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 the Fiscal Year Ended December 30, 2007
Commission File No. 0-21625
FAMOUS DAVES of AMERICA, INC.
(Exact name of registrant as specified in its charter)
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Minnesota
(State or other jurisdiction of
incorporation or organization)
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41-1782300
(I.R.S. Employer
Identification No.)
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12701 Whitewater Drive, Suite 200
Minnetonka, MN 55343
(Address of principal executive offices) (Zip code)
Registrants telephone number, including area code (
952) 294-1300
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the
Securities Exchange Act of 1934 (the Act).
Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes
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No
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Act 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
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No
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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 Registrants 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.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
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Non-Accelerated Filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes
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No
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As of March 7, 2008, 9,631,275 shares of the Registrants Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of our definitive Proxy Statement for our Annual Meeting of Shareholders to be held on May
6, 2008 (the 2008 Proxy Statement) are incorporated by reference into Part III of this Form 10-K,
to the extent described in Part III. The 2008 Proxy Statement will be filed within 120 days after
the end of the fiscal year ended December 30, 2007.
PART I
ITEM 1. BUSINESS
General Development of Business
Famous Daves of America, Inc. (Famous Daves or the Company) was incorporated as a
Minnesota corporation in March 1994 and opened its first restaurant in Minneapolis, Minnesota in
June 1995. As of December 30, 2007, there were 164 Famous Daves restaurants operating in 35
states, including 44 company-owned restaurants and 120 franchise-operated restaurants. An
additional 143 franchise restaurants were committed to be developed through signed area development
agreements at December 30, 2007.
Financial Information about Segments
Since our inception, our revenue, operating income (losses) and assets have been attributable
to the single industry segment of the foodservice industry. Our revenue and operating income for
each of the last three fiscal years, and our assets for each of the last two fiscal years, are set
forth elsewhere in this Form 10-K under Item 8, Financial Statements and Supplementary Data.
Narrative Description of Business
Famous Daves restaurants, a majority of which offer full table service, feature
hickory-smoked off-the-grill entrée favorites. We seek to differentiate ourselves by providing
high-quality food in distinctive and comfortable environments with signature signage. As of
December 30, 2007, 38 of our company-owned restaurants were full-service and 6 were
counter-service. In 2008, we plan to open up to 6 company-owned restaurants featuring our new
prototypical design, which includes the following elements: a designated bar, a signature exterior
smokestack, a separate entrance for our category-leading TO GO business and a patio (where
available). This design enables us to capitalize on a consistent trade-dress and readily
identifiable look and feel for our future locations. Our newest restaurants opened in fiscal 2007
have approximately 6,000 square feet, and approximately 175 seats, with an additional 50 seats in
the bar, and 32 additional seats on the patio.
We pride ourselves on the following:
High Quality Food
Each restaurant features a distinctive selection of authentic
hickory-smoked off-the-grill barbecue favorites, such as flame-grilled St. Louis-style and baby
back ribs, Texas beef brisket, Georgia chopped pork, country-roasted chicken, sassy grilled salmon,
and generous signature sandwiches and salads. Enticing side items, such as honey-buttered corn
bread, potato salad, coleslaw, Shack Fries and Wilbur Beans, accompany the broad entrée
selection. Homemade desserts, including Famous Daves Bread Pudding, Hot Fudge Kahlua Brownies,
and Key Lime Pie, are a specialty. To complement our entrée and appetizer items and to suit
different customer tastes, we offer five regional tableside barbeque sauces: Rich & Sassy®, Texas
Pit, Georgia Mustard, Devils Spit® and Sweet and Zesty. These sauces, in addition to a variety
of seasonings, rubs, marinades, and other items are also distributed in retail grocery stores
throughout the country under licensing agreements.
We believe that high quality food, scratch cooking and smoking our meats daily at each of
our restaurants are principal points of differentiation between us and other casual dining
competitors and are a significant contributing factor to repeat business. We also feel that our
focus on barbecue and being True to the Que allows for product innovation without diluting our
brand. As such, we see no
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geographic impediments to scaling our concept and brand. Our off-premise sales are one, if
not, the highest in the industry and we support this business with a separate TO GO entrance at
many of our restaurants with prominent and distinct signage, and for added convenience, we
separately staff the TO GO counter. We also have grown our catering business which can
accommodate any size party at any venue.
Distinctive Environment Décor and Music
Our original décor theme was a nostalgic roadhouse
shack (Shack), as defined by the abundant use of rustic antiques and items of Americana. In late
1997, we introduced the Lodge format which featured décor reminiscent of a comfortable
Northwoods hunting lodge with a full-service dining room and small bar. In addition, we
developed a larger Blues Club format that featured authentic Chicago Blues Club décor and live
music seven nights a week. We have now evolved our format to that of a full-service concept with a
new prototypical design that incorporates the best attributes of the past restaurants while
providing a consistent brand image for the future. Of our 44 restaurants as of December 30, 2007,
38 were full-service restaurants with 24 having the Lodge format, 6 having the Shack format,
and one, located in the Minneapolis market, was a Blues Club format. Additionally, including 4
new company-owned restaurants that opened in fiscal 2007, we now have a total of 7 company-owned
new prototypical restaurants. The remaining 6 were counter-service restaurants. We will continue to
evaluate converting counter-service restaurants to full-service restaurants where there is
determined to be a sufficient return on our investment.
