<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, 1995
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
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% Debentures due 2033 New York Stock Exchange
8.35% Subordinated Deferrable Interest
Debentures due 2025 New York Stock Exchange
6-5/8% Notes due 2005 New York Stock Exchange
7.05% Debentures due 2025 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. /X/
The aggregate market value of voting stock held by nonaffiliates
of the registrant is $35,081,751,496 and the number of shares of
common stock outstanding is 700,433,950 as of January 31, 1996.
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, 1995.<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 1995, 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, 1995,
1994 and 1993 is included in Part II, item 8, page 44 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 is designed to assure
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, 1995, 1994
and 1993 in Part II, item 7, pages 27 through 30, and Part II, item 8,
page 36 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 395,000 restaurants generate nearly $240
billion in annual sales. McDonald's accounts for about 2.9% of those
restaurants and approximately 6.6% 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 1995, there were no material capital expenditures
for environmental control facilities and no such material expenditures
are anticipated.
Number of employees
During 1995, the Company's average number of employees
worldwide, including company-operated restaurant employees, was
approximately 212,000.
(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 30 and Part II, item 8, page 44, 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 30 and Part II, item 8, pages 35, 36, 38, 39, 40, 43, 50 and
51, 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, 1996 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 1996 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 32 2
James R. Cantalupo President and 11/14/43 21 4
Chief Executive
Officer-International
Winston B.
Christiansen Executive Vice President 07/31/47 25 0
Thomas S. Dentice Executive Vice President 01/12/39 30 11
Robert J. Doran Executive Vice President 07/17/46 29 0
USA
Patrick J. Flynn Executive Vice President 05/01/42 34 8
Thomas W. Glasgow, Jr. Executive Vice President, 02/17/47 27 4
Chief Operations Officer
Jack M. Greenberg Vice Chairman, Chief 09/28/42 14 4
Financial Officer
Michael R. Quinlan Chairman, Chief 12/09/44 32 6
Executive Officer
Edward H. Rensi President and Chief 08/15/44 30 4
Executive Officer-U.S.A.
Paul D. Schrage Senior Executive Vice 02/25/35 28 11
President, Chief
Marketing Officer
James A. Skinner Executive Vice President 10/25/44 25 0
International
Fred L. Turner Senior Chairman 01/06/33 39 6
Shelby Yastrow Executive Vice President 11/03/35 18 0
/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 1995 1994
-------------------------------------------------------------------------
Dividend Per Dividend Per
High Low Common Share High Low Common Share
-------------------------------------------------------------------------
First 35 3/4 28 5/8 .0600 31 1/4 27 1/4 .0538
Second 39 1/4 33 3/4 .0675 31 3/8 27 5/8 .0600
Third 41 1/2 35 7/8 .0675 29 3/4 25 5/8 .0600
Fourth 48 37 3/4 .0675 29 7/8 25 7/8 .0600
-------------------------------------------------------------------------
Year 48 28 5/8 .2625 31 3/8 25 5/8 .2338
-------------------------------------------------------------------------
The approximate number of shareholders of record and beneficial
owners of the Company's common stock as of January 31, 1996 was
estimated to be 798,500.
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 80 consecutive
quarterly dividends on common stock through March 29, 1996, has
increased the per share amount 21 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)
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Systemwide sales $29,914 25,987 23,587 21,885 19,928 18,759 17,333 16,064 14,330 12,432 11,001
U.S. $15,905 14,941 14,186 13,243 12,519 12,252 12,012 11,380 10,576 9,534 8,843
Outside of the U.S. $14,009 11,046 9,401 8,642 7,409 6,507 5,321 4,684 3,754 2,898 2,158
Systemwide sales by type
Operated by franchisees $19,123 17,146 15,756 14,474 12,959 12,017 11,219 10,424 9,452 8,422 7,612
Operated by the Company $ 6,863 5,793 5,157 5,103 4,908 5,019 4,601 4,196 3,667 3,106 2,770
Operated by affiliates $ 3,928 3,048 2,674 2,308 2,061 1,723 1,513 1,444 1,211 904 619
Average sales by
Systemwide restaurants
open at least one year,
in thousands $ 1,844 1,800 1,768 1,733 1,658 1,649 1,621 1,596 1,502 1,369 1,296
Revenues from franchised
restaurants $ 2,931 2,528 2,251 2,031 1,787 1,621 1,465 1,325 1,186 1,037 924
Total revenues $ 9,795 8,321 7,408 7,133 6,695 6,640 6,066 5,521 4,853 4,143 3,694
Operating income $ 2,601 2,241 1,984 1,862 1,679 1,596 1,438 1,288 1,160 983 905
Income before provision
for income taxes $ 2,169 1,887 1,676 1,448 1,299 1,246 1,157 1,046 959 848 782
Net income $ 1,427 1,224 1,083 959 860 802 727 646 549 * 480 433
Cash provided by
operations $ 2,296 1,926 1,680 1,426 1,423 1,301 1,246 1,177 1,051 852 813
Financial position at year end
Net property and
equipment $12,811 11,328 10,081 9,597 9,559 9,047 7,758 6,800 5,820 4,878 4,164
Total assets $15,415 13,592 12,035 11,681 11,349 10,668 9,175 8,159 6,982 5,969 5,043<PAGE>
Total debt $ 4,836 4,351 3,713 3,857 4,615 4,792 4,036 3,269 2,784 2,321 1,768
Total shareholders'
equity $ 7,861 6,885 6,274 5,892 4,835 4,182 3,550 3,413 2,917 2,506 2,245
Per common share
Net income $ 1.97 1.68 1.45 1.30 1.17 1.10 .97 .86 .72 * .62 .55
Dividends declared $ .26 .23 .21 .20 .18 .17 .15 .14 .12 .11 .10
Total shareholders'
equity at year end $ 10.72 9.20 8.12 7.39 6.73 5.82 4.90 4.55 3.86 3.22 2.84
Market price at
year end $45 1/8 29 1/4 28 1/2 24 3/8 19 14 1/2 17 1/4 12 11 10 1/8 9
Restaurants at year end
Systemwide Restaurants 18,380 15,950 14,163 13,093 12,418 11,803 11,162 10,513 9,911 9,410 8,901
U.S. 11,368 10,238 9,397 8,959 8,764 8,576 8,270 7,907 7,567 7,272 6,972
Outside of the U.S. 7,012 5,712 4,766 4,134 3,654 3,227 2,892 2,606 2,344 2,138 1,929
Traditional Restaurants 16,809 15,205 13,993 13,093 12,418 11,803 11,162 10,513 9,911 9,410 8,901
Operated by franchisees 11,240 10,458 9,832 9,237 8,735 8,131 7,573 7,110 6,760 6,406 6,150
Operated by the Company 3,513 3,083 2,699 2,551 2,547 2,643 2,691 2,600 2,399 2,301 2,165
Operated by affiliates 2,056 1,664 1,462 1,305 1,136 1,029 898 803 752 703 586
U.S. 10,341 9,744 9,283 8,959 8,764 8,576 8,270 7,907 7,567 7,272 6,972
Outside of the U.S. 6,468 5,461 4,710 4,134 3,654 3,227 2,892 2,606 2,344 2,138 1,929
Number of countries at
year end 89 79 70 65 59 53 51 50 47 46 42
* Before the cumulative prior years' benefit from the change in accounting for income taxes.
/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, 1995 1994
except per common share data) Amount % Amount %
-----------------------------------------------------------------------
SYSTEMWIDE SALES $3,927 15 $2,401 10
-----------------------------------------------------------------------
REVENUES
Sales by company-operated
restaurants $1,071 18 $ 636 12
Revenues from franchised
restaurants 403 16 277 12
-----------------------------------------------------------------------
TOTAL REVENUES 1,474 18 913 12
-----------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 903 19 481 12
Franchised restaurants 80 18 55 14
General, administrative
and selling expenses 153 14 142 15
Other operating (income)
expense--net (22) 26 (22) 35
-----------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 1,114 18 656 12
-----------------------------------------------------------------------
OPERATING INCOME 360 16 257 13
-----------------------------------------------------------------------
Interest expense 34 11 (10) (3)
Nonoperating income
(expense)--net (43) 88 (56) NM
-----------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 283 15 211 13
-----------------------------------------------------------------------
Provision for income taxes 80 12 69 12
-----------------------------------------------------------------------
NET INCOME $ 203 17 $ 142 13
=======================================================================
NET INCOME PER COMMON SHARE $ .29 17 $ .23 16
-----------------------------------------------------------------------
NM - Not Meaningful<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 1995 and
1994 sales increases were primarily due to expansion. Stronger foreign
currencies and higher sales at existing restaurants also contributed
to these increases. Sales by Company-operated restaurants grew at a
higher rate than Systemwide sales in 1995 and 1994. For both years,
the number of Company-operated restaurants grew at a higher rate than
Systemwide restaurants, and for 1995, Company-operated comparable
sales were also stronger than Systemwide comparable sales.
Average sales by Systemwide restaurants open at least one year were
$1,844,000 in 1995, $44,000 higher than in 1994. Average sales
improved due to stronger foreign currencies and higher sales at
existing restaurants, partially offset by lower average sales for
newer, smaller restaurants. The Company expects that average sales
will continue to be affected by an increasing proportion of lower-
volume sites. Profitable expansion into these sites, consistent with
our Convenience Strategy to gain market share, has been made possible
by a low-cost approach to restaurant development.
Expansion continued at an accelerated pace as 2,430 restaurants
were added Systemwide in 1995 (1,604 traditional and 826 satellites),
compared with 1,787 in 1994 (1,212 traditional and 575 satellites) and
1,070 in 1993 (900 traditional and 170 satellites). Generally,
satellite restaurants offer a simplified menu and are smaller in size
and sales volume compared to traditional restaurants. McDonald's plans
to add between 2,500 and 3,200 restaurants around the world annually
in 1996 and 1997. Between 1,800 and 2,200 of the additions will be
traditional restaurants, with approximately two thirds outside of the
U.S. The remainder will be satellite restaurants, about half of which
will be in the U.S. This higher level of openings is attributable to
our low-cost approach to restaurant development as well as the
potential of our alliances with major oil companies and retailers.
Based on our experience with oil alliance sites, we have determined
that the majority of future expansion for these venues will be
traditional restaurants rather than satellite restaurants as
originally planned.
The consolidated financial statements reflect the operating results
of satellite restaurants 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. Traditional restaurants opened during the year
contributed $1,002 million to Systemwide sales in 1995, $799 million
in 1994 and $572 million in 1993. Satellite restaurants opened during
the year contributed $190 million to Systemwide sales in 1995 and $92
million in 1994.<PAGE>
<PAGE> 13
TOTAL REVENUES
Total revenues consist of sales by Company-operated restaurants and
fees from restaurants operated by franchisees and affiliates based on
a percent of sales with specified minimum payments. The minimum fee
includes 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, the minimum fee generally was 12.0% for rent and
service fees combined. Fees may vary depending on the type of site and
the investment required on the part of the Company. Fees paid by
franchisees outside of the U.S. vary according to local business
conditions. Together with occupancy and operating rights, these fees
are stipulated in franchise arrangements that generally have 20-year
terms. Accordingly, these fees provide a stable, predictable revenue
flow to the Company.
Revenues grow as restaurants are added and as sales build in
existing restaurants. Menu price adjustments affect revenues and
sales; however, different pricing structures, new products, promotions
and product mix variations among markets make quantifying the impact
of menu price adjustments for the System as a whole impractical.
Total revenues for 1995 and 1994 increased due to strong global
operating results, positive comparable sales and an increase in the
Company-operated restaurant base through expansion and changes in
ownership.
In 1995, 60% of sales by Company-operated restaurants and 40% of
revenues from franchised restaurants were outside of the U.S.,
compared with 56% and 37%, respectively, in 1994.
RESTAURANT MARGINS
Company-operated restaurant margins were 19.2% of sales in 1995,
compared with 19.8% in 1994 and 19.2% in 1993. As a percent of 1995
sales, food and paper as well as occupancy and other operating costs
increased, while payroll costs remained relatively flat. As a percent
of 1994 sales, food and paper as well as occupancy and other operating
costs declined, while payroll costs increased.
Franchised margin dollars comprised about two thirds of the
combined operating margins, the same as in the prior year. Franchised
restaurant margins were 82.4% of applicable 1995 revenues, compared
with 82.8% in 1994 and 83.1% in 1993. The decreases reflected a higher
proportion of leased sites, resulting from accelerated expansion and
satellite development, which have financing costs embedded in rent
expense; whereas, financing costs for owned sites are reflected in
interest expense.
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, the resulting gains compensate
the Company for the lower margins prior to exercise and are included
in other operating (income) expense--net. At year-end 1995, 491
restaurants were operating under such arrangements, compared with 484
and 544 at year-end 1994 and 1993, respectively. The majority of these
restaurants were operated outside of the U.S.<PAGE>
<PAGE> 14
GENERAL, ADMINISTRATIVE AND SELLING EXPENSES
The 1995 and 1994 increases were primarily due to strategic global
investment spending to support the Convenience, Value and Execution
Strategies. The 1995 increase was also affected by stronger foreign
currencies while the 1994 increase included a one-time, noncash $15
million charge related to the implementation of a new accounting rule
regarding the timing of expensing advertising production costs. These
expenses as a percent of Systemwide sales have remained relatively
constant and were 4.1% in 1995, 4.2% in 1994 and 4.0% in 1993.
Corporate general, administrative and selling expenses which were
not allocated to the geographic segments of the business were $48.2
million in 1995, $47.6 million in 1994 and $37.7 million in 1993.
OTHER OPERATING (INCOME) EXPENSE--NET
This category is comprised of transactions that 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 1995 income increase
occurred because of greater income from affiliates, principally Japan,
partially offset by higher losses on 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.
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 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 1995 and 1994 increases reflected higher combined operating margin
dollars and stronger foreign currencies, partially offset by higher
general, administrative and selling expenses. In addition, 1994
benefited from higher other operating income.
INTEREST EXPENSE
The 1995 increase was due to higher average debt levels and stronger
foreign currencies, partially offset by lower average interest rates.
The 1994 decrease was primarily due to lower average interest rates,
partially offset by higher average debt levels and stronger 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. The 1995 amount included $60 million of unrealized losses
associated with the Company's investment in Discovery Zone common
stock. These losses were primarily responsible for the decline in 1995
U.S. and Corporate income before provision for income taxes shown on
page 41. Also contributing to the 1995 consolidated results were
higher charges associated with minority interests, partially offset by
higher interest income and lower translation losses. The 1994 decrease
in nonoperating income reflected higher translation losses,
principally from Mexico and Brazil, losses on investments and higher
minority interest charges.
PROVISION FOR INCOME TAXES
The effective income tax rate was 34.2% for 1995, compared with 35.1%
for 1994 and 35.4% for 1993. The 1995 decrease was primarily due to a
reduction in U.S. state income taxes and an increased proportion of
earnings from foreign operations. The Company expects its 1996
effective income tax rate to be in the range of 32.5% to 33.5%, due to
lower taxes related to foreign operations.
Consolidated net deferred tax liabilities included tax assets, net
of valuation allowance, of $308 million in 1995, and $233 million in
1994. Substantially all 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 17% each in 1995
and 13% and 16%, respectively, in 1994. The spread between the 1994
percent increase in net income and net income per common share
reflected the impact of share repurchase. In 1995, the impact of share
repurchase was offset by the conversion of 11 million shares of Series
B and C preferred stock into 8.7 million shares of common stock.<PAGE>
<PAGE> 16
IMPACT OF CHANGING FOREIGN CURRENCIES
While 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 currency-denominated cash flows. Strengthening foreign
currencies had a positive impact on 1995 Systemwide sales, revenues,
operating income and net income. Strengthening foreign currencies had
a positive impact on 1994 Systemwide sales and operating income;
however, the currency impact on interest expense and higher
translation losses in Latin America more than offset this benefit,
resulting in a reduction in net income. Further discussion of our
management of changing foreign currencies is on pages 28 and 29 in the
commentary on financings and total shareholders' equity.
-----------------------------------------------------------------------
(Dollars in millions) As reported As adjusted*
-----------------------------------------------------------------------
1995
-----------------------------------------------------------------------
Systemwide sales $29,914 15% $29,057 12%
Revenues 9,795 18 9,531 15
Operating income 2,601 16 2,513 12
Net income 1,427 17 1,389 13
-----------------------------------------------------------------------
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
-----------------------------------------------------------------------
*If exchange rates remained constant year-over-year.<PAGE>
<PAGE> 17
------------------------------------------------------------------------
U.S. OPERATIONS
------------------------------------------------------------------------
SALES
Restaurant expansion was primarily responsible for increasing sales in
1995. In addition, positive comparable sales were driven by the
Company's continued emphasis on value and customer satisfaction in the
form of Extra Value Meals, Happy Meals and the three-tier value
program in 1995 and 1994. Ongoing programs such as Operation Mac
Attack -- our advertising campaign -- and Fast, Accurate and
Friendly -- our initiative to improve customer satisfaction -- and
promotions such as Monopoly also aided 1995 sales, as did various
promotions in 1994.
------------------------------------------------------------------------
Five Ten
years years
(In millions of dollars) 1995 1994 1993 ago ago
------------------------------------------------------------------------
Operated by franchisees $12,474 $11,965 $11,435 $ 9,379 $6,781
Operated by the Company 2,725 2,550 2,420 2,655 2,000
Operated by affiliates 706 426 331 218 62
------------------------------------------------------------------------
U.S. sales $15,905 $14,941 $14,186 $12,252 $8,843
========================================================================
Average sales by total U.S. restaurants open at least one year were
$1,538,000 in 1995 and $1,577,000 in 1994.
RESTAURANTS
There were 1,130 restaurants added in the U.S. in 1995 (597
traditional and 533 satellites) compared with 841 in 1994 (461
traditional and 380 satellites) and 306 (all traditional) five years
ago. The U.S. accounted for just over one third of traditional
restaurants added globally in 1995 and 1994, compared with about half
five years ago. Of the worldwide satellite restaurant additions, about
two thirds were in the U.S. in 1995 and 1994.
------------------------------------------------------------------------
Five Ten
years years
1995 1994 1993 ago ago
------------------------------------------------------------------------
Operated by franchisees 8,180 7,849 7,628 6,780 5,390
Operated by the Company 1,634 1,546 1,433 1,632 1,534
Operated by affiliates 527 349 222 164 48
------------------------------------------------------------------------
Traditional restaurants 10,341 9,744 9,283 8,576 6,972
Satellite restaurants 1,027 494 114 - -
------------------------------------------------------------------------
Total U.S. restaurants 11,368 10,238 9,397 8,576 6,972
========================================================================<PAGE>
<PAGE> 18
About 84% of traditional U.S. restaurants were operated by
franchisees and affiliates at year-end 1995 and 1994, compared with
81% five years ago. Approximately 80% of U.S. satellite restaurants
were operated by franchisees and affiliates at year-end 1995.
OPERATING RESULTS
------------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993 1992 1991
------------------------------------------------------------------------
REVENUES
Sales by Company-
operated restaurants $2,725 $2,550 $2,420 $2,353 $2,410
Revenues from
franchised restaurants 1,749 1,606 1,511 1,396 1,300
------------------------------------------------------------------------
TOTAL REVENUES 4,474 4,156 3,931 3,749 3,710
------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Company-operated
restaurants 2,244 2,066 1,977 1,920 2,000
Franchised restaurants 304 270 247 235 217
General, administrative
and selling expenses* 682 628 569 507 499
Other operating (income)
expense--net (8) (25) (18) (13) (56)
------------------------------------------------------------------------
TOTAL OPERATING
COSTS AND EXPENSES* 3,222 2,939 2,775 2,649 2,660
------------------------------------------------------------------------
U.S. OPERATING INCOME* $1,252 $1,217 $1,156 $1,100 $1,050
========================================================================
*Operating income prior to 1995 has been restated to reflect a more
meaningful allocation of general, administrative and selling
expenses between the U.S. and international segments and includes an
additional corporate category which is not allocated.
U.S. revenues were positively impacted by expansion and positive
comparable sales in 1995, 1994 and 1993, and reduced by the
franchising of certain Company-operated restaurant businesses in 1992
and 1991.
U.S. Company-operated margins decreased $3 million in 1995, as
lower Company-operated comparable sales and higher costs more than
offset the positive impact of the growth in the number of Company-
operated restaurants. These margins were 17.7% of sales in 1995,
compared with 19.0% in 1994 and 18.3% in 1993. In 1995, the margin
decline was driven by higher payroll costs as a percent of sales
resulting from an increase in the average hourly wage rate and
increased staffing levels designed to improve customer satisfaction.
In 1995 and 1994, the margin benefited from cost reduction efforts and
lower commodity costs.<PAGE>
<PAGE> 19
U.S. franchised margins rose $109 million or 8% in 1995, driven by
expansion and positive comparable sales. These margins were 82.6% of
applicable revenues in 1995, compared with 83.2% in 1994 and 83.6% in
1993. Franchised margins as a percent of revenues declined in 1995 and
1994 as the growth in rent expense, resulting from an increase in the
proportion of new leased sites, particularly satellite locations,
outpaced the growth in franchised revenues.
With the current intensely competitive U.S. operating environment,
we expect continuing pressure on Company-operated margins. However,
while it is difficult to assess the potential effects of legislation
and other factors that may affect the industry, the Company believes
it can maintain annual operating margins as a percent of sales within
the historical range of the past ten years by continuing to build
sales and reduce costs.
U.S. operating income rose $35 million or 3% in 1995 and $61
million or 5% in 1994, and was 48% and 54% of consolidated operating
income in 1995 and 1994, respectively. The 1995 and 1994 increases
resulted primarily from higher combined operating margins, partially
offset by higher general, administrative and selling expenses in the
form of higher employee costs, and other expenditures to support our
Convenience, Value and Execution Strategies. 1994 U.S. operating
income was also impacted by a one-time, $12 million charge related to
the implementation of a new accounting rule for advertising costs.
Operating income included depreciation and amortization of $398
million in 1995, $366 million in 1994 and $348 million in 1993.
While the U.S. market remains intensely competitive, McDonald's is
confident of continued growth in operating income over the long term
through expansion, by controlling costs at the developmental,
operational and administrative levels, and through a greater emphasis
on value and customer satisfaction.
ASSETS AND CAPITAL EXPENDITURES
U.S. assets increased $547 million or 8% in 1995 and $293 million or
5% in 1994. These increases were due to accelerated expansion and
increased reinvestment in existing restaurants during 1995. At year-
end 1995, 46% of consolidated assets were located in the U.S.,
compared with 48% at year-end 1994.
-------------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------
U.S. assets $7,040 $6,493 $6,200 $5,995 $5,921
-------------------------------------------------------------------------
New restaurants $ 602 $ 472 $ 332 $ 196 $ 214
Existing restaurants 213 125 122 125 151
Other properties 104 113 130 76 45
-------------------------------------------------------------------------
U.S. capital expenditures $ 919 $ 710 $ 584 $ 397 $ 410
=========================================================================<PAGE>
<PAGE> 20
U.S. capital expenditures increased $209 million or 30% in 1995,
and represented 44% of consolidated capital expenditures, compared
with 47% five years ago. These amounts excluded initial investments
made by franchisees in equipment, signs, seating and decor, as well as
their ongoing reinvestment expenditures. New restaurant expenditures
increased $130 million or 28%, primarily because of accelerated
expansion.
Expenditures for existing restaurants were made to achieve higher
levels of customer satisfaction and implement technology to improve
service and food quality. In 1995, strategic reinvestment to build
sales included $57 million for indoor Ronald's Playplaces and $37
million for rebuilding and relocating restaurants to adjust to
changing demographics, traffic patterns and market opportunities. Over
the past five years, $188 million has been invested to replace older
buildings with new lower-cost, more efficient restaurants.
Other properties primarily included expenditures for office
buildings and related furnishings.
Traditional restaurants
-------------------------------------------------------------------------
(In thousands of dollars) 1995 1994 1993 1992 1991
-------------------------------------------------------------------------
Land $ 348 $ 317 $ 328 $ 361 $ 433
Building 503 483 482 515 608
Equipment 300 295 317 361 362
-------------------------------------------------------------------------
U.S. average
development costs $1,151 $1,095 $1,127 $1,237 $1,403
=========================================================================
U.S. average development costs increased in 1995 primarily due to
higher site development and preparation costs combined with
investments for indoor Ronald's Playplaces in more than 25% of new
traditional restaurants. Construction efficiencies and a further shift
toward smaller, lower-cost building designs partially offset these
increases.
Average development costs have decreased 26% from 1990 levels.
Initiatives such as the Company's new joint venture to develop modular
restaurant buildings serve as an example of our commitment to further
reduce development costs through standardization, global sourcing and
greater economies of scale. Our objective is to profitably expand into
more locations, consistent with McDonald's goal of increasing market
share with greater marketwide presence throughout the world.
Because real estate ownership yields long-term benefits, including
the ability to fix occupancy costs, the Company purchases new
properties and acquires previously leased properties to the extent
practical. The Company owned 68% of traditional U.S. sites at year-end
1995, compared with 69% five years ago. Most satellite restaurants are
leased locations.<PAGE>
<PAGE> 21
----------------------------------------------------------------------
OPERATIONS OUTSIDE OF THE U.S.
----------------------------------------------------------------------
SALES
Sales outside of the U.S. rose 27% in 1995 and 18% in 1994 due to
aggressive expansion, stronger foreign currencies and higher local
currency sales at existing restaurants in all geographic segments
except Canada. This strong sales growth in 1995 was achieved despite
weak economies in several markets. In 1995, 47% of Systemwide sales
were from markets located outside of the U.S. compared with 43% in
1994 and 35% five years ago.
----------------------------------------------------------------------
Five Ten
years years
(In millions of dollars) 1995 1994 1993 ago ago
----------------------------------------------------------------------
Operated by franchisees $ 6,648 $ 5,182 $4,321 $2,638 $ 831
Operated by the Company 4,139 3,242 2,737 2,364 770
Operated by affiliates 3,222 2,622 2,343 1,505 557
----------------------------------------------------------------------
Sales outside of the U.S. $14,009 $11,046 $9,401 $6,507 $2,158
======================================================================
In Asia/Pacific, Australia, Japan, New Zealand, Singapore and
Taiwan reported strong 1995 sales increases driven by Extra Value Meal
marketing campaigns and rapid store expansion.
In Europe, restaurant expansion continued to drive 1995 sales
growth in Austria, England, France, Germany, the Netherlands and
Spain.
In Latin America, due to the mid-1994 economic reforms, Brazil's
tremendous sales growth continued into 1995. Results in Mexico
continued to be impacted by the weak economy and further peso
devaluation. We currently anticipate this trend to continue through at
least 1996; however, we believe this market offers long-term
potential.
Canada's 1995 sales growth was impacted by a slow economy and
decreased consumer retail spending.
Average sales by total restaurants outside of the U.S. open at
least one year were $2,422,000 in 1995 and $2,254,000 in 1994. This
increase reflected stronger foreign currencies and higher local
currency sales.
RESTAURANTS
During the past five years, 56% of Systemwide and 64% of traditional
restaurant additions have been outside of the U.S. Of the 1,007
traditional restaurants added outside of the U.S. in 1995, 42% were in
the six largest markets -- Australia, Canada, England, France, Germany
and Japan -- compared with 51% in 1994. Of the 293 satellite
restaurants added in 1995, 86% were in the six largest markets
compared with 74% in 1994.<PAGE>
<PAGE> 22
In 1995, Japan added 313 total restaurants (109 traditional and 204
satellites), representing 24% of the total restaurants added outside
of the U.S. Japan's profitable expansion was supported by significant
reductions in average restaurant development costs achieved through
standardization of building designs and utilization of smaller
buildings.
In 1996 and 1997, more than half of total restaurant additions
outside of the U.S. are anticipated to be in the six largest markets
while new and emerging markets, such as the Middle East, China and
Central Europe are expected to represent a growing proportion of
expansion.
----------------------------------------------------------------------
Five Ten
years years
1995 1994 1993 ago ago
----------------------------------------------------------------------
Operated by franchisees 3,060 2,609 2,204 1,351 760
Operated by the Company 1,879 1,537 1,266 1,011 631
Operated by affiliates 1,529 1,315 1,240 865 538
----------------------------------------------------------------------
Traditional restaurants 6,468 5,461 4,710 3,227 1,929
Satellite restaurants 544 251 56
----------------------------------------------------------------------
Total restaurants
outside of the U.S. 7,012 5,712 4,766 3,227 1,929
======================================================================
At year-end 1995, 38% of Systemwide restaurants were outside of the
U.S. compared with 36% in 1994 and 27% five years ago. Restaurants
outside of the U.S. comprised 53% of traditional Company-operated
restaurants and 27% of traditional franchised restaurants. About 29%
of the traditional restaurants outside of the U.S. were Company-
operated, 47% were franchised and 24% were operated by affiliates.
Approximately 69% of traditional Company-operated restaurants were in
England, Canada, Germany, Australia, Taiwan and Brazil. About 66% of
traditional franchised restaurants were in Canada, Germany, Australia,
France, England and the Netherlands. Restaurants operated by
affiliates were principally located in Japan and other Asia/Pacific
countries.
Approximately 81% of satellite restaurants outside of the U.S. were
operated by franchisees and affiliates at year-end 1995. The vast
majority were located in Japan, Canada and Brazil.<PAGE>
<PAGE> 23
OPERATING RESULTS
-----------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993 1992 1991
-----------------------------------------------------------------------
REVENUES
Sales by Company-
operated restaurants $4,139 $3,242 $2,737 $2,750 $2,499
Revenues from
franchised restaurants 1,182 923 740 634 486
-----------------------------------------------------------------------
TOTAL REVENUES 5,321 4,165 3,477 3,384 2,985
-----------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Company-operated
restaurants 3,304 2,579 2,188 2,206 2,029
Franchised restaurants 211 165 133 114 90
General, administrative
and selling expenses* 507 408 335 320 269
Other operating (income)
expense--net (98) (59) (44) (51) (58)
-----------------------------------------------------------------------
TOTAL OPERATING
COSTS AND EXPENSES* 3,924 3,093 2,612 2,589 2,330
-----------------------------------------------------------------------
OPERATING INCOME
OUTSIDE OF THE U.S.* $1,397 $1,072 $ 865 $ 795 $ 655
=======================================================================
*Operating income prior to 1995 has been restated to reflect a more
meaningful allocation of general, administrative and selling expenses
between the U.S. and international segments and includes an additional
corporate category which is not allocated.
