UNITED STATES SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT ON FORM 10-Q pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 for the quarter ended
June 30, 1997, to amend Part I, Item 2 Management's Discussion and
Analysis of Financial Condition and Results of Operations, and Exhibits 3,
10(b)(iii) and 10(e) to correct errors in EDGAR version.
McDONALD'S CORPORATION
Commission File No. 1-5231
Delaware No. 36-2361282
(State of Incorporation) (I.R.S. Employer I.D. No.)
McDonald's Plaza
Oak Brook, Illinois 60523
(630) 623-3000
(Address and Phone Number of Principal Executive Offices)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By: /s/ Michael L. Conley
-----------------------------
Michael L. Conley
Executive Vice President,
Chief Financial Officer
Date: August 13, 1997
<PAGE> 1
Item 2. Management's Discussion And Analysis Of Financial Condition
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And Results Of Operations
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<TABLE>
INCREASES (DECREASES) IN OPERATING RESULTS OVER 1996
<CAPTION>
Dollars in millions, except Six Months Quarter
per common share data Ended June 30 Ended June 30
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SYSTEMWIDE SALES $1,066.7 7% $543.1 7%
------------------------------------------------------------------------
REVENUES
Sales by Company-operated
restaurants $ 267.7 7% $128.3 7%
Revenues from franchised and
affiliated restaurants 91.4 6 39.2 5
------------------------------------------------------------------------
TOTAL REVENUES 359.1 7 167.5 6
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OPERATING COSTS AND EXPENSES
Company-operated restaurants 224.8 8 117.0 8
Franchised restaurants-
occupancy costs 21.5 8 10.4 7
General, administrative
and selling expenses 43.7 7 20.9 6
Other operating (income)
expense-net (14.0) N/M (12.2) N/M
------------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 276.0 7 136.1 7
------------------------------------------------------------------------
OPERATING INCOME 83.1 7 31.4 4
------------------------------------------------------------------------
Interest expense 8.6 5 3.4 4
Nonoperating (income)
expense-net (6.7) N/M 10.4 N/M
------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 81.2 8 17.6 3
------------------------------------------------------------------------
Provision for income taxes 20.5 6 (0.2) 0
------------------------------------------------------------------------
NET INCOME $ 60.7 8% $ 17.8 4%
=========================================================================
NET INCOME PER COMMON
SHARE $ .10 10% $ .04 7%
------------------------------------------------------------------------
(N/M) Not meaningful
</TABLE>
<PAGE> 2
CONSOLIDATED OPERATING RESULTS
Net income per common share and net income increased 10 and eight percent,
respectively, for the six months, and seven and four percent,
respectively, for the quarter. Changing foreign currencies significantly
reduced reported results for the six months and quarter. Excluding the $16
million non-cash charge for the adoption of SFAS 121 in first quarter 1996
and foreign currency impact, net income per common share and net income
would have increased 11 and 10 percent for the six months, respectively.
For the quarter, net income per common share and net income would have
increased 10 and eight percent, respectively, excluding foreign currency
impact.
During the quarter, the Company repurchased four million shares of
common stock for approximately $200 million, bringing total share
repurchase for the six months to 10.7 million shares for about $500
million. Fewer shares outstanding resulted in higher increases in net
income per common share compared with the increases in net income.
Systemwide sales represent sales by Company-operated, franchised
and affiliated restaurants. Total revenues consist of sales by Company-
operated restaurants and fees from restaurants operated by franchisees and
affiliates. These fees are based upon a percent of sales with specified
minimum payments. On a global basis, the increases in sales and revenues
for both periods were due to expansion, offset in part by weaker foreign
currencies. The unusually low number of net U.S. restaurant additions in
both periods was primarily due to a greater number of restaurant closings,
particularly satellite restaurant closings previously announced.
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RESTAURANT ADDITIONS Six Months Ended Quarters Ended
June 30 June 30
1997 1996 1997 1996
----------------------------------------------------------------------
U.S. 84 313 74 184
Outside the U.S. 677 570 433 383
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Total restaurant additions 761 883 507 567
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RESTAURANTS UNDER CONSTRUCTION At June 30
1997 1996
---------------------------------------------------------------------
U.S. 78 153
Outside the U.S. 359 389
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Total restaurants under construction 437 542
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<PAGE> 3
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CONSOLIDATED OPERATING MARGINS Six Months Ended Quarters Ended
June 30 June 30
1997 1996 1997 1996
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In millions of dollars
Company-operated $ 700.1 $ 657.2 $ 374.0 $ 362.7
Franchised 1,283.5 1,213.6 667.4 638.6
Combined operating margins $1,983.6 $1,870.8 $1,041.4 $1,001.3
As a percent of sales/revenues
Company-operated 18.1 18.3 18.6 19.2
Franchised 81.1 81.4 81.5 81.9
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Company-operated margins as a percent of sales were about flat for the six
months and lower for the quarter. As a percent of sales, food & paper costs
increased, while payroll costs decreased for both periods. Occupancy & other
operating costs as a percent of sales increased slightly for the six months
and decreased slightly for the quarter.
Franchised margin dollars comprised about two-thirds of the combined
operating margins, the same as in the prior year. While franchised
margins as a percent of applicable revenues decreased slightly for both
periods, franchised margin dollars increased six percent for the six
months and five percent for the quarter.
The increases in general, administrative & selling expenses were primarily
due to strategic global spending to support the Convenience, Value and
Execution Strategies, including costs associated with expansion outside
the U.S. and continued investment in developing countries, offset in part
by weaker foreign currencies.
Other operating (income) expense--net is composed of transactions
related to franchising and the foodservice business. Gains on sales of
restaurant businesses were lower since fewer restaurants were sold. The
other category reflected lower expense for both periods. This was
primarily due to lower provisions for property dispositions in 1997 for
the quarter, and for the six months, the $16 million charge for the
adoption of SFAS 121 in first quarter 1996.
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OTHER OPERATING (INCOME) Six Months Ended Quarters Ended
EXPENSE-NET June 30 June 30
In millions of dollars 1997 1996 1997 1996
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Gains on sales of restaurant
businesses $(27.6) $(42.3) $(20.0) $(33.3)
Equity in earnings of
unconsolidated affiliates (33.2) (34.4) (17.3) (15.9)
Other (income) expense 5.5 35.4 (12.0) 12.1
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Other operating (income)
expense--net $(55.3) $(41.3) $(49.3) $(37.1)
========================================================================
<PAGE> 4
Consolidated operating income increased $83 million or seven percent and
$31 million or four percent for the six months and quarter, respectively.
The increases reflected higher combined operating margin dollars and other
operating income, offset in part by higher general, administrative &
selling expenses and weaker foreign currencies.
Higher interest expense in both periods reflected higher debt levels,
offset in part by lower average interest rates and weaker foreign
currencies.
Nonoperating (income) expense reflected translation losses in both
periods of 1997 compared with translation gains in 1996, and in the six
months ended June 30, 1996, losses associated with the reduction of the
carrying value of the Company's investment in Discovery Zone common stock
to zero.
The effective income tax rate was 32.5 and 31.9 percent for the six
months and quarter of 1997, respectively, compared with 33.0 and 32.8
percent for the corresponding periods of 1996. For the year 1997, the
Company expects the effective tax rate to be in the range of 32.0 to 32.5
percent.
OPERATING RESULTS OUTSIDE THE U.S.
The sales increases outside the U.S. for both periods were driven
primarily by expansion, offset in part by weaker foreign currencies.
Comparable sales in constant currencies increased slightly for the quarter
and decreased slightly for the six months. If exchange rates had remained
at 1996 levels, sales outside the U.S. would have increased 18 and 16
percent for the quarter and six months, respectively. Severe weather in
Europe in the first quarter and weak economies in both periods negatively
affected results.
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OPERATING RESULTS OUTSIDE Six Months Ended Quarters Ended
THE U.S. June 30 June 30
1997 1996 1997 1996
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Percent increase
SALES
As reported 9 10 11 5
Excluding foreign currency
impact 16 15 18 12
REVENUES
As reported 13 15 14 11
Excluding foreign currency
impact 17 17 19 15
OPERATING INCOME
As reported 12 8 10 7
Excluding foreign currency
impact 17 10 15 11
Excluding SFAS 121 charge and
foreign currency impact 15 13 15 11
As a percent of sales/revenues
Company-operated margins 18.7 19.2 19.0 19.8
Franchised margins 81.2 81.1 81.7 81.2
------------------------------------------------------------------------
<PAGE> 5
Revenues increased at a faster rate than sales in both periods. This
was primarily due to the weakening Japanese Yen, which had a greater
effect on sales than revenues due to our affiliate structure in Japan, and
the higher growth rate in Company-operated versus franchised restaurants.
Of the larger international markets, the following had strong
sales and operating income growth for both periods of 1997: the
Philippines and Taiwan in Asia/Pacific; England, Italy, Spain, Sweden and
Switzerland in Europe; and Mexico in Latin America. Our operations in
Canada were negatively affected by increased competition and low consumer
spending due to high unemployment; weak economies also negatively affected
our operations in France and Germany, although France improved in the
second quarter.
The increases in operating income outside the U.S. in both periods
were driven by higher Company-operated and franchised margin dollars, and
increases in other operating income. Weaker foreign currencies and higher
general, administrative & selling expenses necessary to fund expansion and
continued investment in developing countries partly offset these
increases.
Company-operated margins as a percent of sales declined in both
periods. As a percent of sales, increases in food & paper costs and
occupancy & other operating costs were offset in part by decreases in
payroll costs.
Franchised margins as a percent of revenues were relatively flat
in the six months and up for the quarter.<PAGE>
<PAGE> 6
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
While changing foreign currencies affect reported results, McDonald's
lessens exposures by primarily purchasing goods and services in local
currencies, financing in local currencies and hedging certain foreign-
denominated cash flows.
The weakening of the Japanese Yen and Deutsche Mark were the primary
foreign currency changes that negatively affected results in
both periods. The following table illustrates what 1997 results would have
been if exchange rates had remained at 1996 levels compared with reported
results.
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FOREIGN CURRENCY IMPACT ON WORLDWIDE RESULTS
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Dollars in millions except
per common share data
----------------------------------------------------------------------------
Increase
----------------------------------------------------------------------------
Adjusted Reported Change Adjusted Reported
----------------------------------------------------------------------------
Six months ended June 30, 1997
----------------------------------------------------------------------------
Systemwide sales $16,810.4 $16,308.2 $502.2 10% 7%
Operating income 1,395.3 1,357.7 37.6 9 7
Net income 803.8 782.7 21.1 11 8
Net income per
common share 1.14 1.11 .03 13 10
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Quarter ended June 30, 1997
----------------------------------------------------------------------------
Systemwide sales $8,737.9 $8,475.1 $262.8 10% 7%
Operating income 762.0 743.5 18.5 7 4
Net income 453.1 438.2 14.9 8 4
Net income per
common share .65 .63 .02 10 7
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U.S. OPERATING RESULTS
U.S. sales increased in both periods due to restaurant expansion (497
restaurants were added in the 12 months ended June 30, 1997). U.S. comparable
sales were slightly positive for the six months and slightly negative for
the quarter. This performance reflected successful marketing and
promotions including Monopoly, Chicken McNuggets and Teenie Beanie Babies
and disappointing results from the price component of Campaign 55.
<PAGE> 7
------------------------------------------------------------------------
U.S. OPERATING RESULTS Six Months Ended Quarters Ended
June 30 June 30
1997 1996 1997 1996
------------------------------------------------------------------------
Percent increase/(decrease)
Sales 5 3 3 3
Revenues 0 4 (3) 4
Operating income 1 (1) (2) 0
------------------------------------------------------------------------
As a percent of sales/revenues
Company-operated margins 16.9 16.8 17.7 18.3
Franchised margins 81.0 81.5 81.4 82.4
------------------------------------------------------------------------
U.S. sales increased at a faster rate than revenues primarily
because the number of U.S. franchised and affiliated restaurants increased
over the past year while the number of Company-operated restaurants
decreased.
U.S. operating income increased slightly for the six months and
decreased slightly for the quarter. This performance reflected lower
Company-operated margin dollars and higher general, administrative &
selling expenses, offset in part by higher franchised margin dollars, and
for the quarter, lower other operating expenses.
Company-operated margins as a percent of sales remained relatively
flat for the six months and declined for the quarter. Cost trends as a
percent of sales follow: food & paper costs increased while payroll and
occupancy & other operating expenses decreased for the six months; for the
quarter, food & paper and payroll costs increased while occupancy & other
operating expenses decreased.
Franchised margins as a percent of revenues declined for both periods.