Broad-Based Appeal
We believe that our concept has broad appeal because it attracts
customers of all ages, the menu offers a variety of items, and our distinctive sauces allow our
guests to customize their experience, appealing to many tastes. We believe that our distinctive
barbecue concept, combined with our high-quality food, make Famous Daves appealing to families,
children, teenagers and adults of all ages and socio-economic backgrounds.
Operating Strategy
We believe that our ability to achieve sustainable profitable growth requires us to
deliver high-quality experiences in terms of both food and hospitality to every guest, every day,
and to enhance brand awareness in our markets. Key elements of our strategy include the following:
Operational Excellence
During fiscal 2007, we continued to focus on operational excellence
and integrity, and on creating a consistently enjoyable guest experience, both in terms of food and
hospitality, across our system. We define operational excellence as an uncompromising attention to
the details of our recipes, preparation and cooking procedures, handling procedures, rotation,
sanitation, cleanliness and safety. It also means an unyielding commitment to provide our guests
with precision service during every visit. In our restaurants, we strive to emphasize value and
speed of service by employing a streamlined operating system based on a focused menu and simplified
food preparation techniques.
Our menu focuses on a number of popular smoked, barbeque, meat, entrée items and delicious
side dishes which are prepared using easy-to-operate kitchen equipment and processes that use
prepared proprietary seasonings, sauces and mixes. This streamlined food preparation system helps
lower the cost of operation by requiring fewer staff, lower training costs, and eliminates the need
for highly compensated chefs. In order to enhance our appeal, expand our audience, and promote our
cravable products without discounting, we promote Limited-Time Offerings (LTOs) which often provide
higher margins than our regular menu items. We believe that constant and exciting new product
introductions, offered for a limited period of time, encourage trial visits, build repeat traffic
and increase exposure to our regular menu. In order to increase customer frequency, we have
assembled a research and development product pipeline designed to generate four to six product
introductions annually.
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The first quarter of fiscal 2007 included a successful Spring promotion with an LTO of St.
Louis-style sparerib and fish combinations, featuring either beer-battered cod or sweet and sassy
grilled salmon, a beer-battered cod sandwich and platter, as well as existing menu items: a catfish
fingers appetizer and sweet and sassy salmon platter. Our Summer promotion featured combinations
of our St. Louis-style ribs, brisket and pork all together on the U.S. of BBQ platter. Our Fall
promotion, which was our most successful promotion to date, consisted of Memphis-style dry rub
baby-back ribs and our fall sandwich offering, called BBQ Buddies, which featured four mini
sandwiches with four different BBQ items Georgia Chopped Pork, Texas Beef Brisket, Pulled Chicken
BBQ and Hot Link Sausage. These two menu items performed so well that they will be introduced as
permanent items when we update our menu in June 2008.
Our 2008 Spring promotion consisted of BBQ skewered shrimp available as an appetizer, entrée
platter, or a sandwich combined with our hot-link sausage or combined with a slab of our
award-winning ribs.
Human Resources and Training
We believe that a key component of the success of our concept
rests with our ability to hire, train and motivate and retain qualified employees, whom we refer to
as our Associates, at all levels of our organization. As a result, we place a great deal of
importance on our Human Resource and Training Departments, which take active roles in improving
performance in our restaurants and strive to achieve an exceptional working environment for our
Associates. In October of 2007, and as a result of our efforts, we were honored by the National
Restaurant Association Educational Foundation and
Nations Restaurant News
with the Spirit Award
for excellence in hiring, training, development, recognition and retention.
We are a performance-based organization committed to recognizing and rewarding performance at
all levels of the organization. Our compensation is part of a total rewards program, and is
benchmarked closely against the industry. Our total rewards program includes health and welfare
coverage, 401(k) and non-qualified deferred compensation plans offering a company match, and base
pay and incentive programs developed to maintain our competitive position. We are pleased with our
progress in retention as Management and hourly Associate turnover has been maintained at or below
industry averages. Our Management turnover for fiscal 2007 was approximately 20% and Associate
turnover was approximately 86% in our restaurants. During fiscal 2007, our Human Resource
Department focused on the selection and retention of superior talent through programs in succession
planning, talent management, safety and risk reduction, organizational development and training.
In the Training and Development arena, we conduct a number of training courses for both
restaurant Manager and Multi-Unit Manager levels in an effort to create defined career paths for
our Associates at these levels. We also offer training courses for both Corporate Management and
Franchise Partners. During fiscal 2008, our courses will focus on core competencies and
opportunities for success. The curriculum will include food safety and alcohol awareness; food
execution and quality; human resource skills and restaurant supervision.