The growth in 1995 and 1994 revenue and operating income was driven
by higher combined operating margin dollars resulting from expansion,
positive comparable sales and stronger foreign currencies. The six
largest markets accounted for about 75% of total operating income
outside of the U.S. in 1995 and contributed 70% to operating income
growth outside of the U.S. in 1995 compared with 53% in 1994.<PAGE>
<PAGE> 24
Operations outside of the U.S. continued to contribute greater
amounts to consolidated results as shown below:
---------------------------------------------------------------------
(As a percent of consolidated) 1995 1994 1993 1992 1991
---------------------------------------------------------------------
Systemwide sales 47% 43% 40% 39% 37%
Total revenues 54 50 47 47 45
Operating income* 54 48 44 43 39
Operating margins
Company-operated 63 58 55 56 53
Franchised 40 36 32 31 27
Systemwide restaurants 38 36 34 32 29
Assets 53 51 47 45 46
---------------------------------------------------------------------
*Operating income prior to 1995 has been restated to reflect a more
meaningful allocation of general, administrative and selling
expenses between the U.S. and international segments and includes an
additional corporate category which is not allocated.
Company-operated margins increased $172 million or 26% in 1995.
Company-operated margins accounted for 53% of the total operating
income increase outside of the U.S. in 1995 and 55% of this increase
in 1994. The six largest markets contributed about 68% to total
Company-operated margin dollars outside of the U.S. in 1995 and
accounted for 46% of the increase over 1994.
Company-operated margins declined as a percent of sales in 1995 to
20.2% compared with 20.5% in 1994 and 20.1% in 1993. The 1995 decline
resulted from a strategic decision to invest incremental margin
dollars into our Value Strategy, designed to increase market share and
customer satisfaction, coupled with a comparison to extremely strong
results in the second half of 1994, primarily due to Brazil. The
Company believes it can maintain these annual operating margins as a
percent of sales within the historical range of the past ten years by
continuing to build sales and reduce costs.
Franchised margins grew $213 million or 28% in 1995. These margins
were 82.1% of applicable revenues in 1995 and 1994 compared with 82.0%
in 1993. Franchised margin dollar growth was driven by expansion and
positive comparable sales.
The 1995 and 1994 increases in general, administrative and selling
expenses were caused principally by additional employee costs
associated with rapid expansion in new and emerging markets,
government-mandated payroll and social cost increases and stronger
foreign currencies.
Other operating income increased in 1995 primarily due to higher
income from affiliates, principally Japan. Japan's increased income
resulted from expansion as well as an aggressive value strategy
emphasizing Extra Value Meals which resulted in strong comparable
sales.<PAGE>
<PAGE> 25
The Europe/Africa/Middle East segment accounted for 61% of revenues
and 60% of operating income outside of the U.S. in 1995, growing $650
and $195 million, respectively in 1995 and $369 and $113 million,
respectively, in 1994. Germany, England and France accounted for 83%
of this segment's operating income in 1995, compared with 82% in 1994.
Stronger currencies contributed about one third of this segment's
operating income increase over 1994. This benefit diminished as the
U.S. Dollar strengthened later in 1995.
Asia/Pacific revenues grew $280 and $236 million and operating
income increased $76 and $53 million in 1995 and 1994, respectively.
Australia, Japan, Hong Kong and Taiwan contributed 86% of this
segment's operating income in 1995. Japan's profits increased
significantly compared to 1994 due to an aggressive value campaign and
accelerated expansion. Australia experienced strong sales increases in
1995 from significant restaurant expansion and higher sales at
existing restaurants through a continued emphasis on value. The
Company's share of Taiwan's 1995 and 1994 revenues increased as a
result of a change in ownership from a joint venture to a wholly-owned
subsidiary in May 1994. The 1994 increases in revenues and operating
income were also attributable to expansion and developing economies in
many markets, with the exception of Japan, which suffered from a weak
economy. Strong currencies contributed to this segment's 1995
operating income increase. As the U.S. Dollar strengthened against the
Yen in the later part of the year, the currency benefit significantly
decreased.
Latin American revenues grew $223 and $95 million and operating
income increased $57 and $35 million in 1995 and 1994, respectively.
Brazil continued to be primarily responsible for the Latin American
operating income increase due to expansion as well as significant
sales increases from existing restaurants which began in mid-1994 due
to economic reforms. Brazil's restaurant base grew by 25% in 1995 and
27% in 1994. Mexico continued to be negatively impacted by the economy
and currency devaluation.
Canadian revenues increased $2 million in 1995 and decreased $12
million in 1994, while operating income decreased $2 million in 1995
and increased $6 million in 1994. The 1995 results reflect lower sales
at existing restaurants, caused by the slow economy, partially offset
by new restaurant growth.<PAGE>
<PAGE> 26
ASSETS AND CAPITAL EXPENDITURES
Assets outside of the U.S. rose $1.3 billion or 19% in 1995 due to
expansion and stronger foreign currencies. At year-end 1995, about 53%
of consolidated assets were located outside of the U.S.; 57% of these
assets were located in England, Germany, France, Australia and Canada.
-----------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993 1992 1991
-----------------------------------------------------------------------
Assets outside of the
U.S. $8,206 $6,909 $5,650 $5,271 $5,195
-----------------------------------------------------------------------
New restaurants $ 941 $ 723 $ 609 $ 603 $ 612
Existing restaurants 142 87 94 91 94
Other properties 55 34 55 47 39
-----------------------------------------------------------------------
Capital expenditures
outside of the U.S. $1,138 $ 844 $ 758 $ 741 $ 745
=======================================================================
In the past five years, $4.2 billion has been invested by the
Company outside of the U.S. Capital expenditures outside of the U.S.
rose $294 million or 35% in 1995 reflecting growth in all geographic
segments. Approximately 66% of 1995 capital expenditures outside of
the U.S. were invested in Europe -- primarily in Germany, France and
England.
Overall 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. These investments
accommodate higher sales volumes and transaction counts. Since 1990,
average development costs have decreased due to construction and
design efficiencies, standardization, global sourcing and changes in
the mix of openings.
Expenditures for existing restaurants included dining room remodels
to achieve increased levels of customer satisfaction and technology
upgrades to improve service and food quality. The majority of these
expenditures were in Europe. Expenditures for other properties were
principally for office facilities.
As in the U.S., the Company emphasizes restaurant property
ownership outside of the U.S.; however, various laws and regulations
make property acquisition and ownership much more difficult. Property
is purchased when legally and economically feasible; otherwise, long-
term leases are an alternative. In addition, certain markets have laws
and customs that offer stronger tenancy rights than are available in
the U.S. The Company owned 34% of traditional sites outside of the
U.S. at year-end 1995, compared with 36% in 1994 and 35% five years
ago.
Capital expenditures made by affiliates -- which were not included
in consolidated amounts -- were $258 million in 1995, compared with
$203 million in 1994. The majority of the 1995 expenditures were for
development in Japan, Sweden, Argentina, Russia and Singapore.<PAGE>
<PAGE> 27
-----------------------------------------------------------------------
FINANCIAL POSITION
-----------------------------------------------------------------------
TOTAL ASSETS AND CAPITAL EXPENDITURES
Total assets grew approximately $1.8 billion or 13% in 1995; net
property and equipment represented 83% of total assets and rose $1.5
billion. Capital expenditures increased $503 million or 32%,
reflecting increased expansion, reinvestment in existing restaurants
and stronger foreign currencies.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In the first quarter of 1996, the Company will adopt Statement of
Financial Accounting Standard No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. This
statement requires impairment losses be recognized for long-lived
assets, whether these assets are held for disposal or continue to be
used in operations, when indicators of impairment are present and the
fair value of assets are estimated to be less than carrying amounts.
After reviewing its assets for impairment, the Company anticipates a
pre-tax charge to operating income of approximately $16 million
related to restaurant sites in Mexico on adoption of this new
accounting standard.
CASH PROVIDED BY OPERATIONS
Cash provided by operations increased $370 million or 19% in 1995, and
$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 fifth consecutive 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 any short-term needs through
commercial paper borrowings and line of credit agreements.
Accordingly, a relatively low current ratio has been purposefully
maintained; it was .53 at year-end 1995.
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. Cash provided by
operations is expected to cover capital expenditures over the next
several years, even as expansion continues to accelerate.
-----------------------------------------------------------------------
(Dollars in millions) 1995 1994 1993 1992 1991
-----------------------------------------------------------------------
Cash provided by
operations $2,296 $1,926 $1,680 $1,426 $1,423
Cash provided by operations
less capital expenditures $ 233 $ 388 $ 363 $ 339 $ 294
Cash provided by operations
as a percent of capital
expenditures 111 125 128 131 126
Cash provided by operations
as a percent of average
total debt 49 48 44 33 31
-----------------------------------------------------------------------<PAGE>
<PAGE> 28
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.
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
currency-denominated debt has been used to lessen the impact of
changing foreign currencies on net income and shareholders' equity by
designating these borrowings as hedges of intercompany financings or
the Company's long-term investments in its foreign subsidiaries and
affiliates. Total foreign currency-denominated debt, including the
effects of currency exchange agreements, was $4.3 and $4.0 billion at
year-end 1995 and 1994, respectively.
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
-----------------------------------------------------------------------
Fixed-rate debt as a percent
of total debt 67% 64% 77% 75% 78%
Weighted average annual
interest rate 7.9 8.4 9.1 9.3 9.4
Foreign currency-denominated
debt as a percent of total
debt 89 92 86 72 61
Total debt as a percent of
total capitalization (total
debt and total shareholders'
equity) 38 39 37 40 49
-----------------------------------------------------------------------
The Company manages its debt portfolio to respond to changes in
interest rates and foreign currencies and accordingly, periodically
retires, redeems, and repurchases debt; terminates exchange
agreements; and uses derivatives. 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.<PAGE>
<PAGE> 29
While changing foreign currencies affect reported results, the
Company actively hedges selected foreign currencies, primarily to
minimize the cash exposure of royalty and other payments received in
the U.S. in local currencies. McDonald's restaurants also primarily
purchase goods and services in local currencies resulting in natural
hedges and McDonald's typically finances in local currencies creating
economic hedges. The Company's exposure is diversified within a broad
basket of currencies. At year-end 1995, assets in hyperinflationary
markets and in Mexico were principally financed in U.S. Dollars. The
Company's largest net asset exposures (defined as foreign currency
assets less foreign currency liabilities) by foreign currency were as
follows:
----------------------------------------------------------------------
(In millions of dollars) December 31, 1995 1994
----------------------------------------------------------------------
Canadian Dollars $361 $311
British Pounds Sterling 356 330
Australian Dollars 240 212
French Francs 198 99
Hong Kong Dollars 115 52
Netherland Guilders 107 15
Austrian Schillings 106 84
----------------------------------------------------------------------
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 McDonald's 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 1995, the Company and its subsidiaries had
$1.3 billion available under line of credit agreements and $785
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, the Company and its affiliates have
leased properties related to 40% of U.S. traditional restaurant
openings and 66% of traditional restaurant openings outside of the
U.S.
Since 1990, the Company has improved its balance sheet by reducing
leverage while simultaneously increasing expansion and repurchasing
shares.<PAGE>
<PAGE> 30
TOTAL SHAREHOLDERS' EQUITY
Total shareholders' equity rose $976 million or 14% in 1995,
representing 51% of total assets at year-end. Stronger foreign
currencies increased shareholders' equity by $28 million in 1995.
One technique used to enhance common shareholder value is share
repurchase using excess cash flow or debt capacity, while maintaining
a strong equity base for future expansion. McDonald's has repurchased
$2.8 billion of its common stock, representing 148 million shares,
over the past 10 years. At year-end 1995, the market value of shares
recorded as common stock in treasury was $6.3 billion, compared to the
cost of $2.5 billion.
In January 1996, the Company announced plans to repurchase $2.2
billion of its common stock within the next three years, including
$200 million remaining under the three-year, $1 billion program
announced in January 1994. In 1993, the Company completed a $700
million common share repurchase program begun in 1992.
RETURNS
Return on average assets is computed using operating income. Net
income less preferred stock dividends (net of tax in 1995, 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.
----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------------------------------------------------------------------
Return on average assets 17.9% 17.6% 17.0% 16.4% 15.7%
Return on average common
equity 19.9 19.4 19.0 18.2 19.1
----------------------------------------------------------------------
The improvements in return on average assets since 1991 reflected
better global operating results and a slower rate of asset growth. The
1995, 1994 and 1993 improvements in return on average common equity
reflected higher levels of share repurchase, whereas the decline in
1992 resulted from a lower level 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> 31
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Reference
---------
Management's report 32
Report of independent auditors 33
Consolidated statement of income
for each of the three years in the
period ended December 31, 1995 34
Consolidated balance sheet
at December 31, 1995 and 1994 35
Consolidated statement of cash flows
for each of the three years in the
period ended December 31, 1995 36
Consolidated statement of shareholders'
equity for each of the three years in
the period ended December 31, 1995 37
Notes to consolidated financial statements
(Financial comments) 38 - 56
Quarterly results (unaudited) 57<PAGE>
<PAGE> 32
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, 1995, 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 below.
The Board of Directors, operating through its Audit Committee
composed entirely of independent 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 25, 1996<PAGE>
<PAGE> 33
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 as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December
31, 1995. 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 at December 31, 1995 and 1994, and the
consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
January 25, 1996<PAGE>
<PAGE> 34
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------------------------------
<CAPTION>
(In millions of dollars, except per common share data)
Years ended December 31, 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales by Company-operated restaurants $6,863.5 $5,792.6 $5,157.2
Revenues from franchised restaurants 2,931.0 2,528.2 2,250.9
--------------------------------------------------------------------------
TOTAL REVENUES 9,794.5 8,320.8 7,408.1
--------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants
Food and packaging 2,319.4 1,934.2 1,735.1
Payroll and other employee benefits 1,730.9 1,459.1 1,291.2
Occupancy and other operating expenses 1,497.4 1,251.7 1,138.3
--------------------------------------------------------------------------
5,547.7 4,645.0 4,164.6
--------------------------------------------------------------------------
Franchised restaurants--occupancy expenses 514.9 435.5 380.4
General, administrative and selling expenses 1,236.3 1,083.0 941.1
Other operating (income) expense--net (105.7) (83.9) (62.0)
--------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 7,193.2 6,079.6 5,424.1
--------------------------------------------------------------------------
OPERATING INCOME 2,601.3 2,241.2 1,984.0
--------------------------------------------------------------------------
Interest expense--net of capitalized interest
of $22.5, $20.6 and $20.0 340.2 305.7 316.1
Nonoperating income (expense)--net (92.0) (48.9) 7.8
--------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,169.1 1,886.6 1,675.7
--------------------------------------------------------------------------
Provision for income taxes 741.8 662.2 593.2
--------------------------------------------------------------------------
NET INCOME $1,427.3 $1,224.4 $1,082.5
==========================================================================
NET INCOME PER COMMON SHARE $ 1.97 $ 1.68 $ 1.45
--------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .26 $ .23 $ .21
--------------------------------------------------------------------------
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 35
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED BALANCE SHEET
<CAPTION>
--------------------------------------------------------------------
(In millions of dollars) December 31, 1995 1994
--------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 334.8 $ 179.9
Accounts receivable 377.3 348.1
Notes receivable 36.3 31.2
Inventories, at cost, not in excess of market 58.0 50.5
Prepaid expenses and other current assets 149.4 131.0
--------------------------------------------------------------------
TOTAL CURRENT ASSETS 955.8 740.7
--------------------------------------------------------------------
OTHER ASSETS AND DEFERRED CHARGES
Notes receivable due after one year 98.5 80.0
Investments in and advances to affiliates 656.9 579.3
Miscellaneous 357.3 380.4
--------------------------------------------------------------------
TOTAL OTHER ASSETS AND DEFERRED CHARGES 1,112.7 1,039.7
--------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 17,137.6 15,184.6
Accumulated depreciation and amortization (4,326.3) (3,856.2)
--------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 12,811.3 11,328.4
--------------------------------------------------------------------
INTANGIBLE ASSETS--NET 534.8 483.1
--------------------------------------------------------------------
TOTAL ASSETS $15,414.6 $13,591.9
====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 413.0 $ 1,046.9
Accounts payable 564.3 509.4
Income taxes 55.4 25.0
Other taxes 127.1 102.1
Accrued interest 117.4 107.7
Other accrued liabilities 352.5 291.9
Current maturities of long-term debt 165.2 368.3
--------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,794.9 2,451.3
--------------------------------------------------------------------
LONG-TERM DEBT 4,257.8 2,935.4
OTHER LONG-TERM LIABILITIES AND
MINORITY INTERESTS 664.7 422.8
DEFERRED INCOME TAXES 835.9 840.8
COMMON EQUITY PUT OPTIONS 56.2
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized--165.0 million shares;
issued--7.2 thousand and 11.2 million 358.0 674.2<PAGE>
Common stock, no par value;
authorized--1.25 billion shares;
issued--830.3 million 92.3 92.3
Additional paid-in capital 387.4 286.0
Guarantee of ESOP Notes (214.2) (234.4)
Retained earnings 9,831.3 8,625.9
Foreign currency translation adjustment (87.1) (114.9)
--------------------------------------------------------------------
10,367.7 9,329.1
--------------------------------------------------------------------
Common stock in treasury, at cost;
130.6 and 136.6 million shares (2,506.4) (2,443.7)
--------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,861.3 6,885.4
--------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $15,414.6 $13,591.9
====================================================================
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 36
<TABLE>
McDONALD'S CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
--------------------------------------------------------------------------
(In millions of dollars)
Years ended December 31, 1995 1994 1993
--------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $1,427.3 $1,224.4 $1,082.5
Adjustments to reconcile to cash
provided by operations
Depreciation and amortization 709.0 628.6 568.4
Deferred income taxes (4.2) (5.6) 52.4
Changes in operating working capital items
Accounts receivable increase (49.5) (51.6) (48.3)
Inventories, prepaid expenses and other
current assets increase (20.4) (15.0) (9.6)
Accounts payable increase 52.6 105.4 45.4
Accrued interest increase (decrease) 13.0 (25.5) (5.1)
Taxes and other liabilities increase 158.3 95.2 26.5
Other--net 10.1 (29.7) (32.4)
--------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS 2,296.2 1,926.2 1,679.8
--------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment expenditures (2,063.7) (1,538.6) (1,316.9)
Purchases of restaurant businesses (110.1) (133.8) (64.2)
Sales of restaurant businesses 151.6 151.5 114.2
Property sales 66.2 66.0 61.6
Notes receivable additions (33.4) (15.1) (33.1)
Notes receivable reductions 31.5 56.7 75.7
Other (151.1) (92.6) (55.3)
--------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (2,109.0) (1,505.9) (1,218.0)
--------------------------------------------------------------------------
FINANCING ACTIVITIES
Net short-term borrowings (repayments) (272.9) 521.7 (8.9)
Long-term financing issuances 1,250.2 260.9 1,241.0
Long-term financing repayments (532.2) (536.9) (1,185.9)
Treasury stock purchases (314.5) (495.6) (620.1)
Common and preferred stock dividends (226.5) (215.7) (201.2)
Other 63.6 39.4 62.6
--------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (32.3) (426.2) (712.5)
--------------------------------------------------------------------------
CASH AND EQUIVALENTS INCREASE (DECREASE) 154.9 (5.9) (250.7)
--------------------------------------------------------------------------
Cash and equivalents at beginning of year 179.9 185.8 436.5
--------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $ 334.8 $ 179.9 $ 185.8
==========================================================================<PAGE>
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 331.0 $ 323.9 $ 312.2
Income taxes paid $ 667.6 $ 621.8 $ 521.7
--------------------------------------------------------------------------
The accompanying Financial Comments are an integral part of the
consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 37
<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, 1992 11.6 $680.2 830.3 $92.3 $214.1 $(271.3) $6,727.3 $(127.4) (103.3) $(1,422.8)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 1,082.5
Common stock cash dividends
($.21 per share) (150.3)
Preferred stock cash dividends
(per share: $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 $23.0) 42.1 2.2 5.1 35.1
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 11.4 677.3 830.3 92.3 256.7 (253.6) 7,612.6 (192.2) (123.0) (1,919.0)
- ----------------------------------------------------------------------------------------------------------------------------------<PAGE>
Net income 1,224.4
Common stock cash dividends
($.23 per share) (163.9)
Preferred stock cash dividends
(per share: $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)
Stock option exercises and other
(including tax benefits of
$20.3) 28.8 1.7 3.8 27.1
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 11.2 674.2 830.3 92.3 286.0 (234.4) 8,625.9 (114.9) (136.6) (2,443.7)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income 1,427.3
Common stock cash dividends
($.26 per share) (181.4)
Preferred stock cash dividends
(per share: $1.01 for Series B, $1.16 for
Series C and $1.93 for Series
E depositary share), (net of
tax benefits of $1.6) (40.5)
Preferred stock conversion (11.2) (316.2) 25.3 8.8 144.6
ESOP Notes payment 19.0
Treasury stock acquisitions (8.8) (321.0)
Translation adjustments
(including taxes of $9.0) 27.8
Common equity put options
expiration 56.2<PAGE>
Stock option exercises and other
(including tax benefits of
$42.2) 76.1 1.2 6.0 57.5
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 0.0* $358.0 830.3 $92.3 $387.4 $(214.2) $9,831.3 $ (87.1) (130.6) $(2,506.4)
==================================================================================================================================
* At December 31, 1995, 7.2 thousand shares were outstanding.
The accompanying Financial Comments are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE> 38
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 affiliates, in which the
Company owns 50% or less, are carried at equity in the companies' net
assets.
ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
FOREIGN CURRENCY TRANSLATION
The functional currency of substantially all operations outside of the
U.S. is the respective local currency, except for hyperinflationary
countries where it is the U.S. Dollar.
ADVERTISING COSTS
Production costs for radio and television advertising are expensed as
of the date the commercials are initially aired. Advertising expenses
included in costs of Company-operated restaurants and general,
administrative and selling expenses were (in millions): 1995--$431.0;
1994--$385.6; 1993--$353.8.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, Accounting for Stock-Based Compensation, which is
effective in 1996. As permitted by the new standard, the Company will
continue applying accounting prescribed by APB Opinion No. 25 and
include additional footnote disclosures.
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, consisting primarily of franchise rights reacquired
from franchisees and affiliates, are amortized on the straight-line
method over an average life of 30 years.<PAGE>
<PAGE> 39
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In the first quarter of 1996, the Company will adopt Statement of
Financial Accounting Standard No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. This
statement requires impairment losses be recognized for long-lived
assets, whether these assets are held for disposal or continue to be
used in operations, when indicators of impairment are present and the
fair value of assets are estimated to be less than carrying amounts.
After reviewing its assets, the Company anticipates a pre-tax charge
to operating income of approximately $16 million related to restaurant
sites in Mexico on adoption of this new accounting standard.
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 either long-term investments in or intercompany
loans to foreign subsidiaries and affiliates. 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. Gains or losses from the early termination of
interest rate swaps are amortized as an adjustment to interest expense
over the shorter of the remaining life of the swap or the underlying
debt being hedged.
The Company also purchases foreign currency options (with little or
no intrinsic value) to hedge future foreign currency-denominated
royalty and other payments received in the U.S. The premiums paid for
these options are amortized over the option life and are recorded in
nonoperating expense. Any realized gains on exercised options are
deferred and amortized over the period being hedged.
Short-term forward foreign exchange contracts are also used to
mitigate exposure on foreign currency-denominated cash flows received
from affiliates and subsidiaries. These contracts are marked to market
with the resulting gains or losses recorded in nonoperating income
(expense). Gains and losses associated with these forward contracts
have not been material.
If a hedged item matures or is extinguished, the associated
derivative is marked to market with the resulting gain or loss
recognized immediately. The derivative then is redesignated as a hedge
of some other item or terminated.
The carrying amounts for cash and equivalents and notes receivable
approximated fair value. No fair value was provided for noninterest-
bearing security deposits by franchisees as these deposits are an
integral part of the overall franchise arrangements.
STATEMENT OF CASH FLOWS
The Company considers short-term, highly liquid investments to be cash
equivalents. The impact of changing foreign currencies on cash and
equivalents was not material.<PAGE>
<PAGE> 40
----------------------------------------------------------------------
NUMBER OF RESTAURANTS IN OPERATION
----------------------------------------------------------------------
The Company, its franchisees and affiliates operate traditional and
satellite restaurants. Satellite restaurants generally offer a
simplified menu and are smaller in size and sales volume compared to
traditional restaurants.
----------------------------------------------------------------------
December 31, 1995 1994 1993
----------------------------------------------------------------------
Operated by franchisees 10,776 9,982 9,288
Operated under business
facilities lease arrangements 464 476 544
Operated by the Company 3,513 3,083 2,699
Operated by 50% or less
owned affiliates 2,056 1,664 1,462
----------------------------------------------------------------------
Total traditional restaurants 16,809 15,205 13,993
======================================================================
U.S. 1,027 494 114
Outside of the U.S. 544 251 56
----------------------------------------------------------------------
Total satellite restaurants 1,571 745 170
======================================================================
Franchisees operating under business facilities lease arrangements
have options to purchase the businesses.
In 1995, the Company purchased the remaining minority interest in
its Hong Kong subsidiary. 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.
----------------------------------------------------------------------
OTHER OPERATING (INCOME) EXPENSE--NET
----------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993
----------------------------------------------------------------------
Gains on sales of restaurant businesses $ (63.9) $(67.1) $(48.2)
Equity in earnings of unconsolidated
affiliates (96.5) (47.0) (34.6)
Net losses from property dispositions 49.2 20.0 15.5
Other--net 5.5 10.2 5.3
----------------------------------------------------------------------
Other operating (income) expense--net $(105.7) $(83.9) $(62.0)
======================================================================
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. The 1995 increase in equity in earnings of
unconsolidated affiliates occurred because of greater income from
affiliates, principally Japan.<PAGE>
<PAGE> 41
---------------------------------------------------------------------
INCOME TAXES
---------------------------------------------------------------------
Income before provision for income taxes, classified by source of
income in the following table, was restated to reflect a more
meaningful allocation of general, administrative and selling expenses
between the U.S. and outside of the U.S. segments.
---------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993
---------------------------------------------------------------------
U.S. and Corporate $1,026.2 $1,084.9 $1,017.6
Outside of the U.S. 1,142.9 801.7 658.1
---------------------------------------------------------------------
Income before provision for
income taxes $2,169.1 $1,886.6 $1,675.7
=====================================================================
The provision for income taxes, classified by the timing and
location of payment, was as follows:
---------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993
---------------------------------------------------------------------
U.S. federal $363.7 $379.3 $331.6
U.S. state 60.5 71.1 62.0
Outside of the U.S. 321.8 217.4 147.2
---------------------------------------------------------------------
Current tax provision 746.0 667.8 540.8
---------------------------------------------------------------------
U.S. federal (17.6) (21.2) 21.9
U.S. state (3.9) (3.0) 3.4
Outside of the U.S. 17.3 18.6 27.1
---------------------------------------------------------------------
Deferred tax provision (4.2) (5.6) 52.4
---------------------------------------------------------------------
Provision for income taxes $741.8 $662.2 $593.2
=====================================================================<PAGE>
<PAGE> 42
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, 1995 1994
-------------------------------------------------------------------------
Property and equipment basis differences $ 898.6 $ 852.8
Other 197.8 178.3
-------------------------------------------------------------------------
Total deferred tax liabilities 1,096.4 1,031.1
-------------------------------------------------------------------------
Deferred tax assets before
valuation allowance (1) (360.5) (274.7)
Valuation allowance 52.7 41.4
-------------------------------------------------------------------------
Net deferred tax liabilities (2) $ 788.6 $ 797.8
=========================================================================
(1) Includes tax effects of loss carryforwards (in millions): 1995--
$56.1; 1994--$45.1.
(2) Net of assets recorded in current income taxes (in millions):
1995--$47.3; 1994--$43.0.
Reconciliations of the statutory U.S. federal income tax rates to
the effective income tax rates were as follows:
-------------------------------------------------------------------------
1995 1994 1993
-------------------------------------------------------------------------
Statutory U.S. federal income tax rates 35.0% 35.0% 35.0%
State income taxes, net of related
federal income tax benefit 1.7 2.3 2.5
Benefits and taxes related to
foreign operations (2.9) (2.7) (2.6)
Other .4 .5 .5
-------------------------------------------------------------------------
Effective income tax rates 34.2% 35.1% 35.4%
=========================================================================
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 $915 million at
December 31, 1995, and consisted primarily of undistributed earnings
which are considered to be permanently invested in the businesses. If
these earnings were not considered permanently invested, any
incremental taxes that may need to be provided would not be material.<PAGE>
<PAGE> 43
------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
------------------------------------------------------------------------
(In millions of dollars) December 31, 1995 1994
------------------------------------------------------------------------
Land $ 3,251.5 $ 2,950.1
Buildings and improvements on owned land 6,419.7 5,814.7
Buildings and improvements on leased land 4,986.3 4,211.2
Equipment, signs and seating 1,942.3 1,727.8
Other 537.8 480.8
------------------------------------------------------------------------
17,137.6 15,184.6
------------------------------------------------------------------------
Accumulated depreciation and amortization (4,326.3) (3,856.2)
------------------------------------------------------------------------
Net property and equipment $12,811.3 $11,328.4
========================================================================
Depreciation and amortization were (in millions): 1995--$619.9; 1994--
$550.5; 1993--$492.8. Contractual obligations for the acquisition and
construction of property amounted to $268.2 million at December 31,
1995.<PAGE>
<PAGE> 44
----------------------------------------------------------------------
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 from
subsidiaries outside of the U.S. were (in millions): 1995--$358.4;
1994--$268.9; 1993--$202.8.
Segment operating income has been restated to reflect a more
meaningful allocation of general, administrative and selling expenses
between the U.S. and international segments and includes an additional
corporate category. In addition, segment assets have been restated to
reflect an additional corporate category, primarily comprised of
corporate cash, investments, asset portions of financing instruments
and certain intangibles.
