<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (fee required) for the fiscal year ended
December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (no fee required) for the
transition period from to
Commission File Number 1-5231
McDONALD'S CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2361282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
McDonald's Plaza
Oak Brook, Illinois 60521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 575-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
-------------------------- -----------------------
Common stock, no par value New York Stock Exchange
Chicago Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
9-3/4% Notes due 1999 New York Stock Exchange
9-3/8% Notes due 1997 New York Stock Exchange
8-7/8% Debentures due 2011 New York Stock Exchange
7-3/8% Notes due 2002 New York Stock Exchange
Depositary Shares representing 7.72%
Cumulative Preferred Stock, Series E New York Stock Exchange
6-3/4% Notes due 2003 New York Stock Exchange
7-3/8% Notes due 2033 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
-----
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---<PAGE>
<PAGE> 2
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. / /
The aggregate market value of voting stock held by nonaffiliates
of the registrant is $22,868,486,192 and the number of shares of
common stock outstanding is 694,054,537 as of January 31, 1995.
Documents incorporated by reference. Part III of this 10-K
incorporates information by reference from the registrant's definitive
proxy statement which will be filed no later than 120 days after
December 31, 1994.<PAGE>
<PAGE> 3
PART I
Item 1. Business
McDonald's Corporation, the registrant, together with its
subsidiaries, is referred to herein as the "Company".
(a) General development of business
There have been no significant changes to the Company's
corporate structure during 1994, nor material changes in the Company's
method of conducting business.
(b) Financial information about industry segments
Industry segment data for the years ended December 31, 1994,
1993 and 1992 is included in Part II, item 8, page 42 of this
Form 10-K.
(c) Narrative description of business
General
The Company develops, operates, franchises and services a
worldwide system of restaurants which prepare, assemble, package and
sell a limited menu of value-priced foods. These restaurants are
operated by the Company or, under the terms of franchise arrangements,
by franchisees who are independent third parties, or by affiliates
operating under joint-venture agreements between the Company and local
businesspeople.
The Company's franchising program assures consistency and
quality. The Company is selective in granting franchises and is not
in the practice of franchising to investor groups or passive
investors. Under the conventional franchise arrangement, franchisees
supply capital - initially, by purchasing equipment, signs, seating,
and decor, and over the long term, by reinvesting in the business.
The Company shares the investment by owning or leasing the land and
building; franchisees then contribute to the Company's revenues
through payment of rent and service fees based upon a percent of
sales, with specified minimum payments. Generally, the conventional
franchise arrangement lasts 20 years and franchising practices are
consistent throughout the world. Further discussion regarding site
selection is included in Part 1, item 2, page 6 of this Form 10-K.
Training begins at the restaurant with one-on-one instruction
and videotapes. Aspiring restaurant managers progress through a
development program of classes in basic and intermediate operations,
management and equipment. Assistant managers are eligible to attend
the advanced operations and management class at one of the five
Hamburger University (H.U.) campuses in the U.S., Germany, England,
Japan or Australia. The curriculum at H.U. concentrates on skills and
practices essential to delivering customer satisfaction and running a
restaurant business.<PAGE>
<PAGE> 4
The Company's global brand is well-known. Marketing and
promotional activities are designed to nurture this brand image and
differentiate the Company from competitors by focusing on value, taste
and customer satisfaction. Funding for promotions is handled at the
local restaurant level; funding for regional and national efforts is
handled through advertising cooperatives. Franchised, Company-
operated and affiliated restaurants throughout the world make
voluntary contributions to cooperatives which purchase media.
Production costs for certain advertising efforts are borne by the
Company.
Products
McDonald's restaurants offer a substantially uniform menu
consisting of hamburgers and cheeseburgers, including the Big Mac and
Quarter Pounder with Cheese sandwiches, the Filet-O-Fish, McGrilled
Chicken and McChicken sandwiches, french fries, Chicken McNuggets,
salads, shakes, sundaes and cones made with low fat frozen yogurt,
pies, cookies and a limited number of soft drinks and other beverages.
In addition, the restaurants sell a variety of products during limited
promotional time periods. McDonald's restaurants operating in the
United States are open during breakfast hours and offer a full
breakfast menu including the Egg McMuffin and the Sausage McMuffin
with Egg sandwiches, hotcakes and sausage; three varieties of biscuit
sandwiches; Apple-Bran muffins; and cereals. McDonald's restaurants in
many countries around the world offer many of these same products as
well as other products and limited breakfast menus. The Company tests
new products on an ongoing basis.
The Company, its franchisees and affiliates purchase food
products and packaging from numerous independent suppliers. Quality
specifications for both raw and cooked food products are established
and strictly enforced. Alternative sources of these items are
generally available. Quality assurance labs in the U.S., Europe and
the Pacific work to ensure that the Company's high standards are
consistently met. The quality assurance process involves ongoing
testing and on-site inspections of suppliers' facilities.
Independently owned and operated distribution centers distribute
products and supplies to most McDonald's restaurants. The restaurants
then prepare, assemble and package these products using specially
designed production techniques and equipment to obtain uniform
standards of quality.
Trademarks and patents
The Company has registered trademarks and service marks, some
of which, including "McDonald's", "Ronald McDonald" and other related
marks, are of material importance to the Company's business. The
Company also has certain patents on restaurant equipment which, while
valuable, are not material to its business.
Seasonal operations
The Company does not consider its operations to be seasonal to
any material degree.<PAGE>
<PAGE> 5
Working capital practices
Information about the Company's working capital practices is
incorporated herein by reference to Management's Discussion and
Analysis of the Company's financial position and the consolidated
statement of cash flows for the years ended December 31, 1994, 1993
and 1992 in Part II, item 7, pages 26 through 29, and Part II, item 8
page 35 of this Form 10-K.
Customers
The Company's business is not dependent upon a single customer
or small group of customers.
Backlog
Company-operated restaurants have no backlog orders.
Government contracts
No material portion of the business is subject to renegotiation
of profits or termination of contracts or subcontracts at the election
of the U.S. government.
Competition
McDonald's restaurants compete with international, national,
regional, and local retailers of food products. The Company competes
on the basis of price and service and by offering quality food
products. The Company's competition in the broadest perspective
includes restaurants, quick-service eating establishments, pizza
parlors, coffee shops, street vendors, convenience food stores,
delicatessens, and supermarket freezers.
In the U.S., about 378,000 restaurants generate nearly $224
billion in annual sales. McDonald's accounts for about 2.6% of those
restaurants and approximately 6.7% of those sales. No reasonable
estimate can be made of the number of competitors outside of the U.S.;
however, the Company's business in foreign markets continues to grow.
Research and development
The Company operates research and development facilities in
Illinois. While research and development activities are important to
the Company's business, these expenditures are not material.
Independent suppliers also conduct research activities for the benefit
of the McDonald's System, which includes franchisees and suppliers, as
well as McDonald's, its subsidiaries and joint ventures.<PAGE>
<PAGE> 6
Environmental matters
The Company is not aware of any federal, state or local
environmental laws or regulations which will materially affect its
earnings or competitive position, or result in material capital
expenditures; however, the Company cannot predict the effect on its
operations of possible future environmental legislation or
regulations. During 1994, there were no material capital expenditures
for environmental control facilities and no such material expenditures
are anticipated.
Number of employees
During 1994, the Company's average number of employees
worldwide was approximately 183,000.
(d) Financial information about foreign and domestic operations
Financial information about foreign and domestic markets is
incorporated herein by reference from Selected Financial Data,
Management's Discussion and Analysis and Segment and Geographic
Information in Part II, item 6, page 10, Part II, item 7, pages 11
through 29 and Part II, item 8, page 42, respectively, of this Form
10-K.
Item 2. Properties
The Company identifies and develops sites that offer
convenience to customers and provide for long-term sales and profit
potential. To assess potential, the Company analyzes traffic and
walking patterns, census data, school enrollments and other relevant
data. The Company's experience and access to advanced technology aids
in evaluating this information. In order to control occupancy costs
and rights, the Company owns restaurant sites and buildings where
feasible and where it is not practical, secures long-term leases.
Restaurant profitability for both the Company and franchisees is
important; therefore, ongoing efforts are made to lower average
development costs through construction and design efficiencies,
standardization and by leveraging the Company's global sourcing
system. Additional information about the Company's properties is
included in Management's Discussion and Analysis and the related
financial statements with footnotes in Part II, item 7, pages 11
through 29 and Part II, item 8, pages 34, 35, 37, 39, 43, 48 and 49,
respectively, of this Form 10-K.
Item 3. Legal Proceedings
The Company has pending a number of lawsuits which have been
filed from time to time in various jurisdictions. These lawsuits cover
a broad variety of allegations spanning the Company's entire business.
The following is a brief description of the more significant of these
categories of lawsuits and government regulations. The Company does
not believe that any such claims or lawsuits will have a material
adverse affect on its financial condition or results of operations.<PAGE>
<PAGE> 7
Franchising
A substantial number of McDonald's restaurants are franchised
to independent businesspeople operating under arrangements with the
Company. In the course of the franchise relationship, occasional
disputes arise between the Company and its franchisees relating to a
broad range of subjects including, without limitation, quality,
service and cleanliness issues, contentions regarding grants or
terminations of franchises, franchisee claims for additional
franchises or rewrites of franchises, and delinquent payments.
Suppliers
The Company and its affiliates and subsidiaries do not supply,
with minor exceptions outside of the United States, food, paper, or
related items to any McDonald's restaurants. The Company relies upon
independent suppliers which are required to meet and maintain the
Company's standards and specifications. There are a number of such
suppliers worldwide and on occasion disputes arise between the Company
and its suppliers on a number of issues including, by way of example,
compliance with product specifications and McDonald's business
relationship with suppliers.
Employees
Thousands of persons are employed by the Company and in
restaurants owned and operated by subsidiaries of the Company. In
addition, thousands of persons, from time to time, seek employment in
such restaurants. In the ordinary course of business, disputes arise
regarding hiring, firing and promotion practices.
Customers
McDonald's restaurants serve a large cross-section of the
public and in the course of serving so many people, disputes arise as
to products, service, accidents and other matters typical of an
extensive restaurant business such as that of the Company.
Trademarks
McDonald's has registered trademarks and service marks, some of
which are of material importance to the Company's business. From time
to time, the Company may become involved in litigation to defend and
protect its use of such registered marks.
Government Regulations
Local, state and federal governments have adopted laws and
regulations involving various aspects of the restaurant business,
including, but not limited to, franchising, health, environment,
zoning and employment. The Company does not believe that it is in
violation of any existing statutory or administrative rules, but it
cannot predict the effect on its operations from promulgation of
additional requirements in the future.<PAGE>
<PAGE> 8
Item 4. Submission of Matters to a Vote of Shareholders
None.
Executive Officers of the Registrant
All of the executive officers of McDonald's Corporation as of
March 1, 1995 are shown below. Each of the executive officers has been
continuously employed by the Company for at least five years and has a
term of office until the May 1995 Board of Directors' meeting.
<TABLE>
<CAPTION> Number
Number of
of years
years in
Date of with present
Name Office Birth Company position
--------------------- --------------------- -------- ------- --------
<S> <C> <C> <C> <C>
Robert M. Beavers, Jr. Senior Vice President 01/27/44 31 1
James R. Cantalupo President and 11/14/43 20 3
Chief Executive
Officer-International
Michael L. Conley Senior Vice President, 03/28/48 21 4
Controller
Thomas S. Dentice Executive Vice President 01/12/39 29 10
Patrick J. Flynn Executive Vice President 05/01/42 33 7
Thomas W. Glasgow, Jr. Executive Vice President, 02/17/47 26 3
Chief Operations Officer
Jack M. Greenberg Vice Chairman, Chief 09/28/42 13 3
Financial Officer
Michael R. Quinlan Chairman, Chief 12/09/44 31 5
Executive Officer
Edward H. Rensi President and Chief 08/15/44 29 3
Executive Officer-U.S.A.
Paul D. Schrage Senior Executive Vice 02/25/35 27 10
President, Chief
Marketing Officer
Fred L. Turner Senior Chairman 01/06/33 38 5
/TABLE
<PAGE>
<PAGE> 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
The Company's common stock trades under the symbol MCD and is
listed on the following stock exchanges in the United States: New
York and Chicago.
The following table sets forth the common stock price range on
the New York Stock Exchange composite tape and dividends declared per
common share. Prices and dividends have been adjusted to reflect the
two-for-one common stock split effected in the form of a stock
dividend in June, 1994.
-------------------------------------------------------------------------
Quarter 1994 1993
-------------------------------------------------------------------------
Dividend Per Dividend Per
High Low Common Share High Low Common Share
-------------------------------------------------------------------------
First 31 1/4 27 1/4 .0538 27 1/8 23 3/8 .0500
Second 31 3/8 27 5/8 .0600 26 3/4 22 3/4 .0538
Third 29 3/4 25 5/8 .0600 27 3/4 24 1/8 .0538
Fourth 29 7/8 25 7/8 .0600 29 l/2 25 5/8 .0538
-------------------------------------------------------------------------
Year 31 3/8 25 5/8 .2338 29 1/2 22 3/4 .2114
-------------------------------------------------------------------------
The approximate number of shareholders of record and beneficial
owners of the Company's common stock as of January 31, 1995 was
estimated to be 537,000.
Given the Company's returns on equity and assets, the Company's
management believes it is prudent to reinvest a significant portion of
earnings back into the business. The Company has paid 76 consecutive
quarterly dividends on common stock through March 29, 1995, has
increased the per share amount 20 times since the first dividend was
paid in 1976, and has increased the dividend amount every year.
Additional dividend increases will be considered after reviewing
returns to shareholders, profitability expectations and financing
needs.<PAGE>
<PAGE> 10
Item 6. Selected Financial Data
<TABLE>
11-YEAR SUMMARY
<CAPTION>
(Dollars rounded to millions, except per common share data and average restaurant sales)
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
Systemwide sales $25,987 23,587 21,885 19,928 18,759 17,333 16,064 14,330 12,432 11,001 10,007
U.S. $14,941 14,186 13,243 12,519 12,252 12,012 11,380 10,576 9,534 8,843 8,071
Outside of the U.S. $11,046 9,401 8,642 7,409 6,507 5,321 4,684 3,754 2,898 2,158 1,936
Systemwide sales by type
Operated by franchisees $17,146 15,756 14,474 12,959 12,017 11,219 10,424 9,452 8,422 7,612 6,914
Operated by the Company $ 5,793 5,157 5,103 4,908 5,019 4,601 4,196 3,667 3,106 2,770 2,538
Operated by affiliates $ 3,048 2,674 2,308 2,061 1,723 1,513 1,444 1,211 904 619 555
Average sales by
restaurants open at least
one year, in thousands $ 1,800 1,768 1,733 1,658 1,649 1,621 1,596 1,502 1,369 1,296 1,264
Revenues from franchised
restaurants $ 2,528 2,251 2,031 1,787 1,621 1,465 1,325 1,186 1,037 924 828
Total revenues $ 8,321 7,408 7,133 6,695 6,640 6,066 5,521 4,853 4,143 3,694 3,366
Operating income $ 2,241 1,984 1,862 1,679 1,596 1,438 1,288 1,160 983 905 812
Income before provision
for income taxes $ 1,887 1,676 1,448 1,299 1,246 1,157 1,046 959 848 782 707
Net income $ 1,224 1,083 959 860 802 727 646 549 * 480 433 389
Cash provided by
operations $ 1,926 1,680 1,426 1,423 1,301 1,246 1,177 1,051 852 813 701
Financial position at year end
Net property and
equipment $11,328 10,081 9,597 9,559 9,047 7,758 6,800 5,820 4,878 4,164 3,521
Total assets $13,592 12,035 11,681 11,349 10,668 9,175 8,159 6,982 5,969 5,043 4,230
Long-term debt $ 2,935 3,489 3,176 4,267 4,429 3,902 3,111 2,685 2,131 1,638 1,268<PAGE>
Total shareholders'
equity $ 6,885 6,274 5,892 4,835 4,182 3,550 3,413 2,917 2,506 2,245 2,009
Per common share**
Net income $ 1.68 1.45 1.30 1.17 1.10 .97 .86 .72 * .62 .55 .49
Dividends declared $ .23 .21 .20 .18 .17 .15 .14 .12 .11 .10 .08
Total shareholders'
equity at year end $ 9.20 8.12 7.39 6.73 5.82 4.90 4.55 3.86 3.22 2.84 2.47
Market price at
year end $29 1/4 28 1/2 24 3/8 19 14 1/2 17 1/4 12 11 10 1/8 9 5 3/4
Systemwide restaurants
at year end 15,205 13,993 13,093 12,418 11,803 11,162 10,513 9,911 9,410 8,901 8,304
Operated by franchisees 10,458 9,832 9,237 8,735 8,131 7,573 7,110 6,760 6,406 6,150 5,724
Operated by the Company 3,083 2,699 2,551 2,547 2,643 2,691 2,600 2,399 2,301 2,165 2,053
Operated by affiliates 1,664 1,462 1,305 1,136 1,029 898 803 752 703 586 527
U.S. 9,744 9,283 8,959 8,764 8,576 8,270 7,907 7,567 7,272 6,972 6,595
Outside of the U.S. 5,461 4,710 4,134 3,654 3,227 2,892 2,606 2,344 2,138 1,929 1,709
Number of countries at
year end 79 70 65 59 53 51 50 47 46 42 36
* Before the cumulative prior years' benefit from the change in accounting for income taxes.
**Restated for two-for-one common stock split in June 1994.
/TABLE
<PAGE>
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
CONSOLIDATED OPERATING RESULTS
-----------------------------------------------------------------------
INCREASES (DECREASES) IN OPERATING RESULTS OVER PRIOR YEAR
-----------------------------------------------------------------------
(Dollars rounded to millions, 1994 1993
except per common share data) Amount % Amount %
-----------------------------------------------------------------------
SYSTEMWIDE SALES $2,401 10% $1,702 8%
-----------------------------------------------------------------------
REVENUES
Sales by Company-operated
restaurants $ 636 12 $ 55 1
Revenues from franchised
restaurants 277 12 220 11
-----------------------------------------------------------------------
TOTAL REVENUES 913 12 275 4
-----------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 481 12 38 1
Franchised restaurants 55 14 32 9
General, administrative
and selling expenses 142 15 81 9
Other operating (income)
expense--net (22) 35 2 (3)
-----------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 656 12 153 3
-----------------------------------------------------------------------
OPERATING INCOME 257 13 122 7
-----------------------------------------------------------------------
Interest expense (10) (3) (58) (15)
Nonoperating income
(expense)--net (56) NM 48 NM
-----------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 211 13 228 16
-----------------------------------------------------------------------
Provision for income taxes 69 12 104 21
-----------------------------------------------------------------------
NET INCOME $ 142 13 $ 124 13
=======================================================================
NET INCOME PER COMMON SHARE* $ .23 16 $ .16 12
-----------------------------------------------------------------------
NM - Not Meaningful
* Restated for two-for-one common stock split in June 1994.<PAGE>
<PAGE> 12
SYSTEMWIDE SALES AND RESTAURANTS
Systemwide sales are comprised of sales by restaurants operated by the
Company, franchisees and affiliates operating under joint-venture
agreements between McDonald's and local businesspeople. The 1994
increase was due to expansion, higher sales at existing restaurants
and stronger foreign currencies, negatively affected in part by severe
weather conditions worldwide in early 1994. The 1993 increase was due
to expansion and higher sales at existing restaurants, offset in part
by weaker foreign currencies and one less day in 1993 since 1992 was a
leap year. Sales by Company-operated restaurants grew at a faster rate
than Systemwide sales in 1994 because Company-operated expansion
advanced at a faster rate than Systemwide expansion. Sales by Company-
operated restaurants grew at a slower rate than Systemwide sales in
1993 because weaker foreign currencies had a greater impact on sales
by Company-operated restaurants than on Systemwide sales, and because
of a greater number of franchised restaurants resulting from
expansion.
Average sales by restaurants open at least one year (excluding
satellites) were $1,800,000 in 1994, $32,000 above 1993. Average sales
in both the U.S. and outside of the U.S. improved through the emphasis
on value and customer satisfaction.
Expansion continued at an accelerated pace as 1,212 restaurants
(excluding satellites) were added in 1994, compared with 900 in 1993
and 675 in 1992. Restaurants opened during the year (excluding
satellites) contributed $799 million to Systemwide sales in 1994, $572
million in 1993 and $478 million in 1992. McDonald's plans to add
between 1,200 and 1,500 restaurants (excluding satellites) around the
world in 1995 and in each of the next several years. The mix of net
additions remains at one-third in the U.S. and two-thirds outside of
the U.S.
Our global expansion plan also includes satellites -- foodservice
facilities that leverage the infrastructure of existing restaurants by
using their storage capability and inventory, and by drawing on their
management talent and labor pool. During 1994, 575 satellites were
added around the world; we expect to open approximately 1,000
satellites in 1995. The consolidated financial statements reflect the
operating results of satellites on the same basis as traditional
restaurants; the results of satellites operated by the Company are
included in sales by and costs of Company-operated restaurants, while
those operated by franchisees are included in revenues from and costs
of franchised restaurants. Satellites in operation contributed $150
million to Systemwide sales in 1994. The operating results of
satellites were immaterial to consolidated operating results.
TOTAL REVENUES
Total revenues consist of sales by Company-operated restaurants, and
fees from restaurants operated by franchisees and affiliates based
upon a percent of sales with specified minimum payments. The minimum
fee is comprised of both a rent and service fee amount at a combined
rate of approximately 12.5% of sales for new U.S. franchise
arrangements. Prior to 1994 and since 1987, the minimum fee generally
was a combined 12.0% for both rent and service fees. Higher fees are
charged for sites that require a higher investment on the part of the
Company. Fees paid by franchisees outside of the U.S. vary according<PAGE>
<PAGE> 13
to local business conditions. These fees, together with occupancy and
operating rights, are stipulated in franchise arrangements that
generally have 20-year terms, and provide a stable, predictable
revenue flow to the Company.
Revenues grow as locations are added and as sales build in existing
locations. Menu price adjustments affect revenues as well as sales;
however, due to different pricing structures, new products,
promotions, and product mix variations among markets, it is
impractical to quantify the impact of menu price adjustments for the
System as a whole.
The rate of increase in total revenues in 1994 was greater than the
rate of increase in Systemwide sales due to strong global operating
results and an increase in the Company-operated restaurant base
through expansion and changes in ownership. The rate of increase in
total revenues in 1993 was lower than the rate of increase in
Systemwide sales due to weaker foreign currencies which had a greater
impact on revenues than on Systemwide sales, and because of a greater
number of franchised restaurants resulting from expansion.
Growth rates in sales by Company-operated restaurants and revenues
from franchised restaurants varied in 1993 because of expansion and
changes in ownership and because sales by Company-operated restaurants
were impacted to a greater degree by changing foreign currencies than
were revenues. In 1994, about 56% of sales by Company-operated
restaurants and 37% of revenues from franchised restaurants were
outside of the U.S., compared with 53% and 33%, respectively, in 1993.
RESTAURANT MARGINS
Company-operated margins were 19.8% of sales in 1994, compared with
19.2% in 1993 and 19.1% in 1992. In 1994, as a percent of sales, food
and paper, and occupancy and other operating costs declined, while
payroll costs increased. In 1993, as a percent of sales, food and
paper costs rose, while occupancy, other operating and payroll costs
declined.
Franchised margins comprised about two-thirds of the combined
operating margins. Consolidated franchised margins were 82.8% of
applicable revenues in 1994, compared with 83.1% in 1993 and 82.8% in
1992. The 1994 decrease reflected a higher proportion of leased sites
resulting from accelerated expansion and satellite development, as
financing costs embedded in operating leases were included in rent
expense which does not occur if a site is owned.
Franchised margins include revenues and expenses associated with
restaurants operating under business facilities lease arrangements.
Under these arrangements, the Company leases the businesses --
including equipment -- to franchisees who have options to purchase the
businesses. While higher fees are charged under these arrangements,
margins are generally lower because of equipment depreciation. When
these purchase options are exercised, resulting gains compensate the
Company for lower margins prior to exercise and are included in other
operating (income) expense--net. At year-end 1994, 476 restaurants
were operating under such arrangements, compared with 544 and 583 at
year-end 1993 and 1992, respectively.<PAGE>
<PAGE> 14
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES
The 1994 increase was primarily due to strategic global investment
spending to support expansion and value, and a one-time, noncash $15
million charge related to the early implementation of a new accounting
rule regarding the timing of expensing advertising production costs.
The 1993 increase was primarily due to higher employee costs
associated with expansion and key priorities, partially offset by
weaker foreign currencies. These expenses as a percent of Systemwide
sales have remained relatively constant over the past five years, and
were 4.2% in 1994 and 4.0% in 1993.
OTHER OPERATING (INCOME) EXPENSE--NET
This category is comprised of transactions which relate to franchising
and the foodservice business such as gains on sales of restaurant
businesses, equity in earnings of unconsolidated affiliates, and net
gains or losses from property dispositions. The 1994 income increase
reflected higher gains on sales of restaurant businesses and higher
income from affiliates, offset in part by higher losses on property
dispositions. The 1993 and 1992 amounts were relatively constant,
reflecting greater income from affiliates and gains on sales of
restaurant businesses in 1993, and by the favorable settlement of a
sales tax case in Brazil in 1992.
Gains on sales of restaurant businesses include gains from
exercises of purchase options by franchisees operating under business
facilities lease arrangements and from sales of Company-operated
restaurants. As a franchisor, McDonald's purchases and sells
businesses in transactions with franchisees and affiliates in an
ongoing effort to achieve the optimal ownership mix in each market.
These transactions and resulting gains are integral to franchising and
as such, are appropriately recorded in operating income.
Equity in earnings of unconsolidated affiliates is reported after
interest expense and income taxes, except for U.S. partnerships which
are reported before income taxes. The Company actively participates
in, but does not control, these businesses.
Net gains or losses from property dispositions result from
disposals of excess properties through closings, relocations and other
transactions.
OPERATING INCOME
The 1994 and 1993 increases reflected higher combined operating
margins, partially offset by higher general, administrative and
selling expenses. Additionally, 1994 was positively impacted by higher
other operating income and stronger foreign currencies, while 1993 was
negatively impacted by weaker foreign currencies.
INTEREST EXPENSE
The 1994 decrease was primarily due to lower average interest rates,
partially offset by higher debt levels and stronger foreign
currencies. The 1993 decrease was primarily due to lower average debt
balances, lower average interest rates and weaker foreign currencies.<PAGE>
<PAGE> 15
NONOPERATING INCOME (EXPENSE)--NET
This category includes interest income, gains and losses related to
investments and financings, as well as miscellaneous income and
expense. Higher translation losses, principally from Mexico and
Brazil, losses on investments and higher minority interest charges
impacted 1994. Also contributing to the year-over-year change were
gains on debt extinguishments and higher interest income in 1993. The
1993 increase reflected $9 million in gains related to debt
extinguishments in 1993 and $29 million in charges related to various
early redemptions of high-coupon, U.S. Dollar debt in 1992.
PROVISION FOR INCOME TAXES
The effective tax rate was 35.1% in 1994, compared with 35.4% in 1993
and 33.8% in 1992. The 1993 increase was primarily the result of new
U.S. tax legislation enacted that year, which negatively impacted the
provision by approximately $20 million. Of this amount, nearly $14
million was attributable to a one-time, noncash revaluation of
deferred tax liabilities. The Company expects its 1995 effective
income tax rate to be between 35.0% and 35.5%.
Consolidated net deferred tax liabilities included tax assets of
$233 million in 1994, net of valuation allowance, and $148 million in
1993. Substantially all of the tax assets arose in the U.S. and other
profitable markets, the majority of which is expected to be realized
in future U.S. income tax returns.
NET INCOME AND NET INCOME PER COMMON SHARE
Net income and net income per common share increased 13% and 16%,
respectively, in 1994. The spreads between the percent increases in
net income and net income per common share reflected the impact of
share repurchase. Net income and net income per common share increased
13% and 12%, respectively, in 1993. These increases were negatively
affected by weaker foreign currencies and new U.S. tax legislation.<PAGE>
<PAGE> 16
IMPACT OF CHANGING FOREIGN CURRENCIES
Changing foreign currencies affect reported results. McDonald's
lessens short-term cash exposures principally by purchasing goods and
services in local currencies, financing in local currencies and
hedging foreign-denominated cash flows. In 1994, stronger foreign
currencies positively contributed to operating income, but their
impact on interest expense and higher translation losses in Latin
America more than offset this benefit, resulting in a reduction in net
income. Weaker foreign currencies had a significant negative impact on
1993 results. Further discussion of our management of changing foreign
currencies is on pages 26 through 29 in the commentary on financings
and total shareholders' equity.
-----------------------------------------------------------------------
(Dollars in millions) As reported As adjusted*
-----------------------------------------------------------------------
1994
-----------------------------------------------------------------------
Systemwide sales $25,987 10% $25,715 9%
Revenues 8,321 12 8,268 12
Operating income 2,241 13 2,226 12
Net income 1,224 13 1,233 14
-----------------------------------------------------------------------
1993
-----------------------------------------------------------------------
Systemwide sales 23,587 8 23,993 10
Revenues 7,408 4 7,721 8
Operating income 1,984 7 2,051 10
Net income 1,083 13 1,114 16
-----------------------------------------------------------------------
*If exchange rates remained constant year-over-year.<PAGE>
<PAGE> 17
------------------------------------------------------------------------
U.S. OPERATIONS
------------------------------------------------------------------------
SALES
The 1994 and 1993 increases were due to expansion and higher sales at
existing restaurants. Positive comparable sales were achieved in 1994
through an emphasis on value and customer satisfaction in the form of
Extra Value Meals, Happy Meals and the three-tier value program; as
well as through promotions run during the year in the form of the NBA
cup highlighting large sandwiches, the Flintstones movie tie-in
featuring the McRib Grand Poobah Meal and a set of four Bedrock mugs,
the Dream Team II collector cup, the Music Event offering four artist
collections with the purchase of a large sandwich or Extra Value Meal,
and the Holiday Video offering of four videotapes.
------------------------------------------------------------------------
Five Ten
years years
(In millions of dollars) 1994 1993 1992 ago ago
------------------------------------------------------------------------
Operated by franchisees $11,965 $11,435 $10,615 $ 9,077 $6,166
Operated by the Company 2,550 2,420 2,353 2,728 1,856
Operated by affiliates 426 331 275 207 49
------------------------------------------------------------------------
U.S. sales $14,941 $14,186 $13,243 $12,012 $8,071
========================================================================
RESTAURANTS
There were 461 restaurants added in the U.S. in 1994, representing 38%
of Systemwide additions, compared with 324 and 36% in 1993, and 363
and 56% five years ago. In addition, 494 U.S. satellites were
operating at year-end 1994, compared with 114 at year-end 1993.
McDonald's expects to maintain the current level of U.S. expansion in
1995 and in each of the next several years by adding between 400 and
500 restaurants each year, exclusive of satellites.
------------------------------------------------------------------------
Five Ten
years years
1994 1993 1992 ago ago
------------------------------------------------------------------------
Operated by franchisees 7,849 7,628 7,375 6,374 5,073
Operated by the Company 1,546 1,433 1,395 1,751 1,481
Operated by affiliates 349 222 189 145 41
------------------------------------------------------------------------
U.S. restaurants 9,744 9,283 8,959 8,270 6,595
========================================================================<PAGE>
<PAGE> 18
Restaurants operated by franchisees and affiliates represented 84%
of U.S. restaurants at year-end 1994, compared with 85% at year-end
1993 and 79% five years ago. During the period 1989 through 1991, the
Company franchised certain restaurants it previously operated because
entrepreneurial owners with an equity stake in the business improved
operations, sales and profits as well as consolidated profits. Since
1990, we have continued to make operational improvements and reduce
operating and development costs; as a result, over the past several
years, our base of restaurants has grown at a faster rate.
OPERATING RESULTS
------------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992 1991 1990
------------------------------------------------------------------------
REVENUES
Sales by Company-
operated restaurants $2,550 $2,420 $2,353 $2,410 $2,655
Revenues from
franchised restaurants 1,606 1,511 1,396 1,300 1,216
------------------------------------------------------------------------
TOTAL REVENUES 4,156 3,931 3,749 3,710 3,871
------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Company-operated
restaurants 2,066 1,977 1,920 2,000 2,221
Franchised restaurants 270 247 235 217 202
General, administrative
and selling expenses 714 638 566 549 511
Other operating (income)
expense--net (25) (18) (13) (56) (49)
------------------------------------------------------------------------
TOTAL OPERATING
COSTS AND EXPENSES 3,025 2,844 2,708 2,710 2,885
------------------------------------------------------------------------
U.S. OPERATING INCOME $1,131 $1,087 $1,041 $1,000 $ 986
========================================================================
U.S. revenues were positively impacted by strong sales and expansion
in 1994 and 1993, and negatively affected in 1992, 1991 and 1990 by
the franchising of certain Company-operated restaurant businesses.
U.S. Company-operated margins increased $42 million or 9% in 1994,
reflecting sales improvement and growth in the number of Company-
operated restaurants. These margins were 19.0% of sales in 1994,
compared with 18.3% in 1993 and 18.4% in 1992. In 1994, the margin
benefited from lower commodity costs and improvements in processing
for beef. U.S. franchised margins rose $71 million or 6% in 1994.
These margins were 83.2% of applicable revenues in 1994, compared with
83.6% in 1993 and 83.2% in 1992. Franchised margins as a percent of
revenues decreased in 1994 because rent expense grew at a faster rate
than revenues, resulting from a higher proportion of leased openings.
While it is difficult to assess potential effects of federal and
state legislation in the U.S. that may impact the industry, the
Company believes it can maintain operating margins within the
historical range of the past ten years by continuing to build sales
and reduce costs.<PAGE>
<PAGE> 19
U.S. operating income rose $43 million or 4% in 1994, and was 50% of
consolidated operating income, compared with 55% in 1993. The 1994 and
1993 increases resulted primarily from higher combined operating
margins, partially offset by higher general, administrative and
selling expenses in the form of higher employee costs, other
expenditures to support our global strategies and a one-time $12
million charge related to the implementation of the new accounting
rule for advertising costs in 1994. Without this charge, U.S.
operating income would have grown by 5% in 1994. Operating income
included $366 million of depreciation and amortization in 1994,
compared with $348 million in 1993 and $330 million in 1992.
While the U.S. market remains highly competitive, McDonald's is
confident of continued growth through a greater emphasis on value and
customer satisfaction, and through expansion.
ASSETS AND CAPITAL EXPENDITURES
-------------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------
New restaurants $ 472 $ 332 $ 196 $ 214 $ 446
Existing restaurants 125 122 125 151 249
Other properties 113 130 76 45 51
-------------------------------------------------------------------------
U.S. capital expenditures $ 710 $ 584 $ 397 $ 410 $ 746
=========================================================================
U.S. assets $6,683 $6,385 $6,410 $6,154 $6,060
-------------------------------------------------------------------------
U.S. assets increased $297 million or 5% in 1994, driven by higher
expenditures for restaurant property and buildings resulting from
expansion. At year-end 1994, 49% of consolidated assets were located
in the U.S., compared with 53% at year-end 1993. Capital expenditures
rose $126 million or 22% in 1994, and represented 46% of consolidated
capital expenditures, compared with 55% five years ago. These amounts
excluded expenditures made by franchisees such as their initial
investments in equipment, signs, seating and decor, as well as long-
term, ongoing reinvestment in their businesses. New restaurant
expenditures grew $140 million or 42% because of accelerated
expansion, tempered by lower average development costs, and included
$41 million related to satellite development.
Expenditures for existing restaurants included modifications to
achieve higher levels of customer satisfaction and implementation of
technology to improve service and food quality. The decline since 1990
reflected cost reduction efforts and aggressive reinvestment in prior
years. Rebuilding and relocating restaurants has generated additional
sales, reflecting our ability to adjust to changing demographics,
traffic patterns and market opportunities. More than $40 million were
spent for these investments in 1994, and $249 million over the past
five years.<PAGE>
<PAGE> 20
-------------------------------------------------------------------------
(In thousands of dollars) 1994 1993 1992 1991 1990
-------------------------------------------------------------------------
Land $ 317 $ 328 $ 361 $ 433 $ 433
Building 483 482 515 608 720
Equipment 295 317 361 362 403
-------------------------------------------------------------------------
U.S. average
development costs $1,095 $1,127 $1,237 $1,403 $1,556
=========================================================================
Average development costs have steadily decreased since 1990 due to
efforts to optimize building designs and standardize development.
Average land costs declined as a result of the increase in low-cost
building designs, which utilize smaller land parcels. Average building
costs remained relatively flat reflecting the benefits of these
building designs and construction efficiencies. Low-cost building
designs comprised nearly 83% of 1994 openings compared with 80% in
1993. Average equipment costs decreased due to standardization and
global sourcing. McDonald's intends to pursue ongoing development cost
reductions by taking further advantage of standardization, global
sourcing and economies of scale.
These lower-cost, lower-volume building designs allow us to
profitably expand into more locations. This is consistent with
McDonald's goal of increasing market share with greater marketwide
presence around the world.
The Company continues to emphasize restaurant property ownership,
because real estate ownership yields long-term benefits, including the
ability to fix occupancy costs. However, most satellites are leased
locations. In addition to purchasing new properties, the Company
acquires previously leased properties and owned 69% of U.S. sites at
year-end 1994, the same as five years ago.<PAGE>
<PAGE> 21
----------------------------------------------------------------------
OPERATIONS OUTSIDE OF THE U.S.
----------------------------------------------------------------------
SALES
Sales outside of the U.S. rose 18% in 1994 due to expansion, higher
sales at existing restaurants as comparable sales on a local currency
basis were positive, and stronger foreign currencies. The 1993
increase was negatively impacted by weaker foreign currencies, most
notably the European currencies, as well as the Canadian and
Australian Dollars. Strong operating results have been achieved in the
past several years despite weak economies in several countries,
particularly Canada, England and Japan.
----------------------------------------------------------------------
Five Ten
years years
(In millions of dollars) 1994 1993 1992 ago ago
----------------------------------------------------------------------
Operated by franchisees $ 5,182 $4,321 $3,859 $2,142 $ 748
Operated by the Company 3,242 2,737 2,750 1,873 682
Operated by affiliates 2,622 2,343 2,033 1,306 506
----------------------------------------------------------------------
Sales outside of the U.S. $11,046 $9,401 $8,642 $5,321 $1,936
======================================================================
Although many European economies were weak over the past 18 months,
McDonald's markets generally performed well. Throughout 1994,
comparable sales in France and Germany were not as strong as in prior
years because of the economy, unusually hot weather in the summer, and
World Cup Soccer. Yet, growth and profitability in both markets were
very good. Pacific sales were strong with the exception of our joint
venture in Japan, which has been affected by a weak economy.
Transaction counts and profits were up in Japan, but sales trends had
not fundamentally improved. Business in Canada continued to improve,
despite a weak economy. Latin American economies have been weak, but
our business there has been quite good, particularly in Brazil, since
the mid-year economic reforms. Results in Mexico in 1994 were
impacted by the continuing sluggish economy and in December, by the
devaluation of the Mexican peso. We expect this impact to continue
into 1995.
In 1994, many markets delivered excellent sales growth on a local
currency basis: Argentina, Australia, Austria, Belgium, Brazil,
Canada, Denmark, England, Finland, France, Germany, Hong Kong,
Hungary, Ireland, Italy, Malaysia, Netherlands, New Zealand, Norway,
Panama, Philippines, Puerto Rico, Scotland, Singapore, South Korea,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey and Wales.
RESTAURANTS
During the past five years, 66% of Systemwide additions have been
outside of the U.S. Of the 751 restaurants added in 1994, 51% were in
the six largest markets, compared with 54% in 1993 and 57% in 1992.
This continued relative decline is indicative of the growing
importance of emerging markets. McDonald's expects to boost expansion
outside of the U.S. in 1995 and in each of the next several years by
adding between 800 and 1,000 restaurants, exclusive of satellites.<PAGE>
<PAGE> 22
----------------------------------------------------------------------
Five Ten
years years
1994 1993 1992 ago ago
----------------------------------------------------------------------
Operated by franchisees 2,609 2,204 1,862 1,199 651
Operated by the Company 1,537 1,266 1,156 940 572
Operated by affiliates 1,315 1,240 1,116 753 486
----------------------------------------------------------------------
Restaurants outside of
the U.S. 5,461 4,710 4,134 2,892 1,709
======================================================================
About 79% of Company-operated restaurants outside of the U.S. were
in England, Canada, Germany, Australia, Taiwan, Hong Kong and France.
About 68% of franchised restaurants outside of the U.S. were in
Canada, Germany, Australia, France, Japan and the Netherlands. About
65% of the restaurants operated by affiliates were located in Japan.
OPERATING RESULTS
-----------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------
REVENUES
Sales by Company-
operated restaurants $3,242 $2,737 $2,750 $2,499 $2,364
Revenues from
franchised restaurants 923 740 634 486 405
-----------------------------------------------------------------------
TOTAL REVENUES 4,165 3,477 3,384 2,985 2,769
-----------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Company-operated
restaurants 2,579 2,188 2,206 2,029 1,915
Franchised restaurants 165 133 114 90 77
General, administrative
and selling expenses 369 303 295 246 213
Other operating (income)
expense--net (59) (44) (51) (58) (46)
-----------------------------------------------------------------------
TOTAL OPERATING
COSTS AND EXPENSES 3,054 2,580 2,564 2,307 2,159
-----------------------------------------------------------------------
OPERATING INCOME
OUTSIDE OF THE U.S. $1,111 $ 897 $ 820 $ 678 $ 610
=======================================================================
The 1994 and 1993 revenue and operating income increases reflected
expansion and higher combined operating margins, partially offset by
higher general, administrative and selling expenses. Changing foreign
currencies had a positive effect in 1994 and a negative effect in
1993; higher other operating income helped 1994.
Company-operated margins remained strong, increasing $114 million or
21% in 1994. These margins improved to 20.5% of sales in 1994,
compared with 20.1% in 1993 and 19.8% in 1992. Franchised margins grew
$151 million or 25% in 1994. These margins were 82.1% of applicable
revenues in 1994, compared with 82.0% in 1993 and 82.1% in 1992.<PAGE>
<PAGE> 23
The 1994 and 1993 increases in general, administrative and selling
expenses were primarily due to higher employee costs associated with
expansion.
The 1994 increase in other operating income was primarily due to
gains on sales of restaurant businesses, greater affiliate earnings
from Japan and other markets, and gains resulting from property
dispositions. Other operating income decreased in 1993 due to the
favorable settlement of a sales tax case in Brazil in 1992, offset
somewhat by 1993 increases in gains on sales of restaurant businesses
and greater affiliate earnings.
Operations outside of the U.S. continued to contribute greater
amounts to consolidated results as shown below:
---------------------------------------------------------------------
(As a percent of consolidated) 1994 1993 1992 1991 1990
---------------------------------------------------------------------
Systemwide sales 43 40 39 37 35
Total revenues 50 47 47 45 42
Operating income 50 45 44 40 38
Operating margins
Company-operated 58 55 56 53 51
Franchised 36 32 31 27 24
Systemwide restaurants 36 34 32 29 27
Assets 51 47 45 46 43
---------------------------------------------------------------------
The Europe/Africa/Middle East segment accounted for 63% of revenues
and 61% of operating income outside of the U.S. in 1994, growing $369
and $124 million, respectively. Germany, England and France accounted
for 82% of this segment's operating income, compared with 85% in 1993.
The 1994 increases were primarily due to strong operating results in
these countries, as well as many emerging markets. The 1993 increases
were primarily due to strong operating results in Germany and France,
as well as many emerging markets, offset by weaker foreign currencies;
England's operating income was significantly impacted by the weaker
currency.
Asia/Pacific revenues grew $236 million and operating income
increased $52 million in 1994; 87% of operating income was contributed
by Australia, Japan, Hong Kong and Taiwan. The 1994 and 1993 increases
were attributable to expansion and developing economies in many
markets, with the exception of our affiliate in Japan which continued
to suffer from a weak economy. The change in ownership of Taiwan from
an affiliate to a wholly-owned subsidiary was also a benefit in 1994.<PAGE>
<PAGE> 24
Canadian revenues decreased $12 million in 1994 due to the negative
impact of the weaker currency; revenues would have increased $21
million in 1994 if the exchange rate had remained at its 1993 level.
Operating income increased $6 million because of lower operating costs
and higher gains on sales of restaurant businesses, partially offset
by the weaker currency.
Latin American revenues grew $95 million, while operating income
increased $32 million in 1994. The 1994 increases in revenues and
operating income were primarily a function of expansion, as well as a
strengthening of the Brazilian market since the mid-year economic
reforms. However, operating income in Mexico was down because of the
economy and peso devaluation. The 1993 increase in revenues was
primarily a function of expansion, while the decrease in operating
income reflected the favorable settlement of a sales tax case in
Brazil in 1992, partially offset by better results in Argentina in
1993. Brazil was also affected by a weak economy in 1993 and 1992.
ASSETS AND CAPITAL EXPENDITURES
Assets outside of the U.S. rose $1.3 billion or 22% in 1994 due to
expansion and stronger foreign currencies. At year-end 1994, about 51%
of consolidated assets were located outside of the U.S.; 60% of these
assets were located in England, Germany, France, Australia and Canada.
-----------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------
New restaurants $ 723 $ 609 $ 603 $ 612 $ 639
Existing restaurants 87 94 91 94 126
Other properties 34 55 47 39 74
-----------------------------------------------------------------------
Capital expenditures
outside of the U.S. $ 844 $ 758 $ 741 $ 745 $ 839
=======================================================================
Assets outside of
the U.S. $6,909 $5,650 $5,271 $5,195 $4,608
-----------------------------------------------------------------------
In the past five years, nearly $3.9 billion were invested outside
of the U.S.; in 1994, capital expenditures rose in all geographic
segments. Approximately 70% of capital expenditures outside of the
U.S. were invested in Europe -- principally in Germany, France and
England.
In general, average development costs for new restaurants for the
five largest, majority-owned markets -- Australia, Canada, England,
France and Germany -- were nearly double the U.S. average; such costs
accommodate higher sales volumes and transaction counts. Since 1991,
average development costs have decreased due to construction and
design efficiencies, standardization, global sourcing and changes in
the mix of openings.
These lower-cost, lower-volume building designs allow us to
profitably expand into more locations. This is consistent with
McDonald's goal of increasing market share with greater marketwide
presence around the world.<PAGE>
<PAGE> 25
Expenditures for existing restaurants included seating and decor
upgrades, and equipment required for new products and operating
efficiencies. The majority of these expenditures were in Europe.
Expenditures for other properties were principally for office
facilities.
As in the U.S., business outside of the U.S. emphasizes restaurant
property ownership. However, various laws and regulations make
property acquisition and ownership much more difficult than in the
U.S. Ownership is obtained when practical; otherwise, long-term leases
are a viable alternative. In addition, certain markets have laws and
customs that offer stronger tenancy rights than are available in the
U.S. The Company and affiliates owned 36% of sites outside of the U.S.
at year-end 1994, compared with 35% five years ago.
Capital expenditures made by affiliates -- which were not included
in consolidated amounts -- were $203 million in 1994, compared with
$207 million in 1993. The majority of 1994 expenditures were for
development in Japan, Argentina, Sweden and Singapore.<PAGE>
<PAGE> 26
-----------------------------------------------------------------------
FINANCIAL POSITION
-----------------------------------------------------------------------
TOTAL ASSETS AND CAPITAL EXPENDITURES
Total assets grew approximately $1.6 billion or 13% in 1994; net
property and equipment represented 83% of total assets and rose $1.2
billion. Capital expenditures increased $213 million or 16%,
reflecting higher expansion, partially offset by lower average
development costs and stronger foreign currencies.
CASH PROVIDED BY OPERATIONS
Cash provided by operations increased $246 million or 15% in 1994.
Together with other sources of cash such as borrowings, cash provided
by operations was used principally for capital expenditures, debt
repayments, share repurchase and dividends. For the fourth straight
year, cash provided by operations exceeded capital expenditures.
While cash generated is significant relative to cash required, the
Company also has the ability to meet short-term needs through
commercial paper borrowings and line of credit agreements.
Accordingly, a relatively low current ratio has been purposefully
maintained; it was .30 at year-end 1994.
The Company believes that cash flow measures are meaningful
indicators of growth and financial strength, when evaluated in the
context of absolute dollars, uses and consistency. Over the past five
years, cash flow coverage has improved significantly. Cash provided by
operations is expected to cover capital expenditures over the next
several years, even as expansion continues to accelerate.
-----------------------------------------------------------------------
(Dollars in millions) 1994 1993 1992 1991 1990
-----------------------------------------------------------------------
Cash provided by
operations $1,926 $1,680 $1,426 $1,423 $1,301
Cash provided by operations
less capital expenditures $ 388 $ 363 $ 339 $ 294 $ (270)
Cash provided by operations
as a percent of capital
expenditures 125 128 131 126 83
Cash provided by operations
as a percent of average
total debt 48 44 33 31 29
-----------------------------------------------------------------------
FINANCINGS
The Company strives to minimize interest expense and the impact of
changing foreign currencies while maintaining the capacity to meet
increasing growth requirements. To accomplish these objectives,
McDonald's generally finances long-term assets with long-term debt in
the currencies in which the assets are denominated, while remaining
flexible to take advantage of changing foreign currencies and interest
rates.<PAGE>
<PAGE> 27
Over the years, major capital markets and various techniques have
been utilized to meet financing requirements and reduce interest
expense. Currency exchange agreements have been employed in
conjunction with borrowings to obtain desired currencies at attractive
rates. Interest-rate exchange agreements have been used to effectively
convert fixed-rate to floating-rate debt, or vice versa. Foreign-
denominated debt has been used to lessen the impact of changing
foreign currencies on net income and shareholders' equity. Total
foreign-denominated debt, including the effects of currency exchange
agreements, was $4.0 and $3.1 billion at year-end 1994 and 1993,
respectively.
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------------------------------
Fixed-rate debt as a percent
of total debt at year end 64 77 75 78 78
Weighted average annual
interest rate 8.4 9.1 9.3 9.4 9.4
Foreign-denominated debt
as a percent of total debt
at year end 92 86 72 61 60
Total debt as a percent of
total capitalization (total
debt and total shareholders'
equity) 39 37 40 49 53
-----------------------------------------------------------------------
The Company manages its debt portfolio in order to respond to
changes in interest rates and foreign currencies and accordingly,
periodically retires, redeems, and repurchases debt; terminates
exchange agreements; and uses derivatives. While changing foreign
currencies affect reported results, the Company actively hedges seven
foreign currencies -- Japanese Yen, Deutsche Mark, French Franc,
British Pound Sterling, Australian Dollar, Canadian Dollar and Swiss
Franc -- to minimize the cash exposure of royalty and other payments
received in the U.S. in local currencies.<PAGE>
<PAGE> 28
The Company does not use derivatives with a level of complexity
or with a risk higher than the exposures to be hedged and does not
hold or issue financial instruments for trading purposes; all exchange
agreements are over-the-counter instruments. McDonald's restaurants
also primarily purchase goods and services in local currencies
resulting in natural hedges. McDonald's typically finances in local
currencies creating economic hedges; and the Company's exposure is
diversified within a basket of currencies, as opposed to one or
several. The Company's largest net asset exposures (defined as total
assets less foreign-denominated liabilities) by foreign currency were
as follows:
----------------------------------------------------------------------
(In millions of dollars) December 31, 1994 1993
----------------------------------------------------------------------
British Pounds Sterling $330 $324
Canadian Dollars 311 276
Australian Dollars 212 152
French Francs 99 81
Austrian Schillings 84 63
----------------------------------------------------------------------
Moody's and Standard & Poor's have rated McDonald's debt Aa2 and
AA, respectively, since 1982. Duff & Phelps began rating the debt in
1990, and currently rates it AA+. At the present time, these strong
ratings are important to us in the context of our global development
plans. The Company has not experienced, nor does it expect to
experience, difficulty in obtaining financing or in refinancing
existing debt. At year-end 1994, the Company and its subsidiaries had
$1.7 billion available under line of credit agreements and $585
million under previously filed shelf registrations available for
future debt issuance.
Although McDonald's prefers to own real estate, leases are an
alternative financing method. As in the past, some new properties will
be leased. Such leases frequently include renewal and/or purchase
options. In the past five years, McDonald's has leased properties
related to 40% of U.S. openings (excluding satellites) and 64% of
openings outside of the U.S. (excluding satellites).
Since 1990, the Company has improved its balance sheet by reducing
leverage while simultaneously increasing expansion and repurchasing
shares.
TOTAL SHAREHOLDERS' EQUITY
Total shareholders' equity rose $611 million or 10% in 1994,
representing 51% of total assets at year-end 1994. One technique used
to enhance common shareholder value is to repurchase shares with our
excess cash flow or debt capacity, while maintaining a strong equity
base for future expansion. At year-end 1994, the market value of
shares repurchased and recorded as common stock in treasury was
$4.0 billion, compared to their cost of $2.4 billion.<PAGE>
<PAGE> 29
In conjunction with efforts to enhance common shareholder value,
the Company repurchased about $500 million of its common stock in
1994, representing half of the three-year $1.0 billion program
announced in January 1994. In 1993, the Company completed a $700
million common share repurchase program begun in 1992. In 1992, in
order to lower the cost of equity capital, the Company issued $500
million of Series E 7.72% Cumulative Preferred Stock; at the same
time, the Board of Directors authorized a $500 million common share
repurchase program. Subsequently, the Board authorized an additional
$200 million expenditure for share repurchase in 1993.
Stronger foreign currencies added $77 million to shareholders'
equity in 1994. At year-end 1994, foreign-denominated assets not
entirely financed with related foreign-denominated debt were
principally located in England, Canada, Australia, France and Austria.
At year-end 1994, assets in hyperinflationary markets and in Mexico
were principally financed in U.S. Dollars.
RETURNS
Return on average assets is computed using operating income. Net
income, less preferred stock dividends (net of tax in 1994, 1993 and
1992), is used to calculate return on average common equity. Month-end
balances are used to compute both average assets and average common
equity.
----------------------------------------------------------------------
1994 1993 1992 1991 1990
----------------------------------------------------------------------
Return on average assets 17.6 17.0 16.4 15.7 16.3
Return on average common
equity 19.4 19.0 18.2 19.1 20.7
----------------------------------------------------------------------
The improvements in return on average assets since 1991 reflected
better global operating results and a slower rate of asset growth. The
1994 and 1993 improvements in return on average common equity
reflected higher levels of share repurchase, whereas declines in 1992
and 1991 resulted from lower levels of share repurchase as excess cash
flow was used to reduce debt.
EFFECTS OF CHANGING PRICES--INFLATION
McDonald's has demonstrated an ability to manage inflationary cost
increases effectively. Rapid inventory turnover, ability to adjust
prices, cost controls and substantial property holdings -- many of
which are at fixed costs and partially financed by debt made cheaper
by inflation -- have enabled McDonald's to mitigate the effects of
inflation. In hyperinflationary markets, menu board prices typically
are adjusted to keep pace, thereby mitigating the effect on reported
results.<PAGE>
<PAGE> 30
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reference
---------
Management's report 31
Report of independent auditors 32
Consolidated statement of income
for each of the three years in the
period ended December 31, 1994 33
Consolidated balance sheet
at December 31, 1994 and 1993 34
Consolidated statement of cash flows
for each of the three years in the
period ended December 31, 1994 35
Consolidated statement of shareholders'
equity for each of the three years in
the period ended December 31, 1994 36
Notes to consolidated financial statements
(Financial comments) 37-54
Quarterly results (unaudited) 55<PAGE>
<PAGE> 31
MANAGEMENT'S REPORT
Management is responsible for the preparation, integrity and fair
presentation of the consolidated financial statements and Financial
Comments appearing in this annual report. The financial statements
were prepared in accordance with generally accepted accounting
principles and include certain amounts based on management's judgment
and best estimates. Other financial information presented in the
annual report is consistent with the financial statements.
The Company maintains a system of internal control over financial
reporting including safeguarding of assets against unauthorized
acquisition, use or disposition, which is designed to provide
reasonable assurance to the Company's management and Board of
Directors regarding the preparation of reliable published financial
statements and such asset safeguarding. The system includes a
documented organizational structure and appropriate division of
responsibilities; established policies and procedures which are
communicated throughout the Company; careful selection, training, and
development of our people; and utilization of an internal audit
program. Policies and procedures prescribe that the Company and all
employees are to maintain the highest ethical standards and that
business practices throughout the world are to be conducted in a
manner which is above reproach.
There are inherent limitations in the effectiveness of any system
of internal control, including the possibility of human error and the
circumvention or overriding of controls. Accordingly, even an
effective internal control system can provide only reasonable
assurance with respect to financial statement preparation and
safeguarding of assets. Furthermore, the effectiveness of an internal
control system can change with circumstances. The Company believes
that at December 31, 1994, it maintained an effective system of
internal control over financial reporting and safeguarding of assets
against unauthorized acquisition, use or disposition.
The consolidated financial statements have been audited by
independent auditors, Ernst & Young LLP, who were given unrestricted
access to all financial records and related data. The audit report of
Ernst & Young LLP is presented herein.
The Board of Directors, operating through its Audit Committee
composed entirely of outside Directors, provides oversight to the
financial reporting process. Ernst & Young LLP has independent access
to the Audit Committee and periodically meets with the Committee to
discuss accounting, auditing and financial reporting matters.
McDONALD'S CORPORATION
Oak Brook, Illinois
January 26, 1995<PAGE>
<PAGE> 32
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
McDonald's Corporation
Oak Brook, Illinois
We have audited the accompanying consolidated balance sheet of
McDonald's Corporation and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility
of McDonald's Corporation management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of McDonald's Corporation and subsidiaries at December 31, 1994 and
1993, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 26, 1995<PAGE>
<PAGE> 33
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------------------------------
<CAPTION>
(In millions of dollars, except per common share data)
Years ended December 31, 1994 1993 1992
--------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales by Company-operated restaurants $5,792.6 $5,157.2 $5,102.5
Revenues from franchised restaurants 2,528.2 2,250.9 2,030.8
--------------------------------------------------------------------------
TOTAL REVENUES 8,320.8 7,408.1 7,133.3
--------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants
Food and packaging 1,934.2 1,735.1 1,688.8
Payroll and other employee benefits 1,459.1 1,291.2 1,281.4
Occupancy and other operating expenses 1,251.7 1,138.3 1,156.3
--------------------------------------------------------------------------
4,645.0 4,164.6 4,126.5
--------------------------------------------------------------------------
Franchised restaurants--occupancy expenses 435.5 380.4 348.6
General, administrative and selling expenses 1,083.0 941.1 860.6
Other operating (income) expense--net (83.9) (62.0) (64.0)
--------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 6,079.6 5,424.1 5,271.7
--------------------------------------------------------------------------
OPERATING INCOME 2,241.2 1,984.0 1,861.6
--------------------------------------------------------------------------
Interest expense--net of capitalized interest
of $20.6, $20.0 and $19.5 305.7 316.1 373.6
Nonoperating income (expense)--net (48.9) 7.8 (39.9)
--------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,886.6 1,675.7 1,448.1
--------------------------------------------------------------------------
Provision for income taxes 662.2 593.2 489.5
--------------------------------------------------------------------------
NET INCOME $1,224.4 $1,082.5 $ 958.6
==========================================================================
NET INCOME PER COMMON SHARE $ 1.68 $ 1.45 $ 1.30
--------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .23 $ .21 $ .20
--------------------------------------------------------------------------
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 34
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED BALANCE SHEET
<CAPTION>
--------------------------------------------------------------------
(In millions of dollars) December 31, 1994 1993
--------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $179.9 $185.8
Accounts receivable 348.1 287.0
Notes receivable 31.2 27.6
Inventories, at cost, not in excess of market 50.5 43.5
Prepaid expenses and other current assets 131.0 118.9
--------------------------------------------------------------------
TOTAL CURRENT ASSETS 740.7 662.8
--------------------------------------------------------------------
OTHER ASSETS AND DEFERRED CHARGES
Notes receivable due after one year 80.0 90.0
Investments in and advances to affiliates 579.3 446.7
Miscellaneous 380.4 338.6
--------------------------------------------------------------------
TOTAL OTHER ASSETS AND DEFERRED CHARGES 1,039.7 875.3
--------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 15,184.6 13,459.0
Accumulated depreciation and amortization (3,856.2) (3,377.6)
--------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 11,328.4 10,081.4
--------------------------------------------------------------------
INTANGIBLE ASSETS--NET 483.1 415.7
--------------------------------------------------------------------
TOTAL ASSETS $13,591.9 $12,035.2
====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $1,046.9 $193.3
Accounts payable 509.4 395.7
Income taxes 25.0 56.0
Other taxes 102.1 90.2
Accrued interest 107.7 132.9
Other accrued liabilities 291.9 203.9
Current maturities of long-term debt 368.3 30.0
--------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,451.3 1,102.0
--------------------------------------------------------------------
LONG-TERM DEBT 2,935.4 3,489.4
OTHER LONG-TERM LIABILITIES AND
MINORITY INTERESTS 422.8 334.4
DEFERRED INCOME TAXES 840.8 835.3
COMMON EQUITY PUT OPTIONS 56.2
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized--165.0 million shares;
issued--11.2 and 11.4 million 674.2 677.3<PAGE>
Common stock, no par value;
authorized--1.25 billion shares;
issued--830.3 million 92.3 92.3
Additional paid-in capital 286.0 256.7
Guarantee of ESOP Notes (234.4) (253.6)
Retained earnings 8,625.9 7,612.6
Foreign currency translation adjustment (114.9) (192.2)
--------------------------------------------------------------------
9,329.1 8,193.1
--------------------------------------------------------------------
Common stock in treasury, at cost;
136.6 and 123.0 million shares (2,443.7) (1,919.0)
--------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 6,885.4 6,274.1
--------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,591.9 $12,035.2
====================================================================
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 35
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
--------------------------------------------------------------------------
(In millions of dollars)
Years ended December 31, 1994 1993 1992
--------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $1,224.4 $1,082.5 $958.6
Adjustments to reconcile to cash
provided by operations
Depreciation and amortization 628.6 568.4 554.9
Deferred income taxes (5.6) 52.4 22.4
Changes in operating working capital items
Accounts receivable increase (51.6) (48.3) (29.1)
Inventories, prepaid expenses and other
current assets (increase) decrease (15.0) (9.6) 2.2
Accounts payable increase 105.4 45.4 .8
Accrued interest decrease (25.5) (5.1) (27.4)
Taxes and other liabilities increase
(decrease) 95.2 26.5 (68.2)
Other--net (29.7) (32.4) 11.7
--------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS 1,926.2 1,679.8 1,425.9
--------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment expenditures (1,538.6) (1,316.9) (1,086.9)
Sales of restaurant businesses 151.5 114.2 124.5
Purchases of restaurant businesses (133.8) (64.2) (64.1)
Notes receivable additions (15.1) (33.1) (31.8)
Property sales 66.0 61.6 52.2
Notes receivable reductions 56.7 75.7 78.5
Other (92.6) (55.3) (71.1)
--------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (1,505.9) (1,218.0) (998.7)
--------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings 521.7 (8.9) 17.0
Long-term financing issuances 260.9 1,241.0 509.5
Long-term financing repayments (536.9) (1,185.9) (1,041.5)
Treasury stock purchases (495.6) (620.1) (79.7)
Preferred stock issuances 484.9
Common and preferred stock dividends (215.7) (201.2) (160.5)
Other 39.4 62.6 59.4
--------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (426.2) (712.5) (210.9)
--------------------------------------------------------------------------
CASH AND EQUIVALENTS INCREASE (DECREASE) (5.9) (250.7) 216.3
--------------------------------------------------------------------------
Cash and equivalents at beginning of year 185.8 436.5 220.2
--------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $179.9 $185.8 $436.5
==========================================================================<PAGE>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $323.9 $312.2 $395.7
Income taxes paid $621.8 $521.7 $531.6
--------------------------------------------------------------------------
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 36
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION>
(Dollars and shares in millions, except per share data)
Foreign
Preferred Common Additional Guarantee currency Common stock
stock issued stock issued paid-in of Retained translation in treasury
Shares Amount Shares Amount capital ESOP Notes earnings adjustment Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 19.8 $298.2 830.3 $92.3 $155.8 $(286.7) $5,925.2 $32.3 (113.1) $(1,382.0)
----------------------------------------------------------------------------------------------------------------------------------
Net income 958.6
Common stock cash dividends
($.20 per share) (141.8)
Preferred stock cash dividends
($1.01 for Series B, $1.16 for
Series C and $.16 for Series
E depositary share), (net of
tax benefits of $6.4) (14.7)
Preferred stock issuance 500.0 (15.1)
Preferred stock conversion (8.2) (118.0) 22.9 6.4 95.1
ESOP Notes payment 12.6
Treasury stock acquisitions (3.8) (92.3)
Translation adjustments
(including taxes of $21.2) (159.7)
Common equity put options
issuance (91.5)
Stock option exercises and
other (including tax benefits
of $29.7) 50.5 2.8 7.2 47.9
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 11.6 680.2 830.3 92.3 214.1 (271.3) 6,727.3 (127.4) (103.3) (1,422.8)
----------------------------------------------------------------------------------------------------------------------------------<PAGE>
Net income 1,082.5
Common stock cash dividends
($.21 per share) (150.3)
Preferred stock cash dividends
($1.01 for Series B, $1.16 for
Series C and $1.93 for Series
E depositary share), (net of
tax benefits of $4.1) (46.9)
Preferred stock conversion (.2) (2.9) .5 .2 2.4
ESOP Notes payment 15.5
Treasury stock acquisitions (25.0) (627.7)
Translation adjustments
(including taxes of $1.6) (64.8)
Common equity put options
expiration 94.0
Stock option exercises and other
(including tax benefits of
$23.0) 42.1 2.2 5.1 35.1
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 11.4 677.3 830.3 92.3 256.7 (253.6) 7,612.6 (192.2) (123.0) (1,919.0)
----------------------------------------------------------------------------------------------------------------------------------
Net income 1,224.4
Common stock cash dividends
($.23 per share) (163.9)
Preferred stock cash dividends
($1.01 for Series B, $1.16 for
Series C and $1.93 for Series
E depositary share), (net of
tax benefits of $3.7) (47.2)
Preferred stock conversion (.2) (3.1) .5 .2 2.6
ESOP Notes payment 17.5
Treasury stock acquisitions (17.6) (499.8)
Translation adjustments
(including taxes of $50.8) 77.3
Common equity put options
issuance (54.6)<PAGE>
Stock option exercises and other
(including tax benefits of
$20.3) 28.8 1.7 3.8 27.1
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 11.2 $674.2 830.3 $92.3 $286.0 $(234.4) $8,625.9 $(114.9) (136.6) $(2,443.7)
==================================================================================================================================
The accompanying Financial Comments are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 37
MCDONALD'S CORPORATION FINANCIAL COMMENTS
--------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Investments in 50% or less owned
affiliates are carried at equity in the companies' net assets.
FOREIGN CURRENCY TRANSLATION
The functional currency of each operation outside of the U.S. is the
respective local currency, except for hyperinflationary countries
where it is the U.S. Dollar.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, with depreciation and
amortization provided on the straight-line method over the following
estimated useful lives: buildings--up to 40 years; leasehold
improvements--lesser of useful lives of assets or lease terms
including option periods; and equipment--3 to 12 years.
INTANGIBLE ASSETS
Intangible assets consist primarily of franchise rights reacquired
from franchisees and affiliates, and are amortized on the straight-
line method over an average life of 30 years.
ADVERTISING COSTS
In the fourth quarter of 1994, the Company adopted the American
Institute of Certified Public Accountants' Statement of Position 93-7,
Reporting on Advertising Costs. Under its provisions, the Company
expenses production costs of radio and television ads as of the date
the commercials are initially aired. As a result, the Company recorded
a one-time, noncash $15.0 million charge to general, administrative
and selling expenses in the fourth quarter. Advertising expenses
included in costs of Company-operated restaurants and general,
administrative and selling expenses were (in millions): 1994--$385.6;
1993--$353.8; 1992--$355.7.<PAGE>
<PAGE> 38
FINANCIAL INSTRUMENTS
The Company utilizes derivatives in managing risk, but not for trading
purposes. Non-U.S. Dollar financing transactions generally are
effective as hedges of long-term investments or intercompany loans in
the corresponding currency. Foreign currency gains and losses on the
hedges of long-term investments are recorded as foreign currency
translation adjustment included in shareholders' equity. Gains and
losses related to hedges of intercompany loans offset the gains and
losses on intercompany loans and are recorded in nonoperating income
(expense). Interest-rate exchange agreements are designated and
effective to modify the Company's interest-rate exposures. Net
interest is accrued as either interest receivable or payable with the
offset recorded in interest expense. The Company also uses short-term
forward foreign exchange contracts to hedge future foreign-denominated
royalty cash flows and other payments received in the U.S. from
foreign subsidiaries and affiliates. Gains and losses associated with
these contracts are deferred and amortized over the twelve-month
period being hedged.
The carrying amounts for cash and equivalents and notes receivable
approximated fair value. For noninterest-bearing security deposits by
franchisees, no fair value was provided as these deposits are an
integral part of the overall franchise arrangements.
STATEMENT OF CASH FLOWS
The Company considers all highly liquid investments with short-term
maturity dates to be cash equivalents. The impact of changing foreign
currencies on cash and equivalents was not material.<PAGE>
<PAGE> 39
----------------------------------------------------------------------
NUMBER OF LOCATIONS IN OPERATION
----------------------------------------------------------------------
December 31, 1994 1993 1992 1991
----------------------------------------------------------------------
Operated by franchisees 9,982 9,288 8,654 8,151
Operated under business
facilities lease arrangements 476 544 583 584
Operated by the Company 3,083 2,699 2,551 2,547
Operated by 50% or less
owned affiliates 1,664 1,462 1,305 1,136
----------------------------------------------------------------------
Systemwide restaurants
(excluding satellites) 15,205 13,993 13,093 12,418
======================================================================
Franchisees operating under business facilities lease arrangements
have options to purchase the businesses. The results of operations of
restaurant businesses purchased and sold in transactions with
franchisees and affiliates were not material to the consolidated
financial statements for periods prior to purchase and sale. In 1994,
due to increased ownership, the Company consolidated affiliates in
Taiwan, South Korea, Turkey and China, which increased total assets
and liabilities by approximately $205.0 million.
----------------------------------------------------------------------
December 31, 1994 1993
----------------------------------------------------------------------
U.S. 494 114
Outside of the U.S. 251 56
----------------------------------------------------------------------
Systemwide satellites 745 170
======================================================================
Satellite foodservice facilities are points of distribution which
leverage the infrastructure of existing restaurants by using their
storage capability and inventory, and by drawing on their management
talent and labor pool.
----------------------------------------------------------------------
OTHER OPERATING (INCOME) EXPENSE--NET
----------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
----------------------------------------------------------------------
Gains on sales of restaurant businesses $(67.1) $(48.2) $(43.1)
Equity in earnings of unconsolidated
affiliates (47.0) (34.6) (29.5)
Net losses from property dispositions 20.0 15.5 18.1
Other--net 10.2 5.3 (9.5)
----------------------------------------------------------------------
Other operating (income) expense--net $(83.9) $(62.0) $(64.0)
======================================================================
Gains on sales of restaurant businesses are recognized as income when
the sales are consummated and other stipulated conditions are met.
Proceeds from certain sales of restaurant businesses and property
include notes receivable.<PAGE>
<PAGE> 40
---------------------------------------------------------------------
INCOME TAXES
---------------------------------------------------------------------
Income before provision for income taxes and the provision for income
taxes, classified by source of income, were as follows:
---------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
---------------------------------------------------------------------
U.S. $1,046.4 $ 986.0 $ 873.3
Outside of the U.S. 840.2 689.7 574.8
---------------------------------------------------------------------
Income before provision for
income taxes $1,886.6 $1,675.7 $1,448.1
=====================================================================
U.S. $ 396.2 $ 391.9 $ 316.8
Outside of the U.S. 266.0 201.3 172.7
---------------------------------------------------------------------
Provision for income taxes $ 662.2 $ 593.2 $ 489.5
=====================================================================
Income before provision for income taxes outside of the U.S. and the
related provision for income taxes reflect fees received in the U.S.
from operations outside of the U.S. Income before provision for income
taxes in the U.S. and the related provision for income taxes reflect
interest received in the U.S. from operations outside of the U.S.
The provision for income taxes, classified by the timing and location
of payment, consisted of:
---------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
---------------------------------------------------------------------
Current
U.S. federal $379.3 $331.6 $256.8
U.S. state 71.1 62.0 56.3
Outside of the U.S. 217.4 147.2 154.0
---------------------------------------------------------------------
667.8 540.8 467.1
---------------------------------------------------------------------
Deferred
U.S. federal (21.2) 21.9 (10.3)
U.S. state (3.0) 3.4 4.0
Outside of the U.S. 18.6 27.1 28.7
---------------------------------------------------------------------
(5.6) 52.4 22.4
---------------------------------------------------------------------
Provision for income taxes $662.2 $593.2 $489.5
=====================================================================<PAGE>
<PAGE> 41
Included in the 1993 deferred tax provision were $14.0 million
attributable to a one-time, noncash revaluation of deferred tax
liabilities resulting from the increase in the statutory U.S. federal
income tax rate.
Net deferred tax liabilities consisted of:
-------------------------------------------------------------------------
(In millions of dollars) December 31, 1994 1993
-------------------------------------------------------------------------
Property and equipment basis differences $ 852.8 $ 786.1
Other 178.3 175.4
-------------------------------------------------------------------------
Total deferred tax liabilities 1,031.1 961.5
-------------------------------------------------------------------------
Deferred tax assets before
valuation allowance (1) (274.7) (192.8)
Valuation allowance 41.4 44.5
-------------------------------------------------------------------------
Net deferred tax liabilities (2) $ 797.8 $ 813.2
=========================================================================
(1) Includes loss carryforwards (in millions): 1994--$45.1; 1993--
$46.7.
(2) Net of assets recorded in current income taxes (in millions):
1994--$43.0; 1993--$22.1.
Reconciliations of the statutory U.S. federal income tax rates to
the effective income tax rates were as follows:
-------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------
Statutory U.S. federal income tax rates 35.0% 35.0% 34.0%
State income taxes, net of related
federal income tax benefit 2.3 2.5 2.7
Other (2.2) (2.1) (2.9)
-------------------------------------------------------------------------
Effective income tax rates 35.1% 35.4% 33.8%
=========================================================================
Deferred U.S. income taxes have not been provided on basis differences
related to investments in certain foreign subsidiaries and affiliates.
These basis differences were approximately $675.0 million at December
31, 1994, and consisted primarily of undistributed earnings which are
considered to be permanently invested in the businesses. If these
earnings were not considered permanently invested, no additional taxes
would be provided due to the overall higher tax rates in markets outside
of the U.S. and the ability to recover withholding taxes as foreign tax
credits in the U.S.<PAGE>
<PAGE> 42
----------------------------------------------------------------------
SEGMENT AND GEOGRAPHIC INFORMATION
----------------------------------------------------------------------
The Company operates exclusively in the foodservice industry.
Substantially all revenues result from the sale of menu products at
restaurants operated by the Company, franchisees or affiliates.
Operating income includes the Company's share of operating results of
affiliates. All intercompany revenues and expenses are eliminated in
computing revenues and operating income. Fees received in the U.S.
from subsidiaries outside of the U.S. were (in millions): 1994--
$268.9; 1993--$202.8; 1992--$187.8.
----------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
----------------------------------------------------------------------
U.S. $ 4,155.5 $ 3,931.2 $ 3,749.4
Europe/Africa/Middle East 2,604.7 2,235.9 2,187.0
Asia/Pacific 730.7 494.4 434.6
Canada 546.1 557.8 595.1
Latin America 283.8 188.8 167.2
----------------------------------------------------------------------
Total revenues $ 8,320.8 $ 7,408.1 $ 7,133.3
======================================================================
U.S. $ 1,130.5 $ 1,087.1 $ 1,041.6
Europe/Africa/Middle East 671.9 547.5 484.0
Asia/Pacific 242.9 190.6 163.2
Canada 116.8 111.2 113.5
Latin America 79.1 47.6 59.3
----------------------------------------------------------------------
Operating income $ 2,241.2 $ 1,984.0 $ 1,861.6
======================================================================
U.S. $ 6,682.7 $ 6,385.4 $ 6,410.6
Europe/Africa/Middle East 4,257.5 3,473.2 3,290.9
Asia/Pacific 1,547.7 1,103.2 980.3
Canada 487.6 562.5 587.4
Latin America 616.4 510.9 412.0
----------------------------------------------------------------------
Total assets $13,591.9 $12,035.2 $11,681.2
======================================================================<PAGE>
<PAGE> 43
------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
------------------------------------------------------------------------
(In millions of dollars) December 31, 1994 1993
------------------------------------------------------------------------
Land $ 2,950.1 $ 2,587.2
Buildings and improvements on owned land 5,814.7 5,209.4
Buildings and improvements on leased land 4,211.2 3,673.0
Equipment, signs and seating 1,727.8 1,545.4
Other 480.8 444.0
------------------------------------------------------------------------
15,184.6 13,459.0
------------------------------------------------------------------------
Accumulated depreciation and amortization (3,856.2) (3,377.6)
------------------------------------------------------------------------
Net property and equipment $11,328.4 $10,081.4
========================================================================
Depreciation and amortization were (in millions): 1994--$550.5; 1993--
$492.8; 1992--$492.9. Contractual obligations for the acquisition and
construction of property amounted to $241.2 million at December 31,
1994.
------------------------------------------------------------------------
DEBT FINANCING
------------------------------------------------------------------------
LINE OF CREDIT AGREEMENTS
The Company has a line of credit agreement for $700.0 million, which
remained unused at December 31, 1994, and which may be renewed on an
annual basis unless the participating banks notify the Company four
days prior to the renewal period. Prior to July 20, 1994, the
agreement could not be terminated without 18 months notice and
supported the classification of certain notes maturing within one year
as long-term debt. Each borrowing under the current agreement bears
interest at one of several specified floating rates to be selected by
the Company at the time of borrowing. The agreement provides for fees
of .07% per annum on the unused portion of the commitment. In
addition, certain subsidiaries outside of the U.S. had unused lines of
credit totaling $1.0 billion at December 31, 1994; these were
principally short-term and denominated in various currencies at local
market rates of interest. The weighted average interest rates of
short-term borrowings, comprised of commercial paper and foreign-
denominated bank line borrowings, were 6.8% and 8.1% at December 31,
1994, and 1993, respectively.<PAGE>
<PAGE> 44
EXCHANGE AGREEMENTS
The Company has entered into agreements for the exchange of various
currencies, certain of which also provide for the periodic exchange of
interest payments. These agreements, as well as additional interest-
rate exchange agreements, expire through 2003. The interest-rate
exchange agreements had a notional amount with a U.S. Dollar
equivalent of $1.3 billion at December 31, 1994, and were denominated
primarily in U.S. Dollars, British Pounds Sterling, French Francs,
Deutsche Marks and Japanese Yen. The net value of each exchange
agreement was classified as an asset or liability based on its
carrying amount, and any related interest income was netted against
interest expense.
The counterparties to these agreements consist of a diverse group
of financial institutions. The Company continually monitors its
positions and the credit ratings of its counterparties, and adjusts
positions as appropriate. The Company does not have a significant
exposure to any individual counterparty, and has entered into master
agreements that contain netting arrangements.
The Company also had short-term forward foreign exchange contracts
outstanding at December 31, 1994, with a U.S. Dollar equivalent of
$65.2 million in various currencies, primarily payable in French
Francs, Deutsche Marks, British Pounds Sterling and Japanese Yen. The
deferred loss related to the short-term hedging program was $1.7
million at December 31, 1994.
GUARANTEES
Included in total debt at December 31, 1994, were $159.5 million of
7.5% ESOP Notes Series A and $83.3 million of 7.2% ESOP Notes Series B
issued by the Leveraged Employee Stock Ownership Plan (LESOP), with
payments through 2004 and 2006, respectively, which are guaranteed by
the Company. Interest rates on the notes were adjusted in 1994 due to
refinancing of certain sinking fund payments. The Company has agreed
to repurchase the notes upon the occurrence of certain events.
The Company also has guaranteed certain foreign affiliate loans
totaling $66.9 million at December 31, 1994. The Company also was a
general partner in 70 domestic partnerships with total assets of
$287.0 million and total liabilities of $141.3 million at December 31,
1994.<PAGE>
<PAGE> 45
FAIR VALUES
----------------------------------------------------------------------
December 31, 1994
(In millions of dollars) Carrying amount Fair value
----------------------------------------------------------------------
Liabilities
Debt $3,116.8 $3,050.9
Notes payable 1,046.9 1,046.9
Foreign currency exchange agreements 186.9 225.5
Interest-rate exchange agreements 35.6
----------------------------------------------------------------------
Total liabilities 4,350.6 4,358.9
----------------------------------------------------------------------
Assets
Foreign currency exchange agreements 37.5 18.5
----------------------------------------------------------------------
Net debt $4,313.1 $4,340.4
======================================================================
The carrying amounts for short-term forward foreign exchange contracts
approximated fair value at December 31, 1994. The fair value of the
debt obligations (excluding capital leases) and of the currency and
interest-rate exchange agreements was estimated using quoted market
prices, various pricing models or discounted cash flow analyses. The
Company has no current plans to retire a significant amount of its
debt prior to maturity. Given the market value of its common stock and
its significant real estate holdings, the Company believes that the
fair value of total assets was higher than their carrying value at
December 31, 1994.
DEBT OBLIGATIONS
The Company has incurred debt obligations principally through various
public and private offerings and bank loans. The terms of most debt
obligations contain restrictions on Company and subsidiary mortgages
and long-term debt of certain subsidiaries. Under certain agreements,
the Company has the option to retire debt prior to maturity, either at
par or at a premium over par. The following table summarizes these
debt obligations, including the gross effects of currency and
interest-rate exchange agreements:<PAGE>
<PAGE> 46
DEBT OBLIGATIONS
<TABLE>
<CAPTION>
Interest rates (1) Amounts outstanding
Maturity December 31 December 31 Aggregate maturities by currency for 1994 balances
dates 1994 1993 1994 1993 1995 1996 1997 1998 1999 Thereafter
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In millions of U.S. Dollars)
---------------------------------------------------------------------------------------------------------------------------------
Fixed-original issue 8.2% 8.5% $1,647.0 $1,790.6
Fixed-converted via
exchange agreements (2) 5.7 5.6 (1,483.6) (1,449.0)
Floating 4.5 3.0 167.3 163.2
---------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollars 1995-2033 330.7 504.8 $644.9 $(363.1) $(72.4) $(400.4) $9.9 $511.8
---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.3 8.9 527.2 447.1
Floating 6.0 6.7 292.3 168.6
---------------------------------------------------------------------------------------------------------------------------------
Total French Francs 1995-2003 819.5 615.7 150.3 59.6 56.6 93.8 138.6` 320.6
---------------------------------------------------------------------------------------------------------------------------------
Fixed 6.4 6.3 440.7 423.1
Floating 5.4 6.9 339.5 116.7
---------------------------------------------------------------------------------------------------------------------------------
Total Deutsche Marks 1995-2007 780.2 539.8 168.0 138.5 116.2 259.6 32.3 65.6
---------------------------------------------------------------------------------------------------------------------------------
Fixed 10.4 9.8 464.9 498.6
Floating 6.1 5.4 197.2 178.0
---------------------------------------------------------------------------------------------------------------------------------
Total British Pounds
Sterling 1995-2003 662.1 676.6 32.0 170.7 15.6 77.6 31.3 334.9
---------------------------------------------------------------------------------------------------------------------------------
Fixed 4.3 4.3 375.8 357.7
Floating 2.0 135.5
---------------------------------------------------------------------------------------------------------------------------------
Total Japanese Yen 1996-2023 511.3 357.7 210.8 100.4 200.1
---------------------------------------------------------------------------------------------------------------------------------
Fixed 11.1 12.0 113.3 117.3
Floating 7.4 5.0 106.3 61.0
---------------------------------------------------------------------------------------------------------------------------------
Total Australian
Dollars 1995-2000 219.6 178.3 84.1 65.9 1.0 67.2 .9 .5
---------------------------------------------------------------------------------------------------------------------------------
Fixed 6.4 7.7 149.9 71.7
Floating 5.7 6.2 26.6 22.6
---------------------------------------------------------------------------------------------------------------------------------<PAGE>
Total Netherland
Guilders 1995-1999 176.5 94.3 49.6 77.8 49.1
---------------------------------------------------------------------------------------------------------------------------------
Fixed 11.8 11.6 114.5 166.9
Floating 6.0 4.5 39.3 50.3
---------------------------------------------------------------------------------------------------------------------------------
Total Canadian Dollars 1995-2021 153.8 217.2 80.6 71.5 .2 .2 .3 1.0
---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.1 8.6 97.0 118.4
Floating 6.4 4.1 37.6 21.0
---------------------------------------------------------------------------------------------------------------------------------
Total Hong Kong
Dollars 1995-2008 134.6 139.4 44.1 6.5 25.9 12.9 6.4 38.8
---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.0 41.0
Floating 8.2 69.6
---------------------------------------------------------------------------------------------------------------------------------
Total New Taiwan
Dollars (3) 1995-2001 110.6 22.4 26.6 17.0 13.2 8.6 22.8
---------------------------------------------------------------------------------------------------------------------------------
Fixed 7.5 8.0 289.5 231.6
Floating 12.1 13.6 124.7 48.5
---------------------------------------------------------------------------------------------------------------------------------
Total other currencies 1995-2016 414.2 280.1 135.5 47.6 4.8 99.3 48.5 78.5
---------------------------------------------------------------------------------------------------------------------------------
Debt obligations
including the net effects
of currency and interest-
rate exchange agreements 4,313.1 3,603.9 1,411.5 434.6 265.3 301.2 325.9 1,574.6
---------------------------------------------------------------------------------------------------------------------------------
Net asset positions of
currency exchange
agreements (included in
miscellaneous other
assets) 37.5 108.8 3.7 12.5 .1 7.1 2.5 11.6
---------------------------------------------------------------------------------------------------------------------------------
Total debt obligations $4,350.6 $3,712.7 $1,415.2 $447.1 $265.4 $308.3 $328.4 $1,586.2
=================================================================================================================================
(1) Weighted average effective rate, computed on a semi-annual basis.
(2) A portion of U.S. Dollar fixed-rate debt effectively has been converted into
other currencies and/or into floating-rate debt through the use of exchange
agreements. The rates shown reflected the fixed rate on the receivable portion
of the exchange agreements. All other obligations in this table reflected the
gross effects of these and other exchange agreements.
(3) In 1994, due to an increase in ownership, the Company consolidated its Taiwan
affiliate.
/TABLE
<PAGE>
<PAGE> 47
-------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS
-------------------------------------------------------------------
(In millions of dollars) December 31, 1994 1993
-------------------------------------------------------------------
Security deposits by franchisees $141.2 $121.4
Preferred interests in consolidated
subsidiaries 162.4 106.7
Minority interests in consolidated
subsidiaries 50.3 38.2
Other 68.9 68.1
-------------------------------------------------------------------
Other long-term liabilities and minority
interests $422.8 $334.4
===================================================================
A Company subsidiary issued 25 million British Pounds Sterling of
5.42% Series B Preferred Stock in 1994, and 50 million British Pounds
Sterling of 5.91% Series A Preferred Stock in 1993. Unless redeemed at
the Company's option, each series of preferred stock must be redeemed
five years from the date of issuance. These combined preferred
interests were valued at U.S. $117.4 million at December 31, 1994.
Also, another subsidiary issued additional preferred stock in 1994 and
1993. All of the preferred stock of this subsidiary has a dividend
rate adjusted annually (7.5% at December 31, 1994) and is redeemable
at the option of the holder at a current redemption price totaling
$45.0 million. Each of these issues was reflected in preferred
interests in consolidated subsidiaries.
Included in other was the $100.00 per share redemption value of
181,868 shares of 5% Series D Preferred Stock. This stock, which
carries one vote per share, must be redeemed on the occurrence of
specified events.<PAGE>
<PAGE> 48
---------------------------------------------------------------------
LEASING ARRANGEMENTS
---------------------------------------------------------------------
At December 31, 1994, the Company was lessee at 2,553 locations under
ground leases (the Company leases land and constructs and owns
buildings) and at 3,268 locations under improved leases (lessor owns
land and buildings). Land and building lease terms for most
traditional restaurants are generally for 20 to 25 years and, in many
cases, provide for rent escalations and one or more five-year renewal
options with certain leases providing purchase options. Most
satellites operate under improved leases which are generally of a
shorter term and include primarily percentage rent payments only. For
most locations, the Company is obligated for the related occupancy
costs which include property taxes, insurance and maintenance. In
addition, the Company is lessee under noncancelable leases covering
offices and vehicles.
Future minimum payments required under operating leases with
initial terms of one year or more after December 31, 1994, are:
---------------------------------------------------------------------
(In millions of dollars) Restaurant Other Total
---------------------------------------------------------------------
1995 $ 335.3 $ 39.8 $ 375.1
1996 330.6 36.5 367.1
1997 318.7 32.9 351.6
1998 301.7 28.6 330.3
1999 283.9 24.3 308.2
Thereafter 2,776.8 171.2 2,948.0
---------------------------------------------------------------------
Total minimum payments $4,347.0 $333.3 $4,680.3
=====================================================================
Rent expense was (in millions): 1994--$394.4; 1993--$339.0; 1992--
$320.2. Included in these amounts were percentage rents based on sales
by the related restaurants in excess of minimum rents stipulated in
certain lease agreements (in millions): 1994 $40.3; 1993--$29.0;
1992--$26.1.<PAGE>
<PAGE> 49
----------------------------------------------------------------------
FRANCHISE ARRANGEMENTS
----------------------------------------------------------------------
Franchise arrangements, with franchisees who operate throughout the
U.S. and in most countries around the world, generally provide for
initial fees and continuing payments to the Company based upon a
percentage of sales, with minimum rent payments. Among other things,
franchisees are provided the use of restaurant facilities, generally
for a period of 20 years. They are required to pay related occupancy
costs which include property taxes, insurance, maintenance and a
refundable, noninterest-bearing security deposit. On a limited basis,
the Company accepts notes from franchisees, which generally are
secured by interests in restaurant equipment and franchises.
----------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
----------------------------------------------------------------------
Minimum rents
Owned sites $ 633.4 $ 573.6 $ 538.7
Leased sites 446.0 381.7 353.3
----------------------------------------------------------------------
1,079.4 955.3 892.0
----------------------------------------------------------------------
Percentage fees 1,411.8 1,272.1 1,120.6
Initial fees 37.0 23.5 18.2
----------------------------------------------------------------------
Revenues from franchised restaurants $2,528.2 $2,250.9 $2,030.8
======================================================================
Future minimum payments to the Company, based on minimum rents
specified under franchise arrangements, after December 31, 1994, are:
----------------------------------------------------------------------
Owned Leased
(In millions of dollars) sites sites Total
----------------------------------------------------------------------
1995 $ 721.7 $ 410.4 $ 1,132.1
1996 708.6 446.5 1,155.1
1997 693.0 444.8 1,137.8
1998 677.0 432.7 1,109.7
1999 662.3 421.0 1,083.3
Thereafter 6,368.1 4,029.9 10,398.0
----------------------------------------------------------------------
Total minimum payments $9,830.7 $6,185.3 $16,016.0
======================================================================
At December 31, 1994, net property and equipment under franchise
arrangements totaled $6.6 billion (including land of $2.0 billion),
after deducting accumulated depreciation and amortization of $1.9
billion.<PAGE>
<PAGE> 50
-------------------------------------------------------------------------
PROFIT SHARING PROGRAM
-------------------------------------------------------------------------
The Company has a program for U.S. employees which includes profit
sharing, 401(k) (McDESOP), and leveraged employee stock ownership
features. Profit sharing assets can be invested in McDonald's common
stock or among several other investment alternatives. McDESOP allows
employees to invest in McDonald's common stock by making contributions
which are partially matched by the Company. LESOP is invested in both
McDonald's convertible preferred and common stock.
Staff, executives and restaurant managers share in profit sharing
contributions; shares are released under the LESOP based on
participants' compensation. The profit sharing contribution is
discretionary, and the amount is determined by the Company each year.
The LESOP contribution is based on the loan payments necessary to
amortize the debt initially incurred to acquire the convertible
preferred stock, some of which has been converted to common stock.
Shares held by the LESOP are allocated to participants as the loan is
repaid. Dividends on shares held by the LESOP are used to service the
debt, and shares are released to participants in order to replace the
dividends on shares that have been allocated to them.
LESOP costs shown in the following table were based upon the cash
paid for loan payments less these dividends.
-------------------------------------------------------------------------
(In millions of dollars) 1994 1993 1992
-------------------------------------------------------------------------
Profit sharing $16.1 $13.5 $14.3
LESOP 26.3 25.5 19.6
McDESOP 10.1 8.1 4.9
-------------------------------------------------------------------------
U.S. program costs $52.5 $47.1 $38.8
=========================================================================
Assuming conversion of the preferred stock to common stock, at
December 31, 1994, 4.4 million and 10.7 million shares would have been
allocated and unallocated, respectively; no shares were committed to
be released.
Certain subsidiaries outside of the U.S. also offer profit sharing,
stock purchase or other similar benefit plans. Total plan costs
outside of the U.S. were (in millions): 1994--$15.7; 1993--$13.0;
1992--$14.0.
The Company does not provide any other postretirement benefits, and
postemployment benefits were immaterial.<PAGE>
<PAGE> 51
-------------------------------------------------------------------------
STOCK OPTIONS
-------------------------------------------------------------------------
Under the 1992 Stock Ownership Incentive and the 1975 Stock Ownership
Option Plans, options to purchase common stock are granted at prices
not less than fair market value of the stock on date of grant.
Substantially all of these options become exercisable in four equal
biennial installments, commencing one year from date of grant, and
expiring ten years from date of grant. At December 31, 1994, 79.0
million shares of common stock were reserved for issuance under both
plans.
-------------------------------------------------------------------------
(In millions, except per common share data) 1994 1993 1992
-------------------------------------------------------------------------
Options outstanding at January 1 55.1 50.3 47.4
Options granted 13.6 12.0 11.6
Options exercised (4.1) (5.3) (7.5)
Options forfeited (2.3) (1.9) (1.2)
-------------------------------------------------------------------------
Options outstanding at December 31 62.3 55.1 50.3
=========================================================================
Options exercisable at December 31 21.4 17.6 15.4
Common shares reserved for future
grants at December 31 16.7 28.0 38.2
Option prices per common share
Exercised during the year $5 TO $26 $4 to $24 $4 to $22
Outstanding at year end $7 TO $30 $5 to $28 $4 to $24
-------------------------------------------------------------------------
During the past several years, the Financial Accounting Standards
Board has been considering the appropriate accounting for stock
options, and in December 1994, decided to work towards improving
disclosures about stock-based awards. Pending the resolution of this
issue, the following table provides additional information regarding
the Company's option program. The Company surveyed its institutional
investors regarding the appropriate disclosures for stock-based
awards, and the content contained herein reflects the information
which they considered to be of value.
The potential dilution of common shares outstanding upon exercise
of stock options represents the number of common shares issuable upon
exercise less the number of common shares that could be repurchased
with proceeds from the exercise based upon the respective December 31
prices of the Company's common stock. As such, this potential dilution
was 1.6%, 1.8% and 1.7% at year-end 1994, 1993 and 1992, respectively.
Options outstanding at December 31, 1994, had an average life of 7.4
years if held to their expiration date; options are generally
exercised prior to their expiration date.<PAGE>
<PAGE> 52
-------------------------------------------------------------------------
(Shares in millions) 1994 1993 1992
-------------------------------------------------------------------------
Common shares outstanding
at year end 693.7 707.3 727.0
Potential dilution of common shares
outstanding from option exercises 11.4 12.6 12.2
Average option exercise price $12.14 $11.01 $ 9.68
Average cost of treasury stock issued
for option exercises $ 7.05 $ 6.65 $ 6.55
-------------------------------------------------------------------------
As shown above, the average option exercise price has consistently
exceeded the average cost of treasury stock issued for option
exercises because of the Company's practice of prefunding the program
through share repurchase. As a result, stock option exercises have
generated additional capital, as cash received from employees has
exceeded the Company's average acquisition cost of treasury stock.