These declines reflected slower revenue growth as a result of flat to
negative comparable sales and rent adjustments. The margins were also
negatively affected by higher occupancy costs, primarily rent expense,
driven by an increase in the number of leased sites.
FINANCIAL POSITION
Cash provided by operations for the six months ended June 30, 1997
decreased 4%. Together with other sources of cash such as borrowings,
cash provided by operations was used primarily for capital expenditures,
debt repayments, share repurchases and dividends. The consolidated
capital expenditure decrease of 3% for the six months ended June 30,
resulted from a 30% decrease in U.S. capital expenditures offsetting a 14%
capital expenditure increase from outside the U.S. Based on input from
local management, the Company has refined its plans and expects to add
about 2,400 restaurants globally in 1997, with about 80% being outside the
U.S.
<PAGE> 8
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this report. They use
such words as "may," "will," "expect," "believe," "plan" and other similar
terminology. These statements reflect management's current expectations
and involve a number of risks and uncertainties. Actual results could
differ materially due to changes in global and local business and economic
conditions; legislation and governmental regulation; competition; success
of operating initiatives and advertising and promotional efforts; food,
labor and other operating costs; availability and cost of land and
construction; accounting policies and practices; consumer preferences,
spending patterns and demographic trends; political or economic
instability in local markets; and currency exchange rates.
<PAGE> 9
<TABLE>
SIX MONTHS AND SECOND QUARTER HIGHLIGHTS
<CAPTION>
OPERATING RESULTS
--------------------------------------------------------------------------
Dollars in millions, except Six Months Ended Quarters Ended
per common share data June 30 June 30
1997 1996 1997 1996
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Systemwide sales $16,308.2 $15,241.5 $8,475.1 $7,932.0
--------------------------------------------------------------------------
U.S. sales 8,409.3 8,001.6 4,420.4 4,278.8
Operated by franchisees 6,516.4 6,190.1 3,423.2 3,305.4
Operated by the Company 1,336.6 1,381.5 698.8 741.5
Operated by affiliates 556.3 430.0 298.4 231.9
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Sales outside the U.S. 7,898.9 7,239.9 4,054.7 3,653.2
Operated by franchisees 3,645.5 3,435.2 1,874.6 1,748.9
Operated by the Company 2,530.7 2,218.1 1,315.3 1,144.3
Operated by affiliates 1,722.7 1,586.6 864.8 760.0
--------------------------------------------------------------------------
Total revenues 5,450.2 5,091.1 2,832.6 2,665.1
U.S. 2,262.1 2,264.0 1,178.2 1,211.0
Outside the U.S. 3,188.1 2,827.1 1,654.4 1,454.1
--------------------------------------------------------------------------
Operating income 1,357.7 1,274.6 743.5 712.1
U.S. 611.4 605.2 340.2 346.0
Outside the U.S. 772.9 691.5 416.8 377.3
Corporate G&A (26.6) (22.1) (13.5) (11.2)
--------------------------------------------------------------------------
Income before provision for
income taxes 1,158.8 1,077.6 643.1 625.5
Net income 782.7 722.0 438.2 420.4
Net income per common share 1.11 1.01 .63 .59
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Cash provided by operations 975.8 1,020.8 443.9 546.5
--------------------------------------------------------------------------
Total assets 17,562.0 16,021.4
Total shareholders' equity 8,760.3 8,319.1
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</TABLE>
<PAGE> 10
<TABLE>
RESTAURANTS
<CAPTION>
-------------------------------------------------------------------------
At June 30, 1997 1996
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<S> <C> <C>
Systemwide restaurants 21,783 19,263
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U.S. 12,178 11,681
Operated by franchisees 9,537 9,167
Operated by the Company 1,795 1,852
Operated by affiliates 846 662
-------------------------------------------------------------------------
Outside the U.S. 9,605 7,582
Operated by franchisees 4,166 3,479
Operated by the Company 2,714 2,170
Operated by affiliates 2,725 1,933
-------------------------------------------------------------------------
</TABLE>
BY-LAWS OF
McDONALD'S CORPORATION
ARTICLE I - OFFICES
Section 1 - Principal Office - The registered office shall be established
and maintained at the office of The Prentice Hall Corporation System
Inc., in the City of Dover, in the County of New Castle, in the State of
Delaware; and said Corporation shall be the resident agent of this
Corporation in charge thereof.
Section 2 - Other Offices - The Corporation may also have an office in
the Village of Oak Brook, State of Illinois, and may also have other
offices, either within or without the State of Delaware, at such place or
places as the Board of Directors may from time to time appoint or the
business of the Corporation may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1 - Place of Meetings - The Annual Meeting of Stockholders and
any other meetings of stockholders shall be held at such place as may
from time to time be determined by the Board of Directors and set forth
in a notice thereof.
Section 2 - Annual Election of Directors - The Annual Meeting of
Stockholders for the election of Directors and the transaction of other
business shall be held each year on the date determined by the Board of
Directors. If this date shall fall upon a legal holiday, the meeting
shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect Directors to
succeed those whose terms then expire and may transact any other proper
business. Any previously scheduled meeting of the stockholders may be
postponed by resolution of the Board of Directors upon public notice
given prior to the date previously scheduled for such meeting of
stockholders.
Section 3 - Voting - Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote (or such lesser
number of votes as may be provided with respect to holders of any series
of Preferred Stock in a resolution of the Board of Directors adopted
pursuant to the Certificate of Incorporation), in person or by proxy, for
each share of stock entitled to vote held by such stockholder but no
proxy shall be voted after three (3) years from its date unless such
proxy provides for a longer period. Any motion brought before a
stockholder meeting must be seconded before a vote will be taken. All
votes by stockholders on proposed amendments to the Certificate of
Incorporation and all elections of Directors, shall be by written ballot.
All elections for Directors shall be decided by a plurality of the votes
of the shares present at the meeting, in person or by proxy, and entitled
to vote on the election of directors; all other questions shall be
decided by majority vote of the shares entitled to vote on the subject
matter and present, in person or by proxy, at the meeting, except as
otherwise provided by the Certificate of Incorporation or the laws of the
State of Delaware; and where a separate vote by class is required, the
affirmative vote of the majority of shares of such class present in
person or represented by proxy at the meeting shall be the act of such
class.
Section 4 - Quorum - At all meetings of stockholders, except as otherwise
required by law, by the Certificate of Incorporation, or by these By-
Laws, a majority of the shares entitled to vote, whether present in
person or represented by proxy, shall constitute a quorum. Whether or
not there is such a quorum present at any meeting, the chairman of the
meeting or a majority of the shares so present or represented, shall have
power to adjourn the meeting from time to time. No notice of the time
and place of adjourned meetings need be given except as required by law.
At any such adjourned meeting at which the requisite amount of stock
entitled to vote shall be represented, any business may be transacted
which might have been transacted at the meeting as originally noticed.
If the adjournment is for more than thirty (30) days or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 5 - Special Meetings - Special meetings of the stockholders for
any purpose or purposes may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the Board of Directors
and shall be called by the Secretary in accordance with any such
resolution.
Section 6 - Notice of Meetings - Written or printed notice stating the
place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given by the Secretary to each
stockholder entitled to vote thereat at his address as it appears on the
records of the Corporation not less than ten (l0) nor more than sixty
(60) days before the date of the meeting. Business transacted at any
special meeting shall be confined to the purpose or purposes stated in
the notice of such special meeting.
Section 7 - No Action Without Meeting - Any action required or permitted
to be taken by the stockholders of the Corporation must be effected at a
duly called annual or special meeting of stockholders of the Corporation
and may not be effected by any consent in writing by such stockholders.
Section 8 - Nomination and Stockholder Business -
(A) Annual Meetings of Stockholders - (1) Nominations of persons
for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the stockholders at an annual
meeting of stockholders may be made (a) pursuant to the Corporation's
notice of meeting, (b) by or at the direction of the Board of Directors
or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice provided for in this Section 8,
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 8.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this Section 8, such business, as determined by the
Chairman of the meeting, must be a proper subject for stockholder action
under Delaware corporation law, and the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice shall be delivered to the Secretary at
the principal executive offices of the Corporation not less than sixty
(60) days nor more than ninety (90) days prior to the first anniversary
of the preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more than thirty
(30) days or delayed by more than sixty (60) days from such anniversary
date, notice by the stockholder to be timely must be so delivered not
earlier than the ninetieth (90th) day prior to such annual meeting and
not later than the close of business on the later of the sixtieth (60th)
day prior to such annual meeting or the tenth (10th) day following the
date on which public announcement of the date of such meeting is first
made. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected) and a
representation as to whether or not the stockholder intends to solicit
proxies in support of such proposed nominee; (b) as to any other business
that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, any material
interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made, and a representation as to
whether or not the stockholder intends to solicit proxies in support of
such proposal; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this Section 8 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming all
of the nominees for Directors or specifying the size of the increased
Board of Directors made by the Corporation at least seventy (70) days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 8 shall also be considered
timely, but only with respect to nominees for any new positions created
by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close
of business on the tenth (10th) day following the day on which such
public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders - Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting of stockholders pursuant to the Corporation's notice
of meeting. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of
meeting (a) by or at the direction of the Board of Directors or (b) by
any stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in this Section 8, who shall be
entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 8. Nominations by stockholders of
such persons for election to the Board of Directors may be made at such a
special meeting of stockholders if the stockholder's notice required by
paragraph (A)(2) of this Section 8 shall be delivered to the Secretary at
the principal executive offices of the Corporation not earlier than the
ninetieth (90th) day prior to such special meeting and not later than the
close of business on the later of the sixtieth (60th) day prior to such
special meeting or the tenth (10th) day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such
meeting.
(C) General - (1) Only such persons who are nominated in
accordance with the procedures set forth in this Section 8 shall be
eligible to serve as directors and only such business shall be conducted
at a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section 8.
The Chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this
Section 8 and, if any proposed nomination or business is not in
compliance with this Section 8 or if the stockholder solicits proxies in
support of such stockholder's proposed nomination or proposed business
without such stockholder having made the representation required by
paragraph (A)(2) of this Section 8, to declare that such defective
proposal shall be disregarded.
(2) For purposes of this Section 8, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this Section
8, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 8. Nothing in this Section 8 shall
be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act.
ARTICLE III - DIRECTORS
Section 1 - Number and Term - The number of Directors who shall
constitute the whole Board of Directors shall be the number fixed from
time to time by the Board of Directors in accordance with the Certificate
of Incorporation and shall in no event be less than eleven (11) nor more
than twenty-four (24). At the 1983 Annual Meeting of Stockholders, the
Directors were divided into three (3) classes, as nearly equal in number
as possible with the term of office of the first class to expire at the
1984 Annual Meeting of Stockholders, the term of office of the second
class to expire at the 1985 Annual Meeting of Stockholders, and the term
of office of the third class to expire at the 1986 Annual Meeting of
Stockholders. At each Annual Meeting of Stockholders following such
initial classification and election, Directors elected to succeed those
whose terms then expire shall be elected for a term of office expiring at
the third succeeding Annual Meeting of Stockholders after their election
and until their successors shall be elected and shall qualify.
Section 2 - Resignations - Any Director or member of a committee of the
Board of Directors may resign at any time. Such resignation shall be
made in writing and shall take effect at the time specified therein and
if no time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to
make it effective.
Section 3 - Newly-Created Directorships and Vacancies - Subject to the
rights of the holders of any series of Preferred Stock then outstanding,
newly-created directorships resulting from any increase in the authorized
number of Directors or any vacancies in the Board of Directors resulting
from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled by a majority vote of the Directors
then in office, though less than a quorum. Directors so chosen shall
hold office for a term expiring at the Annual Meeting of Stockholders at
which the term of the class to which they have been elected expires and
until their successors shall be elected and shall qualify. No decrease
in the number of Directors constituting the Board of Directors shall
shorten the term of any incumbent Director.
Section 4 - Removal - Subject to the rights of the holders of any series
of Preferred Stock then outstanding, any Director, or the entire Board of
Directors, may be removed from office at any time but only for cause and
only by the affirmative vote of the holders of eighty percent (80%) of
the voting power of all of the shares of the Corporation entitled to vote
for the election of Directors.
Section 5 - Powers - The Board of Directors shall exercise all of the
powers of the Corporation, except such as are by law or by the
Certificate of Incorporation of the Corporation or by these By-Laws
conferred upon or reserved to the stockholders.
Section 6 - Committees -
(A) Executive Committee - There shall be an Executive Committee of
the Board of Directors selected from time to time by the Board of
Directors from among its own membership. Except as hereinafter provided,
the Executive Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it. Except as otherwise
specified in a resolution of the Board of Directors, the Executive
Committee shall not have the power or authority of the Board of Directors
in reference to: (i) recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets; (ii) recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution; (iii) issuing stock; (iv)
appointing or removing an officer or Director of the Corporation; or (v)
fixing the designations and any of the preferences or rights of shares
relating to dividends, redemption, dissolution any distribution of assets
of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation or fix the
number of shares of any series of stock or authorize the increase or
decrease of the shares of any series.
