UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended January 2, 2000
Commission File Number: 333-71593
CARROLS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 16-0958146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 James Street Syracuse, New York 13203
(Address of principal executive (Zip Code)
office)
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Registrant's telephone number, including area code: (315) 424-0513
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the Registrant: No voting stock is held by non-affiliates.
The number of shares outstanding of each of the Registrant's classes of common stock, as of March 24, 2000: 10.
The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. All references herein to the fiscal years ended December 28, 1997, January 3, 1999 and January 2, 2000 will hereinafter be referred to as the fiscal years ended December 31, 1997, 1998 and 1999, respectively.
PART I
This 1999 Annual Report on Form 10-K contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those statements include statements regarding the intent, belief or current expectations of the Registrant and its management team. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward- looking statements. Such risks and uncertainties include, among other things, competitive conditions, economic and regulatory factors, general economic conditions, fluctuations in commodity prices, availability of restaurant supply and distribution of product, liquidity of major distributors, labor costs, the ability of the Registrant to manage its growth and successfully implement its business strategy and other risks and uncertainties that are discussed herein.
Item 1. Business
Overview
Who We Are
We are an operator of quick-service restaurants. We are one of the largest Burger King(R) franchisees in the world and have operated Burger King restaurants since 1976 and Pollo Tropical restaurants since July 1998. As of December 31, 1999, we operated 352 Burger King restaurants located in 13 Northeastern, Midwestern and Southeastern states. We also own and operate the Pollo Tropical(R) restaurant chain which at December 31, 1999 included 45 company owned restaurants in Florida and 23 franchised restaurants primarily located in Puerto Rico. Over the last five years, we expanded our operations through the acquisition and construction of restaurants while also enhancing the quality of operations and the competitive position and financial performance of our existing restaurants.
As a result of our growth strategy, we increased the total number of Burger King restaurants we operate by over 60% from 1995 to 1999. In July 1998, we completed our purchase of Pollo Tropical for a cash purchase price of approximately $95 million. Pollo Tropical is a regional quick-service restaurant chain featuring grilled marinated chicken and authentic "made from scratch" side dishes. From fiscal 1995 to fiscal 1999, we grew our annual revenues from $226.3 million to $456.5 million. See Note 6 "Summarized Financial Information of Certain Subsidiaries" in Item 14.
The Burger King System
Burger King is the second largest quick-service hamburger restaurant chain in the world, with approximately 10,900 restaurants located throughout the U.S. and in 57 foreign countries. In fiscal 1999, BKC reported worldwide sales of approximately $10.9 billion including $8.2 billion from its restaurants in the U.S. Burger King restaurants are quick-service restaurants of distinctive design which feature flame-broiled hamburgers and serve several widely known, trademarked products, the most popular being the WHOPPER(R) sandwich. Burger King restaurants are generally located in high traffic areas throughout the U.S. We believe that the primary competitive advantages of Burger King restaurants are:
. convenience of location;
. speed of service;
. quality; and
. price.
Pollo Tropical
We operate and franchise Pollo Tropical quick-service restaurants featuring fresh grilled chicken marinated in a proprietary blend of tropical fruit juices and spices and authentic "made from scratch" side dishes. The menu emphasizes freshness and quality, with a focus on flavorful chicken served "hot off the grill." Pollo Tropical restaurants combine high quality, distinctive menu items and an inviting tropical setting with the convenience and value of quick-service restaurants.
Pollo Tropical opened its first company-owned restaurant in 1988 in Miami and its first international franchised restaurant in 1995 in Puerto Rico. As of December 31, 1999, we owned and operated 45 Pollo Tropical restaurants, all located in south and central Florida, and we franchise 22 Pollo Tropical restaurants located in Puerto Rico and Ecuador and one in Miami. For the fiscal year ended December 31, 1999, Pollo Tropical's average restaurant has sales of approximately $2 million, which we believe is among the highest in the quick-service restaurant industry.
Our acquisition of Pollo Tropical has allowed us to:
. broaden our opportunities to build additional restaurants;
. expand our geographic presence;
. diversify our revenue base;
. increase our cash flow; and
. enhance our operating margins.
The Industry
The quick-service restaurant industry, which includes hamburgers, pizza, chicken, various types of sandwiches and Mexican and other ethnic foods, has experienced consistent growth. The National Restaurant Association estimates that sales at quick-service restaurants will reach approximately $114.7 billion in 2000, compared with approximately $61.4 billion in 1988.
This growth in the quick-service restaurant industry reflects consumers' increasing desire for a convenient, reasonably priced restaurant experience. In addition, consumer need for meals and snacks prepared outside of the home has increased as a result of the greater numbers of working women and single parent families. According to the National Restaurant Association, the percentage of the average family's food budget spent on meals consumed "away from home" will have grown from approximately 25% of the food budget in 1955 to a projected 44% in 1999.
Competitive Strengths
We attribute our success in the quick-service restaurant industry to the following competitive strengths:
One of the Largest Burger King Franchisees. We are one of the largest Burger King franchisees in the world. We believe that our leadership position, together with our experienced management team, effective management information systems, an extensive infrastructure and a proven track record for integrating acquisitions and new restaurants, provide us with attractive opportunities to build and acquire additional restaurants. In addition, we believe that these factors enable us to enhance restaurant margins and overall performance and allow us to operate more efficiently than other Burger King franchisees.
Strong Brand Names. Since the formation of BKC in 1954, the Burger King brand has become one of the most recognized brands in the restaurant industry. BKC spends between 4% and 5% of total system sales on advertising per year (approximately $470 million in 1998 and approximately $1.8 billion over the past five years). The strong Burger King brand, coupled with the quality and value of the food and convenience of its restaurants, has provided the Burger King system with consistent growth.
Pollo Tropical provides us with one of the most recognized quick-service restaurant brands in Pollo Tropical's core markets of south and central Florida. We believe that the following factors have led to the success of the Pollo Tropical concept:
. strong brand awareness in Pollo Tropical's markets;
. high frequency of visits and loyalty among our Hispanic customers; and
. positioning of our menu to capitalize on the growing consumer preference
for both healthier and ethnic foods.
Stable Cash Flows. We believe that the stability of our operating cash flow is due to the proven success of our Burger King and Pollo Tropical restaurant concepts and our consistent focus on restaurant operations. During the past five years, our restaurant level EBITDA (EBITDA before general and administrative expenses) margins for our Burger King restaurants ranged between 14.5% and 18.2% and averaged 16.2%. In addition, over the same period, restaurant level EBITDA margins for Pollo Tropical restaurants has ranged between 19.4% and 25.8% and averaged 23.7%. Aggregate cash flow from operations has increased from $16.7 million in 1995 to $38.2 million in 1999 and has averaged $22.5 million over this five year period. We believe that the strength of our cash flow provides us with liquidity to pursue our growth strategy.
Diversified Locations and Restaurant Concepts. Over the past five years, we have increased the number of Burger King restaurants we own by over 60% and we have increased our geographic presence from nine states to 13 states. Our acquisition of Pollo Tropical further expanded our geographic presence through the location of Pollo Tropical restaurants in Florida, the Caribbean and Central and South America. We believe that this geographic expansion and continual growth in restaurants enables us to capitalize on a region that has a rapidly growing population and to further reduce our dependence on the economic performance of any one particular region or restaurant concept.
Experienced Management Team with a Significant Equity Stake. Our senior management team, headed by Chairman and Chief Executive Officer Alan Vituli and President and Chief Operating Officer Daniel T. Accordino, has a long and successful history of developing, acquiring and operating quick-service restaurants. Under their leadership and direction, we have become one of the world's largest Burger King franchisees. Mr. Accordino leads a team of five regional operating directors who have an average of 25 years of restaurant industry experience and 47 district managers who have an average of 17 years of restaurant management experience in the Burger King system. In addition, Nicholas A. Castaldo, President and Chief Operating Officer of our Pollo Tropical Division has over 19 years in the restaurant industry. Our management owns (on a fully diluted basis) approximately 12% of the voting common stock of Carrols Holdings, which owns 100% of our stock. Our regional and district managers also hold options to acquire equity in Carrols Holdings.
Business Strategy
Our business strategy is to continue to increase revenues and cash flow through the construction of new restaurants, acquisitions, franchising and increasing operating efficiencies. Based on our historical performance, we believe that our business strategy represents a low-risk growth plan. Our strategy is based on the following components:
Leverage Brand Names. We realize significant benefits as a Burger King franchisee and the owner of the Pollo Tropical restaurant business. These benefits are the result of the following:
. widespread recognition of the Burger King brand;
. the size and penetration of BKC's advertising;
. BKC's management of the Burger King brand, including new product
development; and
. strong recognition of the Pollo Tropical brand in its core markets.
We believe that the Burger King and Pollo Tropical brands provide opportunities to expand our operations both within and outside our existing geographic markets.
Develop Additional Restaurants in Existing Markets. We believe that our existing markets will continue to provide opportunities for the development of new restaurants. We look to develop restaurants in those of our markets that we believe are underpenetrated and where the demographic characteristics are favorable for the development of new restaurants. Our own staff of real estate and construction professionals conduct our new restaurant development. Before developing a new restaurant, we conduct an extensive site selection and evaluation process which includes in-depth demographic, market and financial analysis. By selectively increasing the number of restaurants we operate in a particular market, we can effectively leverage our management, corporate infrastructure and local marketing while increasing brand awareness.
Selectively Acquire Burger King Restaurants. The Burger King system is highly fragmented in the U.S., with approximately 7,700 Burger King restaurants being operated by approximately 1,600 franchisees. We expect to continue to be a buyer of Burger King restaurants and we believe that opportunities for selective acquisitions will continue in both existing and new geographic markets as smaller franchisees seek liquidity through the sale of their restaurants. As one of the largest Burger King franchisees with a demonstrated ability to effectively integrate acquisitions, we believe that we are better positioned to capitalize on potential acquisitions than many other Burger King franchisees. We believe that by acquiring additional Burger King restaurants, we can achieve operating efficiencies from our ability to improve controls over restaurant food costs, more efficiently utilize labor, and achieve economies of scale by leveraging our corporate infrastructure.
Achieve Operating Efficiencies. We maintain a disciplined commitment to increasing the profitability of our existing restaurants. Our large base of restaurants, centralized management structure and management information systems enable us to optimize operating efficiencies for our new and existing restaurants. We are able to control restaurant and corporate level costs, capture economies of scale by leveraging our existing corporate infrastructure and use our sophisticated management information and point-of-sale systems to more efficiently manage our restaurant operations and to ensure consistent application of operating controls. Our size enables us to realize benefits with improved bargaining power for purchasing and cost management activities. We believe these factors provide the basis for increased unit and company profitability.
Consistently Provide Superior Customer Satisfaction. Our operations are focused on achieving a high level of customer satisfaction through quick, accurate and high-quality customer service. We and BKC have uniform operating standards and specifications relating to the following:
. quality;
. preparation and selection of menu items;
. maintenance and cleanliness; and
. employee conduct.
We closely supervise the operation of all of our restaurants to help ensure that standards and policies are followed and that product quality, customer service and cleanliness of the restaurants are maintained at high levels.
Overview of Restaurant Concepts
Burger King Restaurants
"Have It Your Way"(R) service, flame-broiling, generous portions and competitive prices characterize the Burger King system marketing strategy. Burger King restaurants feature flame-broiled hamburgers, the most popular of which is the WHOPPER(R) sandwich. The WHOPPER is a large, flame-broiled hamburger on a toasted bun garnished with a combination of mayonnaise, lettuce, onions, pickles and tomatoes. The basic menu of all Burger King restaurants consists of hamburgers, cheeseburgers, chicken and fish sandwiches, breakfast items, french fried potatoes, salads, shakes, desserts, soft drinks, milk and coffee. In addition, promotional menu items are introduced periodically for limited periods. BKC continually seeks to develop new products as it endeavors to enhance the menu and service of Burger King restaurants.
Our Burger King restaurants are typically open seven days per week with minimum operating hours from 6:00 AM to 11:00 PM. Burger King restaurants are quick-service restaurants of distinctive design and are generally located in high-traffic areas throughout the U.S. We believe that the primary competitive advantages of Burger King restaurants are:
. convenience of location;
. quality;
. price; and
. speed of service.
Burger King restaurants appeal to a broad spectrum of consumers, with multiple day-part meal segments that appeal to different groups of consumers.
Our Burger King restaurants consist of one of several building types with various seating capacities. BKC's traditional restaurant contains approximately 2,800 to 3,200 square feet with seating capacity for 90 to 100 customers, has drive-thru service windows, and has adjacent parking areas. At December 31, 1999, 334 of our 352 Burger King restaurants were free-standing.
Pollo Tropical Restaurants
Pollo Tropical restaurants combine high quality, distinctive taste and an inviting tropical setting with the convenience and value pricing of quick- service restaurants. Pollo Tropical restaurants offer a unique selection of food items reflecting tropical and Caribbean influences and feature grilled fresh chicken marinated in a proprietary blend of tropical fruit juices and spices. Chicken is grilled in view of customers on large, custom, open-flame grills. Pollo Tropical broadened its selection in 1996 by adding "island" pork to the menu, and in 1997 by adding a line of "TropiChops(R)," a bowl containing rice, black beans, chicken or pork and other ingredients at an attractive price point to the menu. In 1998, grilled shrimp was added to the menu. We also feature an array of distinctive and popular side dishes, including black beans and rice, yucatan fries and sweet plantains, as well as more traditional fare such as french fries, corn, and tossed and caesar salads. We also offer freshly prepared tropical desserts, such as flan and tres leches.
Our Pollo Tropical restaurants incorporate high ceilings, large windows, tropical plants, light colored woods, decorative tiles, a visually distinctive exterior entrance tower, lush landscaping and other signature architectural features, all designed to create an airy, inviting and tropical atmosphere. We design our restaurants to conveniently serve a high volume of customer traffic while retaining an inviting, casual atmosphere.
Our Pollo Tropical restaurants are open for lunch and dinner seven days per week from 11:00 AM to 10:00 PM (11:00 PM on Friday and Saturday) and offer sit- down dining, counter take-out and drive-thru service to accommodate the varied schedules of families, business people, students and other time-sensitive individuals. Our menu offers a variety of portion sizes to accommodate a single customer, family or large group. Pollo Tropical restaurants also offer an economical catering menu, with special prices and portions to serve 25 to 500 persons.
Our Pollo Tropical restaurants typically provide seating for 80 to 100 customers and provide drive-thru service. All of our Pollo Tropical restaurants are free-standing buildings except for three end-cap locations in strip shopping centers and one street-level storefront in an office building. Our current prototypical free-standing Pollo Tropical restaurant ranges between 2,800 and 3,200 square feet in size.
Restaurant Economics
Burger King Restaurants
For fiscal 1999, our Burger King restaurants generated average sales of approximately $1,082,000 and average restaurant level EBITDA of $157,000. Drive-thru sales contributed 56.3% of restaurant sales. In all but 18 locations, which are primarily in malls, our Burger King restaurants have a drive-thru window. Percentages of total sales by day part are as follows:
Breakfast........................................................ 14.7% Lunch............................................................ 33.3% Dinner........................................................... 26.9% Late Afternoon & Late Night...................................... Remainder |
The average sales transaction was $3.88 in 1999.
The cost of the franchise fee, equipment, seating, signage and other interior costs of a standard new Burger King restaurant is approximately $265,000 (excluding the cost of the land, building, and site improvements). The cost of land generally ranges from $200,000 to $500,000. The cost of building and site improvements generally ranges from $500,000 to $550,000. We typically lease the building and land components of our restaurants.
Pollo Tropical Restaurants
For fiscal 1999, our Pollo Tropical restaurants generated average sales of approximately $1,952,000 and average restaurant level EBITDA of $470,000. Pollo Tropical restaurant sales are well balanced by method of service and by day part. For 1999, drive-thru sales contributed 36.6% of restaurant sales and take-out sales accounted for 23.2% of total sales. Percentages of total sales by day part are as follows:
Lunch................................................................ 46.8% Dinner............................................................... 53.2% |
The average sales transaction was $7.70 in 1999.
The cost of equipment, seating signage and other interior costs of a standard new Pollo Tropical restaurant is approximately $240,000 (excluding the cost of the land, building, and site improvements). The cost of land generally ranges from $450,000 to $700,000. The cost of building and site improvements generally ranges from $550,000 to $650,000. We typically lease the real estate associated with our Pollo Tropical restaurants.
Restaurant Locations
Burger King
The following table sets forth the locations of the 352 Burger King restaurants in our system at December 31, 1999.
Total
State Restaurants
----- -----------
Connecticut.................................................... 1
Indiana........................................................ 5
Kentucky....................................................... 10
Maine.......................................................... 4
Massachusetts.................................................. 2
Michigan....................................................... 26
New Jersey..................................................... 2
New York....................................................... 155
North Carolina................................................. 38
Ohio........................................................... 73
Pennsylvania................................................... 13
South Carolina................................................. 22
Vermont........................................................ 1
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Total........................................................ 352
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Pollo Tropical
As of December 31, 1999, we owned and operated 45 Pollo Tropical restaurants, all located in Florida. In addition, of our 23 franchised Pollo Tropical restaurants, 19 are located in Puerto Rico, 3 are located in Ecuador and one is in Miami.
Operations
Management Structure
We conduct substantially all of our executive management, finance, marketing and operations support functions from either our corporate headquarters in Syracuse, New York or our Pollo Tropical headquarters in Miami, Florida. With respect to our Burger King operations, we currently have five regional directors with an average of 25 years of restaurant industry experience, three of whom are vice presidents. Each of our regional directors are responsible for the operations of our Burger King restaurants in their assigned region. Four of our regional directors have been employed by us for over 20 years. Forty-seven district supervisors who have an average of 17 years of restaurant management experience in the Burger King system support the regional directors. Each district supervisor is responsible for the direct oversight of the day-to-day operations of an average of seven restaurants. The management structure for Pollo Tropical consists of a Director of Operations who is supported by 5 District Supervisors. Typically, district supervisors have previously served as restaurant managers at one of our restaurants. Both regional directors and district supervisors are compensated with a fixed salary plus an incentive bonus based upon the performance of the restaurants under their supervision. Typically, our restaurants are staffed with hourly employees who are supervised by a salaried manager and two or three salaried assistant managers.
Training
We maintain a comprehensive training and development program for all of our personnel and provide both classroom and in-restaurant training for our salaried and hourly personnel. This program emphasizes system-wide operating procedures, food preparation methods and customer service standards for each of the concepts. In addition, BKC's training and development programs are also available to us.
Management Information Systems
We believe that our management information systems, which are more sophisticated than those typically utilized by smaller Burger King franchisees and other small quick-service restaurant operators, provide us with the ability to more efficiently manage our restaurants and to ensure consistent application of operating controls throughout the chain. We also believe that our size affords us the ability to maintain an in-house staff of information and restaurant systems professionals dedicated to continuously enhancing our existing systems. These capabilities also allow us to quickly integrate newly acquired restaurants and to leverage our investments in information technology over a large base of restaurants.
Our Burger King restaurants employ state-of-the-art, touch-screen point-of- sale (POS) systems from Micros Systems, Inc. that are designed to facilitate accuracy and speed of order-taking. These systems are user-friendly, require limited cashier training and improve speed-of-service and order accuracy through the use of conversational order-taking techniques. The POS systems are integrated with PC-based applications at the restaurant that are designed to facilitate financial and management control of our restaurant operations.
Our systems provide daily tracking and reporting of traffic counts, menu item sales, labor and food data, and other key operating information for each restaurant. We have the ability to electronically communicate with our Burger King restaurants on a daily basis enabling us to collect this information for use in our corporate application and decision support systems. Our headquarters house a client/server based PeopleSoft ERP system that centrally supports all of our corporate accounting, information and reporting systems. We also operate a 24-hour, 7-day help desk at our headquarters enabling us to provide systems and operational support to our restaurant operations as required. Among other things, our systems provide us with the ability to:
. monitor labor utilization and sales trends on a real-time basis at each
restaurant enabling the store manager to effectively manage to corporate
established labor standards on a timely basis;
. minimize shrinkage using restaurant-level inventory management and
centralized standard costing systems;
. analyze sales and product mix data to help restaurant management
personnel forecast production levels;
. systematically communicate payroll transactions and human resource data
to our corporate office for efficient centralized management of labor
costing and payroll processing;
. employ centralized control over price, menu and inventory management
activities at the restaurant utilizing the remote access capabilities of
our systems;
. take advantage of electronic commerce including our ability to place
orders with suppliers and to integrate detailed invoice, receiving and
product data with our inventory and accounting systems; and,
. provide analyses, reporting and tools to enable all levels of management
to review a wide-range of financial and operating data.
Information from our systems is available daily to the restaurant manager, who is expected to react quickly to trends or situations in his or her restaurant. Our district supervisors also receive daily information for all restaurants under their control and have access to key operating data on a remote basis using laptop computers. Each management level, from the restaurant manager through senior management, monitors key restaurant performance indicators.
The Micros POS systems are currently implemented in over 60% of our Burger Kings, with the remainder scheduled to be installed by the end of our 2000 second quarter. The balance of POS systems being replaced are also integrated with our restaurant-level application systems and with our corporate office.
Our Pollo Tropical restaurants utilize in-store computerized point-of-sale systems to control cash, collect customer and sales statistics, and to track labor and other restaurant data. We believe that we have the ability to continue improving the operating efficiencies of the Pollo Tropical restaurants as we deploy systems and technology with capabilities similar to those in our Burger King restaurants. Since our acquisition of Pollo Tropical in 1998, we have begun to establish the foundation for these systems by installing new versions of POS
software, implementing recipe files to capture inventory costing data, and by the initial introduction of PC-based applications for the restaurant managers.
Site Selection
We believe that the location of our restaurants is a critical component of each restaurant's success. We evaluate potential new development sites based upon accessibility, visibility, costs, surrounding traffic patterns, competition and demographic characteristics. Our senior management determines the acceptability of all acquisition and new development sites, based upon analyses prepared by our real estate professionals and operations personnel.
Burger King Franchise Agreements
Each of our Burger King restaurants operates under a separate franchise agreement. Our franchise agreements with BKC require, among other things, that all restaurants be of standardized design and be operated in a prescribed manner, including utilization of the standard Burger King menu. Our franchise agreements with BKC generally provide for an initial term of 20 years and currently have an initial fee of $40,000 and is increasing to $50,000 on July 1, 2000. BKC may grant a successor franchise agreement (renewal) for an additional 20-year term, provided the restaurant meets the then current BKC operating standards. Our franchise agreements with BKC are non-cancelable except for failure to abide by their terms. We are not in default under our current franchise agreement with BKC. The successor BKC franchise agreement fee is currently $40,000 and is increasing to $50,000 on July 1, 2000.
In order to obtain a successor franchise agreement with BKC, a franchisee is typically required to make capital improvements to the Burger King restaurant to bring the Burger King restaurant up to BKC's then-current design standards. The required capital improvements will vary widely depending upon the magnitude of the required changes and the degree to which we have made interim changes to the restaurant. Our average remodeling cost, for the 95 restaurants we have remodeled in the past three years, was approximately $230,000. We have 12 franchise agreements expiring in 2000, nine franchise agreements expiring in 2001 and 12 franchise agreements expiring in 2002.
We believe that we enjoy a good relationship with BKC and that we will satisfy BKC's normal successor franchise agreement policies. Accordingly, we believe that successor franchise agreements with BKC will be granted on a timely basis by BKC at the expiration of our existing franchise agreements with BKC. Historically, BKC has granted each of our requests for a successor franchise agreement for our restaurants. We cannot assure you, however, that BKC will continue to grant each of our requests for successor franchise agreements.
In addition to the initial franchise fee, we currently pay a monthly royalty of 3 1/2% of the gross revenues from our Burger King restaurants to BKC. We currently also contribute 4% of gross revenues from our Burger King restaurants to fund BKC's national and regional advertising. BKC engages in substantial national advertising and promotional activities and other efforts to maintain and enhance the Burger King brand. We supplement BKC's marketing with local advertising and promotional campaigns. See "Business--Advertising and Promotion."
Our franchise agreements with BKC do not give us exclusive rights to operate a Burger King restaurant in any defined territory. We believe that BKC generally seeks to ensure that newly granted franchises do not materially adversely affect the operations of existing Burger King restaurants. There is no assurance that a franchise given by BKC to a third party will not adversely effect any single Burger King restaurant that we operate.
We are required to obtain BKC's consent before we acquire or develop new Burger King restaurants. BKC also has the right of first refusal to purchase any Burger King restaurant which is the subject of a contract of sale. BKC has granted its approval to all of our historic acquisitions of Burger King restaurants, except for two instances when it exercised its right of first refusal.
Fee Changes and Early Successor Program
Beginning July 1, 2000, BKC will increase its royalty and franchise fees for most new restaurants. At that time, the franchise fee for new restaurants will increase from $40,000 to $50,000 for a 20-year agreement and the royalty rate will increase from 3 1/2% of sales to 4 1/2% of sales, after a transitional period. For franchise agreements entered into during the transitional period, the royalty rate will be 4% of sales for the first 10 years and 4 1/2% of sales for the balance of the term.
For new restaurants, the transitional period will be from July 1, 2000 through June 30, 2003. As of July 1, 2003, the royalty rate will become 4 1/2% of sales for the full term of new restaurant franchise agreements. For renewals of existing franchise agreements, the transitional period will be from July 1, 2000 through June 30, 2001. As of July 1, 2001, existing restaurants that renew their franchise agreements will pay a royalty of 4 1/2% of sales for the full term of the renewed agreement. The advertising contribution will remain at 4% of sales. The royalty rates under existing franchise agreements are not affected by these changes until the time of renewal.
BKC is also offering a voluntary program to incent franchisees to accelerate the renewal of their franchise agreements. Franchisees that elect to participate in the Early Successor Incentive Program will be required to make capital improvements in the restaurants to bring them up to BKC's current design image. Franchise agreements entered into under this program will have special provisions regarding the royalty rates including a reduction in the royalty for a period of time.
For commitments made prior to June 30, 2000 to renew franchise agreements under BKC's Fiscal 2000 early successor program, the renewal franchise fee will remain at $40,000. The royalty rate will remain at 3 1/2% through March 31, 2002, at which time it will then be reduced to 2 3/4% for the following five- year period. The royalty rate reverts back to 3 1/2% effective April 1, 2007 for the remainder of any of the initial franchise term, and then increases to 4 1/2% for the balance of the new agreement. The renewal franchise fees under this program must be paid by June 30, 2000 (less credits for the unexpired term of the existing franchise agreement) and the capital improvements required in conjunction with the successor franchise renewal under this program must be completed by December 31, 2001.
For commitments made between July 1, 2000 and June 30, 2001 to renew franchise agreements under BKC's Fiscal 2001 early successor program, the renewal franchise fee will increase to $50,000. The royalty rate will remain at 3 1/2% through September 30, 2002, at which time it will be reduced to 3% for a three-year period. The royalty rate reverts back to 3 1/2% effective October 1, 2005 for the remainder of any of the initial franchise term, and then increases to 4 1/2% for the balance of the new agreement. The capital improvements required in conjunction with the successor franchise renewal under this program must be completed by June 30, 2002.
After evaluating the applicable royalty reductions and the acceleration of the required capital improvements, we have elected to renew approximately 60 franchise agreements under BKC's fiscal 2000 early successor program. The capital investments and franchise fees related to these renewals are estimated to be approximately $13 to $14 million which will be invested in 2000 and 2001.
Transformation Initiatives
BKC has initiatives underway to encourage and facilitate franchisees' investment in certain upgrades to their restaurants. These transformation initiatives include the installation of new signage with the new Burger King logos, and where necessary, expenditures for painting, parking lot maintenance and landscaping. In addition, BKC is in the process of approving a drive-thru equipment package. BKC is also evaluating potential changes to the kitchen including a new flexible broiler capable of cooking at different speeds and temperatures facilitating the preparation of a wider variety of menu items. By an amendment to our franchise agreement, we have committed:
. to install the new signage in substantially all of our restaurants by
December 31, 2001;
. to "spruce up" our restaurants to the extent necessary including
painting, parking lot sealing/striping, and landscaping by September 30,
2000;
. to install the drive-thru package, once mandated for use by BKC, no later
than December 31, 2001; and,
. to roll-out and install the new kitchen initiatives if and when approved
and mandated by BKC.
BKC has also arranged for the Coca-Cola Company and Dr. Pepper/Seven-Up, Inc. to make funds available to franchisees to be used in connection with the transformation initiatives. By agreeing to make the investments associated with the transformation initiatives, we will be entitled to receive $56,000 per restaurant, or approximately $20.0 million in the aggregate, from the fund established by Coca-Cola and Dr. Pepper. The funds are to be received in two installments of $28,000 per restaurant payable March 15, 2000 and September 30, 2000 based on the number of eligible stores that we are operating on those dates. We received the first installment, which totaled $9.9 million, in March 2000.
We are presently evaluating, in detail, the nature, timing and amount of the required capital investments. Other than the changes to the kitchen, which have not been finalized, we anticipate that we will make these investments over the course of the next two years.
Pollo Tropical Franchise Program
As part of our growth strategy for our Pollo Tropical restaurants, we intend to complement the development of additional restaurants owned by us in the U.S. with a multi-unit area development franchise program as a means of accelerating our penetration into international markets. We offer area development agreements to qualified and experienced area developers in the Caribbean and Central and South American markets who are committed to the development of multiple units in such areas on an expedited basis.
Our standard franchise agreement under which we franchise Pollo Tropical restaurants to independent restaurant operators has a 15-year term (with one 15-year renewal option) and provides for an initial payment by the franchisee of a portion of all franchise fees upon signing of the area development and franchise agreements, with the remainder due before the opening of the franchisee's Pollo Tropical restaurants. The franchisee also pays a continuing royalty, based upon gross sales. The terms and conditions of these franchise agreements will vary depending upon a number of factors, including:
. the experience and resources of the franchisee;
. the size and density of the covered territory;
. the number of units to be developed;
. the schedule for development;
. capital requirements; and
. fee and royalty arrangements.
All franchisees are required to operate their restaurants in compliance with certain methods, standards and specifications developed by Pollo Tropical regarding such matters as menu items, recipes, food preparation, materials, supplies, services, fixtures, furnishings, decor and signs, although the franchisee has discretion to determine the prices to be charged to customers. In addition, all franchisees are required to purchase substantially all food, ingredients, supplies and materials from suppliers approved by us.
Advertising and Promotion
The efficiency and quality of advertising and promotional programs can significantly affect quick-service restaurant businesses. We believe that one of the major advantages of being a Burger King franchisee is the value of the extensive regional and national advertising and promotional programs conducted by BKC. In addition to the benefits derived from BKC's advertising spending, which according to information published by BKC was approximately $470 million for 1998, we supplement BKC's advertising and promotional activities with local advertising and promotions, including the purchase of additional television, radio and print advertising. Our concentration of restaurants in many of our markets permits us to leverage advertising in those markets. We also utilize promotional programs, such as combination value meals and discounted prices, targeted to our customers, in order to create a flexible and directed marketing program.
We are generally required to contribute 4% of gross revenues from restaurant operations to an advertising fund utilized by BKC for its advertising, promotional programs and public relations activities. BKC's advertising
programs consist of national campaigns supplemented by local advertising. BKC's advertising campaigns are generally carried on television, radio and in circulated print media (national and regional newspapers and magazines).
We believe that brand awareness for our Pollo Tropical restaurants is extremely high because of the concentration of our restaurants in the south Florida markets. Pollo Tropical restaurants are clustered in target markets in order to maximize the effectiveness of our advertising efforts. Pollo Tropical advertises in both English and Spanish throughout the year, including television, radio and print advertising. Pollo Tropical also has marketed at the individual restaurant level through special price offerings, coupon discounts and unique promotional and public relations programs. Pollo Tropical spent approximately 4.0%, 4.1% and 4.3% of restaurant sales on advertising in fiscal 1999, 1998 and 1997, respectively.
Supplies and Distribution
We are a member of a national purchasing cooperative created for the Burger King system known as Restaurant Services, Inc. Restaurant Services is a non- profit independent cooperative which acts as the purchasing agent for approved distributors to the system and serves to negotiate the lowest cost for the Burger King system. We use our purchasing power to negotiate directly with certain other vendors, to obtain favorable pricing and terms for supplying our restaurants.
We are required to purchase all of our foodstuffs, paper goods and packaging materials from BKC-approved suppliers. We may purchase non-food items such as kitchen utensils, equipment maintenance tools and other supplies from any suitable source provided that such items meet BKC product uniformity standards. All BKC-approved suppliers are required to purchase foodstuffs and supplies from BKC-approved manufacturers and purveyors. BKC is responsible for monitoring quality control and supervision of these manufacturers and conducts regular visits to observe the preparation of foodstuffs, and to run various tests to ensure that only high quality foodstuffs are sold to BKC-approved suppliers. In addition, BKC coordinates and supervises audits of approved suppliers and distributors to determine continuing product specification compliance and to ensure that manufacturing plant and distribution center standards are met.
For our Pollo Tropical restaurants, we have negotiated directly with local and national suppliers for the purchase of food and beverage products and supplies to ensure consistent quality and freshness and to obtain competitive prices. Each Pollo Tropical restaurant's food and supplies are ordered from approved suppliers and are shipped directly to the restaurants.
AmeriServe Food Distribution, Inc.
We currently obtain substantially all of our foodstuffs for our Burger King restaurants (other than bread products which we purchase from local bakeries), paper goods, promotional premiums and packaging materials from AmeriServe Food Distribution, Inc. under a supply agreement which, as amended on November 22, 1999, expires on May 15, 2000.
On January 31, 2000, AmeriServe filed for protection under Chapter 11 of the U.S. Bankruptcy Code. Subsequently, on February 2, 2000 the Delaware Bankruptcy Court approved a $150 million debtor in possession financing loan to AmeriServe from BKC and Tricon Global Restaurants. Since AmeriServe's bankruptcy filing, we have periodically had some minor disruptions in receiving supplies however, in general, this has not had a material effect on the operation of our restaurants. If a significant disruption in service or supply by AmeriServe were to occur, it could create disruptions in the operations of our Burger King restaurants, which could have a material adverse effect on us.
There are other BKC-approved suppliers/distributors which compete with AmeriServe that we believe can provide reliable alternative sources for our restaurant supplies. We are actively exploring long-term supply alternatives in conjunction with BKC and Restaurant Services, Inc. Although we believe that such arrangements will be attained at competitive prices, it currently appears that such prices will be somewhat higher than what we currently pay under our contract with AmeriServe.
Quality Assurance
We focus our operations on achieving a high level of customer satisfaction with speed, accuracy and quality of service closely monitored. Our senior management and restaurant management staff are principally responsible for ensuring compliance with our and BKC's operating procedures. We and BKC have uniform operating standards and specifications relating to the quality, preparation and selection of menu items, maintenance and cleanliness of the premises and employee conduct. In order to help maintain compliance with these operating standards and specifications, we tabulate and distribute to our restaurant management team detailed reports from our management information system and surveys that are conducted by us or BKC.
We operate in accordance with quality assurance and health standards set by BKC, as well as standards set by Federal, state and local governmental laws and regulations. These standards include food preparation rules regarding, among other things, minimum cooking times and temperatures, sanitation and cleanliness. The "conveyor belt" cooking system utilized in all Burger King restaurants, which is calibrated to carry hamburgers through the flame broiler at regulated speeds, is one of the safest cooking systems among major quick- service restaurants and helps to ensure that the standardized minimum times and temperatures for cooking are met. In addition, BKC has set maximum time standards for holding prepared food.
We closely supervise the operation of all of our Burger King restaurants to help ensure that the restaurants follow standards and policies and maintain product quality, customer service and cleanliness. In addition, BKC may conduct unscheduled inspections of Burger King restaurants throughout the nationwide system.
Our Pollo Tropical restaurant managers are actively involved in all aspects of operations, with an emphasis on supervising the food preparation process as well as food safety while insuring prompt and precise order fulfillment at both the front counter and drive-thru windows. Orders typically are filled within two minutes through the use of a computer display and communications system. Managers conduct internal inspections for taste, quality, cleanliness and food safety several times a day in order to provide a consistent level of customer service.
Trademarks
Pollo Tropical has registered its principal trademarks for "Pollo Tropical(R)," "TropiGrill(R)" and "TropiChops(R)" in the United States and presently has applications pending or registrations granted in various foreign countries in which it conducts business or may conduct business through its franchise system. In certain foreign countries, Pollo Tropical has been involved in trademark opposition proceedings to defend its rights to register certain trademarks. We intend to protect these trademarks by appropriate legal action whenever necessary.
Other than the Pollo trademarks, we have no proprietary intellectual property other than the logo and trademark of Carrols Corporation. As a franchisee of Burger King, we also have contractual rights to use certain BKC-owned trademarks, servicemarks and other intellectual property relating to the Burger King concept.
Government Regulation
Various Federal, state and local laws affect our business, including various health, sanitation, fire and safety standards. Restaurants to be constructed or remodeled are subject to state and local building code and zoning requirements. In connection with the construction and remodeling of our restaurants, we may incur costs to meet certain Federal, state and local regulations, including regulations promulgated under the Americans with Disabilities Act.
We are subject to the Federal Fair Labor Standards Act and various state laws governing such matters as:
. minimum wage requirements;
. overtime; and
. other working conditions and citizenship requirements.
In September 1997, we implemented the second phase of an increase in the minimum wage in accordance with a 1996 amendment to the Federal Fair Labor Standards Act. A significant number of our food service personnel are paid at rates related to the Federal minimum wage and, accordingly, increases in the minimum wage have increased wage rates at our restaurants.
