DEFERRED INCENTIVE PLAN
(As Amended and Restated Effective as of September 1, 1994)
1.1 The Plan and Its Effective Date. The McDonald's Corporation
Deferred Incentive Plan ("Plan") was established November 1, 1993.
The effective date of the amendment and restatement of the Plan as set
forth herein is September 1, 1994.
1.2 Purpose. McDonald's Corporation ("McDonald's" or the
"Company") has established the Plan for its officers, regional
managers, and certain expatriate international country heads to retain
and attract highly qualified personnel by offering the benefits of a
non-qualified, unfunded plan of deferred compensation. The Company
may also allow other subsidiaries or affiliates to adopt the Plan in
accordance with Section 7.
1.3 Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee shall have the powers set forth in the
Plan and the power to interpret its provisions. Any decisions of the
Committee shall be final and binding on all persons with regard to the
Plan. The Committee may delegate its authority hereunder to an
officer or officers of the Company.
Participation and Deferral Elections
2.1 Eligibility and Participation. Subject to the conditions
and limitations of the Plan, all officers and regional managers of the
Company and international country heads who are on United States
payroll and who are identified as eligible by the Committee shall be
eligible to participate in the Plan ("Eligible Employees"). Any
Eligible Employee who makes a Deferral Election as described in
Section 2.2 below shall become a participant in the Plan
("Participant") and shall remain a Participant until the entire
balance of the Participant's Deferral Accounts (defined in Section 4.1
below) is distributed.
2.2 Deferral Elections. Any Eligible Employee may make a
Deferral Election to defer receipt of all or any portion of his or her
incentive under the McDonald's Target Incentive Plan ("TIP") for a
calendar year. Any Eligible Employee who is one of the five highest
compensated officers of the Company (ranked by the total of base pay
and the target incentive under TIP for the current year) may also
elect to defer up to 50% of his or her base salary for the following
2.3 Rules for Deferral Elections. Deferral Elections shall be
made in accordance with the rules set forth below:
(a) All Deferral Elections must be in writing on such forms as
the Committee may prescribe and must be returned to the
Committee no later than the date specified by the Committee.
In no event will the return date specified by the Committee
be later than the end of the year that precedes the year
that the amount being deferred is made available to such
(b) An individual shall be eligible to make a Deferral Election
only if he or she is an Eligible Employee on the date
specified by the Committee for the return of Deferral
(c) If an Eligible Employee terminates employment in the same
calendar year in which he or she makes a Deferral Election,
that Deferral Election will be null and void and no deferral
will be made.
(d) Amounts will be deferred to the "Payment Date" specified by
the Eligible Employee in the Deferral Election and payments
will commence within 30 days following the Payment Date in
accordance with Section 5.1. The Payment Date specified
must be no earlier than the calendar year following the year
in which the deferred amounts would otherwise have been paid
and must be either:
(i) March 31 or September 30 of a specified year in the
future (the "Specific Year Payment Date") or
(ii) the March 31 following the year in which the
Participant terminates employment (the "Employment
Termination Payment Date").
If a Participant terminates employment and has one or more
Specific Year Payment Dates that would occur after the
Employment Termination Payment Date, all amounts deferred to
those Specific Year Payment Date(s) shall automatically be
accelerated to the Employment Termination Payment Date.
Participant McDESOP Equalization Amounts and Company Profit
Sharing Equalization Credits described in Section 3 shall be
deferred to the Participant's Employment Termination Payment
Date, even though a Participant has elected a Specific Year
Payment Date for the remainder of his or her deferral.
Deferral elections made in 1993 specified either a January
31 or July 31 payment date. Due to a change in accounting
procedures, these payment dates will be converted to March
31 and September 30, respectively.
(e) Each Deferral Election shall specify how amounts deferred
pursuant to that election are to be invested under Section
Equalization for McDonald's Corporation Profit Sharing Program
3.1 Equalization to Adjust for Participant 401(k) McDESOP
Contributions. Amounts deferred under this Plan are not considered
compensation for the McDonald's Corporation Profit Sharing Program
(the "Profit Sharing Program") or for the related non-qualified plans:
the McDonald's 1989 Executive Compensation Plan, the McDonald's
Supplemental Employee Benefit Equalization Plan and the McDonald's
Profit Sharing Program Equalization Plan (the "McCAP/McEqual Plans").