(B) Other Committees of the Board - The Board of Directors may, by
resolution or resolutions passed by a majority of Directors present at
any meeting at which there is a quorum, designate one or more other
committees, each committee to consist of two or more of the Directors of
the Corporation which, to the extent provided in said resolution or
resolutions or in these By-Laws shall have and may exercise the powers of
the Board of Directors in the management of the business and affairs of
the Corporation and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it.
(C) Limitation on Committee Authority - No committee shall have the
power or authority of the Board of Directors in reference to (i)
approving or adopting, or recommending to the stockholders, any action or
matter expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval; or (ii) adopting, amending or
repealing the By-Laws of the Corporation.
(D) Procedural Provisions - A majority of the members of a
committee shall constitute a quorum for the transaction of business, and
the act of a majority of such members present at any meeting at which
there is a quorum shall be the act of such committee. If at any meeting
of a committee there shall be less than a quorum present, a majority of
those members present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other
than by announcement at the meeting which shall be so adjourned.
Notwithstanding the foregoing, (i) any action of the Executive Committee
shall be taken only with the unanimous approval of all its members; and
(ii) at the request of any member of the Executive Committee,
consideration of any action proposed to be taken by the Committee shall
be deferred to the Board of Directors.
The Board of Directors may designate one or more Directors as alternate
members of any committee who may replace any absent or disqualified
member at any meeting of the committee. Such committee or committees
shall have such name or names as may be stated in these By-Laws or as may
be determined from time to time by resolution adopted by the Board of
Directors.
Each committee shall keep regular minutes of its proceedings and report
its acts and proceedings to the Board.
Section 7 - Meetings - The newly-elected Directors may hold their first
meeting for the purpose of organization and the transaction of business,
if a quorum be present, immediately after the Annual Meeting of the
Stockholders, or the time and place of such meeting may be fixed by
consent in writing of all the Directors. Commencing in 1984, the Board
of Directors may, without notice, hold its first meeting subsequent to
the election of a class of Directors for the purpose of organization and
the transaction of business, if a quorum be present, immediately after
the Annual Meeting of the Stockholders, or the time and place of such
meeting may be fixed by consent in writing of all the Directors.
Regular meetings of the Board of Directors may be held without notice at
such places, within or without the State of Delaware, and times as shall
be determined from time to time by resolution of the Directors.
Special meetings of the Board of Directors may be called by the Chairman
of the Board or the President and shall be called by the Secretary at the
direction of the Chairman of the Board or the President or on the written
request of any two (2) Directors on notice to each Director sent at least
twenty-four (24) hours prior to each such meeting. Notice of each such
meeting shall be delivered personally to each Director or sent by tele-
gram, telex, or electronic mail to such a place as designated from time
to time by each Director or, in the absence of any such designation, to
the Director's last known place of business or residence. Any such
meeting shall be held at such place or places, within or without the
State of Delaware, and times as may be determined by the Directors or as
shall be stated in the notice.
Section 8 - Quorum - A majority of the Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically
provided by the Certificate of Incorporation, the laws of the State of
Delaware, or these By-Laws. If at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time until a quorum is obtained and
no further notice thereof need be given other than by announcement at the
meeting which shall be so adjourned.
Section 9 - Compensation - No employee of the Company shall receive any
additional compensation or remuneration for serving as a member of the
Board of Directors. By resolution of the Board of Directors, those
members of the Board of Directors who are not otherwise employed by the
Company may receive a fixed fee, payable quarterly, together with a fee
for attendance at each meeting. For purposes of this Section, members of
the Board of Directors who serve the Company in capacities, such as
outside consultants, attorneys, or business advisors, shall not be
considered by virtue of such service as being employed by the Company.
Nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity as an officer, agent, or
otherwise and receiving compensation therefor.
Section 10 - Action Without Meeting - Unless otherwise restricted by the
Certificate of Incorporation or the By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof, may be taken without a meeting if all members of the
Board of Directors, or of such committee, as the case may be, consent
thereto in writing and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
ARTICLE IV - OFFICERS
Section 1 - Officers - The Corporation shall have such officers with such
titles and duties as shall be stated in these By-Laws. Except as
provided in Article IV, Section 2 of these By-Laws, all of such officers
shall be appointed by the Board of Directors. None of the officers,
except the Chief Executive Officer, Senior Chairman and Chairman of the
Board need be Directors. No person shall hold the office of Secretary
who at that time also holds the office of Senior Chairman, Chairman of
the Board or Chief Executive Officer.
Section 2 - Other Officers - In addition to the officers described in
these By-Laws, the Corporation may have: (i) officers with such titles
and duties as may be determined by any resolution of the Board of
Directors which is not inconsistent with these By-Laws; and (ii) such
vice presidents and assistant vice presidents as may be appointed by the
Chief Executive Officer with such duties as may be determined by the
Chief Executive Officer. In addition, the Chief Executive Officer shall
have the right to designate additional titles (such as, by way of example
and not as a limitation, Zone Vice President, Chief Operations Officer,
Chief Marketing Officer) for any officers appointed in accordance
herewith as he or she may determine as necessary or appropriate. The
Chief Executive Officer may also appoint one or more assistant, U.S. and
international controllers; international, assistant, associate and deputy
general counsels; and assistant treasurers as he or she may deem
necessary, who shall hold such office for such term and shall exercise
such power and perform such duties as shall be determined from time to
time by the Chief Executive Officer.
Section 3 - Salaries - The salaries of officers of the Corporation
appointed by the Board of Directors shall be fixed by the Board of
Directors.
Section 4 - Term of Office - Each officer of the Corporation shall hold
his or her office until his or her successor is elected and qualified or
until his or her earlier resignation or removal. Any officer may resign
at any time upon written notice to the Corporation. Any officer elected
or appointed by the Board of Directors or the Chief Executive Officer may
be removed at any time by the affirmative vote of a majority of the Board
of Directors. Except as provided in Article IV, Section 2 of these By-
Laws, any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.
Section 5 - Senior Chairman - The Senior Chairman shall consult with the
Chairman of the Board, Chief Executive Officer, Chairman - U.S.A.,
President and Chief Executive Officer - U.S.A., and President and Chief
Executive Officer - International on the management of the Corporation
and shall assist and cooperate with the other officers of the Corporation
in carrying out all orders, resolutions, duties, and policies adopted or
established by the Board of Directors of the Corporation. In the event
of the inability of the Chairman to act, the Senior Chairman shall
preside at all meetings of the stockholders of the Corporation and of the
Board of Directors of the Corporation.
Section 6 - Chairman of the Board - The Chairman of the Board shall
preside at all meetings of the stockholders of the Corporation and of the
Board of Directors; he or she shall see that all orders, resolutions, and
policies adopted or established by the Board of Directors are carried
into effect; and he or she shall do and perform such other duties as from
time to time may be assigned by the Board of Directors of the
Corporation.
Section 7 - Chief Executive Officer - The Chief Executive Officer shall
have responsibility for the general and active management of the business
of the Corporation and shall do and perform such other duties as from
time to time may be assigned to the Chief Executive Officer by the Board
of Directors.
Section 8 - Vice Chairman of the Board - The Vice Chairman of the Board
shall report to the Chief Executive Officer; he or she shall be
responsible for the implementation of orders, resolutions, and policies
adopted or established by the Board of Directors and the Chief Executive
Officer; and he or she shall do and perform such other duties as from
time to time may be assigned by the Board of Directors or Chief Executive
Officer. In addition, in the event of the inability of the Chairman of
the Board or the Senior Chairman to act, he or she shall preside at all
meetings of the stockholders of the Corporation and of the Board of
Directors of the Corporation.
Section 9 - Chairman and Chief Executive Officer - McDonald's U.S.A. -
The Chairman and Chief Executive Officer - McDonald's U.S.A. shall report
to the Chief Executive Officer; he or she shall oversee the direction of
United States operations and shall be responsible for the implementation
of orders, resolutions and policies adopted or established by the Board
of Directors and Chief Executive Officer; and he or she shall do and
perform such other duties as from time to time may be assigned by the
Board of Directors or the Chief Executive Officer.
Section 10 - President and Chief Executive Officer - International - The
President and Chief Executive Officer - International shall report to the
Chief Executive Officer; he or she shall direct international operations
and shall be responsible for the day-to-day activities of the Corporation
in international markets; and he or she shall do and perform such other
duties as from time to time may be assigned by the Board of Directors or
the Chief Executive Officer.
Section 11 - Division Presidents - One or more Division Presidents shall
report to the Chairman and Chief Executive Officer - McDonald's U.S.A;
each shall direct operations for a designated geographic division of the
United States and shall be responsible for the day-to-day activities of
the Corporation in such division; and each shall do and perform such
duties as from time to time may be assigned by the Board of Directors,
the Chief Executive Officer or the Chairman and Chief Executive Officer -
McDonald's U.S.A.
Section 12 - Other Offices - The following officers shall report to such
person as the Chief Executive Officer may designate and, in addition to
the duties which may be outlined below, shall do and perform such duties
as from time to time may be assigned to such officer by the Board of
Directors or the Chief Executive Officer.
(A) Executive and Senior Vice Presidents - One or more Senior
Executive Vice Presidents, Executive Vice Presidents, and Senior Vice
Presidents may be appointed by the Board of Directors.
(B) Chief Financial Officer - The Chief Financial Officer shall
direct all of the financial activities of the Corporation. The Chief
Financial Officer shall have such power and exercise such authority as
deemed necessary or desirable to maintain the financial integrity of the
Corporation.
(C) Controller - The Controller shall be the principal accounting
officer of the Corporation and shall keep or shall cause to be kept a
true account of all transactions and of the assets and liabilities of the
Corporation. The Controller shall prepare and submit to the Chief
Financial Officer or, in the absence of the Chief Financial Officer to
the Chief Executive Officer, such financial statements and schedules as
may be required to keep the Chief Financial Officer and Chief Executive
Officer currently informed of the operations and financial condition of
the Corporation.
(D) General Counsel - The General Counsel shall be a licensed
attorney at law and shall be the principal legal officer of the
Corporation. The General Counsel shall have such power, exercise such
authority and provide such counsel to the Corporation as deemed necessary
or desirable to enforce the rights and protect the property and integrity
of the Corporation.
(E) Treasurer - The Treasurer shall have custody of the Corporate
funds and securities and shall keep full and accurate account of receipts
and disbursements in books belonging to the Corporation. He or she shall
deposit all monies and other valuables in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors.
The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors or the Chief Executive Officer,
taking proper vouchers for such disbursements. He or she shall render to
the Chairman of the Board, Chief Executive Officer and the Board of
Directors, at the regular meetings of the Board of Directors, or whenever
they may request it, an account of all his or her transactions as
Treasurer and of the financial condition of the Corporation. If required
by the Board of Directors, he or she shall give the Corporation a bond
(which shall be renewed every six (6) years) in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement, or removal from office, of all books, papers, vouchers,
money, and other property of whatever kind in his or her possession or
under his or her control belonging to the Corporation.<PAGE>
(F) Secretary - The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and Directors and all other
notices required by law or by these By-Laws; and in the case of his or
her absence or refusal or neglect so to do, any such notice may be given
by any person thereunto directed by the Chairman of the Board or by the
Board of Directors or stockholders upon whose requisition the meeting is
called as provided in these By-Laws. He or she shall record all the
proceedings of the meetings of the Corporation and of the Board of
Directors. He or she shall have custody of the seal of the Corporation
and shall have the authority to affix the same to all instruments
requiring it and to attest the same. The Board of Directors may appoint
one or more Assistant Secretaries who, in the order determined by the
Chief Executive Officer, shall, in the absence or disability of the
Secretary, perform the duties of the Secretary; and who shall have the
authority to affix the seal of the Corporation and to attest the same.
The Board of Directors may also give general authority to any other
officer to affix the seal of the Corporation and to attest the same.
ARTICLE V - INDEMNIFICATION AND INSURANCE
Section 1 - Right to Indemnification -
(A) Indemnified Persons - Each person who was or is made a party or
is threatened to be made a party to or is involved in or called as a
witness in any Proceeding because he or she is an Indemnified Person,
shall be indemnified and held harmless by the Corporation to the fullest
extent permitted under the Delaware General Corporation Law (the "DGCL"),
as the same now exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than the DGCL
permitted the Corporation to provide prior to such amendment). Such
indemnification shall cover all expenses incurred by an Indemnified
Person (including, but not limited to, attorneys' fees and other expenses
of litigation) and all liabilities and losses (including, but not limited
to, judgments, fines, ERISA or other excise taxes or penalties and
amounts paid or to be paid in settlement) incurred by such person in
connection therewith.