Our leadership development program, entitled Good to Great, has been instrumental in
assessing and training Associates with leadership potential at all levels of our organization and
we will continue this program in 2008. This program includes strength coaching, people, sales and
profit presentations, financial education, and networking opportunities with our Executive Team.
Our focus for our most recent General Manager Workshop in early 2008 was Making it Famous: An
Unrelenting Focus on the Guest. This year featured sessions on such diverse topics as grassroots
marketing, risk prevention, operational areas of focus and flavor profiles. Participants include
all company-owned restaurant General Managers and Area Directors along with most of our
franchise-operated restaurant General Managers and Multi-Unit Operators. In addition to providing
leadership training, we provide individualized training and strength coaching opportunities to all
of our Support Center Associates.
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We strive to instill enthusiasm and dedication in our Associates and regularly solicit
suggestions concerning our operations and endeavors in an attempt to be responsive to their
concerns. In addition, we have numerous programs designed to recognize and reward our Associates
for outstanding performance. Our Presidents Club program rewards General Managers for
accomplishments in many areas directly related to great restaurant operations, such as sales
growth, operating results, safety programs, internal promotions, retention and increased Guest
satisfaction scores. During fiscal 2007, over 60% of our General Managers attained the Presidents
Club designation. During fiscal 2007, we continued our Smokin Superstar program to recognize
Support Center contributions towards the operational success of the organization. Two Support
Center Associates were recognized by both the Company and Franchise operations teams for their
outstanding service and support.
During fiscal 2008, Human Resources will focus on excellence in service to both Company and
Franchise Operation teams by implementing new technologies in recruiting, benefits administration,
and a time management system for operations that is linked to payroll. Training will focus on
increasing hospitality and Guest service across company-owned and franchise-operated restaurants by
continuing to conduct Famous Food Workshops. Additionally, Training will be introducing a Famous
Hospitality and Bar Workshop that will focus on all aspects of Famous Hospitality and Guest Service
along with an increased focus on bar standard operating procedures.
Restaurant Operations
Our ability to manage multiple restaurants in geographically diverse locations is central to
our overall success. In each market, we place specific emphasis on the positions of Area Director
and General Manager, and seek talented individuals that bring a diverse set of skills, knowledge,
and experience to the Company. We strive to maintain quality and consistency in each of our
restaurants through the careful training and supervision of Associates and the establishment of,
and adherence to, high standards relating to performance, food and beverage preparation, and
maintenance of facilities.
All General Managers must complete a seven-week training program, during which they are
instructed in areas such as food quality and preparation, customer service, hospitality, and
Associate relations. We have prepared operations manuals relating to food and beverage quality and
service standards. New Associates participate in training under the close supervision of our
Management. Each General Manager reports up through an Area Director, who manages from four to nine
restaurants, depending on the region. Our Area Directors have all served as General Managers,
either for Famous Daves or for other restaurants, and are responsible for ensuring that
operational standards are consistently applied in our restaurants, communication of company focus
and priorities, and supporting the development of restaurant management teams. In addition to the
training that the General Managers are required to complete as noted above, our Area Directors
receive additional training through Area Director workshops that focus specifically on managing
multiple locations, planning, time management, staff and management development skills.
We also have a Director of Operations position, with currently two Directors of Operations.
Each of these directors are responsible for half of the company-owned restaurants which allows us
to have our operations leadership closer to the day-in and day-out business of our restaurants,
thus creating a smaller span of control for each Director of Operations. The Directors of
Operations assist in the professional development of our Area Directors and General Managers as we
prepare for additional company-owned growth. They are also instrumental in driving our vision of
operational integrity and contributing to the improvement of results achieved at our restaurants,
including building sales, developing personnel and growing profits.
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Staffing levels at each restaurant vary according to the time of day and size of the
restaurant. However, in general, each restaurant has approximately 40 to 60 Associates.
Off-Premise Occasions Focus on Convenience
In addition to our lively and entertaining
sit-down experience, we provide our guests with maximum convenience by offering expedient take-out
service and catering. We believe that Famous Daves entrées and side dishes are viewed by guests as
traditional American picnic foods that maintain their quality and travel particularly well,
making them an attractive choice to replace a home-cooked meal. Also, the high quality, reasonable
cost and avoidance of preparation time make take-out of our product particularly attractive.
During fiscal 2007, we saw continued success in our industry-leading off-premise sales, where approximately 33% of our restaurant sales in fiscal 2007 were derived from catering and TO GO.
Our off-premise sales provide us with revenue opportunities beyond our in-house seating capacity
and we continue to seek ways to leverage these segments of our business.
Catering continues to grow as more consumers and local businesses become aware of the
portability of our product. In addition, each restaurant has a dedicated vehicle to fully support
our catering initiatives. The demand for Famous Daves catering, which accounted for approximately
10% of our sales for fiscal 2007, continues to be strong. We see catering as an opportunity for
new consumers to sample our product who would not otherwise have had the opportunity to visit our
restaurants.