The McDESOP portion of the Profit Sharing Program allows participants
to contribute a percentage of their compensation as Section 401(k)
contributions. Therefore, Eligible Employees who are Profit Sharing
Program participants and make Deferral Elections under this Plan shall
automatically have a portion of the amount deferred set aside until
the Participant's Termination Payment Date to adjust for the fact
McDESOP Section 401(k) contributions cannot be made to the Profit
Sharing Program or the related non-qualified plans for deferred
amounts (the "Participant McDESOP Equalization Amount"). The
Participant McDESOP Equalization Amount shall be based on the amount
that would have been contributed by the Participant under the McDESOP
portion of the Profit Sharing Program and the related non-qualified
plans if the deferral had not occurred.
3.2 Company Profit Sharing Equalization Credits. Amounts
deferred under this Plan are not considered as compensation under the
Profit Sharing Program or the McCAP/McEqual Plans. Therefore, amounts
deferred under this Plan shall be credited with an amount equal to the
Company contribution that the Participant would have received under
the Profit Sharing Program and/or McCAP/McEqual Plans if such deferral
had not occurred ("Company Profit Sharing Equalization Credit"). If a
Participant is not eligible to participate in the Profit Sharing
Program or McCAP/McEqual Plans, or is not eligible to receive a
Company contribution under such plans with respect to a deferred
amount, no Company Profit Sharing Equalization Credit will be made.
3.3 Rules for Profit Sharing Equalization Amounts.
Equalizations amounts under Sections 3.1 and 3.2 above (collectively
referred to as "Equalization Amounts") shall be deferred until the
Participant's Employment Termination Payment Date and cannot be
withdrawn under Section 5.3. Equalization Amounts will become part of
the Participant's Deferral Account for the year to which they relate
and will be credited with earnings as part of that Deferral Account as
described in Section 4.1.
4.1 Deferral Accounts. A bookkeeping account shall be
established in the Participant's name for each year for which a
Participant files a Deferral Election.("Deferral Account"). Each
year's deferral account may be further divided into:
(a) amounts deferred pursuant to that year's Deferral Election
and earnings thereon,
(b) Company Profit Sharing Equalization Credits associated with
that year's Deferral Election and earnings thereon; and
(c) Participant 401(k) McDESOP Equalization amounts associated
with that year's Deferral Election and earnings thereon.
The Equalization Amounts described in Section 4.1(b) and (c) above
shall not be eligible for early withdrawal under Section 5.3. The
Committee may also authorize other divisions or subaccounts of the
deferral accounts as may be necessary to reflect the terms of the plan
as amended from time to time.
Amounts deferred pursuant to a Deferral Election shall be credited to
the Deferral Account as of the end of the month in which, in the
absence of a Deferral Election, the Participant would otherwise have
received the deferred amounts. Any Equalization Amounts shall be
credited to the Deferral Account as of the end of the month in which
the amount would have been allocated under the Profit Sharing Program
or the McCAP/McEqual Plans if the deferral had not occurred.
4.2 Investment Elections and Earnings Credits.
(a) When a Participant makes a Deferral Election, he or she
shall also elect whether amounts credited to his or her
Deferral Account for that year shall be credited with one of
the following rates of return:
(i) a rate of return based upon the McDonald's Common Stock
Fund under the Profit Sharing Program, after adjustment
for expenses ("McDonald's Common Stock" equivalent);
(ii) a rate of return based upon the Insurance Contract Fund
under the Profit Sharing Program, after adjustment for
expenses ("Insurance Contract" equivalent);
(iii)a rate of return based upon the Diversified Stock Fund
under the Profit Sharing Program, after adjustment for
expenses ("Diversified Stock" equivalent); or
(iv) a rate of return based upon the Multi-Asset Fund under
the Profit Sharing Program, after adjustment for
expenses ("Multi-Asset" equivalent).