(B) Additional Indemnified Persons - (1) Each Additional
Indemnified Person who was or is made a party or is threatened to be made
a party to or is involved in or called as a witness in any Proceeding
(other than an action by or in the right of the Corporation) because he
or she is an Additional Indemnified Person shall be indemnified and held
harmless by the Corporation against expenses (including, but not limited
to, attorneys' fees and other expenses of litigation) and all liabilities
and losses (including, but not limited to, judgments, fines, ERISA or
other excise taxes or penalties and amounts paid or to be paid in
settlement) incurred by such person in connection therewith if such
Additional Indemnified Person acted in Good Faith. The termination of
any Proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent shall not of itself create a
presumption that an Additional Indemnified Person did not act in Good
Faith.
(2) Each Additional Indemnified Person who was or is made a
party or is threatened to be made a party to or is involved in or called
as a witness in any Proceeding brought by or in the right of the
Corporation to procure a judgment in its favor because he or she is an
Additional Indemnified Person shall be indemnified and held harmless by
the Corporation against expenses (including, but not limited to,
attorneys' fees and other expenses of litigation) incurred by such person
in connection therewith if such Additional Indemnified Person acted in
Good Faith, except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of
such person's duty to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such
Proceeding shall have been brought or is pending shall determine upon
application that despite the adjudication of liability but in view of all
the circumstances of the case, such Additional Indemnified Person is
fairly and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
(3) Any indemnification under paragraphs (B)(1) or (B)(2) of
this Section 1 (unless ordered by a court) shall be made by the
Corporation unless it is determined that indemnification of the
Additional Indemnified Person is not proper in the circumstances because
such person has not met the applicable standard of conduct set forth in
either paragraph (B)(1) or (B)(2) of this Section 1. Such determination
shall be made: (a) by the Board of Directors of the Corporation by a
majority vote of a quorum consisting of Directors who are not parties to
such Proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable if a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion. Such determination shall
be made within one hundred twenty (120) days (or such longer period
established as set forth in the next sentence) after receipt by the Board
of Directors of written notice from the Additional Indemnified Person
seeking indemnification setting forth in reasonable detail the facts
known to such person concerning the Proceeding. The period during which
the Board of Directors may determine that indemnification is not proper
may be extended to a period established by the Board of Directors by
written notice to the Additional Indemnified Person delivered to such
person within one hundred twenty (120) days after receipt by the Board of
Directors of such person's written notice seeking indemnification.
(C) Denial of Authorization for Certain Proceedings -
Notwithstanding anything to the contrary in this Article V, except with
respect to indemnification of Indemnified Persons specified in Section 3
of this Article V, the Corporation shall indemnify an Indemnified Person
or Additional Indemnified Person in connection with a Proceeding (or part
thereof) initiated by such person only if (i) authorization for such
Proceeding (or part thereof) was not denied by the Board of Directors of
the Corporation prior to the earlier of (x) sixty (60) days after receipt
of notice thereof from such Indemnified Person or one hundred twenty
(120) days after receipt of notice thereof from such Additional
Indemnified Person, as the case may be, or (y) a Change of Control, and
(ii) in the case of a Proceeding initiated by an Additional Indemnified
Person, it is not a Proceeding to enforce rights under this Article V.
(D) Certain Defined Terms - For purposes of this Article V, the
following terms shall have the following means (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
(i) a "Proceeding" is any investigation, action, suit or
proceeding, whether civil, criminal, administrative or
investigative, and any appeal therefrom;
(ii) an "Indemnified Person" is a person who is, was, or had
agreed to become (A) a Director of the Corporation
(including, in the case of such person seeking
indemnification while serving as a Director who is or was
an officer of the Corporation, such person in his capacity
as an officer) or (B) an officer, employee or a Delegate,
as defined herein, of the Corporation (but, except as
included within clause (A), with respect to such officers,
employees and Delegates and persons agreeing to become
officers, employees or Delegates only as to Proceedings
occurring after a Change of Control, as defined herein,
arising out of acts, events or omissions occurring prior
or subsequent to, or simultaneously with, such Change of
Control), or the legal representative or any of the
foregoing;
(iii) a "Delegate" is (A) any employee of the Corporation
serving as a director or officer (or in a substantially
similar capacity) of an entity or enterprise (x) in which
the Corporation owns a l0% or greater equity interest or
(y) the principal function of which is to service or
benefit the Corporation or its licensees; (B) any employee
of the Corporation serving as a trustee or fiduciary of an
employee benefit plan of the Corporation or any entity or
enterprise referred to in clause (A); and (C) any employee
serving at the request of the Corporation in any capacity
with any entity or enterprise other than the Corporation;
(iv) a "Change of Control" shall be deemed to have occurred if
(A) any "Person" (as that term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes (except in a transaction approved
in advance by the Board of Directors of the Corporation)
the beneficial owner (as defined in Rule 13d-3 under such
Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined
voting power of the Corporation's then outstanding secur-
ities, or (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute
the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless
the election of each Director who was not a Director at
the beginning of the period was approved by a vote of at
least two-thirds of the Directors then still in office who
were Directors at the beginning of the period;
(v) an "Additional Indemnified Person" is a person who is,
was, or had agreed to become an officer, Delegate or
employee of the Corporation and who is not an Indemnified
Person; and
(vi) "Good Faith" shall mean with respect to any Additional
Indemnified Person that such person acted in good faith
and in a manner such person reasonably believed to be in
or not opposed to the best interests of the Corporation,
and, with respect to any criminal Proceeding, such person
had no reasonable cause to believe such conduct was
unlawful.
Section 2 - Expenses - Expenses, including attorneys' fees, incurred by a
person indemnified pursuant to Section 1 of this Article V in defending
or otherwise being involved in a Proceeding shall be paid by the
Corporation in advance of the final disposition of such Proceeding,
including any appeal therefrom, upon receipt of an undertaking (the
"Undertaking") by or on behalf of such person to repay such amount if it
shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation; provided, that (A) if a Change of Control
has occurred, such person shall be required to deliver to the Corporation
the Undertaking only if such an undertaking is required under the DGCL
then in effect, and (B) in connection with a Proceeding (or part thereof)
initiated by such person, except a Proceeding authorized by Section 3 of
this Article V, the Corporation shall pay said expenses in advance of
final disposition only if authorization for such Proceeding (or part
thereof) was not denied by the Board of Directors of the Corporation
prior to the earlier of (i) sixty (60) days in the case of an Indemnified
Person, or one hundred twenty (120) days in the case of an Additional
Indemnified Person, after receipt of a request for such advancement
accompanied by the Undertaking or (ii) a Change of Control. A person to
whom expenses are advanced pursuant hereto shall not be obligated to
repay pursuant to the Undertaking until the final determination of any
pending Proceeding in a court of competent jurisdiction concerning the
right of such person to be indemnified or the obligation of such person
to repay such expenses.
Section 3 - Protection of Rights - If a claim by an Indemnified Person
under Section 1 of this Article V is not promptly paid in full by the
Corporation after a written claim has been received by the Corporation or
if expenses pursuant to Section 2 of this Article V have not been
promptly advanced after a written request for such advancement by an
Indemnified Person (accompanied by the Undertaking if required by Section
2 of this Article V) has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover
the unpaid amount of the claim or the advancement of expenses. If
successful, in whole or in part, in such suit, such claimant shall also
be entitled to be paid the reasonable expense thereof. It shall be a
defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any Proceeding in advance of its
final disposition where the Undertaking has been tendered to the
Corporation (or, if a Change of Control has occurred, the Undertaking is
not required to be tendered to the Corporation under the DGCL) that
indemnification of the claimant is prohibited by law, but the burden of
proving such defense shall be on the Corporation. If a Change of Control
has occurred, a claimant making a claim under Section 1 of this Article V
or seeking to avoid repayment to the Corporation of expenses advanced
pursuant to Section 2 of this Article V shall have (i) the right, but not
the obligation, to have a determination made by independent legal
counsel, at the expense of the Corporation, as to whether indemnification
of the claimant is prohibited by law; and (ii) shall have the right (A)
to select as independent legal counsel to make such determination any
legal counsel designated for such purpose in a resolution adopted by the
Board of Directors that is in full force and effect immediately prior to
the Change of Control or (B), if the Board of Directors has failed to
designate any such legal counsel or all such counsel refuse to make such
a determination, to request the American Arbitration Association, at the
expense of the Corporation, to select an independent legal counsel
familiar with matters of the type in dispute to make such a
determination. If a determination has been made in accordance with the
preceding sentence, no determination inconsistent therewith by other
legal counsel, by the Board of Directors, or by stockholders shall be of
any force or effect. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
to have made a determination, if required, prior to the commencement of
such action that indemnification of the claimant is proper in the
circumstances, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that indemnification of the claimant is prohibited, shall be a defense to
the action or create a presumption that indemnification of the claimant
is prohibited.
Section 4 - Miscellaneous -
(A) Non-Exclusivity of Rights - The rights conferred on any person
by this Article V shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested Directors or otherwise. The Board of Directors shall have
the authority, by resolution, to provide for such indemnification of
agents of the Corporation or others and for such other indemnification of
Directors, officers, Delegates or employees, of the Corporation as it
shall deem appropriate.
(B) Insurance, contracts, and funding - The Corporation may
maintain insurance, at its expense, to protect itself and any Director,
officer, Delegate, employee, or agent of, the Corporation against any
expenses, liabilities or losses, whether or not the Corporation would
have the power to indemnify such person against such expenses,
liabilities or losses under the DGCL. The Corporation hereby agrees
that, for a period of six (6) years after any Change of Control, it shall
cause to be maintained policies of directors' and officers' liability
insurance providing coverage at least comparable to and in the same
amounts as that provided by any such policies in effect immediately prior
to such Change of Control. The Corporation may enter into contracts with
any Director, officer, Delegate or employee of the Corporation in
furtherance of the provisions of this Article V and may create a trust
fund, grant a security interest or use other means (including, without
limitation, a letter of credit) to ensure the payment of such amounts as
may be necessary to effect the advancing of expenses and indemnification
as provided in this Article V.
(C) Contractual nature - The provisions of this Article V as
amended effective December 17, 1990 shall be applicable with respect to
events, acts and omissions occurring prior to or subsequent to such
Amendment, and shall continue as to a person who has ceased to be a
Director, officer, Delegate or employee and shall inure to the benefit of
the heirs, executors and administrators of such person. This Article V
shall be deemed to be a contract between the Corporation and each person
who, at any time that this Article V as so amended is in effect, serves
or agrees to serve in any capacity which entitles him to indemnification
hereunder and any repeal or other modification of this Article V or any
repeal or modification of the DGCL or any other applicable law shall not
limit any rights of indemnification for Proceedings then existing or
arising out of events, acts or omissions occurring prior to such repeal
or modification, including, without limitation, the right to
indemnification for Proceedings commenced after such repeal or
modification to enforce this Article V with regard to Proceedings arising
out of acts, omissions or events arising prior to such repeal or
modification.
(D) Cooperation - Each Indemnified Person and Additional
Indemnified Person shall cooperate with the person, persons or entity
making the determination with respect to such Indemnified Person's or
Additional Indemnified Person's entitlement to indemnification under this
Article V, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to such Indemnified Person or Additional Indemnified Person and
reasonably necessary to such determination. Any costs or expenses
(including attorneys' fees and disbursements) incurred by such
Indemnified Person or Additional Indemnified Person in so cooperating
with the person, persons or entity making such determination shall be
borne by the Corporation (irrespective of the determination as to such
Indemnified Person's or Additional Indemnified Person's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to
hold such Indemnified Person or Additional Indemnified Person harmless
therefrom.
(E) Subrogation - In the event of any payment under this Article V
to an Indemnified Person or Additional Indemnified Person, the
Corporation shall be subrogated to the extent of such payment to all of
the rights of recovery of such Indemnified Person or Additional
Indemnified Person, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such
documents as are necessary to enable the Corporation to bring suit to
enforce such rights.
(F) Severability - If this Article V, or any portion hereof shall
be invalidated or held to be unenforceable on any ground by any court of
competent jurisdiction, the decision of which shall not have been
reversed on appeal, this Article V shall be deemed to be modified to the
minimum extent necessary to avoid a violation of law and, as so modified,
this Article V and the remaining provisions hereof shall remain valid and
enforceable in accordance with their terms to the fullest extent
permitted by law.