Options granted during each year were 1.9%, 1.7% and 1.6% of
average common shares outstanding for 1994, 1993 and 1992,
respectively. Stock options were granted to approximately 6,600, 5,800
and 5,700 employees in 1994, 1993 and 1992, respectively. Shares are
issued from treasury stock to employees upon exercise of stock
options.<PAGE>
<PAGE> 53
----------------------------------------------------------------------
CAPITAL STOCK
----------------------------------------------------------------------
STOCK SPLITS
On May 27, 1994, the Board of Directors approved two-for-one stock
splits to be effected in the form of stock dividends to be distributed
on June 24, 1994, to common and Series B and C Preferred shareholders
of record as of June 7, 1994. All common and Series B and C ESOP
Convertible Preferred Stock information appearing in the accompanying
consolidated financial statements and Financial Comments has been
restated to give retroactive effect to the stock splits, including the
transfer of an appropriate amount to common stock from additional
paid-in capital.
PER COMMON SHARE INFORMATION
Income used in the computation of per common share information was
reduced by preferred stock cash dividends (net of tax) and divided by
the weighted average shares of common stock outstanding during each
year (in millions): 1994--701.8; 1993--711.8; 1992--726.5. The effect
of potentially dilutive securities was not material.
PREFERRED STOCK
In December 1992, the Company issued $500.0 million of Series E 7.72%
Cumulative Preferred Stock; 10,000 preferred shares are equivalent to
20.0 million depositary shares having a liquidation preference of
$25.00 per depositary share. Each preferred share is entitled to one
vote under certain circumstances and is redeemable at the option of
the Company beginning on December 3, 1997, at its liquidation
preference plus accrued and unpaid dividends.
In September 1989 and April 1991, the Company sold $200.0 million
of Series B and $100.0 million of Series C ESOP Convertible Preferred
Stock to the LESOP. The LESOP financed the purchase by issuing notes
which are guaranteed by the Company and are included in long-term
debt, with an offsetting reduction in shareholders' equity. Each
preferred share has a liquidation preference of $14.375 and $16.5625,
respectively, and is convertible into a minimum of .7692 and .8 common
share (conversion rate), respectively. Upon termination of employment,
employees are guaranteed a minimum value payable in common shares
equal to the greater of the conversion rate; the fair market value of
their preferred shares; or the liquidation preference plus accrued
dividends, not to exceed one common share. Each preferred share is
entitled to one vote and currently is redeemable at the option of the
Company. In 1992, 8.2 million Series B shares were converted into 6.4
million common shares.<PAGE>
<PAGE> 54
COMMON EQUITY PUT OPTIONS
In June 1994, the Company sold 2.0 million common equity put options
which were exercised in November 1994. During November and December
1994, the Company sold an additional 2.0 million common equity put
options which expired unexercised in the first quarter of 1995. At
December 31, 1994, the $56.2 million exercise price of these options
was classified in common equity put options, and the related offset
was recorded in common stock in treasury, net of premiums received.
In April 1993, the Company sold 1.0 million common equity put
options which expired unexercised in July 1993. In December 1992, the
Company sold 2.0 million common equity put options which expired
unexercised in April 1993. At December 31, 1992, the $94.0 million
exercise price of these options was classified in common equity put
options and the related offset was recorded in common stock in
treasury, net of premiums received.
SHAREHOLDER RIGHTS PLAN
In December 1988, the Company declared a dividend of one Preferred
Share Purchase Right (Right) on each outstanding share of common
stock. Under certain conditions, each Right may be exercised to
purchase one four-hundredth of a share of Series A Junior
Participating Preferred Stock (the economic equivalent of one common
share) at an exercise price of $62.50 (which may be adjusted under
certain circumstances), and is transferable apart from the common
stock ten days following a public announcement that a person or group
has acquired beneficial ownership of 20% or more of the outstanding
common shares (which threshold may be reduced by the Board of
Directors to as low as 10%), or ten business days following the
commencement or announcement of an intention to make a tender or
exchange offer resulting in beneficial ownership by a person or group
exceeding the threshold.
Once the threshold has been exceeded, or if the Company is acquired
in a merger or other business combination transaction, each Right will
entitle the holder, other than such person or group, to purchase at
the then current exercise price, stock of the Company or the acquiring
company having a market value of twice the exercise price.
Each Right is nonvoting and expires on December 28, 1998, unless
redeemed by the Company, at a price of $.0025, at any time prior to
the public announcement that a person or group has exceeded the
threshold. At December 31, 1994, 2.1 million shares of the Series A
Junior Participating Preferred Stock were reserved for issuance under
this plan.<PAGE>
<PAGE> 55
<TABLE>
QUARTERLY RESULTS (UNAUDITED)
<CAPTION>
(In millions of dollars, except per common share data)
---------------------------------------------------------------------------------------------------------------------------------
Quarters ended December 31 September 30 June 30 March 31
1994 1993 1994 1993 1994 1993 1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SYSTEMWIDE SALES $6,964.0 $6,145.7 $6,944.0 $6,247.2 $6,370.2 $5,958.9 $5,709.2 $5,235.1
REVENUES
Sales by Company-operated
restaurants $1,586.8 $1,345.2 $1,551.8 $1,351.1 $1,409.3 $1,307.6 $1,244.7 $1,153.3
Revenues from franchised
restaurants 683.3 586.7 673.6 593.2 620.0 570.2 551.3 500.8
---------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,270.1 1,931.9 2,225.4 1,944.3 2,029.3 1,877.8 1,796.0 1,654.1
---------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 1,267.7 1,085.3 1,231.3 1,076.9 1,128.6 1,049.5 1,017.4 952.9
Franchised restaurants 117.8 100.3 111.7 95.7 105.6 93.6 100.4 90.8
General, administrative
and selling expenses 309.4 256.2 277.1 234.6 257.0 232.5 239.5 217.8
Other operating (income)
expense--net (0.6) 3.5 (32.6) (31.1) (30.3) (15.6) (20.4) (18.8)
---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 1,694.3 1,445.3 1,587.5 1,376.1 1,460.9 1,360.0 1,336.9 1,242.7
---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 575.8 486.6 637.9 568.2 568.4 517.8 459.1 411.4
---------------------------------------------------------------------------------------------------------------------------------
Interest expense 80.1 78.7 80.2 75.7 73.6 82.4 71.8 79.3
Nonoperating income
(expense)--net (24.1) (4.9) (16.6) 7.2 1.7 4.3 (9.9) 1.2
---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 471.6 403.0 541.1 499.7 496.5 439.7 377.4 333.3
---------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 162.7 138.5 191.3 188.8 174.2 150.9 134.0 115.0
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $308.9 $264.5 $349.8 $310.9 $322.3 $288.8 $243.4 $218.3<PAGE>
=================================================================================================================================
NET INCOME PER COMMON SHARE $ .43 $ .36 $ .48 $ .42 $ .44 $ .39 $ .33 $ .29
---------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .06 $ .05 3/8 $ .06 $ .05 3/8 $ .06 $ .05 3/8 $ .05 3/8 $ .05
---------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE> 56
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors is incorporated herein by
reference from the Company's definitive proxy statement which will be
filed no later than 120 days after December 31, 1994.
Information regarding all of the Company's executive officers
is included in Part I.
Item 11. Executive Compensation
Incorporated herein by reference from the Company's definitive
proxy statement which will be filed no later than 120 days after
December 31, 1994.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Incorporated herein by reference from the Company's definitive
proxy statement which will be filed no later than 120 days after
December 31, 1994.
Item 13. Certain Relationships and Related Transactions
Incorporated herein by reference from the Company's definitive
proxy statement which will be filed no later than 120 days after
December 31, 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. Financial statements:
Consolidated financial statements filed as part of this
report are listed under Part II, Item 8 of this Form
10-K.
2. Financial statement schedules:
No additional schedules are required because either the
required information is not present or is not present
in amounts sufficient to require submission of the
schedule, or because the information required is
included in the consolidated financial statements or
the notes thereto.
3. Exhibits:
The exhibits listed in the accompanying index are filed
as part of this report.<PAGE>
<PAGE> 57
McDonald's Corporation
Exhibit Index
(Item 14)
Exhibit Number Description
-------------- -----------
(3) Restated Certificate of Incorporation and By-Laws, dated as
of November 15, 1994, attached hereto as an Exhibit.
(4) Instruments defining the rights of security holders,
including indentures (A):
(a) Debt Securities. Indenture dated as of March 1, 1987
incorporated herein by reference from Exhibit 4(a) of
Form S-3 Registration Statement, SEC file no. 33-12364.
(i) Supplemental Indenture No. 5 incorporated herein
by reference from Exhibit (4) of Form 8-K dated
January 23, 1989.
(ii) 9-3/4% Notes due 1999. Supplemental Indenture
No. 6 incorporated herein by reference from
Exhibit (4) of Form 8-K dated January 23, 1989.
(iii) Medium-Term Notes, Series B, due from nine
months to 30 years from Date of Issue.
Supplemental Indenture No. 12 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated August 18, 1989 and Forms of Medium-Term
Notes, Series B, incorporated herein by
reference from Exhibit (4)(b) of Form 8-K dated
September 14, 1989.
(iv) 9-3/8% Notes due 1997. Form of Supplemental
Indenture No. 14 incorporated herein by
reference from Exhibit (4) of Form 10-K for the
year ended December 31, 1989.
(v) Medium-Term Notes, Series C, due from nine
months to 30 years from Date of Issue. Form of
Supplemental Indenture No. 15 incorporated
herein by reference from Exhibit 4(b) of
Form S-3 Registration Statement, SEC file
no. 33-34762 dated May 14, 1990.
(vi) Medium-Term Notes, Series C, due from nine
months (U.S. Issue)/184 days (Euro Issue) to 30
years from Date of Issue. Amended and restated
Supplemental Indenture No. 16 incorporated
herein by reference from Exhibit (4) of Form
10-Q for the period ended March 31, 1991.
(vii) 8-7/8% Debentures due 2011. Supplemental
Indenture No. 17 incorporated herein by
reference from Exhibit (4) of Form 8-K dated
April 22, 1991.<PAGE>
<PAGE> 58
(viii)Medium-Term Notes, Series D, due from nine
months (U.S. Issue)/184 days (Euro Issue) to 60
years from Date of Issue. Supplemental
Indenture No. 18 incorporated herein by
reference from Exhibit 4(b) of Form S-3
Registration Statement, SEC file no. 33-42642
dated September 10, 1991.
(ix) 7-3/8% Notes due July 15, 2002. Form of
Supplemental Indenture No. 19 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated July 10, 1992.
(x) 6-3/4% Notes due February 15, 2003. Form of
Supplemental Indenture No. 20 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated March 1, 1993.
(xi) 7-3/8% Debentures due July 15, 2033. Form of
Supplemental Indenture No. 21 incorporated
herein by reference from Exhibit (4)(a)of Form
8-K dated July 15, 1993.
(b) Form of Deposit Agreement dated as of November 25, 1992
by and between McDonald's Corporation, First Chicago
Trust Company of New York, as Depositary, and the
Holders from time to time of the Depositary Receipts.
(c) Rights Agreement dated as of December 13, 1988 between
McDonald's Corporation and The First National Bank of
Chicago, incorporated herein by reference from Exhibit
1 of Form 8-K dated December 23, 1988.
(i) Amendment No. 1 to Rights Agreement incorporated
herein by reference from Exhibit 1 of Form 8-K
dated May 25, 1989.
(ii) Amendment No. 2 to Rights Agreement incorporated
herein by reference from Exhibit 1 of Form 8-K
dated July 25, 1990.
(d) Indenture and Supplemental Indenture No. 1 dated as of
September 8, 1989, between McDonald's Matching and
Deferred Stock Ownership Trust, McDonald's Corporation
and Pittsburgh National Bank in connection with SEC
Registration Statement Nos. 33-28684 and 33-28684-01,
incorporated herein by reference from Exhibit (4)(a) of
Form 8-K dated September 14, 1989.
(e) Form of Supplemental Indenture No. 2 dated as of April
1, 1991, supplemental to the Indenture between
McDonald's Matching and Deferred Stock Ownership Trust,
McDonald's Corporation and Pittsburgh National Bank in
connection with SEC Registration Statement Nos.
33-28684 and 33-28684-01, incorporated herein by
reference from Exhibit (4)(c) of Form 8-K dated
March 22, 1991.<PAGE>
<PAGE> 59
Exhibit Number Description
-------------- -----------
(10) Material Contracts
(a) Directors' Stock Plan, as amended and restated,
attached hereto as an Exhibit.*
(b) Profit Sharing Program, as amended and restated, attached
hereto as an Exhibit.*
(c) McDonald's Supplemental Employee Benefit Equalization
Plan, McDonald's Profit Sharing Program Equalization Plan
and McDonald's 1989 Equalization Plan, incorporated by
reference from Form 10-K/A dated May 4, 1993, Amendment
No. 1 to Form 10-K for the year ended December 31, 1992*.
(i) Amendment No. 1 to McDonald's 1989 Equalization
Plan, incorporated herein by reference from Form
10-Q for the period ended June 30, 1993.
(ii) Amendment No. 2 to McDonald's 1989 Equalization
Plan, incorporated herein by reference from Form
10-K for the year ended December 31, 1993.
(iii)Amendment No. 1 to McDonald's Supplemental
Employee Benefit Equalization Plan, incorporated
herein by reference from Form 10-K for the year
ended December 31, 1993.
(iv) Amendment No. 2 to McDonald's Supplemental
Employee Equalization Plan, incorporated herein
by reference from Form 10-K for the year ended
December 31, 1993.
(d) 1975 Stock Ownership Option Plan, incorporated herein
by reference from Exhibit (10)(d) of Form 10-K for the
year ended December 31, 1992*.
(e) Stock Sharing Plan, as amended and restated, attached
hereto as an Exhibit.*
(f) 1992 Stock Ownership Incentive Plan, incorporated
herein by reference from exhibit pages 20-34 of
McDonald's 1992 Proxy Statement and Notice of 1992
Annual Meeting of Shareholders dated April 10, 1992*.
(g) McDonald's Corporation Deferred Incentive Plan, as
amended and restated, attached hereto as an Exhibit.*<PAGE>
<PAGE> 60
Exhibit Number Description
-------------- -----------
(11) Statement re: Computation of per share earnings.
(12) Statement re: Computation of ratios.
(21) Subsidiaries of the registrant.
(23) Consent of independent auditors.
(27) Financial Data Schedule
--------------------
* Denotes compensatory plan.
(A) Other instruments defining the rights of holders of long-term
debt of the registrant and all of its subsidiaries for which
consolidated financial statements are required to be filed and
which are not required to be registered with the Securities and
Exchange Commission, are not included herein as the securities
authorized under these instruments, individually, do not exceed
10% of the total assets of the registrant and its subsidiaries on
a consolidated basis. An agreement to furnish a copy of any such
instruments to the Securities and Exchange Commission upon
request has been filed with the Commission.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the last quarter
covered by this report, and subsequently up to March 29, 1995.<PAGE>
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
McDONALD'S CORPORATION
(Registrant)
By Jack M. Greenberg
----------------------
Jack M. Greenberg
Vice Chairman,
Chief Financial Officer
Date March 29, 1995
----------------------
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
Hall Adams, Jr.
------------------------- Director March 29, 1995
Hall Adams, Jr.
Robert M. Beavers, Jr.
------------------------- Senior Vice President March 29, 1995
Robert M. Beavers, Jr. and Director
James R. Cantalupo
------------------------- President and Chief Executive March 29, 1995
James R. Cantalupo Officer-International and
Director
Michael L. Conley
------------------------- Senior Vice President, March 29, 1995
Michael L. Conley Controller
Gordon C. Gray
------------------------- Director March 29, 1995
Gordon C. Gray
Jack M. Greenberg
------------------------- Vice Chairman, March 29, 1995
Jack M. Greenberg Chief Financial Officer
and Director<PAGE>
<PAGE> 62
Signature Title Date
--------- ----- ----
Donald R. Keough
------------------------- Director March 29, 1995
Donald R. Keough
Donald G. Lubin
------------------------- Director March 29, 1995
Donald G. Lubin
Andrew J. McKenna
------------------------- Director March 29, 1995
Andrew J. McKenna
Michael R. Quinlan
------------------------- Chairman, Chief Executive March 22, 1995
Michael R. Quinlan Officer and Director
Edward H. Rensi
------------------------- President and Chief Executive March 22, 1995
Edward H. Rensi Officer-U.S.A. and Director
Terry L. Savage
------------------------- Director March 29, 1995
Terry L. Savage
Paul D. Schrage
------------------------- Senior Executive Vice March 25, 1995
Paul D. Schrage President, Chief Marketing
Officer and Director
Ballard F. Smith
------------------------- Director March 22, 1995
Ballard F. Smith
------------------------- Director
Roger W. Stone
Robert N. Thurston
------------------------- Director March 29, 1995
Robert N. Thurston
Fred L. Turner
------------------------- Senior Chairman and Director March 29, 1995
Fred L. Turner<PAGE>
B. Blair Vedder, Jr.
------------------------- Director March 29, 1995
B. Blair Vedder, Jr.<PAGE>
Exhibit 3(A)
RESTATED CERTIFICATE OF INCORPORATION
OF
McDONALD'S CORPORATION
(originally incorporated on December 21, 1964
under the name "Regrub, Inc.")
FIRST: The name of the corporation is McDONALD'S
CORPORATION.
SECOND: Its registered office in the State of Delaware is
located at 32 Loockerman Square, Suite L-100, in the City of Dover,
County of Kent.
The name and address of its registered agent is The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L-
100, Dover, Delaware 19901.
THIRD: The nature of the business of the Corporation and
the objects and purposes to be transacted, promoted or carried on are
as follows:
1. To obtain by license or otherwise and to grant to
others by license or otherwise the right to the use of drive-in food
establishment systems and food service systems of every kind and
character, and to manage and operate drive-in and other restaurants
and eating places of all kinds.
2. To manufacture, construct, lease, purchase and
otherwise acquire; to hold, own, repair, maintain, operate and invest,
trade and deal in; to lien, mortgage, pledge and otherwise encumber,
and to let, assign, transfer, sell and otherwise dispose of goods,
wares and merchandise and personal property of every kind and
description and wherever situated.
3. To the same extent as natural persons might or could
do, to purchase or otherwise acquire, hold, own, maintain, work,
develop, sell, lease, sublease, exchange, hire, convey, mortgage or
otherwise dispose of and turn to account and deal in, lands,
leaseholds, any interests, estates and rights in real property, any
personal or mixed property, and franchises, rights, licenses, permits
or privileges of every character.
4. To acquire by purchase, exchange or otherwise, all, or
any part of, or any interest in, the properties, assets, business and
good will of any one or more persons, firms, associations,
corporations or syndicates engaged in any business which the
Corporation is authorized to engage in; to pay for the same in cash,
property or its own or other securities; to hold, operate, reorganize,
liquidate, sell or in any manner dispose of the whole or any part
thereof; and in connection therewith, to assume or guarantee
performance of any liabilities, obligations or contracts of such
persons, firms, associations, corporations or syndicates, and to <PAGE>
conduct in any lawful manner the whole or any part of any business
thus acquired.
5. To acquire by purchase, subscription, contract or
otherwise, and to hold for investment or otherwise, sell, exchange,
mortgage, pledge or otherwise dispose of, or turn to account or
realize upon, and generally to deal in and with, any and all kinds of
securities issued or created by, or interests in, corporations,
associations, partnerships, firms, trustees, syndicates, individuals,
municipalities or other political or governmental divisions or
subdivisions, or any thereof, or by any combinations, organizations or
entities whatsoever, irrespective of their form or the name by which
they may be described; and to exercise any and all rights, powers, and
privileges of individual ownership or interest in respect of any and
all such securities and interests, including the right to vote thereon
and to consent and otherwise act with respect thereto; to do any and
all acts and things for the preservation, protection, improvement and
enhancement in value of any and all such securities or interests, and
to aid by loan, subsidy, guaranty or in any other manner permitted by
law those issuing, creating, or responsible for any such securities or
interests.
6. To develop, apply for, obtain, register, purchase,
lease, take licenses in respect of or otherwise acquire, and to hold,
own, use, operate, enjoy, turn to account, grant licenses in respect
of, manufacture under, introduce, sell, assign, mortgage, pledge or
otherwise dispose of any and all inventions, devices, formulae,
processes, improvements and modifications thereof, letters patent and
all rights connected therewith or appertaining thereunto, copyrights,
trademarks, trade names, trade symbols and other indications of origin
and ownership, franchises, licenses, grants and concessions granted by
or recognized under the laws of the United States of America or of any
state or subdivision thereof or of any other country or subdivision
thereof.
7. To loan money upon the security of real and/or personal
property of whatsoever name, nature or description, or without
security.
8. To borrow money for any of the purposes of the
Corporation, from time to time, and without limit as to amount; to
issue and sell its own securities in such amounts, on such terms and
conditions, for such purposes and for such prices, as the Board of
Directors shall determine; and to secure such securities, by mortgage
upon, or the pledge of, or the conveyance or assignment in trust of,
the whole or any part of the properties, assets, business and good
will of the Corporation, then owned or thereafter acquired.
It is the intention that the objects and purposes set forth
in the foregoing clauses of this Article Third shall not, unless
otherwise specified herein, be in any wise limited or restricted by
reference to, or inference from, the terms of any other clause of this
or any other article in this Certificate, but that the objects and
purposes specified in each of said clauses shall be regarded as
independent objects and purposes.
It is also the intention that the foregoing clauses shall be
construed as powers as well as objects and purposes; that the
Corporation shall be authorized to conduct its business or hold
property in any part of the United States and its possessions, and<PAGE>
foreign countries; that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the general
powers of the Corporation; and that generally the Corporation shall be
authorized to exercise and enjoy all other powers conferred on
corporations by the laws of Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is One Billion Four Hundred
Fifteen Million (1,415,000,000), consisting of One Billion Two Hundred
Fifty Million (1,250,000,000) shares of Common Stock without par value
and One Hundred Sixty-Five Million (165,000,000) shares of Preferred
Stock without par value.
A. COMMON STOCK
Each share of Common Stock shall be equal to every other
share of Common Stock in every respect. Subject to any exclusive
voting rights which may vest in holders of Preferred Stock under the
provisions of any series of the Preferred Stock established by the
Board of Directors pursuant to authority herein provided, the shares
of Common Stock shall entitle the holders thereof to one vote for each
share upon all matters upon which stockholders have the right to vote.
B. PREFERRED STOCK
(1) Preferred Stock may be issued from time to time in one
or more series, each of such series to have such designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as
are stated and expressed in this Article and in the resolution or
resolutions providing for the issuance of such series adopted by the
Board of Directors as hereinafter provided.
(2) Authority is hereby expressly granted to the Board of
Directors subject to the provisions of this Article to authorize the
issuance of one or more series of Preferred Stock and, with respect to
each series, to fix by resolution or resolutions providing for the
issuance of such series:
(a) The number of shares to constitute such series and
the distinctive designations thereof;
(b) The dividend rate or rates to which such shares
shall be entitled and the restrictions, limitations and conditions
upon the payment of such dividends, whether dividends shall be
cumulative or non-cumulative and, if cumulative, the date or dates
from which dividends shall accumulate, the dates on which dividends,
if declared, shall be payable, and the preferences or relations to the
dividends payable on any other series of Preferred Stock;
(c) Whether or not all or any part of the shares of
such series shall be redeemable, and if so, the limitations and
restrictions with respect to such redemptions, the manner of selecting
shares of such series for redemption if less than all shares are to be
redeemed, and the amount, if any, in addition to any accrued dividends
thereon, which the holder of shares of such series shall be entitled
to receive upon the redemption thereof, which amount may vary at
different redemption dates and may be different with respect to shares
redeemed through the operation of any retirement or sinking fund and
with respect to shares otherwise redeemed;<PAGE>
(d) The amount in addition to any accrued dividends
thereon which the holders of shares of such series shall be entitled
to receive upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, which amount may vary depending on
whether such liquidation, dissolution or winding up is voluntary or
involuntary and, if voluntary, may vary at different dates;
(e) Whether or not the shares of such series shall be
subject to the operation of a purchase, retirement or sinking fund,
and, if so, whether such purchase, retirement or sinking fund shall be
cumulative or non-cumulative, the extent and the manner in which such
fund shall be applied to the purchase or redemption of the shares of
such series for retirement or to other corporate purposes and the
terms and provisions relative to the operation thereof;
(f) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or classes, or of any other series of the same class, and if so
convertible or exchangeable, the price or prices or the rate or rates
of conversion or exchange and the method, if any, of adjusting the
same;
(g) The voting powers, if any, of such series in
addition to the voting powers provided by law; except that such powers
shall not include the right to have more than one vote per share;
(h) Any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof as shall not be inconsistent with law or with
this Article.
Notwithstanding the fixing of the number of shares
constituting a particular series upon the issuance thereof, the Board
of Directors may at any time thereafter authorize the issuance of
additional shares of the same series, or decrease the number of shares
constituting such series (but not below the number of shares of such
series then outstanding).
(3) All shares of any one series of Preferred Stock shall
be identical with all other shares of the same series except that
shares of any one series issued at different times may differ as to
the dates from which dividends thereon shall be cumulative; and all
series shall rank equally and be identical in all respects, except as
permitted by the foregoing provisions of paragraph B. (2).
(4) (a) The holders of Preferred Stock shall be entitled
to receive cash dividends when and as declared by the Board of
Directors at such rate per share per annum, cumulatively if so
provided, and with such preferences, as shall have been fixed by the
Board of Directors, before any dividends shall be paid upon or
declared and set apart for the Common Stock or any other class of
stock ranking junior to the Preferred Stock, and such dividends on
each series of the Preferred Stock shall cumulate, if at all, from and
after the dates fixed by the Board of Directors with respect to such
cumulation. Accrued dividends shall bear no interest.
(b) If dividends on the Preferred Stock are not
declared in full then dividends shall be declared ratably on all
shares of stock of each series of equal preference in proportion to<PAGE>
the respective unpaid cumulative dividends, if any, to the end of the
then current dividend period. No ratable distribution shall be
declared or set apart for payment with respect to any series until
accumulated dividends in arrears in full have been declared and paid
on any series senior in preference.
(c) Unless dividends on all outstanding shares of
series of the Preferred Stock having cumulative dividend rights shall
have been fully paid for all past dividend periods, and unless all
required sinking fund payments, if any, shall have been made or
provided for, no dividend (except a dividend payable in Common Stock
or in any other class of stock ranking junior to the Preferred Stock)
shall be paid upon or declared and set apart for the Common Stock or
any other class of stock ranking junior to the Preferred Stock.
(d) Subject to the foregoing provisions, the Board of
Directors may declare and pay dividends on the Common Stock and on any
class of stock ranking junior to the Preferred Stock, to the extent
permitted by law. After full dividends for the current dividend
period, and, in the case of Preferred Stock having cumulative dividend
rights after all prior dividends have been paid or declared and set
apart for payment, the holders of the Common Stock shall be entitled,
to the exclusion of the holders of the Preferred Stock, to all further
dividends declared and paid in such current dividend period.
(5) In the event of any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, before any
payment or distribution of the assets of the Corporation shall be made
to or set apart for the holders of shares of any class or classes of
stock of the Corporation ranking junior to the Preferred Stock, the
holders of the shares of each series of the Preferred Stock shall be
entitled to receive payment of the amount per share fixed in the
resolution or resolutions adopted by the Board of Directors providing
for the issuance of the shares of such series, plus an amount equal to
all dividends accrued thereon to the date of final distribution to
such holders; but they shall be entitled to no further payment. If,
upon any liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of the Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid, then
such assets, or the proceeds thereof, shall be distributed among such
holders ratably in accordance with the respective amount which would
be payable on such shares if all amounts payable thereon were paid in
full. For the purposes of this paragraph B. (5), the sale,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the
property or assets of the Corporation or a consolidation or merger of
the Corporation with one or more corporations shall not be deemed to
be a dissolution, liquidation or winding up, voluntary or involuntary.
(6) Shares of any series of Preferred Stock which have been
issued and reacquired in any manner by the Company (excluding shares
purchased and retired, whether through the operation of a retirement
or sinking fund or otherwise, and shares which, if convertible or
exchangeable, have been converted into or exchanged for shares of
stock of any other class or classes) shall have the status of
authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock
or as part of any other series of Preferred Stock, all subject to the<PAGE>
conditions or restrictions on issuance fixed by the Board of Directors
with respect to the shares of any other series of Preferred Stock.
(7) Except as otherwise specifically provided herein or in
the authorizing resolutions, none of the shares of any series of
Preferred Stock shall be entitled to any voting rights and the Common
Stock shall have the exclusive right to vote for the election of
directors and for all other purposes. So long as any shares of any
series of Preferred Stock are outstanding, the Corporation shall not,
without the consent of the holders of a majority of the then
outstanding shares of Preferred Stock, irrespective of series, either
expressed in writing (to the extent permitted by law) or by their
affirmative vote at a meeting called for that purpose: (i) adopt any
amendment to this Restated Certificate of Incorporation or take any
other action which in any material respect adversely affects any
preference, power, special right, or other term of the Preferred Stock
or the holders thereof, (ii) create or issue any class of stock
entitled to any preference over the Preferred Stock as to the payment
of dividends, or the distribution of capital assets, (iii) increase
the aggregate number of shares constituting the authorized Preferred
Stock or (iv) create or issue any other class of stock entitled to any
preference on a parity with the Preferred Stock as to the payment of
dividends or the distribution of capital assets.
(8) If in any case the amounts payable with respect to any
obligations to retire shares of the Preferred Stock are not paid in
full in the case of all series with respect to which such obligations
exist, the number of shares of each of such series to be retired
pursuant to any such obligations shall be in proportion to the
respective amounts which would be payable on account of such
obligations if all amounts payable in respect of such series were
discharged in full.
(9) The shares of Preferred Stock may be issued by the
Corporation from time to time for such consideration as may be fixed
from time to time by the Board of Directors. Any and all shares for
which the consideration so fixed shall have been paid or delivered
shall be deemed fully paid and nonassessable.
(10) For the purpose of the provisions of this Article
dealing with Preferred Stock or of any resolution of the Board of
Directors providing for the issuance of any series of Preferred Stock
or of any certificate filed with the Secretary of State of the State
of Delaware pursuant to any such resolution (unless otherwise provided
in any such resolution or certificate):
(a) The term "outstanding", when used in reference to
shares of stock, shall mean issued shares, excluding shares held by
the Corporation and shares called for redemption, funds for the
redemption of which shall have been set aside or deposited in trust;
(b) The amount of dividends "accrued" on any share of
Preferred Stock as at any dividend date shall be deemed to be the
amount of any unpaid dividends accumulated thereon to and including
such dividend date, whether or not earned or declared, and the amount
of dividends "accrued" on any share of Preferred Stock as at any date
other than a dividend date shall be calculated as the amount of any
unpaid dividends accumulated thereon to and including the last
preceding dividend date, whether or not earned or declared, plus an
amount equivalent to interest on the involuntary liquidation value of<PAGE>
such share at the annual dividend rate fixed for the shares of such
series for the period after such last preceding dividend date to and
including the date as of which the calculation is made;
(c) The term "class or classes of stock of the
corporation ranking junior to the Preferred Stock" shall mean the
Common Stock of the Corporation and any other class or classes of
stock of the Corporation hereafter authorized which shall rank junior
to the Preferred Stock as to dividends or upon liquidation.
C. PROVISIONS APPLICABLE TO ALL CAPITAL STOCK
No holder of any share or shares of any class of stock of
the Corporation shall have any preemptive or preferential right to
subscribe for or purchase any shares of stock of any class of the
Corporation now or hereafter authorized or any securities convertible
into or carrying any rights to purchase any shares of stock of any
class of the Corporation now or hereafter authorized, other than such
rights, if any, as the Board of Directors in its discretion from time
to time may grant, and at such prices and upon such other terms and
conditions as the Board of Directors in its discretion may fix.
D. SERIES OF PREFERRED STOCK
Following are the statements of the designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations and restrictions thereof, of
the series of Preferred Stock that have been designated by the Board
of Directors as authorized herein:
1. Series A Junior Participating Preferred Stock.
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors" or the "Board") in accordance with the
provisions of the Restated Certificate of Incorporation, the Board of
Directors hereby creates a series of Preferred Stock, without par
value (the "Preferred Stock"), of the Corporation and hereby states
the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Participating Preferred
Stock" (the "Series A Preferred Stock") and the number of shares
constituting the Series A Preferred Stock shall be 2,050,000. Such
number of shares may be increased or decreased by resolution of the
Board of Directors; provided, that no decrease shall reduce the number
of shares of Series A Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants
or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends,<PAGE>
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock, without par value (the "Common Stock"),
of the Corporation, and of any other junior stock, shall be entitled
to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable
in cash on the first day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $1 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1 per share
on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such<PAGE>
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series
A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall
at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event, provided that in no event shall a
share of Series A Preferred Stock be entitled to more than one vote.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series<PAGE>
A Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in
any manner whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock
and may be reissued as part of a new series of Preferred Stock subject
to the conditions and restrictions on issuance set forth herein, in
the Restated Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar
stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock, or (2) to the holders
of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation<PAGE>
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, combination or
other transaction in which the shares of Common stock are exchanged
for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series A Preferred Stock
shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of
assets, junior to all series of any other class of the Corporation's
Preferred Stock.
Section 10. Amendment. The Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner
which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least two-
thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
2. Series B ESOP Convertible Preferred Stock.
RESOLVED, that pursuant to the authority granted to and
vested in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors" or the "Board"), in accordance with
the provisions of the Restated Certificate of Incorporation, the Board<PAGE>
of Directors hereby creates a series of Preferred Stock, without par
value (the "Preferred Stock"), of the Corporation and hereby states
the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof as follows:
Series B ESOP Convertible Preferred Stock:
Section 1. Designation and Amount; Special Purpose
Restricted Transfer Issue.
(A) The shares of such series shall be designated as
"Series B ESOP Convertible Preferred Stock" (the "Series B Preferred
Stock") and the number of shares constituting the Series B Preferred
Stock shall be 5,413,434. Such number may be increased or decreased
by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series B Preferred Stock to a
number less than the number of shares then outstanding plus the number
of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants issued by, or upon the conversion of any
outstanding securities issued by, the Corporation convertible into
Series B Preferred Stock.
(B) Shares of Series B Preferred Stock shall be issued
(whether upon original issuance or upon transfer) only to a trustee or
trustees (or to any successor trustee or trustees) (collectively, a
"Trustee") acting under a trust agreement for the benefit of
participants in one or more employee stock ownership plans or other
employee benefit plans of the Corporation or of any subsidiary of the
Corporation (any such plan, a "Plan"). In the event of a sale,
distribution or other transfer (any such sale, distribution or other
transfer, a "Transfer") of any shares of Series B Preferred Stock to
any person or entity other than the Corporation or a Trustee, but
excluding a distribution of such shares to participants or
beneficiaries in a Plan pursuant to the terms thereof, the shares of
Series B Preferred Stock which are the subject of a Transfer (the
"Transferred Shares") shall be automatically converted into shares of
the Corporation's Common Stock, without par value ("Common Stock") at
the conversion rate provided in Section 5(A) hereof; provided,
however, that in the event of a foreclosure or other realization upon
shares of Series B Preferred Stock pledged as collateral by or
pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series B Preferred Stock by a Plan, the Transferred Shares shall
be automatically converted into shares of Common Stock at the
conversion rate provided in Section 5(B) hereof. In the event of a
Transfer of any shares of Series B Preferred Stock to any person or
entity other than the Corporation or a Trustee in connection with a
distribution of such shares to participants or beneficiaries in a Plan
pursuant to the terms thereof, the Transferred Shares shall
automatically be converted into Common Stock at the conversion rate
provided in Section 5(B) hereof. In each such case conversion will
occur immediately upon such Transfer and without any further action by
the Corporation or the holder of the Transferred Shares and thereafter
(i) any certificates for Transferred Shares shall be deemed to
represent the shares of Common Stock into which such Transferred
Shares have been so converted, (ii) no holder of such Transferred
Shares shall have any of the voting powers, preferences and relative,
participating, optional or special rights of a holder of shares of
Series B Preferred Stock, but, rather, only the powers and rights of a
holder of the Common Stock into which such shares of Series B<PAGE>
Preferred Stock shall be so converted and (iii) the holder of such
Transferred Shares shall be treated for all purposes as the holder of
the shares of Common Stock into which such shares of Series B
Preferred Stock have been automatically converted as of the date of
such Transfer. The pledge of Series B Preferred Stock as collateral
by or pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series B Preferred Stock by a Plan shall not constitute a Transfer
for purposes of this Section 1(B), but the foreclosure or other
realization upon such pledged shares shall constitute a Transfer.
Certificates representing shares of Series B Preferred Stock shall be
legended to reflect the restrictions on transfer set forth in this
Section 1(B). Notwithstanding the foregoing provisions of this
Section 1(B), shares of Series B Preferred Stock (i) may be converted
into shares of Common Stock pursuant to Section 5 or 6 hereof at any
time prior to a Transfer and the shares of Common Stock issued upon
such conversion will not be subject to any of the restrictions of this
Section 1(B) and (ii) shall be redeemable by the Corporation upon the
terms and conditions provided by Sections 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series B Preferred Stock with respect to dividends,
the holders of shares of Series B Preferred Stock, in preference to
the holders of Common Stock and of any other Junior Stock (as defined
in Section 2(D) hereof), shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for
the purpose, cumulative cash dividends payable in an amount per share
equal to $.2515 per quarter and no more (such amount being referred to
herein as the "Dividend Amount"), payable in arrears on the first day
of March, June, September and December in each year (each such date
being referred to herein as "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first issuance of a share of
Series B Preferred Stock. In the event that any Dividend Payment Date
shall occur on any day other than a "Business Day" (as defined in
Section 9(F) hereof), the dividend payment due on such Dividend
Payment Date shall be paid on the Business Day immediately preceding
such Dividend Payment Date. The Board of Directors may fix a record
date for the determination of holders of shares of Series B Preferred
Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
(B) Dividends shall begin to accrue on outstanding shares
of Series B Preferred Stock from the date of issue of such shares and
shall accrue on a daily basis whether or not declared and whether or
not the Corporation shall have earnings or surplus out of which such
dividends could be paid at the time. Dividends accrued on the shares
of Series B Preferred Stock for any period less than a full quarterly
period between Dividend Payment Dates shall be computed on the basis
of a 360-day year of 30-day months. Accrued but unpaid dividends shall
cumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accrued or accumulated but
unpaid dividends.
(C) Dividends paid on the shares of Series B Preferred
Stock in an amount less than the total amount of such dividends at the<PAGE>
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.
(D) So long as any Series B Preferred Stock shall be
outstanding, no dividend shall be declared and paid or set apart for
payment on any other series of stock ranking on a parity with the
Series B Preferred Stock as to dividends ("Parity Stock"), unless
there shall also be or have been declared and paid or set apart for
payment on the Series B Preferred Stock dividends for all dividend
payment periods of the Series B Preferred Stock ending on or before
the dividend payment date of such Parity Stock, ratably in proportion
to the respective amounts of dividends on the Series B Preferred Stock
accumulated and unpaid through the most recent such dividend payment
period, and accumulated and unpaid on such Parity Stock through the
dividend payment period on such Parity Stock ending on such dividend
payment date or such dividend payment date immediately preceding such
dividend payment period. So long as any Series B Preferred Stock shall
be outstanding, in the event that full cumulative dividends on the
Series B Preferred Stock have not been declared and paid or set apart
for payment when due, the Corporation shall not declare and pay or set
apart for payment any dividends or make any other distributions on, or
make any payment on account of the purchase, redemption or other
retirement of, Common Stock or any other class of stock or series
thereof of the Corporation ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding up
of the Corporation, junior to the Series B Preferred Stock
(collectively, "Junior Stock") until full cumulative and unpaid
dividends on the Series B Preferred Stock shall have been paid or
declared and set apart for payment; provided, however, that the
foregoing shall not apply to (i) any dividend payable solely in any
shares of any Junior Stock, or (ii) the acquisition of shares of any
Junior Stock either (x) pursuant to any employee or director incentive
or benefit plan or arrangement of the Corporation or any subsidiary of
the Corporation heretofore or hereafter adopted or (y) in exchange
solely for shares of any other Junior Stock. Subject to the foregoing
provisions of this Section 2(D), the Board of Directors may declare
and the Corporation may pay or set apart for payment dividends and
other distributions on any other Junior Stock or Parity Stock, and may
purchase or otherwise redeem or retire any of the Junior Stock or
Parity Stock or any warrants, rights, or options or other securities
exercisable for or convertible into any of the Junior Stock or Parity
Stock and the holders of shares of the Series B Preferred Stock shall
not be entitled to share therein.
Section 3. Voting Rights. The holders of shares of Series
B Preferred Stock shall have the following voting rights:
(A) Each share of Series B Preferred Stock shall entitle
the holder thereof to one vote on all matters submitted to a vote of
the stockholders of the Corporation; it being understood that whenever
the "Conversion Ratio" (as defined in Section 5(A) hereof) is adjusted
as provided in Section 9 hereof, the number of votes per share of
Series B Preferred Stock shall also be similarly adjusted.
Notwithstanding the foregoing, the number of votes per share of Series
B Preferred Stock shall at no time exceed the highest number then
permitted by the Restated Certificate of Incorporation of the
Corporation as then in effect or by applicable rules and regulations
of the Securities and Exchange Commission or the New York Stock
Exchange. In the event that the number of votes per share of Series B
Preferred Stock is not adjusted upon an adjustment to the Conversion<PAGE>
Ratio as a result of the immediately preceding sentence, then the
Board of Directors shall promptly take such action as may be necessary
to equitably adjust for such adjustment to the Conversion Ratio,
including without limitation, subdividing outstanding shares of Series
B Preferred Stock (by declaring a stock dividend or otherwise) to the
extent the Corporation has authorized shares of Series B Preferred
Stock which are not then outstanding, or designating and issuing
additional shares of Series B Preferred Stock to the extent the
Corporation has authorized shares of Preferred Stock which are not
then outstanding and are undesignated as to series; provided, however,
no such action on the part of the Board of Directors shall adjust or
change the aggregate economic terms assigned to the outstanding shares
of Series B Preferred Shares.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series B
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series B Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action. Any increase or decrease in
the authorized class of Preferred Stock (but not below the number of
shares thereof then outstanding) shall not be deemed to alter or
change the powers, preferences, or special rights of the shares of
Series B Preferred Stock so as to affect them adversely within the
meaning of the General Corporation Law of the State of Delaware and no
class vote shall be required to authorize such increase or decrease.
(D) If at any time dividends payable on the Series B
Preferred Stock, or on any one or more other series of Preferred Stock
of the Corporation entitled to receive cumulative preferred dividends,
are in arrears and unpaid in an amount equal to or exceeding the
amount of dividends payable on such Series B Preferred Stock and/or
other series of Preferred Stock entitled to receive cumulative
dividends for six quarterly dividend periods, whether or not
consecutive, the holders of all outstanding shares of Preferred Stock
entitled to receive cumulative preferred dividends will have the
exclusive right, voting separately as a class, to elect two directors
to the Board of Directors of the Corporation at the next annual
meeting of stockholders of the Corporation, the authorized number of
Directors not to be increased for this purpose. Such voting right
will continue for such Preferred Stock until all dividends on the
Series B Preferred Stock and on such other series have been paid in
full, at which time such voting right of the holders of such Preferred
Stock will terminate, subject to re-vesting in the event of a
subsequent arrearage. Upon any termination of the aforesaid voting
right, the term of office of those directors elected by holders of
Preferred Stock voting separately as a class will terminate.
Section 4. Liquidation, Dissolution.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of stock ranking junior with respect to rights to receive<PAGE>
distributions upon liquidation, dissolution or winding up to the
Series B Preferred Stock unless, prior thereto, the holders of shares
of Series B Preferred Stock shall have received an amount in cash of
$14.375 per share (such amount being referred to herein as the
"Liquidation Preference"), plus an amount in cash equal to accrued and
unpaid dividends thereon, whether or not declared, up to the date of
such payment, or (ii) to the holders of shares of stock ranking on a
parity with respect to the right to receive distributions upon
liquidation, dissolution or winding up with the Series B Preferred
Stock, except distributions made ratably on the Series B Preferred
Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. After payment of the full
amount to which they are entitled as provided by the foregoing
provisions of this Section 4(A), the holders of shares of Series B
Preferred Stock shall not be entitled to any further right or claim to
any of the remaining assets of the Corporation.
(B) Neither the merger or consolidation of the Corporation
with or into any other corporation or other entity, nor the merger or
consolidation of any other corporation or other entity with or into
the Corporation, nor the sale, transfer or lease of all or any portion
of the assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 4, and the holders of Series B Preferred Stock shall
nevertheless be entitled in the event of any such merger or
consolidation to the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating the
payment date or dates when, and the place or places where, the amounts
distributable to holders of Series B Preferred Stock in such
circumstances shall be payable, shall be given by hand delivery, by
courier, by any standard form of telecommunication or by first-class
mail, postage prepaid, delivered, sent or mailed (as the case may be)
not less than twenty (20) days prior to any payment date stated
therein, to the holders of Series B Preferred Stock, at their
respective addresses shown on the books of the Corporation or any
transfer agent for the Series B Preferred Stock; provided, however,
that a failure to give notice as provided above or any defect therein
shall not affect the Corporation's ability to consummate a voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series B Preferred Stock shall be
entitled, at any time prior to the close of business on the date fixed
for redemption of such shares pursuant to Section 7 hereof, to cause
any or all of such shares to be converted into validly issued, fully
paid and nonassessable shares of Common Stock, initially at a
conversion rate equal to the ratio of .7692 share of Common Stock for
each one share of Series B Preferred Stock, which conversion rate
shall be adjusted as hereinafter provided (and, as so adjusted,
rounded to the nearest ten-thousandth, is hereinafter sometimes
referred to as the "Conversion Ratio"); provided, however, that, if
the shares of Common Stock have a par value, in no event shall the
Conversion Ratio be greater than the Liquidation Preference divided by
the par value of one share of Common Stock.<PAGE>
(B) Notwithstanding Section 5(A), in the event of an
automatic conversion pursuant to Section 1(B) hereof due to a
distribution of Series B Preferred Stock to participants or
beneficiaries in a Plan or foreclosure or other realization upon
shares of Series B Preferred Stock pledged as collateral by or
pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series B Preferred Stock by a Plan, shares of Series B Preferred
Stock shall be converted into validly issued, fully paid and
nonassessable shares of Common Stock at a conversion rate, expressed
as a ratio of shares of Common Stock per share of Series B Preferred
Stock, equal to the greatest of: (i) the Conversion Ratio, (ii) a
fraction, the numerator of which shall be the Fair Market Value (as
defined in Section 9(F) hereof) of one share of Series B Preferred
Stock (plus an amount equal to accrued and unpaid dividends thereon,
if such dividends have not already been taken into account in
determining the Fair Market Value) and the denominator of which shall
be the Fair Market Value of one share of Common Stock, both computed
as of the date of conversion, or (iii) the lesser of: (A) one share of
Common Stock per share of Series B Preferred Stock, adjusted
accordingly with adjustments in the Conversion Ratio pursuant to
Section 9 hereof, or (B) a fraction, the numerator of which shall be
the Liquidation Preference plus an amount equal to accrued and unpaid
dividends thereon and the denominator of which shall be the Fair
Market Value of one share of Common Stock on the date of conversion.
(C) Any holder of shares of Series B Preferred Stock
desiring to convert such shares into shares of Common Stock shall
surrender the certificate or certificates representing the shares of
Series B Preferred Stock being converted, duly assigned or endorsed
for transfer to the Corporation (or accompanied by duly executed stock
powers relating thereto), at the principal executive office of the
Corporation or the offices of the transfer agent for the Series B
Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series B Preferred Stock by
the Corporation or the transfer agent for the Series B Preferred
Stock, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of Series B
Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock to be
issued and for any shares of Series B Preferred Stock not to be so
converted to be issued (subject to compliance with applicable legal
requirements if any of said certificates are to be issued in a name
other than the name of the holder), and (ii) the address to which such
holder wishes delivery to be made of such new certificates to be
issued upon such conversion.
(D) Upon surrender of a certificate representing a share or
shares of Series B Preferred Stock for conversion, the Corporation or
the transfer agent for the Common Stock shall, as promptly as
practicable after such surrender, issue and deliver to the holder
thereof or to such holder's designee, at the address designated by
such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled upon conversion,
together with any cash adjustment of any fraction of a share as
hereinafter provided. In the event that there shall have been
surrendered a certificate or certificates representing shares of
Series B Preferred Stock, only part of which are to be converted, the
Corporation shall issue and deliver to such holder or such holder's<PAGE>
designee a new certificate or certificates representing the number of
shares of Series B Preferred Stock which shall not have been
converted.
(E) A conversion of shares of Series B Preferred Stock into
shares of Common Stock shall be effective (i) if made at the option of
the holder thereof, as of the close of business on the day on which
the Corporation receives written notice of conversion pursuant to
Section 5(C) or (ii) if made pursuant to Section 1(B) hereof, at the
time of Transfer. On and after the effective date of conversion, the
shares of Series B Preferred so converted shall no longer be deemed to
be outstanding for any purpose, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock, but no allowance or adjustment shall be made
in respect of dividends payable to holders of Common Stock of record
on any date prior to such effective date. The Corporation shall not
be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series B Preferred Stock on a
Dividend Payment Date if such Dividend Payment Date for such dividend
shall be on or subsequent to the effective date of conversion of such
shares, unless such declared dividends have been set aside for payment
prior to the effective date of conversion of such shares, which
dividends shall be paid on the applicable Dividend Payment Date.
(F) Whenever the Corporation shall issue shares of Common
Stock upon conversion of shares of Series B Preferred Stock as
contemplated by this Section 5, the Corporation shall issue together
with each such share of Common Stock one right to purchase Series A
Junior Participating Preferred Stock of the Corporation (or other
securities in lieu thereof) pursuant to the Rights Agreement dated as
of December 13, 1988 between the Corporation and The First National
Bank of Chicago, as Rights Agent, as such agreement may from time to
time be amended (such Agreement, as so amended, is hereinafter
referred to as the "Rights Agreement"), or any rights issued to
holders of Common Stock in addition thereto or in replacement
therefor, whether or not such rights shall be exercisable at such
time, but only if such rights are issued and outstanding and held by
other holders of Common Stock at such time and have not expired.
Section 6. Other Conversion Rights. In addition to the
conversion rights provided in Section 5(A) and 5(B) hereof, shares of
Series B Preferred Stock may be converted into shares of Common Stock
at the option of the holder at any time and from time to time upon
notice to the Corporation given not less than five (5) Business Days
prior to the date fixed by the holder in such notice for such
conversion, (A) when and to the extent necessary for such holder to
provide for distributions required to be made under, or to satisfy an
investment election provided to participants in accordance with, a
Plan to participants in such Plan at a conversion rate, expressed as a
ratio of shares of Common Stock per share of Series B Preferred Stock,
equal to the greater of (i) the Conversion Ratio or (ii) a fraction,
the numerator of which shall be the Fair Market Value of one share of
Series B Preferred Stock (plus accrued and unpaid dividends thereon to
the date of conversion if such dividends have not already been taken
into account in determining Fair Market Value) and the denominator of
which shall be the Fair Market Value of one share of Common Stock,
both computed as of the date of conversion, or (B) in the event that
the Plan is determined by the Internal Revenue Service not to be
qualified within the meaning of Sections 401(a) and 4975(e)(7) of the<PAGE>
Internal Revenue Code of 1986, as amended (the "Code") at a conversion
rate, expressed as a ratio of shares of Common Stock per share of
Series B Preferred Stock, equal to the greatest of (i) a fraction, the
numerator of which shall be the Fair Market Value of one share of
Series B Preferred Stock plus an amount equal to accrued and unpaid
dividends thereon (if such dividends have not already been taken into
account in determining the Fair Market Value) and the denominator of
which shall be the Fair Market Value of one share of Common Stock,
both computed as of the date of conversion, (ii) a fraction, the
numerator of which shall be the Liquidation Preference plus accrued
but unpaid dividends thereon to the date of conversion and the
denominator of which shall be the Fair Market Value of one share of
Common Stock on the date of conversion or (iii) the Conversion Ratio.
Section 7. Redemption At the Option of the Corporation.
(A) The Series B Preferred Stock shall be redeemable, in
whole or in part, at the option of the Corporation, out of funds
legally available therefor, at any time after September 8, 1992, at
the following redemption prices:
Redemption Price As
During the Twelve-Month A Percentage of
Period Beginning September 8 Liquidation Preference
---------------------------- ----------------------
1989 107.0
1990 106.3
1991 105.6
1992 104.9
1993 104.2
1994 103.5
1995 102.8
1996 102.1
1997 101.4
1998 100.7
and thereafter at the Liquidation Preference, plus, in each case, an
amount equal to all accrued and unpaid dividends thereon to the date
fixed for redemption. Payment of the redemption price shall be made by
the Corporation in cash or shares of Common Stock, or a combination
thereof, as permitted by Section 7(E). From and after the close of
business on the date fixed for redemption, dividends on shares of
Series B Preferred Stock called for redemption will cease to accrue,
such shares will no longer be deemed to be outstanding and all rights
in respect of such shares of the Corporation shall cease, except the
right to receive the redemption price; provided that shares of Series
B Preferred Stock may be converted pursuant to Section 5 or, if
applicable, Section 6 hereof at any time prior to the close of
business on the date fixed for redemption of such shares pursuant to
Section 7 or 8 hereof. No interest shall accrue on the redemption
price after the date fixed for redemption. If less than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the
Corporation shall select the shares to be redeemed in the manner
determined by the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of redemption
with respect to a redemption pursuant to paragraphs (A), (C) or (D) of
this Section 7 will be sent to the holders of Series B Preferred Stock
at the address shown on the books of the Corporation or any transfer
agent for the Series B Preferred Stock by hand delivery, by courier,<PAGE>
by any standard form of telecommunication or by first class mail,
postage prepaid, delivered, sent or mailed (as the case may be) not
less than twenty (20) days nor more than sixty (60) days prior to the
redemption date. Each such notice shall state: (i) the redemption
date; (ii) the total number of shares of the Series B Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price and method of payment therefor;
(iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the
Conversion Ratio in effect at the time. Upon surrender of the
certificates for any shares called for redemption pursuant to the
provisions of this Section 7 or the provisions of Section 8 hereof,
which shares have not previously been converted, such shares shall be
redeemed by the Corporation at the date fixed for redemption and at
the applicable redemption price set forth in this Section 7 or in
Section 8 hereof.
(C) In the event (i) of a change in the federal tax law of
the United States of America or a determination by a court of
competent jurisdiction, which, in either case, has the effect of
precluding the Corporation from claiming any of the tax deductions for
dividends paid on the Series B Preferred Stock when such dividends are
used as provided under Section 404(k)(2) of the Internal Revenue Code
of 1986, as amended (the "Code") and in effect on the date shares of
Series B Preferred Stock are initially issued, or (ii) that shares of
Series B Preferred Stock are held by an employee benefit plan intended
to qualify as an employee stock ownership plan within the meaning of
Section 4975 of the Code, as amended, and such plan is determined by
the Internal Revenue Service not to qualify, the Corporation may, in
its sole discretion and notwithstanding anything to the contrary in
Section 7(A), elect to redeem such shares, out of funds legally
available therefor, at a redemption price equal to the greater of (i)
the Liquidation Preference plus an amount equal to accrued and unpaid
dividends or (ii) the Fair Market Value of a share of Series B
Preferred Stock, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption if such dividends
have not already been taken into account in determining Fair Market
Value, and otherwise on the terms and conditions set forth in
Sections 7(A) and 7(B).
(D) Notwithstanding anything to the contrary in Section
7(A), the Corporation may elect to redeem any or all of the shares of
Series B Preferred Stock at any time on or prior to September 8, 1992,
out of funds legally available therefor, at a redemption price equal
to the greater of (i) the applicable redemption price specified in
Section 7(A) hereof plus an amount equal to accrued and unpaid
dividends, or (ii) the Fair Market Value of a share of Series B
Preferred Stock, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption if such dividends
have not already been taken into account in determining Fair Market
Value, and otherwise on the terms and conditions set forth in Sections
7(A) and 7(B), if the Corporation terminates an employee stock
ownership plan or employee benefit plan pursuant to which shares of
Series B Preferred Stock are then held by a Trustee (in which case
only the shares held pursuant to such plan may be so redeemed).<PAGE>
(E) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of Series B
Preferred Stock in cash or in shares of Common Stock, or in a
combination of such shares and cash, any such shares to be valued for
such purpose at their Fair Market Value as of the date of redemption.
Section 8. Consolidation, Combination, Merger, etc.
(A) In the event that the Corporation shall consummate any
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or other transaction
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged solely for or changed, reclassified or
converted solely into, stock of any successor or resulting company
(including the Corporation) that constitutes "qualifying employer
securities" with respect to a holder of Series B Preferred Stock
within the meaning of Section 409(a) of the Code and Section 407 (d)
(5) of the Employee Retirement Income Security Act of 1974, as
amended, or any successor provisions of law (together, if applicable,
with a cash payment in lieu of fractional shares), the shares of
Series B Preferred Stock of such holder shall in connection therewith
be assumed by and shall become preferred stock of such successor or
resulting company, having in respect of such company insofar as
possible the same powers, preferences and relative, participating,
optional or other special rights (including the redemption rights
provided by Sections 6, 7 and 8 hereof), and the qualifications,
limitations or restrictions thereon, that the Series B Preferred Stock
had immediately prior to such transaction, except that after such
transaction each share of the Series B Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section
5 or 6 hereof, into the number and kind of qualifying employer
securities so receivable by a holder of the number of shares of Common
Stock into which such shares of Series B Preferred Stock could have
been converted pursuant to Section 5(A) hereof immediately prior to
such transaction or, if Section 5(B) or 6 hereof is thereafter
applicable, into the kind of qualifying employer securities so
receivable by a holder of one share of Common Stock and the number of
such shares determined pursuant to Section 5(B) or 6; provided,
however, that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to
the nature and kind of consideration to be received in such transac-
tion, which election cannot practicably be made by the holders of the
Series B Preferred Stock, then such election shall be deemed to be
solely for "qualifying employer securities" (together, if applicable,
with a cash payment in lieu of fractional shares) with the effect
provided above on the basis of the number and kind of qualifying
employer securities receivable by a holder of the number of shares of
Common Stock into which the shares of Series B Preferred Stock could
have been converted pursuant to Section 5(A) hereof immediately prior
to such transaction or if Section 5(B) or 6 hereof is thereafter
applicable, into the kind of qualifying employer securities receivable
by a holder of one share of Common Stock and the number of such shares
determined pursuant to Section 5(B) or 6 (it being understood that if
the kind or amount of qualifying employer securities receivable in
respect of each share of Common Stock upon such transaction is not the
same for each such share, then the kind and amount of qualifying
employer securities deemed to be receivable in respect of each share
of Common Stock for purposes of this proviso shall be the kind and
amount so receivable per share of Common Stock by a plurality of such
shares). The rights of the Series B Preferred Stock as preferred<PAGE>
stock of such successor or resulting company shall successively be
subject to adjustments pursuant to Section 9 hereof after any such
transaction as nearly equivalent as practicable to the adjustments
provided for by such Section prior to such transaction. The
Corporation shall not consummate any such merger, consolidation or
similar transaction unless all then outstanding shares of the Series B
Preferred Stock shall be assumed and authorized by the successor or
resulting company pursuant to this Section 8(A).
(B) In the event that the Corporation shall consummate any
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or other transaction,
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged for or changed, reclassified or converted
into other stock or securities or cash or any other property, or any
combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to
in Section 8(A)) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series B Preferred Stock
shall, without any action on the part of the Corporation or any holder
thereof (but subject to Section 8(C)), be automatically converted by
virtue of such merger, consolidation, combination or similar business
combination transaction immediately prior to its consummation into the
number of shares of Common Stock into which such shares of Series B
Preferred Stock could have been converted at such time so that each
share of Series B Preferred Stock, shall, by virtue of such
transaction and on the same terms as apply to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of
stock, securities, cash or other property (payable in like kind)
receivable by a holder of the number of shares of Common Stock into
which such shares of Series B Preferred Stock could have been
converted pursuant to Section 5(A) hereof immediately prior to such
transaction; provided, however, that if by virtue of the structure of
such transaction a holder of Common Stock is required to make an
election with respect to the nature and kind of consideration to be
received in such transaction, which election cannot practicably be
made by the holders of the Series B Preferred Stock, then the shares
of Series B Preferred Stock shall, by virtue of such transaction and
on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of such stock,
securities, cash or other property (payable in kind) receivable by a
holder of the number of shares of Common Stock into which such shares
of Series B Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock had elected
to receive the maximum amount of qualifying employer securities
offered (it being understood that if the kind or amount of stock,
securities, cash or other property receivable upon such transaction is
not the same for each share which so elected the maximum amount of
qualifying employer securities, then the kind and amount of stock,
securities, cash or other property receivable upon such transaction
for each such share shall be the kind and amount so receivable per
share by a plurality of the shares which so elected the maximum amount
of qualifying employer securities).
(C) In the event the Corporation shall enter into any
agreement providing for any exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization
or other transaction, described in Section 8(B), then the Corporation
shall as soon as practicable thereafter (and in any event at least ten
(10) Business Days before consummation of such transaction) give<PAGE>
notice of such agreement and the material terms thereof to each holder
of Series B Preferred Stock and each such holder shall have the right
to elect, by written notice to the Corporation, to receive, upon
consummation of such transaction (if and when such transaction is
consummated), out of funds legally available therefor, from the
Corporation or the successor of the Corporation, in redemption and
retirement of such Series B Preferred Stock, a cash payment equal to
the redemption price specified in Section 7(A) hereof in effect on the
date set for redemption plus an amount equal to all accrued and unpaid
dividends. No such notice of redemption shall be effective unless
given to the Corporation prior to the close of business on the
Business Day prior to consummation of such transaction, unless the
Corporation or the successor of the Corporation shall waive such prior
notice, but any notice of redemption so given prior to such time may
be withdrawn by notice of withdrawal given to the Corporation prior to
the close of business on the Business Day prior to consummation of
such transaction.
Section 9. Anti-Dilution Adjustments.
(A) (i) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of the Series B Preferred Stock
are outstanding, (x) pay a dividend or make a distribution in respect
of the Common Stock in shares of Common Stock or (y) subdivide the
outstanding shares of Common Stock into a greater number of shares, in
each case whether by reclassification of shares, recapitalization of
the Corporation, a recapitalization or reclassification effected by a
merger, consolidation or other transaction to which Section 8 hereof
applies or otherwise, then, in such event, the Board of Directors
shall, to the extent legally permissible, declare a dividend in
respect of the Series B Preferred Stock in shares of Series B
Preferred Stock (a "Special Dividend") in such a manner that a holder
of Series B Preferred Stock will become the holder of that number of
shares of Series B Preferred Stock equal to the product of the number
of such shares held prior to such event times a fraction (the "Sec.
9(A) Non-Dilutive Share Fraction"), the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock outstanding immediately before such event. A Special Dividend
declared pursuant to this Section 9(A)(i) shall be effective upon
payment of such dividend or distribution in respect of the Common
Stock and in the case of a subdivision shall become effective
immediately as of the effective date thereof. Concurrently with the
declaration of the Special Dividend pursuant to this paragraph
9(A)(i), the Liquidation Preference and the Dividend Amount of all
shares of Series B Preferred Stock shall be adjusted by dividing the
Liquidation Preference and the Dividend Amount, respectively, in
effect immediately before such event by the Sec. 9(A) Non-Dilutive
Share Fraction.
(ii) The Corporation and the Board of Directors shall
each use its best efforts to take all necessary steps or to take all
actions as are reasonably necessary or appropriate for declaration of
the Special Dividend provided in paragraph 9(A)(i) but shall not be
required to call a special meeting of stockholders in order to
implement the provisions thereof. If for any reason the Board of
Directors is precluded from giving full effect to the Special Dividend
provided in paragraph 9(A)(i), then no such Special Dividend shall be
declared, but instead the Conversion Ratio shall automatically be<PAGE>
adjusted by multiplying the Conversion Ratio in effect immediately
before the event by the Sec. 9(A) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
An adjustment to the Conversion Ratio made pursuant to this paragraph
9(A)(ii) shall be given effect upon payment of such a dividend or
distribution as of the record date for the determination of holders
entitled to receive such dividend or distribution (on a retroactive
basis) and in the case of a subdivision shall become effective
immediately as of the effective date thereof. If subsequently the
Board of Directors is able to give full effect to the Special Dividend
as provided in paragraph 9(A)(i), then such Special Dividend will be
declared in accordance with the provisions of paragraph 9(A)(i) and
the adjustment in the Conversion Ratio as provided in this paragraph 9
(A)(ii) will automatically be reversed and nullified prospectively.
(iii) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of the Series B Preferred Stock
are outstanding, combine the outstanding shares of Common Stock into a
lesser number of shares, whether by reclassification of shares,
recapitalization of the Corporation, a recapitalization or
reclassification effected by a merger, consolidation or other
transaction to which Section 8 hereof applies or otherwise, then, in
such event, the Conversion Ratio shall automatically be adjusted by
multiplying the Conversion Ratio in effect immediately before such
event by the Sec. 9(A) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
An adjustment to the Conversion Ratio made pursuant to this paragraph
9(A)(iii) shall be given effect immediately as of the effective date
of such combination.
(B) (i) Subject to the provisions of Sections 9(D) and
(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of Series B Preferred Stock are
outstanding, issue, sell or exchange shares of Common Stock (other
than pursuant to (x) any right or warrant to purchase or acquire
shares of Common Stock (including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock),
(y) the Rights Agreement or (z) any employee or director incentive,
compensation or benefit plan or arrangement of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted) for a
consideration having a Fair Market Value on the date of issuance, sale
or exchange less than the Fair Market Value of such shares on the date
of issuance, sale or exchange, then, in such event, the Board of
Directors shall, to the extent legally permissible, declare a Special
Dividend in such a manner that a holder of Series B Preferred Stock
will become the holder of that number of shares of Series B Preferred
Stock equal to the product of the number of such shares held prior to
such event times a fraction (the "Sec. 9(B)(i) Non-Dilutive Share
Fraction"), the numerator of which is the number of shares of Common
Stock outstanding immediately before the public announcement of such
issuance, sale or exchange plus the number of shares of Common Stock
so issued, sold or exchanged by the Corporation and the denominator of
which is the number of shares of Common Stock outstanding immediately
before the public announcement of such issuance, sale or exchange plus
the number of shares of Common Stock which could be purchased at the
Fair Market Value of the consideration received by the Corporation in
respect of such issuance, sale or exchange. A Special Dividend
declared pursuant to this Section 9(B)(i) shall be effective upon such
issuance, sale or exchange. Concurrently with the declaration of the<PAGE>
Special Dividend pursuant to this Section 9(B)(i), the Liquidation
Preference and the Dividend Amount of all shares of Series B Preferred
Stock shall be adjusted by dividing the Liquidation Preference and the
Dividend Amount, respectively, in effect immediately before such
issuance, sale or exchange by the Sec. 9(B)(i) Non-Dilutive Share
Fraction.
(ii) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any shares of Series B Preferred Stock are
outstanding issue, sell or exchange any right or warrant to purchase
or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of
Common Stock and rights issued under the Rights Agreement), other than
any such issuance to holders of shares of Common Stock as a dividend
or distribution (including by way of a reclassification of shares or a
recapitalization of the Corporation) and other than pursuant to any
employee or director incentive, compensation or benefit plan or
arrangement of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted, exercisable for a consideration
having a Fair Market Value per share of Common Stock on the date of
such issuance, sale or exchange less than the Sec. 9(F) Non-Dilutive
Amount (as defined in Section 9(F) (vi)), then in such event, the
Board of Directors shall, to the extent legally permissible, declare a
Special Dividend in such a manner that a holder of Series B Preferred
Stock will become the holder of that number of shares of Series B
Preferred Stock equal to the product of the number of such shares held
prior to such event times a fraction (the "Sec. 9 (B)(ii) Non-Dilutive
Share Fraction"), the numerator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock that could
be acquired upon exercise in full of all such rights and warrants and
the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at
the Fair Market Value of a share of Common Stock at the time of such
issuance for the maximum aggregate consideration payable upon exercise
in full of all such rights or warrants and any other amounts paid in
connection with such issuance of rights or warrants. A Special
Dividend declared pursuant to this Section 9(B)(ii) shall be effective
upon such issuance, sale or exchange. Concurrently with the
declaration of the Special Dividend pursuant to this Section 9(B)(ii),
the Liquidation Preference and the Dividend Amount of all shares of
Series B Preferred Stock shall be adjusted by dividing the Liquidation
Preference and the Dividend Amount, respectively, in effect
immediately before such issuance of rights or warrants by the Section
9(B)(ii) Non-Dilutive Share Fraction.
(iii) The Corporation and the Board of Directors shall
each use its best efforts to take all necessary steps or to take all
actions as are reasonably necessary or appropriate for declaration of
the Special Dividend provided in Sections 9(B)(i) and (ii) but shall
not be required to call a special meeting of stockholders in order to
implement the provisions hereof. In the event for any reason the
Board of Directors is precluded from giving full effect to the Special
Dividend provided in Section 9(B)(i) or 9(B)(ii), then no such Special
Dividend shall be declared, but instead the Conversion Ratio shall
automatically be adjusted by multiplying the Conversion Ratio in
effect immediately before such issuance of shares, rights or warrants
by the Sec. 9(B)(i) or 9(B)(ii) Non-Dilutive Share Fraction, as the<PAGE>
case may be, and the Liquidation Preference and Dividend Amount will
not be adjusted. If subsequently the Board of Directors is able to
give full effect to the Special Dividend as provided in Section
9(B)(i) or 9(B)(ii), then such Special Dividend will be declared in
accordance with the provisions of Section 9(B)(i) or 9(B)(ii), as the
case may be, and the adjustment in the Conversion Ratio as provided in
this Section 9(B)(iii) will automatically be reversed and nullified
prospectively.
(C) (i) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of Series B Preferred Stock are
outstanding, make an Extraordinary Distribution (as hereinafter
defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the
Corporation (including a recapitalization or reclassification effected
by a transaction to which Section 8 hereof does not apply) or effect a
Pro Rata Repurchase (as hereinafter defined) of Common Stock, then, in
such event, the Board of Directors shall, to the extent legally
permissible, declare a Special Dividend in such a manner that a holder
of Series B Preferred Stock will become the holder of that number of
shares of Series B Preferred Stock equal to the product of the number
of such shares held prior to such event times a fraction (the "Sec.
9(C) Non-Dilutive Share Fraction"), the numerator of which is the
product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata
Repurchase minus, in the case of a Pro Rata Repurchase, the number of
shares of Common Stock repurchased by the Corporation multiplied by
(y) the Fair Market Value of a share of Common Stock on the Valuation
Date (as defined in Section 9(F) (viii)) with respect to an
Extraordinary Distribution or on the expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata Repurchase
or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator
of which is (x) the product of (I) the number of shares of Common
Stock outstanding immediately before such Extraordinary Distribution
or Pro Rata Repurchase multiplied by (II) the Fair Market Value of a
share of Common Stock on the Valuation Date with respect to an
Extraordinary Distribution, or on the expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata
Repurchase which is not a tender offer, as the case may be, minus (y)
the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may
be. The Corporation shall send each holder of Series B Preferred
Stock (x) notice of its intent to make any Extraordinary Distribution
and (y) notice of any offer by the Corporation to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated to holders of
Common Stock or the record date for such dividend is announced in
accordance with the rules of any stock exchange on which the Common
Stock is listed or admitted to trading, as the case may be. Such
notice shall indicate the intended record date and the amount and
nature of such dividend or distribution, or the number of shares
subject to such offer for a Pro Rata Repurchase and the purchase price
payable by the Corporation pursuant to such offer, as well as the
Conversion Ratio. A Special Dividend declared pursuant to this
Section 9(C)(i) shall be effective upon payment of any Extraordinary
Distribution, the expiration date (including all extensions thereof)
of any tender offer which is a Pro Rata Repurchase or on the date of<PAGE>
purchase with respect to any Pro Rata Repurchase which is not a tender
offer, as the case may be. Concurrently with the declaration of the
Special Dividend pursuant to this Section 9(C)(i), the Liquidation
Preference and the Dividend Amount of all shares of Series B Preferred
Stock shall be adjusted by dividing the Liquidation Preference and the
Dividend Amount, respectively, in effect immediately before such
Extraordinary Distribution or Pro Rata Repurchase by the Sec. 9(C)
Non-Dilutive Share Fraction.
(ii) The Corporation and the Board of Directors shall
each use its best efforts to take all reasonably necessary steps or to
take all actions as are necessary or appropriate for the declaration
of the Special Dividend provided in Section 9(C)(i) but shall not be
required to call a special meeting of stockholders in order to
implement the provisions hereof. In the event for any reason the
Board of Directors is precluded from giving full effect to the Special
Dividend provided in Section 9(C)(i), then no such Special Dividend
shall be declared, but instead the Conversion Ratio shall
automatically be adjusted by multiplying the Conversion Ratio in
effect immediately before such Extraordinary Distribution or Pro Rata
Repurchase by the Sec. 9(C) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
If subsequently the Board of Directors is able to give full effect to
the Special Dividend as provided in Section 9(C)(i), then such Special
Dividend will be declared in accordance with the provisions of Section
9(C)(i) and the adjustment in the Conversion Price as provided in this
Section 9(C)(ii) will automatically be reversed and nullified
prospectively.
(D) Notwithstanding any other provisions of this Section 9,
the Corporation shall not be required to make any adjustment of the
Conversion Ratio unless such adjustment would require an increase or
decrease equal to at least one percent (1%) in the Conversion Ratio
prior to such adjustment. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together
with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least one percent (1%) in the Conversion
Ratio. All calculations under this Section 9 shall be made to the
nearest one-hundredth of a cent or the nearest one-ten thousandth of a
share, as the case may be.
(E) If the Corporation shall make any dividend or
distribution of the Common Stock or issue any Common Stock, other
capital stock or other equity security of the Corporation or any
rights or warrants to purchase or acquire any such security or any
other transaction related to or having an impact upon its Common Stock
or the Series B Preferred Stock, which transaction does not result in
an adjustment to the Conversion Ratio pursuant to the foregoing
provisions of this Section 9, the Board of Directors of the
Corporation shall consider whether such action is of such a nature
that it adversely affects the holders of the Series B Preferred Stock
and that an adjustment to the Conversion Ratio, the provisions of
Section 5(B) or 6, or a subdivision or combination of the outstanding
shares of Series B Preferred Stock into a greater or lesser number of
such shares should equitably be made in respect of such transaction.
If in such case the Board of Directors of the Corporation in its sole
discretion determines that an adjustment to the Conversion Ratio, the
provisions of Section 5(B) or 6, or a subdivision or combination of
the outstanding shares of Series B Preferred Stock into a greater or<PAGE>
lesser number of such shares should be made, such adjustment,
subdivision or combination shall be made effective as of such date as
determined by the Board of Directors of the Corporation. The
determination of the Board of Directors of the Corporation as to
whether an adjustment to the Conversion Ratio, the provisions of
Section 5(B) or a subdivision or combination of the outstanding shares
of Series B Preferred Stock into a greater or lesser number of such
shares should be made pursuant to the foregoing provisions of this
Section 9(E), and, if so, as to what adjustment, subdivision or
combination should be made, and when, shall be final and binding on
the Corporation and all stockholders of the Corporation. The
Corporation shall be entitled to make such additional adjustment in
the Conversion Ratio and the provisions of Section 5(B), in addition
to those required by the foregoing provisions of this Section 9, as
shall be necessary in order that any dividend or distribution in
shares of capital stock of the Corporation, subdivision,
reclassification or combination of shares of stock of the Corporation
or any recapitalization of the Corporation shall not be taxable to
holders of the Common Stock.
(F) For purposes of this resolution, the following
definitions shall apply:
(i) "Business Day" shall mean each day that is not a
Saturday, Sunday or a date on which federally or state chartered
banking institutions in Chicago, Illinois or New York, New York are
required or authorized to be closed.
(ii) "Extraordinary Distribution" shall mean any
dividend or other distribution (effected while any of the shares of
Series B Preferred Stock are outstanding) of (x) cash, where the
aggregate amount of such cash dividend or distribution together with
the amount of all cash dividends and distributions made during the
preceding 12 months, when combined with the aggregate amount of all
Pro Rata Repurchases (for this purpose, including only that portion of
the aggregate purchase price of each such Pro Rata Repurchase which is
in excess of the Fair Market Value of the Common Stock repurchased as
determined in accordance with Section 9(C)(i)), exceeds ten percent
(10%) of the aggregate Fair Market Value of all shares of Common Stock
outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and/or (y) any
shares of capital stock of the Corporation (other than shares of
Common Stock), other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person or any other
property (including shares of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of an Extraordinary
Distribution for purposes of Section 9(C) shall be equal to the sum of
the Fair Market Value of such Extraordinary Distribution as of the
date made.
(iii) "Fair Market Value" shall mean, as to shares of
Common Stock or any other class of capital stock or securities of the
Corporation or any other issuer which are publicly traded, the average
of the "Current Market Prices" of such shares or such securities for
each day of the Adjustment Period. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall
mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of
Directors of the Corporation or a committee thereof (which may be the<PAGE>
independent appraiser engaged by any Plan) based on principles
consistently applied, or, if no such investment banking or appraisal
firm is in the good faith judgment of the Board of Directors or such
committee available to make such determination, as determined in good
faith by the Board of Directors of the Corporation or such committee.
(iv) "Current Market Price" of publicly traded shares
of Common Stock or any other class of capital stock or other security
of the Corporation or any other issuer for any day shall mean the last
reported sales price, regular way, or, in case no such reported sale
takes place on such day, the average of the reported closing bid and
asked prices, regular way, in either case as reported on the New York
Stock Exchange Composite Tape, or, if such security is not listed or
admitted to trading on such Exchange, on the principal national
securities exchange on which such security is listed or admitted to
trading, or if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers
Automated Quotations National Market System, or, if such security is
not listed or admitted to trading on any national securities exchange
or quoted on such National Market System, the average of the closing
bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by
the Board of Directors or a committee thereof for such purpose, in
each case, on each trading day during the Adjustment Period.
(v) "Adjustment Period" shall mean the period of five
(5) consecutive trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined.
(vi) "Sec. 9(F) Non-Dilutive Amount" in respect of an
issuance, sale or exchange by the Corporation of any right or warrant
to purchase or acquire shares of Common Stock (including any security
convertible into or exchangeable for shares of Common Stock) shall
mean (x) the product of (I) the Fair Market Value of a share of Common
Stock on the trading day immediately preceding the first public
announcement of such issuance, sale or exchange and (II) the maximum
number of shares of Common Stock which could be acquired on such date
upon the exercise in full of such rights and warrants (including upon
the conversion or exchange of all such convertible or exchangeable
securities), whether or not exercisable (or convertible or
exchangeable) at such date, minus (y) the aggregate amount payable
pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event
shall the Sec. 9(F) Non-Dilutive Amount be less than zero. For
purposes of the foregoing sentence, in the case of a security
convertible into or exchangeable for shares of Common Stock, the
amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security
on the date of the issuance, sale or exchange of such security by the
Corporation.
(vii) "Pro Rata Repurchase" shall mean any purchase of
shares of Common Stock by the Corporation or any subsidiary thereof,
whether for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the
Corporation or any other person or any other property (including
shares of a subsidiary of the Corporation), or any combination
thereof, effected while any of the shares of Series B Preferred Stock
are outstanding, pursuant to any tender offer or exchange offer
subject to Section 13(e) of the Exchange Act, or any successor<PAGE>
provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no
purchase of shares by the Corporation or any subsidiary thereof made
in open market transactions shall be deemed a Pro Rata Repurchase.
For purposes of this Section 9(F) (vii), shares shall be deemed to
have been purchased by the Corporation or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the
Exchange Act, on the date shares of Series B Preferred Stock are
initially issued by the Corporation or on such other terms and
conditions as the Board of Directors of the Corporation or a committee
thereof shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the
Common Stock.
(viii) "Valuation Date" with respect to an Extraordi-
nary Distribution shall mean the day immediately preceding (i) the ex-
dividend date for such Extraordinary Distribution with respect to a
security listed on a national securities exchange or (ii) the record
date for such Extraordinary Distribution with respect to a security
which is not listed on a national securities exchange.
Section 10. Retirement of Shares. Any shares of Series B
Preferred Stock acquired by the Corporation by reason of the
conversion or redemption of such shares as provided hereby, or
otherwise so acquired, shall be cancelled as shares of Series B
Preferred Stock and restored to the status of authorized but unissued
shares of Preferred Stock of the Corporation, undesignated as to
series, and may thereafter be reissued as part of a new series of
Preferred Stock as permitted by law.
Section 11. Miscellaneous.
(A) All notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon the
earlier of receipt thereof or three (3) Business Days after the
mailing thereof if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms of
this Certificate) with postage prepaid, addressed: (i) if to the
Corporation, to its office at McDonald's Plaza, Oak Brook, Illinois
60521 (Attention: Secretary) or to the transfer agent for the Series B
Preferred Stock, or other agent of the Corporation designated as
permitted by this Certificate or (ii) if to any holder of the Series B
Preferred Stock or Common Stock, as the case may be, to such holder at
the address of such holder as listed in the stock record books of the
Corporation (which may include the records of any transfer agent for
the Series B Preferred Stock or Common Stock, as the case may be) or
(iii) to such other address as the Corporation or any such holder, as
the case may be, shall have designated by notice similarly given.
(B) In the event that, at any time as a result of an
adjustment made pursuant to Section 9, the holder of any share of the
Series B Preferred Stock upon surrendering such shares for conversion
shall become entitled to receive any shares or other securities of the
Corporation other than shares of Common Stock, the Conversion Ratio in
respect of such other shares or securities so receivable upon
conversion of shares of Series B Preferred Stock shall thereafter be
adjusted, and shall be subject to further adjustment from time to
time, in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to Common Stock contained in Section 9<PAGE>
hereof, and the provisions of each of the other Sections hereof with
respect to the Common Stock shall apply on like or similar terms to
any such other shares or securities.
(C) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Series B Preferred Stock or shares
of Common Stock or other securities issued on account of Series B
Preferred Stock pursuant hereto or certificates representing such
shares or securities. The Corporation shall not, however, be required
to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series B Preferred
Stock or Common Stock or other securities in a name other than that in
which the shares of Series B Preferred Stock with respect to which
such shares or other securities are issued or delivered were
registered, or in respect of any payment to any person with respect to
any such shares or securities other than a payment to the registered
holder thereof, and shall not be required to make any such issuance,
delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of Series B
Preferred Stock shall not by written notice designate the name in
which shares of Common Stock to be issued upon conversion of such
shares should be registered or to whom payment upon redemption of
shares of Series B Preferred Stock should be made or the address to
which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the holder
of such Series B Preferred Stock as shown on the records of the
Corporation and to send the certificate or certificates representing
such shares, or such payment, to the address of such holder shown on
the records of the Corporation.
(E) Unless otherwise provided in this Certificate of
Designation, as the same may be amended, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution,
liquidation or winding-up or otherwise made upon the shares of Series
B Preferred Stock and any other stock ranking on a parity with the
Series B Preferred Stock with respect to such dividend or distribution
shall be made pro rata, so that amounts paid per share on the Series B
Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that the required dividends, distributions or
payments, as the case may be, then payable per share on the shares of
the Series B Preferred Stock and such other stock bear to each other.
(F) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series B Preferred
Stock. Upon any such appointment or discharge of a transfer agent,
the Corporation shall send notice thereof by first-class mail, postage
prepaid, to each holder of record of Series B Preferred Stock.
3. Series C ESOP Convertible Preferred Stock.
RESOLVED, that the issue of a new series of Preferred Stock
(the "Preferred Stock") without par value of the Corporation is hereby
authorized and the designation, number of shares, relative rights,<PAGE>
preferences and powers, and the qualifications, limitations and
restrictions thereof, are hereby fixed as follows:
Section 1. Designation and Amount; Special Purpose
Restricted Transfer Issue.
(A) The shares of such series shall be designated as
"Series C ESOP Convertible Preferred Stock" (the "Series C Preferred
Stock") and the number of shares constituting the Series C Preferred
Stock shall be 5,936,054. Such number may be increased or decreased
by resolution of the Board of Directors (hereinafter called the "Board
of Directors" or the "Board"); provided, that no decrease shall reduce
the number of shares of Series C Preferred Stock to a number less than
the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights
or warrants issued by, or upon the conversion of any outstanding
securities issued by, the Corporation convertible into Series C
Preferred Stock.
(B) Shares of Series C Preferred Stock shall be issued
(whether upon original issuance or upon transfer) only to a trustee or
trustees (or to any successor trustee or trustees) (collectively, a
"Trustee") acting under a trust agreement for the benefit of
participants in one or more employee stock ownership plans or other
employee benefit plans of the Corporation or of any subsidiary of the
Corporation (any such plan, a "Plan"). In the event of a sale,
distribution or other transfer (any such sale, distribution or other
transfer, a "Transfer") of any shares of Series C Preferred Stock to
any person or entity other than the Corporation or a Trustee, but
excluding a distribution of such shares to participants or
beneficiaries in a Plan pursuant to the terms thereof, the shares of
Series C Preferred Stock which are the subject of a Transfer (the
"Transferred Shares") shall be automatically converted into shares of
the Corporation's Common Stock, without par value ("Common Stock") at
the conversion rate provided in Section 5(A) hereof; provided,
however, that in the event of a foreclosure or other realization upon
shares of Series C Preferred Stock pledged as collateral by or
pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series C Preferred Stock by a Plan, the Transferred Shares shall
be automatically converted into shares of Common Stock at the
conversion rate provided in Section 5(B) hereof. In the event of a
Transfer of any shares of Series C Preferred Stock to any person or
entity other than the Corporation or a Trustee in connection with a
distribution of such shares to participants or beneficiaries in a Plan
pursuant to the terms thereof, the Transferred Shares shall
automatically be converted into Common Stock at the conversion rate
provided in Section 5(B) hereof. In each such case conversion will
occur immediately upon such Transfer and without any further action by
the Corporation or the holder of the Transferred Shares and thereafter
(i) any certificates for Transferred Shares shall be deemed to
represent the shares of Common Stock into which such Transferred
Shares have been so converted, (ii) no holder of such Transferred
Shares shall have any of the voting powers, preferences and relative,
participating, optional or special rights of a holder of shares of
Series C Preferred Stock, but, rather, only the powers and rights of a
holder of the Common Stock into which such shares of Series C
Preferred Stock shall be so converted and (iii) the holder of such
Transferred Shares shall be treated for all purposes as the holder of
the shares of Common Stock into which such shares of Series C<PAGE>
Preferred Stock have been automatically converted as of the date of
such Transfer. The pledge of Series C Preferred Stock as collateral
by or pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series C Preferred Stock by a Plan shall not constitute a Transfer
for purposes of this Section 1(B), but the foreclosure or other
realization upon such pledged shares shall constitute a Transfer.
Certificates representing shares of Series C Preferred Stock shall be
legended to reflect the restrictions on transfer set forth in this
Section 1(B). Notwithstanding the foregoing provisions of this Section
1(B), shares of Series C Preferred Stock (i) may be converted into
shares of Common Stock pursuant to Section 5 or 6 hereof at any time
prior to a Transfer and the shares of Common Stock issued upon such
conversion will not be subject to any of the restrictions of this
Section 1(B) and (ii) shall be redeemable by the Corporation upon the
terms and conditions provided by Sections 7 and 8 hereof.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series C Preferred Stock with respect to dividends,
the holders of shares of Series C Preferred Stock, in preference to
the holders of Common Stock and of any other Junior Stock (as defined
in Section 2(D) hereof), shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for
the purpose, cumulative cash dividends payable in an amount per share
equal to $.2898 per quarter and no more (such amount being referred to
herein as the "Dividend Amount"), payable in arrears on the first day
of March, June, September and December in each year (each such date
being referred to herein as "Dividend Payment Date"), commencing on
the first Dividend Payment Date after the first issuance of a share of
Series C Preferred Stock. In the event that any Dividend Payment Date
shall occur on any day other than a "Business Day" (as defined in
Section 9(F) hereof), the dividend payment due on such Dividend
Payment Date shall be paid on the Business Day immediately preceding
such Dividend Payment Date. The Board of Directors may fix a record
date for the determination of holders of shares of Series C Preferred
Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
(B) Dividends shall begin to accrue on outstanding shares
of Series C Preferred Stock from the date of issue of such shares and
shall accrue on a daily basis whether or not declared and whether or
not the Company shall have earnings or surplus out of which such
dividends could be paid at the time. Dividends accrued on the shares
of Series C Preferred Stock for any period less than a full quarterly
period between Dividend Payment Dates shall be computed on the basis
of a 360-day year of 30-day months. Accrued but unpaid dividends shall
cumulate as of the Dividend Payment Date on which they first become
payable, but no interest shall accrue on accrued or accumulated but
unpaid dividends.
(C) Dividends paid on the shares of Series C Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.<PAGE>
(D) So long as any Series C Preferred Stock shall be
outstanding, no dividend shall be declared and paid or set apart for
payment on any other series of stock ranking on a parity with the
Series C Preferred Stock as to dividends ("Parity Stock"), unless
there shall also be or have been declared and paid or set apart for
payment on the Series C Preferred Stock dividends for all dividend
payment periods of the Series C Preferred Stock ending on or before
the dividend payment date of such Parity Stock, ratably in proportion
to the respective amounts of dividends on the Series C Preferred Stock
accumulated and unpaid through the most recent such dividend payment
period, and accumulated and unpaid on such Parity Stock through the
dividend payment period on such Parity Stock ending on such dividend
payment date or such dividend payment date immediately preceding such
dividend payment period. So long as any Series C Preferred Stock
shall be outstanding, in the event that full cumulative dividends on
the Series C Preferred Stock have not been declared and paid or set
apart for payment when due, the Corporation shall not declare and pay
or set apart for payment any dividends or make any other distributions
on, or make any payment on account of the purchase, redemption or
other retirement of, Common Stock or any other class of stock or
series thereof of the Corporation ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or winding-up
of the Corporation, junior to the Series C Preferred Stock
(collectively, "Junior Stock") until full cumulative and unpaid
dividends on the Series C Preferred Stock shall have been paid or
declared and set apart for payment; provided, however, that the
foregoing shall not apply to (i) any dividend payable solely in any
shares of any Junior Stock, or (ii) the acquisition of shares of any
Junior Stock either (x) pursuant to any employee or director incentive
or benefit plan or arrangement of the Corporation or any subsidiary of
the Corporation heretofore or hereafter adopted or (y) in exchange
solely for shares of any other Junior Stock. Subject to the foregoing
provisions of this Section 2(D), the Board of Directors may declare
and the Corporation may pay or set apart for payment dividends and
other distributions on any other Junior Stock or Parity Stock, and may
purchase or otherwise redeem or retire any of the Junior Stock or
Parity Stock or any warrants, rights, or options or other securities
exercisable for or convertible into any of the Junior Stock or Parity
Stock and the holders of shares of the Series C Preferred Stock shall
not be entitled to share therein.
Section 3. Voting Rights. The holders of shares of Series
C Preferred Stock shall have the following voting rights:
(A) Each share of Series C Preferred Stock shall entitle
the holder thereof to one vote on all matters submitted to a vote of
the stockholders of the Corporation; it being understood that whenever
the "Conversion Ratio" (as defined in Section 5(A) hereof) is adjusted
as provided in Section 9 hereof, the number of votes per share of
Series C Preferred Stock shall also be similarly adjusted.
Notwithstanding the foregoing, the number of votes per share of Series
C Preferred Stock shall at no time exceed the highest number then
permitted by the Restated Certificate of Incorporation of the
Corporation as then in effect or by applicable rules and regulations
of the Securities and Exchange Commission or the New York Stock
Exchange. In the event that the number of votes per share of Series C
Preferred Stock is not adjusted upon an adjustment to the Conversion
Ratio as a result of the immediately preceding sentence, then the
Board of Directors shall promptly take such action as may be necessary
to equitably adjust for such adjustment to the Conversion Ratio,<PAGE>
including without limitation, subdividing outstanding shares of Series
C Preferred Stock (by declaring a stock dividend or otherwise) to the
extent the Corporation has authorized shares of Series C Preferred
Stock which are not then outstanding, or designating and issuing
additional shares of Series C Preferred Stock to the extent the
Corporation has authorized shares of Preferred Stock which are not
then outstanding and are undesignated as to series; provided, however,
no such action on the part of the Board of Directors shall adjust or
change the aggregate economic terms assigned to the outstanding shares
of Series C Preferred Stock.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series C
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series C Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action. Any increase or decrease in
the authorized class of Preferred Stock (but not below the number of
shares thereof then outstanding) shall not be deemed to alter or
change the powers, preferences, or special rights of the shares of
Series C Preferred Stock so as to affect them adversely within the
meaning of the General Corporation Law of the State of Delaware and no
class vote shall be required to authorize such increase or decrease.
(D) If at any time dividends payable on the Series C
Preferred Stock, or on any one or more other series of Preferred Stock
of the Corporation entitled to receive cumulative preferred dividends,
are in arrears and unpaid in an amount equal to or exceeding the
amount of dividends payable on such Series C Preferred Stock and/or
other series of Preferred Stock entitled to receive cumulative
dividends for six quarterly dividend periods, whether or not
consecutive, the holders of all outstanding shares of Preferred Stock
entitled to receive cumulative preferred dividends will have the
exclusive right, voting separately as a class, to elect two directors
to the Board of Directors of the Corporation at the next annual
meeting of stockholders of the Corporation, the authorized number of
Directors not to be increased for this purpose. Such voting right
will continue for such Preferred Stock until all dividends on the
Series C Preferred Stock and on such other series have been paid in
full, at which time such voting right of the holders of such Preferred
Stock will terminate, subject to re-vesting in the event of a
subsequent arrearage. Upon any termination of the aforesaid voting
right, the term of office of those directors elected by holders of
Preferred Stock voting separately as a class will terminate.
Section 4. Liquidation, Dissolution.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of stock ranking junior with respect to rights to receive
distributions upon liquidation, dissolution or winding up of the
Corporation to the Series C Preferred Stock unless, prior thereto, the
holders of shares of Series C Preferred Stock shall have received an<PAGE>
amount in cash of $16.5625 per share (such amount being referred to
herein as the "Liquidation Preference"), plus an amount in cash equal
to accrued and unpaid dividends thereon, whether or not declared, up
to the date of such payment, or (ii) to the holders of shares of stock
ranking on a parity with respect to the right to receive distributions
upon liquidation, dissolution or winding up of the Corporation with
the Series C Preferred Stock, except distributions made ratably on the
Series C Preferred Stock and all such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up. After payment of
the full amount to which they are entitled as provided by the
foregoing provisions of this Section 4(A), the holders of shares of
Series C Preferred Stock shall not be entitled to any further right or
claim to any of the remaining assets of the Corporation.
(B) Neither the merger or consolidation of the Corporation
with or into any other corporation or other entity, nor the merger or
consolidation of any other corporation or other entity with or into
the Corporation, nor the sale, transfer or lease of all or any portion
of the assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 4, and the holders of Series C Preferred Stock shall
nevertheless be entitled in the event of any such merger or
consolidation to the rights provided by Section 8 hereof.
(C) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating the
payment date or dates when, and the place or places where, the amounts
distributable to holders of Series C Preferred Stock in such
circumstances shall be payable, shall be given by hand delivery, by
courier, by any standard form of telecommunication or by first-class
mail, postage prepaid, delivered, sent or mailed (as the case may be)
not less than twenty (20) days prior to any payment date stated
therein, to the holders of Series C Preferred Stock, at their
respective addresses shown on the books of the Corporation or any
transfer agent for the Series C Preferred Stock; provided, however,
that a failure to give notice as provided above or any defect therein
shall not affect the Corporation's ability to consummate a voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation.