We are also subject to various Federal, state and local environmental laws, rules and regulations. We believe that we conduct our operations in substantial compliance with applicable environmental laws and regulations. In an effort to prevent and, if necessary, to correct environmental problems, we conduct environmental audits of proposed restaurant sites and restaurants we seek to acquire. None of the applicable environmental laws or regulations have had a material adverse effect on our operations or financial condition.
With respect to the franchising of Pollo Tropical restaurants, we are subject to franchise and related regulations in the U.S. and certain foreign jurisdictions where we offer and sell franchises. These regulations include obligations to provide disclosure about Pollo Tropical, the franchise agreements and the franchise system. The regulations also include obligations to register certain franchise documents in the U.S. and foreign jurisdictions, and obligations to disclose the substantive relationship between the parties to the agreements.
Competition
The quick-service restaurant industry is highly competitive with respect to price, service, location and food quality. In each of our markets, our restaurants compete with a large number of national and regional restaurant chains, as well as locally-owned restaurants, offering low and medium-priced fare. Convenience stores, grocery store delicatessens and food counters, cafeterias and other purveyors of moderately priced and quickly prepared foods also compete with us.
With respect to our Burger King restaurants, our largest competitors in the quick-service hamburger restaurant segment are McDonald's and Wendy's. According to publicly available information, as of December 31, 1998, McDonald's U.S. operations comprised 12,472 restaurants and had U.S. systemwide sales for the year ended December 31, 1998 of $18.1 billion. As of December 31, 1998, Wendy's U.S. operations comprised 4,676 restaurants and had total U.S. systemwide sales for the year ended December 31, 1998 of $5.0 billion. In addition to the quick-service hamburger restaurant chains, Pollo Tropical's competitors include international and regional chicken theme chains, such as Boston Market and KFC, as well as other types of quick-service restaurants.
We believe that:
. product quality and taste;
. national brand recognition;
. convenience of location;
. speed of service;
. menu variety;
. price; and
. ambiance
are the most important competitive factors in the quick-service restaurant industry and that our Burger King and Pollo Tropical restaurants effectively compete in each category. We also believe that the strong brand awareness of our Pollo Tropical restaurants combined with the relatively high costs associated with starting a quick-service chain in Pollo Tropical's core markets will make it difficult for new competitors to effectively compete with our Pollo Tropical restaurants in these markets.
Employees
At December 31, 1999, we employed approximately 13,200 persons of which approximately 280 were supervisory and administrative personnel and 12,900 were restaurant operating personnel. None of our employees are covered by collective bargaining agreements. Approximately 10,300 of our restaurant operating personnel at December 31, 1999 were part-time employees. We believe that our relations with our employees are good.
Item 2. Properties
At December 31, 1999 we owned or leased the following restaurant properties:
Owned Land; Leased land; Leased Land;
Owned Owned Leased
Building Building Building Total
----------- ------------ ------------ -----
Restaurants--operating............. 23 41 333(a) 397
Restaurants under construction..... 3 3
Excess properties:
Leased to others................. -- -- 6 6
Available for sale or lease...... 1 -- -- 1
--- --- --- ---
Total restaurant properties........ 27 41 339 407
=== === === ===
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We lease 94% of our Burger King restaurants and 93% of our Pollo Tropical restaurants. We typically enter into leases (including options to renew) from 20 to 40 years. The average remaining term on all leases, including options, is approximately 25 years. Generally, we have been able to renew leases, upon or prior to their expiration, at the prevailing market rates.
Most of our Burger King restaurant leases are coterminous with the related Franchise Agreements. We believe that we generally will be able to renew, at commercially reasonable rates, the leases whose terms expire prior to the subject Burger King Franchise Agreements.
Most leases require us, as lessee, to pay utility and water charges, premiums on insurance and real estate taxes. Certain leases also require contingent rentals based upon a percentage of gross sales that exceed specified minimums.
In addition to the restaurant locations set forth under "Business--Restaurant Locations," we own an approximately 22,000 square foot building at 968 James Street, Syracuse, New York, which houses our executive offices and most of our administrative operations for our Burger King restaurants. We lease 13,449 square feet at 7300 North Kendall Drive, 8th Floor, Miami, Florida, which houses most of our administrative operations for our Pollo Tropical restaurants. We also lease five small regional offices that serve as the bases for regional management.
Item 3. Legal Proceedings
On November 16, 1998, the Equal Employment Opportunity Commission ("EEOC") filed suit in the United States District Court for the Northern District of New York, under Title VII of the Civil rights Act of 1964, as amended, against us, on behalf of "Wendy McFarlan and other similarly situated individuals affected by sexual harassment by Carrols Corporation". The suit seeks injunctive relief as well as unspecified compensatory and punitive damages.
The case is in the early phase of discovery; written discovery is required to be completed by May 22, 2000, at which time the parties may file motions for summary judgement. It is too early to make an evaluation of the likelihood of an unfavorable outcome and/or an estimate of the amount or range of potential loss. We intend to contest the case vigorously and believes it is without merit.
We are a party to various other litigation matters incidental to the conduct of our business. We do not believe that the outcome of any of these matters will have a material adverse effect on our financial condition or results of operations and cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
On November 3, 1999, we amended the Restated Certificate of Incorporation of Carrols Holdings Corporation, pursuant to a Certificate of Amendment to the Restated Certificate of Incorporation of Holdings, which was approved and adopted by unanimous written consent of Holdings' stockholders. We are a wholly owned subsidiary of Holdings. This amendment resulted in the following actions:
. 7,250 shares of Holdings' Class A 10% Cumulative Redeemable Preferred
Stock which were authorized but unissued, were canceled;
. Holdings' authorized common stock was increased from 3,000,000 shares to
5,000,000 shares; and
. 100,000 shares of "blank check" Preferred Stock, par value $0.01, were
authorized with such designation, rights and preferences as may be
determined from time to time by the Board of Directors
Holdings' common stock was designated to consist of two series comprised of 3,000,000 shares of Carrols Stock, par value $0.01 per share, and 2,000,000 shares of Pollo Tropical Stock, par value $0.01 per share. The existing common stock and all shares subject to option under the 1996 Long-Term Incentive Plan and the 1998 Directors Stock Option Plan were redesignated, on a share for share basis, for shares of the Carrols class of common stock. The holders of Carrols Stock will have the exclusive right to vote for the election of directors and on all matters requiring action by or submission to the stockholders. No holder of shares of the Pollo Tropical Stock will be entitled to vote or participate in any meeting of the stockholders of Holdings and its existing Carrols class shareholders, unless otherwise required by Delaware law.
Both the Carrols Stock and the Pollo Tropical Stock are considered a tracking stock, which is a class of stock intended to track the separate performance of a separate business unit or group of assets. The Pollo Tropical Stock tracks the separate performance of the Pollo Tropical Group which consists of all of the assets and liabilities of our Pollo Tropical division. One of the reasons that we implemented this tracking stock as a separate series of equity securities was to provide a framework for structuring employee incentive plans for our Pollo Tropical division in a way that we could directly tie such incentives to the business results and performance of the division.
The Carrols Stock consists of the interest of Holdings in all of its assets, liabilities and businesses, other than the assets, liabilities and businesses attributed to the Pollo Tropical Group. Until the issuance of any Pollo Tropical Stock, 100% of the rights, preferences and liabilities of the Pollo Tropical Stock will be retained by Holdings. To the extent that less than 100% of the authorized shares of Pollo Tropical Stock are issued, the rights, preferences and liabilities of the shares not issued remain with Holdings and its existing Carrols class stockholders.
The number of shares of Pollo Tropical Stock that initially represents 100% of the common stockholders' equity of Holdings attributable to the Pollo Tropical Group, was established at 1,000,000 shares by the Board of Directors. Of the 1,000,000 shares that are issuable, none have been issued, and 100,000 have been reserved for grants under the 1998 Pollo Tropical Long-Term Incentive Plan, which is a Holdings stock option plan.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market for our capital stock. Carrols Holdings Corporation owns 10 shares of our common stock (representing 100% of our outstanding capital stock).
There were no cash dividends paid during 1999. Cash dividends paid during 1998 by Carrols to Holdings were as follows:
Per Share Total
----------- ----------
January 1998........................................ $ 9,081.70 $ 90,817
April 1998.......................................... $ 9,081.70 $ 90,817
May 1998............................................ $227,715.60 $2,277,156
June 1998........................................... $141,911.20 $1,419,112
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Our loan agreements contain certain restrictive covenants which limit dividend payments.
Item 6. Selected Financial Data
The selected historical financial information presented below at the end of and for each of the fiscal years ended December 31, 1995, 1996, 1997, 1998 and 1999 have been derived from the audited consolidated financial statements of Carrols. Our acquisition of Pollo Tropical was completed in July 1998 and, as a result, Carrols' audited financial statements as of and for the year ended December 31, 1998 include the results of operations for the Pollo Tropical restaurants since July 10, 1998. The following selected financial information should be read in conjunction with Carrols' Consolidated Financial Statements and accompanying Notes as of December 31, 1998 and 1999 and for the fiscal years ended December 31, 1997, 1998 and 1999 and "Management's Discussion and Analysis of Financial Condition and Results of Operations".
Year Ended December 31,
---------------------------------------------
1995 1996 1997 1998(1) 1999
-------- -------- -------- -------- --------
(Dollars in thousands)
Statement of Operations Data:
Revenues:
Restaurant sales.............. $226,257 $240,809 $295,436 $416,190 $455,440
Franchise revenues............ -- -- -- 395 1,039
-------- -------- -------- -------- --------
Total revenues.............. 226,257 240,809 295,436 416,585 456,479
Costs and expenses:
Cost of sales................. 63,629 68,031 85,542 122,620 137,279
Restaurant wages and related
expenses..................... 65,932 70,894 89,447 121,732 134,125
Other restaurant operating
expenses..................... 45,635 48,683 61,691 82,710 89,093
Advertising expense........... 9,764 10,798 13,122 18,615 20,618
General and administrative.... 10,434 10,387 13,121 19,219 23,102
Depreciation and
amortization................. 11,263 11,015 15,102 20,005 23,898
Other costs(2)................ -- 509 -- -- --
-------- -------- -------- -------- --------
Total costs and expenses.... 206,657 220,317 278,025 384,901 428,115
-------- -------- -------- -------- --------
Income from operations.......... 19,600 20,492 17,411 31,684 28,364
Refinancing expenses............ -- -- -- 1,639 --
Interest expense, net........... 14,500 14,209 14,598 21,068 22,386
-------- -------- -------- -------- --------
Income before income taxes and
extraordinary loss............. 5,100 6,283 2,813 8,977 5,978
Provision (benefit) for income
taxes.......................... (9,826) 3,100 655 4,847 3,826
-------- -------- -------- -------- --------
Income before extraordinary
loss........................... 14,926 3,183 2,158 4,130 2,152
Extraordinary loss on
extinguishment of debt, net of
tax............................ -- -- -- 3,701 1,099
-------- -------- -------- -------- --------
Net income...................... $ 14,926 $ 3,183 $ 2,158 $ 429 $ 1,053
======== ======== ======== ======== ========
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Year Ended December 31,
---------------------------------------------------
1995 1996 1997 1998(1) 1999
-------- -------- -------- --------- --------
(Dollars in thousands)
Balance Sheet Data (At
Period End):
Total assets............. $135,064 $138,588 $215,328 $ 318,810 $320,027
Working capital
deficiency.............. (13,602) (15,004) (18,293) (10,633) (21,696)
Total long-term debt(3).. 120,578 121,265 160,287 261,522 253,494
Stockholder's equity
(deficit)............... (12,916) (11,662) 17,447 13,998 15,051
Other Financial Data:
EBITDA(4)................ $ 30,863 $ 31,507 $ 32,513 $ 45,411 $ 52,262
Adjusted EBITDA(5)....... 30,863 32,016 32,513 51,689 52,262
Adjusted EBITDA margin... 13.6% 13.3% 11.0% 12.4% 11.4%
Cash provided by
operating activities.... 16,682 14,322 19,940 23,273 38,173
Cash used in investing
activities.............. (12,348) (20,238) (95,383) (126,504) (48,935)
Cash provided by
financing activities.... 4,581 5,767 76,381 107,756 5,886
Capital expenditures,
excluding acquisitions.. 8,022 15,255 18,210 33,295 45,332
Operating Statistics:
Total number of
restaurants............. 219 232 335 383 397
Burger King:
Number of restaurants
(at end of period).... 219 232 335 343 352
Average number of
restaurants........... 219 225 280 339 344
Average annual sales
per restaurant........ $ 1,033 $ 1,070 $ 1,055 $ 1,124 $ 1,082
Percentage change in
comparable restaurant
sales(1).............. 3.8% 3.2% (1.4)% 6.2% (2.5)%
Pollo Tropical(6):
Number of restaurants
(at end of period).... 36 35 36 40 45
Average number of
restaurants........... 33 38 35 37 42
Average annual sales
per restaurant........ $ 1,681 $ 1,677 $ 1,861 $ 1,985 $ 1,952
Percentage change in
comparable restaurant
sales(7).............. (5.6)% 7.9% 4.2% 7.8% 0.7%
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
Overview
We are one of the largest Burger King franchisees in the world, and we have operated Burger King restaurants since 1976. As of December 31, 1999, we operated 352 Burger King restaurants located in 13 Northeastern, Midwestern and Southeastern states. Over the last five years, we expanded our operations through the acquisition and construction of additional Burger King restaurants while also enhancing the quality of operations and the competitive position and financial performance of our existing restaurants. As a result of our growth strategy, we increased the total number of restaurants we operate by over 60% from 1995 to 1999. In July 1998, we completed our acquisition of Pollo Tropical for a cash purchase price of approximately $95 million. Pollo Tropical is a regional quick-service restaurant chain featuring grilled marinated chicken and authentic "made from scratch" side dishes. At December 31, 1999, we owned and operated 45 Pollo Tropical restaurants in Florida and franchised an additional 23 restaurants primarily in Puerto Rico. Due to our acquisition of Pollo Tropical in July 1998, our results for the year ended December 31, 1998 include the operations of Pollo Tropical from July 10, 1998.
Results of Operations of Carrols
The following table sets forth, for fiscal years 1997, 1998 and 1999, selected operating results of Carrols as a percentage of restaurant sales:
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
Restaurant Sales:
Burger King restaurants....................... 100.0% 91.6% 81.8%
Pollo Tropical................................ -- % 8.4% 18.2%
------- ------- -------
Total restaurant sales.......................... 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................................. 29.0% 29.5% 30.1%
Restaurant wages and related expenses......... 30.3% 29.2% 29.4%
Other restaurant expenses including
advertising.................................. 25.3% 24.3% 24.1%
General and administrative.................... 4.4% 4.6% 5.1%
Depreciation and amortization................. 5.1% 4.8% 5.2%
------- ------- -------
Income from operations.......................... 5.9% 7.6% 6.2%
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Fiscal 1999 Compared to Fiscal 1998
The results of operations and cash flows for the years ended December 31, 1999 and 1998 include 52 and 53 weeks, respectively. During 1999, we opened eight Burger King restaurants, acquired six Burger King restaurants and closed five underperforming Burger King restaurants. Also during 1999, we opened five Pollo Tropical restaurants.
Restaurant Sales. Total revenues increased 9.6% from $416.6 million in 1998 to $456.5 in 1999 due to the increase in the number of restaurants and due to the inclusion of Pollo Tropical for a full year in 1999. Burger King restaurant sales for the year ended December 31, 1999 decreased 2.2% to $372.7 million from $381.0 million in 1998 due, in part, to the additional week included in 1998. Sales at our 299 comparable Burger King restaurants (those units operating for the entirety of the compared periods) decreased 2.5% in 1999, using a comparable number of weeks from the year ended December 31, 1998 due to a decrease in customer traffic. In 1999, Burger King national promotional activities did not generate a similar level of incremental traffic as in 1998. Pollo Tropical restaurant sales for the year ended December 31, 1999 were $82.8 million as compared to $35.1 million in 1998, due to our acquisition of Pollo Tropical in July 1998. Compared to the twelve months ended December 31, 1998, 1999 Pollo Tropical sales increased 13.8%, in total, and 0.7% on a comparable store basis.
Operating Costs and Expenses. Cost of sales, as a percentage of sales, were 30.1% in 1999 compared to 29.5% in 1998. The increase in 1999 was due to higher food costs as a percentage of sales, at our Pollo Tropical restaurants, relative to our Burger King restaurants, and due to the inclusion of Pollo Tropical in all of 1999 operating results as compared to six months in 1998. This increased total cost of sales in 1999 by 0.5%. Pollo Tropical's cost of sales, as a percentage of sales, were 34.8% in 1999 and 35.1% in 1998. For our Pollo Tropical restaurants lower food costs in 1999, as a percentage of sales, were primarily due to a 3.5% decrease in whole chicken prices. Cost of sales, as a percentage of sales, at our Burger King restaurants were 29.1% in 1999 and 28.9% in 1998. This increase was due to a 3.7% increase in beef costs over 1998 levels and higher promotional discounts in 1999, as compared to 1998, which were offset, in part, by menu price increases of approximately 1% of sales late in the third quarter of 1999.
Restaurant wages and related expenses, as a percentage of sales, increased from 29.2% in 1998 to 29.4% in 1999. For our Burger King restaurants, restaurant wages and related expenses, as a percentage of sales, were 30.8% in 1999 compared to 29.8% in 1998. The Burger King percentage increase was due to a 3.7% increase in productive hourly wage rates in 1999 and the effect of lower Burger King sales on fixed management costs, offset in part, by menu price increases late in 1999. The effect of the Burger King increase, as a percentage of total Company sales, was partially offset by the inclusion of Pollo Tropical in all of 1999 operating results as compared to six months in 1998. Pollo Tropical's restaurant wages and related expenses, as well as other operating expenses, are lower than those of our Burger King restaurants due to Pollo Tropical's higher per unit sales volumes. Pollo Tropical restaurant wages and related expenses, as a percentage of sales, were 23.2% in 1999 and 23.5% in 1998. This caused a 0.5% decrease, as a percentage of sales, in combined restaurant wages and related expenses in 1999. The decrease, as a percentage of sales, for Pollo Tropical for 1999 compared to 1998 was due to lower worker's compensation payroll insurance.
Other restaurant operating expenses, including advertising, as a percentage of sales, decreased from 24.3% in 1998 to 24.1% in 1999 due to the inclusion of Pollo Tropical operating results in all of 1999 as compared to six months in 1998. This caused a 0.5% decrease, as a percentage of sales, in combined other restaurant operating expenses in 1999. This decrease was partially offset by higher occupancy costs in 1999, as a percentage of sales, due to the effect of lower sales volumes on fixed costs at our Burger King restaurants and due to the sale and leaseback of eight Burger King and five Pollo Tropical restaurant properties in 1999.
Administrative expenses, as a percentage of sales, increased from 4.6% in 1998 to 5.1% in 1999. This increase is due to lower sales volumes in our Burger King restaurants in 1999 and administrative functions acquired in the July 1998 acquisition of Pollo Tropical.
EBITDA. EBITDA increased from $45.4 million in 1998 to $52.3 million in 1999. Included in EBITDA for the year ended December 31, 1998 are refinancing expenses of $1.6 million and a redemption premium of $4.6 million associated with the retirement of debt. EBITDA, as adjusted for these items, was $51.7 million for the year ended December 31, 1998. As a percentage of total revenues, EBITDA, as adjusted, decreased from 12.4% in 1998 to 11.4% in 1999 as a result of the factors discussed above.
Depreciation and Amortization. Depreciation and amortization increased $3.9 million in 1999 compared to 1998 due to the increase in goodwill, purchased intangibles and other fixed assets associated with the purchase of Pollo Tropical in July 1998. This increased depreciation and amortization by $2.1 million in 1999 compared to 1998. The remainder of the increase is due primarily to new restaurant construction and remodeling of Burger King restaurants in 1998 and 1999.
Interest Expense. Interest expense was $22.4 million in 1999 compared to $21.1 million in 1998. The increase in 1999 was due to higher average debt balances in 1999 compared to 1998 due to the acquisition of Pollo Tropical in July 1998, offset, in part, by the favorable impact of refinancing our senior subordinated notes in the fourth quarter of 1998. Our weighted average interest rate was 8.9% in 1999 compared to 9.9% in 1998.
Income Taxes. The provision for income taxes of $3.8 million in 1999 is based on an estimated effective income tax rate for 1999 of 64.0%. This rate is higher than the Federal statutory tax rate due to state franchise and income taxes and non-deductible amortization of certain franchise rights and intangible assets pertaining to our acquisitions.
Net Income. Net income was $1,053,000 in 1999 compared to $429,000 in 1998. Net income in 1999 includes an extraordinary loss of $1,099,000, which is net of tax, for the write-off of unamortized debt issue costs related to the Company's previous senior credit facility. Net income in 1998 includes an extraordinary loss of $3,701,000, which is net of tax pertaining to the redemption of our 11.5% senior notes.
Fiscal 1998 Compared to Fiscal 1997
The results of operations and cash flows for the years ended December 31, 1998 and 1997 include 53 and 52 weeks, respectively. During 1998, we opened 11 Burger King restaurants, acquired 2 Burger King restaurants and closed 5 underperforming Burger King restaurants.
Restaurant Sales. Burger King restaurant sales for the year ended December 31, 1998 increased 29.0% to $381.0 million from $295.4 million in 1997. Sales at our 223 comparable Burger King restaurants (those units operating for the entirety of the compared periods) increased 6.2% in 1998, using a comparable number of weeks from the year ended December 31, 1997. Comparable Burger King restaurant sales increased 7.9% using the actual number of weeks in both fiscal years. Burger King sales increases were also due to increased sales from our $.99 Great Tastes Menu and the additional week in 1998. Pollo Tropical restaurant sales for the period July 10, 1998 to December 31, 1998 totaled $35.1 million.
Operating Costs and Expenses. Cost of sales, as a percentage of sales, were 29.5% in 1998 compared to 29.0% in 1997. The increase in 1998 was due to higher cost of sales at our Pollo Tropical restaurants, whose cost of sales was 35.1% in 1998, and which affected total cost of sales, as a percentage of sales, by 0.5%. A 24% increase in costs associated with the new french fry product, introduced in January 1998 at our Burger King restaurants, and higher food and paper costs at recently acquired Burger King restaurants was offset by a 5.7% decrease in beef costs.
Restaurant wages and related expenses, as a percentage of sales, decreased from 30.3% in 1997 to 29.2% in 1998 due to Pollo Tropical restaurant wages and related expenses being 23.5% of sales. Pollo Tropical's restaurant wages and related expenses are lower than those of the Burger King restaurants due to Pollo Tropical's higher per unit sales volumes. This caused a 0.5% decrease, as a percentage of sales, in combined restaurant wages and related expenses. The remainder of the decrease is due to the effect of increased Burger King sales on fixed management costs and lower unemployment tax rates in New York State and Ohio.
Other restaurant operating expenses, including advertising, decreased from 25.3% of sales in 1997 to 24.3% in 1998 due to Pollo Tropical's other restaurant operating expenses being 16.9% of sales. This caused a 0.7% decrease as a percentage of sales, in total other restaurant operating expenses. In addition, reduced utility costs associated with a milder winter in our Burger King operating areas contributed 0.2%, as a percentage of sales, to the decrease from 1997 to 1998.
Administrative expenses, as a percentage of sales, increased from 4.4% in 1997 to 4.6% in 1998. The increase in 1998 is due to the addition of field supervision and corporate support as a result of the 1997 acquisition of 93 Burger King restaurants, administrative functions acquired in the July 1998 acquisition of Pollo Tropical, and increased corporate expenses to support our plans for continued expansion.
EBITDA. EBITDA increased from $32.5 million in 1997 to $45.4 million in 1998. Included in EBITDA for the year ended December 31, 1998 are refinancing expenses of $1.6 million and a redemption premium of $4.6 million associated with the retirement of debt. EBITDA, as adjusted for these items, was $51.7 million for the year ended December 31, 1998. As a percentage of total revenues, EBITDA, as adjusted, increased from 11.0% in 1997 to 12.4% in 1998 as a result of the factors discussed above.
Depreciation and Amortization. Depreciation and amortization increased $4.9 million in 1998 compared to 1997 due primarily to the increase in goodwill and purchased intangibles associated with the purchase of Pollo Tropical in July 1998 and the purchase of Burger King restaurants in 1997.
Interest Expense. Interest expense was $21.1 million in 1998 compared to $15.6 million in 1997. The increase in 1998 was due to higher average debt balances from funding the acquisition of Pollo Tropical in July 1998 and the acquisition of Burger King restaurants in 1997.
Income Taxes. The provision for income taxes of $4.8 million in 1998 is based on an estimated effective income tax rate for 1998 of 53.9%. This rate is higher than the Federal statutory tax rate due to state franchise and income taxes and non-deductible amortization of franchise rights and intangible assets pertaining to our acquisitions.
Net Income. Net income was $429,000 in 1998 compared to $2,158,000 in 1997. Net income in 1998 includes an extraordinary loss of $3,701,000, which is net of tax, pertaining to the redemption of our 11.5% senior notes.
Liquidity and Capital Resources
We do not have significant receivables or inventory and receive trade credit based upon negotiated terms in purchasing food products and other supplies. We are able to operate with a substantial working capital deficit because:
. restaurant operations are conducted on a cash basis;
. rapid turnover results in a limited investment in inventories; and
. cash from sales is usually received before related accounts for food,
supplies and payroll become due.
Our cash requirements arise primarily from:
. the need to finance the opening and equipping of new restaurants;
. ongoing capital reinvestment in our existing restaurants;
. the acquisition of existing Burger King restaurants; and
. servicing our debt.
Our 1999 operations generated approximately $38.2 million in cash, compared to $23.3 million during 1998 and $19.9 million in 1997.
Our capital expenditures included acquisitions of $3.8 million in 1999, $95.3 million in 1998 and $78.5 million in 1997. We acquired Pollo Tropical in July 1998 for approximately $95 million. We also acquired six Burger King restaurants in 1999, two Burger King restaurants in 1998 and 93 Burger King restaurants in 1997.
Capital expenditures, excluding acquisitions, totaled $45.3 million in 1999 as compared to $33.3 million in 1998 and $18.2 million in 1997. Capital expenditures in 1999 included construction costs for eleven new Burger King restaurants, eight of which were open in 1999, and five Pollo Tropical restaurants opened in 1999. Capital expenditures in 1998 included construction costs for twelve new Burger King restaurants, eleven of which were open in 1998, and for five new Pollo Tropical restaurants, four of which were open in 1998. Capital expenditures in 1997 included construction costs for 15 new Burger King units, 11 of which were opened in 1997. Our capital expenditures also include remodeling costs and capital maintenance projects for the ongoing reinvestment and enhancement of our restaurants. These expenditures increased in 1999 and 1998 due to growth in the number of restaurants and investments being made to enhance the operations of the 95 Burger King restaurants that we have acquired since the beginning of 1997. During 1999, we completed the remodeling of 11 Burger King restaurants in conjunction with the renewal of franchises that were scheduled to expire between 1999 and 2004. In 1999, we substantially completed the upgrade of corporate information and decision support systems as well as the purchase of restaurant point-of-sale and management systems for our Burger King restaurants. These projects have resulted in incremental capital investments which totaled $11.9 and $4.2 million in 1999 and 1998, respectively.
During 1999, we generated $14.8 million from the sale and leaseback of eight Burger King restaurant properties and five Pollo Tropical restaurant properties. During 1998, the sale and leaseback of two Burger King restaurant properties and 13 Pollo Tropical restaurant properties generated $20.5 million. During 1997, the sale and leaseback of 15 Burger King restaurant properties generated $13.0 million. The proceeds from these transactions were used to reduce outstanding debt. We also paid dividends to our parent totaling $3.9 million in 1998 and $4.3 million in 1997 for our parent's payment of dividends on and for the redemption of its preferred stock. In 1998 this included the early redemption of the remaining $3.6 million in preferred stock which was scheduled for mandatory redemption in December 1998 and December 1999.
At December 31, 1999, we had total outstanding borrowings of $253.5 million comprised of the $170.0 million principal amount of outstanding senior subordinated notes, borrowings under our senior credit facility of $81.1 million and other debt, including capital leases, of $2.4 million. In total, our borrowings were $8.0 million lower than at December 31, 1998 due to the application of cash generated from the sale and leaseback of 13 restaurant properties in 1999.
On November 24, 1998, we issued $170 million of unsecured senior subordinated notes that bear interest at an annual rate of 9.5% payable on June 1 and December 1. The notes mature on December 1, 2008 and are redeemable, at our option, in whole or in part on or after December 1, 2003.
In connection with the issuance of the 9.5% senior subordinated notes, we redeemed all of our outstanding 11.5% senior notes. This redemption included aggregate principal amounts of $107,637,000, a redemption premium of $4,639,000, and accrued interest to December 24, 1998 of $4,436,000. In addition, we used the proceeds of the 9.5% notes to repay $47.9 million of our previous senior credit facility.
On February 12, 1999 we entered into a new senior credit facility. Under our new senior credit facility, Chase Bank of Texas, National Association, as agent, along with a syndicate of six other lenders, provided a term loan facility of $50 million, $47.0 million of which is outstanding at December 31, 1999, and a revolving credit facility under which we may borrow up to $105 million (including a standby letter of credit facility for up to $5 million). At December 31, 1999, $68,250,000 was available for borrowings under our revolving credit facility, after reserving $2,650,000 for a letter of credit guaranteed by the facility.
The revolving credit facility expires on December 31, 2003, subject to a one-year extension upon request and unanimous approval of the lenders, and the term loan facility is repayable in quarterly installments through September 30, 2003 with a final payment due December 31, 2003. Principal repayments required in 2000 total $4.0 million. Borrowings under our credit facility bear interest, at our option, of either:
(1) the greater of the prime rate, or the Federal Funds Rate plus .50%, plus a margin ranging from 0% to .75%, based on debt to cash flow ratios; or,
(2) LIBOR plus a margin ranging from 1.00% to 2.25%, based on debt to cash flow ratios.
Both the senior subordinated notes and the senior credit facility contain certain restrictive covenants, including limitations on certain restricted payments and dividends. The senior credit facility also requires maintaining certain financial ratios.
In 2000, we anticipate total capital expenditures of approximately $40 million, excluding the cost of any acquisitions that we may make. These amounts include approximately $11 million for construction of new Burger King restaurants, including certain real estate; $4 million for construction of new Pollo Tropical restaurants; approximately $8.5 million for remodeling existing Burger King restaurants; and approximately $6 million for expenditures related to Burger King transformation initiatives, which include new signage and other improvements such as painting, parking lot improvements and landscaping. See Transformation Initiatives on page 11. Remodeling activities in 2000 include approximately $4 million of expenditures related to the Burger King Early Successor Incentive Program. See Fee Changes and Early Successor Program on page 10. Other anticipated Burger King restaurant capital expenditures in 2000 for ongoing reinvestment are approximately $6 million. We are also in the process of completing the rollout of new restaurant point-of-sale systems and anticipate that we will incur related expenditures of approximately $2.5 million. We were committed at December 31, 1999 to purchase approximately $1.6 million of restaurant point-of-sale systems.
Interest payments under our senior subordinated notes and other existing debt obligations represent significant liquidity requirements for us. We believe that cash generated from our operations and availability under our revolving credit facility will provide sufficient cash availability to cover our working capital needs, capital expenditures, planned development and debt service requirements for fiscal 2000.
Inflation
The inflationary factors which have historically affected our results of operations include increases in food and paper costs, labor and other operating expenses. Wages paid in our restaurants are impacted by changes in the Federal or state minimum hourly wage rates. Accordingly, changes in the Federal or states minimum hourly wage rate directly affect our labor cost. We and the restaurant industry typically attempt to offset the effect of inflation, at least in part, through periodic menu price increases and various cost reduction programs. However, no assurance can be given that we will be able to offset such inflationary cost increases in the future.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
To the extent applicable, see note 1 to the Financial Statements.
Item 8. Financial Statements and Supplementary Data
The Index to Financial statements attached hereto is set forth in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with the Company's independent accountants on accounting or financial disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth information about our directors, executive officers and other officers:
Name Age Position with the Company ---- --- ------------------------- Alan Vituli............. 58 Chairman of the Board and Chief Executive Officer Daniel T. Accordino..... 49 President, Chief Operating Officer and Director Paul R. Flanders........ 43 Vice President--Finance and Treasurer Joseph A. Zirkman....... 39 Vice President, General Counsel and Secretary Timothy J. LaLonde...... 43 Vice President--Controller John M. Lukas........... 38 Vice President--Information Systems Michael A. Biviano...... 42 Vice President--Regional Director James A. Doan........... 42 Regional Director Joseph W. Hoffman....... 37 Regional Director David R. Smith.......... 50 Vice President--Regional Director James E. Tunnessen...... 44 Vice President--Regional Director Nicholas A. Castaldo.... 48 President and Chief Operating Officer--Pollo Tropical Benjamin D. Chereskin... 41 Director James M. Conlon......... 32 Director David J. Mathies, Jr. .. 52 Director Robin P. Selati......... 33 Director Clayton E. Wilhite...... 54 Director |
Certain biographical information regarding our directors, executive officers and other officers is set forth below:
Alan Vituli has been Chairman of the Board since 1986 and Chief Executive Officer since March 1992. He is also a Director and Chairman of the Board of Holdings. Between 1983 and 1985, Mr. Vituli was employed by Smith Barney, Harris Upham & Co., Inc. as a Senior Vice President responsible for real estate transactions. From 1966 until joining Smith Barney, Mr. Vituli was associated with the accounting firm of Coopers & Lybrand, first as an employee and for the last ten years as a partner. Among the positions held by Mr. Vituli at Coopers & Lybrand was National Director of Mergers and Acquisitions. Before joining Coopers & Lybrand, Mr. Vituli was employed in a family-owned restaurant business. From 1993 through our acquisition of Pollo Tropical, Mr. Vituli served on the Board of Directors of Pollo Tropical.
Daniel T. Accordino has been President, Chief Operating Officer and a Director since February 1993. Before that, Mr. Accordino served as Executive Vice President--Operations from December 1986 and as Senior Vice President from April 1984. From 1979 to April 1984 he was Vice President responsible for restaurant operations, having previously served as our Assistant Director of Restaurant Operations. Mr. Accordino has been employed by us since 1972.
Paul R. Flanders has been Vice President--Finance and Treasurer since April 1997. Before joining us, he was Vice President--Corporate Controller of Fay's Incorporated, a retailing chain, from 1989 to 1997, and Vice President-- Controller for Computer Consoles, Inc., a computer systems manufacturer, from 1982 to 1989. Mr. Flanders was also associated with the accounting firm of Touche Ross & Co. from 1977 to 1982.
Joseph A. Zirkman became Vice President and General Counsel in January 1993. He was appointed Secretary in February 1993. Before joining us, Mr. Zirkman was an associate with the New York City law firm of Baer Marks & Upham beginning in 1986.
Timothy J. LaLonde has been Vice President--Controller since July 1997. Before joining us, he was a controller at Fay's Incorporated, a retailing chain, from 1992 to 1997. Before that he was a Senior Audit Manager with the accounting firm of Deloitte & Touche LLP, where he was employed since 1978.
John M. Lukas has been Vice President--Information systems since December 1999. Mr. Lukas joined us in 1994 and served in the capacity of Director-- Information Systems from 1994 to 1999.
Michael A. Biviano is Vice President--Regional Director. Mr. Biviano has been Regional Director of Operations since October 1989, having served as District Supervisor from December 1983 to October 1989. Mr. Biviano has been employed by us since 1973.
James A. Doan has been Regional Director since July, 1999, having served as District Supervisor from 1983 to 1999. Mr. Doan has been employed by us since 1980.
Joseph W. Hoffman has been Regional Director since July 1997. Mr. Hoffman joined us in 1993 in connection with one of our acquisitions and served in the capacity of District Supervisor from 1993 to 1997. Before 1993 Mr. Hoffman was in a similar capacity with Community Food Service, Inc.
David R. Smith is Vice President--Regional Director. Mr. Smith has been Regional Director of Operations since 1984, having served as District Supervisor from 1975 to 1984. Mr. Smith has been employed by us since 1972.
James E. Tunnessen is Vice President--Regional Director. He has been Regional Director of Operations since August 1988, having served as District Supervisor from 1979 to August 1988. Mr. Tunnessen has been employed by us since 1972.
Nicholas A. Castaldo has been the President and Chief Operating Officer of the Pollo Tropical Division since our acquisition of Pollo Tropical, Inc. in July 1998. At that time, Mr. Castaldo had been the President of Pollo Tropical, Inc. since October 1995 and its Chief Operating Officer since November 1, 1996. Before joining Pollo Tropical and since August 1993, Mr. Castaldo was employed as Vice President of Marketing for Denny's Inc., a restaurant company. From 1986 to 1993, Mr. Castaldo was employed by S&A Restaurant Corp., which includes Steak & Ale and Bennigan's restaurant chains, and ultimately served as Senior Vice President of Marketing and Business Development. Mr. Castaldo's career spans 20 years and includes management positions at Burger King, Citicorp, and Clairol Inc.
Benjamin D. Chereskin has served as a Director since March 1997. Mr. Chereskin is a Managing Director of Madison Dearborn Partners, Inc., a venture capital firm, and co-founded the firm in 1993. Before that, Mr. Chereskin was with First Chicago Venture Capital for nine years. Mr. Chereskin also serves on the Board of Directors of Cornerstone Brands, Inc.; Tuesday Morning Corporation; NWL Holdings, Inc.; Family Christian Stores, Inc.; i Believe.com, Inc. and Agweb.com, Inc.
