EXHIBIT 10(f)
McDONALD'S CORPORATION
DEFERRED INCOME PLAN
(As Amended and Restated Effective as of July 15, 1997)
Section 1
Introduction
1.1 The Plan and Effective Date. The McDonald's Corporation
Deferred Income Plan, formerly known as the McDonald's Corporation
Deferred Incentive Plan, ("Plan") was established November 1, 1993. The
Plan was amended and restated effective September 1, 1994 and was
subsequently amended by the first amendment thereof effective as of
February 1, 1996 and the second amendment thereof effective as of August
15, 1996 . The Plan was subsequently amended and restated effective as
of January 1, 1997. The ``effective date'' of the amendment and
restatement of the Plan as set forth herein is July 15, 1997 and applies
to deferral elections made by Participants with respect to amounts which
would otherwise be paid in 1998.
1.2 Purpose. McDonald's Corporation ("McDonald's" or the
"Company") has established the Plan for its officers, regional managers,
department directors and certain expatriate international country heads
to retain and attract highly qualified personnel by offering the benefits
of a non-qualified, unfunded plan of deferred compensation. The Company
may also allow other subsidiaries or affiliates to adopt the Plan in
accordance with Section 7.
1.3 Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The Committee shall have the powers set forth in the Plan
and the power to interpret its provisions. Any decisions of the
Committee shall be final and binding on all persons with regard to the
Plan. The Committee may delegate its authority hereunder to an officer
or officers of the Company.
Section 2
Participation and Deferral Elections
2.1 Eligibility and Participation. Subject to the conditions and
limitations of the Plan, all officers, regional managers and department
directors 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 may also make an election to defer a percentage of
his or her base salary for the following calendar year in accordance with
the following schedule:
Maximum Deferral
Category of Eligible Employee Percentage
----------------------------- ----------------
Highest paid five officers (ranked by the
total of base pay and the target incentive
under TIP for the current year) 90%
Executive Vice Presidents 80%
All other officers and regional managers 70%
Department Directors 60%
provided, however that the committee of officers designated by the
Committee to administer the Plan (the ``Officer Committee'') may, in its
discretion, grant individual requests for higher deferral percentages of
base salary and provided further that the Officer Committee may, in its
discretion, increase the deferral percentages of base salary for various
classes of officers as may be necessary to reflect organizational or
title changes.
If applicable, any Eligible Employee may also make an election to defer
all or a portion of his or her Three-Year Incentive award (``Three-Year
Incentive'') under the 1992 Stock Ownership Incentive Plan for a calendar
year.
2.3 Rules for Deferral Elections. Deferral Elections shall be made
in accordance with the rules set forth below:
(a) All Deferral Elections must be in writing on such forms as the
Committee may prescribe and must be returned to the 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
deferred would otherwise be made available to such Eligible
Employee.
(b) An individual shall be eligible to make a Deferral Election
only if he or she is an Eligible Employee on the date specified
by the Committee for the return of Deferral Election forms.
(c) If an Eligible Employee terminates employment in the same
calendar year in which he or she makes a Deferral Election,
that Deferral Election (and any Deferral Elections respecting
future compensation in years following the year of employment
termination) 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 March 31st of the calendar year
following the year in which the deferred amounts would
otherwise have been paid and must be either:
(i) The 15th or last day of a specified month (but not
December 31) 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 and payment with commence on the Employment
Termination Payment Date. Participant 401(k) 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 prior to September 1, 1996 shall be
deferred to the date specified in the deferral election in
accordance with the terms of the Plan prior to January 1, 1997.
Section 3
Equalization for McDonald's Corporation Profit Sharing Program
3.1 Equalization to Adjust for Participant 401(k) McDESOP
Contributions. Amounts deferred under this Plan are not considered
compensation for the McDonald's Corporation Profit Sharing Program (the
"Profit Sharing Program") or for the related non-qualified plans: the
McDonald's 1989 Executive Compensation Plan, the McDonald's Supplemental
Employee 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 for base salary and TIP awards under this
Plan shall automatically have a portion of these deferred amounts 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 these deferred
amounts (the "Participant 401(k) McDESOP Equalization Amount"). The
Participant 401(k) 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 of base salary and TIP had not occurred.
No Participant 401(k) McDESOP Equalization credit will be made for
deferrals of Three-Year Incentive awards under this Plan.
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, base salary and
TIP awards 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. No Company
Profit Sharing Equalization Credit shall be made for Three-Year Incentive
awards deferred under this Plan.
3.3 Rules for Profit Sharing Equalization Amounts. Equalization
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 and will be credited with earnings as part of that Deferral
Account as described in Section 4.1.
Section 4
Deferral Accounts
4.1 Deferral Accounts. A bookkeeping account shall be established
in the Participant's name ("Deferral Account"). Each Participant'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 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 date the Participant would otherwise have
received the deferred amounts in the absence of a Deferral Election. Any
Equalization Amounts shall be credited to the Deferral Account as of the
date 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. Prior to January 1,
1997, amounts deferred under the Plan shall continue to be credited with
the rate of return under the investment options and procedures set forth
in the Plan as in effect prior to that date. Effective on and after
January 1, 1997, each Participant in the Plan shall make an investment
election, as described below, and such election shall apply to the entire
amount credited to the Participant's Deferral Accounts under the Plan.