----------------------------------------------------------------------
(In millions of dollars) 1995 1994 1993
----------------------------------------------------------------------
U.S. $ 4,473.9 $ 4,155.5 $ 3,931.2
Europe/Africa/Middle East 3,255.1 2,604.7 2,235.9
Asia/Pacific 1,010.8 730.7 494.4
Canada 547.8 546.1 557.8
Latin America 506.9 283.8 188.8
----------------------------------------------------------------------
Total revenues $ 9,794.5 $ 8,320.8 $ 7,408.1
======================================================================
U.S. $ 1,252.4 $ 1,216.7 $ 1,156.4
Europe/Africa/Middle East 840.3 645.8 532.7
Asia/Pacific 309.6 233.5 180.1
Canada 114.5 116.8 111.2
Latin America 132.7 76.0 41.3
Corporate (48.2) (47.6) (37.7)
----------------------------------------------------------------------
Total Operating income $ 2,601.3 $ 2,241.2 $ 1,984.0
======================================================================
U.S. $ 7,040.2 $ 6,492.7 $ 6,200.1
Europe/Africa/Middle East 5,069.2 4,257.5 3,473.2
Asia/Pacific 1,813.6 1,547.7 1,103.2
Canada 510.5 487.6 562.5
Latin America 812.5 616.4 510.9
Corporate 168.6 190.0 185.3
----------------------------------------------------------------------
Total assets $15,414.6 $13,591.9 $12,035.2
======================================================================<PAGE>
<PAGE> 45
------------------------------------------------------------------------
DEBT FINANCING
------------------------------------------------------------------------
LINE OF CREDIT AGREEMENTS
Effective April 19, 1995, the Company canceled its existing $700.0
million line of credit agreement and entered into a new $675.0 million
five-year revolving credit agreement with various banks. Accordingly,
$675.0 million of notes maturing within one year have been
reclassified as long-term debt. In June 1995, the Company entered into
an additional $25.0 million revolving credit agreement with various
banks for a renewable term of 364 days. Both agreements, which
remained unused at December 31, 1995, provide for fees of .07% per
annum on the total commitment. Each borrowing under the agreements
bears interest at one of several specified floating rates selected by
the Company at the time of borrowing. In addition, certain
subsidiaries outside of the U.S. had unused lines of credit totaling
$550.5 million at December 31, 1995; 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 6.4% and 6.8% at December 31, 1995, and 1994,
respectively.<PAGE>
<PAGE> 46
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 $1.6 billion at December 31, 1995, and were denominated
primarily in U.S. Dollars, Japanese Yen, Deutsche Marks and British
Pounds Sterling. 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 purchased foreign currency options which were
outstanding at December 31, 1995, with a notional amount equivalent to
U.S. $187.7 million in various currencies, primarily Deutsche Marks,
British Pounds Sterling and French Francs. At December 31, 1995, the
unamortized premium related to these currency options was $4.9
million. There were no deferred gains related to these options at year
end. Short-term forward foreign exchange contracts outstanding at
December 31, 1995, had a U.S. Dollar equivalent of $27.6 million in
various currencies, primarily Deutsche Marks, Japanese Yen and Swiss
Francs.
GUARANTEES
The Company has guaranteed and included in total debt at December 31,
1995, $146.7 million of 7.4% ESOP Notes Series A and $77.1 million of
7.1% ESOP Notes Series B issued by the Leveraged Employee Stock
Ownership Plan with payments through 2004 and 2006, respectively.
Interest rates on the notes were adjusted in 1995 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 $60.6 million at
December 31, 1995.
The Company was a general partner in 92 domestic partnerships with
total assets of $407.9 million and total liabilities of $232.5 million
at December 31, 1995.<PAGE>
<PAGE> 47
FAIR VALUES
----------------------------------------------------------------------
December 31, 1995
(In millions of dollars) Carrying amount Fair value
----------------------------------------------------------------------
Liabilities
Debt $4,204.9 $4,399.9
Notes payable 413.0 413.0
Foreign currency exchange agreements 218.1 287.2
Interest-rate exchange agreements (1.1)
----------------------------------------------------------------------
Total liabilities 4,836.0 5,099.0
----------------------------------------------------------------------
Assets
Foreign currency exchange agreements 40.6 28.8
----------------------------------------------------------------------
Net debt $4,795.4 $5,070.2
======================================================================
Purchased foreign currency options $ 4.9 $ 5.3
----------------------------------------------------------------------
Short-term forward foreign exchange contracts were recorded at their
fair value of $27.6 million at December 31, 1995. The fair value of
the debt and notes payable obligations (excluding capital leases), the
currency and interest-rate exchange agreements, and the foreign
currency options 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, 1995.
DEBT OBLIGATIONS
The Company has incurred debt obligations principally through 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> 48
DEBT OBLIGATIONS
<TABLE>
<CAPTION>
Interest rates (1) Amounts outstanding
Maturity December 31 December 31 Aggregate maturities by currency for 1995 balances
dates 1995 1994 1995 1994 1996 1997 1998 1999 2000 Thereafter
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In millions of U.S. Dollars)
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed--original issue 7.5% 8.2% $2,172.6 $1,647.0
Fixed--converted via
exchange agreements (2) 5.9 5.7 (1,844.2) (1,483.6)
Floating 5.5 4.5 216.5 167.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total U.S. Dollars 1996-2033 544.9 330.7 $120.7 $(60.2) $(230.2) $(211.1) (46.6) $972.3
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 6.0 6.4 552.7 440.7
Floating 4.4 5.4 376.6 339.5
- ---------------------------------------------------------------------------------------------------------------------------------
Total Deutsche Marks 1996-2007 929.3 780.2 231.7 130.7 280.0 139.3 147.3 0.3
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 7.8 8.3 727.3 527.2
Floating 5.8 6.0 177.4 292.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total French Francs 1996-2003 904.7 819.5 75.9 126.0 163.2 190.7 0.1 348.8
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 4.4 4.3 409.5 375.8
Floating 0.6 2.0 130.5 135.5
- ---------------------------------------------------------------------------------------------------------------------------------
Total Japanese Yen 1996-2023 540.0 511.3 154.7 96.7 288.6
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 9.3 10.4 382.3 464.9
Floating 6.2 6.1 121.1 197.2
- ---------------------------------------------------------------------------------------------------------------------------------
Total British Pounds
Sterling 1996-2003 503.4 662.1 149.8 21.1 85.4 247.1
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 11.0 11.1 113.8 113.3
Floating 7.6 7.4 100.5 106.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total Australian Dollars 1996-2001 214.3 219.6 141.6 1.6 65.2 1.7 1.7 2.5
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 6.2 6.4 136.9 149.9
Floating 4.2 5.7 32.2 26.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total Netherland Guilders 1996-1999 169.1 176.5 7.3 108.8 53.0<PAGE>
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 9.0 11.8 130.3 114.5
Floating 6.0 6.0 22.0 39.3
- ---------------------------------------------------------------------------------------------------------------------------------
Total Canadian Dollars 1996-2021 152.3 153.8 95.5 55.2 0.2 0.2 0.2 1.0
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.7 8.1 77.6 97.0
Floating 6.6 6.4 40.1 37.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total Hong Kong Dollars 1996-2008 117.7 134.6 38.4 30.6 17.6 11.1 11.2 8.8
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 4.7 4.4 81.1 97.6
Floating 2.3 30.4
- ---------------------------------------------------------------------------------------------------------------------------------
Total Swiss Francs 1996-2000 111.5 97.6 16.1 34.7 60.7
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.5 8.0 43.9 41.0
Floating 7.9 8.2 65.3 69.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total New Taiwan Dollars 1996-2001 109.2 110.6 31.7 16.3 12.7 8.2 40.3
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 9.5 9.5 63.5 58.7
Floating 11.3 8.2 39.1 7.1
- ---------------------------------------------------------------------------------------------------------------------------------
Total Spanish Pesetas 1997-1998 102.6 65.8 39.1 63.5
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed 8.4 9.0 161.7 133.2
Floating 10.9 12.3 234.7 117.6
- ---------------------------------------------------------------------------------------------------------------------------------
Total other currencies 1996-2016 396.4 250.8 163.7 116.8 19.8 51.1 11.8 33.2
- ---------------------------------------------------------------------------------------------------------------------------------
Debt obligations
including the net effects
of currency and interest-
rate exchange agreements 4,795.4 4,313.1 1,227.1 552.8 556.6 244.2 271.8 1,942.9
- ---------------------------------------------------------------------------------------------------------------------------------
Obligations supported by
long-term line of credit
agreement (675.0) 675.0
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset positions of
currency exchange
agreements (included in
miscellaneous other
assets) 40.6 37.5 26.1 0.5 2.2 11.8
- ---------------------------------------------------------------------------------------------------------------------------------
Total debt obligations $4,836.0 $4,350.6 $578.2 $552.8 $557.1 $246.4 $946.8 $1,954.7
=================================================================================================================================
(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 reflect the fixed rate on the receivable portion of
the exchange agreements. All other obligations in this table reflect the gross
effects of these and other exchange agreements.<PAGE>
/TABLE
<PAGE>
<PAGE> 49
-------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS
-------------------------------------------------------------------
(In millions of dollars) December 31, 1995 1994
-------------------------------------------------------------------
Security deposits by franchisees $155.0 $141.2
Preferred interests in consolidated
subsidiaries 400.6 162.4
Minority interests in consolidated
subsidiaries 33.2 50.3
Other
75.9 68.9
-------------------------------------------------------------------
Other long-term liabilities and minority
interests $664.7 $422.8
===================================================================
Preferred interests in consolidated subsidiaries reflects preferred
stock issued by Company subsidiaries. One subsidiary issued preferred
stock denominated in British Pounds Sterling as follows: British
Pounds 150 million of Series C, D and E at an average rate of 7.04% in
1995; British Pounds 25 million of 5.42% Series B in 1994; and British
Pounds 50 million of 5.91% Series A 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. $349.4 million at December 31, 1995. Another
subsidiary issued additional preferred stock in 1994 and 1993. At
December 31, 1995, the preferred stock of this subsidiary had a
dividend rate of 14.6% (adjusted annually) and was redeemable at the
option of the holder at a redemption price totaling $51.2 million.
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> 50
---------------------------------------------------------------------
LEASING ARRANGEMENTS
---------------------------------------------------------------------
At December 31, 1995, the Company was lessee at 2,976 locations under
ground leases (the Company leases land and constructs and owns
buildings) and at 4,204 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 satellite
restaurants operate under improved leases which generally include
percentage rent payments only and are of a shorter term. 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 are:
---------------------------------------------------------------------
(In millions of dollars) Restaurant Other Total
---------------------------------------------------------------------
1996 $ 400.3 $ 45.0 $ 445.3
1997 392.7 41.9 434.6
1998 377.3 36.9 414.2
1999 359.0 28.0 387.0
2000 341.0 23.5 364.5
Thereafter 3,379.8 117.4 3,497.2
---------------------------------------------------------------------
Total minimum payments $5,250.1 $292.7 $5,542.8
=====================================================================
Rent expense was (in millions): 1995--$497.6; 1994--$394.4; 1993--
$339.0. 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): 1995--$73.5; 1994--$40.3;
1993--$29.0.<PAGE>
<PAGE> 51
----------------------------------------------------------------------
FRANCHISE ARRANGEMENTS
----------------------------------------------------------------------
Franchise arrangements include a lease and a license and generally
provide for initial fees as well as continuing rent and service fee
payments to the Company, based upon a percentage of sales with minimum
rent payments. Franchisees are granted the right to operate a
McDonald's restaurant using the McDonald's system. Additionally,
franchisees are provided the use of a restaurant facility 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) 1995 1994 1993
----------------------------------------------------------------------
Owned sites $ 708.6 $ 633.4 $ 573.6
Leased sites 521.4 446.0 381.7
----------------------------------------------------------------------
Minimum rents 1,230.0 1,079.4 955.3
----------------------------------------------------------------------
Percentage rent and service fees 1,638.4 1,411.8 1,272.1
Initial fees 62.6 37.0 23.5
----------------------------------------------------------------------
Revenues from franchised restaurants $2,931.0 $2,528.2 $2,250.9
======================================================================
Future minimum rent payments due to the Company under franchise
arrangements are:
----------------------------------------------------------------------
Owned Leased
(In millions of dollars) sites sites Total
----------------------------------------------------------------------
1996 $ 787.9 $ 547.1 $ 1,335.0
1997 776.1 541.7 1,317.8
1998 780.7 542.3 1,323.0
1999 763.1 528.9 1,292.0
2000 745.7 512.5 1,258.2
Thereafter 6,937.0 4,825.4 11,762.4
----------------------------------------------------------------------
Total minimum payments $10,790.5 $7,497.9 $18,288.4
======================================================================
At December 31, 1995, net property and equipment under franchise
arrangements totaled $7.3 billion (including land of $2.2 billion)
after deducting accumulated depreciation and amortization of $2.2
billion.<PAGE>
<PAGE> 52
-------------------------------------------------------------------------
PROFIT SHARING PROGRAM
-------------------------------------------------------------------------
The Company has a program for U.S. employees which includes profit
sharing, 401(k) (McDESOP), and leveraged employee stock ownership
(LESOP) features. McDESOP allows participants to make contributions
which are partially matched by the Company. Profit sharing assets and
contributions made by McDESOP participants can be invested in
McDonald's common stock or among several other investment
alternatives. Company contributions to McDESOP are invested in
McDonald's common stock. Due to the conversion of all remaining
preferred shares in 1995, the LESOP is now invested only in McDonald's
common stock.
Staff, executives and restaurant managers participate in profit
sharing contributions and shares released under the LESOP based on
participant's 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 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 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) 1995 1994 1993
-------------------------------------------------------------------------
Profit sharing $14.2 $15.2 $13.5
LESOP 29.9 25.4 25.5
McDESOP 11.7 9.5 8.1
-------------------------------------------------------------------------
U.S. program costs $55.8 $50.1 $47.1
=========================================================================
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): 1995 $26.6 1994--$18.1;
1993--$13.0.
Profit sharing costs were restated to reflect a more meaningful
allocation of program costs between the U.S. and outside of the U.S.
segments. The Company does not provide any other postretirement
benefits, and postemployment benefits were immaterial.<PAGE>
<PAGE> 53
-------------------------------------------------------------------------
STOCK OPTIONS
-------------------------------------------------------------------------
At December 31, 1995, the Company had three stock-based compensation
plans which were accounted for under APB Opinion No. 25. Accordingly,
no compensation cost has been recognized in the consolidated financial
statements for these plans because options to purchase common stock
are granted at prices not less than the fair market value of the stock
on date of grant.
Substantially all of the options under these plans become
exercisable in four equal biennial installments, commencing one year
from date of grant, and expire ten years from date of grant. At
December 31, 1995, 105.1 and 37.0 million shares of common stock were
reserved for issuance and for future grants, respectively, under these
plans.
-------------------------------------------------------------------------
Number of options Weighted average
(in millions) exercise price
-------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993
-------------------------------------------------------------------------
Options outstanding
at January 1 62.3 55.1 50.3 $21.02 $18.16 $15.54
Options granted 13.7 13.6 12.0 33.24 29.90 26.25
Options exercised (6.0) (4.1) (5.3) 15.76 12.14 11.01
Options forfeited (1.9) (2.3) (1.9) 24.55 18.72 17.28
-------------------------------------------------------------------------
Options outstanding
at December 31 68.1 62.3 55.1 $23.86 $21.02 $18.16
=========================================================================
Options exercisable
at December 31 24.4 21.4 17.6
-------------------------------------------------------------------------
Options granted during each year were 1.96%, 1.94% and 1.69% of
average common shares outstanding for 1995, 1994 and 1993,
respectively. Stock options were granted to approximately 8,500, 7,700
and 6,800 employees in 1995, 1994 and 1993, respectively. Shares are
issued from treasury stock to employees upon exercise of stock
options.
The potential dilution of common shares outstanding upon exercise
of stock options shown in the following table 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 2.9%, 1.6% and 1.8% of shares
outstanding at year-end 1995, 1994 and 1993, respectively.<PAGE>
<PAGE> 54
-------------------------------------------------------------------------
(Shares in millions) 1995 1994 1993
-------------------------------------------------------------------------
Common shares outstanding
at year end 699.8 693.7 707.3
Potential dilution of common shares
outstanding from option exercises 20.4 11.4 12.6
Average option exercise price $15.76 $12.14 $11.01
Average cost of treasury stock issued
for option exercises $ 7.16 $ 7.05 $ 6.65
-------------------------------------------------------------------------
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.
----------------------------------------------------------------------
December 31, 1995
----------------------------------------------------------------------
Options outstanding Options exercisable
----------------------------------------------------------------------
Weighted
average Weighted Weighted
Range of Number remaining average Number average
exercise of options contractual exercise of options exercise
prices in millions life (Years) price in millions price
----------------------------------------------------------------------
$ 9 to 12 5.5 2.0 $11.05 5.5 $11.05
14 to 18 17.0 5.0 15.42 9.2 15.30
21 to 30 32.1 7.4 26.58 9.6 25.71
33 to 42 13.5 9.3 33.27 .1 33.19
----------------------------------------------------------------------
$ 9 to 42 68.1 6.7 $23.86 24.4 $18.50
======================================================================<PAGE>
<PAGE> 55
----------------------------------------------------------------------
CAPITAL STOCK
----------------------------------------------------------------------
PER COMMON SHARE INFORMATION
Income used in the computation of per common share information was
reduced by preferred stock cash dividends (net of tax benefits). In
1995, it was also reduced by $3.9 million for the one-time effect of
the Company's offer to exchange its Series E 7.72% Cumulative
Preferred Stock for subordinated debt securities completed on June 30,
1995, and by an additional $.4 million for the effect of the Company's
repurchase of additional Series E preferred stock in the third
quarter. Adjusted net income was divided by the weighted average
shares of common stock outstanding during each year (in millions):
1995--701.5; 1994--701.8; 1993--711.8. Including the effect of
potentially dilutive securities, fully diluted earnings per common
share amounts and increases were: 1995--$1.92, 18%; 1994--$1.63, 16%;
1993--$1.41, 12%.
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. On June 30, 1995, the
Company completed an exchange of approximately 5.2 million depositary
shares, representing 2,600 shares of Series E 7.72% Cumulative
Preferred Stock, for subordinated debt securities. In the third
quarter of 1995, the Company repurchased approximately .5 million
depositary shares equivalent to 250 shares of Series E 7.72%
Cumulative Preferred Stock.
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 had a liquidation preference of $14.375 and $16.5625,
respectively, and was convertible to a minimum of .7692 and .8 common
share (conversion rate), respectively. Upon termination of employment,
employees were 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 was
entitled to one vote and was redeemable at the option of the Company.
In 1992, 8.2 million Series B shares were converted into 6.4 million
common shares. During 1995, the remaining 5.2 million Series B shares
and 5.8 million Series C shares were converted into 8.7 million common
shares.<PAGE>
<PAGE> 56
COMMON EQUITY PUT OPTIONS
During May and June 1995, the Company sold 1.5 million common equity
put options which expired unexercised in August and September. In
August 1995, the Company sold .5 million common equity put options of
which .4 million were exercised and .1 million expired unexercised in
October 1995.
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 February 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, 2.0 million common equity put options issued by the
Company in December 1992, having an exercise price of $94.0 million,
expired unexercised. In April 1993, the Company also sold 1.0 million
common equity put options which expired unexercised in July 1993.
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, 1995, 2.1 million shares of the Series A
Junior Participating Preferred Stock were reserved for issuance under
this plan.
<PAGE> 57
<TABLE>
QUARTERLY RESULTS (UNAUDITED)
<CAPTION>
(In millions of dollars, except per common share data)
- ---------------------------------------------------------------------------------------------------------------------------------
Quarters ended December 31 September 30 June 30 March 31
1995 1994 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SYSTEMWIDE SALES $7,734.4 $6,964.0 $7,866.6 $6,944.0 $7,641.3 $6,370.2 $6,671.6 $5,709.2
REVENUES
Sales by Company-operated
restaurants $1,812.2 $1,586.8 $1,811.9 $1,551.8 $1,727.8 $1,409.3 $1,511.6 $1,244.7
Revenues from franchised
restaurants 773.3 683.3 768.2 673.6 739.8 620.0 649.7 551.3
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,585.5 2,270.1 2,580.1 2,225.4 2,467.6 2,029.3 2,161.3 1,796.0
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 1,476.8 1,267.7 1,448.0 1,231.3 1,389.7 1,128.6 1,233.2 1,017.4
Franchised restaurants 137.2 117.8 131.7 111.7 127.8 105.6 118.2 100.4
General, administrative
and selling expenses 341.4 309.4 314.1 277.1 305.4 257.0 275.4 239.5
Other operating (income)
expense--net (16.0) (0.6) (35.8) (32.6) (41.7) (30.3) (12.2) (20.4)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 1,939.4 1,694.3 1,858.0 1,587.5 1,781.2 1,460.9 1,614.6 1,336.9
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 646.1 575.8 722.1 637.9 686.4 568.4 546.7 459.1
- ---------------------------------------------------------------------------------------------------------------------------------
Interest expense 87.7 80.1 86.1 80.2 85.4 73.6 81.0 71.8
Nonoperating income
(expense)--net (18.8) (24.1) (26.5) (16.6) (16.1) 1.7 (30.6) (9.9)
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 539.6 471.6 609.5 541.1 584.9 496.5 435.1 377.4
- ---------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 172.8 162.7 209.4 191.3 205.2 174.2 154.4 134.0
- ---------------------------------------------------------------------------------------------------------------------------------<PAGE>
Net income $ 366.8 $ 308.9 $ 400.1 $ 349.8 $ 379.7 $ 322.3 $ 280.7 $ 243.4
=================================================================================================================================
NET INCOME PER COMMON SHARE $ .51 $ .43 $ .56 $ .48 $ .52 $ .44 $ .39 $ .33
- ---------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $.06 3/4 $ .06 $.06 3/4 $ .06 $.06 3/4 $ .06 $ .06 $.05 3/8
- ---------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE> 58
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, 1995.
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, 1995.
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, 1995.
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, 1995.
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> 59
McDonald's Corporation
Exhibit Index
(Item 14)
Exhibit Number Description
-------------- -----------
(3) Restated Certificate of Incorporation and By-Laws, dated as
of November 15, 1994, incorporated herein by reference from
Exhibit 3 of Form 10-K for the year ended December 31, 1994.
(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) 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.
(iii) 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.
(iv) 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.
(v) 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> 60
Exhibit Number Description
-------------- -----------
(vi) 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.
(vii) 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.
(viii)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.
(ix) 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.
(x) Medium-Term Notes, Series E, due from nine
months to 60 years from date of issue. Form of
Supplemental Indenture No. 22, incorporated
herein by reference from Exhibit (4) of Form
10-Q for the period ended June 30, 1995.
(xi) 6-5/8% Notes due September 1, 2005. Form of
Supplemental Indenture No. 23 incorporated
herein by reference from Exhibit 4(a) of Form
8-K dated September 5, 1995.
(xii) 7.05% Debentures due 2025. Form of Supplemental
Indenture No. 24 incorporated herein by
reference from Exhibit (4)(a) of Form 8-K dated
November 13, 1995.
(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.<PAGE>
<PAGE> 61
Exhibit Number Description
-------------- -----------
(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.
(f) 8.35% Subordinated Deferrable Interest Debentures due
2025. Indenture incorporated herein by reference from
Exhibit 99.1 of Schedule 13E-4/A Amendment No. 2 dated
July 14, 1995.
(10) Material Contracts
(a) Directors' Stock Plan, as amended and restated,
incorporated herein by reference from Form 10-K for the
year ended December 31, 1994.*
(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, as amended and
restated, attached hereto as an Exhibit.*
(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) 1992 Stock Ownership Incentive Plan, incorporated
herein by reference from Exhibit B on pages 29-41 of
McDonald's 1995 Proxy Statement and Notice of 1995
Annual Meeting of Shareholders dated April 12, 1995*.<PAGE>
<PAGE> 62
Exhibit Number Description
-------------- -----------
(f) McDonald's Corporation Deferred Incentive Plan, as
amended and restated, incorporated herein by reference
from Form 10-K for the year ended December 31, 1994.*
(g) Non-Employee Director Stock Option Plan, incorporated
by reference from Exhibit A on pages 25-28 of
McDonald's 1995 Proxy Statement and Notice of 1995
Annual Meeting of Shareholders dated April 12, 1995.*
(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
The following reports on Form 8-K were filed for the last quarter
covered by this report, and subsequently up to March 29, 1996.
Financial Statements
Date of Report Item Number Required to be Filed
-------------- ----------- --------------------
11/13/95 Item 5 No
10/19/95 Item 7 No
01/25/96 Item 7 No<PAGE>
<PAGE> 63
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/s/ Jack M. Greenberg
----------------------
Jack M. Greenberg
Vice Chairman,
Chief Financial Officer
Date March 29, 1996
----------------------
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 on the 29th day of
March, 1996:
Signature Title
--------- -----
/s/ Hall Adams, Jr.
------------------------- Director
Hall Adams, Jr.
/s/ Robert M. Beavers, Jr.
------------------------- Senior Vice President
Robert M. Beavers, Jr. and Director
/s/ James R. Cantalupo
------------------------- President and Chief Executive
James R. Cantalupo Officer-International and
Director
/s/ Gordon C. Gray
------------------------- Director
Gordon C. Gray
/s/ Jack M. Greenberg
------------------------- Vice Chairman,
Jack M. Greenberg Chief Financial Officer
and Director<PAGE>
<PAGE> 64
Signature Title
--------- -----
------------------------- Director
Donald R. Keough
/s/ Donald G. Lubin
------------------------- Director
Donald G. Lubin
------------------------- Director
Andrew J. McKenna
/s/ Michael R. Quinlan
------------------------- Chairman, Chief Executive
Michael R. Quinlan Officer and Director
/s/ Edward H. Rensi
------------------------- President and Chief Executive
Edward H. Rensi Officer-U.S.A. and Director
/s/ Terry L. Savage
------------------------- Director
Terry L. Savage
------------------------- Senior Executive Vice
Paul D. Schrage President, Chief Marketing
Officer and Director
------------------------- Director
Ballard F. Smith
------------------------- Director
Roger W. Stone
/s/ Robert N. Thurston
------------------------- Director
Robert N. Thurston
------------------------- Senior Chairman and Director
Fred L. Turner<PAGE>
/s/ B. Blair Vedder, Jr.
