It is essentially to secure the services of a player if their first year works out, so we get first refusal.
We offered the same sort of deal to Fletcher at the beginning of last season, but chose to release him.
Contractually, we need to honour the deal outlined when the player first signed, so in the case of McDonald if the club are offering reduced terms, the option is not binding and the player is free to pursue other options.
Speculating, McDonald maybe looking for a two year deal on similar wages to what he was being paid last season, something which Hibs or another club might be in a better position to offer.