pricing Supplement. The
first payment of interest on any Book-Entry Note
originally issued between a Regular Record Date and an
Interest Payment Date will be made on the next
succeeding Interest Payment Date. Unless otherwise
specified therein, each payment of interest for a Book-
Entry Note will include interest accrued to but
excluding the Interest Payment Date or to but excluding
Stated Maturity. Interest payable at the Stated Maturity
of a Book-Entry Note will be payable to the person to
whom the principal of such Note is payable. Standard &
Poor's will use the information received in the pending
deposit message described under Settlement Procedure "C"
below in order to include the amount of any interest
payable and certain other information regarding the
related Global Security in the appropriate daily bond
report published by Standard & Poor's.
Regular Record Dates. Unless otherwise specified in
--------------------
the applicable Pricing Supplement, the Regular Record
Date with respect to any Interest Payment Date for a
Fixed Rate Book-Entry Note shall be the February 1 or
August 1 (whether or not a Business Day) immediately
preceding such Interest Payment Date. Unless otherwise
specified in the applicable Pricing Supplement, the
Regular Record Date with respect to any Interest Payment
Date for a Floating Rate Book-Entry Note shall be the
date (whether or not a Business Day) 15 calendar days
immediately preceding such Interest Payment Date.
Interest Payment Dates on Fixed Rate Book-Entry Notes.
-----------------------------------------------------
Unless otherwise specified pursuant to Settlement
Procedure "A" below, interest payments on Fixed Rate
Book-Entry Notes will be made semiannually on February
15 and August 15 of each year and at Stated Maturity;
provided, however, that if any Interest Payment Date for
a Fixed Rate Book-Entry Note is not a Business Day, the
payment due on such day shall be made on the next
succeeding Business Day, and no interest shall accrue on
such payment for the period from and after such Interest
Payment Date; and provided further that in the case of a
Fixed Rate Book-Entry Note issued between a Regular
Record Date and an Interest Payment Date, the first
interest payment will be made on the Interest Payment
Date following the next succeeding Regular Record Date.
B-6
Interest Payment Dates on Floating Rate Book-Entry
--------------------------------------------------
Notes. Unless otherwise specified, interest payments
-----
will be made on Floating Rate Book-Entry Notes
monthly, quarterly, semiannually or annually. Unless
otherwise specified, interest will be payable, in the
case of Floating Rate Book-Entry Notes that: reset
daily, weekly or monthly, on the third Wednesday of
each month or on the third Wednesday of March, June,
September and December of each year, as specified;
reset quarterly, on the third Wednesday of March,
June, September and December of each year; reset
semiannually, on the third Wednesday of each of two
months specified pursuant to Settlement Procedure "A"
below; and reset annually, on the third Wednesday of
the month specified pursuant to Settlement Procedure
"A" below; provided, however, that if an Interest
Payment Date for a Floating Rate Book-Entry Note would
otherwise be a day that is not a Business Day with
respect to such Floating Rate Book-Entry Note, such
Interest Payment Date will be the next succeeding
Business Day with respect to such Floating Rate Book-
Entry Note, except in the case of a Floating Rate Book
Entry Note for which the Base Rate is LIBOR, if such
Business Day is in the next succeeding calendar month,
such Interest Payment Date will be the immediately
preceding Business Day; and provided further, that in
the case of a Floating Rate Book-Entry Note issued
between a Regular Record Date and an Interest Payment
Date, the first interest payment will be made on the
Interest Payment Date following the next succeeding
Regular Record Date.
Notice of Interest Payment and Regular Record Dates.
---------------------------------------------------
On the first Business Day of January, April, July and
October of each year, the DTC Agent will deliver to
the Company and DTC a written list of Regular Record
Dates and Interest Payment Dates that will occur with
respect to Book-Entry Notes during the six-month
period beginning on such first Business Day. Promptly
after each Interest Determination Date for Floating
Rate Book-Entry Notes, First Chicago, as Calculation
Agent, will make available to Standard & Poor's the
interest rates determined on such Interest
Determination Date.
Calculation of Interest: Fixed Rate Book-Entry Notes. Interest on Fixed Rate
----------------------- ---------------------------
Book-Entry Notes (including interest for partial
periods) will be
B-7
calculated on the basis of a 360-day year of twelve 30-
day months.
Floating Rate Book-Entry Notes. Interest rates on
------------------------------
Floating Rate Book-Entry Notes will be determined as set
forth in the form of Notes. Interest on Floating Rate
Book-Entry Notes, except as otherwise set forth herein,
will be calculated on the basis of actual days elapsed
and a year of 360 days, except that in the case of a
Floating Rate Book-Entry Note for which the Base Rate is
the Treasury Rate or CMT, interest will be calculated on
the basis of the actual number of days in the year.
Amortizing Book-Entry Notes. Unless otherwise indicated
---------------------------
in the applicable Pricing Supplement, interest on
Amortizing Notes will be calculated on the basis of a
360-day year of twelve 30-day months.
Payments of Principal
---------------------
and Interest: Payment of Interest Only. Promptly after each Regular
------------ ------------------------
Record Date, the DTC Agent will deliver to the Company
and DTC a written notice specifying the CUSIP number,
the amount of interest to be paid on each Global
Security on the following Interest Payment Date (other
than an Interest Payment Date coinciding with Stated
Maturity) and the total of such amounts. DTC will
confirm the amount payable on each Global Security on
such Interest Payment Date by reference to the daily
bond reports published by Standard & Poor's. The Company
will pay to the Paying Agent the total amount of
interest due on such Interest Payment Date (other than
at Stated Maturity), and the Paying Agent will pay such
amount to DTC, at the times and in the manner set forth
below under "Manner of Payment".
Payments at Stated Maturity. On or about the first
---------------------------
Business Day of each month, the DTC Agent will deliver
to the Company and DTC a written list of principal and
interest to be paid on each Global Security maturing in
the following month. The Company, DTC and the DTC Agent
will confirm the amounts of such principal and interest
payments with respect to each such Global Security on or
about the fifth Business Day preceding the Stated
Maturity of such Global Security. The Company will pay
to the Paying Agent the principal amount of such Global
Security, together with
B-8
interest due at such Stated Maturity. The Paying Agent
will pay such amount to DTC at the times and in the
manner set forth below under "Manner of Payment".