However, Section 16 Insiders, as defined in Section 5.5 of the Plan may
not make investment elections involving McDonald's Common Stock. (For
further details concerning these restrictions, see Section 5.5 of the
Plan.) Participants who terminated employment prior to January 1, 1997,
may file a new investment election in accordance with the provisions of
this Section 4.2 effective on and after January 1, 1997, but if no new
investment election is filed, Deferral Accounts for these participants
will continue to be invested in accordance with the investment elections
made prior to January 1, 1997.
A Participant may change his investment election effective as of the
first day of any month up to a maximum of twelve such investment
elections each calendar year. All investment elections shall be made by
filing an investment election form with the Committee at such time and in
such manner as the Committee may specify.
Investment elections may be split between the following equivalent rates
of return in increments of 10%, provided that the percentages specified
must total 100%.
(a) 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);
(b) a rate of return based upon the Insurance Contract Fund under
the Profit Sharing Program, after adjustment for expenses
("Insurance Contract" equivalent);
(c) a rate of return based upon the Diversified Stock Fund under
the Profit Sharing Program, after adjustment for expenses
("Diversified Stock" equivalent);
(d) a rate of return based upon the Multi-Asset Fund under the
Profit Sharing Program, after adjustment for expenses ("Multi-
Asset" equivalent); and
(e) a rate of return based upon the Money Market Fund under the
Profit Sharing Program, after adjustment for expenses (``Money
Market'' equivalent).
If a Participant who is employed fails to make an investment election,
amounts shall be credited with the same rate of return as amounts for
which no investment election is received under the Profit Sharing
component of the McDonald's Corporation Profit Sharing Program.
(Currently, this is the Money Market equivalent rate of return.) All
investment elections will continue in effect for all Participants until
the Participant files a new investment election.
As of the 15th day (or if the fifteenth day of the month is not a
business day, the next previous business day) and the last business day
of each calendar month, or such additional dates as the Committee shall
specify ("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, since the prior Valuation Date.
4.3 Vesting. A Participant shall be fully vested at all times in
the balance of his or her Deferral Account.
Section 5
Payment of Benefits
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 and shall also specify whether installments are
to be made quarterly or annually. 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
payments 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 Valuation Date 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 investment rate equivalents elected by the
Participant. 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 in accordance with such procedures as the Company may establish.
Generally, any Social Security taxes, including the Medicare portion of
such taxes, shall be withheld and paid at the time incentive payments
under the Target Incentive Plan, long term incentive plan or base salary
payments 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 following limitations:
(a) An Eligible Employee who is a Section 16 Insider at the time he
or she makes a Deferral Election may elect a McDonald's Common
Stock based return and at the same time must also specify the
Payment Date and 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 by an investment election at a later date. 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. Section 16 Insiders who elect a McDonald's
Common Stock based return and a form of payment will not be
able to change those elections, even if the Plan is amended at
a later date to provide increased flexibility.
(b) A Section 16 Insider who elects to invest in McDonald's Common
Stock based return shall also elect, at the time the deferral
is made, whether the distribution will be paid in cash or in
the form of McDonald's Common Stock. This provision applies
only to deferral elections made on and after August 15, 1996.
Amounts deferred under all deferral elections made prior to
August 15, 1996 will be paid in cash. However, for these cash
distributions only, to the extent that a Section 16 Insider
uses the cash 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 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 on
an investment election form 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 make investment
choices for investment options that do not involve McDonald's
Common Stock, make early withdrawals and elect accelerated
installments under Section 5.3.
(d) Elections to invest in McDonald's Common Stock based returns
can be made by Section 16 Insiders only at the time the
deferral election is made. Investment elections which would
result in a transfer into the McDonald's Common Stock based
return at a later date are not permitted for Section 16
Insiders.
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.
Section 6
Miscellaneous
6.1 Funding. Benefits payable under the Plan to any Participant
shall be paid directly by the Company. The Company shall not be required
to fund, or otherwise segregate assets to be used for payment of benefits
under the Plan. While the Company may, in the discretion of the
Committee, make investments (a) in shares of McDonald's Common Stock
through open market purchases or (b) in other investments in amounts
equal or unequal to amounts payable hereunder, the Company shall not be
under any obligation to make such investments and any such investment
shall remain an asset of the Company subject to the claims of its general
creditors. Notwithstanding the foregoing, the Company may maintain one
or more trusts ("Trust") to hold assets to be used for payment of
benefits under the Plan. Any payments by a Trust of benefits provided to
a Participant under the Plan shall be considered payment by the Company
and shall discharge the Company of any further liability under the Plan
for such payments.
6.2 Account Statements. The Company shall provide Participants
with statements of the balance of their Deferral Accounts under the Plan
at least annually. The Committee may, in their discretion, also issue
statements as of the March 31, June 30, September 30 and December 31
Valuation Dates, or as of any other Valuation Date that the Committee
deems appropriate.