Section 5. Conversion into Common Stock.
(A) A holder of shares of Series C Preferred Stock shall be
entitled, at any time prior to the close of business on the date fixed
for redemption of such shares pursuant to Section 7 hereof, to cause
any or all of such shares to be converted into validly issued, fully
paid and nonassessable shares of Common Stock, initially at a
conversion rate equal to the ratio of .8000 share of Common Stock for
each one share of Series C Preferred Stock, which conversion rate
shall be adjusted as hereinafter provided (and, as so adjusted,
rounded to the nearest ten-thousandth, is hereinafter sometimes
referred to as the "Conversion Ratio"); provided, however, that, if
the shares of Common Stock have a par value, in no event shall the
Conversion Ratio be greater than the Liquidation Preference divided by
the par value of one share of Common Stock.
(B) Notwithstanding Section 5(A), in the event of an
automatic conversion pursuant to Section 1(B) hereof due to a
distribution of Series C Preferred Stock to participants or<PAGE>
beneficiaries in a Plan or foreclosure or other realization upon
shares of Series C Preferred Stock pledged as collateral by or
pursuant to any credit agreement, indenture or other document or
instrument for the financing or refinancing of the initial purchase of
the Series C Preferred Stock by a Plan, shares of Series C Preferred
Stock shall be converted into validly issued, fully paid and
nonassessable shares of Common Stock at a conversion rate, expressed
as a ratio of shares of Common Stock per share of Series C Preferred
Stock, equal to the greatest of: (i) the Conversion Ratio, (ii) a
fraction, the numerator of which shall be the Fair Market value (as
defined in Section 9(F) hereof) of one share of Series C Preferred
Stock (plus an amount equal to accrued and unpaid dividends thereon,
if such dividends have not already been taken into account in
determining the Fair Market Value) and the denominator of which shall
be the Fair Market Value of one share of Common Stock, both computed
as of the date of conversion, or (iii) the lesser of: (A) one share of
Common Stock per share of Series C Preferred Stock, adjusted
accordingly with adjustments in the Conversion Ratio pursuant to
Section 9 hereof, or (B) a fraction, the numerator of which shall be
the Liquidation Preference plus an amount equal to accrued and unpaid
dividends thereon and the denominator of which shall be the Fair
Market Value of one share of Common Stock on the date of conversion.
(C) Any holder of shares of Series C Preferred Stock
desiring to convert such shares into shares of Common Stock shall
surrender the certificate or certificates representing the shares of
Series C Preferred Stock being converted, duly assigned or endorsed
for transfer to the Corporation (or accompanied by duly executed stock
powers relating thereto), at the principal executive office of the
Corporation or the offices of the transfer agent for the Series C
Preferred Stock or such office or offices in the continental United
States of an agent for conversion as may from time to time be
designated by notice to the holders of the Series C Preferred Stock by
the Corporation or the transfer agent for the Series C Preferred
Stock, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of Series C
Preferred Stock to be converted and the name or names in which such
holder wishes the certificate or certificates for Common Stock to be
issued and for any shares of Series C Preferred Stock not to be so
converted to be issued (subject to compliance with applicable legal
requirements if any of said certificates are to be issued in a name
other than the name of the holder), and (ii) the address to which such
holder wishes delivery to be made of such new certificates to be
issued upon such conversion.
(D) Upon surrender of a certificate representing a share or
shares of Series C Preferred Stock for conversion, the Corporation or
the transfer agent for the Common Stock shall, as promptly as
practicable after such surrender, issue and deliver to the holder
thereof or to such holder's designee, at the address designated by
such holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled upon conversion,
together with any cash adjustment of any fraction of a share as
hereinafter provided. In the event that there shall have been
surrendered a certificate or certificates representing shares of
Series C Preferred Stock, only part of which are to be converted, the
Corporation shall issue and deliver to such holder or such holder's
designee a new certificate or certificates representing the number of
shares of Series C Preferred Stock which shall not have been
converted.<PAGE>
(E) A conversion of shares of Series C Preferred Stock into
shares of Common Stock shall be effective (i) if made at the option of
the holder thereof, as of the close of business on the day on which
the Corporation receives written notice of conversion pursuant to
Section 5(C) or (ii) if made pursuant to Section 1(B) hereof, at the
time of Transfer. On and after the effective date of conversion, the
shares of Series C Preferred so converted shall no longer be deemed to
be outstanding for any purpose, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock, but no allowance or adjustment shall be made
in respect of dividends payable to holders of Common Stock of record
on any date prior to such effective date. The Corporation shall not
be obligated to pay any dividends which shall have been declared and
shall be payable to holders of shares of Series C Preferred Stock on a
Dividend Payment Date if such Dividend Payment Date for such dividend
shall be on or subsequent to the effective date of conversion of such
shares, unless such declared dividends have been set aside for payment
prior to the effective date of conversion of such shares, which
dividends shall be paid on the applicable Dividend Payment Date.
(F) Whenever the Corporation shall issue shares of Common
Stock upon conversion of shares of Series C Preferred Stock as
contemplated by this Section 5, the Corporation shall issue together
with each such share of Common Stock one right to purchase Series A
Junior Participating Preferred Stock of the Corporation (or other
securities in lieu thereof) pursuant to the Rights Agreement dated as
of December 13, 1988 between the Corporation and The First National
Bank of Chicago, as Rights Agent, as such agreement has been, and may
from time to time be, amended (such Agreement, as so amended, is
hereinafter referred to as the "Rights Agreement"), or any rights
issued to holders of Common Stock in addition thereto or in
replacement therefor, whether or not such rights shall be exercisable
at such time, but only if such rights are issued and outstanding and
held by other holders of Common Stock at such time and have not
expired.
Section 6. Other Conversion Rights. In addition to the
conversion rights provided in Section 5(A) and 5(B) hereof, shares of
Series C Preferred Stock may be converted into shares of Common Stock
at the option of the holder at any time and from time to time upon
notice to the Corporation given not less than five (5) Business Days
prior to the date fixed by the holder in such notice for such
conversion, (A) when and to the extent necessary for such holder to
provide for distributions required to be made under, or to satisfy an
investment election provided to participants in accordance with, a
Plan, to participants in such Plan at a conversion rate, expressed as
a ratio of shares of Common Stock per share of Series C Preferred
Stock, equal to the greater of (i) the Conversion Ratio or (ii) a
fraction, the numerator of which shall be the Fair Market Value of one
share of Series C Preferred Stock (plus accrued and unpaid dividends
thereon to the date of conversion if such dividends have not already
been taken into account in determining Fair Market Value) and the
denominator of which shall be the Fair Market Value of one share of
Common Stock, both computed as of the date of conversion, or (B) in
the event that the Plan is determined by the Internal Revenue Service
not to be qualified within the meaning of Sections 401(a) and
4975(e)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"), at a conversion rate, expressed as a ratio of shares of<PAGE>
Common Stock per share of Series C Preferred Stock, equal to the
greatest of (i) a fraction, the numerator of which shall be the Fair
Market Value of one share of Series C Preferred Stock plus an amount
equal to accrued and unpaid dividends thereon (if such dividends have
not already been taken into account in determining the Fair Market
Value) and the denominator of which shall be the Fair Market Value of
one share of Common Stock, both computed as of the date of conversion,
(ii) a fraction, the numerator of which shall be the Liquidation
Preference plus accrued but unpaid dividends thereon to the date of
conversion and the denominator of which shall be the Fair Market Value
of one share of Common Stock on the date of conversion or (iii) the
Conversion Ratio.
Section 7. Redemption at the Option of the Corporation.
(A) The Series C Preferred Stock shall be redeemable, in
whole or in part, at the option of the Corporation, out of funds
legally available therefor, at any time after April 1, 1994, at the
following redemption prices:
Redemption Price As
During the Twelve-Month A Percentage of
Period Beginning April 1 Liquidation Preference
------------------------ ----------------------
1991 107.0
1992 106.3
1993 105.6
1994 104.9
1995 104.2
1996 103.5
1997 102.8
1998 102.1
1999 101.4
2000 100.7
and thereafter at the Liquidation Preference, plus in each case, an
amount equal to all accrued and unpaid dividends thereon to the date
fixed for redemption. Payment of the redemption price shall be made
by the Corporation in cash or shares of Common Stock, or a combination
thereof, as permitted by Section 7(E). From and after the close of
business on the date fixed for redemption, dividends on shares of
Series C Preferred Stock called for redemption will cease to accrue,
such shares will no longer be deemed to be outstanding and all rights
in respect of such shares of the Corporation shall cease, except the
right to receive the redemption price; provided that shares of Series
C Preferred Stock may be converted pursuant to Section 5 or, if
applicable, Section 6 hereof at any time prior to the close of
business on the date fixed for redemption of such shares pursuant to
Section 7 or 8 hereof. No interest shall accrue on the redemption
price after the date fixed for redemption. If less than all of the
outstanding shares of Series C Preferred Stock are to be redeemed, the
Corporation shall select the shares to be redeemed in the manner
determined by the Board of Directors of the Corporation.
(B) Unless otherwise required by law, notice of redemption
with respect to a redemption pursuant to paragraphs (A), (C) or (D) of
this Section 7 will be sent to the holders of Series C Preferred Stock
at the address shown on the books of the Corporation or any transfer
agent for the Series C Preferred Stock by hand delivery, by courier,
by any standard form of telecommunication or by first class mail,<PAGE>
postage prepaid, delivered, sent or mailed (as the case may be) not
less than twenty (20) days nor more than sixty (60) days prior to the
redemption date. Each such notice shall state: (i) the redemption
date; (ii) the total number of shares of the Series C Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price and method of payment therefor;
(iv) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the conversion rights of the shares to be redeemed, the
period within which conversion rights may be exercised, and the
Conversion Ratio in effect at the time. Upon surrender of the
certificates for any shares called for redemption pursuant to the
provisions of this Section 7 or the provisions of Section 8 hereof,
which shares have not previously been converted, such shares shall be
redeemed by the Corporation at the date fixed for redemption and at
the applicable redemption price set forth in this Section 7 or in
Section 8 hereof.
(C) In the event (i) of a change in the federal tax law of
the United States of America or a determination by a court of
competent jurisdiction, which, in either case, has the effect of
precluding the Corporation from claiming any of the tax deductions for
dividends paid on the Series C Preferred Stock when such dividends are
used as provided under Section 404(k)(2) of the Internal Revenue Code
of 1986, as amended (the "Code") and in effect on the date shares of
Series C Preferred Stock are initially issued, or (ii) that shares of
Series C Preferred Stock are held by an employee benefit plan intended
to qualify as an employee stock ownership plan within the meaning of
Section 4975 of the Code, as amended, and such plan is determined by
the Internal Revenue Service not to qualify, the Corporation may, in
its sole discretion and notwithstanding anything to the contrary in
Section 7(A), elect to redeem such shares, out of funds legally
available therefor, at a redemption price equal to the greater of (i)
the Liquidation Preference plus an amount equal to accrued and unpaid
dividends or (ii) the Fair Market Value of a share of Series C
Preferred Stock, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption if such dividends
have not already been taken into account in determining Fair Market
Value, and otherwise on the terms and conditions set forth in Sections
7(A) and 7(B).
(D) Notwithstanding anything to the contrary in Section
7(A), the Corporation may elect to redeem any or all of the shares of
Series C Preferred Stock at any time on or prior to April 1, 1994, out
of funds legally available therefor, at a redemption price equal to
the greater of (i) the applicable redemption price specified in
Section 7(A) hereof plus an amount equal to accrued and unpaid
dividends, or (ii) the Fair Market Value of a share of Series C
Preferred Stock, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption if such dividends
have not already been taken into account in determining Fair Market
Value, and otherwise on the terms and conditions set forth in Sections
7(A) and 7(B), if the Corporation terminates an employee stock
ownership plan or employee benefit plan pursuant to which shares of
Series C Preferred Stock are then held by a Trustee (in which case
only the shares held pursuant to such plan may be so redeemed).<PAGE>
(E) The Corporation, at its option, may make payment of the
redemption price required upon redemption of shares of Series C
Preferred Stock in cash or in shares of Common Stock, or in a
combination of such shares and cash, any such shares to be valued for
such purpose at their Fair Market Value as of the date of redemption.
Section 8. Consolidation, Combination, Merger, etc.
(A) In the event that the Corporation shall consummate any
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or other transaction
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged solely for or changed, reclassified or
converted solely into, stock of any successor or resulting company
(including the Corporation) that constitutes "qualifying employer
securities" with respect to a holder of Series C Preferred Stock
within the meaning of Section 409(a) of the Code and Section 407(d)(5)
of the Employee Retirement Income Security Act of 1974, as amended, or
any successor provisions of law (together, if applicable, with a cash
payment in lieu of fractional shares), the shares of Series C
Preferred Stock of such holder shall in connection therewith be
assumed by and shall become preferred stock of such successor or
resulting company, having in respect of such company insofar as
possible the same powers, preferences and relative, participating,
optional or other special rights (including the redemption rights
provided by Sections 6, 7 and 8 hereof), and the qualifications,
limitations or restrictions thereon, that the Series C Preferred Stock
had immediately prior to such transaction, except that after such
transaction each share of the Series C Preferred Stock shall be
convertible, otherwise on the terms and conditions provided by Section
5 or 6 hereof, into the number and kind of qualifying employer
securities so receivable by a holder of the number of shares of Common
Stock into which such shares of Series C Preferred Stock could have
been converted pursuant to Section 5(A) hereof immediately prior to
such transaction or, if Section 5(B) or 6 hereof is thereafter
applicable, into the kind of qualifying employer securities so
receivable by a holder of one share of Common Stock and the number of
such shares determined pursuant to Section 5(B) or 6; provided,
however, that if by virtue of the structure of such transaction, a
holder of Common Stock is required to make an election with respect to
the nature and kind of consideration to be received in such transac-
tion, which election cannot practicably be made by the holders of the
Series C Preferred Stock, then such election shall be deemed to be
solely for "qualifying employer securities" (together, if applicable,
with a cash payment in lieu of fractional shares) with the effect
provided above on the basis of the number and kind of qualifying
employer securities receivable by a holder of the number of shares of
Common Stock into which the shares of Series C Preferred Stock could
have been converted pursuant to Section 5(A) hereof immediately prior
to such transaction or if Section 5(B) or 6 hereof is thereafter
applicable, into the kind of qualifying employer securities receivable
by a holder of one share of Common Stock and the number of such shares
determined pursuant to Section 5(B) or 6 (it being understood that if
the kind or amount of qualifying employer securities receivable in
respect of each share of Common Stock upon such transaction is not the
same for each such share, then the kind and amount of qualifying
employer securities deemed to be receivable in respect of each share
of Common Stock for purposes of this proviso shall be the kind and
amount so receivable per share of Common Stock by a plurality of such
shares). The rights of the Series C Preferred Stock as preferred<PAGE>
stock of such successor or resulting company shall successively be
subject to adjustments pursuant to Section 9 hereof after any such
transaction as nearly equivalent as practicable to the adjustments
provided for by such Section prior to such transaction. The
Corporation shall not consummate any such merger, consolidation or
similar transaction unless all then outstanding shares of the Series C
Preferred Stock shall be assumed and authorized by the successor or
resulting company pursuant to this Section 8(A).
(B) In the event that the Corporation shall consummate any
exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or other transaction,
pursuant to which the outstanding shares of Common Stock are by
operation of law exchanged for or changed, reclassified or converted
into other stock or securities or cash or any other property, or any
combination thereof, other than any such consideration which is
constituted solely of qualifying employer securities (as referred to
in Section 8(A)) and cash payments, if applicable, in lieu of
fractional shares, outstanding shares of Series C Preferred Stock
shall, without any action on the part of the Corporation or any holder
thereof (but subject to Section 8(C)), be automatically converted by
virtue of such merger, consolidation, combination or similar business
combination transaction immediately prior to its consummation into the
number of shares of Common Stock into which such shares of Series C
Preferred Stock could have been converted at such time so that each
share of Series C Preferred Stock, shall, by virtue of such
transaction and on the same terms as apply to the holders of Common
Stock, be converted into or exchanged for the aggregate amount of
stock, securities, cash or other property (payable in like kind)
receivable by a holder of the number of shares of Common Stock into
which such shares of Series C Preferred Stock could have been
converted pursuant to Section 5(A) hereof immediately prior to such
transaction; provided, however, that if by virtue of the structure of
such transaction a holder of Common Stock is required to make an
election with respect to the nature and kind of consideration to be
received in such transaction, which election cannot practicably be
made by the holders of the Series C Preferred Stock, then the shares
of Series C Preferred Stock shall, by virtue of such transaction and
on the same terms as apply to the holders of Common Stock, be
converted into or exchanged for the aggregate amount of such stock,
securities, cash or other property (payable in kind) receivable by a
holder of the number of shares of Common Stock into which such shares
of Series C Preferred Stock could have been converted immediately
prior to such transaction if such holder of Common Stock had elected
to receive the maximum amount of qualifying employer securities
offered (it being understood that if the kind or amount of stock,
securities, cash or other property receivable upon such transaction is
not the same for each share which so elected the maximum amount of
qualifying employer securities, then the kind and amount of stock,
securities, cash or other property receivable upon such transaction
for each such share shall be the kind and amount so receivable per
share by a plurality of the shares which so elected the maximum amount
of qualifying employer securities).
(C) In the event the Corporation shall enter into any
agreement providing for any exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization
or other transaction, described in Section 8(B), then the Corporation
shall as soon as practicable thereafter (and in any event at least ten
(10) Business Days before consummation of such transaction) give<PAGE>
notice of such agreement and the material terms thereof to each holder
of Series C Preferred Stock and each such holder shall have the right
to elect, by written notice to the Corporation, to receive, upon
consummation of such transaction (if and when such transaction is
consummated), out of funds legally available therefor, from the
Corporation or the successor of the Corporation, in redemption and
retirement of such Series C Preferred Stock, a cash payment equal to
the redemption price specified in Section 7(A) hereof in effect on the
date set for redemption plus an amount equal to all accrued and unpaid
dividends. No such notice of redemption shall be effective unless
given to the Corporation prior to the close of business on the
Business Day prior to consummation of such transaction, unless the
Corporation or the successor of the Corporation shall waive such prior
notice, but any notice of redemption so given prior to such time may
be withdrawn by notice of withdrawal given to the Corporation prior to
the close of business on the Business Day prior to consummation of
such transaction.
Section 9. Anti-Dilution Adjustments.
(A) (i) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of the Series C Preferred Stock
are outstanding, (x) pay a dividend or make a distribution in respect
of the Common Stock in shares of Common Stock or (y) subdivide the
outstanding shares of Common Stock into a greater number of shares, in
each case whether by reclassification of shares, recapitalization of
the Corporation, a recapitalization or reclassification effected by a
merger, consolidation or other transaction to which Section 8 hereof
applies or otherwise, then, in such event, the Board of Directors
shall, to the extent legally permissible, declare a dividend in
respect of the Series C Preferred Stock in shares of Series C
Preferred Stock (a "Special Dividend") in such a manner that a holder
of Series C Preferred Stock will become the holder of that number of
shares of Series C Preferred Stock equal to the product of the number
of such shares held prior to such event times a fraction (the "Sec.
9(A) Non-Dilutive Share Fraction"), the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock outstanding immediately before such event. A Special Dividend
declared pursuant to this paragraph 9(A)(i) shall be effective upon
payment of such dividend or distribution in respect of the Common
Stock and in the case of a subdivision shall become effective
immediately as of the effective date thereof. Concurrently with the
declaration of the Special Dividend pursuant to this paragraph
9(A)(i), the Liquidation Preference and the Dividend Amount of all
shares of Series C Preferred Stock shall be adjusted by dividing the
Liquidation Preference and the Dividend Amount, respectively, in
effect immediately before such event by the Sec. 9(A) Non-Dilutive
Share Fraction.
(ii) The Corporation and the Board of Directors shall
each use its best efforts to take all necessary steps or to take all
actions as are reasonably necessary or appropriate for declaration of
the Special Dividend provided in paragraph 9(A)(i) but shall not be
required to call a special meeting of stockholders in order to
implement the provisions thereof. If for any reason the Board of
Directors is precluded from giving full effect to the Special Dividend
provided in paragraph 9(A)(i), then no such Special Dividend shall be
declared, but instead the Conversion Ratio shall automatically be<PAGE>
adjusted by multiplying the Conversion Ratio in effect immediately
before the event by the Sec. 9(A) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
An adjustment to the Conversion Ratio made pursuant to this paragraph
9(A)(ii) shall be given effect upon payment of such a dividend or
distribution as of the record date for the determination of holders
entitled to receive such dividend or distribution (on a retroactive
basis) and in the case of a subdivision shall become effective
immediately as of the effective date thereof. If subsequently the
Board of Directors is able to give full effect to the Special Dividend
as provided in paragraph 9(A)(i), then such Special Dividend will be
declared in accordance with the provisions of paragraph 9(A)(i) and
the adjustment in the Conversion Ratio as provided in this paragraph
9(A)(ii) will automatically be reversed and nullified prospectively.
(iii) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of the Series C Preferred Stock
are outstanding, combine the outstanding shares of Common Stock into a
lesser number of shares, whether by reclassification of shares,
recapitalization of the Corporation, a recapitalization or
reclassification effected by a merger, consolidation or other
transaction to which Section 8 hereof applies or otherwise, then, in
such event, the Conversion Ratio shall automatically be adjusted by
multiplying the Conversion Ratio in effect immediately before such
event by the Sec. 9(A) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
An adjustment to the Conversion Ratio made pursuant to this paragraph
9(A)(iii) shall be given effect immediately as of the effective date
of such combination.
(B) (i) Subject to the provisions of Sections 9(D) and
(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of Series C Preferred Stock are
outstanding, issue, sell or exchange shares of Common Stock (other
than pursuant to (x) any right or warrant to purchase or acquire
shares of Common Stock (including as such a right or warrant any
security convertible into or exchangeable for shares of Common Stock),
(y) the Rights Agreement or (z) any employee or director incentive,
compensation or benefit plan or arrangement of the Corporation or any
subsidiary of the Corporation heretofore or hereafter adopted) for a
consideration having a Fair Market Value on the date of issuance, sale
or exchange less than the Fair Market Value of such shares on the date
of issuance, sale or exchange, then, in such event, the Board of
Directors shall, to the extent legally permissible, declare a Special
Dividend in such a manner that a holder of Series C Preferred Stock
will become the holder of that number of shares of Series C Preferred
Stock equal to the product of the number of such shares held prior to
such event times a fraction (the "Sec. 9(B)(i) Non-Dilutive Share
Fraction"), the numerator of which is the number of shares of Common
Stock outstanding immediately before the public announcement of such
issuance, sale or exchange plus the number of shares of Common Stock
so issued, sold or exchanged by the Corporation and the denominator of
which is the number of shares of Common Stock outstanding immediately
before the public announcement of such issuance, sale or exchange plus
the number of shares of Common Stock which could be purchased at the
Fair Market Value of the consideration received by the Corporation in
respect of such issuance, sale or exchange. A Special Dividend
declared pursuant to this paragraph 9(B)(i) shall be effective upon
such issuance, sale or exchange. Concurrently with the declaration of<PAGE>
the Special Dividend pursuant to this paragraph 9(B)(i), the
Liquidation Preference and the Dividend Amount of all shares of Series
C Preferred Stock shall be adjusted by dividing the Liquidation
Preference and the Dividend Amount, respectively, in effect
immediately before such issuance, sale or exchange by the Sec. 9(B)(i)
Non-Dilutive Share Fraction.
(ii) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any shares of Series C Preferred Stock are
outstanding issue, sell or exchange any right or warrant to purchase
or acquire shares of Common Stock (including as such a right or
warrant any security convertible into or exchangeable for shares of
Common Stock and rights issued under the Rights Agreement), other than
any such issuance to holders of shares of Common Stock as a dividend
or distribution (including by way of a reclassification of shares or a
recapitalization of the Corporation) and other than pursuant to any
employee or director incentive, compensation or benefit plan or
arrangement of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted, exercisable for a consideration
having a Fair Market Value per share of Common Stock on the date of
such issuance, sale or exchange less than the Sec. 9(F) Non-Dilutive
Amount (as defined in paragraph 9(F)(vi)), then in such event, the
Board of Directors shall, to the extent legally permissible, declare a
Special Dividend in such a manner that a holder of Series C Preferred
Stock will become the holder of that number of shares of Series C
Preferred Stock equal to the product of the number of such shares held
prior to such event times a fraction (the "Sec. 9(B)(ii) Non-Dilutive
Share Fraction"), the numerator of which is the number of shares of
Common Stock outstanding immediately before such issuance of rights or
warrants plus the maximum number of shares of Common Stock that could
be acquired upon exercise in full of all such rights and warrants and
the denominator of which is the number of shares of Common Stock
outstanding immediately before such issuance of rights or warrants
plus the number of shares of Common Stock which could be purchased at
the Fair Market Value of a share of Common Stock at the time of such
issuance for the maximum aggregate consideration payable upon exercise
in full of all such rights or warrants and any other amounts paid in
connection with such issuance of rights or warrants. A Special
Dividend declared pursuant to this paragraph 9(B)(ii) shall be
effective upon such issuance, sale or exchange. Concurrently with the
declaration of the Special Dividend pursuant to this paragraph
9(B)(ii), the Liquidation Preference and the Dividend Amount of all
shares of Series C Preferred Stock shall be adjusted by dividing the
Liquidation Preference and the Dividend Amount, respectively, in
effect immediately before such issuance of rights or warrants by the
Sec. 9(B)(ii) Non-Dilutive Share Fraction.
(iii) The Corporation and the Board of Directors shall
each use its best efforts to take all necessary steps or to take all
actions as are reasonably necessary or appropriate for declaration of
the Special Dividend provided in paragraphs 9(B)(i) and 9(B)(ii) but
shall not be required to call a special meeting of stockholders in
order to implement the provisions hereof. In the event for any reason
the Board of Directors is precluded from giving full effect to the
Special Dividend provided in paragraphs 9(B)(i) or 9(B)(ii), then no
such Special Dividend shall be declared, but instead the Conversion
Ratio shall automatically be adjusted by multiplying the Conversion
Ratio in effect immediately before such issuance of shares, rights or
warrants by the Sec. 9(B)(i) or 9(B)(ii) Non-Dilutive Share Fraction,<PAGE>
as the case may be, and the Liquidation Preference and Dividend Amount
will not be adjusted. If subsequently the Board of Directors is able
to give full effect to the Special Dividend as provided in paragraphs
9(B)(i) or 9(B)(ii), then such Special Dividend will be declared in
accordance with the provisions of paragraphs 9(B)(i) or 9(B)(ii), as
the case may be, and the adjustment in the Conversion Ratio as
provided in this paragraph 9(B)(iii) will automatically be reversed
and nullified prospectively.
(C) (i) Subject to the provisions of Sections 9(D) and
9(E) hereof, in the event the Corporation shall, at any time or from
time to time while any of the shares of Series C Preferred Stock are
outstanding, make an Extraordinary Distribution (as hereinafter
defined) in respect of the Common Stock, whether by dividend,
distribution, reclassification of shares or recapitalization of the
Corporation (including a recapitalization or reclassification effected
by a transaction to which Section 8 hereof does not apply) or effect a
Pro Rata Repurchase (as hereinafter defined) of Common Stock, then, in
such event, the Board of Directors shall, to the extent legally
permissible, declare a Special Dividend in such a manner that a holder
of Series C Preferred Stock will become the holder of that number of
shares of Series C Preferred Stock equal to the product of the number
of such shares held prior to such event times a fraction (the "Sec.
9(C) Non-Dilutive Share Fraction"), the numerator of which is the
product of (x) the number of shares of Common Stock outstanding
immediately before such Extraordinary Distribution or Pro Rata
Repurchase minus, in the case of a Pro Rata Repurchase, the number of
shares of Common Stock repurchased by the Corporation multiplied by
(y) the Fair Market Value of a share of Common Stock on the Valuation
Date (as defined in paragraph 9(F)(viii)) with respect to an
Extraordinary Distribution or on the expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata Repurchase
or on the date of purchase with respect to any Pro Rata Repurchase
which is not a tender offer, as the case may be, and the denominator
of which is (x) the product of (I) the number of shares of Common
Stock outstanding immediately before such Extraordinary Distribution
or Pro Rata Repurchase multiplied by (II) the Fair Market Value of a
share of Common Stock on the Valuation Date with respect to an
Extraordinary Distribution, or on the expiration date (including all
extensions thereof) of any tender offer which is a Pro Rata
Repurchase, or on the date of purchase with respect to any Pro Rata
Repurchase which is not a tender offer, as the case may be, minus (y)
the Fair Market Value of the Extraordinary Distribution or the
aggregate purchase price of the Pro Rata Repurchase, as the case may
be. The Corporation shall send each holder of Series C Preferred
Stock (x) notice of its intent to make any Extraordinary Distribution
and (y) notice of any offer by the Corporation to make a Pro Rata
Repurchase, in each case at the same time as, or as soon as
practicable after, such offer is first communicated to holders of
Common Stock or the record date for such dividend is announced in
accordance with the rules of any stock exchange on which the Common
Stock is listed or admitted to trading, as the case may be. Such
notice shall indicate the intended record date and the amount and
nature of such dividend or distribution, or the number of shares
subject to such offer for a Pro Rata Repurchase and the purchase price
payable by the Corporation pursuant to such offer, as well as the
Conversion Ratio. A Special Dividend declared pursuant to this
paragraph 9(C)(i) shall be effective upon payment of any Extraordinary
Distribution, the expiration date (including all extensions thereof)
of any tender offer which is a Pro Rata Repurchase or on the date of<PAGE>
purchase with respect to any Pro Rata Repurchase which is not a tender
offer, as the case may be. Concurrently with the declaration of the
Special Dividend pursuant to this paragraph 9(C)(i), the Liquidation
Preference and the Dividend Amount of all shares of Series C Preferred
Stock shall be adjusted by dividing the Liquidation Preference and the
Dividend Amount, respectively, in effect immediately before such
Extraordinary Distribution or Pro Rata Repurchase by the Sec. 9(C)
Non-Dilutive Share Fraction.
(ii) The Corporation and the Board of Directors shall
each use its best efforts to take all reasonably necessary steps or to
take all actions as are necessary or appropriate for the declaration
of the Special Dividend provided in paragraph 9(C)(i) but shall not be
required to call a special meeting of stockholders in order to
implement the provisions hereof. In the event for any reason the
Board of Directors is precluded from giving full effect to the Special
Dividend provided in paragraph 9(C)(i), then no such Special Dividend
shall be declared, but instead the Conversion Ratio shall
automatically be adjusted by multiplying the Conversion Ratio in
effect immediately before such Extraordinary Distribution or Pro Rata
Repurchase by the Sec. 9(C) Non-Dilutive Share Fraction, and the
Liquidation Preference and the Dividend Amount will not be adjusted.
If subsequently the Board of Directors is able to give full effect to
the Special Dividend as provided in paragraph 9(C)(i), then such
Special Dividend will be declared in accordance with the provisions of
paragraph 9(C)(i) and the adjustment in the Conversion Price as
provided in this paragraph 9(C)(ii) will automatically be reversed and
nullified prospectively.
(D) Notwithstanding any other provisions of this Section 9,
the Corporation shall not be required to make any adjustment of the
Conversion Ratio unless such adjustment would require an increase or
decrease equal to at least one percent (1%) in the Conversion Ratio
prior to such adjustment. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together
with, the next subsequent adjustment which, together with any
adjustment or adjustments so carried forward, shall amount to an
increase or decrease of at least one percent (1%) in the Conversion
Ratio. All calculations under this Section 9 shall be made to the
nearest one-hundredth of a cent or the nearest one-ten thousandth of a
share, as the case may be.
(E) If the Corporation shall make any dividend or
distribution of the Common Stock or issue any Common Stock, other
capital stock or other equity security of the Corporation or any
rights or warrants to purchase or acquire any such security or any
other transaction related to or having an impact upon its Common Stock
or the Series C Preferred Stock, which transaction does not result in
an adjustment to the Conversion Ratio pursuant to the foregoing
provisions of this Section 9, the Board of Directors of the
Corporation shall consider whether such action is of such a nature
that it adversely affects the holders of the Series C Preferred Stock
and that an adjustment to the Conversion Ratio, the provisions of
Sections 5(B) or 6, or a subdivision or combination of the outstanding
shares of Series C Preferred Stock into a greater or lesser number of
such shares should equitably be made in respect of such transaction.
If in such case the Board of Directors of the Corporation in its sole
discretion determines that an adjustment to the Conversion Ratio, the
provisions of Sections 5(B) or 6, or a subdivision or combination of
the outstanding shares of Series C Preferred Stock into a greater or<PAGE>
lesser number of such shares should be made, such adjustment,
subdivision or combination shall be made effective as of such date as
determined by the Board of Directors of the Corporation. The
determination of the Board of Directors of the Corporation as to
whether an adjustment to the Conversion Ratio, the provisions of
Section 5(B) or 6, or a subdivision or combination of the outstanding
shares of Series C Preferred Stock into a greater or lesser number of
such shares should be made pursuant to the foregoing provisions of
this Section 9(E), and, if so as to what adjustment, subdivision or
combination should be made and when, shall be final and binding on the
Corporation and all stockholders of the Corporation. The Corporation
shall be entitled to make such additional adjustment in the Conversion
Ratio and the provisions of Section 5(B) or 6, in addition to those
required by the foregoing provisions of this Section 9, as shall be
necessary in order that any dividend or distribution in shares of
capital stock of the Corporation, subdivision, reclassification or
combination of shares of stock of the Corporation or any
recapitalization of the Corporation shall not be taxable to holders of
the Common Stock.
(F) For purposes of this resolution, the following
definitions shall apply:
(i) "Business Day" shall mean each day that is not a
Saturday, Sunday or a date on which federally or state chartered
banking institutions in Chicago, Illinois or New York, New York are
required or authorized to be closed.
(ii) "Extraordinary Distribution" shall mean any
dividend or other distribution (effected while any of the shares of
Series C Preferred Stock are outstanding) of (x) cash, where the
aggregate amount of such cash dividend or distribution together with
the amount of all cash dividends and distributions made during the
preceding 12 months, when combined with the aggregate amount of all
Pro Rata Repurchases (for this purpose, including only that portion of
the aggregate purchase price of each such Pro Rata Repurchase which is
in excess of the Fair Market Value of the Common Stock repurchased as
determined in accordance with paragraph 9(C)(i)), exceeds ten percent
(10%) of the aggregate Fair Market Value of all shares of Common Stock
outstanding on the record date for determining the shareholders
entitled to receive such Extraordinary Distribution and/or (y) any
shares of capital stock of the Corporation (other than shares of
Common Stock), other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person or any other
property (including shares of any subsidiary of the Corporation), or
any combination thereof. The Fair Market Value of an Extraordinary
Distribution for purposes of Section 9(C) shall be equal to the sum of
the Fair Market Value of such Extraordinary Distribution as of the
date made.
(iii) "Fair Market Value" shall mean, as to shares of
Common Stock or any other class of capital stock or securities of the
Corporation or any other issuer which are publicly traded, the average
of the "Current Market Prices" of such shares or such securities for
each day of the Adjustment Period. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall
mean the fair value thereof as determined by an independent investment
banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of
Directors of the Corporation or a committee thereof (which may be the<PAGE>
independent appraiser engaged by any Plan) based on principles
consistently applied, or, if no such investment banking or appraisal
firm is in the good faith judgment of the Board of Directors or such
committee available to make such determination, as determined in good
faith by the Board of Directors of the Corporation or such committee.
(iv) "Current Market Price" of publicly traded shares
of Common Stock or any other class of capital stock or other security
of the Corporation or any other issuer for any day shall mean the last
reported sales price, regular way, or, in case no such reported sale
takes place on such day, the average of the reported closing bid and
asked prices, regular way, in either case as reported on the New York
Stock Exchange Composite Tape, or, if such security is not listed or
admitted to trading on such Exchange, on the principal national
securities exchange on which such security is listed or admitted to
trading, or if not listed or admitted to trading on any national
securities exchange, on the National Association of Securities Dealers
Automated Quotations National Market System, or, if such security is
not listed or admitted to trading on any national securities exchange
or quoted on such National Market System, the average of the closing
bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by
the Board of Directors or a committee thereof for such purpose, in
each case, on each trading day during the Adjustment Period.
(v) "Adjustment Period" shall mean the period of five
(5) consecutive trading days preceding, and including, the date as of
which the Fair Market Value of a security is to be determined.
(vi) "Sec. 9(F) Non-Dilutive Amount" in respect of an
issuance, sale or exchange by the Corporation of any right or warrant
to purchase or acquire shares of Common Stock (including any security
convertible into or exchangeable for shares of Common Stock) shall
mean (x) the product of (I) the Fair Market Value of a share of Common
Stock on the trading day immediately preceding the first public
announcement of such issuance, sale or exchange and (II) the maximum
number of shares of Common Stock which could be acquired on such date
upon the exercise in full of such rights and warrants (including upon
the conversion or exchange of all such convertible or exchangeable
securities), whether or not exercisable (or convertible or
exchangeable) at such date, minus (y) the aggregate amount payable
pursuant to such right or warrant to purchase or acquire such maximum
number of shares of Common Stock; provided, however, that in no event
shall the Sec. 9(F) Non-Dilutive Amount be less than zero. For
purposes of the foregoing sentence, in the case of a security
convertible into or exchangeable for shares of Common Stock, the
amount payable pursuant to a right or warrant to purchase or acquire
shares of Common Stock shall be the Fair Market Value of such security
on the date of the issuance, sale or exchange of such security by the
Corporation.
(vii) "Pro Rata Repurchase" shall mean any purchase of
shares of Common Stock by the Corporation or any subsidiary thereof,
whether for cash, shares of capital stock of the Corporation, other
securities of the Corporation, evidences of indebtedness of the
Corporation or any other person or any other property (including
shares of a subsidiary of the Corporation), or any combination
thereof, effected while any of the shares of Series C Preferred Stock
are outstanding, pursuant to any tender offer or exchange offer
subject to Section 13(e) of the Exchange Act, or any successor<PAGE>
provision of law, or pursuant to any other offer available to
substantially all holders of Common Stock; provided, however, that no
purchase of shares by the Corporation or any subsidiary thereof made
in open market transactions shall be deemed a Pro Rata Repurchase.
For purposes of this paragraph 9(F)(vii), shares shall be deemed to
have been purchased by the Corporation or any subsidiary thereof "in
open market transactions" if they have been purchased substantially in
accordance with the requirements of Rule 10b-18 as in effect under the
Exchange Act, on the date shares of Series C Preferred Stock are
initially issued by the Corporation or on such other terms and
conditions as the Board of Directors of the Corporation or a committee
thereof shall have determined are reasonably designed to prevent such
purchases from having a material effect on the trading market for the
Common Stock.
(viii) "Valuation Date" with respect to an Extraordi-
nary Distribution shall mean the day immediately preceding (i) the ex-
dividend date for such Extraordinary Distribution with respect to a
security listed on a national securities exchange or (ii) the record
date for such Extraordinary Distribution with respect to a security
which is not listed on a national securities exchange.
Section 10. Retirement of Shares. Any shares of Series C
Preferred Stock acquired by the Corporation by reason of the
conversion or redemption of such shares as provided hereby, or
otherwise so acquired, shall be cancelled as shares of Series C
Preferred Stock and restored to the status of authorized but unissued
shares of Preferred Stock of the Corporation, undesignated as to
series, and may thereafter be reissued as part of a new series of
Preferred Stock as permitted by law.
Section 11. Miscellaneous.
(A) All notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon the
earlier of receipt thereof or three (3) Business Days after the
mailing thereof if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms of
this Certificate of Designations) with postage prepaid, addressed: (i)
if to the Corporation, to its office at McDonald's Plaza, Oak Brook,
Illinois 60521 (Attention: Secretary) or to the transfer agent for the
Series C Preferred Stock, or other agent of the Corporation designated
as permitted by this Certificate or (ii) if to any holder of the
Series C Preferred Stock or Common Stock, as the case may be, to such
holder at the address of such holder as listed in the stock record
books of the Corporation (which may include the records of any
transfer agent for the Series C Preferred Stock or Common Stock, as
the case may be) or (iii) to such other address as the Corporation or
any such holder, as the case may be, shall have designated by notice
similarly given.
(B) In the event that, at any time as a result of an
adjustment made pursuant to Section 9 hereof, the holder of any share
of the Series C Preferred Stock upon surrendering such shares for
conversion shall become entitled to receive any shares or other
securities of the Corporation other than shares of Common Stock, the
Conversion Ratio in respect of such other shares or securities so
receivable upon conversion of shares of Series C Preferred Stock shall
thereafter be adjusted, and shall be subject to further adjustment
from time to time, in a manner and on terms as nearly equivalent as<PAGE>
practicable to the provisions with respect to Common Stock contained
in Section 9 hereof, and the provisions of each of the other Sections
hereof with respect to the Common Stock shall apply on like or similar
terms to any such other shares or securities.
(C) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Series C Preferred Stock or shares
of Common Stock or other securities issued on account of Series C
Preferred Stock pursuant hereto or certificates representing such
shares or securities. The Corporation shall not, however, be required
to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Series C Preferred
Stock or Common Stock or other securities in a name other than that in
which the shares of Series C Preferred Stock with respect to which
such shares or other securities are issued or delivered were
registered, or in respect of any payment to any person with respect to
any such shares or securities other than a payment to the registered
holder thereof, and shall not be required to make any such issuance,
delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the
amount of any such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid or is not payable.
(D) In the event that a holder of shares of Series C
Preferred Stock shall not by written notice designate the name in
which shares of Common Stock to be issued upon conversion of such
shares should be registered or to whom payment upon redemption of
shares of Series C Preferred Stock should be made or the address to
which the certificate or certificates representing such shares, or
such payment, should be sent, the Corporation shall be entitled to
register such shares, and make such payment, in the name of the holder
of such Series C Preferred Stock as shown on the records of the
Corporation and to send the certificate or certificates representing
such shares, or such payment, to the address of such holder shown on
the records of the Corporation.
(E) Unless otherwise provided in this Certificate of
Designations, as the same may be amended, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution,
liquidation or winding-up or otherwise made upon the shares of Series
C Preferred Stock and any other stock ranking on a parity with the
Series C Preferred Stock with respect to such dividend or distribution
shall be made pro rata, so that amounts paid per share on the Series C
Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that the required dividends, distributions or
payments, as the case may be, then payable per share on the shares of
the Series C Preferred Stock and such other stock bear to each other.
(F) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series C Preferred
Stock. Upon any such appointment or discharge of a transfer agent,
the Corporation shall send notice thereof by first-class mail, postage
prepaid, to each holder of record of Series C Preferred Stock.
4. Series D Preferred Stock.
FURTHER RESOLVED, that pursuant to the authority granted to
and vested in the Board of Directors of this Corporation (hereinafter
called the "Board of Directors" or the "Board") in accordance with the<PAGE>
provisions of the Restated Certificate of Incorporation, the Board of
Directors hereby creates a series of Preferred Stock, without par
value (the "Preferred Stock"), of the Corporation and hereby states
the designation and number of shares, and fixes the relative rights,
preferences and limitations thereof as follows:
Series D Preferred Stock:
Section 1. Designation and Amount. The shares of such
series shall be designated as Series D Preferred Stock (the "Series D
Preferred Stock") and the number of shares constituting the Series D
Preferred Stock shall be three hundred thousand (300,000). Shares of
Series D Preferred Stock shall have a stated value of $100 per share.
Such number may be increased or decreased by resolution of the Board
of Directors; provided, however that no decrease shall reduce the
number of shares of Series D Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or
warrants issued by or upon the conversion of any outstanding
securities issued by the Corporation convertible into Series D
Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series D Preferred Stock with respect to dividends,
the holders of shares of Series D Preferred Stock, in preference to
the holders of Common Stock and of any other Junior Stock (as
hereinafter defined in Section 4(B)), shall be entitled to receive a
cash dividend payable in an amount per share equal to $1.25 per
quarter and no more (such amount being referred to herein as the
"Dividend Amount"), which dividend shall be payable when and as
declared by the Board of Directors, out of funds legally available for
the purpose, payable quarterly in arrears on the first day of March,
June, September and December in each year (each such date being
referred to herein as "Dividend Payment Date"), subject to Section
2(B) below, commencing on the first Dividend Payment Date after the
first issuance of a share of Series D Preferred Stock. In the event
that any Dividend Payment Date shall occur on any day other than a
"Business Day" (as hereinafter defined), the dividend payment due on
such Dividend Payment Date shall be paid on the Business Day
immediately preceding such Dividend Payment Date. The Board of
Directors may fix a record date for the determination of holders of
shares of Series D Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
For purposes of these resolutions, "Business Day" shall mean each day
that is not a Saturday, Sunday or a date on which federally or state
chartered banking institutions in Chicago, Illinois or New York, New
York are required or authorized to be closed.
(B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series D Preferred Stock from the date of issue
of such shares and shall accrue on a daily basis whether or not
declared and whether or not the Corporation shall have earnings or
surplus out of which such dividends could be paid at the time.
Dividends accrued on the shares of Series D Preferred Stock for any
period less than a full quarterly period between Dividend Payment
Dates shall be computed on the basis of a 360-day year of 30-day<PAGE>
months and in lieu of the initial quarterly dividend, such a
proportional dividend shall accrue for the period from the date of
issue until the first Dividend Payment Date after the issuance of any
such shares. Accrued but unpaid dividends shall not bear interest.
Accumulated but unpaid dividends shall cumulate as of the Dividend
Payment Date on which they first become payable, but no interest shall
accrue on accumulated but unpaid dividends.
(C) Dividends paid on the shares of Series D Preferred
Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding.
Section 3. Voting Rights. The holders of shares of Series
D Preferred Stock shall have the following voting rights:
(A) Each share of Series D Preferred Stock shall entitle
the holder thereof to one vote on all matters submitted to a vote of
the stockholders of the Corporation.
(B) Except as otherwise provided by law or in the Restated
Certificate of Incorporation, the holders of shares of Series D
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law or in the Restated Certificate of Incorporation, holders of
Series D Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled
to vote with holders of Common stock as set forth herein) for taking
any corporate action. Any increase or decrease in the authorized
class of Preferred Stock shall not be deemed to alter or change the
powers, preferences, or special rights of the shares of Series D
Preferred Stock so as to affect them adversely within the meaning of
the General Corporation Law of the State of Delaware and no class vote
shall be required to authorize such increase or decrease.
Section 4. Certain Restrictions.
(A) So long as any Series D Preferred Stock shall be
outstanding, no dividend shall be declared and paid or set apart for
payment on any other series of stock ranking on a parity with the
Series D Preferred Stock as to dividends ("Parity Stock"), unless
there shall also be or have been declared and paid or set apart for
payment on the Series D Preferred Stock dividends for all dividend
payment periods of the Series D Preferred Stock ending on or before
the dividend payment date of such Parity Stock, ratably in proportion
to the respective amounts of dividends on the Series D Preferred Stock
accumulated and unpaid through the most recent such dividend payment
period, and accumulated and unpaid on such Parity Stock through the
dividend payment period on such Parity Stock ending on such dividend
payment date or such dividend payment date immediately preceding such
dividend payment period.
(B) So long as any Series D Preferred Stock shall be
outstanding, in the event that full cumulative dividends on the Series
D Preferred Stock have not been declared and paid or set apart for
payment, the Corporation shall not declare and pay or set apart for<PAGE>
payment any dividends or make any other distributions on, or make any
payment on account of the purchase, redemption or other retirement of,
Common Stock or any other class of stock or series thereof of the
Corporation ranking, as to dividends or as to distributions in the
event of a liquidation, dissolution or winding up of the Corporation,
junior to the Series D Preferred Stock (collectively, "Junior Stock")
until full cumulative and unpaid dividends on the Series D Preferred
Stock shall have been paid or declared and set apart for payment;
provided, however, that the foregoing shall not apply to (i) any
dividend payable solely in any shares of Junior Stock, or (ii) the
acquisition of shares of Junior Stock either (x) pursuant to any
employee or director incentive or benefit plan or arrangement of the
Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted or (y) in exchange solely for shares of any other
Junior Stock. Subject to the foregoing provisions of this Section 4,
the Board of Directors may declare and the Corporation may pay or set
apart for payment dividends and other distributions on any Junior
Stock or Parity Stock; and may purchase or otherwise redeem or retire
any of the Junior Stock or Parity Stock or any warrants, rights, or
options or other securities exercisable for or convertible into any of
the Junior Stock or Parity Stock and the holders of shares of the
Series D Preferred Stock shall not be entitled to share therein.
Section 5. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of
shares of Junior Stock unless, prior thereto, the holders of shares of
Series D Preferred Stock shall have received $100 per share (such
amount being referred to herein as the "Liquidation Preference"), plus
an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, as to the date of such payment, or
(ii) to the holders of shares of Parity Stock, except distributions
made ratably on the Series D Preferred Stock and all such Parity Stock
in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
After payment of the full amount to which they are entitled as
provided by the foregoing provisions of this Section 5(A), the holders
of shares of Series D Preferred Stock shall not be entitled to any
further right or claim to any of the remaining assets of the
Corporation.
(B) Neither the merger or consolidation of the Corporation
with or into any other corporation or other entity, nor the merger or
consolidation of any other corporation or other entity with or into
the Corporation, nor the sale, transfer or lease of all or any portion
of the assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this
Section 5.
(C) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating the
payment date or dates when, and the place or places where, the amounts
distributable to holders of Series D Preferred Stock in such
circumstances shall be payable, shall be made in accordance with
Section 8 below not less than 20 days prior to any payment date stated
therein, to the holders of Series D Preferred Stock, at their
respective addresses shown on the books of the Corporation or any
transfer agent for the Series D Preferred Stock; provided, however,
that a failure to give notice as provided herein or any defect therein<PAGE>
shall not affect the Corporation's ability to consummate a voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation.
Section 6. Redemption.
All of the outstanding Series D Preferred Stock shall be
redeemed, by the Corporation, out of funds legally available therefor,
on the later of (i) February 1, 1997 and (ii) the death of Maurice J.
Sullivan, an individual residing in the State of Hawaii, to whom the
initial shares of Series D Preferred Stock will initially be issued
(the "Redemption Date"). The shares shall be redeemed at a price of
$100 per share, plus an amount equal to accrued and unpaid dividends
thereon, to the Redemption Date (the "Redemption Price"). On or
subsequent to the Redemption Date, upon surrender of the certificates
for any shares to be redeemed pursuant to the provisions of this
Section 6, the Redemption Price of such shares shall be paid in cash.
In the event that the Redemption Price is either paid or made
available for payment, then, notwithstanding that the certificate or
certificates evidencing any of the shares of the Series D Preferred
Stock shall not have been surrendered, all rights with respect to such
shares shall terminate, effective on the Redemption Date, and any such
certificate shall represent only the right to receive the Redemption
Price, without interest, upon surrender. No interest shall accrue on
the Redemption Price after the Redemption Date.
Section 7. Reacquired Shares. Any shares of Series D
Preferred Stock acquired by the Corporation by reason of the
redemption of such shares as provided hereby, or otherwise so
acquired, shall be retired and the Corporation shall take all actions
necessary to restore such shares to the status of authorized but
unissued shares of Preferred Stock, without par value, of the
Corporation, which shares may thereafter be reissued as part of a new
series of such Preferred Stock or as Series D Preferred Stock, as
permitted by law.
Section 8. Miscellaneous.
(A) All notices referred to herein shall be in writing, and
delivered personally, sent by courier, or by registered or certified
mail (postage prepaid, return receipt requested) addressed: (i) if to
the Corporation, to its office at McDonald's Plaza, Oak Brook,
Illinois 60521 (Attention: Secretary) or to the transfer agent
designated by the Corporation or (ii) if to any holder of the Series D
Preferred Stock, to such holder at the address of such holder as
listed in the stock records books of the Corporation (which may
include the records of any transfer agent for the Series D Preferred
Stock or Common Stock, as the case may be) or (iii) to such other
address as the Corporation or any such holder, as the case may be,
shall have designated by notice similarly given.
(B) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any
issuance or delivery or shares of Series D Preferred Stock or
certificates representing such shares. The Corporation shall not,
however, be required to pay any such tax which may be payable in
respect of any transfer involved in the issuance or delivery of shares
of Series D Preferred Stock in a name other than the name in which the
shares of Series D Preferred Stock with respect to which such shares
are issued or delivered were registered, or in respect of any payment<PAGE>
to any person with respect to any such shares other than a payment to
the registered holder thereof, and shall not be required to make any
such issuance, delivery or payment unless and until the person
otherwise entitled to such issuance, delivery or payment has paid to
the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid or is not
payable.
(C) Unless otherwise provided in the Certificate of
Designations as the same may be amended, all payments in the form of
dividends, distributions on voluntary or involuntary dissolution,
liquidation or winding-up otherwise made upon the shares of Series D
Preferred Stock and any other stock ranking on a parity with the
Series D Preferred Stock with respect to such dividend or distribution
shall be made pro rata, so that amounts paid per share on the Series D
Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that the required dividends, distributions or
payments, as the case may be, then payable per share on the shares of
the Series D Preferred Stock and such other stock bear to each other.
(D) The Corporation may appoint and from time to time
discharge and change, a transfer agent for the Series D Preferred
Stock. Upon any such appointment or discharge of a transfer agent,
the Corporation shall send notice thereof in accordance with Section
8(A) to each holder of record of Series D Preferred Stock.
5. Series E Preferred Stock.
RESOLVED, That the issuance of a series of Preferred Stock,
without par value, of the Corporation is hereby authorized and the
designations, preferences and privileges, relative, participating,
optional and other special rights and qualifications, limitations and
restrictions thereof, in addition to those set forth in the Restated
Certificate of Incorporation of the Corporation, are hereby fixed as
follows:
7.72% Cumulative Preferred Stock, Series E
Section 1. Designation and Amount. The shares of such
series shall be designated as 7.72% Cumulative Preferred Stock,
Series E (the "Series E Preferred Stock"), and the number of shares
constituting the Series E Preferred Stock shall be 10,000. Shares of
Series E Preferred Stock shall have a liquidation preference of
$50,000 per share. The number of shares may be increased or
decreased by resolution of the Board of Directors; provided, however,
that no decrease shall reduce the number of shares of Series E
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants issued by or upon
the conversion of any outstanding securities issued by the
Corporation convertible into Series E Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any similar stock) ranking prior
and superior to Series E Preferred Stock with respect to dividends,
the holders of shares of Series E Preferred Stock, in preference to
the holders of Common Stock and of any other Junior Stock (as
hereinafter defined in Section 4(B)), shall be entitled to receive a<PAGE>
cash dividend payable in an amount per share equal to $965.00 per
quarter and no more (such amount being referred to herein as the
"Dividend Amount"), which dividend shall be payable when, as and if
declared by the Board of Directors, out of funds legally available
for that purpose, quarterly in arrears on the first day of March,
June, September and December in each year (each such date being
referred to herein as a "Dividend Payment Date"), commencing on March
1, 1993. In the event that any Dividend Payment Date shall occur on
any day other than a "Business Day" (as hereinafter defined), the
dividend payment due on such Dividend Payment Date shall be paid on
the Business Day immediately preceding such Dividend Payment Date.
The Board of Directors may fix a record date for the determination of
holders of shares of Series E Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof. For purposes of these resolutions, "Business Day"
shall mean each day that is not a Saturday, Sunday or a date on which
federally or state chartered banking institutions in Chicago,
Illinois or New York, New York are required or authorized to be
closed.
(B) Dividends shall begin to accrue on outstanding shares
of Series E Preferred Stock from the date of original issuance of
such shares and shall accrue on a daily basis whether or not declared
and whether or not the Corporation shall have earnings or surplus out
of which such dividends could be paid at the time. Dividends accrued
on the shares of Series E Preferred Stock for any period greater or
less than a full quarterly period between Dividend Payment Dates
shall be computed on the basis of a 360-day year of twelve 30-day
months. Accrued but unpaid dividends shall not bear interest.
Accrued but unpaid dividends shall cumulate as of the Dividend
Payment Date on which they first become payable, but no interest
shall accrue on such accumulated but unpaid dividends.
(C) Dividends paid on the shares of Series E Preferred
Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time
outstanding.
Section 3. Voting Rights.
(A) Except as set forth herein, or as otherwise provided by
law or in the Restated Certificate of Incorporation, holders of Series
E Preferred Stock shall have no special voting rights and their
consent shall not be required for taking any corporate action. On
those matters where voting rights are conferred herein, by law or in
the Restated Certificate of Incorporation, each share of Series E
Preferred Stock shall entitle the voter thereof to one vote. Any
increase or decrease in the authorized class of Preferred Stock shall
not be deemed to alter or change the powers, preferences, or special
rights of the shares of Series E Preferred Stock so as to affect them
adversely within the meaning of the General Corporation Law of the
State of Delaware and no class vote shall be required to authorize
such increase or decrease.
(B) If at any time dividends payable on Series E Preferred
Stock, or on any one or more other series of Preferred Stock of the
Corporation entitled to receive cumulative preferred dividends, are
in arrears and unpaid in an amount equal to or exceeding the amount<PAGE>
of dividends payable on such Series E Preferred Stock and/or other
series of Preferred Stock entitled to receive cumulative dividends
for six quarterly dividend periods, whether or not consecutive, the
holders of all outstanding shares of Preferred Stock entitled to
receive cumulative preferred dividends will have the exclusive right,
voting separately as a class, to elect two directors to the Board of
Directors of the Corporation at the next annual meeting of
stockholders of the Corporation. The authorized number of Directors
shall not be increased for this purpose. Such voting right will
continue for such Preferred Stock until all dividends on Series E
Preferred Stock and on such other series have been paid in full, at
which time such voting right of the holders of such Preferred Stock
will terminate, subject to re-vesting in the event of a subsequent
arrearage. Upon any termination of the aforesaid voting right, the
term of office of those directors elected by holders of Preferred
Stock voting separately as a class will terminate.
Section 4. Certain Restrictions.
(A) So long as any Series E Preferred Stock shall be
outstanding, no dividend shall be declared and paid or set apart for
payment on any other series of stock ranking on a parity with Series
E Preferred Stock as to dividends ("Parity Stock"), unless there
shall also be or have been declared and paid or set apart for payment
on Series E Preferred Stock dividends for all dividend payment
periods of Series E Preferred Stock ending on or before the dividend
payment date of such Parity Stock, ratably in proportion to the
respective amounts of dividends on the Series E Preferred Stock
accrued and unpaid through the most recent such dividend payment
period, and accrued and unpaid on such Parity Stock through the
dividend payment period on such Parity Stock ending on such dividend
payment date or such dividend payment date immediately preceding such
dividend payment period.
(B) So long as any Series E Preferred Stock shall be
outstanding, in the event that full cumulative dividends on the
Series E Preferred Stock have not been declared and paid or set apart
for payment when due, the Corporation shall not declare and pay or
set apart for payment any dividends on Common Stock or any other
class of stock or series thereof of the Corporation ranking as to
dividends junior to Series E Preferred Stock (collectively, "Junior
Stock") until full cumulative and unpaid dividends on Series E
Preferred Stock shall have been paid or declared and set apart for
payment; provided, however, that the foregoing shall not apply to any
dividend payable solely in any shares of Junior Stock. Subject to
the foregoing provisions of this Section 4, the Board of Directors
may declare and the Corporation may pay or set apart for payment
dividends on any Junior Stock or Parity Stock and the holders of
shares of Series E Preferred Stock shall not be entitled to share
therein.
Section 5. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, no distribution shall
be made (i) to the holders of shares of stock ranking junior to the
Series E Preferred Stock as to distributions in the event of any
liquidation, dissolution or winding up of the Corporation unless,
prior thereto, the holders of shares of Series E Preferred Stock
shall have received $50,000 per share (such amount being referred to<PAGE>
herein as the "Liquidation Preference"), plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or
not declared, as to the date of such payment, or (ii) to the holders
of shares of stock ranking on a parity with the Series E Preferred
Stock as to distributions in the event of any liquidation,
dissolution or winding up of the Corporation ("Parity Liquidation
Stock"), except distributions made ratably on Series E Preferred
Stock and all such Parity Liquidation Stock in proportion to the
total amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up. After payment of
the full amount to which they are entitled as provided by the
foregoing provisions of this Section 5(A), the holders of shares of
Series E Preferred Stock shall not be entitled to any further right
or claim to any of the remaining assets of the Corporation.
(B) Neither the merger or consolidation of the Corporation
with or into any other corporation or other entity, nor the merger or
consolidation of any other corporation or other entity with or into
the Corporation, nor the sale, lease, exchange or other transfer of
all or any portion of the assets of the Corporation, shall be deemed
to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 5.
(C) Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when, and the place or places where, the
amounts distributable to holders of Series E Preferred Stock in such
circumstances shall be payable, shall be made in accordance with
Section 9 below not less than 20 days prior to any payment date
stated therein, to the holders of Series E Preferred Stock, at their
respective addresses shown on the books of the Corporation or any
transfer agent for the Series E Preferred Stock; provided, however,
that a failure to give notice as provided herein or any defect
therein shall not affect the Corporation's ability to consummate a
voluntary or involuntary liquidation, dissolution or winding up of
the Corporation.
Section 6. Redemption. The Series E Preferred Stock will
not be redeemable prior to December 3, 1997. The Series E Preferred
Stock will be redeemable, at the option of the Corporation, in whole
or in part, out of funds legally available therefor, at any time, on
or after December 3, 1997, upon not less than 30 nor more than 90
days' notice, at a redemption price per share of Series E Preferred
Stock equal to the Liquidation Preference, plus an amount equal to
accrued and unpaid dividends to the redemption date. On or
subsequent to the redemption date, upon surrender of the certificates
for any shares to be redeemed pursuant to the provisions of this
Section 6, the redemption price of such shares shall be paid in cash.
In the event that the redemption price is either paid or made
available for payment, then, notwithstanding that the certificate or
certificates evidencing any of the shares of the Series E Preferred
Stock shall not have been surrendered, all rights with respect to
such shares shall terminate, effective on the redemption date, and
any such certificate shall represent only the right to receive the
redemption price, without interest, upon surrender. No interest
shall accrue on the redemption price after the redemption date.
Section 7. Reacquired Shares. Any shares of Series E
Preferred Stock acquired by the Corporation by reason of the
redemption of such shares as provided hereby, or otherwise acquired,<PAGE>
shall be retired and the Corporation shall take all actions necessary
to restore such shares to the status of authorized but unissued
shares of Preferred Stock, without par value, of the Corporation,
which shares may thereafter be reissued as part of a new series of
such Preferred Stock or as Series E Preferred Stock, as permitted by
law.
Section 8. Ranking. The Series E Preferred Stock will
rank on a parity as to payment of dividends and distribution of
assets upon liquidation, dissolution or winding up, whether voluntary
or involuntary, of the Corporation with the Corporation's Series B
ESOP Convertible Preferred Stock, Series C ESOP Convertible Preferred
Stock and Series D Preferred Stock (which are the only series of
Preferred Stock currently outstanding) and prior to the Corporation's
Common Stock. The Series E Preferred Stock will rank prior to the
Corporation's Series A Junior Participating Preferred Stock (the
"Series A Preferred Stock") as to the payment of dividends and on a
parity with the Series A Preferred Stock as to distribution of assets
upon liquidation, dissolution or winding up, whether voluntary or
involuntary, if such Series A Preferred Stock is issued.
Section 9. Miscellaneous.
(A) All notices referred to herein shall be in writing,
and delivered personally, sent by courier, or by registered or
certified mail (postage prepaid, return receipt requested) addressed:
(i) if to the Corporation, to its office at One McDonald's Plaza, Oak
Brook, Illinois 60521 (Attention: Secretary) or to the transfer agent
designated by the Corporation or (ii) if to any holder of Series E
Preferred Stock, to such holder at the address of such holder as
listed in the stock record books of the Corporation or (iii) to such
other address as the Corporation or any such holder, as the case may
be, shall have designated by notice similarly given.
(B) The Corporation shall pay any and all stock transfer
and documentary stamp taxes that may be payable in respect of any
issuance or delivery of shares of Series E Preferred Stock or
certificates representing such shares. The Corporation shall not,
however, be required to pay any such tax which may be payable in
respect of any transfer involved in the issuance or delivery of
shares of Series E Preferred Stock in a name other than the name in
which such shares of Series E Preferred Stock were registered, or in
respect of any payment to any person with respect to any such shares
other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and
until the person otherwise entitled to such issuance, delivery or
payment has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax
has been paid or is not payable.
(C) Unless otherwise provided in the Certificate of
Designations, Preferences and Rights, as the same may be amended, all
payments in the form of dividends, distributions on voluntary or
involuntary dissolution, liquidation or winding-up otherwise made
upon the shares of Series E Preferred Stock and any other stock
ranking on a parity with Series E Preferred Stock with respect to
such dividend or distribution shall be made pro rata, so that amounts
paid per share on Series E Preferred Stock and such other stock shall
in all cases bear to each other the same ratio that the required
dividends, distributions or payments, as the case may be, then<PAGE>
payable per share on the shares of the Series E Preferred Stock and
such other stock bear to each other.
(D) The Corporation may appoint, and from time to time
discharge and change, a transfer agent for Series E Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the
Corporation shall send notice thereof in accordance with Section 9(A)
to each holder of record of Series E Preferred Stock.
FIFTH: The minimum amount of capital with which the
Corporation will commence business is One Thousand Dollars ($1,000).
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders of the
Corporation shall not be subject to the payment of corporate debts to
any extent whatsoever.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware the Board of Directors
is expressly authorized and empowered:
(a) In the manner provided in the by-laws of the
Corporation to make, alter, amend and repeal the by-laws of the
Corporation in any respect not inconsistent with the laws of the State
of Delaware or with the Restated Certificate of Incorporation of the
Corporation;
(b) By a resolution or resolutions passed by a majority of
the whole Board, to designate one or more committees, each committee
to consist of two or more of the directors of the Corporation which,
to the extent provided in said resolution or resolutions or in the by-
laws of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of
the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated
in the by-laws of the Corporation or as may be determined from time to
time by resolution adopted by the Board of Directors;
(c) Subject to any applicable provisions of the by-laws of
the Corporation then in effect, to determine from time to time,
whether and to what extent and at what times and places and under what
conditions and regulations the accounts and books of the Corporation,
or any of them, shall be open to the inspection of the stockholders;
and no stockholder shall have any right to inspect any account or book
or document of the Corporation, except as conferred by the laws of the
State of Delaware, unless and until authorized so to do by resolution
of the Board of Directors or of the stockholders of the Corporation;
(d) To fix from time to time the amount of the surplus or
profits of the Corporation to be reserved as working capital or for
any other lawful purpose;
(e) Without any action by the stockholders, to authorize
the borrowing of moneys for any of the purposes of the Corporation
and, from time to time without limit as to amount, to authorize and
cause the making, execution, issuance, sale or other disposition of
promissory notes, drafts, bonds, debentures and other negotiable or<PAGE>
non-negotiable instruments and evidences of indebtedness, and the
securing of the same by mortgage, pledge, deed of trust or otherwise.
In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may be
exercised, or done by the Corporation, subject, nevertheless, to the
provisions of the laws of the State of Delaware, this Restated
Certificate of Incorporation and the by-laws of the Corporation.
Any contract, transaction or act of the Corporation or of
the directors or of any committee, which shall be ratified by the
holders of a majority of the shares of stock of the Corporation
present in person or by proxy and voting at any annual meeting, or at
any special meeting called for such purpose, shall, insofar as
permitted by law or by this Restated Certificate of Incorporation, be
as valid and as binding as though ratified by every stockholder of the
Corporation.
The Corporation may enter into contracts or transact
business with one or more of its directors, or with any firm of which
one or more of its directors are members or with any trust, firm,
corporation or association in which any one or more of its directors
is a stockholder, director or officer or otherwise interested, and any
such contract or transaction shall not be invalidated in the absence
of fraud because such director or directors have or may have interests
therein which are or might be adverse to the interest of the
Corporation, even though the presence and/or vote of the director or
directors having such adverse interest shall have been necessary to
constitute a quorum and/or to obligate the Corporation upon such
contract or transaction, provided that such interests shall have been
disclosed to the other directors and a majority of the directors
voting shall have approved such contract or transaction; and no
director having such adverse interest shall be liable to this
Corporation or to any stockholder or creditor thereof, or to any other
person for any loss incurred by it under or by reason of any such
contract or transaction; nor shall any such director or directors be
accountable for any gains or profits realized thereon.
The Corporation shall have power to indemnify any and all of
its directors or officers or former directors or officers or any
person who may have served at its request as a director or officer of
another corporation in which it owns shares of capital stock or of
which it is a creditor against liabilities and expenses actually and
necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made
parties, or a party, by reason of being or having been directors or
officers or a director or officer of the Corporation, or of such other
corporation, except in relation to matters as to which any such
director or officer or former director or officer or person shall be
adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty. Such
indemnification shall not be deemed exclusive of any other rights to
which those indemnified may be entitled, under any by-law, agreement,
vote of stockholders or otherwise.
NINTH: Meetings of stockholders may be held outside the
State of Delaware, if the by-laws so provide. The books of the
Corporation may be kept (subject to the laws of the State of Delaware)
outside the State of Delaware at such place or places as may be<PAGE>
designated from time to time by the Board of Directors or in the by-
laws of the Corporation. Elections of directors need not be by ballot
unless the by-laws of the Corporation shall so provide.
TENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Restated Certificate
of Incorporation, to the extent and in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ELEVENTH: It is hereby declared to be a proper corporate
purpose, reasonably calculated to benefit stockholders, for the Board
of Directors to base the response of the Corporation to any
'Acquisition Proposal' on the Board of Directors' evaluation of what
is in the best interests of the Corporation and for the Board of
Directors, in evaluating what is in the best interests of the
Corporation, to consider:
(i) the best interest of the stockholders; for this
purpose the Board shall consider, among other factors, not only the
consideration being offered in the Acquisition Proposal, in relation
to the then current market price, but also in relation to the then
current value of the Corporation in a freely negotiated transaction
and in relation to the Board of Directors' then estimate of the future
value of the Corporation as an independent entity; and
(ii) such other factors as the Board of Directors deter-
mines to be relevant, including, among other factors, the social,
legal and economic effects upon franchisees, employees, suppliers,
customers and business.
"Acquisition Proposal" means any proposal of any person (a)
for a tender offer or exchange offer for any equity security of the
Corporation, (b) to merge or consolidate the Corporation with another
corporation, or (c) to purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation.
TWELFTH: Subject to all other applicable provisions of this
Restated Certificate of Incorporation and to all applicable provisions
of the law of Delaware, relating, inter alia, to stockholder approval,
the Board of Directors shall have the power to merge or consolidate
the Corporation with another corporation or to sell, lease or exchange
all or substantially all of the property and assets of the
Corporation, including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may
be in whole or in part shares of stock in, and/or other securities of,
any corporation or corporations, as the Board of Directors shall deem
expedient and for the best interests of the Corporation, but,
regardless of any other provision of this Restated Certificate of
Incorporation, if any party to any such transaction shall be a person
or entity owning, immediately prior to the consummation of such
transaction, of record or beneficially, 2% or more of the stock of the
Corporation issued and outstanding having voting power, such power of
the Board of Directors shall be exercisable only when and as duly
authorized by the affirmative vote of the holders of not less than 66-
2/3% of the stock of the Corporation issued and outstanding having
voting power given at a stockholders' meeting duly called for that
purpose; provided, however, that the Board of Directors shall have the
power to merge the Corporation with another corporation without action
by the stockholders to the extent and in the manner permitted from<PAGE>
time to time by the law of Delaware. In determining whether or not
any person or entity (the 'Primary Holder') owns, of record or
beneficially, 2% or more of the stock of the Corporation issued and
outstanding having voting power, there shall be aggregated with all
shares of such stock owned of record or beneficially by the Primary
Holder (a) all shares of such stock owned of record or beneficially by
any person or entity who or which would be deemed to be controlling,
controlled by or under common control with the Primary Holder under
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, any federal statute enacted to take the place of
either or both such statutes or any regulation promulgated under
either of such statutes or such successor statutes (an 'Affiliate')
and (b) all shares of such stock owned of record or beneficially by
any person or entity acting in concert with the Primary Holder and/or
with an Affiliate of the Primary Holder. This Article Twelfth shall
not be altered, amended or repealed except by the affirmative vote of
the holders of not less than 66-2/3% of the stock of the Corporation
issued and outstanding having voting power, given at a stockholders'
meeting duly called for that purpose, upon a proposal adopted by the
Board of Directors.
THIRTEENTH: Board of Directors.
(a) Number, Election and Terms. The business and affairs
of the Corporation shall be managed by or under the direction of a
Board of Directors consisting of not less than 11 nor more than 24
persons. The exact number of directors within the minimum and maximum
limitations specified in the preceding sentence shall be fixed from
time to time by the Board of Directors pursuant to a resolution
adopted by a majority of the entire Board of Directors.
At the 1983 Annual Meeting of Stockholders, the directors
shall be divided into three classes, as nearly equal in number as
possible, with the term of office of the first class to expire at the
1984 annual meeting of stockholders, the term of office of the second
class to expire at the 1985 annual meeting of stockholders and the
term of office of the third class to expire at the 1986 annual meeting
of stockholders.
At each annual meeting of stockholders following such
initial classification and election, directors elected to succeed
those whose terms then expire shall be elected for a term of office
expiring at the third succeeding annual meeting of stockholders after
their election.
(b) Newly Created Directorships and Vacancies. Subject to
the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase
in the authorized number of directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office. Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of the class to which they have been
elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent
director.
(c) Removal. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any director, or the<PAGE>
entire Board of Directors, may be removed from office at any time, but
only for cause and only by the affirmative votes of the holders of at
least 80% of the voting power of all the shares of the Corporation
entitled to vote for the election of directors.
(d) Amendment, Repeal, Etc. Notwithstanding anything to
the contrary contained in this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least 80% of the voting
power of all of the shares of the Corporation entitled to vote for the
election of directors shall be required to amend, alter or repeal, or
to adopt any provision inconsistent with, this Article Thirteenth.
FOURTEENTH: Stockholder Action. Any action required or
permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be effected by any consent in writing by
such stockholders. Special meetings of stockholders of the
Corporation may be called upon not less than 10 nor more than 60 days'
written notice only by the Board of Directors pursuant to a resolution
approved by a majority of the Board of Directors. Notwithstanding
anything contained in this Restated Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least 80% of
the voting power of all of the shares of the Corporation entitled to
vote for the election of directors shall be required to amend, alter
or repeal, or to adopt any provision inconsistent with, this Article
Fourteenth.
FIFTEENTH: Elimination of Certain Liability of Directors.
To the fullest extent that the general corporate law of the State of
Delaware, as it exists on the date hereof or as it may hereafter be
amended, permits the limitation or elimination of the liability of
directors, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director. No amendment to or repeal of this
Article Fifteenth shall apply to or have any effect on liability or
alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation, which restates and integrates but does not further
amend the Restated Certificate of Incorporation of
McDonald's Corporation, as heretofore amended or supplemented, there
being no discrepancy between such Restated Certificate of
Incorporation, as so amended and supplemented, and the provisions
hereof, and having been adopted in accordance with Section 245 of the
Delaware General Corporation Law, has been executed by its Senior Vice
President and attested by its Assistant Secretary, as of this 15th day
of November, 1994.
McDONALD'S CORPORATION
By: /s/ Shelby Yastrow
------------------------
Shelby Yastrow
Senior Vice President<PAGE>
ATTEST:
/s/ Gloria Santona
------------------------
Gloria Santona
Assistant Secretary
Exhibit 3(B)
BY-LAWS OF
McDONALD'S CORPORATION
ARTICLE I - OFFICES
Section l - Principal Office - The registered office shall be
established and maintained at the office of The Prentice Hall
Corporation System Inc., in the City of Dover, in the County of New
Castle, in the State of Delaware; and said Corporation shall be the
resident agent of this Corporation in charge thereof.
Section 2 - Other Offices - The Corporation may also have an office in
the Village of Oak Brook, State of Illinois, and may also have other
offices, either within or without the State of Delaware, at such place
or places as the Board of Directors may from time to time appoint or
the business of the Corporation may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section l - Place of Meetings - The Annual Meeting of Stockholders and
any other meetings of stockholders shall be held at such place as may
from time to time be determined by the Board of Directors and set
forth in a notice thereof.
Section 2 - Annual Election of Directors - The Annual Meeting of
Stockholders for the election of Directors and the transaction of
other business shall be held each year on the date determined by the
Board of Directors. If this date shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each
annual meeting, the stockholders entitled to vote shall elect
Directors to succeed those whose terms then expire and may transact
any other proper business. Any previously scheduled meeting of the
stockholders may be postponed by resolution of the Board of Directors
upon public notice given prior to the date previously scheduled for
such meeting of stockholders.
Section 3 - Voting - Each stockholder entitled to vote in accordance
with the terms of the Certificate of Incorporation and in accordance
with the provisions of these By-Laws shall be entitled to one vote (or
such lesser number of votes as may be provided with respect to holders
of any series of Preferred Stock in a resolution of the Board of
Directors adopted pursuant to the Certificate of Incorporation), in
person or by proxy, for each share of stock entitled to vote held by
such stockholder but no proxy shall be voted after three (3) years
from its date unless such proxy provides for a longer period. Any
motion brought before a stockholder meeting must be seconded before a
vote will be taken. All votes by stockholders on proposed amendments
to the Certificate of Incorporation and all elections of Directors,
shall be by written ballot. All elections for Directors shall be
decided by a plurality of the votes of the shares present at the
meeting, in person or by proxy, and entitled to vote on the election
of directors; all other questions shall be decided by majority vote of
the shares entitled to vote on the subject matter and present, in
person or by proxy, at the meeting, except as otherwise provided by
the Certificate of Incorporation or the laws of the State of Delaware;
and where a separate vote by class is required, the affirmative vote
of the majority of shares of such class present in person or<PAGE>
represented by proxy at the meeting shall be the act of such class.
Section 4 - Quorum - At all meetings of stockholders, except as
otherwise required by law, by the Certificate of Incorporation, or by
these By-Laws, a majority of the shares entitled to vote, whether
present in person or represented by proxy, shall constitute a quorum.
Whether or not there is such a quorum present at any meeting, the
chairman of the meeting or a majority of the shares so present or
represented, shall have power to adjourn the meeting from time to
time. No notice of the time and place of adjourned meetings need be
given except as required by law. At any such adjourned meeting at
which the requisite amount of stock entitled to vote shall be repre-
sented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment
is for more than thirty (30) days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 5 - Special Meetings - Special meetings of the stockholders
for any purpose or purposes may be called only by the Board of
Directors pursuant to a resolution approved by a majority of the Board
of Directors and shall be called by the Secretary in accordance with
any such resolution.
Section 6 - Notice of Meetings - Written or printed notice stating the
place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given by the Secretary to each
stockholder entitled to vote thereat at his address as it appears on
the records of the Corporation not less than ten (l0) nor more than
sixty (60) days before the date of the meeting. Business transacted
at any special meeting shall be confined to the purpose or purposes
stated in the notice of such special meeting.
Section 7 - No Action Without Meeting - Any action required or
permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be effected by any consent in writing by
such stockholders.
Section 8 - Nomination and Stockholder Business -
(A) Annual Meetings of Stockholders - (1) Nominations of
persons for election to the Board of Directors of the Corporation and
the proposal of business to be considered by the stockholders at an
annual meeting of stockholders may be made (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the
Board of Directors or (c) by any stockholder of the Corporation who
was a stockholder of record at the time of giving of notice provided
for in this Section 8, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 8.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (A)(1) of this Section 8, such business, as
determined by the Chairman of the meeting, must be a proper subject
for stockholder consideration under Delaware corporate law, and the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive offices
of the Corporation not less than sixty (60) days nor more than ninety
(90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of
the annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary date,
notice by the stockholder to be timely must be so delivered not
earlier than the ninetieth (90th) day prior to such annual meeting and
not later than the close of business on the later of the sixtieth
(60th) day prior to such annual meeting or the tenth (10th) day
following the date on which public announcement of the date of such
meeting is first made. Such stockholder's notice shall set forth (a)
as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such
person that is required to be disclosed in solicitations of proxies
for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (Including such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that
the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and
(c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the
name and address of such stockholder, as they appear on the Corpora-
tion's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and
of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 8 to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming
all of the nominees for Directors or specifying the size of the
increased Board of Directors made by the Corporation at least seventy
(70) days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Section 8
shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered
to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth (10th) day following
the day on which such public announcement is first made by the
Corporation.
(B) Special Meetings of Stockholders - Only such business shall
be conducted at a special meeting of stockholders as shall have been
brought before the meeting of stockholders pursuant to the
Corporation's notice of meeting. Nominations of persons for election
to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder of the Corporation who is
a stockholder of record at the time of giving of notice provided for
in this Section 8, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section 8.
Nominations by stockholders of such persons for election to the Board
of Directors may be made at such a special meeting of stockholders if
the stockholder's notice required by paragraph (A)(2) of this Section
8 shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day
prior to such special meeting and not later than the close of business
on the later of the sixtieth (60th) day prior to such special meeting
or the tenth (10th) day following the day on which public announcement
is first made of the date of the special meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting.
(C) General - (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 8 shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this
Section 8. The Chairman of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures
set forth in this Section 8 and, if any proposed nomination or
business is not in compliance with this Section 8, to declare that
such defective proposal shall be disregarded.
(2) For purposes of this Section 8, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 8, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Section 8.
Nothing in this Section 8 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III - DIRECTORS
Section l - Number and Term - The number of Directors who shall
constitute the whole Board of Directors shall be the number fixed from
time to time by the Board of Directors in accordance with the
Certificate of Incorporation and shall in no event be less than eleven
(11) nor more than twenty-four (24). At the 1983 Annual Meeting of
Stockholders, the Directors were divided into three (3) classes, as
nearly equal in number as possible with the term of office of the
first class to expire at the 1984 Annual Meeting of Stockholders, the
term of office of the second class to expire at the 1985 Annual
Meeting of Stockholders, and the term of office of the third class to
expire at the 1986 Annual Meeting of Stockholders. At each Annual
Meeting of Stockholders following such initial classification and
election, Directors elected to succeed those whose terms then expire
shall be elected for a term of office expiring at the third succeeding
Annual Meeting of Stockholders after their election and until their
successors shall be elected and shall qualify.
Section 2 - Resignations - Any Director or member of a committee of
the Board of Directors may resign at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein
and if no time be specified, at the time of its receipt by the
President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
Section 3 - Newly-Created Directorships and Vacancies - Subject to the
rights of the holders of any series of Preferred Stock then
outstanding, newly-created directorships resulting from any increase
in the authorized number of Directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall be filled
by a majority vote of the Directors then in office, though less than a
quorum. Directors so chosen shall hold office for a term expiring at
the Annual Meeting of Stockholders at which the term of the class to
which they have been elected expires and until their successors shall
be elected and shall qualify. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any
incumbent Director.
Section 4 - Removal - Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any Director, or the
entire Board of Directors, may be removed from office at any time but
only for cause and only by the affirmative vote of the holders of
eighty percent (80%) of the voting power of all of the shares of the
Corporation entitled to vote for the election of Directors.
Section 5 - Powers - The Board of Directors shall exercise all of the
powers of the Corporation, except such as are by law or by the
Certificate of Incorporation of the Corporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 6 - Committees -
(A) Executive Committee - There shall be an Executive Committee
of the Board of Directors selected from time to time by the Board of
Directors from among its own membership. Except as hereinafter
provided, the Executive Committee shall have and may exercise all the
powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require
it. The Executive Committee is expressly granted the power and
authority to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law ("DGCL"), and to
declare dividends, provided that with respect to common stock
dividends declared for any quarter, the rate per share does not exceed
the rate per share paid in the previous quarter.
(B) Other Committees of the Board - The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board,
designate one or more other committees, each committee to consist of
two or more of the Directors of the Corporation which, to the extent
provided in said resolution or resolutions or in these By-Laws shall
have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation and may have
power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
(C) Limitation on Committee Authority - No committee shall have
the power or authority of the Board of Directors in reference to (i)
adopting an agreement of merger or consolidation under Sections 25l or
252 of the DGCL; (ii) recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's property
and assets; (iii) recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution; (iv) amending the
By-Laws of the Corporation; (v) except as otherwise specified in a
resolution of the Board of Directors, issuing stock; (vi) appointing
or removing an officer or Director of the Corporation; (vii)
submitting any proposition to the stockholders of the Corporation; or
(viii) amending the Certificate of Incorporation (except that a
committee may, to the extent authorized in a resolution or resolutions
adopted by the Board of Directors, as provided in Subsection (a) of
Section 151 of the DGCL, fix the designations and any of the
preferences or rights of shares relating to dividends, redemption,
dissolution any distribution of assets of the Corporation or the
conversion into, or the exchange of such shares for, shares of any
other class or classes or any other series of the same or any other
class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of
the shares of any series).
(D) Procedural Provisions - A majority of the members of a
committee shall constitute a quorum for the transaction of business,
and the act of a majority of such members present at any meeting at
which there is a quorum shall be the act of such committee. If at any
meeting of a committee there shall be less than a quorum present, a
majority of those members present may adjourn the meeting from time to
time until a quorum is obtained, and no further notice thereof need be
given other than by announcement at the meeting which shall be so
adjourned. Notwithstanding the foregoing, (i) any action of the
Executive Committee shall be taken only with the unanimous approval of
all its members; and (ii) at the request of any member of the
Executive Committee, consideration of any action proposed to be taken
by the Committee shall be deferred to the Board of Directors.
The Board of Directors may designate one or more Directors as
alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee. Such committee
or committees shall have such name or names as may be stated in these
By-Laws or as may be determined from time to time by resolution
adopted by the Board of Directors.
Each committee shall keep regular minutes of its proceedings and
report its acts and proceedings to the Board.
Section 7 - Meetings - The newly-elected Directors may hold their
first meeting for the purpose of organization and the transaction of
business, if a quorum be present, immediately after the Annual Meeting
of the Stockholders, or the time and place of such meeting may be
fixed by consent in writing of all the Directors. Commencing in 1984,
the Board of Directors may, without notice, hold its first meeting
subsequent to the election of a class of Directors for the purpose of
organization and the transaction of business, if a quorum be present,
immediately after the Annual Meeting of the Stockholders, or the time
and place of such meeting may be fixed by consent in writing of all
the Directors.
Regular meetings of the Board of Directors may be held without notice
at such places, within or without the State of Delaware, and times as
shall be determined from time to time by resolution of the Directors.
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President and shall be called by the
Secretary at the direction of the Chairman of the Board or the
President or on the written request of any two (2) Directors on notice
to each Director sent at least twenty-four (24) hours prior to each
such meeting. Notice of each such meeting shall be delivered
personally to each Director or sent by telegram, telex, or electronic
mail to such a place as designated from time to time by each Director
or, in the absence of any such designation, to the Director's last
known place of business or residence. Any such meeting shall be held
at such place or places, within or without the State of Delaware, and
times as may be determined by the Directors or as shall be stated in
the notice.
Section 8 - Quorum - A majority of the Directors shall constitute a
quorum for the transaction of business and the act of a majority of
the Directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors, except as may be otherwise
specifically provided by the Certificate of Incorporation, the laws of
the State of Delaware, or these By-Laws. If at any meeting of the
Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time
until a quorum is obtained and no further notice thereof need be given
other than by announcement at the meeting which shall be so adjourned.
Section 9 - Compensation - No employee of the Company shall receive
any additional compensation or remuneration for serving as a member of
the Board of Directors. By resolution of the Board of Directors,
those members of the Board of Directors who are not otherwise employed
by the Company may receive a fixed fee, payable quarterly, together
with a fee for attendance at each meeting. For purposes of this
Section, members of the Board of Directors who serve the Company in
capacities, such as outside consultants, attorneys, or business
advisors, shall not be considered by virtue of such service as being
employed by the Company. Nothing herein contained shall be construed
to preclude any Director from serving the Corporation in any other
capacity as an officer, agent, or otherwise and receiving compensation
therefor.
Section l0 - Action Without Meeting - Unless otherwise restricted by
the Certificate of Incorporation or the By-Laws, any action required
or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof, may be taken without a meeting if all
members of the Board of Directors, or of such committee, as the case
may be, consent thereto in writing and such written consent is filed
with the minutes of proceedings of the Board of Directors or
committee.
ARTICLE IV - OFFICES
Section l - Officers - The Corporation shall have such officers with
such titles and duties as shall be stated in these By-Laws or in a
resolution of the Board of Directors which is not inconsistent with
the By-Laws. All of such officers shall be elected by the Board of
Directors. None of the officers, except the Senior Chairman and the
Chairman of the Board and Chief Executive Officer need be Directors.
No person shall hold the office of Secretary who at that time also
holds either the office of Senior Chairman or Chairman of the Board
and Chief Executive Officer.
Section 2 - Other Officers - The Board of Directors may elect or
appoint such other officers as it shall deem necessary who shall hold
their offices for such terms and shall exercise such power and perform
such duties as shall be determined from time to time by the Board of
Directors.
Section 3 - Salaries - The salaries of all officers of the Corporation
shall be fixed by the Board of Directors.
Section 4 - Term of Office - Each officer of the Corporation shall
hold his office until his successor is elected and qualified or until
his earlier resignation or removal. Any officer may resign at any
time upon written notice to the Corporation. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy
occurring in any office of the Corporation shall be filled by the
Board of Directors.
Section 5 - Senior Chairman - The Senior Chairman shall consult with
the Chairman of the Board and Chief Executive Officer, the President
and Chief Executive Officer - U.S.A., and the President and Chief
Executive Officer - International on the management of the Corporation
and shall assist and cooperate with the other officers of the
Corporation in carrying out all orders, resolutions, duties, and
policies adopted or established by the Board of Directors of the
Corporation.
Section 6 - Chairman of the Board and Chief Executive Officer - The
Chairman of the Board shall be the Chief Executive Officer of the
Corporation; he shall preside at all meetings of the stockholders of
the Corporation, of the Board of Directors and, in the absence of the
Chairman of the Executive Committee of the Board of Directors, shall
preside at meetings of the Executive Committee; he shall have
responsibility for the general and active management of the business
of the Corporation; he shall consult with the Senior Chairman, the
President and Chief Executive Officer - U.S.A., and the President and
Chief Executive Officer - International, and the other officers of the
Corporation on the management of the Corporation; he shall see that
all orders, resolutions, and policies adopted or established by the
Board of Directors are carried into effect; he shall do and perform
such other duties as from time to time may be assigned to him by the
Board of Directors; and he shall be authorized to execute contracts
and stock certificates on behalf of the Corporation and to cause the
seal to be affixed on any instrument requiring it and when so affixed
the seal shall be attested by the signature of the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
Section 7 - Chairman of the Executive Committee - The Chairman of the
Executive Committee shall preside at all meetings of the Executive
Committee of the Board of Directors; he shall, in the absence of the
Chairman of the Board and Chief Executive Officer, preside at all
meetings of the stockholders of the Corporation and of the Board of
Directors; he shall be authorized to execute contracts and stock
certificates on behalf of the Corporation and to cause the seal to be
affixed on any instrument requiring it and when so affixed the seal
shall be attested by the signature of the Secretary or the Treasurer
or an Assistant Secretary or an Assistant Treasurer.
Section 8 - Vice Chairman of the Board and Chief Financial Officer -
The Vice Chairman of the Board shall be the Chief Financial Officer of
the Corporation; he shall direct all of the financial activities of
the Corporation and such other activities of the Corporation as may be
designated by the Chairman of the Board and Chief Executive Officer;
he shall report to the Chairman of the Board and Chief Executive
Officer and consult with such other officers of the Corporation as may
be appropriate; he shall be responsible for the implementation of
orders, resolutions, and policies adopted or established by the Board
of Directors and the Chairman of the Board and Chief Executive Officer
of the Corporation; and he shall do and perform such other duties as
from time to time may be assigned to him by the Board of Directors and
the Chairman of the Board and Chief Executive Officer of the
Corporation. In addition, in the event of the inability to act of the
Chairman of the Board and the Chairman of the Executive Committee, he
shall preside at all meetings of the stockholders of the Corporation
and the Board of Directors.
Section 9 - President and Chief Executive Officer - U.S.A. - The
President and Chief Executive Officer - U.S.A. shall direct United
States operations; he shall report to the Chairman of the Board and
the Chief Executive Officer and consult with such other officers of
the Corporation as may be appropriate; he shall be responsible for the
day-to-day activities of the corporation in the United States and for
the implementation of orders, resolutions, and policies adopted or
established by the Board of Directors and the Chairman of the Board
and Chief Executive Officer of the Corporation; and he shall do and
perform such other duties as from time to time may be assigned to him
by the Board of Directors and the Chairman of the Board and Chief
Executive Officer of the Corporation.
Section 10 - President and Chief Executive Officer - International -
The President and Chief Executive Officer - International shall direct
international operations; he shall report to the Chairman of the Board
and the Chief Executive Officer and consult with such other officers
of the Corporation as may be appropriate; he shall be responsible for
the day-to-day activities of the Corporation in international markets;
he shall be responsible for the implementation of orders, resolutions,
and policies adopted or established by the Board of Directors and the
Chairman of the Board and Chief Executive Officer of the Corporation;
and he shall do and perform such other duties as from time to time may
be assigned to him by the Board of Directors and the Chairman of the
Board and Chief Executive Officer of the Corporation.
Section 11 - Chief Operations Officer - The Chief Operations Officer
shall supervise the day-to-day operations activities of the
Corporation and consult with such other officers of the Corporation as
may be appropriate; he shall report to the Chairman of the Board and
Chief Executive Officer; he shall be responsible for the operations
activities of the Corporation and for the implementation of orders,
resolutions, and policies adopted or established by the Board of
Directors and the Chairman of the Board and Chief Executive Officer of
the Corporation; and he shall do and perform such other duties as from
time to time may be assigned to him by the Board of Directors and the
Chairman of the Board and Chief Executive Officer of the Corporation,
and the Presidents of the Corporation.
Section 12 - Senior Executive Vice President and Chief
Accounting Officer - A Senior Executive Vice President shall act as
the Chief Accounting Officer of the Corporation; he shall report to
such person as the Chairman of the Board and Chief Executive Officer
may designate and consult such officers of the Corporation as may be
appropriate; he shall supervise the accounting activities of the
Corporation; he shall be responsible for the implementation of orders,
resolutions, and policies adopted or established by the Board of
Directors and the Chairman of the Board and Chief Executive Officer of
the Corporation; and he shall do and perform such other duties as from
time to time may be assigned to him by the Board of Directors and the
Chairman of the Board and Chief Executive Officer of the Corporation.
Section 13 -
(A) Senior Executive Vice President; Executive Vice President -
Each Senior Executive Vice President and each Executive Vice President
shall have such powers and shall perform such duties as shall be
assigned to him by the Board of Directors and shall report to such
person as the Chairman of the Board and Chief Executive Officer may
designate; he shall be responsible for the implementation of orders,
resolutions, and policies adopted or established by the Board of
Directors and the Chairman of the Board and Chief Executive Officer of
the Corporation; and he shall do and perform such other duties as from
time to time may be assigned to him by the Board of Directors and the
Chairman of the Board and Chief Executive Officer of the Corporation.
(B) Senior Vice President, Vice President - Each Senior Vice
President and each Vice President shall have such powers and shall
perform such duties as shall be assigned to him by the Board of
Directors and shall report to such person as the Chairman of the Board
and Chief Executive Officer may designate; he shall be responsible for
the implementation of orders, resolutions, and policies adopted or
established by the Board of Directors and the Chairman of the Board
and Chief Executive Officer of the Corporation; and he shall do and
perform such other duties as from time to time may be assigned to him
by the Board of Directors and the Chairman of the Board and Chief
Executive Officer of the Corporation.
(C) Assistant Vice President - Each Assistant Vice President
shall have such powers and perform such duties as shall be assigned to
him by the Board of Directors and shall report to such person as the
Chairman of the Board and Chief Executive Officer may designate; he
shall be responsible for the implementation of orders, resolutions,
and policies adopted or established by the Board of Directors and the
Chairman of the Board and Chief Executive Officer of the Corporation;
and he shall do and perform such other duties as from time to time may
be assigned to him by the Board of Directors and the Chairman of the
Board and Chief Executive Officer of the Corporation.