Promptly after payment to DTC of the principal and
interest due at the Stated Maturity of such Global
Security, the Paying Agent will cancel such Global
Security and deliver it to the Company with an
appropriate debit advice.
Manner of Payment. The total amount of any principal
-----------------
and interest due on Global Securities on any Interest
Payment Date or at Stated Maturity shall be paid by the
Company to the Paying Agent in immediately available
funds no later than 9:30 a.m. (New York City time) on
such date. The Company will make such payment on such
Global Securities by instructing the Paying Agent to
withdraw funds from an account maintained by the
Company. The Company will confirm any such instructions
in writing to the Paying Agent. For Stated Maturity,
redemption and other principal payments, the Paying
Agent will pay, prior to 10:00 a.m. (New York City time)
on such date or as soon as possible thereafter, by
separate wire transfer (using Fedwire message entry
instructions in a form previously specified by DTC) to
an account at the Federal Reserve Bank of New York
previously specified by DTC, in funds available for
immediate use by DTC, each payment of principal
(together with interest thereon) due on a Global
Security on such date. Thereafter on such date, DTC will
pay, in accordance with its SDFS operating procedures
then in effect, such amounts in funds available for
immediate use to the respective Participants in whose
names the Book-Entry Notes represented by such Global
Security are recorded in the book-entry system
maintained by DTC. Payments of interest shall be made to
DTC in same day funds in accordance with existing
arrangements in place between the DTC Agent and DTC.
None of the Company, the Paying Agent or the DTC Agent
shall have any direct responsibility or liability for
the payment by DTC to such Participants of the principal
of and interest on the Book-Entry Notes.
If an issue of Notes is denominated in a currency other
than the U.S. dollar, the Company will make payments of
principal and any interest in the currency in which the
Notes are denominated (the "foreign currency") or in
U.S. dollars. DTC has elected to have all such payments
of principal and
B-9
interest in U.S. dollars unless notified by
any of its Participants through which an
interest in the Notes is held that it elects,
in accordance with and to the extent permitted
by the applicable Pricing Supplement and the
Note, to receive such payment of principal or
interest in the foreign currency. On or prior
to the third Business Day after the record
date for payment of interest and twelve days
prior to the date for payment of principal,
such Participant shall notify DTC of (i) its
election to receive all, or the specified
portion, of such payment in the foreign
currency; and (ii) its instructions for wire
transfer of such payment to a foreign currency
account.
DTC will notify the applicable Trustee on or
prior to the fifth Business Day after the
record date for payment of interest and ten
days prior to the date for payment of
principal of the portion of such payment to be
received in the foreign currency and the
applicable wire transfer instructions, and the
applicable Trustee shall use such instructions
to pay the Participants directly. If DTC does
not so notify the applicable Trustee, it is
understood that only U.S. dollar payments are
to be made. The applicable Trustee shall
notify DTC on or prior to the second Business
Day prior to payment date of the conversion
rate to be used and the resulting U.S. dollar
amount to be paid per $1,000 face amount. In
the event that the applicable Trustee's
quotation to convert the foreign currency into
U.S. dollars is not available, the applicable
Trustee shall notify DTC's Dividend Department
that the entire payment is to be made in the
foreign currency. In such event, DTC will ask
its Participants for payment instructions and
forward such instructions to the applicable
Trustee and the applicable Trustee shall use
such instructions to pay the Participants
directly.
Withholding Taxes. The amount of any taxes
-----------------
required under applicable law to be withheld
from any interest payment on a Book-Entry Note
will be determined and withheld by the
Participant, indirect participant in DTC or
other person responsible for forwarding
payments and materials directly to the
beneficial owner of such Note.
Procedures upon Company's
-------------------------
Exercise of Optional Redemption: Company Notice to Trustee and Paying Agent
------------------------------- ------------------------------------------
regarding Exercise of Optional Redemption.
-----------------------------------------
At least 45 days prior to
B-10
the date on which it intends to redeem a Book-
Entry Note, the Company will notify the Trustee
and Paying Agent that it is exercising such option
with respect to such Book-Entry Note on such date.
Paying Agent Notice to DTC regarding Company's
----------------------------------------------
Exercise of Optional Redemption. After receipt of
-------------------------------
notice that the Company is exercising its option
to redeem a Book-Entry Note, the Trustee will, at
least 30 days before the redemption date of such
Book-Entry Note, hand deliver to DTC a notice
identifying such Book-Entry Note by CUSIP number
and informing DTC of the Company's exercise of
such option with respect to such Book-Entry Note.
Deposit of Redemption Price. On or before any
---------------------------
redemption date, the Company shall deposit with
the Paying Agent an amount of money sufficient to
pay the redemption price, plus interest accrued to
such redemption date, for all the Book-Entry Notes
or portions thereof which are to be repaid on such
redemption date. The Paying Agent will use such
money to repay such Book-Entry Notes pursuant to
the terms set forth in such Notes.
Procedure for Rate Setting
--------------------------
and Posting: The Company and the Agent will discuss from time
-----------
to time the aggregate principal amount of, the
issuance price of and the interest rates to be
borne by, Book-Entry Notes that may be sold as a
result of the solicitation of orders by the Agent.
If the Company decides to set prices of, and rates
borne by, any Book-Entry Notes in respect of which
the Agent is to solicit orders (the setting of
such prices and rates to be referred to herein as
"posting") or if the Company decides to change
prices or rates previously posted by it, it will
promptly advise the Agent of the prices and rates
to be posted.
Acceptance and Rejection
------------------------
of Offers: Unless otherwise instructed by the Company, the
---------
Agent will advise the Company promptly by
telephone of all orders to purchase Book-Entry
Notes received by the Agent, other than those
rejected by it in whole or in part in the
reasonable exercise of its discretion. Unless
otherwise agreed by the Company and the Agent, the
Company has the right to accept
B-11
orders to purchase Book-Entry Notes and may reject
any such orders in whole or in part.
Confirmation: For each order to purchase a Book-Entry Note
------------
solicited by the Agent and accepted by or on behalf
of the Company, the Agent will issue a confirmation
to the purchaser, with a copy to the Company,
setting forth the details set forth above and
delivery and payment instructions.