ARTICLE VI - MISCELLANEOUS
Section 1 - Certificates of Stock - Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the
name of the Corporation by the Senior Chairman of the Board or the
Chairman of the Board, Chief Executive Officer or a President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of
shares owned by him in the Corporation. If such certificate is
countersigned (l) by a transfer agent or (2) by a registrar, any other
signature on the certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Section 2 - Lost Certificates - A new certificate of stock may be issued
in the place of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen, or destroyed; and the Directors may,
in their discretion, require the owner of the lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond
in such sum as they may direct not exceeding double the value of the
stock to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any
such certificate, or the issuance of any such new certificate.
Section 3 - Transfer of Shares - The shares of stock of the Corporation
shall be transferable upon its books by the holders thereof in person or
by their duly authorized attorneys or legal representatives by the
surrender of the old certificates duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, to the
Corporation by the delivery thereof to the person in charge of the stock
and transfer books and ledgers or to such other person as the Directors
may designate, by whom they shall be canceled; and new certificates shall
thereupon be issued. A record shall be made of each transfer and a
duplicate thereof mailed to the Delaware office; and whenever a transfer
shall be made for collateral security, and not absolutely, it shall be
expressed in the entry of the transfer.
Section 4 - Record Date - In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
Corporate action in writing without a meeting or entitled to receive
payment of any dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date which shall not
precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which shall not be more than sixty
(60) nor less than ten (l0) days before the date of such meeting nor more
than sixty (60) days prior to any other action.
Section 5 - Registered Stockholders - The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends and to vote as such owner and to
hold liable for calls and assessments a person registered on its books as
the owner of shares and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
Section 6 - Dividends - Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the
capital stock of the Corporation as and when they deem expedient.
Dividends may be paid in cash, in property, or in shares of the capital
stock of the Corporation; and in the case of a dividend paid in shares of
theretofore unissued capital stock of the Corporation, the Board of
Directors shall, by resolution, direct that there be designated as
capital in respect of such shares an amount not less than the aggregate
par value of such shares and, in the case of shares without par value,
such amount as shall be fixed by the Board of Directors. Before
declaring any dividend, there may be set apart out of any funds of the
Corporation available for dividends, such sum or sums as the Directors
from time to time in their discretion deem proper for working capital or
as a reserve fund to meet contingencies or for such other purposes as the
Directors shall deem conducive to the interests of the Corporation.
Section 7 - Seal - The Corporate seal shall be circular in form and shall
contain the name of the Corporation, the year of its creation, and the
words, "CORPORATE SEAL DELAWARE." Said seal may be used by causing it,
or a facsimile thereof, to be impressed or affixed or reproduced or
otherwise.
Section 8 - Fiscal Year - The fiscal year of the Corporation shall begin
on the first day of January in each year and shall end on the last day of
December in each year.
Section 9 - Checks - All checks, drafts, or other orders for the payment
of money, notes, or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall be determined from
time to time by resolution of the Board of Directors.
Section 10 - Notice and Waiver of Notice - Whenever any notice is
required by these By-Laws to be given, personal notice is not meant
unless expressly so stated. If mailed, notice is given when deposited in
the United States mail, postage prepaid, directed to the stockholder at
his address as it appears on the records of the Corporation.
Stockholders not entitled to vote shall not be entitled to receive notice
of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law or under the provisions of the Certificate of Incorporation of
the Corporation or these By-Laws, a waiver thereof in writing signed by
the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
Section 11 - Ratification by Stockholders - Any contract, transaction, or
act of the Corporation or of the Directors or of any committee which
shall be ratified by the holders of a majority of the shares of stock of
the Corporation present in person or by proxy and voting at any annual
meeting or at any special meeting called for such purpose, shall, insofar
as permitted by law or under the provisions of the Certificate of
Incorporation of the Corporation or these By-Laws, be as valid and
binding as though ratified by every stockholder of the Corporation.
Section 12 - Interested Directors - No contract or transaction between
the Corporation and one or more of its Directors or officers or between
the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its Directors or officers are
directors or officers or have a financial interest, shall be void or
voidable solely for this reason or solely because the Director or officer
is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose if:
(1) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
Board of Directors or the committee and the Board or committee
in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors,
even though the disinterested directors be less than a quorum;
or
(2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
the shareholders; or
(3) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved, or ratified by the Board
of Directors, a committee thereof, or the shareholders.
Common or interested Directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
ARTICLE VII - AMENDMENTS
The By-Laws of this Corporation may be made, altered, amended, or
repealed by the affirmative vote of a majority of the Board of Directors
at any regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed making,
alteration, amendment, or repeal to be made is contained in the Notice of
such special meeting provided, however, that no By-Law shall be made,
altered, amended, or repealed so as to make such By-Law inconsistent with
or violative of any provision of the Certificate of Incorporation.
As amended through July 15, 1997<PAGE>
EXHIBIT 10(b)(iii)
THIRD AMENDMENT TO THE
MCDONALD'S CORPORATION
PROFIT SHARING PROGRAM
The McDonald's Corporation Profit Sharing Program (the ``Program''),
as amended and restated effective January 1, 1996, is hereby amended,
effective January 1, 1997, as follows:
I
Section 11.2(d)(3) through the colon is hereby amended to read as
follows:
(3) Minimum Distribution Incidental Benefit Requirements. If
benefits are paid in installments to the Participant and if the
Participant's beneficiary is not his spouse or his former spouse
receiving benefits pursuant to a Qualified Domestic Relations Order as
defined in Section 16.5, 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:
II
Section 11.13(e) shall be amended to read as follows:
(e) Elective Distributions. Notwithstanding the foregoing
provisions of Section 11.13, a Participant, who is not a Five
Percent Owner and has attained his Required Beginning Date but has
not had a Termination of Employment, may elect to receive or not to
receive distributions as provided in Sections 11.13(a) and 11.13(b).
If the Participant fails to make such an election, the distributions
provided in Sections 11.13(a) and 11.13(b) shall be made to such a
Participant. If such distributions have commenced to such a
Participant, he or she may make an election to discontinue such
distributions. If such distributions are not being made to a
Participant, he or she may make one election, which shall be
irrevocable subject to the Participant's right under Section
11.16(c) to elect a distribution of his entire Net Balance Account,
to commence receiving distributions as provided in Sections 11.13(a)
and 11.13(b). Elections made hereunder shall be made at such time
and in accordance with such procedures as the Committee shall from
time to time permit.
III
Section 11.16(c) is hereby amended to read as follows:
(c) Distributions after Age 70-1/2. A Participant who has
attained the age of 70-1/2 but has not had a Termination of
Employment may elect, at such time and on such form as the Committee
shall permit, to begin receiving installment payments beginning
after he becomes 70-1/2 or to receive a distribution of his entire
Net Balance Account. An affirmative election to receive installment
payments shall be irrevocable, provided that at any time a
Participant who has attained the age of 70-1/2 may elect a
distribution of his entire Net Balance Account.
IV
Except as amended herein, the Program shall remain in full force and
effect.
EXHIBIT 10(e)
McDONALD'S CORPORATION 1992 STOCK OWNERSHIP INCENTIVE PLAN AS AMENDED AND
RESTATED
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THE PLAN
McDonald's Corporation, a Delaware corporation (the "Company")
established the McDonald's Corporation 1992 Stock Ownership Incentive
Plan (the ``Plan'') effective as of June 1, 1992. The Plan was first
amended and restated, effective as of June 1, 1995 and was subsequently
amended and restated effective as of March 19, 1997 to incorporate non-
material modifications. Unless specifically provided for in an Award (as
defined herein) to the contrary, an Award shall be governed by and
subject to the applicable provisions of the Plan in effect on the date
such Award was granted, or in the case of an amended Award, the date the
Award was amended.
1. Purpose
The purpose of this Plan is to advance the interest of the Company by
encouraging and enabling the acquisition of a larger personal financial
interest in the Company by those employees upon whose judgment and
efforts the Company is largely dependent for the successful conduct of
its operations. An additional purpose of this Plan is to provide a means
by which employees of the Company and its Subsidiaries can acquire and
maintain Stock ownership, thereby strengthening their commitment to the
success of the Company and their desire to remain employed by the Company
and its Subsidiaries. It is anticipated that the acquisition of such
financial interest and Stock ownership will stimulate the efforts of such
employees on behalf of the Company, strengthen their desire to continue
in the service of the Company and encourage shareholder and
entrepreneurial perspectives through employee stock ownership. It is
also anticipated that the opportunity to obtain such financial interest
and Stock ownership will prove attractive to promising new employees and
will assist the Company in attracting such employees.
2. Definitions
As used in this Plan, terms defined parenthetically immediately after
their use shall have the respective meanings provided by such definitions
and the terms set forth below shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms
of the terms defined):
(a) "Award" means options, shares of restricted stock, stock
appreciation rights, performance units or stock bonuses granted under
this Plan.
(b) "Award Agreement" has the meaning specified in Section 4(c)(v).
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" includes termination based on the commission of any act
or acts involving dishonesty, fraud, illegality or moral turpitude.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section
of the Code shall include references to successor provisions.
(f) "Committee" means the committee of the Board appointed pursuant
to Section 4.
(g) "Company" has the meaning set forth in the introductory
paragraph.
(h) "Disability" means, as relates to the exercise of an incentive
stock option after termination of employment, a disability within the
meaning of Section 22(e)(3) of the Code, and for all other purposes, a
mental or physical condition which, in the opinion of the Committee,
renders a Grantee unable or incompetent to carry out the job
responsibilities which such Grantee held or the tasks to which such
Grantee was assigned at the time the disability was incurred, and which
is expected to be permanent or for an indefinite duration exceeding one
year.
(i) "Effective Date" means June 1, 1992.
(j) "Fair Market Value" of any security of the Company means, as of
any applicable date the closing price, regular way, of the security as
reported on the New York Stock Exchange Composite Tape, or if no such
reported sale of the security shall have occurred on such date, on the
next preceding date on which there was such a reported sale.
(k) "Grant Date" means the date on which an Award shall be duly
granted, as determined in accordance with Section 6(a)(i).
(l) "Grantee" means an individual who has been granted an Award.
(m) "including" or "includes" means "including, without
limitation," or "includes, without limitation."
(n) "Measuring Period" has the meaning specified in Section
6(f)(i)(B).
(o) "Minimum Consideration" means $.01 per share or such larger
amount determined pursuant to resolution of the Board to be capital
within the meaning of Section 154 of the Delaware General Corporation
law.
(p) "1934 Act" means the Securities Exchange Act of 1934, as
amended. References to a particular section of, or rule under, the 1934
Act shall include references to successor provisions.
(q) "Option Price" means the per share purchase price of Stock
subject to an option.
(r) "Performance Percentage" has the meaning specified in Section
6(f)(i)(C).
(s) "Plan" means the McDonald's Corporation 1992 Stock Ownership
Incentive Plan, as amended and restated in the manner set forth in the
introductory paragraph.
(t) "Retirement" means a termination of employment with the Company
and its Subsidiaries any time after attaining age 60 with at least 20
years of Company service.
(u) "SEC" means the Securities and Exchange Commission.
(v) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to
transactions involving equity securities of the Company.
(w) "Stock" means the common stock of the Company, par value $.01
per share.
(x) "Subsidiary" means (i) with respect to incentive stock options,
a corporation as defined in Section 424(f) of the Code with the Company
being treated as the employer corporation for purposes of this
definition, and (ii) for all other purposes any entity in which the
Company directly or through intervening subsidiaries owns twenty-five
percent (25%) or more of the total combined voting power or value of all
classes of stock or, in the case of an unincorporated entity, a twenty-
five percent (25%) or more interest in the capital and profits.
(y) "10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than
10% of the total combined voting power of all classes of stock of the
Company.
3. Scope of this Plan
(a) The number of shares of Stock which represented five percent
(5%) of the number of issued and outstanding shares of Stock as of June
1, 1992 was made available and reserved for delivery on account of the
exercise of Awards and payment of benefits in connection with Awards.
Effective June 1, 1995, an additional 32 million shares of Stock were
made available and were reserved for delivery on account of the exercise
of Awards and payment of benefits in connection with Awards. Such shares
may be treasury shares or newly issued shares, as may be determined from
time to time by the Board or the Committee.
(b) Subject to adjustment as provided in Section 22, the maximum
number of Shares of Stock for which Awards may be granted to any Grantee
in any three-year period shall not exceed 2,500,000.
(c) Subject to Section 3(a) and (b) (as to the maximum number of
shares of Stock available for delivery in connection with Awards) and to
Section 3(d), up to 5,000,000 shares of restricted stock, and up to
200,000 bonus shares of Stock may be granted under this Plan.