------------------------- Director
B. Blair Vedder, Jr.
/s/ Michael L. Conley
------------------------- Senior Vice President,
Michael L. Conley Controller<PAGE>
EXHIBIT 10(b)
McDONALD'S CORPORATION
PROFIT SHARING PROGRAM
As amended and restated
effective
January 1, 1996
McDONALD'S CORPORATION PROFIT SHARING PROGRAM
Summary of Contents
Page
ARTICLE I - DEFINITIONS
1.1 "Account"......................................... 3
1.2 "Active Participant".............................. 6
1.3 "Affiliated Service Group"........................ 7
1.4 "Authorized Leave of Absence"..................... 9
1.5 "Auxiliary ESOP".................................. 9
1.6 "Beneficiary"..................................... 9
1.7 "Board of Directors".............................. 9
1.8 "Break in Service"................................ 9
1.9 "Committee"....................................... 9
1.10 "Commonly Controlled Corporation"................. 9
1.11 "Commonly Controlled Entity"...................... 9
1.12 "Company"......................................... 9
1.13 "Company Stock"................................... 10
1.14 "Considered Compensation"......................... 10
1.15 "Credited Service"................................ 12
1.16 "Disability"...................................... 13
1.17 "Disqualified Person"............................. 13
1.18 "Domestic Affiliate".............................. 13
1.19 "Effective Date".................................. 13
1.20 "Eligibility Computation Period".................. 13
1.21 "Eligibility Service"............................. 14
1.22 "Employee"........................................ 13
1.23 "Employer"........................................ 14
1.24 "Employer Contributions".......................... 14
1.25 "Entry Date"...................................... 15
1.26 "ERISA"........................................... 15
1.27 "Five Percent Owner".............................. 15
1.28 "Foreign Affiliate"............................... 15
1.29 "Forfeiture"...................................... 15
1.30 "Highly Compensated Employee"..................... 15
1.31 "Hour of Service"................................. 17
1.32 "Internal Revenue Code"........................... 21
1.33 "Investment Fund"................................. 21
1.34 "Leased Employee"................................. 21
1.35 "Leveraged ESOP".................................. 21
1.36 "Leveraged ESOP Suspense Account.................. 21
1.37 "Licensee"........................................ 22
1.38 "McDESOP"......................................... 22
1.39 "Non-highly Compensated Employee"................. 22
1.40 "Parental Leave".................................. 22
1.41 "Participant"..................................... 22
1.42 "Participant Contributions"....................... 23
1.43 "Participant Elected Contributions"............... 23
1.44 "Party in Interest"............................... 23
1.45 "Program"......................................... 23
1.46 "Plan Administrator............................... 23
1.47 "Plan Year"....................................... 23
1.48 "Profit Sharing Plan"............................. 23
1.49 "Qualified Preretirement Survivor Annuity"........ 23
1.50 "Related Plan".................................... 24
1.51 "Required Beginning Date"......................... 24
1.52 "Rollover"........................................ 24
1.53 "STIF Fund"....................................... 24
1.54 "Stock Sharing"................................... 25
1.55 "Subsidiary"...................................... 25
1.56 "Termination of Employment"....................... 25
1.57 "Top Paid Group".................................. 25
1.58 "Trust"........................................... 25
1.59 "Trust Agreement"................................. 25
1.60 "Trustee"......................................... 26
1.61 "Trust Fund"...................................... 26
1.62 "Valuation Date".................................. 26
1.63 "Vesting Retirement Date"......................... 26
1.64 "Year of Credited Service"........................ 26
1.65 "Year of Eligibility Service"..................... 26
ARTICLE II - PARTICIPATION
2.1 Participation..................................... 27
2.2 Certification of Participation and Compensation
to Committee...................................... 27
2.3 Termination of Employment, Break in Service,
Reemployment and Change in Employment Status...... 27
2.4 Employees of Foreign or Domestic Affiliates....... 28
2.5 Leased Employee................................... 28
ARTICLE III - PROFIT SHARING PLAN EMPLOYER CONTRIBUTIONS
3.1 Profit Sharing Contributions...................... 29
3.2 Payment of Contributions Made Pursuant to
Article III....................................... 30
ARTICLE IV - McDESOP EMPLOYER CONTRIBUTIONS
4.1 Amount of Employer Matching Contributions......... 31
4.2 Leveraged ESOP Contributions...................... 33
4.3 Annual Employer Contribution Elections............ 35
4.4 Additional Employer Contributions................. 36
4.5 Payment of Contributions Made Pursuant to
Article IV........................................ 36
4.6 Form of Contributions............................. 37
ARTICLE V - PARTICIPANT ELECTED CONTRIBUTIONS
5.1 Participant Elected Contributions................. 38
5.2 Restrictions on Participant Elected Contributions. 39
5.3 Allocation of Income to Certain Distributed
Amounts........................................... 42
5.4 Multiple Use of Alternative Limitations........... 43
5.5 Excess Compensation Reduction Elections........... 44
5.6 Deadline for Participant Elected Contributions.... 45
5.7 Application of the Limitations of Sections
5.2(c), 5.2(e), 4.1(c), 5.4 and 9.1............... 45
ARTICLE VI - LEVERAGED AUXILIARY ESOP PROVISIONS
6.1 Power to Borrow................................... 47
6.2 Accounting for Loan Proceeds and Leveraged ESOP
Contributions..................................... 48
6.3 Release from Leveraged ESOP Suspense Account...... 48
6.4 Installment Payments on Exempt Loan............... 50
6.5 Non-Terminable Rights and Protections............. 51
6.6 Independent Appraisals Required................... 52
ARTICLE VII - ALLOCATIONS OF CONTRIBUTIONS
7.1 Profit Sharing Contribution Allocation Formula.... 53
7.2 Employer Matching Contributions, Additional
Employer Contributions and Special Section 401(k)
Employer Contributions............................ 54
7.3 Leveraged ESOP Contributions...................... 55
7.4 Participant Elected Contributions................. 56
7.5 Timing of Allocations............................. 56
ARTICLE VIII - ROLLOVER CONTRIBUTIONS AND TRUSTEE TRANSFERS
8.1 Participant Rollovers............................. 57
8.2 Limited Participation............................. 57
8.3 Withdrawal of Rollovers........................... 57
8.4 Rollover Not Forfeitable.......................... 57
ARTICLE IX - LIMITATIONS ON CONTRIBUTIONS
BECAUSE OF FEDERAL LEGISLATION
9.1 Limitations on Contributions...................... 58
9.2 Employer Contribution Reductions.................. 62
ARTICLE X - TRUSTEE AND TRUST FUNDS
10.1 Trust Agreements.................................. 63
10.2 Trustee's Duties.................................. 63
10.3 Trust Expenses.................................... 63
10.4 Trust Entity...................................... 63
10.5 Right of the Employers to Trust Assets............ 63
10.6 Trust Investment Funds............................ 64
10.7 Investment of Participant's Employer Profit
Sharing Contributions............................. 67
10.8 Investment Election with Regard to a Participant's
Profit Sharing, Diversification, Investment Savings
and Rollover Accounts............................. 67
10.9 Failure to Make an Investment Election............ 68
10.10 Diversification of McDESOP and Leveraged ESOP
Contributions..................................... 69
10.11 Effective Date of Participant's Investment and
Diversification Elections......................... 73
10.12 Trust Income...................................... 73
10.13 Adjustment of Participant Account Balances and
Leveraged ESOP Suspense Accounts.................. 73
10.14 Allocation of Income to Holding Funds............. 75
10.15 Separate Accounting in the Trust Fund............. 75
10.16 Trust Investment.................................. 75
10.17 Separate Accounting for Leveraged ESOP Suspense
Account........................................... 75
10.18 Correction of Error............................... 76
10.19 Statement of Accounts............................. 76
10.20 Purchase or Sale of Company Stock................. 76
10.21 Shareholder Rights in Company Stock............... 77
10.22 Cash Distributions with Respect to Company Stock.. 79
10.23 Holding Funds..................................... 79
ARTICLE XI - DISTRIBUTION OF BENEFITS
11.1 Distributions, General............................ 81
11.2 Payment of Net Balance Account on Disability, or
on Retirement or Other Termination of Employment.. 81
11.3 Payment of Net Balance Account on Death of
Participant....................................... 91
11.4 Vesting and Forfeitures...........................95
11.5 Payment of Employer Profit Sharing Contribution
for Year of Termination of Employment.............98
11.6 Designation of Beneficiary and Form of
Beneficiary Benefit...............................98
11.7 Incompetency, Distribution of Benefits............99
11.8 Deduction of Taxes from Accounts Payable..........100
11.9 Deadline for Payment of Benefits..................100
11.10 Spousal Consent to a Beneficiary or a Waiver......100
11.11 Single Sum Payment without Election...............101
11.12 Installment Payments..............................101
11.13 Required Minimum Distributions to Employed
Participants......................................103
11.14 Transitional Rules................................104
11.15 Sale of Restaurant - Special Vesting Rules........104
11.16 In-Service Withdrawals............................105
11.17 Direct Rollovers..................................106
ARTICLE XII - SUBSIDIARY PARTICIPATION
12.1 Adoption of Program and Trust.....................109
12.2 Withdrawal from Program by Participating
Employer..........................................109
ARTICLE XIII - ADMINISTRATION OF The Program
13.1 Appointment and Removal of, and Resignation by,
Trustee...........................................111
13.2 Appointment of Committee; Tenure in Office........111
13.3 Named Fiduciaries.................................111
13.4 Delegation of Responsibilities....................112
13.5 Committee Duties..................................112
13.6 Committee Action by Majority -- Authorization of
Members to Execute Documents......................113
13.7 Secretary.........................................114
13.8 Member as Participant.............................114
13.9 Rules and Decisions...............................114
13.10 Agents and Counsel................................114
13.11 Authorization of Benefit Distribution.............114
13.12 Claims Procedure..................................114
13.13 Information to be Furnished to Committee..........115
13.14 Plan Administrator................................116
13.15 Fiduciary as Participant..........................116
13.16 Fiduciary Responsibility..........................116
ARTICLE XIV - AMENDMENT, TERMINATION, MERGER AND
CONSOLIDATION OF PLAN
14.1 Amendment.........................................117
14.2 Termination of Program By the Company.............117
14.3 Merger, Consolidation, or Transfer of Assets......118
14.4 Transfer of Assets from Plans of Subsidiaries.....118
ARTICLE XV - TOP HEAVY PROVISIONS
15.1 Application.......................................120
15.2 Special Top Heavy Definitions.....................120
15.3 Special Top Heavy Provisions......................127
ARTICLE XVI - MISCELLANEOUS PROVISIONS
16.1 Headings..........................................131
16.2 Indemnification...................................131
16.3 Employees' Trust..................................131
16.4 Nonalienation of Benefits.........................131
16.5 Qualified Domestic Relations Order................132
16.6 Unclaimed Amounts.................................133
16.7 Maximum Age Condition.............................135
16.8 Invalidity of Certain Provisions..................135
16.9 Gender and Number.................................135
16.10 Law Governing.....................................136
MCDONALD'S CORPORATION PROFIT SHARING PROGRAM
History. 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 "Program"). The
Program was subsequently amended from time to time and was amended and
restated effective July 1, 1992. The McDonald's Stock Sharing Plan
("Stock Sharing Plan") was amended and restated effective January 1,
1989.
The Stock Sharing Plan was merged into the Program effece
after the close of business on December 2199995. After the merger,
the Stock Sharing portion of the Program continued to be controlled by
the McDonald's Stock Sharing Plan, as amended and restated effective
JJaanuary 1, 1989 and the Profit Sharing portion of the Program
continued to be controlled by the McDonald's Corporation Profit
Sharing Program, as amended and restated effective January 1, 1992
until January 1, 1996, the effective date of this restatement. The
assets of the McDonald's Stock Sharing Trust were transferred to the
McDonald's Matching and Deferred Stock Ownership Trust on or after
December 29, 1995 until such time as there were no remaining assets
and the Trust ceased to exist.
The Program is hereby amended and restated in one Plan document
effective January 1, 1996, except as otherwise specifically provided
herein.
Structure and Purpose. The Program has four component portions,
(1) 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, (2) the McDESOP portion which is intended to
meet the requirements for a stock bonus plan and a cash or deferred
arrangement under Sections 401(a) and 401(k) of the Internal Revenue
Code, (3) the Leveraged ESOP portion which is intended to meet the
requirements of a stock bonus plan and a leveraged employee stock
ownership plan under Sections 401(a) and 4975(e)(7) of the Internal
Revenue Code and (4) the Stock Sharing portion which is intended to
meet the requirements of a stock bonus plan and a tax credit ESOP in
accordance with Sections 401(a) and 409 of the Internal Revenue Code
and Section 41 of the Internal Revenue Code before its repeal with
respect to compensation paid or accrued after December 31, 1986. Each
portion of the Program 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 Leveraged ESOP
portion of the Program and the Stock Sharing portion of the Program
shall be invested primarily in qualifying employer securities as
defined in Section 409(l) of the Internal Revenue Code.
Application of Provisions. 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
Program 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 Program as
amended and restated herein applies to persons who are Employees on
and after January 1, 1996. Eligibility, benefits, payment of benefits
and the amount of benefits, if any, of a person whose employment with
an Employer terminated before January 1, 1996, and who is not rehired
by an Employer on or after January 1, 1996, shall, except as otherwise
specifically provided herein, be determined in accordance with the
provisions of the Program, the Stock Sharing 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.
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 Program, and the income, profits and
increments thereon less all losses, expenses and distributions
chargeable thereto.
(a) Each Participant may have one or more of the following
Accounts in the Profit Sharing portion of the Program ("Profit
Sharing Accounts") which shall be held in the Trust Fund:
(1) "Investment Savings Account," to which shall be
credited the Participant's after tax Participant
Contributions to the Profit Sharing Plan which were made
before January 1, 1987.
(2) "Profit Sharing Account," to which shall be
credited each Participant's share of Employer Profit Sharing
Contributions with respect to the Profit Sharing Plan
allocated in accordance with Section 7.1. A Participant's
Profit Sharing Account shall include his "Pre-Break Profit
Sharing Account" and his "Post-Break Profit Sharing Account"
pursuant to Section 11.4(e), if applicable.
(3) "Profit Sharing Holding Account," to which shall
be credited the Participant's share of Employer Profit
Sharing Contributions until such contributions shall be
removed and invested in accordance with Sections 10.7 and
10.8 as of each February 1.
(4) "Rollover Account," to which shall be credited the
balance of the Participant's Rollover Holding Account as of
each Valuation Date.
(5) "Rollover Holding Account," to which shall be
credited the Participant's Rollover pursuant to Section 8.1
until such contributions are removed and credited to the
Participant's Rollover Account at the next Valuation Date
occurring at the end of a calendar month in which such
contributions were made.
(b) Each Participant may have one or more of the following
Accounts in the McDESOP portion of the Program ("McDESOP
Accounts") 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 Program 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
under the provisions of the Program before January 1, 1996),
Additional Employer Contributions, Special Section 401(k)
Employer Contributions and any Forfeitures allocated to the
Participant in accordance with Section 7.2.
(3) The "McDESOP Holding Account" to which shall be
credited the Participants' Participant Elected Contributions
to the Program until such contributions are credited to the
Participants' Participant Elected Contribution Account.
(4) The "Matching Contribution Holding Account" to
which shall be credited the Participants' Employer Matching
Contributions to the Program until such contributions are
credited to the Participants' Employer Matching Contribution
Account.
(c) Each Participant shall have the following accounts in
the Leveraged ESOP portion of the Program ("Leveraged ESOP
Accounts") which shall be held in the Trust Fund and which shall
include:
(1) A "Per Capita Leveraged ESOP Contribution
Account," to which were credited Company Stock and
sssociated dividends attributable to Employer Contributions
madn aa Per Capita Basis under the terms of the Program
before January 1996.
(2) A "Leveraged ESOP Account," to which shall be
credited Company Stock released from the Leveraged 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
(3) An "Additional Leveraged ESOP Account," to which
shall be credited, in accordance with Section 7.3(b) a
Participant's Per Capita Additional Leveraged ESOP
Contributions and Forfeitures therefrom and his Compensation
Based Additional Leveraged ESOP Contributions and
Forfeitures therefrom.
(d) Each Participant who has an account in the Stock
Sharing Plan may have the following Accounts in the Stock Sharing
portion of the Program ("Stock Sharing Accounts") which shall be
held in the Trust Fund:
(1) A "Participant Contribution Stock Sharing
Account," to which shall be credited Participant Matched
Contributions made under the Stock Sharing Plan with respect
to Plan Years ending on or before December 31, 1982, plus
income and gains and less expenses and losses attributable
thereto;
(2) An "Unmatched Employer Contribution Stock Sharing
Contribution Account," to which shall be credited Unmatched
Employer Contributions contributed to the Stock Sharing Plan
with respect to Plan Years ending on or before December 31,
1982, plus income and gains and less expenses and losses
attributable thereto;
(3) A "PAYSOP Stock Sharing Contribution Account," to
which shall be credited Employer Contributions contributed
to the Stock Sharing Plan with respect to Plan Years
beginning on or after January 1, 1983 and before January 1,
1987, plus income and gains and less expenses and losses
attributable thereto;
(4) An "Employer Matching Contribution Account," to
which shall be credited Employer Matching Contributions made
by an Employer to the Program 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;
(5) An "Additional Employer Contribution Account," to
which shall be credited (A) 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 (B) with respect to contributions for
Plan Years ending after December 31, 1982, contributions to
the Stock Sharing Plan in excess of the amount which
qualified for tax credit under Section 41(a)(2) of the
Internal Revenue Code, plus income and gains and less
expenses and losses attributable thereto.
(e) Each Participant shall have the following accounts
("Diversification Accounts"), to which shall be credited the
respective portions of a Participant's Leveraged ESOP Account,
and McDESOP Account, transferred to his Diversification Account
pursuant to a Diversification Election made in accordance with
Section 10.10. A Participant's Diversification Account shall be
part of the McDESOP and Leveraged ESOP portion of the Program, as
applicable, but is held in the Profit Sharing Master Trust in
order to implement Participant's diversification elections made
in accordance with Section 10.10. The Diversification Account
shall consist of two sub-accounts as follows:
(1) "Leveraged ESOP Diversification Account," to which
shall be credited the portions of a Participant's Leveraged
ESOP Account transferred to his Leveraged ESOP
Diversification Account pursuant to a Diversification
Election made in accordance with Section 10.10(a); and
(2) "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 Sections 10.10(b) and
10.10(c).
(f) "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 Program; and
(b) for the purpose of being eligible to share in
allocations of Company Stock released from an Leveraged ESOP
Suspense Account for a Plan Year, in accordance with
Section 6.3(a), and of Additional Leveraged ESOP Contributions
for a Plan Year, a Participant who is a staff or an executive
employee or a store manager; and
(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 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 Program; and
(c) for purposes of the McDESOP portion of the Program, 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
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" means the Leveraged ESOP portion of the
Program and the provisions applicable thereto.
1.6 "Beneficiary" means the person or persons designated by a
Participant or the Program, as applicable, in accordance with the
provisions of Section 11.3 or 11.6 to receive any benefit which shall
be distributable under the Program 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 and any person or committee authorized to act on behalf of the
Board of Directors.
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
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 Program and the Trust.
1.13 "Company Stock" means common or preferred stock of the
Company which is a qualifying employer security as defined in (a)
Section 4975(e)(8) of the Internal Revenue Code (for purposes of the
Leveraged ESOP), (b) Section 409(l) of the Internal Revenue Code (for
purposes of the Stock Sharing portion of the Program) and (c) Section
407(d)(5) of ERISA (for the purpose of all portions of the Program).
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 Program as
reported in Box 1, for 1995, or the equivalent box on any
comparable form for subsequent Plan Years, increased by (i) any
amounts by which the Participant's compensation is reduced by
Participant Elected Contributions under the McDESOP portion of
the Program or any other portion of the Program, and under any
portion of any Related Plan which meets the requirements of
Section 401(k) of the Internal Revenue Code; and (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
excluding (I) provisions for life insurance; (II) reimbursement
for or other payment for expenses related to, moving expenses
(including the relocation bonuses); (III) any benefits under the
Program or any other qualified plan described in Section 401(a)
of the Internal 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
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;
options, restricted stock, stock appreciation rights, performance
units and stock bonuses awarded under the McDonald's 1992 Stock
Ownership Incentive Plan, as amended and restated as of July 1,
1995; (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)
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 special termination
bonus paid pursuant to a termination agreement and any severance
pay;
(b) for purposes of top heavy rules in Article XV (except
for determining whether a Participant is a Key Employee pursuant
to Section 15.2(d)) and for determining the limitations under
Code Section 415 in 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, 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 Program 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 Program or any other portion of the Program or of any other
plan which meets the requirements of Section 401(k) of the
Internal Revenue Code, whether credited to the Participant's
accounts under the Program, 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 1, as revised for 1995, 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 Program or
any other portion of the Program 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) 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 Program shall not exceed
$150,000 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 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.
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
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 Account or his Leveraged ESOP
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
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 January 1, 1996.
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 Program, respectively, with
respect to contributions to such portions of the Program 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 Program and other
provisions of the Program as they relate to the Profit Sharing
Plan portion of the Program and for purposes of Section 4.1, 4.3
and Article V, concerning Employer Matching Contributions and
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, pursuant to Section 12.1, elects to adopt the
Profit Sharing Plan portion of the Program; and
(b) for purposes of the Leveraged ESOP portion of the
Program, the Company and any Commonly Controlled Corporation
which, pursuant to Section 12.1, elects to adopt the Leveraged
ESOP portion of the Program on or after January 1, 1989; and
(c) for purposes of the Stock Sharing portions of the
Program, the Company and any Commonly Controlled Corporation
which had adopted the McDonald's Stock Sharing Plan before
January 1, 1989.
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);
(b) "Employer Matching Contributions" made pursuant to
Section 4.1;
(c) "Special Section 401(k) Employer Contributions" made
pursuant to Section 4.3(b);
(d) "Leveraged ESOP Contributions" made pursuant to
Section 4.2;
(e) "Additional Employer Contributions" made pursuant to
Section 4.4;
(f) "Special Dividend Replacement Contributions" made
pursuant to Section 4.2(d).
(g) "Unmatched Employer Stock Sharing Contributions,"
"Employer Contributions", "Employer Matching Contributions," and
"Additional Employer Contributions" made to the Stock Sharing
Plan at various dates with respect to periods before January 1,
1987 as provided in Section 1.1(d).
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 Account which is forfeited as provided in Section 11.4, his
Leveraged ESOP 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
$100,000 (for 1996, 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
$100,000 (for 1996, 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 $66,000 (for 1996, 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 ($120,000 in 1996, 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.
(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
$100,000 (for 1996, adjusted in subsequent years as provided
by the Secretary of the Treasury or his delegate);
(3) received Considered Compensation in excess of
$66,000 (for 1996, 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 ($120,000 for 1996, 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) "$66,000" (in 1996, adjusted in subsequent years provided by
the Secretary of the Treasury or his delegate) for "$100,000" (in
1996, 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 Program
(e.g., which Participants are considered to be Highly Compensated
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 Program.
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"). For the purposes
of this Section 1.31(b)(1)(B), a sale of assets or
stock to a Domestic or Foreign Affiliate that is
not an Employer under the Program shall not be
considered a Company Initiated Transfer with
respect to employees employed solely with respect
to such assets or stock who become employees of
such purchasing Domestic or Foreign Affiliate
immediately after such sale, provided that the
decisions concerning such employment are made by
an entity which is not more than 50 percent owned
by an Employer.
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
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
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 Program 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 Profit Sharing Holding Fund pursuant to
Section 10.23, (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 and Leveraged
ESOP portions of the Trust Fund shall be held in the McDESOP
McDonald's Common Stock Fund provided, however, that separate
subaccounts shall be maintained of the amount of Company Stock held in
the McDESOP McDonald's Common Stock Fund and allocated to
Participants' Stock Sharing Accounts, Participant Elected Contribution
Accounts, Employer Matching Contribution Accounts and Leveraged ESOP
Accounts, in the latter case accounting separately for the Company
Stock purchased with each Loan (or Company Stock into which the
Company Stock purchased with the Loan has been converted).
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 "Leveraged ESOP" means the portion of the Program consisting
of Participants' Leveraged ESOP Accounts, and Additional Leveraged
ESOP Accounts.
1.36 "Leveraged ESOP Suspense Account" means the separate
accounts maintained by the Committee pursuant to Section 6.2. All
Employer Leveraged ESOP Contributions made with respect to a Loan and
the dividends with respect to Employer Stock purchased with such Loan
(and the Employer Stock into which such stock has been converted)
including dividends which have been replaced in Participant's
Leveraged ESOP Accounts by Dividend Replacement Contributions shall be
held and accounted for within the separate Leveraged ESOP Suspense
Account.
1.37 "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.
1.38 "McDESOP" means the portion of the Program consisting of
Participants' Participant Elected Contribution Accounts and Employer
Matching Contribution Accounts, McDESOP Holding Accounts, Matching
Contribution Holding Account and McDESOP Diversification Accounts.
1.39 "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.
1.40 "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
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.
1.41 "Participant" means a person participating in the Program in
accordance with the provisions of Article II.
1.42 "Participant Contributions" means (a) 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 Account and (b) Participant Matched Contributions
made under the Stock Sharing Plan with respect to Plan Years ending on
or before December 31, 1983 and credited to his Participant
Contribution Stock Sharing Account.
1.43 "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.
1.44 "Party in Interest" means a person defined in Section 3(14)
of ERISA.
1.45 "Program" means the McDonald's Corporation Profit Sharing
Program as herein set forth, and as hereafter amended from time to
time, including its four components: (i) the Profit Sharing Plan,
McDESOP, the Leveraged ESOP and Stock Sharing.
1.46 "Plan Administrator" means the Plan Administrator appointed
under or by the provisions of Section 13.14.
1.47 "Plan Year" means the 12-month period commencing on
January 1 and ending on December 31.
1.48 "Profit Sharing Plan" means the portion of the Program
consisting of Participants' Profit Sharing Accounts, Rollover
Accounts, Rollover Holding Accounts, Investment Savings Accounts and
of the Profit Sharing Holding Fund.
1.49 "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).
1.50 "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, a Commonly Controlled Entity or member of an Affiliated
Service Group, respectively called a "Related Defined Contribution
Plan" and "Related Defined Benefit Plan."
1.51 "Required Beginning Date" means April 1 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.
1.52 "Rollover" 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 Holding Fund Account, in accordance with
Section 8.1., Rollovers 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 Rollovers made in compliance with
Section 401(a)(31) of the Internal Revenue Code.
1.53 "STIF Fund" means the Northern Trust Company Collectively
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.
1.54 "Stock Sharing" means the portion of the Program consisting
of Participants' Stock Sharing Accounts as identified in
Section 1.1(d).
1.55 "Subsidiary" shall mean any corporation affiliated with the
Company within the meaning of Section 1504 of the Internal Revenue
Code.
1.56 "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.
1.57 "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.
1.58 "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, Rollovers, Participant Elected Contributions, the
proceeds of any loan made pursuant to Article VI, Employer Leveraged
ESOP Contributions the Leveraged ESOP Suspense Account, any Company
Stock purchased therewith, amounts held in Participants' Stock Sharing
Accounts and any net income and profits thereon shall be received,
held, invested and distributed to or for the benefit of the
Participants and Beneficiaries.
1.59 "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 ("McDESOP Trust") and effective after December
29, 1995, the McDonald's Stock Sharing Trust for so long as it holds
assets of the Program ("Trust") and until such assets are transferred
to the McDESOP Trust, as amended from time to time and such additional
trust agreements as the Company and the Trustee shall establish under
the Program.
1.60 "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.
1.61 "Trust Fund" means all property received and held by a
Trustee pursuant to a Trust Agreement for the Program.
1.62 "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 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.
1.63 "Vesting Retirement Date" means the date on which a
Participant attains age 55.
1.64 "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.
1.65 "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 Profit Sharing Program or the
McDonald's Stock Sharing Plan on the day before the Effective Date,
shall continue to be a Participant hereunder. Each other Employee
shall become a Participant in the Program on the first Entry Date
coinciding with or next following the date he completes one Year of
Eligibility Service and attains age 21; provided that each Participant
who is a certified swing manager, primary maintenance employee, crew
member or other store hourly employee shall only become a Participant
solely for purposes of the Profit Sharing Plan and the McDESOP
portions of the Program.
Admission to participation in the Program 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 for purposes
other than being an Active Participant as provided in Sections 1.2(a)
and 1.2(c) 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.
Notwithstanding the foregoing, each Participant is a participant
only with respect to the portions of the Program which have been
adopted by his Employer and no additional Participants shall enter the
Stock Sharing portion of the Plan.
2.2 Certification of Participation and Compensation to
Committee. Each Employer shall certify to the Committee, within a
reasonable time before 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
("Rehired Employee"), and who completes one Year of Eligibility
Service following such Break in Service shall become a Participant
retroactively to the day of such Rehired Employee's Retroactive
Participation Date (as defined in the following sentence) provided
that such Rehired 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; and further 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.
Notwithstanding the foregoing provisions of this Section 2.3, a
Rehired Employee who has a Participant Elected Contribution Account
shall have his Participant Elected Contributions reinstated at the
same level as was in effect at the time of his Termination of
Employment subject to any new election made by such Participant
pursuant to Section 5.1
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.
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
Program 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, described in
Section 3.1(a)(1), of all Employers; 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, described in
Section 3.1(a)(2), of all Employers.
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, if any, for each Plan Year
shall be held in the Profit Sharing Holding Fund and, if contributed
in cash, invested in the STIF 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 Accounts and invest them in accordance
with Section 10.7, 10.8 or 10.9(a), as applicable.
ARTICLE IV
McDESOP and LEVERAGED 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 after any charges to Forfeitures
provided hereunder, (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.
(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 and such amount of 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.
Solely for purposes of the Average ACP test the Committee
shall have the discretion to determine the portion of a
Participant's (or selected group of Participant's) Employer
Matching Contributions (and Forfeitures), Special Section 401(k)
Employer Contributions or Participant Elected Contributions to be
counted in calculating the Participant's average contribution
percentage and in making such determination shall be under no
obligation to treat similarly situated Participants in a like
manner so long as the following requirements (to the extent
applicable) are satisfied:
(1) The amount of Special Section 401(k) Employer
Contributions is non-discriminatory under Code Section
401(a)(4);
(2) The amount of Participant Elected Contributions,
including any Participant Elected Contributions counted for
purposes in calculating Participants' average contribution
percentages, shall satisfy the requirements of Code Section
401(k)(3);
(3) The Special Section 401(k) Contributions are
allocated to the Participant as of a date within the Plan
Year and the Participant Elective Contributions satisfy the
requirements of Treas. Reg. Section 1.401(k)-1(b)(4)(i) for
the Plan Year.
A Participant's Employer Matching Contributions, Special
Section 401(k) Contributions or Participant Elected Contributions
which are counted for purposes of the Required ADP Test pursuant
to Section 5.2(e) shall not be counted for purposes of
calculating such Participant's average contribution percentage.
(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 not exceeding
the amounts in both 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 reductions until the Average ACP for the Highly
Compensated Employees does not exceed both the amounts in
Sections 4.1(c)(1) or (c)(2) above. The Committee shall make any
distributions necessary for the Program 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 Leveraged ESOP Contributions. Leveraged ESOP Contributions
shall be made by Employers, as follows:
(a) Company Leveraged 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 Leveraged ESOP
Contributions, such amounts (if any) as shall be determined by
the Board of Directors, provided, however, the Company's
Leveraged 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 (including 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 (including Company
Stock into which such shares have been converted) held in
Participants' Leveraged ESOP Accounts acquired with the
proceeds of such loan (or any Loan refinanced with such
loan) and earnings attributable to such dividends and to
Leveraged 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 Leveraged 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' Leveraged
ESOP 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) Leveraged ESOP Contributions by Other Employers. Each
Employer that has adopted the Leveraged ESOP portion of the Plan
(other than the Company) shall contribute to the Trust an amount
equal to the product of:
(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 Leveraged
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) Additional Leveraged ESOP Contributions. The Board of
Directors may, in its discretion, determine that Additional
leveraged ESOP Contributions shall be made for a Plan Year in
Company Stock and designate such contributions as Per Capita
Additional Leveraged ESOP Contributions or Compensation Based
Additional Leveraged ESOP Contributions (collectively called
"Additional Leveraged ESOP Contributions"). The Company shall
make such Additional Leveraged ESOP Contributions in an amount
equal to the total Additional Leveraged 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 Leveraged ESOP (other
than the Company) shall contribute to the Trust as Additional
Leveraged 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 Leveraged ESOP Contribution and the denominator of
which is the Compensation paid by the Company to Employees while
they were Active Participants.
(d) 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 Leveraged
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.
4.3 Annual Employer Contribution Elections.
(a) Minimum and Maximum Amount of Participant Elected
Matched 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) six percent (6%) of the Participant's Considered
Compensation if the Participant is a staff or an executive
employee or a store manager,
(2) ten percent (10%) of the Participant's Considered
Compensation if the Participant is a Certified Swing Manager
or primary maintenance employee, and
(3) 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 Program 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.
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 McDESOP and Leveraged
ESOP Holding Fund until allocated to Participant's Accounts as
provided in Sections 7.2(a), 7.2(b) and 7.2(c), respectively.
Participant Elected Contributions shall be invested in the McDESOP
McDonald's Common Stock Fund and held in the McDESOP and Leveraged
ESOP 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
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
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.
At each quarterly Valuation Date, the amount of a Participant's
Participant Elected Matched Contributions shall be redetermined by
recharacterizing any Participant Elected Unmatched Contributions as
Participant Elected Matched Contributions to the extent in the Plan
Year to date taking into account all of the Participant's Participant
Elected Matched Contributions and his Considered Compensation in the
Plan Year through the Valuation Date, the Participant has not made the
maximum permitted Participant Elected Matched Contributions for
Participants in the same category as the Participant. 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 Program 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.
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 Program, 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 Program 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 $9,500 (in 1996 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
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 Program 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 Program, 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 amount 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.
Solely for purposes of calculating the Average ADP the
Committee shall have the discretion to determine the portion of a
Participant's (or selected group of Participant's) Participant
Elected Contributions, Employer Matching Contributions or Special
Section 401(k) Employer Contributions to be counted in
calculating the Participant's Actual Deferral Percentage and in
making such determination shall be under no obligation to treat
similarly situated Participants in a like manner so long as the
following requirements (to the extent applicable) are satisfied:
(1) The amount of Special Section 401(k) Employer
Contributions treated as Participant Elected Contributions
for purposes of calculating the Average Deferral Percentage
shall satisfy the requirements of Section 401(a)(4);
(2) The amount of Special Section 401(k) Employer
Contributions treated as Participant Elected Contributions
for purposes of the ADP test and those Special Section
401(k) Contributions counted in the calculation of the ACP
Test satisfies the requirements of Code Section 401(a)(4);
and
(3) The Special Section 401(k) Contributions are
allocated to Participant's Net Balance Account under the
Program as of the last day of the Plan Year for which the
ADP test is being calculated.
(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
(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 or a portion of
the 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:
(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
Participant Elected Contribution Account or Employer Matching
Contribution Account, in accordance with Section 10.13, 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).
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 reduce prospectively the amount of the Participant
Elected Contributions which may be made by an Employer to the
McDESOP Trust on behalf of an Active Participant or any specified
group of Active Participants who are Highly Compensated Employees
by reducing the future contributions made with respect to such
Participant's or Participants' elections to the extent the
Committee reasonably determines it is necessary to satisfy
Section 5.2(e) or 5.4. In making reductions to future
Participant Elected Contributions hereunder the Committee,
generally, shall have no obligation to treat similarly situated
Participants who are Highly Compensated Employees in the same
manner and, particularly, shall not be obligated to reduce
Participant's future elections in any particular systematic
manner based upon the amount of Participant Elected Contributions
already made for the Plan Year, the percentage of a Participant's
Considered Compensation which Participant Elected Contributions
constitute, or the amount or percentage of Considered
Compensation which a Participant's effective Participant Elected
Contribution election constitutes.