If a Participant fails to make an investment election with
respect to a Deferral Election, the amount deferred by that
election shall be credited with the Insurance Contract based
return. The rates of return described above shall be
effective as of January 1, 1995.
Effective January 1, 1995, participants shall be permitted
to elect to change the rate of return credited to each
year's Deferral Account on a prospective basis as of any
January 1, April 1, July 1, and October 1 by filing an
advance written request with the Committee at such time as
the Committee may specify.
(b) As of each March 31, June 30, September 30, and December 31
("Valuation Date"), each Deferral Account shall be credited
with earnings, gains and losses equal to the amount the
Deferral Account would have earned, gained or lost,
compounded on a monthly basis, since the prior Valuation
Date. The Committee, in its discretion, may also request a
special Valutation Date as of the end of any month.
4.3 Vesting. A Participant shall be fully vested at all times
in the balance of his or her Deferral Account.
Payment of Benefits
5.1 Time and Method of Payment. Payments to a Participant, or
the Participant's beneficiary if the Participant is deceased, shall
automatically be paid in a lump sum within 30 days following the
Payment Date, unless the Participant or the Participant's beneficiary
files a written installment distribution election on or before
December 31 of the calendar year preceding the Payment Date. An
installment distribution election shall apply to all payments for that
Payment Date and shall specify the period of years (up to a maximum of
15 years) over which payments are to be made. Installment payments
shall be made in substantially equal installments over the installment
period specified and shall commence within 30 days after the Payment
Date. Each installment payment shall be computed by dividing the
balance of the Deferral Account(s) that is to be paid in installments
by the number of years remaining in the installment period. Once an
installment election is filed for a payment date, it cannot be
revoked. However, because the method of payment described above is
more flexible, Deferral Elections made in 1993 which specified a five
year installment payment shall be null and void, and shall be paid in
a lump sum, unless the Participant or the Participant's beneficiary
files a written installment election prior to December 31 of the
calendar year preceding the Payment Date.
5.2 Form of Payment. All payments shall be made in cash.
However, a Participant who has elected a McDonald's Common Stock
based return may elect to receive payment in the form of shares of
McDonald's Common Stock by filing a written request with the Committee
prior to December 31 of the calendar year preceding the Payment Date.
5.3 Early Withdrawals and Acceleration of Installment Payments.
A Participant shall have the right to withdraw in cash any portion of
the balance of his or her Deferral Accounts (except for the
Equalization Amounts of the Participant's Deferral Accounts under
Sections 4.1(b) and (c) and amounts which were not withdrawable under
the terms of the Plan prior to September 1, 1994) at any time prior to
the applicable Payment Date, subject to the Committee's consent and a
10% forfeiture penalty on the amount requested. A Participant who is
receiving installment payments may accelerate payment of any unpaid
amount, subject to the Committee's consent and 10% forfeiture penalty
on the amount accelerated. The withdrawal or accelerated installment
(reduced by the 10% forfeiture penalty) shall be paid within 30 days
of the March 31 or September 30 next following the date the election
to withdraw or accelerate payments is approved by the Committee.
Withdrawals and accelerated installments shall be made first from the
earliest maturing Deferral Account and shall be taken pro rata from
the investments in each year's Deferral Account based on the account
balance of each investment to the total account balance for the
applicable Payment Date. Withdrawals shall be subject to such
procedures as the Committee shall establish from time to time.
5.4 Withholding of Taxes. The Company shall withhold any
applicable Federal, state or local income tax from payments due under
the Plan. Any Social Security taxes, including the Medicare portion
of such taxes, shall be withheld and paid at the time incentive under
the Target Incentive Plan or base salary would otherwise have been
paid to the Participant. The Company shall also withhold any other
employment taxes as necessary to comply with applicable laws.
5.5 Limitations For Section 16 Insiders. A "Section 16
Insider" shall include any Participant who has been deemed to be
subject to Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") by the Board of Directors of the Company.