James M. Conlon has served as a Director since 1998. Mr. Conlon has served as Managing Director of Dilmun Investments, Inc., an investment advisory firm, since 1992. Since 1997, Mr. Conlon has been the Co-Head of the bank's U.S. Merchant Banking group. Before joining Dilmun Investments, Inc., Mr. Conlon was employed as an Investment Analyst in the Securities Division of TIAA-CREF. Mr. Conlon also serves on the Boards of Directors of Capital Recovery Holdings, Inc; Thompson Products, Inc; Independent Pictures, Inc.; Intimates Holdings, Inc; and Springfield Services Corporation.
David J. Mathies, Jr. has served as a Director since 1996. Mr. Mathies has served as President of Dilmun Investments, Inc., an investment advisory firm, since its inception in 1988. From 1971 to 1988, he was employed by Mellon Bank, where he was head of their Pension Management Group, providing investment management services to middle market clients.
Robin P. Selati has served as a Director since March 1997. Mr. Selati is a Managing Director of Madison Dearborn Partners, Inc., a venture capital firm, and joined the firm in 1993. Before 1993, Mr. Selati was associated with Alex Brown & Sons Incorporated in the consumer/retail investment banking group. Mr. Selati also serves on the Board of Directors of Peter Piper, Inc., Tuesday Morning Corporation; NWL Holdings, Inc.; Beverages & More, Inc.; Family Christian Stores, Inc.; i Believe.com, Inc. and Ruth U. Fertel, Inc.
Clayton E. Wilhite has served as a Director since July 1997. Since January 1998, Mr. Wilhite has been with CFI Group, Inc., has been its Managing Partner since May 1998, and has served on its Board of Directors since September 1998. CFI Group, Inc. is an international marketing and consulting firm specializing in measuring customer satisfaction. Between 1996 and 1998, he was the Chairman of Thurloe Holdings, L.L.C. Before 1996, Mr. Wilhite was with the advertising firm of D'Arcy Masius Benton & Bowles, Inc. having served as its Vice Chairman from 1995 to 1996, as President of DMB&B/North America from 1988 to 1995, and as Chairman and Managing Director of DMB&B/St. Louis from 1985 to 1988. From August 1996 through our acquisition of Pollo Tropical, Mr. Wilhite served on the Board of Directors of Pollo Tropical, Inc.
All directors hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. Our executive officers are chosen by the Board and serve at its discretion. All of our directors also serve as directors of Holdings.
Item 11. Executive Compensation
The following tables set forth certain information for the fiscal years ended December 31, 1999, 1998 and 1997 for our Chief Executive Officer and our next four most highly compensated executive officers who were serving as executive officers at December 31, 1999 and whose annual compensation exceeded $100,000. Stock option data refers to the stock options of Holdings.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
---------------------- -------------
Securities
Underlying
Name and Principal Position Year Salary Bonus(a) Options(#)(c)
--------------------------- ---- -------- -------- -------------
Alan Vituli............................... 1999 $450,000 $ -- --
Chairman of the Board and Chief Executive
Officer 1998 425,004 297,503 --
1997 392,758 -- 72,830
Daniel T. Accordino....................... 1999 $340,000 $ -- --
President, Chief Operating Officer and
Director 1998 320,004 192,002 --
1997 288,386 -- 31,479
Nicholas A. Castaldo(b)................... 1999 $300,000 $300,000 --
President and Chief Operating Officer, 1998 144,230 150,000 50,000
Pollo Tropical Division 1997 -- -- --
Paul R. Flanders.......................... 1999 $152,503 $ -- 300
Vice President, Finance and Treasurer 1998 143,759 71,880 500
1997 105,925 -- 1,500
Joseph A. Zirkman......................... 1999 $140,000 $ -- 272
Vice President, General Counsel and
Secretary 1998 131,000 65,500 400
1997 120,436 -- 1,118
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Option Grants in Last Fiscal Year
Potential Realizable
Number of % of Total Value at Assumed Rates
Securities Options of Stock Appreciation
Underlying Granted to for Option Term(b)
Options Employees in Exercise Price Expiration -----------------------
Name Granted(a) 1999 (Price per Share) Date 5% 10%
---- ---------- ------------ ----------------- ---------- ----------- -----------
Paul R. Flanders........ 300 4.8 $126.00 2/24/2007 $ 18,048 $ 43,228
Joseph A. Zirkman....... 272 3.9 $126.00 2/24/2007 16,363 39,193
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Option Exercises in Last Fiscal Year and Year End Option Values
Number of Securities
Underlying Options at
Shares Year-End(#) Value of Unexercised In-
Acquired on Value ------------------------- the-Money Options at
Exercise Realized Exercisable/unexercisable Year-End($)(c)
----------- -------- ------------------------- ------------------------
Alan Vituli............. -- -- 43,922/28,908
Daniel T. Accordino..... -- -- 22,452/ 9,027
Nicholas A. Castaldo.... -- -- 20,000/30,000
Paul R. Flanders........ -- -- 1,450/ 850
Joseph A. Zirkman....... -- -- 979/ 811
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Compensation Committee Interlocks and Insider Participation
During the last fiscal year, no executive officer of ours served as a director of or member of a compensation committee of any entity for which any of the persons serving on our Board of Directors or on the Compensation Committee of the Board of Directors is an executive officer. The Compensation Committee is comprised of Messrs. Chereskin, Mathies and Wilhite.
Board of Directors
Directors' Compensation. Directors who are our employees do not receive any additional compensation for serving as directors. Directors who are not our employees receive a fee of $15,000 per annum. All directors are reimbursed for all reasonable expenses they incur while acting as directors, including as members of any committee of the Board of Directors.
Liability Limitation. As permitted under the Delaware General Corporation Law, our Restated Certificate of Incorporation provides that a director will not be personally liable to us or our stockholders for monetary damages for breach of a fiduciary duty owed to us or our stockholders. By its terms and in accordance with the laws of the State of Delaware, however, this provision does not eliminate or limit the liability of any of our directors:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law;
. for any transaction from which the director derived an improper personal
benefit; or
. for an improper declaration of dividends or purchase or redemption of our
securities.
Indemnification. Our Restated Certificate of Incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Delaware law.
Description of Plans
Employee Retirement Plan. We offer salaried employees, excluding those of Pollo Tropical, the option to participate in the Carrols Corporation Retirement Savings Plan, which as amended April 1, 1999, offers both a post-tax savings option and a savings option pursuant to section 401(k) of the Internal Revenue Code. Participating employees may contribute up to 18% of their salary annually to either savings option, subject to certain limitations. In accordance with the plan, we match up to $1,040 of an employee's mandatory contributions by contributing $0.50 for each dollar contributed by the employee. Employees are fully vested in their own contributions; employees become vested in our contributions beginning in the fourth year of service and are fully vested after seven years of service or upon retirement at age 65 with five years service, death, or permanent or total disability. If any of the foregoing events occurs, benefits may be paid out in a single cash lump sum or in periodic installments over not more than the employee's assumed life expectancy. The employee's contributions may be withdrawn at any time, subject to restrictions on future contributions. Our matching contributions may be withdrawn under certain conditions of financial necessity or hardship as defined in the plan. Our contributions to the plan totaled $245,000, $216,000 and $208,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Pollo Tropical 401(k) Savings Plan. Pollo Tropical has an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code. All employees who are age 21 or older and who have been credited with at least 1,000 hours of service within twelve consecutive months are eligible to participate in the plan. Employees may elect to contribute to the plan through payroll deductions in an amount not to exceed the amount permitted under the Internal Revenue Code. We make discretionary matching contributions, which are allocated to participants based on the participant's eligible deferrals during the plan year. Employees are fully vested in their contributions. Our contributions vest at a rate of 33% for each complete year of service. Our contributions to the 401(k) plan totaled $29,000 and $17,000 for the years ended December 31, 1999 and 1998, respectively.
Bonus Plans. We have cash bonus plans designed to promote and reward excellent performance by providing employees with incentive compensation. Key senior management executives of each operating division can be eligible for bonuses equal to varying percentages of their respective annual salaries determined by our performance as well as the division's performance.
1996 Long-Term Incentive Plan. In connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings adopted the Carrols Holdings Corporation 1996 Long-Term Incentive Plan pursuant to which we may grant awards such as "Incentive Stock Options" (as defined under Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, performance shares and performance units and other stock-based awards to certain of our and our subsidiaries' officers and employees. The 1996 Long-Term Incentive Plan replaced a prior long-term incentive plan which was adopted December 26, 1996. The plan is designed to advance our interests and the interests of Holdings by providing an additional incentive to attract, retain and motivate qualified and competent persons through the encouragement of stock ownership or stock appreciation rights in Holdings.
The 1996 Long-Term Incentive Plan permits the Compensation Committee of the Board of Directors of Holdings to grant, from time to time, options to purchase an aggregate of up to 106,250 shares of Holdings' Carrols common stock. The vesting periods for options and the expiration dates for exercisability of options granted under the 1996 Long-Term Incentive Plan are determined by Holdings' Compensation Committee; however, the exercise period for an option granted under the 1996 Long-Term Incentive Plan may not exceed ten years from the date of the grant. Holdings' Compensation Committee is authorized to grant options under the plan to all of our and our subsidiaries' eligible officers and employees, including executive officers and directors (other than outside directors and members of Holdings' Compensation Committee).
Holdings' Compensation Committee determines the option exercise price per share of any option granted under the 1996 Long-Term Incentive Plan; however, the option price per share of an option intended to qualify as an Incentive Stock Option shall not be less than the fair market value of the Holdings' Carrols common stock of Holdings on the date such option is granted. Payment of such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Carrols common stock already owned by the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms of the 1996 Long-Term Incentive Plan, the applicable stock option agreement and any applicable guidelines of Holdings' Compensation Committee in effect at the time; or
(5) by any other means approved by Holdings' Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the exercise price of such option by delivering a promissory note, such promissory note may be either:
(1) unsecured and fully recourse against the holder of such option; or
(2) nonrecourse but secured by the shares of Holdings' Carrols common stock being purchased by such exercise and by other assets having a fair market value equal to not less than 40% of the exercise price of such option. In either event, such note shall mature on the fifth anniversary of the date of the note and bear interest at the rate provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended from time to time.
Pursuant to the 1996 Long-Term Incentive Plan, in the event of a Change of Control (as defined in the plan) any and all options issued and outstanding will vest and become exercisable in full on the date of such Change of Control. In addition, as soon as practicable but no later than thirty days before such Change of Control, Holdings' Compensation Committee shall notify any holder of an option granted under the plan of such Change of Control. Further, upon a Change of Control that qualifies as an Approved Sale (as defined in the plan) in which the outstanding Holdings' Carrols common stock is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in the plan),
(1) each option granted under the plan shall become exercisable solely for the amount of such cash, property or securities that the holder of such option would have been entitled to had such option been exercised immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale and participate in such sale as a holder of Holdings' Carrols common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for such option consideration equal to the amount determined by multiplying:
(x) the same amount of consideration per share of Holdings' Carrols common stock received by the holders in connection with the Approved Sale less the exercise price per share of such option to acquire Holdings' Carrols common stock by
(y) the number of shares of Holdings' Carrols common stock represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous with such Approved Sale, any such option shall be canceled.
1998 Directors' Stock Option Plan. During 1998, Holdings adopted the Carrols Holdings Corporation 1998 Directors' Stock Option Plan pursuant to which we may grant "Incentive Stock Options" (as defined under Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, and other stock-based awards to certain non-employee directors of Holdings. The plan is designed to advance the interests of Holdings and us by providing an additional incentive to attract, retain and motivate non-employee individuals as directors of our Board and the Board of Holdings.
The 1998 Directors' Stock Option Plan permits Holdings' Compensation Committee to grant, from time to time, options to purchase an aggregate of up to 10,000 shares of Holdings' Carrols common stock. The vesting periods for these options and the expiration dates for exercisability of the options granted under the plan are determined by the Compensation Committee; however, the exercise period for an option granted under the plan may not exceed ten years from the date of the grant. Holdings' Compensation Committee is authorized to grant options under the plan to all eligible non-employee directors of Holdings. Directors that are our employees or employees of Holdings, Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital Partners II, L.P. or BIB Holdings, or any of their respective affiliates are not eligible under the plan.
The option exercise price per share of any option granted under the 1998 Directors' Stock Option Plan is determined by Holdings' Compensation Committee; however, the option price per share of an option intended to qualify as an Incentive Stock Option shall not be less than the fair market value of Holdings' Carrols common stock on the date such option is granted. Payment of such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Carrols common stock already owned by the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms of the plan, the applicable stock option agreement and any applicable guidelines of the Holdings Compensation Committee in effect at the time; or
(5) by any other means approved by the Holdings Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the exercise price of such option by delivering a promissory note, such promissory note may be either:
(1) unsecured and fully recourse against the holder of such options; or
(2) nonrecourse but secured by the shares of Holdings' Carrols common stock being purchased by such exercise and by other assets having a fair market value equal to not less than 40% of the exercise price of such option.
In either event, such note shall mature on the fifth anniversary of the date of the note and bear interest at the rate provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended from time to time.
Pursuant to the 1998 Directors' Stock Option Plan, in the event of a Change of Control (as defined in the plan), any and all options issued and outstanding shall vest and become exercisable in full on the date of such Change of Control. In addition, as soon as practicable but in no event later than 30 days prior to a Change of Control, Holdings' Compensation Committee shall notify any holder of an option granted under the plan of such Change of Control. Further, upon a Change of Control that qualifies as an Approved Sale (as defined in the 1998 Directors' Plan) in which the outstanding Holdings' Carrols common stock is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in the 1998 Directors' Plan):
(1) each option granted under the plan shall become exercisable solely for the amount of such cash, property or securities that the holder of such award would have been entitled to had such award been exercised immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale and participate in such sale as a holder of Holdings' Carrols common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for such award consideration equal to the amount determined by multiplying:
(x) the same amount of consideration per share of Holdings' Carrols common stock received by the holders in connection with the Approved Sale less the exercise price per share of such award to acquire Holdings' Carrols common stock by
(y) the number of shares of Holdings' Carrols common stock represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous with such Approved Sale, any such award will be canceled.
1998 Pollo Tropical Long-Term Incentive Plan. Holdings has also adopted the Carrols Holdings Corporation 1998 Pollo Tropical Long-Term Incentive Plan pursuant to which we may grant awards such as "Incentive Stock Options" (as defined under Section 422 of the Internal Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, performance shares and performance units and other stock-based awards to certain of our and our subsidiaries' officers and employees. The plan is designed to advance our interests and the interests of Holdings by providing an additional incentive to attract, retain and motivate qualified and competent persons through the encouragement of stock ownership or stock appreciation rights in Holdings.
The 1998 Pollo Tropical Long-Term Incentive Plan permits the Compensation Committee of the Board of Directors of Holdings to grant, from time to time, options to purchase an aggregate of up to 100,000 shares of Holdings' Pollo Tropical class of common stock. The vesting periods for options and the expiration dates for exercisability of options granted under the 1998 Pollo Tropical Long-Term Incentive Plan are determined by Holdings' Compensation Committee; however, the exercise period for an option granted under the 1998 Pollo Tropical Long-Term Incentive Plan may not exceed ten years from the date of the grant. Holdings' Compensation Committee is authorized to grant options under the plan to all of our and our subsidiaries' eligible officers and employees, including executive officers and directors (other than outside directors and members of Holdings' Compensation Committee).
Holdings' Compensation Committee determines the option exercise price per share of any option granted under the 1998 Pollo Tropical Long-Term Incentive Plan; however, the option price per share of an option intended to qualify as an Incentive Stock Option shall not be less than the fair market value of the Holdings' Pollo Tropical class of common stock on the date such option is granted. Payment of such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Pollo Tropical class of common stock already owned by the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms of the 1998 Pollo Tropical Long-Term Incentive Plan, the applicable stock option agreement and any applicable guidelines of Holdings' Compensation Committee in effect at the time; or
(5) by any other means approved by Holdings' Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the exercise price of such option by delivering a promissory note, such promissory note may be either:
(1) unsecured and fully recourse against the holder of such option; or
(2) nonrecourse but secured by the shares of Holdings' Pollo Tropical class of common stock being purchased by such exercise and by other assets having a fair market value equal to not less than 40% of the exercise price of such option. In either event, such note shall mature on the fifth anniversary of the date of the note and bear interest at the rate provided under Section 1274(d) of the Internal Revenue Code of 1986, as amended from time to time.
Pursuant to the 1998 Pollo Tropical Long-Term Incentive Plan, in the event of a Change of Control (as defined in the plan) any and all options issued and outstanding will vest and become exercisable in full on the
date of such Change of Control. Under the terms of the 1998 Pollo Tropical Long-Term Incentive Plan a Change of Control includes both a change of control of Holdings or a sale of the Pollo Tropical Group. In addition, as soon as practicable but no later than thirty days before such Change of Control, Holdings' Compensation Committee shall notify any holder of an option granted under the plan of such Change of Control. Further, upon a Change of Control that qualifies as an Approved Sale (as defined in the plan) in which the outstanding common stock of Holdings is converted or exchanged for or becomes a right to receive any cash, property or securities other than Illiquid Consideration (as defined in the plan),
(1) each option granted under the plan shall become exercisable solely for the amount of such cash, property or securities that the holder of such option would have been entitled to had such option been exercised immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale and participate in such sale as a holder of Holdings' Pollo Tropical common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for such option consideration equal to the amount determined by multiplying:
(x) the same amount of consideration per share of Holdings' Pollo Tropical common stock received by the holders of Holdings' Pollo Tropical common stock in connection with the Approved Sale less the exercise price per share of Holdings' Pollo Tropical common stock of such option to acquire Holdings' Pollo Tropical common stock by
(y) the number of shares of Holdings' Pollo Tropical common stock represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous with such Approved Sale, any such option shall be canceled.
Description of Employment Agreements
Vituli Employment Agreement. On March 27, 1997, in connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., we entered into a Second Amended and Restated Employment Agreement with Alan Vituli, which amended and restated an Amended and Restated Employment Agreement dated April 3, 1996 between us and Mr. Vituli. Pursuant to the amended employment agreement, Mr. Vituli will continue to serve as our Chairman of the Board and Chief Executive Officer. The amended employment agreement will be for an initial term of four years, commencing on March 27, 1997 and will be subject to automatic renewals for successive one- year terms unless either we or Mr. Vituli elect not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the amended employment agreement, Mr. Vituli will receive a base salary of $400,000 for the first year of the term, which amount increases annually by at least $25,000 subject to additional increases that may be authorized by the Compensation Committee. Pursuant to the amended employment agreement, Mr. Vituli will participate in our Executive Bonus Plan and any of our stock option plans applicable to executive employees. The amended employment agreement also requires that we are responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Vituli providing a death benefit of $1.5 million payable to an irrevocable trust designated by Mr. Vituli. The amended employment agreement provides that if Mr. Vituli's employment is terminated without Cause (as defined in the amended employment agreement) following a Change of Control (as defined in the amended employment agreement),
(1) Mr. Vituli will receive a cash payment in the amount equal to 2.99 times his Five Year Compensation Average (as defined in the amended employment agreement) if such Change of Control occurs during the first two years of the initial term of the amended employment agreement; and
(2) a cash lump sum equal to his salary during the previous 12 months if terminated thereafter. The amended employment agreement includes non- competition and non-solicitation provisions effective during the term of the amended employment agreement and for two years following its termination.
Accordino Employment Agreement. On March 27, 1997, in connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., we entered into a Second Amended and Restated Employment Agreement with Daniel T. Accordino, which amended and restated an Amended and Restated Employment Agreement dated April 3, 1996 between us and Mr. Accordino. Pursuant to the amended employment agreement, Mr. Accordino will continue to serve as our President and Chief Operating Officer. The amended employment agreement will be for an initial term of four years, commencing on March 27, 1997 and will be subject to automatic renewal for successive one-year terms unless either we or Mr. Accordino elect not to renew by giving written notice to the other at least 90 days before a scheduled expiration date. Pursuant to the amended employment agreement, Mr. Accordino will receive a base salary of $300,000 for the first year of the term, which amount increases annually by at least $20,000 subject to additional increases that may be authorized by the Compensation Committee. Pursuant to the amended employment agreement, Mr. Accordino will participate in our Executive Bonus Plan and any of stock option plans applicable to executive employees. The amended employment agreement also will require that we are responsible for maintaining the premium payments on a split-dollar life insurance policy on the life of Mr. Accordino providing a death benefit of $1.0 million payable to an irrevocable trust designated by Mr. Accordino. The amended employment agreement provides that if Mr. Accordino's employment is terminated without Cause (as defined in the amended employment agreement) following a Change of Control (as defined in the amended employment agreement),
(1) Mr. Accordino will receive a cash payment in the amount equal to 2.99 times his Five Year Compensation Average (as defined in the amended employment agreement) if such change of control occurs during the first two years of the agreement; and
(2) a cash lump sum equal to his salary during the previous 12 months if terminated thereafter. The agreement includes non-competition and non- solicitation provisions effective during the term of the amended employment agreement and for two years following its termination.
Castaldo Employment Agreement. Effective July 20, 1998, in connection with our acquisition of Pollo Tropical, we entered into an Amended and Restated Employment Agreement with Nicholas A. Castaldo, which amended and restated an Employment Agreement dated September 19, 1995, as amended May 5, 1997, between Pollo Tropical and Mr. Castaldo. Pursuant to the amended agreement, Mr. Castaldo serves as the President and Chief Operating Officer of our Pollo Tropical Division. The agreement is for an initial term commencing on July 20, 1998 and ending September 30, 2003, and is subject to renewal for up to two additional one-year periods at our option, exercisable by giving written notice to Mr. Castaldo by no later than July 31, 2003 or 2004, as applicable. Pursuant to the agreement, Mr. Castaldo receives a base salary of $300,000 per year during the term, which amount increases on each January 1st during the term by at least 5% subject to additional increases that may be authorized by our Board of Directors. Pursuant to the agreement, Mr. Castaldo is eligible to receive an annual bonus of up to 100% of his base salary (of which not more than 50% may be subject to deferral provisions in our Executive Bonus Plan (as defined in the agreement)), which bonus is payable in accordance with our Executive Bonus Plan and is based solely upon the achievement by Mr. Castaldo of certain corporate and individual performance standards during the relevant period as reasonably established by us with Mr. Castaldo. Pursuant to the agreement, Mr. Castaldo was granted non-qualified options to purchase 5% of Holdings' Pollo Tropical common stock pursuant to the 1998 Pollo Tropical Long-Term Incentive Plan. Mr. Castaldo's agreement provides that if Mr. Castaldo's employment is terminated by us without Cause (as defined in the agreement) or by Mr. Castaldo for Good Reason (as defined in the agreement), or if the term of the agreement expires, then Mr. Castaldo is entitled to the following payments and benefits:
(1) An amount equal to the greater of:
(a) Mr. Castaldo's base salary then in effect, from the date on which his employment is terminated or expires under the terms of the agreement until 12 months after such termination date; or
(b) Mr. Castaldo's base salary from such termination date through the
end of the initial term. The foregoing will be payable as follows:
a lump sum equal to one year's then current base salary payable
within ten days of such termination date and the balance, if any,
payable in 24 equal monthly installments.
(2) Mr. Castaldo's stock options granted under the Option Agreement (as defined in the agreement) shall vest as set forth in and in accordance with the terms and provisions of the Option Agreement;
(3) Mr. Castaldo's health and medical insurance benefits will be continued at our expense through the date which is 24 months following the termination date; and
(4) any portion of bonus that was deferred under the Pollo Tropical Executive Bonus Plan will be payable in a lump sum within ten days of the termination date.
Mr. Castaldo's agreement includes non-competition and non-solicitation provisions effective during the term of the agreement and for two years following its termination.
Option Agreements Pursuant to the 1996 Long-term Incentive Plan
Vituli Plan Option Agreement. On December 30, 1996, pursuant to the Securities Purchase Agreement dated as of March 6, 1996 among Holdings, the stockholders of Holdings, BIB Holdings and us, Holdings granted to Alan Vituli, under the 1996 Long-Term Incentive Plan, an option to purchase 43,350 shares of Holdings' common stock. The option:
(1) was immediately exercisable with regard to 15,300 shares of Holdings' common stock at an exercise price of $110.00 per share; and
(2) was to become exercisable on June 1, 1997 with regard to:
(a) 15,300 shares of Holdings' common stock at an exercise price of $130.00 per share; and
(b) 12,750 shares of Holdings' common stock at an exercise price of $140.00 per share.
On January 22, 1997, Mr. Vituli contributed these options to the Vituli Family Trust for the benefit of his children.
In connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings granted an option to purchase 43,350 shares of Holdings' common stock under the 1996 Long- Term Incentive Plan in exchange for the options held by the Vituli Family Trust. The Vituli Family Trust agreed to reduce the exercise price to $101.7646 per share. The new option:
(1) has a term of ten years from the date of grant;
(2) became exercisable:
(a) on the date of grant with regard to 15,300 shares of Holdings' common stock;
(b) on December 31, 1997 with regard to 5,610 shares of Holdings' common stock;
(c) on December 31, 1998 with regard to 5,610 shares of Holdings' common stock;
(d) on December 31, 1999 with regard to 5,610 shares of Holdings' common stock; and
(3) will become exercisable:
(a) on December 31, 2000 with regard to 11,220 shares of Holdings' common stock.
Accordino Plan Option Agreement. On December 30, 1996, pursuant to the Securities Purchase Agreement dated as of March 6, 1996, Holdings granted to Daniel T. Accordino, under the 1996 Long-Term Incentive Plan, an option to purchase 28,900 shares of Holdings' common stock. The option:
(1) was immediately exercisable with regard to 10,200 shares of Holdings' common stock at an exercise price of $110.00 per share; and
(2) was to become exercisable on December 31, 1997 with regard to:
(a) 10,200 shares of Holdings' common stock at an exercise price of $130.00 per share; and
(b) 8,500 shares of Holdings' common stock at an exercise price of $140.00 per share.
In connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, the option granted to Mr. Accordino was canceled and Holdings granted to Mr. Accordino, under the 1996 Long-Term Incentive Plan, an option to purchase 28,900 shares of Holdings' common stock at an exercise price of $101.7646 per share. The new option:
(1) has a term of ten years from the date of grant;
(2) became exercisable:
(a) on the date of grant with regard to 10,200 shares of Holdings' common stock;
(b) on December 31, 1997 with regard to 3,740 shares of Holdings' common stock;
(c) on December 31, 1998 with regard to 3,740 shares of Holdings' common stock;
(d) on December 31, 1999 with regard to 3,740 shares of Holdings' common stock, and
(3) will become exercisable:
(a) on December 31, 2000 with regard to 7,480 shares of Holdings' common stock.
Other Option Agreements
Vituli Non-Plan Option Agreement. In connection with the investment by Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings granted to Mr. Vituli a nonqualified stock option to purchase 29,480 shares of Holdings' common stock at an exercise price of $101.7646. The option will have a term of ten years from the date of grant and will become exercisable in five equal parts on the five consecutive anniversaries of the date of grant. The option will have substantially the same terms as options issued under the 1996 Long-Term Incentive Plan with respect to:
(1) the method of payment of the exercise price of the option; and
(2) the effect of a Change of Control (as defined in the 1996 Long-Term Incentive Plan).
Accordino Non-Plan Option Agreement. In connection with the investment by Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings granted to Mr. Accordino a nonqualified stock option to purchase 2,579 shares of Holdings' common stock at an exercise price of $101.7646. The option will have a term of ten years from the date of grant and will become exercisable in five equal parts on the five consecutive anniversaries of the date of grant. The option will have substantially the same terms as the option granted to Mr. Vituli.
Zirkman Non-Plan Option Agreement. In connection with the investment by Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings granted to Mr. Zirkman a nonqualified stock option to purchase 368 shares of Holdings' common stock at an exercise price of $101.7646. The option will have a term of ten years from the date of grant and will become exercisable in five substantially equal parts on the five consecutive anniversaries of the date of grant. The option will have substantially the same terms as the option granted to Mr. Vituli.
Castaldo Option Agreement. In conjunction with Mr. Castaldo's employment agreement Holdings granted Mr. Castaldo a nonqualified stock option to purchase 50,000 shares of Holdings' Pollo Tropical class of common stock under the 1998 Pollo Tropical Long-Term Incentive Plan. The option:
(1) has a term of ten years from the date of grant;
(2) became exercisable on July 19, 1999 with regard to 20,000 shares of Holdings' Pollo Tropical common stock at an exercise price of $77.50 per share; and
(3) will become exercisable:
(a) on July 19, 2000 with regard to 7,500 shares of Holdings' Pollo Tropical common stock at an exercise price of $88.80 per share;
(b) on July 19, 2001 with regard to 7,500 shares of Holdings' Pollo Tropical common stock at an exercise price of $102.90 per share;
(c) on July 19, 2002 with regard to 7,500 shares of Holdings' Pollo Tropical common stick at an exercise price of $119.50 per share; and
(d) on July 19, 2003 with regard to 7,500 shares of Holdings' Pollo Tropical common stock at an exercise price of $137.00 per share.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth the number and percentage of shares of our voting stock and Holdings' voting common stock beneficially owned, as of March 15, 2000, by:
(1) all persons known by us to be the beneficial owners of more than 5% of the shares of such voting common stock;
(2) each of our directors who owns shares of such voting common stock;
(3) each of our executive officers included in the Summary Compensation Table above; and
(4) all of our executive officers and directors as a group.
Shares Beneficially Owned
----------------------------
Number Percentage
------------- --------------
Stockholders of Carrols
Corporation:
Carrols Holdings 10 100%
Corporation.............
968 James Street
Syracuse, New York 13203
Carrols Class Pollo Tropical Class
---------------------------- ------------------------
Number Percentage Number Percentage
------------- -------------- ----------- ------------
Stockholders of Carrols
Holdings Corporation(a):
BIB Holdings (Bermuda) 566,667 46.8% -- --
Ltd.(b).................
c/o Dilmun Investments
Metro Center
One Station Place
Stamford, CT 06902
Madison Dearborn Capital 283,333 23.4% -- --
Partners, L.P. .........
Three First National
Plaza
Suite 3800
Chicago, IL 60602
Madison Dearborn Capital 283,334 23.4% -- --
Partners II, L.P. ......
(Same address as Madison
Dearborn Capital
Partners, L.P.)
Executive Officers and
Directors:
Alan Vituli(c).......... 59,645 4.8%
Daniel T. Accordino..... 23,828 1.9%
Nicholas A. Castaldo.... -- -- 20,000 2.0%
Paul R. Flanders........ 1,450 *
Joseph A. Zirkman....... 1,175 *
Clayton E. Wilhite...... 625 *
Directors and executive
officers of Carrols as
a group (11 persons)... 87,291 7.1% 20,000 2.0%
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(a) The number of shares shown in the table includes stock options which are
currently exercisable or exercisable within 60 days to purchase: 49,818
shares held by Mr. Vituli; 22,968 shares held by Mr. Accordino; 20,000 held
by Mr. Castaldo; 1,450 shares held by Mr. Flanders; 1,052 shares held by
Mr. Zirkman; and 625 shares held by Mr. Wilhite.
(b) These 566,667 shares of Holdings' common stock were previously owned by
Atlantic Restaurants, Inc. which was formed to effect the acquisition of
the company in 1996. Atlantic Restaurants, Inc., which was a wholly-owned
subsidiary of BIB Holdings, was merged into BIB Holdings on February 10,
1999.
(c) Includes 32,130 vested stock options contributed to and held by the Vituli
Family Trust.
Item 13. Certain Relationships and Related Transactions
Stockholders Agreement. On March 27, 1997, in connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., all holders of Holdings' voting common stock entered into a Stockholders Agreement. The agreement provides that all holders of Holdings' voting common stock will vote their common stock in order to cause the following individuals to be elected to the Board of Directors of Holdings and each of its subsidiaries (including us):
(a) three representatives designated collectively by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P.;
(b) three representatives designated by BIB Holdings; and
(c) two representatives designated by Mr. Vituli as long as Mr. Vituli is our Chief Executive Officer, subject in each case to adjustment if the percentage holdings of each decreases below a certain threshold.
In addition, the agreement provides for certain limitations on the ability of holders of Holdings' common stock to sell, transfer, assign, pledge or otherwise dispose of their common stock. The agreement contains covenants requiring us to obtain the prior consent of Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital Partners II, L.P., and BIB Holdings before taking certain actions including the redemption, purchase or other acquisition of Holdings' capital budget approved by Holdings' Board of Directors for that year or the entry into the ownership, active management or operation of any business other than Burger King franchise restaurants.
Registration Rights Agreement. On March 27, 1997, in connection with the investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., those entities, BIB Holdings, Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman entered into a registration agreement with Holdings. The registration agreement provides for demand and piggyback rights with respect to Holdings' common stock. The Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P. or BIB Holdings may demand registration under the Securities Act of all or any portion of their shares of Holdings' common stock or options for shares of Holdings' common stock (the "Registrable Securities"), provided that:
(1) in the case of the first demand registration, Madison Dearborn Capital Partners, L.P., and Madison Dearborn Capital Partners II, L.P. and BIB Holdings must consent to a demand registration unless Holdings has completed a registered public offering of the Holdings' common stock; and
(2) all demand registrations on Form S-1 must be underwritten.
Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P., collectively, and BIB Holdings are each entitled to request:
(1) three demand registrations on Form S-1 in which Holdings will pay all registration expenses, provided that the offering value of the Registrable Securities is at least $15 million; and
(2) an unlimited number of demand registrations on Form S-3 in which Holdings will pay all registration expenses, provided that the offering value of the Registrable Securities is at least $5 million with an underwritten offering equal to at least $10 million.
Whenever Holdings proposes to register any of its securities (other than pursuant to a demand registration) and the registration form may be used for the registration of Registrable Securities, Holdings shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall include in such registration all Registrable Securities to which Holdings has received written requests for inclusion in such registration within 20 days after receipt of Holdings' notice. Holdings shall pay the registration expenses of the holders of Registrable Securities in all such piggyback registrations. The Registration Agreement contains typical "cut back" provisions in connection with both demand registrations and piggyback registrations. We will provide the holders of the Registrable Securities with typical indemnification in the event of certain misstatements or omissions made in connection with both demand registrations and piggyback registrations.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements
Page
----
CARROLS CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants............. F-1
Financial Statements:
Consolidated Balance Sheets.................................. F-2
Consolidated Statements of Operations........................ F-3
Consolidated Statements of Stockholder's Equity.............. F-4
Consolidated Statements of Cash Flows........................ F-5
Notes to Consolidated Financial Statements................... F-6 to F-19
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(b) Financial Statement Schedules
Schedule Description Page -------- ----------- ---- II Valuation and Qualifying Accounts F-20 |
Schedules other than those listed are omitted for the reason that they are not required, not applicable, or the required information is shown in the financial statements or notes thereto.
Separate financial statements of the Company are not filed for the reasons that (1) consolidated statements of the Company and its consolidated subsidiaries are filed and (2) the Company is primarily an operating Company and all subsidiaries included in the consolidated financial statements filed are wholly-owned, and indebtedness of all subsidiaries included in the consolidated financial statements to any person other than the Company does not exceed 5% of the total assets as shown by the Consolidated Balance Sheet at December 31, 1999.
Reports on Form 8-K--No current reports on Form 8-K were filed during the quarter ended January 2, 2000.