(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.
(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 Program, secondly, Section 5.2(e) shall be
applied to contributions under the Program, thirdly, Section 4.1(c)
shall be applied to contributions under the Program, fourthly,
Section 5.4 shall be applied to contributions under the Program, and
lastly, Section 9.1 shall be applied to contributions under the
Program.
ARTICLE VI
LEVERAGED 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 Program 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 Program is liable. In the
event the Trustee's borrowing shall cause a lending of money or other
extension of credit to be made between the Program 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 Program, such loan or other
extension of credit to the Program 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;
(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 Program 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 Program
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 Program
other than the collateral, Leveraged 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 Leveraged
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' Leveraged ESOP
Accounts;
(e) In the event of a default upon the loan, the value of
the Program 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 Program to the
extent changes in applicable law require or permit.
6.2 Accounting for Loan Proceeds and Leveraged ESOP
Contributions. The Committee shall establish with respect to each
loan a separate Leveraged 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) Leveraged ESOP
Contributions with respect to such loan, (c) any income, gains or
losses allocated to the Leveraged 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
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 Leveraged 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 Leveraged 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 Leveraged 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 Leveraged 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
Leveraged ESOP Accounts, 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 Leveraged 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
Leveraged ESOP Suspense Account immediately before the
release increased by the number of shares, if any,
previously released from the Leveraged 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 Leveraged ESOP Suspense Account in accordance with
Section 6.3(b) for the Plan Year with respect to such loan.
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
Leveraged 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 Leveraged ESOP
Suspense Account immediately before the release increased by
the number of shares, if any, previously released from the
Leveraged 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
Leveraged 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 Leveraged 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 Leveraged 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 Leveraged 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(d) with respect to
the loan.
(c) Any release from the Leveraged 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 Leveraged 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 Leveraged ESOP Suspense
Account, from amounts of Leveraged 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 a Leveraged ESOP Suspense Account
and allocated to Participants' Accounts and from dividends or
other earnings with respect to the Leveraged ESOP Suspense
Account maintained with respect to such loan.
(b) Sale of Company Stock Held in Leveraged 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 a Leveraged ESOP Suspense Account are sold
prior to release from such Leveraged 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 Program 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 Program 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
distributed from the Program, whether or not the Program 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 subject to this provision pursuant to Section
11.2(k) 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 Program, 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 Program
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
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, the
Profit Sharing Contributions made pursuant to Section 3.1(b)(1)
and the net income gains and losses of the Profit Sharing Holding
Fund as provided in Sections 10.13 and 10.14 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 Contributions made pursuant to
Section 3.1(b)(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, the
Profit Sharing Contributions made pursuant to Section 3.1(b)(2)
and the net income gains and losses of the Profit Sharing Holding
Fund as provided in Sections 10.13 and 10.14 shall be allocated
to the Profit Sharing 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:
(1) is Profit Sharing Contributions made pursuant to
Section 3.1(b)(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 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 Holding Fund until allocated to the Profit Sharing
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 Account as provided in
Sections 10.7, 10.8 or 10.9.
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 held in the McDESOP and Leveraged ESOP 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 McDESOP
and Leveraged ESOP 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 10.15)
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
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
Program 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.
7.3 Leveraged ESOP Contributions.
(a) Leveraged 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 Leveraged
ESOP Contributions (or a loan refinanced by such loan) and
released from the Leveraged ESOP Suspense Accounts maintained
with respect to such loan, any income from such Leveraged ESOP
Suspense Accounts released pursuant to Sections 6.2 and 6.3, and
any Forfeitures from Leveraged ESOP Accounts for the Plan Year
shall be allocated to each Active Participant's Leveraged ESOP
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 Leveraged ESOP Suspense
Account pursuant to Section 10.13(b) 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 Leveraged 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.
(b) Additional Leveraged ESOP Contributions. Additional
Leveraged ESOP Contributions for a Plan Year which were
designated in accordance with Section 4.2(c) as Per Capita
Additional Leveraged ESOP Contributions (and any Forfeitures
therefrom) shall be allocated as of the last Valuation Date of
the Plan Year to the Additional Leveraged ESOP Account of each
Active Participant in an amount equal to the total amount of Per
Capita Additional Leveraged ESOP Contributions (and any
Forfeitures therefrom) for the Plan Year divided by the number of
Active Participants. Additional Leveraged ESOP Contributions for
a Plan Year which were designated in accordance with
Section 4.2(c) as Compensation Based Additional Leveraged ESOP
Contributions (and any Forfeitures therefrom) shall be allocated
as of the last Valuation Date of such Plan Year to the Additional
Leveraged ESOP Account of each Active Participant in an amount
equal to the total amount of Additional Leveraged 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 Leveraged ESOP
Contributions and Compensation Based Additional Employer
Leveraged ESOP Contributions shall be separately accounted for in
Participants' Additional Leveraged ESOP Accounts.
(c) Special Dividend Replacement Contributions. Any
Special Dividend Replacement Contributions made to the Program
pursuant to Section 4.2(d) shall be credited to Participant's
Accounts to replace dividends which pursuant to Section 6.3(b)
are credited to the Leveraged 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 McDESOP and
Leveraged ESOP 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 10.12, 10.13 and 10.14.
Amounts contributed to the Program shall be credited as of the date
of contribution to the following Accounts and Funds: Profit Sharing
Holding Fund, McDESOP and Leveraged ESOP Holding Fund, and Rollover
Holding Account as provided in Section 10.23 and the Leveraged ESOP
Suspense Account as provided in Section 6.2.
ARTICLE VIII
ROLLOVERS AND TRUSTEE TRANSFERS
8.1 Participant Rollovers. A Participant may elect through
procedures approved by the Committee to make Rollovers to the Program.
If any Rollover includes property other than money, the Trustee may
in its sole discretion refuse to accept such Rollover or may condition
its acceptance of such Rollover on such terms and conditions as it
deems reasonable. Each Participant's Rollover shall be held in his
Rollover Holding Account until the next following Valuation Date at
which time his Rollover Holding Account is transferred to the
Participant's Rollover Account and invested in accordance with his
investment elections provided for in Section 10.8.
8.2 Limited Participation. An Employee who is not eligible to
participate in the Program 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 Program solely for the limited purpose of making a
Rollover subject to the same conditions on such Rollovers as any other
Participant.
8.3 Withdrawal of Rollovers. At the election of the
Participant, amounts in his Rollover Account and Rollover Holding
Account may be withdrawn as provided in Section 11.16.
8.4 Rollover Not Forfeitable. A Participant's Rollover Account
and Rollover 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. Rollovers 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 allocated to his Profit
Sharing 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
Leveraged ESOP Account) for such Plan Year allocated to the
Participant's accounts for such Plan Year under the Program
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 Program 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 provided in Code Section 415(l)(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) $30,000, 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 under
the Leveraged ESOP portion of the Program, 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 Leveraged ESOP Contributions used to repay each
loan for the Plan Year, 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) 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 Leveraged ESOP 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 Ptiiccipant's Considered
Compensation, multiplied by a fraction, the numerator of
which is the Participant's allocation to his Leveraged ESOP
Account for the Plan Year after applying the Annual Excess
reduction provisions hereunder and the denominator of which
is such allocation to his Leveraged ESOP 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
Participant's Leveraged ESOP Account under the McDESOP
portion of the Program, and (B) the sum of the products of
the Leveraged ESOP Contributions used to repay each loan for
the Plan Year (including the amount used to repay interest
on such loans), multiplied by (i) in the case of Leveraged
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 Leveraged ESOP 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 Leveraged ESOP
Account for the Plan Year, after applying the Annual Excess
reduction provisions hereunder and the denominator of which
is such allocation to his Leveraged ESOP Account for the
Plan Year before applying the Annual Excess reduction
provisions hereunder.
(3) The amount of Leveraged 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 Leveraged 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
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
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) 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.
(4) 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.
(5) 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.
(6) If any Annual Excess remains after application of
the preceding paragraph, the Participant's allocations to
his Additional Leveraged ESOP Account shall be reduced to
the extent such reductions reduce the amount of the Annual
Excess.
(7) If any Annual Excess remains after application of
the preceding paragraph, any Special Dividend Replacement
Contributions credited to the Participant's Leveraged ESOP
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 Program 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 Program 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 9.1anndd any such amounts which cannot be
reallocad tto 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
Fraction to 1.0. In calculating the Participant's Defined
Contribution Fraction employee contributions as permitted under
the Program or a Related Plan before January 1, 1987, shall be
counted as Annual Additions only to the extent that they were
counted under the Program 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 Program 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 Program,
contributions to the Program 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 Program 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 Program, and any and all
rights or benefits which may accrue to any person under the Program
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
Agreement and as may be delegated to, and accepted by, the Trustee
from the Committee and Board of Directors. Nothing contained in the
Program either expressly or by implication shall be deemed to impose
any additional powers, duties or responsibilities upon the Trustee.
All Employer Contributions, Participant Contributions, Rollovers and
Participant Elected Contributions shall be paid into a Trust and all
withdrawals permitted and benefits payable under the Program 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 Program and the Trust
and the Trustee's fees shall be paid by the Trust and shall be
proportionately charged to the Profit Sharing, McDESOP, Leveraged
ESOP, Stock Sharing 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 directly charged to that portion of the Trust
Fund.
10.4 Trust Entity. The Trust under this Program 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 Program for the exclusive benefit of the
Participants or their Beneficiaries and for defraying the reasonable
expenses of administering the Program 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 Partipaannts with
respect to which such contributions were made.
Notwithstanding any other provision of ts SSection 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
Holding Funds, as provided in Section 10.23, assets of the Trust Fund
shall be held as follows:
(a) Profit Sharing Plan. The assets held in Participant's
Profit Sharing Accounts and any amounts held in Participant's
Diversification Accounts shall be held in the following
Investment Funds:
(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) in
contracts issued by an insurance or other company (or
companies), (ii) 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 (iii) 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 (iv) may be investment contracts or
(v) may be investment management agreements which may
provide separate book value guarantees pursuant to which the
insurance or other company guarantees (A) the book value of
a pool or segregated group of fixed income obligations held
in the Insurance Contract Fund and (B) specified amounts of
income under various conditions as provided in such
agreement ((iv) and (v) collectively shall be referred to as
"Assets Subject to Guarantee"). With respect to Assets
Subject to Guarantee, the Program 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 according with such guidelines as the
Board of Directors may from time to time approve; 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 those banks designated under the McDonald's
Corporation Investment Policy.
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, the Insurance
Contract Fund, the Money Market Fund, and the Multi-Asset Fund in
cash, a short-term investment fund (a "STIF Fund"), 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 or custodian, if the
Trustee or custodian is a bank, and common or commingled trust
funds invested in such securities, including those of the Trustee
or custodian).
(b) Leveraged ESOP. The assets of the Leveraged ESOP
portion of the Trust (other than any amounts which have been
transferred to a Participant's Diversification Account pursuant
to Section 10.10) shall be invested in Company Stock which is
common stock of McDonald's Corporation held in the McDESOP
McDonald's Common Stock Fund, provided that it shall at all times
be possible to determine the number of such shares of Company
Stock which are allocated to a Participant's Leveraged ESOP
Accounts.
In order to maintain adequate liquidity, pending the
investment of funds, or the use of funds to make payments on a
loan, or for funds which could not be appropriately invested
eher because of the small amount involved or the orrtt time
duration for which the investment is to be made, the Trustee is
authorized to hold portions of the Leveraged ESOP in cash, a STIF
Fund 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 or
custodian, if the Trustee or custodian is a bank, and common or
commingled trust funds invested in such securities, including
those of the Trustee or custodian).
(c) (1) 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
10.10) shall be held in the McDESOP McDonald's Common Stock
Fund invested in Company Stock which is common stock of
McDonald's Corporation.
(2) McDESOP Diversification. Participant Elected
Contributions which a Participant has elected to diversify
pursuant to Section 10.10 shall be credited to the
Participant's McDESOP Contribution Diversification Account
and invested in the Profit Sharing Plan Trust Investment
Funds listed in Section 10.6(a) as provided in Section 10.11
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 10.10
and 10.11 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 10.10 shall be invested in the McDESOP
McDonald's Common Stock Fund until the Diversification
Election is implemented pursuant to Section 10.11. In the
case of future contributions subject to a Diversification
Election pursuant to Section 10.10, the Diversification
Election shall be implemented as of the next date on which
Investment Elections are implemented in accordance with
Section 10.8 or 10.9(a), as applicable, after the date such
contributions are made to the Program.
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
"Automatic McDonald's Stock Proportion" is a percentage, if any,
announced by the Board of Directors for the Plan Year. 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 10.9, 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.
(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 10.9, as applicable.
10.8 Investment Election with Regard to a Participant's Profit
Sharing, Diversification, Investment Savings and Rollover Accounts.
Four times each Plan Year (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 each of
(a) his Profit Sharing 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, (b) his Investment Savings Account, or (c) his Rollover Account
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 from time
to time 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 Leveraged ESOP Diversification Election,
McDESOP Future Contribution Diversification Election, or McDESOP
Diversification Election in accordance with Section 10.10, his
Diversification Account, if any, shall be invested in accordance with
his Profit Sharing Account investment election in effect at the time
his diversification election is effective or in accordance with
Section 10.9(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 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 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.
1100.9 Failure to Make an Investment Election.
(a) Profit Sharing Account IIf a Participant fails to
make an investment election for his Profit Sharing 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 Account, the
Participant's LESOP Diversification Account and the McDESOP
Diversification Account shall be invested one hundred percent
(100%) in the Money Market Fund.
(b) Investment Savings Fund Account and Rollover Account.
If a Participant fails to make an investment election for his
Investment Savings Account and/or his Rollover 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.
10.10 Diversification of McDESOP and Leveraged ESOP 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
during each Annual Election Period and, in addition, at the
same times and subject to the same administrative
requirements as apply to Investment Elections under Section
10.8 (other than the limitation that only four elections be
made in a Plan Year), each Qualified Participant shall be
permitted to make a diversification election with respect to
his Qualified Account ("Leveraged ESOP Diversification
Election").
(2) Definitions. As used in Section 10.10(a), the
following terms shall have the meanings indicated:
(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 Leveraged ESOP Account.
(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) "Leveraged Diversification Election" means an
election by a Qualified Participant to transfer to his
Leveraged ESOP Diversification Account, an amount not
exceeding the difference between
(i) the Maximum Diversification Percentage
(or lesser percentages in five percent (5%)
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 10.10 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 Leveraged ESOP
Diversification Election and has not made a
subsequent Leveraged ESOP Diversification Election
with a lower percentage election than his prior
Leveraged ESOP 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 Leveraged ESOP
Diversification Election shall be transferred to
the Participant's Leveraged ESOP Diversification
Account. If a Participant who has made a
Leveraged ESOP Diversification Election makes a
new Leveraged ESOP Diversification Election at a
percentage (including to zero) lower than the
percentage of the earlier Leveraged ESOP
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 Leveraged ESOP
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 Leveraged ESOP Account.
(3) Investment of Amounts Subject to Leveraged ESOP
DDiversification Election. The amount subject to a
Participant's Leveraged ESOP Diversification Election shall
be transferred to the Participant's Leveraged ESOP
Diversification Account under the Program and thereafter
shall be invested in accordance with the Participant's
elections pursuant to Section 10.8 or 10.9(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 Leveraged ESOP Diversification
Election or at such earlier dates as the Committee, pursuant
to Section 10.11 shall permit.
(b) Diversification of McDESOP Future Participant Elected
Contributions. A Participant may make an election ("McDESOP
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 5
percent, credited to his McDESOP Diversification Account. Once
he has made a McDESOP Future Contribution Diversification
Election, a Participant may change his election with respect to
future Participant Elected Contributions, subject to
Section 10.11, but each such change shall only effect Participant
Elected Contributions made to the Program after the date the
election is effective and before the date a new McDESOP Future
Contribution Diversification Election becomes effective.
(c) Age Diversification of McDESOP Accounts. 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 ("McDESOP Diversification Election") 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.
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 10.11. 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 Program shall apply to amounts subject to a
Diversification Election under Section 10.10 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 Account pursuant
to Section 10.8 or as provided in Section 10.9(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 10.9(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.
The foregoing provisions shall apply only to the extent that a
Partipaannt does not receive distributions of amounts under Section
11.13(b) during a Qualified Election Period.
10.11 Effective Date of Participant's Investment and
Diversification Elections. Each Participant's investment election or
Diversification Election submitted by the 25th of a calendar month,
pursuant to Section 10.8 and a Diversification Election made pursuant
to Section 10.10, 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 10.10 shall be
implemented the first day of the calendar month after the month in
which such contributions are made to the Program or as soon thereafter
as is administratively convenient. This Section 10.11 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.
10.12 Trust Income. As of the close of business on each Valuation
Date, the Trustee shall determine the fair market value of the Trust
Fund and of each separate Investment Fund. 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 and
the Investment Funds shall be recorded and communicated in writing to
the Committee by the Trustee. The Trustee's determination of fair
market value shall be final and conclusive on all persons.
10.13 Adjustment of Participant Account Balances and Leveraged
ESOP Suspense Accounts. 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 Leveraged ESOP Suspense Accounts
to make the total of the portion of all such Account balances which
are invested in an Investment Fund equal to the total value of that
Investment Fund.
(a) Valuation of the Portion of Profit Sharing Accounts,
Investment Savings Accounts, Rollover Accounts, Diversification
Accounts, Participant Elected Contribution Accounts and Employer
Matching Contribution Accounts invested in an Investment Fund.
The value of the portion of each of a Participant's Accounts
invested in an Investment Fund 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 an Investment Fund as of the
Valuation Date, and
(2) is a fraction, the numerator of which is the value
of the portion of each of a Participant's Accounts invested
in such Investment Fund as of the Valuation Date reduced by
any distributions therefrom on or 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 any distributions
therefrom since the immediately preceding Valuation Date.
(b) Valuation of the Portion of the Leveraged ESOP Suspense
Account and of Participants' Leveraged ESOP Accounts and Stock
Sharing Accounts invested in Company Stock. Each Valuation Date,
Participants' Leveraged ESOP Accounts and Stock Sharing Accounts
and the Leveraged ESOP Suspense Accounts shall be credited with
the dividends and other distributions and earnings of shares of
Company Stock credited thereto; provided that any dividends
credited to Participants' Leveraged ESOP Accounts which are to be
used to repay an Exempt Loan shall immediately after being so
credited to Participants' Accounts be transferred to the
Leveraged ESOP Suspense Account and held therein a separate
account until used to repay a loan and further provided that the
amount of such dividends transferred to the Leveraged 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' Leveraged ESOP Accounts
pursuant to Section 6.3(b) for the Plan Year. Earnings on
Forfeitures from the Leveraged ESOP portion of the Program shall
be allocated to Participants' Leveraged ESOP Accounts as of each
Valuation Date in the proportion that dividends and other
distributions and earnings are allocated in accordance with the
preceding sentence. The income under Section 16.6 (d) shall be
allocated to Participant's Stock Sharing Accounts in the
proportion that each Participants Stock Sharing Account balance
is to the total of all Participants' Stock Sharing Account
balances. Notwithstanding the foregoing, the records of such
accounts may be maintained in cash provided that it is at all
times possible to determine the number and the basis of the
shares Company Stock credited to a Participant's Accounts in the
Leveraged ESOP and the Stock Sharing Plan and to the Leveraged
ESOP Suspense Account.
The Accounts of Participants as adjusted according to
Section 10.13 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.
10.14 Allocation of Income to Holding Funds.
(a) Profit Sharing Holding Fund. Any net income and gains
(after reduction by losses and by expenses not paid by an
Employer) of the Profit Sharing Holding Fund for a Plan Year
shall be allocated to each Participant's Profit Sharing Accounts
in the proportion that the amount of Profit Sharing Contributions
allocated to each Participant in accordance with Section 7.1
bears to the total amount of Profit Sharing Contributions
allocated under Section 7.1 to all Participants.
(b) McDESOP and Leveraged ESOP Holding Fund. Any net
income and gains (after reduction by losses and by expenses not
paid by an Employer) of the McDESOP and Leveraged ESOP Holding
Fund for a Plan Year shall be allocated to Participants'
Leveraged ESOP Accounts, Stock Sharing Accounts, and Participant
Elected Contribution Accounts in the proportion that amounts
identified with the McDESOP, Leveraged ESOP, and Stock Sharing
portions of the Program are transferred to the McDESOP and
Leveraged ESOP Holding Fund. The amounts so allocated with
respect to Participants' McDESOP Accounts shall be allocated to
individual Participant's Participant Elected Contribution
Accounts by addingucchhmoouunts to the numerator of the fraction
described in Section 10.13(a)(2) as of the last Valuation Date of
the Plan Year for the purpose of determining the value of such
accounts. The amounts allocated to Participants' Leveraged ESOP
Accounts shall be added to earnings on Forfeitures from the
Leveraged ESOP as of the last Valuation Date of the Plan Year and
shall be allocated therewith in accordance with Section 10.13(b).
The amounts allocated to the Stock Sharing Accounts shall be
allocated in accordance with Section 10.13(b).
(c) Rollover Holding Fund. Any net income and gains (after
reduction by losses and by expenses not paid by an Employer) of
the Rollover Holding Fund for a Plan Year shall be allocated to
Participant's Profit Sharing Accounts pursuant to Section
10.13(a).
10.15 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.
10.16 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.
10.17 Separate Accounting for Leveraged ESOP Suspense Account.
The Committee shall create and maintain a separate account, called an
Leveraged 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 Leveraged ESOP Contributions to the Program to
repay each such loan or extension of credit, (c) net income, gains or
losses charged to such Leveraged ESOP Contributions and Leveraged ESOP
Suspense Account under Sections 10.13 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.
10.18 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.
Corrections of Participant Elected Contributions and Employer
Matching Contributions which an individual should have been permitted
to make, but because of an error in Program 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.
10.19 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.
10.20 Purchase or Sale of Company Stock. The Trustee, on behalf
of the Program, 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.
10.21 Shareholder Rights in Company Stock. A fundamental purpose
of the Program and the Trust 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 offer. A key
purpose of the Program 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 the Program 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. The broad employee participation in the Program 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 beevveed that such Participants as a group are uniquely able to
determine the best interests of future Participans who benefit from
future allocations of Company Stock under the Program. 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 Account and Diversification
Accounts), 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 Program 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
10.21(b).
(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
10.21(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 10.21(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 Program 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
10.21(a) and (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 is 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 Program
and, with respect to shares of Company Stock voted pursuant to
Section 10.21(b), he should consider the long-term interests of
both current and future Participants and Beneficiaries in
providing benefits under the Program and Trust rather than a
short term gain.
(d) Confidentiality. The Trustee shall solicit the
directions of Participants and Beneficiaries in accordance with
Section 10.21(a) or (b) 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.
10.22 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
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., accounts in the Profit Sharing
portion of the Program, the Leveraged ESOP Accounts, McDESOP Accounts
and Stock Sharing Accounts) which held the stock before sale or
transfer as of the Valuation Date next following the sale or transfer.
10.23 Holding Funds.
(a) Profit Sharing Holding Fund. Profit Sharing
Contributions made to the Program shall be held in the Profit
Sharing Holding Fund until allocated to Participant's accounts in
accordance with Section 7.1. Such contributions as provided in
Section 3.1(a) and 3.1(b) shall be separately accounted for.
Amounts which in accordance with Article XI are currently
distributable in cash to Participants or Beneficiaries with
respect to the Profit Sharing portion of the Plan shall be
transferred to the Profit Sharing Holding Fund during the
calendar month next following the calendar month within which
such amount became distributable. The Profit Sharing Holding
Fund shall be held (a) in a checking account of the Trustee in
the name of the Trust with, if the Trustee or custodian ia bbank
or a Trust Company, th TTrrustee's orussttodian's banking
department, or (b) in a STIF Fund or in such types of investments
or pooled, common, commingled or collective trust funds,
including, if the Trustee or custodian is a bank, those of the
Trustee or custodian, 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.
(b) McDESOP and Leveraged ESOP Holding Fund. Participant
Elected Contributions and Matching Contributions made to the
Program shall be held in the McDESOP and Leveraged ESOP Holding
Fund until credited to Participant's accounts in accordance with
Sections 7.4 and 7.2, respectively, and amounts which are
distributable to a Participant or Beneficiary in cash from the
McDESOP portion of the Program shall, at the direction of the
Committee, be transferred to the McDESOP and Leveraged ESOP
Holding Fund during the calendar month next following the
calendar month within which such amount became distributable.
The McDESOP and Leveraged ESOP Holding Fund shall be held (a) in
a checking account of the Trustee in the name of the Trust with,
if the Trustee or custodian is a bank, the banking department of
the Trustee or custodian, or (b) in the STIF Fund or in such
types of investments or pooled, common, commingled or collective
trust funds including, if the Trustee or custodian is a bank,
those of the Trustee or custodian, 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.
(c) Rollover Holding Fund. Rollover Contributions to the
Program made in a calendar month shall be held in the Rollover
Holding fund until the next Valuation Date when such
contributions shall be invested in accordance with the
Participant's investment elections.
(d) Committee Action. 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 Holding Funds 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 Holding
Funds shall be determined separately from the remainder of the
Trust and the net income or losses of the Holding Funds, for each
Plan Year shall be added to the net income of the Trust Fund for
such Plan Year as provided in Section 10.14 and any net losses of
the Holding Funds 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.
(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 not later
than his Required Beginning Date as provided in Section 11.13.
(e) A Participant shall be entitled to elect to receive
in-service withdrawals from Investment Savings Accounts, Rollover
Accounts and Stock Sharing Accounts as provided in Section 11.16.
11.12 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
Program 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
determined in accordance with Section 11.12, either
directly from the Program, 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.
(2) Ternaattion for assoons 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 subject to the Participant's election to receive
nonperiodic or installment distributions, as follows:
(A) Profit Sharing Account. The vested
portion of the Participant's Profit Sharing
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.
(B) Investment Savings Account. The
Participant's Investment Savings 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.
(C) Rollover Account and Rollover Holding
Account. The Participant's Rollover Account and
Rollover Holding 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.
(D) 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.
(E) Stock Sharing Accounts. The Participant's
Stock Sharing Accounts, including the vested portion of
all accounts identified in Section 1.1(d) shall be
distributed to the Participant in cash or in McDonald's
common stock as provided in Section 11.2(i) within a
reasonable time after the Participant elects to receive
or to commence receiving a distribution of such
account.
(F) 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 greater of the Minimum Distribution
Amount, as defined in Section 11.12(d), and the amount
determined under Section 11.2(d)(3), his entire vested
Net Balance Account shall be distributed or 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, except as he may otherwise be entitled to
receive in-service distributions pursuant to Section 11.16,
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, McDESOP
leveraged ESOP, Stock Sharing, Rollover and Investment Savings
portions of the Program, 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.
(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,
(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.
(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 Applicable
on Birthday in Calendar Year 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
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
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 Program, 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
(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 Profit Sharing Plan portion of his vested
Net Balance Account 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 Holding Fund in
accordance with Section 10.23 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
Program 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 and 10.9,
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 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.
(h) Leveraged ESOP Accounts. If the sum of the portion of
a Participant's vested balance in his Leveraged ESOP Accounts and
his Leveraged ESOP 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 of the
portion of a Participant's vested Net Balance Account in his
Leveraged ESOP Account and his Leveraged ESOP Diversification
Account to the extent it is attributable to his Employer
Leveraged 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.
(i) Stock Sharing Accounts. If a distribution from a
Participant's Stock Sharing Accounts has a value of $1500 or more
as of the Valuation Date preceding the date of distribution, 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. If the amount to be distributed from a
Participant's Stock Sharing Accounts has a value of less than
$1500, the distribution shall be in the form of cash unless the
Participant elects to receive payment in the form of shares of
common stock of the Company.
(j) 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 Holding Fund in
accordance with Section 10.23, 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 10.10, and (B) any portion of his Net Balance Account
remaining in the McDESOP, Leveraged ESOP or Stock Sharing
portions of the Program shall continue to be invested in Company
Stock and held therein.
(k) Put Option. If any Company Stock distributed from a
Participant's Participant Elected Contribution Account, Employer
Matching Contribution Account, McDESOP Diversification Account,
Leveraged ESOP Diversification Account or Stock Sharing 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.
(l) 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
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 Program, except
to the extent otherwise provided in Section 11.2(e)(2) in cases
in which the Participant has elected an annuity form of
distribution, 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
Program; 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's 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 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 Program
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.
(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, the Participant's 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 Program and
(1) if the following requirements are met, the
Beneficiary or Beneficiaries of the trust shall be
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 Account; (2) his Rollover Account;
(3) Rollover Holding Account; (4) Participant Elected
Contribution Account; (5) Employer Matching Contribution Account;
(6) McDESOP Diversification Account; and (7) Stock Sharing
Account. Such Participant shall be vested in his Profit Sharing
Account, Leveraged ESOP Account and Leveraged ESOP
Diversification 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 Account, Leveraged
ESOP Account and Leveraged ESOP Diversification Account:
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
Account, Leveraged ESOP Account and Leveraged ESOP
Diversification 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
Account, Leveraged ESOP Account and Leveraged ESOP
Diversification 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 Account shall be
credited to the McDESOP and Leveraged ESOP 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' Leveraged ESOP Accounts and Leveraged ESOP
Diversification Account shall be allocated for the Plan Year
among all Active Participants as provided in Section 7.3 for
Forfeitures from Participants' Leveraged ESOP 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 Account, Leveraged ESOP Account and Leveraged ESOP
Diversification Account as of the Valuation Date immediately
following the date on which the Participant has a Termination of
Employment or Break in Service.
(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 Account, Leveraged ESOP Account
and Leveraged ESOP Diversification 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 Program,
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
Holding Fund and the McDESOP and Leveraged ESOP Holding Fund,
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 Account,
Leveraged ESOP Account or Leveraged ESOP Diversification 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
Account, Leveraged ESOP Account or Leveraged ESOP Diversification
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 Account, Leveraged ESOP Account or
Leveraged ESOP Diversification 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 in such
accounts upon Termination of Employment or Break in Service,
then: (1) the Vested Percentage of the Participant's Profit
Sharing Account, Leveraged ESOP Account or Leveraged ESOP
Diversification Account at the time of Forfeiture which was not
distributed shall be held in a "Pre-Break Profit Sharing
Account," "Pre-Break Leveraged ESOP Account" or "Pre-Break
Leveraged ESOP Diversification Account," respectively, which
shall be 100% vested; and (2) the Participant's Profit Sharing
Contributions and the net earnings thereon and Leveraged 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 Account," and "Post-Break Leveraged ESOP Account,"
respectively, which shall be vested in accordance with Section
11.4(b). Any amounts transferred to the Participant's Leveraged
ESOP Diversification Account from the Participant's Pre-Break
Leveraged ESOP Account shall be held in the Participant's
Pre-Break Leveraged ESOP Diversification Account and amounts
transferred from the Participant's Post-Break Leveraged ESOP
Account shall be held in the Participant's Post-Break Leveraged
ESOP Diversification Account.