Settlement: The receipt by the Company of immediately available
----------
funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Security
representing such Book-Entry Note shall constitute
"settlement" with respect to such Book-Entry Note,
and the date of such settlement, the "Settlement
Date". All orders accepted by the Company will be
settled on the third Business Day next succeeding
the date of acceptance pursuant to the timetable for
settlement set forth below unless the Company and
the purchaser agree to settlement on another day,
which shall be no earlier than the next Business Day
following the date of sale.
Settlement Procedures: Settlement Procedures with regard to each Book-Entry
---------------------
Note sold by the Company to or through the Agent,
except pursuant to a Terms Agreement, shall be as
follows:
A. The Agent will advise the Company by
telephone (or by facsimile or other
acceptable written means) that such Note is a
Book-Entry Note and of the following
settlement information:
1. Principal or face amount.
2. Series.
3. Stated Maturity.
4. In the case of a Fixed Rate Book-Entry
Note, the interest rate and reset,
redemption, repayment and extension
provisions (if any) or, in the case of a
Floating Rate Book-Entry Note, the Base
Rate, Initial Interest Rate (if known at
such time) Interest Reset Period,
Interest Reset Dates, Index Maturity,
Spread and/or Spread Multiplier (if any),
Minimum Interest Rate (if any), Maximum
Interest
B-12
Rate (if any) and reset, redemption,
repayment and extension provisions (if any).
5. Interest Payment Dates and the Interest
Payment Period.
6. Amortization provisions, if any.
7. Settlement Date and Issue Date, if
different.
8. Specified Currency.
9. Denominated Currency, Index Currency, base
exchange rate, and the determination date,
if applicable.
10. Price.
11. Agent's commission, determined as provided
in the Agreement.
12. Whether such Book-Entry Note is an Original
Issue Discount Note and, if so, the total
amount of a OID, the Yield to Maturity and
the initial accrual period.
13. Any other terms necessary to describe the
Book-Entry Note.
B. The Company will advise the relevant DTC Agent by
telephone (confirmed in writing at any time on
the same date), written telecommunication or
electronic transmission of the information set
forth in Settlement Procedure "A" above. Each
such communication by the Company shall
constitute a representation and warranty by the
Company to the DTC Agent for such Note, the
Trustee for such Note and the Agent that (i) such
Note is then, and at the time of issuance and
sale thereof will be, duly authorized for
issuance and sale by the Company; and (ii) such
Note, and the Global Security representing such
Note, will conform with the terms of the
Indenture for such Note. The DTC Agent will then
assign a CUSIP number to the Global
B-13
Security representing such Book-Entry Note and
notify the Agent and the Company by telephone
(confirmed in writing at any time on the same
date), written telecommunication or electronic
transmission of such CUSIP number as soon as
practicable.
C. The DTC Agent will enter a pending deposit message
through DTC's Participant Terminal System,
providing the following Settlement information to
DTC, such Agent, Standard & Poor's and, upon
request, the Trustee:
1. The information set forth in Settlement
Procedure "A".
2. Identification as a Fixed Rate Book-Entry
Note or a Floating Rate Book-Entry Note.
3. Initial Interest Payment Date for such Note,
number of days by which such date succeeds
the related DTC Record Date and amount of
interest, if known, payable on such Interest
Payment Date.
4. Interest Payment Period or frequency of
Interest Payment Dates.
5. CUSIP number of the Global Security
representing such Note.
6. Whether such Global Security will represent
any other Book-Entry Note (to the extent
known at such time).
7. The participant account numbers maintained by
DTC on behalf of the Trustee and the Agent.
D. To the extent the Company has not already done so,
the Company will deliver to the Trustee for such
Notes a Global Security in a form that has been
approved by the Company, the Agent and the
Trustee.
E. First Chicago, as Authenticating Agent, will
complete each Book-Entry Note, stamp the
appropriate legend, as instructed by DTC, if not
B-14
already set forth thereon, and authenticate the
Global Security representing such Note.
F. DTC will credit such Note to the DTC Agent's
participant account at DTC.
G. The DTC Agent will enter an SDFS delivery order
through DTC's Participant Terminal System
instructing DTC to (i) debit such Note to the DTC
Agent's participant account; and credit such Note
to such Agent's participant account; and (ii)
debit such Agent's settlement account and credit
the DTC Agent's settlement account for an amount
equal to the price of such Note less such Agent's
commission. The entry of such a deliver order
shall constitute a representation and warranty by
the DTC Agent to DTC that (i) the Global Security
representing such Book-Entry Note has been issued
and authenticated; and (ii) the DTC Agent is
holding such Global Security pursuant to the
Medium-Term Note Certificate Agreement between the
DTC Agent and DTC.
H. Unless the Agent is purchasing such Note as
principal, the Agent will enter an SDFS delivery
order through DTC's Participant Terminal System
instructing DTC (i) to debit such Note to such
Agent's participant account and credit such Note
to the participant accounts of the Participants
with respect to such Note; and (ii) to debit the
settlement accounts of such Participants and
credit the settlement account of such Agent for an
amount equal to the price of such Note.
I. Transfers of funds in accordance with SDFS
delivery orders described in Settlement Procedures
"G" and "H" will be settled in accordance with
SDFS operating procedures in effect on the
settlement date.
J. The DTC Agent will, upon receipt of funds from the
Agent in accordance with Settlement Procedure "G",
credit to an account of the Company maintained at
the DTC Agent funds available for
B-15
immediate use in the amount transferred
to the DTC Agent in accordance with
Settlement Procedure "G".
K. Such Agent will confirm the purchase of
such Note to the purchaser either by
transmitting to the Participants with
respect to such Note a confirmation
order or orders through DTC's
institutional delivery system or by
mailing a written confirmation to such
purchaser.
L. Monthly, the DTC Agent will send to the
Company a statement setting forth the
principal amount of Registered Notes
Outstanding as of the date of such
statement and setting forth a brief
description of any sales of which the
Company has advised the DTC Agent but
which have not yet been settled.