Notwithstanding any provision of the Plan to the contrary, the
Deferral Account of each Section 16 Insider is subject to the
(a) An Eligible Employee who is a Section 16 Insider at the time
he or she makes a Deferral Election may elect a McDonald's
Common Stock based return and at the same time must also
specify whether the payment will be in a lump sum or the
specific installment period that will apply. The election
of a McDonald's Common Stock based return is irrevocable and
cannot be changed at the quarterly investment change dates
nor at any other time. A Participant who is a Section 16
Insider may not make a withdrawal or accelerate installments
under Section 5.3 of any Deferral Account(s) that are
credited with a McDonald's Common Stock based return.
Insiders who elected a McDonald's Common Stock based return
and a five year installment in 1993 will not be able to
change that election.
(b) All amounts distributed to a Section 16 Insider shall be
paid only in cash. However, to the extent that a former
Section 16 Insider uses the distribution to purchase shares
of McDonald's Common Stock on the open market in one or more
transactions within seven months after the date such amounts
are distributed, the Company shall reimburse the former
Section 16 Insider for all reasonable brokerage fees and
other transaction costs incurred in connection with such
purchases upon presentation of satisfactory evidence thereof
not later than 60 days after the date of each transaction.
(c) If any Participant becomes a Section 16 Insider after making
a Deferral Election under the Plan, any Deferral Account
that is being credited with a McDonald's Common Stock based
return shall automatically be converted to any non-
McDonald's Common Stock based investment return specified by
the Participant as of the Valuation Date immediately
preceding the date the Participant is designated a Section
16 Insider by the Board of Directors. This automatic change
to non-McDonald's Common Stock based returns will be made to
preserve the Participant's right to early withdrawals and
accelerated installments under Section 5.3 for such amounts.
In addition, the Committee may take such other actions as are
necessary so that transactions by Section 16 Insiders do not result in
liability under Section 16(b) of the Exchange Act.
5.6 Beneficiary. A Participant shall have the right to name a
beneficiary or beneficiaries who shall receive the balance of a
Participant's Deferral Account in the event of the Participant's death
prior to the payment of his or her entire Deferral Account. If no
beneficiary is named by a Participant or if he or she survives all of
the named beneficiaries, the Deferral Account shall be paid to the
same beneficiary or beneficiaries to which the Deferral Account would
have been paid if it were in the Participant's Profit Sharing Fund
Account under the Profit Sharing Program as of the date of the
Participant's death. To be effective, any beneficiary designation
shall be filed in writing with the Committee. A Participant may
revoke an existing beneficiary designation by filing another written
beneficiary designation with the Committee. The latest beneficiary
designation received by the Committee shall be controlling.
6.1 Funding. Benefits payable under the Plan to any Participant
shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment
of benefits under the Plan. While the Company may, in the discretion
of the Committee, make investments (a) in shares of McDonald's Common
Stock through open market purchases or (b) in other investments in
amounts equal or unequal to amounts payable hereunder, the Company
shall not be under any obligation to make such investments and any
such investment shall remain an asset of the Company subject to the
claims of its general creditors. Notwithstanding the foregoing, the
Company may maintain one or more trusts ("Trust") to hold assets to be
used for payment of benefits under the Plan. Any payments by a Trust
of benefits provided to a Participant under the Plan shall be
considered payment by the Company and shall discharge the Company of
any further liability under the Plan for such payments.
6.2 Account Statements. The Company shall provide Participants
with annual statements of the balance of their Deferral Accounts
hereunder as of the latest applicable Valuation Date.
6.3 Employment Rights. Establishment of the Plan shall not be
construed to give any Eligible Employee the right to be retained in
the Company's service or to any benefits not specifically provided by
6.4 Interests Not Transferable. Except as to withholding of any
tax under the laws of the United States or any state or locality and
the provisions of Section 5.6, no benefit payable at any time under
the Plan shall be subject in any manner to alienation, sale, transfer,
assignment, pledge, attachment, or other legal process, or encumbrance
of any kind. Any attempt to alienate, sell, transfer, assign, pledge
or otherwise encumber any such benefits, whether currently or
thereafter payable, shall be void. No person shall, in any manner, be
liable for or subject to the debts or liabilities of any person
entitled to such benefits. If any person shall attempt to, or shall
alienate, sell, transfer, assign, pledge or otherwise encumber
benefits under the Plan, or if by any reason of the Participant's
bankruptcy or other event happening at any time, such benefits would
devolve upon any other person or would not be enjoyed by the person
entitled thereto under the Plan, then the Company, in its discretion,
may terminate the interest in any such benefits of the person entitled
thereto under the Plan and hold or apply them to or for the benefit of
such person entitled thereto under the Plan or such individual's
spouse, children or other dependents, or any of them, in such manner
as the Company may deem proper.