TO GO, which accounted for approximately 23% of our restaurant sales for fiscal 2007, also
continues to grow as an integral part of our overall business plan. Our restaurants have been
designed specifically to accommodate a significant level of TO GO sales, including a separate TO
GO entrance with prominent and distinct signage and for added convenience we separately staff the
TO GO counter. This option enables Famous Daves to capture a greater portion of the growing
convenience and flexibility of the take-out market and allows consumers to trade within our
brand, when dining in isnt always an option. We pursue efforts to increase awareness of TO GO
in all company-owned and franchise-operated restaurants by featuring signage and merchandising both
inside and outside the restaurants.
Customer Satisfaction
We believe that we achieve a significant level of repeat business by
providing high-quality food, efficient friendly service, and warm caring hospitality in an
entertaining environment at moderate prices. We strive to maintain quality and consistency in each
of our restaurants through the purposeful hiring, training and supervision of personnel and the
establishment of, and adherence to, high standards of performance, food preparation and facility
maintenance. We have also built family-friendly strategies into each restaurants food, service and
design by providing childrens menus, smaller-sized entrees at reduced prices and changing tables
in restrooms. We diligently monitor the guest experience through the use of an interactive voice
response (IVR) guest feedback system to ensure that our system is producing desired results. We
also utilize an OSAT overall satisfaction system which measures overall guest satisfaction using a
rating scale of 1 to 5. The company rating is based on the number of responses that give the
highest rating of five. During 2007, we saw continued improvement in guest satisfaction scores
through these monitoring programs.
Value Proposition and Guest Frequency
We offer high quality food and a distinctive
atmosphere at competitive prices to encourage frequent patronage. Lunch and dinner entrees range
from $6.00 to $21.00 resulting in a per person average of $13.59 during fiscal 2007. Lunch checks
averaged $11.85 during fiscal 2007 and dinner checks averaged $14.79 during fiscal 2007. We
believe that constant and exciting new product introductions, offered for a limited period of time,
will help drive new, as well as infrequent guests into our restaurants for additional meal
occasions. We have a fully-equipped test kitchen at our corporate headquarters. This facility
allows us to create new menu selections, prepare and test LTOs and further refine our recipe books
and preparation techniques.
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Marketing and Promotion
We believe that Famous Daves is the category-defining brand in barbecue. Specializing in a
unique and distinctive brand of grilled, smoked, and southern style food, our menu specialty helps
set the brand apart from the rest of the crowded field in casual dining. During fiscal 2008, we
will continue to leverage our brand position. We have a system-wide public relations and marketing
fund. All company-owned, and those franchise-operated restaurants with agreements signed after
December 17, 2003, are required to contribute 1.0% of net sales to this fund. During fiscal 2007,
company-owned restaurants spent approximately 3.5% of net restaurant sales on marketing and
advertising, with 1.0% dedicated to the development of advertising and promotional materials and
programs designed to create brand awareness in the markets within which we operate. The marketing
team working with our advertising agency is responsible for the advertising, promotion, creative
development, branding and media-buying for Famous Daves. In addition to the traditional marketing
and publicity methods, Famous Daves uses marketing efforts that include: television, cable, radio
and outdoor billboards.
We are also creating awareness for the Famous Daves brand through product and brand licensing
arrangements that extend our barbeque sauces, seasonings, rubs, marinades and other items in retail
outlets across the United States. This retail distribution allows consumers to enrich their
at-home barbeque experiences with Famous Daves bold and zesty flavors.
Advertising isnt the only vehicle we use to build awareness of the Famous Daves brand.
Annually, our Rib Team competed in scores of events and festivals nationwide. This team travels
the country, participating in contests and festivals to introduce people to our brand of barbeque
and build brand awareness in a segment largely defined by independents. Since inception, we have
received over 300 awards. Our Rib Teams most notable awards in 2007 were both the Critics
Choice Award and Peoples Choice Award at the Best of the West barbeque festival in Reno,
Nevada, an invitation-only competition that we attended for the third time. Other awards included
Peoples Choice and Critics Choice at the Columbus, Ohio Ribfest. We have also received
various concept awards of which we are very proud, including the Spirit Award from the
National
Restaurant Association Educational Foundation
and
Nations Restaurant News.
The strategic focus in 2008 for marketing and promotion remains the same to be the
categorydefining brand in BBQ, create more competitive distinction, and continue to strengthen the
perception of value in the consumers mind.
Growth Strategy
We believe that the barbeque segment of the casual dining niche of the restaurant industry
offers strong growth opportunities, and we see no impediments to our growth on a geographical
basis. Our geographical concentration as of December 30, 2007 was 48% Midwest, 22% South, 18% West
and 12% Northeast. We are located in 35 states and plan to add a 36
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state, Oregon,
during fiscal 2008. During fiscal 2008, we plan to open up to 6 company-owned restaurants with
total new restaurant openings in the range of 20-25. The key elements of our long-term growth
strategy include the following:
Company-Owned Restaurant Expansion
We intend to build in our existing markets in high
profile, heavy traffic retail locations in order to continue to build brand awareness. Our plan is
focused on sustainable, controlled growth, primarily in markets where multiple restaurants can be
opened, thereby expanding consumer awareness, and creating opportunities for operating,
distribution, and marketing efficiencies.