(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 Leveraged ESOP 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
Leveraged 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,
7.2 and 7.3 for the Plan Year shall be credited to the Participant's
respective Accounts 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 Program 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 and Leveraged ESOP portions of the Program. A beneficiary
designation form filed with the Committee on or after January 1, 1989
and before January 1, 1996 shall be deemed to apply to the Profit
Sharing, McDESOP and Leveraged ESOP portions of the Program and to
replace all prior Beneficiary designations unless the Beneficiary
designation provides otherwise. A Beneficiary designation filed by a
Participant under the Stock Sharing Plan before January 1, 1996 shall
be deemed to apply to the Stock Sharing portion of the Program. A
Beneficiary designation filed with the Committee on or after January
1, 1996, shall be deemed to apply to the entire Program and to replace
all prior Beneficiary designations except to the extent such
Beneficiary designation provides otherwise. The Participant may
submit separate Beneficiary designations for the Profit Sharing,
McDESOP, Leveraged ESOP and Stock Sharing portions of the Program
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
Program, his Beneficiary designated under McDESOP portion of the
Program; with respect to the McDESOP and Leveraged ESOP portion
of the Program, his Beneficiary designated under the McDonald's
Corporation Savings and Profit Sharing Plan or the Profit Sharing
Plan portion of the Program; and with respect to the Stock
Sharing portion of the Program, those persons designated by the
Participant to receive his death benefits under the Participant's
Group Life Insurance Program of the Employer or, in the absence
of such designation, under the Profit Sharing Plan portion of the
Program.
(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.
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 Program 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.
(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 the value of the vested portion of a Participant's
Net Balance Account under the Program 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 of any election or consent of
the Participant, his spouse, or other Beneficiary. If the Net Balance
Account under the Program of an alternate payee under a Qualified
Domestic Relations Order, as provided under Section 16.5, does not
exceed $3,500, the Committee shall direct the immediate distribution
of such benefit regardless of any election of the alternate payee
absent a contrary provision in the Qualified Domestic Relations Order.
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
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 Program.
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. SubSection 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
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 Program, notwithstanding any
other provision herein, distributions to Participants or
Beneficiaries made from the Profit Sharing Plan portion of the
Program, 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 Program, 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 Program 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 Account and his Leveraged ESOP
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") 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 Account and his Leveraged ESOP 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 In-Service Withdrawals.
(a) Investment Savings and Rollover Accounts. A
Participant may, upon written notice to the Committee, given
before the administrative cutoff date prior to the end of any
calendar month, withdraw all or any portion of such Participant's
Investment Savings Account, Rollover Account and Rollover Holding
Account valued as of the Valuation Date of the calendar month in
which such 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 Rollovers under this Section 11.16 provided,
however, that in no event shall the Committee limit Participants'
rights 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.
(b) Stock Sharing Accounts. 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 cash or in shares of common
stock of the Company, the shares which have been allocated to his
Stock Sharing Account for eighty-four (84) months following the
month in which such shares were allocated to his Stock Sharing
Account, providedhaat such withdrawals shall consist of whole
shas.. As of the Effective Date all shares of common stock of
the Company purchased with contributions to the Stock Sharing
Plan have been held for more than 84 months and therefore may be
distributed.
11.17 Direct Rollovers.
(a) Notwithstanding any provision of the Program to the
contrary that would otherwise limit a Distributee's election
under this Section 11.17, a Distributee whose benefit is
distributable pursuant to another provision of the Program 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 Program, 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 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
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 Program
to the Eligible Retirement Plan specified by the
Distributee.
ARTICLE XII
SUBSIDIARY PARTICIPATION
12.1 Adoption of Program 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 Program
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 Leveraged ESOP portion of the Program 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 whi is part of a group of corporations
in icchh 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
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 Program by Participating Employer. While it
is not the present intention of any Employer to withdraw from the
Program, 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 Program 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 Program 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 Program 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 Program
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.
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 Program 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 Program (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
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 Program and the Trust
shall administer and operate the Program and the Trust Agreement in
accordance with the terms of the Program and the Trust Agreement and
shall periodically report to the Board of Directors on the
administration and operation of the Program. 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 Program'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
Program;
(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 Program;
(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 Program, 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
Program;
(g) To have prepared and furnished to Participants or
Beneficiaries all information required under Federal law or
provisions of this Program 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 Program, including those relating to the
eligibility of persons to become Participants; the rights of
Participants and their Beneficiaries; and Employer Contributions;
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
meeting at which some or all of the members of the Committee are
present by telephone) 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 Program.
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 Program so
long as such benefit is computed and paid on a basis that is
consistent with the terms of the Program 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 Program. 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 Program 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 Program.
All such directions shall be in accordance with the Program.
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 evaluedd 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.
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 Program so long as
such benefit is computed and paid on a basis that is consistent with
the terms of the Program 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 Program 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 Program
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 Program 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
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 Program 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 Program
with respect to contritiioons prevussly 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 Program and the Trust Agreement as the
Board of Directors in the following circumstances:
(a) to adopt amendments to the Program or Trust which the
Committee determines are necessary or desirable for the Program
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 Program.
The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors on a timely basis.
14.2 Termination of Program By the Company. Although it is the
intention of the Company that this Program be permanent, the Company
reserves the right to terminate the Program 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 Program or permanent discontinuance of
Employer Contributions to the Program, 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
Program, 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 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 Program 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 Program 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 Program
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 Program were terminated immediately
after such action would not be less than the benefits which would have
been payable to each such Participant if the Program 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 Program, 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.
(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 Rollovers as provided in Article VIII of the
Program.
(e) Each Participant's Transferred Assets shall be
distributable in the same manner as a Participant's Rollover
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 Program, for any
Plan Year in which the Program 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 Program is a multlee employer
plan as described in Internal Revenue Code Section 413(c), the
provisions of this ArticleV sshall 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 Program
allocated for a Participant to the Program and employer
contributions and forfeitures allocated for the Participant to
all Related Defined Contribution Plans in the Aggregation Group;
provided, however, that 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 Program,
unless inclusion of Related Plans in the Permissive Aggregation
Group in the Aggregation Group would prevent the Program from
being a Top Heavy Plan, in which case "Aggregation Group" means
the group of plans consisting of the Program and each other
Related Plan in a Permissive Aggregation Group with the Program.
(1) "Mandatory Aggregation Group" means each plan
(considering the Program 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 Program 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 Program, 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
Program 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 Program.
(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 is an 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 ($120,000 in
1996, 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
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 in any
Measurement Period, 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
1996 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 sh
Plan Year, the largest percentage interests in the
Employer, Commoy CControlled 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
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 Program or
an 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 Program 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
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 Defin BBeenefit Plans or, if no single accrual
meodd 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
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 Program
or any plan in the Aggregation Group shall be included
in determining the Present Value of Accrued Benefits:
(i) Unrelated Transfers made from the
Program or any plan in the Aggregation Group shall
be included.
(ii) Related Transfers made from the Program
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 Program 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 Program 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 Program.
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 Program 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 Program.
(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 Program 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 Program is a Top Heavy Plan, the Employers shall make
additional Employer Contributions to the Program 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 Program because:
(1) he has failed to complete the requisite number
of hours of service (if any) after becoming a Participant in
the Program,
(2) he is excluded from participation in the Prgram
(or accrues no benefit) merely because his compensation is
less than a stated amount, or
(3) he is excluded from participation in the Program
(or accrues no benefit) merely because of a failure to make
mandatory employee contributions or because of a failure to
make elective 401(k) contribution.
(b) Vesting. For each Plan Year in which the Program 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 Program
becomes a Top Heavy Plan to a percentage of his Profit Sharing
Account and Employer Leveraged ESOP Account (to the extent such
Accounts had not been forfeited prior to the Program'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 Program 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 Program 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 Program is a Top Heavy Plan and in which the Program 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 Program is a Top Heavy Plan and the
Program 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 15.3(c) and 15.3(d),
for each Plan Year in which the Program 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 Program 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 Program 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 Program.
(g) Frozen Plans. If the Program becomes a Top Heavy Plan
after contributions have ceased under the Program but all assets
have not been distributed to participants or their beneficiaries,
the provisions of Section 15.3 shall apply to the Program.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.1 Headings. Headings of sections and subsections of the
Program are inserted for convenience of reference and are neither part
of the Program 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 Program 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
Employee which arise as a result of his actions or failure to act in
connection with the operation and administration of the Program 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 Program is created for the exclusive
purpose of providing benefits to the Participants in the Program 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. Benefits payable under this
Program 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 Program; 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.
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 Program, 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 Program 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
Program,
(2) require the Program 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
16.5(c)(1) solely because such order requires that payment of
benefits be made to an alternate payee:
(1) without regard to the Participant's attainment of
ansppeecified age;
(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 Program 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 Holding 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.
(a) Unclaimed amounts with respect to Accounts held in the
Profit Sharing Plan portion of the Program 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.
(b) The Committee shall allocate Forfeitures with respect
to Accounts held in the McDESOP portion of the Program to
Participants' Participant Elected Contribution Accounts and
Employer Matching Contribution Accounts by crediting such
Forfeitures to the McDESOP and Leveraged ESOP Holding Fund as of
the Valuation Date following the date the amount of such
Forfeitures is determined for the immediately preceding Plan year
but not later than March 31 of the year following the Plan year
with respect to which such Forfeitures occurred.
(c) Forfeitures arising in respect to a Leveraged ESOP
Account to Participants' Leveraged ESOP Accounts shall be
allocated in the same manner as Forfeitures under Section 7.3 are
allocated to such Accounts.
(d) As of the last day of the Plan Year, Forfeitures
arising in respect to the Stock Sharing Accounts of Participants
shall be charged with the expenses of the Stock Sharing portion
of the Program without regard to the limitations on reimbursement
for expenses prescribed by Section 409(l) of the Internal Revenue
Code. Any net Forfeitures after such charges and charges
pursuant to Section 16.6(e) shall be allocated as income of the
Stock Sharing portion of the Program as provided in Section
10.13(b).
(e) 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 Program for such year in an amount sufficient
to pay such Reclaimed Amount, it shall be charged as follows:
(1) 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 Program, it shall be
charged against Forfeitures from the Profit Sharing portion
of the Program and, if such Forfeitures are not sufficient,
the remainder shall be treated as an expense of the Profit
Sharing Plan portion of the Program during the Plan Year in
which the Participant or Beneficiary makes such claim.
(2) To the extent that the Reclaimed Amount originated
as an unclaimed amount with respect to the amounts held in
the McDESOP portion of the Program 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 the McDESOP portion of the Program.
(3) To the extent that such Reclaimed Amount
originated as an unclaimed amount in respect to an Leveraged
ESOP 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' Leveraged ESOP
Accounts and, to the extent such Forfeitures are not
sufficient, shall be treated as an expense of the Leveraged
ESOP portion of the Program.
(4) To the extent that such Reclaimed Amount
originated as an unclaimed amount with respect to a Stock
Sharing Account, it shall be treated as a charge against
Forfeitures arising under Section 16.6 for the Plan Year
with respect to Participants' Stock Sharing Accounts and, to
the extent that such Forfeitures are not sufficient, shall
be treated as an expense of the Stock Sharing portion of the
Program.
16.7 Maximum Age Condition. Anything to the contrary herein
notwithstanding, eligibility to participate in the Program 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
Program shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions hereof, and
this Program 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.
16.10 Law Governing. This Program 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 18th day of December, 1995.
McDonald's Corporation
By: /s/ Stanley R. Stein
-------------------------
Stanley R. Stein
Its: Senior Vice President
EXHIBIT 10(c)(i)
McDONALD'S
SUPPLEMENTAL EMPLOYEE BENEFIT EQUALIZATION PLAN
("McCAP II")
McDONALD'S
SUPPLEMENTAL EMPLOYEE BENEFIT EQUALIZATION PLAN
(McCAP II)
Section 1
Introduction
1.1 The Plan and Its Effective Date. The McDonald's
Supplemental Employee Benefit Equalization Plan (formerly, the
McDonald's 1986 Tax Reform Equalization Plan) as amended and
restated, effective January 1, 1989 and again amended and
restated January 1, 1990 (the "Plan" or "McCAP II") is hereby
amended and restated, effective January 1, 1996, except as
otherwise provided herein. The Plan provides certain benefits
previously provided by McDonald's 1986 Tax Reform Equalization
Plan with respect to years before January 1, 1989 and certain
additional benefits.
1.2 Purpose. McDonald's Corporation ("McDonald's" or the
"Company") maintains the McDonald's Corporation Profit Sharing
Program ("Profit Sharing Program") which has four components, the
Profit Sharing Plan, McDESOP, the Leveraged ESOP and the
McDonald's Stock Sharing Plan which are intended to meet the
requirements of a qualified plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). Code
Section 402(g) generally limits to $9,500 (in 1996, as adjusted
in subsequent years by the Secretary of Treasury for cost of
living adjustments in accordance with Code Section 402(g)(5)) the
maximum amount of employee elective deferrals under a qualified
plan ("Elective Contribution Limit"); Code Section 401(a)(17)
limits to $150,000 (in 1996, as adjusted in subsequent years as
provided by the Secretary of the Treasury) the amount of
compensation which may be taken into account for a Plan Year
under a qualified plan ("Compensation Limit"); and elective
deferrals to a nonqualified plan are not taken into account in
determining compensation and benefits under the qualified plans
("Elective Deferral Exclusions") (such limits and exclusion are
collectively referred to herein as the "Limits").
However, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), permits the provision of benefits under an
unfunded plan maintained by an employer primarily for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees. The purpose of the
Plan is to provide benefits to eligible employees which would be
provided under the Profit Sharing Program as in effect on
January 1, 1989, and thereafter, as from time to time amended,
but which are not provided thereunder because of the Limits,
subject to the requirement that the benefits provided under this
Plan shall be determined as though the only employee elected
deferrals of an Active Participant, as defined in Section 2.1,
are the Participant Elected Contributions elected under the
McDESOP portion of the Profit Sharing Program, the Profit Sharing
Program Equalization Plan ("McEqual"), the McDonald's 1989
Executive Equalization Plan ("McCAP I") and under Section 2.4
hereof. In determining the amounts to be credited to the
accounts of an Active Participant, as defined in Section 2.1,
during a calendar year under the Plan, McEqual, McCAP I, and the
Profit Sharing Program, the Committee may make assumptions based
upon reasonable estimates and, as necessary, make subsequent
adjustments to the extent the estimates prove to be incorrect.
1.3. Defined Terms. Except as otherwise indicated
capitalized terms used in this plan document which are not
defined herein have the same meaning as the same term in the
McDonald's Profit Sharing Program.
Section 2
Participation and Benefits
2.1 Eligibility for Benefits. Before the beginning of each
calendar year, the Committee shall designate as eligible to be
credited with benefits under the Plan for such year a select
group of management or highly compensated employees of the
Company or any other entity which has adopted the Plan in
accordance with Section 4 who are not active participants under
McCAP I for such year ("Active Participants"). Persons to be
designated as Active Participants from the group of employees who
first become participants in the Profit Sharing Program during a
calendar year shall be designated by the Committee on or before
their Profit Sharing Program Entry Date. A person who was a
participant in McDonald's 1986 Tax Reform Equalization Plan for
periods before January 1, 1989 or who becomes an Active
Participant thereafter shall remain a participant ("Participant")
until all amounts credited to his account under the Plan
("McCAP II Account") have been distributed.
2.2 Amount of Benefits. The amount credited to an Active
Participant's McCAP II Account for a calendar year shall equal
(a) the amount, if any, the Active Participant would have
received under the Profit Sharing Program for that year
(including, if the Active Participant pursuant to Section 2.4 so
elects, the amount of any elections of Participant Elected
Contributions made by the Active Participant and any associated
Matching Contributions) in the absence of the limitations under
Section 415 of the Code as stated in Article IX thereof
("415 Limits") and in the absence of the Limits reduced by
(b) the sum of the amounts allocated to such Participant's
accounts under the Profit Sharing Program and amounts credited to
the Participant's account under McEqual for the calendar year
("Annual Benefit Credits"). Notwithstanding the foregoing, (1)
any amount distributed to a participant in the Profit Sharing
Program in accordance with Sections 4.1(c), 5.2(c), 5.2(e) or 5.4
of the Program shall be considered an amount which was received
under the Profit Sharing Program in the calendar year for which
the amount was contributed to the Profit Sharing Program (or
would have been so contributed in the absence of the Limits) and
(2) an Active Participant who does not have an election in effect
under Section 2.4 for a calendar year shall not be credited with
any Participant Elected Contributions or Employer Matching
Contributions hereunder for that calendar year.
2.3 Accounts and Income Credits. Amounts credited to a
Participant's McCAP II Account for periods before January 1, 1996
shall be credited to Participant's McCAP II Accounts as provided
by the Plan as then in effect. Such amounts and amounts credited
to a Participant's McCAP II Account with respect to periods after
December 31, 1995 shall be credited with net earnings, gains and
losses as described below:
(a) McCAP II Profit Sharing Investment Account. The
portion of a Participant's Annual Benefit Credits which, in
the absence of the Limits, would have been Employer Profit
Sharing Contributions to the Profit Sharing Plan portion of
the Profit Sharing Program, shall be credited to the
Participant's McCAP II Profit Sharing Investment Account for
a calendar year. A Participant's McCAP II Profit Sharing
Investment Account shall also be credited with any amounts
with respect to which a Participant has made a
Diversification Election, as provided in Section 2.5, and any
amounts subject to any election made by the Participant
pursuant to Section 2.6. A Participant's McCAP II Profit
Sharing Investment Account shall be credited with net
earnings, gains and losses as of each Valuation Date under
the Profit Sharing Program in an amount equal to the amount
which such account would have earned, gained or lost if at
all times fully invested in the same manner as the
Participant's Profit Sharing Fund Account under the Profit
Sharing Program.
(b) McCAP II McDonald's Common Stock Account. Subject
to Section 2.5, the portion of a Participant's Annual Benefit
Credits which, in the absence of the Limits, would have been
credited to such Active Participant's accounts under the
Profit Sharing Program with respect to Participant Elected
Contributions, Employer Matching Contributions and Employer
Leveraged ESOP Contributions shall be credited to the
Participant's McCAP II McDonald's Common Stock Account for a
calendar year. A Participant's McCAP II McDonald's Common
Stock Account shall be credited with net earnings, gains and
losses as of each Valuation Date under the Profit Sharing
Program in an amount equal to the amount which such account
would have earned, gained or lost if such amounts and the
income credited thereon were at all times fully invested in
the Profit Sharing McDonald's Common Stock Fund.
2.4 Deferral Elections. Each person who is a participant in
the Profit Sharing Program and who is designated by the Committee
as an Active Participant with respect to each calendar year may
elect by filing a written election with the Committee, in
accordance with such rules and procedures as the Committee shall
establish, before the beginning of each subsequent calendar year,
to have the Participant Elected Contributions and Employer
Matching Contributions described in Section 2.2, if any, credited
to his McCAP II Account. An employee who becomes a participant
in the Profit Sharing Program during a year who is designated by
the Committee as an Active Participant hereunder, may elect
within 60 days of the date he becomes a participant in the Profit
Sharing Program to have the Participant Elected Contributions and
Employer Matching Contributions, if any, described in Section 2.2
credited to his McCAP II Account.
If an Active Participant has an election pursuant to this
Section 2.4 in effect for a calendar year, such election and the
Active Participant's elected deferrals under McDESOP may not be
changed during the year. If an Active Participant does not have
an election in effect pursuant to this Section 2.4 for the
calendar year, any amounts of Participant Elected Contributions
in excess of the Elective Contribution Limit which are elected by
such Participant under the McDESOP portion of the Profit Sharing
Program either shall not be contributed or shall be returned to
him as provided thereunder and no benefit shall be credited to
him hereunder with respect to his Participant Elected
Contributions and Employer Matching Contributions under the
Profit Sharing Program.
2.5 Diversification of Investments. If a Participant makes a
Diversification Election in accordance with Section 10.10 of the
Profit Sharing Program (the "Diversification Election"), his
corresponding McCAP II accounts and subaccounts containing the
contributions and income with respect thereto which, if not for
the Limits, would have been credited to his accounts under the
McDESOP or the Leveraged ESOP portions of the Profit Sharing
Program shall to the same extent be credited to the Participant's
McCAP II Profit Sharing Investment Account and shall thereafter
be credited with income as provided in Section 2.3(a).
2.6 Transfers to the Profit Sharing Investment Account. A
Participant may make an irrevocable election to have all amounts
which have been credited to his McCAP II McDonald's Common Stock
Account through March 31, 1991, which represent amounts which
except for the Limits would have been credited to the Profit
Sharing Plan portion of the Profit Sharing Program and any
accumulated income credited thereon, credited with earnings,
gains and losses as of each Valuation Date, as defined in the
McDonald's Profit Sharing Program, equal to the amount which such
credited amounts would have earned, gained or lost if at all
times after the effective date of such election such amounts and
the income credited thereon had been fully invested in the
Participant's McCAP II Profit Sharing Investment Account. Any
election made pursuant to this Section shall be completed,
delivered to the Committee and made effective in such manner and
at such time as the Committee shall determine in accordance with
its rules concerning the manner of making investment elections
under the Profit Sharing Plan portion of the Profit Sharing
Program.
2.7 Vesting. A Participant shall be vested in the portions
of his McCAP II Account which in the absence of the Limits would
have been allocated to his Profit Sharing Account under the
Profit Sharing Program and the earnings, gains or losses thereon
to the same extent he is vested in his Profit Sharing Account
under the Profit Sharing Program. A Participant shall be vested
in the portions of his McCAP II Account which in the absence of
the Limits would have been allocated to his Leveraged ESOP
Account under the Profit Sharing Program and the earnings, gains
and losses thereon to the same extent he is vested in his
Employer Leveraged ESOP Account under the Profit Sharing Program.
All other amounts credited to a Participant's McCAP II Account
and the earnings thereon shall be fully vested.
2.8 Payment of Benefits. Distributions of the McCAP II
Account of a Participant who has not made a Delinking Election,
as provided in Section 2.10(a) or 2.10(b), shall be made as
follows:
(a) McDESOP Portion of McCAP II Account. The portion
of a Participant's McCAP II Account which in the absence of
the Limits would have been benefits provided by the McDESOP
portion of the Profit Sharing Program shall be paid to him in
cash at the same time and in the same form (other than in the
form of an annuity purchased from an insurance company) that
his account under the McDESOP portion of the Profit Sharing
Program is paid or commences to be paid.
(b) Profit Sharing Plan Portion of McCAP II Account.
The portion of a Participant's McCAP II Account which in the
absence of the Limits would have been benefits provided by
the Profit Sharing Plan portion of the Profit Sharing Program
shall be paid to the Participant in cash at the same time and
in the same form (other than in the form of an annuity
purchased from an insurance company) that his account under
the Profit Sharing Plan portion of the Profit Sharing Program
is paid or commences to be paid.
(c) Leveraged ESOP Portion of McCAP II Account. The
portion of a Participant's McCap II Account which in the
absence of the Limits would have been benefits provided by
the Leveraged ESOP portion of the Profit Sharing Program
shall be paid to him in cash at the same time and in the same
form (other than in the form of an annuity contract purchased
from an insurance company) that benefits are paid under the
Leveraged ESOP portion of the Profit Sharing Program.
(d) Annuity Elections. A participant in the Profit
Sharing Program who elects to receive his accounts under the
Profit Sharing Program in the form of an annuity shall
receive payment of the same portions of his McCap II Accounts
in installment payments over a period certain equal to the
joint and last survivor life expectancy of the Participant
and his beneficiary, if any, at the time that the annuity is
purchased under the Profit Sharing Program.
(e) Qualified Domestic Relations Order.
Notwithstanding the foregoing, no distribution shall be made
in accordance with Sections 2.8(a), 2.8(b) or 2.8(c) on
account of the payment, under the Profit Sharing Program, of
a distribution from the account of a participant who is, at
the time of distribution, an active McDonald's employee, nor
shall a distribution be made on account of a distribution
made from the Profit Sharing Program in accordance with a
qualified domestic relations order except as provided in
Section 3.8.
(f) Transaction Costs. To the extent that the amounts
described in Section 2.3(b) are used by the Participant or
former employee to purchase shares of McDonald's stock on the
open market in one or more transactions within seven months
after the date such amounts were distributed, the Company
shall reimburse such Participant or former employee for all
reasonable brokerage fees and other transaction costs
incurred by him in connection with such purchases upon
presentation to the Company not later than 60 days after the
date of each transaction or satisfactory evidence thereof.
2.9 Beneficiary Designation. Absent a Beneficiary Delinking
Election by a Participant under Section 2.10(c):
(a) A Participant's McCap II Profit Sharing Account
shall be paid to the beneficiary entitled to receive his
Profit Sharing Accounts under the Profit Sharing Program in
the same form and same time as distributions are made
thereunder.
(b) A Participant's McCap II McDESOP Account shall be
paid to the beneficiary entitled to receive his McDESOP
Accounts under the Profit Sharing Program in the same form
and same time as distributions are made thereunder.
(c) A Participant's McCap II Leveraged ESOP Account
shall be paid to the beneficiary entitled to receive his
Leveraged ESOP Accounts under the Profit Sharing Program in
the same form and the same time as distributions are made
thereunder.
2.10 Delinking Election. Distributions of McCap II Accounts
pursuant to a Delinking Election, as provided in Sections 2.10(b)
or 2.10(d), (the "Delinking Election") shall be made in
accordance with this Section 2.10 rather than Section 2.8. A
Participant's Delinking Election shall be irrevocable except to
the extent provided in this Section 2.10.
(a) Active Employees. Each Participant who has made a
Delinking Election as to distributions to be made in his
lifetime, as provided herein, shall receive distributions
after he has a Termination of Employment and during his life
in accordance with this Section 2.10(a) ("Lifetime Delinking
Election").
(1) Time of Lifetime Delinking Election. A
Participant who is an active employee on or after
September 20, 1995, may make a Lifetime Delinking
Election or a revised Lifetime Delinking Election to
change the form or timing of distributions under his
Lifetime Delinking Election at any time.
(2) Complete Election. Each Lifetime Delinking
Election shall designate the date on which the
Participant's account balances are to be paid or
commence to be paid and shall select whether payments
are to be made in the form of a single sum payment or in
installments. Installments may be paid monthly,
quarterly or annually over a period designated in the
Lifetime Delinking Election by the Participant which
period which shall not exceed the period specified in
Section 2.11(b). A Lifetime Delinking Election shall
not be effective unless it is complete and includes an
election as to the timing and form of the distribution
or distributions.
(3) Distribution Election. Each Participant who
is an active employee and who has made a Lifetime
Delinking Election shall be permitted to make a new
Lifetime Delinking Election changing his elections as to
the timing and form of his distribution. Each such
Lifetime Delinking Election which is made before
October 31, or such earlier date as the Committee shall
designate by giving notice to Participants, shall become
effective the next January 1 and shall remain effective
through at least December 31 of such year. In the
absence of a new Lifetime Delinking Election, the
Participant's prior Lifetime Delinking Election shall
stay in effect from year to year. The Lifetime
Delinking Election of a Participant who has a
Termination of Employment shall become irrevocable.
(4) Qualified Domestic Relations Order. No
distributions shall be made in accordance with Section
2.10 on account of the payment, under the Profit Sharing
Program, of a distribution from the McCAP II Account of
a Participant who is, at the time of distribution, an
active McDonald's employee, nor shall such a
distribution be made on account of a distribution made
from the Profit Sharing Program in accordance with a
qualified domestic relations order except as provided in
Section 3.8.
(b) Former Employees. Each Participant who was a
former employee on September 20, 1995, may make a Lifetime
Delinking Election or a Beneficiary Delinking Election,
before October 31, 1995, with respect to his McCap I, McCAP
II and McEqual account balances available for distribution
after December 31, 1995. Such a Lifetime Delinking Election
shall be irrevocable in all respects and shall designate both
the form in which the distributions are to be made (a single
sum distribution or monthly, quarterly or yearly installments
paid over a period not to exceed the period specified in
Section 2.11(b)), and the date on which distributions will be
made, if in a single sum, or commence to be made, if in
installments. Under a Beneficiary Delinking Election, the
former employee's beneficiary designation under the Profit
Sharing Program shall no longer apply to designate his
beneficiary under McEqual, McCAP I and McCAP II and he shall
complete a separate beneficiary designation which shall not
name different beneficiaries to receive the Profit Sharing,
McDESOP, leveraged ESOP and Stock Sharing portions of the
McEqual, McCAP I and McCAP II. Except as provided in this
Section 2.10(b), Lifetime Delinking Elections or Beneficiary
Delinking Elections shall not be made by former employees.
(c) Beneficiary Delinking Election. Effective on July
1, 1996 or at such earlier date as the Committee designates,
each Participant who is an active employee may make an
election to delink his beneficiary designation under the
Plan, McEqual or McCAP I (a "Beneficiary Delinking Election")
and may elect to designate beneficiaries to receive his
McEqual, McCAP I and McCAP II Accounts which may or may not
be different persons than the beneficiaries designated to
receive his Net Balance Accounts under the Profit Sharing
Program. Under a Beneficiary Delinking Election, a
Participant shall not name different beneficiaries to receive
the Profit Sharing, McDESOP, Leveraged ESOP and Stock Sharing
portions of the Plan, McEqual and McCAP I. However, several
beneficiaries can be designated to receive a proportion of
the total of such benefits.
(d) Beneficiary's Elections. Each beneficiary of a
deceased Participant who before his death made a Beneficiary
Delinking Election and each beneficiary who is the
beneficiary of a Participant who died before September 20,
1995, shall have a one time opportunity to make an election
designating the form (a single sum distribution or monthly,
quarterly or yearly installments) and the date on which
distributions will be made, if in a single sum, or commence
to be made, if in installments (a "Form of Payment Delinking
Election") as follows:
(1) The beneficiary of a former employee who died
before September 20, 1995, must make his Form of Payment
Delinking Election hereunder not later than October 31,
1995 and such election shall be made with respect to
amounts which otherwise would not be paid until after
December 31, 1995. If such a beneficiary does not make
a Delinking Election, distributions shall be made as
provided in Section 2.8.
(2) The beneficiary of a deceased Participant who
had made a Beneficiary Delinking Election before his
death shall make a Form of Payment Delinking Election
within 183 days of the date of such Participant's death.