(d) If and to the extent an Award shall expire or terminate for any
reason without having been exercised in full, or shall be forfeited,
without, in either case, the Grantee having enjoyed any of the benefits
of stock ownership (other than voting rights or dividends that are
likewise forfeited), the shares of Stock (including restricted stock)
associated with such Award shall become available for other Awards.
4. Administration
(a) Subject to Section 4(b), this Plan shall be administered by a
committee ("Committee") of the Board of Directors. All members of the
Committee shall be "Outside Directors" as defined or interpreted for
purposes of Section 162(m) of the Code. The composition of the Committee
shall also be subject to such limitations as the Board deems appropriate
to permit transactions in Stock pursuant to this Plan to be exempt from
liability under Rule 16b-3 under the 1934 Act.
(b) The Board may, in its discretion, reserve to itself or delegate
to another committee of the Board any or all of the authority and
responsibility of the Committee with respect to Awards to Grantees who
are not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two or
more directors who may, but need not be, officers or employees of the
Company or of any of its Subsidiaries. To the extent that the Board has
reserved to itself or delegated to such other committee the authority and
responsibility of the Committee, all references to the Committee in this
Plan shall be to the Board or such other committee.
(c) The Committee shall have full and final authority, in its
discretion, but subject to the express provisions of this Plan, as
follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted, and
(B) whether or not specific Awards shall be identified with other
specific Awards, and if so whether they shall be exercisable cumulatively
with or alternatively to such other specific Awards,
(iii) to interpret this Plan and to make all determinations
necessary or advisable for the administration of this Plan,
(iv) to prescribe, amend, and rescind rules and regulations
relating to this Plan, including rules with respect to the exercisability
and nonforfeitability of Awards upon the termination of employment of a
Grantee,
(v) to determine the terms and provisions and any restrictions
or conditions (including specifying such performance criteria as the
Committee deems appropriate, and imposing restrictions with respect to
stock acquired upon exercise of an option, which restrictions may
continue beyond the Grantee's termination of employment) of the written
agreements by which all Awards shall be evidenced ("Award Agreements")
which need not be identical and, with the consent of the Grantee, to
modify any such Award Agreement at any time,
(vi) to authorize foreign Subsidiaries to adopt plans as
provided in Section 15,
(vii) to delegate its duties and responsibilities under
this Plan with respect to such foreign Subsidiary plans, except its
duties and responsibilities with respect to Section 16 Grantees, and (A)
the acts of such delegates shall be treated hereunder as acts of the
Committee and (B) such delegates shall report to the Committee regarding
the delegated duties and responsibilities,
(viii) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions
applicable to, any Award, or any group of Awards for any reason,
(ix) subject to Section 6(a)(ii), to extend the time during
which any Award or group of Awards may be exercised,
(x) to make such adjustments or modifications to Awards to
Grantees working outside the United States as are necessary and advisable
to fulfill the purposes of this Plan,
(xi) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the
Committee may, before or concurrently with the grant thereof, deem
appropriate, including requiring simultaneous exercise of related
identified Awards, and limiting the percentage of Awards which may from
time to time be exercised by a Grantee, and
(xii) to prescribe rules and regulations concerning the
transferability of any Awards granted on or after June 1, 1995 and to
make such adjustments or modifications to Awards transferable pursuant to
Section 8 as are necessary and advisable to fulfill the purposes of this
Plan.<PAGE>
The determination of the Committee on all matters relating to this
Plan or any Award Agreement shall be conclusive and final. No member of
the Committee shall be liable for any action or determination made in
good faith with respect to this Plan or any Award.
5. Eligibility
Awards may be granted to any full-time employee (including any officer)
of the Company or any of its domestic Subsidiaries, or any employee,
officer or director of any of the Company's foreign Subsidiaries. In
selecting the individuals to whom Awards may be granted, as well as in
determining the number of shares of Stock subject to, and the other terms
and conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes
of this Plan.
6. Conditions to Grants
(a) General conditions.
(i) The Grant Date of an Award shall be the date on which the
Committee grants the Award or such later date as specified in advance by
the Committee.
(ii) The term of each Award (subject to Section 6(c) with
respect to incentive stock options) shall be a period of not more than
15 years from the Grant Date, and shall be subject to earlier termination
as herein provided.
(iii) A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
(b) Grant of options and option price. No later than the Grant
Date of any option, the Committee shall determine the Option Price of
such option. The Option Price of an option shall not be less than 100%
of the Fair Market Value of the Stock on the Grant Date. Such price
shall be subject to adjustment as provided in Section 22. The Award
Agreement may provide that the option shall be exercisable for restricted
stock.
(c) Grant of incentive stock options. At the time of the grant of
any option, the Committee may designate that such option shall be made
subject to additional restrictions to permit it to qualify as an
"incentive stock option" under the requirements of Section 422 of the
Code. Any option designated as an incentive stock option:
(i) shall not be granted to a 10% Owner;
(ii) shall be for a period of not more than 10 years from the
Grant Date, and shall be subject to earlier termination as provided
herein or in the applicable Award Agreement;
(iii) shall not have an aggregate Fair Market Value
(determined for each incentive stock option at its Grant Date) of Stock
with respect to which incentive stock options are exercisable for the
first time by such Grantee during any calendar year (under this Plan and
any other employee stock option plan of the Grantee's employer or any
parent or Subsidiary thereof ("Other Plans")), determined in accordance
with the provisions of Section 422 of the Code, which exceeds $100,000
(the "$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to all incentive stock
options previously granted under this Plan and any Other Plans ("Prior
Grants") and any incentive stock options under such grant (the "Current
Grant") which are exercisable for the first time during any calendar year
would exceed the $100,000 Limit, be exercisable as follows:
(A) the portion of the Current Grant exercisable for the
first time by the Grantee during any calendar year which would, when
added to any portions of any Prior Grants, be exercisable for the first
time by the Grantee during such calendar year with respect to Stock which
would have an aggregate Fair Market Value (determined as of the
respective Grant Date for such options) in excess of the $100,000 Limit
shall, notwithstanding the terms of the Current Grant, be exercisable for
the first time by the Grantee in the first subsequent calendar year or
years in which it could be exercisable for the first time by the Grantee
when added to all Prior Grants without exceeding the $100,000 Limit; and
(B) if, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the provisions of
the immediately preceding sentence during any calendar year commencing
with the calendar year in which it is first exercisable through and
including the last calendar year in which it may by its terms be
exercised, such portion of the Current Grant shall not be an incentive
stock option, but shall be exercisable as a separate option at such date
or dates as are provided in the Current Grant;
(v) shall be granted within 10 years from the earlier of the
date this Plan is adopted or the date this Plan is approved by the
stockholders of the Company;
(vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the incentive
stock option under the circumstances described in Section 421(b) of the
Code (relating to certain disqualifying dispositions), within 10 days of
such disposition; and
(vii) shall by its terms not be assignable or transferable
other than by will or the laws of descent and distribution and may be
exercised, during the Grantee's lifetime, only by the Grantee; provided,
however, that the Grantee may, to the extent provided in this Plan and
in a manner specified by the Committee, designate in writing a
beneficiary to exercise his incentive stock option after the Grantee's
death.
Notwithstanding the foregoing and Section 4(c)(v), the Committee
may, without the consent of the Grantee, at any time before the exercise
of an option (whether or not an incentive stock option), take any action
necessary to prevent such option from being treated as an incentive stock
option.
(d) Grant of Shares of Restricted Stock.
(i) The Committee may, in its discretion grant shares of
restricted stock to any individual eligible under Section 5 to receive
Awards.
(ii) The Committee shall, in its discretion, determine the
amount, if any, that a Grantee shall pay for shares of restricted stock,
subject to the following sentence. Except with respect to shares of
restricted stock that are treasury shares, for which no payment need be
required, the Committee shall require the Grantee to pay at least the
Minimum Consideration for each share of restricted stock granted to such
Grantee. Such payment shall be made in full by the Grantee before the
delivery of the shares and in any event no later than 10 days after the
Grant Date for such shares. In the discretion of the Committee and to
the extent permitted by law, payment may also be made in accordance with
Section 10.
(iii) The Committee may, but need not, provide that all or
any portion of a Grantee's Award of restricted stock, or restricted stock
acquired upon exercise of an option shall be forfeited:
(A) except as otherwise specified in the Award Agreement,
upon the Grantee's termination of employment for reasons other than
death, disability or any other reason specified in the Award Agreement
within a specified time period after the Grant Date, or
(B) if the Company or the Grantee does not achieve
specified performance goals (if any) within a specified time period after
the Grant Date and before the Grantee's termination of employment, or
(C) upon failure to satisfy such other restrictions as
the Committee may specify in the Award Agreement; provided that subject
to Sections 4(c)(viii) and 14, in no case shall such Award become
nonforfeitable before the first anniversary of the Grant Date.
(iv) If a share of restricted stock is forfeited, then (A) if
the Grantee was required to pay for such share or acquired such
restricted stock upon the exercise of an option, the Grantee shall be
deemed to have resold such share of restricted stock to the Company at
the lesser of (1) the amount paid or, if the restricted stock was
acquired on exercise of an option, the Option Price paid by the Grantee
for such share of restricted stock, or (2) the Fair Market Value of a
share of Stock on the date of such forfeiture; (B) the Company shall pay
to the Grantee the amount determined under clause (A) of this sentence as
soon as is administratively practical; and such share of restricted stock
shall cease to be outstanding, and shall no longer confer on the Grantee
thereof any rights as a stockholder of the Company, from and after the
later of the date the event causing the forfeiture occurred or the date
of the Company's tender of the payment specified in clause (B) of this
sentence, whether or not such tender is accepted by the Grantee.
(v) The Committee may provide that any share of restricted
stock shall be held (together with a stock power executed in blank by the
Grantee) in escrow by the Secretary of the Company until such shares
become nonforfeitable or are forfeited. Any share of restricted stock
shall bear an appropriate legend specifying that such share is non-
transferable and subject to the restrictions set forth in this Plan and
the Award Agreement. If any shares of restricted stock become
nonforfeitable, the Company shall cause certificates for such shares to
be issued or reissued without such legend.
(e) Grant of Stock Appreciation Rights. When granted, stock
appreciation rights may, but need not, be identified with shares of Stock
subject to a specific option, specific shares of restricted stock, or
specific performance units of the Grantee (including any option, shares
of restricted stock, or performance units granted on or before the Grant
Date of the stock appreciation rights) in a number equal to or different
from the number of stock appreciation rights so granted. If stock
appreciation rights are identified with shares of Stock subject to an
option, with shares of restricted stock, or with performance units, then,
unless otherwise provided in the applicable Award Agreement, the
Grantee's associated stock appreciation rights shall terminate upon
(i) the expiration, termination, forfeiture or cancellation of such
option, shares of restricted stock, or performance units, (ii) the
exercise of such option or performance units, or (iii) the date such
shares of restricted stock become nonforfeitable.
(f) Grant of Performance Units.
(i) Before the grant of any performance unit, the Committee
shall:
(A) determine performance goals applicable to such grant,
(B) designate a period, of not less than one year nor
more than seven years, for the measurement of the extent to which
performance goals are attained, which period may begin prior to the Grant
Date (the "Measuring Period"), and
(C) assign a "Performance Percentage" to each level of
attainment of performance goals during the Measuring Period, with the
percentage applicable to minimum attainment being zero percent (0%) and
the percentage applicable to maximum attainment to be determined by the
Committee from time to time.
(ii) In establishing performance goals, the Committee may
consider any performance factor or factors it deems appropriate,
including net income, growth in net income, earnings per share, growth of
earnings per share, return on equity or return on capital, remaining
employed for a specified period, or any other factor. The Committee may,
at any time, in its discretion, modify performance goals in order to
facilitate their attainment for any reason, including recognition of
unusual or nonrecurring events affecting the Company or a Subsidiary or
changes in applicable laws, regulations or accounting principles. If a
Grantee is promoted, demoted or transferred to a different business unit
of the Company during a Measuring Period, then, to the extent the
Committee determines the performance goals or Measuring Period are no
longer appropriate, (A) the Committee may adjust, change or eliminate the
performance goals or the applicable Measuring Period as it deems
appropriate in order to make them appropriate and comparable to the
initial performance goals or Measuring Period; or (B) make a cash payment
to the Grantee in an amount determined in accordance with the method
described in Section 14(b)(iii), substituting the effective date of such
promotion, demotion or transfer for the termination of employment
referred to in Section 14(b)(iii).