Settlement Procedures Timetable: For sales by the Company of Book-Entry
-------------------------------
Notes solicited by an Agent and accepted
by the Company (except pursuant to a
Terms Agreement) for settlement on the
first Business Day after the sale date,
Settlement Procedures "A" through "K"
set forth above shall be completed as
soon as possible but not later than the
respective times (New York City time)
set forth below:
Settlement
Procedure Time
A 11:00 a.m. on the sale date
B 12:00 Noon on the sale date
C 2:00 p.m. on the sale date
D 3:00 p.m. on day before Settlement
Date
E 9:00 a.m. on Settlement Date
F 10:00 a.m. on Settlement Date
G-H 2:00 p.m. on Settlement Date
I 4:00 p.m. on Settlement Date
J-K 5:00 p.m. on Settlement Date
If a sale is to be settled more than one
Business Day after the sale date,
Settlement Procedures "A", "B" and "C"
shall be completed as soon as
practicable
B-16
but not later than 11:00 a.m., 12:00 Noon and 2:00
p.m., respectively, on the first Business Day
after the sale date. If the Initial Interest Rate
for a Floating Rate Book-Entry Note has not been
determined at the time that Settlement Procedure
"A" is completed, Settlement Procedures "B" and
"C" shall be completed as soon as such rate has
been determined but no later than 12:00 Noon and
2:00 p.m., respectively, on the second Business
Day before the settlement date. Settlement
Procedure "I" is subject to extension in
accordance with any extension of Fedwire closing
deadlines and in the other events specified in
SDFS operating procedures in effect on the
settlement date.
If settlement of a Book-Entry Note is rescheduled
or canceled, the DTC Agent will deliver to DTC
through DTC's Participant Terminal System, a
cancellation message to such effect by no later
than 5:00 p.m. on the Business Day immediately
preceding the scheduled settlement date.
Failure to Settle: If settlement of a Book-Entry Note is rescheduled
-----------------
and the DTC Agent for such Note has not entered an
SDFS deliver order with respect to a Book-Entry
Note pursuant to Settlement Procedure "G", after
receiving notice from the Company or the Agent,
such DTC Agent shall deliver to DTC, through DTC's
Participant Terminal System, as soon as
practicable, a withdrawal message instructing DTC
to debit such Book-Entry Note to such DTC Agent's
participant account. DTC will process the
withdrawal message, provided that such DTC Agent's
participant account contains a principal amount of
the Global Security representing such Book-Entry
Note that is at least equal to the principal
amount to be debited. If a withdrawal message is
processed with respect to all the Book-Entry Notes
represented by a Global Security, the Trustee for
the Notes represented by such Global Security will
mark such Global Security "canceled", make
appropriate entries in such Trustee's records and
destroy the canceled Global Security in accordance
with the Indenture and deliver a
B-17
certificate of destruction to the Company. The
CUSIP number assigned to such Global Security
shall, in accordance with CUSIP Service Bureau
procedures, be canceled and not immediately
reassigned. If a withdrawal message is processed
with respect to one or more, but not all, of the
Book-Entry Notes represented by a Global Security,
the DTC Agent for such Book-Entry Notes will
exchange such Global Security for two Global
Securities, one of which shall represent such BooK
-Entry Notes and shall be canceled immediately
after issuance and the other of which shall
represent the other Book-Entry Notes previously
represented by the surrendered Global Security and
shall bear the CUSIP number of the surrendered
Global Security.
If the purchase price for any Book-Entry Note is
not timely paid to the Participants with respect
to such Note by the beneficial purchaser thereof
(or a Person, including an indirect participant in
DTC, acting on behalf of such purchaser), such
Participants and, in turn, the Presenting Agent
may enter SDFS deliver orders through DTC's
Participant Terminal System reversing the orders
entered pursuant to Settlement Procedures "H" and
"G", respectively. Thereafter, the DTC Agent for
such Book-Entry Note will deliver the withdrawal
message and take the related actions described in
the preceding paragraph. If such failure shall
have occurred for any reason other than a default
by the Agent in the performance of its obligations
hereunder and under the Agreement, then the
Company will reimburse the Agent for the loss of
the use of the funds during the period when they
were credited to the account of the Company.
Notwithstanding the foregoing, upon any failure to
settle with respect to a Book-Entry Note, DTC may
take any actions in accordance with its SDFS
operating procedures then in effect. In the event
of a failure to settle with respect to one or
more, but not all, of the Book-Entry Notes to have
been represented by a Global Security, the DTC
Agent for such Book-Entry Note or Notes will
provide, in
B-18
accordance with Settlement Procedures "E" and "G",
for the authentication and issuance of a Global
Security representing the other Book-Entry Notes
to have been represented by such Global Security
and will make appropriate entries in its records.
Procedure for Rate Changes;
---------------------------
Preparation of Pricing
----------------------
Supplements: The Company and the Agents will discuss
-----------
from time to time the rates to be borne by
Registered Notes that may be sold as a result of
the solicitation of offers by any Agent. If any
offer to purchase a Registered Note is accepted by
the Company, the Company will prepare a Pricing
Supplement reflecting the terms of such Note and
will arrange to have the Pricing Supplement filed
with the Commission in accordance with the
applicable paragraph of Rule 424(b) under the
Securities Act and will supply by facsimile
transmission or by overnight express for delivery
by 11:00 a.m. on the Business Day next following
the date of acceptance one copy thereof (or
additional copies if requested) to each Agent
which presented the order (each, a "Presenting
Agent") at each address listed below and one copy
to the Trustee. The relevant Agent will cause a
Prospectus and Pricing Supplement to be delivered
to the purchaser of the Registered Note.
Copies of Pricing Supplements shall be sent to:
if Merrill Lynch & Co. is the Presenting Agent:
Merrill Lynch & Co. - Tritech Services
44B Colonial Drive
Piscataway, New Jersey 08854
Attn: Prospectus Operations/Nachman
Kimerling
Telephone: (732) 885-2768
Facsimile: (732) 885-2774/5/6
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center,
North Tower, 10th Floor
B-19
New York, New York 10281-1323
Attn: MTN Product Management
Telephone: (212) 449-7476
Facsimile: (212) 449-2234
if Goldman, Sachs & Co. is the Presenting Agent:
Goldman, Sachs & Co.