We have a real estate site selection model to assess the quality and sales potential of new
locations. This process involves extensive consumer research in our existing restaurants captured
in a guest profile,
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which is updated on an annual basis. Each location is evaluated based on three primary sales
drivers, which include: sales potential from the residential base (home quality), employment base
(work quality), and retail activity (retail quality). Locations are also evaluated on their site
characteristics which include seven categories of key site attributes, including but not limited
to, access, visibility, and parking.
We prepare an overall market development strategy for each market. The creation of this
market strategy starts with identifying trade areas that align demographically with the guest
profile. The trade areas are then assessed for viability and vitality and prioritized as initial,
second tier, or future development. Since markets are dynamic, the market strategy includes a
continual and ongoing assessment of all existing restaurant locations. If financially feasible, a
restaurant may be relocated as the retail or residential focus of a trade area shifts.
We anticipate using our new prototype concept for all future restaurants in order to
streamline the development and expansion process. We intend to finance development through the use
of cash on hand, cash flow generated from operations, and through availability on our revolving
line of credit.
Franchise-Operated Restaurant Expansion
As of December 30, 2007, we had 143 signed franchise
area development commitments that are expected to open over approximately the next seven years. We
continue to expand our franchisee network throughout the United States. Generally, we find
franchise candidates with prior franchise casual-dining restaurant experience in the markets for
which they will be granted. The area development agreements generally range from 5 to 15
restaurants.
Purchasing
We strive to obtain consistent quality items at competitive prices from reliable sources. In
order to maximize operational efficiencies and to provide the freshest ingredients for our food
products, each restaurants management team determines the daily quantities of food items needed
and orders such quantities to be delivered to their restaurant. The products, produced by major
manufacturers designated by us, are shipped directly to the restaurants through foodservice
distributors.
Products on contract account for approximately 88% of our total purchases. Contracts for
various items are negotiated throughout the year and prices are typically fixed for twelve months.
On occasion, we will enter into short-term contracts in times when it is anticipated that near-term
prices could decrease due to the volatility of commodity markets. For fiscal 2008, our pork
contract is an annual contract, our poultry contract is for nine months from January to September,
while our brisket contract is booked from January to July and our hamburger contract is from
January to December 2008. Of our total purchases, pork is approximately 33%, poultry is
approximately 12%, and beef, including hamburger and brisket, is approximately 9%. Our pork
contract for 2008 resulted in an increase of approximately 1.2% compared to 2007. Poultry prices
negotiated in January 2008 resulted in a price increase of approximately 12%. Our brisket and
hamburger contract price remained essentially flat to the June December 2007 timeframe. As a
result of these newly renewed contracts, we are expecting that food costs as a percentage of sales
will be 30-40 basis points higher for the first 5 months on 2008 over 2007s percentage for the
same timeframe. For the remainder of the year, we expect to minimize the impact from these higher
costs by offering LTOs and bundling products with higher margins, in addition to taking a price
increase in June.
In fiscal 2007, our adult beverage sales as a percentage of dine-in sales were approximately
9%. We have determined that we have limited ability to grow the bar in the majority of our existing
restaurants due to the fact that these restaurants have little to no designated bar, and some only
serve beer and wine. Recent openings in fiscal 2007 of company-owned restaurants with a designated
bar are averaging slightly higher adult beverage sales than our overall average.
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Our food manufacturers produce our products and our distributors warehouse and ship our
products. Our primary broad line distributor accounts for approximately 85% of our total
purchases. We believe that our relationships with our food manufacturers and distributors are
excellent, and anticipate no interruption in the supply of product delivered by any of these
companies. In the case of a potential supply disruption, however, we have focused on identifying
alternative suppliers and methods to ensure that there is no disruption of product flow. We
currently have secondary source suppliers for several items and continue to enhance this program.
We believe we could obtain competitive products and prices on short notice from a number of
alternative suppliers.
Information Technology
Famous Daves recognizes the importance of leveraging information to support and extend our
competitive position in the restaurant industry. We continue to invest in capabilities that not
only provide secure and efficient operations, but also the ability to analyze data that describes
our operations.
We have implemented a suite of restaurant and support center systems which support operations
by providing secure transactional functions (ordering, card processing, etc) and reporting at both
the unit and support center level. Basic interfaces between Point-of-Sale (POS), labor management,
inventory management, menu management, Associate screening/hiring and accounting systems provide
the following operator and support center visibility:
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Average daily guest check, by location, by server, by day part
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Daily reports of revenue and labor (both current and projected)
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Weekly reports of selected controllable restaurant expenses
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Monthly reporting of detailed revenue and expenses
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Fiscal 2007 featured technology infrastructure upgrades to increase stability, performance,
and ensure compliance with various external standards, most notably the Payment Card Industry (PCI)
Data Security Standard. Upgrades for all company-owned restaurants included the hardware and
updated version of the Micros POS, and the replacement of outdated telephone systems. Back-office
solution implementation continued with a project to optimize the use of existing labor scheduling
functionality. In addition, we continued to pursue food cost management functionality which can
enhance our operations. Internally, the IT Department invested significant effort in developing a
tool, processes, and a culture to provide increasingly efficient and organized service to support
the expanding technology needs of our organization.