Section 14 - Treasurer - The Treasurer shall report to such person as
the Chairman of the Board and Chief Executive Officer may designate.
He shall have the custody of the Corporate funds and securities and
shall keep full and accurate account of receipts and disbursements in
books belonging to the Corporation. He shall deposit all monies and
other valuables in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the Chairman of the Board and
Chief Executive Officer, taking proper vouchers for such
disbursements. He shall render to the Chairman of the Board and Chief
Executive Officer and the Board of Directors, at the regular meetings
of the Board of Directors, or whenever they may request it, an account
of all his transactions as Treasurer and of the financial condition of
the Corporation. If required by the Board of Directors, he shall give
the Corporation a bond (which shall be renewed every six (6) years) in
such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of
his office and for the restoration to the Corporation, in case of his
death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 15 - Assistant Treasurer - The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have
such other powers as the Board of Directors may from time to time
prescribe.
Section 16 - Secretary - The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and Directors and all
other notices required by law or by these By-Laws; and in the case of
his absence or refusal or neglect so to do, any such notice may be
given by any person thereunto directed by the Chairman of the Board
and Chief Executive Officer, or by the Board of Directors or
stockholders upon whose requisition the meeting is called as provided
in these By-Laws. He shall record all the proceedings of the meetings
of the Corporation and of the Board of Directors in a book to be kept
for that purpose and shall perform such other duties as may be
assigned to him by the Board of Directors and the Chairman of the
Board and Chief Executive Officer. He shall have the custody of the
seal of the Corporation and shall affix the same to all instruments
requiring it when authorized by the Board of Directors and the
Chairman of the Board and Chief Executive Officer and attest the same.
The Board of Directors may give general authority to any other officer
to affix the seal of the Corporation and to attest to the affixing by
his signature.
Section 17 - Assistant Secretary - The Assistant Secretary or, if
there be more than one, the Assistant Secretaries, shall have the
authority to affix the seal of the Corporation to all instruments
requiring it and attest the same. In addition, the Assistant
Secretary, or if there be more than one, the Assistant Secretaries in
the order determined by the Board of Directors, shall, in the absence
or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have
such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE V - INDEMNIFICATION AND INSURANCE
Section 1 - Right to Indemnification -
(A) Indemnified Persons - Each person who was or is made a party
or is threatened to be made a party to or is involved in or called as
a witness in any Proceeding because he or she is an Indemnified
Person, shall be indemnified and held harmless by the Corporation to
the fullest extent permitted under the Delaware General Corporation
Law (the "DGCL"), as the same now exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification
rights than the DGCL permitted the Corporation to provide prior to
such amendment). Such indemnification shall cover all expenses
incurred by an Indemnified Person (including, but not limited to,
attorneys' fees and other expenses of litigation) and all liabilities
and losses (including, but not limited to, judgments, fines, ERISA or
other excise taxes or penalties and amounts paid or to be paid in
settlement) incurred by such person in connection therewith.
(B) Additional Indemnified Persons - (1) Each Additional
Indemnified Person who was or is made a party or is threatened to be
made a party to or is involved in or called as a witness in any
Proceeding (other than an action by or in the right of the
Corporation) because he or she is an Additional Indemnified Person
shall be indemnified and held harmless by the Corporation against
expenses (including, but not limited to, attorneys' fees and other
expenses of litigation) and all liabilities and losses (including, but
not limited to, judgments, fines, ERISA or other excise taxes or
penalties and amounts paid or to be paid in settlement) incurred by
such person in connection therewith if such Additional Indemnified
Person acted in Good Faith. The termination of any Proceeding by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption
that an Additional Indemnified Person did not act in Good Faith.
(2) Each Additional Indemnified Person who was or is made a
party or is threatened to be made a party to or is involved in or
called as a witness in any Proceeding brought by or in the right of
the Corporation to procure a judgment in its favor because he or she
is an Additional Indemnified Person shall be indemnified and held
harmless by the Corporation against expenses (including, but not
limited to, attorneys' fees and other expenses of litigation) incurred
by such person in connection therewith if such Additional Indemnified
Person acted in Good Faith, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in
the performance of such person's duty to the Corporation unless and
only to the extent that the Court of Chancery of the State of Delaware
or the court in which such Proceeding shall have been brought or is
pending shall determine upon application that despite the adjudication
of liability but in view of all the circumstances of the case, such
Additional Indemnified Person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other
court shall deem proper.
(3) Any indemnification under paragraphs (B)(1) or (B)(2)
of this Section 1 (unless ordered by a court) shall be made by the
Corporation unless it is determined that indemnification of the
Additional Indemnified Person is not proper in the circumstances
because such person has not met the applicable standard of conduct set
forth in either paragraph (B)(1) or (B)(2) of this Section 1. Such
determination shall be made: (a) by the Board of Directors of the
Corporation by a majority vote of a quorum consisting of Directors who
are not parties to such Proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable if a quorum of disinterested
Directors so directs, by independent legal counsel in a written
opinion. Such determination shall be made within one hundred twenty
(120) days (or such longer period established as set forth in the next
sentence) after receipt by the Board of Directors of written notice
from the Additional Indemnified Person seeking indemnification setting
forth in reasonable detail the facts known to such person concerning
the Proceeding. The period during which the Board of Directors may
determine that indemnification is not proper may be extended to a
period established by the Board of Directors by written notice to the
Additional Indemnified Person delivered to such person within one
hundred twenty (120) days after receipt by the Board of Directors of
such person's written notice seeking indemnification.
(C) Denial of Authorization for Certain Proceedings -
Notwithstanding anything to the contrary in this Article V, except
with respect to indemnification of Indemnified Persons specified in
Section 3 of this Article V, the Corporation shall indemnify an
Indemnified Person or Additional Indemnified Person in connection with
a Proceeding (or part thereof) initiated by such person only if (i)
authorization for such Proceeding (or part thereof) was not denied by
the Board of Directors of the Corporation prior to the earlier of (x)
sixty (60) days after receipt of notice thereof from such Indemnified
Person or one hundred twenty (120) days after receipt of notice
thereof from such Additional Indemnified Person, as the case may be,
or (y) a Change of Control, and (ii) in the case of a Proceeding
initiated by an Additional Indemnified Person, it is not a Proceeding
to enforce rights under this Article V.
(D) Certain Defined Terms - For purposes of this Article V, the
following terms shall have the following means (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
(i) a "Proceeding" is any investigation, action, suit or
proceeding, whether civil, criminal, administrative
or investigative, and any appeal therefrom;
(ii) an "Indemnified Person" is a person who is, was, or
had agreed to become (A) a Director of the
Corporation (including, in the case of such person
seeking indemnification while serving as a Director
who is or was an officer of the Corporation, such
person in his capacity as an officer) or (B) an
officer, employee or a Delegate, as defined herein,
of the Corporation (but, except as included within
clause (A), with respect to such officers, employees
and Delegates and persons agreeing to become
officers, employees or Delegates only as to
Proceedings occurring after a Change of Control, as
defined herein, arising out of acts, events or
omissions occurring prior or subsequent to, or
simultaneously with, such Change of Control), or the
legal representative or any of the foregoing;
(iii) a "Delegate" is (A) any employee of the Corporation
serving as a director or officer (or in a substan-
tially similar capacity) of an entity or enterprise
(x) in which the Corporation owns a l0% or greater
equity interest or (y) the principal function of
which is to service or benefit the Corporation or its
licensees; (B) any employee of the Corporation
serving as a trustee or fiduciary of an employee
benefit plan of the Corporation or any entity or
enterprise referred to in clause (A); and (C) any
employee serving at the request of the Corporation in
any capacity with any entity or enterprise other than
the Corporation;
(iv) a "Change of Control" shall be deemed to have
occurred if (A) any "Person" (as that term is used in
Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) is or becomes (except in a
transaction approved in advance by the Board of
Directors of the Corporation) the beneficial owner
(as defined in Rule 13d-3 under such Act), directly
or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power
of the Corporation's then outstanding securities, or
(B) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board of Directors of the Corporation
cease for any reason to constitute at least a
majority thereof unless the election of each Director
who was not a Director at the beginning of the period
was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors at
the beginning of the period;
(v) an "Additional Indemnified Person" is a person who
is, was, or had agreed to become an officer, Delegate
or employee of the Corporation and who is not an
Indemnified Person; and
(vi) "Good Faith" shall mean with respect to any
Additional Indemnified Person that such person acted
in good faith and in a manner such person reasonably
believed to be in or not opposed to the best
interests of the Corporation, and, with respect to
any criminal Proceeding, such person had no
reasonable cause to believe such conduct was
unlawful.
Section 2 - Expenses - Expenses, including attorneys' fees, incurred
by a person indemnified pursuant to Section 1 of this Article V in
defending or otherwise being involved in a Proceeding shall be paid by
the Corporation in advance of the final disposition of such
Proceeding, including any appeal therefrom, upon receipt of an
undertaking (the "Undertaking") by or on behalf of such person to
repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation; provided, that
(A) if a Change of Control has occurred, such person shall be required
to deliver to the Corporation the Undertaking only if such an
undertaking is required under the DGCL then in effect, and (B) in
connection with a Proceeding (or part thereof) initiated by such
person, except a Proceeding authorized by Section 3 of this Article V,
the Corporation shall pay said expenses in advance of final
disposition only if authorization for such Proceeding (or part
thereof) was not denied by the Board of Directors of the Corporation
prior to the earlier of (i) sixty (60) days in the case of an
Indemnified Person, or one hundred twenty (120) days in the case of an
Additional Indemnified Person, after receipt of a request for such
advancement accompanied by the Undertaking or (ii) a Change of
Control. A person to whom expenses are advanced pursuant hereto shall
not be obligated to repay pursuant to the Undertaking until the final
determination of any pending Proceeding in a court of competent
jurisdiction concerning the right of such person to be indemnified or
the obligation of such person to repay such expenses.
Section 3 - Protection of Rights - If a claim by an Indemnified Person
under Section 1 of this Article V is not promptly paid in full by the
Corporation after a written claim has been received by the Corporation
or if expenses pursuant to Section 2 of this Article V have not been
promptly advanced after a written request for such advancement by an
Indemnified Person (accompanied by the Undertaking if required by
Section 2 of this Article V) has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation
to recover the unpaid amount of the claim or the advancement of
expenses. If successful, in whole or in part, in such suit, such
claimant shall also be entitled to be paid the reasonable expense
thereof. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending
any Proceeding in advance of its final disposition where the
Undertaking has been tendered to the Corporation (or, if a Change of
Control has occurred, the Undertaking is not required to be tendered
to the Corporation under the DGCL) that indemnification of the
claimant is prohibited by law, but the burden of proving such defense
shall be on the Corporation. If a Change of Control has occurred, a
claimant making a claim under Section 1 of this Article V or seeking
to avoid repayment to the Corporation of expenses advanced pursuant to
Section 2 of this Article V shall have (i) the right, but not the
obligation, to have a determination made by independent legal counsel,
at the expense of the Corporation, as to whether indemnification of
the claimant is prohibited by law; and (ii) shall have the right (A)
to select as independent legal counsel to make such determination any
legal counsel designated for such purpose in a resolution adopted by
the Board of Directors that is in full force and effect immediately
prior to the Change of Control or (B), if the Board of Directors has
failed to designate any such legal counsel or all such counsel refuse
to make such a determination, to request the American Arbitration
Association, at the expense of the Corporation, to select an
independent legal counsel familiar with matters of the type in dispute
to make such a determination. If a determination has been made in
accordance with the preceding sentence, no determination inconsistent
therewith by other legal counsel, by the Board of Directors, or by
stockholders shall be of any force or effect. Neither the failure of
the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination, if
required, prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances, nor an
actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that
indemnification of the claimant is prohibited, shall be a defense to
the action or create a presumption that indemnification of the
claimant is prohibited.
Section 4 - Miscellaneous -
(A) Non-Exclusivity of Rights - The rights conferred on any
person by this Article V shall not be exclusive of any other rights
which such person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Law, agreement, vote
of stockholders or disinterested Directors or otherwise. The Board of
Directors shall have the authority, by resolution, to provide for such
indemnification of agents of the Corporation or others and for such
other indemnification of Directors, officers, Delegates or employees,
of the Corporation as it shall deem appropriate.
(B) Insurance, contracts, and funding - The Corporation may
maintain insurance, at its expense, to protect itself and any
Director, officer, Delegate, employee, or agent of, the Corporation
against any expenses, liabilities or losses, whether or not the
Corporation would have the power to indemnify such person against such
expenses, liabilities or losses under the DGCL. The Corporation
hereby agrees that, for a period of six (6) years after any Change of
Control, it shall cause to be maintained policies of directors' and
officers' liability insurance providing coverage at least comparable
to and in the same amounts as that provided by any such policies in
effect immediately prior to such Change of Control. The Corporation
may enter into contracts with any Director, officer, Delegate or
employee of the Corporation in furtherance of the provisions of this
Article V and may create a trust fund, grant a security interest or
use other means (including, without limitation, a letter of credit) to
ensure the payment of such amounts as may be necessary to effect the
advancing of expenses and indemnification as provided in this Article
V.
(C) Contractual nature - The provisions of this Article V as
amended effective December 17, 1990 shall be applicable with respect
to events, acts and omissions occurring prior to or subsequent to such
Amendment, and shall continue as to a person who has ceased to be a
Director, officer, Delegate or employee and shall inure to the benefit
of the heirs, executors and administrators of such person. This
Article V shall be deemed to be a contract between the Corporation and
each person who, at any time that this Article V as so amended is in
effect, serves or agrees to serve in any capacity which entitles him
to indemnification hereunder and any repeal or other modification of
this Article V or any repeal or modification of the DGCL or any other
applicable law shall not limit any rights of indemnification for
Proceedings then existing or arising out of events, acts or omissions
occurring prior to such repeal or modification, including, without
limitation, the right to indemnification for Proceedings commenced
after such repeal or modification to enforce this Article V with
regard to Proceedings arising out of acts, omissions or events arising
prior to such repeal or modification.
(D) Cooperation - Each Indemnified Person and Additional
Indemnified Person shall cooperate with the person, persons or entity
making the determination with respect to such Indemnified Person's or
Additional Indemnified Person's entitlement to indemnification under
this Article V, including providing to such person, persons or entity
upon reasonable advance request any documentation or information which
is not privileged or otherwise protected from disclosure and which is
reasonably available to such Indemnified Person or Additional
Indemnified Person and reasonably necessary to such determination.
Any costs or expenses (including attorneys' fees and disbursements)
incurred by such Indemnified Person or Additional Indemnified Person
in so cooperating with the person, persons or entity making such
determination shall be borne by the Corporation (irrespective of the
determination as to such Indemnified Person's or Additional
Indemnified Person's entitlement to indemnification) and the
Corporation hereby indemnifies and agrees to hold such Indemnified
Person or Additional Indemnified Person harmless therefrom.
(E) Subrogation - In the event of any payment under this Article
V to an Indemnified Person or Additional Indemnified Person, the
Corporation shall be subrogated to the extent of such payment to all
of the rights of recovery of such Indemnified Person or Additional
Indemnified Person, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to
enforce such rights.
(F) Severability - If this Article V, or any portion hereof
shall be invalidated or held to be unenforceable on any ground by any
court of competent jurisdiction, the decision of which shall not have
been reversed on appeal, this Article V shall be deemed to be modified
to the minimum extent necessary to avoid a violation of law and, as so
modified, this Article V and the remaining provisions hereof shall
remain valid and enforceable in accordance with their terms to the
fullest extent permitted by law.
ARTICLE VI - MISCELLANEOUS
Section l - Certificates of Stock - Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Senior Chairman of the Board or the
Chairman of the Board and Chief Executive Officer or a President or a
Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. If such certificate
is countersigned (l) by a transfer agent or (2) by a registrar, any
other signature on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar
at the date of issue.
Section 2 - Lost Certificates - A new certificate of stock may be
issued in the place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed; and the
Directors may, in their discretion, require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to give
the Corporation a bond in such sum as they may direct not exceeding
double the value of the stock to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss,
theft, or destruction of any such certificate, or the issuance of any
such new certificate.
Section 3 - Transfer of Shares - The shares of stock of the
Corporation shall be transferable upon its books by the holders
thereof in person or by their duly authorized attorneys or legal
representatives by the surrender of the old certificates duly endorsed
or accompanied by proper evidence of succession, assignment, or
authority to transfer, to the Corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers or to
such other person as the Directors may designate, by whom they shall
be canceled; and new certificates shall thereupon be issued. A record
shall be made of each transfer and a duplicate thereof mailed to the
Delaware office; and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be expressed in the entry of
the transfer.
Section 4 - Record Date - In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
Corporate action in writing without a meeting or entitled to receive
payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record
date which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors and which shall
not be more than sixty (60) nor less than ten (l0) days before the
date of such meeting nor more than sixty (60) days prior to any other
action.
Section 5 - Registered Stockholders - The Corporation shall be
entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends and to vote as
such owner and to hold liable for calls and assessments a person
registered on its books as the owner of shares and shall not be bound
to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
Section 6 - Dividends - Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally
available therefor at any regular or special meeting, declare
dividends upon the capital stock of the Corporation as and when they
deem expedient. Dividends may be paid in cash, in property, or in
shares of the capital stock of the Corporation; and in the case of a
dividend paid in shares of theretofore unissued capital stock of the
Corporation, the Board of Directors shall, by resolution, direct that
there be designated as capital in respect of such shares an amount not
less than the aggregate par value of such shares and, in the case of
shares without par value, such amount as shall be fixed by the Board
of Directors. Before declaring any dividend, there may be set apart
out of any funds of the Corporation available for dividends, such sum
or sums as the Directors from time to time in their discretion deem
proper for working capital or as a reserve fund to meet contingencies
or for such other purposes as the Directors shall deem conducive to
the interests of the Corporation.
Section 7 - Seal - The Corporate seal shall be circular in form and
shall contain the name of the Corporation, the year of its creation,
and the words, "CORPORATE SEAL DELAWARE." Said seal may be used by
causing it, or a facsimile thereof, to be impressed or affixed or
reproduced or otherwise.
Section 8 - Fiscal Year - The fiscal year of the Corporation shall
begin on the first day of January in each year and shall end on the
last day of December in each year.
Section 9 - Checks - All checks, drafts, or other orders for the
payment of money, notes, or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as
shall be determined from time to time by resolution of the Board of
Directors.
Section l0 - Notice and Waiver of Notice - Whenever any notice is
required by these By-Laws to be given, personal notice is not meant
unless expressly so stated. If mailed, notice is given when deposited
in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the
Corporation. Stockholders not entitled to vote shall not be entitled
to receive notice of any meetings except as otherwise provided by
statute.
Whenever any notice whatever is required to be given under the
provisions of any law or under the provisions of the Certificate of
Incorporation of the Corporation or these By-Laws, a waiver thereof in
writing signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 11 - Ratification by Stockholders - Any contract, transaction,
or act of the Corporation or of the Directors or of any committee
which shall be ratified by the holders of a majority of the shares of
stock of the Corporation present in person or by proxy and voting at
any annual meeting or at any special meeting called for such purpose,
shall, insofar as permitted by law or under the provisions of the
Certificate of Incorporation of the Corporation or these By-Laws, be
as valid and binding as though ratified by every stockholder of the
Corporation.
Section l2 - Interested Directors - No contract or transaction between
the Corporation and one or more of its Directors or officers or
between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its
Directors or officers are directors or officers or have a financial
interest, shall be void or voidable solely for this reason or solely
because the Director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their
votes are counted for such purpose if:
(l) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the Board of Directors or the committee and the Board or
committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the shareholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by
vote of the shareholders; or
(3) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved, or ratified by the
Board of Directors, a committee thereof, or the
shareholders.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
ARTICLE VII - AMENDMENTS
The By-Laws of this Corporation may be made, altered, amended, or
repealed by the affirmative vote of a majority of the Board of
Directors at any regular meeting of the Board of Directors or at any
special meeting of the Board of Directors if notice of the proposed
making, alteration, amendment, or repeal to be made is contained in
the Notice of such special meeting provided, however, that no By-Law
shall be made, altered, amended, or repealed so as to make such By-Law
inconsistent with or violative of any provision of the Certificate of
Incorporation.
As amended through November 15, 1994
Exhibit 10(a)
McDONALD'S
DIRECTORS' STOCK PLAN
Section 1
Introduction
1.1 The Plan. McDonald's Corporation (the "Company") first
established the McDonald's Directors' Deferred Compensation Plan (the
"Plan") for the members of its Board of Directors who are not officers
or employees of the Company ("Outside Directors") on July 1, 1984.
The Plan was last amended and restated effective December 19, 1991,
and is hereby amended and restated effective January 19, 1995.
Effective January 19, 1995, in order to reflect the Plan's focus on
creating an identity of interest between the Company's Outside
Directors and its shareholders, the Plan is hereby renamed the
"Directors' Stock Plan".
1.2 Purpose. The purposes of the Plan are: to advance the
Company's interests by attracting and retaining well-qualified Outside
Directors; to provide such individuals with incentives to put forth
maximum efforts for the long term success of the Company's business;
and to provide a vehicle to increase the identity of interest between
Outside Directors and shareholders.
Section 2
Benefits
2.1 Elected Deferred Benefits. Each Outside Director may elect
in accordance with Section 2.7 to defer all or any part of the fees
received by such Outside Director for service on the Board of
Directors of the Company (including the annual retainer and Board and
committee meeting fees) ("Elected Deferred Benefits").
2.2 Deferred Fee Account. Elected Deferred Benefits shall be
credited to an account ("Deferred Fee Account") of each Outside
Director on a quarterly basis at such a time and in such a manner as
is reasonably determined by the Controller of the Company and as of
the date of any distribution pursuant to Section 2.5. Amounts
credited to the Deferred Fee Account of each Outside Director shall be
credited with income, gains and losses in the amounts and at the times
such as would have occurred if amounts credited to an Outside
Director's Deferred Fee Account were invested in shares (including
fractional shares) of common stock of McDonald's Corporation
("McDonald's Stock") as of the dates such amounts (including income,
gains and losses) were credited to the Outside Director's Deferred Fee
Account.
2.3 Stock Equivalent Benefit. In addition to the benefits
described in Sections 2.1 and 2.2, each Outside Director shall
receive a stock equivalent benefit which shall be determined in the
manner described in this Section 2.3 ("Stock Equivalent Benefit").
On January 19, 1995, an amount equal to $17,500 multiplied by the<PAGE>
number of an Outside Director's full years of service (up to a maximum
of ten years) shall be accrued for such Outside Director's Stock
Equivalent Benefit. After January 19, 1995, for each Outside
Director, an amount equal to $17,500 shall be accrued for such Outside
Director's Stock Equivalent Benefit at the end of each full year of
service (up to a maximum of ten years). In no event shall an Outside
Director receive a Stock Equivalent Benefit pursuant to this Section
2.3 which exceeds $175,000 ($17,500 multiplied by 10 years of
service). In measuring full years of service, Board service shall
commence as of the first Board meeting or committee meeting for which
the Outside Director received compensation and end with the last Board
meeting or committee meeting for which the Outside Director received
compensation. Amounts accrued for an Outside Director's Stock
Equivalent Benefit shall be adjusted periodically (but no less than
once each year), at such time or times and in such manner as is
reasonably determined by the Controller of the Company and as of the
date of any distribution pursuant to Section 2.5, in order to treat
each such accrual as though it had been invested in shares of
McDonald's Stock by reflecting income, gains and losses in the amounts
and at the times as such would have occurred if an amount equal to
such accrual were invested in shares (including fractional shares) of
McDonald's Stock on the date such accrual was made.
2.4 Value of McDonald's Stock. The market value of McDonald's
Stock for purposes hereof on any day shall be the closing price of
McDonald's Stock on the New York Stock Exchange Composite Tape on such
day (or, if quotations for McDonald's Stock are not reported on the
New York Stock Exchange Composite Tape on that day, the closing price
of McDonald's Stock on the New York Stock Exchange Composite Tape on
the first day preceding such day on which such quotations are so
reported).
2.5 Payment of Benefits. An Outside Director's Deferred Fee
Account and Stock Equivalent Benefit shall be paid to the Outside
Director or to such other person as he or she may designate by written
notice to the Company (or in the event of his or her death to the
beneficiaries designated by the Outside Director in writing to the
Secretary of the Board of Directors, or, if the Outside Director fails
to designate beneficiaries or if all such beneficiaries predecease the
Outside Director, to the Outside Director's surviving spouse, and if
none, then to the Outside Director's estate) promptly after the date
the Outside Director ceases to be a member of the Board of Directors
because of the expiration of such Outside Director's term, his or her
resignation from the Board of Directors, or his or her death. Payment
shall be made in cash in an amount equal to the total of: (a) the
amount credited to the Outside Director's Deferred Fee Account on the
day preceding the date payment is made, and (b) the Stock Equivalent
Benefit determined in accordance with Section 2.3 hereof. To the
extent that the amount so paid shall be used by such Outside Director
to purchase shares of McDonald's Stock in the open market within seven
months after the date such Outside Director ceases to be a member of
the Board of Directors, the Company shall reimburse such Outside
Director for all brokerage fees and other transaction costs incurred
by such Outside Director in connection with such purchase upon
presentation of reasonably satisfactory evidence thereof.
2.6 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company. The Company shall not be<PAGE>
required to fund or otherwise segregate assets to be used for payment
of benefits under the Plan. While the Company may cause investments
in shares of McDonald's Stock to be made through open market purchases
in amounts equal or unequal to amounts payable hereunder, the Company
shall not be under any obligation to make such investments and any
such investment shall remain subject to the claims of its general
creditors and the amounts payable to any Outside Directors under the
Plan shall not be affected by any such investment. Notwithstanding
the foregoing, the Company, in its discretion, may maintain one or
more trusts to hold assets to be used for payment of benefits under
the Plan; provided that the assets of such trust shall be subject to
the creditors of the Company in the event that the Company becomes
insolvent or is subject to bankruptcy or insolvency proceedings. Any
payments by such a trust of benefits provided hereunder shall be
considered payment by the Company and shall discharge the Company of
any further liability for the payments made by such trust.
2.7 Deferral Elections. A person who becomes an Outside
Director in a year may elect by a written notice delivered to
McDonald's Corporation within 60 days after becoming an Outside
Director to receive Elected Deferred Benefits as provided in Section
2.1 with respect to fees earned in the portion of such year following
the delivery of such notice to McDonald's Corporation. Each other
Outside Director may elect by filing a written election with
McDonald's Corporation before the beginning of the year to receive
Elected Deferred Benefits as provided in Section 2.1 for such calendar
year. Any election made pursuant to this Section 2.7 shall be
irrevocable.
Section 3
General Provisions
3.1 Plan Administration. The Plan shall be administered by the
Committee responsible for administration of the Company's Profit
Sharing Program. The Committee shall have, to the extent appropriate,
the same power, rights, duties and obligations with respect to the
Plan as it has with respect to the Profit Sharing Program.
3.2 Retention Rights. Establishment of the Plan shall not be
construed to give an Outside Director the right to be retained on the
Board of Directors or to any benefits not specifically provided by the
Plan.
3.3 Interests Not Transferable. Except as to withholding of any
tax required under the laws of the United States or any state or
locality and except with respect to designation of a beneficiary to
receive benefits in the event of the death of an Outside Director, no
benefit payable at any time under the Plan shall be subject in any
manner to alienation, sale, transfer, assignment, pledge, attachment,
or other legal process, or encumbrance of any kind. Any attempt by an
Outside Director to alienate, sell, transfer, assign, pledge or
otherwise encumber any such benefits whether current or thereafter
payable, shall be void. No benefit shall, in any manner, be liable
for or subject to the debts or liabilities of any person entitled to
such benefits. If any person shall attempt to, or shall alienate,
sell, transfer, assign, pledge or otherwise encumber his or her<PAGE>
benefits under the Plan, or if by any reason of his or her bankruptcy
or other event happening at any time, such benefits would devolve upon
any other person or would not be enjoyed by the person entitled
thereto under the Plan, then the Company in its discretion, may
terminate the interest in any such benefits of the person entitled
thereto under the Plan and hold or apply them to or for the benefit of
such person entitled thereto under the Plan or his or her spouse,
children or other dependents, or any of them, in such manner as the
Company may deem proper.
3.4 Amendment and Termination. Subject to the provisions of
Section 3.1, the Board intends the Plan to be permanent, but reserves
the right at any time to modify, amend or terminate the Plan,
provided, however, that benefits credited as provided herein shall
constitute an irrevocable obligation of the Company.
3.5 Controlling Law. The law of Illinois, except its law with
respect to choice of law, shall be controlling in all manners relating
to the Plan.
3.6 Number. Words in the plural shall include the singular and
the singular shall include the plural.
Executed with effect as of the 19th day of January, 1995.
McDONALD'S CORPORATION
By:/s/ Jack M. Greenberg
------------------------------------
Vice Chairman and Chief Financial
Officer
ATTEST:
/s/ Gloria Santona
------------------------
Assistant Secretary
Exhibit 10(b)
McDONALD'S CORPORATION
PROFIT SHARING PROGRAM
As amended and restated
effective
July 1, 1992
McDONALD'S CORPORATION PROFIT SHARING PROGRAM
Summary of Contents
Page
ARTICLE I - DEFINITIONS
1.1 "Account" ......................................... 2
1.2 "Active Participant" .............................. 4
1.3 "Affiliated Service Group" ........................ 5
1.4 "Authorized Leave of Absence" ..................... 6
1.5 "Auxiliary ESOP Suspense Account" ................. 7
1.6 "Beneficiary" ..................................... 7
1.7 "Board of Directors" .............................. 7
1.8 "Break in Service" ................................ 7
1.9 "Committee" ....................................... 7
1.10 "Commonly Controlled Corporation" ................. 7
1.11 "Commonly Controlled Entity" ...................... 7
1.12 "Company" ......................................... 7
1.13 "Company Stock" ................................... 7
1.14 "Considered Compensation" ......................... 8
1.15 "Credited Service" ................................ 11
1.16 "Disability" ...................................... 11
1.17 "Disqualified Person" ............................. 11
1.18 "Domestic Affiliate" .............................. 11
1.19 "Effective Date" .................................. 12
1.20 "Eligibility Computation Period" .................. 12
1.21 "Eligibility Service" ............................. 12
1.22 "Employee" ........................................ 12
1.23 "Employer" ........................................ 12
1.24 "Employer Contributions" .......................... 13
1.25 "Entry Date" ...................................... 13
1.26 "ERISA" ........................................... 13
1.27 "Five Percent Owner" .............................. 13
1.28 "Foreign Affiliate" ............................... 13
1.29 "Forfeiture" ...................................... 14
1.30 "Highly Compensated Employee" ..................... 14
1.31 "Hour of Service" ................................. 16
1.32 "Internal Revenue Code" ........................... 19
1.33 "Investment Fund" ................................. 19
1.34 "Leased Employee" ................................. 19
1.35 "Licensee" ........................................ 20
1.36 "McDESOP" ......................................... 20
1.37 "Non-highly Compensated Employee" ................. 20
1.38 "Parental Leave" .................................. 20
1.39 "Participant" ..................................... 21
1.40 "Participant Contributions" ....................... 21<PAGE>
1.41 "Participant Elected Contributions" ............... 21
1.42 "Party in Interest" ............................... 21
1.43 "Plan" ............................................ 21
1.44 "Plan Administrator" .............................. 21
1.45 "Plan Year" ....................................... 21
1.46 "Profit Sharing Plan" ............................. 21
1.47 "Qualified Preretirement Survivor Annuity" ........ 21
1.48 "Related Plan" .................................... 22
1.49 "Required Beginning Date" ......................... 22
1.50 "Rollover Contribution" ........................... 22
1.51 "Subsidiary" ...................................... 22
1.52 "Termination of Employment" ....................... 23
1.53 "Top Paid Group" .................................. 23
1.54 "Trust" ........................................... 23
1.55 "Trust Agreement" ................................. 23
1.56 "Trustee" ......................................... 23
1.57 "Trust Fund" ...................................... 23
1.58 "Valuation Date" .................................. 26
1.59 "Vesting Retirement Date" ......................... 26
1.60 "Year of Credited Service" ........................ 27
1.61 "Year of Eligibility Service" ..................... 27
ARTICLE II - PARTICIPATION
2.1 Participation ..................................... 28
2.2 Certification of Participation and Compensation
to Committee ...................................... 28
2.3 Termination of Employment, Break in Service,
Reemployment and Change in Employment Status ...... 28
2.4 Employees of Foreign or Domestic Affiliates ....... 29
2.5 Leased Employee ................................... 29
2.6 McDESOP Participation ............................. 29
ARTICLE III - PROFIT SHARING PLAN EMPLOYER CONTRIBUTIONS
3.1 Profit Sharing Contributions ...................... 30
3.2 Payment of Contributions Made Pursuant to
Article III ....................................... 31
ARTICLE IV - McDESOP EMPLOYER CONTRIBUTIONS
4.1 Amount of Employer Matching Contributions ......... 32
4.2 Auxiliary ESOP Contributions ...................... 34
4.3 Annual Employer Contribution Elections ............ 36
4.4 Additional Employer Contributions ................. 38
4.5 Payment of Contributions Made Pursuant to
Article IV ........................................ 38
4.6 Form of Contributions ............................. 39
ARTICLE V - PARTICIPANT ELECTED CONTRIBUTIONS
5.1 Participant Elected Contributions ................. 40
5.2 Restrictions on Participant Elected
Contributions ..................................... 41
5.3 Allocation of Income to Certain Distributed
Amounts ........................................... 44
5.4 Multiple Use of Alternative Limitations ........... 45
5.5 Excess Compensation Reduction Elections ........... 46
5.6 Deadline for Participant Elected Contributions .... 47
5.7 Application of the Limitations of<PAGE>
Sections 5.2(c), 5.2(e), 4.1(c), 5.4 and 9.1 ...... 47
ARTICLE VI - AUXILIARY ESOP PROVISIONS
6.1 Power to Borrow ................................... 48
6.2 Accounting for Loan Proceeds and Employer
Auxiliary ESOP Contributions ...................... 49
6.3 Release from Auxiliary ESOP Suspense Account ...... 49
6.4 Installment Payments on Exempt Loan ............... 51
6.5 Non-Terminable Rights and Protections ............. 52
6.6 Independent Appraisals Required ................... 54
ARTICLE VII - ALLOCATIONS OF CONTRIBUTIONS
7.1 Profit Sharing Contribution Allocation Formula .... 55
7.2 Employer Matching Contributions, Additional
Employer Contributions and Special Section
401(k) Employer Contributions ..................... 56
7.3 Auxiliary ESOP Contributions ...................... 57
7.4 Participant Elected Contributions ................. 59
7.5 Timing of Allocations ............................. 59
ARTICLE VIII - ROLLOVER CONTRIBUTIONS AND TRUSTEE TRANSFERS
8.1 Participant Rollover Contributions ................ 60
8.2 Limited Participation ............................. 60
8.3 Withdrawal of Rollover Contributions .............. 60
8.4 Rollover Contributions Not Forfeitable ............ 60
ARTICLE IX - LIMITATIONS ON CONTRIBUTIONS BECAUSE OF FEDERAL LEGISLATION
9.1 Limitations on Contributions ...................... 61
9.2 Employer Contribution Reductions .................. 66
ARTICLE X - TRUSTEE AND TRUST FUNDS
10.1 Trust Agreements .................................. 68
10.2 Trustee's Duties .................................. 68
10.3 Trust Expenses .................................... 68
10.4 Trust Entity ...................................... 68
10.5 Right of the Employers to Trust Assets ............ 68
10.6 Trust Investment Funds ............................ 69
10.7 Investment of Participant's Employer Profit
Sharing Contributions ............................. 73
10.8 Investment Election with Regard to a
Participant's Profit Sharing Fund Account and
Diversification Accounts .......................... 73
10.9 Investment Election with Regard to a
Participant's Investment Savings Fund Account ..... 74
10.10 Investment Election with Regard to a
Participant's Rollover Contribution Account ....... 74
10.11 Failure to Make an Investment Election ............ 75
10.12 Diversification of McDESOP Accounts and
Contributions ..................................... 75
10.13 Effective Date of Participant's Investment
and Diversification Elections ..................... 80
10.14 Trust Income ...................................... 80
10.15 Trust Sub-fund Income ............................. 81
10.16 Income Directly Credited to Trust Sub-funds ....... 82
10.17 Adjustment of Account Balances .................... 83<PAGE>
10.18 Allocation of Income of the Distribution Fund ..... 85
10.19 Separate Accounting in the Trust Fund ............. 85
10.20 Trust Investment .................................. 85
10.21 Separate Accounting for Auxiliary ESOP
Suspense Account .................................. 85
10.22 Correction of Error ............................... 85
10.23 Statement of Accounts ............................. 86
10.24 Purchase or Sale of Company Stock ................. 86
10.25 Shareholder Rights in Company Stock ............... 86
10.26 Cash Distributions with Respect to
Company Stock ..................................... 89
10.27 Distribution Fund ................................. 89
ARTICLE XI - DISTRIBUTION OF BENEFITS
11.1 Distributions, General ............................ 90
11.2 Payment of Net Balance Account on Disability,
or on Retirement or Other Termination of
Employment ........................................ 90
11.3 Payment of Net Balance Account on Death of
Participant .......................................100
11.4 Vesting and Forfeitures ...........................104
11.5 Payment of Employer Profit Sharing
Contribution for Year of Termination of
Employment ........................................106
11.6 Designation of Beneficiary and Form of
Beneficiary Benefit ...............................107
11.7 Incompetency, Distribution of Benefits ............108
11.8 Deduction of Taxes from Accounts Payable ..........108
11.9 Deadline for Payment of Benefits ..................108
11.10 Spousal Consent to a Beneficiary or a Waiver ......109
11.11 Single Sum Payment without Election ...............109
11.12 Installment Payments ..............................110
11.13 Required Minimum Distributions to Employed
Participants ......................................112
11.14 Transitional Rules ................................112
11.15 Sale of Restaurant - Special Vesting Rules ........113
11.16 Withdrawal of Participant and Rollover
Contributions Permitted ...........................113
11.17 Direct Rollovers ..................................114
ARTICLE XII - SUBSIDIARY PARTICIPATION
12.1 Adoption of Plan and Trust ........................117
12.2 Withdrawal from Plan by Participating
Employer ..........................................117
ARTICLE XIII - ADMINISTRATION OF THE PLAN
13.1 Appointment and Removal of, and Resignation by,
Trustee ...........................................119
13.2 Appointment of Committee; Tenure in Office ........119
13.3 Named Fiduciaries .................................119
13.4 Delegation of Responsibilities ....................120
13.5 Committee Duties ..................................120
13.6 Committee Action by Majority -- Authorization
of Members to Execute Documents ...................121
13.7 Secretary .........................................122
13.8 Member as Participant .............................122
13.9 Rules and Decisions ...............................122<PAGE>
13.10 Agents and Counsel ................................122
13.11 Authorization of Benefit Distribution .............122
13.12 Claims Procedure ..................................122
13.13 Information to be Furnished to Committee ..........123
13.14 Plan Administrator ................................123
13.15 Fiduciary as Participant ..........................124
13.16 Fiduciary Responsibility ..........................124
ARTICLE XIV - AMENDMENT, TERMINATION, MERGER AND CONSOLIDATION OF PLAN
14.1 Amendment .........................................125
14.2 Termination of Plan By the Company ................125
14.3 Merger, Consolidation, or Transfer of Assets ......126
14.4 Transfer of Assets from Plans of Subsidiaries .....126
ARTICLE XV - TOP HEAVY PROVISIONS
15.1 Application .......................................128
15.2 Special Top Heavy Definitions .....................128
15.3 Special Top Heavy Provisions ......................136
ARTICLE XVI - MISCELLANEOUS PROVISIONS
16.1 Headings ..........................................139
16.2 Indemnification ...................................139
16.3 Employees' Trust ..................................139
16.4 Nonalienation of Benefits .........................139
16.5 Qualified Domestic Relations Order ................140
16.6 Unclaimed Amounts .................................142
16.7 Maximum Age Condition .............................143
16.8 Invalidity of Certain Provisions ..................143
16.9 Gender and Number .................................143
16.10 Law Governing .....................................144
MCDONALD'S CORPORATION PROFIT SHARING PROGRAM
The McDonald's Corporation Savings and Profit Sharing Plan, as
amended and restated effective January 1, 1987 ("Profit Sharing Plan")
and subsequently amended from time to time and the McDonald's Matching
and Deferred Stock Ownership Plan, as amended and restated effective
January 1, 1984 ("McDESOP") and subsequently amended from time to
time, were merged, effective December 31, 1988, amended and restated
effective January 1, 1989, and renamed the "McDonald's Corporation
Profit Sharing Program" (the "Plan"). The Plan as subsequently
amended from time to time is hereby amended and restated effective
July 1, 1992.
The Plan has two component portions, the Profit Sharing Plan
portion which is intended to be a profit sharing plan and to meet the
requirements of Sections 401(a) of the Internal Revenue Code and the
McDESOP portion which is intended to meet the requirements for a stock
bonus plan and has two components, a cash or deferred arrangement
under Sections 401(a) and 401(k) of the Internal Revenue Code and an
employee stock ownership plan under Sections 401(a) and 4975(e)(7) of
the Internal Revenue Code. Each portion of the Plan shall be
interpreted in a manner consistent with it meeting the requirements of
the respective Internal Revenue Code Sections applicable thereto. The
assets of the employee stock ownership plan portion of the Plan shall<PAGE>
be invested primarily in qualifying employer securities as defined in
Section 409(l) of the Internal Revenue Code.
The purposes of the McDonald's Corporation Profit Sharing Program
are to permit Participants (1) to share in the success of the Company
by receiving a portion of its profits, (2) to provide employees a
convenient means to save for their own future retirement security
through their participation in this Plan and (3) to provide
Participants individually and as a group with a substantial ownership
interest in the Company.
Except as otherwise specifically provided herein, the Plan as
amended and restated applies to persons who are Employees on and after
July 1, 1992. Eligibility, benefits, payment of benefits and the
amount of benefits, if any, of a person whose employment with an
Employer terminated before July 1, 1992 and who is not rehired by an
Employer on or after July 1, 1992 shall, except as otherwise
specifically provided herein, be determined in accordance with the
provisions of the Plan or of McDESOP and the Profit Sharing Plan as in
effect on the date the person ceased to be an Employee of an Employer.
ARTICLE I
DEFINITIONS
The following words and phrases, when used herein, unless their
context clearly indicates otherwise, shall have the following
respective meanings:
1.1 "Account" means a Participant's share of contributions and
Forfeitures arising under the Plan, and the income, profits and
increments thereon less all losses, expenses and distributions
chargeable thereto.
(a) Each Participant shall have the following Accounts in
the Profit Sharing Plan which shall be held in the Trust Fund:
(1) "Investment Savings Fund Account," to which shall
be credited the Participant's Participant Contributions with
respect to Plan Years commencing before January 1, 1987. A
Participant's Investment Savings Fund Account shall be fully
vested and non-forfeitable.
(2) "Profit Sharing Fund Account," to which shall be
credited each Participant's share of Employer Profit Sharing
Contributions and Forfeitures with respect to the Profit
Sharing Plan allocated in accordance with Section 7.1. A
Participant's Profit Sharing Fund Account shall include his
"Pre-Break Profit Sharing Fund Account" and his "Post-Break
Profit Sharing Fund Account" pursuant to Section 11.4(e), if
applicable.
(3) "Rollover Contribution Account," to which shall be
credited the balance of the Participant's Rollover
Contribution Holding Account as of each Valuation Date.
(4) "Rollover Contribution Holding Account," to which
shall be credited the Participant's Rollover Contributions
pursuant to Section 8.1 until such contributions are removed
and credited to the Participant's Rollover Contribution<PAGE>
Account at the next Valuation Date occurring at the end of a
calendar month in which such contributions were made.
(b) Each Participant shall have the following Accounts in
McDESOP which shall be held in the Trust Fund:
(1) A "Participant Elected Contribution Account", to
which shall be credited Participant Elected Contributions
made to the Plan on behalf of the Participant in accordance
with Section 7.4;
(2) An "Employer Matching Contribution Account" to
which shall be credited Employer Matching Contributions
(including any Employer Per Capita Matching Contributions),
Additional Employer Contributions, Special Section 401(k)
Employer Contributions and any Forfeitures allocated to the
Participant in accordance with Section 7.2.
(3) An "Employer Auxiliary ESOP Contribution Account"
which shall include:
(A) A "Per Capita Employer Auxiliary ESOP
Contribution Account," to which shall be credited
Company Stock released from the Auxiliary ESOP Suspense
Account in accordance with Section 6.3, allocated in
accordance with Section 7.3(a) and any Special Dividend
Replacement Contributions credited to such account in
accordance with Section 7.3(d);
(B) A "Compensation Based Employer Auxiliary ESOP
Contribution Account," to which shall be credited
Company Stock released from the Auxiliary ESOP Suspense
Account in accordance with Section 6.3, allocated in
accordance with Section 7.3(b) and any Special Dividend
Replacement Contributions credited to such account in
accordance with Section 7.3(d); and
(C) An "Additional Employer Auxiliary ESOP
Contribution Account," to which shall be credited, in
accordance with Section 7.3(c) a Participant's Per
Capita Additional Auxiliary ESOP Contributions and
Forfeitures therefrom and his Compensation Based
Additional Auxiliary ESOP Contributions and Forfeitures
therefrom.
(c) Each Participant shall have the following
Diversification Accounts, to which shall be credited the portions
of a Participant's Employer Auxiliary ESOP Contribution Account,
Participant Elected Contribution Account and Employer Matching
Contribution Account, transferred to his Diversification Account
pursuant to a Diversification Election made in accordance with
Section 10.12. A Participant's Diversification Account shall be
part of the McDESOP portion of the Plan but is held in the Profit
Sharing Master Trust in order to implement Participant's
diversification elections made in accordance with Section 10.12.
Effective July 1, 1994, the Diversification Account shall consist
of two-sub-accounts as follows:
(A) "LESOP Diversification Account," to which
shall be credited the portions of a Participant's<PAGE>
Employer Auxiliary ESOP Contribution Account
transferred to his LESOP Diversification Account
pursuant to a Diversification Election made in
accordance with Section 10.12; and
(B) "McDESOP Diversification Account" to which
shall be credited the portions of a Participant's
Participant Elected Contribution Account and Employer
Matching Contribution Account, transferred to his
McDESOP Diversification Account pursuant to a
Diversification Election made in accordance with
Section 10.12.
(d) "Net Balance Account," means a Participant's interest
in the Trust composed of all of the Participant's Accounts. A
Participant's accrued benefit at any time during any Plan Year
(except on a Valuation Date) shall be the value of the number of
full and fractional shares of Company Stock and any other value
held in such Participant's Accounts as adjusted on the
immediately preceding Valuation Date, and on a Valuation Date it
shall be the number of full and fractional shares of Company
Stock and other value held in such Participant's Accounts as
adjusted to that Valuation Date.
1.2 "Active Participant" means
(a) for purposes of receiving an allocation of the Profit
Sharing Contributions pursuant to Section 7.1 for a Plan Year, a
Participant
(1) who (A) has accumulated one thousand (1,000) Hours
of Service during the Plan Year; (B) has Considered
Compensation during such Plan Year; and (C) is employed by
an Employer on the last day of the Plan Year; or
(2) who (A) is transferred during the Plan Year to a
Domestic Affiliate or Foreign Affiliate; (B) has accumulated
one thousand (1,000) Hours of Service during a Plan Year;
(C) has Considered Compensation during such Plan Year; and
(D) is employed on the last day of the Plan Year by an
Employer, a Domestic Affiliate or a Foreign Affiliate; or
(3) who (A) was a Participant on any day of a Plan
Year; (B) has Considered Compensation during such Plan Year;
and (C) prior to the last day of such Plan Year, died,
retired on or after attaining age 55 or suffering a
Disability, terminated his employment because of the sale or
lease of a McDonald's restaurant operation and became an
employee of the purchasing Licensee, or terminated his
employment when he had at least 10 years of Credited Service
under the Plan; and
(b) for the purpose of being eligible to share in
allocations of Company Stock released from an Auxiliary ESOP
Suspense Account for a Plan Year, in accordance with
Section 6.3(a), and of Additional Employer Auxiliary ESOP
Contributions for a Plan Year, a Participant who is a staff or an
executive employee or a store manager; and<PAGE>
(1) who (A) has accumulated one thousand (1,000) Hours
of Service during the Plan Year; (B) has Considered
Compensation during such Plan Year; and (C) is employed by
an Employer on the last day of the Plan Year; or
(2) who (A) is transferred during the Plan Year to a
Domestic Affiliate or Foreign Affiliate; (B) has accumulated
one thousand (1,000) Hours of Service during a Plan Year;
(C) has Considered Compensation during such Plan Year; and
(D) is employed on the last day of the Plan Year by an
Employer, a Domestic Affiliate or a Foreign Affiliate; or
(3) who (A) was a Participant on any day of a Plan
Year; (B) has Considered Compensation during such Plan Year;
and (C) prior to the last day of such Plan Year, died,
retired on or after attaining age 55 or suffering a
Disability, terminated his employment because of the sale or
lease of a McDonald's restaurant operation and became an
employee of the purchasing Licensee, or terminated his
employment when he had at least 10 years of Credited Service
under the Plan; and
(c) for purposes of the McDESOP portion of the Plan, except
for the purpose of being eligible to share in allocations of
Company Stock released from an Auxiliary ESOP Suspense Account
for a Plan Year in accordance with Section 6.3(a), and of
Additional Employer Auxiliary ESOP Contributions for a Plan Year,
a Participant who is an Employee on any day of the Plan Year.
1.3 "Affiliated Service Group" means a group including an
Employer which:
(a) consists of an organization the principal business of
which is the performance of services ("first service
organization") and one or more of the organizations described in
(1) or (2):
(1) any other service organization which
(A) is a shareholder or partner in the first
service organization (as determined in accordance with
applicable Treasury Regulations), and
(B) regularly performs services for the first
service organization or is regularly associated with
the first service organization in performing services
for third persons, or
(2) any other organization if
(A) a significant portion of the business of such
organization is the performance of services for the
first service organization or for one or more
organizations identified in Section 1.3(a)(1) or for
both, and the services are of a type historically
performed in such service field by employees, and
(B) 10 percent or more of the interests in such
organization are held by persons who are highly
compensated employees (within the meaning of section<PAGE>
414(q) of the Internal Revenue Code) of the first
service organization or an organization described in
Section 1.3(a)(1); or
(b) consists of
(1) an organization the principal business of which is
to perform on a regular and continuing basis management
functions for an organization identified in Section
1.3(b)(3), 1.3(b)(4) or 1.3(b)(5);
(2) all organizations aggregated in accordance with
Code Sections 414(b), 414(c), 414(m) or 414(o) with the
organization identified in Section 1.3(b)(1);
(3) an organization for which management functions are
performed by the organization identified in Section
1.3(b)(1);
(4) all organizations aggregated in accordance with
Code Sections 414(b), 414(c), 414(m) or 414(o) with the
organization identified in Section 1.3(b)(3); and
(5) all organizations ("first organizations") related
to any organization identified in Section 1.3(b)(3) or
1.3(b)(4) if the organization identified in Section
1.3(b)(3) or 1.3(b)(4) and the first organizations would be
related persons pursuant to Code Section 144(a)(3) and the
organization identified in Section 1.3(b)(3) or 1.3(b)(4)
performs management functions for the first organizations;
or
(c) is required to be aggregated pursuant to regulations
issued under Section 414(o) of the Internal Revenue Code.
1.4 "Authorized Leave of Absence" means any absence authorized
by an Employer under such Employer's standard personnel practices. An
absence due to service in the Armed Forces of the United States shall
be considered an Authorized Leave of Absence provided that the
Employee returns to employment with the Employer with reemployment
rights provided by law.
1.5 "Auxiliary ESOP Suspense Account" means the separate
accounts maintained by the Committee under Section 6.2.
1.6 "Beneficiary" means the person or persons designated by a
Participant or the Plan, as applicable, in accordance with the
provisions of Section 11.3 or 11.6 to receive any benefit which shall
be distributable under the Plan on account of the Participant's death.
Such a Beneficiary shall be deemed to be the Participant's "designated
beneficiary" for purposes of Section 401(a)(9) of the Internal Revenue
Code to the extent permitted therein.
1.7 "Board of Directors" means the board of directors of the
Company.
1.8 "Break in Service" means, for purpose of determining
Eligibility Service and Participant status, an Eligibility Computation
Period, and for all other purposes, a Plan Year, within which an<PAGE>
Employee has not completed more than five hundred (500) Hours of
Service.
1.9 "Committee" means the Administrative Committee appointed
pursuant to Section 13.2.
1.10 "Commonly Controlled Corporation" means the Company and any
other corporation if it and the Company are members of a controlled
group of corporations as defined in Section 409(1)(4) of the Internal
Revenue Code.
1.11 "Commonly Controlled Entity" means a corporation, trade or
business if it and an Employer are members of a controlled group of
corporations as defined in Section 414(b) of the Internal Revenue Code
or under common control as defined in Section 414(c) of the Internal
Revenue Code; provided, however, that solely for purposes of
Article IX including the definition of Related Plan when used in
Article IX, the standard of control under Sections 414(b) and 414(c)
of the Internal Revenue Code shall be deemed to be "more than 50%"
rather than "at least 80%."
1.12 "Company" means McDonald's Corporation or any successor
corporation by merger, consolidation, purchase or otherwise which
elects to adopt the Plan and the Trust.
1.13 "Company Stock" means common or preferred stock of the
Company which is a qualifying employer security as defined in Section
4975(e)(8) of the Internal Revenue Code and Section 407(d)(5) of
ERISA, including, but not limited to, Series B ESOP Convertible
Preferred Stock of McDonald's Corporation and Series C ESOP
Convertible Preferred Stock of McDonald's Corporation, both as
described in the Certificate of Designations annexed hereto, and any
subsequently issued series of convertible preferred stock of
McDonald's Corporation which is purchased with the proceeds of an
Exempt Loan.
1.14 "Considered Compensation" of a Participant for a Plan Year
means:
(a) except as otherwise specified below, the Participant's
total compensation paid during the Plan Year to such Participant
by an Employer while an Active Participant in the Plan as
reported in Box 10 of the Participant's Internal Revenue Service
Form W-2 (or Box 1, as revised for 1993, or the equivalent box on
any comparable form for subsequent years) for the Plan Year,
increased by (i) any amounts by which the Participant's
compensation is reduced by Participant Elected Contributions
under the McDESOP portion of the Plan or any other portion of the
Plan, and under any portion of any Related Plan which meets the
requirements of Section 401(k) of the Internal Revenue Code; (ii)
compensation reduction contributions for medical, dental or
dependent care or other benefits under a cafeteria plan meeting
the requirements of Section 125 of the Internal Revenue Code; and
(iii) payments under the McDonald's Target Incentive Plan which
the Participant received in April 1994; and excluding (I)
provisions for life insurance; (II) reimbursement for or other
payment for expenses related to, moving expenses (other than the
relocation bonus, but effective January 1, 1994, including the
relocation bonus); (III) any benefits under the Plan or any other
qualified plan described in Section 401(a) of the Internal<PAGE>
Revenue Code; (IV) distributions under McDonald's Profit Sharing
Program Equalization Plan ("McEqual"), McDonald's 1989 Executive
Equalization Plan ("McCAP I"), the McDonald's Supplemental
Employee Benefit Equalization Plan ("McCAP II") or, effective
January 1, 1994, the McDonald's Corporation Deferred Incentive
Plan; (V) income earned from stock options granted under the
McDonald's 1975 Stock Ownership Option Plan; Stock Exchange
Rights or Performance Units granted under the McDonald's
Corporation 1978 Incentive Plan; effective January 1, 1993,
options, restricted stock, stock appreciation rights, performance
units and stock bonuses awarded under the McDonald's 1992 Stock
Ownership Incentive Plan; (VI) payments to a Participant for
foreign service in the form of tax gross-up benefits; (VII)
allowances for cost of living, housing and education, and other
similar payments; (VIII) effective January 1, 1994, any income
attributable to personal use of an employer-provided vehicle, an
allowance paid for the loss of an employer-provided vehicle, use
of a company condo, participation in group trips, gift stock,
spouse's travel and perquisites whether in cash or in kind and
other similar items; and (IX) any severance pay and any special
termination bonus paid pursuant to a termination agreement;
(b) for purposes of Article XV (except for determining
whether a Participant is a Key Employee pursuant to
Section 15.2(d)) and for determining the limitations under
Article IX, Considered Compensation means total compensation paid
to the Participant by an Employer, a Commonly Controlled Entity
or a member of an Affiliated Service Group for the Plan Year,
(i) effective prior to January 1, 1993, excluding any
benefits under the Plan or any other qualified plan
described in Section 401(a) of the Internal Revenue Code, or
the amount of any Participant Elected Contributions under
the McDESOP portion of the Plan which are credited to the
Participant's accounts under the Plan, the McDonald's
Supplemental Employee Benefit Equalization Plan
("McCAP II"), the McDonald's Profit Sharing Program
Equalization Plan ("McEqual"), the McDonald's 1989 Executive
Equalization Plan ("McCAP I") or any other non-qualified
deferred compensation plans from time to time maintained by
the Company, or other deferred compensation, stock options,
and any other distribution which receives special tax
benefit;
(ii) effective on or after January 1, 1993, including
distributions from any nonqualified deferred compensation
plans maintained by an Employer, Commonly Controlled Entity
or member of an Affiliated Service Group and amounts paid or
reimbursed by the employer for moving expenses incurred by
the Participant to the extent it is reasonable to believe
that such amounts are not deductible by the Participant
under Section 217 of the Internal Revenue Code and excluding
any salary reduction contributions to a cafeteria plan
meeting the requirements of Code Section 125 or to the Plan
or any other qualified plan described in Section 401(a) of
the Internal Revenue Code, or the amount of the
Participant's Participant Elected Contributions under the
McDESOP portion of the Plan or any other portion of the Plan
or of any other plan which meets the requirements of Section
401(k) of the Internal Revenue Code, whether credited to the<PAGE>
Participant's accounts under the Plan, the McDonald's
Supplemental Employee Benefit Equalization Plan
("McCAP II"), the McDonald's Profit Sharing Program
Equalization Plan ("McEqual"), the McDonald's 1989 Executive
Equalization Plan ("McCAP I") or any other non-qualified
deferred compensation plans from time to time maintained by
the Company, or other deferred compensation, stock options,
and any other amounts which receive special tax benefits;
(c) for the purpose of determining whether a Participant is
(1) a Highly Compensated Employee or (2) a member of the Top Paid
Group or (3) whether a Participant is a Key Employee pursuant to
Section 15.2(d), Considered Compensation shall be the
Participant's Considered Compensation as defined in Section
1.14(b) increased by the amount by which the Participant's
compensation is reduced pursuant to a compensation reduction
election under Section 5.1 or any other Related Plan which meets
the requirements of Section 401(k) of the Internal Revenue Code
or pursuant to other compensation reduction contributions for
medical, dental or dependent care or other benefits under a
cafeteria plan meeting the requirements of Section 125 of the
Internal Revenue Code;
(d) for the purpose of calculating (1) the actual
contribution percentage in accordance with Section 4.1, (2) the
actual deferral percentage in accordance with Section 5.2 or
(3) the multiple use test in accordance with Section 5.4,
Considered Compensation shall be the Participant's
compensation for the portion of the Plan Year during which he or
she was an Active Participant as defined in Section 1.2(c) (i) as
reported in Box 10 of his Internal Revenue Service Form W-2 (or
Box 1, as revised for 1993, or the equivalent box on any
comparable form for subsequent years) plus (ii) any amounts by
which the Participant's compensation is reduced by Participant
Elected Contributions under the McDESOP portion of the Plan or
any other portion of the Plan or any other plan which meets the
requirements of Section 401(k) of the Internal Revenue Code or
compensation reduction contributions for medical, dental or
dependent care or other benefits under a cafeteria plan meeting
the requirements of Section 125 of the Internal Revenue Code;
(e) effective January 1, 1993, for the purpose of
determining the amount of Participant Elected Contributions
pursuant to Section 5.1, Considered Compensation means a
Participant's Considered Compensation as defined in Section
1.14(a) increased by expatriate equalization differentials and
reduced by all compensation not paid in cash, by cash perquisites
and by any payments for referrals to the extent included in
Considered Compensation as defined in Section 1.14(a).
For purposes of Sections 1.14(a), (c), (d) and (e), Considered
Compensation taken into account under the Plan shall not exceed
$228,860 (in 1992, and as adjusted in subsequent years as provided by
the Secretary of the Treasury) (the "dollar limit"). In determining
whether a Participant's Considered Compensation for a Plan Year
exceeds the dollar limit, if and only to the extent required by the
Internal Revenue Code, the Considered Compensation of each Five
Percent Owner and of each Participant who is one of the ten Highly
Compensated Employees paid the greatest Considered Compensation
(determined before the aggregation of the Considered Compensation of<PAGE>
any family member) shall include the Considered Compensation of such
Participant's spouse and lineal descendants who have not attained
age 19 before the end of the Plan Year earned as employees of an
Employer, a Commonly Controlled Entity or member of an Affiliated
Service Group. For purposes of applying the dollar limit in the first
sentence of this paragraph, if the Considered Compensation of a Five
Percent Owner or of a Participant who is one of the ten Highly
Compensated Employees paid the greatest compensation (determined
before the aggregation of the compensation of any family member) is
equal to or greater than the dollar limit ("Affected Participant"),
the Considered Compensation of each of such Affected Participant, his
spouse and lineal descendants who have not attained age 19 before the
end of the Plan Year ("Affected Family Member") shall be equal to the
dollar limit for the Plan Year multiplied by a fraction the numerator
of which is such individual's Considered Compensation after
application of the dollar limit and the denominator of which is the
sum of such Considered Compensation for the Affected Participant and
the Affected Family Members.
Effective January 1, 1994, "$150,000" shall be substituted for
"$228,860" in the above paragraph.
Anything to the contrary herein notwithstanding, Considered
Compensation for a Plan Year shall not be reduced by the pay for a
period of short term disability which is repaid to an Employer in a
subsequent Plan Year by a Participant who fails to complete the
requirements to be eligible to retain such pay.
1.15 "Credited Service" shall mean an Employee's total Years of
Credited Service excluding the following:
(a) Years of Credited Service before January 1, 1964;
(b) Years of Credited Service before January 1, 1976, which
would have been disregarded under the McDonald's Corporation
Savings and Profit Sharing Plan before January 1, 1976, with
regard to the then existing rules on reemployment;
(c) Years of Credited Service prior to a Break in Service,
if the Participant had no vested interest in his Profit Sharing
Fund Account prior to such Break in Service and (1) effective
with respect to a Break in Service which occurred before
January 1, 1985, if the Participant had no more than one year of
Credited Service prior to such Break in Service and (2) effective
with respect to one or more consecutive Breaks in Service none of
which occurred before January 1, 1985, if the number of
consecutive Breaks in Service equals or exceeds five consecutive
Breaks in Service;
(d) For purposes of determining a Participant's vested
interest in his Profit Sharing Fund Account or his Employer
Auxiliary ESOP Contribution Account accrued before (1) a Break in
Service which occurred before January 1, 1985 and (2) five
consecutive Breaks in Service if none of the Breaks in Service
occurred before January 1, 1985, Years of Credited Service after
such Break in Service.
1.16 "Disability" means a mental or physical condition which
renders a Participant permanently unable or incompetent to carry out
the job responsibilities he held or tasks to which he was assigned at<PAGE>
the time the disability was incurred. Such determination shall be
made by the Committee on the basis of such medical and other competent
evidence as the Committee shall deem relevant.
1.17 "Disqualified Person" means a person defined in Section
4975(e)(2) of the Internal Revenue Code.
1.18 "Domestic Affiliate" means any domestic corporation,
partnership or joint venture of which, in the case of a corporation,
the Company owns, directly or indirectly, either twenty-five percent
or more of the voting power of all classes of stock or twenty-five
percent or more of the value of all stock, or of which, in the case of
a partnership or joint venture, the Company owns, directly or
indirectly, a twenty-five percent or more interest in both the capital
and profits.
1.19 "Effective Date" means July 1, 1992.
1.20 "Eligibility Computation Period" means the twelve-month
period commencing with the first day of the pay period in which an
Employee first performs an Hour of Service following hire (or rehire
after a Break in Service) and each subsequent twelve-month period
commencing on an anniversary of that date. In addition, with respect
to Hours of Service which are credited to an Employee pursuant to
Section 1.31(b)(2) for service with a Licensee whose restaurant(s) are
acquired by an Employer (the "Acquisition"), Eligibility Computation
Period means (a) each full calendar year such individual was employed
by the Licensee before the calendar year of such Acquisition
commencing with the calendar year in which such Employee first
performed an hour of service for the Licensee and continuing through
the calendar year ending immediately before the date of such
Acquisition and (b) if such Employee was employed by the Licensee on
January 1 of the calendar year of the Acquisition, the calendar year
of such Acquisition; provided that for the calendar year in which the
Acquisition occurs both Hours of Service credited pursuant to Section
1.31(b)(2) and those credited pursuant to the remainder of Section
1.31 for service after the Acquisition shall both be counted in the
Eligibility Computation Period in which the Acquisition occurred.
1.21 "Eligibility Service" means the number of Eligibility
Computation Periods during which an Employee has completed not less
than 1000 Hours of Service excluding any Eligibility Service earned
before a Break in Service until the Employee has completed one Year of
Eligibility Service following the Break in Service.
1.22 "Employee" means any person who is employed by the Company
or another Employer (as that entity is defined for the Profit Sharing
Plan portion or McDESOP portion of the Plan, respectively, with
respect to contributions to such portions of the Plan with respect to
which the term Employee is being used) including a person on an
Authorized Leave of Absence. Such term does not include a consultant,
an independent contractor or a Leased Employee.
1.23 "Employer" means,
(a) for purposes of Article III, concerning contributions
to the Profit Sharing Plan portion of the Plan and other
provisions of the Plan as they relate to the Profit Sharing Plan
portion of the Plan and for purposes of Section 4.1, 4.3 and
Article V, concerning Employer Matching Contributions and<PAGE>
Participant Elected Contributions, the Company and any
Subsidiary, Commonly Controlled Entity, Domestic or Foreign
Affiliate, or any other business in which the Company owns an
interest which had adopted the McDonald's Corporation Savings and
Profit Sharing Plan before the Effective Date or, pursuant to
Section 12.1, elects to adopt the Profit Sharing Plan portion of
the Plan on or after the Effective Date; and
(b) for purposes of Section 4.2 and Article VI concerning
the Auxiliary ESOP and other provisions of the Plan as they
relate to the contributions and loans provided in the Auxiliary
ESOP portion of the Plan, the Company and any Commonly Controlled
Corporation which had adopted the McDonald's Matching and
Deferred Stock Ownership Plan before the Effective Date or,
pursuant to Section 12.1, elects to adopt the McDESOP portion of
the Plan on or after the Effective Date.
1.24 "Employer Contributions" means the following payments made
from time to time by an Employer to the Trustee:
(a) "Employer Profit Sharing Contributions" made pursuant
to Sections 3.1 or 15.3(a) hereof;
(b) "Employer Matching Contributions" made pursuant to
Section 4.1 hereof;
(c) "Special Section 401(k) Employer Contributions" made
pursuant to Section 4.3(b) hereof;
(d) "Employer Auxiliary ESOP Contributions" made pursuant
to Section 4.2 hereof;
(e) "Additional Employer Contributions" made pursuant to
Section 4.4 hereof; and
(f) "Special Dividend Replacement Contributions" made
pursuant to Section 4.2.
1.25 "Entry Date" means January 1 and July 1 of each Plan Year.
1.26 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.27 "Five Percent Owner" means a Participant who owns (or is
considered as owning within the meaning of Section 318 of the Internal
Revenue Code) more than five percent of an Employer, Commonly
Controlled Entity or member of an Affiliated Service Group as provided
in Section 416(i)(1)(B)(i) of the Internal Revenue Code.
1.28 "Foreign Affiliate" means any foreign corporation,
partnership or joint venture of which, in the case of a corporation,
the Company owns, directly or indirectly, either twenty-five percent
or more of the voting power of all classes of stock or twenty-five
percent or more of the value of all stock, or, of which, in the case
of a partnership or a joint venture, the Company owns, directly or
indirectly, a twenty-five or more percent interest in both the capital
and profits.
1.29 "Forfeiture" means the portion of a Participant's Profit
Sharing Fund Account which is forfeited as provided in Section 11.4,<PAGE>
his Auxiliary ESOP Contribution Account which is forfeited as provided
in Section 11.4 and unclaimed amounts which are forfeited under
Section 16.6.
1.30 "Highly Compensated Employee" means, for a Plan Year, any
Participant who performs services as an employee for an Employer,
Commonly Controlled Entity or member of an Affiliated Service Group
during such Plan Year and who:
(a) (1) at any time during the Plan Year or the preceding
Plan Year ("Preceding Plan Year"), was a Five Percent Owner;
or
(2) (A) received Considered Compensation in excess of
$90,803 (for 1991, adjusted in subsequent years as provided
by the Secretary of the Treasury) during the Preceding Plan
Year or (B) received Considered Compensation in excess of
$93,518 (for 1992, adjusted in subsequent years as provided
by the Secretary of the Treasury) during the Plan Year and
was one of the 100 employees of the group consisting of the
Employers, Commonly Controlled Entities and members of an
Affiliated Service Group who received the most Considered
Compensation during the Plan Year; or
(3) received Considered Compensation for the Preceding
Plan Year in excess of $60,535 (for 1991, adjusted in
subsequent years as provided by the Secretary of the
Treasury) and is in the Top Paid Group for the Preceding
Plan Year; or
(4) (A) was an officer of (or performed the duties of
an officer for) an Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group during the Preceding
Plan Year or was an officer of such an entity (or performed
the duties of an officer of such an entity) during the Plan
Year and one of the 100 employees of the group consisting of
the Employers, Commonly Controlled Entities and members of
an Affiliated Service Group who received the most Considered
Compensation during the Plan Year, and (B) received
Considered Compensation in excess of fifty percent (50%) of
the amount in effect under Section 415(b)(1)(A) of the
Internal Revenue Code ($108,963 in 1991 and $112,221 in
1992, adjusted in subsequent years as determined in
accordance with regulations prescribed by the Secretary of
the Treasury or his delegate), provided that no more than
fifty (50) persons shall be treated as officers hereunder
for any Plan Year or Preceding Plan Year.
(b) For purposes of this Section 1.30, the Considered
Compensation of (1) any Highly Compensated Employee in the group
consisting of the ten (10) Highly Compensated Employees paid the
greatest Considered Compensation (without regard to this Section
1.30(b)) or, (2) any Five Percent Owner, shall include any
Considered Compensation paid to a spouse, lineal ascendants or
descendants, or any spouse of such lineal ascendants or
descendants of such Highly Compensated Employee or such Five
Percent Owner and such spouse, lineal ascendants or descendants,
or any spouse of such lineal ascendants or descendants shall not
be treated as an employee for purposes of this Section 1.30.<PAGE>
(c) For purposes of this Section 1.30 and Section 1.53,
employees who are nonresident aliens and who receive no earned
income (within the meaning of Section 911(d)(2) of the Internal
Revenue Code) from an Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group which constitutes income
from sources within the United States (within the meaning of
Section 861(a)(3) of the Internal Revenue Code) shall not be
treated as employees.
(d) A former employee shall also be treated as a Highly
Compensated Employee for a Plan Year if such former employee had
a Termination of Employment prior to such Plan Year and was a
Highly Compensated Employee (without regard to this Section
1.30(d)) for either the Plan Year in which he had a Termination
of Employment or any Plan Year ending on or after his 55th
birthday.
(e) In lieu of determining which individuals are Highly
Compensated Employees as provided in paragraphs (a)(1), (a)(2),
(a)(3), and (a)(4) of this Section 1.30, the Plan Administrator
may elect for any Plan Year to consider as a Highly Compensated
Employee for such Plan Year each Participant who performs
services as an employee for an Employer, Commonly Controlled
Entity or member of an Affiliated Service Group during such Plan
Year and who, during the Plan Year:
(1) was at any time a Five Percent Owner;
(2) received Considered Compensation in excess of
$93,518 (for 1992, adjusted in subsequent years as provided
by the Secretary of the Treasury or his delegate);
(3) received Considered Compensation in excess of
$62,345 (for 1992, adjusted in subsequent years as provided
by the Secretary of the Treasury or his delegate) and was a
member of the Top Paid Group; and
(4) was an officer of (or performed the duties of an
officer for) an Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group and received
Considered Compensation in excess of fifty percent (50%) of
the amount in effect under Section 415(b)(1)(A) of the
Internal Revenue Code ($112,221 for 1992, adjusted in
subsequent years as provided by the Secretary of the
Treasury or his delegate).
(f) The Committee may elect for any Plan Year to determine
the Highly Compensated Employees for such year by substituting
(1) "$62,345" (in 1992, adjusted in subsequent years provided by
the Secretary of the Treasury or his delegate) for "$93,518" (in
1992, adjusted in subsequent years provided by the Secretary of
the Treasury or his delegate) in Sections 1.30(a)(ii) or
1.30(e)(2) as applicable, and ignoring Sections 1.30(a)(iii) or
1.30(e)(3), respectively.
(g) A Committee may make any of the elections permitted
under Sections 1.30(e) and 1.30(f) for a Plan Year, may make
different elections from Plan Year to Plan Year and may make
different elections for different purposes under the Plan (e.g.,
which Participants are considered to be Highly Compensated<PAGE>
Employees (1) for the purposes of calculating the limits
described in Sections 4.1(c), 5.2(e) and 5.4 and (2) for other
purposes under the Plan.
1.31 "Hour of Service" means:
(a) Each hour for which an employee or a Leased Employee
(determined without regard to Section 1.34(b)) is paid directly
or indirectly, or entitled to payment, by an Employer, Commonly
Controlled Entity or member of an Affiliated Service Group,
(1) for performance of duties;
(2) on account of a period of time during which no
duties were performed, provided that, except as herein
otherwise expressly provided, no more than 501 Hours of
Service shall be credited for any single continuous period
during which an Employee performs no duty, and provided that
no Hours of Service shall be credited for payments made or
due under a plan maintained solely for the purpose of
complying with applicable worker's compensation,
unemployment compensation or disability insurance laws, or
for reimbursement of medical expenses; and
(3) for which back pay, irrespective of mitigation of
damages, is awarded or agreed to by the Employer, provided
that no more than 501 Hours of Service shall be credited for
any single continuous period of time during which the
Employee did not or would not have performed duties.
(b) (1) The credit for Hours of Service shall be given for
the following:
(A) For Plan Years beginning before January 1,
1994, an Employee's prior or subsequent employment
by a Foreign Affiliate or Domestic Affiliate;
(B) For Plan years beginning after December 31,
1993, an Employee's prior or subsequent employment
by a Domestic or Foreign Affiliate if the employee
is transferred to or from such Domestic or Foreign
Affiliate from or to, respectively, the employment
of an Employer at the initiative of an Employer (a
"Company Initiated Transfer").
In determining the number of such Hours of Service to be
credited, the Plan Administrator shall make good faith
estimates based upon the available information and records
including the use of reasonable equivalencies similar to
those permitted under DOL Reg. Section 2530.200b-3 or
estimated average number of hours per week for employees in
a given job category.
(2) If a McDonald's Restaurant or a group of
restaurants operated by a Licensee is acquired by the
Company or another Employer in the first six months of a
calendar year and if such restaurant or group of restaurants
is designated as a permanent acquisition by the Company, the
store managers who are employed by such Licensee either in a
restaurant or in connection with the operation of one or<PAGE>
more restaurants as of the date of such acquisition and who
continue to be employed by the Company or other Employer
until June 30 of the Plan Year in which the acquisition
occurred shall be credited by the Employer with his Hours of
Service with such Licensee. If a McDonald's Restaurant or
group of restaurants operated by a Licensee is acquired by
the Company or another Employer, during the Plan Year, each
store manager who is employed by such Licensee either in a
restaurant or in connection with the operation of one or
more restaurants as of the date of acquisition and continues
to be employed by the Company or other Employer until the
last day of the Plan Year in which such acquisition occurred
who has not already received credit for service with the
Licensee under the preceding sentence shall as of the last
day of such Plan Year be credited by the Company or other
Employer with his Hours of Service with such Licensee. In
determining the number of such Hours of Service to be
credited, the Plan Administrator shall make good faith
estimates based upon the available information and records
including the estimated average number of hours per week for
employees in a given job category.
(3) To the extent an Employee is not otherwise
credited with Hours of Service for each payroll period while
on an Authorized Leave of Absence, an Employee shall be
credited with the number of Hours of Service equal to the
average number of Hours of Service per payroll period (not
to exceed forty Hours of Service per week) of such Employee
for the six calendar week period, or pertinent payroll
period if such period is longer, ending immediately prior to
the commencement of the Authorized Leave of Absence
notwithstanding the limitations of Section 1.31(a)(2). If a
Participant is on an Authorized Leave of Absence on the last
day of a Plan Year, the Hours of Service credited pursuant
to the preceding sentence shall be counted for the purpose
of determining whether he is an Active Participant under
Sections 1.2(a) and (b) for such Plan Year. Notwithstanding
the foregoing, an Employee who fails either (A) to return to
his employment within ninety (90) days after the expiration
of an Authorized Leave of Absence, or (B) to remain in the
employ of an Employer after the expiration of an Authorized
Leave of Absence for the lesser of (i) a period equal to the
period of his Authorized Leave of Absence or (ii) one year
following his return to employment, unless such failure
shall be due to death, Disability, illness, retirement on or
after age 55 or the sale by the Company, one of its
subsidiaries or affiliates of the McDonald's Restaurant in
which such Employee is employed, shall be considered to have
voluntarily terminated his employment as of the date the
Leave of Absence commenced for purposes of determining Hours
of Service for Eligibility Service and Credited Service.
(4) A person who became an Employee on September 16,
1994, as a result of the acquisition of the Special
Operations Division of Corporate Systems, Inc. and who
immediately prior to that date was an employee of the
Special Operations Division of Corporate Systems, Inc. shall
be credited with Hours of Service pursuant to the foregoing
provisions of this Section 1.31 as if service with Corporate
Systems, Inc. were service with the Company. Such Hours of<PAGE>
Service shall be credited using actual hours of service for
hourly paid employees and using the service equivalencies
provided in Section 1.31(e) for salaried employees.
(c) To the extent not otherwise credited in Section 1.31,
solely for purposes of avoiding a Break in Service, for periods
of absence from work on account of Parental Leave, an Employee
shall be credited with Hours of Service as defined below:
(1) the Hours of Service which normally would have
been credited to such individual but for the Parental Leave,
or
(2) eight (8) Hours of Service per day of such absence
if the Plan is unable to determine the Hours of Service
which would have been credited to such individual but for
the Parental Leave.
An Employee's Hours of Service for absence on account
of Parental Leave shall not exceed the lesser of 501 Hours of
Service or the number of Hours of Service needed to prevent a
Break in Service and shall be credited to the Eligibility
Computation Period (for purposes of crediting Eligibility
Service) or the Plan Year (for purposes of crediting service
other than Eligibility Service) in which absence because of a
Parental Leave commenced; except that if such Hours of Service
are not needed to prevent a Break in Service in the Eligibility
Computation Period or Plan Year in which absence because of a
Parental Leave commenced, and the Parental Leave continues into
the next following Eligibility Computation Period or Plan Year
then, if needed to prevent a Break in Service, such Hours of
Service shall be credited to the Eligibility Computation Period
or Plan Year following the year in which such absence commenced.
(d) Hours of Service for reasons other than the performance
of duties shall, except as provided in Section 1.31(b)(2), be
determined in accordance with the provisions of Department of
Labor Regulations Section 2530.200b-2(b), and Hours of Service
shall be credited to computation periods in accordance with the
provisions of Department of Labor Regulations Section
2530.200b-2(c).
(e) Except as provided in Sections 1.31(b)(2) and 1.31(c)
each Employee who is paid on a salaried basis shall be credited
with 95 Hours of Service for each semimonthly payroll period
during which such Employee has any Hours of Service.
1.32 "Internal Revenue Code" means the Internal Revenue Code of
1986, as from time to time amended and any subsequent Internal Revenue
Code. References to any section of the Internal Revenue Code shall be
deemed to include similar sections of the Internal Revenue Code as
renumbered or amended.
1.33 "Investment Fund" As provided in Section 10.6 and excluding
those assets held in the Distribution Fund pursuant to Section 10.27,
(a) assets of the Profit Sharing Plan portion of the Trust Fund shall
be held in the following Investment Funds: (1) the Diversified Stock
Fund, (2) the Profit Sharing McDonald's Common Stock Fund, (3) the
Money Market Fund, (4) the Insurance Contract Fund, and (5) the
Multi-Asset Fund, and (b) assets of the McDESOP portion of the Trust<PAGE>
Fund shall be held in the following two Investment Funds: (1) the
McDESOP McDonald's Common Stock Fund and (2) the McDESOP McDonald's
Preferred Stock Fund; provided, however, that shares of Company Stock
held in the McDESOP McDonald's Common Stock Fund and McDESOP
McDonald's Preferred Stock Fund shall be separately allocated to
Participants' Participant Elected Contribution Accounts, Employer
Matching Contribution Accounts and Employer Auxiliary ESOP
Contribution Accounts which shall be denominated in shares of Company
Stock.
1.34 "Leased Employee" means any person who is not an employee of
an Employer, a Commonly Controlled Entity or a member of an Affiliated
Service Group and who provides service to an Employer if:
(a) such services are provided pursuant to an agreement
between the recipient and any other person;
(b) such person has performed such services for the
Employer (or for the Employer, any Commonly Controlled Entity or
member of an Affiliated Service Group) on a substantially full
time basis for a period of at least 1 year; and
(c) such services are of a type historically performed, in
the business field of the Employer, Commonly Controlled Entity or
Affiliated Service Group, by employees.
1.35 "Licensee" means any person, other than the Company or a
Commonly Controlled Entity which operates a McDonald's Restaurant
pursuant to lease and license agreements (or so-called "Business
Facilities Lease") with the Company or affiliated companies.
1.36 "McDESOP" means the portion of the Plan consisting of
Participants' Participant Elected Contribution Accounts, Employer
Matching Contribution Accounts, Diversification Accounts, Employer
Auxiliary ESOP Contribution Accounts and the Employer Auxiliary ESOP
Suspense Accounts.
1.37 "Non-highly Compensated Employee" means, for a Plan Year,
any Participant who performs services for an Employer, Commonly
Controlled Entity or Affiliated Service Group during such Plan Year
and who was not a Highly Compensated Employee for such Plan Year.
1.38 "Parental Leave" means a period during which an individual
is absent from work for any period:
(a) by reason of the pregnancy of the individual,
(b) by reason of the birth of a child of the individual,
(c) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement.
An absence from work shall not be a Parental Leave unless
the individual furnishes the Committee such timely information as may
reasonably be required to establish that the absence from work was for
one of the reasons specified above and the number of days for which<PAGE>
there was such an absence. Nothing contained herein shall be
construed to establish an Employer policy of treating a Parental Leave
as an Authorized Leave of Absence or to otherwise establish a parental
leave policy for any Employer, except for the purpose of avoiding a
Break in Service.
1.39 "Participant" means a person participating in the Plan in
accordance with the provisions of Article II.
1.40 "Participant Contributions" means the voluntary
contributions made by a Participant to the Trustee with respect to
Plan Years commencing before January 1, 1987, and credited to his
Investment Savings Fund Account.
1.41 "Participant Elected Contributions" means the contributions
made by an Employer on behalf of an Active Participant attributable to
reductions of the Participant's Considered Compensation determined
under Section 5.1, including:
(a) "Participant Elected Matched Contributions", which
means the portion of Participant Elected Contributions for a Plan
Year with respect to which the Company may elect, in accordance
with Section 7.2, to make Employer Matching Contributions; and
(b) "Participant Elected Unmatched Contributions", which
means the portion of Participant Elected Contributions for a Plan
Year with respect to which the Company may not, in accordance
with Section 7.2, make Employer Matching Contributions.
1.42 "Party in Interest" means a person defined in Section 3(14)
of ERISA.
1.43 "Plan" means the McDonald's Corporation Profit Sharing
Program as herein set forth, and as hereafter amended from time to
time, including its two components, the Profit Sharing Plan and
McDESOP.
1.44 "Plan Administrator" means the Plan Administrator appointed
under or by the provisions of Section 13.14.
1.45 "Plan Year" means the 12-month period commencing on
January 1 and ending on December 31.
1.46 "Profit Sharing Plan" means the portion of the Plan
consisting of Participants' Profit Sharing Fund Accounts, Rollover
Contribution Accounts, Rollover Contribution Holding Accounts,
Investment Savings Fund Accounts and of the Profit Sharing
Contribution Holding Fund.
1.47 "Qualified Preretirement Survivor Annuity" means an
immediate monthly pension payable in accordance with Section
11.2(e)(2) to the surviving spouse of a Participant who has elected to
receive benefits in the form of a life annuity in an amount equal to
an annuity for the life of the surviving spouse which can be purchased
with fifty percent of the portion of the Participant's vested Net
Balance Account which the Participant had elected to be paid in the
form of a life annuity pursuant to Section 11.2(a).
1.48 "Related Plan" means any other qualified defined
contribution plan or qualified defined benefit plan (as defined in<PAGE>
Section 415(k) of the Internal Revenue Code) maintained by an
Employer, a Commonly Controlled Entity or member of an Affiliated
Service Group, respectively called a "Related Defined Contribution
Plan" and "Related Defined Benefit Plan."
1.49 "Required Beginning Date" means April 1 (but not before
April 1, 1990 for a Participant who is not a Five Percent Owner) of
the calendar year following:
(a) for a Participant who reaches age 70-1/2 before
January 1, 1988, the later of:
(1) the calendar year in which he reaches age 70-1/2,
or
(2) if the Participant is not a Five Percent Owner at
any time during the Plan Year ending with or within the
calendar year in which he attains age 70-1/2 or any of the
four (4) prior Plan Years, the calendar year in which he has
a Termination of Employment; provided that if any such
Participant becomes a Five Percent Owner during any Plan
Year after he attains age 70-1/2, the "Required Beginning
Date" for such Participant shall be the April 1 of the
calendar year following the calendar year in which such Plan
Year ends, and
(b) for a Participant who reaches age 70-1/2 on or after
January 1, 1988, the calendar year in which the Participant
reaches age 70-1/2.
Notwithstanding the foregoing, the Required Beginning Date shall not
be any date earlier than any date to which Required Beginning Date can
be delayed in accordance with Section 11.14 and any applicable law,
regulations, or rulings.
1.50 "Rollover Contribution" means a Participant's rollover
contribution as described in Section 402(a)(5) (effective before
January 1, 1993), Section 402(c) (effective on or after January 1,
1993), Section 403(a)(4) or Section 408(d)(3) of the Internal Revenue
Code and credited to his Rollover Contribution Holding Fund Account,
in accordance with Section 8.1. Effective January 1, 1993, Rollover
contributions made in accordance with Section 402(c) or 403(a)(4) may
be transfers of (a) distributions made to a Participant in accordance
with one of the above referenced sections of the Internal Revenue Code
or (b) direct rollover contributions made in compliance with Section
401(a)(31) of the Internal Revenue Code.
1.51 "Subsidiary" shall mean any corporation affiliated with the
Company within the meaning of Section 1504 of the Internal Revenue
Code.
1.52 "Termination of Employment" means (a) a resignation by an
Employee for any reason, (b) a dismissal of an Employee for any
reason, or (c) any other termination of the employee-employer
relationship. Transfers of an Employee from an Employer, Commonly
Controlled Entity, member of an Affiliated Service Group, Domestic
Affiliate or Foreign Affiliate to another Employer, Commonly
Controlled Entity, member of an Affiliated Service Group, Domestic
Affiliate or Foreign Affiliate shall not be treated as a Termination
of Employment.<PAGE>
1.53 "Top Paid Group" means, for a Plan Year, the group
consisting of the top twenty percent of the total number of persons
employed by all Employers, Commonly Controlled Entities and members of
Affiliated Service Groups when ranked on the basis of Considered
Compensation paid during the Plan Year; provided that for purposes of
determining the total number of persons employed by such entities, the
following employees shall be excluded:
(a) employees who had not completed six (6) months of
service,
(b) employees who worked less than seventeen and one-half
(17-1/2) hours per week,
(c) employees who normally worked during not more than six
(6) months during any Plan Year, and
(d) employees who had not attained age 21.
1.54 "Trust" means the legal entity or entities resulting from
the Trust Agreement between the Company and the Trustee, and any
amendments thereto, by which Employer Contributions, Participant
Contributions, Rollover Contributions, Participant Elected
Contributions, the proceeds of any loan made pursuant to Article VI,
Employer Auxiliary ESOP Account, the Employer Auxiliary ESOP Suspense
Account and any Company Stock purchased therewith shall be received,
held, invested and distributed to or for the benefit of the
Participants and Beneficiaries.
1.55 "Trust Agreement" means any agreement between the Company
and a Trustee, establishing the McDonald's Corporation Savings and
Profit Sharing Master Trust and the McDonald's Matching and Deferred
Stock Ownership Trust ("Trust"), as amended from time to time and such
additional trust agreements as the Company and the Trustee shall
establish under the Plan.
1.56 "Trustee" means any corporation, individual or individuals
who shall accept the appointment to execute the duties of Trustee as
set forth in a Trust Agreement.
1.57 "Trust Fund" means all property received and held by a
Trustee pursuant to a Trust Agreement for the Plan. The Trust Fund
shall be composed of the sub-funds ("Trust Sub-funds") which shall be
part of the Profit Sharing Plan and McDESOP portions of the Plan as
follows:
(a) The Profit Sharing Plan portion of the Plan shall be
held in the following Trust Sub-funds.
(1) "Investment Savings Fund" which means the portion
of the Trust Fund established by segregating Participants'
Contributions to the Trust with respect to Plan Years
commencing before January 1, 1987, together with all income,
profits and increments thereon less all losses, expenses and
distributions chargeable thereto.
(2) "Profit Sharing Fund" which means the portion of
the Trust Fund established by segregating the Employer
Profit Sharing Contributions to the Trust and any<PAGE>
Forfeitures (for Plan Years beginning before January 1,
1992) which have been allocated to Participants' Profit
Sharing Contribution Fund Accounts in accordance with
Section 7.1 for all Plan Years, together with all income,
profits, and increments thereon less all losses, expenses
and distributions chargeable thereto.
(3) "Rollover Contribution Fund" which means the
portion of the Trust Fund established by segregating the
amounts contributed to the Trust by Employees pursuant to
Section 8.1 for all preceding valuation periods, together
with all income, profits and increments thereon less all
losses, expenses and distributions chargeable thereto.
(4) "Rollover Contribution Holding Fund" which means
the portion of the Trust Fund established by segregating
Rollover Contributions to the Trust received since the
immediately preceding Valuation Date, together with all
income, profits and increments thereon less all losses,
expenses and distributions chargeable thereto until such
contributions shall be transferred to the Rollover
Contribution Fund as of the Valuation Date next following
their receipt.
(5) "Profit Sharing Contribution Holding Fund" which
means the portions of the Trust Fund established by
segregating Employer Profit Sharing Contributions for a Plan
Year made pursuant to Article III for Active Participants,
who are (A) staff or executive employees or store managers
("Profit Sharing Contribution Holding Fund #1") and
(B) certified swing managers, primary maintenance employees,
crew members or other store hourly employees ("Profit
Sharing Contribution Holding Fund #2"), together with all
income, profits and increments thereon less all losses,
expenses and distributions chargeable respectively thereto
until such contributions are transferred to Participant's
Profit Sharing Fund Accounts following the close of such
Plan Year and receipt of Employer Profit Sharing
Contributions for such Plan Year as provided in Section 3.2.
(b) The McDESOP portion of the Plan shall be held in the
following Trust Sub-funds:
(1) "Participant Elected Contribution Fund" which
means the portion of the Trust Fund determined by
segregating the Participant Elected Contributions to the
Trust Fund and any Forfeitures allocated thereto for all
preceding valuation periods credited to Participants'
Accounts or credited to the Trust since the preceding
Valuation Date together with all income, profits and
increments thereon less all losses, expenses and
distributions chargeable thereto.
(2) "Employer Matching Contribution Fund" which means
the portion of the Trust Fund determined by segregating the
Employer Contributions, Special Section 401(k) Employer
Contributions, Additional Employer Contributions and any
Forfeitures allocated to Participants' Employer Matching
Contribution Accounts in accordance with Section 7.2 as of
all preceding Valuation Dates, together with all income,<PAGE>
profits and increments thereon less all losses, expenses and
distributions chargeable thereto.
(3) "Participant Elected Contribution Holding Fund"
which means the portion of the Trust Fund established by
segregating Participant Elected Contributions to the Trust
received since the immediately preceding Valuation Date and
any Company Stock purchased with such contributions,
together with all losses, expenses and distributions
chargeable thereto until such contributions shall be
transferred to the Participant Elected Contribution Fund.
(4) "Employer Matching Contribution Holding Fund"
which means the portion of the Trust Fund established by
segregating the Employer Matching Contributions to the Trust
(excluding any Employer Per Capital Matching Contributions)
and any amount of Forfeitures pursuant to Sections 11.4(c)
and 16.6 as of a Valuation Date including any Company Stock
purchased with such contributions or Forfeitures, together
with all income, profits and increments thereon, less all
losses, expenses and distributions chargeable thereto until
such contributions are transferred to the Employer Matching
Contribution Fund as of a subsequent Valuation Date as
provided in Section 7.2(a).
(5) "Employer Per Capita Matching Contribution Holding
Fund" which means the portion of the Trust Fund established
by segregating in separate subaccounts the Employer Matching
Contributions made to the Trust and designated as Employer
Per Capita Matching Contributions in accordance with
Section 4.1(a) and any Additional Employer Contributions in
accordance with Section 4.4 for the Plan Year or portion of
the Plan Year, any Forfeitures which the Board of Directors
determines shall be allocated as Per Capita Matching
Contributions as provided in Section 4.1(a) and any Company
Stock purchased with such contributions, together with all
income, profits and increments thereon less all losses,
expenses and distributions chargeable thereto until all such
contributions are transferred to the Employer Matching
Contribution Fund as of a subsequent Valuation Date as
provided in Section 7.2(d).
(6) "Employer Auxiliary ESOP Fund" which means the
portion of the Trust Fund established by segregating the
amounts released from an Auxiliary ESOP Suspense Account
pursuant to Section 6.3 and Forfeitures allocated in
accordance with Section 11.4(c) for all preceding Plan
Years, together with all income (other than dividends on
Company Stock which are used to repay a loan), profits, and
increments thereon less all losses, expenses and
distributions chargeable thereto.
(7) "McDESOP Suspense Fund" which means the portion of
the Trust Fund determined by segregating the Auxiliary ESOP
Suspense Accounts established with respect to each loan made
in accordance with Section 6.1 together with all income,
profits and increments thereon less all losses, expenses,
loan payments or transfers changeable thereto.<PAGE>
(c) "Diversification Fund" means the portion of the Trust
Fund established by segregating the amounts transferred from
Participant's Employer Auxiliary ESOP Contribution Accounts,
Participant Elected Contribution Accounts and Employer Matching
Contribution Accounts in the McDESOP portion of the Plan in
accordance with Section 10.12. The Diversification Trust Sub-
fund is part of the McDESOP portion of the Plan but is held in
the Profit Sharing Master Trust in order to implement
Participants' diversification elections made in accordance with
Section 10.12.
1.58 "Valuation Date" means the last business day of each
calendar month and such additional dates as the Committee may from
time to time specify except that, effective July 1, 1993, solely for
the purpose of valuing accounts to make distributions pursuant to
Article XI, "Valuation Date" means the fifteenth day of each calendar
month (or if the fifteenth day of the month is not a business day, the
next previous business day) and the last business day of each calendar
month and such additional dates as the Committee may from time to time
specify.
1.59 "Vesting Retirement Date" means the date on which a
Participant attains age 55.