(iii) When granted, performance units may, but need not, be
identified with shares of Stock subject to a specific option, specific
shares of restricted stock, or specific stock appreciation rights of the
Grantee granted under this Plan in a number equal to or different from
the number of the performance units so granted. If performance units are
identified with shares of Stock subject to an option, shares of
restricted stock, or stock appreciation rights, then, unless otherwise
provided in the applicable Award Agreement, the Grantee's associated
performance units shall terminate upon (A) the expiration, termination,
forfeiture or cancellation of such option, shares of restricted stock, or
stock appreciation rights, (B) the exercise of such option or stock
appreciation rights, or (C) the date such shares of restricted stock
become nonforfeitable.
(iv) If a Grantee commences employment after the performance
goals of a particular Measuring Period are established, the Committee may
grant an Award that is proportionately adjusted based on the period of
actual service during the Measuring Period.
(g) Grant of Stock Bonuses. The Committee may, in its discretion,
grant shares of Stock to any individual eligible under Section 5 to
receive Awards, other than executive officers of the Company.
7. Grantee's Agreement to Serve
Each Grantee who is granted an Award shall, by executing such Grantee's
Award Agreement, agree that such Grantee will remain in the employ of the
Company or any of its Subsidiaries for at least one year after the Grant
Date. No obligation of the Company or any of its Subsidiaries as to the
length of any Grantee's employment shall be implied by the terms of this
Plan, any grant of an Award hereunder or any Award Agreement. The
Company and its Subsidiaries reserve the same rights to terminate
employment of any Grantee as existed before the Effective Date.
8. Non-Transferability
Each Award (other than restricted stock) granted hereunder shall not be
assignable or transferable other than by will or the laws of descent and
distribution; provided, however, that a Grantee may, in a manner
specified by the Committee and to the extent provided in this Plan: (a)
designate in writing a beneficiary to exercise his Award after the
Grantee's death; (b) transfer an option (other than an incentive stock
option), stock appreciation right or performance unit to a revocable
inter vivos trust as to which the Grantee is both the settlor and the
trustee; and (c) if the Award Agreement expressly permits, transfer an
Award (other than restricted stock or an incentive stock option) for no
consideration to any of the following permissible transferees (each a
"Permissible Transferee"): (w) any member of the Immediate Family of the
Grantee to whom such Award was granted, (x) any trust for the benefit of
members of the Grantee's Immediate Family, (y) any partnership whose
partners are members of the Grantee's Immediate Family or (z) Ronald
McDonald Children's Charities or any Ronald McDonald House; and further
provided that (i) the transferee shall remain subject to all of the terms
and conditions applicable to such Award prior to such transfer; (ii) any
such transfer shall be subject to and in accordance with the rules and
regulations prescribed by the Committee in accordance with Section
4(c)(xii) (the ``Transfer Rules'') and (iii) except as otherwise
expressly provided for in the Plan or in the Transfer Rules, a
Permissible Transferee shall have all the rights and obligations of the
Grantee hereunder and the Grantee shall not retain any rights with
respect to the transferred Award and further provided that the payment of
any tax attributable to the exercise of an Award shall remain the
obligation of the Grantee and the period during which an Award shall
remain exercisable under Section 14 shall depend upon the time and nature
of the Grantee's termination of employment. For purposes of this Section
8, "Immediate Family" includes, such Grantee's spouse, children,
grandchildren, stepchildren, parents, stepparents, grandparents, siblings,
nieces, nephews and in-laws. Notwithstanding the foregoing, the
Committee may, from time to time, in its sole discretion designate
additional individuals, persons or classes as Permissible Transferees.
Each share of restricted stock shall be non-transferable until such share
becomes nonforfeitable.
9. Exercise
(a) Exercise of Options. Subject to Sections 4(c)(viii) and 14 and
such terms and conditions as the Committee may impose, each option shall
be exercisable in one or more installments commencing not earlier than
the first anniversary of the Grant Date of such option.
Each option shall be exercised by delivery to the Company of written
notice of intent to purchase a specific number of shares of Stock subject
to the option. The Option Price of any shares of Stock or shares of
restricted stock as to which an option shall be exercised shall be paid
in full at the time of the exercise. Payment may, at the election of the
Grantee, be made in any one or any combination of the following:
(i) cash,
(ii) Stock held by the Grantee for at least 6 months prior
to exercise of the option, valued at its Fair Market Value on the date of
exercise,
(iii) with the approval of the Committee, shares of
restricted stock held by the Grantee for at least 6 months prior to
exercise of the option, each valued at the Fair Market Value of a share
of Stock on the date of exercise, or
(iv) through simultaneous sale through a broker of shares
acquired on exercise, as permitted under Regulation T of the Federal
Reserve Board.
In the discretion of the Committee and to the extent permitted by
law, payment may also be made in accordance with Section 10.
If restricted stock ("Tendered Restricted Stock") is used to pay the
Option Price for Stock subject to an option, then the Committee may, but
need not, specify that (i) all the shares of Stock acquired on exercise
of the option shall be subject to the same restrictions as the Tendered
Restricted Stock, determined as of the date of exercise of the option, or
(ii) a number of shares of Stock acquired on exercise of the option equal
to the number of shares of Tendered Restricted Stock shall, unless the
Committee provides otherwise, be subject to the same restrictions as the
Tendered Restricted Stock, determined as of the date of exercise of the
option.
(b) Exercise of Stock Appreciation Rights. Subject to Sections
4(c)(viii) and 14 and such terms and conditions as the Committee may
impose, each stock appreciation right shall be exercisable not earlier
than the first anniversary of the Grant Date of such stock appreciation
right, to the extent the option with which it is identified, if any, may
be exercised, to the extent the restricted stock with which it is
identified, if any, is nonforfeitable, or to the extent the performance
unit with which it is identified, if any, may be exercised unless
otherwise provided by the Committee. Stock appreciation rights shall be
exercised by delivery to the Company of written notice of intent to
exercise a specific number of stock appreciation rights. Unless
otherwise provided in the applicable Award Agreement, the exercise of
stock appreciation rights which are identified with shares of Stock
subject to an option, shares of restricted stock or performance units
shall result in the cancellation or forfeiture of such option, shares of
restricted stock or performance units, as the case may be, to the extent
of such exercise.
The benefit for each stock appreciation right exercised shall be
equal to:
(i) the Fair Market Value of a share of Stock on the date of
such exercise, reduced by
(ii) an amount equal to:
(A) for any stock appreciation right identified with
shares of Stock subject to an option, the Option Price of such option,
unless the Committee in the grant of the stock appreciation right
specified a higher amount or
(B) for any other stock appreciation right, the Fair
Market Value of a share of Stock on the Grant Date of such stock
appreciation right, unless the Committee in the grant of the stock
appreciation right specified a higher amount; provided that the
Committee, in its discretion, may provide that the benefit for any stock
appreciation right shall not exceed such percentage of the Fair Market
Value of a share of Stock on such Grant Date as the Committee shall
specify. The benefit upon the exercise of a stock appreciation right
shall be payable in cash, except that the Committee, may, in its
discretion, provide in the Award Agreement that benefits, with respect to
any particular exercise, may be paid wholly or partly in Stock.
(c) Exercise of Performance Units.
(i) Subject to Section 14 and such terms and conditions as the
Committee may impose, if, with respect to any performance unit, the
minimum performance goals have been achieved during the applicable
Measuring Period, then such performance unit shall vest and be
exercisable commencing on the later of (A) the first anniversary of the
Grant Date or (B) the first day after the end of the applicable Measuring
Period. Performance units shall be exercised by delivery to the Company
of written notice of intent to exercise a specific number of performance
units; provided, however, that performance units not identified with
shares of Stock subject to an option, shares of restricted stock or stock
appreciation rights shall be deemed exercised on the date on which they
first become exercisable. Unless otherwise provided in the applicable
Award Agreement, the exercise of performance units which are identified
with shares of Stock subject to an option, shares of restricted stock or
stock appreciation rights shall result in the cancellation or forfeiture
of such shares of Stock subject to option, shares of restricted stock or
stock appreciation rights as the case may be, to the extent of such
exercise.
(ii) The benefit for each performance unit exercised shall be
an amount equal to the product of:
(A) the Unit Value (as defined below) multiplied by
(B) the Performance Percentage attained during the
Measuring Period for such performance unit.
(iii) The Unit Value shall be, as specified by the
Committee,
(A) a dollar amount,
(B) an amount equal to the Fair Market Value of a share
of Stock on the Grant Date,
(C) an amount equal to the Fair Market Value of a share
of Stock on the exercise date of the performance unit, including, if so
provided in the Award Agreement, an amount ("Dividend Equivalent Amount")
equal to the value that would result if dividends paid on a share of
Stock on or after the Grant Date and on or before the exercise date were
invested in shares of Stock as of each respective dividend payment date,
or
(D) an amount equal to the Fair Market Value of a share
of Stock on the exercise date of the performance unit (plus, if so
specified in the Award Agreement a Dividend Equivalent Amount), reduced
by the Fair Market Value of a share of Stock on the Grant Date of the
performance unit.
(iv) Unless expressly provided for in the Award Agreement, the
benefit upon the exercise of a performance unit shall be payable on or
about April 1st following the close of the Measuring Period.
(v) Benefits upon exercise of a performance unit shall be
payable in cash (unless deferred under the terms and conditions of the
Company's Deferred Income Plan or in accordance with such other rules and
regulations as the Committee may approve), except that the Committee,
may, in its discretion, provide in the Award Agreement that benefits,
with respect to any particular exercise, may be paid wholly or partly in
Stock. In the event the Award Agreement provides that the benefit may be
paid wholly in Stock unless the Committee, in its discretion, specifies
at the time of exercise that the benefit shall be paid partly or wholly
in cash, the number of shares of Stock payable in lieu of cash shall be
determined by valuing the Stock at its Fair Market Value on the date such
benefit is to be paid.
10. Loans and Guarantees
The Committee may, in its discretion:
(a) allow a Grantee to defer payment to the Company of all or any
portion of (i) the Option Price of an option, (ii) the purchase price of
a share of restricted stock, or (iii) any taxes associated with a benefit
hereunder which is not a cash benefit at the time such benefit is so
taxable, or
(b) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price,
purchase price, or any related taxes.
Any such payment deferral or guarantee by the Company pursuant to
this Section 10 shall be on such terms and conditions as the Committee
may determine; provided that the interest rate applicable to any such
payment deferral shall be not more favorable to the Grantee than the
terms applicable to funds borrowed by the Company. Notwithstanding the
foregoing, a Grantee shall not be entitled to defer the payment of such
Option Price, purchase price or any related taxes unless the Grantee
(i) enters into a binding obligation to pay the deferred amount and
(ii) except with respect to treasury shares, pays upon exercise of an
option or grant of shares of restricted stock, as the case may be, an
amount equal to or greater than the Minimum Consideration thereof. If
the Committee has permitted a payment deferral or caused the Company to
guarantee a loan pursuant to this Section 10, then the Committee may, in
its discretion, require the immediate payment of such deferred amount or
the immediate release of such guarantee upon the Grantee's termination of
employment or if the Grantee sells or otherwise transfers the Grantee's
shares of Stock purchased pursuant to such deferral or guarantee.
11. Notification under Section 83(b)
The Committee may, on the Grant Date or any later date, prohibit a
Grantee from making the election described below. If the Committee has
not prohibited such Grantee from making such election, and the Grantee
shall, in connection with the exercise of any option, or the grant of any
share of restricted stock, make the election permitted under Section
83(b) of the Code (i.e., an election to include in such Grantee's gross
income in the year of transfer the amounts specified in Section 83(b) of
the Code), such Grantee shall notify the Company of such election within
10 days of filing notice of the election with the Internal Revenue
Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Code.
12. Mandatory Withholding Taxes
(a) Whenever under this Plan, cash or shares of Stock are to be
delivered upon exercise or payment of an Award or upon a share of
restricted stock becoming nonforfeitable, or any other event with respect
to rights and benefits hereunder, the Company shall be entitled to
require as a condition of delivery (i) that the Grantee remit an amount
sufficient to satisfy all federal, state, and local withholding tax
requirements related thereto, (ii) the withholding of such sums from
compensation otherwise due to the Grantee or from any shares of Stock due
to the Grantee under this Plan or (iii) any combination of the foregoing
provided, however, that no amount shall be withheld from any cash payment
or shares of Stock relating to an Award which was transferred by the
Grantee in accordance with this Plan and such cash payment or delivery to
such Permissible Transferee shall in no way be conditioned upon the
Grantee's remittance obligation described herein.
(b) If any disqualifying disposition described in Section 6(c)(vi)
is made with respect to shares of Stock acquired under an incentive stock
option granted pursuant to this Plan or any election described in
Section 11 is made, then the person making such disqualifying disposition
or election shall remit to the Company an amount sufficient to satisfy
all federal, state, and local withholding taxes thereby incurred;
provided that, in lieu of or in addition to the foregoing, the Company
shall have the right to withhold such sums from compensation otherwise
due to the Grantee or from any shares of Stock due to the Grantee under
this Plan.