The most significant technology infrastructure focus for 2008 is reducing the number of
physical servers by combining them via server virtualization technology. This will reduce both the
energy and labor needed to maintain computing resources while increasing reliability and stability.
In addition, technology for a backup internet connection will be tested at strategically chosen
restaurant locations.
An increasingly analytic culture will be supported in 2008 via several application projects:
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Existing corporate and franchise intranet resources will be transitioned to a portal
that provides users with easier access to more information and a framework for future
collaborative and analytic capabilities.
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The main focus for back-office enhancements will be supply chain and food cost
visibility through an operator friendly solution. Labor scheduling updates will
significantly reduce the number of manual steps involved in hiring and maintaining
Associates while increasing the accuracy of the related information.
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Data generated by current and future systems will be evaluated and standardized in
order to support more users in performing the cross-functional analysis which can
identify previously undiscovered profit opportunities.
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Trademarks
Our Company has registered various trademarks and makes use of various unregistered marks, and
intends to vigorously defend these marks. Famous Daves and the Famous Daves logo are
registered trademarks of Famous Daves of America, Inc. The Company highly values its trademarks,
trade names and service marks and will defend against any improper use of its marks to the fullest
extent allowable by law.
Franchise Program
We have offered franchises of our concept since July 1998 and currently file our franchise
circular in all 50 states. Our growth and success depends in part upon our ability to attract,
contract with and retain qualified franchisees. It also depends upon the ability of those
franchisees to successfully operate their restaurants with our standards of quality and promote and
develop Famous Daves brand awareness.
Although we have established criteria to evaluate prospective franchisees, and our franchise
agreements include certain operating standards, each franchisee operates his/her restaurants
independently. Various laws limit our ability to influence the day-to-day operation of our
franchise restaurants. We cannot assure you that franchisees will be able to successfully operate
Famous Daves restaurants in a manner consistent with our standards for operational excellence,
service and food quality.
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At December 30, 2007, we had 39 ownership groups operating 120 Famous Daves franchise
restaurants. Signed area development agreements, representing commitments to open an additional 143
franchise restaurants, were in place as of December 30, 2007. There can be no assurance that these
franchisees will fulfill their commitments or fulfill them within the anticipated timeframe. We
continue to grow the franchise program for our restaurants and anticipate up to 19 additional
franchise restaurants will open during fiscal 2008.
As of December 30, 2007, we had franchise-operated restaurants in the following locations:
|
|
|
|
|
|
|
Number of Franchise-Operated
|
State
|
|
Restaurants
|
Arkansas
|
|
|
2
|
|
Arizona
|
|
|
5
|
|
California
|
|
|
8
|
|
Colorado
|
|
|
4
|
|
Connecticut
|
|
|
1
|
|
Florida
|
|
|
3
|
|
Georgia
|
|
|
4
|
|
Illinois
|
|
|
3
|
|
Indiana
|
|
|
3
|
|
Iowa
|
|
|
3
|
|
Kansas
|
|
|
3
|
|
Kentucky
|
|
|
1
|
|
Massachusetts
|
|
|
1
|
|
Michigan
|
|
|
9
|
|
Minnesota
|
|
|
9
|
|
Missouri
|
|
|
2
|
|
Montana
|
|
|
4
|
|
Nebraska
|
|
|
4
|
|
Nevada
|
|
|
2
|
|
New Hampshire
|
|
|
1
|
|
New Jersey
|
|
|
7
|
|
New York
|
|
|
4
|
|
North Dakota
|
|
|
2
|
|
Ohio
|
|
|
3
|
|
Pennsylvania
|
|
|
5
|
|
South Dakota
|
|
|
1
|
|
Tennessee
|
|
|
5
|
|
Texas
|
|
|
2
|
|
Utah
|
|
|
4
|
|
Washington
|
|
|
3
|
|
West Virginia
|
|
|
2
|
|
Wisconsin
|
|
|
10
|
|
|
|
|
|
|
Total
|
|
|
120
|
|
During 2008, we plan to open restaurants in existing states and plan to add the state of
Oregon.
Our Franchise Department is made up of a Vice President of Franchise Operations who guides the
efforts of four Franchise Business Consultants (FBCs). These four individuals have equal
responsibility for supporting our franchisees geographically throughout the country. Our FBCs are a
critical position for
12
us as well as for our franchise community. FBCs manage the relationship between the franchisee
and the franchisor and provide an understanding of the roles, responsibilities, differences, and
accountabilities of that relationship. They are active participants towards enhancing performance,
as they partner in strategic and operational planning sessions with our franchise partners and
review the individual strategies and tactics for obtaining superior performance for the franchisee.