Whether or not such a beneficiary makes a Delinking
Election, distributions to such a beneficiary shall not
commence any earlier than 90 days after the one year
anniversary of the Participant's death. Distributions
made to such a beneficiary in the form of installments
shall be made over a period, not to exceed the period
specified in Section 2.11(b). If the beneficiary of a
deceased Participant, who had made a Beneficiary
Delinking Election before his death, does not make a
Form of Payment Delinking Election, his account balances
shall be distributed in a single sum no sooner than the
90th day after the first anniversary of the
Participant's death.
The beneficiary of a Participant's beneficiary who
was subject to a Beneficiary Delinking Election shall
receive his benefits in a single sum payment as soon as
administratively feasible after the Valuation Date
immediately following the beneficiary's death and the
administrative determination of the identity of such
beneficiary's beneficiary.
(3) If a deceased Participant who has made a
Delinking Election fails to designate a beneficiary or
designates as beneficiary an individual who predeceases
the Participant or an entity which ceases to exist
before the Participant's death, the Participant's
beneficiary for purposes of the Plan shall be his
Beneficiary as designated in the Profit Sharing Plan.
2.11 Installment Payments.
(a) Order of Payment of Accounts. Installment
distributions under a Delinking Election made pursuant to
Section 2.10 shall be paid:
(1) first, from the Participant's or beneficiary's
leveraged ESOP account under McEqual, McCAP I and
McCAP II, in that order;
(2) second, from the Participant's or
beneficiary's McDESOP account under McEqual, McCAP I and
McCAP II, in that order; and
(3) last, from the Participant's or beneficiary's
Profit Sharing account under McEqual, McCAP I and
McCAP II in that order.
(b) Maximum Period of Payment. Participants or
Beneficiaries electing to receive installment payments may
elect to receive substantially equal payments over a fixed
period of not more than 25 years or payments in a fixed
dollar amount which shall not be less than the amount which
at the time the election is made would be expected, assuming
no interest and no mortality, to result in the payment of the
Participants' accounts under McEqual, McCAP I and McCAP II in
a period not in excess of 25 years.
2.12 Limitation on Elections and Payments. Notwithstanding
any other provision of this Section 2:
(a) no investment election or other election which is
permitted hereunder to be made by any individual who is an
officer or director of the Company for the purposes of
Section 16 of the Securities Exchange Act of 1934, as amended
(the "Act"), shall be effective before the first date that
such election could be made effective without being
considered a nonexempt purchase or sale under Section 16(b)
of the Act, and
(b) no distribution from the Plan shall be made
hereunder to any person who, at the time of distribution, is,
or within the immediately preceding six months was, an
officer or director of the Company for purposes of Section 16
of the Act before the first date that such distribution would
not be a nonexempt purchase or sale under Section 16(b) of
the Act.
2.13 Valuation of Accounts. The value of any portion of a
Participant's McCap II Profit Sharing Account to be paid in cash
shall be valued as of the Valuation Date, as defined in the
McDonald's Profit Sharing Program, preceding the date of payment,
based upon the value of the Investment Funds under the Profit
Sharing Plan portion of the Profit Sharing Program. The value of
any portion of a Participant's McCap II McDonald's Common Stock
Account to be paid in cash shall be valued as of the Valuation
Date, preceding the date of payment, using the same values of
McDonald's Common Stock determined for the Profit Sharing
McDonald's Common Stock Fund.
2.14 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company or other adopting employer
(collectively called "Employers") which employs such person. The
Employers shall not be required to fund, or otherwise segregate
assets to be used for payment of benefits under the Plan. While
the Employers may, in the discretion of the Board of Directors,
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 Employers
shall not be under any obligation to make such investments and
any such investment shall remain an asset of the contributing
Employer subject to the claims of its general creditors.
Notwithstanding the foregoing, the Employers, in the discretion
of the Company, 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
contributing Employer in an amount equal to the amount held in
the trust multiplied by the percentage of all McCAP II Account
balances which represent amounts credited to Participants on
account of their being employees of such Employer in the event
such Employer becomes insolvent or is subject to bankruptcy or
insolvency proceedings. Any payments by such a trust of benefits
provided to a Participant under the Plan shall be considered
payment by the Participant's Employer and shall discharge such
Employer of any further liability for the payments made by such
trust.
Section 3
Miscellaneous
3.1 Plan Administration. The Plan shall be administered by
the Committee responsible for administration of the Profit
Sharing Program ("Committee"). The Committee shall have, to the
extent appropriate, the same powers, rights, duties and
obligations with respect to the Plan as it has with respect to
the Profit Sharing Program.
3.2 Employment Rights. Establishment of the Plan shall not
be construed to give any employee the right to be retained in the
Company's service or to any benefits not specifically provided by
the Plan, nor shall the establishment of the Plan in any manner
modify the Company's right to modify, amend or terminate the
Profit Sharing Program, McEqual or McCAP I.
3.3 Interests Not Transferable. Except as to withholding of
any tax under the laws of the United States or any state or
locality or as provided in Section 3.8, 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 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 benefits under the Plan,
or if by reason of his 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 spouse, children or other
dependents, or any of them, in such manner as the Company may
deem proper.
3.4 Unclaimed Amounts. Unclaimed amounts shall consist of
the amounts of the McCAP II Accounts of a Participant which
cannot be distributed because of the Committee's inability, after
a reasonable search, to locate the Participant or his beneficiary
within a period of two (2) years after the payment of benefits
becomes due. Unclaimed amounts shall be forfeited at the end of
such two-year period. 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 his McCAP II Account.
3.5 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.
3.6 Gender and Number. Words in the masculine gender shall
include the feminine, and the plural shall include the singular
and the singular shall include the plural.
3.7 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 McDonald's Corporation or any member of the
Committee or person(s) authorized by resolution of the Board of
Directors of McDonald's Corporation.
3.8 Qualified Domestic Relations Order.
(a) Notwithstanding Section 3.3, the Committee shall
comply with the provisions of any order determined by the
Committee to be a Qualified Relations Order.
(b) "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 Accrued Benefit under the Plan; and
(4) with respect to which the requirements of
paragraphs (c) and (d) are met.
(c) 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.
(d) 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.
(e) 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 3.8(d)(l) solely because such order requires that
payment of benefits be made to an alternate payee:
(1) without regard to the Participant's attainment
of any specified age;
(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.
Section 4
Subsidiary Participation
4.1 Adoption of Plan. Any Commonly Controlled Entity,
Commonly Controlled Corporation, Domestic Affiliate or Foreign
Affiliate, as defined in the Profit Sharing Program, which has
adopted a portion of the Profit Sharing Program 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.
4.2 Withdrawal from the Plan by Participating Employer.
While it is not the present intention of any adopting employer to
withdraw from the Plan, any such 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 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 McCAP II
Accounts of Participants employed by the withdrawing employer as
of the date of withdrawal shall be distributed by such employer
in cash 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.
Section 5
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 paragraph ) to modify, amend or terminate the Plan,
notwithstanding that an amendment may change the timing or the
optional form of benefit elected by a Participant in a Delinking
Election or the timing or optional form of benefit in which a
Participant's benefits would otherwise have been paid under
Section 2, provided, however, that if a Participant has a
McCAP II Account, benefits provided under Section 2.1 shall
constitute an irrevocable obligation of the employer to the same
extent that such McCAP II Account, had it been an account under
the Profit Sharing Program, would have been an irrevocable
obligation of the Profit Sharing Program.
The Committee shall have the same authority with respect to
the adoption of amendments to the Plan 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 Internal Revenue Service or other
governmental 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'
contributions to the Plan.
The Committee shall provide notice of amendments adopted by
the Committee to the Board of Directors on a timely basis.
Executed in multiple originals this 18th day of December, 1995.
McDONALD'S CORPORATION
By /s/ Stanley R. Stein
__________________________________
Stanley R. Stein
Senior Vice President
EXHIBIT 10(c)(ii)
McDONALD's
PROFIT SHARING PROGRAM EQUALIZATION PLAN
("McEQUAL")
McDONALD's
PROFIT SHARING PROGRAM EQUALIZATION PLAN
("McEQUAL")
Section 1
Introduction
1.1 The Plan and Its Effective Date. The McDonald's Profit
Sharing Program Equalization Plan (the "Plan" or "McEqual"), was
established effective January 1, 1989, by the merger, amendment
and restatement of the McDonald's Supplemental Employee Benefit
Equalization Plan, established effective January 1, 1983,
approved by the shareholders on May 19, 1983, and amended and
restated effective January 1, 1987, and the McDESOP Equalization
Plan, established effective January 1, 1986, approved by the
shareholders on May 23, 1986, and amended and restated effective
January 1, 1987. The Plan which was further amended and restated
effective January 1, 1989, and January 1, 1990 is hereby amended
and restated effective January 1, 1996, except as otherwise
provided herein.
1.2 Purpose. McDonald's Corporation ("McDonald's" or the
"Company") maintains the McDonald's Corporation Profit Sharing
Program ("Profit Sharing Program") which has four components, the
Profit Sharing Plan, McDESOP, the Leveraged ESOP and the
McDonald's Stock Sharing Plan which are intended to meet the
requirements of a qualified plan under the Internal Revenue Code
of 1986, as amended (the "Code"). While Code Section 415 places
limitations on the maximum amount of contributions and benefits
which may be paid under a qualified plan ("Limits"), the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
permits the payment under an "excess benefit plan" of the
benefits which may not be paid under a qualified plan because of
such Limits. The purpose of the Plan is to provide benefits
which would be provided under the Profit Sharing Program, as
presently in effect and as hereafter from time to time amended,
but which are not provided thereunder because of the Limits. In
determining the amounts to be credited to an Active Participant's
accounts during a Plan Year under the Plan, the Profit Sharing
Program, the McDonald's 1989 Executive Equalization Plan
("McCAP I") and the McDonald's Supplemental Employee Benefit
Equalization Plan ("McCAP II"), the Committee may make
assumptions based upon reasonable estimates and, as necessary,
make subsequent adjustments to the extent the estimates prove to
be incorrect.
1.3 Defined Terms. Except as otherwise indicated
capitalized terms used in this plan document which are not
defined herein have the same meaning as the same term in the
McDonald's Profit Sharing Program.
Section 2
Participation and Benefits
2.1 Eligibility for and Amount of Benefits. Subject to the
conditions and limitations of the Plan, if for any year an
employee of the Company or any other entity which has adopted the
Plan in accordance with Section 4 who is a participant in the
Profit Sharing Program has the amount of employer contributions
(including Participant Elected Contributions) and forfeitures
which would have been allocated to his accounts under the Profit
Sharing Program reduced pursuant to the Limits as stated in
Article IX thereof, the amount of each such reduction shall be
credited to such employee's "McEqual Account" hereunder ("Annual
Benefit Credits") and he shall be an active participant for such
year ("Active Participant"). Notwithstanding the foregoing, any
amount distributed to a participant in the Profit Sharing Program
in accordance with Sections 4.1(c), 5.2(c), 5.2(e) or 5.4 of the
Profit Sharing Program shall be considered an amount which was
received under the Profit Sharing Program in the calendar year
for which the amount was contributed to the Profit Sharing
Program (or would have been so contributed in the absence of the
Limits). A person who was a participant in the McDonald's
Supplemental Employee Benefit Equalization Plan or the McDESOP
Equalization Plan before January 1, 1989 or who becomes an Active
Participant thereafter shall remain a participant ("Participant")
with respect to amounts credited to his McEqual Account until the
amounts credited to his McEqual Account have been distributed.
2.2 Income Credits. Amounts credited to a Participant's
McEqual Account for periods before January 1, 1996 shall be
credited to Participant's McEqual Accounts as provided by the
Plan as then in effect. Such amounts and amounts credited to a
Participant's McEqual Account with respect to periods after
December 31, 1995 shall be credited with earnings, gains and
losses as described below:
(a) McEqual Profit Sharing Investment Account. The
portion of a Participant's Annual Benefit Credits which in
the absence of the Limits would have been Employer Profit
Sharing Contributions to the Profit Sharing portion of the
Profit Sharing Program shall be credited to the
Participant's McEqual Profit Sharing Investment Account for
a calendar year. A Participant's McEqual Profit Sharing
Investment Account shall also be credited with any amounts
with respect to which a Participant has made a
Diversification Election, as provided in Section 2.3 and any
amounts subject to any election made by the Participant
pursuant to Section 2.4. A Participant's McEqual Profit
Sharing Investment Account shall be credited with net
earnings, gains and losses as of the Valuation Date under
the Profit Sharing Program in an amount equal to the amount
which such account would have earned, gained or lost if at
all times such amounts and the income credited thereon were
fully invested in the same manner as the Participant's
Employer Profit Sharing Contribution Account under the
Profit Sharing Program.
(b) McEqual McDonald's Common Stock Account. Subject
to Section 2.3, the portion of a Participant's Annual
Benefit Credits which, in the absence of the Limits, would
have been credited to such Active Participant's accounts
under the Profit Sharing Program with respect to Participant
Elected Contributions, Employer Matching Contributions and
Employer Leveraged ESOP Contributions shall be credited to
the Participant's McEqual McDonald's Common Stock Account
for a calendar year. A Participant's McEqual McDonald's
Common Stock Account shall be credited with net earnings,
gains and losses as of each Valuation Date under the Profit
Sharing Program in an amount equal to the amount which such
account would have earned, gained or lost if such amounts
and the income credited thereon were at all times fully
invested in the Profit Sharing McDonald's Common Stock Fund.
2.3 Diversification of Investments. If a Participant makes
a Diversification Election in accordance with the provisions of
Section 10.10 of the Profit Sharing Program (the "Diversification
Election"), his corresponding McEqual accounts and subaccounts
containing the contributions and income with respect thereto
which, if not for the Limits, would have been credited to his
accounts under the McDESOP or the Leveraged ESOP portions of the
Profit Sharing Program shall to the same extent be credited to
the Participant's McEqual Profit Sharing Account and shall
thereafter be credited with income as provided in Section 2.2(a).
2.4 Transfers to the Profit Sharing Investment Account. A
Participant may make an irrevocable election to have all amounts
which have been credited to his McEqual McDonald's Common Stock
Account through March 31, 1991, which represent amounts which
except for the Limits would have been credited to the Profit
Sharing Plan portion of the Profit Sharing Program and any
accumulated income credited thereon, credited with earnings,
gains and losses as of each Valuation Date, as defined in the
McDonald's Profit Sharing Program, equal to the amount which such
credited amounts would have earned, gained or lost if at all
times after the effective date of such election such amounts and
the income credited thereon had been fully invested in the
McEqual Profit Sharing Investment Account. Any election made
pursuant to this Section shall be completed, delivered to the
Committee and made effective in such manner and at such time as
the Committee shall determine in accordance with its rules
concerning the manner of making investment elections under the
Profit Sharing Plan portion of the Profit Sharing Program.
2.5 Vesting. A Participant shall be vested in the portion
of his McEqual Account which in the absence of the Limits would
have been allocated to his Profit Sharing Account under the
Profit Sharing Program and the earnings, gains or losses thereon
to the same extent he is vested in his Profit Sharing Account
under the Profit Sharing Program. A Participant shall be vested
in the portions of his McEqual Account which in the absence of
the Limits would have been allocated to his Leveraged ESOP
Account under the Profit Sharing Program and the earnings, gains
or losses thereon to the same extent that he would have been
vested in his Employer Leveraged ESOP Account under the Profit
Sharing Program. All other amounts credited to a Participant's
McEqual Account and the earnings thereon shall be fully vested.
2.6 Payment of Benefits. Distributions of the McEqual
Account of a Participant who has not made a Delinking Election,
as provided in Section 2.8, shall be made as follows:
(a) McDESOP Portion of McEqual Account. The portion
of a Participant's McEqual Account which in the absence of
the Limits would have been benefits provided by the McDESOP
portion of the Profit Sharing Program shall be paid to him
in cash at the same time and in the same form (other than in
the form of an annuity purchased from an insurance company)
that his account under the McDESOP portion of the Profit
Sharing Program is paid or commences to be paid.
(b) Profit Sharing Plan Portion of McEqual Account.
The portion of a Participant's McEqual Account which in the
absence of the Limits would have been benefits provided by
the Profit Sharing Plan portion of the Profit Sharing
Program shall be paid to the Participant in cash at the same
time and in the same form (other than in the form of an
annuity purchased from an insurance company) that his
accounts under the Profit Sharing Plan portion of the Profit
Sharing Program are paid or commence to be paid.
(c) Leveraged ESOP Portion of McEqual Account. The
portion of a Participant's McEqual Account which in the
absence of the Limits would have been benefits provided by
the Leveraged ESOP portion of the Profit Sharing Program
shall be paid to him in cash at the same time and in the
same form (other than in the form of an annuity contract
purchased from an insurance company) that benefits are paid
under the Leveraged ESOP portion of the Profit Sharing
Program.
(d) Annuity Elections. A participant in the Profit
Sharing Program who elects to receive his accounts under the
Profit Sharing Program in the form of an annuity shall
receive payment of the same portions of his McEqual Accounts
in installment payments over a period certain equal to the
joint and last survivor life expectancy of the Participant
and his beneficiary, if any, at the time that the annuity is
purchased under the Profit Sharing Program.
(e) Qualified Domestic Relations Order.
Notwithstanding the foregoing, no distribution shall be made
in accordance with Sections 2.6(a), 2.6(b) or 2.6(c) on
account of the payment, under the Profit Sharing Program, of
a distribution from the account of a participant who is, at
the time of distribution, an active McDonald's employee, nor
shall such a distribution be made on account of a
distribution made from the Profit Sharing Program in
accordance with a qualified domestic relations order except
as provided in Section 3.8.
2.7 Beneficiary Designation. Absent a Beneficiary
Delinking Election by a Participant under Section 2.8(c):
(a) A Participant's McEqual Profit Sharing Account
shall be paid to the beneficiary entitled to receive his
Profit Sharing Accounts under the Profit Sharing Program in
the same form and same time as distributions are made
thereunder.
(b) A Participant's McEqual McDESOP Account shall be
paid to the beneficiary entitled to receive his McDESOP
Accounts under the Profit Sharing Program in the same form
and same time as distributions are made thereunder.
(c) A Participant's McEqual Leveraged ESOP Account
shall be paid to the beneficiary entitled to receive his
Leveraged ESOP Accounts under the Profit Sharing Program in
the same form and the same time as distributions are made
thereunder.
If a beneficiary who is entitled to do so does not make a
Delinking Election as provided in Section 2.8(d), the
distribution of his accounts shall be made as provided in this
Section 2.7 beginning no earlier than the applicable date
provided in Section 2.8(d).
2.8 Delinking Election. Delinking elections shall only be
made by Participants who are on the McDonald's Executive Payroll
and the beneficiaries of such Participant as permitted below.
Distributions of McEqual Accounts pursuant to a Delinking
Election, as provided in Section 2.8(b) or 2.8(d), (the
"Delinking Election") shall be made in accordance with this
Section 2.8 rather than Section 2.6. A Participant's Delinking
Election shall be irrevocable except to the extent provided in
this Section 2.8.
(a) Active Employees. Each Participant who has made a
Delinking Election as to distributions to be made in his
lifetime, as provided herein, shall receive distributions
after he has a Termination of Employment and during his life
in accordance with this Section 2.8(a) ("Lifetime Delinking
Election").
(1) Time of Lifetime Delinking Election. A
Participant who is an active employee on or after
September 1, 1995, may make a Lifetime Delinking
Election or a revised Lifetime Delinking Election to
change the form or timing of distributions under his
Lifetime Delinking Election at any time.
(2) Complete Election. Each Lifetime Delinking
Election shall designate the date on which the
Participant's account balances are to be paid or
commence to be paid and shall select whether payments
are to be made in the form of a single sum payment or
in installments. Installments may be paid monthly,
quarterly or annually over a period designated in the
Lifetime Delinking Election by the Participant which
period which shall not exceed the period specified in
Section 2.9(b). A Lifetime Delinking Election shall
not be effective unless it is complete and includes an
election as to the timing and form of the distribution
or distributions.
(3) Distribution Election. Each Participant who
is an active employee and who has made a Lifetime
Delinking Election shall be permitted to make a new
Lifetime Delinking Election changing his elections as
to the timing and form of his distribution. Each such
Lifetime Delinking Election which is made before
October 31, or such earlier date as the Committee shall
designate by giving notice to Participants, shall be
effective the next January 1 and shall remain effective
through at least December 31 of such year. In the
absence of a new Lifetime Delinking Election the
Participant's prior Lifetime Delinking Election shall
stay in effect from year to year. The Lifetime
Delinking Election of a Participant who has a
Termination of Employment shall become irrevocable.
(4) Qualified Domestic Relations Order. No
distributions shall be made in accordance with Section
2.9 on account of the payment, under the Profit Sharing
Program, of a distribution from the McEqual Account of
a Participant who is, at the time of distribution, an
active McDonald's employee, nor shall such a
distribution be made on account of a distribution made
from the Profit Sharing Program in accordance with a
qualified domestic relations order except as provided
in Section 3.8.
(b) Former Employees. Each Participant who was a
former employee on September 20, 1995, may make a Lifetime
Delinking Election or a Beneficiary Delinking Election, on
or before October 31, 1995, with respect to his McEqual,
McCAP I and McCAP II account balances available for
distribution after December 31, 1995. Such a Lifetime
Delinking Election shall be irrevocable in all respects and
shall designate both the form in which the distributions are
to be made (a single sum distribution or monthly, quarterly
or yearly installments paid over a period not to exceed the
period specified in Section 2.9(b), and the date on which
distributions will be made, if in a single sum, or commence
to be made, if in installments. Under a Beneficiary
Delinking Election, the former employee's beneficiary
designation under the Profit Sharing Program shall no longer
apply to designate his beneficiary under McEqual, McCAP I
and McCAP II and he shall complete a separate beneficiary
designation which shall not name different beneficiaries to
receive the Profit Sharing, McDESOP, leveraged ESOP and
Stock Sharing portions of McEqual, McCAP I and McCAP II.
Except as provided in this Section 2.8(b), Lifetime
Delinking Elections or Beneficiary Delinking Elections shall
not be made by former employees.
(c) Beneficiary Delinking Election. Effective on July
1, 1996 or at such earlier date as the Committee designates,
each Participant who is an active employee may make an
election to delink his beneficiary designation under the
Plan, McCAP I and McCAP II (a "Beneficiary Delinking
Election") may elect to designate beneficiaries to receive
his McEqual Accounts which may or may not be different
persons than the beneficiaries designated to receive his Net
Balance Accounts under the Profit Sharing Program. Under a
Beneficiary Delinking Election, a Participant shall not name
different beneficiaries to receive the Profit Sharing,
McDESOP, Leveraged ESOP and Stock Sharing portions of the
Plan, McEqual and McCAP II. However, several beneficiaries
can be designated to receive a proportion of the total of
such benefits.
(d) Beneficiary's Elections. Each beneficiary of a
deceased Participant who before his death made a Beneficiary
Delinking Election and each beneficiary who is the
beneficiary of a Participant who died before September 20,
1995, shall have a one time opportunity to make an election
designating the form (a single sum distribution or monthly,
quarterly or yearly installments) and the date on which
distributions will be made, if in a single sum, or commence
to be made, if in installments (a "Form of Payment Delinking
Election") as follows:
(1) The beneficiary of a former employee who died
before September 20, 1995, must make his Form of
Payment Delinking Election hereunder not later than
October 31, 1995 and such election shall be made with
respect to amounts which otherwise would not be paid
until after December 31, 1995. If such a beneficiary
does not make a Delinking Election, distributions shall
be made as provided in Section 2.7.
(2) The beneficiary of a deceased Participant who
had made a Beneficiary Delinking Election before his
death shall make a Form of Payment Delinking Election
within 183 days of the date of such Participant's
death. Whether or not such a beneficiary makes a Form
of Payment Delinking Election, distributions to such a
beneficiary shall not commence any earlier than 90 days
after the one year anniversary of the Participant's
death. Distributions made to such a beneficiary in the
form of installments shall be made over a period, not
to exceed the period specified in Section 2.9(b). If
the beneficiary of a deceased Participant, who had made
a Beneficiary Delinking Election before his death, does
not make a Form of Payment Delinking Election, his
account balances shall be distributed in a single sum
no sooner than the 90th day after the first anniversary
of the Participant's death.
The beneficiary of a Participant's beneficiary who
was subject to a Bbeneficiary Delinking Election shall
receive his benefit in a single sum payment as soon as
administratively feasible after the Valuation Date
immediately following the beneficiary's death and the
administrative determination of the identity of such
beneficiary's beneficiary.
(3) If a deceased Participant who has made a
Delinking Election fails to designate a beneficiary or
designates as beneficiary an individual who predeceases
the Participant or an entity which ceases to exist
before the Participant's death, the Participant's
beneficiary for purposes of the Plan shall be his
Beneficiary as designated in the Profit Sharing Plan.
2.9 Installment Payments.
(a) Order of Payment of Accounts. Installment
distributions under a Delinking Election made pursuant to
Section 2.8 shall be paid:
(1) first, from the Participant's or
beneficiary's leveraged ESOP account under McEqual,
McCAP I and McCAP II, in that order;
(2) second, from the Participant's or
beneficiary's McDESOP account under McEqual, McCAP I
and McCAP II, in that order; and
(3) last, from the Participant's or beneficiary's
Profit Sharing account under McEqual, McCAP I and
McCAP II in that order.
(b) Minimum Period of Payment. Participants or
Beneficiaries electing to receive installment payments may
elect to receive substantially equal payments over a fixed
period of not more than 25 years or payments in a fixed
dollar amount which shall not be less than the amount which
at the time the election is made would be expected, assuming
no interest and no mortality, to result in the payment of
the Participants' accounts under McEqual, McCAP I and McCAP
II in a period not in excess of 25 years.
2.10 Limitation on Elections and Payments. Notwithstanding
any other provision of this Section 2:
(a) no investment election or other election which is
permitted hereunder to be made by any individual who is an
officer or director of the Company for the purposes of
Section 16 of the Securities Exchange Act of 1934, as
amended (the "Act"), shall be effective before the first
date that such election could be made effective without
being considered a nonexempt purchase or sale under
Section 16(b) of the Act, and
(b) no distribution from the Plan shall be made
hereunder to any person who, at the time of distribution,
is, or within the immediately preceding six months was, an
officer or director of the Company for purposes of Section
16 of the Act before the first date that such distribution
would not be a nonexempt purchase or sale under Section
16(b) of the Act.
2.11 Valuation of Accounts. The value of any portion of a
Participant's McEqual Profit Sharing Account to be paid in cash
shall be valued as of the Valuation Date, as defined in the
McDonald's Profit Sharing Program, preceding the date of payment,
based upon the value of the Investment Funds under the Profit
Sharing Plan portion of the Profit Sharing Program. The value of
any portion of a Participant's McEqual McDonald's Common Stock
Account to be paid in cash shall be valued as of the Valuation
Date, preceding the date of payment, using the values of
McDonald's Common Stock determined for the Profit Sharing
McDonald's Common Stock Fund.
2.12 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company or other adopting employer
(collectively called "Employers") which employs such person. The
Employers shall not be required to fund, or otherwise segregate
assets to be used for payment of benefits under the Plan. While
the Employers may, in the discretion of the Board of Directors,
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 Employers
shall not be under any obligation to make such investments and
any such investment shall remain an asset of the contributing
Employer subject to the claims of its general creditors.
Notwithstanding the foregoing, the Employers, in the discretion
of the Company, 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
contributing Employer in an amount equal to the amount held in
the trust multiplied by the percentage of all McEqual account
balances which represent amounts credited to Participants on
account of their being employees of such Employer in the event
such Employer becomes insolvent or is subject to bankruptcy or
insolvency proceedings. Any payments by such a trust of benefits
provided to a Participant under the Plan shall be considered
payment by the Participant's Employer and shall discharge such
Employer of any further liability under the Plan for the payments
made by such trust.
Section 3
Miscellaneous
3.1 Plan Administration. The Plan shall be administered by
the Committee responsible for administration of the Profit
Sharing Program ("Committee"). The Committee shall have, to the
extent appropriate, the same powers, rights, duties and
obligations with respect to the Plan as it has with respect to
the Profit Sharing Program.
3.2 Employment Rights. Establishment of the Plan shall not
be construed to give any Participant the right to be retained in
the Company's service or to any benefits not specifically
provided by the Plan, nor shall the establishment of the Plan in
any manner modify the Company's right to modify, amend or
terminate the Profit Sharing Program, McCAP I or McCAP II.
3.3 Interests Not Transferable. Except as to withholding
of any tax under the laws of the United States or any state or
locality or as provided in Section 3.8, 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 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 benefits under the Plan,
or if by reason of his 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 spouse, children or other
dependents, or any of them, in such manner as the Company may
deem proper.
3.4 Unclaimed Amounts. Unclaimed amounts shall consist of
the amounts of the McEqual Accounts of a Participant 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 shall be forfeited at the end of
such two-year period. 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 his McEqual Account.
3.5 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.
3.6 Gender and Number. Words in the masculine gender shall
include the feminine, and the plural shall include the singular
and the singular shall include the plural.
3.7 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 McDonald's Corporation or any member of the
Committee or person(s) authorized by resolution of the Board of
Directors of McDonald's Corporation.
3.8 Qualified Domestic Relations Order.
(a) Notwithstanding Section 3.3, the Committee shall
comply with the provisions of any order determined by the
Committee to be a Qualified Relations Order.
(b) "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 Accrued Benefit under the Plan;
and
(4) with respect to which the requirements of
paragraphs (c) and (d) are met.
(c) 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.
(d) 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.
(e) 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 3.8(d)(l) solely because such order
requires that payment of benefits be made to an alternate
payee:
(1) without regard to the Participant's
attainment of any specified age;
(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.
Section 4
Subsidiary Participation
4.1 Adoption of Plan. Any Commonly Controlled Entity,
Commonly Controlled Corporation, Domestic Affiliate or Foreign
Affiliate, as defined in the Profit Sharing Program, which has
adopted a portion of the Profit Sharing Program 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.
4.2 Withdrawal from the Plan by Participating Employer.
While it is not the present intention of any adopting employer to
withdraw from the Plan, any such 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 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 McEqual
Accounts of Participants employed by the withdrawing employer as
of the date of withdrawal shall be distributed by such employer
in cash 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.
Section 5
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 paragraph) to modify, amend or terminate the Plan
notwithstanding that an amendment may change the timing or the
optional form of benefit elected by a Participant in a Delinking
Election or the timing or optional form of benefit in which a
Participant's benefits would otherwise have been paid under
Section 2, provided, however, that if a Participant has a McEqual
Account, benefits provided under Section 2.1 hereof shall
constitute an irrevocable obligation of the employer to the same
extent that such McEqual Account, had it been an account under
the Profit Sharing Program, would have been an irrevocable
obligation of the Profit Sharing Program.
The Committee shall have the same authority with respect to
the adoption of amendments to the Plan 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 Internal Revenue Service or other
governmental 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' contributions to the
Plan.