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
2.1 Agreement and Plan of Merger dated June 3, 1998 by and between Carrols
Corporation and Pollo Tropical, Inc. (incorporated by reference to
Exhibit (c)(1) to the Tender Offer Statement on Schedule 14 (d)(1)
dated July 3, 1998)
3.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.(3)(a) to Carrols Corporation's 1987 Annual Report on Form
10-K)
3.2 Certificate of Amendment of the Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to Carrols Corporation's
Amendment No. 1 to Form S-4 filed March 24, 1999)
3.3 Restated By-laws (incorporated by reference to Exhibit 3.(3)(b) to
Carrols Corporation's 1986 Annual Report on Form 10-K)
3.4 Certificate of Amendment to the Restated Certificate of Incorporation
of Carrols Holdings Corporation (incorporated by reference to Exhibit
3.1 to Carrols Corporation's September 30, 1999 Quarterly Report on
Form 10-Q)
4.1 Indenture, dated as of November 24, 1998, between Carrols Corporation,
the Guarantors named therein and IBJ Schroder Bank & Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to Carrols
Corporation's Form S-4 filed February 2, 1999)
4.2 Exchange and Registration Rights Agreement, dated as of November 24,
1998, among Carrols Corporation and Chase Securities Inc. and
NationsBanc Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 to Carrols Corporation's Form S-4 filed on February 2,
1999
4.3 Form of 9 1/2% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to Carrols Corporation's Form S-4 filed
February 2, 1999)
10.1 Loan Agreement dated as of May 12, 1997 by and among Carrols
Corporation, Texas Commerce Bank National Association, Heller
Financial, Inc., First Union National Bank of North Carolina, and the
other lenders now or thereafter parties thereto (incorporated by
reference to Exhibit 10.1 to Carrols Corporation's Form S-4 filed
February 2, 1999)
10.2 Stock Purchase Agreement dated as of February 25, 1997 by and among
Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital
Partners II, L.P., Atlantic Restaurants, Inc. and Carrols Holdings
Corporation (incorporated by reference to Exhibit 10.12 to Carrols
Corporation's 1996 Annual Report on Form 10-K)
(2)10.3 1994 Regional Directors Bonus Plan (incorporated by reference to
Exhibit 10.19 to Carrols Corporation's 1994 Annual Report on Form 10-K)
(2)10.4 Amended and Restated Employment Agreement dated as of April 3, 1996 by
and between Carrols Corporation and Alan Vituli (incorporate reference
to Exhibit 10.23 to Carrols Corporation's Current Report on Form 8-K
filed on April 10, 1996)
(2)10.5 Amended and Restated Employment Agreement dated as of April 3, 1996 by
and between Carrols Corporation and Daniel T. Accordino (incorporated
by reference to Exhibit 10.24 to Carrols Corporation's Current Report
on Form 8-K filed on April 10, 1996)
(2)10.6 Amended and Restated Employment Agreement dated as of July 20, 1998 by
and between Carrols Corporation and Nicholas A. Castaldo (incorporated
by reference to Exhibit 10.11 to Carrols Corporation's Form S-4 filed
February 2, 1999)
(2)10.7 Carrols Corporation 1996 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.20 to Carrols Corporation's 1996 Annual Report
on Form 10-K)
(2)10.8 Stock Option Agreement dated as of December 30, 1996 by and between
Carrols Corporation and Alan Vituli (incorporated by reference to
Exhibit 10.21 to Carrols Corporation's 1996 Annual Report on Form 10-K)
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Exhibit
Number Description
------- -----------
(2)10.9 Stock Option Agreement dated as of December 30, 1996 by and between
Carrols Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.22 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.10 Form of Stockholders Agreement by and among Carrols Holdings
Corporation, Madison Dearborn Capital Partners, L.P., Madison
Dearborn Capital Partners II, L.P., Atlantic Restaurants, Inc.,
Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman (incorporated
by reference to Exhibit 10.23 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.11 Form of Registration Agreement by and among Carrols Holdings
Corporation, Atlantic Restaurants, Inc., Madison Dearborn Capital
Partners, L.P., Madison Dearborn Capital Partners II, L.P.,
Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman (incorporated
by reference to Exhibit 10.24 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.12 Form of Second Amended and Restated Employment Agreement by and
between Carrols Corporation and Alan Vituli (incorporated by
reference to Exhibit 10.25 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.13 Form of Second Amended and Restated Employment Agreement by and
between Carrols Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.26 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.14 Form of Carrols Holdings Corporation 1996 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.27 to Carrols Corporation's
1996 Annual Report on Form 10-K)
(2)10.15 Form of Stock Option Agreement by and between Carrols Holdings
Corporation and Alan Vituli (incorporated by reference to Exhibit
10.28 to Carrols Corporation's 1996 Annual Report on Form 10-K)
(2)10.16 Form of Stock Option Agreement by and between Carrols Holdings
Corporation and Daniel T. Accordino (incorporated by reference to
Exhibit 10.29 to Carrols Corporation's 1996 Annual Report on Form 10-
K)
(2)10.17 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Alan Vituli (incorporated by reference to
Exhibit 10.30 to Carrols Corporation's 1996 Annual Report on Form 10-
K)
(2)10.18 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.31 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
(2)10.19 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Joseph A. Zirkman (incorporated by reference
to Exhibit 10.32 to Carrols Corporation's 1996 Annual Report on Form
10-K)
10.20 First Amendment to the Stock Purchase Agreement dated March 27, 1997
by and among Carrols Holdings Corporation, Atlantic Restaurants,
Inc., Madison Dearborn Capital Partners, L.P. and Madison Dearborn
Capital Partners II, L.P. (incorporated by reference to Exhibit 10.38
to Carrols Corporation's current report on Form 8-K filed March 27,
1997)
10.21 Purchase and Sale Agreement dated as of January 15, 1997 by and
between Carrols Corporation, as Purchaser, Omega Services, Inc. as
Seller and Mr. Harold W. Hobgood as Omega's Agent (incorporated by
reference to Exhibit 10.39 to Carrols Corporation's current report on
Form 8-K filed March 27, 1997)
10.22 Purchase and Sale Agreement dated as of January 15, 1997 by and
between Carrols Corporation, as Purchaser, Omega Services, Inc. as
Seller and Mr. Harold W. Hobgood as Omega's Agent (incorporated by
reference to Exhibit 10.40 to Carrols Corporation's current report on
Form 8-K filed March 27, 1997)
|
Exhibit
Number Description
------- -----------
10.23 Purchase Agreement dated as of July 7, 1997 among Carrols
Corporation, as Purchaser, and the individuals and trusts listed
on Exhibit A attached thereto, as Sellers, the individuals and
entities listed on Exhibit B attached thereto, as Affiliated Real
Property Owners, and Richard D. Fors, Jr. and Charles J. Mund, as
the Seller's representatives (incorporated by reference to Exhibit
10.41 to Carrols Corporation's current report on Form 8-K filed
August 20, 1997)
(2)10.24 Carrols Holdings Corporation 1998 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29 to Carrols
Corporation's 1998 Annual Report on Form 10-K)
10.25 Loan Agreement dated as of February 12, 1999 by and among Carrols
Corporation, each of the Lenders party thereto, Manufacturers and
Traders Trust Company, as Co-Agent, Nationsbank, N.A., as Co-
Agent, Suntrust Bank, Atlanta, as Co-Agent and Chase Bank of
Texas, National Association, as Agent (incorporated by reference
to Exhibit 10.30 to Carrols Corporation's Amendment No. 1 to Form
S-4 filed March 24, 1999)
10.26 Supply Agreement between AmeriServe Food Distribution, Inc. and
Carrols Corporation dated January 31, 1999 (incorporated by
reference to Exhibit 10.31 to Carrols Corporation's June 30, 1999
Quarterly Report on Form 10-Q)
10.27 Amendment to Loan Agreement dated as of May 17, 1999 by and among
Carrols Corporation, each of the Lenders party thereto,
Manufacturers and Traders Trust Company, as Co-Agent, Nationsbank,
N.A., as Co-Agent, Suntrust Bank, Atlanta, as Co-Agent and Chase
Bank of Texas, National Association, as Agent (incorporated by
reference to Exhibit 10.32 to Carrols Corporation's June 30, 1999
Quarterly Report on Form 10-Q)
(2)10.28 Carrols Holdings Corporation 1998 Pollo Tropical Long-Term
Incentive Plan (incorporated by reference to Exhibit 10.1 to
Carrols Corporation's September 30, 1999 Quarterly Report on
Form 10-Q)
(1)(2)10.29 Carrols Corporation Retirement Savings Plan dated April 1, 1999.
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to
Carrols Corporation's Form S-4 filed February 2, 1999)
(1)27 Financial Data Schedule
|
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of Carrols Corporation
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholder's equity, cash flows, and supplemental schedule present fairly, in all material respects, the financial position of Carrols Corporation (a wholly owned subsidiaries of Carrols Corporation) and its Subsidiaries at December 31, 1999 and December 31, 1998, and the results of their operations and their cash flows for the three years ended in the period December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements and schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for the opinion expressed above.
/s/ Pricewaterhousecoopers LLP
Syracuse, New York
February 25, 2000
|
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 1,901,000 $ 6,777,000
Trade and other receivables, net of reserves of
$53,000 and $93,000, respectively 787,000 1,060,000
Inventories....................................... 4,211,000 3,431,000
Prepaid rent...................................... 1,829,000 1,370,000
Prepaid expenses and other current assets......... 1,629,000 1,398,000
Refundable income taxes (Note 7).................. 682,000 4,588,000
Deferred income taxes (Note 7).................... 6,475,000 3,956,000
------------ ------------
Total current assets............................... 17,514,000 22,580,000
------------ ------------
Property and equipment, at cost (Notes 3 and 4):
Land.............................................. 9,280,000 9,497,000
Buildings and improvements........................ 27,044,000 22,275,000
Leasehold improvements............................ 61,034,000 57,148,000
Equipment......................................... 102,647,000 81,630,000
Capital leases.................................... 14,407,000 14,570,000
------------ ------------
214,412,000 185,120,000
Less accumulated depreciation and amortization..... (91,599,000) (77,451,000)
------------ ------------
Net property and equipment......................... 122,813,000 107,669,000
------------ ------------
Franchise rights, at cost less accumulated
amortization of $34,174,000 and $29,785,000,
respectively...................................... 101,927,000 105,045,000
Intangible assets, at cost less accumulated
amortization of $11,328,000 and $9,630,000,
respectively...................................... 67,545,000 69,167,000
Other assets....................................... 10,228,000 11,363,000
Deferred income taxes (Note 7)..................... -- 2,986,000
------------ ------------
$320,027,000 $318,810,000
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................. $ 19,345,000 $ 11,162,000
Accrued interest.................................. 1,920,000 2,012,000
Accrued payroll, related taxes and benefits....... 7,267,000 9,390,000
Other liabilities................................. 6,302,000 7,153,000
Current portion of long-term debt (Note 4)........ 4,120,000 3,200,000
Current portion of capital lease obligations (Note
3)............................................... 256,000 296,000
------------ ------------
Total current liabilities.......................... 39,210,000 33,213,000
Long-term debt, net of current portion (Note 4).... 247,661,000 256,285,000
Capital lease obligations, net of current portion
(Note 3).......................................... 1,457,000 1,741,000
Deferred income--sale/leaseback of real estate
(Note 3).......................................... 4,463,000 4,274,000
Accrued postretirement benefits (Note 12).......... 1,913,000 1,708,000
Deferred income taxes (Note 7)..................... 1,208,000 --
Other liabilities.................................. 9,064,000 7,591,000
------------ ------------
Total liabilities.................................. 304,976,000 304,812,000
Commitments and contingencies (Notes 3 and 10)
Stockholder's equity (Note 8):
Common stock, par value $1; authorized 1,000
shares, issued and outstanding--10 shares......... 10 10
Additional paid-in capital......................... 24,484,990 24,484,990
Accumulated deficit................................ (9,434,000) (10,487,000)
------------ ------------
Total stockholder's equity......................... 15,051,000 13,998,000
------------ ------------
$320,027,000 $318,810,000
============ ============
|
The accompanying notes are an integral part of these financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------ ------------
Revenues:
Restaurant sales.................... $455,440,000 $416,190,000 $295,436,000
Franchise fees and royalty
revenues........................... 1,039,000 395,000 --
------------ ------------ ------------
Total revenues...................... 456,479,000 416,585,000 295,436,000
------------ ------------ ------------
Costs and expenses:
Cost of sales....................... 137,279,000 122,620,000 85,542,000
Restaurant wages and related
expenses........................... 134,125,000 121,732,000 89,447,000
Other restaurant operating
expenses........................... 89,093,000 82,710,000 61,691,000
Advertising expense................. 20,618,000 18,615,000 13,122,000
General and administrative.......... 23,102,000 19,219,000 13,121,000
Depreciation and amortization....... 23,898,000 20,005,000 15,102,000
------------ ------------ ------------
Total operating expenses............ 428,115,000 384,901,000 278,025,000
------------ ------------ ------------
Income from operations................ 28,364,000 31,684,000 17,411,000
Interest expense.................... 22,386,000 21,068,000 15,581,000
Interest income (Note 7)............ -- -- (983,000)
Refinancing expenses (Note 5)....... -- 1,639,000 --
------------ ------------ ------------
Income before income taxes and
extraordinary loss................... 5,978,000 8,977,000 2,813,000
Provision for income taxes (Note 7)... 3,826,000 4,847,000 655,000
------------ ------------ ------------
Income before extraordinary loss...... 2,152,000 4,130,000 2,158,000
Extraordinary loss on extinguishment
of debt, net of tax benefit (Note
4)................................... 1,099,000 3,701,000 --
------------ ------------ ------------
Net income............................ $ 1,053,000 $ 429,000 $ 2,158,000
============ ============ ============
|
The accompanying notes are an integral part of these financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Years Ended December 31, 1999, 1998 and 1997
Additional Total
Common Paid-In- Accumulated Notes Stockholder's
Stock Capital Deficit Receivable Equity (Deficit)
------ ----------- ------------ ----------- ----------------
Balance at January 1,
1997................... 10 $ 1,411,990 $(10,574,000) $(2,500,000) $(11,662,000)
Net income............ 2,158,000 2,158,000
Dividends declared.... (4,338,000) (4,338,000)
Capital contribution.. 30,382,000 30,382,000
Tax benefit from sale
of stock options due
to change of
control.............. 907,000 907,000
Redemption of
warrants............. (2,500,000) 2,500,000
--- ----------- ------------ ----------- ------------
Balance at December 31,
1997................... 10 28,362,990 (10,916,000) -- 17,447,000
Net income............ 429,000 429,000
Dividends declared.... (3,878,000) (3,878,000)
--- ----------- ------------ ----------- ------------
Balance at December 31,
1998................... 10 24,484,990 (10,487,000) -- 13,998,000
Net income............ 1,053,000 1,053,000
--- ----------- ------------ ----------- ------------
Balance at December 31,
1999................... 10 $24,484,990 $ (9,434,000) $ -- $ 15,051,000
=== =========== ============ =========== ============
|
The accompanying notes are an integral part of these financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
------------ ------------- ------------
Cash Flows from Operating
Activities:
Net income......................... $ 1,053,000 $ 429,000 $ 2,158,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss (gain) on disposal of property
and equipment..................... 102,000 (96,000) (344,000)
Depreciation and amortization...... 23,898,000 20,005,000 15,102,000
Extraordinary loss on
extinguishment of debt, net of
tax............................... 1,099,000 3,701,000 --
Deferred income taxes.............. 1,675,000 854,000 860,000
Changes in operating assets and
liabilities:
Refundable income taxes............ 4,632,000 2,204,000 (2,141,000)
Accounts payable................... 8,183,000 (3,169,000) 2,631,000
Accrued payroll, related taxes and
benefits.......................... (2,123,000) 2,128,000 1,286,000
Accrued income taxes............... -- -- (1,058,000)
Other liabilities--current......... (851,000) 383,000 1,229,000
Accrued interest................... (92,000) (2,758,000) 29,000
Other liabilities--long-term....... 1,953,000 -- 1,593,000
Other.............................. (1,356,000) (408,000) (1,405,000)
------------ ------------- ------------
Net cash provided from operating
activities......................... 38,173,000 23,273,000 19,940,000
------------ ------------- ------------
Cash Flows for Investing
Activities:
Capital expenditures:
Purchase of Pollo Tropical, Inc.
net of cash acquired............. -- (94,632,000) --
New restaurant development........ (14,085,000) (13,297,000) (9,732,000)
Restaurant remodeling............. (9,795,000) (9,500,000) (3,807,000)
Corporate and restaurant
information systems.............. (11,883,000) (4,246,000) (320,000)
Other capital expenditures........ (9,569,000) (6,252,000) (4,351,000)
Acquisition of restaurants........ (3,833,000) (629,000) (78,485,000)
Payments received on notes and
mortgages......................... -- 715,000 88,000
Proceeds from dispositions of
property and equipment............ 230,000 1,337,000 1,224,000
------------ ------------- ------------
Net cash used for investing
activities......................... $(48,935,000) $(126,504,000) $(95,383,000)
------------ ------------- ------------
Cash Flows from Financing
Activities:
Proceeds from long-term debt, net.. $ -- $ 245,000,000 $ 65,206,000
Principal payments and retirements
of long-term obligations.......... (8,028,000) (143,851,000) (26,184,000)
Proceeds from sale-leaseback
transactions...................... 14,800,000 20,532,000 13,000,000
Dividends paid..................... -- (3,878,000) (4,338,000)
Financing costs associated with
issuance of debt.................. (886,000) (5,408,000) (2,592,000)
Redemption premium on retirement of
debt.............................. -- (4,639,000) --
Exercise of employee stock options
and related tax benefits.......... -- -- 907,000
Capital contribution............... -- -- 30,382,000
------------ ------------- ------------
Net cash provided from financing
activities......................... 5,886,000 107,756,000 76,381,000
------------ ------------- ------------
Net increase (decrease) in cash and
cash equivalents................... (4,876,000) 4,525,000 938,000
Cash and cash equivalents, beginning
of year............................ 6,777,000 2,252,000 1,314,000
------------ ------------- ------------
Cash and cash equivalents, end of
year............................... $ 1,901,000 $ 6,777,000 $ 2,252,000
============ ============= ============
Supplemental disclosures:
Interest paid on debt.............. $ 22,739,000 $ 23,826,000 $ 15,552,000
Income taxes paid.................. $ 1,594,000 $ 3,652,000 $ 1,456,000
|
The accompanying notes are an integral part of these financial statements.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies
Basis of Consolidation. The consolidated financial statements include the accounts of Carrols Corporation and its Subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. The Company is a wholly-owned subsidiary of Carrols Holdings Corporation ("Holdings").
At December 31, 1999 the Company operated, as franchisee, 352 quick-service restaurants under the trade name "Burger King" in thirteen Northeastern, Midwestern and Southeastern states. As described in Note 13, during 1998, the Company purchased Pollo Tropical, Inc. ("Pollo Tropical"). At December 31, 1999 the Company also owned and operated 45 Pollo Tropical restaurants located in Florida and franchised 23 restaurants in Puerto Rico, Ecuador and Florida.
Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Inventories. Inventories are stated at the lower of cost (first-in, first- out) or market. Inventories are primarily comprised of food and paper.
Property and Equipment. Property and equipment are recorded at cost. Depreciation and amortization is provided using the straight-line method over the following estimated useful lives:
Buildings and improvements...... 5 to 20 years
Leasehold improvements.......... Remaining life of lease including renewal
options or life of asset whichever is
shorter
Equipment....................... 3 to 10 years
Computer hardware and software.. 3 to 7 years
Capital leases.................. Remaining life of lease
|
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was $15,314,000, $12,737,000 and $9,718,000, respectively.
Burger King Franchise Rights. Fees for initial franchises and renewals are amortized using the straight-line method over the term of the agreement, generally twenty years. Acquisition costs allocated to franchise rights are amortized using the straight-line method, principally over the remaining lives of the acquired leases including renewal options, but not in excess of 40 years.
Intangible Assets. Intangible assets consist of the excess purchase price over net assets acquired, beneficial leases and trademarks. The excess purchase price over net assets acquired and trademarks are amortized using the straight line method over 40 years. Beneficial leases are amortized using the straight-line method over the lives of the leases including renewal options, but not in excess of 40 years.
Long-Lived Assets. The Company assesses the recoverability of property and equipment, franchise rights and intangible assets by determining whether the amortization of these assets, over their respective remaining lives, can be recovered through undiscounted future operating cash flows. Impairment is reviewed whenever events or changes in circumstances indicate the carrying amounts of these assets may not be fully recoverable.
Deferred Financing Costs. Financing costs, which are included in other assets, were incurred in obtaining long-term debt are capitalized and amortized over the life of the related debt on an effective interest basis for
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
costs associated with the Company's unsecured senior subordinated notes and on a straight-line basis for costs associated with the Company's senior credit facility.
Franchise Fees and Royalty Revenues associated with Pollo Tropical restaurants. Franchise fees are typically collected upon execution of an area development and/or franchise agreement. Royalty revenues are based on a percent of gross sales. Franchise fees are initially recorded as deferred revenue and are recognized in earnings when the franchised restaurants are opened, or upon forfeiture of such fees by the franchisees pursuant to the terms of the franchise development agreements.
Income Taxes. The Company and its subsidiaries have filed separate federal income tax returns for the year ended December 31, 1997 and a consolidated federal income tax return for the years ended December 31, 1998 and 1999.
Advertising Costs. All advertising costs are expensed as incurred.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Self Insurance. The Company is generally self-insured for workers compensation and general liability insurance. The Company maintains stop loss coverage for both individual and aggregate claim amounts. Losses are accrued based upon the Company's estimates of the aggregate liability for claims based on Company experience and certain actuarial methods used to measure such estimates.
Fair Value of Financial Instruments. The following methods were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that fair value:
. Current Assets and Liabilities. The carrying value of cash and cash equivalents and accrued liabilities approximates fair value because of the short maturity of those instruments.
. Senior Subordinated Notes. The fair values of outstanding senior subordinated notes and senior notes are based on quoted market prices. The fair values at December 31, 1999 and 1998 are approximately $153,850,000, and $171,275,000, respectively.
. Revolving and Term Loan Facilities. Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate fair value. The recorded amounts, as of December 31, 1999 and 1998, approximated fair value.
Stock-Based Compensation. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," (SFAS 123) permits entities to recognize as an expense over the vesting period the fair value of all stock- based awards on the date of grant. Alternatively, SFAS 123 also allowed entities to continue to apply the provisions of APB 25 and provide pro forma net income disclosures for employee stock option grants as if the fair-value- based method defined in SFAS 123 has been applied. The Company has elected to continue to apply the provisions of APB 25 and provide the pro forma disclosure provisions of SFAS 123.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday closest to December 31. The financial statements included herein are as of January 2, 2000 (52 weeks), January 3, 1999 (53 weeks) and December 28, 1997 (52 weeks).
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Reclassifications. Certain amounts for prior years have been reclassified to conform to the current year presentation.
2. Intangible Assets
Intangible assets at December 31, net of accumulated amortization, consist of the following:
1999 1998
----------- -----------
Excess cost over net assets acquired................ $61,912,000 $62,961,000
Beneficial leases................................... 5,192,000 5,665,000
Trademarks.......................................... 421,000 315,000
Other............................................... 20,000 226,000
----------- -----------
$67,545,000 $69,167,000
=========== ===========
|
3. Leases
The Company utilizes land and buildings in its operations under various lease agreements. These leases are generally for initial terms of twenty years and, in most cases, contain renewal options for two to four additional five year periods. The rent payable under such leases is generally a percentage of sales with a provision for minimum rent. In addition, most leases require payment of property taxes, insurance and utilities.
Deferred gains have been recorded as a result of sale/leaseback transactions and are being amortized over the lives of the leases. These leases are operating leases, with a twenty year primary term with four five-year renewal options. Accumulated amortization pertaining to capital leases for the years ended December 31, 1999 and 1998 was $10,898,000 and $10,580,000, respectively.
Minimum rent commitments under capital and non-cancelable operating leases at December 31, 1999 were as follows:
Years Ending Capital Operating
------------ ---------- ------------
2000............................................... $ 466,000 $ 25,533,000
2001............................................... 455,000 25,003,000
2002............................................... 425,000 23,977,000
2003............................................... 288,000 22,852,000
2004............................................... 229,000 21,577,000
2005 and thereafter................................ 812,000 167,134,000
---------- ------------
Total minimum lease payments....................... 2,675,000 $286,076,000
========== ============
Less amount representing interest................ 962,000
----------
Total obligations under capital leases............. 1,713,000
Less current portion............................. (256,000)
----------
Long-term obligations under capital leases......... $1,457,000
==========
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Total rent expense on operating leases, including percentage rent on both operating and capital leases, for the past three years was as follows:
1999 1998 1997
----------- ----------- -----------
Minimum rent on real property.......... $25,775,000 $22,441,000 $15,303,000
Additional rent based on a percentage
of sales.............................. 3,901,000 4,328,000 3,099,000
Equipment rent......................... 226,000 39,000 162,000
----------- ----------- -----------
$29,902,000 $26,808,000 $18,564,000
=========== =========== ===========
|
4. Long-Term Debt
Long-term debt at December 31 consisted of:
1999 1998
------------ ------------
Collateralized:
Revolving credit facility.................... $ 34,100,000 $ 38,619,000
Term loan facility........................... 47,000,000 50,000,000
Other notes payable with interest rates to
10%......................................... 681,000 866,000
Unsecured 9.5% senior subordinated notes....... 170,000,000 170,000,000
------------ ------------
251,781,000 259,485,000
Less current portion........................... (4,120,000) (3,200,000)
------------ ------------
$247,661,000 $256,285,000
============ ============
|
On February 12, 1999, the Company entered into a new senior credit facility with Chase Bank of Texas, National Association, as agent and lender, and other lenders as parties thereto. This facility provides for total borrowings of $155 million and consists of a $105 million revolving credit facility (including a standby letter of credit facility for up to $5 million) and a $50 million term loan facility.
In connection with the new senior credit facility above, the Company has recognized an extraordinary loss of $1,099,000 in 1999 which is net of a $726,000 income tax benefit. This loss represents the write off of unamortized debt issue costs related to the previous senior credit facility.
Borrowings under the revolving credit facility may be used to finance permitted acquisitions and new store development, or for working capital and general corporate purposes. At December 31, 1999, $68,250,000 was available for borrowings under the revolving credit facility, after reserving $2,650,000 for a letter of credit guaranteed by the facility.
Borrowings under the revolving credit facility and the term loan facility bear interest at a per annum rate, at the Company's option, of either:
1) the greater of the prime rate or the federal funds rate plus .50% plus a margin ranging from 0% to .75%, based on debt to cash flow ratios; or
2) LIBOR plus a margin ranging from 1.00% to 2.25%, based on debt to cash flow ratios.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The revolving credit facility expires on December 31, 2003 (subject to a one-year extension upon request and unanimous approval of the lenders). Remaining amounts under the term loan facility are repayable as follows:
1) an aggregate of $4.0 million payable in four quarterly installments in 2000;
2) an aggregate of $5.0 million payable in four quarterly installments in 2001;
3) an aggregate of $6.0 million payable in four quarterly installments in 2002;
4) an aggregate of $7.0 million payable in four quarterly installments in 2003; and
5) a final payment of $25.0 million payable upon the term loan facility's maturity on December 31, 2003.
In general, the Company's obligations under the senior credit facility are secured by all of the Company's assets, a pledge of the Company's common stock and the stock of each of the Company's subsidiaries.
The Company issued $170 million of unsecured senior subordinated notes on November 24, 1998. The senior subordinated notes bear interest at a rate of 9.5% payable semi-annually on June 1 and December 1 and mature on December 1, 2008. The notes are redeemable at the option of the Company in whole or in part on or after December 1, 2003 at a price of 104.75% of the principal amount if redeemed before December 1, 2004, 103.167% of the principal amount if redeemed after December 1, 2004 but before December 1, 2005, 101.583% of the principal amount if redeemed after December 1, 2005 but before December 1, 2006 and at 100% of the principal amount after December 1, 2006.
In connection with the issuance of the 9.5% senior subordinated notes, the Company redeemed all of its outstanding 11.5% senior notes. This redemption included aggregate principal amounts of $107,637,000, a redemption premium of $4,639,000, and accrued interest to December 24, 1998 of $4,436,000. In addition, the Company used the proceeds of the 9.5% notes to repay $47.9 million of its previous senior credit facility.
In connection with the redemption of the 11.5% senior notes in the fourth quarter of 1998, the Company recognized an extraordinary loss of $3,701,000, which is net of a $3,281,000 income tax benefit, for the redemption premium and the write-off of $2,343,000 in unamortized debt issue costs related to the 11.5% notes.
Restrictive covenants of the senior subordinated notes and the senior credit facility include limitations with respect to the Company's ability to issue additional debt, incur liens, sell or acquire assets or businesses, pay dividends and make certain investments. In addition, the senior credit facility requires the Company to meet certain financial ratio tests.
At December 31, 1999, principal payments required on all long-term debt, including the new senior credit facility, are as follows:
2000............................................................ $ 4,120,000
2001............................................................ 5,000,000
2002............................................................ 6,000,000
2003............................................................ 66,100,000
2004............................................................ --
Thereafter...................................................... 170,561,000
------------
$251,781,000
============
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The weighted average interest rate for the years ended December 31, 1999 and 1998 was 8.9% and 9.9%, respectively.
5. Refinancing Expenses
The Company expensed all costs associated with its efforts to refinance its existing debt in the third quarter of 1998 as the timing of any future refinancing was then uncertain and the related activities had ceased. Approximately $1.2 million of these costs related to losses on interest rate hedge transactions.
6. Summarized Financial Information of Certain Subsidiaries
The following table presents summarized combined financial information for the wholly-owned subsidiaries that unconditionally guarantee the $170 million senior subordinated notes of the Company. These subsidiaries are Carrols Realty Holdings, Carrols Realty I Corp., Carrols Realty II Corp., Carrols J.G. Corp., Quanta Advertising Corp., Pollo Franchise Inc. and Pollo Operations, Inc. The Statement of Operations for the year ended December 31, 1998 includes the operations of Pollo Operations, Inc. and Pollo Franchise Inc. for the period July 10, 1998 (date of acquisition) through December 31, 1998.
December 31,
-----------------------
1999 1998
----------- -----------
Balance sheet:
Current assets.................................... $ 2,657,000 $ 910,000
Non-current assets................................ 89,527,000 89,922,000
Current liabilities............................... 5,734,000 7,401,000
Non-current liabilities........................... 78,549,000 79,129,000
Year Ended December 31,
-----------------------------------
1999 1998 1997
----------- ----------- -----------
Statement of Operations:
Revenues.............................. $84,271,000 $35,543,000 $ 283,000
Operating expenses.................... 71,719,000 30,576,000 283,000
Income from operations................ 12,552,000 4,967,000 --
Net income............................ 2,048,000 805,000 --
|
7. Income Taxes
The income tax provision was comprised of the following for the years ended December 31:
1999 1998 1997
---------- ---------- ----------
Current:
Federal.................................. $ 288,000 $ 152,000 $ 887,000
Foreign.................................. 239,000 114,000 --
State.................................... 744,000 471,000 628,000
---------- ---------- ----------
1,271,000 737,000 1,515,000
---------- ---------- ----------
Deferred:
Federal.................................. 2,188,000 3,602,000 (672,000)
State.................................... 367,000 508,000 (188,000)
---------- ---------- ----------
2,555,000 4,110,000 (860,000)
---------- ---------- ----------
$3,826,000 $4,847,000 $ 655,000
========== ========== ==========
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The components of deferred income tax assets and liabilities at December 31, are as follows:
1999 1998
---------- ----------
Current Deferred Tax Assets:
Accounts receivable and other reserves........... $ 260,000 $ 206,000
Accrued vacation benefits........................ 827,000 649,000
Other non-deductible accruals.................... 723,000 695,000
Loss on disposal of assets....................... -- 259,000
Reserve for closed restaurants................... 149,000 450,000
Net operating loss carrryforwards................ 4,516,000 1,697,000
---------- ----------
Total Current Deferred Tax Assets.................. 6,475,000 3,956,000
---------- ----------
Long Term Deferred Tax Assets/(Liabilities):
Deferred income on sale/leaseback of real
estate.......................................... 1,782,000 1,265,000
Postretirement benefit expenses.................. 764,000 723,000
Capital leases................................... 361,000 412,000
Property and equipment depreciation.............. (3,987,000) (1,216,000)
Net operating loss carryforwards................. 5,190,000 7,388,000
Amortization of franchise rights................. (6,772,000) (6,443,000)
Non-deductible rent expense...................... 762,000 843,000
Tax credit carryforwards......................... 471,000 --
Other............................................ 221,000 14,000
---------- ----------
Total Long-Term Net Deferred Tax
Assets/(Liabilities).............................. (1,208,000) 2,986,000
---------- ----------
Total Net Deferred Tax Assets...................... $5,267,000 $6,942,000
========== ==========
|
The Company has net operating loss carryforwards for income tax purposes of approximately $25 million, at December 31, 1999. The net operating loss carryforwards expire in varying amounts beginning in 2003 through 2010. Due to a change in ownership the Company is generally limited, for Federal income tax purposes, to an annual utilization of net operating losses of $4,641,000. The Company has net operating losses of approximately $11.7 million available to be utilized in 2000 due to this limit not being fully utilized in prior years. In addition, the Company has available Federal alternative minimum tax credit carryforwards with no expiration date and other Federal tax credit carryforwards which begin to expire in 2018. Realization of the deferred income tax assets relating to net operating losses and tax credit carryforwards is dependent on generating sufficient taxable income prior to the expiration of these carryforwards. Based upon results of operations, management believes it is more likely than not that the Company will generate sufficient future taxable income to fully realize the benefit of deferred tax assets, although there can be no assurance of this.
In connection with a tax appeals settlement, the Company recognized $983,000 of interest income in 1997.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
A reconciliation of the statutory federal income tax rate to the effective tax rates for the years ended December 31, is as follows:
1999 1998 1997
--------------- --------------- ----------------
Statutory federal income
tax rate................. $2,034,000 34.0% $3,053,000 34.0% $ 957,000 34.0%
State income taxes, net of
federal benefit.......... 526,000 8.8 515,000 5.7 266,000 9.5
Nondeductible expenses.... 956,000 16.0 611,000 6.8 197,000 7.0
Tax appeals settlement.... -- -- -- -- (806,000) (28.7)
Foreign taxes............. 158,000 2.6 114,000 1.3 -- --
Miscellaneous............. 152,000 2.6 554,000 6.1 41,000 1.4
---------- ---- ---------- ---- --------- -----
$3,826,000 64.0% $4,847,000 53.9% $ 655,000 23.2%
========== ==== ========== ==== ========= =====
|
Nondeductible expenses consist primarily of amortization of certain franchise rights and other intangibles.
8. Stockholder's Equity
The Company
The Company has 1,000 shares of common stock authorized of which 10 shares are issued and outstanding. The Company is 100% owned by Holdings. Dividends on the Company's common stock are restricted to amounts permitted by various loan agreements.
Holdings
During 1999, Holdings amended its Restated Certificate of Incorporation and its stockholders approved and adopted the following actions: (1) 7,250 shares of Holdings' Class A 10% Cumulative Redeemable Preferred Stock which were authorized but unissued, were canceled; (2) Holdings' authorized common stock was increased from 3,000,000 shares to 5,000,000 shares; and, (3) 100,000 shares of Preferred Stock, par value $0.01, were authorized.
Holdings' common stock was designated to consist of two series comprising of 3,000,000 shares of Carrols Stock, par value $0.01 per share, and 2,000,000 shares of Pollo Tropical Stock, par value $0.01 per share. The existing common stock of Holdings was redesignated, on a share for share basis, for shares of the Carrols class of common stock. The holders of the Carrols Stock have exclusive voting rights; no holders of the Pollo Tropical Stock have voting rights, except as may be required pursuant to Delaware law.
The Pollo Tropical class of Holdings' stock is considered a tracking stock, which is a class of stock intended to track the separate performance of the Company's Pollo Tropical division. This tracking stock was adopted as a separate series of equity securities in order to provide a framework for structuring employee incentive plans and to tie such incentives to the business results and performance of the Pollo Tropical division.
The number of shares of Pollo Tropical class stock that initially represents 100% of the common stockholders' equity of Holdings attributable to the Pollo Tropical Group, was established at 1,000,000 shares by the Board of Directors. Of the 1,000,000 shares that are issuable, none have been issued, and 100,000 have been reserved for grants under the 1998 Pollo Tropical Long-Term Incentive Plan, which is a Holdings stock option plan.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The Carrols class of Holdings' stock consists of the interest of Holdings in all of its assets, liabilities and businesses, other than the assets, liabilities and businesses attributed to the Pollo Tropical Group. Until the issuance of any Pollo Tropical Stock, the rights, preferences and liabilities of the Pollo Tropical Stock will be retained by Holdings. To the extent that less than 100% of the authorized shares of Pollo Tropical Stock are issued, the rights, preferences, assets and liabilities of the shares not issued remain with Holdings and its existing Carrols class stockholders.
Of the 5,000,000 common shares authorized, 1,144,144 shares of Holdings' Carrols common stock are issued and outstanding. In 1998, all preferred stock was redeemed at the option of Holdings, at a price of $1,000 per share, plus accrued dividends. In February 1997, a 1 for 3.701 reverse stock split was effected to reduce the outstanding shares of common stock of Holdings to 850,000 shares. In 1997, Holdings also exercised its option to purchase warrants at an aggregate price of $2,510,000 from a third party in exchange for payment on a related loan.
On March 27, 1997, Holdings sold 283,334 shares of its common stock to Madison Dearborn Capital Partners ("Madison Dearborn"), an independent third party, for $30.4 million. On March 27, 1997, BIB Holdings (Bermuda) Ltd. ("BIB"), the then sole stockholder of Holdings, also sold 283,333 of its shares of Holdings to Madison Dearborn resulting in both BIB and Madison Dearborn having an equal interest in the Company.
Stock Options for Carrols Class Stock
In 1996, Holdings adopted a stock option plan entitled the 1996 Long-Term Incentive Plan ("1996 Plan") and authorized a total of 106,250 shares to be granted at prices ranging from $101.76 to $140.00 per share. Options under this plan generally vest over a four year period. In 1998, Holdings adopted the 1998 Directors' Stock Option Plan ("1998 Directors' Plan") authorizing to grant up to 10,000 options to non-employee Directors. Options under this plan are exercisable over four years. In addition, in conjunction with the 1997 sale of Holdings common stock to Madison Dearborn, additional options not part of the 1996 Plan for 32,427 shares at a price of $101.76 were granted with vesting over a five year period. As a result of the adoption of the Pollo Tropical tracking stock, the stock options under these plans were redesignated as options of Holdings' Carrols class common stock.