The FBCs share best practices throughout the system and work to create a one-system mentality that
benefits everyone. In addition, they ensure compliance with obligations under our area development
and franchise agreements. Franchisees are encouraged to utilize all available assistance from the
FBCs and the Support Center but are not required to do so.
We make periodic inspections of our franchise-operated restaurants to ensure that the
franchisee is complying with the same quality of service, operational excellence and food
specifications that are found at our company-owned restaurants. We generally provide support as it
relates to all aspects of the franchise operations including, but not limited to, store openings,
operating performance, and human resource strategic planning.
Our franchise-related revenue consists of area development fees, initial franchise fees and
continuing royalty payments. Our area development fee consists of a one-time, non-refundable
payment equal to $10,000 per restaurant in consideration for the services we perform in preparation
of executing each area development agreement. Substantially all of these services which include,
but are not limited to, conducting market and trade area analysis, a meeting with Famous Daves
Executive Team, and performing potential franchise background investigation, all of which are
completed prior to our execution of the area development agreement and receipt of the corresponding
area development fee. As a result, we recognize this fee in full upon receipt. Our initial,
non-refundable, franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized
immediately when a franchise agreement is signed, reflecting the commission earned and expenses
incurred related to the sale. The remaining $35,000 is included in deferred franchise fees and is
recognized as revenue, when we have performed substantially all of our obligations. The franchise
agreement represents a separate and distinct earnings process from the area development agreements.
Franchisees are also required to pay us a monthly royalty equal to a percentage of their net
sales, which has historically varied from 4% to 5%. Currently, new franchises pay us a monthly
royalty of 5% of their net sales.
The franchisees investment depends primarily upon restaurant size. This investment includes
the area development fee, initial franchise fee, real estate and leasehold improvements, fixtures
and equipment, POS systems, business licenses, deposits, initial food inventory, smallwares, décor
and training fees as well as working capital. All new franchisees are required to contribute 1% of
net sales to a national public relations and marketing fund dedicated to building system-wide brand
awareness.
Seasonality
Our restaurants typically generate higher revenue in the second and third quarters of our
fiscal year as a result of seasonal traffic increases and high catering sales experienced during
the summer months, and lower revenue in the first and fourth quarters of our fiscal year, due to
possible adverse weather which can disrupt customer and Associate transportation to our
restaurants.
Government Regulation
Our Company is subject to extensive state and local government regulation by various
governmental agencies, including state and local licensing, zoning, land use, construction and
environmental regulations and various regulations relating to the sale of food and alcoholic
beverages, sanitation, disposal of refuse and waste products, public health, safety and fire
standards. Our restaurants
13
are subject to periodic inspections by governmental agencies to ensure conformity with such
regulations. Any difficulty or failure to obtain required licensing or other regulatory approvals
could delay or prevent the opening of a new restaurant, and the suspension of, or inability to
renew a license could interrupt operations at an existing restaurant, any of which would adversely
affect our operations. Restaurant operating costs are also affected by other government actions
that are beyond our control, including increases in the minimum hourly wage requirements, workers
compensation insurance rates, health care insurance costs, property and casualty insurance, and
unemployment and other taxes. We are also subject
to dram-shop statutes, which generally provide a person injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic beverages to the
intoxicated person.
As a franchisor, we are subject to federal regulation and certain state laws that govern the
offer and sale of franchises. Many state franchise laws impose substantive requirements on
franchise agreements, including limitations on non-competition provisions and the termination or
non-renewal of a franchise. Bills have been introduced in Congress from time to time that would
provide for federal regulation of substantive aspects of the franchisor-franchisee relationship. As
proposed, such legislation would limit, among other things, the duration and scope of
non-competition provisions, the ability of a franchisor to terminate or refuse to renew a
franchise, and the ability of a franchisor to designate sources of supply.
The 1990 Federal Americans with Disabilities Act prohibits discrimination on the basis of
disability in public accommodations and employment. We could be required to incur costs to modify
our restaurants in order to provide service to, or make reasonable accommodations for, disabled
persons. Our restaurants are currently designed to be accessible to the disabled, and we believe
we are in substantial compliance with all current applicable regulations relating to this Act.
Associates
As of December 30, 2007, we employed approximately 2,800 Associates, of which approximately
300 were full-time. None of our Associates are covered by a collective bargaining agreement. We
consider our relationships with our Associates to be good.