6.5 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall
consist of the amounts of the Deferral Accounts of a Participant that
cannot be distributed because of the Committee's inability, after a
reasonable search, to locate a Participant or the Participant's
beneficiary, as applicable, within a period of two (2) years after the
Payment Date upon which the payment of benefits become due. Unclaimed
amounts shall be forfeited at the end of such two-year period.
Penalties charged for withdrawals under Section 5.3 shall also be
forfeited in the year in which the penalty is charged. These
forfeitures will reduce the obligations of the Company under the Plan.
After an unclaimed amount has been forfeited, the Participant or
beneficiary, as applicable, shall have no further right to the
Participant's Deferral Account.
6.6 Controlling Law. The law of Illinois, except its law with
respect to choice of law, shall be controlling in all matters relating
to the Plan to the extent not preempted by ERISA.
6.7 Action by the Company. Except as otherwise specifically
provided herein, any action required of or permitted by the Company
under the Plan shall be by resolution of the Board of Directors of the
Company or by action of any member of the Committee or person(s)
authorized by resolution of the Board of Directors of the Company.
7.1 Adoption of Plan. Any subsidiary or affiliate of the
Company ("Employer") may, with the approval of the Committee and under
such terms and conditions as the Committee may prescribe, adopt the
corresponding portions of the Plan by resolution of its board of
directors. The Committee may amend the Plan as necessary or desirable
to reflect the adoption of the Plan by an Employer, provided however,
that an adopting Employer shall not have the authority to amend or
terminate the Plan under Section 8.
7.2 Withdrawal from the Plan by Employer. Any such Employer
shall have the right, at any time, upon the approval of and under such
conditions as may be provided by the Committee, to withdraw from the
Plan by delivering to the Committee written notice of its election so
to withdraw. Upon receipt of such notice by the Committee, the
portion of the Deferral Accounts of Participants and beneficiaries
attributable to credits made while the Participants were employees of
such withdrawing Employer, plus any net earnings, gains and losses or
such credits, shall be distributed from the Trust at the direction of
the Committee in cash at such time or times as the Committee, in its
sole discretion, may deem to be in the best interest of such employees
and their beneficiaries. To the extent the amounts held in the Trust
for the benefit of such Participants and beneficiaries are not
sufficient to satisfy the Employer's obligation to such Participants
and their beneficiaries accrued on account of their employment with
the Employer, the remaining amount necessary to satisfy such
obligation shall be an obligation of the Employer, and the Company
shall have no further obligation to such Participants and
beneficiaries with respect to such amounts.
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the
right at any time by action of its Board of Directors or by the
Committee (in accordance with the restrictions in the following
sentence) to modify, amend or terminate the Plan, provided however,
that any amendment or termination of the Plan shall not reduce or
eliminate any Deferral Account accrued through the date of such
amendment or termination.
The Committee shall have the same authority to adopt amendments
to the Plan as the Board of Directors of the Company in the following
(a) to adopt amendments to the Plan which the Committee
determines are necessary or desirable for the Plan to comply
with or to obtain benefits or advantages under the
provisions of applicable law, regulations or rulings or
requirements of the Internal Revenue Service or other
governmental or administrative agency or changes in such
law, regulations, rulings or requirements; and
(b) to adopt any other procedural or cosmetic amendment
that the Committee determines to be necessary or desirable
that does not materially change benefits to Participants or
their beneficiaries or materially increase the Company's or
adopting Employers' credits to the Plan.
The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors of the Company on a timely basis.
Executed in multiple originals this 9th day of September, 1994.
/s/ Stanley R. Stein
By: Stanley R. Stein
Title: Senior Vice President