The Committee shall provide notice of amendments adopted by
the Committee to the Board of Directors on a timely basis.
Executed in multiple originals this 18th day of December, 1995.
McDONALD'S CORPORATION
By: /s/ Stanley R. Stein
_________________________
Stanley R. Stein
Senior Vice President
EXHIBIT 10(c)(iii)
McDONALD'S
1989 EXECUTIVE EQUALIZATION PLAN
("McCAP I")
McDONALD'S
1989 EXECUTIVE EQUALIZATION PLAN
("McCAP I")
Section 1
Introduction
1.1 The Plan and Its Effective Date. The McDonald's 1989
Executive Equalization Plan (the "Plan" or "McCAP I") as
established by McDonald's Corporation ("McDonald's" or the
"Company") effective January 1, 1989, and amended and restated
effective January 1, 1990, and as amended from time to time
thereafter is hereby again amended and restated effective
January 1, 1996 except as otherwise provided herein.
1.2 Purpose. The Company maintains the McDonald's
Corporation Profit Sharing Program ("Profit Sharing Program")
which has four components, the Profit Sharing Plan, McDESOP, the
Leveraged ESOP and the McDonald's Stock Sharing Plan which are
intended to meet the requirements of a qualified plan under
Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"). Code Section 402(g) generally limits to $9,500 (in
1996, as adjusted in subsequent years for increases in the cost
of living in accordance with Code Section 402(g)(5)) the maximum
amount of employee elective deferrals under a qualified plan
("Elective Contribution Limit"); Code Section 401(a)(17) limits
to $150,000 (in 1996, as adjusted in subsequent years as provided
by the Secretary of the Treasury) the amount of compensation
which may be taken into account for a Plan Year under a qualified
plan ("Compensation Limit"); and elective deferrals to a
nonqualified plan are not taken into account in determining
compensation and benefits under the qualified plans ("Elective
Deferral Exclusion") (such limits and exclusion are collectively
referred to herein as the "Limits").
However, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), permits the provision of benefits under an
unfunded plan maintained by an employer primarily for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees. The purpose of the
Plan is to provide benefits to eligible employees which would be
provided under the Profit Sharing Program as in effect on
January 1, 1989, and thereafter, as from time to time amended,
but which are not provided thereunder because of the Limits,
subject to the requirement that the benefits provided under this
Plan shall be determined as though the only employee elected
deferrals of an Active Participant, as defined in Section 2.1,
are the Participant Elected Contributions elected under the
McDESOP portion of the Profit Sharing Program, the McDonald's
Profit Sharing Program Equalization Plan ("McEqual"), the
McDonald's Supplemental Employee Benefit Equalization Plan
("McCAP II"), and under Section 2.4 hereof. In determining the
amounts to be credited to the accounts of an Active Participant,
during a calendar year under the Plan, McEqual, McCAP II, and the
Profit Sharing Program, the Committee may make assumptions based
upon reasonable estimates and, as necessary, make subsequent
adjustments to the extent the estimates prove to be incorrect.
1.3 Defined Terms. Except as otherwise indicated capitalized
terms used in this plan document which are not defined herein
have the same meaning as the same term in the McDonald's Profit
Sharing Program.
Section 2
Participation and Benefits
2.1 Eligibility for Benefits. Before the beginning of each
calendar year, the Committee shall designate as eligible to be
credited with benefits under the Plan for such calendar year
employees of the Company or any other entity which has adopted
the Plan in accordance with Section 4 who are at the pay level of
director or higher or who are expected to earn $130,500 or more
(in 1996, as adjusted in subsequent years for increases in the
cost of living in such manner as the Committee shall determine)
("Active Participants"). Persons to be designated as Active
Participants from the group of employees who first become
participants in the Profit Sharing Program during a calendar year
shall be designated by the Committee on or before their Profit
Sharing Program Entry Date. A person who becomes an Active
Participant shall remain a participant ("Participant") until all
amounts credited to his account under the Plan ("McCAP I
Account") have been distributed.
2.2 Amount of Benefits. The amount credited to an Active
Participant's McCAP I Account for a calendar year shall equal (a)
the amount, if any, the Active Participant would have received
under the Profit Sharing Program for that year (including, if the
Active Participant pursuant to Section 2.4 so elects, the amount
of any elections of Participant Elected Contributions made by the
Active Participant and any associated Matching Contributions) in
the absence of the limitations under Section 415 of the Code as
stated in Article IX thereof ("415 Limits") and in the absence of
the Limits reduced by (b) the sum of the amounts allocated to
such Participant's accounts under the Profit Sharing Program and
amounts credited to the Participant's account under McEqual for
the calendar year ("Annual Benefit Credits"). Notwithstanding
the foregoing, (1) any amount distributed to a participant in the
Profit Sharing Program in accordance with Sections 4.1(c),
5.2(c), 5.2(e) or 5.4 of the Program shall be considered an
amount which was received under the Profit Sharing Program in the
calendar year for which the amount was contributed to the Profit
Sharing Program (or would have been so contributed in the absence
of the Limits) and (2) an Active Participant who does not have an
election in effect under Section 2.4 for a calendar year shall
not be credited with any Participant Elected Contributions or
Employer Matching Contributions hereunder for that calendar year.
2.3 Accounts and Income Credits. Except as otherwise
provided herein, amounts credited to a Participant's McCAP I
Account for periods before January 1, 1996 shall be credited to
Participant's McCAP I Accounts as provided by the Plan as then in
effect. Such amounts and amounts credited to a Participant's
McCAP I Account with respect to periods after December 31, 1995
shall be credited with net earnings, gains and losses as
described below:
(a) McCAP I Profit Sharing Investment Account. The
portion of a Participant's Annual Benefit Credits which, in
the absence of the Limits, would have been Employer Profit
Sharing Contributions to the Profit Sharing portion of the
Profit Sharing Program shall be credited to the Participant's
McCAP I Profit Sharing Investment Account for a calendar
year. A Participant's McCAP I Profit Sharing Investment
Account shall also be credited with any amounts with respect
to which a Participant has made a Diversification Election,
as provided in Section 2.5, or any election made by the
Participant pursuant to Section 2.6. A Participant's McCAP I
Profit Sharing Investment Account shall be credited with
earnings, gains and losses as of each Valuation Date under
the Profit Sharing Program in an amount equal to the amount
which such account would have earned, gained or lost if at
all times fully invested in the same manner as the
Participant's Profit Sharing Fund Account under the Profit
Sharing Program.
(b) McCAP I McDonald's Common Stock Account. Subject
to Section 2.5, the portion of a Participant's Annual Benefit
Credits which, in the absence of the Limits, would have been
credited to such Active Participant's Accounts under the
Profit Sharing Program with respect to Participant Elected
Contributions, Employer Matching Contributions and Employer
Leveraged ESOP Contributions shall be credited to the
Participant's McCap I McDonald's Common Stock Account for a
calendar year. A Participant's McCAP I McDonald's Common
Stock Account shall be credited with net earnings, gains and
losses as of each Valuation Date under the Profit Sharing
Program in an amount equal to the amount which such account
would have earned, gained or lost if such amounts and the
income credited thereon were at all times fully invested in
the Profit Sharing McDonald's Common Stock Fund.
2.4 Deferral Elections. Each person who is a participant in
the Profit Sharing Program and who is designated by the Committee
as an Active Participant with respect to each calendar year may
elect by filing a written election with the Committee, in
accordance with such rules and procedures as the Committee shall
establish, before the beginning of such calendar year, to have
the Participant Elected Contributions and Employer Matching
Contributions described in Section 2.2, if any, credited to his
McCAP I Account. An employee who becomes a participant in the
Profit Sharing Program during a year who is designated by the
Committee as an Active Participant hereunder, may elect within
60 days of the date he becomes a participant in the Profit
Sharing Program to have the Participant Elected Contributions and
Employer Matching Contributions, if any, described in Section 2.2
credited to his McCAP I Account.
If an Active Participant has an election pursuant to this
Section 2.4 in effect for a calendar year, such election and the
Active Participant's elected deferrals under McDESOP may not be
changed during the year. If an Active Participant does not have
an election in effect pursuant to this Section 2.4 for the
calendar year, any amounts of Participant Elected Contributions
in excess of the Elective Contribution Limit which are elected by
such Participant under the McDESOP portion of the Profit Sharing
Program either shall not be contributed or shall be returned to
him as provided thereunder and no benefit shall be credited to
him hereunder with respect to his Participant Elected
Contributions and Employer Matching Contributions under the
Profit Sharing Program.
2.5 Diversification of Investments. If a Participant makes
a Diversification Election in accordance with Section 10.10 of
the Profit Sharing Program (the "Diversification Election"), his
corresponding McCAP I accounts and subaccounts containing the
contributions and income with respect thereto which, if not for
the Limits, would have been credited to his accounts under the
McDESOP or the Leveraged ESOP portions of the Profit Sharing
Program shall to the same extent be credited to the Participant's
McCAP I Profit Sharing Investment Account and shall thereafter be
credited with income as provided in Section 2.3(a).
2.6 Transfers to the Profit Sharing Investment Account. A
Participant may make an irrevocable election to have all amounts
which have been credited to his McCAP I McDonald's Common Stock
Account through March 31, 1991, which represent amounts which
except for the Limits would have been credited to the Profit
Sharing Plan portion of the Profit Sharing Program, and any
accumulated income credited thereon, credited with earnings,
gains and losses as of each Valuation Date, as defined in the
McDonald's Profit Sharing Program, equal to the amount which such
credited amounts would have earned, gained or lost if at all
times after the effective date of such election such amounts and
the income credited thereon had been fully invested in the
Participant's McCAP I Profit Sharing Investment Account. Any
election made pursuant to this Section shall be completed,
delivered to the Committee and made effective in such manner and
at such time as the Committee shall determine in accordance with
its rules concerning the manner of making investment elections
under the Profit Sharing Plan portion of the Profit Sharing
Program.
2.7 Vesting. A Participant shall be vested in the portions
of his McCAP I Account which in the absence of the Limits would
have been allocated to his Profit Sharing Account under the
Profit Sharing Program and the earnings, gains or losses thereon
to the same extent he is vested in his Profit Sharing Account
under the Profit Sharing Program. A Participant shall be vested
in the portions of his McCAP I Account which in the absence of
the Limits would have been allocated to his Leveraged ESOP
Account under the Profit Sharing Program and the earnings, gains
and losses thereon to the same extent he is vested in his
Leveraged ESOP Account under the Profit Sharing Program. All
other amounts credited to a Participant's McCAP I Account and the
earnings thereon shall be fully vested.
2.8 Payment of Benefits. Distributions of the McCAP I
Account of a Participant who has not made a Delinking Election,
as provided in Section 2.10(a) or 2.10(b), shall be made as
follows:
(a) McDESOP Portion of McCAP I Account. The portion of
a Participant's McCAP I Account which in the absence of the
Limits would have been benefits provided by the McDESOP
portion of the Profit Sharing Program shall be paid to him in
cash at the same time and in the same form (other than in the
form of an annuity purchased from an insurance company) under
the McDESOP portion of the Profit Sharing Program.
(b) Profit Sharing Plan Portion of McCAP I Account.
The portion of a Participant's McCAP I Account which in the
absence of the Limits would have been benefits provided by
the Profit Sharing Plan portion of the Profit Sharing Program
shall be paid to the Participant in cash at the same time and
in the same form (other than in the form of an annuity
purchased from an insurance company) that his account under
the Profit Sharing Plan portion of the Profit Sharing Program
is paid or commences to be paid.
(c) Leveraged ESOP Portion of McCAP I Account. The
portion of a Participant's McCAP I Account which in the
absence of the Limits would have been benefits provided by
the Leveraged ESOP portion of the Profit Sharing Program
shall be paid to him in cash at the same time and in the same
form (other than in the form of an annuity contract purchased
from an insurance company) that benefits are paid under the
Leveraged ESOP portion of the Profit Sharing Program.
(d) Annuity Elections. A participant in the Profit
Sharing Program who elects to receive his accounts under the
Profit Sharing Program in the form of an annuity shall
receive payment of the same portions of his McCAP I Accounts
in installment payments over a period certain equal to the
joint and last survivor life expectancy of the Participant
and his beneficiary, if any, at the time that the annuity is
purchased under the Profit Sharing Program.
(e) Qualified Domestic Relations Order. Notwithstand-
ing the foregoing, no distribution shall be made in
accordance with Sections 2.8(a), 2.8(b) or 2.8(c) on account
of the payment, under the Profit Sharing Program, of a
distribution from the account of a participant who is, at the
time of distribution, an active McDonald's employee, nor
shall such a distribution be made on account of a
distribution made from the Profit Sharing Program in
accordance with a qualified domestic relations order except
as provided in Section 3.8.
(f) Transaction Costs. To the extent that the amounts
described in Section 2.3(b) are distributed to the
Participant and are used by the Participant or former
employee to purchase shares of McDonald's stock on the open
market in one or more transactions within seven months after
the date such amounts were distributed, the Company shall
reimburse such Participant or former employee for all
reasonable brokerage fees and other transaction costs
incurred by him in connection with such purchases upon
presentation to the Company not later than 60 days after the
date of each transaction or satisfactory evidence thereof.
2.9 Beneficiary Designation. Absent a Beneficiary Delinking
Election by a Participant under Section 2.10(c):
(a) A Participant's McCAP I Profit Sharing Account
shall be paid to the beneficiary entitled to receive his
Profit Sharing Accounts under the Profit Sharing Program in
the same form and same time as distributions are made
thereunder.
(b) A Participant's McCAP I McDESOP Account shall be
paid to the beneficiary entitled to receive his McDESOP
Accounts under the Profit Sharing Program in the same form
and same time as distributions are made thereunder.
(c) A Participant's McCAP I Leveraged ESOP Account
shall be paid to the beneficiary entitled to receive his
Leveraged ESOP Accounts under the Profit Sharing Program in
the same form and the same time as distributions are made
thereunder.
2.10 Delinking Election. Distributions of McCAP I Accounts
pursuant to a Delinking Election as provided in Section 2.10(b)
or 2.10(d) (the "Delinking Election") shall be made in accordance
with this Section 2.10 rather than Section 2.8. A Participant's
Delinking Election shall be irrevocable except to the extent
provided in this Section 2.10.
(a) Active Employees. Each Participant who has made a
Delinking Election as to distributions to be made in his
lifetime, as provided herein, shall receive distributions
after he has a termination of Employment and during his life
in accordance with this Section 2.10(a) ("Lifetime Delinking
Election").
(1) Time of Lifetime Delinking Election. A
Participant who is an active employee on or after
September 20, 1995, may make a Lifetime Delinking
Election or a revised Lifetime Delinking Election to
change the form or timing of distributions under his
Lifetime Delinking Election at any time.
(2) Complete Election. Each Lifetime Delinking
Election shall designate the date on which the
Participant's account balances are to be paid or
commence to be paid and shall select whether payments
are to be made in the form of a single sum payment or in
installments. Installments may be paid monthly,
quarterly or annually over a period designated in the
Lifetime Delinking Election by the Participant which
period shall not exceed the period specified in
Section 2.11(b). A Lifetime Delinking Election shall
not be effective unless it is complete and includes an
election as to the timing and form of the distribution
or distributions.
(3) Distribution Election. Each Participant who
is an active employee and who has made a Lifetime
Delinking Election shall be permitted to make a new
Lifetime Delinking Election changing his elections as to
the timing and form of his distribution. Each such
Lifetime Delinking Election which is made before October
31, or such earlier date as the Committee shall
designate by giving notice to Participants, shall be
effective the next January 1 and shall remain effective
through at least December 31 of such year. In the
absence of a new Lifetime Delinking Election the
Participant's prior Lifetime Delinking Election shall
stay in effect from year to year. The Lifetime
Delinking Election of a Participant who has a
Termination of Employment shall become irrevocable.
(4) Qualified Domestic Relations Order. No
distributions shall be made in accordance with Section
2.10 on account of the payment, under the Profit Sharing
Program, of a distribution from the McCAP I Account of a
Participant who is, at the time of distribution, an
active McDonald's employee, nor shall such a
distribution be made on account of a distribution made
from the Profit Sharing Program in accordance with a
qualified domestic relations order except as provided in
Section 3.8.
(b) Former Employees. Each Participant who was a
former employee on September 20, 1995, may make a Lifetime
Delinking Election or a Beneficiary Delinking Election, on or
before October 31, 1995, with respect to his McCAP I, McCAP
II and McEqual account balances available for distribution
after December 31, 1995. Such a Lifetime Delinking Election
shall be irrevocable in all respects and shall designate both
the form in which the distributions are to be made (a single
sum distribution or monthly, quarterly or yearly installments
paid over a period not to exceed the period specified in
Section 2.11(b)), and the date on which distributions will be
made, if in a single sum, or commence to be made, if in
installments. Under a Beneficiary Delinking Election, the
former employee's beneficiary designation under the Profit
Sharing Program shall no longer apply to designate his
beneficiary under McEqual, McCAP I and McCAP II and he shall
complete a separate beneficiary designation which shall not
name different beneficiaries to receive the Profit Sharing,
McDESOP, leveraged ESOP and Stock Sharing portions of the
Plan, McEqual, McCAP II. Except as provided in this Section
2.10(b), Lifetime Delinking Elections or Beneficiary
Delinking Elections shall not be made by former employees.
(c) Beneficiary Delinking Election. Effective at July
1, 1996 or such earlier date as the Committee designates,
each Participant who is an active employee may make an
election to delink his beneficiary designation under the
Plan, McEqual or McCAP II (a "Beneficiary Delinking
Election") and may elect to designate beneficiaries to
receive his McEqual, McCAP I, and McCAP II Accounts which may
or may not be different persons than the beneficiaries
designated to receive his Net Balance Accounts under the
Profit Sharing Program. Under a Beneficiary Delinking
Election, a Participant shall not name different
beneficiaries to receive the Profit Sharing, McDESOP,
Leveraged ESOP and Stock Sharing portions of the Plan,
McEqual and McCAP II. However, several beneficiaries can be
designated to receive a proportion of the total of such
benefits.
(d) Beneficiary's Elections. Each beneficiary of a
deceased Participant who before his death has made a
Beneficiary Delinking Election and each beneficiary who is
the beneficiary of a Participant who died before
September 20, 1995, shall have a one time opportunity to make
a Delinking Election designating the form (a single sum
distribution or monthly, quarterly or yearly installments)
and the date on which distributions will be made, if in a
single sum, or commence to be made, if in installments (a
"Form of Payment Delinking Election") as follows:
(1) The beneficiary of a former employee who died
before September 20, 1995, must make his Form of Payment
Delinking Election hereunder not later than October 31,
1995 and such election shall be made with respect to
amounts which otherwise would not be paid until after
December 31, 1995. If such a beneficiary does not make
a Form of Payment Delinking Election, distributions
shall be made as provided in Section 2.8.
(2) The beneficiary of a deceased Participant who
had made a Beneficiary Delinking Election before his
death shall make a Form of Payment Delinking Election
within 183 days of the date of such Participant's death.
Whether or not such a beneficiary makes a Form of
Payment Delinking Election, distributions to such a
beneficiary shall not commence any earlier than 90 days
after the one year anniversary of the Participant's
death. Distributions made to such a beneficiary in the
form of installments shall be made over a period not to
exceed the period specified in Section 2.11(b). If the
beneficiary of a deceased Participant who had made a
Beneficiary Delinking Election before his death does not
make a Form of Payment Delinking Election, his account
balances shall be distributed in a single sum no sooner
than the 90th day after the first anniversary of the
Participant's death.
The beneficiary of a beneficiary who was subject to
a Beneficiary Delinking Election shall receive his
benefits in a single sum payment as soon as
administratively feasible after the Valuation Date
immediately following the beneficiary's death and the
administrative determination of the identity of such
beneficiary's beneficiary.
(3) If a deceased Participant who has made a
Delinking Election fails to designate a beneficiary or
designates as beneficiary an individual who predeceases
the Participant or an entity which ceases to exist
before the Participant's death, the Participant's
beneficiary for purposes of the Plan shall be his
Beneficiary as designated in the Profit Sharing Plan.
2.11 Installment Payments.
(a) Order of Payment of Accounts. Installment
distributions, under a Delinking Election made pursuant to
Section 2.10, shall be paid:
(1) first, from the Participant's or beneficiary's
leveraged ESOP account under McEqual, McCAP I and
McCAP II, in that order;
(2) second, from the Participant's or
beneficiary's McDESOP account under McEqual, McCAP I and
McCAP II, in that order; and
(3) last, from the Participant's or beneficiary's
Profit Sharing account under McEqual, McCAP I and
McCAP II in that order.
(b) Maximum Period of Payment. Participants or
Beneficiaries electing to receive installment payments may
elect to receive substantially equal payments over a fixed
period of not more than 25 years or payments in a fixed
dollar amount which shall not be less than the amount which
at the time the election is made would be expected, assuming
no interest and no mortality, to result in the payment of the
Participants' accounts under McEqual, McCAP I and McCAP II in
a period not in excess of 25 years.
2.12 Limitation on Elections and Payments. Notwithstanding
any other provision of this Section 2:
(a) no investment election or other election which is
permitted hereunder to be made by any individual who is an
officer or director of the Company for the purposes of
Section 16 of the Securities Exchange Act of 1934, as amended
(the "Act"), shall be effective before the first date that
such election could be made effective without being
considered a nonexempt purchase or sale under Section 16(b)
of the Act, and
(b) no distribution from the Plan shall be made
hereunder to any person who, at the time of distribution, is,
or within the immediately preceding six months was, an
officer or director of the Company for purposes of Section 16
of the Act before the first date that such distribution would
not be a nonexempt purchase or sale under Section 16(b) of
the Act.
2.13 Valuation of Accounts. The value of any portion of a
Participant's McCAP I Profit Sharing Account to be paid in cash
shall be valued as of the Valuation Date, as defined in the
McDonald's Profit Sharing Program, preceding the date of payment,
based upon the value of the Investment Funds under the Profit
Sharing Plan portion of the Profit Sharing Program. The value of
any portion of a Participant's McCAP I McDonald's Common Stock
Account to be paid in cash shall be valued as of the Valuation
Date, preceding the date of payment, using the value of
McDonald's Common Stock determined for the Profit Sharing
McDonald's Common Stock Fund.
2.14 Funding. Benefits payable under the Plan to any person
shall be paid directly by the Company or other adopting employer
(collectively called "Employers") which employs such person. The
Employers shall not be required to fund, or otherwise segregate
assets to be used for payment of benefits under the Plan. While
the Employers may, in the discretion of the Board of Directors,
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 Employer shall
not be under any obligation to make such investments and any such
investment shall remain an asset of the contributing Employer
subject to the claims of its general creditors. Notwithstanding
the foregoing, the Employers, in the discretion of the Company,
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 contributing
Employer in an amount equal to the amount held in the trust
multiplied by the percentage of all McCAP I Account balances
which represent amounts credited to Participants on account of
their being employees of such Employer in the event such Employer
becomes insolvent or is subject to bankruptcy or insolvency
proceedings. Any payments by such a trust of benefits provided
to a Participant under the Plan shall be considered payment by
the Participant's Employer and shall discharge such Employer of
any further liability for the payments made by such trust.
Section 3
Miscellaneous
3.1 Plan Administration. The Plan shall be administered by
the Committee responsible for administration of the Profit
Sharing Plan ("Committee"). The Committee shall have, to the
extent appropriate, the same powers, rights, duties and
obligations with respect to the Plan as it has with respect to
the Profit Sharing Program.
3.2 Employment Rights. Establishment of the Plan shall not
be construed to give any employee the right to be retained in the
Company's service or to any benefits not specifically provided by
the Plan, nor shall the establishment of the Plan in any manner
modify the Company's right to modify, amend or terminate the
Profit Sharing Program McEqual or McCAP II.
3.3 Interests Not Transferable. Except as to withholding of
any tax under the laws of the United States or any state or
locality or as provided in Section 3.8, 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 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 benefits under
the Plan, or if by reason of his 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
spouse, children or other dependents, or any of them, in such
manner as the Company may deem proper.
3.4 Unclaimed Amounts. Unclaimed amounts shall consist of
the amounts of the McCAP I Accounts of a Participant which cannot
be distributed because of the Committee's inability, after a
reasonable search within a period of two (2) years after the
payment of benefits becomes due. Unclaimed amounts shall be
forfeited at the end of such two-year period. 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 his
McCAP I Account.
3.5 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.
3.6 Gender and Number. Words in the masculine gender shall
include the feminine, and the plural shall include the singular
and the singular shall include the plural.
3.7 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 McDonald's Corporation or any member of the
Committee or person(s) authorized by resolution of the Board of
Directors of McDonald's Corporation.
3.8 Qualified Domestic Relations Order.
(a) Notwithstanding Section 3.3, the Committee shall
comply with the provisions of any order determined by the
Committee to be a Qualified Relations Order.
(b) "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 Accrued Benefit under the Plan; and
(4) with respect to which the requirements of
paragraphs (c) and (d) are met.
(c) 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.
(d) 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.
(e) 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 3.8(d)(l) solely because such order requires that
payment of benefits be made to an alternate payee:
(1) without regard to the Participant's attainment
of any specified age;
(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.
Section 4
Subsidiary Participation
4.1 Adoption of Plan. Any Commonly Controlled Entity,
Commonly Controlled Corporation, Domestic Affiliate or Foreign
Affiliate, as defined in the Profit Sharing Program, which has
adopted a portion of the Profit Sharing Program 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.
4.2 Withdrawal from the Plan by Participating Employer.
While it is not the present intention of any adopting employer to
withdraw from the Plan, any such 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 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 McCAP I
Accounts of Participants employed by the withdrawing employer as
of the date of withdrawal shall be distributed by such employer
in cash 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.
Section 5
Amendment and Termination
5.1 Company Authority to Amend. 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 paragraph) to
modify, amend or terminate the Plan, notwithstanding that an
amendment may change the timing or the optional form of benefit
elected by a Participant in a Delinking Election or the timing or
optional form of benefit in which a Participant's or
beneficiary's benefits would otherwise have been paid under
Section 2, provided, however, that if a Participant has a McCAP I
Account, benefits provided under Section 2.1 shall constitute an
irrevocable obligation of the employer to the same extent that
such McCAP I Account, had it been an account under the Profit
Sharing Program, would have been an irrevocable obligation of the
Profit Sharing Program.
5.2 Committee Authority to Amend. The Committee shall have
the same authority with respect to the adoption of amendments to
the Plan 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 Internal Revenue Service or other governmental
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' contributions to the Plan.
The Committee shall provide notice of amendments adopted by
the Committee to the Board of Directors on a timely basis.
Executed in multiple originals this 18th day of December, 1995.
McDONALD'S CORPORATION
By /s/ Stanley R. Stein
______________________________
Stanley R. Stein
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>
Years ended December 31,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income $1,427.3 $1,224.4 $1,082.5
Preferred stock dividends (net of tax benefits) (40.5) (47.2) (46.9)
-------- -------- --------
Net income available after preferred stock dividends (A) 1,386.8 1,177.2 1,035.6
Effect of preferred stock exchange* (4.3) .0 .0
Common stock dividends on assumed conversion of preferred stock .6 1.2 1.2
-------- -------- --------
Net income available to common shareholders $1,383.1 $1,178.4 $1,036.8
======== ======== ========
Weighted average number of common shares outstanding during the period (A) 701.5 701.8 711.8
Additional shares related to potentially dilutive securities 20.5 20.5 21.6
-------- -------- --------
Adjusted weighted average common shares 722.0 722.3 733.4
======== ======== ========
Fully diluted net income per common share $1.92 $1.63 $1.41
======== ======== ========
Increase in fully diluted net income per common share over prior year 18% 16% 12%
======== ======== ========
---------------------
* The 1995 period includes $3.9 million for the effect of the Company's
exchange of Series E Cumulative Preferred Stock for subordinated debt
securities completed in June, 1995, and an additional .4 million for the
effect of the Company's repurchase of additional Series E preferred stock
in the third quarter.<PAGE>
(A) Refer to Consolidated statement of income and Financial comments on
pages 33 and 53 from Part II, item 8 of this 1995 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>
Years Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
- Income before provision for income taxes $2,169.1 $1,886.6 $1,675.7 $1,448.1 $1,299.4
- Minority interest in operating results of
majority-owned subsidiaries, including
fixed charges related to redeemable preferred
stock, less equity in undistributed operating
results of less-than-50% owned affiliates 19.6 6.6 6.9 5.3 5.1
- Provision for income taxes of 50% owned
affiliates included in consolidated income
before provision for income taxes 73.3 34.9 34.2 29.4 34.1
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* 103.8 83.4 71.6 70.1 67.9
- Interest expense, amortization of debt
discount and issuance costs, and
depreciation of capitalized interest* 388.8 346.0 358.0 413.8 433.9
--------------------------------------------------------------
$2,754.6 $2,357.5 $2,146.4 $1,966.7 $1,840.4
==============================================================
FIXED CHARGES
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* $103.8 $83.4 $71.6 $70.1 $67.9
- Interest expense, amortization of debt discount
and issuance costs, and fixed charges
related to redeemable preferred stock* 403.4 343.9 349.3 405.4 425.7
- Capitalized interest* 22.8 21.0 20.7 20.5 28.5
--------------------------------------------------------------
$530.0 $448.3 $441.6 $496.0 $522.1
==============================================================
RATIO OF EARNINGS TO FIXED CHARGES 5.20 5.26 4.86 3.96 3.53
==============================================================
*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)
McDonald's Systems of Espana, 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)
McDonald's Restaurants (Swisse) S.A. (Switzerland)
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 25, 1996, 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,
1995:
Commission File No.
------------------------------------------
Form S-8 Form S-3
------------------------------------------
33-09267 33-00001
33-24958 33-42642
33-49817 33-50025
33-50701 33-50695
33-58840 33-64873
33-60939
ERNST & YOUNG LLP
Chicago, Illinois
March 28, 1996<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5 Exhibit 27
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 335
<SECURITIES> 0
<RECEIVABLES> 414
<ALLOWANCES> 0
<INVENTORY> 58
<CURRENT-ASSETS> 956
<PP&E> 17,137
<DEPRECIATION> 4,326
<TOTAL-ASSETS> 15,415
<CURRENT-LIABILITIES> 1,795
<BONDS> 4,258
0
358
<COMMON> 92
<OTHER-SE> 9,918
<TOTAL-LIABILITY-AND-EQUITY> 15,415
<SALES> 6,864
<TOTAL-REVENUES> 9,795
<CGS> 5,548
<TOTAL-COSTS> 6,062
<OTHER-EXPENSES> (106)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 340
<INCOME-PRETAX> 2,169
<INCOME-TAX> 742
<INCOME-CONTINUING> 1,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,427
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 0
</TABLE>