1.60 "Year of Credited Service" means a Plan Year during which an
Employee has not less than one thousand (1,000) Hours of Service
including once the individual has become an employee Hours of Service
credited while he was a Leased Employee.
1.61 "Year of Eligibility Service" means an Eligibility
Computation Period during which an Employee has not less than one
thousand (1,000) Hours of Service including once the individual has
become an employee Hours of Service credited while he was a Leased
Employee.
ARTICLE II
PARTICIPATION
2.1 Participation. Each person who was a Participant under the
provisions of the McDonald's Corporation Savings and Profit Sharing
Plan or McDonald's Matching and Deferred Stock Ownership Plan on the
day before the Effective Date, shall continue to be a Participant
hereunder. Each other Employee shall become a Participant on the
first Entry Date coinciding with or next following the date he
completes one Year of Eligibility Service and attains age 21.
Admission to participation in the Plan shall only be made when an
Employee is not on an Authorized Leave of Absence or serving with the
Armed Forces of the United States.
Each Participant shall continue to be a Participant until the
later of (a) the date he incurs a Termination of Employment or has a
Break in Service and (b) the date his entire vested Net Balance
Account has been paid from the Trust.
Each Participant is a participant only with respect to the
portions of the Plan which have been adopted by his Employer.<PAGE>
2.2 Certification of Participation and Compensation to
Committee. Each Employer shall certify to the Committee, within a
reasonable time after each Entry Date, the names of all new
Participants. Each Employer, within a reasonable time after the last
day of each Plan Year, shall certify to the Committee with respect to
its Employees each Participant's number of Hours of Service and
Considered Compensation during such Plan Year and such other
information as the Committee may request.
2.3 Termination of Employment, Break in Service, Reemployment
and Change in Employment Status. Upon resuming employment following a
Break in Service, an Employee who is at least age 21, who had at least
one Year of Eligibility Service prior to such Break in Service, and
who completes one Year of Eligibility Service following such Break in
Service shall become a Participant retroactively to the day of such
Employee's Retroactive Participation Date (as defined in the following
sentence) provided that such Employee shall not be an Active
Participant until the first day of the calendar month in which occurs
the date of his completion of one Year of Eligibility Service
following the Break in Service (the "Active Participation Date") and
his Considered Compensation shall be deemed to be first earned
commencing with his Active Participation Date; provided that
Participant Elected Contributions and Employer Matching Contributions
shall commence on the first day of the pay period in which the
Participant completes One Year of Eligibility Service or as soon as
administratively feasible thereafter. An Employee's "Retroactive
Participation Date" is the date such Employee resumes employment.
Upon a change in his employment status or resuming employment
following a Termination of Employment which did not constitute a Break
in Service, an Employee who was a Participant prior to a Termination
of Employment shall be treated as an Active Participant from the day
of his change in status or resumption of employment.
2.4 Employees of Foreign or Domestic Affiliates. An employee of
a Foreign or Domestic Affiliate who becomes an Employee shall become a
Participant on the later of the day such individual becomes an
Employee or the next Entry Date following the date such Employee
attains age 21 and completes one Year of Eligibility Service.
2.5 Leased Employee. A person who has been a Leased Employee
(determined without regard to Section 1.34(b)) who becomes an Employee
shall become a Participant on the later of (a) the first day of the
month following the month in which such person becomes an Employee or
(b) the next Entry Date following the date such person attains age 21
and completes one Year of Eligibility Service.
2.6 McDESOP Participation. Each Eligible Employee who, pursuant
to this Article II, would otherwise become a Participant in the
McDESOP portion of the Plan upon employment or reemployment on or
after November 1, 1992 and who is a certified swing manager, primary
maintenance employee, crew member or other store hourly employee shall
only become a Participant for purposes of making Participant Elected
Contributions and receiving associated matching contributions and for
the portions of the plan relating to such contributions (the "401(k)
portion of the Plan") and shall not become a Participant for the
purpose of receiving allocations of shares of Company Stock released
from the Auxiliary ESOP Suspense Account as provided in Section 6.3(a)
("Auxiliary ESOP portion of the Plan"). Notwithstanding the forgoing,
any such Eligible Employee who was a Participant in the Auxiliary ESOP<PAGE>
portion of the Plan on December 31, 1991, shall on January 1, 1992,
cease to be a Participant therein and, if such Eligible Employee has
Accounts in the Auxiliary ESOP portion of the Plan such Eligible
Employee shall nonetheless cease to be a Participant for all purposes
except for the purpose of receiving distributions, and making claims
for benefits under the Plan and shall receive no further allocations
from the Auxiliary ESOP portion of the Plan.
ARTICLE III
PROFIT SHARING PLAN EMPLOYER CONTRIBUTIONS
3.1 Profit Sharing Contributions. Profit Sharing Contributions
shall be made by Employers, as follows:
(a) Determination of Contribution. The Board of Directors
shall determine and certify to the Committee the amount, if any,
of Employer Profit Sharing Contributions to be made to the Plan
by all Employers hereunder separately for (1) staff and executive
employees or store managers and (2) Certified Swing Managers,
primary maintenance employees, crew members and other hourly
restaurant employees. In its discretion, the Board of Directors
may determine different amounts of contributions or contributions
of different percentages of Considered Compensation for the
groups identified in (1) and (2) of the preceding sentence. Such
determination shall be binding on all Participants, the
Committee, the Company and the Other Employers.
(b) Employer's Shares of Profit Sharing Contributions.
Subject to Section 12.2, each Employer including the Company
shall contribute for each Plan Year an amount equal to the sum of
the Staff Contribution and the Crew Contribution as determined
for such Employer below:
(1) Staff Contribution. The amount of an Employer's
Staff Contribution shall equal the product of (A) the total
Profit Sharing Contributions for the Plan Year for the
Participants identified in Section 3.1(a)(1), as determined
by the Board of Directors in accordance with Section 3.1(a),
multiplied by (B) a fraction the numerator of which is the
total Considered Compensation for such Plan Year of such
Participants who are (i) Active Participants and
(ii) Employees of such Employer and the denominator of which
is the total Considered Compensation for the Plan Year of
all Active Participants who are Employees of all Employers
described in Section 3.1(a)(1); and
(2) Crew Contribution. The amount of an Employer's
Crew Contribution shall equal the product of (A) the total
Profit Sharing Contributions for the Plan Year for the
Participants identified in Section 3.1(a)(2), as determined
by the Board of Directors in accordance with Section 3.1(a),
multiplied by (B) a fraction the numerator of which is the
total Considered Compensation for such Plan Year of such
Participants who are (i) Active Participants and
(ii) Employees of such Employer and the denominator of which
is the total Considered Compensation for the Plan Year of
all Active Participants who are Employees of all Employers
described in Section 3.1(a)(2).<PAGE>
3.2 Payment of Contributions Made Pursuant to Article III. The
Employer Profit Sharing Contributions for each Plan Year shall be paid
in cash or in securities of McDonald's Corporation, which are
qualifying employer securities as defined in ERISA Section 407(d)(5)
(which includes but is not limited to Company Stock), in full not
later than the due date for filing the federal income tax return of
the Employer for the tax year during which the last day of such Plan
Year falls.
Employer Profit Sharing Contributions and Forfeitures, if any,
for each Plan Year shall be held in the Profit Sharing Contribution
Holding Fund and, if contributed in cash, invested in the Money Market
Fund or, if contributed as qualifying employer securities, remain
invested in qualifying employer securities until February 1 following
the Plan Year or, if not administratively feasible, as soon thereafter
as administrative requirements may warrant, at which time the
Committee shall allocate such amounts to Participants' Profit Sharing
Fund Accounts and invest them in accordance with Section 10.7, 10.8 or
10.11(a), as applicable.
ARTICLE IV
McDESOP EMPLOYER CONTRIBUTIONS
4.1 Amount of Employer Matching Contributions. Employer
Matching Contributions shall be made by Employers as specified in (a),
subject to the limitations specified in (b), as follows:
(a) Employer Matching Contributions. For each Plan Year,
each Employer shall contribute to the Trust as Employer Matching
Contributions an amount equal to (i) the Matching Amount reduced
by (ii) the Forfeiture Amount, as defined below:
(1) The Matching Amount shall equal fifty percent (or
such greater percentage as the Board of Directors from time
to time determines) of the sum of all Participant Elected
Matched Contributions (excluding Special Participant Elected
Matched Contributions as described in Section 5.1) for the
Plan Year made for Active Participants who are employed by
that Employer. If the Forfeiture Amount for a Plan Year is
greater than the Matching Amount, the Matching Amount shall
equal the Forfeiture Amount plus any Employer Matching
Contributions made to the Trust by the Employers for such
Plan Year.
(2) The Forfeiture Amount shall equal (A) the amount
of Forfeitures which occur during a Plan Year pursuant to
Sections 11.4(c) and 16.6, (B) multiplied by a fraction the
numerator of which is the amount of Participant Elected
Matched Contributions (excluding Special Participant Elected
Matched Contributions) made for Active Participants who are
Employees of such Employer and the denominator of which is
the total amount of Participant Elected Matched
Contributions (excluding Special Participant Elected Matched
Contributions) made for Active Participants for the Plan
Year.<PAGE>
Notwithstanding the foregoing, the Board of Directors may
from time to time determine that each Employer shall make
Employer Matching Contributions in a designated equal amount for
the Plan Year or a designated portion of such Plan Year for each
Participant ("Employer Per Capita Matching Contributions").
(b) Average Actual Contribution Percentage. The average
actual contribution percentage ("Average ACP") for a specified
group of Participants for a Plan Year shall be the average of the
actual contribution percentages of the persons in such group. A
Participant's actual contribution percentage is equal to the
product of (1) 100 multiplied by (2) the quotient of (A) the sum
of Employer Matching Contributions including any Forfeitures
allocated therewith and Special Section 401(k) Employer
Contributions (both to the extent not counted for purposes of the
Required ADP Test pursuant to Section 5.2(d)) and, if the
Committee in its discretion so elects, Participant Elected
Contributions actually paid to the Trust for each such Employee
for such Plan Year divided by (B) the Employee's Considered
Compensation for the Plan Year ("Actual Contribution
Percentage"). As soon as practicable after the end of the Plan
Year, the Committee shall calculate the Average ACP for the Plan
Year for the group of Employees eligible to be Active
Participants who are Highly Compensated Employees and for the
group of such Employees who are Non-highly Compensated Employees.
(c) Required Actual Contribution Percentage Test and
Adjustment. The Average ACP for the group of Highly Compensated
Employees eligible to be Active Participants for any Plan Year
shall not exceed both (1) and (2) ("Required ACP Test") as
follows:
(1) the Average ACP for the group of Participants who
are Non-highly Compensated Employees multiplied by 1.25, and
(2) the lesser of (A) the Average ACP for the group of
Employees eligible to be Active Participants who are Non-
highly Compensated Employees multiplied by 2 or (B) such
Average ACP for such Employees plus 2%.
If the Required ACP Test for a Plan Year is not met and, if the
Company does not elect to make Special Section 401(k) Employer
Contributions with respect to the Plan Year sufficient to result
in the Average ACP of the Highly Compensated Employees not
exceeding the amounts in both Sections 4.1(c)(1) and (c)(2), then
the Committee shall reduce Employer Matching Contributions
including any Forfeitures allocated therewith which may be
allocated to Participants who are Highly Compensated Employees to
the highest percentage of Considered Compensation which results
in the Average ACP of Highly Compensated Employees meeting the
requirements of Section 4.1(c)(1) or (c)(2) above. The Committee
shall reduce and distribute such excess Employer Matching
Contributions including any Forfeitures allocated therewith and
any income, gains or losses attributable thereto, as determined
in accordance with Section 5.3, to Highly Compensated Employees
by first reducing and distributing the Employer Matching
Contributions including any Forfeitures allocated therewith of
such Participants with the highest Actual Contribution Percentage
to equal that of the Highly Compensated Employee with the next
highest Actual Contribution Percentage and repeating such<PAGE>
reductions until the Average ACP for the Highly Compensated
Employees does not exceed both the amounts in Sections 4.1(c)(1)
and (c)(2) above. The Committee shall make any distributions
necessary for the Plan to meet the Required ACP Test after the
end of the Plan Year with respect to which such reduced Employer
Matching Contributions including any Forfeitures allocated
therewith were made and, if reasonably possible, by March 15
following the end of such Plan Year but, in any event, not later
than by the end of the following Plan Year.
4.2 Auxiliary ESOP Contributions. Employer Auxiliary ESOP
Contributions shall be made by Employers, as follows:
(a) Company Auxiliary ESOP Contributions. For each Plan
Year that a loan authorized under Section 6.1 remains unpaid, the
Company shall contribute in cash to the Trust, as Employer
Auxiliary ESOP Contributions, such amounts (if any) as shall be
determined by the Board of Directors, provided, however, the
Company's Employer Auxiliary ESOP Contribution in cash for any
Plan Year shall not be less than the product of:
(1) the installment (if any) payable on such loan
reduced by the dividends on unallocated shares of Company
Stock (or Company stock into which such shares have been
converted) held in the suspense account associated with such
loan (or any loan refinanced with such loan), dividends on
allocated shares of Company Stock (or Company Stock into
which such shares have been converted) held in Participants'
Employer Auxiliary ESOP Contribution Accounts acquired with
the proceeds of such loan (or any Loan refinanced with such
loan) and earnings attributable to such dividends and to
Employer Auxiliary ESOP Contributions made to repay such
loan; multiplied by
(2) a fraction, the numerator of which is the
Considered Compensation paid by the Company to Employees for
the Plan Year paid while they were Active Participants and
the denominator of which is the Considered Compensation for
the Plan Year paid to all Employees while they were Active
Participants.
If no installment (as drawn or renegotiated) is payable on a loan
for the Plan Year, no Employer Auxiliary ESOP Contribution shall
be required with respect to such loan for the Plan Year, except
as otherwise determined by the Board of Directors. The dividends
on allocated shares of Company Stock held in Participants'
Employer Auxiliary ESOP Contribution Accounts acquired with the
proceeds of a loan or any loan refinanced with such loan (or
shares into which such Company Stock has been converted) shall be
included in Section 4.2(a)(1) only to the extent that Employer
Contributions and the dividends and other income attributable to
unallocated shares held in the suspense account associated with
such loan are less than the installments payable or to be payable
with respect to such loan.
(b) Employer Auxiliary ESOP Contributions. Each Employer
that has adopted the Auxiliary ESOP (other than the Company)
shall contribute to the Trust an amount equal to the product of:<PAGE>
(1) the total Considered Compensation for the Plan
Year paid by such Employer to Employees while they were
Active Participants; multiplied by
(2) a fraction the numerator of which is the Employer
Auxiliary ESOP Contribution of the Company for the Plan Year
and the denominator of which is the Considered Compensation
paid by the Company to Employees while they were Active
Participants.
(c) Types of Auxiliary ESOP Contributions. There shall be
two types of Employer Auxiliary ESOP Contributions, determined by
the type of loan designated by the Board of Directors at the time
a loan is authorized under Section 6.1 hereof:
(1) Per Capita Employer Auxiliary ESOP Contributions
with respect to which amounts released from the Auxiliary
ESOP Suspense Account (after such released amount is reduced
by amounts allocated to Participants' Per Capita Employer
Auxiliary ESOP Contribution Accounts with respect to
dividends paid on shares of Company Stock held in such
Accounts and used to repay the loan) shall be allocated to
Participants' Per Capita Employer Auxiliary ESOP
Contribution Accounts in accordance with Section 7.3(a), and
(2) Compensation Based Employer Auxiliary ESOP
Contributions with respect to which amounts released from
the Auxiliary ESOP Suspense Account (after such released
amount is reduced by amounts allocated to Participants'
Compensation Based Employer Auxiliary ESOP Contribution
Accounts with respect to dividends paid on shares of Company
Stock held in such Accounts and used to repay the loan)
shall be allocated to Participants' Compensation Based
Employer Auxiliary ESOP Contribution Accounts in accordance
with Section 7.3(b).
(d) Additional Employer Auxiliary ESOP Contributions. The
Board of Directors may, in its discretion, determine that
Additional Employer Auxiliary ESOP Contributions shall be made
for a Plan Year in Company Stock and designate such contributions
as Per Capita Additional Auxiliary ESOP Contributions or
Compensation Based Additional Auxiliary ESOP Contributions
(collectively called "Additional Employer Auxiliary ESOP
Contributions"). The Company shall make such Additional Employer
Auxiliary ESOP Contributions in an amount equal to the total
Additional Employer Auxiliary ESOP Contribution multiplied by a
fraction the numerator of which is the Considered Compensation
paid by the Company to Employees for the Plan Year paid while
they were Active Participants and the denominator of which is the
Considered Compensation for the Plan Year paid to all Employees
while they were Active Participants.
Each Employer that has adopted the Auxiliary ESOP (other
than the Company) shall contribute to the Trust as Additional
Employer Auxiliary ESOP Contributions an amount equal to the
product of the total Considered Compensation for the Plan Year
paid by such Employer to Employees while they were Active
Participants multiplied by a fraction the numerator of which is
the Company's Additional Employer Auxiliary ESOP Contribution and<PAGE>
the denominator of which is the Compensation paid by the Company
to Employees while they were Active Participants.
(e) Special Dividend Replacement Contributions. The Board
of Directors may, in its discretion, determine that Special
Dividend Replacement Contributions shall be made as of any
Valuation Date in an amount not to exceed the dividends with
respect to Company Stock allocated to Participant's Employer
Auxiliary ESOP Accounts which are used pursuant to Section
6.3(b). Each Employer shall make any such Special Dividend
Replacement Contributions in an amount equal to the total amount
of such contributions to be made as of a Valuation Date
multiplied by a fraction the numerator of which is the Considered
Compensation paid to Active Participants who are Employees of the
Employer for the calendar quarter ending on the Valuation Date
and the denominator of which is the Considered Compensation paid
to all Active Participants during the calendar quarter ending on
the Valuation Date.
(f) Auxiliary ESOP Suspense Account. All Employer
Auxiliary ESOP Contributions made with respect to a loan shall be
held and accounted for within the separate Auxiliary ESOP
Suspense Account associated with such loan.
4.3 Annual Employer Contribution Elections.
(a) Minimum and Maximum Amount of Participant Elected
Matched Contributions. Prior to January 1, 1993, an Active
Participant may elect a Special Participant Elected Matched
Contribution in the amount of $1 per week to commence to be made
to the Trust on his behalf. Once elected, such Special
Participant Elected Matched Contributions shall continue for so
long as the Participant is an Active Participant until the
Participant elects to discontinue such contributions.
If Participant Elected Matched Contributions (in addition to
Special Participant Elected Matched Contributions made prior to
January 1, 1993) are to be permitted for all or any portion of a
Plan Year, the Company by action of its Board of Directors shall
specify for the Plan Year or portion of the Plan Year, the amount
(either as a dollar amount or a percentage of each Active
Participant's Considered Compensation) of such Participant
Elected Matched Contributions ("Specified Participant Elected
Matched Contributions") which shall be made on behalf of an
Active Participant in the absence of a contrary election by the
Participant and may also specify, the minimum and maximum amounts
of Participant Elected Matched Contributions which a Participant
may elect in lieu of Specified Participant Elected Matched
Contributions (either as a dollar amount or a percentage of each
Participant's Considered Compensation) for the Plan Year or
portion of the Plan Year as permitted by procedures established
by the Plan Administrator, provided that such minimum and maximum
amounts shall be not greater for any Plan Year than
(1) prior to to January 1, 1993, one dollar ($1) per week
plus
(A) five percent (5%) of the Participant's Considered
Compensation if the Participant is a staff or an executive
employee or a store manager,<PAGE>
(B) ten percent (10%) of the Participant's Considered
Compensation if the Participant is a Certified Swing Manager
or primary maintenance employee, and
(C) eight percent (8%) of the Participant's Considered
Compensation if the Participant is a crew member or other
hourly restaurant employee; and
(2) on or after January 1, 1993 and prior to January 1,
1994
(A) five percent (5%) of the Participant's Considered
Compensation if the Participant is a staff or an executive
employee or a store manager,
(B) ten percent (10%) of the Participant's
Compensation if the Participant is a Certified Swing Manager
or primary maintenance employee, and
(C) eight percent (8%) of the Participant's
Compensation if the Participant is a crew member or other
hourly restaurant employee; and
(3) on or after January 1, 1994
(A) six percent (6%) of the Participant's Considered
Compensation if the Participant is a staff or an executive
employee or a store manager,
(B) ten percent (10%) of the Participant's Considered
Compensation if the Participant is a Certified Swing Manager
or primary maintenance employee, and
(C) eight percent (8%) of the Participant's Considered
Compensation if the Participant is a crew member or other
hourly restaurant employee.
(b) Special Section 401(k) Employer Contributions. For
each Plan Year, the Company may elect to have the Company and the
other Employers make a Special Section 401(k) Employer
Contribution to the Plan in such amount (if any) as the Board of
Directors may determine, which shall be allocated pursuant to
Section 7.2(b) to the Employer Matching Contribution Accounts of
those Active Participants who for the Plan Year are Non-highly
Compensated Employees who have Compensation reduction elections
in effect. In any Plan Year in which the Company elects to have
such a Special Section 401(k) Employer Contribution made, each
Employer, including the Company, shall contribute a fractional
portion of the Special Section 401(k) Employer Contribution, in
an amount equal to the Special Section 401(k) Employer
Contribution multiplied by a fraction, the numerator of which is
the amount of Participant Elected Contributions for such Plan
Year of those Active Participants who are employed by the
Employer and who are Non-highly Compensated Employees, and the
denominator of which is the amount of Participant Elected
Contributions for the Plan Year of all Active Participants who
are Non-highly Compensated Employees.<PAGE>
4.4 Additional Employer Contributions. For such Plan Years, if
any, as the Board of Directors shall direct, the Employers shall make
Additional Employer Contributions in an amount to be determined by the
Board of Directors. Each such Employer shall contribute Additional
Employer Contributions to the Trust for a Plan Year in an amount equal
to the total Additional Employer Contributions for such Plan Year
multiplied by a fraction the numerator of which is the number of
Active Participants eligible to receive Additional Employer
Contributions who are Employees of the Employer and the denominator of
which is the total number of Active Participants eligible to receive
Additional Employer Contributions.
4.5 Payment of Contributions Made Pursuant to Article IV.
Employer Contributions for each Plan Year made in accordance with
Article IV, except for Special Section 401(k) Employer Contributions
as provided in Section 4.3(b), shall be delivered to the Trustee on or
before the due date for the filing of the federal income tax return
(including any extensions) of the Employer for the tax year during
which the last day of such Plan Year occurs. Special Section 401(k)
Employer Contributions for a Plan Year may be made during the Plan
Year or at any time on or before the last day of the following Plan
Year.
Employer Matching Contributions and any Forfeitures allocated
therewith, Special Section 401(k) Employer Contributions and
Additional Employer Contributions shall be invested in the McDESOP
McDonald's Common Stock Fund and held in the Employer Matching
Contribution Holding Fund until allocated to Participant's Accounts as
provided in Sections 7.2(a), 7.2(b) and 7.2(c), respectively.
Employer Per Capita Matching Contributions shall be invested in the
McDESOP McDonald's Common Stock Fund and held in the Employer Per
Capita Matching Contribution Holding Fund until allocated to
Participant's Accounts as provided in Section 7.2(d). Participant
Elected Contributions shall be invested in the McDESOP McDonald's
Common Stock Fund and held in the Participant Elected Contribution
Holding Fund until credited to Participant's Accounts as provided in
Section 7.4.
4.6 Form of Contributions. Except as otherwise provided,
Employer Contributions to the McDESOP Trust shall be either in cash or
in Company Stock, as each Employer shall determine in its discretion.
ARTICLE V
PARTICIPANT ELECTED CONTRIBUTIONS
5.1 Participant Elected Contributions. Each Active Participant,
who is employed by an Employer, shall have his Considered Compensation
reduced for each Plan Year or designated portion of a Plan Year by an
amount equal to the Specified Participant Elected Matched Contribution
for the Plan Year or designated portion of a Plan Year, as provided in
Section 4.3(a), which amount his Employer shall contribute to the
McDESOP Trust on the Participant's behalf as a Participant Elected
Matched Contribution, unless the Participant shall elect, on such
form, at such time and in such manner as the Committee shall specify,
not to have his Considered Compensation so reduced or (subject to the
minimum and maximum amounts of reduction specified for the Plan Year
pursuant to Section 4.3(a)) reduced by a lesser or greater amount. In
addition, each Active Participant may elect in writing on forms<PAGE>
approved by the Committee to have his Employer contribute to the
McDESOP Trust on the Participant's behalf as Participant Elected
Unmatched Contributions an amount equal to any additional amount by
which the Participant elects to have his Considered Compensation
reduced (which election may be a larger percentage for certain
Considered Compensation during a Plan Year, e.g. bonus, and a smaller
percentage for other Considered Compensation, e.g. salary, as the
Committee shall permit), provided that such amount may not exceed (i)
prior to January 1, 1993, five percent (5%), and (ii) on or after
January 1, 1993, seven percent (7%) of his Considered Compensation for
a Plan Year and further provided that an Active Participant may elect
Participant Elected Unmatched Contributions as provided above
regardless of whether the Participant is making Participant Elected
Matched Contributions for that period. The Committee may from time to
time establish general policies requiring Participants to elect
Participant Elected Matched Contributions up to a specified level
before electing any Participant Elected Unmatched Contributions.
Prior to January 1, 1993, each Participant may elect to have his
Considered Compensation reduced by one dollar ($1.00) per week as
provided in Section 4.3(a) which his Employer shall contribute to the
McDESOP Trust on his behalf as a Special Participant Elected Matched
Contribution and may elect to discontinue such contributions. Such
Special Participant Elected Matched Contributions shall be treated as
Participant Elected Matched Contributions for all purposes hereunder
except that Special Participant Elected Contributions shall not be
counted as Participant Elected Matched Contributions for the purpose
of applying the limit of five percent (5.0%) of a Participant's
Considered Compensation applicable to Participant Elected Matched
Contributions.
Notwithstanding any provision herein to the contrary, the amount of a
Participant's Participant Elected Contributions for any calendar year
shall not exceed an amount or percentage which from time to time is
established by the Committee or the Board of Directors, nor a pro rata
portion of said amount for any partial calendar year of contributions.
Except as otherwise specifically provided herein, a Participant
may make, change or revoke a Compensation reduction election at such
times and in such manner as the Committee may permit, provided that
any such election, change or revocation shall apply solely to
Considered Compensation, which is not currently available to the
Participant as of the date of such election, change or revocation.
The Compensation reduction election by the Active Participant which is
in accordance with the Plan shall continue in effect, notwithstanding
any change in Considered Compensation, until he shall change such
Compensation reduction election or until he shall cease to be an
Active Participant. If a Participant has an election pursuant to the
McDonald's 1989 Executive Equalization Plan ("McCap I") or the
McDonald's Supplemental Employee Benefit Equalization Plan
("McCap II") in effect for a calendar year, the Participant's
Compensation reduction election hereunder may not be changed for such
year but may only be changed before the beginning of the following
Plan Year for such Plan Year. Each Employer shall make Participant
Elected Contributions to the Trustee on behalf of each Active
Participant employed by the Employer in the amount by which the
Participant's Considered Compensation was reduced pursuant to this
Section 5.1.<PAGE>
5.2 Restrictions on Participant Elected Contributions.
Notwithstanding the provisions of Section 5.1, the following
restrictions shall apply to Participant Elected Contributions:
(a) No Participant Compensation reduction election shall be
solicited or accepted from any Participant and no Participant
Elected Contributions shall be made on behalf of any Participant
unless and until a registration statement under the Securities
Act of 1933 has become effective with respect to securities
offered in connection with the Plan, unless in the opinion of
counsel for the Company such registration statement is not
required;
(b) No Compensation reduction election shall be solicited
or accepted from any Participant who resides or works in any
state and no Participant Elected Contributions shall be made on
behalf of any Participant who resides or works in any state
unless and until the Plan shall have complied with applicable
securities and blue sky laws of the state or in the opinion of
counsel of the Company is exempt from such law; and
(c) (1) The sum of Participant Elected Contributions and
of elected deferrals under any Related Defined Contribution
Plan for any Participant shall in no event exceed a maximum
of $8,728 (in 1992 as adjusted from time to time, in
accordance with Section 402(g)(5) of the Internal Revenue
Code) for a calendar year ("Maximum Elective Deferral
Amount").
(2) If the Participant notifies the Committee in
writing by March 1 following the Plan Year or such later
date not later than the April 15 following the Plan Year as
the Committee shall permit, that the sum of his elective
contributions to a simplified employer pension, to a 403(b)
plan (as defined in Section 402(g)(3) of the Internal
Revenue Code), or to any qualified cash or deferred
arrangement (as defined in Section 401(k) of the Internal
Revenue Code) exceeds the Maximum Elective Deferral Amount
("Excess Elected Deferrals"), such portion of the
Participant's Participant Elected Contributions as the
Participant shall elect in such notice not to exceed the
amount of such Excess Elected Deferrals (including any
income allocated thereto as determined in accordance with
Section 5.3) shall be distributed to the Participant not
later than the April 15 following the Plan Year. In
determining whether a Participant has made Excess Elected
Deferrals under this Section 5.2(c)(2), if a Participant is
a participant in any plan described in Section 403(b) of the
Internal Revenue Code under which he makes elective
deferrals, the Maximum Elective Deferral Amount shall be
increased in accordance with the provisions of Sections
402(g)(4) and 402(g)(8) of the Internal Revenue Code with
respect to any Participant who participates in a plan
described in Section 403(b) of the Internal Revenue Code or
who is a qualified employee in a plan of a qualified
organization (as defined in Section 402(g)(8) of the
Internal Revenue Code) for a calendar year.
(3) Notwithstanding the foregoing, if the Participant
has elected to participate in McCAP I or McCAP II as<PAGE>
provided therein his Compensation reduction elections
hereunder shall be irrevocable to the extent provided in
Section 5.1 and any amount of such deferrals which shall be
in excess of the Maximum Elective Deferral Amount and any
Employer Matching Contributions and any Forfeitures
allocated therewith shall not be contributed hereunder but
shall be credited to the Participant's account under McCAP I
or McCAP II, as applicable, to the extent provided
thereunder and further provided that no such amount shall be
credited to a Participant under more than one of the
McDonald's Profit Sharing Program Equalization Plan
("McEqual"), McCAP I and McCAP II or any other non-qualified
deferred compensation plan from time to time maintained by
the Company.
(4) If a Participant is not eligible to or has not
elected to participate in McCAP I or McCAP II as provided
therein and has Compensation reduction elections in excess
of the Maximum Elective Deferral Amount hereunder, such
Participant Elected Contributions shall not be contributed
to the Plan nor shall such Participant be credited with any
Participant Elected Contributions or Employer Matching
Contributions and any Forfeitures allocated therewith under
McCAP I or McCAP II, as applicable, for the Plan Year.
(5) In determining whether the Maximum Elective
Deferral Amount has been exceeded, the Plan Administrator
may count Participant Elected Contributions toward the limit
in the order contributed to the Plan, may apply the Maximum
Elective Deferral Amount on a pro rata basis to periods
specified by the Plan Administrator or such other approach
as the Plan Administrator shall reasonably determine.
(d) Average Actual Deferral Percentage. The average Actual
Deferral Percentage ("Average ADP") for a specified group of
Participants for a Plan Year shall be the average of the Actual
Deferral Percentages of the members of such group. The Actual
Deferral Percentage of an individual is the amount of his
Participant Elected Contributions (excluding for each Non-highly
Compensated Employee any such contributions in excess of the
Maximum Elective Deferral Amount as defined in Section 5.2(c)(1))
and such portion, if any, as the Committee determines, of
Employer Matching Contributions and Special Section 401(k)
Employer Contributions, actually paid to the Trust for each such
Employee for such Plan Year divided by the Employee's Considered
Compensation for the Plan Year ("Actual Deferral Percentage").
As soon as practicable after the end of the Plan Year, the
Committee shall calculate the Average ADP for the Plan Year for
the group of Participants who are Highly Compensated Employees
and for the group of Participants who are Non-highly Compensated
Employees.
(e) Required ADP Test and Adjustment. The Average ADP for
a group of Highly Compensated Employees eligible to be Active
Participants for any Plan Year shall not exceed both (1) and (2)
("Required ADP Test") below:
(1) the Average ADP for the group of Active
Participants who are Non-highly Compensated Employees
multiplied by 1.25, and<PAGE>
(2) the lesser of (A) the Average ADP for Active
Participants who are Non-highly Compensated Employees
multiplied by 2 or (B) such Average ADP for such Active
Participants plus 2%.
If the Required ADP Test for a Plan Year is not met and, if
the Company does not elect to make Special Section 401(k)
Contributions with respect to the Plan Year sufficient to result
in the Average ADP of the Highly Compensated Employees not
exceeding both the amounts in Sections 5.2(e)(1) and (e)(2), then
the Committee shall reduce, in accordance with Section 5.5,
Participant Elected Contributions (and any Employer Matching
Contributions and any Forfeitures allocated therewith allocated
with respect thereto) that Active Participants who are Highly
Compensated Employees may defer so that the Average ADP of Highly
Compensated Employees does not exceed the amounts in
Sections 5.2(e)(1) and (e)(2).
The Committee shall reduce and distribute such excess
Participant Elected Contributions and any income, gains or losses
attributable thereto, as determined in accordance with
Section 5.3, to Highly Compensated Employees by first reducing
the Participant Elected Contributions (and any Employer Matching
Contributions and any Forfeitures allocated therewith) of such
Participants with the highest Actual Deferral Percentage to equal
that of the Highly Compensated Employee with the next highest
Actual Deferral Percentage and repeating such reductions until
the ADP for the Highly Compensated Employees does not exceed the
amounts in both Section 5.2(e)(1) and (e)(2) above. The
Committee shall distribute such reduced Participant Elected
Contributions and any income allocable thereto after the end of
the Plan Year with respect to which such reduced Participant
Elected Contributions were made and, if reasonably possible, by
March 15 following the end of such Plan Year but, in any event,
not later than by the end of the following Plan Year. If
Employer Matching Contributions and any Forfeitures allocated
therewith are included in calculating the ADP for a Plan Year,
any such contributions reduced hereunder shall be distributed to
Participants in the same manner as Participant Elected
Contributions are distributed (including any income allocable
thereto). If Employer Matching Contributions and any Forfeitures
allocated therewith are not included in calculating the ADP for
Plan Year, any amount of Employer Matching Contributions and any
forfeitures allocated therewith reduced hereunder because such
contributions were originally allocated with respect to
Participant Elected Matched Contributions which are reduced to
meet the Required ADP Test shall become a Forfeiture and shall be
allocated to other Participant's Employer Matching Contribution
Accounts in proportion to the Employer Matching Contributions and
any Forfeitures allocated therewith to such accounts pursuant to
Sections 7.2(a) and (d).
5.3 Allocation of Income to Certain Distributed Amounts.
Income, gains and losses equal to the sum of the amounts determined
under (a) below shall be allocated to and distributed with any amounts
distributed to a Participant pursuant to Sections 4.1(c), 5.2(e) or
5.4 as follows:<PAGE>
(a) Income for Plan Year. Income, gains and losses for a
completed Plan Year with respect to contributions distributed in
accordance with Section 4.1(c), 5.2(e) or 5.4 shall equal the
income, gains and losses for the Plan Year allocable to a
Participant's Account for such contributions (taking the
contributions allocated to each different type of Account,
separately) multiplied by a fraction the numerator of which is
the amount of such contributions so distributed and the
denominator of which is the total of such Account balance as of
the last day of the Plan Year reduced by all earnings and gains
and increased by all expenses and losses allocable to such
Account for the Plan Year.
(b) Allocation of Distributed Income to Accounts. Income,
gains and losses distributed with any amounts distributed to a
Participant pursuant to Sections 4.1(c), 5.2(e) or 5.4 shall
reduce the income, gains and losses allocated to a Participant's
Elected Contribution Account or Employer Matching Contribution
Account, in accordance with Section 10.15, in an amount equal to
the total amount of such income, gains and losses distributed.
5.4 Multiple Use of Alternative Limitations. If after any
reductions provided for in Sections 4.1(c) and 5.2(e) are made, the
ACP of Highly Compensated Employees exceeds the amount in Section
4.1(c)(1) but does not exceed the lesser of the amounts in Section
4.1(c)(2) and the Average ADP of Highly Compensated Employees exceeds
the amount in Section 5.2(e)(1) but does not exceed the lesser of the
amounts in Section 5.2(e)(2), the sum of the Average ADP and the
Average ACP, for a Plan Year, of the Highly Compensated Employees who
are Active Participants (i) shall not exceed the greater of (a) or
(b), where:
(a) equals the sum of (1) plus (2) where:
(1) is one hundred and twenty-five percent (125%) of
the greater of (A) the Average ADP for such Plan Year of the
Non-Highly Compensated Employees who are Active
Participants, or (B) the Average ACP for such Plan Year of
such Non-Highly Compensated Employees; and
(2) is two percent plus the lesser of the amount
determined under Section 5.4(a)(1)(A) or the amount
determined under Section 5.4(a)(1)(B), but in no event shall
this amount exceed two hundred percent (200%) of the lesser
of the amounts determined under Section 5.4(a)(1)(A) or
5.4(a)(1)(B); and
(b) equals the sum of (1) plus (2) where
(1) is one hundred and twenty-five percent (125%) of
the lesser of (A) the Average ADP for such Plan Year of the
Non-Highly Compensated Employees who are Active
Participants, or (B) the Average ACP for such Plan Year of
such Non-Highly Compensated Employees; and
(2) is two percent plus the greater of the amount
determined under Section 5.4(b)(1)(A) or 5.4(b)(1)(B). In
no event, however, shall this amount exceed 200 percent of
the greater of the amounts determined under
Section 5.4(b)(1)(A) or 5.4(b)(1)(B).<PAGE>
The Committee may establish, from time to time, such rules,
restrictions and limitations as it may deem appropriate to insure that
the above limitations are met. If the Committee determines that the
reduction or disallowance of Employer Matching Contributions and any
Forfeitures allocated therewith, Participant elections or Participant
Elected Contributions is necessary or desirable with respect to Highly
Compensated Employees, the Committee may reduce or disallow Employer
Matching Contributions and any Forfeitures allocated therewith or
Participant Elected Contributions and the income, gains and losses
thereon as determined pursuant to Section 5.3 for such Highly
Compensated Employees, including elections for Participant Elected
Contributions or such contributions and Employer Matching
Contributions and any Forfeitures allocated therewith already made for
the Plan Year, as provided in Section 4.1(c), 5.2(e) or 5.5.
5.5 Excess Compensation Reduction Elections. Participant
Elected Contributions for any Participant or group of Participants
shall not exceed the maximum amounts permitted under Sections 4.1(c),
5.2(e) and 5.4, as determined by the Committee in its sole discretion.
If any amounts of Employer Matching Contributions and any Forfeitures
allocated therewith of any Participant or group of Participants are
determined by the Committee to be in excess of the amounts permitted
under Section 4.1(c) or 5.4, or if any amounts of Participant Elected
Contributions for any Participant or group of Participants are
determined by the Committee to be in excess of the amounts permitted
under Section 5.2(e) or 5.4 and if the Company has not elected to make
Special Section 401(k) Employer Contributions with respect to the Plan
Year sufficient to satisfy the requirements of Section 4.1(c), 5.2(e)
or 5.4 or if the Committee reasonably expects that Employer Matching
Contributions and any Forfeitures allocated therewith or Participant
Elected Contributions will be in excess of the amounts permitted under
Section 4.1(c), 5.2(e) or 5.4, the Committee may apply one or both of
(a) and (b) below to the extent the Committee, in its discretion,
reasonably estimates to be necessary to satisfy Section 4.1(c), 5.2(e)
or 5.4.
(a) Restrictions on Participant Elected Contributions. The
Committee may, in accordance with uniform and non-discriminatory
rules from time to time established by the Committee, reduce
prospectively the amount of the Participant Elected Contributions
which may be made by an Employer to the McDESOP Trust on behalf
of Active Participants who are Highly Compensated Employees by
reducing the Participant's elections for such contribution to the
extent the Committee reasonably determines it is necessary to
satisfy Section 5.2(e) or 5.4.
(b) Staggered and Limited Elections for Highly Compensated
Employees. The Committee may, in accordance with uniform and
non-discriminatory rules it establishes from time to time,
require that Active Participants who are among the Highly
Compensated Employees for the Plan Year make Compensation
reduction elections following and/or preceding the completion of
such elections by Employees who are Non-highly Compensated
Employees and the Committee may (1) limit the amount by which
each Participant who is among the Highly Compensated Employees
may elect to reduce his Considered Compensation, and (2) permit
each Employee who is a Non-highly Compensated Employee to elect
to reduce his Considered Compensation within higher limits than
those for Highly Compensated Employees.<PAGE>
(c) Estimated Compensation. For the purposes of
Section 5.5(a) and (b), Employers are permitted to determine that
Participants are Highly Compensated Employees or Non-highly
Compensated Employees based on the Participant's Considered
Compensation for the immediately preceding Plan Year or estimated
Considered Compensation for the current Plan Year in accordance
with uniform and nondiscriminatory rules whenever information
regarding actual Considered Compensation for the Plan Year is not
reasonably available at the time the amount of a contribution
hereunder is determined or limited; provided that subsequent
adjustments shall be made, as necessary, to the extent such
estimates prove to be incorrect.
5.6 Deadline for Participant Elected Contributions. Each
Employer shall contribute on behalf of each Active Participant the
Participant Elected Contributions for each Plan Year to the Trustee as
soon as administratively possible as of the earliest date on which
such contributions can reasonably be segregated from the Employer's
general assets but not later than the earlier of (1) 90 days from the
date on which such amounts would otherwise have been payable to the
Active Participant in cash or (2) the end of the twelve-month period
immediately following the last day of such Plan Year or by such later
date as may be permitted under applicable law, Treasury Regulations
and Rulings of the Internal Revenue Service.
5.7 Application of the Limitations of Sections 5.2(c), 5.2(e),
4.1(c), 5.4 and 9.1. Section 5.2(c) shall be first applied to
contributions under the Plan, secondly, Section 5.2(e) shall be
applied to contributions under the Plan, thirdly, Section 4.1(c) shall
be applied to contributions under the Plan, fourthly, Section 5.4
shall be applied to contributions under the Plan, and lastly,
Section 9.1 shall be applied to contributions under the Plan.
ARTICLE VI
AUXILIARY ESOP PROVISIONS
6.1 Power to Borrow. The Board of Directors in its discretion
may authorize the Trustee of the Trust to borrow funds on behalf of
the Plan for the purpose of purchasing Company Stock and for making
repayment of outstanding loans, the proceeds of which have been used
to purchase Company Stock and for which the Plan is liable. At the
time of authorizing a loan, the Board of Directors shall specify
whether the loan is to be a loan to be repaid with Per Capita Employer
Auxiliary ESOP Contributions ("Per Capita Loan") or Compensation Based
Employer Auxiliary ESOP Contributions ("Compensation Based Loan"). In
the event the Trustee's borrowing shall cause a lending of money or
other extension of credit to be made between the Plan and a
Disqualified Person or a Party in Interest or, if in connection with
such borrowing, a Disqualified Person or Party in Interest shall
guarantee a loan or other extension of credit to the Plan, such loan
or other extension of credit to the Plan shall, as an "Exempt Loan,"
meet the requirements of Section 4975(d)(3) of the Internal Revenue
Code and Section 408(b)(3) of ERISA and regulations thereunder, which
include the following:
(a) The loan shall be for a specific term and not payable
upon demand except in the event of default;<PAGE>
(b) The loan is primarily for the benefit of Participants
and Beneficiaries, at a reasonable rate of interest, and under
terms at the time the loan is made which are at least as
favorable to the Plan as the terms of a comparable loan resulting
from arms-length negotiations between independent parties;
(c) The proceeds of the loan must be used within a
reasonable time after their receipt to acquire Company Stock or
for making repayment of an outstanding Exempt Loan;
(d) The loan shall be without recourse against the Plan and
collateral for the loan shall be limited to the shares of Company
Stock acquired with the proceeds of the loan (or Company Stock
into which such shares have been converted) or used as collateral
on an outstanding Exempt Loan which is being repaid with the
proceeds of the loan. No person entitled to payment under the
loan shall have any right to any assets of the Plan other than
the collateral, Employer Auxiliary ESOP Contributions (excluding
contributions of Company Stock), earnings on such collateral and
contributions (including but not limited to dividends paid on
unallocated Company Stock held in the Auxiliary ESOP Suspense
Account) and dividends on Company Stock (or Company Stock into
which such shares have been converted) acquired with the loan
proceeds and held in Participants' Employer Auxiliary ESOP
Contribution Accounts;
(e) In the event of a default upon the loan, the value of
the Plan assets transferred in satisfaction of the loan shall not
exceed the amount of the default and, if the lender is a Party in
Interest or Disqualified Person, shall not exceed an amount of
Plan assets equal to the amount of the payment schedule with
respect to which there is a failure to pay; and
(f) The loan may provide that there shall be no required
payments of principal and/or interest for one or more years and
the Company may from time to time request the Trustee to
renegotiate any such loan to change the payment terms with
respect to payments not then due and payable, to extend the
period of payment, or to reduce or eliminate the amount of any
payment or payments of principal and/or interest not then due and
payable.
These rules shall be changed by amendment to the Plan to the
extent changes in applicable law require or permit.
6.2 Accounting for Loan Proceeds and Employer Auxiliary ESOP
Contributions. The Committee shall establish with respect to each
loan a separate Auxiliary ESOP Suspense Account to record and
separately account for: (a) the proceeds of each loan or other
extension of credit authorized under Section 6.1 and any unallocated
Company Stock purchased with proceeds of such a loan or any loan
refinanced with such loan (and any Company Stock into which such
purchased shares have been converted), (b) Employer Auxiliary ESOP
Contributions with respect to such loan, (c) any income, gains or
losses allocated to the Auxiliary ESOP Suspense Account with respect
to such loan and (d) any dividends from shares of Company Stock
purchased (and Company Stock into which such purchased shares have
been converted) with the proceeds of the loan (or any loan refinanced
with such loan) which have been allocated to Participants' Accounts<PAGE>
and transferred to the Suspense Account. Subject to the discretion of
the Trustee to reinvest proceeds from the sale of Company Stock
pursuant to Section 6.4(b), earnings of the Auxiliary ESOP Suspense
Account with respect to a loan shall be used to repay the loan, and to
the extent not so used shall be released and allocated under
Section 6.3 hereof. Assets shall be released from the Auxiliary ESOP
Suspense Account only in accordance with the provisions of Section 6.3
or to repay a loan or for reinvestment in Company Stock pursuant to
Section 6.4(b), provided, however, proceeds of an Exempt Loan may not
be used to repay any loan which is not an Exempt Loan.
6.3 Release from Auxiliary ESOP Suspense Account.
(a) Loan Repayment Release. Company Stock acquired with
the proceeds of an Exempt Loan, or other loan authorized under
Section 6.1 or a loan refinanced with such Exempt Loan or other
loan (and Company Stock into which such purchased shares have
been converted) and held in the Auxiliary ESOP Suspense Account
under Section 6.2 shall be released as of the last Valuation Date
of a Plan Year immediately following the release under
Section 6.3(b) for such Valuation Date for allocation to Per
Capita Employer Auxiliary ESOP Contribution Accounts or
Compensation Based Employer Auxiliary ESOP Contribution Accounts,
as applicable, of each Active Participant in accordance with the
provisions of Section 6.3(a)(1) below, unless such loan provides
for the annual payment of principal and interest at a cumulative
rate that is not less rapid at any time than level annual
payments of such amounts for ten (10) years, and the interest
paid on such loan is determined under standard loan amortization
tables, in which case such Company Stock shall be released in
accordance with Section 6.3(a)(1) or (2) below, as may be
selected by the Board of Directors in its discretion at the time
such loan is made; provided, however, if such loan is renewed,
extended or refinanced, and if the sum of the expired duration of
the loan, any renewal period, extension period, and the duration
of the refinancing exceeds ten (10) years, determined as of the
date of the renewal, extension or refinancing, Section 6.3(a)(1)
shall apply:
(1) Each Plan Year in which any amount remains
outstanding under an Exempt Loan (or other loan authorized
under Section 6.1), the number of shares of Company Stock
released from the Auxiliary ESOP Suspense Account shall
equal the difference between (A) the product (rounded upward
to the nearest whole number of shares) of the number of
shares of Company Stock held and accounted for under the
Auxiliary ESOP Suspense Account immediately before the
release increased by the number of shares, if any,
previously released from the Auxiliary ESOP Suspense Account
in accordance with Section 6.3(b) for the Plan Year with
respect to such loan, multiplied by a fraction, the
numerator of which is the amount of principal and interest
paid on the Exempt Loan (or other loan authorized under
Section 6.1) for the Plan Year and the denominator of which
is the sum of the numerator plus the principal and interest
to be paid for all future Plan Years (without consideration
of possible extensions or renewal periods) reduced by
(B) the number of shares, if any, previously released from
the Auxiliary ESOP Suspense Account in accordance with
Section 6.3(b) for the Plan Year with respect to such loan.<PAGE>
If the interest rate under the Exempt Loan (or other loan
authorized under Section 6.1) is variable, the interest to
be paid in future Plan Years shall be computed by using the
interest rate applicable as of the end of the Plan Year of
payment.
(2) For each Plan Year during the duration of an
Exempt Loan (or other loan authorized under Section 6.1),
the number of shares of Company Stock released from the
Auxiliary ESOP Suspense Account shall equal the difference
between (A) the product of the number of shares of Company
Stock held and accounted for under the Auxiliary ESOP
Suspense Account immediately before the release increased by
the number of shares, if any, previously released from the
Auxiliary ESOP Suspense Account in accordance with
Section 6.3(b) for the Plan Year with respect to such loan,
multiplied by a fraction, the numerator of which is the
amount of principal paid on the Exempt Loan (or other loan
authorized under Section 6.1) for the Plan Year and the
denominator of which is the sum of the numerator plus the
principal to be paid for all future years reduced by (B) the
number of shares, if any, previously released from the
Auxiliary ESOP Suspense Account in accordance with Section
6.3(b) for the Plan Year with respect to such loan.
If subsection (1) is applicable and if no amount of
principal and interest is paid with respect to a loan for the
Plan Year, or if subsection (2) is applicable and no amount of
principal is paid for the Plan Year, there shall be no release of
shares of Company Stock from the Auxiliary ESOP Suspense Account
maintained with respect to such loan for the Plan Year in
accordance with Section 6.3(a). If an Exempt Loan (or other loan
authorized under Section 6.1) is repaid as a result of a
refinancing by another Exempt Loan (or other loan authorized
under Section 6.1), such repayment shall not be considered a
repayment of principal under Sections 6.3(a)(1) and (2) and the
release of shares shall be determined as provided in Section
6.3(a)(1) and (2), by aggregating principal and interest on the
loan and any refinancings of the loan.
(b) As of each Valuation Date, there shall be released from
the Auxiliary ESOP Suspense Account maintained with respect to
each Exempt Loan (or other loan authorized under Section 6.1)
Company Stock in an amount equal to (1) the number of shares
which have a fair market value as of the Valuation Date equal to
the amount of dividends paid to the Trust with respect to shares
of Company Stock which were purchased with the proceeds of such
loan or any loan refinanced with such loan (and Company Stock
into which such purchased shares have been converted) and which
have been allocated to Participants' Accounts, which dividends
shall be received by the Trust since the immediately preceding
Valuation Date, credited to Participants' Accounts and
immediately placed in the Auxiliary ESOP Suspense Account to be
used to repay the loan, reduced by (2) the number of any shares
contributed or the number of shares purchased with any cash
contributed to the Trust as Special Dividend Replacement
Contributions in accordance with Section 4.2(e) with respect to
the loan.<PAGE>
(c) Any release from the Auxiliary ESOP Suspense Account
provided for in Section 6.3(b) for each Valuation Date during a
Plan Year (including the last Valuation Date for a Plan Year)
shall be made prior to the release from the Auxiliary ESOP
Suspense Account provided for in Section 6.3(a).
6.4 Installment Payments on Exempt Loan.
(a) Installment Payments. The Trustee shall make payments
on an Exempt Loan (or other loan authorized under Section 6.1) in
the amounts and at such times as such payments are due under the
terms of such loan and such additional payments on such loan as
the Trustee determines in its discretion, provided, however, such
payments shall be made solely from the Auxiliary ESOP Suspense
Account, from amounts of Employer Auxiliary ESOP Contributions
made in cash, from dividends with respect to shares of Company
Stock purchased with a loan or a loan refinanced by such loan (or
Company Stock into which such shares have been converted) which
shares have been released from an Auxiliary ESOP Suspense Account
and allocated to Participants' Accounts and from dividends or
other earnings with respect to the Auxiliary ESOP Suspense
Account maintained with respect to such loan and provided further
that Per Capita Employer Auxiliary ESOP Contributions and related
earnings shall be used solely to repay Per Capita Loans and
Compensation Based Employer Auxiliary ESOP Contributions and
related earnings shall be used solely to repay Compensation Based
Loans.
(b) Sale of Company Stock Held in Auxiliary ESOP Suspense
Account. In the event that any shares of Company Stock acquired
with the proceeds of a loan or a loan refinanced with such loan
(and Company Stock into which such purchased shares have been
converted) and held in an Auxiliary ESOP Suspense Account are
sold prior to release from such Auxiliary ESOP Suspense Account,
the Trustee, in its sole discretion, may either (1) apply the
proceeds of such sale, or any portion thereof, toward repayment
of such loan or a loan refinanced with such loan or (2) reinvest
the proceeds of such sale, or any portion thereof, in shares of
Company Stock. In exercising its discretion pursuant to Section
6.4(a), the Trustee shall consider the long-term interests of
both current and future Participants and Beneficiaries in
providing benefits under the Plan and Trust.
6.5 Non-Terminable Rights and Protections. Any of the
provisions herein to the contrary notwithstanding, the following
protections and rights are non-terminable, except to the extent
required or permitted under applicable law, Treasury Regulations and
Rulings of the Internal Revenue Service, with respect to proceeds of
an Exempt Loan regardless of whether the Plan continues to be
maintained as a leveraged ESOP.
(a) Except as provided in this Section 6.5, or except as
otherwise required by applicable law, no security acquired with
the proceeds of an Exempt Loan may be subject to a put, call
(other than a call with respect to Company Stock which is
convertible preferred stock which provides for a reasonable
opportunity for a conversion into common stock of the Company
which is Company Stock after such call is exercised), or other
option, or buy-sell or similar arrangement while held by and when<PAGE>
distributed from the Plan, whether or not the Plan is then an
ESOP.
(b) If any Company Stock acquired with the proceeds of an
Exempt Loan (or other loan authorized under Section 6.1) or which
is otherwise held in an Account in the McDESOP portion of the
Plan is not readily tradeable on an established market, or
thereafter ceases to be publicly traded and if and only if such
Company Stock should ever be distributed from the Plan, the
distributee shall be given an option exercisable only by the
distributee (or the distributee's donees or a person, including
an estate of a distributee, to whom the security passes by reason
of the Participant's death), to put the security to the Company
for a 60 day period beginning on the date of distribution ("First
Put Period") and for another 60 day period commencing on the
first anniversary of the date of distribution ("Second Put
Period"). If such security ceases to be readily tradeable on an
established market (or becomes subject to a trading limitation)
before the end of the Second Put Period, the Company shall notify
the Participant in writing on or before the 10th day after the
date the security ceases to be readily tradeable on an
established market (or becomes subject to a trading limitation)
that the security is subject to a put option to the Company for
any portion of the First Put Period and the Second Put Period
remaining after the date the security ceases to be readily
tradeable on an established market, and such notice shall inform
the distributees of the terms of the put option. The Plan shall
have the right, but not the obligation, to assume the rights and
obligations of the Company with respect to the put option at the
time the put option is exercised. A put option hereunder shall
be exercised by the holder notifying the Company in writing that
the put option is being exercised. If during the First Put
Period or the Second Put Period, a distributee is unable to
exercise a put option because the Company is prohibited from
honoring it under applicable Federal or State law ("Non-Exercise
Period"), the put option shall be exercisable during an extended
put period ("Extended Put Period"). The Extended Put Period
shall commence on the 10th day after the Company can honor the
put option and notice of this fact is given to the distributees
entitled to an Extended Put Period and shall extend for a period
equal to the number of days in the Non-Exercise Period but not
more than 60 days.
If the Non-Exercise Period was for more than 60 days, a
second Extended Put Period shall occur commencing on the first
anniversary of the first Extended Put Period and shall extend for
the lesser of (1) 60 days or (2) number of days in the
Non-Exercise Period reduced by 60 days.
A put option shall be exercisable at a price equal to the
value of the security determined as of the most recent Valuation
Date following the Participant's exercise of the put option.
Payment under a put option shall not be restricted by the
provisions of a loan or other arrangement, including the
Company's articles of incorporation, unless so required by State
law. If the distributee exercises a put option with respect to
Company Stock received by the Participant as part of an
installment distribution, the Company shall pay for such Company
Stock not later than thirty days after the exercise of such
option. If the distributee exercises a put option with respect<PAGE>
to Company Stock received as part of a distribution to the
Participant within one taxable year of the balance to the credit
of the Participant's vested Net Balance Account, the Company may
pay for such Company Stock not later than the thirtieth day after
the exercise of such option or may elect to pay for such Company
Stock with deferred payments. Payments for shares of Company
Stock put to the Company may be deferred only if adequate
security and a reasonable rate of interest are provided and if
periodic payments are made in substantially equal installments
(at least annually) beginning within 30 days after the date the
put option is exercised and extending for no more than 5 years
after the put option is exercised.
The provisions of this Section 6.5 shall not be terminated or
amended except to the extent required or permitted under applicable
law, Treasury Regulations and Rulings of the Internal Revenue Service.
6.6 Independent Appraisals Required. All valuations of Company
Stock which is not readily tradeable on an established securities
market shall be made as of each Valuation Date by an independent
appraiser meeting requirements similar to the requirements of the
regulations prescribed under Section 170(a)(1) of the Internal Revenue
Code.
ARTICLE VII
ALLOCATIONS OF CONTRIBUTIONS
7.1 Profit Sharing Contribution Allocation Formula.
(a) As of the last Valuation Date of each Plan Year, Profit
Sharing Contribution Holding Fund #1 (after adjustment for
earnings or losses of the Distribution Fund as provided in
Section 10.18 and all contributions for the Plan Year which are
made after the last day of the Plan Year as provided in
Section 10.19) shall be allocated to the Profit Sharing Fund
Account of each Active Participant who is a staff or an executive
employee or a store manager, in an amount equal to the product of
(1) multiplied by (2) where:
(1) is Profit Sharing Contribution Holding Fund #1 for
the Plan Year, and
(2) is a fraction the numerator of which is the Active
Participant's Considered Compensation for the Plan Year and
the denominator of which is the total Considered
Compensation of all such Active Participants for such Plan
Year.
(b) As of the last Valuation Date of each Plan Year, Profit
Sharing Contribution Holding Fund #2 (after adjustment for
earnings or losses of the Distribution Fund as provided in
Section 10.18 and all Contributions for the Plan Year which are
made after the last day of the Plan Year as provided in Section
10.19) shall be allocated to the Profit Sharing Fund Account of
each Active Participant who is a certified swing manager, a
primary maintenance employee or crew or other store hourly
employee in an amount equal to the product of (1) multiplied by
(2) where:<PAGE>
(1) is Profit Sharing Contribution Holding Fund #2 for
the Plan Year, and
(2) is a fraction of the numerator of which is the
Active Participant's Considered Compensation for the Plan
Year and the denominator of which is the total Considered
Compensation of all such Active Participants for such Plan
Year.
(c) Allocations to the Profit Sharing Fund Accounts of
Active Participants shall be made as soon as reasonably possible
after the end of a Plan Year after the Company has determined
that its final contribution for the Plan Year has been made to
the McDonald's Corporation Savings and Profit Sharing Master
Trust. Employer Profit Sharing Contributions shall be held in
the Profit Sharing Contribution Holding Fund until allocated to
the Profit Sharing Fund Account of each Active Participant. If
notwithstanding its earlier determination that the final
contribution for a Plan Year has been made, additional Employer
Profit Sharing Contributions are contributed for a Plan Year,
such contributions shall be allocated no later than the last day
of the next following Plan Year. Effective the first day of the
calendar month next following the date amounts are allocated
pursuant to this Section 7.1, such amounts shall be invested in
accordance with the investment elections applicable to each
respective Participant's Profit Sharing Fund Account as provided
in Sections 10.7, 10.8 or 10.11.
7.2 Employer Matching Contributions, Additional Employer
Contributions and Special Section 401(k) Employer Contributions.
(a) Allocation of Employer Matching Contributions. As of
each Valuation Date, the Employer Matching Contributions and
Forfeitures (excluding Employer Per Capita Matching
Contributions) held in the Employer Matching Contribution Holding
Fund shall be allocated to the Employer Matching Contribution
Account of each Active Participant in an equal percentage (not to
exceed the Matching Percentage as defined in Section 4.1(a)) of
each Participant's Participant Elected Matched Contributions
(excluding Special Participant Elected Matched Contributions)
made for the period since the immediately preceding Valuation
Date. Notwithstanding the foregoing, any amount in the Employer
Matching Contribution Holding Fund as of the last Valuation Date
of the Plan Year (even if such contributions for the Plan Year
are made after such Valuation Date as provided in Section 10.18)
after allocations are made pursuant to the preceding sentence,
shall be allocated to Employer Matching Contribution Account of
each Active Participant who is an Employee on such Valuation Date
in an amount equal to such remaining amount multiplied by a
fraction the numerator of which is the amount of Participant
Elected Matched Contributions (excluding Special Participant
Elected Matched Contributions) made on behalf of such Active
Participant for the Plan Year and the denominator of which is the
total amount of Participant Elected Matched Contributions
(excluding Special Participant Elected Matched Contributions)
made on behalf of all such Active Participants for the Plan Year.
(b) Allocation of Special Section 401(k) Employer
Contributions. Special Section 401(k) Employer Contributions to<PAGE>
the Trust for a Plan Year shall be allocated, as of the last
Valuation Date of the Plan Year, in an equal amount to the
Employer Matching Contribution Account of each designated Active
Participant. The designated Active Participants shall be the
smallest group of Non-Highly Compensated Employees who made
Participant Elected Contributions for the Plan Year and to whom
the dollar amount of per individual Special Section 401(k)
Employer Contributions could be allocated which would cause the
Plan to pass whichever of the following tests it would not
otherwise pass: the ADP test in Section 5.2(e), the ACP test in
Section 4.1(c) or the multiple use test in Section 5.4.
(c) Allocation of Additional Employer Contributions. As of
the last Valuation Date of each Plan Year as the Board of
Directors may direct, Additional Employer Contributions shall be
allocated to the Employer Matching Contribution Account of each
Active Participant in an amount equal to the amount of the
Additional Employer Contributions for the Plan Year multiplied by
a fraction, the numerator of which is the number of full calendar
months during which the Participant was an Active Participant,
and the denominator of which is the aggregate number of full
calendar months during which all Active Participants were Active
Participants.
(d) Allocation of Employer Per Capita Matching
Contributions. As of the last Valuation Date of the Plan Year or
as of such other date as the Committee shall specify with respect
to specified Employer Per Capita Matching Contributions, the
Employer Per Capita Matching Contributions held in the Employer
Per Capita Matching Contribution Holding Fund (even if such
contributions for the Plan Year are made after such Valuation
Date as provided in Section 7.5) shall be allocated to the
Employer Matching Contribution Account of each Active Participant
for a Plan Year or portion of a Plan Year in an amount equal to
the Employer Per Capita Matching Contributions divided by the
number of Active Participants eligible to receive Employer Per
Capita Matching Contributions for the Plan Year or portion of a
Plan Year.
7.3 Auxiliary ESOP Contributions.
(a) Per Capita Auxiliary ESOP Contributions. Any shares of
Company Stock purchased with the proceeds of a loan (or any
Company Stock into which such shares have been converted)
designated by the Board of Directors to be repaid by Per Capita
Auxiliary ESOP Contributions (or a loan refinanced by such loan)
and released from the Auxiliary ESOP Suspense Accounts maintained
with respect to such loans, any income from such Per Capita
Auxiliary ESOP Suspense Accounts released pursuant to
Sections 6.2 and 6.3, and any Forfeitures from Per Capita
Employer Auxiliary ESOP Contribution Accounts for the Plan Year
shall be allocated to each Active Participant's Per Capita
Employer Auxiliary ESOP Contribution Account:
(1) as of each Valuation Date, in an amount, if any,
with respect to each loan equal to the amount of dividends
paid with respect to Company Stock (or Company Stock into
which such shares have been converted) which was purchased
with the proceeds of such loan (or a loan refinanced with
such loan) and which has been allocated to the Participant's<PAGE>
Account, which dividends, since the immediately preceding
Valuation Date were credited to Participant's Accounts and
immediately transferred to the Auxiliary ESOP Suspense
Account to be used to make payments on the loan; and
(2) as of the last Valuation Date of each Plan Year,
in an amount equal to the number of shares of Company Stock
released from the Per Capita Auxiliary ESOP Suspense Account
in accordance with Section 6.3(a) divided by the number of
Active Participants for the Plan Year.
(b) Compensation Based Auxiliary ESOP Contributions. Any
shares of Company Stock purchased with the proceeds of a loan (or
Company Stock into which such shares have been converted)
designated by the Board of Directors to be repaid by Compensation
Based Auxiliary ESOP Contributions (or a loan refinanced by such
loan) and released from the Auxiliary ESOP Suspense Accounts
maintained with respect to such loan, any income from such
Compensation Based Auxiliary ESOP Suspense Accounts released
pursuant to Sections 6.2 and 6.3, and any Forfeitures from
Compensation Based Employer Auxiliary ESOP Contribution Accounts
for the Plan Year shall be allocated to each Active Participant's
Compensation Based Employer Auxiliary ESOP Contribution Account:
(1) as of each Valuation Date, in an amount, if any,
with respect to each loan equal to the amount of dividends
paid with respect to Company Stock (or Company Stock into
which such shares have been converted) which was purchased
with the proceeds of such a loan (or a loan refinanced by
such loan) and which has been allocated to the Participant's
Account, which dividends, since the immediately preceding
Valuation Date, were credited to Participants' Accounts and
immediately transferred to the Auxiliary ESOP Suspense
Account pursuant to Section 10.17(b)(3) to be used to make
payments on the loan; and
(2) as of the last Valuation Date of each Plan Year,
in an amount equal to the number of shares of Company Stock
released from the Compensation Based Auxiliary ESOP
Contribution Suspense Account in accordance with
Section 6.3(a) multiplied by a fraction the numerator of
which is the Considered Compensation of the Active
Participant and the denominator of which is the total of all
Considered Compensation of all Active Participants.
(c) Additional Employer Auxiliary ESOP Contributions.
Additional Employer Auxiliary ESOP Contributions for a Plan Year
which were designated in accordance with Section 4.2(d) as Per
Capita Additional Employer Auxiliary ESOP Contributions (and any
Forfeitures therefrom) shall be allocated as of the last
Valuation Date of the Plan Year to the Additional Employer
Auxiliary ESOP Contribution Account of each Active Participant in
an amount equal to the total amount of Per Capita Additional
Employer Auxiliary ESOP Contributions (and any Forfeitures
therefrom) for the Plan Year divided by the number of Active
Participants. Additional Employer Auxiliary ESOP Contributions
for a Plan Year which were designated in accordance with
Section 4.2(d) as Compensation Based Additional Employer
Auxiliary ESOP Contributions (and any Forfeitures therefrom)
shall be allocated as of the last Valuation Date of such Plan<PAGE>
Year to the Additional Employer Auxiliary ESOP Contribution
Account of each Active Participant in an amount equal to the
total amount of Additional Employer Auxiliary ESOP Contributions
(and any Forfeitures therefrom) multiplied by a fraction the
numerator of which is the Considered Compensation of such Active
Participant and the denominator of which is the total Considered
Compensation of all Active Participants for the Plan Year. Per
Capita Additional Employer Auxiliary ESOP Contributions and
Compensation Based Additional Employer Auxiliary ESOP
Contributions shall be separately accounted for in Participants'
Additional Employer Auxiliary ESOP Contribution Accounts.
(d) Special Dividend Replacement Contributions. Any
Special Dividend Replacement Contributions made to the Plan
pursuant to Section 4.2(e) shall be credited to Participant's
Accounts to replace dividends which pursuant to Section 6.3(b)
are credited to the Auxiliary ESOP Suspense Account to be used to
repay the Exempt Loan the proceeds of which purchased the shares
of Company Stock with respect to which such dividends were paid.
7.4 Participant Elected Contributions. As of each Valuation
Date, the Participant Elected Contributions in the Participant Elected
Contribution Holding Fund shall be credited to the Participant Elected
Contribution Accounts of the Participants for whom such contributions
were made.
7.5 Timing of Allocations. Amounts allocated to or transferred
to Participants' Accounts as of a Valuation Date shall be credited to
the Accounts as of such Valuation Date but after the adjustments are
made for Trust income as provided in Sections 10.14, 10.15, 10.16 and
10.17. Amounts contributed to the Plan shall be credited as of the
date of contribution to the following Funds: Profit Sharing
Contribution Holding Fund, Participant Elected Contribution Holding
Fund, Employer Matching Contribution Holding Fund, Employer Per Capita
Matching Contribution Holding Fund, Rollover Contribution Holding
Account and the Auxiliary ESOP Suspense Account.
ARTICLE VIII
ROLLOVER CONTRIBUTIONS AND TRUSTEE TRANSFERS
8.1 Participant Rollover Contributions. A Participant may elect
through procedures approved by the Committee to make Rollover
Contributions to the Plan. If any Rollover Contribution includes
property other than money, the Trustee may in its sole discretion
refuse to accept such Rollover Contribution or may condition its
acceptance of such Rollover Contribution on such terms and conditions
as it deems reasonable. Each Participant's Rollover Contribution
shall be held in his Rollover Contribution Holding Account until the
next following Valuation Date at which time his Rollover Contribution
Holding Account is transferred to the Participant's Rollover
Contribution Account and invested in accordance with his investment
elections provided for in Section 10.10.
8.2 Limited Participation. An Employee who is not eligible to
participate in the Plan solely by reason of failing to meet the
eligibility requirements of Section 2.1 and who reasonably expects to
become a Participant when such requirements are met, may be a
Participant in the Plan solely for the limited purpose of making a<PAGE>
Rollover Contribution subject to the same conditions on such Rollover
Contributions as any other Participant.
8.3 Withdrawal of Rollover Contributions. At the election of
the Participant, Rollover Contributions may be withdrawn from his
Rollover Contribution Account and Rollover Contribution Holding
Account as provided in Section 11.16.
8.4 Rollover Contributions Not Forfeitable. A Participant's
Rollover Contribution Account and Rollover Contribution Holding
Account shall be fully vested and non-forfeitable.
ARTICLE IX
LIMITATIONS ON CONTRIBUTIONS
BECAUSE OF FEDERAL LEGISLATION
9.1 Limitations on Contributions. Any of the provisions herein
to the contrary notwithstanding, a Participant's Annual Additions (as
defined in paragraph (a) below) for any Plan Year shall not exceed his
Maximum Annual Additions (as defined in paragraph (b) below) for the
Plan Year. If a Participant's Annual Additions would but for the
provisions of this Section 9.1, exceed his Maximum Annual Additions
(the "Annual Excess"), the Participant's Annual Additions for the Plan
Year shall be reduced under Section 9.1(d) by the amount necessary to
eliminate such Annual Excess. Rollover Contributions shall not be
included as part of a Participant's Annual Additions.
(a) "Annual Additions" of a Participant for a Plan Year
means the sum of the following:
(1) Employer Contributions and Forfeitures allocated
to his Profit Sharing Fund Account for the Plan Year;
(2) Participant Elected Contributions, Employer
Matching Contributions, Additional Employer Contributions,
Special Section 401(k) Contributions and any Forfeitures
allocated therewith for the Plan Year allocated to the
Participant;
(3) any amount of Leveraged ESOP Annual Additions, as
determined under Section 9.1(c), allocated to the
Participant;
(4) all other employer contributions and forfeitures
(excluding Forfeitures allocated to the Participant's
Employer Auxiliary ESOP Contribution Account) for such Plan
Year allocated to the Participant's accounts for such Plan
Year under the Plan or any other Related Defined
Contribution Plan not already included under Section
9.1(a)(1), 9.1(a)(2) or 9.1(a)(3);
(5) the amount of nondeductible participant
contributions under the Plan or any Related Plan made by the
Participant for the Plan Year; and
(6) solely with respect to the limitation under
Section 9.1(b)(2) contributions allocated to any individual
medical account (as defined in Internal Revenue Code<PAGE>
Section 401(h)) which is part of a defined benefit plan
maintained by an Employer as provided in Internal Revenue
Code Section 415(1) and any amount attributable to post
retirement medical benefits allocated to an account
established under Internal Revenue Code Section 419A(d)(1).
(b) "Maximum Annual Additions" of a Participant for a Plan
Year means the lesser of (1) or (2) below:
(1) 25% of the Participant's Considered Compensation,
or
(2) the greater of (i) $30,000 or (ii) one-fourth
(1/4) of the amount in effect under Section 415(b)(1)(A) of
the Internal Revenue Code ($112,221 in 1992, adjusted in
subsequent years for cost of living adjustments determined
in accordance with regulations prescribed by the Secretary
of Treasury or his delegate pursuant to the provisions of
Section 415(d) of the Internal Revenue Code).
(c) "Leveraged ESOP Annual Additions" means:
(1) If the Participant is an Active Participant with
respect to the Auxiliary ESOP for the Plan Year under the
McDESOP portion of the Plan, and if no more than one-third
(1/3) of the total amounts deductible under Section
404(a)(9) of the Internal Revenue Code for the Plan Year is
allocated to Highly Compensated Employees, an amount for
each Exempt Loan equal to the product of (A) the Employer
Auxiliary ESOP Contributions used to repay each loan for the
Plan Year, and reduced, for any Plan Year for which the loan
repaid is an Exempt Loan as defined in Section 6.1, by the
amount used to pay interest on the Exempt Loan, multiplied
by (B) (i) in the case of Per Capita Employer Auxiliary ESOP
Contributions, a fraction, the numerator of which is one,
and the denominator of which is the number of Active
Participants and (ii) in the case of Compensation Based
Auxiliary ESOP Contributions, a fraction, the numerator of
which is the Participant's Considered Compensation for the
Plan Year, and the denominator of which is the Considered
Compensation of all Active Participants for the Plan Year;
provided that, if a Participant's allocations to his
Employer Auxiliary ESOP Contribution Account are reduced in
order to reduce the Annual Excess in accordance with the
provisions of this Article IX, the Participant's Considered
Compensation for purposes of both the numerator and the
denominator of this fraction shall be reduced to an amount
equal to the Participant's Considered Compensation,
multiplied by a fraction, the numerator of which is the
Participant's allocation to his Employer Auxiliary ESOP
Contribution Account for the Plan Year after applying the
Annual Excess reduction provisions hereunder and the
denominator of which is such allocation to his Employer
Auxiliary ESOP Contribution Account for the Plan Year before
applying the Annual Excess reduction provisions hereunder.
(2) If the Participant is an Active Participant with
respect to the ESOP for the Plan Year and if
Section 9.1(c)(1) does not apply, an amount for each loan
equal to the sum of (A) Forfeitures allocated to the<PAGE>
Participant's Per Capita Employer Auxiliary ESOP
Contribution Account and Compensation Based Employer
Auxiliary ESOP Contribution Account under the McDESOP
portion of the Plan, and (B) the sum of the products of the
Employer Auxiliary ESOP Contributions used to repay each
loan for the Plan Year (including the amount used to repay
interest on such loans), multiplied by (i)(a) in the case of
Per Capita Employer Auxiliary ESOP Contributions, a
fraction, the numerator of which is one, and the denominator
of which is the number of Active Participants and (b) in the
case of Compensation Based Auxiliary ESOP Contributions, a
fraction, the numerator of which is the Participant's
Considered Compensation for the Plan Year and the
denominator of which is the Considered Compensation of all
Active Participants for the Plan Year; provided that, if a
Participant's allocations to his Employer Auxiliary ESOP
Contribution Account are reduced in order to reduce the
Annual Excess in accordance with the provisions of this
Article IX, the Participant's Considered Compensation for
purposes of both the numerator and the denominator of this
fraction shall be reduced to an amount equal to the
Participant's Considered Compensation, multiplied by a
fraction, the numerator of which is the Participant's
allocation to his Employer Auxiliary ESOP Contribution
Account for the Plan Year, after applying the Annual Excess
reduction provisions hereunder and the denominator of which
is such allocation to his Employer Auxiliary ESOP
Contribution Account for the Plan Year before applying the
Annual Excess reduction provisions hereunder.
(3) The amount of Employer Auxiliary ESOP
Contributions deemed to be used to pay interest on a loan
for a Plan Year for purposes of Section 9.1(c)(2)(A) and (B)
shall be the amount of Employer Auxiliary ESOP Contributions
made for the Plan Year multiplied by a fraction the
numerator of which is the amount of all interest payments
made by the Trust for the Plan Year with respect to such
loan (including any refinancing of such loan) from all
sources and the denominator of which is the amount of all
payments of both principal and interest made by the Trust
for the Plan Year with respect to such loan (including any
refinancing of such loan) from all sources.
(d) Elimination of Annual Excess. If a Participant has an
Annual Excess for a Plan Year, such excess shall not be allocated
to the Participant's Accounts, but shall be eliminated as
follows:
(1) If any Annual Excess remains after application of
the preceding paragraph, the Participant's Employer
Contributions allocable to such Participant's Profit Sharing
Fund Account shall be reduced to the extent such reductions
reduce the Annual Excess.
(2) If any Annual Excess remains after application of
the preceding paragraph, the Participant's Leveraged ESOP
Annual Additions (other than those with respect to Dividend
Replacement Contributions) shall be reduced by reducing the
allocations made as of a given Valuation Date reducing
allocations with respect to Forfeitures before allocations<PAGE>
with respect to Employer Contributions for each loan
starting first with the most recent loan and then with other
loans in the reverse of the order in which made to the
extent which reductions reduce the amount of the Annual
Excess.
(3) For Plan Years ending before July 1, 1993, if any
Annual Excess remains after application of the preceding
paragraph, Participant Elected Contributions, Employer
Matching Contributions, Special Section 401(k) Employer
Contributions and Forfeitures shall be reduced by reducing
those contributions most recently credited to the
Participant's Accounts first (followed by the next most
recent and so forth) and with respect to contributions
credited as of a Valuation Date, reducing allocations in the
order indicated below:
(A) The Participant's allocations of Participant
Elected Unmatched Contributions and any Special Section
401(k) Employer Contributions allocated with respect
thereto shall be reduced, in proportionate amounts, to
the extent such reductions reduce the amount of the
Annual Excess.
(B) The Participant's allocations of Participant
Elected Matched Contributions and the Employer Matching
Contributions, Special Section 401(k) Employer
Contributions and Forfeitures allocated with respect
thereto shall be reduced, in proportionate amounts, to
the extent such reductions reduce the amount of the
Annual Excess. Participant Elected Matched
Contributions (except for Special Participant Elected
Matched Contributions) which are matched by Employer
Matching Contributions at the lowest rate shall be
reduced first followed by those matched at higher rates
in sequence and followed lastly by Special Participant
Elected Matched Contributions.
to the extent such reductions reduce the amount of the
Annual Excess.
(4) For Plan Year ending on or after July 1, 1993, if
any Annual Excess remains after application of the preceding
paragraph, Participant Elected Contributions and Employer
Matching Contributions shall be reduced by reducing those
contributions most recently credited to the Participant's
Accounts first (followed by the next most recent and so
forth) and with respect to contributions credited as of a
Valuation Date reducing contributions in the order listed,
as follows: Employer Matching Contributions, Participant
Elected Unmatched Contributions and Participant Elected
Matched Contributions to the extent such reductions reduce
the amount of the Annual Excess.
(5) If any Annual Excess remains after application of
the preceding paragraph, the Participant's allocations of
Additional Employer Contributions shall be reduced to the
extent such reductions reduce the amount of the Annual
Excess.<PAGE>
(6) For Plan Years ending on or after July 1, 1993, if
any Annual Excess remains after application of the preceding
paragraph, the Participant's allocations of Special Section
401(k) Employer Contributions shall be reduced to the extent
such reductions reduce the amount of the remaining Annual
Excess.
(7) If any Annual Excess remains after application of
the preceding paragraph, the Participant's allocations to
his Additional Employer Auxiliary ESOP Contribution Account
shall be reduced to the extent such reductions reduce the
amount of the Annual Excess.
(8) If any Annual Excess remains after application of
the preceding paragraph, any Special Dividend Replacement
Contributions credited to the Participant's Employer
Auxiliary ESOP Contribution Account shall be reduced to the
extent such reductions reduce the amount of the remaining
Annual Excess.
Any allocations of Employer Contributions and Forfeitures reduced
or eliminated under this Section 9.1(d), as above provided,
shall, subject to the limits of this Section 9.1, be reallocated
to the Accounts of the other Participants not having such
reductions as of the last day of that Plan Year in the same
manner as such Employer Contributions and Forfeitures were
initially allocated under Article VII. The amount of any
Participant Elected Contributions reduced or eliminated under
this Section 9.1 which have been contributed to the Plan shall be
allocated as (and in lieu of) Employer Matching Contributions in
the Plan Year for which or next following the Plan Year for which
the reduction is made. Any Employer Contributions and
Forfeitures which, under the limits of this Section 9.1, cannot
be reallocated to the Accounts of other Participants in the Plan
Year shall, subject to the limits of this Section 9.1, be held in
an unallocated suspense account and reallocated in a subsequent
Plan Year. If the Plan shall be terminated, any amounts held in
a suspense account shall be reallocated to the accounts of all
Participants in accordance with Article VII subject to the
limitations of Section 9.1, and any such amounts which cannot be
reallocated to Participants in the Plan Year of the termination
shall be returned to the Employers in such proportions as shall
be determined by the Committee.
(e) Limitation in Case of Employee Participation in Both
Defined Benefit and Defined Contribution Plans. If a Participant
participates in any defined benefit plan of the Employer (or any
Related Defined Benefit Plan), the sum of the Defined Benefit
Plan Fraction (as defined in Section 415(e)(2) of the Internal
Revenue Code) and the Defined Contribution Plan Fraction (as
defined in Section 415(e)(3) of the Internal Revenue Code) for
such Participant shall not exceed 1.0 (called the "Combined
Fraction"). If the Combined Fraction of such Participant exceeds
1.0, the Participant's Defined Benefit Plan Fraction shall be
reduced by limiting the Participant's annual benefits payable
from the Related Defined Benefit Plan in which he participates to
the extent necessary to reduce the Combined Fraction of such
Participant to 1.0, and to the extent the Combined Fraction
continues to exceed 1.0, by reducing the Participant's Maximum
Annual Additions to the extent necessary to reduce the Combined<PAGE>
Fraction to 1.0. In calculating the Participant's Defined
Contribution Fraction employee contributions as permitted under
the Plan or a Related Plan before January 1, 1987, shall be
counted as Annual Additions only to the extent that they were
counted under the Plan as then in effect.
9.2 Employer Contribution Reductions. If a Participant's
Participant Elected Contributions or his allocations of Employer
Contributions and Forfeitures are reduced or eliminated under
Section 9.1, the amount shall be provided to the Participant under
McEqual, McCAP I or McCAP II, or other non-qualified plans maintained
by the Company, to the extent therein provided. Amounts of
Participant Elected Contributions and Employer Matching Contributions
expected to be within the limitations under Section 9.1 shall be
contributed to the Plan and credited hereunder. Amounts of such
contributions expected to be in excess of the limitations under
Section 9.1 shall be tentatively credited to McEqual, McCAP I or
McCAP II or other non-qualified plans maintained by the Company. If
it is subsequently determined that additional amounts of Participant
Elected Contributions or Employer Matching Contributions should be
contributed hereto to attain the limitations under Section 9.1, in
order to put the Participant in the same position he would have been
in had such amounts been contributed contemporaneously to the Plan,
contributions to the Plan will reflect, to the extent of the limits of
Section 9.1, the income, gains and losses which would have been
credited to the Participant's Accounts hereunder had such amounts been
credited hereto instead of being tentatively credited to McEqual,
McCAP I, McCAP II or other non-qualified plans maintained by the
Company. The effect of adjustments to contributions for such income,
gains and losses may be that some Participants hereunder will be
credited with Participant Elected Contributions in excess of the
limits stated in Sections 4.3(a) and 5.1 and in amounts which are more
than or less than the amounts of such contributions elected by the
Participant, and may have rates of Employer Matching Contributions
which are larger or smaller than the rate established by the Company
for the Plan Year in accordance with Section 4.1. In determining the
amounts to be credited to a Participant's accounts during a Plan Year
under McEqual, McCAP I, McCAP II and other non-qualified plans
maintained by the Company, the Committee may make assumptions based
upon reasonable estimates of the amount of the Participant's
Considered Compensation, his Participant Elected Contributions, levels
of Employer Contributions hereunder and other relevant factors and, as
necessary, make subsequent adjustments to the extent the estimates
prove to be incorrect.
ARTICLE X
TRUSTEE AND TRUST FUNDS
10.1 Trust Agreements. The Company and the Trustee have entered
into one or more Trust Agreements which provide for the investment of
the assets of the Plan and administration of the Trust Funds. The
Trust Agreement, as from time to time amended, shall continue in force
and shall be deemed to form a part of the Plan, and any and all rights
or benefits which may accrue to any person under the Plan shall be
subject to all the terms and provisions of the Trust Agreement.
10.2 Trustee's Duties. The powers, duties and responsibilities
of the Trustee of the Trust shall be as stated in the respective Trust<PAGE>
Agreement and as may be delegated to, and accepted by, the Trustee
from the Committee and Board of Directors. Nothing contained in the
Plan either expressly or by implication shall be deemed to impose any
additional powers, duties or responsibilities upon the Trustee. All
Employer Contributions, Participant Contributions, Rollover
Contributions and Participant Elected Contributions shall be paid into
a Trust and all withdrawals permitted and benefits payable under the
Plan shall be paid from the Trust.
10.3 Trust Expenses. Except to the extent paid by an Employer,
all clerical, legal and other expenses of the Plan and the Trust and
the Trustee's fees shall be paid by the Trust and shall be
proportionately charged to the Auxiliary ESOP and other parts of the
Trust Fund except to the extent directly attributable to a specific
portion of a Trust Fund in which case it shall be charged to that
portion of the Trust Fund.
10.4 Trust Entity. The Trust under this Plan from its inception
shall be a separate entity aside and apart from the Employers or their
assets. The Trusts and the corpus and income thereof, shall not be
subject to the rights or claims of any creditor of any Employer.
10.5 Right of the Employers to Trust Assets. Subject to the
provisions of Section 9.1, the Employers shall have no right or claims
of any nature in or to the Trust Fund except the right to require the
Trustee to hold, use, apply, and pay such assets in its possession in
accordance with the Plan for the exclusive benefit of the Participants
or their Beneficiaries and for defraying the reasonable expenses of
administering the Plan and Trust, provided that:
(a) if, and to the extent that, a deduction for Employer
contributions under Section 404 of the Internal Revenue Code is
disallowed, employer contributions conditioned on deductibility
shall be returned to the appropriate Employer within one year
after the disallowance of the deduction; and
(b) if, and to the extent that, an Employer contribution is
made through mistake of fact, such employer contribution shall be
returned to the appropriate Employer within one year of the
payment of the contribution and any Participant Elected
Contributions shall be distributed to the Participants with
respect to which such contributions were made.
Notwithstanding any other provision of this Section 10.5, if,
upon application of (a) or (b) above, Employer contributions would be
returned to an Employer, then the Employer shall distribute the value
of any portion of such contributions to the appropriate Participants.
All Employer Contributions are conditioned on their being
deductible under Section 404 of the Internal Revenue Code.
10.6 Trust Investment Funds. Excluding those assets held in the
Distribution Fund, as provided in Section 10.27, assets of the Trust
Fund shall be held as follows:
(a) Profit Sharing Plan. The assets of the Profit Sharing
Plan portion of the Trust and any amounts transferred to a
Qualified Participant's Diversification Account pursuant to
Sections 10.6(c) and 10.12 shall be held in the following
Investment Funds:<PAGE>
(1) The Diversified Stock Fund invested in common
stocks, and securities convertible into common stocks, of
corporations other than McDonald's Corporation or its
Domestic or Foreign Affiliates, and in any other securities
which represent an equity investment, provided, however,
that the Diversified Stock Fund may be invested in pooled or
common trust funds or open-end investment companies without
regard to whether assets of such funds or investment
companies are invested in securities of McDonald's
Corporation or its Domestic or Foreign Affiliates;
(2) The Profit Sharing McDonald's Common Stock Fund
invested in common stock of McDonald's Corporation;
(3) The Insurance Contract Fund or such other fund
designated by the Committee which shall be invested:
(i) Effective prior to November 1, 1993, solely
in such contracts issued by such insurance company (or
companies) as may be from time to time selected by the
Committee, which may include (but shall not be limited
to) a group annuity contract, a guaranteed investment
contract, an immediate participation guaranty contract,
or a deposit administration contract. Such insurance
company as of date of selection, must have an A plus
rating by A.M. Best Company or a comparable rating by a
comparable service which rates insurance companies.
The Committee shall have the right directly, or
indirectly through directing the Trustee, to exercise
all rights, powers and elections provided under any
such contract.
(ii) Effective November 1, 1993 and thereafter,
(A) in contracts issued by an insurance or other
company (or companies), (B) directly in debt securities
that have fixed obligations to pay interest and
principal on specified dates or which have similar
investment characteristics (which may have equity
features triggered by performance, the passage of time,
or similar characteristics or may be securities which
are derivatives of such securities) ("Fixed Income
Obligations") or (C) in pooled or common trust funds,
regulated investment companies, or open-ended
investment companies generally invested in Fixed Income
Obligations without regard to whether assets of such
common trust funds, regulated investment companies, or
open-ended investment companies are invested in
securities of McDonald's Corporation or its Domestic or
Foreign Affiliates. The contracts issued by insurance
or other companies held by the Insurance Contract Fund
(X) may be investment contracts or (Y) may be
investment management agreements which may provide
separate book value guarantees pursuant to which the
insurance or other company guarantees (i) the book
value of a pool or segregated group of fixed income
obligations held in the Insurance Contract Fund and
(ii) specified amounts of income under various
conditions as provided in such agreement ((X) and (Y)
collectively shall be referred to as "Assets Subject to<PAGE>
Guarantee"). With respect to Assets Subject to
Guarantee, the Plan shall use book value accounting and
Participants' Accounts shall contain and shall be
entitled only to their pro rata share of book value and
guaranteed income which for all purposes hereunder will
be treated as fair market value unless the Committee
determines that the guarantees no longer apply, a
market value distribution has occurred under the
contract, or there has been a default on the guarantee.
(4) The Multi-Asset Fund invested in domestic common
stocks, debt securities that have a fixed obligation to pay
interest and principal on specified dates or which have
substantially similar investment characteristics, real
estate, international common stocks, and securities
convertible into domestic common stocks, of corporations
other than McDonald's Corporation or its Domestic or Foreign
Affiliates, and in any other securities which represent an
equity investment, provided, however, that the Multi-Asset
Fund may be invested in pooled or common trust funds or
open-end investment companies without regard to whether
assets of such funds or investment companies are invested in
securities of McDonald's Corporation or its Domestic or
Foreign Affiliates; and
(5) The Money Market Fund invested in United States
Government debt securities which mature or become payable
within two years and which are the direct obligation of or
guaranteed by the United States Government, including bonds,
notes, certificates of indebtedness, and treasury bills; in
commercial paper rated A-l and P-l by Moody's and Standard &
Poor's; and in certificates of deposit in those banks
designated in the agreement with the Investment Manager or,
if there is no such agreement or if the agreement fails to
designate such banks, in the McDonald's Corporation
Investment Policy.
In addition to investments otherwise permitted for the
Money Market Fund, funds which otherwise could not be
appropriately invested either because of the small amount
involved, or because of the short time duration for which an
investment is to be made, may be invested in the Northern
Trust Company Collective Trust Short Term Investment Fund
and such other common or collective trust funds or
investment companies registered under the Investment Company
Act of 1940, which have similar investment and
administrative characteristics, as the Committee may from
time to time designate. The portion of a Trust Sub-fund
invested in the Money Market Fund may be held in a separate
Subaccount within the Money Market Fund or may be aggregated
into Subaccounts for several Trust Sub-funds as the Plan
Administrator shall determine. The portion of the Profit
Sharing Contribution Holding Fund and the portion of the
Rollover Contribution Holding Fund invested in the Money
Market Fund shall each be invested in separate Trust
Subaccounts which may be invested in identified accounts in
a common or collective trust fund or investment company fund
or may hold identified assets and shall be directly credited
with the income of such separate Trust Subaccount or
identified assets.<PAGE>
In order to maintain appropriate or adequate liquidity and
pending or pursuant to investment directions from an Investment
Manager, the Trustee of the Trust is authorized to hold such
portions as it deems necessary of the Diversified Stock Fund, the
Profit Sharing McDonald's Common Stock Fund, and the Multi-Asset
Fund in cash or liquid short-term cash equivalent investments or
securities (including, but not limited to United States
government treasury bills, commercial paper, and savings accounts
and certificates of deposit, including those of the Trustee, and
common or commingled trust funds invested in such securities,
including those of the Trustee).
(b) McDESOP. The assets of the McDESOP portion of the
Trust (other than any amounts which have been transferred to a
Participant's Diversification Account pursuant to Section 10.12)
shall be held in the following Investment Funds:
(1) The McDESOP McDonald's Common Stock Fund invested
in Company Stock which is common stock of McDonald's
Corporation, and
(2) The McDESOP McDonald's Preferred Stock Fund
invested in Company Stock which is non-callable preferred
stock of McDonald's Corporation which is convertible at any
time into common stock of McDonald's Corporation or is
callable preferred stock which provides a reasonable
opportunity for conversion into McDonald's common stock
after it is called;
provided that any shares of Company Stock held in the McDESOP
McDonald's Common Stock Fund and McDESOP McDonald's Preferred
Stock Fund shall be separately allocated to Participant's
Participant Elected Contribution Accounts, Employer Matching
Contribution Accounts and Employer Auxiliary ESOP Contribution
Accounts which shall be denominated in shares of Company Stock.
In order to maintain adequate liquidity, pending the
investment of funds in one of the aforementioned Investment
Funds, pending the use of funds to make payments on a loan or for
funds which could not be appropriately invested either because of
the small amount involved or the short time duration for which
the investment is to be made, the Trustee is authorized to hold
such portions of the Trust Fund in the Northern Trust Company
Collective Trust Short Term Investment Fund and such other common
or collective trust funds or investment companies registered
under the Investment Company Act of 1940, which have similar
investment and administrative characteristics, as the Committee
may from time to time designate. The portion of a Trust Sub-fund
so invested shall be held in a separate identified Sub-account in
such short term fund and shall be directly credited with the
income of such separate Trust Sub-account. The McDESOP
McDonald's Common Stock Fund and the McDESOP McDonald's Preferred
Stock Fund may hold identified assets and shall be directly
credited with the income of such identified assets.
(c) McDESOP Diversification Fund. Participant Elected
Contributions which a Participant has elected to diversify
pursuant to Section 10.12 shall be credited to the Participant's
McDESOP Contribution Diversification Account and invested in the<PAGE>
Profit Sharing Plan Trust Investment Funds listed in Section
10.6(a) as provided in Section 10.12 as of the first business day
of the calendar month following the month in which (1) the
diversification election was made for amounts diversified in
accordance with Sections 10.8, 10.12 and 10.13 and (2) the
compensation (from which such Participant Elected Contributions
were taken) was paid or as of such earlier date as the Committee
shall provide. Until such date as the Committee shall provide
otherwise, Participant Elected Contributions and Employer
Matching Contributions which the Participant has elected to
diversify pursuant to Section 10.12 shall be invested in the
McDESOP McDonald's Common Stock Fund until the Diversification
Election is implemented pursuant to Section 10.13. In the case
of future contributions subject to a Diversification Election
pursuant to Section 10.12, the Diversification Election shall be
implemented as of the next date on which Investment Elections are
implemented in accordance with Section 10.8 or 10.11(a), as
applicable, after the date such contributions are made to the
Plan.