85 Broad Street
Medium-Term Note Trading Department
Attn: Karen Robertson
New York, New York 10004
Telephone: (212) 902-8401
Facsimile: (212) 902-0658
if J.P. Morgan Securities Inc. is the Presenting
Agent:
J.P. Morgan Securities Inc.
60 Wall Street
3rd Floor
Attn: MTN Desk
New York, New York 10260
Telephone: (212) 648-0591
Facsimile: (212) 648-5909
if Morgan Stanley & Co. Incorporated is the
Presenting Agent:
Morgan Stanley & Co. Incorporated
1585 Broadway
2nd Floor
New York, New York 10036
Attn: Medium-Term Note Trading Desk
if Salomon Brothers Inc is the Presenting Agent:
Salomon Smith Barney
Brooklyn Army Terminal
140 58th Street
8th Floor
Brooklyn, New York 11220
Attn: Diane Graham
Telephone: (212) 921-8475
Facsimile: (718) 921-8472
B-20
Suspension of Solicitation;
---------------------------
Amendment or Supplement: Subject to the Company's representations,
-----------------------
warranties and covenants contained in the
Agreement, the Company may instruct the Agents to
suspend solicitation of purchases at any time, for
any period of time or permanently. Upon receipt
of notice from the Company, the Agents will
forthwith suspend solicitation until such time as
the Company has advised it that solicitation of
purchases may be resumed.
If the Company decides to amend or supplement the
Registration Statement or the Prospectus, it will
promptly advise the Agents and the Trustee and
will furnish each Agent and Trustee with the
proposed amendment or supplement in accordance
with the terms of the Agreement. The Company will
mail to the Commission for filing therewith any
supplement to the Prospectus (including any
Pricing Supplement), provide each Agent with
copies of any supplement (or, in the case of a
Pricing Supplement, provide each relevant Agent
with copies of such Pricing Supplement), and
confirm to each Agent that such supplement has
been mailed for filing with the Commission (or, in
the case of a Pricing Supplement, confirm such
information with each relevant Agent).
In the event that at the time the Company suspends
solicitation of purchases there shall be any
orders outstanding for settlement, the Company
will promptly advise the relevant Agent and the
DTC Agent whether such orders may be settled and
whether copies of the Prospectus as in effect at
the time of the suspension may be delivered in
connection with the settlement of such orders.
The Company will have the sole responsibility for
such decision and for any arrangements which may
be made in the event that the Company determines
that such orders may not be settled or that copies
of such Prospectus may not be so delivered.
Delivery of Prospectus: A copy of the Prospectus and a Pricing Supplement
----------------------
relating to a Book-Entry Note must accompany or
B-21
precede the earlier of (i) the written
confirmation of a sale sent to an investor or
other purchaser or its agent; and (ii) the
delivery of Notes to an investor or other
purchaser or its agent the purchase of such
Note and payment of such Note by its
purchaser. Subject to the second preceding
paragraph, each Agent will deliver a
Prospectus and Pricing Supplement as herein
described with respect to each Book-Entry
Note sold by it. The Company will make such
delivery if such Note is sold directly by the
Company to a purchaser (other than an Agent).
Authenticity of Signatures: The Company will cause the Trustee and the
--------------------------
Authenticating Agent (if other than the
Trustee) to furnish each Agent from time to
time with the specimen signatures of each of
the Trustee's or Authenticating Agent's
officers, employees or agents who have been
authorized by the Trustee to authenticate
Notes, but no Agent will have any obligation
or liability to the Company or the Trustee in
respect of the authenticity of the signature
of any officer, employee or agent of the
Company, the Trustee or the Authenticating
Agent on any Note.
Trustee Not to Risk Funds: Nothing herein shall be deemed to require the
-------------------------
Trustee to risk or expend its own funds in
connection with any payment to the Company,
DTC, the Agent or the purchaser, it being
understood by all parties that payments made
by the Trustee to the Company, DTC, the Agent
or the purchaser shall be made only to the
extent that funds are provided to the Trustee
for such purpose.
Payment of Selling Commissions
------------------------------
and Expenses: The Company agrees to pay each Agent a
------------
commission as set forth in the Agreement in
the form of a discount equal to the
percentage of the principal amount of each
Note sold by the Company as a result of a
solicitation made by such Agent.
PART II: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
Issuance: Each Certificated Note will be dated and
--------
issued as of the date of its authentication
by the applicable
B-22
Trustee. Each Certificated Note will bear an
Original Issue Date, which will be (i) with
respect to an original Certificated Note (or any
portion thereof), its original issuance date
(which will be the settlement date); and (ii) with
respect to any Certificated Note (or portion
thereof) issued subsequently upon transfer or
exchange of a Certificated Note or in lieu of a
destroyed, lost or stolen Certificated Note, the
Original Issue Date of the predecessor
Certificated Note, regardless of the date of
authentication of such subsequently issued
Certificated Note.
Maturities: Each Certificated Note will have a maturity from
----------
date of issue of not less than one year and not
more than 60 years. Unless otherwise specified in
the applicable Pricing Supplement, a Floating Rate
Certificated Note will mature only on an Interest
Payment Date for such Note.
Currency: The currency denomination with respect to any
--------
Certificated Note and the payment of principal,
premium (if any) and interest (if any) with
respect to any such Certificated Note, shall be as
set forth therein and in the applicable Pricing
Supplement.
Denominations: Unless otherwise specified in the applicable
-------------
Pricing Supplement, Certificated Notes denominated
in U.S. dollars will be issued only in minimum
denominations of $1,000 and any larger amount that
is an integral multiple of $1,000. In the case of
a Certificated Note having a Specified Currency
other than U.S. dollars, the minimum denomination
and other authorized denominations shall be set
forth in the applicable Pricing Supplement and in
such Certificated Note.
Registration: Each Certificated Note will be issued in fully
------------
registered definitive form.
Transfers and Exchanges: A Certificated Note may be presented for transfer
-----------------------
or exchange at the corporate trust office of the
Trustee. Certificated Notes will be exchangeable
for Certificated Notes having identical terms but
B-23
different authorized denominations without service
charge. Certificated Notes will not be
exchangeable for Book-Entry Notes.