Stock Options for Pollo Tropical Tracking Stock
Holdings has also adopted the 1998 Pollo Tropical Long-Term Incentive Plan ("1998 Pollo Plan") authorizing to grant up to 100,000 shares of Holdings' Pollo Tropical class of common stock. Options under this plan generally vest over a five year period.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
A summary of all option activity under Holdings' stock option plans for the years ended December 31, 1999, 1998 and 1997 is as follows:
NonPlan 1996 Directors Pollo
Options Plan Plan Plan
------- ---------- --------- --------
Shares Under Option:
Outstanding at December 31, 1996..... -- -- -- --
Granted............................ 32,427 86,710 -- --
Canceled........................... -- (570) -- --
------- ---------- ------ --------
Outstanding at December 31, 1997..... 32,427 86,140 -- --
Granted............................ -- 10,400 2,000 70,000
Canceled........................... -- (775) -- --
------- ---------- ------ --------
Outstanding at December 31, 1998..... 32,427 95,765 2,000 70,000
Granted............................ -- 6,245 500 6,250
Canceled........................... -- (3,587) (1,000) --
------- ---------- ------ --------
Outstanding at December 31, 1999..... 32,427 98,423 1,500 76,250
Grant Prices:
1997............................... $101.76 $101.76 to $ -- $ --
110.00
1998............................... -- 124.78 110.00 77.50 to
137.00
1999............................... -- 126.00 126.00 109.00
Average Option Price:
at December 31, 1997............... $101.76 $ 103.09 $ -- $ --
at December 31, 1998............... 101.76 105.32 110.00 92.31
at December 31, 1999............... 101.76 106.28 115.33 102.04
Options Exercisable:
at December 31, 1997............... -- 38,323 -- --
at December 31, 1998............... 6,486 53,474 500 --
at December 31, 1999............... 12,972 68,057 625 25,000
|
Had compensation cost been determined based upon the fair value of the stock options at grant date consistent with the method of SFAS 123, the Company's pro-forma net income (loss) would have been $534,000, $(37,000) and $1,488,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
The fair value of each option grant was estimated using the minimum value option pricing model with the following weighted-average assumptions:
1999 1998 1997
------- ------- -------
Risk-free interest rate........................... 5.51% 5.60% 6.53%
Annual dividend yield............................. 0% 0% 0%
Expected life..................................... 5 years 5 years 5 years
|
9. Business Segment Information
The Company is engaged in the quick-service restaurant industry, with two restaurant concepts: Burger King operating as a franchisee and Pollo Tropical, a Company owned concept. The Company's Burger King
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
restaurants are all located in the United States, primarily in the Northeast, Southeast and Midwest. Pollo Tropical is a regional quick-service restaurant chain featuring grilled marinated chicken and authentic "made from scratch" side dishes. Pollo Tropical's core markets are located in south and central Florida.
Segment information for December 31, 1997 is not presented, since the Pollo Tropical acquisition did not occur until July 9, 1998 and previous to this the Company operated its business as one segment whose results are reflected in the 1997 Statement of Operations. For 1998, segment information includes Burger King restaurants for the year ended December 31, 1998 and Pollo Tropical for the period July 10, 1998 through December 31, 1998. Segment information for 1999 and 1998 is shown in the following table. The "Other" column includes corporate related items not allocated to reportable segments and for income from operations, principally corporate depreciation and amortization. Other identifiable assets consist primarily of franchise rights and intangible assets. Non-operating expenses, comprised of interest expense, interest income, and refinancing expenses and the extraordinary loss are corporate related items and therefore have not been allocated to the reportable segments.
Burger King Pollo
Restaurants Tropical Other Consolidated
----------- -------- ------- ------------
($ in 000's)
Year Ended December 31, 1999:
Revenues........................ $372,689 $83,790 $ -- $456,479
Cost of sales................... 108,489 28,790 -- 137,279
Restaurant wages and related
expenses....................... 114,935 19,190 -- 134,125
Depreciation and amortization... 13,113 1,948 8,837 23,898
Income from operations.......... 22,742 14,459 (8,837) 28,364
Identifiable assets............. 199,907 24,168 95,952 320,027
Capital expenditures, excluding
acquisitions................... 32,159 9,522 3,651 45,332
Year Ended December 31, 1998:
Revenues........................ 381,042 35,543 -- 416,585
Cost of sales................... 110,269 12,351 -- 122,620
Restaurant wages and related
expenses....................... 113,456 8,276 -- 121,732
Depreciation and amortization... 11,620 1,018 7,367 20,005
Income from operations.......... 33,334 5,717 (7,367) 31,684
Identifiable assets............. 196,136 23,078 99,596 318,810
Capital expenditures, excluding
acquisitions................... 26,560 4,335 2,400 33,295
|
10. Contingencies
On November 16, 1998, the Equal Employment Opportunity Commission ("EEOC") filed suit in the United States District Court for the Northern District of New York, under Title VII of the Civil rights Act of 1964, as amended, against the Company.
The case is in the early phase of discovery; written discovery is required to be completed by May 22, 2000, at which time the parties may file motions for summary judgement. It is too early to make an evaluation of the likelihood of an unfavorable outcome and/or an estimate of the amount or range of potential loss. The Company intends to contest the case virorously and believes it is without merit.
The Company is a party to various other legal proceedings arising from the normal course of business. It is the Company's policy to accrue costs associated with significant outstanding legal proceedings, which are able
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
to be estimated. Based on information currently available, management believes adverse decisions relating to litigation and contingencies in the aggregate would not materially affect the Company's results of operations, cash flows or financial condition.
11. Retirement Plans
The Company offers two retirement plans, a savings plan for its salaried Burger King employees (the "Carrols Corporation Retirement Savings Plan") and a 401(k) plan for its Pollo Tropical employees (the "Pollo Tropical 401(k) Retirement Savings Plan").
Effective April 1, 1999, the Carrols Corporation Retirement Savings Plan was amended. Under this amendment, the plan was modified to include a savings option pursuant to section 401(k) of the Internal Revenue Code in addition to a post tax savings option. Under the amended plan, participating employees may contribute up to 18% of their salary annually to either of the savings options, subject to other limitations. The Company's contributions, which begin to vest after three years and fully vest after seven years of service, are equal to 50% of the employee's contributions to a maximum Company contribution of $520 annually. The employees have various investment options available under a trust established by the plan. The plan expense, including Company contributions, was $245,000, $216,000 and $208,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Under the Pollo Tropical 401(k) Retirement Savings Plan, all employees who are age 21 or older and who have been credited with at least 1,000 hours of service within 12 consecutive months are eligible to participate in the 401K Plan. The Company makes discretionary matching contributions, which are allocated to participants based on the participant's eligible deferrals during the plan year. Company contributions vest at a rate of 33% for each year of service. Company contributions to the 401K Plan totaled $29,000 and $17,000, for the years ended December 31, 1999 and 1998.
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
12. Postretirement Benefits
The Company provides postretirement medical and life insurance benefits covering substantially all salaried employees. The following is the plan status and accumulated postretirement benefit obligation (APBO) at December 31, 1999 and 1998:
1999 1998 1997
----------- ----------- -----------
Change in benefit obligation:
Benefit obligation at beginning of
the year......................... $ 1,723,000 $ 1,361,000 $ 1,241,000
Service Cost...................... 141,000 107,000 69,000
Interest cost..................... 115,000 101,000 85,000
Plan participant's contributions.. 2,000 3,000 --
Amendments, curtailments, special
terminations..................... 8,000 69,000 --
Actuarial (gain) loss............. (262,000) 177,000 --
Benefits paid..................... (44,000) (95,000) (34,000)
----------- ----------- -----------
Benefit obligation at end of the
year............................. 1,683,000 1,723,000 1,361,000
Change in plan assets:
Fair value of plan assets at end
of year.......................... -- -- --
----------- ----------- -----------
Funded status..................... (1,683,000 (1,723,000) (1,361,000)
Unrecognized prior service cost... (160,000) (193,000) (286,000)
Unrecognized actuarial net (gain)
loss............................. (70,000) 208,000 20,000
----------- ----------- -----------
Accrued benefit cost.............. $(1,913,000) $(1,708,000) $(1,627,000)
=========== =========== ===========
Weighted average assumptions as of
December 31:
Discount rate..................... 7.5% 6.5% 7.0%
=========== =========== ===========
For measurement purposes, a 6.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999, gradually
decreasing to 5.5% by the year 2001 and remaining at that rate thereafter.
1999 1998 1997
----------- ----------- -----------
Components of net periodic benefit
cost:
Service cost...................... $ 141,000 $ 107,000 $ 69,000
Interest cost..................... 115,000 101,000 85,000
Amortization of gains and losses.. 4,000 -- 4,000
Amortization of unrecognized prior
service cost..................... (24,000) (25,000) (29,000)
----------- ----------- -----------
Net periodic postretirement benefit
cost............................... $ 236,000 $ 183,000 $ 129,000
=========== =========== ===========
|
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point change in the health care cost trend rates would have the following effects:
Increase Decrease
-------- ---------
Effect on total of service and interest cost
components.......................................... $ 57,000 $ (43,000)
Effect on postretirement benefit obligation.......... 293,000 (226,000)
|
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
13. Acquisitions
On July 9, 1998, the Company consummated the purchase of the outstanding common stock of Pollo Tropical Inc. ("Pollo Tropical") for an approximate cash purchase price of $94.6 million and on July 20, 1998 merged Pollo Tropical into the Company. The Pollo Tropical acquisition has been accounted for by the purchase method of accounting and, accordingly, the results of operations of Pollo Tropical from July 10, 1998 are included in the accompanying consolidated financial statements. The excess purchase price over net assets acquired is included in intangible assets and is amortized over 40 years using the straight-line method. The Company used its previous senior credit facility to finance the Pollo Tropical acquisition.
On March 28, 1997, the Company purchased certain assets and franchise rights of twenty-three Burger King restaurants in North and South Carolina for a cash price of approximately $21 million. On August 20, 1997, the Company purchased certain assets and franchise rights of sixty-three Burger King restaurants, primarily in Western New York State, Indiana and Kentucky for a cash price of approximately $52 million.
The following proforma results of operations for the periods presented below assume these acquisitions occurred as of the beginning of the respective period in which the acquisition occurred:
Year Ended December 31,
-------------------------
1998 1997
------------ ------------
(unaudited)
Revenues.......................................... $454,672,000 $407,819,000
============ ============
Income from operations............................ $ 37,313,000 $ 29,356,000
============ ============
Net income........................................ $ 1,206,000 $ 2,728,000
============ ============
|
The preceding proforma financial information is not necessarily indicative of the operating results that would have occurred had any of the acquisitions been consummated as of the beginning of the respective periods, nor are they necessarily indicative of future operating results.
Assets acquired and liabilities assumed in these acquisitions were as follows:
1998 1997
Acquisition Acquisition
of of
Pollo Burger King
Tropical Units
----------- -----------
Current assets, excluding cash..................... $ 2,422,000 $ --
Inventory.......................................... 298,000 604,000
Property and equipment............................. 38,005,000 12,778,000
Franchise rights................................... -- 65,496,000
Intangible assets including goodwill............... 64,011,000 --
Other non-current assets........................... 783,000 --
Accounts payable................................... (1,833,000) --
Accrued payroll, related taxes and benefits........ (963,000) (393,000)
Current liabilities................................ (3,944,000) --
Other non-current liabilities...................... (4,147,000) --
----------- -----------
$94,632,000 $78,485,000
=========== ===========
|
CARROLS CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1999, 1998 and 1997
Col. A Col. B Col. C Col. D Col. E
------ ---------- ---------- ---------- ----------
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- ---------- ---------- ---------- ----------
Year ended December 31, 1999:
Reserve for doubtful trade
accounts receivable....... $ 93,000 $ $(40,000)(b) $ 53,000
Other reserves(a).......... 974,000 1,501,000 (989,000)(b) 1,486,000
Year ended December 31, 1998:
Reserve for doubtful trade
accounts receivable....... 130,000 64,000(c) (101,000)(b) 93,000
Other reserves(a).......... 886,000 365,000 (277,000)(b) 974,000
Year ended December 31, 1997:
Reserve for doubtful trade
accounts receivable....... 310,000 -- (180,000)(b) 130,000
Other reserves(a).......... 753,000 133,000 -- 886,000
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 29th day of March, 2000.
Carrols Corporation
/s/ Alan Vituli
By: _________________________________
Alan Vituli,
Chairman and Chief Executive
Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Alan Vituli Director, Chairman and March 29, 2000
______________________________________ Chief Executive Officer
Alan Vituli (Principal Executive
Officer)
/s/ Daniel T. Accordino Director, President and March 29, 2000
______________________________________ Chief Operating Officer
Daniel T. Accordino
/s/ Benjamin D. Chereskin Director March 29, 2000
______________________________________
Benjamin D. Chereskin
/s/ James M. Conlon Director March 29, 2000
______________________________________
James M. Conlon
/s/ David J. Mathies, Jr. Director March 29, 2000
______________________________________
David J. Mathies, Jr.
/s/ Robin P. Selati Director March 29, 2000
______________________________________
Robin P. Selati
/s/ Clayton E. Wilhite Director March 29, 2000
______________________________________
Clayton E. Wilhite
/s/ Paul R. Flanders Vice President--Finance March 29, 2000
______________________________________ and Treasurer (Principal
Paul R. Flanders Financial Officer and
Principal Accounting
Officer)
/s/ Timothy J. LaLonde Vice President--Controller March 29, 2000
______________________________________
Timothy J. LaLonde
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EXHIBIT 10.29
CARROLS CORPORATION RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER................. 18
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY..................... 19
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR...................... 20
2.4 RECORDS AND REPORTS......................................... 21
2.5 APPOINTMENT OF ADVISERS..................................... 21
2.6 PAYMENT OF EXPENSES......................................... 22
2.7 CLAIMS PROCEDURE............................................ 22
2.8 CLAIMS REVIEW PROCEDURE..................................... 22
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY................................... 23
3.2 EFFECTIVE DATE OF PARTICIPATION............................. 23
3.3 DETERMINATION OF ELIGIBILITY................................ 23
3.4 TERMINATION OF ELIGIBILITY.................................. 23
3.5 OMISSION OF ELIGIBLE EMPLOYEE............................... 24
3.6 INCLUSION OF INELIGIBLE EMPLOYEE............................ 24
3.7 ELECTION NOT TO PARTICIPATE................................. 24
ARTICLE IV
CONTRIBUTION AND ALLOCATION
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4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION....................... 24
4.2 PARTICIPANT'S SALARY REDUCTION AND VOLUNTARY CONTRIBUTION ELECTION.. 25
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION............................ 29
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS............................. 30
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS.................................... 33
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS...................... 35
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS................................ 38
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS.................. 41
4.9 MAXIMUM ANNUAL ADDITIONS............................................ 44
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS........................... 48
4.11 TRANSFERS FROM QUALIFIED PLANS...................................... 49
4.12 MANDATORY CONTRIBUTIONS............................................. 52
4.13 VOLUNTARY CONTRIBUTIONS............................................. 53
4.14 DIRECTED INVESTMENT ACCOUNT......................................... 54
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND......................................... 56
5.2 METHOD OF VALUATION................................................. 57
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT........................... 57
6.2 DETERMINATION OF BENEFITS UPON DEATH................................ 57
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.................... 59
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6.4 DETERMINATION OF BENEFITS UPON TERMINATION...................... 59
6.5 DISTRIBUTION OF BENEFITS........................................ 63
6.6 DISTRIBUTION OF BENEFITS UPON DEATH............................. 66
6.7 TIME OF SEGREGATION OR DISTRIBUTION............................. 68
6.8 DISTRIBUTION FOR MINOR BENEFICIARY.............................. 68
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN.................. 68
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP............................... 69
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION................. 71
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE........................... 71
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE..................... 72
7.3 OTHER POWERS OF THE TRUSTEE..................................... 73
7.4 LOANS TO PARTICIPANTS........................................... 76
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS........................ 78
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES................... 78
7.7 ANNUAL REPORT OF THE TRUSTEE.................................... 78
7.8 AUDIT........................................................... 79
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.................. 79
7.10 TRANSFER OF INTEREST............................................ 81
7.11 DIRECT ROLLOVER................................................. 81
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT....................................................... 82
8.2 TERMINATION..................................................... 83
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8.3 MERGER OR CONSOLIDATION........................................ 83
ARTICLE IX
TOP HEAVY
9.1 TOP HEAVY PLAN REQUIREMENTS.................................... 84
9.2 DETERMINATION OF TOP HEAVY STATUS.............................. 84
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS........................................... 88
10.2 ALIENATION..................................................... 88
10.3 CONSTRUCTION OF PLAN........................................... 89
10.4 GENDER AND NUMBER.............................................. 89
10.5 LEGAL ACTION................................................... 89
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS......................... 89
10.7 BONDING........................................................ 90
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE..................... 90
10.9 INSURER'S PROTECTIVE CLAUSE.................................... 90
10.10 RECEIPT AND RELEASE FOR PAYMENTS............................... 91
10.11 ACTION BY THE EMPLOYER......................................... 91
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY............. 91
10.13 HEADINGS....................................................... 92
10.14 APPROVAL BY INTERNAL REVENUE SERVICE........................... 92
10.15 UNIFORMITY..................................................... 93
ARTICLE XI
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PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS.................................. 93
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS...................... 93
11.3 DESIGNATION OF AGENT......................................... 94
11.4 EMPLOYEE TRANSFERS........................................... 94
11.5 PARTICIPATING EMPLOYER CONTRIBUTION.......................... 94
11.6 AMENDMENT.................................................... 94
11.7 DISCONTINUANCE OF PARTICIPATION.............................. 95
11.8 ADMINISTRATOR'S AUTHORITY.................................... 95
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CARROLS CORPORATION RETIREMENT SAVINGS PLAN
THIS AGREEMENT, hereby made and entered into this 1st day of April, 1999, by and between Carrols Corporation (herein referred to as the "Employer") and Paul R. Flanders (herein referred to as the "Trustee"). Prior to June 4, 1997, the Trustee of the Plan was Richard V. Cross.
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan and Trust effective January 1, 1979, (hereinafter called the "Effective Date") known as Carrols Corporation Corporate Employee Savings Plan and which plan shall hereinafter be known as Carrols Corporation Retirement Savings Plan (herein referred to as the "Plan") in recognition of the contribution made to its successful operation by its employees and for the exclusive benefit of its eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to amend the Plan, provided the Trustee joins in such amendment if the provisions of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective January 1, 1997, except as otherwise provided, the Employer and the Trustee in accordance
with the provisions of the Plan pertaining to amendments thereof, hereby amend the Plan in its entirety and restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
.1 "Act" means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.
.1 "Administrator" means the Employer unless another person or entity has been designated by the Employer pursuant to Section 2.2 to administer the Plan on behalf of the Employer.
.1 "Affiliated Employer" means any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to Regulations under Code Section 414(o).
.1 "Aggregate Account" means, with respect to each Participant, the value of all accounts maintained on behalf of a Participant, whether attributable to Employer or Employee contributions, subject to the provisions of Section 9.2.
.1 "Anniversary Date" means December 31.
.1 "Beneficiary" means the person to whom the share of a deceased Participant's total account is payable, subject to the restrictions of Sections 6.2 and 6.6.
.1 "Code" means the Internal Revenue Code of 1986, as amended or replaced from time to time.
.1 "Compensation" with respect to any Participant means such Participant's wages for the Plan Year within the meaning of Code Section 3401(a) (for the purposes of income tax withholding at the source) but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall be made by:
(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.2.
Compensation in excess of $150,000 shall be disregarded. Such amount
shall be adjusted for increases in the cost of living in accordance with Code
Section 401(a)(17), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year. For any short Plan Year the Compensation limit shall be an
amount equal to the Compensation limit for the calendar year in which the Plan
Year begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12). In applying this limitation, the
family group of a Highly Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year, shall be treated as a single Participant, except that for this purpose Family Members shall include only the affected Participant's spouse and any lineal descendants who have not attained age nineteen (19) before the close of the year. If, as a result of the application of such rules the adjusted limitation is exceeded, then the limitation shall be prorated among the affected Family Members in proportion to each such Family Member's Compensation prior to the application of this limitation, or the limitation shall be adjusted in accordance with any other method permitted by Regulation.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these
adjustments, an "excess amount" still results, such "excess amount" shall be disposed of in the manner described in Section 4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement, the definition of Compensation has been modified, then, for Plan Years prior to the Plan Year which includes the adoption date of this amendment and restatement, Compensation means compensation determined pursuant to the Plan then in effect.
.1 "Contract" or "Policy" means any life insurance policy, retirement income or annuity policy, or annuity contract (group or individual) issued pursuant to the terms of the Plan.
.1 "Deferred Compensation" with respect to any Participant means the amount of the Participant's total Compensation which has been contributed to the Plan in accordance with the Participant's deferral election pursuant to Section 4.2 excluding
any such amounts distributed as excess "annual additions" pursuant to Section 4.10(a).
.1 "Designated Investment Alternative" means a specific investment identified by name by a Fiduciary as an available investment under the Plan which may be acquired or disposed of by the Trustee pursuant to the investment direction by a Participant.
.1 "Directed Investment Option" means one or more of the following:
(a) a Designated Investment Alternative.
(a) any other investment permitted by the Plan and the Participant Direction Procedures and acquired or disposed of by the Trustee pursuant to the investment direction of a Participant.
.1 "Early Retirement Date." This Plan does not provide for a retirement date prior to Normal Retirement Date.
.1 "Elective Contribution" means the Employer contributions to the Plan of Deferred Compensation excluding any such amounts distributed as excess "annual additions" pursuant to
Section 4.10(a). In addition, any Employer Qualified Non-Elective Contribution made pursuant to Section 4.6(b) which is used to satisfy the "Actual Deferral Percentage" tests shall be considered an Elective Contribution for purposes of the Plan. Any contributions deemed to be Elective Contributions (whether or not used to satisfy the "Actual Deferral Percentage" tests) shall be subject to the requirements of Sections 4.2(b) and 4.2(c) and shall further be required to satisfy the nondiscrimination requirements of Regulation 1.401(k)-1(b)(5), the provisions of which are specifically incorporated herein by reference.
.1 "Eligible Employee" means any Employee who is compensated on a salary basis and any class of hourly employees who are eligible for all salaried employee benefits.
Highly Compensated Employees shall not be eligible to participate in this Plan, provided, however, that those Employees who, in any Plan Year, are deemed Highly Compensated Employees solely because of the reimbursement to them of moving expenses by the Employer, shall continue to participate in the Plan.
Employees of Affiliated Employers shall not be eligible to participate in this Plan unless such Affiliated Employers have specifically adopted this Plan in writing.
.1 "Employee" means any person who is employed by the Employer or Affiliated Employer, but excludes any person who is an independent contractor. Employee shall include Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and such Leased Employees do not constitute more than 20% of the recipient's non-highly compensated work force.
.1 "Employer" means Carrols Corporation and any successor which shall maintain this Plan; and any predecessor which has maintained this Plan. The Employer is a corporation, with principal offices in the State of New York. In addition, where appropriate, the term Employer shall include any Participating Employer (as defined in Section 11.1) which shall adopt this Plan.
.1 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b), voluntary Employee contributions made pursuant to
Section 4.13, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants
for such Plan Year, over the maximum amount of such contributions permitted under the limitations of Section 4.7(a).
.1 "Excess Contributions" means, with respect to a Plan Year, the excess of Elective Contributions used to satisfy the "Actual Deferral Percentage" tests made on behalf of Highly Compensated Participants for the Plan Year over the maximum amount of such contributions permitted under Section 4.5(a). Excess Contributions, including amounts recharacterized pursuant to Section 4.6(a)(2), shall be treated as an "annual addition" pursuant to Section 4.9(b).
.1 "Excess Deferred Compensation" means, with respect to any taxable year of a Participant, the excess of the aggregate amount of such Participant's Deferred Compensation and the elective deferrals pursuant to Section 4.2(f) actually made on behalf of such Participant for such taxable year, over the dollar limitation provided for in Code Section 402(g), which is incorporated herein by reference. Excess Deferred Compensation shall be treated as an "annual addition" pursuant to Section 4.9(b) when contributed to the Plan unless distributed to the affected Participant not later than the first April 15th following the close of the Participant's taxable year. Additionally, for purposes of Sections 9.2 and 4.4(g), Excess Deferred Compensation shall continue to be treated as Employer
contributions even if distributed pursuant to Section 4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated Participants is not taken into account for purposes of Section 4.5(a) to the extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
.1 "Family Member" means, with respect to an affected Participant, such Participant's spouse and such Participant's lineal descendants and ascendants and their spouses, all as described in Code Section 414(q)(6)(B). Commencing January 1, 1997, all references in the Plan to family aggregation rules shall be disregarded.
.1 "Fiduciary" means any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan or has any authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan, including, but not limited to, the Trustee, the Employer and its representative body, and the Administrator.
.1 "Fiscal Year" means the Employer's accounting year of 12 months ending on the Sunday closest to December 31st.
.1 "Forfeiture" means that portion of a Participant's Account that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Terminated Participant's Account, or
(a) the last day of the Plan Year in which the Participant incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(g)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
.1 "Former Participant" means a person who has been a Participant, but who has ceased to be a Participant for any reason.
.1 "415 Compensation" with respect to any Participant means such Participant's wages for the Plan Year within the meaning of Code Section 3401(a) (for the purposes of income tax withholding at the source) but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement, the definition of "415 Compensation" has been modified, then, for Plan Years prior to the Plan Year which includes the adoption date of this amendment and restatement, "415 Compensation" means compensation determined pursuant to the Plan then in effect.
Notwithstanding any language contained in the Plan to the contrary, on
and after January 1, 1998, "415 Compensation" shall include any amount which is
contributed or deferred by the Employer at the election of the Participant and
which is not includible in the gross income of the Participant by reason of Code
Section 125 or 402(e)(3).
.1 "414(s) Compensation" with respect to any Participant means such Participant's Elective Contributions attributable to
Deferred Compensation recharacterized as voluntary Employee contributions pursuant to Section 4.6(a) plus "415 Compensation" paid during a Plan Year. The amount of "414(s) Compensation" with respect to any Participant shall include "414(s) Compensation" for the entire twelve (12) month period ending on the last day of such Plan Year, except that "414(s) Compensation" shall only be recognized for that portion of the Plan Year during which an Employee was a Participant in the Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $150,000 shall be disregarded. Such amount shall be adjusted for increases in the cost of living in accordance with Code Section 401(a)(17), except that the dollar increase in effect on January 1 of any calendar year shall be effective for the Plan Year beginning with or within such calendar year. For any short Plan Year the "414(s) Compensation" limit shall be an amount equal to the "414(s) Compensation" limit for the calendar year in which the Plan Year
begins multiplied by the ratio obtained by dividing the number of full months in the short Plan Year by twelve (12). In applying this limitation, the family group of a Highly Compensated Participant who is subject to the Family Member aggregation rules of Code Section 414(q)(6) because such Participant is either a "five percent owner" of the Employer or one of the ten (10) Highly Compensated Employees paid the greatest "415 Compensation" during the year, shall be treated as a single Participant, except that for this purpose Family Members shall include only the affected Participant's spouse and any lineal descendants who have not attained age nineteen (19) before the close of the year.
If, in connection with the adoption of this amendment and restatement, the definition of "414(s) Compensation" has been modified, then, for Plan Years prior to the Plan Year which includes the adoption date of this amendment and restatement, "414(s) Compensation" means compensation determined pursuant to the Plan then in effect.
.1 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or "look-back year" were "five percent owners" as defined in Section 1.34(c).
(a) Employees who received "415 Compensation" during the "look- back year" from the Employer in excess of $75,000.
(a) Employees who received "415 Compensation" during the "look- back year" from the Employer in excess of $50,000 and were in the Top Paid Group of Employees for the Plan Year.
(a) Employees who during the "look-back year" were officers of the Employer (as that term is defined within the meaning of the Regulations under Code Section 416) and received "415 Compensation" during the "look-back year" from the Employer greater than 50 percent of the limit in effect under Code Section 415(b)(1)(A) for any such Plan Year. The number of officers shall be limited to the lesser of (i) 50 employees; or (ii) the greater of 3 employees or 10 percent of all employees. For the purpose of determining the number of officers, Employees described in Section 1.61(a), (b), (c) and (d) shall be excluded, but such Employees shall still be considered for the purpose of identifying the particular Employees who are officers. If the
Employer does not have at least one officer whose annual "415 Compensation" is in excess of 50 percent of the Code Section 415(b)(1)(A) limit, then the highest paid officer of the Employer will be treated as a Highly Compensated Employee.
(a) Employees who are in the group consisting of the 100 Employees paid the greatest "415 Compensation" during the "determination year" and are also described in (b), (c) or (d) above when these paragraphs are modified to substitute "determination year" for "look-back year."
The "determination year" shall be the Plan Year for which testing is being performed, and the "look-back year" shall be the immediately preceding twelve-month period.
If an Employee is, during a "determination year" or "look-back year", a Family Member of either a "five percent owner" (whether active or former) or a Highly Compensated Employee who is one of the 10 most Highly Compensated Employees ranked on the basis of "415 Compensation" paid by the Employer during such year, then the Family Member and the "five percent owner" or top-ten Highly Compensated Employee shall be aggregated. In such case, the Family Member and "five percent owner" or top-ten Highly Compensated Employee shall be treated as a single Employee receiving "415 Compensation" and Plan
contributions or benefits equal to the sum of such "415 Compensation" and contributions or benefits of the Family Member and "five percent owner" or top- ten Highly Compensated Employee.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are non-resident aliens and who received no earned income (within the meaning of Code Section 911(d)(2)) from the Employer constituting United States source income within the meaning of Code Section 861(a)(3) shall not be treated as Employees. Additionally, all Affiliated Employers shall be taken into account as a single employer and Leased Employees within the
meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Employer. The exclusion of Leased Employees for this purpose shall be applied on a uniform and consistent basis for all of the Employer's retirement plans. Highly Compensated Former Employees shall be treated as Highly Compensated Employees without regard to whether they performed services during the "determination year."
On and after January 1, 1998, "Highly Compensated Employee" means an Employee described in Code Section 414(q) and the Regulations thereunder, and generally means an Employee who performed services for the Employer during the "determination year" and is in one or more of the following groups:
(f) Employees who at any time during the "determination year" or "look-back year" were "five percent owners" of the Employer.
(g) Employees who received "415 Compensation" during the "look- back year" from the Employer in excess of $80,000.
The "determination year" shall be the Plan Year for
which testing is being performed, and the "look-back year" shall be the immediately preceding twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amount specified in (b) above shall be adjusted at such time
and in the same manner as under Code Section 415(d), except that the base period
shall be the calendar quarter ending September 30, 1996.
In determining who is a Highly Compensated Employee, all Affiliated
Employers shall be taken into account as a single employer and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. The exclusion of Leased Employees for this purpose shall be applied on
a uniform and consistent basis for all of the Employer's retirement plans.
Highly Compensated Former Employees shall be treated as Highly Compensated
Employees without regard
to whether they performed services during the "determination year."
.1 "Highly Compensated Former Employee" means a former Employee who had a separation year prior to the "determination year" and was a Highly Compensated Employee in the year of separation from service or in any "determination year" after attaining age 55. Notwithstanding the foregoing, an Employee who separated from service prior to 1987 will be treated as a Highly Compensated Former Employee only if during the separation year (or year preceding the separation year) or any year after the Employee attains age 55 (or the last year ending before the Employee's 55th birthday), the Employee either received "415 Compensation" in excess of $50,000 or was a "five percent owner." For purposes of this Section, "determination year," "415 Compensation" and "five percent owner" shall be determined in accordance with Section 1.28. Highly Compensated Former Employees shall be treated as Highly Compensated Employees. The method set forth in this Section for determining who is a "Highly Compensated Former Employee" shall be applied on a uniform and consistent basis for all purposes for which the Code Section 414(q) definition is applicable.
.1 "Highly Compensated Participant" means any Highly Compensated Employee who is eligible to participate in the Plan.
.1 "Hour of Service" means each hour for which an Employee is paid or entitled to payment for the performance of duties for the Employer.
.1 "Income" means the income or losses allocable to "excess amounts" which shall equal the allocable gain or loss for the "applicable computation period". The income allocable to "excess amounts" for the "applicable computation period" is determined by multiplying the income for the "applicable computation period" by a fraction. The numerator of the fraction is the "excess amount" for the "applicable computation period." The denominator of the fraction is the total "account balance" attributable to "Employer contributions" as of the end of the "applicable computation period", reduced by the gain allocable to such total amount for the "applicable computation period" and increased by the loss allocable to such total amount for the "applicable computation period". The provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by substituting:
(1) "Excess Deferred Compensation" for "excess amounts";
(2) "taxable year of the Participant" for "applicable computation period";
(3) "Deferred Compensation" for "Employer contributions"; and
(4) "Participant's Elective Account" for "account balance."
(a) For purposes of Section 4.6(a), by substituting:
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Elective Contributions" for "Employer contributions"; and
(4) "Participant's Elective Account" for "account balance."
(a) For purposes of Section 4.8(a), by
substituting:
(1) "Excess Aggregate Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Employer matching contributions made pursuant to Section 4.1(b), voluntary Employee contributions made pursuant to Section 4.13 and any qualified non-elective contributions or elective deferrals taken into account pursuant to Section 4.7(c)" for "Employer contributions"; and
(4) "Participant's Account and Voluntary Contribution Account" for "account balance."
Income allocable to any distribution of Excess Deferred Compensation on or before the last day of the taxable year of the Participant shall be calculated from the first day of the taxable year of the Participant to the date on which the distribution is made pursuant to either the "fractional method" or the "safe harbor method." Under such "safe harbor method," allocable Income for such period shall be deemed to equal ten percent (10%) of the Income allocable to such Excess Deferred Compensation multiplied
by the number of calendar months in such period. For purposes of determining the number of calendar months in such period, a distribution occurring on or before the fifteenth day of the month shall be treated as having been made on the last day of the preceding month and a distribution occurring after such fifteenth day shall be treated as having been made on the first day of the next subsequent month.
The Income allocable to Excess Aggregate Contributions resulting from the recharacterization of Elective Contributions shall be determined and distributed as if such recharacterized Elective Contributions had been distributed as Excess Contributions.
.1 "Investment Manager" means an entity that (a) has the power to manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility to the Plan in writing. Such entity must be a person, firm, or corporation registered as an investment adviser under the Investment Advisers Act of 1940, a bank, or an insurance company.
.1 "Key Employee" means an Employee as defined in Code Section 416(i) and the Regulations thereunder. Generally, any Employee or former Employee (as well as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the preceding four (4) Plan Years, has been included in one of the following categories:
(a) an officer of the Employer (as that term is defined within the meaning of the Regulations under Code Section 416) having annual "415 Compensation" greater than 50 percent of the amount in effect under Code Section 415(b)(1)(A) for any such Plan Year.
(a) one of the ten employees having annual "415 Compensation" from the Employer for a Plan Year greater than the dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and owning (or considered as owning within the meaning of Code Section 318) both more than one-half percent interest and the largest interests in the Employer.
(a) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated as separate employers.
(a) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner" means
any person who owns (or is considered as owning within the meaning of Code
Section 318) more than one percent (1%) of the outstanding stock of the Employer
or stock possessing more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than one percent (1%) of the capital or
profits interest in the Employer. In determining percentage ownership hereunder,
employers that would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated under Code Sections
414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation" shall be made by including amounts which are contributed by the Employer pursuant to a salary reduction
agreement and which are not includible in the gross income of the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions.
.1 "Late Retirement Date" means the first day of the month coinciding with or next following a Participant's actual Retirement Date after having reached his Normal Retirement Date.
.1 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension plan providing:
(1) a non-integrated employer contribution rate of at least 10% of compensation, as defined in Code Section 415(c)(3), but including amounts which are contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(a) if Leased Employees do not constitute more than 20% of the recipient's non-highly compensated work force.
.1 "Non-Elective Contribution" means the Employer contributions to the Plan excluding, however, contributions made pursuant to the Participant's deferral election provided for in Section 4.2 and any Qualified Non-Elective Contribution used in the "Actual Deferral Percentage" tests.
.1 "Non-Highly Compensated Participant" means any Participant who is neither a Highly Compensated Employee nor a
Family Member.
.1 "Non-Key Employee" means any Employee or former Employee (and his Beneficiaries) who is not a Key Employee.
.1 "Normal Retirement Age" means the Participant's 65th birthday, or his 5th anniversary of joining the Plan, if later. A Participant shall become fully Vested in his Participant's Account upon attaining his Normal Retirement Age.
.1 "Normal Retirement Date" means the first day of the month coinciding with or next following the Participant's Normal Retirement Age.
.1 "1-Year Break in Service" means a Period of Severance of at least 12 consecutive months.
.1 "Participant" means any Eligible Employee who participates in the Plan and has not for any reason become ineligible to participate further in the Plan.
.1 "Participant Direction Procedures" means such instructions, guidelines or policies, the terms of which are incorporated herein, as shall be established pursuant to Section 4.14 and observed by the Administrator and applied and provided
to Participants who have Participant Directed Accounts.
.1 "Participant's Account" means the account established and maintained by the Administrator for each Participant with respect to his total interest in the Plan and Trust resulting from the Employer Non-Elective Contributions.
.1 "Participant's Combined Account" means the total aggregate amount of each Participant's Elective Account and Participant's Account.
.1 "Participant's Directed Account" means that portion of a Participant's interest in the Plan with respect to which the Participant has directed the investment in accordance with the Participant Direction Procedure.
.1 "Participant's Elective Account" means the account established and maintained by the Administrator for each Participant with respect to his total interest in the Plan and Trust resulting from the Employer Elective Contributions used to satisfy the "Actual Deferral Percentage" tests. A separate accounting shall be maintained with respect to that portion of the Participant's Elective Account attributable to such Elective Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective Contributions.
.1 "Period of Service" means the aggregate of all periods commencing with the Employee's first day of employment or reemployment with the Employer or Affiliated Employer and ending on the date a 1-Year Break in Service begins. The first day of employment or reemployment is the first day the Employee performs an Hour of Service. An Employee will also receive partial credit for any Period of Severance of less than 12 consecutive months. Fractional periods of a year will be expressed in terms of days.
.1 "Period of Severance" means a continuous period of time during which the Employee is not employed by the Employer. Such period begins on the date the Employee retires, quits or is discharged, or if earlier, the 12 month anniversary of the date on which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first day of such absence shall not constitute a 1-Year Break in Service. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the individual, (b) by reason of the birth of a child of the individual, (c) by reason of the placement of a child with the individual in connection with the adoption of such
child by such individual, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement.
.1 "Plan" means this instrument, including all amendments thereto.
.1 "Plan Year" means the Plan's accounting year of twelve (12) months commencing on January 1st of each year and ending the following December 31st.