10.7 Investment of Participant's Employer Profit Sharing
Contributions. The provisions of Sections 10.7(a) and 10.7(b) shall
apply to Employer Profit Sharing Contributions as follows:
(a) Each Participant's share of Employer Profit Sharing
Contributions and the earnings thereon shall be invested in the
Profit Sharing McDonald's Common Stock Fund in an amount equal to
the Participant's share of Employer Profit Sharing Contributions
multiplied by the Automatic McDonald's Stock Proportion. The
remainder of the Participant's Employer Profit Sharing
Contributions and the earnings thereon for the Plan Year shall be
invested in accordance with Section 10.8 or 10.11, as applicable;
provided that if in accordance with a Participant's elections
pursuant to Section 10.8, a percentage of his Employer Profit
Sharing Contributions and the earnings thereon for the Plan Year
greater than the Automatic McDonald's Stock Proportion would be
invested in the Profit Sharing McDonald's Common Stock Fund, the
Participant's Employer Profit Sharing Contributions and the
earnings thereon with respect to the Profit Sharing Plan for the
Plan Year shall be invested in accordance with the Participant's
elections pursuant to Section 10.8. The "Automatic McDonald's
Stock Proportion" is a percentage announced by the Board of
Directors for the Plan Year.
(b) A Participant may elect, at such time and in such
manner as the Committee shall designate for each Plan Year not to
have the Automatic McDonald's Stock Proportion of his Employer
Profit Sharing Contributions and Forfeitures and the earnings
thereon with respect to the Profit Sharing Plan for the Plan Year
invested in the Profit Sharing McDonald's Common Stock Fund. If
a Participant elects not to have the Automatic McDonald's Stock
Proportion of his Employer Profit Sharing Contributions and
Forfeitures with respect to the Profit Sharing Plan for the Plan
Year invested in the Profit Sharing McDonald's Common Stock Fund,
his Employer Profit Sharing Contributions, such Forfeitures and
the earnings thereon shall be invested in accordance with
Sections 10.8 or 10.11, as applicable.
10.8 Investment Election with Regard to a Participant's Profit
Sharing Fund Account and Diversification Accounts. Four times each<PAGE>
Plan Year (three times each Plan Year prior to July 1, 1993) (or on
such more frequent basis as the Committee shall permit), each
Participant shall have the right to elect, on such forms and in
accordance with such rules and procedures as the Committee may from
time to time prescribe, to have his Profit Sharing Fund Account
(including any amounts which have previously been invested in the
Profit Sharing McDonald's Common Stock Fund pursuant to Section 10.7)
and his Diversification Accounts, if any, invested in the Diversified
Stock Fund, the Money Market Fund, the Profit Sharing McDonald's
Common Stock Fund, the Insurance Contract Fund, the Multi-Asset Fund
or other similar fund designated by the Committee or in any
combination of them; provided that amounts which have been invested in
the Profit Sharing McDonald's Common Stock Fund in accordance with
Section 10.7 shall remain invested in the Profit Sharing McDonald's
Common Stock Fund until a new investment election made by the
Participant in accordance with this Section 10.8 is effective.
If a Participant makes a LESOP Diversification Election, a Future
Contribution Diversification Election or McDESOP Diversification
Election in accordance with Section 10.12, his Diversification
Account, if any, shall be invested in accordance with his Profit
Sharing Fund Account investment election in effect at the time his
diversification election is effective or in accordance with
Section 10.11(a) if no such investment election is in effect and shall
be invested in accordance with any subsequently effective Investment
Election as provided above. The Participant's election as to the
percentage of his Profit Sharing Fund Account and Diversification
Account to be invested in each Investment Fund, shall be made in
increments of 10 percent (10%) up to 100 percent (100%). A
Participant may elect to invest as much as 100% of his Profit Sharing
Fund Account and Diversification Account in the Profit Sharing
McDonald's Common Stock Fund. Subject to Section 10.7, a
Participant's investment election shall be effective until his next
investment election is effective.
10.9 Investment Election with Regard to a Participant's
Investment Savings Fund Account. Four times each Plan Year (three
times each Plan Year prior to July 1, 1993) (or on such more frequent
basis as the Committee shall permit), each Participant who elected to
make Participant Contributions, shall have the right to elect, on such
forms and in accordance with such rules and procedures as the
Committee may from time to time prescribe, to have his Investment
Savings Fund Account invested in the Diversified Stock Fund, the Money
Market Fund, the Insurance Contract Fund or the Multi-Asset Fund (or
other similar fund designated by the Committee) or in any combination
of them. The Participant's investment election under this Section
shall be made in increments of ten percent (l0%) up to 100 percent
(100%). A Participant's investment election shall be effective until
his next investment election.
10.10 Investment Election with Regard to a Participant's Rollover
Contribution Account. Four times each Plan Year (three times each
Plan Year prior to July 1, 1993) (or on such more frequent basis as
the Committee shall permit), each Participant shall have the right to
elect, on such forms and in accordance with such rules and procedures
as the Committee may from time to time prescribe, to have his Rollover
Contribution Account invested in the Insurance Contract Fund (or other
similar fund designated by the Committee), the Diversified Stock Fund,
the Money Market Fund or the Multi-Asset Fund or in any combination of<PAGE>
them. The Participant's investment election under this Section shall
be made in increments of ten percent (l0%) up to 100 percent (100%).
10.11 Failure to Make an Investment Election.
(a) Profit Sharing Fund Accounts. If a Participant fails
to make an investment election for his Profit Sharing Fund
Account and his Diversification Account during any Plan Year,
then such Accounts shall be invested in accordance with such
Participant's immediately preceding investment election made with
respect to such Accounts in accordance with Section 10.8;
provided that any amounts invested in the Profit Sharing
McDonald's Common Stock Fund in accordance with Section 10.7
shall remain invested in the Profit Sharing McDonald's Common
Stock Fund until a new investment election made by the
Participant in accordance with Section 10.8 is effective. If a
Participant has never made an investment election with respect to
such Accounts, then the amount, if any, invested in the Profit
Sharing McDonald's Common Stock Fund in accordance with
Section 10.7 shall remain invested in the Profit Sharing
McDonald's Common Stock Fund and the remainder of the
Participant's Profit Sharing Fund Account, the Participant's
LESOP Diversification Account and the McDESOP Contribution
Diversification Account shall be invested one hundred percent
(100%) in the Money Market Fund.
(b) Investment Savings Fund Account and Rollover
Contribution Account. If a Participant fails to make an
investment election for his Investment Savings Fund Account
and/or his Rollover Contribution Account during any Plan Year,
then such Account(s) shall be invested in accordance with such
Participant's immediately preceding investment election made with
respect to such Account(s). If a Participant has never made an
investment election with respect to such Account(s) then such
Account(s) shall be invested 100 percent (100%) in the Money
Market Fund.
10.12 Diversification of McDESOP Accounts and Contributions.
(a) Age Diversification of Leveraged ESOP Account Balances.
(1) Diversification Elections by Qualified
Participant. Commencing with the first day of the month
after a Participant becomes a Qualified Participant (and, if
later, the first day of the month after a Participant
attains age 60) and during each Annual Election Period and
at the same times and subject to the same administrative
requirements as apply to Investment Elections under Section
10.8, each Qualified Participant shall be permitted to make
a diversification election with respect to his Qualified
Account ("LESOP Diversification Election").
(A) Effective on or after July 1, 1994, a
Qualified Participant, regardless of the amount in his
Employer Auxiliary ESOP Contribution Account, may make
a LESOP diversification election.
(B) Effective before July 1, 1994, a Qualified
Participant was permitted to make a LESOP
Diversification Election if the sum of his Employer<PAGE>
Auxiliary ESOP Contribution Account, Participant
Elected Contribution Account, Employer Matching
Contribution Account (including any corresponding
accounts in McEqual, McCAPI or McCAPII) and the portion
of the balance of his McDonald's Stock Sharing Plan
Accounts attributable to Company Stock (acquired after
December 31, 1986) was at any time equal to or more
than $500. Such an election was effective with respect
to all such accounts in the Plan and the corresponding
accounts in McEqual, McCAPI and McCAPII.
(2) Definitions.
(A) "Qualified Participant" means a Participant
(including a Participant who has had a Termination of
Employment) who has attained age 55 or the Beneficiary
of a deceased Participant who would have attained the
age of 55 if he were alive.
(B) "Annual Election Period" means the 90 day
period after the last day of each Plan Year commencing
with the Plan Year in which the Participant first
becomes a Qualified Participant.
(C) "Qualified Account" means a Qualified
Participant's accounts identified below:
(i) For periods on and after July 1, 1994,
Auxiliary ESOP Contribution Account, and
(ii) For periods before July 1, 1994,
Auxiliary ESOP Contribution Account, Participant
Elected Contribution Account and Employer Matching
Contribution Account and his McDonald's Stock
Sharing Plan Accounts (the latter considering only
the portion of the balance attributable to the
Company Stock acquired by the McDonald's Stock
Sharing Plan after December 31, 1986).
(D) "Maximum Diversification Percentage" means:
(i) In the case of a Qualified Participant
who has not attained age 60 and who has not had a
Termination of Employment, 25%;
(ii) In the case of a Qualified Participant
who has attained age 60 and has not had a
Termination of Employment, 50%; and
(iii) In the case of a Qualified Participant
who has had a Termination of Employment, 100%.
(E) "LESOP Diversification Election" means an
election by a Qualified Participant to transfer to his
LESOP Diversification Account or McDESOP
Diversification Account, as applicable, an amount not
exceeding the difference between
(i) the Maximum Diversification Percentage
(or lesser percentages in five percent (5%)<PAGE>
increments) of the sum of (a) the value of Company
Stock credited to the Participant's Qualified
Account plus (b) the amounts previously
transferred under this Section 10.12 from such
Qualified Account to the Participant's
Diversification Accounts ("Prior Diversification
Transfers"), reduced by
(ii) the Participant's Prior Diversification
Transfers.
If a Participant has made a LESOP
Diversification Election and has not made a
subsequent LESOP Diversification Election with a
lower percentage election than his prior LESOP
Diversification Election, a percentage of the
value of all future allocations to the
Participant's Qualified Account equal to the
percentage of the Participant's LESOP
Diversification Election shall be transferred to
the Participant's LESOP Diversification Account.
If a Participant who has made a LESOP
Diversification Election makes a new LESOP
Diversification Election at a percentage
(including to zero) lower than the percentage of
the earlier LESOP Diversification Election, no
portion of allocations to the Participant's
Qualified Account shall be transferred to the
Diversification Account until the product of the
new lower percentage elected multiplied by the sum
of the Qualified Account plus Prior
Diversification Transfers exceeds the Prior
Diversification Transfers, at which time such
excess, and thereafter, a percentage of all future
allocations to the Participant's Qualified Account
equal to the percentage of the Participant's LESOP
Diversification Election shall be transferred to
Participant's Diversification Account. No amount
transferred to a Participant's Diversification
Account may be transferred back to the
Participant's Employer Auxiliary ESOP Account.
(3) Investment of Amounts Subject to LESOP
Diversification Election. The amount subject to a
Participant's LESOP Diversification Election shall be
transferred to the Participant's LESOP Diversification
Account or McDESOP Diversification Account under the Plan
and thereafter shall be invested in accordance with the
Participant's elections pursuant to Section 10.8 or 10.11(a)
but determined without regard to Section 10.7 provided that
such transfer shall occur no later than 90 days after the
date on which the Participant becomes a Qualified
Participant, attains age 60 or the end of each Annual
Election Period during which the Participant makes a LESOP
Diversification Election or at such earlier dates as the
Committee, pursuant to Section 10.13 shall permit.
(b) Diversification of Future Contributions Participant
Elected Contributions. Effective on or after July 1, 1993, if
the balance of a Participant's Participant Elected Contribution<PAGE>
Account is equal to $1500 or more (or such lesser amount as the
Committee from time to time determines), the Participant may make
an election ("Future Contribution Diversification Election") with
respect to his future Participant Elected Contributions to have
up to 100 percent of the amount of such contributions, in
increments of 25 percent, credited to his McDESOP Diversification
Account. Once he has made a Future Contribution Diversification
Election, a Participant may change his election with respect to
future Participant Elected Contributions, subject to
Section 10.13, but each such change shall only effect Participant
Elected Contributions made to the Plan after the date the
election is effective and before the date a new Future
Contribution Diversification Election becomes effective.
Effective July 1, 1994, Future Contribution Diversification
Elections may be made by any Participant regardless of the size
of his account balance and may be made in five percent (5%)
increments.
(c) Age Diversification of Participant Elected Contribution
Accounts and Employer Matching Contribution Accounts. Effective
July 1, 1994, beginning with the first day of the month following
the month in which a Participant attains 50 years of age, the
Participant (or the Beneficiary of a Participant who would have
attained age 50 if he had not died) may elect to diversify by
transferring to his McDESOP Diversification Account up to 100
percent (100%) (in increments of five percent (5%)) of his:
(1) Participant Elected Contribution Account; and
(2) Employer Matching Contribution Accounts.
The diversification amount to be transferred from a
Participant's Participant Elected Contribution Account shall be
an amount equal to the difference between (A) the diversification
percentage elected by the Participant multiplied by the sum of
(i) the Participant's Participant Elected Contribution Account,
and (ii) the amounts previously transferred from the
Participant's Participant Elected Contribution Account to the
Participant's McDESOP Diversification Account ("Prior Elected
Contribution Transfers") reduced by (B) the amount of the
Participant's Prior Elected Contribution Transfers. The
Diversification Amount to be transferred from a Participant's
Employer Matching Contribution Accounts shall be an amount equal
to the difference between (A) the diversification percentage
elected by the Participant multiplied by the sum of (i) the
Participant's Employer Matching Contribution Accounts and
(ii) the amounts previously transferred from the Participant's
Employer Matching Contribution Accounts to the Participant's
McDESOP Diversification Account ("Prior Matching Contribution
Transfers") reduced by (B) the amount of the Participant's Prior
Matching Contribution Transfers. If a Participant has made a
Diversification Election and has not made a subsequent
Diversification Election with a lower percentage, a percentage of
the value of all future allocations to the Participant's
Participant Elected Contribution Account and Employer Matching
Contribution Accounts respectively equal to the percentage of the
Participant's Diversification Election shall be transferred to
the Participant's McDESOP Diversification Account.<PAGE>
If a Participant who has made a McDESOP Diversification
Election, makes a new McDESOP Diversification Election at a
percentage (including zero) lower than the percentage of the
earlier McDESOP Diversification Election, no portion of the
allocations to the Participant's Participant Elected Contribution
Account and Employer Matching Contribution Accounts,
respectively, shall be transferred to the McDESOP Diversification
Account until the respective products of the new lower percentage
elected multiplied by (A) the sum of the Participant Elected
Contribution Account plus Prior Elected Contribution Transfers
and (B) the sum of the Employer Matching Contribution Accounts
plus Prior Matching Contribution Transfers exceed (A) the Prior
Elected Contribution Transfers and (B) Prior Matching
Contribution Transfers, at which time each such respective
excess, and thereafter, a percentage of all future allocations
respectively to the Participant's Participant Elected
Contribution Account and Employer Matching Contribution Accounts
equal to the percentage of the Participant's McDESOP
Diversification Election shall be transferred to the
Participant's McDESOP Diversification Account. A McDESOP
Diversification Election shall be made at the same time and with
the same effective dates and such other rules as investment
elections under Section 10.13. Once a Participant has made a
McDESOP Diversification Election of a given percentage it will
continue in effect until he makes a new election. A Participant
can elect to reduce the percentage of his McDESOP Diversification
Election to a larger or a lesser percentage (including to zero);
however, amounts already credited to his McDESOP Diversification
Account shall not be transferred back to his Participant Elected
Contribution Account and his Employer Matching Contribution
Accounts.
(d) Distributions from Diversification Accounts. The
provisions of the Plan shall apply to amounts subject to a
Diversification Election under Section 10.12 in the same manner
as to the Participant Elected Contribution Accounts or Employer
Matching Contribution Accounts, except that the balance in a
Participant's McDESOP Diversification Account shall be invested
in the Trust Investment Funds in the same manner as the
Participant elects to invest his Profit Sharing Fund Account
pursuant to Section 10.8 or as provided in Section 10.11(a),
whichever is applicable, but determined without regard to Section
10.7. Contributions credited to a Participant's McDESOP
Contribution Diversification Account shall be credited to the
Investment Funds available under the Profit Sharing Plan in the
same proportions as the Participant elects pursuant to Section
10.8 or as provided in Section 10.11(a) whichever is applicable,
but determined without regard to Section 10.7. A Participant to
whom a distribution is payable under Article X shall have the
right to elect to receive any distributions made from his McDESOP
Diversification Account in McDonald's common stock.
10.13 Effective Date of Participant's Investment and
Diversification Elections. Effective prior to July 1, 1994, each
Participant's investment election, pursuant to Sections 10.8, 10.9 and
10.10 and a Diversification Election made pursuant to Section 10.12,
shall be made effective as of such date or dates as the Committee
shall, in accordance with uniform and non-discriminatory rules
designate, or as soon thereafter as is administratively convenient.
Effective July 1, 1994 and thereafter, each Participant's investment<PAGE>
election or Diversification Election submitted by the 25th of a
calendar month, pursuant to Sections 10.8, 10.9 and 10.10 and a
Diversification Election made pursuant to Section 10.12, shall be made
effective as of the first day of the next calendar month or as soon
thereafter as is administratively convenient. Diversification
Elections with respect to future contributions made in accordance with
Section 10.12 shall be implemented the first day of the calendar month
after the month in which such contributions are made to the Plan or as
soon thereafter as is administratively convenient. This Section 10.13
is intended to give the Committee the authority to implement
Participants' Investment Elections and Diversification Elections as
soon as possible with due regard for requiring advance notice of
elections. The Committee may use such methods as making transfers
between Investment Funds based upon estimates followed by corrective
adjustments made when exact data becomes available and, in the event
of inability to effectuate elections because of data processing,
communications or other systems breakdowns, the Committee may
effectuate such elections as soon as is reasonable under the existing
circumstances.
10.14 Trust Income. As of the close of business on each Valuation
Date, the fair market value of the Trust Fund shall be determined.
The fair market value of Assets Subject to Guarantee, as defined in
Section 10.6(a)(3), shall be book value for all purposes hereunder
unless the Committee determines that the book value guarantees no
longer apply, a market value distribution has occurred under the
contract or there has been a default on the guarantee. The fair
market value of the Trust Fund shall be determined, recorded and
communicated in writing to the Committee by the Trustee. The Trustee
shall also determine the fair market value of each separate Investment
Fund. The Trustee's determination of fair market value shall be final
and conclusive on all persons. Once the values of each such
Investment Fund have been determined, the value of each Trust Sub-fund
invested in such Investment Fund shall be determined in accordance
with Section 10.15. Once the fair market value of each Trust Sub-fund
invested in each Investment Fund is determined, the value of each
Participant's Accounts held in such Trust Sub-fund shall be determined
therefrom in accordance with Section 10.17.
For purposes of valuation under Sections 10.15 and 10.16, the "daily
weighted average" of amounts held under or transferred into a fund or
account means the sum of the daily values of such amounts in the fund
or account for each day of the month divided by the number of days in
the month, determined by including amounts on the date of transfer
into a fund or an account and excluding amounts on the date of
transfer out of a fund or an account.
10.15 Trust Sub-fund Income. As of each Valuation Date, the
Committee shall determine the adjustment required to be made to the
value of each Trust Sub-fund to make the total of all Trust Sub-fund
balances which are invested in an Investment Fund equal to the total
value of the Investment Fund in the manner described below:
(a) Income Allocation to Trust Sub-funds Invested in the
Diversified Stock Fund, Profit Sharing McDonald's Common Stock
Fund, the Insurance Contract Fund, the Multi-Asset Fund, McDESOP
McDonald's Preferred Stock Fund, McDESOP McDonald's Common Stock
Fund or the Money Market Fund Subaccounts which are not directly
credited with income. The value of the portion of each Trust
Sub-fund in the Profit Sharing Plan (including Participants'<PAGE>
Diversification Accounts) invested in the Diversified Stock Fund,
the Profit Sharing McDonald's Common Stock Fund, the Multi-Asset
Fund, the Insurance Contract Fund, the Money Market Fund Sub
accounts which are not directly credited with income pursuant to
Section 10.6(a)(5) and the Participant Elected Contribution Sub-
fund, the Employer Matching Contribution Sub-fund and to the
extent not invested in Company Stock, the Employer Auxiliary ESOP
Contribution Sub-fund and the Auxiliary ESOP Suspense Account
invested in the McDESOP McDonald's Preferred Stock Fund or the
McDESOP McDonald's Common Stock Fund as of a Valuation Date is
equal to the product of (1) multiplied by (2) where:
(1) is the value of the portion of such Trust Sub-fund
invested in an Investment Fund as of the immediately
preceding Valuation Date, reduced by the amount of any
distributions therefrom since the immediately preceding
Valuation Date, and
(2) is a fraction the numerator of which is the value
of the Investment Fund as of the Valuation Date reduced by
the amount of any contributions credited thereto since the
immediately preceding Valuation Date and the denominator of
which is the value of such Investment Fund as of the
immediately preceding Valuation Date reduced by the amount
of any distributions from such Investment Fund since the
immediately preceding Valuation Date.
(b) Income Allocation to Trust Sub-funds Invested in the
Money Market Fund Subaccounts which are directly credited with
income pursuant to Section 10.6(a)(6). The value of the portion
of each Trust Sub-fund in the Profit Sharing Plan invested in
Profit Sharing Money Market Fund Subaccounts which are directly
credited with income as of a Valuation Date shall be equal to the
sum of (1) plus (2) where:
(1) is the value of the portion of such Trust Sub-fund
invested in a Money Market Fund Subaccount as of the
immediately preceding Valuation Date, reduced by any
transfers or distributions therefrom since the immediately
preceding Valuation Date, and
(2) is an amount equal to the income of the portion of
the Trust Sub-fund invested in the Money Market Fund
Subaccount since the immediately preceding Valuation Date.
Notwithstanding the foregoing, any dividends paid to the Trust
with respect to Company Stock which was purchased with the proceeds of
an Exempt Loan (or other loan permitted in accordance with Section 6.1
including a loan which was refinanced with such loan) and any Company
Stock into which such purchased shares have been converted, which has
been allocated to Participants' Accounts and which are being used
pursuant to Section 6.4(a) to repay such loan shall not be credited to
Participants' Accounts but shall be credited to the Auxiliary ESOP
Suspense Account maintained with respect to such loan pursuant to
Section 6.2 and used to repay such loan; provided that the amount of
any such dividends which are not used as of the last Valuation Date of
a Plan Year to repay the loan shall be allocated to Participants'
Accounts pursuant to Section 10.17 as of such Valuation Date.<PAGE>
10.16 Income Directly Credited to Trust Sub-funds. For the
purpose of determining the allocation of income to Participants'
Participant Elected Contribution Accounts as of a Valuation Date,
there shall be added to the value of the Participant Elected
Contribution Fund as of that Valuation Date an amount equal to the sum
of (a) the income directly credited to the Participant Elected
Contribution Holding Fund pursuant to Section 10.6 and (b) the income
allocated to such Fund from the Distribution Fund in accordance with
Section 10.18 for the period ending on such Valuation Date. For the
purpose of determining the allocation of income to Participants'
Employer Matching Contribution Account as of a Valuation Date there
shall be added to the value of the Employer Matching Contribution Fund
as of that Valuation Date an amount equal to the sum of (a) the income
directly credited to the Employer Matching Contribution Holding Fund
and the Per Capita Employer Matching Contribution Holding Fund
pursuant to Section 10.6 and (b) the income allocated to such Fund
from the Distribution Fund in accordance with Section 10.18 for the
period ending on such Valuation Date. Any income directly credited to
the Profit Sharing Contribution Holding Fund shall be allocated to
Participant Accounts as part of the Profit Sharing Contribution
Holding Fund as provided in Section 7.1.
10.17 Adjustment of Account Balances. As of each Valuation Date,
the Committee shall determine the adjustment required to be made to
the value of each Participant's Accounts and the Auxiliary ESOP
Suspense Accounts to make the total of all such Account balances which
are invested in an Investment Fund and held in a Trust Sub-fund equal
to the total amount invested in that Investment Fund and held in that
Trust Sub-fund.
(a) Valuation of the Portion of Profit Sharing Fund
Accounts, Investment Savings Fund Accounts, Rollover Contribution
Accounts, Diversification Accounts, Participant Elected
Contribution Accounts and Employer Matching Contribution Accounts
invested in an Investment Fund other than the Money Market Fund
Subaccounts which are directly credited with income. The value
of the portion of each Participant's Profit Sharing Fund Account,
Investment Savings Fund Account, Rollover Contribution Account,
Diversification Account, Participant Elected Contribution Account
and Employer Matching Contribution Account invested in an
Investment Fund other than the Money Market Fund Subaccounts
which are directly credited with income pursuant to
Section 10.6(a)(6) as of a Valuation Date shall be equal to the
product for each Investment Fund of (1) multiplied by (2) where:
(1) is the value of the portion of such Account held
in a Trust Sub-fund and invested in an Investment Fund as of
the immediately preceding Valuation Date, reduced by any
distributions therefrom since the immediately preceding
Valuation Date, and
(2) is a fraction, the numerator of which is the value
of the portion of the Trust Sub-fund invested in such
Investment Fund as of the Valuation Date reduced by any
contributions credited thereto since the immediately
preceding Valuation Date and the denominator of which is the
value of such portion of the Trust Sub-fund invested in such
Investment Fund as of the immediately preceding Valuation
Date reduced by any distributions therefrom since the
immediately preceding Valuation Date. In determining the<PAGE>
value of the foregoing numerator for purposes of the
Participant Elected Contribution Fund and the Employer
Matching Contribution Fund, the income of the Participant
Elected Contribution Holding Fund and the Employer Matching
Contribution Holding Fund and the Per Capita Employer
Matching Contribution Holding Fund shall be included in
accordance with Section 10.16.
(b) Valuation of the Portion of Participants' Accounts
Invested in the Money Market Fund. The value of the portion of
each Participant's Accounts held in a Trust Sub-fund and invested
in a Money Market Fund Subaccount which is directly credited with
income as of a Valuation Date shall be equal to the sum of (1)
plus (2) where:
(1) is the value of the portion of the Participant's
Account held in a Trust Sub-fund and invested in the Money
Market Fund Subaccount which is directly credited with
income pursuant to Section 10.6(a)(b) as of the immediately
preceding Valuation Date, reduced by any transfers or
distributions therefrom since the immediately preceding
Valuation Date, and
(2) is an amount equal to the income of the portion of
such Account held in a Trust Sub-fund and invested in the
Money Market Fund Subaccount since the immediately preceding
Valuation Date. The income of such portion of such Account
is equal to the product of (A) multiplied by (B) where:
(A) is the difference between (i) the sum of (I)
the value of the portion of the Trust Sub-fund invested
in the Money Market Fund Subaccount as of the Valuation
Date plus (II) any transfers or distributions therefrom
since the immediately preceding Valuation Date, reduced
by (ii) the sum of (I) the value of such portion of the
Trust Sub-fund invested in the Money Market Fund
Subaccount as of the immediately preceding Valuation
Date plus (II) any contributions or other amounts
transferred thereto since the immediately preceding
Valuation Date; and
(B) is a fraction, the numerator of which is the
daily weighted average value of the portion of the
Account held in the Trust Sub-fund and invested in the
Money Market Fund Subaccount for the period since the
immediately preceding Valuation Date, and the
denominator of which is the daily weighted average
value of the portion of the Trust Sub-fund invested in
the Money Market Fund Subaccount for the period since
the immediately preceding Valuation Date.
(3) Valuation of the Portion of the Auxiliary ESOP
Suspense Account and Participants' Employer Auxiliary ESOP
Accounts invested in Company Stock. Participants' Employer
Auxiliary ESOP Accounts and Auxiliary ESOP Suspense Accounts
shall be directly credited with the dividends and other
distributions and earnings of shares of Company Stock
credited thereto; provided that any dividends credited to
Participants' Employer Auxiliary ESOP Accounts which are to
be used to repay an Exempt Loan shall immediately after<PAGE>
being so credited to Participants' Accounts be transferred
to the Auxiliary ESOP Suspense Account and held in a
separate account until used to repay a loan and further
provided that the amount of such dividends transferred to
the Auxiliary ESOP Suspense Account for a Plan Year shall
not exceed the fair market value of the Company Stock
(determined on the Valuation Date allocated) allocated to
Participants' Employer Auxiliary ESOP Accounts pursuant to
Section 6.3(b) for the Plan Year.
The Accounts of Participants as adjusted according to
Section 10.17 shall determine the value of the interest of each
Participant in the Trust for all purposes subject to the crediting of
any contributions as provided in Article VII until a subsequent
determination is made by the Committee.
10.18 Allocation of Income of the Distribution Fund. Any net
income and gains (after reduction by losses and by expenses not paid
by an Employer) of the Distribution Fund shall be allocated to the
Profit Sharing Plan and to McDESOP in proportion to the amount of
distributions from each such portion of the Plan transferred to the
Distribution Fund since the preceding Valuation Date. The portion of
such net income allocated to the Profit Sharing Plan shall be credited
to Profit Sharing Contribution Holding Funds #1 and #2 in proportion
to the Profit Sharing Contributions made thereto in accordance with
Article III and shall be allocated to Participants' Profit Sharing
Contribution Accounts in accordance with Section 7.1. The portion of
such income allocated to McDESOP shall be credited to Participants'
Participant Elected Matched Contribution Accounts and Employer
Matching Contribution Accounts in proportion to the income allocable
thereto in accordance with Section 10.16. Effective July 1, 1993, for
purposes of making the foregoing allocations, distributions from
Participants' Diversification Accounts shall be considered to be part
of the McDESOP portion of the Plan.
10.19 Separate Accounting in the Trust Fund. The Committee shall
create and maintain separate accounts for each Participant as
described in Section 1.1. Every adjustment to a Participant's
Accounts shall be considered as having been made on the relevant
Valuation Date, regardless of the date of actual entry or receipt by
the Trustee of Employer Contributions and Participant Elected
Contributions for a Plan Year.
10.20 Trust Investment. The assets of a Trust Fund may at any one
time be invested up to 100% exclusively in Company Stock subject to
the provisions of the Trust.
10.21 Separate Accounting for Auxiliary ESOP Suspense Account.
The Committee shall create and maintain a separate account, called an
Auxiliary ESOP Suspense Account, to record and to separately account
for (a) each loan or other extension of credit made pursuant to
Section 6.1, (b) all Employer Auxiliary ESOP Contributions to the Plan
to repay each such loan or extension of credit, (c) net income, gains
or losses charged to such Employer Auxiliary ESOP Contributions and
Auxiliary ESOP Suspense Account under Sections 10.17 and 10.6(b), and
(d) all payments made on such loan or other extension of credit until
such loan or other extension of credit is repaid, in accordance with
Sections 6.1, 6.2 and 6.3.<PAGE>
10.22 Correction of Error. In the event of any error, including
but not limited to an error in the adjustment of a Participant's
Accounts or an error in including or excluding persons as
Participants, the Committee, in its sole discretion, may correct such
error by either crediting or charging the adjustment required, or such
adjustment as the Committee in its sole discretion shall determine to
be equitable, to make such correction to or against Forfeitures or to
or against income and expenses of the Trust for the Plan Year in which
the correction is made, or if an Employer contributes an amount to
correct any such error, from such amount.
Effective January 1, 1995, corrections of Participant Elected
Contributions and Employer Matching Contributions which an individual
should have been permitted to make, but because of an error in Plan
administration was not permitted to make, shall be made as provided in
the preceding sentence by crediting the individual's Participant
Elected Contribution Account and Employer Matching Contribution
Account respectively with (a) Participant Elected Contributions equal
to the average percentage of compensation which was contributed for
the preceding Plan Year as such contributions by highly compensated
employees or non-highly compensated employees (whichever the
individual is classified as) and (b) the amount of Employer Matching
Contributions and Forfeitures which would have been credited to such
individual's Employer Matching Contribution Account with respect to
such Employer Matching Contributions. After the preceding correction
is made, the Participant's Participant Elected Contribution Account
and Employer Matching Contribution Account shall be credited with a
rate of return which is equal to the rate of return the Participant's
accounts would have received had the accounts been invested in the
manner in which such accounts were invested at the time the
Participant was first given the opportunity to make Participant
Elected Contributions.
Except as provided in this Section, the Accounts of other
Participants shall not be readjusted on account of such error.
10.23 Statement of Accounts. As soon as practicable after the
last day of each Plan Year, the Committee shall deliver to each
Participant a statement of his Net Balance Account.
10.24 Purchase or Sale of Company Stock. The Trustee, on behalf
of McDESOP, may (a) sell Company Stock to a Party in Interest or a
Disqualified Person if such sale is for at least the fair market value
of the Company Stock and (b) purchase Company Stock from a Party in
Interest or a Disqualified Person, if such purchase is for no more
than the fair market value of the Company Stock and (c) no commission
is charged with respect to such sale or acquisition; provided that
such sale or acquisition is for the price of the Company Stock
prevailing on an established securities market, if the Company Stock
is readily tradeable on such market and determined by an independent
appraiser, if the Company Stock is not readily tradeable on an
established securities market.
10.25 Shareholder Rights in Company Stock. A fundamental purpose
of the McDESOP portion of the Plan and the Trust which is maintained
to implement the McDESOP portion of the Plan is to obtain for the
Company, its shareholders, Participants and future Participants the
benefits resulting from Participants having the right to vote shares
of Company Stock and to determine whether shares of Company Stock
should be sold or retained in response to a public or private tender<PAGE>
offer. A key purpose of the McDESOP portion of the Plan is to
encourage Participants to feel and to act like owners of the Company
by assuring them the opportunity to share the economic benefit of
ownership of Company Stock and the opportunity to direct the manner in
which shares held by McDESOP are voted at all shareholder meetings and
to determine whether shares of Company Stock should be sold or
retained in response to a public or private tender offer. It is
similarly desired that Participants who elect to invest their profit
sharing accounts in Company Stock have the same opportunity with
respect to the shares held in Participants' Profit Sharing Accounts.
The broad employee participation in the Plan at all levels of the
Company and limitations on maximum benefits to Participants who are
officers, shareholders or highly compensated employees assure that
such voting and decisions by Participants represent the overall
knowledge and experience of a broad representative cross-section of
employees of the Company. It, therefore, is anticipated that the
votes and other decisions of Participants will be fairly
representative of both present and future Participants' interests.
Accordingly it has been concluded that Participants are best able to
determine questions concerning voting and whether to sell or retain
shares of Company Stock in a public or private tender offer with
respect to shares allocated to their own accounts, as each person is
uniquely able to determine his best interests based upon both his
unique knowledge of his own situation and his unique knowledge of the
Company. Moreover, because the overall broad group of employees who
are Participants is fairly representative of both present and future
Participants' interests it is believed that such Participants as a
group are uniquely able to determine the best interests of future
Participants who benefit from future allocations of Company Stock
under the Plan. Further, such participation in fundamental
shareholder decisions by Participants is expected to result in
increased commitment to the success of the Company further enhancing
financial rewards of plan participation for such Participants, as well
as enhancing shareholder and Company values. In order to assure that
each Participant will express his or her unrestrained best judgment
concerning how these rights should be exercised independent of any
considerations associated with such Participant's employment status
with the Company, Participants exercise such rights through a method
that assures the confidentiality of their votes and other decisions.
(a) Allocated Shares. With respect to shares (and
fractional shares) of Company Stock which have been allocated to
Participants' Accounts (including shares held in the Profit
Sharing McDonald's Stock Fund with respect to amounts credited to
Participant's Profit Sharing Fund Account or Diversification
Account), each Participant or Beneficiary, as a named fiduciary,
shall have the right to direct the Trustee as to the manner of
voting and the exercise of all other rights which a shareholder
of record has with respect to such shares (including, but not
limited to, the right to sell or retain such shares in a public
or private tender offer). In voting or exercising such other
rights with respect to such shares the Participants and
Beneficiaries shall consider their own individual long-term best
interests in providing benefits under the Plan and Trust rather
than a short term gain. In the event that a Participant shall
fail to direct the Trustee as to the manner of voting of such
shares of Company Stock allocated to the Participant's Accounts
or as to the exercise of other rights in respect of such shares,
the Trustee shall vote such shares or exercise such rights with
respect to such shares in accordance with Section 10.25(b).<PAGE>
(b) Unallocated Shares and Allocated Shares Not Directed.
With respect to shares (and fractional shares) of Company Stock
which are either not allocated to Participants' Accounts or are
allocated to the Accounts of Participants who fail (or whose
Beneficiaries fail) to provide any direction pursuant to Section
10.25(a), each Participant who is an Employee, as a named
fiduciary, shall have the right to direct the Trustee as to the
manner of voting the number of such shares (and fractional
shares), and the exercise of all other rights which a shareholder
of record has with respect to such shares (including, but not
limited to, the right to sell or retain such shares in a public
or private tender offer), as is equal to the product of (i) the
sum of the number of unallocated shares and undirected shares
multiplied by (ii) a fraction, the numerator of which is the
number of shares (and fractional shares) of Company Stock which
have been allocated to the Accounts of such Participant and the
denominator of which is the total number of shares (and
fractional shares) of Company Stock which have been allocated to
the Accounts of all Participants who give directions to the
Trustee pursuant to this Section 10.25(b). In voting or
exercising such other rights with respect to such shares such
Participants shall consider the long term interests of both
current and future Participants and Beneficiaries in providing
benefits under the Plan and Trust rather than a short term gain.
(c) Named Fiduciaries. The Trustee shall notify each
Participant and Beneficiary who is authorized pursuant to Section
10.25(a) or (b) to direct the Trustee as to the manner of voting
and the exercise of other shareholder rights with respect to
shares (and fractional shares) of Company Stock that such
Participant or Beneficiary is a named fiduciary, within the
meaning of Section 402(a)(2) of ERISA, with respect to such
shares (and fractional shares), and shall instruct each such
Participant and Beneficiary that in exercising such authority to
direct the Trustee, with respect to shares of Company Stock
allocated to his Accounts, he should consider his own individual
long-term best interests in providing benefits under the Plan
and, with respect to shares of Company Stock voted pursuant to
Section 10.25(b), he should consider the long-term interests of
both current and future Participants and Beneficiaries in
providing benefits under the Plan and Trust rather than a short
term gain.
(d) Confidentiality. The Trustee shall solicit the
directions of Participants and Beneficiaries in accordance with
Section 10.25(a), (b) and (c) and shall follow such directions by
delivering aggregated votes to the Company or otherwise
implementing such directions in any convenient manner which
preserves the confidentiality of the votes or other directions of
individual Participants or Beneficiaries. Any designee of the
Trustee who assists in the solicitation or tabulation of the
directions of Participants or Beneficiaries shall certify that he
will maintain the confidentiality of all directions given.
10.26 Cash Distributions with Respect to Company Stock. If there
is a discrepancy between (1) the amount received by the Trust upon the
sale of Company Stock or credited to a portion of the Trust upon the
transfer of Company Stock from one portion of the Trust to another,
for the purpose of making cash distributions to Participants or<PAGE>
Beneficiaries and (2) the value of such Company Stock on the Valuation
Date as of which such stock is valued for the purpose of determining
the amount of the Participant's cash distributions, such discrepancy
shall be credited to or charged against the Trust Income of the
portion of the Trust Fund (i.e., the Profit Sharing Plan Accounts, the
Leveraged ESOP Accounts and the remaining McDESOP Accounts) which held
the stock before sale or transfer as of the Valuation Date next
following the sale or transfer.
10.27 Distribution Fund. Any of the provisions herein to the
contrary notwithstanding, the Committee shall have the authority to
direct a Trustee to transfer amounts which in accordance with Article
XI are currently distributable in cash to Participants or
Beneficiaries who have had a Termination of Employment or, in the case
of the Profit Sharing Plan, a Break in Service, to a Distribution Fund
("Distribution Fund"), during the calendar month next following the
calendar month within which such amount became distributable. The
Distribution Fund shall be held (a) in a checking account of the
Trustee in the name of the Trust with, if the Trustee is a bank or a
Trust Company, the Trustee's banking department, or (b) in short term
liquid investments, in such types of investments or pooled, common,
commingled or collective trust funds, including, if the Trustee is a
bank, those of the Trustee, as the Committee may from time to time
authorize the Trustee to invest in such respective amounts and
proportions and in such manner as the Committee shall from time to
time determine. The Committee may authorize one or more of its
members, or their designees, to sign, manually, or by facsimile
signature, any and all checks, drafts, and orders, including orders or
directions in informal or letter form, against any funds in the
Distribution Fund and the Trustee is authorized to honor any and all
checks, drafts and orders so signed. As of each Valuation Date,
income, gains, losses and expenses (to the extent not paid by an
Employer) of the Distribution Fund shall be determined separately from
the remainder of the Trust and the net income or losses of the
Distribution Fund, for each Plan Year shall be added to the net income
of the Trust Fund for such Plan Year as provided in Section 10.18 and
any net losses of the Distribution Fund for the Plan Year shall be
paid by the Company.
ARTICLE XI
DISTRIBUTION OF BENEFITS
11.1 Distributions, General.
(a) Except as provided in Section 11.11 (for lump sum
distributions of amounts not more than $3,500) and subject to
Section 11.8 (with respect to withholding of taxes), upon the
Participant's Termination of Employment on or after Vesting
Retirement Date, Disability or for any other reason other than
death, distributions shall be made in accordance with Section
11.2.
(b) Except as provided in Section 11.11 (for lump sum
distributions of amounts not more than $3,500) and subject to
Section 11.8 (with respect to withholding of taxes), upon the
Participant's death, distributions shall be made in accordance
with Section 11.3.<PAGE>
(c) If a Participant or Beneficiary is otherwise entitled
to a distribution because of retirement on or after Vesting
Retirement Date, Disability, death or other Termination of
Employment, the Committee shall require that immediate
distribution of small vested Accrued Benefits shall be made in
accordance with and subject to the limitations of Section 11.11,
notwithstanding the provisions of Sections 11.2 and 11.3.
(d) A Participant or Beneficiary who has not had a
Termination of Employment shall receive a distribution as
provided in Section 11.13 not later than his Required Beginning
Date.
11.2 Payment of Net Balance Account on Disability, or on
Retirement or Other Termination of Employment.
(a) Form of Payment of Accounts.
(1) Retirement or Disability. Subject to
Sections 11.11 and 11.14, if a Participant retires on or
after his Vesting Retirement Date or has a Termination of
Employment on account of a Disability and if the Participant
makes no election pursuant to Section 11.2(b), the Trustee
shall distribute to the Participant the vested portion of
his Net Balance Account credited to his Accounts held in the
Plan in a single non-periodic distribution within a
reasonable time after the Valuation Date next following the
later of (i) such event or (ii) the last day of the Plan
Year in which he attains the age of 70-1/2. A Participant
whose Net Balance Account is payable pursuant to the
preceding sentence may elect to receive payment in whichever
of the following methods the Participant shall elect in
writing:
(A) A single non-periodic payment;
(B) Substantially equal installments, not less
frequently than annually, over a period certain subject
to Section 11.12, either directly from the Plan, or by
purchase of a nontransferable period certain annuity
contract purchased from an insurance company which is
authorized to do business in any state and which has an
A plus rating by A.M. Best Company or a comparable
rating by a comparable service which rates insurance
companies, payable for such period of time as the
Participant shall elect; or
(C) In the form of a nontransferable life annuity
contract in an amount which can be purchased from an
insurance company designated by the Participant which
is authorized to do business in any state and which has
an A plus rating by A.M. Best Company or a comparable
rating by a comparable service which rates insurance
companies, with the Participant's vested Net Balance
Account credited to his Accounts or with the portion of
the Participant's vested Net Balance Account which the
Participant elects to receive in the form of a
nontransferable life annuity contract.<PAGE>
(2) Termination for Reasons Other than Retirement or
Disability or Death. If a Participant has a Termination of
Employment for reasons other than retirement on or after his
Vesting Retirement Date, Disability or death, the Trustee
shall distribute the Participant's vested Net Balance
Account:
(A) Prior to July 1, 1993, subject to an election
by the Participant to accelerate the date of
distribution, in cash and in a single non-periodic
payment within a reasonable time after the last day of
the Plan Year in which he attains the age of 70-1/2,
but not later than his Required Beginning Date. Such a
Participant shall not be entitled to elect installment
payments or an annuity for distributions which commence
on or after the Participant has attained age 55.
(B) On or after July 1, 1993, subject to the
Participant's election to receive nonperiodic or
installment distributions as follows:
(I) Profit Sharing Fund Account. The
vested portion of the Participant's Profit Sharing
Fund Account shall be distributed to the
Participant in cash or in McDonald's common stock,
in accordance with Section 11.2(f), within a
reasonable time after the Participant elects to
receive or to commence receiving a distribution of
such account.
(II) Investment Savings Fund Account. The
Participant's Investment Savings Fund Account
shall be distributed to the Participant in cash
within a reasonable time after the Participant
elects to receive or to commence receiving a
distribution of such account.
(III) Rollover Contribution Account and
Rollover Contribution Holding Account. The
Participant's Rollover Contribution Account and
Rollover Contribution Holding Account shall be
distributed to the Participant in cash within a
reasonable time after the Participant elects to
receive or to commence receiving a distribution of
such account.
(IV) McDESOP Accounts. The Participant's
McDESOP Accounts, including the vested portion of
all accounts identified in Sections 1.1(b) and in
1.1(c) shall be distributed to the Participant in
cash or in McDonald's common stock as provided in
Section 11.2(g) within a reasonable time after the
Participant elects to receive or to commence
receiving a distribution of such account.
(V) Distributions in Default of Election.
In the absence of an election by a Participant to
receive a distribution of his entire vested Net
Balance Account or to commence to receive
installment distributions at least equal to the<PAGE>
greater of the Minimum Distribution Amount and the
amount determined under Section 11.2(d)(3), his
entire vested Net Balance Account shall be
distributed or to commence to be distributed
within a reasonable time after the end of the
calendar year in which he attains the age of 70
1/2, but not later than his Required Beginning
Date.
A Participant entitled to elect to receive a
distribution or to commence receiving
distributions pursuant to this Section 11.2(a)(2)
is not entitled to elect an annuity form of
distribution.
(3) Break in Service. If a Participant has a Break in
Service without having a Termination of Employment, the
Trustee shall distribute the portion of his vested Net
Balance Account in the Profit Sharing Plan in cash and in a
single non-periodic payment within a reasonable time after
the earlier of the Valuation Date next following the date
the Participant elects to receive such distribution or after
the Participant attains the age of 70-1/2, but not later
than his Required Beginning Date; provided that if the
Participant completes one year of Eligibility Service
following the Break in Service, he shall not be permitted
further elections to receive distributions made pursuant to
Article XI until he again has a Break in Service or
Termination of Employment.
(b) Elections by Retired or Disabled Participants. As
permitted in Section 11.2(a)(1), with respect to a distribution
on account of a Participant's Termination of Employment on or
after his Vesting Retirement Date or on account of Disability, a
Participant may elect separately with respect to the portion of
his Net Balance Account held in the Profit Sharing Plan and in
McDESOP, on such form as may be provided or approved by the
Committee, the form of benefit and the date (including an
immediate or a delayed date) of commencement of benefits. The
actual date of distribution shall be determined in accordance
with the administrative procedures established by the Plan
Administrator but shall be no earlier than the day following the
Valuation Date which next follows the date the completed election
form is submitted to the Plan Administrator. To the extent that
such a Participant is receiving a portion of his benefit in a
form other than an annuity purchased from an insurance company,
he may from time to time make or change his benefit elections to
accelerate or to delay the date and the rate of distribution on
such a form as may be provided or approved by the Committee,
subject to such rules as the Committee shall specify and to the
limits stated in Sections 11.2(d) and 11.2(e), hereof. In the
absence of any election, a Participant who has a Termination of
Employment on or after his Vesting Retirement Date or on account
of Disability shall be deemed to have elected to receive the
vested portion of his Net Balance Account in a single
non-periodic payment paid within a reasonable time after the end
of the calendar year in which he attains age 70-1/2, but not
later than his Required Beginning Date.<PAGE>
(c) Types of Annuities. If the Participant elects to
receive his benefit in the form of an annuity contract as
permitted under Section 11.2(a)(1), each Participant, subject to
Sections 11.2(d) and 11.2(e) shall have the right to direct the
Trustee to purchase an available nontransferable annuity contract
from an insurance company designated by the Participant which is
authorized to do business in any state and which has an A plus
rating by A.M. Best Company or a comparable rating by a
comparable service which rates insurance companies. The benefit
under such annuity contract shall be paid to the Participant
prior to his death, and if a joint and survivor annuity is
provided, unless such joint annuitant shall be the Participant's
spouse, the periodic benefit payable to the Participant's
Beneficiary shall not be greater than the following percentage of
the benefit paid to the Participant:
Excess of age of employee Applicable
over age of beneficiary percentage
------------------------- ----------
10 years or less 100
11 96
12 93
13 90
14 87
15 84
16 82
17 79
18 77
19 75
20 73
21 72
22 70
23 68
24 67
25 66
26 64
27 63
28 62
29 61
30 60
31 59
32 59
33 58
34 57
35 56
36 56
37 55
38 55
39 54
40 54
41 53
42 53
43 53
44 and greater 52
(d) Limitations on Participant Elections. Notwithstanding
the provisions of Section 11.9 or any elections made by the
Participant,<PAGE>
(1) Period for Installment or Annuity Payments.
Except as provided in Section 11.14, installment payments
and period certain payments under any annuity contract
purchased from an insurance company shall be made or shall
commence not later than the Required Beginning Date and
shall be made over a period not in excess of (A) the lesser
of the period determined under Section 11.2(d)(3) or (B) the
Participant's life expectancy or the joint and last survivor
life expectancy of the Participant and his Beneficiary (such
life expectancies to be determined in accordance with
Section 11.12(e)). In the case of payments made in the form
of a life annuity, payments shall be made over a period not
in excess of the life of the Participant or the lives of the
Participant and his Beneficiary.
(2) Annuity Payments. If benefits are paid under an
annuity contract, payments shall be non-increasing or shall
increase only as follows:
(A) with any percentage increase in a specified
and generally recognized cost-of-living index,
(B) to the extent of the reduction in the
Participant's payments to provide for a survivor
benefit upon death of the beneficiary whose life was
being used to determine the period over which benefits
are being paid; or
(C) to provide cash refunds of Participant
Contributions upon the Participant's death; and
(3) Minimum Distribution Incidental Benefit
Requirements. If benefits are paid in installments,
payments for the calendar year in which the Participant
attains the age of 70-1/2 and in each calendar year
thereafter shall equal at least the dollar value of the
Participant's vested Net Balance Account as of the last
Valuation Date of the immediately preceding Plan Year
divided by the following Applicable Divisor:
Attained Age of Participant
on Birthday in Calendar Year Applicable Divisor
---------------------------- ------------------
70 26.2
71 25.3
72 24.4
73 23.5
74 22.7
75 21.8
76 20.9
77 20.1
78 19.2
79 18.4
80 17.6
81 16.8
82 16.0
83 15.3
84 14.5
85 13.8<PAGE>
86 13.1
87 12.4
88 11.8
89 11.1
90 10.5
91 9.9
92 9.4
93 8.8
94 8.3
95 7.8
96 7.3
97 6.9
98 6.5
99 6.1
100 5.7
101 5.3
102 5.0
103 4.7
104 4.4
105 4.1
106 3.8
107 3.6
108 3.3
109 3.1
110 2.8
111 2.6
112 2.4
113 2.2
114 2.0
115 1.8
If benefits are paid in the form of an annuity with a period
certain feature, the number of years over which such period
certain payments are made shall not exceed the lesser of
(1) the Participant's or the Participant's and Beneficiary's
joint and last survivor life expectancy as determined in
Section 11.12(e) or (2) the number of years shown in the
Applicable Divisor column above.
(e) Qualified Joint and Survivor Annuities.
(1) Notwithstanding the foregoing provisions of this
Section 11.2, in the case of a Participant who has elected
pursuant to Section 11.2(a)(1) to receive one or more of his
Accounts in a life annuity, such distribution shall be in
the form of a Qualified Joint and Survivor Annuity purchased
by the Trust from an insurance company designated by the
Participant which is authorized to do business in any state
and which has an A plus rating by A.M. Best Company or a
comparable rating by a comparable service which rates
insurance companies, unless the Participant with his
spouse's consent as provided in Section 11.10 elects to
receive a different form of annuity or another form of
benefit. The term "Qualified Joint and Survivor Annuity"
means an immediate annuity payable, for a married
Participant, to the Participant for life and, if the
Participant's spouse survives the Participant, a survivor
annuity payable to the spouse for life in an amount equal to
50 percent (50%) of the annuity payable to the Participant
and, for an unmarried Participant, a single life annuity<PAGE>
payable to the Participant for life. The amount of the
benefits payable under a Qualified Joint and Survivor
Annuity shall be the amount which can be purchased from an
insurance company with the vested portion of the one or more
of his Accounts which the Participant elects to receive in
the form of a life annuity.
(2) If a Participant who has elected to receive all or
a portion of his vested Net Balance Account in the form of a
life annuity dies before the annuity starting date, such
portion of his vested Net Balance Account shall be paid to
his surviving spouse in the form of a Qualified
Preretirement Survivor Annuity payable to the surviving
spouse for life ("QPSA") unless either the Participant, with
his spouse's consent in accordance with Section 11.10, has
elected to waive the QPSA or the spouse elects pursuant to
Section 11.3(a)(3) to waive the QPSA and to receive another
form of benefit; provided that if the Trust has paid for an
annuity to provide a life annuity benefit elected by the
Participant and the Participant dies before his annuity
starting date under the contract, the QPSA shall be provided
by the annuity contract and the surviving spouse shall have
no claim against the Trust with respect to the Accounts
which he has elected to receive in the form of a life
annuity. Any portion of a Participant's vested Net Balance
Account in excess of the value of a QPSA, if paid directly
by the Plan, or remaining after the payment of annuity
premiums to an insurance company, if paid by an insurance
company, shall be distributed to the Participant's
Beneficiary as provided in Section 11.3.
(3) A Participant who elects to receive benefits in
the form of a life annuity and to whom benefits would be
payable in the form of a Qualified Joint and Survivor
Annuity pursuant to this Section 11.2(e) shall have the
right to waive a Qualified Joint and Survivor Annuity (such
waiver shall be consented to by the Participant's spouse in
writing in accordance with Section 11.10) and the QPSA by
delivering written notice to the Committee, at any time
within the 90 day period prior to the annuity starting date,
to receive all or a portion of such benefits in a different
form of annuity or another form of benefit. If a
Participant elects to receive benefits in the form of a life
annuity, the Committee shall within a reasonable period of
time provide the Participant, by personal delivery or first
class mail, with a written explanation of:
(A) the terms and conditions of the Qualified
Joint and Survivor Annuity and the QPSA;
(B) the Participant's right to make, and the
effect of, an election to waive the Qualified Joint and
Survivor Annuity and the QPSA;
(C) the rights of the Participant's spouse to
consent to the Participant's election to waive the
Qualified Joint and Survivor Annuity and the QPSA and
the effect of consenting to such waiver; and<PAGE>
(D) the Participant's right to make, and the
effect of, a revocation of an election to waive the
Qualified Joint and Survivor Annuity and the QPSA.
Any election made by a Participant to receive a life annuity
form of benefit pursuant to this Section 11.2(e) may be revoked
by such Participant (with his spouse's consent) by delivering
written notice to the Committee at any time prior to the
Participant's annuity starting date and, once revoked, may be
made again at any time by delivering written notice to the
Committee prior to the Participant's annuity starting date. If a
Participant, who has elected a life annuity form of benefit and
who has not waived (with his spouse's consent) the QPSA, dies
before his annuity starting date, his surviving spouse may elect
pursuant to (A) through (D) and Section 11.10 to waive the QPSA.
(f) Form of Profit Sharing Distributions. If the method of
distribution selected by a Participant includes either a
nonperiodic payment or installment payments or a combination of
nonperiodic payments and installments, the Participant may elect,
on such form and in such manner as the Committee shall provide or
permit, to receive the portion of his vested Net Balance Account
in the Profit Sharing Plan distributed in cash or in shares of
McDonald's common stock or in any combination of the two as
elected by the Participant; provided however that, in the absence
of an election to receive shares of McDonald's common stock, such
distributions shall be made in cash and, further provided, that
the portion of such distribution distributed in the form of
shares of McDonald's common stock shall not, except as otherwise
provided below, exceed the value (if any) of the Participant's
interest in the Profit Sharing McDonald's Common Stock Fund.
Until such time as a Participant's vested Net Balance
Account has been distributed, transferred to a Distribution Fund
in accordance with Section 10.27 or forfeited in accordance with
Section 11.4, any portion of the Participant's Net Balance
Account remaining in the Profit Sharing Plan portion of the Plan
shall continue to be invested in accordance with Section 10.7 and
the Participant's (or his Beneficiary's) investment elections in
accordance with Sections 10.8, 10.9, 10.10 and 10.11, as
applicable.
(g) McDESOP Accounts. If the sum of the portion of a
Participant's vested balances in his Participant Elected
Contribution Account, Employer Matching Contribution Account and
McDESOP Diversification Account to the extent it is attributable
to amounts diversified from his Participant Elected Contributions
or Employer Matching Contribution Account and is invested in
McDonald's common stock, consists of $1500 or more as of the
Valuation Date immediately preceding a distribution, such amounts
shall be distributed in the form of shares of McDonald's common
stock, unless the Participant (or his Beneficiary) elects a
distribution in cash. If the sum of the portion of a
Participant's vested balance in his Employer Auxiliary ESOP
Contribution Accounts and his LESOP Diversification Account to
the extent it is invested in McDonald's common stock consists of
$1500 or more as of the Valuation Date immediately preceding the
date of distribution, such accounts shall be distributed in the
form of shares of McDonald's common stock, unless the Participant
(or his Beneficiary) elects a distribution in cash. If the sum<PAGE>
of the portion of a Participant's vested balance in his
Participant Elected Contribution Account, Employer Matching
Contribution Account and his Diversification Account to the
extent it is attributable to his Participant Elected
Contributions or Employer Matching Contributions and is invested
in McDonald's common stock is less than $1500 as of the Valuation
Date immediately preceding the distribution, such Accounts shall
be distributed in cash, unless the Participant (or his
Beneficiary) elects to receive a distribution in shares of
McDonald's common stock. If the sum of the portion of a
Participant's vested Net Balance Account in his Employer
Auxiliary ESOP Contribution Account and his LESOP Diversification
Account to the extent it is attributable to his Employer
Auxiliary ESOP Contributions and is invested in McDonald's common
stock has a value of less than $1500 as of the Valuation Date
immediately preceding the distribution, such Accounts shall be
distributed in cash, unless the Participant (or his Beneficiary)
elects to receive a distribution in shares of McDonald's common
stock.
If any distribution in shares of McDonald's common stock
described in this Section 11.2 would not be in whole shares, the
value of any fractional share shall be distributed in cash. A
Participant or Beneficiary who is entitled to a distribution may
elect to receive a cash distribution in lieu of McDonald's common
stock or a McDonald's common stock distribution in lieu of cash
by filing a written election with the Committee on forms approved
by the Committee and in a manner prescribed by the Committee on
or before the Valuation Date coincident with or next preceding
the date of distribution.
Until such time as a Participant's vested Net Balance
Account has been distributed, transferred to a Distribution Fund
in accordance with Section 10.27, or forfeited in accordance with
Section 11.4 (A) any portion of his Net Balance Account in his
Diversification Account shall continue to be invested as provided
in Section 10.12(b), and (B) any portion of his Net Balance
Account remaining in the McDESOP portion of the Plan shall
continue to be invested in Company Stock and held therein.
If any Company Stock distributed from a Participant's
Participant Elected Contribution Account, Employer Matching
Contribution Account or Diversification Account is not readily
tradeable on an established market when distributed, the
distributee shall have the put option rights which are described
in Section 6.5(b) with respect to such shares.
(h) Distributions After Rehire. If a Participant who has
had a Termination of Employment subsequently becomes an Employee,
such Participant shall not be entitled to elect distributions
until he again becomes eligible to receive distributions as
provided in Section 11.2.
11.3 Payment of Net Balance Account on Death of Participant.
(a) Form of Payment. The Net Balance Account of a
Participant who dies before having a Termination of Employment
shall be fully vested. The Net Balance Account of a Participant
who dies after having a Termination of Employment for reasons
other than a Termination of Employment on or after Vesting<PAGE>
Retirement Date, death or Disability shall be vested as provided
in Section 11.4(b). If a Participant dies before his entire
vested Net Balance Account has been paid from the Plan, except to
the extent otherwise provided in Section 11.2(e)(2),
distributions shall be made as follows:
(1) If the Participant has a surviving spouse, the
Trustee shall distribute the vested portion of the
Participant's Net Balance Account to the Participant's
surviving spouse as the Participant's Beneficiary in
accordance with Section 11.3(a)(3) unless the Participant
(with his spouse's consent in accordance with Section 11.10)
has named another Beneficiary.
(2) If the Participant does not have a surviving
spouse or if the Participant (with his spouse's written
consent in accordance with Section 11.10) has named another
Beneficiary, the Trustee shall distribute the vested portion
of the Participant's Net Balance Account in accordance with
Section 11.3(a)(3) to the Beneficiary named by the
Participant in accordance with Section 11.6.
(3) The Participant's vested Net Balance Account shall
be distributed within a reasonable time after the Valuation
Date following the Participant's death or at such later date
as the Beneficiary may elect under Section 11.3(b).
Distributions to the Participant's Beneficiary shall be in
whichever of the following methods of payment the
Beneficiary, by written notice to the Committee, shall elect
unless the Participant has elected in a written notice
delivered to the Committee not to permit such Beneficiary
elections in which case the Participant shall elect the
method of payment, from the following:
(A) A single non-periodic payment;
(B) Substantially equal installments, not less
frequently than annually, over a period certain,
directly from the Profit Sharing Plan portion of the
Plan; or
(C) In the form of a nontransferable annuity
contract purchased from an insurance company designated
by the Beneficiary which is authorized to do business
in any state and which has an A plus rating by A.M.
Best Company or a comparable rating by a comparable
service which rates insurance companies payable to the
Beneficiary over his life.
In the absence of any election by a Participant or a
Beneficiary as to time and manner of payment, the Participant and
the Beneficiary shall be deemed to have elected to receive the
benefit in an immediate single sum payment. Distributions shall
be made to a Participant's Beneficiary in cash or in Company
Stock under the conditions provided in Sections 11.2(f) and
11.2(g).
(b) Beneficiary Elections. With respect to a distribution
on account of a Participant's death, his Beneficiary, as
designated pursuant to Section 11.6, may elect the form of<PAGE>
benefit and the date of commencement of benefits, unless the
Participant has elected not to permit such Beneficiary elections.
If the Participant has not elected otherwise, the Beneficiary may
also elect, with respect to benefits not being received in the
form of an annuity, to accelerate or to delay the receipt of
benefits. Such elections shall be made in writing on a form
provided or approved by the Committee and are subject to such
rules as the Committee shall specify and to the limits stated in
Sections 11.3(c), 11.3(d), 11.3(e) and 11.3(f), as applicable.
Once a Beneficiary has made benefit elections, he may in the same
manner and subject to the same conditions, with respect to
benefits not being received in the form of an annuity contract
purchased from an insurance company, change the election at any
time, and with respect to any election delay or accelerate the
receipt of benefits from time to time.
(c) Period of Distribution - Death After Distributions
Commence. Notwithstanding any other provisions of this Plan and
any elections made by the Participant or his Beneficiary, except
an election made in accordance with Section 11.13(a), if a
Participant dies on or after his Required Beginning Date but
before his entire vested Net Balance Account has been
distributed, and on or after the date upon which distribution of
his vested Net Balance Account has commenced in installments over
a period certain:
(1) not in excess of the life expectancy of the
Participant or the joint and last survivor life expectancy
of the Participant and his Beneficiary and such life
expectancy was not subject to redetermination under Section
11.12(b), the balance of the Participant's vested Net
Balance Account shall be distributed to his Beneficiary at
least as rapidly as under the method of distribution in
effect on the date of the Participant's death; or
(2) not in excess of the life expectancy or life
expectancies which are subject to periodic redetermination
in accordance with Section 11.12(b), the balance of the
Participant's vested Net Balance Account shall be
distributed to his Beneficiary (A) by the last day of the
Plan Year following the Plan Year in which the Participant
died, if the period was based solely upon the Participant's
life expectancy and (B) over a period not longer than the
Beneficiary's remaining life expectancy as determined under
the method of determining life expectancy used for the
Beneficiary at the time benefit payments commenced to the
Participant, if the period was based upon the joint and last
survivor life expectancy of the Participant and the
Beneficiary. The remaining life expectancy of a Beneficiary
for purposes of the preceding sentence shall be (1) if such
life expectancy is not subject to redetermination, the
Beneficiary's life expectancy at the time installment
payments commenced to be made to the Participant reduced by
one year for each year over which such payments have been
made or (2) if such life expectancy is subject to
redetermination, the Beneficiary's life expectancy as
redetermined at the applicable times following the
Participant's death.<PAGE>
(d) Period of Distribution - Death Before Distributions
Commence. Notwithstanding any elections made by a Participant or
Beneficiary, if Section 11.3(c) is not applicable, and a
Participant dies before his entire vested Net Balance Account has
been distributed or commenced to be distributed, the
Participant's vested Net Balance Account shall be distributed not
later than December 31 of the calendar year which contains the
fifth anniversary of the Participant's death; except that if his
Beneficiary is an individual, the Participant's vested Net
Balance Account may be distributed over a period not exceeding
the Beneficiary's life expectancy (or, if there are multiple
Beneficiaries, the Beneficiary with the shortest life expectancy)
determined as of the date of the Participant's death, and if the
Beneficiary is a trust, his vested Net Balance Account may be
distributed over a period not exceeding the life expectancy,
determined as of the Participant's death, of the beneficiary of
the trust or estate who then has the shortest life expectancy,
beginning no later than December 31 of the calendar year after
the calendar year of the Participant's death to the extent
permitted under Section 11.3(h). Notwithstanding the foregoing,
if the Beneficiary is the Participant's surviving spouse,
distribution shall be made or shall commence not later than
December 31 of the calendar year in which the Participant would
have attained the age of 70-1/2 years.
(e) Death of Surviving Spouse Who Is Beneficiary Before
Benefit Payments Commence. If the surviving spouse of a
Participant is the Beneficiary, and the surviving spouse dies
before distributions have begun to the surviving spouse in
accordance with Section 11.3(c)(1) or (2), the rules of Sections
11.3(c) and 11.3(d) shall apply as though such surviving spouse
were the Participant, substituting the date of death of such
spouse for the date of the Participant's death to determine the
dates therein. Distributions are considered to have begun to the
surviving spouse on the later of the dates specified in Section
11.3(c)(1) or (2).
(f) Death of Beneficiary After Benefit Payments Commence.
If a Beneficiary has commenced to receive distributions under
Section 11.3(d), and such Beneficiary dies before the entire
vested Net Balance Account has been distributed, any subsequent
Beneficiary whose status as a Beneficiary was contingent on the
death of the first Beneficiary shall receive distributions at
least as rapidly as under the distribution method in effect upon
the first Beneficiary's death.
(g) Amount Paid to a Child. Any amount paid to a child, in
accordance with regulations prescribed by the Secretary of the
Treasury, shall be treated as if it had been paid to the
Participant's surviving spouse if such amount will become payable
to the surviving spouse upon such child reaching majority (or
such other events as the Secretary of the Treasury may by
regulations prescribe).
(h) Trust as Beneficiary. Notwithstanding the foregoing
provisions of Section 11.3, if a trust is designated the
Beneficiary under the Plan and
(1) if the following requirements below are met, the
Beneficiary or Beneficiaries of the trust shall be<PAGE>
considered the Beneficiary in accordance with applicable
regulations and rulings for the purpose of determining the
period over which distributions in the form of installments
or annuities may be distributed. The applicable trust
requirements are:
(A) the trust is a valid trust under state law,
or would be but for the fact that there is no corpus;
(B) the trust is irrevocable, as of the
Participant's death;
(C) the beneficiaries of the trust with respect
to the trust's interest in the Participant's vested Net
Balance Account are identifiable; and
(D) a copy of the trust instrument is provided to
the Plan Administrator; and
(2) If the above listed requirements are not met and
the Participant dies on or after the Participant's Required
Beginning Date, the Participant shall be treated as not
having designated a Beneficiary for purposes of determining
the period over which distributions may be made and
distributions shall be made to the trust at least as rapidly
as over the longest period over which distributions could
have been made under Section 11.3(c) if the Participant had
no Beneficiary.
(3) If the above listed requirements are not met, and
the Participant dies before his Required Beginning Date, the
Participant shall be treated as not having designated a
Beneficiary for purposes of the exception to the requirement
in Section 11.3(d) that distributions be made within five
years and distributions shall be made within the five year
period designated in Section 11.3(d).
11.4 Vesting and Forfeitures.
(a) A Participant who has a Termination of Employment on or
after his Vesting Retirement Date or who has a Termination of
Employment on account of Disability or death shall be fully
vested in his Net Balance Account.
(b) If a Participant has a Break in Service or has a
Termination of Employment with the Employer for reasons other
than retirement on or after his Vesting Retirement Date, death,
or Disability, such Participant shall be fully vested in his
(1) Investment Savings Fund Account; (2) Participant Contribution
Holding Account; (3) his Rollover Contribution Account;
(4) Rollover Contribution Holding Account; (5) Participant
Elected Contribution Account; and (6) Employer Matching
Contribution Account. Such Participant shall be vested in his
Profit Sharing Fund Account and his Employer Auxiliary ESOP
Contribution Account in accordance with the following table
wherein the first column represents the Credited Service of the
Participant, and the second column represents the Vested
Percentage of the Participant's Profit Sharing Fund Account and
Employer Auxiliary ESOP Contribution Account:<PAGE>
Years of Credited Service Vested Percentage
------------------------- -----------------
less than 2 years 0
2 years but less than 3 5
3 years but less than 4 20
4 years but less than 5 40
5 years but less than 6 60
6 years but less than 7 80
7 years and over 100
(c) The portion of the Participant's Profit Sharing Fund
Account and Employer Auxiliary ESOP Contribution Account which is
not vested as of his Termination of Employment or the occurrence
of a Break in Service shall become a Forfeiture at the earlier of
(1) the first day of the Plan Year immediately following the Plan
Year in which the Participant has five consecutive Breaks in
Service or (2) as of the Valuation Date immediately following the
Valuation Date as of which the Vested Percentage of the
Participant's Profit Sharing Fund Account and Employer Auxiliary
ESOP Contribution Account, respectively, are distributed.
Subject to Section 11.3(d) and 11.3(e), (A) Forfeitures occurring
with respect to a Participant's Profit Sharing Fund Account shall
be credited to the Employer Matching Contribution Holding Fund as
of the Valuation Date following the date the amount of such
Forfeiture is determined but not later than the sixth Valuation
Date after the date as of which the amounts became a Forfeiture
and (B) from Participants' Employer Auxiliary ESOP Contribution
Accounts shall be allocated for the Plan Year among all Active
Participants as provided in Section 7.3 for Forfeitures from
Participants' Employer Auxiliary ESOP Contribution Accounts. A
Participant whose Vested Percentage is zero at the time of his
Termination of Employment or Break in Service shall be deemed to
have had a distribution of the Vested Percentage of his Profit
Sharing Fund Account and Employer Auxiliary ESOP Contribution
Account as of the Valuation Date immediately following the date
on which the Participant has a Termination of Employment or Break
in Service. Notwithstanding the foregoing, if the vested portion
of a Participant's Profit Sharing Fund Account and Employer
Auxiliary ESOP Contribution Account was distributed as of a
Valuation Date in 1992 before July 1, the unvested portion of
such account balances shall become a Forfeiture as of June 30,
1992.
(d) If a Participant, (1) who had a Termination of
Employment, resumes employment with an Employer before he has a
Break in Service or, (2) who had a Termination of Employment or
Break in Service occurring on or after January 1, 1985, earns one
Year of Eligibility Service following the Break in Service (but
before having five consecutive Breaks in Service), the amount of
the Participant's Profit Sharing Fund Account and Employer
Auxiliary ESOP Contribution Account, if any, forfeited under
Section 11.4(c) shall be reinstated to the respective Accounts
out of Forfeitures from the Profit Sharing portion and the
leveraged ESOP portion of the McDESOP portion of the Plan,
respectively, for the Plan Year in which such resumption of
employment occurs or such one Year of Eligibility Service is
earned, whichever is applicable. To the extent that Forfeitures
for such Plan Year are not sufficient, the amount to be
reinstated shall be charged against income of the Profit Sharing
Fund and the Employer Auxiliary ESOP Contribution Fund,<PAGE>
respectively. Thereafter, in the case of a Participant who
received a distribution and had his Forfeiture reinstated, the
Participant's Vested Percentage in his Profit Sharing Fund
Account or Employer Auxiliary ESOP Contribution Account shall be
equal to an amount determined by subtracting the amount
distributed (the "Distributed Amount") on the Participant's
Termination of Employment or Break in Service from the product of
(1) the Participant's Vested Percentage determined pursuant to
Section 11.4 multiplied by (2) the sum of (a) the Distributed
Amount and (b) the value of the Participant's Profit Sharing Fund
Account or Employer Auxiliary ESOP Contribution Account,
respectively.
(e) The amount, if any, forfeited under Section 11.4(c)
shall not be reinstated if a Participant is rehired or again
becomes a Participant and if the Participant (1) had a Break in
Service before January 1, 1985 or (2) did not have a Break in
Service before January 1, 1985 and had five consecutive Breaks in
Service. If all or a portion of the Vested Percentage of a
Participant's Profit Sharing Fund Account or Employer Auxiliary
ESOP Contribution Account prior to his Termination of Employment
or Break in Service was not distributed prior to his resumption
of service and he was not 100% vested upon Termination of
Employment or Break in Service, then: (1) the Vested Percentage
of the Participant's Profit Sharing Fund Account or Employer
Auxiliary ESOP Contribution Account at the time of Forfeiture
which was not distributed shall be held in a "Pre-Break Profit
Sharing Fund Account" and "Pre-Break Employer Auxiliary ESOP
Contribution Account," respectively, which shall be 100% vested;
and (2) the Participant's Profit Sharing Contributions and the
net earnings thereon and Employer Auxiliary ESOP Contributions
and the net earnings thereon attributable to service after the
Break in Service or five (5) consecutive Breaks in Service, as
applicable, shall be held in a "Post-Break Profit Sharing Fund
Account," and "Post-Break Employer Auxiliary ESOP Contributions,"
respectively, which shall be vested in accordance with Section
11.4(b).
(f) Each Participant who is a certified swing manager,
primary maintenance employee, crew member or other hourly
restaurant employee who is an Employee on July 1, 1992, shall be
fully vested in his Employer Auxiliary ESOP Contribution Account
as of July 1, 1992.
11.5 Payment of Employer Profit Sharing Contribution for Year of
Termination of Employment. If a Participant (or the Beneficiary
thereof) who is an Active Participant for the Plan Year in which or
immediately before which he has a Termination of Employment receives
an allocation of Employer Profit Sharing Contributions pursuant to
Section 7.1, an allocation of Company Stock released from the
Auxiliary ESOP Suspense Account pursuant to Section 7.3 or an
allocation of Employer Matching Contributions and Forfeitures pursuant
to Section 7.2 after he has received a single sum distribution of his
Net Balance Account, the vested portion of any such allocation shall
be distributed to the Participant or, in the event of his death, to
his Beneficiary within a reasonable time after the later of the close
of the Plan Year or the Valuation Date following the Participant's
election to receive such distribution. If such Participant or
Beneficiary has not received a single sum distribution of his vested
Net Balance Account, any such allocations pursuant to Sections 7.1,<PAGE>
7.2 and 7.3 for the Plan Year shall be credited to the Participant's
Profit Sharing Fund Account, Employer Auxiliary ESOP Contribution
Account and Employer Matching Contribution Account, respectively, and
the vested portion of such contributions shall be distributed as a
part of such account in the manner provided in Section 11.2 or 11.3,
whichever shall apply.
11.6 Designation of Beneficiary and Form of Beneficiary Benefit.
Subject to Sections 11.3 and 11.10, the Participant may (1) designate
his Beneficiary, (2) elect the form of his Beneficiary's benefit and
(3) elect to prohibit Beneficiary elections under Section 11.3(b) on
forms provided by and filed with the Committee; provided that a
beneficiary designation completed and filed with the Committee before
January 1, 1989, under the McDonald's Corporation Savings and Profit
Sharing Plan shall be deemed to apply to the Profit Sharing Plan
portion of the Plan and a beneficiary designation completed and filed
with the Committee before January 1, 1989, under the McDonald's
Matching and Deferred Stock Ownership Plan shall be deemed to apply to
the McDESOP portion of the Plan. A beneficiary designation form filed
with the Committee on or after January 1, 1989 shall be deemed to
apply to the entire plan unless the form specifically states
otherwise. The Participant may change his Beneficiary designation and
his elections concerning his Beneficiary's benefit from time to time
by filing the beneficiary designation form with the Committee. No
designation of Beneficiary or election concerning a Beneficiary's
benefit or change of such designation or election shall be effective
until filed with the Committee. If a Participant shall fail to file a
valid Beneficiary designation, if all persons designated on the
Beneficiary designation form predecease the Participant (or, in the
case of a Beneficiary other than an individual, cease to exist prior
to the Participant's death) or to the extent that the Participant's
Beneficiary designation form fails to dispose of his entire interest,
the Trustee shall distribute the Participant's vested Net Balance
Account to the following persons in the following order of precedence:
(a) His surviving spouse;
(b) With respect to the Profit Sharing Plan portion of the
Plan, his Beneficiary designated under the McDonald's Matching
and Deferred Stock Ownership Plan or the McDESOP portion of the
Plan; and with respect to the McDESOP portion of the Plan, his
Beneficiary designated under the McDonald's Corporation Savings
and Profit Sharing Plan or the Profit Sharing Plan portion of the
Plan;
(c) The person or entity who receives the Participant's
McDonald's group term life insurance benefits;
(d) His lawful descendants including adopted children per
stripes;
(e) His parents in equal shares, or (if only one parent
survives him) his surviving parent;
(f) The lawful descendants of his parents, per stripes;
(g) His estate.<PAGE>
In the absence of a Participant's election to prohibit the Beneficiary
elections allowed in Section 11.3(b), his Beneficiary shall be
permitted to make such elections.
11.7 Incompetency, Distribution of Benefits.
(a) If a Participant or Beneficiary is declared an
incompetent or is a minor, and a conservator, guardian or other
person legally charged with his care is appointed or if such
Participant is not a minor and has executed a so-called durable
power of attorney and if the Committee is given written notice of
such appointment or power of attorney, any benefits to which such
Participant or Beneficiary is entitled shall be distributable to
such conservator, guardian or other person legally charged with
his care or to the attorney-in-fact under the power of attorney.
(b) If a Participant or Beneficiary is incompetent, a minor
or, in the opinion of the Committee, would fail to derive benefit
from distribution of his accounts and if a conservator, guardian
or other person legally charged with his care has not been
appointed or if the Committee has not been given written notice
of such appointment, the Committee may (1) require the
appointment of a conservator or guardian, (2) distribute the
Participant's Accounts to relatives of the Participant or
Beneficiary for the benefit of the Participant or Beneficiary, or
(3) distribute such Accounts directly to or for the benefit of
the Participant or Beneficiary.
(c) The decision of the Committee in such matters shall be
final, binding and conclusive upon the Employer and the Trustee
and upon each Employee, Participant, Beneficiary and every other
person or party interested or concerned, and neither the
Employer, the Committee nor the Trustee shall be under any duty
to see to the proper application of such distribution made to or
for a Participant or Beneficiary, or conservator, guardian or
relative of a Participant or Beneficiary.
11.8 Deduction of Taxes from Accounts Payable. The Trustee or
the Committee may deduct from the amount to be distributed such amount
as the Trustee or the Committee, in its sole discretion, deems proper
to protect the Trustee, the Committee and the Trust against liability
for the payment of death, succession, inheritance, income, or other
taxes, and out of the money so deducted, the Trustee may discharge any
such liability and pay the amount remaining to the Participant, the
Beneficiary or the deceased Participant's estate, as the case may be.
11.9 Deadline for Payment of Benefits. Except to the extent that
a Participant in accordance with the Plan otherwise elects and except
to the extent it is not administratively feasible, payment of benefits
shall be made or commence not later than sixty (60) days after the
latest of (a) the close of the Plan Year in which the Participant
attains age fifty-five (55), (b) the close of the Plan Year in which
occurs the tenth (10th) anniversary of the Plan Year in which the
Participant commenced participation, and (c) the close of the Plan
Year in which the Participant has a Termination of Employment;
provided that, a Participant, who is entitled to receive a
distribution pursuant to this Section 11.9, must submit a claim for
benefits before any distributions will be made hereunder.
11.10 Spousal Consent to a Beneficiary or a Waiver.<PAGE>
(a) A valid spousal consent to the Participant's naming of
a Beneficiary other than his spouse or to the Participant's
Waiver of a Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity shall be:
(1) in a writing acknowledging the effect of the
consent;
(2) witnessed by a notary public;
(3) effective only with respect to a specific
Beneficiary and, in the case of a waiver of a Qualified
Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity, shall specify an optional form of benefit
unless the spouse voluntarily in such consent expressly
permits subsequent designations of beneficiaries or
elections of optional forms of benefit without further
spousal consent and acknowledges the spouse's right to limit
the consent to a specific Beneficiary and optional form of
benefit, where applicable; and
(4) effective only for the spouse who exercises the
consent;
provided that notwithstanding the provisions of this Article XI,
the consent of a Participant's spouse shall not be required if it
is established to the satisfaction of a Plan representative that
such consent may not be obtained because there is no spouse,
because the spouse cannot be located or because of such other
circumstances as the Secretary of the Treasury may by regulations
prescribe.
(b) To the extent provided in any Qualified Domestic
Relations Order (as defined in Section 414(p) of the Internal
Revenue Code), the former spouse of a Participant shall be
treated as the surviving spouse of such Participant for purposes
of Section 11.3 and for providing consent in accordance with
Section 11.10(a).
11.11 Single Sum Payment without Election. Notwithstanding any
provisions of this Article XI (except Section 11.14 to the extent
therein provided) to the contrary, if the Participant or Beneficiary
is entitled to a distribution because of the Participant's Break in
Service (but not in the case of a Break in Service without a
Termination of Employment), retirement on or after his Vesting
Retirement Date, death, Disability, or other Termination of
Employment, and if
(a) prior to July 1, 1993, the value of the vested portion
of the Participant's Net Balance Account under the Plan; and
(b) effective on or after July 1, 1993, the value of the
sum of (1) the vested portion of a Participant's Net Balance
Account under the Plan and (2) his Accounts under the McDonald's
Stock Sharing Plan
does not exceed $3,500, the Committee shall direct the immediate
distribution of such benefit prior to the annuity starting date or
other date of distribution or commencement of distribution, regardless<PAGE>
of any election or consent of the Participant, his spouse, or other
Beneficiary.
11.12 Installment Payments. Notwithstanding anything in
Sections 11.2 or 11.3 to the contrary and subject to Section 11.4:
(a) Elected Installments Paid to Participant. If a
Participant elects installment payments, they shall be
substantially equal installments, paid at least annually, over a
period certain as elected by the Participant which period shall
not be in excess of the life expectancy of the Participant or the
joint and last survivor life expectancy of the Participant and
his Beneficiary, if such Beneficiary is an individual
("Applicable Life Expectancy") determined as of the date such
payments commence; provided that if elected by the Participant
pursuant to Section 11.12(e), life expectancy may be
redetermined.
(b) Required Installments Paid to Participant. The
Applicable Life Expectancy of a Participant, who according to the
records of the Employer has attained the age of 70-1/2 and who
elects to receive installments but who fails to make a
permissible election with respect to the period over which
installments shall be paid or fails to provide the Committee with
any requested proof of his age or the age of his Beneficiary by
such deadline as the Committee shall require, shall be deemed to
be the life expectancy of the Participant as reasonably
determined from the records of the Employer; provided that if a
Participant subsequently provides the Committee with proof that
his age is greater than the Employer's records indicated, the
Committee shall redetermine the Participant's Applicable Life
Expectancy based upon the corrected information and shall
distribute to the Participant any amounts which would have been
required to be distributed if the Participant's correct age had
been used to determine his Applicable Life expectancy for the
purpose of determining the Minimum Distribution Amount for any
installment distributions which have already been made.
(c) Installments Commencing After Participant's Death. If
installments commence to be paid after the Participant's death to
the Participant's Beneficiary who is an individual, they shall be
substantially equal installments, paid at least annually, over a
period certain not in excess of the life expectancy of such
individual ("Applicable Life Expectancy") determined as of the
date such payments commence; provided that if the Participant's
Beneficiary is his surviving spouse, such Beneficiary may elect
to have his life expectancy redetermined as provided in
Section 11.12(e).
(d) Minimum Distribution Amount. Installment payments are
substantially equal if the amount of each installment distributed
in a calendar year is not less than an amount ("Minimum
Distribution Amount") equal to the balance of the person's Net
Balance Account as of the last day of the preceding calendar year
divided by the Applicable Life Expectancy. In calculating the
Minimum Distribution Amount for each calendar year after the
calendar year in which the Participant attained the age of 70-1/2
or for each calendar year after payments to the Beneficiary have
commenced (either of which is called the "First Year"), the<PAGE>
Applicable Life Expectancy shall be reduced by one for each
calendar year which has elapsed commencing with the First Year.
(e) Determination of Life Expectancy. The life expectancy
of a Participant and of his spouse and the joint and last
survivor life expectancy of the Participant and his spouse may be
redetermined for purposes of determining the amounts required to
be distributed pursuant to Section 11.2(c), 11.2(d) or 11.12(a),
if elected by the Participant (or his spouse, if the Participant
is deceased and if his spouse is the Participant's Beneficiary)
in accordance with such uniform and nondiscriminatory rules as
the Committee shall establish, but may not be redetermined more
frequently than annually. Life expectancies shall not be
redetermined unless the Participant (or spouse) so elects by the
date distributions are required to commence under the Plan.
Unless subject to redetermination, life expectancies are
calculated using the Participant's or Beneficiary's birth date in
the calendar year in which the Participant attains the age of
70-1/2, in the case of benefits commencing during the
Participant's lifetime and in the case of payments to the
Beneficiary, as of the date such payments commence. In the case
of annuity payments, however, life expectancy is determined in
the calendar year in which annuity payments commence. If a
Participant's or his spouse's life expectancy is not being
redetermined, it shall be reduced by one for each year after the
calendar year in which it was determined for the purpose of
determining the amount of installment payments hereunder. All
life expectancies shall be determined using the expected return
multiples in Tables V and VI of Treas. Reg. Section 1.72-6 or any
successor tables issued from time to time by the Internal Revenue
Service.
11.13 Required Minimum Distributions to Employed Participants.
(a) A Participant who has attained his Required Beginning
Date but has not had a Termination of Employment shall commence
receiving installment payments for the calendar year in which he
becomes 70-1/2 not later than April 1 of the following year and
installment payments for each calendar year after the calendar
year in which he became 70-1/2, not later than the last day of
each such year.
(b) The amount distributed for the year in which such
Participant becomes 70-1/2 and in each calendar year thereafter
shall be not less than the Minimum Distribution Amount determined
under Section 11.12(a).
(c) A Participant who has not had a Termination of
Employment and who expects to attain his Required Beginning Date
in the next calendar year, may elect at such time and on such
form as the Committee shall permit to receive his first
distribution required pursuant to Section 11.13(a) in the year in
which he becomes 70-1/2 years of age.
(d) If the vested Net Balance Account of a Participant who
receives a distribution of the Minimum Distribution Amount under
this Section 11.13 is $3500 or less, the Participant may elect to
receive his entire vested Net Balance Account at the same time
that such Minimum Distribution Amount is paid. A Participant,
who elects to receive his entire vested Net Balance Account<PAGE>
pursuant to the preceding sentence, may elect to have such
election apply each subsequent Plan Year until he changes the
election with respect to a future Plan Year. Effective
November 1, 1994, the first sentence of this Section 11.13(d)
shall be applied without regard to the requirement that the
Participant's vested Net Balance Account be $3,500 or less.
11.14 Transitional Rules.
(a) TEFRA 242(b) Elections. Effective for all Participants
and Beneficiaries whether or not the Participant was an Employee
after the Effective Date of the Plan, notwithstanding any other
provision herein, distributions to Participants or Beneficiaries
made from the Profit Sharing Plan portion of the Plan, except for
the Participant's Diversification Account, are subject to any
valid election under TEFRA Section 242(b) made under the
McDonald's Corporation Savings and Profit Sharing Plan by a
Participant prior to January 1, 1984 to have the distribution of
the Participant's benefits deferred or extended beyond the period
otherwise permitted under the provisions of this Article XI which
was then permitted under applicable law until the Participant (or
his Beneficiary) revokes the election by an act recognized as a
revocation under TEFRA 242(b); provided that if the Participant's
spouse is not the Beneficiary of 100 percent of his vested
Accrued Benefit under the Plan, the Participant's spouse shall
have consented to the naming of another Beneficiary in accordance
with Section 11.10.
(b) Distributions to Certain Participants and Beneficiaries
in Pay Status. Effective for all Participants and Beneficiaries
whether or not the Participant was an Employee after January 1,
1984, for any distribution which would not have disqualified the
Trust under Code Section 401(a)(9) as in effect prior to
amendment by the Tax Reform Act of 1984, which was permitted
under the Plan as in effect on the date such distributions
commenced, and which either
(1) commenced prior to and continued on or after
January 1, 1984, distributions may continue to the
Participant or the Beneficiary to whom such distribution is
being made under the method of distribution in effect;
provided that the method of distribution was specified in a
writing including the time at which the distribution was to
commence, the period over which such distributions will be
made and, in the case of any distribution upon the
Participant's death, a list of the Beneficiaries of the
Participant in order or priority; or
(2) commenced prior to the first Plan Year beginning
in 1985, distributions may continue to the Participant or
the Beneficiary to the extent permitted under applicable
law, regulations and rulings.
11.15 Sale of Restaurant - Special Vesting Rules. Notwithstanding
any of the provisions herein to the contrary, a Participant who is not
100% vested in his Profit Sharing Fund Account and his Employer
Auxiliary ESOP Contribution Account and who has a Termination of
Employment on account of a sale on or after December 1, 1986 but prior
to January 1, 1993 of a McDonald's restaurant to a joint venture
partnership in which the Company owns an interest ("Joint Venture")<PAGE>
shall have a single opportunity to elect, in accordance with such
procedures as the Committee shall establish, to receive a distribution
of his benefits as provided in Article XI (or to retain the ability to
make an election to receive such a distribution at any time) or
(notwithstanding the provisions of Section 11.11 to the contrary),
solely for purposes of determining the Participant's Vested Percentage
in his Profit Sharing Fund Account and his Employer Auxiliary ESOP
Contribution Account, to continue to be credited with Credited Service
for employment with the Joint Venture. If the Participant elects to
continue to be credited with Credited Service for employment with the
Joint Venture, his Accounts will subsequently be distributed by
applying Article XI as if the Joint Venture were his sole Employer for
the purpose of determining when such Participant thereafter has a
Termination of Employment. Service for periods of employment with the
Joint Venture shall be determined by crediting each such electing
Participant with one Year of Credited Service for each subsequent
consecutive October 31 that such Participant is employed by the Joint
Venture; provided that a Participant shall not receive more than one
Year of Credited Service for a single Plan Year.
11.16 Withdrawal of Participant and Rollover Contributions
Permitted. A Participant may, upon written notice to the Committee,
ten (10) days prior to the end of any calendar month, withdraw all or
any portion of such Participant's Investment Savings Fund Account,
Rollover Contribution Account and Rollover Contribution Holding
Account valued as of the Valuation Date of the calendar month in which
notice is given. Distribution of such withdrawals shall be made
within the next calendar month. The Committee may, from time to time,
establish such rules and procedures as it deems appropriate to
administer or limit the withdrawal of Participant and Rollover
Contributions under this Section 11.16 provided, however, that in no
event shall the Committee limit a Participant's right of withdrawal to
less than one withdrawal per Plan Year. To the extent
administratively feasible the period of notice required for withdrawal
or distribution can be relaxed, reduced or eliminated upon appropriate
request to the Committee.
11.17 Direct Rollovers. This Section 11.17 applies to
distributions made on or after January 1, 1993.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election
under this Section 11.17, a Distributee may elect, at the time
and in the manner prescribed by the Committee, to have any
portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct
Rollover; subject to such reasonable administrative requirements
as the Committee may from time to time establish which may
include, but shall not be limited to, requirements consistent
with Treasury Regulations and other guidance issued by the
Internal Revenue Service permitting de minimis standards for
amounts eligible to be rolled over or paid partly to the
Participant and partly rolled over. A Participant may make an
election pursuant to this Section 11.17 only after the
Distributee has met otherwise applicable requirements for receipt
of a distribution under the Plan, including but not limited to
any applicable requirements that the Participant's spouse or
(pursuant to a Qualified Domestic Relations Order as defined in
Section 16.5) former spouse consent to the Participant's waiver<PAGE>
of a Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity.
If a Participant or Beneficiary elects to receive a Direct
Rollover or a distribution in a form other than an annuity as
provided in Section 11.2(a)(1)(C) or 11.3(a)(3)(C), such
distribution may be made or commence to be made less than 30 days
after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
(1) the Committee shall clearly inform the Participant
or Beneficiary that he has a right to a period of at least
30 days after receiving the notice to consider the decision
of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(2) the Participant or Beneficiary after receiving the
notice affirmatively elects a distribution.
(b) In the absence of the adoption by the Committee of any
requirements to the contrary, the following shall apply:
(1) A Distributee whose Eligible Rollover Distribution
is less than $200 upon the Valuation Date immediately
preceding the date of distribution shall not be permitted to
elect to have all or any portion of the distribution made in
the form of a Direct Rollover.
(2) A Distributee who elects a Direct Rollover in an
amount equal to at least $500 may also elect to have the
remaining portion of his distribution paid to the
Distributee.
(3) A Distributee shall be permitted to divide an
Eligible Rollover Distribution into separate distributions
to be paid to two or more Eligible Retirement Plans in two
or more Direct Rollovers.
(4) A Distributee's election to make or not to make a
Direct Rollover with respect to a payment in a series of
periodic payments shall apply to all subsequent payments in
the series until the Distributee changes his election.
(5) If a Distributee, who has been notified as to the
availability of the Direct Rollover option, fails to elect a
Direct Rollover with respect to an Eligible Rollover
Distribution, such Distributee shall be deemed to have
elected not to make a Direct Rollover.
(c) As used in this Section 11.17, the following terms
shall have the following meanings:
(1) "Eligible Rollover Distribution" means any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's<PAGE>
designated Beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Section 11.13; and the
portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(2) "Eligible Retirement Plan" means an individual
retirement account described in Section 408(a) of the
Internal Revenue Code, an individual retirement annuity
described in Section 408(b) of the Internal Revenue Code, an
annuity plan described in Section 403(a) of the Internal
Revenue Code, or a qualified trust described in Section
401(a) of the Internal Revenue Code, that accepts the
Distributee's Eligible Rollover Distributions. However, in
the case of an Eligible Rollover Distribution to a
Participant's surviving spouse or surviving former spouse
who is a Distributee pursuant to a Qualified Domestic
Relations Order, an Eligible Retirement Plan is an
individual retirement account or individual retirement
annuity.
(3) "Distributee" means a Participant. In addition, a
Participant's surviving spouse and a former spouse who is
the alternate payee under a Qualified Domestic Relations
Order are Distributees with regard to the interest of such
spouse or former spouse.