Interest: General. Unless otherwise indicated in the
-------- -------
applicable Pricing Supplement, interest, if any,
on each Certificated Note will accrue from the
Original Issue Date (or such other date on which
interest otherwise begins to accrue (if different
from the Original Issue Date)) of such Note for
the first interest period or the last date to
which interest has been paid, if any, for each
subsequent interest period, on such Note, and will
be calculated and paid in the manner and on the
dates described in such Note and in the
Prospectus, as supplemented by the applicable
Pricing Supplement. Unless otherwise specified
therein, each payment of interest on a
Certificated Note will include interest accrued to
but excluding the Interest Payment Date.
Regular Record Dates. Unless otherwise specified
--------------------
in the applicable Pricing Supplement, the Regular
Record Date with respect to any Interest Payment
Date for a Fixed Rate Certificated Note shall,
unless otherwise specified, be the February 1 or
August 1 (whether or not a Business Day)
immediately preceding such Interest Payment Date.
Unless otherwise specified in the applicable
Pricing Supplement, the Regular Record Date with
respect to any Interest Payment Date for a
Floating Rate Certificated Note shall be the date
(whether or not a Business Day) 15 calendar days
immediately preceding such Interest Payment Date.
Interest Payment Dates on Fixed Rate Certificated
-------------------------------------------------
Notes. Unless otherwise specified pursuant to
-----
Settlement Procedure "A" below, interest payments
on Fixed Rate Certificated Notes will be made
semiannually on February 15 and August 15 of each
year and at Stated Maturity; provided, however,
that if any Interest Payment Date for a Fixed Rate
Book-Entry Note is not a Business Day, the payment
due on such day shall be made on the next
succeeding Business Day, and no interest shall
accrue on such
B-24
payment for the period from and after such
Interest Payment Date; and provided further, that
in the case of a Fixed Rate Certificated Note
issued between a Regular Record Date and an
Interest Payment Date, the first interest payment
will be made on the Interest Payment Date
following the next succeeding Regular Record Date.
Interest Payment Dates on Floating Rate
---------------------------------------
Certificated Notes. Unless otherwise specified,
------------------
interest payments will be made on Floating Rate
Certificated Notes monthly, quarterly,
semiannually or annually. Unless otherwise
specified, interest will be payable, in the case
of Floating Rate Certificated Notes that: reset
daily, weekly or monthly, on the third Wednesday
of each month or on the third Wednesday of March,
June, September and December of each year, as
specified; reset quarterly, on the third Wednesday
of March, June, September and December of each
year; reset semiannually, on the third Wednesday
of each of two months specified pursuant to
Settlement Procedure "A" below; and reset
annually, on the third Wednesday of the month
specified pursuant to Settlement Procedure "A"
below; provided, however, that if an Interest
Payment Date for a Floating Rate Certificated Note
would otherwise be a day that is not a Business
Day with respect to such Floating Rate
Certificated Note, such Interest Payment Date will
be the next succeeding Business Day with respect
to such Floating Rate Certificated Note, except in
the case of a Floating Rate Certificated Note for
which the Base Rate is LIBOR, if such Business Day
is in the next succeeding calendar month, such
Interest Payment Date will be the immediately
preceding Business Day; and provided further, that
in the case of a Floating Rate Certificated Note
issued between a Regular Record Date and an
Interest Payment Date, the first interest payment
will be made on the Interest Payment Date
following the next succeeding Regular Date.
B-25
Calculation of Interest: Fixed Rate Certificated Notes. Interest
-----------------------------
on Fixed Rate Certificated Notes
(including interest for partial periods)
will be calculated on the basis of a
360-day year of twelve 30-day months.
Floating Rate Certificated Notes.
--------------------------------
Interest rates on Floating Rate
Certificated Notes will be determined as
set forth in the form of Notes. Interest
on Floating Rate Certificated Notes,
except as otherwise set forth herein,
will be calculated on the basis of
actual days elapsed and a year of 360
days, except that in the case of a
Floating Rate Certificated Note for
which the Base Rate is the Treasury Rate
or CMT Rate, interest will be calculated
on the basis of the actual number of
days in the year.
Amortizing Certificated Notes: Unless otherwise indicated in the
applicable Pricing Supplement, interest
on Amortizing Notes will be calculated
on the basis of a 360-day year of twelve
30-day months.
Payments of Principal and Interest: The Trustee will pay the principal
----------------------------------
amount of each Certificated Note at
Stated Maturity or upon redemption upon
presentation and surrender of such Note
to the Trustee. Such payment, together
with payment of interest due at Stated
Maturity or upon redemption of such
Note, will be made in funds available
for immediate use by the Trustee and in
turn by the Holder of such Note.
Certificated Notes presented to the
Trustee at Stated Maturity or upon
redemption for payment will be canceled
and destroyed by the Trustee, and a
certificate of destruction will be
delivered to the Company. All interest
payments on a Certificated Note (other
than interest due at Stated Maturity or
upon redemption) will be made by check
drawn on the Trustee (or another person
appointed by the Trustee) and mailed by
the Trustee to the person entitled
thereto as provided in such Note and the
Indenture; provided, however, that the
Holder of $10,000,000 or more of Notes
having the same Interest Payment Dates
will, upon written request prior to the
Regular Record Date in respect of an
Interest Payment Date,
B-26
be entitled to receive payment by wire
transfer of immediately available funds.
Following each Regular Record Date, the
Trustee will furnish the Company with a list
of interest payments to be made on the
following Interest Payment Date for each
Certificated Note and in total for all
Certificated Notes. Interest at Stated
Maturity or upon redemption will be payable
to the person to whom the payment of
principal is payable. The Trustee will
provide monthly to the Company lists of
principal and interest, to the extent
ascertainable, to be paid on Certificated
Notes maturing or to be redeemed in the next
month.
Withholding Taxes. The amount of any taxes
-----------------
required under applicable law to be withheld
from any interest payment on a Certificated
Note will be determined and withheld by the
Trustee.
The Company will be responsible for
withholding taxes on interest paid on
Certificated Notes as required by applicable
law.
Procedure for Rate Setting
---------------------------
and Posting: The Company and the Agent will discuss from
-----------
time to time the aggregate principal amount
of, the issuance price of, and the interest
rates to be borne by, Notes that may be sold
as a result of the solicitation of orders by
the Agent. If the Company decides to set
prices of, and rates borne by, any Notes in
respect of which the Agent is to solicit
orders (the setting of such prices and rates
to be referred to herein as "posting") or if
the Company decides to change prices or rates
previously posted by it, it will promptly
advise the Agent of the prices and rates to
be posted.