.1 "Qualified Non-Elective Contribution" means any Employer contributions made pursuant to Section 4.6(b) and Section 4.8(h). Such contributions shall be considered an Elective Contribution for the purposes of the Plan and used to satisfy the "Actual Deferral Percentage" tests or the "Actual Contribution Percentage" tests.
.1 "Regulation" means the Income Tax Regulations as promulgated by the Secretary of the Treasury or his delegate, and as amended from time to time.
.1 "Retired Participant" means a person who has been a Participant, but who has become entitled to retirement benefits under the Plan.
.1 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
.1 "Super Top Heavy Plan" means a plan described in Section 9.2(b).
.1 "Terminated Participant" means a person who has been a Participant, but whose employment has been terminated other than by death, Total and Permanent Disability or retirement.
.1 "Top Heavy Plan" means a plan described in Section 9.2(a).
.1 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top Heavy Plan.
.1 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.28) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2)
and 414(o)(2) shall be considered Employees unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Employer. Employees who are non-resident aliens and who received no earned income (within the meaning of Code Section 911(d)(2)) from the Employer constituting United States source income within the meaning of Code Section 861(a)(3) shall not be treated as Employees. Additionally, for the purpose of determining the number of active Employees in any year, the following additional Employees shall also be excluded; however, such Employees shall still be considered for the purpose of identifying the particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(a) Employees who normally work less than 17 1/2 hours per week;
(a) Employees who normally work less than six (6) months during a year; and
(a) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of
the Employer are covered under agreements the Secretary of Labor finds to be collective bargaining agreements between Employee representatives and the Employer, and the Plan covers only Employees who are not covered under such agreements, then Employees covered by such agreements shall be excluded from both the total number of active Employees as well as from the identification of particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a uniform and consistent basis for all purposes for which the Code Section 414(q) definition is applicable.
.1 "Total and Permanent Disability" means a physical or mental condition of a Participant resulting from bodily injury, disease, or mental disorder which renders him incapable of continuing his usual and customary employment with the Employer. The disability of a Participant shall be determined by a licensed physician chosen by the Administrator. The determination shall be applied uniformly to all Participants.
.1 "Trustee" means the person or entity named as trustee herein or in any separate trust forming a part of this Plan, and any successors.
.1 "Trust Fund" means the assets of the Plan and Trust as the same shall exist from time to time.
.1 "USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994. Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u).
.1 "Valuation Date" means the Anniversary Date and such other date or dates deemed necessary by the Administrator. The Valuation Date may include any day during the Plan Year that the Trustee, any transfer agent appointed by the Trustee or the Employer and any stock exchange used by such agent are open for business.
.1 "Vested" means the nonforfeitable portion of any account maintained on behalf of a Participant.
.1 "Voluntary Contribution Account" means the account established and maintained by the Administrator for each Participant with respect to his total interest in the Plan resulting from the Participant's nondeductible voluntary contributions made pursuant to Sections 4.12 and 4.13.
Amounts recharacterized as voluntary Employee contributions pursuant
to Section 4.6(a) shall remain subject to the limitations of Sections 4.2(b) and
4.2(c). Therefore, a separate accounting shall be maintained with respect to
that portion of the Voluntary Contribution Account attributable to voluntary
Employee contributions made pursuant to Section 4.13.
ARTICLE I
ADMINISTRATION
.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and responsibilities otherwise provided for in this Plan, the Employer shall be empowered to appoint and remove the Trustee and the Administrator from time to time as it deems necessary for the proper administration of the Plan to ensure that the Plan is being operated for the exclusive benefit of the Participants and their Beneficiaries in accordance with the terms of the Plan, the Code, and the Act. The Employer may appoint counsel, specialists, advisers, agents (including any nonfiduciary agent) and other persons as the Employer deems necessary or desirable in connection with the exercise of its fiduciary duties under this Plan. The Employer may compensate such agents or advisers from the assets of the Plan as fiduciary expenses (but not including
any business (settlor) expenses of the Employer), to the extent not paid by the Employer.
(a) The Employer may, by written agreement or designation, appoint at its option an Investment Manager (qualified under the Investment Company Act of 1940 as amended), investment adviser, or other agent to provide direction to the Trustee with respect to any or all of the Plan assets. Such appointment shall be given by the Employer in writing in a form acceptable to the Trustee and shall specifically identify the Plan assets with respect to which the Investment Manager or other agent shall have authority to direct the investment.
(a) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and investment
growth (and stability of same) is a more current need, or shall appoint a
qualified person to do so. The Employer or its delegate shall communicate such
needs and goals to the Trustee, who shall coordinate such Plan needs with its
investment policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of the
Trust Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of
the Act.
(a) The Employer shall periodically review the performance of any Fiduciary or other person to whom duties have been delegated or allocated by it under the provisions of this Plan or pursuant to procedures established hereunder. This requirement may be satisfied by formal periodic review by the Employer or by a qualified person specifically designated by the Employer, through day-to-day conduct and evaluation, or through other appropriate ways.
.1 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer may appoint any person, including, but not limited to, the Employees of the Employer, to perform the duties of the Administrator. Any person so appointed shall signify his acceptance by filing written acceptance with the Employer. Upon the resignation or removal of any individual performing the duties of the Administrator, the Employer may designate a successor.
.1 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their Beneficiaries, subject to the specific terms of the Plan. The Administrator shall administer the Plan in accordance with its terms and shall have the power and discretion to construe the terms of the Plan and to determine all questions arising in connection with the administration, interpretation, and application of the Plan. Any such determination by the Administrator shall be conclusive and binding upon all persons. The Administrator may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of the Plan; provided, however, that any procedure, discretionary act, interpretation or construction shall be done in a nondiscriminatory manner based upon uniform principles consistently applied and shall be consistent with the intent that the Plan shall continue to be deemed a qualified plan under the terms of Code Section 401(a), and shall comply with the terms of the Act and all regulations issued pursuant thereto. The Administrator shall have all powers necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the eligibility of Employees to participate or remain a Participant hereunder and to receive benefits under the Plan;
(a) to compute, certify, and direct the Trustee with respect to the amount and the kind of benefits to which any Participant shall be entitled hereunder;
(a) to authorize and direct the Trustee with respect to all nondiscretionary or otherwise directed disbursements from the Trust;
(a) to maintain all necessary records for the administration of the Plan;
(a) to interpret the provisions of the Plan and to make and publish such rules for regulation of the Plan as are consistent with the terms hereof;
(a) to determine the size and type of any Contract to be purchased from any insurer, and to designate the insurer from which such Contract shall be purchased;
(a) to compute and certify to the Employer and
to the Trustee from time to time the sums of money necessary or desirable to be contributed to the Plan;
(a) to consult with the Employer and the Trustee regarding the short and long-term liquidity needs of the Plan in order that the Trustee can exercise any investment discretion in a manner designed to accomplish specific objectives;
(a) to prepare and implement a procedure to notify Eligible Employees that they may elect to have a portion of their Compensation deferred or paid to them in cash;
(a) to act as the named Fiduciary responsible for communications
with Participants as needed to maintain Plan compliance with ERISA Section
404(c), including but not limited to the receipt and transmitting of
Participant's directions as to the investment of their account(s) under the Plan
and the formulation of policies, rules, and procedures pursuant to which
Participants may give investment instructions with respect to the investment of
their accounts;
(a) to assist any Participant regarding his rights, benefits, or elections available under the Plan.
.1 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep all other books of account, records, policies, and other data that may be necessary for proper administration of the Plan and shall be responsible for supplying all information and reports to the Internal Revenue Service, Department of Labor, Participants, Beneficiaries and others as required by law.
.1 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator, may appoint counsel, specialists, advisers, agents (including nonfiduciary agents) and other persons as the Administrator or the Trustee deems necessary or desirable in connection with the administration of this Plan, including but not limited to agents and advisers to assist with the administration and management of the Plan, and thereby to provide, among such other duties as the Administrator may appoint, assistance with maintaining Plan records and the providing of investment information to the Plan's investment fiduciaries and to Plan Participants.
.1 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless paid by the Employer. Such expenses shall include any expenses incident to the functioning of the Administrator, or any person or persons retained or appointed by any Named Fiduciary incident to the exercise of their duties under the Plan, including, but not limited to, fees of accountants, counsel, Investment Managers, agents (including nonfiduciary agents) appointed for the purpose of assisting the Administrator or the Trustee in carrying out the instructions of Participants as to the directed investment of their accounts and other specialists and their agents, and other costs of administering the Plan. Until paid, the expenses shall constitute a liability of the Trust Fund.
.1 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the Administrator. Written notice of the disposition of a claim shall be furnished to the claimant within 90 days after the application is filed. In the event the claim is denied, the reasons for the denial shall be specifically set forth in the notice in language calculated to be understood by the claimant, pertinent provisions of the Plan shall be cited, and, where appropriate, an explanation as to how the claimant can perfect the claim will be provided. In addition, the claimant shall be
furnished with an explanation of the Plan's claims review procedure.
.1 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been denied a benefit by a decision of the Administrator pursuant to Section 2.7 shall be entitled to request the Administrator to give further consideration to his claim by filing with the Administrator (on a form which may be obtained from the Administrator) a request for a hearing. Such request, together with a written statement of the reasons why the claimant believes his claim should be allowed, shall be filed with the Administrator no later than 60 days after receipt of the written notification provided for in Section 2.7. The Administrator shall then conduct a hearing within the next 60 days, at which the claimant may be represented by an attorney or any other representative of his choosing and at which the claimant shall have an opportunity to submit written and oral evidence and arguments in support of his claim. At the hearing (or prior thereto upon 5 business days written notice to the Administrator) the claimant or his representative shall have an opportunity to review all documents in the possession of the Administrator which are pertinent to the claim at issue and its disallowance. Either the claimant or the Administrator may cause
a court reporter to attend the hearing and record the proceedings. In such event, a complete written transcript of the proceedings shall be furnished to both parties by the court reporter. The full expense of any such court reporter and such transcripts shall be borne by the party causing the court reporter to attend the hearing. A final decision as to the allowance of the claim shall be made by the Administrator within 60 days of receipt of the appeal (unless there has been an extension of 60 days due to special circumstances, provided the delay and the special circumstances occasioning it are communicated to the claimant within the 60 day period). Such communication shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based.
ARTICLE I
ELIGIBILITY
.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on the date of his employment with the Employer. However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall
continue to participate in the Plan.
.1 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the date on which he satisfies the eligibility requirements of Section 3.1.
In the event an Employee who is not a member of an eligible class of Employees becomes a member of an eligible class, such Employee will participate immediately if such Employee would have otherwise previously become a Participant.
.1 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for participation in the Plan based upon information furnished by the Employer. Such determination shall be conclusive and binding upon all persons, as long as the same is made pursuant to the Plan and the Act. Such determination shall be subject to review per Section 2.8.
.1 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible Employee, such Former Participant shall continue to vest in his interest in the Plan for each Period of Service completed while a noneligible Employee, until such time as his Participant's Account shall be forfeited or distributed pursuant to the terms of the Plan. Additionally, his interest in the Plan shall continue to share in the earnings of the Trust Fund.
(a) In the event a Participant is no longer a member of an eligible class of Employees and becomes ineligible to participate, such Employee will participate immediately upon returning to an eligible class of Employees.
.1 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a contribution by his Employer for the year has been made, the Employer shall make a subsequent contribution with respect to the omitted Employee in the amount which the said Employer would have contributed with respect to him had he not been omitted. Such contribution shall be made regardless of whether or not it is deductible in whole or in part in any taxable year under applicable provisions of the Code.
.1 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a Participant in the Plan is erroneously included and discovery of such incorrect inclusion is not made until after a contribution for the year has been made, the Employer shall not be entitled to recover the contribution made with respect to the ineligible person regardless of whether or not a deduction is allowable with respect to such contribution. In such event, the amount contributed with respect to the ineligible person shall constitute a Forfeiture (except for Deferred Compensation which shall be distributed to the ineligible person) for the Plan Year in which the discovery is made.
.1 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated to the Employer, in writing, at least thirty (30) days before the beginning of a Plan Year.
ARTICLE I
CONTRIBUTION AND ALLOCATION
.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) Effective April 1, 1999, the amount of the total salary reduction elections of all Participants made pursuant to Section 4.2(a), which amount shall be deemed an Employer Elective Contribution.
(a) On behalf of each Participant who is eligible to share in matching contributions for the Plan Year, a matching contribution equal to 50% of each such Participant's mandatory contributions made on and before March 31, 1999 pursuant to Section 4.12, 50% of each such Participant's Deferred Compensation made on and after April 1, 1999, plus, effective April 1, 1999, 50% of each such Participant's Voluntary Contributions, pursuant to Section 4.13, which amount shall be deemed an Employer Non-Elective Contribution. Only Employee mandatory contributions, Elective Contributions and Employee Voluntary Contributions which are made during the current Plan Year and are in the Trust as of the last day of the Plan Year shall be eligible to receive an Employer matching contribution.
In applying the matching percentage specified above, only mandatory contributions, salary reductions and, effective April 1, 1999, Voluntary Contributions pursuant to Section 4.13, up to $20.00 per week combined shall be considered.
(a) Additionally, to the extent necessary, the Employer shall contribute to the Plan the amount necessary to provide the top heavy minimum contribution. All contributions by the Employer shall be made in cash.
.1 PARTICIPANT'S SALARY REDUCTION AND VOLUNTARY CONTRIBUTION ELECTION
(a) Each Participant may elect to defer a percentage of his Compensation which would have been received in the Plan Year. Additionally, effective April 1, 1999, each Participant may elect to make after-tax Voluntary Contributions to the Plan pursuant to Section 4.13. The combined total of contributions shall not exceed 18% of Compensation, provided however, that for purposes of this Section, any Employee shall not be permitted to defer or contribute any amounts received from the Employer as a bonus. A deferral election (or modification of an earlier election) or a voluntary contribution may not be made
with respect to Compensation which is currently available on or before the date the Participant executed such election. For purposes of this Section, Compensation shall be determined prior to any reductions made pursuant to Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions, and as aforesaid, shall exclude bonuses.
The amount by which Compensation is reduced shall be that Participant's Deferred Compensation and be treated as an Employer Elective Contribution and allocated to that Participant's Elective Account.
(a) The balance in each Participant's Elective Account shall be fully Vested at all times and shall not be subject to Forfeiture for any reason.
(a) Notwithstanding anything in the Plan to the contrary, amounts held in the Participant's Elective Account may not be distributable (including any offset of loans) earlier than:
(1) a Participant's separation from service, Total and Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or existence of a "successor plan," as that term is described in Regulation 1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that is not an Affiliated Employer of substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business of such corporation if such corporation continues to maintain this Plan after the disposition with respect to a Participant who continues employment with the corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated Employer who maintains the Plan of its interest in a subsidiary (within the meaning of Code Section 409(d)(3)) to an entity which is not an Affiliated Employer but only with respect to a Participant who continues employment with such subsidiary; or
(6) the proven financial hardship of a Participant, subject to the limitations of Section 6.10.
(a) For each Plan Year, a Participant's Deferred
Compensation made under this Plan and all other plans, contracts or arrangements of the Employer maintaining this Plan shall not exceed, during any taxable year of the Participant, the limitation imposed by Code Section 402(g), as in effect at the beginning of such taxable year. If such dollar limitation is exceeded, a Participant will be deemed to have notified the Administrator of such excess amount which shall be distributed in a manner consistent with Section 4.2(f). The dollar limitation shall be adjusted annually pursuant to the method provided in Code Section 415(d) in accordance with Regulations.
(a) In the event a Participant has received a hardship distribution from his Participant's Elective Account pursuant to Section 6.10(b) or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained by the Employer, then such Participant shall not be permitted to elect to have Deferred Compensation contributed to the Plan on his behalf for a period of twelve (12) months following the receipt of the distribution. Furthermore, the dollar limitation under Code Section 402(g) shall be reduced, with respect to the Participant's taxable year following the taxable year in which the hardship distribution was made, by the amount of such Participant's Deferred Compensation, if any, pursuant to this Plan (and any other plan maintained by the Employer) for the taxable year of the hardship distribution.
(a) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation 1.402(g)-1(b))
under another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)), a
salary reduction arrangement (within the meaning of Code Section 3121(a)(5)(D)),
a deferred compensation plan under Code Section 457(b), or a trust described in
Code Section 501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to Regulations) for such Participant's taxable
year, the Participant may, not later than March 1 following the close of the
Participant's taxable year, notify the Administrator in writing of such excess
and request that his Deferred Compensation under this Plan be reduced by an
amount specified by the Participant. In such event, the Administrator may direct
the Trustee to distribute such excess amount (and any Income allocable to such
excess amount) to the Participant not later than the first April 15th following
the close of the Participant's taxable year. Any distribution of less than the
entire amount of Excess Deferred Compensation and Income shall be treated as a
pro rata distribution of Excess Deferred Compensation and Income. The amount
distributed shall not exceed the Participant's Deferred Compensation under the
Plan for the
taxable year (and any Income allocable to such excess amount). Any distribution on or before the last day of the Participant's taxable year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which the Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall be made first from unmatched Deferred Compensation and, thereafter, from Deferred Compensation which is matched. Matching contributions which relate to such Deferred Compensation shall be forfeited.
(a) Notwithstanding Section 4.2(f) above, a Participant's Excess Deferred Compensation shall be reduced, but not below zero, by any distribution and/or recharacterization of Excess Contributions pursuant to Section 4.6(a) for the Plan Year beginning with or within the taxable year of the Participant.
(a) At Normal Retirement Date, or such other date when the Participant shall be entitled to receive benefits, the fair market value of the Participant's Elective Account shall be used to provide additional benefits to the Participant or his Beneficiary.
(a) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or savings
and loan association, money market certificate, or other short-term debt
security acceptable to the Trustee until such time as the allocations pursuant
to Section 4.4 have been made.
(a) The Employer and the Administrator shall implement the salary reduction elections provided for herein in accordance with the following:
(1) A Participant must make his initial salary deferral election within a reasonable time, not to exceed thirty (30) days, after entering the Plan pursuant to Section 3.2. If the Participant fails to make an initial salary deferral election within such time, then such Participant may thereafter make an election in accordance with the rules governing modifications. The Participant shall make such an election by entering into a
written salary reduction agreement with the Employer and filing such agreement with the Administrator. Such election shall initially be effective beginning with the pay period following the acceptance of the salary reduction agreement by the Administrator, shall not have retroactive effect and shall remain in force until revoked.
(2) A Participant may modify a prior election during the Plan Year and concurrently make a new election by filing a written notice with the Administrator within a reasonable time before the pay period for which such modification is to be effective. However, modifications to a salary deferral election shall only be permitted quarterly, during election periods established by the Administrator prior to the first day of each Plan Year quarter. Any modification shall not have retroactive effect and shall remain in force until revoked.
(3) A Participant may elect to prospectively revoke his salary reduction agreement in its entirety at any time during the Plan Year by providing the Administrator with thirty (30) days written notice of such revocation (or upon such shorter notice period as may be acceptable to the Administrator). Such revocation shall become effective as of the beginning of the first pay period coincident with or next following the expiration of the notice period. Furthermore, the termination of the
Participant's employment, or the cessation of participation for any reason, shall be deemed to revoke any salary reduction agreement then in effect, effective immediately following the close of the pay period within which such termination or cessation occurs.
.1 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the Plan for each Plan Year within the time prescribed by law, including extensions of time, for the filing of the Employer federal income tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated through payroll deductions shall be paid to the Trustee as of the earliest date on which such contributions can reasonably be segregated from the Employer general assets, but in any event within 15 business days from the end of the month in which such amounts would otherwise have been payable to the Participant in cash. The provisions of Department of Labor regulations 2510.3-102 are incorporated herein by reference. Furthermore, any additional Employer contributions which are allocable to the Participant's Elective Account for a Plan Year shall be paid to the Plan no later than the twelve-month period immediately following the close of such Plan Year.
.1 ALLOCATION OF CONTRIBUTION AND EARNINGS
(a) The Administrator shall establish and maintain an account in the name of each Participant to which the Administrator shall credit as of each Anniversary Date all amounts allocated to each such Participant as set forth herein.
(a) The Employer shall provide the Administrator with all information required by the Administrator to make a proper allocation of the Employer contributions for each Plan Year. Within a reasonable period of time after the date of receipt by the Administrator of such information, the Administrator shall allocate such contribution as follows:
(1) With respect to the Employer Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective Account in an amount
equal to each such Participant's Deferred Compensation for the year, and, on and
after April 1, 1999, with respect to the Participant's Voluntary Contributions
pursuant to Section 4.13, to each Participant's Voluntary Contribution account
in an amount equal to such Participant's Voluntary Contributions pursuant to
Section 4.13.
(2) With respect to the Employer Non-Elective Contribution made pursuant to Section 4.1(b), to each
Participant's Account in accordance with Section 4.1(b).
Only Participants who have completed a Period of Service during the Plan Year, are actively employed on the last day of the Plan Year, and whose contributions remain in the Trust as of the last day of the Plan Year shall be eligible to share in the matching contribution for the year.
(a) As of each Anniversary Date any amounts which became Forfeitures since the last Anniversary Date shall first be made available to reinstate previously forfeited account balances of Former Participants, if any, in accordance with Section 6.4(g)(2). The remaining Forfeitures, if any, shall be used to reduce the contribution of the Employer hereunder for the Plan Year in which such Forfeitures occur.
(a) For any Top Heavy Plan Year, Employees not otherwise eligible to share in the allocation of contributions as provided above, shall receive the minimum allocation provided for in Section 4.4(g) if eligible pursuant to the provisions of Section 4.4(i).
(a) Notwithstanding the foregoing, Participants who are not actively employed on the last day of the Plan Year due to Retirement (Normal or Late), Total and Permanent
Disability or death shall share in the allocation of contributions for that Plan Year, to the extent and provided that such affected Participants' deferrals and contributions are in the Trust as of the last day of the Plan Year.
(a) As of each Valuation Date, before the current valuation period allocation of Employer contributions and after allocation of Forfeitures, any earnings or losses (net appreciation or net depreciation) of the Trust Fund shall be allocated in accordance with the insurance contracts' normal methods as provided in the riders to the respective insurance contracts.
Participants' transfers from other qualified plans and voluntary contributions deposited in the general Trust Fund shall share in any earnings and losses (net appreciation or net depreciation) of the Trust Fund in the same manner provided above. Each segregated account maintained on behalf of a Participant shall be credited or charged with its separate earnings and losses.
(a) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer contributions allocated to the Participant's Combined Account of each
Employee shall be equal to at least three percent (3%) of such Employee's "415
Compensation"
(reduced by contributions and forfeitures, if any, allocated to each Employee in
any defined contribution plan included with this plan in a Required Aggregation
Group). However, if (1) the sum of the Employer contributions allocated to the
Participant's Combined Account of each Key Employee for such Top Heavy Plan Year
is less than three percent (3%) of each Key Employee's "415 Compensation" and
(2) this Plan is not required to be included in an Aggregation Group to enable a
defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410,
the sum of the Employer contributions allocated to the Participant's Combined
Account of each Employee shall be equal to the largest percentage allocated to
the Participant's Combined Account of any Key Employee. However, in determining
whether a Non-Key Employee has received the required minimum allocation, such
Non-Key Employee's Deferred Compensation and matching contributions needed to
satisfy the "Actual Contribution Percentage" tests pursuant to Section 4.7(a)
shall not be taken into account.
However, no such minimum allocation shall be required in this Plan for any Employee who participates in another defined contribution plan subject to Code Section 412 included with this Plan in a Required Aggregation Group.
(a) For purposes of the minimum allocations set forth above, the percentage allocated to the Participant's
Combined Account of any Key Employee shall be equal to the ratio of the sum of the Employer contributions allocated on behalf of such Key Employee divided by the "415 Compensation" for such Key Employee.
(a) For any Top Heavy Plan Year, the minimum allocations set forth above shall be allocated to the Participant's Combined Account of all Employees who are Participants and who are employed by the Employer on the last day of the Plan Year, including Employees who have (1) failed to complete a Period of Service; and (2) declined to make mandatory contributions (if required) or, in the case of a cash or deferred arrangement, elective contributions to the Plan.
(a) For the purposes of this Section, "415 Compensation" shall be limited to $150,000. Such amount shall be adjusted for increases in the cost of living in accordance with Code Section 401(a)(17), except that the dollar increase in effect on January 1 of any calendar year shall be effective for the Plan Year beginning with or within such calendar year. For any short Plan Year the "415 Compensation" limit shall be an amount equal to the "415 Compensation" limit for the calendar year in which the Plan Year begins multiplied by the ratio obtained by dividing the number of full months in the short Plan Year by twelve (12).
(a) Notwithstanding anything herein to the contrary, Participants who terminated employment for any reason during the Plan Year shall share in the salary reduction contributions made by the Employer for the year of termination without regard to the Hours of Service credited.
(a) If a Former Participant is reemployed after five (5) consecutive 1-Year Breaks in Service, then separate accounts shall be maintained as follows:
(1) one account for nonforfeitable benefits attributable to pre- break service; and
(2) one account representing his status in the Plan attributable to post-break service.
.1 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year, the annual allocation derived from Employer Elective Contributions to a Participant's Elective Account shall satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the
Highly Compensated Participant group shall not be more than the "Actual Deferral Percentage" of the Non-Highly Compensated Participant group multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly Compensated Participant group over the "Actual Deferral Percentage" for the Non-Highly Compensated Participant group shall not be more than two percentage points. Additionally, the "Actual Deferral Percentage" for the Highly Compensated Participant group shall not exceed the "Actual Deferral Percentage" for the Non-Highly Compensated Participant group multiplied by 2. The provisions of Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are incorporated herein by reference.
However, in order to prevent the multiple use of the alternative method described in (2) above and in Code Section 401(m)(9)(A), any Highly Compensated Participant eligible to make elective deferrals pursuant to Section 4.2 and to make Employee contributions or to receive matching contributions under this Plan or under any other plan maintained by the Employer or an Affiliated Employer shall have a combination of his actual deferral ratio and his actual contribution ratio reduced pursuant to Section 4.6(a) and Regulation 1.401(m)-2, the provisions of which are incorporated herein by reference.
(a) For the purposes of this Section "Actual Deferral Percentage" means, with respect to the Highly Compensated Participant group and Non-Highly Compensated Participant group for a Plan Year, the average of the ratios, calculated separately for each Participant in such group, of the amount of Employer Elective Contributions allocated to each Highly Compensated Participant's Elective Account for such Plan Year and to each such Non-Highly Compensated Participant's Elective Account for the preceding Plan Year, to such Participant's "414(s) Compensation" for the applicable Plan Year. The actual deferral ratio for each Participant and the "Actual Deferral Percentage" for each group shall be calculated to the nearest one-hundredth of one percent. Employer Elective Contributions allocated to each Non-Highly Compensated Participant's Elective Account for the preceding Plan Year shall be reduced by Excess Deferred Compensation for the preceding Plan Year to the extent such excess amounts are made under this Plan or any other plan maintained by the Employer.
(a) For the purpose of determining the actual deferral ratio of a Highly Compensated Employee who is subject to the Family Member aggregation rules of Code Section 414(q)(6) because such Participant is either a "five percent owner" of the Employer or one of the ten (10) Highly Compensated Employees paid
the greatest "415 Compensation" during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group (which shall be treated as one Highly Compensated Participant) shall be determined by aggregating Employer Elective Contributions and "414(s) Compensation" of all eligible Family Members (including Highly Compensated Participants). However, in applying the $150,000 limit to "414(s) Compensation," Family Members shall include only the affected Employee's spouse and any lineal descendants who have not attained age 19 before the close of the Plan Year.
(2) The Employer Elective Contributions and "414(s) Compensation" of all Family Members shall be disregarded for purposes of determining the "Actual Deferral Percentage" of the Non-Highly Compensated Participant group except to the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of more than one family group in a plan, all Participants who are members of those family groups that include the Participant are aggregated as one family group in accordance with paragraphs (1) and (2) above.
(a) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated Participant and a Non-Highly Compensated Participant shall include any Employee eligible to make a deferral election pursuant to Section 4.2, whether or not such deferral election was made or suspended pursuant to Section 4.2.
(a) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash or
deferred arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or not
such arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such a
case, the cash or deferred arrangements included in such plans and the plans
including such arrangements shall be treated as one arrangement and as one plan
for purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(k).
Plans may be aggregated under this paragraph (e) only if they have the same plan
year.
Notwithstanding the above, an employee stock ownership plan described in Code Section 4975(e)(7) or 409 may not be combined with this Plan for purposes of determining
whether the employee stock ownership plan or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(k).
(a) For the purposes of this Section, if a Highly Compensated Participant is a Participant under two or more cash or deferred arrangements (other than a cash or deferred arrangement which is part of an employee stock ownership plan as defined in Code Section 4975(e)(7) or 409) of the Employer or an Affiliated Employer, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement for the purpose of determining the actual deferral ratio with respect to such Highly Compensated Participant. However, if the cash or deferred arrangements have different plan years, this paragraph shall be applied by treating all cash or deferred arrangements ending with or within the same calendar year as a single arrangement.
.1 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer Elective Contributions made pursuant to Section 4.4 do not satisfy one of the tests set forth in Section 4.5(a), the Administrator shall adjust Excess Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third
month following the end of each Plan Year, the Highly Compensated Participant having the greatest actual deferral ratio shall have his actual deferral ratio reduced until one of the tests set forth in Section 4.5(a) is satisfied, or until his actual deferral ratio equals the actual deferral ratio of the Highly Compensated Participant having the second largest actual deferral ratio. This process shall continue until one of the tests set forth in Section 4.5(a) is satisfied. Once one of the tests set forth in Section 4.5(a) is satisfied, the total dollar amount of Elective Contributions represented by such reduction or reductions in actual deferral ratio or ratios shall be identified as the total amount of Excess Contributions to be distributed. These Excess Contributions will be attributed to and distributed from the accounts of Highly Compensated Employees as follows. The Elective Contribution for the Highly Compensated Employee with the largest Elective Contribution shall be reduced until either a) the total amount of Excess Contributions is distributed, or b) the Elective Contribution for the Highly Compensated Employee with the greatest Elective Contribution is reduced to the level of the Elective Contribution for the Highly Compensated Employee with the next greatest Elective Contribution. This process shall continue until the total amount of Excess Contributions is distributed.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the Plan Year following the Plan Year to which they are allocable;
(ii) shall be adjusted for Income; and
(iii) shall be designated by the Employer as a distribution of Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess Contributions pursuant to (a) above, such recharacterized amounts:
(i) shall be deemed to have occurred on the date on which the last of those Highly Compensated Participants with Excess Contributions to be recharacterized is notified of the recharacterization and the tax consequences of such recharacterization;
(ii) shall not exceed the amount of Deferred Compensation on behalf of any Highly Compensated Participant for any Plan Year;
(iii) shall be treated as voluntary Employee contributions for purposes of Code Section 401(a)(4) and Regulation 1.401(k)-1(b). However, for purposes of Sections 9.2 and 4.4(g), recharacterized Excess Contributions continue to be treated as Employer contributions that are Deferred Compensation. Excess Contributions recharacterized as voluntary Employee contributions shall continue to be nonforfeitable and subject to the same distribution rules provided for in Section 4.2(c);
(iv) are not permitted if the amount recharacterized plus voluntary Employee contributions actually made by such Highly Compensated Participant, exceed the maximum amount of voluntary Employee contributions (determined prior to application of Section 4.7(a)) that such Highly Compensated Participant is permitted to make under the Plan in the absence of recharacterization; and
(v) shall be adjusted for Income.
(3) Any distribution and/or recharacterization of less than the entire amount of Excess Contributions shall be treated as a pro rata distribution and/or recharacterization of Excess Contributions and Income.
(4) The determination and correction of Excess
Contributions of a Highly Compensated Participant whose actual deferral ratio is determined under the family aggregation rules shall be accomplished by reducing the actual deferral ratio as required herein, and the Excess Contributions for the family unit shall then be allocated among the Family Members in proportion to the Elective Contributions of each Family Member that were combined to determine the group actual deferral ratio.
(5) Matching contributions which relate to Excess Contributions shall be forfeited unless the related matching contribution is distributed as an Excess Aggregate Contribution pursuant to Section 4.8.
(a) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants electing salary reductions pursuant to
Section 4.2 in an amount sufficient to satisfy one of the tests set forth in
Section 4.5(a). Such contribution shall be allocated to the Participant's
Elective Account of each Non-Highly Compensated Participant electing salary
reductions pursuant to Section 4.2 in the same proportion that each such Non-
Highly Compensated Participant's Deferred Compensation for the year bears to the
total Deferred Compensation of all such Non-Highly Compensated Participants.
(a) If during a Plan Year the projected aggregate amount of Elective Contributions to be allocated to all Highly Compensated Participants under this Plan would, by virtue of the tests set forth in Section 4.5(a), cause the Plan to fail such tests, then the Administrator may automatically reduce proportionately or in the order provided in Section 4.6(a) each affected Highly Compensated Participant's deferral election made pursuant to Section 4.2 by an amount necessary to satisfy one of the tests set forth in Section 4.5(a).
.1 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for the Highly Compensated Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated Participant group; or
(2) the lesser of 200 percent of such percentage for the Non- Highly Compensated Participant group, or such percentage for the Non-Highly Compensated Participant group plus 2 percentage points. However, to prevent the multiple use of the alternative method described in this paragraph and Code
Section 401(m)(9)(A), any Highly Compensated Participant eligible to make elective deferrals pursuant to Section 4.2 or any other cash or deferred arrangement maintained by the Employer or an Affiliated Employer and to make Employee contributions or to receive matching contributions under this Plan or under any plan maintained by the Employer or an Affiliated Employer shall have a combination of his actual deferral ratio and his actual contribution ratio reduced pursuant to Regulation 1.401(m)-2 and Section 4.8(a). The provisions of Code Section 401(m) and Regulations 1.401(m)-1(b) and 1.401(m)-2 are incorporated herein by reference.
(a) For the purposes of this Section and Section 4.8, "Actual Contribution Percentage" for a Plan Year means, with respect to the Highly Compensated Participant group and Non-Highly Compensated Participant group, the average of the ratios (calculated separately for each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made pursuant to Sections 4.12
and 4.13 and Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) on behalf of each such Participant for
such Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(a) For purposes of determining the "Actual Contribution Percentage" and the amount of Excess Aggregate Contributions pursuant to Section 4.8(d), only Employer matching contributions contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Administrator may elect to take into account, with respect to Employees eligible to have Employer matching contributions pursuant to Section 4.1(b) or voluntary Employee contributions pursuant to Sections 4.12 and 4.13 allocated to their accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and qualified non-elective contributions (as defined in Code Section 401(m)(4)(C)) contributed to any plan maintained by the Employer. Such elective deferrals and qualified non-elective contributions shall be treated as Employer matching contributions subject to Regulation 1.401(m)-1(b)(5) which is incorporated herein by reference. However, the Plan Year must be the same as the plan year of the plan to which the elective deferrals and the qualified non-elective contributions are made.
(a) For the purpose of determining the actual contribution ratio of a Highly Compensated Employee who is
subject to the Family Member aggregation rules of Code Section 414(q)(6) because
such Employee is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall be
determined by aggregating Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made pursuant to Sections 4.12
and 4.13, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and "414(s) Compensation" of all
eligible Family Members (including Highly Compensated Participants). However, in
applying the $150,000 limit to "414(s) Compensation", Family Members shall
include only the affected Employee's spouse and any lineal descendants who have
not attained age 19 before the close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section 4.1(b), voluntary Employee contributions made pursuant to Sections 4.12 and 4.13, Excess Contributions recharacterized as voluntary Employee contributions pursuant to Section 4.6(a) and "414(s) Compensation" of all Family Members shall be disregarded for purposes of determining the "Actual
Contribution Percentage" of the Non-Highly Compensated Participant group except to the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of more than one family group in a plan, all Participants who are members of those family groups that include the Participant are aggregated as one family group in accordance with paragraphs (1) and (2) above.
(a) For purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(m), if two or more plans of the Employer to which matching contributions, Employee contributions, or both, are made are treated as one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than the average benefits test under Code Section 410(b)(2)(A)(ii)), such plans shall be treated as one plan. In addition, two or more plans of the Employer to which matching contributions, Employee contributions, or both, are made may be considered as a single plan for purposes of determining whether or not such plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though such aggregated plans were a single plan. Plans may be aggregated under this paragraph (e) only if they have the same plan year.
Notwithstanding the above, an employee stock ownership plan described in Code Section 4975(e)(7) or 409 may not be aggregated with this Plan for purposes of determining whether the employee stock ownership plan or this Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(a) If a Highly Compensated Participant is a Participant under two or more plans (other than an employee stock ownership plan as defined in Code Section 4975(e)(7) or 409) which are maintained by the Employer or an Affiliated Employer to which matching contributions, Employee contributions, or both, are made, all such contributions on behalf of such Highly Compensated Participant shall be aggregated for purposes of determining such Highly Compensated Participant's actual contribution ratio. However, if the plans have different plan years, this paragraph shall be applied by treating all plans ending with or within the same calendar year as a single plan.
(a) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Employer matching contributions pursuant to Section
4.1(b) (whether or not a deferral election was made or suspended pursuant to
Section 4.2(e)) or voluntary Employee contributions pursuant to Sections
4.12 and 4.13 (whether or not voluntary Employee contributions are made) allocated to his account for the Plan Year.