(4) "Direct Rollover" means a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
ARTICLE XII
SUBSIDIARY PARTICIPATION
12.1 Adoption of Plan and Trust. Any Commonly Controlled Entity,
Subsidiary or Domestic or Foreign Affiliate of the Company (or other
business entity in which the Company owns an interest) may, with the
approval of the Board of Directors and under such terms and conditions
as the Board of Directors may prescribe, adopt the Plan and Trust by
resolution of its board of directors (or approval of other appropriate
persons in the case of a noncorporate entity); provided that the
Auxiliary ESOP portion of the Plan can be adopted only by a
corporation which is a Commonly Controlled Entity or another
corporation included with the Company in a group defined in (a) or (b)
below:
(a) a corporation which is part of a group of corporations
in which a common parent owns directly stock possessing at least
50 percent of the voting power of all classes of stock and at
least 50 percent of each class of non-voting stock in a first
tier subsidiary and such subsidiary (and all other corporations
below it in the chain) which would meet the 80 percent test of
Section 1563(a) of the Code if the first tier subsidiary were the
common parent); and
(b) a corporation which is part of a group of corporations
in which a common parent owns directly stock possessing all of<PAGE>
the voting power of all classes of stock and all of the
non-voting stock in the first tier subsidiary and the first tier
subsidiary owns directly stock possessing at least 50 percent of
the voting power of all classes of stock, and at least 50 percent
of each class of non-voting stock, in a second tier subsidiary of
the common parent and such second tier subsidiary (and all other
corporations below it in the chain which would meet the 80
percent test of Section 1563(a) of the Code if the second tier
subsidiary were a common parent).
12.2 Withdrawal from Plan by Participating Employer. While it is
not the present intention of any Employer to withdraw from the Plan,
any Employer other than the Company shall have the right, at any time,
upon the approval of and under such conditions as may be provided by
the Board of Directors, to withdraw from the Plan and Trust by
delivering to the Committee and the Trustee written notice of its
election so to withdraw.
Upon receipt of such notice by the Committee, the Accounts of
Participants employed by the withdrawing Employer as of the date of
withdrawal shall be fully vested and shall not thereafter be subject
to Forfeiture unless such Participant shall transfer to another
Employer as of the date of the withdrawal. In the event of the
withdrawal of an Employer, such Employer shall elect and notify the
Committee of its election, whether the Net Balance Accounts of the
Participants employed by such Employer (a) shall be immediately
distributable by the Trustee, (b) shall be retained in the Plan and
become distributable when such employees die, or otherwise terminate
their employment with the Employer, or (c) if the Employer establishes
a plan which meets the requirements of Section 401(a) of the Code
which plan permits a transfer from this Plan to it by transfer of the
Net Balance Accounts of Participants who are employees of such
Employer to such Employer's plan to be held in separate accounts under
such plan for the benefit of the respective Participants; provided
that a distribution shall not be made to a Participant who is not
otherwise entitled to a distribution in accordance with Article XI
unless there has been a disposition of substantially all the assets
used by the Employer in a trade or business and the Employee continues
employment with the corporation acquiring such assets or the Company
has disposed of its interest in the Employer and the Employee
continues employment with the former Employer.
ARTICLE XIII
ADMINISTRATION OF THE PLAN
13.1 Appointment and Removal of, and Resignation by, Trustee.
The Board of Directors shall have the power to appoint a successor to
a Trustee (including any one or more individuals acting as Trustee)
which has resigned or been removed, to direct the Trustee to enter
into a custodial agreement providing for deposit of all or any part of
the Trust Fund with the custodian, and, with the consent of the
Trustee, to appoint a co-Trustee. The Trustee may resign at any time
upon thirty (30) days' written notice (or such shorter period of time
as the Board of Directors shall permit by written consent) to the
Company and the Committee. The Board of Directors shall have the
power to remove the Trustee, with or without cause, upon written
notice to the Trustee.<PAGE>
The appointment of a successor Trustee or co-Trustee shall become
effective upon acceptance in writing of such appointment by the
successor Trustee or co-Trustee and upon acceptance of such
appointment by the successor Trustee, the Trustee shall assign,
transfer and pay over to the successor Trustee the Trust Fund. The
successor Trustee or co-Trustee may be either a corporate Trustee or
an individual, and, except as required by federal law, the successor
Trustee or co-Trustee shall not be personally liable for anything done
or omitted to be done by a predecessor Trustee or co-Trustee prior to
the appointment of the successor or co-Trustee or be required to
examine the accounts, records or acts of any predecessor Trustee or
co-Trustee. Each successor Trustee appointed to and accepting a
Trusteeship hereunder shall have all the rights, title, powers,
duties, exemptions and limitations of the original Trustee.
13.2 Appointment of Committee; Tenure in Office. The
administrative committee ("Committee") shall consist of not less than
five (5) members who shall be appointed by the Board of Directors.
The Board of Directors shall have power to determine the period during
which any Committee member shall serve and, in its discretion, may
remove any member of the Committee at any time without assigning any
reason therefore. A Committee member may resign at any time by
written notice to the Chief Executive Officer or any Executive Vice
President of the Company. Upon a vacancy occurring, owing to the
death, resignation or removal by the Board of Directors of any member
of the Committee, a successor shall be appointed by the Board of
Directors. Until a vacancy in the Committee is filled by the Board of
Directors, the remaining members of the Committee shall continue to
act as the Committee. The Board of Directors shall certify to the
Trustee and the Committee the names of the members of the Committee
and, thereafter, any change in its membership.
13.3 Named Fiduciaries. The Company, the Board of Directors, the
Committee and every Participant, Beneficiary or Employee of the
Company, its subsidiaries or affiliates who becomes a fiduciary by
virtue of the delegation of duties, responsibilities and authority
with respect to the administration and operation of the Plan in
accordance with Article XIII shall be "named fiduciaries" as provided
in Section 402(a) of ERISA, and shall, accordingly, be afforded the
protection provided for in Section 405(c)(2) of ERISA with respect to
named fiduciaries.
13.4 Delegation of Responsibilities. The Committee and the Board
of Directors shall have the authority, as it may deem advisable, to
delegate, from time to time, by instrument in writing all or any part
of its responsibilities under the Plan (including the power to
delegate) to such person or persons as it may deem suitable, and in
the same manner to revoke any such delegation of responsibility.
Periodically the delegate shall report to the Committee or Board of
Directors concerning the discharge of his delegated responsibilities.
Any action of the delegate in the exercise of such delegated
responsibilities shall have the same force and effect for all purposes
hereunder as if such action had been taken by the Committee or the
Board of Directors. Neither the Committee, the Board of Directors nor
any of their members shall be liable for the acts or omissions of such
delegate except as otherwise required by Federal law.
The Committee's authority to delegate in accordance with this
Section 13.4 shall include, but not be limited to, authority to
delegate all or any part of the responsibilities set forth in<PAGE>
Section 13.5 to any department or employee of the Company or other
Employer including but not limited to the Legal Department, the Tax
Department, the Accounting Department, the Human Resources Department,
the Information Services Department or the Payroll Department.
13.5 Committee Duties. The Committee on behalf of the
Participants and all other Beneficiaries of the Plan and the Trust
shall administer and operate the Plan and the Trust Agreement in
accordance with the terms of the Plan and the Trust Agreement and
shall periodically report to the Board of Directors on the
administration and operation of the Plan. The Committee shall have
all powers necessary to discharge its duties, including, but not by
way of limitation, the following:
(a) To periodically review and monitor the performance of
the Investment Managers, as defined in Section 4.4 of the Trust
Agreement, and provide recommendations to the Board of Directors
for the appointment or removal of the Plan's Investment Managers;
(b) To prepare and furnish to the Board of Directors its
recommendations with respect to the establishment of and, from
time to time, changes in the general investment objectives and
guidelines for the management and investment of the assets of the
Plan;
(c) To prepare and furnish the Board of Directors with
periodic reports on the performance of the Investment Funds and
the general administration of the Plan;
(d) To review and monitor the performance of the Trustee
with respect to the responsibilities set forth in the Trust
Agreements;
(e) To construe and interpret the Plan, decide all
questions concerning eligibility for participation and questions
relating to the amount and manner of payment of benefits
hereunder and all such determinations shall be conclusive and
binding upon Participants, spouses and other Beneficiaries;
(f) To receive from the Company and Employer or have
prepared by the Company and Employer such records and information
as shall be necessary for the proper administration of the Plan;
(g) To have prepared and furnished to Participants or
Beneficiaries all information required under Federal law or
provisions of this Plan to be furnished to them;
(h) To have prepared and filed or published with the
Department of Labor and the Department of Treasury or other
governmental agency all reports or other information required
under federal law;
(i) To have maintained records of the Trust Fund with
respect to the Net Balance Accounts of Participants;
(j) To determine all questions arising in the
administration of the Plan, including those relating to the
eligibility of persons to become Participants; the rights of
Participants and their Beneficiaries; and Employer Contributions;<PAGE>
and its decision thereon shall be final and binding upon all
persons hereunder; and
(k) To review the performance of any person to whom duties
and responsibilities have been delegated under Section 13.4.
13.6 Committee Action by Majority -- Authorization of Members to
Execute Documents. The Committee may act at a meeting (including a
telephonic meeting) by the consent of a majority of its members, or
without a meeting by the unanimous written consent of its members.
No member of the Committee shall vote or decide upon any matter
relating specifically to himself or to his specific rights or benefits
under the Plan.
The Committee may authorize any of its members to execute on its
behalf any document which reflects an action or decision of the
Committee and the Committee shall notify the Trustee in writing of the
names of its members so authorized. Until the Committee revokes or
alters such authorization by a written notice to the Trustee, the
Trustee may accept and rely upon any document executed by such members
as reflecting action by the Committee.
13.7 Secretary. The Committee shall appoint a Secretary (who
may, but need not, be a member of the Committee) to keep records of
the acts and resolutions of the Committee. The Secretary may also
perform such other duties which may, from time to time, be delegated
to him in writing by the Committee.
13.8 Member as Participant. A member of the Committee who is
also a Participant or a Beneficiary shall receive any benefit to which
he may be entitled as a Participant or Beneficiary in the Plan so long
as such benefit is computed and paid on a basis that is consistent
with the terms of the Plan as applied to all other Participants and
Beneficiaries.
13.9 Rules and Decisions. The Committee may, from time to time,
adopt or amend such rules and regulations as it deems necessary or
desirable which are consistent with the provisions or the purposes of
the Plan. All rules and decisions of the Committee shall be applied
to all Participants in similar circumstances in a uniform and
non-discriminatory manner. In adopting, amending or applying its
rules and regulations, the Committee shall be entitled to, but need
not, rely upon information furnished by a Participant or Beneficiary,
a delegate, an Employer or Employee, the Trustee or the Company. All
rules and regulations of the Committee shall be conclusive and binding
upon Participants, spouses and Beneficiaries.
13.10 Agents and Counsel. The Committee and its delegates shall
have the authority to appoint or employ individuals to assist or to
advise in the administration of the Plan and any other agent deemed
advisable, including but not limited to, independent certified public
accountants and legal and actuarial counsel, who may but need not be
the accountants or the legal or the actuarial counsel of the Company.
13.11 Authorization of Benefit Distribution. The Committee shall
issue directions to the Trustee concerning all distributions to be
made from the Trust Fund pursuant to the provisions of the Plan. All
such directions shall be in accordance with the Plan.<PAGE>
13.12 Claims Procedure.
(a) Each Participant or Beneficiary (for purposes of this
Section called a "Claimant") may submit his claim for benefits to
the Plan Administrator in writing in such form as is permitted by
the Committee. A Claimant shall have no right to seek review of
a denial of benefits, or to bring any action in any court to
enforce a claim for benefits, prior to his filing a claim for
benefits and exhausting his rights to review in accordance with
this Section.
When a claim for benefits has been filed properly, such
claim for benefits shall be evaluated and the Claimant shall be
notified of the approval or the denial within ninety (90) days
after the receipt of such claim unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period, and such
notice shall specify the special circumstances requiring an
extension and the date by which a final decision will be reached
(which date shall not be later than one hundred and eighty (180)
days after the date on which the claim was filed). A Claimant
shall be given a written notice in which he shall be advised as
to whether the claim is granted or denied, in whole or in part.
If a claim is denied, in whole or in part, the Claimant shall be
given written notice which shall contain (1) the specific reasons
for the denial, (2) references to pertinent Plan provisions on
which the denial is based, (3) a description of any additional
material or information necessary to perfect the claim and an
explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
(b) If a claim is denied, in whole or in part, the Claimant
shall have the right to request that the Committee review the
denial, provided that he files a written request for review with
the Committee within sixty (60) days after the date on which he
received written notification of the denial (or such longer
period as the Committee for good cause may permit). A Claimant
(or his duly authorized representative) may review pertinent
documents and submit issues and comments in writing to the
Committee. Within sixty (60) days after a request for review is
received, the review shall be made and the Claimant shall be
advised in writing of the decision on review, unless special
circumstances require an extension of time for processing the
review, in which case the Claimant shall, within such initial
sixty (60) day period, be given a written notification specifying
the reasons for the extension and when such review shall be
completed (provided that such review shall be completed within
one hundred and twenty (120) days after the date on which the
request for review was filed). The decision on review shall be
forwarded to the Claimant in writing and shall include specific
reasons for the decision and references to Plan provisions upon
which the decision is based. A decision on review shall be final
and binding on all persons for all purposes. If a Claimant shall
fail to file a request for review in accordance with the
procedures herein outlined, such Claimant shall have no rights to
review and shall have no right to bring action in any court, and
the denial of the claim shall become final and binding on all
persons for all purposes.<PAGE>
13.13 Information to be Furnished to Committee. The Company and
Employers shall furnish the Committee or its delegate such evidence,
data and information as the Committee or its delegate may reasonably
request. Participants and their Beneficiaries shall also furnish to
the Committee such evidence, data or information as the Committee or
its delegate shall request.
13.14 Plan Administrator. The Committee may appoint a Plan
Administrator who may (but need not) be a member of the Committee; and
in the absence of such appointment, the Committee shall be the Plan
Administrator.
13.15 Fiduciary as Participant. A fiduciary who is also a
Participant or a Beneficiary shall receive any benefit to which he may
be entitled as a Participant or Beneficiary in the Plan so long as
such benefit is computed and paid on a basis that is consistent with
the terms of the Plan as applied to all other Participants and
Beneficiaries.
13.16 Fiduciary Responsibility. If a Plan fiduciary acts in
accordance with ERISA, Title I, Subtitle B, Part 4:
(a) in determining that a Participant's spouse has
consented to the naming of a Beneficiary other than the spouse,
in relying on a Participant's election to waive a Qualified Joint
and Survivor Annuity or a qualified survivor annuity or a
revocation of such an election, or in determining that the
consent of the Participant's spouse may not be obtained because
there is no spouse, the spouse cannot be located or other
circumstances prescribed by the Secretary of the Treasury by
regulations, then to the extent of payments made pursuant to such
consent, revocation or determination, the Plan and its
fiduciaries shall have no further liability;
(b) in treating a domestic relations order as being (or not
being) a Qualified Domestic Relations Order, or, during any
period in which the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined (by
the Committee, by a court of competent jurisdiction, or
otherwise), in segregating in a separate account in the Plan or
in an escrow account the amounts which would have been payable to
the alternate payee during such period if the order had been
determined to be a Qualified Domestic Relations Order, in paying
the amounts segregated or held in escrow to the person entitled
thereto if within 18 months the domestic relations order (or a
modification thereof) is determined to be a Qualified Domestic
Relations Order, in paying such amounts to the person entitled
thereto if there had been no order, if within 18 months the
domestic relations order is determined not to be qualified or if
the issue is not resolved within 18 months and in prospectively
applying a domestic relations order which is determined to be
qualified after the close of the 18-month period, then the
obligation of the Plan and its fiduciaries to the Participant and
each alternate payee shall be discharged to the extent of any
payment made pursuant to such acts.
ARTICLE XIV<PAGE>
AMENDMENT, TERMINATION, MERGER AND CONSOLIDATION OF PLAN
14.1 Amendment. The Board of Directors shall have the right, at
any time and from time to time, to amend, in whole or in part, any or
all of the provisions of the Plan and the Trust Agreement, provided
that no amendment shall authorize or permit any part of the Trust Fund
to be used for or diverted to purposes other than for the exclusive
benefit of the Participants or their beneficiaries, or permit any
portion of the Trust Fund to revert to or become the property of any
Employer, except as may be permitted under applicable law, regulations
and rulings. No amendment shall deprive any Participant or any
Beneficiary of a deceased Participant of any of the benefits or of an
optional form of benefit to which he is entitled under this Plan with
respect to contributions previously made or, except to the extent
permitted in regulations and rulings issued by the Secretary of the
Treasury, shall eliminate an optional form of benefit with respect to
contributions previously made, nor shall any amendment decrease any
Participant's Accounts provided that no amendment made in conformance
to provisions of the Internal Revenue Code or any other statute
relating to employee's trusts, or any official regulations or rulings
issued pursuant thereto, shall be considered prejudicial to the rights
of any Participant or Beneficiary. No amendment which affects the
rights, duties or responsibilities of the Trustee may be made without
the Trustee's written consent.
The Committee shall have the same authority with respect to the
adoption of amendments to the Plan and the Trust Agreement as the
Board of Directors in the following circumstances:
(a) to adopt amendments to the Plan or Trust which the
Committee determines are necessary or desirable for the Plan to
comply with or to obtain benefits or advantages under the
provisions of applicable law, regulations or rulings or
requirements of the Internal Revenue Service or other government
administrative agency or of changes in such law, regulations,
rulings or requirements; and
(b) to adopt any other procedural or cosmetic amendment
that the Committee determines to be necessary or desirable that
does not materially change benefits to Participants or their
Beneficiaries or materially increase the Employers' contributions
to the Plan.
The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors on a timely basis.
14.2 Termination of Plan By the Company. Although it is the
intention of the Company that this Plan be permanent, the Company
reserves the right to terminate the Plan and the Trust at any time, by
delivering to the Committee, the Trustee and each Employer hereunder,
written notice of termination.
Upon termination of the Plan or permanent discontinuance of
Employer Contributions to the Plan, the interest in his Net Balance
Account of each Participant who is an Employee at the time of the
termination, shall become fully vested. Such vested Accounts, shall,
however, be subject to readjustment as provided in Sections 10.14,
10.15, 10.16, 10.17 and 10.19. In the event of termination of this
Plan, the Board of Directors may direct that the Trustee continue the
Trust for a specified period of time, or for such period of time, as<PAGE>
the Trustee, in its sole discretion, may deem to be in the best
interest of the Participants or their Beneficiaries. In the absence
of specific direction from the Board of Directors, the Trust assets
shall be distributed by the Trustee to Participants under the options
set forth in Section 11.2 hereof or to Beneficiaries under the options
set forth in Section 11.3; provided, however, that Participant Elected
Contributions shall be distributed only if (a) the Participant has a
Termination of Employment, death or Disability, or has attained the
age of 59-1/2, (b) the Plan is terminated without the Employer's
establishment or maintenance of another defined contribution plan
(excluding a leveraged ESOP as defined in Code Section 4975(e)(7)) or
(c) the Employer disposes of substantially all of its assets used in a
trade or business or disposes of its interest in a subsidiary and the
Employee continues employment with the corporation acquiring the
assets or the subsidiary and if, in the case of a distribution made
pursuant to Section 14.2(b) or (c) the distribution is made in the
form of a single distribution of the entire balance to the credit of
the Participant in a single taxable year. Upon the partial
termination of the Plan the interest of each Participant whose
employment is terminated on account of, or who is affected by, such
partial termination shall become fully vested and such Participant's
benefits shall be distributable to the extent permitted in the
preceding sentence. Sales of McDonald's Restaurants by the Company or
another Employer will not constitute a partial termination unless such
sale under all other facts and circumstances constitutes a partial
termination.
14.3 Merger, Consolidation, or Transfer of Assets. This Plan
shall not be merged or consolidated with, nor shall any assets or
liabilities be transferred to, any other plan, unless the benefits
payable to each Participant if the Plan were terminated immediately
after such action would not be less than the benefits which would have
been payable to each such Participant if the Plan had been terminated
immediately before such action.
14.4 Transfer of Assets from Plans of Subsidiaries. The Board of
Directors may, in its sole and exclusive discretion, authorize and
direct the transfer to the Trust of all (or any designated portion) of
the assets of any defined contribution plan (the "Transferred Assets")
which is a Related Plan. The Transferred Assets, to the extent
allocable to persons who are Participants in the Plan, shall be held,
managed and distributed for the benefit of participants of the Related
Plan (the "Transferred Assets") subject to such terms and conditions
as the Board of Directors and the board of directors (or persons
having authority similar to the board of directors of a corporation)
of the Commonly Controlled Entity, if applicable, of the Company shall
provide.
(a) The Trustee shall accept, under such terms and
conditions as the Board of Directors shall provide for, all
Transferred Assets.
(b) Except as otherwise expressly provided by the Board of
Directors and the board of directors (or persons having authority
similar to the board of directors of a corporation) of the
Commonly Controlled Entity, if applicable, all Participants'
interests in the Transferred Assets shall be 100 percent (100%)
vested and non-forfeitable.<PAGE>
(c) The Committee shall keep separate records of account
for each Participant's interests in the Transferred Assets.
(d) Except as otherwise expressly provided herein, the
Transferred Assets shall be held, managed, invested and
distributed in the same manner (and subject to the same
restrictions) as Rollover Contributions, as provided in
Article VIII of the Plan.
(e) Each Participant's Transferred Assets shall be
distributable in the same manner as a Participant's Rollover
Contribution Account; provided that the Participant can also
elect any benefit option which was available with respect to the
Transferred Assets under the Related Plan.
ARTICLE XV
TOP HEAVY PROVISIONS
15.1 Application. The definitions in Section 15.2 shall apply
under this Article XV and the special rules in Section 15.3 shall
apply, notwithstanding any other provisions of the Plan, for any Plan
Year in which the Plan is a Top Heavy Plan and for such other Plan
Years as may be specified herein. Anything in this Article XV to the
contrary notwithstanding, if the Plan is a multiple employer plan as
described in Internal Revenue Code Section 413(c), the provisions of
this Article XV shall be applied separately to each Employer (together
with the businesses which with that Employer are Commonly Controlled
Entities or members of an Affiliated Service Group) taking account of
benefits under the plan provided to employees of the Employer,
Commonly Controlled Entity or members of an Affiliated Service Group
because of service with that Employer or Commonly Controlled Entity.
15.2 Special Top Heavy Definitions. The following special
definitions shall apply under this Article XV.
(a) "Aggregate Employer Contributions" means the sum of all
Employer Contributions and Forfeitures under this Plan allocated
for a Participant to the Plan and employer contributions and
forfeitures allocated for the Participant to all Related Defined
Contribution Plans in the Aggregation Group; provided, however,
that for Plan Years beginning before January 1, 1985, employer
contributions attributable to salary reduction or similar
arrangement under the Plan shall not be included in Aggregate
Employer Contributions and provided further that, for Plan Years
which begin after December 31, 1988, Participant Elected
Contributions, Employer Matching Contributions and Special
Section 401(k) Contributions shall not be included for Non-Key
Employees.
(b) "Aggregation Group" means the group of plans in a
Mandatory Aggregation Group, if any, that includes the Plan,
unless inclusion of Related Plans in the Permissive Aggregation
Group in the Aggregation Group would prevent the Plan from being
a Top Heavy Plan, in which case "Aggregation Group" means the
group of plans consisting of the Plan and each other Related Plan
in a Permissive Aggregation Group with the Plan.<PAGE>
(1) "Mandatory Aggregation Group" means each plan
(considering the Plan and Related Plans) that, during the
Plan Year that contains the Determination Date or any of the
four preceding Plan Years,
(A) had a participant who was a Key Employee, or
(B) was necessary to be considered with a plan in
which a Key Employee participated in order to enable
the plan in which the Key Employee participated to meet
the requirements of Section 401(a)(4) and Section 410
of the Internal Revenue Code.
If the Plan is not described in (A) or (B) above, it shall
not be part of a Mandatory Aggregation Group.
(2) "Permissive Aggregation Group" means the group of
plans consisting of (A) the plans, if any, in a Mandatory
Aggregation Group with the Plan, and (B) any other Related
Plan, that, when considered as a part of the Aggregation
Group, does not cause the Aggregation Group to fail to
satisfy the requirements of Section 401(a)(4) and
Section 410 of the Internal Revenue Code. A Related Plan in
(B) of the preceding sentence may include a simplified
employee pension plan, as defined in Internal Revenue Code
Section 408(k), and a collectively bargained plan, if when
considered as a part of the Aggregation Group such plan does
not cause the Aggregation Group to fail to satisfy the
requirements of Section 401(a)(4) and Section 410 of the
Internal Revenue Code considering, if the plan is a multiple
employer plan as described in Internal Revenue Code Section
413(c), benefits under the plan only to the extent provided
to employees of the employer because of service with the
employer and, if the plan is a simplified employee pension
plan, only the employer's contribution to the plan.
(c) "Determination Date" means, with respect to a Plan
Year, the last day of the preceding Plan Year or, in the case of
the first Plan Year, the last day of such Plan Year. If the Plan
is aggregated with other plans in the Aggregation Group, the
Determination Date for each other plan shall be, with respect to
any Plan Year, the Determination Date for each such other plan
which falls in the same calendar year as the Determination Date
for the Plan.
(d) "Key Employee" means, for the Plan Year containing the
Determination Date, any person or the beneficiary of any person
who is an employee or former employee of an Employer, a Commonly
Controlled Entity or member of an Affiliated Service Group as
determined under Internal Revenue Code Section 416(i) and who, at
any time during the Plan Year containing the Determination Date
or any of the four (4) preceding Plan Years (the "Measurement
Period"), is a person described in paragraph (1), (2), (3) or
(4), subject to paragraph (5).
(1) An officer of the Employer, Commonly Controlled
Entity or member of an Affiliated Service Group who:
(A) in any Measurement Period, in the case of a
Plan Year beginning after December 31, 1983, is an<PAGE>
officer during the Plan Year and has annual Considered
Compensation for the Plan Year in an amount greater
than fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of Internal Revenue Code for the
calendar year in which such Plan Year ends ($112,221 in
1992, adjusted in subsequent years as determined in
accordance with regulations prescribed by the Secretary
of the Treasury or his delegate pursuant to the
provisions of Section 415(d) of the Internal Revenue
Code); and
(B) in any Measurement Period, in the case of a
Plan Year beginning before January 1, 1984, is an
officer during the Plan Year, regardless of his
Considered Compensation (except to the extent that
applicable law, regulations and rulings indicate that
the compensation requirement set forth in subparagraph
(A) above is applicable).
No more than a total of fifty (50) persons (or, if lesser,
the greater of three (3) persons or ten percent (10%) of all
persons or beneficiaries of persons who are employees or
former employees) shall be treated as Key Employees under
this paragraph (1) for any Measurement Period. In the case
of an Employer, Commonly Controlled Entity or member of an
Affiliated Service Group which is not a corporation (I) in
any Measurement Period, in the case of a Plan Year beginning
on or before February 28, 1985 no persons shall be treated
as Key Employees under this paragraph (1); and (II) in any
Measurement Period, in the case of a Plan Year beginning
after February 28, 1985, the term "officer" as used in this
subsection (d) shall include administrative executives as
described in Section 1.416-1(T-13) of the Treasury
Regulations.
(2) One (1) of the ten (10) persons who, during a Plan
Year in the Measurement Period:
(A) have annual Considered Compensation from the
Employer, Commonly Controlled Entity or member of an
Affiliated Service Group for such Plan Year greater
than the amount in effect under Section 415(c)(1)(A) of
the Internal Revenue Code for the calendar year in
which such Plan Year ends (the greater of $30,000 for
1992 or one-fourth of the dollar limitation in effect
under Section 415(b)(1)(A) of the Internal Revenue
Code, adjusted in subsequent years as determined in
accordance with regulations prescribed by the Secretary
of the Treasury or his delegate pursuant to the
provisions of Section 415(d) of the Internal Revenue
Code); and
(B) own (or are considered as owning within the
meaning of Internal Revenue Code Section 318) in such
Plan Year, the largest percentage interests in the
Employer, Commonly Controlled Entity or member of an
Affiliated Service Group, in such Plan Year, provided
that no person shall be treated as a Key Employee under
this paragraph unless he owns more than one-half
percent (1/2%) interest in the Employer, Commonly<PAGE>
Controlled Entity or member of an Affiliated Service
Group.
No more than a total of ten (10) persons or beneficiaries of
persons who are employees or former employees shall be
treated as Key Employees under this paragraph (2) for any
Measurement Period.
(3) A person who, for a Plan Year in the Measurement
Period, is a more than five percent (5%) owner (or is
considered as owning more than five percent (5%) within the
meaning of Internal Revenue Code Section 318) of the
Employer, Commonly Controlled Entity or member of an
Affiliated Service Group.
(4) A person who, for a Plan Year in the Measurement
Period, is a more than one percent (1%) owner (or is
considered as owning more than one percent (1%) within the
meaning of Internal Revenue Code Section 318) of the
Employer, a Commonly Controlled Entity or member of an
Affiliated Service Group and has an annual Considered
Compensation for such Plan Year from the Employer, Commonly
Controlled Entity or member of an Affiliated Service Group
of more than $150,000.
(5) If the number of persons who meet the requirements
to be treated as Key Employees under paragraph (1) or (2)
exceed the limitation on the number of Key Employees to be
counted under paragraph (1) or (2), those persons with the
highest annual Considered Compensation in a Plan Year in the
Measurement Period for which the requirements are met and
who are within the limitation on the number of Key Employees
will be treated as Key Employees.
If the requirements of paragraph (1) or (2) are met by a
person in more than one (1) Plan Year in the Measurement
Period, each person will be counted only once under
paragraph (1) or (2):
(A) under paragraph (1), the Plan Year in the
Measurement Period in which a person who was an officer
and had the highest annual Considered Compensation
shall be used to determine whether the person will be
treated as a Key Employee under the preceding sentence;
(B) under paragraph (2), the Plan Year in the
Measurement Period in which the ownership percentage
interest is the greatest shall be used to determine
whether the person will be treated as a Key Employee
under the preceding sentence.
Notwithstanding the above provisions of paragraph (5), a
person may be counted in determining the limitation under
both paragraphs (1) and (2). In determining the sum of the
Present Value of Accrued Benefits for Key Employees under
subsection (h) of this Section, the Present Value of Accrued
Benefits for any person shall be counted only once.
(e) "Non-Key Employee" means (1) a person or the
beneficiary of a person with an account balance in the Plan or an<PAGE>
account balance or accrued benefit in any Related Plan in the
Aggregation Group or (2) an employee, a former employee or the
beneficiary of such person who has received a distribution during
the Measurement Period and (3) who during the Measurement Period
is not a Key Employee.
(f) "Present Value of Accrued Benefits" means, for any Plan
Year, an amount equal to the sum of (1), (2) and (3) for each
person who, in the Plan Year containing the Determination Date,
was a Key Employee or a Non-Key Employee.
(1) Subject to (4) below, the value of a person's Net
Balance Account under the Plan and his accrued benefit under
each Related Defined Contribution Plan in the Aggregation
Group, determined as of the valuation date coincident with
or immediately preceding the Determination Date, adjusted
for contributions due as of the Determination Date, as
follows:
(A) in the case of a plan not subject to the
minimum funding requirements of Section 412 of the
Internal Revenue Code, by including the amount of any
contributions actually made after the valuation date
but on or before the Determination Date, and, in the
first plan year of a plan, by including contributions
made after the Determination Date that are allocated as
of a date in that first plan year; and
(B) in the case of a plan that is subject to the
minimum funding requirements, by including the amount
of any contributions that would be allocated as of a
date not later than the Determination Date, plus
adjustments to those amounts as required under
applicable rulings, even though those amounts are not
yet required to be contributed or allocated (e.g.,
because they have been waived) and by including the
amount of any contributions actually made (or due to be
made) after the valuation date but before the
expiration of the extended payment period in
Section 412(c)(10) of the Internal Revenue Code.
(2) Subject to (4) below, the sum of the actuarial
present values of a person's accrued benefits under each
Related Defined Benefit Plan in the Aggregation Group,
expressed as a benefit commencing at Vesting Retirement Date
(or the person's attained age, if later) determined based on
the following actuarial assumptions:
(A) Interest rate 5%; and
(B) Post Retirement Mortality: 1984 Unisex
Pension Table;
and determined in accordance with Internal Revenue Code
Section 416(g), provided, however, that if a defined benefit
plan in the Aggregation Group provides for different or
additional actuarial assumptions to be used in determining
the present value of accrued benefits thereunder for the
purpose of determining the top heavy status thereof, then
such different or additional actuarial assumptions shall<PAGE>
apply with respect to each defined benefit plan in the
Aggregation Group, and further provided that the accrued
benefit of any Non-Key Employee shall be determined under
the method which is used for accrual purposes for all
Related Defined Benefit Plans or, if no single accrual
method is used in all such plans, such accrued benefit shall
be determined as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under Section
411(b)(1)(C) of the Internal Revenue Code.
The present value of an accrued benefit for any person who
is employed by an employer maintaining a plan on the
Determination Date is determined as of the most recent
valuation date which is within a 12-month period ending on
the Determination Date, provided however that:
(C) for the first plan year of the plan, the
present value for an employee is determined as if the
employee had a Termination of Employment (i) on the
Determination Date or (ii) on such valuation date but
taking into account the estimated accrued benefit as of
the Determination Date; and
(D) for the second and subsequent plan years of
the plan, the accrued benefit taken into account for an
employee is not less than the accrued benefit taken
into account for the first plan year unless the
difference is attributable to using an estimate of the
accrued benefit as of the Determination Date for the
first plan year and using the actual accrued benefit as
of the Determination Date for the second plan year.
For purposes of this paragraph (2), the valuation date is
the valuation date used by the plan for computing plan costs
for minimum funding, regardless of whether a valuation is
performed that year.
If the plan provides for a nonproportional subsidy as
described in Treasury Regulations Section 1.416-1 (T-27),
the present value of accrued benefits shall be determined
taking into account the value of nonproportional subsidized
early retirement benefits and nonproportional subsidized
benefit options.
(3) Subject to (4) below, the aggregate value of
amounts distributed during the plan year that includes the
Determination Date or any of the four preceding plan years
including amounts distributed under a terminated plan which,
if it had not been terminated, would have been in the
Aggregation Group.
(4) The following rules shall apply in determining the
Present Value of Accrued Benefits:
(A) Amounts attributable to qualified voluntary
employee contributions, as defined in Section 219(e) of
the Internal Revenue Code, shall be excluded.
(B) In computing the Present Value of Accrued
Benefits with respect to rollovers or plan-to-plan<PAGE>
transfers, the following rules shall be applied to
determine whether amounts which have been distributed
during the five (5) year period ending on the
Determination Date from or accepted into this Plan or
any plan in the Aggregation Group shall be included in
determining the Present Value of Accrued Benefits:
(i) Unrelated Transfers accepted into the
Plan or any plan in the Aggregation Group after
December 31, 1983 shall not be included.
(ii) Unrelated Transfers accepted on or
before December 31, 1983 and all Related Transfers
accepted at any time into the Plan or any plan in
the Aggregation Group shall be included.
(iii) Unrelated Transfers made from the
Plan or any plan in the Aggregation Group shall be
included.
(iv) Related Transfers made from the Plan or
any plan in the Aggregation Group shall not be
included by the transferor plan (but shall be
counted by the accepting plan).
The accrued benefit of any individual who has not performed
services for an Employer maintaining the Plan at any time during
the five (5) year period ending on the Determination Date shall
be excluded in computing the Present Value of Accrued Benefits.
(g) "Related Transfer" means a rollover or a plan-to-plan
transfer which is either not initiated by the Employee or is made
between plans each of which is maintained by a Commonly
Controlled Entity or member of an Affiliated Service Group.
(h) A "Top Heavy Aggregation Group" means an Aggregation
Group in any Plan Year for which, as of the Determination Date,
the sum of the Present Value of Accrued Benefits for Key
Employees under all plans in the Aggregation Group exceeds sixty
percent (60%) of the sum of the Present Value of Accrued Benefits
for all employees under all plans in the Aggregation Group;
provided that, for purposes of determining the sum of Present
Value of Accrued Benefits for all employees, former Key Employees
who have not performed any services for an Employer, a Commonly
Controlled Entity or a member of an Affiliated Service Group in
the Plan Year containing the Determination Date or the preceding
four Plan Years shall be excluded entirely from the calculation
of the Present Value of Accrued Benefits for the Plan Year that
contains the Determination Date. For purposes of applying the
special rules herein with respect to a Super Top Heavy Plan, a
Top Heavy Aggregation Group will also constitute a "Super Top
Heavy Aggregation Group" if in any Plan Year as of the
Determination Date, the sum of the Present Value of Accrued
Benefits for Key Employees under all plans in the Aggregation
Group exceeds ninety percent (90%) of the sum of the Present
Value of Accrued Benefits for all employees under all plans in
the Aggregation Group.
(i) "Top Heavy Plan" means the Plan in any Plan Year in
which it is a member of a Top Heavy Aggregation Group, including<PAGE>
a Top Heavy Aggregation Group consisting solely of the Plan. For
purposes of applying the rules herein with respect to a Super Top
Heavy Plan, a Top Heavy Plan will also constitute a "Super Top
Heavy Plan" if the Plan in any Plan Year is a member of a Super
Top Heavy Aggregation Group, including a Super Top Heavy
Aggregation Group consisting solely of the Plan.
(j) "Unrelated Transfer" means a rollover or a plan-to-plan
transfer which is both initiated by the Employee and (1) made
from a plan maintained by a Commonly Controlled Entity or member
of an Affiliated Service Group to a plan maintained by an
employer which is not a Commonly Controlled Entity or member of
an Affiliated Service Group or (2) made to a plan maintained by a
Commonly Controlled Entity or member of an Affiliated Service
Group from a plan maintained by an employer which is not a
Commonly Controlled Entity or member of an Affiliated Service
Group.
15.3 Special Top Heavy Provisions. For each Plan Year in which
the Plan is a Top Heavy Plan, the following rules shall apply, except
that the special provisions of this Section 15.3 shall not apply with
respect to any employee included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a
collective-bargaining agreement between employee representatives and
one or more employers if there is evidence that retirement benefits
were the subject of good faith bargaining between such employee
representative and the Employer or Employers:
(a) Minimum Employer Contributions. In any Plan Year in
which the Plan is a Top Heavy Plan, the Employers shall make
additional Employer Contributions to the Plan as necessary for
each Participant who is employed on the last day of the Plan Year
and who is a Non-Key Employee to bring the amount of his
Aggregate Employer Contributions for the Plan Year up to at least
three percent (3%) of his Considered Compensation, or such lesser
amount as is equal to the largest percentage of a Key Employee's
Considered Compensation allocated to the Key Employee as
Aggregate Employer Contributions.
For purposes of determining whether a Non-Key Employee is a
Participant entitled to have minimum Employer Contributions made
on his behalf, a Non-Key Employee will be treated as a
Participant even if he is not otherwise a Participant (or accrues
no benefit) under the Plan because:
(1) he has failed to complete the requisite number of
hours of service (if any) after becoming a Participant in
the Plan,
(2) he is excluded from participation in the Plan (or
accrues no benefit) merely because his compensation is less
than a stated amount, or
(3) he is excluded from participation in the Plan (or
accrues no benefit) merely because of a failure to make
mandatory employee contributions or because of a failure to
make elective 401(k) contributions.
(b) Vesting. For each Plan Year in which the Plan is a Top
Heavy Plan and for each Plan Year thereafter, the vested right of<PAGE>
each Participant who has an Hour of Service after the Plan
becomes a Top Heavy Plan to a percentage of his Profit Sharing
Fund Account and Employer Auxiliary ESOP Contribution Account (to
the extent such Accounts had not been forfeited prior to the
Plan's becoming a Top Heavy Plan) shall be determined under the
following table:
Year of Credited Service Vested Percentage
------------------------ -----------------
Less than 2 0%
2 but less than 3 20
3 but less than 4 40
4 but less than 5 60
5 but less than 6 80
6 or more 100
(c) Limitations. In computing the limitations under
Article IX hereof for years in which the Plan is a Top Heavy
Plan, the special rules of Section 416(h) of the Code shall be
applied in accordance with applicable regulations and rulings so
that, in determining the denominator of the defined contribution
plan fraction, as defined in Section 415(e)(3) of the Internal
Revenue Code ("Defined Contribution Plan Fraction") and the
defined benefit plan fraction as defined in Section 415(e)(2) of
the Internal Revenue Code ("Defined Benefit Plan Fraction") at
each place at which "1.25" would have been used, "1.00" shall be
substituted and by substituting $41,500 for $51,875 in the
numerator of the transition fraction described in Section
415(e)(6)(B) of the Internal Revenue Code, unless the Plan is not
a Super Top Heavy Plan and the special requirements of Section
416(h)(2) of the Internal Revenue Code have been satisfied.
(d) Transition Rule for a Top Heavy Plan. Notwithstanding
the provisions of Section 15.3(c), for each Plan Year in which
the Plan is a Top Heavy Plan and in which the Plan does not meet
the special requirements of Section 416(h)(2) of the Internal
Revenue Code in order to use 1.25 in the denominator of the
Defined Contribution Plan Fraction and the Defined Benefit Plan
Fraction, if an Employee was a participant in one or more defined
benefit plans and in one or more defined contribution plans
maintained by the Employer before the plans became Top Heavy
Plans and if such Participant's Combined Fraction exceeds 1.00
because of accruals and additions that were made before the plans
became Top Heavy Plans, a factor equal to the lesser of 1.25 or
such lesser amount (but not less than 1.00) as shall be needed to
make the Employee's Combined Fraction equal to 1.00 shall be used
in the denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction if there are no further
accruals or annual additions under any Top Heavy Plans until the
Participant's Combined Fraction is not greater than 1.00 when a
factor of 1.00 is used in the denominators of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction. Any
provisions herein to the contrary notwithstanding, if the Plan is
a Top Heavy Plan and the Plan does not meet the special
requirements of Section 416(h)(2) of the Internal Revenue Code in
order to use 1.25 in the denominator of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction, there shall
be no further Annual Additions for a Participant whose Combined
Fraction is greater than 1.00 when a factor of 1.00 is used in
the denominator of the Defined Benefit Plan Fraction and the<PAGE>
Defined Contribution Plan Fraction, until such time as the
Participant's Combined Fraction is not greater than 1.00.
(e) Transition Rule for a Super Top Heavy Plan.
Notwithstanding the provisions of Sections 15.3(c) and 15.3(d),
for each Plan Year in which the Plan is a Super Top Heavy Plan,
(1) if an Employee was a participant in one or more defined
benefit plans and in one or more defined contribution plans
maintained by the employer before the plans became Super Top
Heavy Plans, and (2) if such Participant's Combined Fraction
exceeds 1.00 because of accruals and additions that were made
before the plans became Super Top Heavy Plans and if immediately
before the plans became Super Top Heavy Plans the Combined
Fraction as then computed did not exceed 1.00, then a factor
equal to the lesser of 1.25 or such lesser amount (but not less
than 1.00) as shall be needed to make the Employee's Combined
Fraction equal to 1.00 shall be used in the denominator of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction if there are no further accruals or annual additions
under any Super Top Heavy Plans until the Participant's Combined
Fraction is not greater than 1.00 when a factor of 1.00 is used
in the denominators of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction. Any provisions herein to the
contrary notwithstanding, if the Plan is a Super Top Heavy Plan,
there shall be no further Annual Additions for a Participant
whose Combined Fraction is greater than 1.00 when a factor of
1.00 is used in the denominator of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction until the
Participant's Combined Fraction is not greater than 1.00.
(f) Terminated Plan. If the Plan becomes a Top Heavy Plan
after it has formally been terminated, has ceased crediting for
benefit accruals and vesting and has been or is distributing all
plan assets to participants and their beneficiaries as soon as
administratively feasible or if a terminated plan has distributed
all benefits of participants and their beneficiaries, the
provisions of Section 15.3 shall not apply to the Plan.
(g) Frozen Plans. If the Plan becomes a Top Heavy Plan
after contributions have ceased under the Plan but all assets
have not been distributed to participants or their beneficiaries,
the provisions of Section 15.3 shall apply to the Plan.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 Headings. Headings of sections and subsections of the Plan
are inserted for convenience of reference and are neither part of the
Plan nor to be considered in the construction thereof.
16.2 Indemnification. Each member of the Committee, each member
of the Board of Directors, each individual serving as Trustee without
compensation, and each and every Employee to whom are delegated
duties, responsibilities and authority with respect to the Plan and
the Trust shall be indemnified, held harmless and promptly reimbursed
by the Company against all claims, liabilities, fines and penalties
and all expenses (including, but not limited to, attorney fees)
reasonably incurred by or imposed upon such member, individual or<PAGE>
Employee which arise as a result of his actions or failure to act in
connection with the operation and administration of the Plan and the
Trust, to the extent lawfully allowable; provided that to the extent
that such claim, liability, fine, penalty or expense is paid for by
liability insurance purchased by or paid for by the Company,
reimbursement shall be limited to amounts which would not cause the
loss of coverage under such insurance and further provided that to the
extent that the Company has reimbursed the Employee, the Company shall
be subrogated to the Trustee's rights to reimbursement under such
insurance. Notwithstanding the foregoing, the Company shall not
indemnify any person for any such amount incurred through any
settlement or compromise of any action unless the Company consents in
writing to such settlement or compromise. Expenses incurred in
defending a civil or criminal action, suit or proceeding shall be paid
by the Company in advance of the final disposition of such action,
suit or proceeding as authorized by the Company in the specific case
upon receipt of an undertaking by or on behalf of the member of the
Committee, member of the Board of Directors, individual Trustee or
Employee to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Company as authorized in
this Section 16.2.
16.3 Employees' Trust. This Plan is created for the exclusive
purpose of providing benefits to the Participants in the Plan and
their Beneficiaries, and shall be interpreted in a manner consistent
with its being a Plan described in Section 401(a) of the Internal
Revenue Code and with the Trust's being a Trust exempt under Section
501(a) of the Internal Revenue Code.
16.4 Nonalienation of Benefits.
(a) Benefits payable under this Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution
or levy of any kind, either voluntary or involuntary, prior to
actually being received by the person entitled to the benefit
under the terms of the Plan; and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge,
garnish, execute on, levy or otherwise dispose of any right to
benefits payable hereunder, shall be void. The Trust Fund shall
not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person
entitled to benefits hereunder. The foregoing provisions of this
Section 16.4(a) shall not preclude the (1) enforcement of a
Federal tax levy made pursuant to Section 6331 of the Internal
Revenue Code or (2) collection by the United States on a judgment
resulting from an unpaid tax assessment.
(b) Notwithstanding Section 16.4(a), the Trustee
(1) shall comply with an order entered on or after
January 1, 1985 determined by the Plan Administrator to be a
Qualified Domestic Relations Order as provided in
Section 16.5,
(2) shall comply with a domestic relations order
entered before January 1, 1985 if benefits are already being
paid under such order, and<PAGE>
(3) may treat an order entered before January 1, 1985
as a Qualified Domestic Relations Order even if it does not
meet the requirements of Section 16.5.
16.5 Qualified Domestic Relations Order.
(a) Qualified Domestic Relations Order means any judgment,
decree, or order (including approval of a property settlement
agreement):
(1) which is made pursuant to a state domestic
relations law (including a community property law),
(2) which relates to the provision of child support,
alimony payments, or marital property rights to a spouse,
former spouse, child, or other dependent of a Participant,
(3) which creates or recognizes the existence of an
alternate payee's right to receive all or a portion of the
Participant's Net Balance Account under the Plan, and
(4) with respect to which the requirements of
paragraphs (b) and (c) are met.
(b) A domestic relations order can be a Qualified Domestic
Relations Order only if such order clearly specifies:
(1) the name and the last known mailing address, if
any, of the Participant and the name and mailing address of
each alternate payee covered by the order,
(2) the amount or percentage of the Participant's
Accrued Benefit to be paid by the Plan to each such
alternate payee, or the manner in which such amount or
percentage is to be determined,
(3) the number of payments or period to which such
order applies, and
(4) each Plan to which such order applies.
(c) A domestic relations order can be a Qualified Domestic
Relations Order only if such order does not:
(1) require the plan to provide any type or form of
benefit, or any option not otherwise provided under the
Plan,
(2) require the Plan to provide increased benefits
(determined on the basis of actuarial value), or
(3) require the payment of benefits to an alternate
payee which are required to be paid to another alternate
payee under another order previously determined to be a
Qualified Domestic Relations Order.
(d) In the case of any payment before a Participant has had
a Termination of Employment, a domestic relations order shall not
be treated as failing to meet the requirements of Section<PAGE>
16.5(c)(1) solely because such order requires that payment of
benefits be made to an alternate payee:
(1) (A) on or after the date on which the Participant
attains (or would have attained) the age of 50, for periods
before May 1, 1990, and (B) without regard to the
Participant's attainment of any specified age, for periods
after April 30, 1990.
(2) as if the Participant had retired on the date on
which such payment is to begin under such order; and
(3) in any form in which such benefits may be paid
under the Plan to the Participant (other than in the form of
a Qualified Joint and Survivor Annuity with respect to the
alternate payee and his or her subsequent spouse).
(e) To the extent provided in any Qualified Domestic
Relations Order the former spouse of a Participant if married to
the Participant for at least one year, shall be treated as the
surviving spouse of such Participant for purposes of consenting
to the waiver of a Qualified Joint and Survivor Annuity as
provided in Sections 11.2(f) and 11.10 and the naming of another
Beneficiary to the extent provided in Sections 11.3 and 11.10.
(f) Notwithstanding anything to the contrary in Article X,
if, pursuant to a Qualified Domestic Relations Order, a
segregated account is established containing the interest of an
alternate payee, the alternate payee shall direct the manner in
which such segregated account shall be invested in accordance
with the procedures under Article X; provided that such
segregated account shall remain invested in the same manner as
the assets were invested before the account was segregated until
the alternate payee's election in accordance with this
Section 16.5(f) becomes effective.
16.6 Unclaimed Amounts. Unclaimed amounts shall consist of the
amounts of the Accounts of a retired, deceased or terminated
Participant (including amounts held in the Distribution Fund with
respect to checks which are distributed but which are not cashed)
which cannot be distributed because of the Committee's inability,
after a reasonable search, to locate a Participant or his Beneficiary
within a period of two (2) years after the payment of benefits becomes
due.
Unclaimed amounts with respect to Accounts held in the Profit
Sharing Plan portion of the Plan for a Plan Year shall become a
Forfeiture and shall be allocated for such Plan Year as determined in
accordance with Section 7.1 hereof, within a reasonable time after the
close of the Plan Year in which such two-year period shall end. The
Committee shall allocate Forfeitures with respect to Accounts held in
the McDESOP portion of the Plan (excluding those arising in respect to
an Employer Auxiliary ESOP Contribution Account) to Participants'
Participant Elected Contribution Accounts and Employer Matching
Contribution Accounts (a) for periods before December 1, 1994, in the
same manner as trust income is allocated to such Accounts under
Section 7.2 and (ii) effective December 1, 1994 and thereafter by
crediting such Forfeitures to the Employer Matching Contribution
Holding Fund as of the Valuation Date following the date the amount of
such Forfeitures is determined for the immediately preceding Plan year<PAGE>
but not later than March 31 of the year following the Plan year with
respect to which such Forfeitures occurred. Forfeitures arising in
respect to an Employer Auxiliary ESOP Contribution Account to
Participants' Employer Auxiliary ESOP Contribution Accounts shall be
allocated in the same manner as Forfeitures under Section 7.3 are
allocated to such Accounts.
If an unclaimed amount is subsequently properly claimed by the
Participant or the Participant's Beneficiary ("Reclaimed Amount") and
unless an Employer in its discretion makes a contribution to the Plan
for such year in an amount sufficient to pay such Reclaimed Amount, it
shall be charged as follows:
(a) To the extent such Reclaimed Amount originated as an
unclaimed amount with respect to the Accounts held in the Profit
Sharing Plan portion of the Plan, it shall be charged against
Forfeitures from the Profit Sharing portion of the Plan and, if
such Forfeitures are not sufficient, the remainder shall be
treated as an expense of the Profit Sharing Plan portion of the
Plan during the Plan Year in which the Participant or Beneficiary
makes such claim.
(b) To the extent that the Reclaimed Amount originated as
an unclaimed amount with respect to the amounts held in the
McDESOP portion of the Plan, excluding those arising in respect
to an Employer Auxiliary ESOP Contribution Account, it shall be
charged against Forfeitures for the Plan Year with respect to
Participants' Participant Elected Contribution Accounts and
Employer Matching Contribution Accounts and, to the extent such
Forfeitures are not sufficient, shall be treated as an expense of
that portion of the McDESOP portion of the Plan which excludes
the portion of the McDESOP portion of the Plan which is held by
the Trustee pursuant to the Auxiliary ESOP provisions of the
Plan.
(c) To the extent that such Reclaimed Amount originated as
an unclaimed amount in respect to an Employer Auxiliary ESOP
Contribution Account, it shall be treated as a charge against
Forfeitures arising under Sections 11.4 and 16.6 for the Plan
Year with respect to Participants' Employer Auxiliary ESOP
Contribution Accounts and, to the extent such Forfeitures are not
sufficient, shall be treated as an expense of the Auxiliary ESOP
portion of the McDESOP portion of the Plan.
16.7 Maximum Age Condition. Anything to the contrary herein
notwithstanding, eligibility to participate in the Plan and to elect
or receive allocations of contributions to the Trust shall not be
subject to any restrictions on account of a maximum age condition.
16.8 Invalidity of Certain Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and
this Plan shall be construed and enforced as if such provisions, to
the extent invalid or unenforceable, had not been included.
16.9 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology herein shall also include the
feminine and the singular shall also include the plural.<PAGE>
16.10 Law Governing. This Plan and Trust shall be construed and
enforced according to the laws of the State of Illinois other than its
laws respecting choice of law, to the extent not preempted by ERISA.
Executed in multiple originals this 21st day of November, 1994.
McDonald's Corporation
By: /s/ Stanley R. Stein
---------------------
Stanley R. Stein
Its: Senior Vice President Human Resources
Exhibit 10(e)
McDONALD'S
STOCK SHARING PLAN
As Amended and Restated
Effective January 1, 1989
TABLE OF CONTENTS
PAGE
SECTION I - Definitions....................................... 2
1.1 "Accounts" or "Participant's Accounts"............... 2
1.2 "Authorized Leave of Absence"........................ 3
1.3 "Beneficiary"........................................ 3
1.4 "Benefits Retirement Date"........................... 3
1.5 "Board of Directors"................................. 3
1.6 "Committee".......................................... 3
1.7 "Commonly Controlled Entity"......................... 3
1.8 "Company"............................................ 3
1.9 "Compensation"....................................... 3
1.10 "Considered Compensation"............................ 5
1.11 "Disability"......................................... 5
1.12 "Domestic Affiliate"................................. 5
1.13 "Economic Recovery Tax Act".......................... 5
1.14 "Effective Date"..................................... 5
1.15 "Employee"........................................... 5
1.16 "Employer"........................................... 6
1.17 "Employer Contributions"............................. 6
1.18 "ERISA".............................................. 6
1.19 "Foreign Affiliate".................................. 6
1.20 "Highly Compensated Employee"........................ 6
1.21 "Hour of Service".................................... 9
1.22 "Internal Revenue Code".............................. 11
1.23 "Leased Employee".................................... 11
1.24 "Licensee"........................................... 11
1.25 "Matching and Deferred Stock Ownership Plan"......... 11<PAGE>
1.26 "Participant"........................................ 11
1.27 "Plan"............................................... 11
1.28 "Plan Year".......................................... 11
1.29 "Related Plan"....................................... 11
1.30 "Required Beginning Date"............................ 12
1.31 "Subsidiary"......................................... 12
1.32 "Tax Reduction Act".................................. 12
1.33 "Termination of Service"............................. 12
1.34 "Top Paid Group"..................................... 13
1.35 "Trust".............................................. 13
1.36 "Trust Agreement".................................... 13
1.37 "Trustee"............................................ 13
1.38 "Trust Fund"......................................... 13
1.39 "Valuation Date"..................................... 13
SECTION II - Participation.................................... 14
2.1 Participation........................................ 14
SECTION III - Contributions and Allocations................... 15
3.1 Plan Contributions................................... 15
3.2 Participant's Vested Rights.......................... 16
3.3 Allocations of Contributions......................... 16
3.4 Limits on Allocation and Contributions............... 17
3.5 Contributions Irrevocable............................ 17
3.6 Maximum Limitations on Contributions................. 18
SECTION IV - Trust Fund....................................... 21
4.1 Trust Fund........................................... 21
4.2 Determination of Increase or Decrease in Net Worth
of the Trust Fund.................................... 21
4.3 Statement of Accounts................................ 21
4.4 Participant Rights................................... 21
4.5 Participant's Interest in the Trust Fund............. 22
4.6 Expenses of the Trust Fund........................... 22
4.7 Separate Accounting For Contributions................ 22
4.8 Correction of Error.................................. 22
4.9 Distribution Fund.................................... 23
4.10 Diversification...................................... 23
SECTION V - Distribution of Benefits.......................... 25
5.1 Payment of Benefits in General....................... 25
5.2 Distributions of Participant's Accounts.............. 25
5.3 Death of Participant................................. 26
5.4 Participant Withdrawals.............................. 27
5.5 Form of Distributions................................ 27
5.6 Incompetency, Distribution of Benefits............... 28
5.7 Deduction of Taxes from Amounts Payable.............. 29
5.8 Spousal Consent to Waiver............................ 29
5.9 Latest Time of Distribution.......................... 29
5.10 Direct Rollovers..................................... 30
SECTION VI - Subsidiary Participation......................... 33
6.1 Adoption of Plan and Trust by a Subsidiary........... 33
6.2 Withdrawal from Plan by Participating Employer....... 33
SECTION VII - Administration of the Plan...................... 34
7.1 Appointment of Trustee............................... 34
7.2 Appointment of Committee; Tenure in Office........... 34<PAGE>
7.3 Named Fiduciaries.................................... 34
7.4 Delegation of Responsibilities....................... 35
7.5 Committee Action by Majority - Authorization of
Members to Execute Documents......................... 35
7.6 Secretary............................................ 35
7.7 Member as Participant................................ 35
7.8 Committee Powers and Duties.......................... 35
7.9 Rules and Decisions.................................. 36
7.10 Agents and Counsel................................... 36
7.11 Authorization of Benefit Distribution................ 37
7.12 Claims Procedure..................................... 37
7.13 Information to be Furnished to Committee............. 38
7.14 Fiduciary Responsibility............................. 38
7.15 Fiduciary as Participant............................. 39
SECTION VIII - Amendment, Termination, Merger and
Consolidation of Plan.......................... 40
8.1 Amendment............................................ 40
8.2 Termination of Plan By the Company................... 41
8.3 Merger, Consolidation, or Transfer of Assets......... 41
8.4 Put Option Requirement............................... 41
SECTION IX - Top Heavy Provisions............................. 43
9.1 Application.......................................... 43
9.2 Special Top Heavy Definitions........................ 43
9.3 Special Top Heavy Provisions......................... 51
SECTION X - Miscellaneous Provisions.......................... 55
10.1 Headings............................................ 55
10.2 Indemnification..................................... 55
10.3 Employees' Trust.................................... 55
10.4 Nonalienation of Benefits........................... 55
10.5 Qualified Domestic Relations Order.................. 56
10.6 Exception to Distribution Limitation Period......... 58
10.7 Unclaimed Amounts................................... 58
10.8 Invalidity of Certain Provisions.................... 60
10.9 Gender and Number................................... 60
10.10 Law Governing....................................... 60
McDONALD'S STOCK SHARING PLAN
The McDonald's Stock Sharing Plan, as originally adopted
effective January 1, 1975, and amended from time to time, is hereby
amended and restated to read as herein set forth and is intended to
qualify as an employee stock ownership plan - stock bonus plan as
defined in Sections 301(d) and 301(e) of the Tax Reduction Act and
Sections 401(a) and 409 of the Internal Revenue Code and in Section
331 of the Economic Recovery Tax Act and Section 41 of the Internal
Revenue Code before its repeal effective with respect to compensation
accrued on or after January 1, 1987) of the Internal Revenue Code.
Eligibility, benefits, payment of benefits and the amount of benefits,
if any, of a person whose employment with an Employer terminated
before January 1, 1989 and who is not rehired by an Employer on or
after January 1, 1989 shall, except as otherwise specifically provided
herein, be determined in accordance with the provisions of the Plan as<PAGE>
in effect on the date the person ceased to be an Employee of an
Employer.
As originally adopted and as amended and restated herein, the
purpose of the McDonald's Stock Sharing Plan is to provide eligible
employees with an equity interest in McDonald's Corporation through
their participation in this Plan. Pursuant to this purpose and the
intent of the applicable law, assets of the Plan will be invested
primarily in qualifying employee securities in the form of shares of
common stock of McDonald's Corporation.
No person shall become a participant in the Plan and no further
contributions shall be made to the Plan, except as provided in Section
3.1(a), on or after January 1, 1987.
SECTION I
Definitions
The following words and phrases, when used herein, unless their
context clearly indicates otherwise, shall have the following
respective meanings:
1.1 "Accounts" or "Participant's Accounts" means a Participant's
share in the Trust, including all shares (or fractional shares) of
common stock of McDonald's Corporation allocated to such Accounts.
Each Participant shall have five (5) separate Accounts, which shall
be:
(a) A "Participant Contribution Account", to which shall be
credited Participant Matched Contributions made with respect to
Plan Years ending on or before December 31, 1982, plus income and
gains and less expenses and losses attributable thereto;
(b) An "Unmatched Employer Contribution Account", to which
shall be credited Unmatched Employer Contributions contributed in
accordance with Section 3.1(a), which have been allocated to a
Participant with respect to Plan Years ending on or before
December 31, 1982, plus income and gains and less expenses and
losses attributable thereto;
(c) A "PAYSOP Employer Contribution Account", to which
shall be credited Employer Contributions contributed in
accordance with Section 3.1(b) and which have been allocated to a
Participant with respect to Plan Years beginning on or after
January 1, 1983, plus income and gains and less expenses and
losses attributable thereto;
(d) An "Employer Matching Contribution Account", to which
shall be credited Employer Matching Contributions made by an
Employer to the Plan in accordance with Section 3.1(d) for Plan
Years ending on or before December 31, 1982, plus income and
gains and less expenses and losses attributable thereto;
(e) An "Additional Employer Contribution Account", to which
shall be credited (1) contributions which have been allocated to
a Participant's Additional Company Contribution Account with
respect to Plan Years ending on or before December 31, 1982, and<PAGE>
(2) with respect to contributions for Plan Years ending after
December 31, 1982, contributions in excess of the amount which
qualifies for tax credit under Section 41(a)(2) of the Internal
Revenue Code, plus income and gains and less expenses and losses
attributable thereto.
1.2 "Authorized Leave of Absence" means any absence authorized
by an Employer under the Employer's standard personnel practices. An
absence due to service in the Armed Forces of the United States shall
be considered an Authorized Leave of Absence provided that the
Employee returns to employment with the Employer within the period
provided by law.
1.3 "Beneficiary" means the person or persons designated by a
Participant in accordance with the provisions of Section 5.3 to
receive any death benefit which shall be distributable under the Plan.
1.4 "Benefits Retirement Date" means the date on which a
Participant attains age 55.
1.5 "Board of Directors" means the Board of Directors of the
Company.
1.6 "Committee" means the Committee appointed pursuant to
Section 7.2.
1.7 "Commonly Controlled Entity" means a corporation, trade or
business if it and an Employer are members of a controlled group of
corporations as defined in Section 414(b) of the Internal Revenue
Code, under common control as defined in Section 414(c) of the
Internal Revenue Code, or members of an affiliated service group as
defined in Section 414(m) of the Internal Revenue Code; provided,
however, that solely for purposes of Section 3.6 and of Section 1.29
when used in Section 3.6, the standard of control under Sections
414(b) and 414(c) of the Internal Revenue Code shall be deemed to be
"more than 50%" rather than "at least 80%."
1.8 "Company" means McDonald's Corporation, or any successor
corporation by merger, consolidation, purchase or otherwise which
elects to adopt the Plan and the Trust.
1.9 "Compensation" of a Participant for a Plan Year means
(a) except as otherwise provided herein, the Participant's
total compensation paid during the Plan Year to such Participant
by an Employer while a Participant in the Plan as reflected in
Box 10 of the Participant's Internal Revenue Service Form W-2 (or
Box 1, as revised for 1993, or the equivalent box on any
comparable form which may hereafter replace such form) for the
Plan Year, increased by any amounts by which the Participant's
compensation is reduced pursuant to a compensation reduction
election under any Related Plan or pursuant to other compensation
reduction contributions for medical, dental or dependent care or
other benefits and by the amount of Participant Elected
Contributions under the McDonald's Matching and Deferred Stock
Ownership Plan which are credited to the Participant's account
under the McDonald's McDESOP Equalization Plan for the Plan Year
and excluding provisions for life insurance, reimbursement for<PAGE>
moving expenses, non-cash compensation, officers' discretionary
bonuses, any benefits under the Plan or any other qualified plan
described in Section 401(a) of the Internal Revenue Code, or
income earned from stock options, Stock Exchange Rights or
Performance Units, (as such terms are defined in the McDonald's
Corporation 1978 Incentive Plan) and payments to a Participant
for foreign service in the form of tax gross-up benefits,
allowances for cost of living, housing and education, and other
similar payments;
(b) for purposes of Article IX and for determining the
limitations under Section 3.6, Compensation means the total
compensation paid to the Participant by an Employer, or a
Commonly Controlled Entity, as defined in Section 414(m) of the
Internal Revenue Code for the Plan Year, excluding any benefits
under the Plan or any other qualified plan described in
Section 401(a) of the Internal Revenue Code, or other deferred
compensation, stock options, and any other distribution which
receives special tax benefit; and
(c) for the purpose of determining whether a Participant is
(1) a Highly Compensated Employee, (2) a member of the Top Paid
Group or (3) a Key Employee pursuant to Section 9.2(d),
Compensation shall be Compensation as defined in Section 1.9(b)
increased by the amount by which the Participant's compensation
is reduced pursuant to a cash or deferred arrangement which meets
the requirements of Section 401(k) of the Internal Revenue Code
and pursuant to compensation reduction contributions for medical,
dental or dependent care or other benefits under a cafeteria plan
meeting the requirements of Section 125 of the Internal Revenue
Code.
For purposes of Sections 1.9(a) and (c), Compensation taken into
account under the Plan shall not exceed $200,000 (in 1989, and as
adjusted in subsequent years as provided by the Secretary of the
Treasury) (the "dollar limit"). In determining whether a
Participant's compensation for a Plan Year exceeds the dollar limit,
if and only to the extent required by the Internal Revenue Code, the
compensation of each Five Percent Owner and of each Participant who is
one of the ten Highly Compensated Employees paid the greatest
compensation (determined before the aggregation of the compensation of
any family member) shall include the compensation of such
Participant's spouse and lineal descendants who have not attained
age 19 before the end of the Plan Year earned as employees of
McDonald's or a Commonly Controlled Entity. For purposes of applying
the dollar limit in the first sentence of this paragraph, if the
Compensation of a Five Percent Owner or of a Participant who is one of
the ten Highly Compensated Employees paid the greatest compensation
(determined before the aggregation of the compensation of any family
member) is equal to or greater than the dollar limit or more
("Affected Participant"), the Compensation of each of such Affected
Participant, his spouse and lineal descendants who have not attained
age 19 before the end of the Plan Year ("Affected Family Member")
shall be equal to the dollar limit for the Plan Year multiplied by a
fraction the numerator of which is such individual's Compensation
after application of the dollar limit and the denominator of which is
the sum of such Compensation for the Affected Participant and the
Affected Family Members.<PAGE>
Effective January 1, 1994, "$150,000" shall be substituted for
"$200,000" in the above paragraph.
1.10 "Considered Compensation" means Compensation of a
Participant, excluding any amount in excess of $1.00.
1.11 "Disability" means a mental or physical condition which
renders a Participant permanently unable or incompetent to carry out
the job responsibilities he held or tasks to which he was assigned at
the time the disability was incurred. The determination of disability
shall be made by the Committee on the basis of such medical and other
competent evidence as the Committee shall deem relevant.
1.12 "Domestic Affiliate" means any domestic corporation,
partnership or joint venture of which, in the case of a corporation,
the Company either owns, directly or indirectly, either twenty-five
percent (25%) or more of the voting power of all classes of stock or
twenty-five percent (25%) or more of the value of all stock, or of
which, in the case of a partnership or joint venture, the Company
owns, directly or indirectly, twenty-five percent (25%) or more of
both the capital and profits.
1.13 "Economic Recovery Tax Act" means the Economic Recovery Tax
Act of 1981, as amended, and any subsequent legislation dealing with
payroll-based tax credit employee stock ownership plans as described
in Section 331 of the Economic Recovery Tax Act.
1.14 "Effective Date" of the restatement is January 1, 1989.
1.15 "Employee" means any person who is employed by the Company
or another Employer including persons on an Authorized Leave of
Absence. Such term does not include a consultant, an independent
contractor or a Leased Employee.
1.16 "Employer" means the Company and any Subsidiary of the
Company which, pursuant to Section 6.l, elects to adopt the Plan and
the Trust.
1.17 "Employer Contributions" means contributions by an Employer
under the Plan including:
(a) Employer Matching Contributions made in accordance with
Section 46(a)(2)(B)(ii) of the Internal Revenue Code of 1954 for
years ending on or before December 31, 1978, and thereafter, in
accordance with Section 46(a)(2)(E)(ii) of the Internal Revenue
Code of 1954 for years ending on or before December 31, 1982 and
(b) Unmatched Employer Contributions made in accordance
with Section 46(a)(2)(B)(i) of the Internal Revenue Code of 1954
for years ending on or before December 31, 1978, and thereafter,
in accordance with Section 46(a)(2)(E)(i) of the Internal Revenue
Code of 1954 for years ending on or before December 31, 1982;
(c) PAYSOP Employer Contributions made in accordance with
Section 41(a)(2) of the Internal Revenue Code of 1954, for years
beginning on or after January 1, 1983; and<PAGE>
(d) Additional Employer Contributions, including
contributions allocated to a Participant's Additional Company
Contribution Account for Plan Years ending on or before
December 31, 1982, and thereafter, contributions made by an
Employer and allocated to a Participant's Additional Employer
Contribution Account for Plan Years beginning on or after
January 1, 1983, which are in excess of the amount which
qualifies for tax credit under Section 41(a)(2) of the Internal
Revenue Code of 1954.
1.18 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.19 "Foreign Affiliate" means any foreign corporation,
partnership or joint venture of which, in the case of a corporation,
the Company owns, directly or indirectly, twenty-five percent (25%) or
more of the voting power of all classes of stock or twenty-five
percent (25%) or more of the value of all stock, or of which, in the
case of a partnership or a joint venture, the Company owns, directly
or indirectly, twenty-five percent (25%) or more of both the capital
and profits.
1.20 "Highly Compensated Employee" means, for a Plan Year, any
Participant who performs services as an employee for an Employer or
Commonly Controlled Entity during such Plan Year and who:
(a) (1) at any time during the Plan Year or the preceding
Plan Year ("Preceding Plan Year"), was a Five Percent Owner; or
(2) (A) received Compensation in excess of $78,353
(for 1988, adjusted in subsequent years as provided by the
Secretary of the Treasury) during the Preceding Plan Year or
(B) received Compensation in excess of $81,720 (for 1989,
adjusted in subsequent years as provided by the Secretary of
the Treasury) during the Plan Year and was one of the 100
employees of the group consisting of the Employers and
Commonly Controlled Entities who received the most
Compensation during the Plan Year; or
(3) received Compensation for the Preceding Plan Year
in excess of $52,235 (for 1988, adjusted in subsequent years
as provided by the Secretary of the Treasury) and is in the
Top Paid Group for the Preceding Plan Year; or
(4) (A) was an officer of (or performed the duties of
an officer for) an Employer or a Commonly Controlled Entity
during the Preceding Plan Year or was an officer of such an
entity (or performed the duties of an officer of such an
entity) during the Plan Year and one of the 100 employees of
the group consisting of the Employers and Commonly
Controlled Entities who received the most Compensation
during the Plan Year, and (B) received Compensation in
excess of fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of the Internal Revenue Code ($94,023
in 1988 and $98,064 in 1989, adjusted in subsequent years as
determined in accordance with regulations prescribed by the
Secretary of the Treasury or his delegate), provided that no<PAGE>
more than fifty (50) persons shall be treated as officers
hereunder for any Plan Year or Preceding Plan Year.
(b) For purposes of this Section 1.20, the Compensation of
(1) any Highly Compensated Employee in the group consisting of
the ten (10) Highly Compensated Employees paid the greatest
Compensation (without regard to this Section 1.20(b)) or, (2) any
Five Percent Owner, shall include any Compensation paid to a
spouse, lineal ascendants or descendants, or any spouse of such
lineal ascendants or descendants of such Highly Compensated
Employee or such Five Percent Owner and such spouse, lineal
ascendants or descendants, or any spouse of such lineal
ascendants or descendants shall not be treated as an employee for
purposes of this Section 1.20.
(c) For purposes of this Section 1.20 and Section 1.38,
employees who are nonresident aliens and who receive no earned
income (within the meaning of Section 911(d)(2) of the Internal
Revenue Code) from an Employer or a Commonly Controlled Entity
which constitutes income from sources within the United States
(within the meaning of Section 861(a)(3) of the Internal Revenue
Code) shall not be treated as employees.
(d) A former employee shall also be treated as a Highly
Compensated Employee for a Plan Year if such former employee had
a Termination of Service prior to such Plan Year and was a Highly
Compensated Employee (without regard to this Section 1.20(d)) for
either the Plan Year in which he had a Termination of Service or
any Plan Year ending on or after his 55th birthday.
(e) Effective July 1, 1993, in lieu of determining which
individuals are Highly Compensated Employees as provided in
paragraphs (a)(1), (a)(2), (a)(3), and (a)(4) of this Section
1.20, the Plan Administrator may elect for any Plan Year to
consider as a Highly Compensated Employee for such Plan Year each
Participant who performs services as an employee for an Employer
or Commonly Controlled Entity during such Plan Year and who,
during the Plan Year:
(1) was at any time a Five Percent Owner;
(2) received Compensation in excess of $81,720 (for
1989, adjusted in subsequent years as provided by the
Secretary of the Treasury or his delegate);
(3) received Compensation in excess of $52,235 (for
1989, adjusted in subsequent years as provided by the
Secretary of the Treasury or his delegate) and was a member
of the Top Paid Group; and
(4) was an officer of (or performed the duties of an
officer for) an Employer, a Commonly Controlled Entity or
member of an Affiliated Service Group and received
Compensation in excess of fifty percent (50%) of the amount
in effect under Section 415(b)(1)(A) of the Internal Revenue
Code ($98,064 for 1989, adjusted in subsequent years as
provided by the Secretary of the Treasury or his delegate).<PAGE>
(f) The Committee may elect for any Plan Year to determine
the Highly Compensated Employees for such year by substituting
(1) "$62,345" (in 1992, adjusted in subsequent years provided by
the Secretary of the Treasury or his delegate) for "$93,518" (in
1992, adjusted in subsequent years provided by the Secretary of
the Treasury or his delegate) in Sections 1.20(a)(ii) or
1.20(e)(2) as applicable, and ignoring Sections 1.20(a)(iii) or
1.20(e)(3), respectively.
1.21 "Hour of Service" means:
(a) Each hour for which an employee or a Leased Employee is
paid directly or indirectly, or entitled to payment, by an
Employer or a Commonly Controlled Entity (regardless of whether
then an Employee):
(1) for performance of duties;
(2) on account of a period of time during which no
duties were performed, provided that, except as herein
otherwise expressly provided, no more than 501 Hours of
Service shall be credited for any single continuous period
during which an Employee performs no duty, and provided that
no Hours of Service shall be credited for payments made or
due under a plan maintained solely for the purpose of
complying with applicable worker's compensation,
unemployment compensation or disability insurance laws, or
for reimbursement of medical expenses shall be excluded; and
(3) for which back pay, irrespective of mitigation of
damages, is awarded or agreed to by the employer, provided
that no more than 501 Hours of Service shall be credited any
single continuous period of time during which the Employee
did not or would not have performed duties.
(b) (1) An Employee's prior or subsequent employment by a
Foreign Affiliate or Domestic Affiliate shall be treated as Hours
of Service by the Employer. If a McDonald's Restaurant operated
by a Licensee is acquired by the Company or one of its
Subsidiaries or affiliates, each person who is employed by such
Licensee as of the date of acquisition and is continuously
employed by McDonald's until the last day of the Plan Year shall
be credited by the Employer with their Hours of Service with such
Licensee.
(2) To the extent an Employee is not otherwise
credited with Hours of Service while on an Authorized Leave
of Absence, an Employee on an Authorized Leave of Absence
shall be credited with a number of Hours of Service for each
payroll period during the Authorized Leave of Absence equal
to the average number of Hours of Service per payroll period
(not to exceed forty Hours of Service per week) credited to
such Employee for the six calendar week period (or pertinent
payroll period if such period is longer), ending immediately
prior to the commencement of the Authorized Leave of
Absence, notwithstanding the limitations of Section
1.21(a)(2). Notwithstanding the foregoing, an Employee who
fails either (l) to return to his employment within ninety<PAGE>
(90) days after the expiration of an Authorized Leave of
Absence or (2) to remain in the employ of an Employer after
the expiration of an Authorized Leave of Absence for the
lesser of (a) a period equal to the period of his Leave of
Absence or (b) one year following his return to employment,
unless such failure shall be due to death, Disability,
illness or retirement on or after the Participant's Benefits
Retirement Date, shall be considered to have voluntarily
terminated his employment as of the date the Leave of
Absence commenced for purposes of determining Hours of
Service under this Section.
(c) Effective January 1, 1985, to the extent not otherwise
credited in Section 1.21, solely for purposes of avoiding a Break
in Service, for periods of absence from work on account of
Parental Leave, an Employee shall be credited with Hours of
Service as defined below:
(1) the Hours of Service which normally would have
been credited to such individual but for the Parental Leave,
or
(2) eight (8) Hours of Service per day of such absence
if the Plan is unable to determine the Hours of Service
which would have been credited to such individual but for
the Parental Leave.
(d) The determination of Hours of Service for reasons other
than the performance of duties shall, except as provided in
Section 1.21(b)(2), be in accordance with the provisions of Labor
Department Regulations Section 2530.200b-2(b), and Hours of
Service shall be credited to computation periods in accordance
with the provisions of Labor Department Regulations Section
2530.200b-2(c).
(e) Except as provided in Section 1.21(b)(2), each Employee
who is paid on a salaried basis shall be credited with 95 Hours
of Service for each semi-monthly payroll period during which such
Employee has any Hours Of Service.
1.22 "Internal Revenue Code" means the Internal Revenue Code of
1986, as from time to time amended and any subsequent Internal Revenue
Code; provided that references to the Internal Revenue Code with
respect to contributions previously permitted hereunder shall be
understood to be references to the Internal Revenue Code as in effect
for the periods during which such contributions were permitted
hereunder and shall be deemed to include any such sections of the
Internal Revenue Code prior to amendment, modification or renumbering.
References to any section of the Internal Revenue Code shall be deemed
to include similar sections of the Internal Revenue Code as renumbered
or amended.
1.23 "Leased Employee" means any person who is not an employee of
an Employer or a Commonly Controlled Entity and who provides service
to an Employer if:
(a) such services are provided pursuant to an agreement
between the recipient and any other person;<PAGE>
(b) such person has performed such services for the
Employer (or for the Employer or any Commonly Controlled Entity)
on a substantially full time basis for a period of at least 1
year; and
(c) such services are of a type historically performed, in
the business field of the Employer or Commonly Controlled Entity,
by employees.
1.24 "Licensee" means any person, other than McDonald's
Corporation or any of its Subsidiaries or Domestic Affiliates or
Foreign Affiliates, who operates a McDonald's Restaurant pursuant to
lease and license agreements (or so-called "Business Facilities
Lease") with the Company or affiliated companies.
1.25 "Matching and Deferred Stock Ownership Plan" means the
McDonald's Matching and Deferred Stock Ownership Plan, as from time to
time amended.
1.26 "Participant" means a person participating in the Plan in
accordance with the provisions of Section 2.l.
1.27 "Plan" means the McDonald's Stock Sharing Plan as herein set
forth and as hereafter amended from time to time.
1.28 "Plan Year" means the 12 month period commencing on
January l and ending on December 31.
1.29 "Related Plan" means any other qualified defined
contribution plan or qualified defined benefit plan (as defined in
Section 415(k) of the Internal Revenue Code) maintained by an Employer
or a Commonly Controlled Entity, respectively called a "Related
Defined Contribution Plan" and a "Related Defined Benefit Plan."
1.30 "Required Beginning Date" means April 1 (but not before
April 1, 1990 for a Participant who is not a Five Percent Owner) of
the calendar year following:
(a) for a Participant who reaches age 70-1/2 before
January 1, 1988, the later of:
(1) the calendar year in which he reaches age 70-1/2,
or
(2) if the Participant is not a Five Percent Owner at
any time during the Plan Year ending with or within the
calendar year in which he attains age 70-1/2 or any of the
four (4) prior Plan Years, the calendar year in which he has
a Termination of Service; provided that if any such
Participant becomes a Five Percent Owner during any Plan
Year after he attains age 70-1/2, the "Required Beginning
Date" for such Participant shall be the April 1 of the
calendar year following the calendar year in which such Plan
Year ends, and<PAGE>
(b) for a Participant who reaches age 70-1/2 on or after
January 1, 1988, the calendar year in which the Participant
reaches age 70-1/2.
Notwithstanding the foregoing, the Required Beginning Date shall not
be any date earlier than any date to which Required Beginning Date can
be delayed in accordance with applicable law, regulations, or rulings.
1.31 "Subsidiary" means any other corporation if it and the
Company are members of a controlled group of corporations within the
meaning of Section 409(l)(4) of the Internal Revenue Code.
1.32 "Tax Reduction Act" means the Tax Reduction Act of 1975 as
amended from time to time, and any successor thereto pertaining to
investment tax credit employee stock ownership plans as described in
Sections 301(d) and 301(e) of the Tax Reduction Act and references to
sections thereof shall be deemed to include any such sections as
amended, modified or renumbered.
1.33 "Termination of Service" means termination of an Employee's
employment with an Employer for any reason, including death,
Disability, resignation, discharge, or retirement on or after Benefits
Retirement Date; provided, however, that the transfer of a Participant
from an Employer to a Foreign or Domestic Affiliate or from one
Foreign or Domestic Affiliate to another Foreign or Domestic Affiliate
or to an Employer shall not be regarded as a Termination of Service.
1.34 "Top Paid Group" means, for a Plan Year, the group
consisting of the top twenty percent of the total number of persons
employed by all Employers and Commonly Controlled Entities when ranked
on the basis of Compensation paid during the Plan Year; provided that
for purposes of determining the total number of persons employed by
such entities, the following employees shall be excluded:
(a) employees who had not completed six (6) months of
service,
(b) employees who worked less than seventeen and one-half
(17-1/2) hours per week,
(c) employees who normally worked during not more than six
(6) months during any Plan Year, and
(d) employees who had not attained age 21.
1.35 "Trust" means the legal entity resulting from the Trust
Agreement between the Company and the Trustee, and any amendments
thereto, by which contributions under the Plan shall be received,
held, invested and distributed to or for the benefit of the
Participants and Beneficiaries.
1.36 "Trust Agreement" means the agreement between the Company
and the Trustee, establishing the McDonald's Stock Sharing Trust, as
amended from time to time.
1.37 "Trustee" means any corporation, individual, or individuals
who shall accept the appointment to execute the duties of Trustee as
set forth in the Trust Agreement.<PAGE>
1.38 "Trust Fund" means all property received by the Trustee,
together with all income, profits and increments thereon, less all
losses and distributions chargeable thereto.
1.39 "Valuation Date" means the last business day of the calendar
quarter and such other dates as the Committee shall specify.
SECTION II
Participation
2.1 Participation. No person shall become a Participant after
December 31, 1986. Any person who was a Participant before that date
shall continue as a Participant until his Accounts are distributed
from the Plan.
SECTION III
Contributions and Allocations
3.1 Plan Contributions.
(a) Additional Employer Contribution. While the Company
does not currently intend to make further contributions to the
Plan, the Company, in its discretion, may contribute to the Trust
for any Plan Year such amount ("Additional Employer
Contribution") as shall be determined by the Board of Directors.
If the Company elects to make an Additional Employer Contribution
for any Plan Year each Employer other than the Company shall
contribute to the Trust for the Plan Year an amount equal to the
product of the total Considered Compensation for the Plan Year of
all Participants who are Employees of such Employer multiplied by
a fraction, the numerator of which is the Additional Employer
Contribution of the Company for the Plan Year and the denominator
of which is the total Considered Compensation for the Plan Year
of all Participants who are Employees of the Company.
Notwithstanding the provisions of this Section 3.l(a), no
Employer shall make any contribution under this Section 3.l(a)
for any Plan Year in excess of the maximum amount deductible from
income by the Employer for the Plan Year under the provisions of
the Internal Revenue Code. The Board of Directors shall
determine and certify to the Committee the amount of any
contribution to be made by each Employer under this Section
3.l(a). Such determination shall be binding on all Participants,
the Committee, the Company, and the other Employers.
(b) Employer Contributions Made Before Effective Date. The
following Employer Contributions made before the date indicated
shall be held in Participant's Accounts as follows:
(1) Unmatched Employer Contributions made with respect
to periods before December 31, 1982 and credited to
Participant's Unmatched Employer Contribution Account;
(2) PAYSOP Employer Contributions made with respect to
periods on or after January 1, 1983 and ending on or before<PAGE>
December 31, 1986 and credited to Participant's PAYSOP
Employer Contribution Account; and
(3) Employer Matching Contributions made with respect
to periods ending on or before December 31, 1982 and
credited to Participant's Employer Matching Contribution
Account.
(c) Participant Contributions After January 1, 1983. No
Participant Contributions may be made with respect to Plan Years
beginning on or after January 1, 1983. Participant Contributions
made before January 1, 1983 shall continue to be held in
Participants' Participant Contribution Accounts.
(d) Form of Contributions. Contributions to the Trust by
an Employer shall be either in cash or in shares of common stock
of the Company, as the Employer shall determine in its
discretion.
3.2 Participant's Vested Rights. Each Participant's rights to
the Participant's Accounts shall be fully vested and non-forfeitable.
3.3 Allocations of Contributions.
(a) Unmatched Employer Contributions. For periods ending
on or before December 31, 1982, Unmatched Employer Contributions
to the Trust for each Plan Year were allocated, as of the last
day of the Plan Year, to each Participant, who (1) completed not
less than 1,000 Hours of Service during the Plan Year, (2) was a
Participant for any period of time during the Plan Year and had a
Termination of Service because of retirement after age 55, death,
or Disability, or (3) was a Participant for any period of time
during the Plan Year and had a Termination of Service during the
Plan Year and had at least 10 years of Credited Service under the
McDonald's Corporation Savings and Profit Sharing Plan as of the
end of the Plan Year, in the proportion that each such
Participant's Considered Compensation for the Plan Year bears to
the Aggregate Considered Compensation for the Plan Year of all
such Participants.
(b) Employer Matching Contributions. For periods ending on
or before December 31, 1982, all Employer Matching Contributions
to the Trust for each Plan Year ending on or before December 31,
1982 were allocated, as of the last day of the Plan Year, to each
Participant who was entitled to an allocation for the year under
Section 3.3(a) in an amount equal to the amount of such
Participant's Fixed Participant Contributions and Variable
Participant Contributions for the Plan Year which have been paid
in such manner and by such time as was established by the
Committee, which date shall be not later than 24 months after the
end of the Plan Year.
(c) PAYSOP Employer Contributions. All PAYSOP Employer
Contributions to the Trust for each Plan Year beginning on or
after January 1, 1983 and ending on or before December 31, 1986,
were allocated, as of the last day of the Plan Year, to each
Participant who (1) completed not less than 1,000 Hours of
Service during the Plan Year, or (2) was a Participant for any<PAGE>
period of time during the Plan Year and had a Termination of
Service because of retirement after age 55, death, or Disability,
or (3) was a Participant for any period of time during the Plan
Year and had a Termination of Service during the Plan Year and
had at least 10 years of Credited Service under the McDonald's
Corporation Savings and Profit Sharing Plan as of the end of the
Plan Year, in the proportion that each such Participant's
Considered Compensation for the Plan Year bears to the Aggregate
Considered Compensation for the Plan Year for all such
Participants.
(d) Additional Employer Contributions. Additional Employer
Contributions, if any, to the Trust for each Plan Year shall be
allocated, as of the last day of the Plan Year, to each
Participant who (1) completed not less than 1,000 Hours of
Service during the Plan Year, or (2) was a Participant for any
period of time during the Plan Year and had a Termination of
Service because of retirement after age 55, death, or Disability,
or (3) was a Participant for any period of time during the Plan
Year and had a Termination of Service during the Plan Year and
had at least 10 years of Credited Service under the Profit
Sharing Plan portion of the McDonald's Corporation Profit Sharing
Program as of the end of the Plan Year, in the proportion that
each such Participant's Considered Compensation for the Plan Year
bears to the Aggregate Considered Compensation for the Plan Year
for all such Participants.
3.4 Limits on Allocation and Contributions. Any of the
provisions of the Plan to the contrary notwithstanding, no amount
shall be allocated to the Account of any Participant in excess of
the maximum amount permitted to be allocated to a participant in
a plan of this type as described in Section 401 of the Internal
Revenue Code and no amount shall be contributed by any Employer
in excess of the maximum amount permitted to be contributed by
such Employer to a plan of this type as described in Section 401
of the Internal Revenue Code.
3.5 Contributions Irrevocable. Amounts contributed by an
Employer to the Plan shall, subject to the provisions of Section 3.6,
be irrevocable, shall not be returned to any Employer, and shall
continue to be allocated in accordance with the provisions of the Plan
notwithstanding any circumstances under which any Employer suffers
recapture of the tax credit obtained initially through the Employer
Contributions to the Plan; provided however, that if, and to the
extent that the amount of Employer Matching Contributions for a Plan
Year exceeds the amount of Participant Matched Contributions for such
Plan Year, such excess shall be returned to the Employer.
3.6 Maximum Limitations on Contributions.
(a) Limitations on Contributions. Any of the provisions
herein to the contrary notwithstanding, a Participant's Annual
Additions for any Plan Year shall not exceed his Maximum Annual
Additions for the Plan Year. If a Participant's Annual Additions
exceed his Maximum Annual Additions (the "Annual Excess"), the
Participant's Annual Additions for the Plan Year shall be reduced
under Section 3.6(c) by the amount necessary to eliminate such
Annual Excess.<PAGE>
(b) Definitions.
(1) "Annual Additions" of a Participant for a Plan
Year means the sum of the following:
(A) Additional Employer Contributions for the
Plan Year;
(B) all annual additions with respect to employer
contributions and forfeitures for such Plan Year
allocated to such Participant's accounts for such Plan
Year under any other Related Defined Contribution Plan,
not already included under Section 3.6(b)(1)(A)
provided that Forfeitures of employer securities under
the Employer Auxiliary ESOP portion of the Profit
Sharing Program and employer contributions used to
repay interest on an exempt loan thereunder shall not
be included under this Section 3.6(b)(1)(B);
(C) the amount of nondeductible participant
contributions under this Plan or any Related Plan made
by the Participant for the Plan Year; and
(D) contributions allocated to any individual
medical account (as defined in Code Section 401(h))
which is part of a defined benefit plan maintained by
an Employer as provided in Code Section 415(1) and any
amount attributable to post-retirement medical benefits
allocated to an account established under Internal
Revenue Code Section 419(d)(1).
(2) "Maximum Annual Addition" of a Participant for a
Plan Year means effective for Plan Years beginning on or
before July 12, 1989 the greater of (A) and (B) below and
effective for Plan Years beginning after July 12, 1989, the
amount in (A) below:
(A) the lesser of (i) and (ii) below:
(i) 25% of the Participant's Compensation,
or
(ii) the greater of (I) $30,000 or
(II) one-fourth (1/4) of the amount in effect
under Section 415(b)(1)(A) of the Internal Revenue
Code ($98,064 in 1989, adjusted in subsequent
years for cost of living adjustments determined in
accordance with regulations prescribed by the
Secretary of Treasury or his delegate pursuant to
the provisions of Section 415(d) of the Internal
Revenue Code).
(B) the lesser of (i) and (ii) below:
(i) 25% of the Participant's Compensation,
or<PAGE>
(ii) the sum of (I) the greater of
(a) $30,000 or (b) one-fourth (1/4) of the amount
in effect under Section 415(b)(1)(A) of the
Internal Revenue Code ($98,064 for 1989, adjusted
in subsequent years for cost of living adjustments
determined in accordance with regulations
prescribed by the Secretary of Treasury or his
delegate pursuant to the provisions of
Section 415(d) of the Internal Revenue Code), and
(II) the lesser of (a) the amount determined under
clause (I) above and (b) the Participant's
leveraged ESOP Annual Additions for the Plan Year
under the McDonald's Profit Sharing Program.
(c) If a Participant has an Annual Excess for a Plan Year,
the Annual Excess shall be eliminated as follows:
(1) The allocations to the Participant's accounts
under McDonald's Profit Sharing Program shall be reduced as
provided therein.
(2) If any Annual Excess remains after application of
paragraph (1), Additional Employer Contributions, in that
order, shall be reduced to the extent such reductions reduce
the amount of the remaining Annual Excess.
(3) Subject to Section 3.6(c)(5), any allocations of
Additional Employer Contributions reduced or eliminated
under this Section 3.6 shall, subject to the limits of this
Section 3.6, be reallocated to the Accounts of the other
Participants as of the last day of the Plan Year in the same
manner as such Employer Contributions were initially
allocated under Section 3.3. Any Additional Employer
Contributions which cannot, under the limits of this
Section 3.6, be reallocated to the Accounts of other
Participants in the Plan Year shall, subject to the limits
of this Section 3.6, be held in an unallocated suspense
account and reallocated in the subsequent Plan Year. If the
Plan is terminated, any amounts held in an unallocated
suspense account not then allocated shall, to the maximum
extent permitted under Section 3.6(a), be allocated among
Participants in the Plan Year of termination and any amounts
in excess of such limit shall be returned to the Employers.
(d) If a Participant participates in any Related Defined
Benefit Plan, the sum of the Defined Benefit Plan Fraction (as
defined in Section 415(e)(2) of the Internal Revenue Code) and
the Defined Contribution Plan Fraction (as defined in
Section 415(e)(3) of the Internal Revenue Code) for such
Participant shall not exceed 1.0 (called the "Combined
Fraction"). If the Combined Fraction of such Participant exceeds
1.0, the Participant's Defined Benefit Plan Fraction shall be
reduced by limiting the Participant's annual benefits payable
from the Related Defined Benefit Plan in which he participates to
the extent necessary to reduce the Combined Fraction of such
Participant to 1.0, and to the extent the Combined Fraction
continues to exceed 1.0, by reducing the Participant's Maximum<PAGE>
Annual Additions to the extent necessary to reduce the Combined
Fraction to 1.0.
SECTION IV
Trust Fund
4.1 Trust Fund. All assets held under the Plan shall be held in
the Trust Fund pursuant to the terms and provisions of the Trust
Agreement, and shall be invested primarily in shares of common stock
of the Company. The Trustee is specifically authorized to invest up
to 100% of the assets of the Trust Fund in shares of common stock of
the Company. The Trustee may, at its discretion, retain in cash an
amount equal to the value of fractional shares allocable to
Participants entitled to receive an immediate distribution from the
Plan and amounts permitted to be so held pursuant to Section 4.9
hereof.