13. Elective Share Withholding
(a) Subject to Section 13(b), a Grantee may elect the withholding
("Share Withholding") by the Company of a portion of the shares of Stock
otherwise deliverable to such Grantee upon the exercise or payment of an
Award or upon a share of restricted stock becoming nonforfeitable (each a
"Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required federal,
state, or local withholding tax liability attributable to the Taxable
Event; or
(ii) with the Committee's prior approval, a greater amount, not
to exceed the estimated total amount of such Grantee's tax liability with
respect to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be subject
to the following restrictions:
(i) any Grantee's election shall be subject to the Committee's
right to revoke such election of Share Withholding by such Grantee at any
time before the Grantee's election if the Committee has reserved the
right to do so in the Award Agreement;
(ii) the Grantee's election must be made before the date (the
"Tax Date") on which the amount of tax to be withheld is determined;
(iii) the Grantee's election shall be irrevocable;
(iv) provided, however, that no election to have shares of
Stock withheld from any Award shall be effective with respect to an Award
which was transferred by the Grantee in accordance with this Plan.
14. Termination of Employment
(a) For Cause. If a Grantee has a termination of employment for
Cause,
(i) the Grantee's shares of restricted stock that are
forfeitable shall thereupon be forfeited, subject to the provisions of
Section 6(d)(iv) regarding repayment of certain amounts to the Grantee;
and<PAGE>
(ii) any unexercised option, stock appreciation right, or
performance unit shall terminate upon such termination.
(b) On Account of Death or Disability. If a Grantee has a
termination of employment on account of the Grantee's death or
Disability, then, except as otherwise provided in the Award Agreement,
(i) the Grantee's shares of restricted stock that were
forfeitable shall thereupon become nonforfeitable;
(ii) any unexercised option or stock appreciation right,
whether or not exercisable on the date of such termination of employment
may be exercised, in whole or in part, at any time within three years
after such termination of employment by the Grantee, or after the
Grantee's death, by (A) his personal representative or by the person to
whom the option or stock appreciation right is transferred by will or the
applicable laws of descent and distribution, (B) the Grantee's
beneficiary designated in accordance with Sections 6(c)(vii) or 8, (C)
the then-acting trustee of the trust described in clause (b) in the first
paragraph of Section 8 (the "Trust"); or (D) a Permissible Transferee of
an Award assigned or transferred in accordance with Section 8; and
(iii) any unexercised performance unit shall be deemed
exercised upon such termination of employment by the Grantee (or, if
applicable, an individual or entity as specified in Section 14(b)(ii)) as
follows: (A) the value of any vested performance units shall be payable
at the same time that payments for that Measuring Period are made to
other Grantees under the Plan; and (B) the value of any unvested
performance units shall be payable on or about April 1st of the year
following the year of such termination; provided that the value of any
unvested performance unit shall be equal to the product of the Unit Value
multiplied successively by each of the following:
(1) a fraction, the numerator of which is the number of
months (including as a whole month any partial month) that have elapsed
since the beginning of such Measuring Period until the date of such
termination of employment and the denominator of which is the number of
months (including as a whole month any partial month) in the Measuring
Period (the "Time Proration Factor"); and
(2) the percentage that would be earned under the terms
of the applicable Award Agreement assuming that the rate at which the
performance goals are achieved as of December 31 following termination
would continue until the end of the Measuring Period (the "Performance
Percentage Factor").
(c) On Account of Retirement. If a Grantee has a termination of
employment on account of Retirement, any unexercised option or stock
appreciation right (other than a stock appreciation right identified with
a share of restricted stock or a performance unit) which is then
exercisable or which would become exercisable within three years of such
Retirement if the Grantee remained employed by the Company or a
Subsidiary throughout such three-year period, may be exercised, in whole
or in part, by the Grantee or Permissible Transferee of an Award assigned
or transferred in accordance with Section 8, at any time within three
years after the Grantee's Retirement. The nonforfeitability and
exercisability of the Grantee's restricted stock (and any stock
appreciation rights identified therewith) shall be determined under
Section 14(e). The vesting and exercisability of the Grantee's
performance units shall be determined under Section 14(b)(iii).
(d) On Account of Termination of Employment After Age 60. If a
Grantee has a termination of employment after attaining age 60, other
than a termination of employment on account of death, Disability or
Retirement, any unexercised option or stock appreciation right (other
than a stock appreciation right identified with a share of restricted
stock or a performance unit) to the extent exercisable on the date of
such termination of employment, may be exercised, in whole or in part by
the Grantee or Permissible Transferee of an Award assigned or transferred
in accordance with Section 8, at any time within one year after the
Grantee's termination of employment. The nonforfeitability and
exercisability of the Grantee's restricted stock (and any stock
appreciation rights identified therewith) shall be determined under
Section 14(e). The vesting and exercisability of the Grantee's
performance units shall be determined under Section 14(b)(iii).
(e) Any Other Reason. If a Grantee has a termination of employment
for a reason other than for Cause, death of the Grantee, the Grantee's
Disability, and, with respect to options and stock appreciation rights
(other than stock appreciation rights identified with a share of
restricted stock or a performance unit) the termination of employment is
for reasons other than the Grantee's Retirement or the Grantee's
termination of employment after attaining age 60,
(i) the Grantee's shares of restricted stock (and any stock
appreciation rights identified therewith), to the extent forfeitable on
the date of the Grantee's termination of employment, shall be forfeited
on such date;
(ii) any unexercised option or stock appreciation right (other
than a stock appreciation right identified with a share of restricted
stock or performance unit) to the extent exercisable on the date of the
Grantee's termination of employment, may be exercised in whole or in part
by the Grantee or Permissible Transferee of an Award assigned or
transferred in accordance with Section 8, not later than the 30th day
following the Grantee's termination of employment; provided that if such
30th day is not a business day, such option or stock appreciation right
may be exercised not later than the first business day following such
30th day; and
(iii) the Grantee's performance units (and any stock
appreciation rights identified therewith) shall not vest further and may
not be exercised in whole or in part by the Grantee or Permissible
Transferee of an Award assigned or transferred in accordance with Section
8; provided that the value of any vested performance units shall be
payable to the Grantee at the same time that payments for that Measuring
Period are made to other Grantees under the Plan.
(f) Extension of Term. In the event of termination of employment
other than for Cause, the term of any Award (except for an Award of
performance units) which by its terms would otherwise expire after the
Grantee's termination of employment but prior to the end of the period
following the Grantee's termination of employment described in
Sections (b), (c), (d) and (e) above for exercise of Awards shall be
extended so as to permit any unexercised portion thereof to be exercised
at any time by the Grantee or Permissible Transferee of an Award assigned
or transferred in accordance with Section 8 within such period; provided,
however, that in no event may the term of any Award expire more than 15
years after the Grant Date of such Award.
15. Equity Incentive Plans of Foreign Subsidiaries
The Committee may authorize any foreign Subsidiary to adopt a plan for
granting Awards ("Foreign Equity Incentive Plan"). All awards granted
under such Foreign Equity Incentive Plans shall be treated as grants
under this Plan. Such Foreign Equity Incentive Plans shall have such
terms and provisions as the Committee permits not inconsistent with the
provisions of this Plan and which may be more restrictive than those
contained in this Plan. Awards granted under such Foreign Equity
Incentive Plans shall be governed by the terms of this Plan except to the
extent that the provisions of the Foreign Equity Incentive Plans are more
restrictive than the terms of this Plan, in which case such terms of the
Foreign Equity Incentive Plans shall control.
16. Securities Law Matters
(a) If the Committee deems necessary to comply with the Securities
Act of 1933, the Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend
be affixed to certificates for shares of Stock.
(b) If based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities law or (ii) the listing
requirements of any national securities exchange on which are listed any
of the Company's equity securities, then the Committee may postpone any
such exercise, nonforfeitability or delivery, as the case may be, but the
Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such provisions at the
earliest practicable date.
17. Funding
Benefits payable under this Plan to any person shall be paid directly by
the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for payment of, benefits under this Plan.
18. No Employment Rights
Neither the establishment of this Plan, nor the granting of any Award
shall be construed to (a) give any Grantee the right to remain employed
by the Company or any of its Subsidiaries or to any benefits not
specifically provided by this Plan or (b) in any manner modify the right
of the Company or any of its Subsidiaries to modify, amend, or terminate
any of its employee benefit plans.
19. Rights as a Stockholder
A Grantee shall not, by reason of any Award (other than restricted stock)
have any right as a stockholder of the Company with respect to the shares
of Stock which may be deliverable upon exercise or payment of such Award
until such shares have been delivered to him. Shares of restricted stock
held by a Grantee or held in escrow by the Secretary of the Company shall
confer on the Grantee all rights of a stockholder of the Company, except
as otherwise provided in this Plan. The Committee, in its discretion, at
the time of grant of restricted stock, may permit or require the payment
of cash dividends thereon to be deferred and, if the Committee so
determines, reinvested in additional restricted stock to the extent
shares are available under Section 3 or otherwise reinvested. Stock
dividends and deferred cash dividends issued with respect to restricted
stock shall be treated as additional shares of restricted stock that are
subject to the same restrictions and other terms as apply to the shares
with respect to which such dividends are issued. The Committee may, in
its discretion, provide for crediting to and payment of interest on
deferred cash dividends.
20. Nature of Payments
Any and all grants, payments of cash, or deliveries of shares of Stock
hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (a) any pension, retirement,
profit-sharing, bonus, life insurance or other employee benefit plan of
the Company or any of its Subsidiaries or (b) any agreement between the
Company or any Subsidiary, on the one hand, and the Grantee, on the other
hand, except as such plan or agreement shall otherwise expressly provide.
21. Non-Uniform Determinations
Neither the Committee's nor the Board's determinations under this Plan
need be uniform and may be made by the Committee or the Board selectively
among persons who receive, or are eligible to receive, Awards (whether or
not such persons are similarly situated). Without limiting the
generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations, to enter into
non-uniform and selective Award Agreements as to (a) the identity of the
Grantees, (b) the terms and provisions of Awards, and (c) the treatment,
under Section 14, of terminations of employment. Notwithstanding the
foregoing, the Committee's interpretation of Plan provisions shall be
uniform as to similarly situated Grantees.
22. Adjustments
The Committee shall make equitable adjustment of:
(a) the aggregate numbers of shares of Stock, shares of restricted
stock, and bonus stock available under Sections 3(a) and 3(c),
(b) the number of shares of Stock, shares of restricted stock,
stock appreciation rights or performance units covered by an Award,
(c) the Option Price,
(d) the Fair Market Value of Stock to be used to determine the
amount of the benefit payable upon exercise of stock appreciation rights
or performance units, and
(e) the maximum number of shares of Stock for which Awards may be
granted to any Grantee in any three year period under Section 3(b),
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of
property or shares, separation, asset spin-off, reorganization, stock
rights offering, liquidation or similar event, of or by the Company.
Notwithstanding the foregoing, upon the approval by the stockholders of
the Company of a plan of liquidation for the Company, any unexercised
options, stock appreciation rights and performance units theretofore
granted shall thereupon become exercisable, and any shares of restricted
stock that have not become nonforfeitable shall become nonforfeitable.
23. Amendment of this Plan
The Board may from time to time in its discretion amend or modify this
Plan without the approval of the stockholders of the Company, except as
such stockholder approval may be required (a) to permit the grant of
Awards under, and transactions in Stock pursuant to, this Plan to be
exempt from liability under Section 16(b) of the 1934 Act or (b) under
the listing requirements of any national securities exchange on which are
listed any of the Company's equity securities.
24. Termination of this Plan<PAGE>
This Plan shall terminate on the tenth (10th) anniversary of the
Effective Date or at such earlier time as the Board may determine. Any
termination, whether in whole or in part, shall not affect any Award then
outstanding under this Plan.
25. No Illegal Transactions
This Plan and all Awards granted pursuant to it are subject to all laws
and regulations of any governmental authority which may be applicable
thereto; and notwithstanding any provision of this Plan or any Award,
Grantees shall not be entitled to exercise Awards or receive the benefits
thereof and the Company shall not be obligated to deliver any Stock or
pay any benefits to a Grantee if such exercise, delivery, receipt or
payment of benefits would constitute a violation by the Grantee or the
Company of any provision of any such law or regulation.
26. Controlling Law
The law of the State of Illinois, except its law with respect to choice
of law, shall be controlling in all matters relating to this Plan.
27. Severability
If all or any part of this Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity
shall not serve to invalidate any portion of this Plan not declared to be
unlawful or invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which
will give effect to the terms of such Section or part of a Section to the
fullest extent possible while remaining lawful and valid.