.1 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that the "Actual Contribution Percentage" for the Highly Compensated Participant group exceeds the "Actual Contribution Percentage" for the Non-Highly Compensated Participant group pursuant to Section 4.7(a), the Highly Compensated Participant having the greatest actual contribution ratio shall have his actual contribution ratio reduced until one of the tests set forth in Section 4.7(a) is satisfied, or until his actual contribution ratio equals the actual contribution ratio of the Highly Compensated Participant having the second largest actual contribution ratio. This process shall continue until one of the tests set forth in Section 4.7(a) is satisfied. Once one of the tests set forth in Section 4.7(a) is satisfied, the total dollar amount of aggregate contributions represented by such reduction or reductions in actual contribution ratio or ratios shall be identified as the total amount of Excess Aggregate Contributions to be distributed and/or forfeited. These Excess Aggregate Contributions will be attributed to and distributed (with income), if vested, or forfeited (with income), if not vested from the accounts of Highly Compensated Employees as follows. The matching
contribution for the Highly Compensated Employee with the largest matching contribution shall be reduced until either a) the total amount of Excess Aggregate Contributions is distributed, or b) the matching contributions for the Highly Compensated Employee with the greatest matching contributions is reduced to the level of the matching contributions for the Highly Compensated Employee with the next greatest matching contributions. This process shall continue until all Excess Aggregate Contributions are eliminated. Excess Aggregate Contributions shall be distributed to or forfeited by Highly Compensated Participants on or before the fifteenth day of the third month following the end of the Plan Year, but in no event later than the close of the following Plan Year.
To the extent necessary to affect correction, distributions and forfeitures shall occur proportionately from the vested portion of a Highly Compensated Employee's aggregate contributions (and Income allocable to such contributions) and, if forfeitable, from the non-Vested Excess Aggregate Contributions attributable to Employer matching contributions (and Income allocable to such forfeitures).
If the correction of Excess Aggregate Contributions attributable to Employer matching contributions is
not in proportion to the Vested and non-Vested portion of such contributions, then the Vested portion of the Participant's Account attributable to Employer matching contributions after the correction shall be subject to Section 6.5(g).
(a) Any distribution and/or forfeiture of less than the entire amount of Excess Aggregate Contributions (and Income) shall be treated as a pro rata distribution and/or forfeiture of Excess Aggregate Contributions and Income. Distribution of Excess Aggregate Contributions shall be designated by the Employer as a distribution of Excess Aggregate Contributions (and Income). Forfeitures of Excess Aggregate Contributions shall be treated in accordance with Section 4.4.
(a) Excess Aggregate Contributions attributable to amounts other than voluntary Employee contributions, including forfeited matching contributions, shall be treated as Employer contributions for purposes of Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to Participants' Accounts for the Plan Year in which the forfeiture occurs shall be treated as an "annual addition" pursuant to Section 4.9(b) for the Participants to whose Accounts they are reallocated and for the Participants from whose Accounts
they are forfeited.
(a) For each Highly Compensated Participant, the amount of
Excess Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee contributions made pursuant
to Sections 4.12 and 4.13, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of the Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount determined by multiplying the
Highly Compensated Participant's actual contribution ratio (determined after
application of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one percent.
In no case shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b), voluntary Employee contributions
made pursuant to Sections 4.12 and 4.13, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6(a) and any qualified
non-elective contributions or elective deferrals taken into account pursuant to
Section 4.7(c) on behalf of such Highly Compensated Participant for such Plan
Year.
(a) The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to be treated as voluntary Employee contributions due to recharacterization for the plan year of any other qualified cash or deferred arrangement (as defined in Code Section 401(k)) maintained by the Employer that ends with or within the Plan Year or which are treated as voluntary Employee contributions due to recharacterization pursuant to Section 4.6(a).
(a) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual contribution
ratio is determined under the family aggregation rules, then the actual
contribution ratio shall be reduced and the Excess Aggregate Contributions for
the family unit shall be allocated among the Family Members in proportion to the
sum of Employer matching contributions made pursuant to Section 4.1(b),
voluntary Employee contributions made pursuant to Sections 4.12 and 4.13, Excess
Contributions recharacterized as voluntary Employee contributions pursuant to
Section 4.6(a) and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) of each Family Member
that were combined to determine the group actual contribution ratio.
(a) If during a Plan Year the projected aggregate amount of Employer matching contributions, voluntary Employee contributions and Excess Contributions recharacterized as voluntary Employee contributions to be allocated to all Highly Compensated Participants under this Plan would, by virtue of the tests set forth in Section 4.7(a), cause the Plan to fail such tests, then the Administrator may automatically reduce proportionately or in the order provided in Section 4.8(a) each affected Highly Compensated Participant's projected share of such contributions by an amount necessary to satisfy one of the tests set forth in Section 4.7(a).
(a) Notwithstanding the above, within twelve (12) months after the end of the Plan Year, the Employer may make a special Qualified Non-Elective Contribution on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy one of the tests set forth in Section 4.7(a). Such contribution shall be allocated to the Participant's Account of each Non-Highly Compensated Participant in the same proportion that each Non-Highly Compensated Participant's Compensation for the year bears to the total Compensation of all Non-Highly Compensated Participants. A separate accounting of any special Qualified Non-Elective Contribution shall be maintained in the Participant's Account.
.1 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions" credited to a Participant's accounts for any "limitation year" shall equal the lesser of: (1) $30,000 adjusted annually as provided in Code Section 415(d) pursuant to the Regulations, or (2) twenty-five percent (25%) of the Participant's "415 Compensation" for such "limitation year." For any short "limitation year," the dollar limitation in (1) above shall be reduced by a fraction, the numerator of which is the number of full months in the short "limitation year" and the denominator of which is twelve (12).
(a) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee contributions,
(3) forfeitures, (4) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Code Section 415(l)(2) which is part of a pension
or annuity plan maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as defined in Code
Section 419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415 Compensation"
percentage limitation referred to in paragraph (a)(2) above shall not apply to:
(1) any contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual addition"
under Code Section 415(l)(1).
(a) For purposes of applying the limitations of Code Section 415, the transfer of funds from one qualified plan to another is not an "annual addition." In addition, the following are not Employee contributions for the purposes of Section 4.9(b)(2): (1) rollover contributions (as defined in Code Sections 402(e)(6), 403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant from the Plan; (3) repayments of distributions received by an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of distributions received by an Employee pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and (5) Employee contributions to a simplified employee pension excludable from gross income under Code Section 408(k)(6).
(a) For purposes of applying the limitations of
Code Section 415, the "limitation year" shall be the Plan Year.
(a) For the purpose of this Section, all qualified defined benefit plans (whether terminated or not) ever maintained by the Employer shall be treated as one defined benefit plan, and all qualified defined contribution plans (whether terminated or not) ever maintained by the Employer shall be treated as one defined contribution plan.
(a) For the purpose of this Section, if the Employer is a member of a controlled group of corporations, trades or businesses under common control (as defined by Code Section 1563(a) or Code Section 414(b) and (c) as modified by Code Section 415(h)), is a member of an affiliated service group (as defined by Code Section 414(m)), or is a member of a group of entities required to be aggregated pursuant to Regulations under Code Section 414(o), all Employees of such Employers shall be considered to be employed by a single Employer.
(a) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, each Employer who maintains this Plan will be considered to
be a separate Employer.
(a)(1) If a Participant participates in more than one defined contribution plan maintained by the
Employer which have different Anniversary Dates, the maximum "annual additions" under this Plan shall equal the maximum "annual additions" for the "limitation year" minus any "annual additions" previously credited to such Participant's accounts during the "limitation year."
(2) If a Participant participates in both a defined contribution plan subject to Code Section 412 and a defined contribution plan not subject to Code Section 412 maintained by the Employer which have the same Anniversary Date, "annual additions" will be credited to the Participant's accounts under the defined contribution plan subject to Code Section 412 prior to crediting "annual additions" to the Participant's accounts under the defined contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined contribution plan not subject to Code Section 412 maintained by the Employer which have the same Anniversary Date, the maximum "annual additions" under this Plan shall equal the product of (A) the maximum "annual additions" for the "limitation year" minus any "annual additions" previously credited under subparagraphs (1) or (2) above, multiplied by (B) a fraction (i) the numerator of which is the "annual additions" which would
be credited to such Participant's accounts under this Plan without regard to the limitations of Code Section 415 and (ii) the denominator of which is such "annual additions" for all plans described in this subparagraph.
(a) If an Employee is (or has been) a Participant in one or more defined benefit plans and one or more defined contribution plans maintained by the Employer, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any "limitation year" may not exceed 1.0.
(a) The defined benefit plan fraction for any "limitation year" is a fraction, the numerator of which is the sum of the Participant's projected annual benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of 125 percent of the dollar limitation determined for the "limitation year" under Code Sections 415(b) and (d) or 140 percent of the highest average compensation, including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first day of the first "limitation year" beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were
in existence on May 6, 1986, the denominator of this fraction will not be less than 125 percent of the sum of the annual benefits under such plans which the Participant had accrued as of the close of the last "limitation year" beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code Section 415 for all "limitation years" beginning before January 1, 1987.
(a) The defined contribution plan fraction for any "limitation year" is a fraction, the numerator of which is the sum of the annual additions to the Participant's Account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior "limitation years" (including the annual additions attributable to the Participant's nondeductible Employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the annual additions attributable to all welfare benefit funds, as defined in Code Section 419(e), and individual medical accounts, as defined in Code Section 415(l)(2), maintained by the Employer), and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior "limitation years" of service with the Employer (regardless of whether a defined contribution plan
was maintained by the Employer). The maximum aggregate amount in any "limitation year" is the lesser of 125 percent of the dollar limitation determined under Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35 percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first day of the first "limitation year" beginning after December 31, 1986, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (1) the excess of the sum of the fractions over 1.0 times (2) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last "limitation year" beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the Plan made after May 5, 1986, but using the Code Section 415 limitation applicable to the first "limitation year" beginning on or after January 1, 1987. The annual addition for any "limitation year" beginning before January 1, 1987 shall not be recomputed to treat all Employee contributions as annual additions.
(a) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in this
Section shall at all times comply with the provisions of Code Section 415 and
the Regulations thereunder, the terms of which are specifically incorporated
herein by reference.
.1 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a Participant's Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any Participant under the limits of Section 4.9 or other facts and circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the "annual additions" under this Plan would cause the maximum "annual additions" to be exceeded for any Participant, the Administrator shall (1) distribute any elective deferrals (within the meaning of Code Section 402(g)(3)) or return any Employee contributions (whether voluntary or mandatory), and for the distribution of gains attributable to those elective deferrals and Employee contributions, to the extent that the distribution or return would reduce the "excess amount" in the Participant's accounts (2) hold any "excess
amount" remaining after the return of any elective deferrals or voluntary Employee contributions in a "Section 415 suspense account" (3) use the "Section 415 suspense account" in the next "limitation year" (and succeeding "limitation years" if necessary) to reduce Employer contributions for that Participant if that Participant is covered by the Plan as of the end of the "limitation year," or if the Participant is not so covered, allocate and reallocate the "Section 415 suspense account" in the next "limitation year" (and succeeding "limitation years" if necessary) to all Participants in the Plan before any Employer or Employee contributions which would constitute "annual additions" are made to the Plan for such "limitation year" (4) reduce Employer contributions to the Plan for such "limitation year" by the amount of the "Section 415 suspense account" allocated and reallocated during such "limitation year."
(a) For purposes of this Article, "excess amount" for any Participant for a "limitation year" shall mean the excess, if any, of (1) the "annual additions" which would be credited to his account under the terms of the Plan without regard to the limitations of Code Section 415 over (2) the maximum "annual additions" determined pursuant to Section 4.9.
(a) For purposes of this Section, "Section 415 suspense account" shall mean an unallocated account equal to the
sum of "excess amounts" for all Participants in the Plan during the "limitation year." The "Section 415 suspense account" shall not share in any earnings or losses of the Trust Fund.
.1 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be transferred from other qualified plans by Eligible Employees, provided that the trust from which such funds are transferred permits the transfer to be made and the transfer will not jeopardize the tax exempt status of the Plan or Trust or create adverse tax consequences for the Employer. The amounts transferred shall be set up in a separate account herein referred to as a "Participant's Rollover Account." Such account shall be fully Vested at all times and shall not be subject to Forfeiture for any reason. Effective April 1, 1999, amounts in a Participant's Rollover Account are subject to the loan provisions of Section 7.4.
(a) Amounts in a Participant's Rollover Account shall be held by the Trustee pursuant to the provisions of this Plan and may not be withdrawn by, or distributed to the Participant, in whole or in part, except as provided in paragraphs (c) and (d) of this Section.
(a) Except as permitted by Regulations (including Regulation 1.411(d)-4), amounts attributable to elective contributions (as defined in Regulation 1.401(k)-1(g)(3)), including amounts treated as elective contributions, which are transferred from another qualified plan in a plan-to- plan transfer shall be subject to the distribution limitations provided for in Regulation 1.401(k)-1(d).
(a) At Normal Retirement Date, or such other date when the Participant or his Beneficiary shall be entitled to receive benefits, the fair market value of the Participant's Rollover Account shall be used to provide additional benefits to the Participant or his Beneficiary. Any distributions of amounts held in a Participant's Rollover Account shall be made in a manner which is consistent with and satisfies the provisions of Section 6.5, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder. Furthermore, such amounts shall be considered as part of a Participant's benefit in determining whether an involuntary cash-out of benefits without Participant consent may be made.
(a) The Administrator may direct that employee transfers made after a valuation date be segregated into a separate account for each Participant in a federally insured
savings account, certificate of deposit in a bank or savings and loan association, money market certificate, or other short term debt security acceptable to the Trustee until such time as the allocations pursuant to this Plan have been made, at which time they may remain segregated or be invested as part of the general Trust Fund, to be determined by the Administrator.
(a) For purposes of this Section, the term "qualified plan" shall mean any tax qualified plan under Code Section 401(a). The term "amounts transferred from other qualified plans" shall mean: (i) amounts transferred to this Plan directly from another qualified plan; (ii) distributions from another qualified plan which are eligible rollover distributions and which are either transferred by the Employee to this Plan within sixty (60) days following his receipt thereof or are transferred pursuant to a direct rollover; (iii) amounts transferred to this Plan from a conduit individual retirement account provided that the conduit individual retirement account has no assets other than assets which (A) were previously distributed to the Employee by another qualified plan as a lump-sum distribution (B) were eligible for tax-free rollover to a qualified plan and (C) were deposited in such conduit individual retirement account within sixty (60) days of receipt thereof and other than earnings on said assets; and (iv) amounts distributed to the Employee from a conduit individual retirement
account meeting the requirements of clause (iii) above, and transferred by the Employee to this Plan within sixty (60) days of his receipt thereof from such conduit individual retirement account.
(a) Prior to accepting any transfers to which this Section applies, the Administrator may require the Employee to establish that the amounts to be transferred to this Plan meet the requirements of this Section and may also require the Employee to provide an opinion of counsel satisfactory to the Employer that the amounts to be transferred meet the requirements of this Section.
(a) This Plan shall not accept any direct or indirect transfers (as that term is defined and interpreted under Code Section 401(a)(11) and the Regulations thereunder) from a defined benefit plan, money purchase plan (including a target benefit plan), stock bonus or profit sharing plan which would otherwise have provided for a life annuity form of payment to the Participant.
(a) Notwithstanding anything herein to the contrary, a transfer directly to this Plan from another qualified plan (or a transaction having the effect of such a transfer)
shall only be permitted if it will not result in the elimination or reduction of any "Section 411(d)(6) protected benefit" as described in Section 8.1.
.1 MANDATORY CONTRIBUTIONS
(a) On and prior to March 31, 1999, as a condition of sharing in Employer contributions, each Participant shall agree to contribute from $3.00 to $20.00 per week of his Compensation to the Trustee. Such contribution shall be credited to his "Employee Contribution Account" and shall share in Trust Fund earnings and losses. "Employee Contribution Account" means the account established by the Administrator for each Participant with respect to his total interest in the Plan resulting from the Participant's mandatory non-deductible contributions made to pursuant to this Section 4.12.
(b) A Participant may increase or decrease his Employee Contribution rate upon written notice to the Employer. The new rate shall become effective in accordance with the procedures established by the Employer.
(c) The Employee Contribution Account shall be fully vested at all times.
(d) A Participant may elect to withdraw funds from his Employee Contribution Account. In the event such a withdrawal is made, he shall be barred from making any additional Employee Contributions to the Trust Fund for a period of 12 months. A Participant may commence contributing on the January 1st or July 1st following the 12 month period.
Withdrawals from a Participant's Employee Contribution
Account shall not reduce the vested percentage of such Participant's
Account balance attributable to minimum contributions made pursuant to
Section 4.4.
(e) Withdrawals from Employee Contribution Accounts may be made at any time during the Plan Year.
(f) In the event a Participant has received a hardship distribution pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained by the Employer, then such Participant shall be barred from making any Employee Contributions to the Trust Fund for a period of 12 months after receipt of the distribution. A Participant may commence contributing on the January 1st or July 1st following the 12 month period.
(g) A Participant may discontinue or reduce his Employee Contributions by notifying the Employer of his election at least 10 days prior to the end of an applicable pay period in accordance with procedures established by the Employer.
(h) Any Participant who has elected to discontinue his Employee Contributions may resume making Employee Contributions on the following January 1st or July 1st after the effective date of such discontinuance.
(i) The Employer shall transfer Employee contributions to the Trustee as of the earliest date on which such contributions can be reasonably segregated from the Employer's general assets, but in any event within 15 business days following the end of the month in which such amounts would otherwise have been payable to the Participant in cash.
(j) Upon attainment of Normal Retirement Age, or such other date when the Participant or his Beneficiary shall be entitled to receive benefits, the fair market value of the Employee Contribution Account shall be used to provide additional benefits to the Participant
or his Beneficiary.
Any distributions of amounts held in an Employee Contribution Account shall be made in a manner which is consistent with and satisfies the provisions of Section 6.5, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder.
.1 VOLUNTARY CONTRIBUTIONS
(a) On and after April 1, 1999, in order to allow Participants the opportunity to increase their retirement income, each Participant may, at the discretion of the Administrator, elect to voluntarily contribute a portion of his after-tax compensation earned while a Participant under this Plan. A Participant may elect to contribute a percentage of his after-tax compensation provided that the combined percentage of voluntary contributions and Employee Elective Contributions may not exceed 18% of a Participant's Compensation. Such contributions shall be paid to the Trustee within a reasonable period of time after the Employer receives the contribution. The balance in each Participant's Voluntary Contribution Account shall be fully Vested at all times and shall not be subject to
Forfeiture for any reason.
(a) A Participant may elect to withdraw his voluntary
contributions from his Voluntary Contribution Account and the actual earnings
thereon in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent requirements
of Code Section 411(a)(11) and the Regulations thereunder. If the Administrator
maintains sub-accounts with respect to voluntary contributions (and earnings
thereon) which were made on or before a specified date, a Participant shall be
permitted to designate which sub-account shall be the source for his withdrawal.
In the event such a withdrawal is made, or in the event a Participant has received a hardship distribution from his Participant's Elective Account pursuant to Section 6.10(b) or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained by the Employer, then such Participant shall be barred from making any voluntary contributions to the Trust Fund for a period of twelve (12) months after receipt of the withdrawal or distribution.
(a) At Normal Retirement Date, or such other date when the Participant or his Beneficiary shall be entitled to
receive benefits, the fair market value of the Voluntary Contribution Account shall be used to provide additional benefits to the Participant or his Beneficiary.
(a) The Administrator may direct that voluntary contributions made after a valuation date be segregated into a separate account for each Participant in a federally insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate, or other short term debt security acceptable to the Trustee until such time as the allocations pursuant to this Plan have been made, at which time they may remain segregated or be invested as part of the general Trust Fund, to be determined by the Administrator.
.1 DIRECTED INVESTMENT ACCOUNT
(a) Participants may, subject to a procedure established by the Administrator (the Participant Direction Procedures) and applied in a uniform nondiscriminatory manner, direct the Trustee to invest all of their accounts in specific assets, specific funds or other investments permitted under the Plan and the Participant Direction Procedures. That portion of the interest of any Participant so directing will thereupon be considered a Participant's Directed Account. On and before June 30, 1996, Mandatory Employee Contributions were invested in the
Guaranteed Long Term Account.
(a) As of each Valuation Date, all Participant Directed Accounts shall be charged or credited with the net earnings, gains, losses and expenses as well as any appreciation or depreciation in the market value using publicly listed fair market values when available or appropriate.
(1) To the extent that the assets in a Participant's Directed Account are accounted for as pooled assets or investments, the allocation of earnings, gains and losses of each Participant's Directed Account shall be based upon the total amount of funds so invested, in a manner proportionate to the Participant's share of such pooled investment.
(2) To the extent that the assets in the Participant's Directed Account are accounted for as segregated assets, the allocation of earnings, gains and losses from such assets shall be made on a separate and distinct basis.
(a) The Participant Direction Procedures shall provide an explanation of the circumstances under which Participants and their Beneficiaries may give investment instructions, including, but need not be limited to, the following:
(1) the conveyance of instructions by the Participants and their Beneficiaries to invest Participant Directed Accounts in Directed Investments;
(2) the name, address and phone number of the Fiduciary (and, if applicable, the person or persons designated by the Fiduciary to act on its behalf) responsible for providing information to the Participant or a Beneficiary upon request relating to the investments in Directed Investments;
(3) applicable restrictions on transfers to and from any Designated Investment Alternative;
(4) any restrictions on the exercise of voting, tender and similar rights related to a Directed Investment by the Participants or their Beneficiaries;
(5) a description of any transaction fees and expenses which affect the balances in Participant Directed Accounts in connection with the purchase or sale of Directed Investments; and
(6) general procedures for the dissemination of investment and other information relating to the Designated
Investment Alternatives as deemed necessary or appropriate, including but not limited to a description of the following:
(i) the investment vehicles available under the Plan, including specific information regarding any Designated Investment Alternative;
(ii) any designated Investment Managers; and
(iii) a description of the additional information which may be obtained upon request from the Fiduciary designated to provide such information.
(a) Any information regarding investments available under the Plan, to the extent not required to be described in the Participant Direction Procedures, may be provided to the Participant in one or more written documents which are separate from the Participant Direction Procedures and are not thereby incorporated by reference into this Plan.
(a) The Administrator may, at its discretion, include in or exclude by amendment or other action from the Participant Direction Procedures such instructions, guidelines or policies as it deems necessary or appropriate to ensure proper
administration of the Plan, and may interpret the same accordingly.
ARTICLE I
VALUATIONS
.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation Date, to determine the net worth of the assets comprising the Trust Fund as it exists on the Valuation Date. In determining such net worth, the Trustee shall value the assets comprising the Trust Fund at their fair market value as of the Valuation Date and shall deduct all expenses for which the Trustee has not yet obtained reimbursement from the Employer or the Trust Fund. The Trustee may update the value of any shares held in the Participant Directed Account by reference to the number of shares held by that Participant, priced at the market value as of the Valuation Date.
.1 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund which are listed on a registered stock exchange, the Administrator shall direct the Trustee to value the
same at the prices they were last traded on such exchange preceding the close of business on the Valuation Date. If such securities were not traded on the Valuation Date, or if the exchange on which they are traded was not open for business on the Valuation Date, then the securities shall be valued at the prices at which they were last traded prior to the Valuation Date. Any unlisted security held in the Trust Fund shall be valued at its bid price next preceding the close of business on the Valuation Date, which bid price shall be obtained from a registered broker or an investment banker. In determining the fair market value of assets other than securities for which trading or bid prices can be obtained, the Trustee may appraise such assets itself, or in its discretion, employ one or more appraisers for that purpose and rely on the values established by such appraiser or appraisers.
ARTICLE I
DETERMINATION AND DISTRIBUTION OF BENEFITS
.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire for the purposes hereof on his Normal Retirement Date. However, a Participant may postpone the termination of his employment with the Employer to a later date,
in which event the participation of such Participant in the Plan, including the right to receive allocations pursuant to Section 4.4, shall continue until his Late Retirement Date. Upon a Participant's Retirement Date, or as soon thereafter as is practicable, the Trustee shall distribute, at the election of the Participant, all amounts credited to such Participant's Combined Account in accordance with Section 6.5.
.1 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or other termination of his employment, all amounts credited to such Participant's Combined Account shall become fully Vested. The Administrator shall direct the Trustee, in accordance with the provisions of Sections 6.6 and 6.7, to distribute the value of the deceased Participant's accounts to the Participant's Beneficiary.
(a) Upon the death of a Former Participant, the Administrator shall direct the Trustee, in accordance with the provisions of Sections 6.6 and 6.7, to distribute any remaining Vested amounts credited to the accounts of a deceased Former Participant to such Former Participant's Beneficiary.
(a) Any security interest held by the Plan by
reason of an outstanding loan to the Participant or Former Participant shall be taken into account in determining the amount of the death benefit.
(a) The Administrator may require such proper proof of death and such evidence of the right of any person to receive payment of the value of the account of a deceased Participant or Former Participant as the Administrator may deem desirable. The Administrator's determination of death and of the right of any person to receive payment shall be conclusive.
(a) The Beneficiary of the death benefit payable pursuant to this Section shall be the Participant's spouse. Except, however, the Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court order to such
effect (and there is no "qualified domestic relations order" as defined in Code
Section 414(p) which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a form satisfactory to the Administrator. A Participant may at any time revoke his designation of a Beneficiary or change his Beneficiary by filing written notice of such revocation or change with the Administrator. However, the Participant's spouse must again consent in writing to any change in Beneficiary unless the original consent acknowledged that the spouse had the right to limit consent only to a specific Beneficiary and that the spouse voluntarily elected to relinquish such right. In the event no valid designation of Beneficiary exists at the time of the Participant's death, the death benefit shall be payable to his estate.
(a) Any consent by the Participant's spouse to waive any rights to the death benefit must be in writing, must acknowledge the effect of such waiver, and be witnessed by a Plan representative or a notary public. Further, the spouse's consent must be irrevocable and must acknowledge the specific nonspouse Beneficiary.
.1 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to his Retirement Date or other termination of his employment, all amounts credited to such Participant's Combined Account shall become fully Vested. In the event of a Participant's Total and Permanent Disability, the Trustee, in accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such Participant all amounts credited to such Participant's Combined Account as though he had retired.
.1 DETERMINATION OF BENEFITS UPON TERMINATION
(a) If a Participant's employment with the Employer is terminated for any reason other than death, Total and Permanent Disability or retirement, such Participant shall be entitled to such benefits as are provided hereinafter pursuant to this Section 6.4.
Distribution of the funds due to a Terminated Participant shall be made on the occurrence of an event which would result in the distribution had the Terminated Participant remained in the employ of the Employer (upon the Participant's death, Total and Permanent Disability or Normal
Retirement). However, at the election of the Participant, the Administrator shall direct the Trustee to cause the entire Vested portion of the Terminated Participant's Combined Account to be payable to such Terminated Participant. Any distribution under this paragraph shall be made in a manner which is consistent with and satisfies the provisions of Section 6.5, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit derived from Employer and Employee contributions does not exceed $3,500 ($5,000 on and after January 1, 1998) and has never exceeded $3,500 ($5,000 on and after January 1, 1998) at the time of any prior distribution, the Administrator shall direct the Trustee to cause the entire Vested benefit to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated Participant's Vested benefit is zero, the Terminated Participant shall be deemed to have received a distribution of such Vested benefit.
(a) The Vested portion of any Participant's Account shall be a percentage of the total amount credited to his Participant's Account determined on the basis of the
Participant's number of whole years of his Period of Service according to the following schedule:
Vesting Schedule
Periods of Service Percentage
Less than 3
3 30 %
4 40 %
5 60 %
6 80 %
7 100 %
|
(a) Notwithstanding the vesting attributable to Employer matching contributions provided for in paragraph 6.4(b) above, for any Top Heavy Plan Year, the Vested portion of the Participant's Account attributable to Employer matching contributions of any Participant who has an Hour of Service after the Plan becomes top heavy shall be a percentage of the amount credited to his Participant's Account attributable to Employer matching contributions determined on the basis of the Participant's number of whole years of his Period of Service according to the following schedule:
Vesting Schedule
Periods of Service Percentage Less than 20 % 2 20 % 3 40 % 4 60 % 5 80 % 6 100 % |
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan, the Administrator shall revert to the vesting schedule in effect before this Plan became a Top Heavy Plan. Any such reversion shall be treated as a Plan amendment pursuant to the terms of the Plan.
(a) Notwithstanding the vesting schedule above, the Vested percentage of a Participant's Account shall not be less than the Vested percentage attained as of the later of the effective date or adoption date of this amendment and restatement.
(a) Notwithstanding the vesting schedule above, upon the complete discontinuance of the Employer contributions to the Plan or upon any full or partial termination of the Plan, all amounts credited to the account of any affected Participant shall
become 100% Vested and shall not thereafter be subject to Forfeiture.
(a) The computation of a Participant's nonforfeitable percentage of his interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Plan. For this purpose, the Plan shall be treated as having been amended if the Plan provides for an automatic change in vesting due to a change in top heavy status. In the event that the Plan is amended to change or modify any vesting schedule, a Participant with at least three (3) whole years of his Period of Service as of the expiration date of the election period may elect to have his nonforfeitable percentage computed under the Plan without regard to such amendment. If a Participant fails to make such election, then such Participant shall be subject to the new vesting schedule. The Participant's election period shall commence on the adoption date of the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the amendment from the Employer or Administrator.
(a)(1) If any Former Participant shall be reemployed by the Employer before a 1-Year Break in Service occurs, he shall continue to participate in the Plan in the same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received, or was deemed to have received, a distribution of his
entire Vested interest prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to him before the
earlier of five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer or the close of the first period of five
(5) consecutive 1-Year Breaks in Service commencing after the distribution, or
in the event of a deemed distribution, upon the reemployment of such Former
Participant. In the event the Former Participant does repay the full amount
distributed to him, or in the event of a deemed distribution, the undistributed
portion of the Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Valuation Date coinciding with or
preceding his termination. The source for such reinstatement shall first be any
Forfeitures occurring during the year. If such source is insufficient, then the
Employer shall
contribute an amount which is sufficient to restore any such forfeited Accounts.
(3) If any Former Participant is reemployed after a 1-Year Break in Service has occurred, Periods of Service shall include Periods of Service prior to his 1-Year Break in Service subject to the following rules:
(i) If a Former Participant has a 1-Year Break in Service, his pre-break and post-break service shall be used for computing Periods of Service for eligibility and for vesting purposes only after he has been employed for one (1) Period of Service following the date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does not have a nonforfeitable right to any interest in the Plan resulting from Employer contributions shall lose credits otherwise allowable under (i) above if his consecutive 1-Year Breaks in Service equal or exceed the greater of (A) five (5) or (B) the aggregate number of his pre-break Periods of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service, a Former Participant's Vested Account balance attributable to pre-break service shall not be increased as a
result of post-break service;
(iv) If a Former Participant is reemployed by the Employer, he shall participate in the Plan immediately on his date of reemployment;
(v) If a Former Participant (a 1-Year Break in Service previously occurred, but employment had not terminated) is credited with an Hour of Service after the first eligibility computation period in which he incurs a 1-Year Break in Service, he shall participate in the Plan immediately.
(a) In determining Periods of Service for purposes of vesting under the Plan, Periods of Service prior to the Effective Date of the Plan shall be excluded.
.1 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the Participant, shall direct the Trustee to distribute to a Participant or his Beneficiary any amount to which he is entitled under the Plan in one or more of the following methods:
(1) One lump-sum payment in cash.
(2) Payments over a period certain in monthly, quarterly, semiannual, or annual cash installments. In order to provide such installment payments, the Administrator may (A) segregate the aggregate amount thereof in a separate, federally insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate or other liquid short- term security or (B) purchase a nontransferable annuity contract for a term certain (with no life contingencies) providing for such payment. The period over which such payment is to be made shall not extend beyond the Participant's life expectancy (or the life expectancy of the Participant and his designated Beneficiary).
(a) Any distribution to a Participant who has a benefit which exceeds, or has ever exceeded, $3,500 ($5,000 on and after January 1, 1998) at the time of any prior distribution shall require such Participant's consent if such distribution commences prior to the later of his Normal Retirement Age or age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer receipt of the distribution. If a Participant fails to consent, it shall be deemed an election to defer the commencement of payment of any benefit. However, any election to defer the receipt of benefits shall not apply with respect to
distributions which are required under Section 6.5(c).
(2) Notice of the rights specified under this paragraph shall be provided no less than 30 days and no more than 90 days before the date the distribution commences.
(3) Written consent of the Participant to the distribution must not be made before the Participant receives the notice and must not be made more than 90 days before the date the distribution commences.
(4) No consent shall be valid if a significant detriment is imposed under the Plan on any Participant who does not consent to the distribution.
Any such distribution may commence less than 30 days after the notice required under Regulation 1.411(a)-11(c) is given, provided that: (1) the Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution.
(a) Notwithstanding any provision in the Plan to the contrary, the distribution of a Participant's benefits shall be made in accordance with the following requirements and shall otherwise comply with Code Section 401(a)(9) and the Regulations thereunder (including Regulation 1.401(a)(9)-2), the provisions of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed or must begin to be distributed to him not later than April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2 or (ii) the calendar year in which the Participant retires, provided, however, that this clause (ii) shall not apply in the case of a Participant who is a "five (5) percent owner" at any time during the five (5) Plan Year period ending in the calendar year in which he attains age 70 1/2 or, in the case of a Participant who becomes a "five (5) percent owner" during any subsequent Plan Year, clause (ii) shall no longer apply and the required beginning date shall be the April 1st of the calendar year following the calendar year in which such subsequent Plan Year ends. Such distributions shall be equal to or greater than any required distribution. Notwithstanding the foregoing, but only on and before December 31, 1996, clause (ii) above shall not apply to any Participant unless the Participant had attained age 70 1/2 before January 1, 1988 and was not a "five (5) percent
owner" at any time during the Plan Year ending with or within the calendar year in which the Participant attained age 66 1/2 or any subsequent Plan Year.
Alternatively, distributions to a Participant must begin no later than the applicable April 1st as determined under the preceding paragraph and must be made over a period certain measured by the life expectancy of the Participant (or the life expectancies of the Participant and his designated Beneficiary) in accordance with Regulations.
(2) Distributions to a Participant and his Beneficiaries shall only be made in accordance with the incidental death benefit requirements of Code Section 401(a)(9)(G) and the Regulations thereunder.
(a) For purposes of this Section, the life expectancy of a Participant and a Participant's spouse may, at the election of the Participant or the Participant's spouse, be redetermined in accordance with Regulations. The election, once made, shall be irrevocable. If no election is made by the time distributions must commence, then the life expectancy of the Participant and the Participant's spouse shall not be subject to recalculation. Life expectancy and joint and last survivor expectancy shall be computed using the return multiples in Tables
V and VI of Regulation 1.72-9.
(a) The restrictions imposed by this Section shall not apply if
a Participant has, prior to January 1, 1984, made a written designation to have
his retirement benefit paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982. Any such written designation made by a Participant
shall be binding upon the Plan Administrator notwithstanding any contrary
provision of Section 6.5.
(a) All annuity Contracts under this Plan shall be non- transferable when distributed. Furthermore, the terms of any annuity Contract purchased and distributed to a Participant or spouse shall comply with all of the requirements of the Plan.
(a) If a distribution is made at a time when a Participant is not fully Vested in his Participant's Account and the Participant may increase the Vested percentage in such account:
(1) a separate account shall be established for the Participant's interest in the Plan as of the time of the distribution; and
(2) at any relevant time, the Participant's Vested portion of the separate account shall be equal to an amount ("X") determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested percentage at the relevant time, AB is the account balance at the relevant time, D is the amount of distribution, and R is the ratio of the account balance at the relevant time to the account balance after distribution.
.1 DISTRIBUTION OF BENEFITS UPON DEATH
(a) (1) The death benefit payable pursuant to Section 6.2 shall be paid to the Participant's Beneficiary within a reasonable time after the Participant's death by either of the following methods, as elected by the Participant (or if no election has been made prior to the Participant's death, by his Beneficiary) subject, however, to the rules specified in Section 6.6(b):
(i) One lump-sum payment in cash.
(ii) Payment in monthly, quarterly,
semi-annual, or annual cash installments over a period to be determined by the Participant or his Beneficiary. After periodic installments commence, the Beneficiary shall have the right to direct the Trustee to reduce the period over which such periodic installments shall be made, and the Trustee shall adjust the cash amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section 6.2 is payable in installments, then, upon the death of the Participant, the Administrator may direct the Trustee to segregate the death benefit into a separate account, and the Trustee shall invest such segregated account separately, and the funds accumulated in such account shall be used for the payment of the installments.
(a) Notwithstanding any provision in the Plan to the contrary, distributions upon the death of a Participant shall be made in accordance with the following requirements and shall otherwise comply with Code Section 401(a)(9) and the Regulations thereunder. If it is determined pursuant to Regulations that the distribution of a Participant's interest has begun and the Participant dies before his entire interest has been distributed to him, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution selected pursuant to Section 6.5 as of his date of
death. If a Participant dies before he has begun to receive any distributions of his interest under the Plan or before distributions are deemed to have begun pursuant to Regulations, then his death benefit shall be distributed to his Beneficiaries by December 31st of the calendar year in which the fifth anniversary of his date of death occurs.
However, in the event that the Participant's spouse (determined as of the date of the Participant's death) is his Beneficiary, then in lieu of the preceding rules, distributions must be made over a period not extending beyond the life expectancy of the spouse and must commence on or before the later of: (1) December 31st of the calendar year immediately following the calendar year in which the Participant died; or (2) December 31st of the calendar year in which the Participant would have attained age 70 1/2. If the surviving spouse dies before distributions to such spouse begin, then the 5- year distribution requirement of this Section shall apply as if the spouse was the Participant.