4.2 Determination of Increase or Decrease in Net Worth of the
Trust Fund. As of each Valuation Date the Trustee shall determine the
fair market value of the Trust and give written notice thereof to the
Committee. The Trustee's determination of fair market value shall be
final and conclusive on all persons. The net income thus derived from
the Trust shall be accumulated and shall from time to time be invested
as a part of the Trust Fund. As of each Valuation Date, the Committee
shall determine the Trust Fund's net income, gains or losses since
immediately preceding Valuation Date, and shall proportionately
allocate such net income, gains or losses among (a) the sum of all
Participants' Accounts, and (b) the sum of amounts held in a suspense
account under Section 3.6(c), all valued as of the immediately
preceding Valuation Date. Thereafter, the Committee shall credit (or
charge) each Account of a Participant with such allocated net income,
gains or losses by multiplying such allocated net income, gains or
losses by a fraction, the numerator of which is the balance of such
Participant's Account, reduced by the amount of any distributions
therefrom, as of the immediately preceding Valuation Date, and the
denominator of which is the total value of all Participants' Accounts,
reduced by the amount of any distributions therefrom, as of the
immediately preceding Valuation Date.
4.3 Statement of Accounts. As soon as practicable after the
last day of each Plan Year, the Committee shall deliver to each
Participant a statement of his Account.
4.4 Participant Rights. Each Participant shall have the right
to direct the Committee with respect to shares (and fractional shares)
of stock of the Company allocated to his Account as to the manner of
voting such shares (and fractional shares) and such other rights
(including, but not limited to the right to sell or retain such shares
in extraordinary instances involving an unusual price and terms and
conditions for shares of common stock of the Company such as a tender
offer) as the Participant would be entitled to exercise if the
Participant were the shareholder of record for such shares as provided
in Section 7.8(c). In the event that a Participant shall fail to
direct the Committee as to the manner of voting shares of stock
allocated to the Participant's Account or as to the exercise of other
rights in respect of such shares, the Committee shall direct the
Trustee not to vote such shares or exercise such rights. The Company<PAGE>
shall notify each Participant of his rights (and the Committee of the
Participants' rights), as described under this Section 4.4, a
reasonable period prior to the date on which such rights must be
exercised (not less than 30 days prior to such date unless a lesser
period, in the opinion of counsel for the Company, is permitted,
considering applicable law and provisions with respect to shareholders
of the Company generally under the Company's by-laws) and provide each
Participant with all information with respect to such rights that a
shareholder of record would receive.
4.5 Participant's Interest in the Trust Fund. The Participant's
interest in the Trust Fund shall include all assets of the Trust Fund
allocated to the Participant's Account and any dividends or other
distributions made in respect thereto. All assets allocated to the
Participant's Account and all dividends or distributions received in
respect of assets held in the Participant's Account shall be invested
and reinvested in shares of common stock of the Company.
4.6 Expenses of the Trust Fund. Effective for periods before
January 1, 1990, all expenses of the Plan and of the Trust
("Expenses") of whatever kind including, but not limited to,
administrative and legal expenses, shall be paid by the Company and
shall in no event be paid with any assets of the Trust Fund.
Effective on or after January 1, 1990, Expenses shall be paid by the
Trust from Forfeitures in accordance with Section 10.7 to the extent
not paid by an Employer.
4.7 Separate Accounting For Contributions. Separate Accounts
shall be maintained for each Participant as described
in Section l.l hereof.
4.8 Correction of Error. In the event of any error, including
but not limited to an error in the adjustment of a Participant's
Accounts, an error in including or excluding persons as Participants,
or otherwise, the Committee, in its sole discretion, may correct such
error by either crediting or charging the adjustment required or such
adjustment as the Committee in its sole discretion shall determine to
be equitable, in order to make such correction either to or against
unclaimed amounts in accordance with Section 10.7 or to or against
income and expenses of the Plan for the Plan Year in which the
correction is made, or in the discretion of the Company, by Additional
Employer Contributions to the Plan.
4.9 Distribution Fund. Any of the provisions herein to the
contrary notwithstanding, the Committee shall have the authority to
direct the Trustee to transfer amounts currently distributable in cash
to Participants who have had a Termination of Service to a
distribution fund (the "Distribution Fund") during the calendar
quarter next following the calendar quarter within which such amounts
became distributable occurred. The Distribution Fund shall be held
(a) in a checking account of the Trustee in the name of the Trust with
the Trustee's banking department, and (b) in short term liquid
investments, in such types of investments or pooled, common,
commingled or collective trust funds, including those of the Trustee,
as the Committee may from time to time authorize the Trustee to invest
in such respective amounts and proportions and in such manner as the
Committee shall from time to time determine. The Committee may
authorize one or more of its members, or their designees, to sign,<PAGE>
manually, or by facsimile signature, any and all checks, drafts, and
orders, including orders or directions in informal or letter form,
against any funds in the Distribution Fund and the Trustee is
authorized to honor any and all checks, drafts and orders so signed.
Income, gains, losses and expenses of the Distribution Fund as of the
last day of each calendar quarter (to the extent not paid by an
Employer), shall be determined separately. Any net income of the
Distribution Fund shall be added to the net income of the Trust Fund
for such calendar quarter and any net losses of the Distribution Fund
for a Plan Year shall be paid by the Company. Checks for amounts
transferred to the Distribution Fund, shall be written and sent to
each Participant within 90 days after such amount has been transferred
to the Distribution Fund.
4.10 Diversification. Within 90 days after the last Valuation
Date within the Qualified Election Period, a Qualified Participant may
make a diversification election with respect to the Specified Portion
of his Accounts. The specified portion of a Participant's Accounts
which he elects to diversify shall be distributed to the Participant
within 90 days after the Qualified Election Period. Distributions
shall be made in accordance with this Section 4.10 not withstanding
the requirement that employer securities be held in the Plan for 84
months after the date of acquisition by the Plan. As used herein, the
following terms shall have the meanings indicated:
(a) "Qualified Election Period" means the 6-Plan Year
period beginning with the later of:
(1) the first Plan Year in which the individual first
becomes a Qualified Participant, or
(2) the first Plan Year beginning after December 31,
1986.
(b) "Qualified Participant" means any Participant who has
completed at least ten years of participation in the Plan and has
attained age 55.
(c) "Specified Portion" means 25 percent of the shares of
common stock of McDonald's corporation acquired by the Plan after
December 31, 1986; provided that the Participant's Specified
Portion shall be zero unless the value of such common stock of
McDonald's Corporation is equal to or more than $500. In a
Participant's sixth Qualified Election Period, the preceding
sentence shall be applied by substituting "50 percent" for
"25 percent". The amount which shall be subject to a
diversification election shall equal (A)(i) 25 percent and 50
percent, as applicable, be multiplied by (ii) the sum of (a) the
value of the common stock of McDonald's Corporation credited to
the Participant's Accounts plus (b) the amounts previously
distributed pursuant to this Section 4.10 and Section 5.4 reduced
by (B) the amounts previously distributed pursuant to this
Section 4.10.
The foregoing provisions shall apply only to the extent that a
Participant is not otherwise eligible to elect to receive
distributions of amounts eligible to be distributed hereunder in
accordance with Section 5.4 during a Qualified Election Period.<PAGE>
SECTION V
Distribution of Benefits
5.1 Payment of Benefits in General. A Participant's benefits
under this Plan shall be payable in accordance with the provisions of
this Article.
(a) If a Participant has a Termination of Service due to
retirement on or after his Benefits Retirement Date, Total and
Permanent Disability, or for any other reason other than death,
the Participant's Accrued Benefit shall be payable in a lump sum
in accordance with and subject to the limitations of Section 5.2.
(b) If a Participant dies, his Accrued Benefit shall be
payable to his surviving spouse if he was married at the time of
his death, or to his other Beneficiary or Beneficiaries if he was
not married at the time of his death or to the extent he is
permitted to name a Beneficiary other than his surviving spouse
in a lump sum in accordance with and subject to the limitations
of Section 5.3.
(c) A Participant may elect to receive an in-service
distribution of his Accrued Benefit in accordance with and
subject to the limitations of Section 5.4.
(d) If a Participant is otherwise entitled to a
distribution due to retirement on or after Benefits Retirement
Date, Total and Permanent Disability, death or other Termination
of Service, the Committee may require the immediate distribution
of small vested Accrued Benefits in accordance with and subject
to the limitations of Section 5.9, notwithstanding the provisions
of Sections 5.2, and 5.3.
5.2 Distributions of Participant's Accounts. If the value of a
Participant's Considered Accounts is not greater than $3,500 on the
Valuation Date immediately following his Termination of Service,
within a reasonable time after such Valuation Date, the Participant's
Accounts shall be distributed to the Participant; and within a
reasonable time after the date on which the Company makes its
contribution to the Trust for the Plan Year in which the Participant
has a Termination of Service, the Participant shall receive a
distribution of any amount credited after the initial distribution to
his Accounts for such Plan Year. If the value of a Participant's
Considered Accounts is greater than $3,500 on the Valuation Date
immediately following his Termination of Service, the Participant's
Accounts shall be distributed at an administratively convenient time
(but not later than April 1) in the year following the later of the
year in which the Participant attains age 70-1/2 or has a Termination
of Service, unless such Participant elects in writing to receive a
lump sum distribution at an earlier date.
The term, "Considered Accounts" as used in this Section 5.2 shall
have the following meaning:
(a) Effective before July 1, 1993, the Participant's
Accounts under the Plan; and<PAGE>
(b) Effective on and after July 1, 1993, the sum of (1) the
Participant's Accounts under the Plan on the date valued for
distribution and (2) his vested Net Balance Account under the
Profit Sharing Program.
5.3 Death of Participant.
(a) Form of Payment. If a Participant dies before the
Participant's Accounts have been paid from the Plan, distribution
shall be made as follows:
(1) If the Participant has a surviving spouse, the
Trustee shall distribute the Participant's Accounts to the
Participant's surviving spouse as the Participant's
Beneficiary in accordance with Section 5.3(b) unless the
Participant has named another Beneficiary, the Participant's
spouse has consented in accordance with Section 5.8.
(2) If the Participant does not have a surviving
spouse or if the Participant, with his spouse's consent in
accordance with Section 5.8, has named another Beneficiary,
the Trustee shall distribute the Participant's Accounts in
accordance with Section 5.3(a)(3) to the Beneficiary named
by the Participant in accordance with Section 5.3(b).
(3) The Participant's Accounts shall be distributed
within a reasonable time after the Valuation Date following
the Participant's death in a lump sum except as provided in
Section 5.7, and any amount credited after the initial
distribution to the Participant's Accounts for the Plan Year
will also be so distributed within a reasonable time after
the date on which the Company makes its contribution to the
Trust for the Plan Year within which the Participant dies.
(b) Beneficiary Designation. Subject to Section 5.3(a),
the Participant may change his designation of Beneficiary from
time to time by filing a new Beneficiary designation form with
the Committee. No designation of Beneficiary or change in
designation of Beneficiary shall be effective until filed with
the Committee. Except as provided in Section 5.3(a)(1), if a
Participant shall fail to file a valid Beneficiary designation
form, or if all persons designated on the Beneficiary designation
form predecease the Participant, the Trustee shall distribute
such Participant's Accounts in a lump sum to the following
persons, in the following order of precedence:
(1) His surviving spouse;
(2) Those persons designated by the Participant to
receive his death benefits under the Group Life Insurance
Program of the Employer or, in the absence of such
designation, under the Profit Sharing Plan portion of the
McDonald's Corporation Profit Sharing Program;
(3) The person or entity who receives the
Participant's McDonald's group term life insurance benefits
whether or not designated as beneficiary by the Participant;<PAGE>
(4) Lawful descendants including adopted children, per
stirpes;
(5) Parents in equal shares, or (if only one parent
survives him) his surviving parent;
(6) Lawful descendants of his parents, per stirpes;
and
(7) His estate.
(c) Period of Distribution to Beneficiary. Notwithstanding
any other provisions of this Plan or any elections made by a
Participant or Beneficiary, the Participant's Accrued Benefit
shall be distributed within five (5) years of the Participant's
death.
5.4 Participant Withdrawals. A Participant may, on a form at
such time and in such manner as the Committee shall prescribe, elect
to have distributed to him in shares of common stock of the Company,
the shares which have been allocated to his Account for eighty-four
(84) months following the month in which such shares were allocated to
his Account, provided that such withdrawals shall consist of whole
shares.
5.5 Form of Distributions. The form of distribution to a
Participant or Beneficiary shall be as follows:
(a) Effective before January 1, 1993:
(1) If the distribution would be five (5) or more
shares of common stock of the Company, the distribution
shall be in the form of shares of common stock of the
Company unless the Participant or Beneficiary elects to
receive payment in cash.
(2) If the distribution would be fewer than five (5)
shares of common stock of the Company, the distribution
shall be in the form of cash, unless the Participant or
Beneficiary elects to receive payment in the form of shares
of common stock of the Company.
(b) Effective on or after January 1, 1993:
(1) If amount to be distributed from the Participant's
Account has a value of $1500 or more, the distribution shall
be in the form of shares of common stock of the Company
unless the Participant or Beneficiary elects to receive
payment in cash.
(2) If the amount to be distributed has a value of
less than $1500, the distribution shall be in the form of
cash, unless the Participant or Beneficiary elects to
receive payment in the form of shares of common stock of the
Company.<PAGE>
A Participant or Beneficiary may exercise his right to elect the
form of distribution by filing a written election with the Committee
on forms approved by the Committee at the time and in a manner
prescribed by the Committee on or before the date of distribution.
If a Participant or Beneficiary receives a cash distribution, the
value of his Account shall be determined as of the last day preceding
the date of distribution.
If a Participant's interest in his Account is distributable and
includes a fractional share, the fractional share shall be distributed
to the Participant in cash.
5.6 Incompetency, Distribution of Benefits. In the event a
Participant or Beneficiary is declared an incompetent or is a minor,
and a conservator, guardian or other person legally charged with his
care is appointed, any benefits to which such Participant or
Beneficiary is entitled shall be distributable to such conservator,
guardian or other person legally charged with his care.
If a Participant or Beneficiary is incompetent, a minor or in the
opinion of the Committee, would fail to derive benefit from
distribution of his Account and, if a conservator, guardian or other
person legally charged for his care has not been appointed, the
Committee, in its sole and exclusive discretion, may (a) require the
appointment of a conservator or guardian, (b) distribute the
Participant's Account to relatives of the Participant or Beneficiary
for the benefit of the Participant or Beneficiary, or (c) distribute
such Account directly to or for the benefit of the Participant or
Beneficiary.
The decision of the Committee in such matters shall be final,
binding and conclusive upon the Employer and the Trustee and upon each
Employee, Participant, Beneficiary and every other person or party
interested or concerned, and neither the Employer, the Committee nor
the Trustee shall be under any duty to see to the proper application
of such distributions made to a Participant or Beneficiary, or
conservator, guardian or relatives of a Participant or Beneficiary.
5.7 Deduction of Taxes from Amounts Payable. The Trustee may
deduct from the amount to be distributed such amount as the Trustee,
in its sole discretion, deems proper to protect the Plan
Administrator, Trustee and the Trust against liability for the payment
of death, succession, inheritance, income, or other taxes, and out of
the money so deducted, the Trustee may discharge any such liability
and pay the amount remaining to the Participant, the Beneficiary or
the deceased Participant's estate, as the case may be.
5.8 Spousal Consent to Waiver. A valid spousal consent to the
Participant's naming of a Beneficiary other than his spouse shall be:
(a) in a writing acknowledging the effect of the consent;
(b) witnessed by a notary public; and
(c) effective only for the spouse who exercises the
consent;<PAGE>
provided that notwithstanding the provisions of this Section V, the
consent of a Participant's spouse shall not be required if it is
established to the satisfaction of a Plan representative that such
consent may not be obtained because there is no spouse, because the
spouse cannot be located or because of such other circumstances as the
Secretary of the Treasury may by regulations prescribe.
5.9 Latest Time of Distribution. Any provision herein to the
contrary notwithstanding, distribution shall be made to a Participant
not later than sixty (60) days after the latest of the close of the
Plan Year in which (a) occurs the Participant's Benefits Retirement
Date, (b) the Participant has a Termination of Service, and (c) occurs
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; provided that, all of a Participant's
Accounts shall be distributed not later than the Participant's
Required Beginning Date and further provided that, a Participant, who
is entitled to receive a distribution pursuant to Section V, must
submit a claim for benefits before any distribution will be made
hereunder.
5.10 Direct Rollovers. This Section 10.5 applies to
distributions made on or after January 1, 1993.
(a) Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election
under this Section 5.10, a Distributee may elect, at the time and
in the manner prescribed by the Committee, to have any portion of
an Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct
Rollover; subject to such reasonable administrative requirements
as the Committee may from time to time establish which may
include, but shall not be limited to, requirements consistent
with Treasury Regulations and other guidance issued by the
Internal Revenue Service permitting de minimis standards for
amounts eligible to be rolled over or paid partly to the
Participant and partly rolled over. A Participant may make an
election pursuant to this Section 5.10 only after the Distributee
has met otherwise applicable requirements for receipt of a
distribution under the Plan, including but not limited to any
applicable requirements that the Participant's spouse or
(pursuant to a Qualified Domestic Relations Order as defined in
Section 10.5) former spouse consent to the Participant's waiver
of a Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity.
If a Participant or Beneficiary elects to receive a Direct
Rollover, such distribution may be made or commence to be made less
than 30 days after the notice required under Section 1.411(a)-11(c) of
the Income Tax Regulations is given, provided that:
(A) the Committee shall clearly inform the Participant
or Beneficiary that he has a right to a period of at least
30 days after receiving the notice to consider the decision
of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(B) the Participant or Beneficiary after receiving the
notice affirmatively elects a distribution.<PAGE>
(b) In the absence of the adoption by the Committee of any
requirements to the contrary, the following shall apply:
(A) A Distributee whose Eligible Rollover Distribution
is less than $200 upon the Valuation Date immediately
preceding the date of distribution shall not be permitted to
elect to have all or any portion of the distribution made in
the form of a Direct Rollover.
(B) A Distributee who elects a Direct Rollover in an
amount equal to at least $500 may also elect to have the
remaining portion of his distribution paid to the
Distributee.
(C) A Distributee shall be permitted to divide an
Eligible Rollover Distribution into separate distributions
to be paid to two or more Eligible Retirement Plans in two
or more Direct Rollovers.
(D) A Distributee's election to make or not to make a
Direct Rollover with respect to a payment in a series of
periodic payments shall apply to all subsequent payments in
the series until the Distributee changes his election.
(E) If a Distributee, who has been notified as to the
availability of the Direct Rollover option, fails to elect a
Direct Rollover with respect to an Eligible Rollover
Distribution, such Distributee shall be deemed to have
elected not to make a Direct Rollover.
(c) As used in this Section 5.10, the following terms shall
have the following meanings:
(A) "Eligible Rollover Distribution" means any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's
designated Beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Section 5.2; and the portion
of any distribution that is not includable in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(B) "Eligible Retirement Plan" means an individual
retirement account described in Section 408(a) of the
Internal Revenue Code, an individual retirement annuity
described in Section 408(b) of the Internal Revenue Code, an
annuity plan described in Section 403(a) of the Internal
Revenue Code, or a qualified trust described in Section
401(a) of the Internal Revenue Code, that accepts the
Distributee's Eligible Rollover Distributions. However, in<PAGE>
the case of an Eligible Rollover Distribution to a
Participant's surviving spouse or surviving former spouse
who is a Distributee pursuant to a Qualified Domestic
Relations Order, an Eligible Retirement Plan is an
individual retirement account or individual retirement
annuity.
(C) "Distributee" means a Participant. In addition, a
Participant's surviving spouse and a former spouse who is
the alternate payee under a Qualified Domestic Relations
Order are Distributees with regard to the interest of such
spouse or former spouse.
(D) "Direct Rollover" means a payment by the Plan to
the Eligible Retirement Plan specified by the Distributee.
SECTION VI
Subsidiary Participation
6.1 Adoption of Plan and Trust by a Subsidiary. Any Subsidiary
of the Company may, with the approval of the Board of Directors and
under such terms and conditions as the Board of Directors may
prescribe, adopt the Plan and Trust by resolution of its own board of
directors.
6.2 Withdrawal from Plan by Participating Employer. While it is
not the present intention of any Employer to withdraw from the Plan,
any Employer other than the Company shall have the right, at any time,
to withdraw from the Plan and Trust by delivering to the Committee and
the Trustee written notice of its election to so withdraw.
Upon receipt of such notice by the Committee, the Accounts of
Participants employed by the withdrawing Employer as of the date of
withdrawal shall thereafter be distributable
in shares of common stock of the Company by the Trustee at the
discretion of the Committee at such time or times as the Committee, in
its sole discretion, may deem to be in the best interest of such
Participants or their Beneficiaries, provided that, except as provided
in Section 10.6, no distribution shall be made to a Participant with
respect to shares of common stock of the Company which have been
allocated to the Participant's Account for less than eighty-four (84)
months following the month in which such shares were allocated to the
Participant's Account, unless the Participant shall have a separation
from service as defined in Section 409(d) of the Internal Revenue
Code.
SECTION VII
Administration of the Plan
7.1 Appointment of Trustee. The Board of Directors shall have
the power to remove the Trustee, with or without cause, upon thirty
(30) days' written notice to the Trustee unless the Trustee agrees to
a shorter period, and to appoint a successor to a Trustee which has
resigned or been removed, and, with the consent of the Trustee or
Trustees, to appoint a co-Trustee or co-Trustees.<PAGE>
The appointment of a successor Trustee or co-Trustee shall become
effective upon acceptance in writing of such appointment by the
successor Trustee or co-Trustee. The successor Trustee or co-Trustee
may be either a corporate Trustee or an individual Trustee, and the
successor Trustee or co-Trustee shall have no liability for anything
done or omitted to be done by the former Trustee or co-Trustee prior
to the appointment of the successor Trustee or co-Trustee. Each
successor Trustee appointed to and accepting a Trusteeship hereunder
shall have all the rights, title, powers, duties, exemptions and
limitations of the original Trustee.
7.2 Appointment of Committee; Tenure in Office. The Committee,
which shall be the Administrator of the Plan, unless the Committee
shall appoint an Employee to act as Plan Administrator, shall consist
of not less than five (5) members who shall be appointed by the Board
of Directors. The Board of Directors shall have power to determine the
period during which any Committee member shall serve and, in its
discretion, may remove any member of the Committee at any time without
assigning any reason therefor. Upon a vacancy occurring upon the
death, resignation or removal by the Board of Directors of any member
of the Committee, a successor shall be appointed by the Board of
Directors within ninety (90) days after such event. Until a vacancy
in the Committee is filled by the Board of Directors the remaining
members of the Committee shall continue to act as the Committee. The
Board of Directors shall certify to the Trustee the names of the
members of the Committee and, thereafter, any change in its
membership.
7.3 Named Fiduciaries. The Company, the Board of Directors, the
Committee and every employee of the Company, its subsidiaries or
affiliates who becomes a fiduciary by virtue of the delegation of
duties, responsibilities and authority with respect to the
administration and operation of the Plan in accordance with this
Section 7 shall be considered "named fiduciaries" as provided in
Section 402(a)(2) of ERISA, and accordingly afforded the protection
provided for in Section 405(c)(2) of ERISA with respect to named
fiduciaries.
7.4 Delegation of Responsibilities. The Committee and the Board
of Directors shall have the authority to delegate, from time to time,
by instrument in writing, all or any part of its responsibilities
under the Plan (including the power to delegate) to such person or
persons as it may deem advisable, and in the same manner to revoke any
such delegation of responsibility. Periodically, the delegate shall
report to the Committee or Board of Directors concerning the discharge
of the delegated responsibilities. Any action of the delegate in the
exercise of such delegated responsibilities shall have the same force
and effect for all purposes hereunder as if such action had been taken
by the Committee or the Board of Directors. Neither the Committee,
the Board of Directors nor any of their members shall be liable for
the acts or omissions of such delegate except as otherwise required by
federal law.
7.5 Committee Action by Majority - Authorization of Members to
Execute Documents. The Committee may act at a meeting (including a
telephonic meeting) by the consent of a majority of its members or
without a meeting by the unanimous written consent of its members.<PAGE>
No member of the Committee shall vote or decide upon any matter
relating solely to himself or to his specific rights or benefits under
the Plan.
The Committee may authorize any of its members to execute on its
behalf any document which reflects an action or decision of the
Committee and the Committee shall notify the Trustee in writing of the
names of its members so authorized. Until the Committee revokes or
alters such authorization by a written notice to the Trustee, the
Trustee may accept and rely upon any document executed by such members
as reflecting action by the Committee.
7.6 Secretary. The Committee shall appoint a Secretary (who
may, but need not be a member of the Committee) to keep records of the
acts and resolutions of the Committee. The Secretary may also perform
such other duties which may, from time to time, be delegated to him in
writing by the Committee.
7.7 Member as Participant. A member of the Committee who is
also a Participant or a Beneficiary shall receive any benefit to which
he may be entitled as a Participant or Beneficiary in the Plan so long
as such benefit is computed and paid on a basis that is consistent
with the terms of the Plan as applied to all other Participants and
Beneficiaries.
7.8 Committee Powers and Duties. The Committee shall have such
powers as may be necessary to discharge its duties hereunder,
including but not by way of limitation, the following:
(a) To construe and interpret the Plan and to decide all
questions concerning the eligibility for participation and
relating to the amount and manner of distribution of benefits
hereunder;
(b) To receive from the Company and Employer and/or have
prepared by the Company and Employer such records and information
as shall be necessary for the proper administration of the Plan;
(c) To receive each Participant's directions to the Trustee
with respect to the Participant's rights described under Section
4.4, to aggregate all Participant directions (including to the
extent possible, Participant directions with respect to
fractional shares) and to communicate to the Trustee all such
Participant directions;
(d) To have prepared and furnished to Participants and/or
Beneficiaries all information required under federal law or
provisions of this Plan to be furnished to them;
(e) To have prepared and filed or published with the
Department of Labor or the Department of Treasury or other
governmental agency all reports and other information required
under federal law;
(f) To have maintained records of the Trust Fund with
respect to the Accounts of Participants;<PAGE>
(g) To review and monitor the performance of the Trustee
with respect to the responsibilities set forth in the Trust
Agreement; and
(h) To maintain separate accounts for Participants in
accordance with Section 4.7 of the Plan.
7.9 Rules and Decisions. The Committee may, from time to time,
adopt such rules and regulations as it deems necessary or desirable
which are consistent with the provisions or the purposes of the Plan.
All rules and decisions of the Committee shall be uniformly and
consistently applied to all Participants in similar circumstances.
The Committee shall be entitled to, but need not, rely upon
information furnished by a Participant or Beneficiary, a delegate, an
Employer or Employee, a prior Licensee, the Trustee or the Company.
7.10 Agents and Counsel. The Committee and its delegates shall
have the authority to appoint or employ individuals to assist or to
advise in the administration of the Plan and any other agent deemed
advisable, including but not limited to, independent certified public
accountants and legal and actuarial counsel, who may but need not be
the accountants or the legal or the actuarial counsel of the Company.
7.11 Authorization of Benefit Distribution. The Committee shall
issue directions to the Trustee concerning all distributions to be
made from the Trust Fund pursuant to the provisions of the Plan, and
warrants that all such directions are in accordance with the Plan.
7.12 Claims Procedure.
(a) Each Participant or Beneficiary (for purposes of this
Section called a "Claimant") may submit his claim for benefits to
the Plan Administrator in writing in such form as is permitted by
the Committee. A Claimant shall have no right to seek review of
a denial of benefits, or to bring any action in any court to
enforce a claim for benefits, prior to his filing a claim for
benefits and exhausting his rights to review in accordance with
this Section.
When a claim for benefits has been filed properly, such
claim for benefits shall be evaluated and the Claimant shall be
notified of the approval or the denial within ninety (90) days
after the receipt of such claim unless special circumstances
require an extension of time for processing the claim. If such
an extension of time for processing is required, written notice
of the extension shall be furnished to the Claimant prior to the
termination of the initial ninety (90) day period, and such
notice shall specify the special circumstances requiring an
extension and the date by which a final decision will be reached
(which date shall not be later than one hundred and eighty (180)
days after the date on which the claim was filed). A Claimant
shall be given a written notice in which he shall be advised as
to whether the claim is granted or denied, in whole or in part.
If a claim is denied, in whole or in part, the Claimant shall be
given written notice which shall contain (1) the specific reasons
for the denial, (2) references to pertinent Plan provisions on
which the denial is based, (3) a description of any additional
material or information necessary to perfect the claim and an<PAGE>
explanation of why such material or information is necessary, and
(4) the Claimant's rights to seek review of the denial.
(b) If a claim is denied, in whole or in part, the Claimant
shall have the right to request that the Committee review the
denial, provided that he files a written request for review with
the Committee within sixty (60) days after the date on which he
received written notification of the denial. A Claimant (or his
duly authorized representative) may review pertinent documents
and submit issues and comments in writing to the Committee.
Within sixty (60) days after a request for review is received,
the review shall be made and the Claimant shall be advised in
writing of the decision on review, unless special circumstances
require an extension of time for processing the review, in which
case the Claimant shall, within such initial sixty (60) day
period, be given a written notification specifying the reasons
for the extension and when such review shall be completed
(provided that such review shall be completed within one hundred
and twenty (120) days after the date on which the request for
review was filed). The decision on review shall be forwarded to
the Claimant in writing and shall include specific reasons for
the decision and references to Plan provisions upon which the
decision is based. A decision on review shall be final and
binding on all persons for all purposes. If a Claimant shall
fail to file a request for review in accordance with the
procedures herein outlined, such Claimant shall have no rights to
review and shall have no right to bring action in any court, and
the denial of the claim shall become final and binding on all
persons for all purposes.
7.13 Information to be Furnished to Committee. The Company and
Employers shall furnish the Committee or its delegate such data and
information as the Committee may reasonably request.
Participants and their Beneficiaries shall furnish to the
Committee such evidence, data or information as the Committee or its
delegate shall request.
7.14 Fiduciary Responsibility. If a Plan fiduciary acts in
accordance with ERISA, Title I, Subtitle B, Part 4:
(a) in determining that the Participant's spouse has
consented to the naming of a Beneficiary other than the spouse or
that the consent of the Participant's spouse may not be obtained
because there is no spouse, the spouse cannot be located or other
circumstances prescribed by the Secretary of the Treasury by
regulations, then to the extent of payments made pursuant to such
consent, revocation or determination, the Plan and its
fiduciaries shall have no further liability.
(b) in treating a domestic relations order as being (or not
being) a Qualified Domestic Relations Order, or, during any
period in which the issue of whether a domestic relations order
is a Qualified Domestic Relations Order is being determined (by
the Committee, by a court of competent jurisdiction, or
otherwise), in segregating in a separate account in the Plan or
in an escrow account the amounts which would have been payable to
the alternate payee during such period if the order had been<PAGE>
determined to be a Qualified Domestic Relations Order, in paying
the amounts segregated or held in escrow to the person entitled
thereto if within 18 months the domestic relations order (or a
modification thereof) is determined to be a Qualified Domestic
Relations Order, in paying such amounts to the person entitled
thereto if there had been no order, if within 18 months the
domestic relations order is determined not to be qualified or if
the issue is not resolved within 18 months and in prospectively
applying a domestic relations order which is determined to be
qualified after the close of the 18-month period, then the
obligation of the Plan and its fiduciaries to the Participant and
each alternate payee shall be discharged to the extent of any
payment made pursuant to such acts.
7.15 Fiduciary as Participant. A fiduciary who is also a
Participant or a Beneficiary shall receive any benefit to which he may
be entitled as a Participant or Beneficiary in the Plan so long as
such benefit is computed and paid on a basis that is consistent with
the terms of the Plan as applied to all other Participants and
Beneficiaries.
SECTION VIII
Amendment, Termination, Merger and Consolidation of Plan
8.1 Amendment. The Board of Directors shall have the right, at
any time and from time to time, to amend, in whole or in part, any or
all of the provisions of the Plan and the Trust Agreement (except
Section 8.4 of the Plan, which shall not be amended except as provided
therein), provided that no amendment shall authorize or permit any
part of the Trust Fund to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their
Beneficiaries, or permit any portion of the Trust Fund to revert to or
become the property of any Employer, except as may be required to
obtain or retain qualification, or as permitted, under Section 401(a)
of the Internal Revenue Code or to be a Plan described in Sections
301(d) and 301(e) of the Tax Reduction Act, Section 331 of the
Economic Recovery Tax Act and Section 409 of the Internal Revenue Code
and that no amendment shall deprive any Participant or any Beneficiary
of a deceased Participant of any of the benefits or of an optional
form of benefit to which he is entitled under this Plan with respect
to contributions previously made, nor shall any amendment decrease any
Participant's Accounts provided that no amendment made in conformance
to provisions of the Internal Revenue Code or any other statute
relating to employee's trusts, or any official regulations or rulings
issued pursuant thereto, shall be considered prejudicial to the rights
of any Participant or Beneficiary. No amendment which affects the
rights, duties or responsibilities of the Trust may be made without
the Trustee's written consent.
The Committee shall have the same authority with respect to the
adoption of amendments to the Plan and Trust Agreement as the Board of
Directors in the following circumstances:
(a) to adopt amendments to the Plan which the Committee
determines are necessary or desirable for the Plan to comply with
or to obtain benefits or advantages under the provisions of
applicable law, regulations or rulings or requirements of the<PAGE>
Internal Revenue Service or other government administrative
agency or changes in such law, regulations, rulings or
requirements; and
(b) to adopt any other procedural or cosmetic amendment
that the Committee determines to be necessary or desirable that
does not materially change benefits to Participants or their
Beneficiaries or materially increase the Employer's contributions
to the Plan.
The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors on a timely basis.
8.2 Termination of Plan By the Company. Although it is the
intention of the Company that this Plan be permanent, the Company
reserves the right to terminate the Plan and the Trust at any time, by
delivering to the Committee, the Trustee and each Employer hereunder,
written notice thereof.
Upon termination of the Plan or permanent discontinuance of
Employer Contributions to the Plan, the interest of each Participant
and Beneficiary in his Accounts shall remain fully vested, but shall
be subject to readjustment as provided in Section 4.2 hereof. In the
event of termination of this Plan, the Board of Directors may direct
that the Trustee continue the Trust for a specified period of time, or
for such period of time as the Trustee, in its sole discretion, may
deem to be in the best interest of the Participants or their
Beneficiaries. In the absence of specific direction from the Board of
Directors, the Trust assets shall be distributed by the Trustee in
shares of common stock of the Company. Notwithstanding the provision
of this Section, no distributions shall be made to any Participant of
any assets which have been allocated to the Participant's Account for
less than eighty-four (84) months following the month in which such
assets were allocated to the Participant's Account, unless the
Participant shall have a separation from service as defined in Section
409(d) of the Internal Revenue Code, except as otherwise permitted in
Section 10.6.
Upon the partial termination of the Plan, the interest of each
Participant whose employment is terminated on account of (or who
otherwise suffers such) partial termination shall remain fully vested.
Sales of McDonald's Restaurants by the Company or another Employee
will not constitute a partial termination unless such sale under all
other facts and circumstances constitutes a partial termination. In
the absence of specific direction from the Board of Directors, the
Trust assets shall be distributed by the Trustee in shares of Company
Stock.
8.3 Merger, Consolidation, or Transfer of Assets. This Plan
shall not be merged or consolidated with, nor shall any assets or
liabilities be transferred to, any other plan, unless the benefits
payable to each Participant, if the Plan were terminated immediately
after such action, would be not less than the benefits which would
have been payable to each such Participant if the Plan had been
terminated immediately before such action.
8.4 Put Option Requirement. If any common stock of the Company
allocated to a Participant's Accounts, except the Participant's<PAGE>
Additional Employer Contribution Account, under the Plan (the "Tax
Credit Employer Security") is not publicly traded when distributed, or
thereafter ceases to be publicly traded (or becomes subject to a
trading limitation), the distributee shall be given an option
exercisable only by the distributee (or the distributee's donees or a
person, including an estate of a distributee, to whom the Tax Credit
Employer Security passes by reason of the Participant's death), to put
the Tax Credit Employer Security to the Company for a 15-month period
beginning on the date of distribution. If such Tax Credit Employer
Security ceases to be publicly traded (or becomes subject to a trading
limitation) within 15 months after the distribution, the Company shall
notify the Participant in writing on or before the 10th day after the
date the Tax Credit Employer Security ceased to be publicly traded (or
became subject to a trading limitation) that the Tax Credit Employer
Security is subject to a put option to the Company for the remainder
of the 15-month period (or, if such notice is given after the 10th day
after the Tax Credit Employer Security ceases to be publicly traded,
for a period equal to the remainder of the 15-month period plus a
number of days equal to the number of days between such 10th day and
the date on which such notice is actually given), and such notice
shall inform the distributees of the terms of the put option. The
Plan shall have the right, but not the obligation, to assume the
rights and obligations of the Company with respect to the put option
at the time the put option is exercised. A put option hereunder shall
be exercised by the holder notifying the Company in writing that the
put option is being exercised. The period during which the put option
is exercisable shall be extended by the duration of any time period
when a distributee is unable to exercise it because the Company is
prohibited from honoring it under applicable Federal or State law. A
put option shall be exercisable at a price equal to the value of the
Tax Credit Employer Security determined as of the most recent
Valuation Date. Payment under a put option shall not be restricted by
the provisions of a loan or other arrangement, including the Company's
articles of incorporation, unless so required by State law.
Provisions for a payment under any put option shall be reasonable.
Payments may be deferred only if adequate security and a reasonable
rate of interest are provided and if periodic payments are made in
substantially equal installments beginning within 30 days after the
date the put option is exercised and extending for no more than 5
years after the put option is exercised.
The provisions of this Section 8.4 shall not be terminated or
amended except to the extent required or permitted under applicable
law, Treasury Regulations and Rulings of the Internal Revenue Service.
SECTION IX
Top Heavy Provisions
9.1 Application. The definitions in Section 9.2 shall apply
under this Section IX and the special rules in Section 9.3 shall
apply, notwithstanding any other provisions of the Plan, for any Plan
Year in which the Plan is a Top Heavy Plan and for such other Plan
Years as may be specified herein.
9.2 Special Top Heavy Definitions. The following special
definitions shall apply under this Section IX.<PAGE>
(a) "Aggregate Employer Contributions" means the sum of all
Employer Contributions and Forfeitures under this Plan allocated
for a Participant to the Plan and employer contributions and
forfeitures allocated for the Participant to all Related Defined
Contribution Plans in the Aggregation Group; provided, however,
that for Plan Years beginning before January 1, 1985, employer
contributions attributable to salary reduction or similar
arrangement which complies with Section 401(k) of the Internal
Revenue Code ("Salary Reduction Contributions") under any Related
Defined Contribution Plans shall not be included in Aggregate
Employer Contributions and further provided that for Plan Years
which began after December 31, 1988, Salary Reduction
Contributions made under any Related Plan and any employer
contributions to such Plan which match Salary Reduction
Contributions.
(b) "Aggregation Group" means the group of plans in a
Mandatory Aggregation Group, if any, that includes the Plan,
unless inclusion of Related Plans in the Permissive Aggregation
Group in the Aggregation Group would prevent the Plan from being
a Top Heavy Plan, in which case "Aggregation Group" means the
group of plans consisting of the Plan and each other Related Plan
in a Permissive Aggregation Group with the Plan.
(1) "Mandatory Aggregation Group" means each plan
(considering the Plan and Related Plans) that, during the
Plan Year that contains the Determination Date or any of the
four preceding Plan Years,
(A) had a participant who was a Key Employee, or
(B) was necessary to be considered with a plan in
which a Key Employee participated in order to enable
the plan in which the Key Employee participated to meet
the requirements of Section 401(a)(4) and Section 410
of the Internal Revenue Code.
If the Plan is not described in (A) or (B) above, it
shall not be part of a Mandatory Aggregation Group.
(2) "Permissive Aggregation Group" means the group of
plans consisting of (A) the plans, if any, in a Mandatory
Aggregation Group with the Plan, and (B) any other Related
Plan, that, when considered as a part of the Aggregation
Group, does not cause the Aggregation Group to fail to
satisfy the requirements of Section 401(a)(4) and Section
410 of the Internal Revenue Code. A Related Plan in (B) of
the preceding sentence may include a simplified employee
pension plan, as defined in Internal Revenue Code Section
408(k), and a collectively bargained plan, if when
considered as a part of the Aggregation Group such plan does
not cause the Aggregation Group to fail to satisfy the
requirements of Section 401(a)(4) and Section 410 of the
Internal Revenue Code considering, if the plan is a
multiemployer plan as described in Internal Revenue Code
Section 414(f) or a multiple employer plan as described in
Internal Revenue Code Section 413(c), benefits under the
plan only to the extent provided to employees of the<PAGE>
employer because of service with the employer and, if the
plan is a simplified employee pension plan, only the
employer's contribution to the plan.
(c) "Determination Date" means, with respect to a Plan
Year, the last day of the preceding Plan Year or, in the case of
the first Plan Year, the last day of such Plan Year. If the Plan
is aggregated with other plans in the Aggregation Group, the
Determination Date for each other plan shall be, with respect to
any Plan Year, the Determination Date for each such other plan
which falls in the same calendar year as the Determination Date
for the Plan.
(d) "Key Employee" means, for the Plan Year containing the
Determination Date, any person or the beneficiary of any person
who is an employee or former employee of an Employer or a
Commonly Controlled Entity as determined under Internal Revenue
Code Section 416(i) and who, at any time during the Plan Year
containing the Determination Date or any of the four (4)
preceding Plan Years (the "Measurement Period"), is a person
described in paragraph (1), (2), (3) or (4), subject to
paragraph (5).
(1) An officer of the Employer or Commonly Controlled
Entity who:
(A) in any Measurement Period, in the case of a
Plan Year beginning after December 31, 1983, is an
officer during the Plan Year and has annual
Compensation for the Plan Year in an amount greater
than fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of Internal Revenue Code for the
calendar year in which such Plan Year ends ($30,000 in
1989, adjusted in subsequent years as determined in
accordance with regulations prescribed by the Secretary
of the Treasury or his delegate pursuant to the
provisions of Section 415(d) of the Internal Revenue
Code); and
(B) in any Measurement Period, in the case of a
Plan Year beginning on or before December 1, 1983, is
an officer during the Plan Year, regardless of his
Compensation (except to the extent that applicable law,
regulations and rulings indicate that the compensation
requirement set forth in subparagraph (A) above is
applicable).
No more than a total of fifty (50) persons (or, if
lesser, the greater of three (3) persons or ten percent
(10%) of all persons or beneficiaries of persons who are
employees or former employees) shall be treated as Key
Employees under this paragraph (1) for any Measurement
Period. In the case of an Employer or Commonly Controlled
Entity which is not a corporation (I) in any Measurement
Period, in the case of a Plan Year beginning on or before
February 28, 1985 no persons shall be treated as Key
Employees under this paragraph (1); and (II) in any
Measurement Period, in the case of a Plan Year beginning<PAGE>
after February 28, 1985, the term "officer" as used in this
subsection (d) shall include administrative executives as
described in Section 1.416-1(T-13) of the Treasury
Regulations.
(2) One (1) of the ten (10) persons who, during a Plan
Year in the Measurement Period:
(A) have annual Compensation from the Employer or
a Commonly Controlled Entity for such Plan Year greater
than the amount in effect under Section 415(c)(1)(A) of
the Internal Revenue Code for the calendar year in
which such Plan Year ends ($30,000 for 1989 or one-
fourth of the dollar limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code, adjusted in
subsequent years as determined in accordance with
regulations prescribed by the Secretary of the Treasury
or his delegate pursuant to the provisions of Section
415(d) of the Internal Revenue Code); and
(B) own (or are considered as owning within the
meaning of Internal Revenue Code Section 318) in such
Plan Year, the largest percentage interests in the
Employer or a Commonly Controlled Entity, in such Plan
Year, provided that no person shall be treated as a Key
Employee under this paragraph unless he owns more than
one-half percent (1/2%) interest in the Employer or a
Commonly Controlled Entity.
No more than a total of ten (10) persons or
beneficiaries of persons who are employees or former
employees shall be treated as Key Employees under this
paragraph (2) for any Measurement Period.
(3) A person who, for a Plan Year in the Measurement
Period, is a more than five percent (5%) owner (or is
considered as owning more than five percent (5%) within the
meaning of Internal Revenue Code Section 318) of the
Employer or a Commonly Controlled Entity.
(4) A person who, for a Plan Year in the Measurement
Period, is a more than one percent (1%) owner (or is
considered as owning more than one percent (1%) within the
meaning of Internal Revenue Code Section 318) of the
Employer or a Commonly Controlled Entity and has an annual
Compensation for such Plan Year from the Employer and
Commonly Controlled Entities of more than $150,000.
(5) If the number of persons who meet the requirements
to be treated as Key Employees under paragraph (1) or (2)
exceed the limitation on the number of Key Employees to be
counted under paragraph (1) or (2), those persons with the
highest annual Compensation in a Plan Year in the
Measurement Period for which the requirements are met and
who are within the limitation on the number of Key Employees
will be treated as Key Employees.<PAGE>
If the requirements of paragraph (1) or (2) are met by
a person in more than one (1) Plan Year in the Measurement
Period, each person will be counted only once under
paragraph (1) or (2):
(A) under paragraph (1), the Plan Year in the
Measurement Period in which a person who was an officer
and had the highest annual Compensation shall be used
to determine whether the person will be treated as a
Key Employee under the preceding sentence;
(B) under paragraph (2), the Plan Year in the
Measurement Period in which the ownership percentage
interest is the greatest shall be used to determine
whether the person will be treated as a Key Employee
under the preceding sentence.
Notwithstanding the above provisions of paragraph (5),
a person may be counted in determining the limitation under
both paragraphs (1) and (2). In determining the sum of the
Present Value of Accrued Benefits for Key Employees under
subsection (h) of this Section, the Present Value of Accrued
Benefits for any person shall be counted only once.
(e) "Non-Key Employee" means (i) a person or the
beneficiary of a person with an account balance in the Plan or an
account balance or accrued benefit in any Related Plan in the
Aggregation Group or (ii) an employee, a former employee or the
beneficiary of such person who has received a distribution during
the Measurement Period and (iii) who during the Measurement
Period is not a Key Employee.
(f) "Present Value of Accrued Benefits" means, for any Plan
Year, an amount equal to the sum of (1), (2) and (3) for each
person who, in the Plan Year containing the Determination Date,
was a Key Employee or a Non-Key Employee and, further provided
that the accrued benefit of any Non-Key Employee shall be
determined under the method which is used for accrual purposes
for all Related Defined Benefit Plans or, if no single accrual
method is used in all such plans, such accrued benefit shall be
determined as if such benefit accrued not more rapidly than the
slowest accrual rate permitted under Section 411(b)(1)(C) of the
Internal Revenue Code.
(1) Subject to (4) below, the value of a person's
Accounts under the Plan and each Related Defined
Contribution Plan in the Aggregation Group, determined as of
the valuation date coincident with or immediately preceding
the Determination Date, adjusted for contributions due as of
the Determination Date, as follows:
(A) in the case of a plan not subject to the
minimum funding requirements of Section 412 of the
Internal Revenue Code, by including the amount of any
contributions actually made after the valuation date
but on or before the Determination Date, and, in the
first plan year of a plan, by including contributions<PAGE>
made after the Determination Date that are allocated as
of a date in that first plan year; and
(B) in the case of a plan that is subject to the
minimum funding requirements, by including the amount
of any contributions that would be allocated as of a
date not later than the Determination Date, plus
adjustments to those amounts as required under
applicable rulings, even though those amounts are not
yet required to be contributed or allocated (e.g.,
because they have been waived) and by including the
amount of any contributions actually made (or due to be
made) after the valuation date but before the
expiration of the extended payment period in
Section 412(c)(10) of the Internal Revenue Code.
(2) Subject to (4) below, the sum of the actuarial
present values of a person's accrued benefits under each
Related Defined Benefit Plan in the Aggregation Group,
expressed as a benefit commencing at normal retirement date
(or the person's attained age, if later) determined based on
the following actuarial assumptions:
(A) Interest rate 5%; and
(B) Post Retirement Mortality: 1984 Unisex
Pension Table;
and determined in accordance with Internal Revenue Code
Section 416(g), provided, however, that if a defined benefit
plan in the Aggregation Group provides for different or
additional actuarial assumptions to be used in determining
the present value of accrued benefits thereunder for the
purpose of determining the top heavy status thereof, then
such different or additional actuarial assumptions shall
apply with respect to each defined benefit plan in the
Aggregation Group.
The present value of an accrued benefit for any person
who is employed by an employer maintaining a plan on the
Determination Date is determined as of the most recent
valuation date which is within a 12-month period ending on
the Determination Date, provided however that:
(C) for the first plan year of the plan, the
present value for an employee is determined as if the
employee had a Termination of Service (1) on the
Determination Date or (2) on such valuation date but
taking into account the estimated accrued benefit as of
the Determination Date; and
(D) for the second and subsequent plan years of
the plan, the accrued benefit taken into account for an
employee is not less than the accrued benefit taken
into account for the first plan year unless the
difference is attributable to using an estimate of the
accrued benefit as of the Determination Date for the<PAGE>
first plan year and using the actual accrued benefit as
of the Determination Date for the second plan year.
For purposes of this paragraph (2), the valuation date
is the valuation date used by the plan for computing plan
costs for minimum funding, regardless of whether a valuation
is performed that year.
If the plan provides for a nonproportional subsidy as
described in Treasury Regulations Section 1.416-1 (T-27),
the present value of accrued benefits shall be determined
taking into account the value of nonproportional subsidized
early retirement benefits and nonproportional subsidized
benefit options.
(3) Subject to (4) below, the aggregate value of
amounts distributed during the plan year that includes the
Determination Date or any of the four preceding plan years
including amounts distributed under a terminated plan which,
if it had not been terminated, would have been in the
Aggregation Group.
(4) The following rules shall apply in determining the
Present Value of Accrued Benefits:
(A) Amounts attributable to qualified voluntary
employee contributions, as defined in Section 219(e) of
the Internal Revenue Code, shall be excluded.
(B) In computing the Present Value of Accrued
Benefits with respect to rollovers or plan-to-plan
transfers, the following rules shall be applied to
determine whether amounts which have been distributed
during the five (5) year period ending on the
Determination Date from or accepted into this Plan or
any plan in the Aggregation Group shall be included in
determining the Present Value of Accrued Benefits:
(i) Unrelated Transfers accepted into the
Plan or any plan in the Aggregation Group after
December 31, 1983 shall not be included.
(ii) Unrelated Transfers accepted on or
before December 31, 1983 and all Related Transfers
accepted at any time into the Plan or any plan in
the Aggregation Group shall be included.
(iii) Unrelated Transfers made from the Plan
or any plan in the Aggregation Group shall be
included.
(iv) Related Transfers made from the Plan or
any plan in the Aggregation Group shall not be
included by the transferor plan (but shall be
counted by the accepting plan).
The accrued benefit of any individual who has not
received any Compensation from an Employer maintaining the<PAGE>
Plan at any time during the five (5) year period ending on
the Determination Date shall be excluded in computing the
Present Value of Accrued Benefits.
(g) "Related Transfer" means a rollover or a plan-to-plan
transfer which is either not initiated by the Employee or is made
between plans each of which is maintained by a Commonly
Controlled Entity.
(h) A "Top Heavy Aggregation Group" means an Aggregation
Group in any Plan Year for which, as of the Determination Date,
the sum of the Present Value of Accrued Benefits for Key
Employees under all plans in the Aggregation Group exceeds sixty
percent (60%) of the sum of the Present Value of Accrued Benefits
for all employees under all plans in the Aggregation Group;
provided that, for purposes of determining the sum of Present
Value of Accrued Benefits for all employees, former Key Employees
who have not performed any services for an Employer or a Commonly
Controlled Entity in the Plan Year containing the Determination
Date at the preceding four Plan Years shall be excluded entirely
from the calculation of the Present Value of Accrued Benefits for
the Plan Year that contains the Determination Date. For purposes
of applying the special rules herein with respect to a Super Top
Heavy Plan, a Top Heavy Aggregation Group will also constitute a
"Super Top Heavy Aggregation Group" if in any Plan Year as of the
Determination Date, the sum of the Present Value of Accrued
Benefits for Key Employees under all plans in the Aggregation
Group exceeds ninety percent (90%) of the sum of the Present
Value of Accrued Benefits for all employees under all plans in
the Aggregation Group.
(i) "Top Heavy Plan" means the Plan in any Plan Year in
which it is a member of a Top Heavy Aggregation Group, including
a Top Heavy Aggregation Group consisting solely of the Plan. For
purposes of applying the rules herein with respect to a Super Top
Heavy Plan, a Top Heavy Plan will also constitute a "Super Top
Heavy Plan" if the Plan in any Plan Year is a member of a Super
Top Heavy Aggregation Group, including a Super Top Heavy
Aggregation Group consisting solely of the Plan.
(j) "Unrelated Transfer" means a rollover or a plan-to-plan
transfer which is both initiated by the Employee and (a) made
from a plan maintained by a Commonly Controlled Entity to a plan
maintained by an employer which is not a Commonly Controlled
Entity or (b) made to a plan maintained by a Commonly Controlled
Entity from a plan maintained by an employer which is not a
Commonly Controlled Entity.
9.3 Special Top Heavy Provisions. For each Plan Year in which
the Plan is a Top Heavy Plan, the following rules shall apply, except
that the special provisions of this Section 9.3 shall not apply with
respect to any employee included in a unit of employees covered by an
agreement which the Secretary of Labor finds to be a
collective-bargaining agreement between employee representatives and
one or more employees if there is evidence that retirement benefits
were the subject of good faith bargaining between such employee
representative and the Employer or Employers:<PAGE>
(a) Minimum Employer Contributions.
(1) For any Plan Year in which the Plan is a Top
Heavy Plan, the Employers shall make additional Employer
Contributions to the Plan as necessary for each Participant
who is employed on the last day of the Plan Year and who is
a Non-Key Employee to bring the amount of his Aggregate
Employer Contributions for the Plan Year up to at least
three percent (3%) of his Compensation, or if the Plan is
not required to be included in an aggregation group in order
to permit a defined benefit plan in the aggregation group to
satisfy the requirements of Section 401(a)(4) or Section 410
of the Internal Revenue Code, such lesser amount as is equal
to the largest percentage of a Key Employee's Compensation
(as limited in accordance with Section 9.3(c)) allocated to
the Key Employee as Aggregate Employer Contributions.
(2) For purposes of determining whether a Non-Key
Employee is a Participant entitled to have minimum Employer
Contributions made on his behalf, a Non-Key Employee will be
treated as a Participant even if he is not otherwise a
Participant (or accrues no benefit) under the Plan because:
(A) he has failed to complete the requisite
number of hours of service (if any) after becoming a
Participant in the Plan,
(B) he is excluded from participation in the Plan
(or accrues no benefit) merely because his compensation
is less than a stated amount, or
(C) he is excluded from participation in the Plan
(or accrues no benefit) merely because of a failure to
make mandatory employee contributions or, if the Plan
is a Plan described in Section 401(k) of the Internal
Revenue Code, because of a failure to make elective
401(k) contributions.
(b) Vesting. For each Plan Year in which the Plan is a Top
Heavy Plan and for each Plan Year thereafter, the vested right of
each Participant who has an Hour of Service after the Plan
becomes a Top Heavy Plan to a percentage of his Accrued Benefit
to the extent the Accrued Benefit had not been forfeited prior to
the Plan's becoming a Top Heavy Plan shall remain fully vested
and nonforfeitable.
(c) Top Heavy Limitations.
(1) In computing the limitations under Section 3.6
hereof, if the Plan is a Top Heavy Plan and is not a Super
Top Heavy Plan, the special rules of Section 416(h) of the
Internal Revenue Code shall be applied in accordance with
applicable regulations and rulings so that
(A) in determining the denominator of the Defined
Contribution Plan Fraction and the Defined Benefit Plan
Fraction, at each place at which "1.25" would have been
used, "1.00" shall be substituted and<PAGE>
(B) in determining the numerator of the
transition fraction described in Section 415(e)(6)(B)
of the Internal Revenue Code by substituting $41,500
for $51,875,
unless the special requirements of Section 416(h)(2) of
the Internal Revenue Code have been satisfied.
(2) In computing the limitations under Section 3.6
hereof, if the Plan is a Super Top Heavy Plan, the special
rules of Section 416(h) of the Code shall be applied in
accordance with applicable regulations and rulings so that
(A) in determining the denominator of the Defined
Contribution Plan Fraction and the Defined Benefit Plan
Fraction, at each place at which "1.25" would have been
used, "1.00" shall be substituted and
(B) in determining the numerator of the
transitional fraction described in Section 415(e)(6)(B)
of the Internal Revenue Code $41,500 shall be
substituted for $51,875.
(d) Transition Rule for a Top Heavy Plan. Notwithstanding
the provisions of Section 9.3(c), for each Plan Year in which the
Plan is a Top Heavy Plan and in which the Plan does not meet the
special requirements of Section 416(h)(2) of the Internal Revenue
Code in order to use 1.25 in the denominator of the Defined
Contribution Plan Fraction and the Defined Benefit Plan Fraction,
if an Employee was a participant in one or more defined benefit
plans and in one or more defined contribution plans maintained by
the employer before the plans became Top Heavy Plans and if such
Participant's Combined Fraction exceeds 1.00 because of accruals
and additions that were made before the plans became Top Heavy
Plans, a factor equal to the lesser of 1.25 or such lesser amount
(but not less than 1.00) as shall be needed to make the
Employee's Combined Fraction equal to 1.00 shall be used in the
denominator of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction if there are no further accruals or
annual additions under any Top Heavy Plans until the
Participant's Combined Fraction is not greater than 1.00 when a
factor of 1.00 is used in the denominators of the Defined Benefit
Plan Fraction and the Defined Contribution Plan Fraction. Any
provisions herein to the contrary notwithstanding, if the Plan is
a Top Heavy Plan and the Plan does not meet the special
requirements of Section 416(h)(2) of the Internal Revenue Code in
order to use 1.25 in the denominator of the Defined Benefit Plan
Fraction and the Defined Contribution Plan Fraction, there shall
be no further Annual Additions for a Participant whose Combined
Fraction is greater than 1.00 when a factor of 1.00 is used in
the denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction, until such time as the
Participant's Combined Fraction is not greater than 1.00.
(e) Transition Rule for a Super Top Heavy Plan.
Notwithstanding the provisions of Sections 9.3(c) and 9.3(d), for
each Plan Year in which the Plan is a Super Top Heavy Plan, (1)<PAGE>
if an Employee was a participant in one or more defined benefit
plans and in one or more defined contribution plans maintained by
the employer before the plans became Super Top Heavy Plans, and
(2) if such Participant's Combined Fraction exceeds 1.00 because
of accruals and additions that were made before the plans became
Super Top Heavy Plans and if immediately before the plans became
Super Top Heavy Plans the Combined Fraction as then computed did
not exceed 1.00, then a factor equal to the lesser of 1.25 or
such lesser amount (but not less than 1.00) as shall be needed to
make the Employee's Combined Fraction equal to 1.00 shall be used
in the denominator of the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction if there are no further
accruals or annual additions under any Super Top Heavy Plans
until the Participant's Combined Fraction is not greater than
1.00 when a factor of 1.00 is used in the denominators of the
Defined Benefit Plan Fraction and the Defined Contribution Plan
Fraction. Any provisions herein to the contrary notwithstanding,
if the Plan is a Super Top Heavy Plan, there shall be no further
Annual Additions for a Participant whose Combined Fraction is
greater than 1.00 when a factor of 1.00 is used in the
denominator of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction until the Participant's Combined
Fraction is not greater than 1.00.
(f) Terminated Plan. If the Plan becomes a Top Heavy Plan
after it has formally been terminated, has ceased crediting for
benefit accruals and vesting and has been or is distributing all
plan assets to participants and their beneficiaries as soon as
administratively feasible or if a terminated plan has distributed
all benefits of participants and their beneficiaries, the
provisions of Section 11.3 shall not apply to the Plan.
(g) Frozen Plans. If the Plan becomes a Top Heavy Plan
after contributions have ceased under the Plan but all assets
have not been distributed to Participants or their beneficiaries,
the provisions of Section 9.3 shall apply to the Plan.
SECTION X
Miscellaneous Provisions
10.1 Headings. Headings of sections and subsections of the Plan
are inserted for convenience of reference and are not part of the Plan
and are not to be considered in the construction thereof.
10.2 Indemnification. The Company shall indemnify and hold
harmless each member of the Committee, each member of the Board of
Directors, each individual Trustee and each and every employee of the
Company or of a Commonly Controlled Entity, its Subsidiaries or
Affiliates to whom are delegated duties, responsibilities and
authority with respect to the Plan and the Trust against all claims,
liabilities, fines and penalties and all expenses reasonably incurred
by or imposed upon him (including but not limited to reasonable
attorney fees) which arise as a result of his actions or failure to
act in connection with the operation and administration of the Plan
and the Trust to the extent lawfully allowable and to the extent that
such claim, liability, fine, penalty or expense is not paid for by
liability insurance purchased by or paid for by the Company.<PAGE>
Notwithstanding the foregoing, the Company shall not indemnify any
person for any such amount incurred through any settlement or
compromise of any action unless the Company consents in writing to
such settlement or compromise. Expenses incurred in defending a civil
or criminal suit or proceeding may be paid by the Company in advance
of the final disposition of such action, suit or proceeding as
authorized by the Company in the specific case upon receipt of an
undertaking by or on behalf of the member of the Committee, member of
the Board of Directors, each individual Trustee or employee of the
Company or of a Commonly Controlled Entity, its Subsidiary, or
Affiliate, to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the Company as
authorized in this Section 10.2.
10.3 Employees' Trust. This Plan is created for the exclusive
purpose of providing benefits to the Participants in the Plan and
their Beneficiaries, and shall be interpreted in a manner consistent
with its being a Plan described in Sections 401(a) and 409 of the
Internal Revenue Code, Sections 301(d) and 301(e) of the Tax Reduction
Act and Section 331 of the Economic Recovery Tax Act, and the Trust
exempt under Section 501(a) of the Internal Revenue Code.
10.4 Nonalienation of Benefits.
(a) Benefits payable under this Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution
or levy of any kind, either voluntary or involuntary, prior to
actually being received by the person entitled to the benefit
under the terms of the Plan; and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber, charge,
garnish, execute on, levy or otherwise dispose of any right to
benefits payable hereunder, shall be void. The Trust Fund shall
not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements or torts of any person
entitled to benefits hereunder. The foregoing provisions of this
Section 10.4(a) shall not preclude the (1) enforcement of a
Federal tax levy made pursuant to Section 6331 of the Internal
Revenue Code or (2) collection by the United States on a judgment
resulting from an unpaid tax assessment.
(b) Notwithstanding Section 10.4(a), the Trustee
(1) shall comply with an order entered on or after
January 1, 1985 determined by the Plan Administrator to be a
Qualified Domestic Relations Order as provided in
Section 10.5,
(2) shall comply with a domestic relations order
entered before January 1, 1985 if benefits are already being
paid under such order, and
(3) may treat an order entered before January 1, 1985
as a Qualified Domestic Relations Order even if it does not
meet the requirements of Section 10.5.
10.5 Qualified Domestic Relations Order.<PAGE>
(a) "Qualified Domestic Relations Order" means any
judgment, decree, or order (including approval of a property
settlement agreement)
(1) which is made pursuant to a state domestic
relations law (including a community property law),
(2) which relates to the provision of child support,
alimony payments, or marital property rights to a spouse,
former spouse, child, or other dependent of a Participant,
(3) which creates or recognizes the existence of an
alternate payee's right to or assigns to an alternate payee
the right to receive all or a portion of the Participant's
Accounts under the Plan, and
(4) with respect to which the requirements of
paragraphs (b) and (c) are met.
(b) A domestic relations order can be a Qualified Domestic
Relations Order only if such order clearly specifies
(1) the name and the last known mailing address, if
any, of the Participant and the name and mailing address of
each alternate payee covered by the order;
(2) the amount or percentage of the Participant's
Accrued Benefit to be paid by the Plan to each such
alternate payee, or the manner in which such amount or
percentage is to be determined;
(3) the number of payments or period to which such
order applies; and
(4) each Plan Year to which such order applies.
(c) A domestic relations order can be a Qualified Domestic
Relations Order only if such order does not
(1) require the Plan to provide any type or form of
benefit, or any option not otherwise provided under the
Plan,
(2) require the Plan to provide increased benefits
(determined on the basis of actuarial value), or
(3) require the payment of benefits to an alternate
payee which are required to be paid to another alternate
payee under another order previously determined to be a
Qualified Domestic Relations Order.
If so ordered under a Qualified Domestic Relations Order, a
distribution shall be made of shares of Company Stock held in the
Participant's Unmatched Employer Contribution Account, Employer
Matching Contribution Account, Participant Contribution Account
and PAYSOP Employer Contribution Account for less than 84 months
following the month in which such shares were allocated to his
Accounts.<PAGE>
(d) In the case of any payment before a Participant has had
a Termination of Service, a domestic relations order shall not be
treated as failing to meet the requirements of Section 10.5(c)(1)
solely because such order requires that payment of benefits be
made to an alternate payee
(1) (A) Effective for periods before January 1, 1993
on or after the date on which the Participant attains (or
would have attained) the age which is ten years before the
Normal Retirement Date under the Plan, and
(B) Effective for periods on or after January 1, 1993,
without regard to the Participant's attainment of any
specified age; provided that until an IRS determination
letter is received stating that the Plan as amended by this
provision is qualified, no common stock of the Company which
has been held in a Participant's Account for less than 84
months shall be distributed pursuant to a QDRO to an
alternate payee with respect to a Participant who is both
under age 50 and not otherwise eligible to receive a
distribution under the Plan.
(2) as if the Participant had retired on the date on
which such payment is to begin under such order, and
(3) in any form in which such benefits may be paid
under the Plan to the Participant.
(e) To the extent provided in a Qualified Domestic
Relations Order, the former spouse of a Participant shall be
treated as the surviving spouse of such Participant for the
purposes of Section 5.3.
10.6 Exception to Distribution Limitation Period.
Notwithstanding any other provision of the Plan regarding limitations
on the period of distribution of Trust Fund assets, the distribution
limitation period restrictions imposed by Internal Revenue Code
Section 409(d) with respect to distribution of Trust Fund assets from
a Participant's Account shall not apply to assets which have been
allocated to a Participant's Account in the event of:
(a) a transfer of the Participant to the employment of an
acquiring employer from the employment of an Employer upon the
sale by the Employer to the acquiring employer of (i)
substantially all of the assets used by the Employer in a trade
or business conducted by the Employer; or (ii) the sale of
substantially all of the stock of a subsidiary of the Employer;
or
(b) with respect to the stock of the Employer, a
disposition of the Employer's interest in a subsidiary where the
Participant continues employment with such subsidiary.
10.7 Unclaimed Amounts.
(a) Effective for periods before January 1, 1990, unclaimed
amounts shall consist of the amounts of the Accounts of a<PAGE>
retired, deceased or terminated Participant which are not
distributed because of the Committee's inability, after a
reasonable search, to locate a Participant or his Beneficiary
within a period of two years after the payment of benefits
becomes due. Subject to Section 4.8, unclaimed amounts for a
Plan Year shall be allocated as provided in Section 3.3(d) as
Additional Employer Contributions for the Plan Year in which such
two-year period shall end. If an Unclaimed Amount is
subsequently properly claimed by the Participant or the
Participant's Beneficiary, said amount shall be paid to such
Participant or Beneficiary by treating such amount as an expense
of all Participants' Additional Employer Contribution Accounts
during the Plan Year in which the Participant or Beneficiary
makes such claim, unless the Company in its discretion makes a
contribution to the Plan for such Plan Year in an amount
sufficient to pay such amount.
(b) Effective for periods on or after January 1, 1990,
unclaimed amounts shall consist of the amounts of the Accounts of
a retired, deceased or terminated Participant which are not
distributed because of the Committee's inability, after a
reasonable search, to locate a Participant or his Beneficiary
within a period of two years after the payment of benefits
becomes due. As of the last day of the Plan Year in which such
two-year period shall end, and as of the last day of each
succeeding Plan Year in which there remain any Unclaimed Amounts,
each Account which contains Unclaimed Amounts shall be reduced by
an amount ("Forfeiture"), as determined hereinafter, which
Forfeiture shall be applied (i) to restore any prior years'
Forfeitures of Unclaimed Amounts which are properly claimed by a
Participant or by a Participant's Beneficiary during such Plan
Year and (ii) to pay any expenses of the Plan or Trust incurred
during such Plan Year. The total amount of Forfeitures from
Unclaimed Amounts for each Plan Year shall be equal to the sum of
(A) prior years' Forfeitures from Unclaimed Amounts which are
properly claimed by a Participant or by a Participant's
Beneficiary during such Plan Year and are not paid from
contributions made to the Plan by the Company for such Plan Year
and (B) expenses of the Plan incurred during such Plan Year that
are not paid by the Company. Forfeitures for each Plan Year
shall come first from those Unclaimed Amounts which have remained
in the Trust for the greatest period of time since first becoming
Unclaimed Amounts, and thereafter from Unclaimed Amounts in
descending order of maturity. If a Forfeiture of Unclaimed
Amounts is subsequently properly claimed by the Participant or
the Participant's Beneficiary, said amount shall be paid to the
Participant or Beneficiary from Forfeitures for the Plan Year in
which the Participant or Beneficiary makes such claim, as
provided in this Section 10.7, or, to the extent such current
year's Forfeitures are not sufficient, from contributions made to
the Plan by the Company for such purpose.
Subject to receipt of a favorable determination by the
Internal Revenue Service that the application of Forfeitures
pursuant to the provisions of this sentence will not adversely
affect the qualification of the Plan as a tax credit employee
stock ownership plan within the meaning of Section 409(a) of the
Internal Revenue Code or, alternatively, that the Plan, as<PAGE>
amended to provide for the application of Forfeitures pursuant to
the provisions of this sentence, continues to qualify as a tax
credit employee stock ownership plan within the meaning of
Section 409(i) of the Internal Revenue Code, Forfeitures of
Unclaimed Amounts may be applied to the payment of Plan expenses
pursuant to this Section 10.7 without regard to the limitations
on reimbursement for expenses prescribed by Section 409(i) of the
Internal Revenue Code.
10.8 Invalidity of Certain Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof and this
Plan shall be construed and enforced as if such provisions had not
been included.
10.9 Gender and Number. Except when otherwise indicated by the
context, any masculine terminology herein shall also include the
feminine and the singular shall also include the plural.
10.10 Law Governing. This Plan and Trust shall be construed
and enforced according to the laws of the State of Illinois other than
its laws respecting choice of law, to the extent not preempted by
ERISA.
Executed in multiple originals this 21st day of November, 1994.
McDONALD'S CORPORATION
By: /s/ Stanley R. Stein
----------------------------
Its: Senior Vice President
Exhibit 10(g)
McDONALD'S CORPORATION
DEFERRED INCENTIVE PLAN
(As Amended and Restated Effective as of September 1, 1994)
Section 1
Introduction
1.1 The Plan and Its Effective Date. The McDonald's Corporation
Deferred Incentive Plan ("Plan") was established November 1, 1993.
The effective date of the amendment and restatement of the Plan as set
forth herein is September 1, 1994.
1.2 Purpose. McDonald's Corporation ("McDonald's" or the
"Company") has established the Plan for its officers, regional
managers, and certain expatriate international country heads to retain
and attract highly qualified personnel by offering the benefits of a
non-qualified, unfunded plan of deferred compensation. The Company
may also allow other subsidiaries or affiliates to adopt the Plan in
accordance with Section 7.
1.3 Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee shall have the powers set forth in the
Plan and the power to interpret its provisions. Any decisions of the
Committee shall be final and binding on all persons with regard to the
Plan. The Committee may delegate its authority hereunder to an
officer or officers of the Company.
Section 2
Participation and Deferral Elections
2.1 Eligibility and Participation. Subject to the conditions
and limitations of the Plan, all officers and regional managers of the
Company and international country heads who are on United States
payroll and who are identified as eligible by the Committee shall be
eligible to participate in the Plan ("Eligible Employees"). Any
Eligible Employee who makes a Deferral Election as described in
Section 2.2 below shall become a participant in the Plan
("Participant") and shall remain a Participant until the entire
balance of the Participant's Deferral Accounts (defined in Section 4.1
below) is distributed.
2.2 Deferral Elections. Any Eligible Employee may make a
Deferral Election to defer receipt of all or any portion of his or her
incentive under the McDonald's Target Incentive Plan ("TIP") for a
calendar year. Any Eligible Employee who is one of the five highest
compensated officers of the Company (ranked by the total of base pay
and the target incentive under TIP for the current year) may also
elect to defer up to 50% of his or her base salary for the following
calendar year.
2.3 Rules for Deferral Elections. Deferral Elections shall be
made in accordance with the rules set forth below:
(a) All Deferral Elections must be in writing on such forms as
the Committee may prescribe and must be returned to the<PAGE>
Committee no later than the date specified by the Committee.
In no event will the return date specified by the Committee
be later than the end of the year that precedes the year
that the amount being deferred is made available to such
Eligible Employee.
(b) An individual shall be eligible to make a Deferral Election
only if he or she is an Eligible Employee on the date
specified by the Committee for the return of Deferral
Election forms.
(c) If an Eligible Employee terminates employment in the same
calendar year in which he or she makes a Deferral Election,
that Deferral Election will be null and void and no deferral
will be made.
(d) Amounts will be deferred to the "Payment Date" specified by
the Eligible Employee in the Deferral Election and payments
will commence within 30 days following the Payment Date in
accordance with Section 5.1. The Payment Date specified
must be no earlier than the calendar year following the year
in which the deferred amounts would otherwise have been paid
and must be either:
(i) March 31 or September 30 of a specified year in the
future (the "Specific Year Payment Date") or
(ii) the March 31 following the year in which the
Participant terminates employment (the "Employment
Termination Payment Date").
If a Participant terminates employment and has one or more
Specific Year Payment Dates that would occur after the
Employment Termination Payment Date, all amounts deferred to
those Specific Year Payment Date(s) shall automatically be
accelerated to the Employment Termination Payment Date.
Participant McDESOP Equalization Amounts and Company Profit
Sharing Equalization Credits described in Section 3 shall be
deferred to the Participant's Employment Termination Payment
Date, even though a Participant has elected a Specific Year
Payment Date for the remainder of his or her deferral.
Deferral elections made in 1993 specified either a January
31 or July 31 payment date. Due to a change in accounting
procedures, these payment dates will be converted to March
31 and September 30, respectively.
(e) Each Deferral Election shall specify how amounts deferred
pursuant to that election are to be invested under Section
4.2.
Section 3
Equalization for McDonald's Corporation Profit Sharing Program
3.1 Equalization to Adjust for Participant 401(k) McDESOP
Contributions. Amounts deferred under this Plan are not considered
compensation for the McDonald's Corporation Profit Sharing Program
(the "Profit Sharing Program") or for the related non-qualified plans:
the McDonald's 1989 Executive Compensation Plan, the McDonald's<PAGE>
Supplemental Employee Benefit Equalization Plan and the McDonald's
Profit Sharing Program Equalization Plan (the "McCAP/McEqual Plans").
The McDESOP portion of the Profit Sharing Program allows participants
to contribute a percentage of their compensation as Section 401(k)
contributions. Therefore, Eligible Employees who are Profit Sharing
Program participants and make Deferral Elections under this Plan shall
automatically have a portion of the amount deferred set aside until
the Participant's Termination Payment Date to adjust for the fact
McDESOP Section 401(k) contributions cannot be made to the Profit
Sharing Program or the related non-qualified plans for deferred
amounts (the "Participant McDESOP Equalization Amount"). The
Participant McDESOP Equalization Amount shall be based on the amount
that would have been contributed by the Participant under the McDESOP
portion of the Profit Sharing Program and the related non-qualified
plans if the deferral had not occurred.
3.2 Company Profit Sharing Equalization Credits. Amounts
deferred under this Plan are not considered as compensation under the
Profit Sharing Program or the McCAP/McEqual Plans. Therefore, amounts
deferred under this Plan shall be credited with an amount equal to the
Company contribution that the Participant would have received under
the Profit Sharing Program and/or McCAP/McEqual Plans if such deferral
had not occurred ("Company Profit Sharing Equalization Credit"). If a
Participant is not eligible to participate in the Profit Sharing
Program or McCAP/McEqual Plans, or is not eligible to receive a
Company contribution under such plans with respect to a deferred
amount, no Company Profit Sharing Equalization Credit will be made.
3.3 Rules for Profit Sharing Equalization Amounts.
Equalizations amounts under Sections 3.1 and 3.2 above (collectively
referred to as "Equalization Amounts") shall be deferred until the
Participant's Employment Termination Payment Date and cannot be
withdrawn under Section 5.3. Equalization Amounts will become part of
the Participant's Deferral Account for the year to which they relate
and will be credited with earnings as part of that Deferral Account as
described in Section 4.1.
Section 4
Deferral Accounts
4.1 Deferral Accounts. A bookkeeping account shall be
established in the Participant's name for each year for which a
Participant files a Deferral Election.("Deferral Account"). Each
year's deferral account may be further divided into:
(a) amounts deferred pursuant to that year's Deferral Election
and earnings thereon,
(b) Company Profit Sharing Equalization Credits associated with
that year's Deferral Election and earnings thereon; and
(c) Participant 401(k) McDESOP Equalization amounts associated
with that year's Deferral Election and earnings thereon.
The Equalization Amounts described in Section 4.1(b) and (c) above
shall not be eligible for early withdrawal under Section 5.3. The
Committee may also authorize other divisions or subaccounts of the
deferral accounts as may be necessary to reflect the terms of the plan
as amended from time to time.<PAGE>
Amounts deferred pursuant to a Deferral Election shall be credited to
the Deferral Account as of the end of the month in which, in the
absence of a Deferral Election, the Participant would otherwise have
received the deferred amounts. Any Equalization Amounts shall be
credited to the Deferral Account as of the end of the month in which
the amount would have been allocated under the Profit Sharing Program
or the McCAP/McEqual Plans if the deferral had not occurred.
4.2 Investment Elections and Earnings Credits.
(a) When a Participant makes a Deferral Election, he or she
shall also elect whether amounts credited to his or her
Deferral Account for that year shall be credited with one of
the following rates of return:
(i) a rate of return based upon the McDonald's Common Stock
Fund under the Profit Sharing Program, after adjustment
for expenses ("McDonald's Common Stock" equivalent);
(ii) a rate of return based upon the Insurance Contract Fund
under the Profit Sharing Program, after adjustment for
expenses ("Insurance Contract" equivalent);
(iii)a rate of return based upon the Diversified Stock Fund
under the Profit Sharing Program, after adjustment for
expenses ("Diversified Stock" equivalent); or
(iv) a rate of return based upon the Multi-Asset Fund under
the Profit Sharing Program, after adjustment for
expenses ("Multi-Asset" equivalent).
If a Participant fails to make an investment election with
respect to a Deferral Election, the amount deferred by that
election shall be credited with the Insurance Contract based
return. The rates of return described above shall be
effective as of January 1, 1995.
Effective January 1, 1995, participants shall be permitted
to elect to change the rate of return credited to each
year's Deferral Account on a prospective basis as of any
January 1, April 1, July 1, and October 1 by filing an
advance written request with the Committee at such time as
the Committee may specify.
(b) As of each March 31, June 30, September 30, and December 31
("Valuation Date"), each Deferral Account shall be credited
with earnings, gains and losses equal to the amount the
Deferral Account would have earned, gained or lost,
compounded on a monthly basis, since the prior Valuation
Date. The Committee, in its discretion, may also request a
special Valutation Date as of the end of any month.
4.3 Vesting. A Participant shall be fully vested at all times
in the balance of his or her Deferral Account.
Section 5
Payment of Benefits<PAGE>
5.1 Time and Method of Payment. Payments to a Participant, or
the Participant's beneficiary if the Participant is deceased, shall
automatically be paid in a lump sum within 30 days following the
Payment Date, unless the Participant or the Participant's beneficiary
files a written installment distribution election on or before
December 31 of the calendar year preceding the Payment Date. An
installment distribution election shall apply to all payments for that
Payment Date and shall specify the period of years (up to a maximum of
15 years) over which payments are to be made. Installment payments
shall be made in substantially equal installments over the installment
period specified and shall commence within 30 days after the Payment
Date. Each installment payment shall be computed by dividing the
balance of the Deferral Account(s) that is to be paid in installments
by the number of years remaining in the installment period. Once an
installment election is filed for a payment date, it cannot be
revoked. However, because the method of payment described above is
more flexible, Deferral Elections made in 1993 which specified a five
year installment payment shall be null and void, and shall be paid in
a lump sum, unless the Participant or the Participant's beneficiary
files a written installment election prior to December 31 of the
calendar year preceding the Payment Date.
5.2 Form of Payment. All payments shall be made in cash.
However, a Participant who has elected a McDonald's Common Stock
based return may elect to receive payment in the form of shares of
McDonald's Common Stock by filing a written request with the Committee
prior to December 31 of the calendar year preceding the Payment Date.
5.3 Early Withdrawals and Acceleration of Installment Payments.
A Participant shall have the right to withdraw in cash any portion of
the balance of his or her Deferral Accounts (except for the
Equalization Amounts of the Participant's Deferral Accounts under
Sections 4.1(b) and (c) and amounts which were not withdrawable under
the terms of the Plan prior to September 1, 1994) at any time prior to
the applicable Payment Date, subject to the Committee's consent and a
10% forfeiture penalty on the amount requested. A Participant who is
receiving installment payments may accelerate payment of any unpaid
amount, subject to the Committee's consent and 10% forfeiture penalty
on the amount accelerated. The withdrawal or accelerated installment
(reduced by the 10% forfeiture penalty) shall be paid within 30 days
of the March 31 or September 30 next following the date the election
to withdraw or accelerate payments is approved by the Committee.
Withdrawals and accelerated installments shall be made first from the
earliest maturing Deferral Account and shall be taken pro rata from
the investments in each year's Deferral Account based on the account
balance of each investment to the total account balance for the
applicable Payment Date. Withdrawals shall be subject to such
procedures as the Committee shall establish from time to time.
5.4 Withholding of Taxes. The Company shall withhold any
applicable Federal, state or local income tax from payments due under
the Plan. Any Social Security taxes, including the Medicare portion
of such taxes, shall be withheld and paid at the time incentive under
the Target Incentive Plan or base salary would otherwise have been
paid to the Participant. The Company shall also withhold any other
employment taxes as necessary to comply with applicable laws.
5.5 Limitations For Section 16 Insiders. A "Section 16
Insider" shall include any Participant who has been deemed to be
subject to Section 16 of the Securities Exchange Act of 1934 (the<PAGE>
"Exchange Act") by the Board of Directors of the Company.
Notwithstanding any provision of the Plan to the contrary, the
Deferral Account of each Section 16 Insider is subject to the
following limitations:
(a) An Eligible Employee who is a Section 16 Insider at the time
he or she makes a Deferral Election may elect a McDonald's
Common Stock based return and at the same time must also
specify whether the payment will be in a lump sum or the
specific installment period that will apply. The election
of a McDonald's Common Stock based return is irrevocable and
cannot be changed at the quarterly investment change dates
nor at any other time. A Participant who is a Section 16
Insider may not make a withdrawal or accelerate installments
under Section 5.3 of any Deferral Account(s) that are
credited with a McDonald's Common Stock based return.
Insiders who elected a McDonald's Common Stock based return
and a five year installment in 1993 will not be able to
change that election.
(b) All amounts distributed to a Section 16 Insider shall be
paid only in cash. However, to the extent that a former
Section 16 Insider uses the distribution to purchase shares
of McDonald's Common Stock on the open market in one or more
transactions within seven months after the date such amounts
are distributed, the Company shall reimburse the former
Section 16 Insider for all reasonable brokerage fees and
other transaction costs incurred in connection with such
purchases upon presentation of satisfactory evidence thereof
not later than 60 days after the date of each transaction.
(c) If any Participant becomes a Section 16 Insider after making
a Deferral Election under the Plan, any Deferral Account
that is being credited with a McDonald's Common Stock based
return shall automatically be converted to any non-
McDonald's Common Stock based investment return specified by
the Participant as of the Valuation Date immediately
preceding the date the Participant is designated a Section
16 Insider by the Board of Directors. This automatic change
to non-McDonald's Common Stock based returns will be made to
preserve the Participant's right to early withdrawals and
accelerated installments under Section 5.3 for such amounts.
In addition, the Committee may take such other actions as are
necessary so that transactions by Section 16 Insiders do not result in
liability under Section 16(b) of the Exchange Act.
5.6 Beneficiary. A Participant shall have the right to name a
beneficiary or beneficiaries who shall receive the balance of a
Participant's Deferral Account in the event of the Participant's death
prior to the payment of his or her entire Deferral Account. If no
beneficiary is named by a Participant or if he or she survives all of
the named beneficiaries, the Deferral Account shall be paid to the
same beneficiary or beneficiaries to which the Deferral Account would
have been paid if it were in the Participant's Profit Sharing Fund
Account under the Profit Sharing Program as of the date of the
Participant's death. To be effective, any beneficiary designation
shall be filed in writing with the Committee. A Participant may
revoke an existing beneficiary designation by filing another written<PAGE>
beneficiary designation with the Committee. The latest beneficiary
designation received by the Committee shall be controlling.
Section 6
Miscellaneous
6.1 Funding. Benefits payable under the Plan to any Participant
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment
of benefits under the Plan. While the Company may, in the discretion
of the Committee, make investments (a) in shares of McDonald's Common
Stock through open market purchases or (b) in other investments in
amounts equal or unequal to amounts payable hereunder, the Company
shall not be under any obligation to make such investments and any
such investment shall remain an asset of the Company subject to the
claims of its general creditors. Notwithstanding the foregoing, the
Company may maintain one or more trusts ("Trust") to hold assets to be
used for payment of benefits under the Plan. Any payments by a Trust
of benefits provided to a Participant under the Plan shall be
considered payment by the Company and shall discharge the Company of
any further liability under the Plan for such payments.
6.2 Account Statements. The Company shall provide Participants
with annual statements of the balance of their Deferral Accounts
hereunder as of the latest applicable Valuation Date.
6.3 Employment Rights. Establishment of the Plan shall not be
construed to give any Eligible Employee the right to be retained in
the Company's service or to any benefits not specifically provided by
the Plan.
6.4 Interests Not Transferable. Except as to withholding of any
tax under the laws of the United States or any state or locality and
the provisions of Section 5.6, no benefit payable at any time under
the Plan shall be subject in any manner to alienation, sale, transfer,
assignment, pledge, attachment, or other legal process, or encumbrance
of any kind. Any attempt to alienate, sell, transfer, assign, pledge
or otherwise encumber any such benefits, whether currently or
thereafter payable, shall be void. No person shall, in any manner, be
liable for or subject to the debts or liabilities of any person
entitled to such benefits. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge or otherwise encumber
benefits under the Plan, or if by any reason of the Participant's
bankruptcy or other event happening at any time, such benefits would
devolve upon any other person or would not be enjoyed by the person
entitled thereto under the Plan, then the Company, in its discretion,
may terminate the interest in any such benefits of the person entitled
thereto under the Plan and hold or apply them to or for the benefit of
such person entitled thereto under the Plan or such individual's
spouse, children or other dependents, or any of them, in such manner
as the Company may deem proper.
6.5 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall
consist of the amounts of the Deferral Accounts of a Participant that
cannot be distributed because of the Committee's inability, after a
reasonable search, to locate a Participant or the Participant's
beneficiary, as applicable, within a period of two (2) years after the
Payment Date upon which the payment of benefits become due. Unclaimed
amounts shall be forfeited at the end of such two-year period.<PAGE>
Penalties charged for withdrawals under Section 5.3 shall also be
forfeited in the year in which the penalty is charged. These
forfeitures will reduce the obligations of the Company under the Plan.
After an unclaimed amount has been forfeited, the Participant or
beneficiary, as applicable, shall have no further right to the
Participant's Deferral Account.
6.6 Controlling Law. The law of Illinois, except its law with
respect to choice of law, shall be controlling in all matters relating
to the Plan to the extent not preempted by ERISA.
6.7 Action by the Company. Except as otherwise specifically
provided herein, any action required of or permitted by the Company
under the Plan shall be by resolution of the Board of Directors of the
Company or by action of any member of the Committee or person(s)
authorized by resolution of the Board of Directors of the Company.
Section 7
Employer Participation
7.1 Adoption of Plan. Any subsidiary or affiliate of the
Company ("Employer") may, with the approval of the Committee and under
such terms and conditions as the Committee may prescribe, adopt the
corresponding portions of the Plan by resolution of its board of
directors. The Committee may amend the Plan as necessary or desirable
to reflect the adoption of the Plan by an Employer, provided however,
that an adopting Employer shall not have the authority to amend or
terminate the Plan under Section 8.
7.2 Withdrawal from the Plan by Employer. Any such Employer
shall have the right, at any time, upon the approval of and under such
conditions as may be provided by the Committee, to withdraw from the
Plan by delivering to the Committee written notice of its election so
to withdraw. Upon receipt of such notice by the Committee, the
portion of the Deferral Accounts of Participants and beneficiaries
attributable to credits made while the Participants were employees of
such withdrawing Employer, plus any net earnings, gains and losses or
such credits, shall be distributed from the Trust at the direction of
the Committee in cash at such time or times as the Committee, in its
sole discretion, may deem to be in the best interest of such employees
and their beneficiaries. To the extent the amounts held in the Trust
for the benefit of such Participants and beneficiaries are not
sufficient to satisfy the Employer's obligation to such Participants
and their beneficiaries accrued on account of their employment with
the Employer, the remaining amount necessary to satisfy such
obligation shall be an obligation of the Employer, and the Company
shall have no further obligation to such Participants and
beneficiaries with respect to such amounts.
Section 8
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the
right at any time by action of its Board of Directors or by the
Committee (in accordance with the restrictions in the following
sentence) to modify, amend or terminate the Plan, provided however,
that any amendment or termination of the Plan shall not reduce or<PAGE>
eliminate any Deferral Account accrued through the date of such
amendment or termination.
The Committee shall have the same authority to adopt amendments
to the Plan as the Board of Directors of the Company in the following
circumstances:
(a) to adopt amendments to the Plan which the Committee
determines are necessary or desirable for the Plan to comply
with or to obtain benefits or advantages under the
provisions of applicable law, regulations or rulings or
requirements of the Internal Revenue Service or other
governmental or administrative agency or changes in such
law, regulations, rulings or requirements; and
(b) to adopt any other procedural or cosmetic amendment
that the Committee determines to be necessary or desirable
that does not materially change benefits to Participants or
their beneficiaries or materially increase the Company's or
adopting Employers' credits to the Plan.
The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors of the Company on a timely basis.
Executed in multiple originals this 9th day of September, 1994.
McDONALD'S CORPORATION
/s/ Stanley R. Stein
--------------------------------------
By: Stanley R. Stein
Title: Senior Vice President
<TABLE>
Exhibit 11
McDONALD'S CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars and shares in millions, except per common share data)
<CAPTION>
Year ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net Income $1,224.4 $1,082.5 $958.6
Preferred stock dividends (net of tax benefits of $3.7 for 1994, $4.1 for
1993 and $6.4 for 1992) (47.2) (46.9) (14.7)
-------- -------- --------
Net income available after preferred stock dividends (A) 1,177.2 1,035.6 943.9
Common stock dividends on assumed conversion of preferred stock 1.2 1.2 1.8
-------- -------- --------
Net income available to common shareholders $1,178.4 $1,036.8 $945.7
======== ======== ========
Weighted average number of common shares outstanding during the period (A) 701.8 711.8 726.5
Additional shares related to potentially dilutive securities 20.5 21.6 21.4
-------- -------- --------
Adjusted weighted average common shares 722.3 733.4 747.9
======== ======== ========
Fully diluted net income per common share $1.63 $1.41 $1.26
======== ======== ========
---------------------
(A) Refer to Consolidated statement of income and Financial comments on pages 33 and 53 from Part II,
item 8 of this 1994 10-K for information concerning the computation of Net income per common share.
/TABLE
<PAGE>
<TABLE> Exhibit 12
McDONALD'S CORPORATION
STATEMENT RE COMPUTATION OF RATIOS
(Dollars in Millions)
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
- Income before provision for income taxes $1,886.6 $1,675.7 $1,448.1 $1,299.4 $1,246.3
- Minority interest in operating results of
majority-owned subsidiaries, less equity in
undistributed operating results of
less-than-50% owned affiliates 6.6 6.9 5.3 5.1 0.6
- Provision for income taxes of 50% owned
affiliates included in consolidated income
before provision for income taxes 34.9 34.2 29.4 34.1 28.8
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* 83.4 71.6 70.1 67.9 59.0
- Interest expense, amortization of debt
discount and issuance costs, and
depreciation of capitalized interest* 346.0 358.0 413.8 433.9 411.9
--------------------------------------------------------------
$2,357.5 $2,146.4 $1,966.7 $1,840.4 $1,746.6
==============================================================
FIXED CHARGES
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* $83.4 $71.6 $70.1 $67.9 $59.0
- Interest expense and amortization of debt
discount and issuance costs* 343.9 349.3 405.4 425.7 403.4
- Capitalized interest* 21.0 20.7 20.5 28.5 38.9
--------------------------------------------------------------
$448.3 $441.6 $496.0 $522.1 $501.3
==============================================================
RATIO OF EARNINGS TO FIXED CHARGES 5.26 4.86 3.96 3.53 3.48
==============================================================
*Includes amounts of the Registrant and its majority-owned subsidiaries, and one-half of the amounts of 50% owned
affiliates.
/TABLE
<PAGE>
Exhibit 21
MCDONALD'S CORPORATION
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY (STATE OR COUNTRY OF INCORPORATION)
DOMESTIC SUBSIDIARIES
McDonald's Australian Property Corporation (Delaware)
McDonald's Deutschland, Inc. (Delaware)
McDonald's Restaurant Operations, Inc. (Delaware)
McDonald's Property Company Limited (Delaware)
McDonald's System of France, Inc. (Delaware)
FOREIGN SUBSIDIARIES
McDonald's Restaurants of Canada Limited (Canada)
McDonald's Australia Limited (Australia)
McDonald's Properties (Australia) Pty., Ltd. (Australia)
McDonald's Immobilien GmbH (Germany)
McDonald's GmbH (Germany)
McDonald's Restaurants Limited (England)
McDonald's France, S.A. (France)
McDonald's Restaurants Limited (Hong Kong)
McDonald's Nederland B.V. (Netherlands)
McDonald's Restaurants Co., Ltd. (Taiwan)
Restco Comercio de Alimentos Ltda. (Brazil-Sao Paulo)
Realco Comercio de Alimentos Ltda. (Brazil-Rio de Janeiro)
_______________________
The names of certain subsidiaries have been omitted as follows:
(a) 47 wholly-owned subsidiaries of the Company, each of which
operates one or more McDonald's restaurants within the United
States.
(b) Additional subsidiaries, including some foreign, other than those
mentioned in (a), because considered in the aggregate as a single
subsidiary, they would not constitute a significant subsidiary.<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following
Registration Statements of McDonald's Corporation and in the related
prospectuses of our report dated January 26, 1995, with respect to the
consolidated financial statements of McDonald's Corporation included
in this Annual Report (Form 10-K) for the year ended December 31,
1994:
Commission File No.
------------------------------------------
Form S-8 Form S-3
------------------------------------------
33-09267 33-00001
33-24958 33-40194
33-49817 33-42642
33-50701 33-50025
33-58840 33-50695
ERNST & YOUNG LLP
Chicago, Illinois
March 29, 1995<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 180
<SECURITIES> 0
<RECEIVABLES> 379
<ALLOWANCES> 0
<INVENTORY> 51
<CURRENT-ASSETS> 741
<PP&E> 15,185
<DEPRECIATION> 3,856
<TOTAL-ASSETS> 13,592
<CURRENT-LIABILITIES> 2,451
<BONDS> 2,935
<COMMON> 92
0
674
<OTHER-SE> 8,563
<TOTAL-LIABILITY-AND-EQUITY> 13,592
<SALES> 5,793
<TOTAL-REVENUES> 8,321
<CGS> 4,645
<TOTAL-COSTS> 5,081
<OTHER-EXPENSES> 999
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306
<INCOME-PRETAX> 1,887
<INCOME-TAX> 662
<INCOME-CONTINUING> 1,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,224
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 0
</TABLE>