Redemption: The applicable Pricing Supplement will set
----------
forth all terms, if any, relating to the
redemption of Notes prior to Stated Maturity.
Acceptance and Rejection
------------------------
of Offers: Unless otherwise instructed by the Company,
---------
the Agent will advise the Company promptly by
B-27
telephone of all orders to purchase Certificated
Notes received by the Agent, other than those
rejected by it in whole or in part in the
reasonable exercise of its discretion. Unless
otherwise agreed by the Company and the Agent, the
Company has the sole right to accept orders to
purchase Certificated Notes and may reject any
such orders in whole or in part. Before accepting
any order to purchase a Certificated Note to be
settled in less than three Business Days, the
Company shall verify that the Trustee for such
Certificated Note will have adequate time to
prepare and authenticate such Note.
Settlement: The receipt by the Company of immediately
----------
available funds in exchange for an authenticated
Certificated Note delivered to the Agent and the
Agent's delivery of such Certificated Note against
receipt of immediately available funds shall, with
respect to such Certificated Note, constitute
"settlement". All orders accepted by the Company
will be settled on the third Business Day next
succeeding the date of acceptance pursuant to the
timetable for settlement set forth below, unless
the Company and the purchaser agree to settlement
on another day, which shall be no earlier than the
next Business Day following the date of sale.
Details for Settlement: Settlement Procedures with regard to each
----------------------
Certificated Note sold by the Company to or
through the Agent, as agent (except pursuant to a
Terms Agreement), shall be as follows:
A. The Agent will advise the Company by
telephone or by facsimile transmission (or
other acceptable written means) that such
Note is a Certificated Note and of the
following settlement information, in time
for the Trustee for such Certificated Note
to prepare and authenticate the required
Note:
1. Name in which such Certificated Note is
to be registered ("Registered Owner").
B-28
2. Address of the Registered Owner and
address for payment of principal and
interest.
3. Taxpayer identification number of the
Registered Owner (if available).
4. Principal or face amount.
5. Series.
6. Stated Maturity.
7. In the case of a Fixed Rate
Certificated Note, the Interest Rate
and reset provisions (if any) or, in
the case of a Floating Rate
Certificated Note, the Base Rate,
Initial Interest Rate (if known at such
time), Interest Reset Period, Interest
Reset Dates, Index Maturity, Spread
and/or Spread Multiplier (if any),
Minimum Interest Rate (if any), Maximum
Interest Rate (if any) and reset
provisions (if any).
8. Interest Payment Dates and the Interest
Payment Period.
9. Specified Currency.
10. Denominated Currency, Index Currency,
Base Exchange Rate and the
Determination Date, if applicable.
11. Redemption, repayment, amortization or
extension provisions, if any.
12. Settlement date.
13. Price (including currency).
B-29
14. Agent's commission, if any, determined
as provided in the Agreement.
15. Whether such Certificated Note an
Original Issue Discount Note, and, if
so, the total amount of OID and the
Yield to Maturity and the initial
accrual period.
16. Any other terms necessary to describe
the Certificated Note.
Such Agent will advise the Company of the
foregoing information for each sale made by
it in time for the Trustee's authenticating
agent, including the Trustee itself if no
authenticating agent is appointed (the
"Authenticating Agent"), to prepare the
required Certificated Notes. If the Company
rejects an offer, the Company will promptly
notify the relevant Agent.
B. The Company will advise the relevant Trustee
by telephone (confirmed in writing at any
time on the sale date), written
telecommunication or electronic transmission
of the information set forth in Settlement
Procedure "A" above and the name of the
Presenting Agent.
C. The Company will deliver to the relevant
Trustee a pre-printed four-ply packet for
such Certificated Note, which packet will
contain the following documents in forms
that have been approved by Company, the
Agents and the Trustee:
1. Certificated Note with customer
confirmation.
2. Stub One - For Trustee.
3. Stub Two - For Agent.
B-30
4. Stub Three - For Company.
D. The Trustee will complete such Certificated
Note and will authenticate such Certificated
Note and deliver it (with the confirmation)
and Stubs One and Two to the Agent, and the
Agent will acknowledge receipt of the Note
by stamping or otherwise marking Stub One
and returning it to the Trustee. Such
delivery will be made only against such
acknowledgment of receipt and evidence that
instructions have been given by the Agent
for payment to such account as the Company
shall have specified in funds available for
immediate use, of an amount equal to the
price of such Certificated Note less the
Agent's commission. In the event that the
instructions given by the Agent for payment
to the account of the Company are revoked,
the Company will as promptly as possible
wire transfer to the account of the Agent an
amount of immediately available funds equal
to the amount of such payment made.
E. Unless the Agent purchased the Note as
Principal, the Agent will deliver such
Certificated Note (with the confirmation) to
the customer against payment in immediately
payable funds. The Agent will obtain the
acknowledgment of receipt of such
Certificated Note by retaining Stub Two.
F. The Trustee will send Stub Three to the
Company's Treasury Department by first-class
mail. Periodically, the Authenticating
Agent will also send to the Company's
Treasury Department a statement to the
Company setting forth the principal amount
of the Notes outstanding as of that date
after giving effect to such transaction.
B-31
Settlement Procedures Timetable: For orders of Certificated Notes solicited
-------------------------------
by the Agent, as agent, and accepted by the
Company, Settlement Procedures "A" through
"F" set forth above shall be completed on or
before the respective times (New York City
time) set forth below:
Confirmation: Each Agent shall, for each Certificated
------------
Note offer received by it and accepted by
the Company, issue a confirmation to the
purchaser, with a copy to the Company,
setting forth such of the details set forth
above as is deemed appropriate by such
Agent.
Note Delivery and Cash Payment: Upon instructions from the Company, the
------------------------------
Authenticating Agent will deliver the
Certificated Notes to the relevant Agent
(for the benefit of the purchaser).
Delivery by the Authenticating Agent of the
Certificated Notes will be made in
accordance with paragraph D of the Details
for Settlement.