6.3 Employment Rights. Establishment of the Plan shall not be
construed to give any Eligible Employee the right to be retained in the
Company's service or to any benefits not specifically provided by the
Plan.
6.4 Interests Not Transferable. Except as to withholding of any
tax under the laws of the United States or any state or locality and the
provisions of Section 5.6, no benefit payable at any time under the Plan
shall be subject in any manner to alienation, sale, transfer, assignment,
pledge, attachment, or other legal process, or encumbrance of any kind.
Any attempt to alienate, sell, transfer, assign, pledge or otherwise
encumber any such benefits, whether currently or thereafter payable,
shall be void. No person shall, in any manner, be liable for or subject
to the debts or liabilities of any person entitled to such benefits. If
any person shall attempt to, or shall alienate, sell, transfer, assign,
pledge or otherwise encumber benefits under the Plan, or if by any reason
of the Participant's bankruptcy or other event happening at any time,
such benefits would devolve upon any other person or would not be enjoyed
by the person entitled thereto under the Plan, then the Company, in its
discretion, may terminate the interest in any such benefits of the person
entitled thereto under the Plan and hold or apply them to or for the
benefit of such person entitled thereto under the Plan or such
individual's spouse, children or other dependents, or any of them, in
such manner as the Company may deem proper.
6.5 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall
consist of the amounts of the Deferral Accounts of a Participant that
cannot be distributed because of the Committee's inability, after a
reasonable search, to locate a Participant or the Participant's
beneficiary, as applicable, within a period of two (2) years after the
Payment Date upon which the payment of benefits become due. Unclaimed
amounts shall be forfeited at the end of such two-year period. Penalties
charged for withdrawals under Section 5.3 shall also be forfeited in the
year in which the penalty is charged. These forfeitures will reduce the
obligations of the Company under the Plan. After an unclaimed amount has
been forfeited, the Participant or beneficiary, as applicable, shall have
no further right to the Participant's Deferral Account.
6.6 Controlling Law. The law of Illinois, except its law with
respect to choice of law, shall be controlling in all matters relating to
the Plan to the extent not preempted by ERISA.
6.7 Action by the Company. Except as otherwise specifically
provided herein, any action required of or permitted by the Company under
the Plan shall be by resolution of the Board of Directors of the Company
or by action of any member of the Committee or person(s) authorized by
resolution of the Board of Directors of the Company.
Section 7
Employer Participation
7.1 Adoption of Plan. Any subsidiary or affiliate of the Company
("Employer") may, with the approval of the Committee and under such terms
and conditions as the Committee may prescribe, adopt the corresponding
portions of the Plan by resolution of its board of directors. The
Committee may amend the Plan as necessary or desirable to reflect the
adoption of the Plan by an Employer, provided however, that an adopting
Employer shall not have the authority to amend or terminate the Plan
under Section 8.
7.2 Withdrawal from the Plan by Employer. Any such Employer shall
have the right, at any time, upon the approval of and under such
conditions as may be provided by the Committee, to withdraw from the Plan
by delivering to the Committee written notice of its election so to
withdraw. Upon receipt of such notice by the Committee, the portion of
the Deferral Accounts of Participants and beneficiaries attributable to
credits made while the Participants were employees of such withdrawing
Employer, plus any net earnings, gains and losses or such credits, shall
be distributed from the Trust at the direction of the Committee in cash
at such time or times as the Committee, in its sole discretion, may deem
to be in the best interest of such employees and their beneficiaries. To
the extent the amounts held in the Trust for the benefit of such
Participants and beneficiaries are not sufficient to satisfy the
Employer's obligation to such Participants and their beneficiaries
accrued on account of their employment with the Employer, the remaining
amount necessary to satisfy such obligation shall be an obligation of the
Employer, and the Company shall have no further obligation to such
Participants and beneficiaries with respect to such amounts.
Section 8
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the right at
any time by action of its Board of Directors or by the Committee (in
accordance with the restrictions in the following sentence) to modify,
amend or terminate the Plan, provided however, that any amendment or
termination of the Plan shall not reduce or eliminate any Deferral
Account accrued through the date of such amendment or termination.
The Committee shall have the same authority to adopt amendments to the
Plan as the Board of Directors of the Company in the following
circumstances:
(a) to adopt amendments to the Plan which the Committee determines
are necessary or desirable for the Plan to comply with or to
obtain benefits or advantages under the provisions of
applicable law, regulations or rulings or requirements of the
Internal Revenue Service or other governmental or
administrative agency or changes in such law, regulations,
rulings or requirements; and
(b) to adopt any other procedural or cosmetic amendment that
the Committee determines to be necessary or desirable that does
not materially change benefits to Participants or their
beneficiaries or materially increase the Company's or adopting
Employers' credits to the Plan.
The Committee shall provide notice of amendments adopted by the Committee
to the Board of Directors of the Company on a timely basis.
Executed in multiple originals this 31st day of July, 1997.
McDONALD'S CORPORATION
/s/ Stanley R. Stein
------------------------------------
By: Stanley R. Stein
Title: Executive Vice President