(a) For purposes of this Section, the life expectancy of a Participant and a Participant's spouse may, at the election of the Participant or the Participant's spouse, be redetermined in accordance with Regulations. The election, once made, shall be irrevocable. If no election is made by the time
distributions must commence, then the life expectancy of the Participant and the Participant's spouse shall not be subject to recalculation. Life expectancy and joint and last survivor expectancy shall be computed using the return multiples in Tables V and VI of Regulation 1.72-9.
(a) Subject to the spouse's right of consent afforded under the Plan, the restrictions imposed by this Section shall not apply if a Participant has, prior to January 1, 1984, made a written designation to have his death benefits paid in an alternative method acceptable under Code Section 401(a) as in effect prior to the enactment of the Tax Equity and Fiscal Responsibility Act of 1982.
.1 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to make a distribution or to commence a series of payments the distribution or series of payments may be made or begun as soon as is practicable. However, unless a Former Participant elects in writing to defer the receipt of benefits (such election may not result in a death benefit that is more than incidental), the payment of benefits shall begin not later than the 60th day after the close of the Plan Year in which the latest of the following events occurs: (a) the date on which the
Participant attains the earlier of age 65 or the Normal Retirement Age specified herein; (b) the 10th anniversary of the year in which the Participant commenced participation in the Plan; or (c) the date the Participant terminates his service with the Employer.
.1 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the Administrator may direct that such distribution be paid to the legal guardian, or if none, to a parent of such Beneficiary or a responsible adult with whom the Beneficiary maintains his residence, or to the custodian for such Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by the laws of the state in which said Beneficiary resides. Such a payment to the legal guardian, custodian or parent of a minor Beneficiary shall fully discharge the Trustee, Employer, and Plan from further liability on account thereof.
.1 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a Participant or his Beneficiary hereunder shall, at the later of the Participant's attainment of
age 62 or his Normal Retirement Age, remain unpaid solely by reason of the inability of the Administrator, after sending a registered letter, return receipt requested, to the last known address, and after further diligent effort, to ascertain the whereabouts of such Participant or his Beneficiary, the amount so distributable shall be treated as a Forfeiture pursuant to the Plan. In the event a Participant or Beneficiary is located subsequent to his benefit being reallocated, such benefit shall be restored unadjusted for earnings or losses.
.1 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) On and before March 31, 1999, the Administrator, at the election of the Participant, shall direct the Trustee to distribute to any Participant in any one Plan Year, up to the lesser of 100% of his vested portion of his Employer Non-Elective Account valued as of the last Valuation Date or the amount necessary to satisfy the immediate and heavy financial need of the Participant, and the Participant's Employer Non-Elective account shall be reduced accordingly.
On and after April 1, 1999, the Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any one Plan
Year, in the following order, up to the lesser of 100% of his 1) Voluntary
Contribution account, 2) effective April 1, 1999, Participant's Rollover
Account, 3) Participant's Elective Account, and 4) vested portion of a
Participant's Employer Non-Elective Account, all valued as of the last
Valuation Date or the amount necessary to satisfy the immediate and heavy
financial need of the Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day of the Plan Year or,
if later, the Valuation Date immediately preceding the date of
distribution, and the Participant's Elective Account and Participant's
Rollover Account shall be reduced accordingly.
Withdrawal under this Section shall be authorized only if the distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d) previously incurred by the Participant, his spouse, or any of his dependents (as defined in Code Section 152) or necessary for these persons to obtain medical care;
(2) The costs directly related to the purchase
of a principal residence for the Participant (excluding mortgage payments);
(3) Payment of tuition, related educational fees, and room and board expenses for the next twelve (12) months of post-secondary education for the Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence.
(5) Funeral expenses for a member of the Participant's family.
(a) No distribution shall be made pursuant to this Section unless the Administrator, based upon the Participant's representation and such other facts as are known to the Administrator, determines that all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant. The amount of the immediate and heavy financial need may include any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result
from the distribution;
(2) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable (at the time of the loan) loans currently available under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer, provide that the Participant's elective deferrals and voluntary Employee contributions will be suspended for at least twelve (12) months after receipt of the hardship distribution or, the Participant, pursuant to a legally enforceable agreement, will suspend his elective deferrals and voluntary Employee contributions to the Plan and all other plans maintained by the Employer for at least twelve (12) months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer, provide that the Participant may not make elective deferrals for the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant's elective deferrals for the taxable year of the hardship distribution.
(a) Notwithstanding the above, distributions from the Participant's Elective Account pursuant to this Section shall be limited, as of the date of distribution, to the Participant's Elective Account as of the end of the last Plan Year ending before July 1, 1989, plus the total Participant's Deferred Compensation after such date, reduced by the amount of any previous distributions pursuant to this Section.
(a) Any distribution made pursuant to this Section shall be made
in a manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of Code
Section 411(a)(11) and the Regulations thereunder.
.1 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any "alternate payee" under a "qualified domestic relations order." Furthermore, a distribution to an "alternate payee" shall be permitted if such distribution is authorized by a "qualified domestic relations order," even if the affected Participant has not separated from service and has not reached the "earliest retirement age" under the Plan. For the purposes of this Section, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meaning set forth under Code
Section 414(p).
ARTICLE I
TRUSTEE
.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
(a) The Trustee shall have the following categories of responsibilities:
(1) Consistent with the "funding policy and method" determined by the Employer, to invest, manage, and control the Plan assets subject, however, to the direction of a Participant with respect to his Participant Directed Accounts, the Employer or an Investment Manager appointed by the Employer or any agent of the Employer;
(2) At the direction of the Administrator, to pay benefits required under the Plan to be paid to Participants, or, in the event of their death, to their Beneficiaries; and
(3) To maintain records of receipts and disbursements and furnish to the Employer and/or Administrator for each Plan Year a written annual report per Section 7.7.
(a) In the event that the Trustee shall be directed by a Participant (pursuant to the Participant Direction Procedures), or the Employer, or an Investment Manager or other agent appointed by the Employer with respect to the investment of any or all Plan assets, the Trustee shall have no liability with respect to the investment of such assets, but shall be responsible only to execute such investment instructions as so directed.
(1) The Trustee shall be entitled to rely fully on the written instructions of a Participant (pursuant to the Participant Direction Procedures), or the Employer, or any Fiduciary or nonfiduciary agent of the Employer, in the discharge of such duties, and shall not be liable for any loss or other liability, resulting from such direction (or lack of direction) of the investment of any part of the Plan assets.
(2) The Trustee may delegate the duty to execute such instructions to any nonfiduciary agent, which may be an affiliate of the Trustee or any Plan representative.
(3) The Trustee may refuse to comply with any direction from the Participant in the event the Trustee, in its sole and absolute discretion, deems such directions improper by virtue of applicable law. The Trustee shall not be responsible or liable for any loss or expense which may result from the Trustee's refusal or failure to comply with any directions from the Participant.
(4) Any costs and expenses related to compliance with the Participant's directions shall be borne by the Participant's Directed Account, unless paid by the Employer.
(a) If there shall be more than one Trustee, they shall act by a majority of their number, but may authorize one or more of them to sign papers on their behalf.
.1 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the Trust Fund invested without distinction between principal and income and in such securities or property, real or personal, wherever situated, as the Trustee shall deem advisable, including, but not limited to, stocks, common or preferred, bonds and other evidences of indebtedness or ownership, and real estate or any interest therein. The Trustee
shall at all times in making investments of the Trust Fund consider, among other factors, the short and long-term financial needs of the Plan on the basis of information furnished by the Employer. In making such investments, the Trustee shall not be restricted to securities or other property of the character expressly authorized by the applicable law for trust investments; however, the Trustee shall give due regard to any limitations imposed by the Code or the Act so that at all times the Plan may qualify as a qualified Profit Sharing Plan and Trust.
(a) The Trustee may employ a bank or trust company pursuant to the terms of its usual and customary bank agency agreement, under which the duties of such bank or trust company shall be of a custodial, clerical and record- keeping nature.
(a) With respect to assets in a Participant's Directed Investment Account, the Participant or Beneficiary shall direct the Trustee with regard to any voting, tender and similar rights associated with the ownership of such assets, (i.e., the "Stock Right(s)") as follows:
(1) Each Participant or Beneficiary shall direct the Trustee to vote or otherwise exercise such
Stock Rights in accordance with the provisions, conditions and terms of any such Stock Right(s).
(2) Such directions shall be provided to the Trustee by the Participant or Beneficiary in accordance with the procedure as established by the Administrator. The Trustee shall vote or otherwise exercise such Stock Right(s) with respect to which it has received directions to do so under this Section.
(3) To the extent to which a Participant or Beneficiary does not instruct the Trustee or does not issue valid directions to the Trustee to vote or otherwise exercise such Stock Right(s), such Participants or Beneficiaries shall be deemed to have directed the Trustee that such Stock Rights remain nonvoted and unexercised.
.1 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law, statutory authority, including the Act, and other provisions of the Plan, shall have the following powers and authorities, to be exercised in the Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other property and to retain the same. In
conjunction with the purchase of securities, margin accounts may be opened and maintained;
(a) To sell, exchange, convey, transfer, grant options to purchase, or otherwise dispose of any securities or other property held by the Trustee, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition, with or without advertisement;
(a) To vote upon any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights or other options, and to make any payments incidental thereto; to oppose, or to consent to, or otherwise participate in, corporate reorganizations or other changes affecting corporate securities, and to delegate discretionary powers, and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities, or other property. However, the Trustee shall not vote proxies relating to securities for which it has not been assigned full investment management responsibilities. In those cases where another party has such investment authority or discretion, the Trustee will
deliver all proxies to said party who will then have full responsibility for voting those proxies;
(a) To cause any securities or other property to be registered in the Trustee's own name or in the name of one or more of the Trustee's nominees, and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund;
(a) To borrow or raise money for the purposes of the Plan in such amount, and upon such terms and conditions, as the Trustee shall deem advisable; and for any sum so borrowed, to issue a promissory note as Trustee, and to secure the repayment thereof by pledging all, or any part, of the Trust Fund; and no person lending money to the Trustee shall be bound to see to the application of the money lent or to inquire into the validity, expediency, or propriety of any borrowing;
(a) To keep such portion of the Trust Fund in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Plan, without liability for interest thereon;
(a) To accept and retain for such time as the
Trustee may deem advisable any securities or other property received or acquired as Trustee hereunder, whether or not such securities or other property would normally be purchased as investments hereunder;
(a) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted;
(a) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Plan, to commence or defend suits or legal or administrative proceedings, and to represent the Plan in all suits and legal and administrative proceedings;
(a) To employ suitable agents and counsel and to pay their reasonable expenses and compensation, and such agent or counsel may or may not be agent or counsel for the Employer;
(a) To apply for and procure from responsible insurance companies, to be selected by the Administrator, as an investment of the Trust Fund such annuity, or other Contracts (on the life of any Participant) as the Administrator shall deem proper; to exercise, at any time or from time to time, whatever
rights and privileges may be granted under such annuity, or other Contracts; to collect, receive, and settle for the proceeds of all such annuity or other Contracts as and when entitled to do so under the provisions thereof;
(a) To invest funds of the Trust in time deposits or savings accounts bearing a reasonable rate of interest in the Trustee's bank;
(a) To invest in Treasury Bills and other forms of United States government obligations;
(a) To invest in shares of investment companies registered under the Investment Company Act of 1940;
(a) To sell, purchase and acquire put or call options if the options are traded on and purchased through a national securities exchange registered under the Securities Exchange Act of 1934, as amended, or, if the options are not traded on a national securities exchange, are guaranteed by a member firm of the New York Stock Exchange;
(a) To deposit monies in federally insured savings accounts or certificates of deposit in banks or savings and loan associations;
(a) To pool all or any of the Trust Fund, from time to time, with assets belonging to any other qualified employee pension benefit trust created by the Employer or an affiliated company of the Employer, and to commingle such assets and make joint or common investments and carry joint accounts on behalf of this Plan and such other trust or trusts, allocating undivided shares or interests in such investments or accounts or any pooled assets of the two or more trusts in accordance with their respective interests;
(a) To appoint a nonfiduciary agent or agents to assist the Trustee in carrying out any investment instructions of Participants and of any Investment Manager or Fiduciary, and to compensate such agent(s) from the assets of the Plan, to the extent not paid by the Employer;
(a) To do all such acts and exercise all such rights and privileges, although not specifically mentioned herein, as the Trustee may deem necessary to carry out the purposes of the Plan.
.1 LOANS TO PARTICIPANTS
(a) Effective April 1, 1999, the Trustee may, in
the Trustee's discretion, make loans to Participants and Beneficiaries under the following circumstances: (1) loans shall be made available to all Participants and Beneficiaries on a reasonably equivalent basis; (2) loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Participants and Beneficiaries; (3) loans shall bear a reasonable rate of interest; (4) loans shall be adequately secured; and (5) shall provide for repayment over a reasonable period of time (6) loans shall come first from a Participant's Rollover account, if any, and second from a Participant's Elective Account. Loans may not be made from a Participant's Employer Non-Elective Contributions.
(a) Loans made pursuant to this Section (when added to the outstanding balance of all other loans made by the Plan to the Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan to the Participant during the one year period ending on the day before the date on which such loan is made, over the outstanding balance of loans from the Plan to the Participant on the date on which such loan was made, or
(2) one-half (1/2) of the present value of the non-forfeitable accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer shall be considered one plan. Additionally, with respect to any loan made prior to January 1, 1987, the $50,000 limit specified in (1) above shall be unreduced.
(a) Loans shall provide for level amortization with payments to be made not less frequently than quarterly over a period not to exceed five (5) years. Additionally, loans made prior to January 1, 1987, may provide for periodic payments which are made less frequently than quarterly and which do not necessarily result in level amortization. Loan repayments will be suspended under this Plan as permitted under Code Section 414(u)(4).
(a) Any loans granted or renewed on or after the last day of the first Plan Year beginning after December 31, 1988 shall be made pursuant to a Participant loan program. Such loan program shall be established in writing and must include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans offered;
(5) the procedure under the program for determining a reasonable rate of interest;
(6) the types of collateral which may secure a Participant loan; and
(7) the events constituting default and the steps that will be taken to preserve Plan assets.
Such Participant loan program shall be contained in a separate written document which, when properly executed, is hereby incorporated by reference and made a part of the Plan. Furthermore, such Participant loan program may be modified or amended in writing from time to time without the
necessity of amending this Section.
.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to time, in accordance with the terms of the Plan, make payments out of the Trust Fund. The Trustee shall not be responsible in any way for the application of such payments.
.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon in writing by the Employer and the Trustee. An individual serving as Trustee who already receives full-time pay from the Employer shall not receive compensation from the Plan. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable counsel fees incurred by it as Trustee. Such compensation and expenses shall be paid from the Trust Fund unless paid or advanced by the Employer. All taxes of any kind and all kinds whatsoever that may be levied or assessed under existing or future laws upon, or in respect of, the Trust Fund or the income thereof, shall be paid from the Trust Fund.
.1 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date or receipt of the Employer contribution for each Plan Year, the Trustee shall furnish to the Employer and Administrator a written statement of account with respect to the Plan Year for which such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(a) the gains, or losses, realized by the Trust Fund upon sales or other disposition of the assets;
(a) the increase, or decrease, in the value of the Trust Fund;
(a) all payments and distributions made from the Trust Fund; and
(a) such further information as the Trustee and/or Administrator deems appropriate. The Employer, forthwith upon its receipt of each such statement of account, shall acknowledge receipt thereof in writing and advise the Trustee and/or Administrator of its approval or disapproval thereof. Failure by the Employer to disapprove any such statement of account within thirty (30) days after its receipt thereof shall
be deemed an approval thereof. The approval by the Employer of any statement of account shall be binding as to all matters embraced therein as between the Employer and the Trustee to the same extent as if the account of the Trustee had been settled by judgment or decree in an action for a judicial settlement of its account in a court of competent jurisdiction in which the Trustee, the Employer and all persons having or claiming an interest in the Plan were parties; provided, however, that nothing herein contained shall deprive the Trustee of its right to have its accounts judicially settled if the Trustee so desires.
.1 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and the regulations thereunder for any Plan Year, the Administrator shall direct the Trustee to engage on behalf of all Participants an independent qualified public accountant for that purpose. Such accountant shall, after an audit of the books and records of the Plan in accordance with generally accepted auditing standards, within a reasonable period after the close of the Plan Year, furnish to the Administrator and the Trustee a report of his audit setting forth his opinion as to whether any statements, schedules or lists that are required by Act Section 103 or the Secretary of Labor to be filed
with the Plan's annual report, are presented fairly in conformity with generally accepted accounting principles applied consistently. All auditing and accounting fees shall be an expense of and may, at the election of the Administrator, be paid from the Trust Fund.
(a) If some or all of the information necessary to enable the Administrator to comply with Act Section 103 is maintained by a bank, insurance company, or similar institution, regulated and supervised and subject to periodic examination by a state or federal agency, it shall transmit and certify the accuracy of that information to the Administrator as provided in Act Section 103(b) within one hundred twenty (120) days after the end of the Plan Year or by such other date as may be prescribed under regulations of the Secretary of Labor.
.1 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer, at least thirty (30) days before its effective date, a written notice of his resignation.
(a) The Employer may remove the Trustee by mailing by registered or certified mail, addressed to such Trustee at his last known address, at least thirty (30) days
before its effective date, a written notice of his removal.
(a) Upon the death, resignation, incapacity, or removal of any Trustee, a successor may be appointed by the Employer; and such successor, upon accepting such appointment in writing and delivering same to the Employer, shall, without further act, become vested with all the estate, rights, powers, discretions, and duties of his predecessor with like respect as if he were originally named as a Trustee herein. Until such a successor is appointed, the remaining Trustee or Trustees shall have full authority to act under the terms of the Plan.
(a) The Employer may designate one or more successors prior to the death, resignation, incapacity, or removal of a Trustee. In the event a successor is so designated by the Employer and accepts such designation, the successor shall, without further act, become vested with all the estate, rights, powers, discretions, and duties of his predecessor with the like effect as if he were originally named as Trustee herein immediately upon the death, resignation, incapacity, or removal of his predecessor.
(a) Whenever any Trustee hereunder ceases to serve as such, he shall furnish to the Employer and Administrator a written statement of account with respect to the portion of the
Plan Year during which he served as Trustee. This statement shall be either (i)
included as part of the annual statement of account for the Plan Year required
under Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than the due
date of the annual statement of account for the Plan Year. The procedures set
forth in Section 7.7 for the approval by the Employer of annual statements of
account shall apply to any special statement of account rendered hereunder and
approval by the Employer of any such special statement in the manner provided in
Section 7.7 shall have the same effect upon the statement as the Employer's
approval of an annual statement of account. No successor to the Trustee shall
have any duty or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by Section 7.7
and this subparagraph.
.1 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee at the direction of the Administrator shall transfer the Vested interest, if any, of such Participant in his account to another trust forming part of a pension, profit sharing or stock bonus plan maintained by such Participant's new employer and represented by said employer in writing as meeting
the requirements of Code Section 401(a), provided that the trust to which such transfers are made permits the transfer to be made.
.1 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an eligible rollover distribution that is equal to at least $500 paid directly to an eligible retirement plan specified by the distributee in a direct rollover.
(a) For purposes of this Section the following definitions shall apply:
(1) An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to
the extent such distribution is required under Code Section 401(a)(9); the portion of any other distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any other distribution that is reasonably expected to total less than $200 during a year.
(2) An eligible retirement plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the spouse or former
spouse.
(4) A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee.
ARTICLE I
AMENDMENT, TERMINATION AND MERGERS
.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan, subject to the limitations of this Section. However, any amendment which affects the rights, duties or responsibilities of the Trustee and Administrator, other than an amendment to remove the Trustee or Administrator, may only be made with the Trustee's and Administrator's written consent. Any such amendment shall become effective as provided therein upon its execution. The Trustee shall not be required to execute any such amendment unless the Trust provisions contained herein are a part of the Plan and the amendment affects the duties of the Trustee hereunder.
(a) No amendment to the Plan shall be effective if it authorizes or permits any part of the Trust Fund (other than such part as is required to pay taxes and administration expenses) to be used for or diverted to any purpose other than
for the exclusive benefit of the Participants or their Beneficiaries or estates; or causes any reduction in the amount credited to the account of any Participant; or causes or permits any portion of the Trust Fund to revert to or become property of the Employer.
(a) Except as permitted by Regulations, no Plan amendment or transaction having the effect of a Plan amendment (such as a merger, plan transfer or similar transaction) shall be effective to the extent it eliminates or reduces any "Section 411(d)(6) protected benefit" or adds or modifies conditions relating to "Section 411(d)(6) protected benefits" the result of which is a further restriction on such benefit unless such protected benefits are preserved with respect to benefits accrued as of the later of the adoption date or effective date of the amendment. "Section 411(d)(6) protected benefits" are benefits described in Code Section 411(d)(6)(A), early retirement benefits and retirement-type subsidies, and optional forms of benefit.
.1 TERMINATION
(a) The Employer shall have the right at any time to terminate the Plan by delivering to the Trustee and Administrator written notice of such termination. Upon any full or partial termination, all amounts credited to the affected
Participants' Combined Accounts shall become 100% Vested as provided in Section 6.4 and shall not thereafter be subject to forfeiture, and all unallocated amounts shall be allocated to the accounts of all Participants in accordance with the provisions hereof.
(a) Upon the full termination of the Plan, the Employer shall direct the distribution of the assets of the Trust Fund to Participants in a manner which is consistent with and satisfies the provisions of Section 6.5. Distributions to a Participant shall be made in cash or through the purchase of irrevocable nontransferable deferred commitments from an insurer. Except as permitted by Regulations, the termination of the Plan shall not result in the reduction of "Section 411(d)(6) protected benefits" in accordance with Section 8.1(c).
.1 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets and/or liabilities may be transferred to any other plan and trust only if the benefits which would be received by a Participant of this Plan, in the event of a termination of the plan immediately after such transfer, merger or consolidation, are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the
transfer, merger or consolidation, and such transfer, merger or consolidation does not otherwise result in the elimination or reduction of any "Section 411(d)(6) protected benefits" in accordance with Section 8.1(c).
ARTICLE I
TOP HEAVY
.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the special minimum allocation requirements of Code Section 416(c) pursuant to Section 4.4 of the Plan.
.1 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as of the Determination Date, (1) the Present Value of Accrued Benefits of Key Employees and (2) the sum of the Aggregate Accounts of Key Employees under this Plan and all plans of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such Participant was a Key Employee for any prior Plan Year, such Participant's Present Value of Accrued Benefit and/or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top Heavy Group). In addition, if a Participant or Former Participant has not performed any services for any Employer maintaining the Plan at any time during the five year period ending on the Determination Date, any accrued benefit for such Participant or Former Participant shall not be taken into account for the purposes of determining whether this Plan is a Top Heavy or Super Top Heavy Plan.
(a) This Plan shall be a Super Top Heavy Plan for any Plan Year in which, as of the Determination Date, (1) the Present Value of Accrued Benefits of Key Employees and (2) the sum of the Aggregate Accounts of Key Employees under this Plan and all plans of an Aggregation Group, exceeds ninety percent (90%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key Employees under this Plan and all plans of an Aggregation Group.
(a) Aggregate Account: A Participant's Aggregate Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most recent valuation occurring within a twelve (12) month period ending on the Determination Date;
(2) an adjustment for any contributions due as of the Determination Date. Such adjustment shall be the amount of any contributions actually made after the Valuation Date but due on or before the Determination Date, except for the first Plan Year when such adjustment shall also reflect the amount of any contributions made after the Determination Date that are allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that includes the Determination Date or within the four (4) preceding Plan Years. However, in the case of distributions made after the Valuation Date and prior to the Determination Date, such distributions are not included as distributions for top heavy purposes to the extent that such distributions are already included in the Participant's Aggregate Account balance as of the Valuation Date. Notwithstanding anything herein to the contrary, all distributions, including distributions made prior to January 1, 1984, and distributions under a terminated plan which if it
had not been terminated would have been required to be included in an Aggregation Group, will be counted. Further, distributions from the Plan (including the cash value of life insurance policies) of a Participant's account balance because of death shall be treated as a distribution for the purposes of this paragraph.
(4) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to tax deductible qualified voluntary employee contributions shall not be considered to be a part of the Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides the rollovers or plan-to-plan transfers, it shall always consider such rollovers or plan-to-plan transfers as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers as part of the Participant's Aggregate Account balance. However, rollovers or plan-to-plan transfers accepted prior to January 1, 1984 shall be considered as part of the Participant's Aggregate Account
balance.
(6) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides the rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Participant's Aggregate Account balance, irrespective of the date on which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are to be treated as the same employer in (5) and (6) above, all employers aggregated under Code Section 414(b), (c), (m) and (o) are treated as the same employer.
(a) "Aggregation Group" means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a
participant in the Plan Year containing the Determination Date or any of the four preceding Plan Years, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group will be considered a Top Heavy Plan if the Required Aggregation Group is a Top Heavy Group. No plan in the Required Aggregation Group will be considered a Top Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) and 410. Such group shall be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the Employer if it was maintained within the last five (5) years ending on the Determination Date.
(a) "Determination Date" means (a) the last day of the preceding Plan Year, or (b) in the case of the first Plan Year, the last day of such Plan Year.
(a) Present Value of Accrued Benefit: In the case of a defined benefit plan, the Present Value of Accrued Benefit for a Participant other than a Key Employee, shall be as determined using the single accrual method used for all plans of the Employer and Affiliated Employers, or if no such single method exists, using a method which results in benefits accruing not more rapidly than the slowest accrual rate permitted under Code Section 411(b)(1)(C). The determination of the Present Value
of Accrued Benefit shall be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date except as provided in Code Section 416 and the Regulations thereunder for the first and second plan years of a defined benefit plan.
(a) "Top Heavy Group" means an Aggregation Group in which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Participants.
ARTICLE I
MISCELLANEOUS
.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant or Employee at any time regardless of the effect which such discharge shall have upon him as a Participant of this Plan.
.1 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall be payable out of the Trust Fund to any person (including a Participant or his Beneficiary) shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law.
(a) This provision shall not apply to the extent a Participant or Beneficiary is indebted to the Plan, as a result of a loan from the Plan. At the time a distribution is to be made to or for a Participant's or Beneficiary's benefit, such proportion of the amount distributed as shall equal such loan indebtedness shall be paid by the Trustee to the Trustee or the Administrator, at the direction of the Administrator, to apply against or discharge such loan indebtedness. Prior to making a payment, however, the Participant or Beneficiary must be given written notice by the Administrator that such loan indebtedness is to be so paid in whole or part from his Participant's Combined Account. If the Participant or Beneficiary does not agree that the loan indebtedness is a valid claim against his Vested Participant's Combined Account, he shall be entitled to a review of the validity of the claim in accordance with procedures provided in Sections 2.7 and 2.8.
(a) This provision shall not apply to a "qualified domestic relations order" defined in Code Section 414(p), and those other domestic relations orders permitted to be so treated by the Administrator under the provisions of the Retirement Equity Act of 1984. The Administrator shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Further, to
the extent provided under a "qualified domestic relations order," a former spouse of a Participant shall be treated as the spouse or surviving spouse for all purposes under the Plan.
.1 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act and the laws of the State of New York, other than its laws respecting choice of law, to the extent not preempted by the Act.
.1 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.
.1 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Trust and/or Plan established hereunder to which the Trustee, the Employer or the Administrator may be a party,
and such claim, suit, or proceeding is resolved in favor of the Trustee, the Employer or the Administrator, they shall be entitled to be reimbursed from the Trust Fund for any and all costs, attorney's fees, and other expenses pertaining thereto incurred by them for which they shall have become liable.
.1 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by law, it shall be impossible by operation of the Plan or of the Trust, by termination of either, by power of revocation or amendment, by the happening of any contingency, by collateral arrangement or by any other means, for any part of the corpus or income of any trust fund maintained pursuant to the Plan or any funds contributed thereto to be used for, or diverted to, purposes other than the exclusive benefit of Participants, Retired Participants, or their Beneficiaries.
(a) In the event the Employer shall make an excessive contribution under a mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer may demand repayment of such excessive contribution at any time within one (1) year following the time of payment and the Trustees shall return such amount to the Employer within the one (1) year period. Earnings of the Plan attributable to the excess contributions may not be returned to
the Employer but any losses attributable thereto must reduce the amount so returned.
.1 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by the Act and regulations thereunder, shall be bonded in an amount not less than 10% of the amount of the funds such Fiduciary handles; provided, however, that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of funds handled shall be determined at the beginning of each Plan Year by the amount of funds handled by such person, group, or class to be covered and their predecessors, if any, during the preceding Plan Year, or if there is no preceding Plan Year, then by the amount of the funds to be handled during the then current year. The bond shall provide protection to the Plan against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in connivance with others. The surety shall be a corporate surety company (as such term is used in Act Section 412(a)(2)), and the bond shall be in a form approved by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary, the cost of such bonds shall be an expense of and may, at the election of the Administrator, be paid from the Trust Fund or by the Employer.
.1 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the Trustee, nor their successors shall be responsible for the validity of any Contract issued hereunder or for the failure on the part of the insurer to make payments provided by any such Contract, or for the action of any person which may delay payment or render a Contract null and void or unenforceable in whole or in part.
.1 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any responsibility for the validity of this Plan or for the tax or legal aspects of this Plan. The insurer shall be protected and held harmless in acting in accordance with any written direction of the Trustee, and shall have no duty to see to the application of any funds paid to the Trustee, nor be required to question any actions directed by the Trustee. Regardless of any provision of this Plan, the insurer shall not be required to take or permit any action or allow any benefit or privilege contrary to the terms of any Contract which it issues hereunder, or the rules of the insurer.
.1 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or to any guardian or committee appointed for such Participant or Beneficiary in accordance with the provisions of the Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Trustee and the Employer, either of whom may require such Participant, legal representative, Beneficiary, guardian or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Trustee or Employer.
.1 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required to do or perform any act or matter or thing, it shall be done and performed by a person duly authorized by its legally constituted authority.
.1 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the Administrator and (3) the Trustee. The named Fiduciaries shall have only those specific powers, duties, responsibilities, and obligations as are specifically given them
under the Plan or as accepted by or assigned to them pursuant to any procedure provided under the Plan, including but not limited to any agreement allocating or delegating their responsibilities, the terms of which are incorporated herein by reference. In general, unless otherwise indicated herein or pursuant to such agreements, the Employer shall have the duties specified in Article II hereof, as the same may be allocated or delegated thereunder, including but not limited to the responsibility for making the contributions provided for under Section 4.1; and shall have the authority to appoint and remove the Trustee and the Administrator; to formulate the Plan's "funding policy and method"; and to amend or terminate, in whole or in part, the Plan. The Administrator shall have the responsibility for the administration of the Plan, including but not limited to the items specified in Article II of the Plan, as the same may be allocated or delegated thereunder. The Administrator shall act as the named Fiduciary responsible for communicating with the Participant according to the Participant Direction Procedures. The Trustee shall have the responsibility of management and control of the assets held under the Trust, except to the extent directed pursuant to Article II or with respect to those assets, the management of which has been assigned to an Investment Manager, who shall be solely responsible for the management of the assets assigned to it, all as specifically provided in the Plan and any agreement with the Trustee. Each named Fiduciary
warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan, authorizing or providing for such direction, information or action. Furthermore, each named Fiduciary may rely upon any such direction, information or action of another named Fiduciary as being proper under the Plan, and is not required under the Plan to inquire into the propriety of any such direction, information or action. It is intended under the Plan that each named Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under the Plan as specified or allocated herein. No named Fiduciary shall guarantee the Trust Fund in any manner against investment loss or depreciation in asset value. Any person or group may serve in more than one Fiduciary capacity. In the furtherance of their responsibilities hereunder, the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and to resolve ambiguities, inconsistencies and omissions, which findings shall be binding, final and conclusive.
.1 HEADINGS
The headings and subheadings of this Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.
.1 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan under Code
Section 401. If the Plan receives an adverse determination with respect to its
initial qualification, then the Plan may return such contributions to the
Employer within one year after such determination, provided the application for
the determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted, or such
later date as the Secretary of the Treasury may prescribe.
(a) Notwithstanding any provisions to the contrary, except Sections 3.5, 3.6, and 4.1(c), any contribution by the Employer to the Trust Fund is conditioned upon the deductibility of the contribution by the Employer under the Code and, to the extent any such deduction is disallowed, the Employer may, within one (1) year following the disallowance of the deduction, demand repayment of such disallowed contribution and the Trustee shall return such contribution within one (1) year following the disallowance. Earnings of the Plan attributable to the excess contribution may not be returned to the Employer, but any losses attributable thereto must reduce the amount so returned.
.1 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform, nondiscriminatory manner. In the event of any conflict between the terms of this Plan and any Contract purchased hereunder, the Plan provisions shall control.
ARTICLE I
PARTICIPATING EMPLOYERS
.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the Employer and Trustee, any other corporation or entity, whether an affiliate or subsidiary or not, may adopt this Plan and all of the provisions hereof, and participate herein and be known as a Participating Employer, by a properly executed document evidencing said intent and will of such Participating Employer.
.1 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same Trustee as provided in this Plan.
(a) The Trustee may, but shall not be required to, commingle, hold and invest as one Trust Fund all contributions made by Participating Employers, as well as all increments thereof. However, the assets of the Plan shall, on an ongoing basis, be available to pay benefits to all Participants and Beneficiaries under the Plan without regard to the Employer or Participating Employer who contributed such assets.
(a) The transfer of any Participant from or to an Employer participating in this Plan, whether he be an Employee of the Employer or a Participating Employer, shall not affect such Participant's rights under the Plan, and all amounts credited to such Participant's Combined Account as well as his accumulated service time with the transferor or predecessor, and his length of participation in the Plan, shall continue to his credit.
(a) All rights and values forfeited by termination of employment shall inure only to the benefit of the Participants of the Employer or Participating Employer by which the forfeiting Participant was employed.
(a) Any expenses of the Trust which are to be paid by the Employer or borne by the Trust Fund shall be paid by
each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed by such Employer bears to the total standing to the credit of all Participants.
.1 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan; provided, however, that with respect to all of its relations with the Trustee and Administrator for the purpose of this Plan, each Participating Employer shall be deemed to have designated irrevocably the Employer as its agent. Unless the context of the Plan clearly indicates the contrary, the word "Employer" shall be deemed to include each Participating Employer as related to its adoption of the Plan.
.1 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating Employers, and in the event of any such transfer, the Employee involved shall carry with him his accumulated service and eligibility. No such transfer shall effect a termination of employment hereunder, and the Participating Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such
Employee in the same manner as was the Participating Employer from whom the Employee was transferred.
.1 PARTICIPATING EMPLOYER CONTRIBUTION
All contributions made by a Participating Employer, as provided for in this Plan, shall be determined separately by each Participating Employer, and shall be allocated only among the Participants eligible to share of the Employer or Participating Employer making the contribution. On the basis of the information furnished by the Administrator, the Trustee shall keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the accounts and credits of the Employees of each Participating Employer. The Trustee may, but need not, register Contracts so as to evidence that a particular Participating Employer is the interested Employer hereunder, but in the event of an Employee transfer from one Participating Employer to another, the employing Employer shall immediately notify the Trustee thereof.
.1 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a Participating Employer hereunder shall only be by the written action of each and every Participating Employer
and with the consent of the Trustee where such consent is necessary in accordance with the terms of this Plan.
.1 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its participation in the Plan. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Trustee. The Trustee shall thereafter transfer, deliver and assign Contracts and other Trust Fund assets allocable to the Participants of such Participating Employer to such new Trustee as shall have been designated by such Participating Employer, in the event that it has established a separate pension plan for its Employees, provided however, that no such transfer shall be made if the result is the elimination or reduction of any "Section 411(d)(6) protected benefits" in accordance with Section 8.1(c). If no successor is designated, the Trustee shall retain such assets for the Employees of said Participating Employer pursuant to the provisions of Article VII hereof. In no such event shall any part of the corpus or income of the Trust as it relates to such Participating Employer be used for or diverted to purposes other than for the exclusive benefit of the Employees of such Participating Employer.
.1 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary rules or regulations, binding upon all Participating Employers and all Participants, to effectuate the purpose of this Article.
IN WITNESS WHEREOF, this Plan has been executed the day and year first above written.
Carrols Corporation
By
EMPLOYER
/s/ Paul R. Flanders
------------------------------
TRUSTEE
|
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT FOR THE 12 MONTHS ENDED DECEMBER 31,1999 OF CARROLS CORPORATION |
| PERIOD TYPE | 12 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD END | DEC 31 1999 |
| CASH | 1,901,000 |
| SECURITIES | 0 |
| RECEIVABLES | 787,000 |
| ALLOWANCES | (53,000) |
| INVENTORY | 4,211,000 |
| CURRENT ASSETS | 17,514,000 |
| PP&E | 214,412,000 |
| DEPRECIATION | (91,599,000) |
| TOTAL ASSETS | 320,027,000 |
| CURRENT LIABILITIES | 39,210,000 |
| BONDS | 249,118,000 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 0 |
| OTHER SE | 15,051,000 |
| TOTAL LIABILITY AND EQUITY | 320,027,000 |
| SALES | 455,440,000 |
| TOTAL REVENUES | 456,479,000 |
| CGS | 137,279,000 |
| TOTAL COSTS | 384,395,000 |
| OTHER EXPENSES | 0 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 22,386,000 |
| INCOME PRETAX | 5,978,000 |
| INCOME TAX | 3,826,000 |
| INCOME CONTINUING | 2,152,000 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 1,099,000 |
| CHANGES | 0 |
| NET INCOME | 1,053,000 |
| EPS BASIC | 0 |
| EPS DILUTED | 0 |