Failure to Settle: If a purchaser fails to accept delivery of
-----------------
and make payment for any Certificated Note,
the Agent will notify the Company and the
Trustee by telephone and return such Note to
the Trustee. Upon receipt
B-32
of such notice, the Company will immediately
wire transfer to the account of the Agent an
amount equal to the amount previously
credited thereto in respect of such Note.
Such wire transfer will be made on the
settlement date, if possible, and in any
event not later than the Business Day
following the settlement date. If the
failure shall have occurred for any reason
other than a default by the Agent in the
performance of its obligations hereunder and
under the Agreement with the Company, then
the Company will reimburse the Agent or the
Trustee, as appropriate, on an equitable
basis for its loss of the use of the funds
during the period when they were credited to
the account of the Company. Immediately upon
receipt of the Certificated Note in respect
of which such failure occurred, the Trustee
will mark such Note "canceled", make
appropriate entries in the Trustee's records
and send such Note to the Company.
Maturity: At Stated Maturity, the principal amount of
--------
each Note will be payable in immediately
available funds provided that the Trustee or
other paying agent receives the Certificated
Note and appropriate payment information in
writing. Certificated Notes presented to any
paying agent or the Trustee will be
destroyed by the Trustee.
Procedure for Rate Changes: The Company and the Agents will discuss from
--------------------------
time to time the rates to be borne by
Certificated Notes that may be sold as a
result of the solicitation of offers by any
Agent. If any offer to purchase a
Certificated Note is accepted by the
Company, the Company will prepare a Pricing
Supplement reflecting the terms of such
Certificated Note and will arrange to have
the Pricing Supplements filed with the
Commission in accordance with the applicable
paragraph of Rule 424(b) under the
Securities Act and will supply by facsimile
transmission or by overnight express one
copy for delivery by 11:00 a.m. on the
Business Day next following the date of
acceptance one copy thereof (or additional
copies if requested) to each Agent which
presented the order (each, a Presenting
B-33
Agent") at each address listed below and one copy
to the Trustee. The relevant Agent will cause a
Prospectus and Pricing Supplement to be delivered
to the purchaser of the Certificated Note.
Copies of Pricing Supplements shall be sent to:
if Merrill Lynch & Co. is the Presenting Agent:
Merrill Lynch & Co. - Tritech Services
44B Colonial Drive
Piscataway, New Jersey
08854
Attn: Prospectus Operations/Nachman Kimerling
Telephone: (732) 885-2768
Facsimile: (732) 885-2774/5/6
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center,
North Tower, 10th Floor
New York, New York 10281-1323
Attn: MTN Product Management
Telephone: (212) 449-7476
Facsimile: (212) 449-2234
if Goldman, Sachs & Co. is the Presenting Agent:
Goldman, Sachs & Co.
85 Broad Street
Medium-Term Note Trading Department
New York, New York 10004
Attn: Karen Robertson
Telephone: (212) 902-8401
Facsimile: (212) 902-0658
if J. P. Morgan Securities Inc. is the Presenting
Agent:
J.P. Morgan Securities Inc.
60 Wall Street
3rd Floor
New York, New York 10260
Attn: MTN Desk
Telephone: (212) 648-0591
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Facsimile: (212) 648-5909
if Morgan Stanley & Co. Incorporated is the
Presenting Agent:
Morgan Stanley & Co. Incorporated
1585 Broadway
2nd Floor
New York, New York 10036
Attn: Medium-Term Note Trading Desk
if Salomon Brothers Inc is the Presenting Agent:
Salomon Smith Barney
Brooklyn Army Terminal
154 58th Street
8th Floor
Brooklyn, New York 11220
Attn: Diane Graham
Telephone: (212) 921-8475
Facsimile: (718) 921-8472
Suspension of Solicitation;
---------------------------
Amendment or Supplement: The Company may instruct the Agents to suspend
-----------------------
solicitation of purchases at any time. Upon
receipt of notice from the Company, the Agents
will forthwith suspend solicitation until such
time as the Company has advised them that
solicitation of purchases may be resumed.
If the Company decides to amend or supplement the
Registration Statement or the Prospectus, it will
promptly advise the Agents and the Trustee and
will furnish each Agent and Trustee with the
proposed amendment or supplement in accordance
with the terms of the Agreement. The Company will
mail to the Commission for filing therewith any
supplement to the Prospectus (including any
Pricing Supplement), provide each Agent with
copies of any supplement (or, in the case of a
Pricing Supplement, provide each relevant Agent
with copies of such Pricing Supplement), and
confirm to each Agent that such supplement has
been mailed
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for filing with the Commission (or, in the
case of a Pricing Supplement, confirm such
information with each relevant Agent).
In the event that at the time the Company
suspends solicitation of purchases there
shall be any orders outstanding for
settlement, the Company will promptly advise
the relevant Agent and the Trustee whether
such orders may be settled and whether copies
of the Prospectus as in effect at the time of
the suspension may be delivered in connection
with the settlement of such orders. The
Company will have the sole responsibility for
such decision and for any arrangements which
may be made in the event that the Company
determines that such orders may not be
settled or that copies of such Prospectus may
not be so delivered.
Authenticity of Signatures: The Company will cause the Trustee and the
--------------------------
Authenticating Agent (if other than the
Trustee) to furnish each Agent from time to
time with the specimen signatures of each of
the Trustee's or Authenticating Agent's
officers, employees or agents who have been
authorized by the Trustee to authenticate
Notes, but no Agent will have any obligation
or liability to the Company or the Trustee in
respect of the authenticity of the signature
of any officer, employee or agent of the
Company, the Trustee or the Authenticating
Agent on any Note.
Trustee Not to Risk Funds: Nothing herein shall be deemed to require the
-------------------------
Trustee to risk or expend its own funds in
connection with any payment to the Company,
the Agent or the purchaser, it being
understood by all parties that payments made
by the Trustee to the Company, the Agent or
the purchaser shall be made only to the
extent that funds are provided to the Trustee
for such purpose.
Payment of Selling Commissions
------------------------------
and Expenses: The Company agrees to pay each Agent a
------------
commission as set forth in the Agreement in
the form of a discount equal to the
percentage of the
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principal amount of each Note sold by the
Company as a result of a solicitation made by
such Agent.
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