ITEM 1A. RISK FACTORS
Famous Daves makes written and oral statements from time to time, including statements
contained in this Annual Report on Form 10-K regarding its business and prospects, such as
projections of future performance, statements of managements plans and objectives, forecasts of
market trends and other matters that are forward-looking statements within the meaning of Sections
27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Statements containing the words or phrases will likely result, anticipates, are expected to,
will continue, is anticipated, estimates, projects, believes, expects, intends,
target, goal, plans, objective, should or similar expressions identify forward-looking
statements which may appear in documents, reports, filings with the Securities and Exchange
Commission, news releases, written or oral presentations made by our officers or other
representatives to analysts, shareholders, investors, news organizations, and others, and
discussions with our management and other Company representatives. For such statements, we claim
the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Our future results, including results related to forward-looking statements, involve a number
of risks and uncertainties. No assurance can be given that the results reflected in any
forward-looking statements will be achieved. Any forward-looking statements made by us or on our
behalf speak only as of the date on which such statement is made. Our forward-looking statements
are based upon assumptions that are sometimes based upon estimates, data, communications and other
information from suppliers, government agencies and other sources that may be subject to revision.
We do not undertake
14
any obligation to update or keep current either (i) any forward-looking statements to reflect
events or circumstances arising after the date of such statement, or (ii) the important factors
that could cause our future results to differ materially from historical results or trends, results
anticipated or planned by us, or which are reflected from time to time in any forward-looking
statement which may be made by us or on our behalf.
In addition to other matters identified or described by us from time to time in filings with
the SEC, including the risks described below and elsewhere in this Annual Report on Form 10-K,
there are several important factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or results that are reflected
from time to time in any forward-looking statement that may be made by us or on our behalf.
Our Future Revenue and Operating Income Are Dependent on Consumer Preference and Our Ability
to Successfully Execute Our Plan.
Our Companys future revenue and operating income will depend upon various factors, including
continued and additional market acceptance of the Famous Daves concept, the quality of our
restaurant operations, our ability to grow our brand, our ability to successfully expand into new
and existing markets, our ability to successfully execute our franchise program, our ability to
raise additional financing as needed, discretionary consumer spending, the overall success of the
venues where Famous Daves restaurants are or will be located, economic conditions affecting
disposable consumer income, general economic conditions and the continued popularity of the Famous
Daves concept. An adverse change in any or all of these conditions would have a negative effect
on our operations and the market value of our common stock.
It is our plan to open up to 20-25 restaurants in fiscal 2008, including up to six
company-owned restaurants. There is no guarantee that any of our company-owned or
franchise-operated restaurants will open when planned, or at all, due to the risks associated with
pre-construction delays in the development of new restaurants, such as governmental approvals, the
availability of sites, and the availability of capital, many of which are beyond our control.
There can be no assurance that we will successfully implement our growth plan for our company-owned
and franchise-operated restaurants. In addition, we also face all of the risks, expenses and
difficulties frequently encountered in the development of an expanding business.
Competition May Reduce Our Revenue and Operating Income.
Competition in the restaurant industry is intense. The restaurant industry is affected by
changes in consumer preferences, as well as by national, regional and local economic conditions,
and demographic trends. Discretionary spending priorities, traffic patterns, tourist travel,
weather conditions, Associate availability and the type, number and location of competing
restaurants, among other factors, will also directly affect the performance of our restaurants.
Changes in any of these factors in the markets where we currently operate our restaurants could
adversely affect the results of our operations.
Increased competition by existing or future competitors may reduce our sales. Our restaurants
compete with moderately-priced restaurants primarily on the basis of quality of food and service,
atmosphere, location and value. In addition to existing barbeque restaurants, we expect to face
competition from steakhouses and other restaurants featuring protein-rich foods. We also compete
with other restaurants and retail establishments for quality sites. Competition in the restaurant
industry is affected by changes in consumer taste, economic and real estate conditions, demographic
trends, traffic patterns, the cost and availability of qualified labor, product availability and
local competitive factors.
15
Many of our competitors have substantially greater financial, marketing and other resources
than we do. Regional and national restaurant companies continue to expand their operations into our
current and anticipated market areas. We believe our ability to compete effectively depends on our
ongoing ability to promote our brand and offer high quality food and hospitality in a distinctive
and comfortable environment. If we are unable to respond to, or unable to respond in a timely
manner, the various competitive factors affecting the restaurant industry, our revenue and
operating income could be adversely affected.
Our Failure to Execute Our Franchise Program May Negatively Impact Our Revenue and Operating
Income.
Our growth and success depends in part upon increasing the number of our franchised
restaurants, through execution of area development agreements with new and existing franchisees in
new and existing markets. Our ability to successfully franchise additional restaurants will depend
on various factors, including our ability to attract, contract with and retain quality franchisees,
the availability of suitable sites, the negotiation of acceptable leases or purchase terms for new
locations, permitting and regulatory compliance, the ability to meet construction schedules, the
financial and other capabilities of our franchisees, our ability to manage this anticipated
expansion, and general economic and business conditions. Many of the foregoing factors are beyond
the control of the Company or our franchisees.
Our growth and success also depends upon the ability of our franchisees to successfully
operate their restaurants to our standards and promote the Famous Daves brand. Although we have
established criteria to evaluate prospective franchisees, and our franchise agreements include
certain operating standards, each franchisee operates his/her restaurant independently. Various
laws limit our ability to influence the day-to-day operation of our franchise restaurants. We
cannot assure you that our franchisees will be able to successfully operate Famous Daves
restaurants in a manner consistent with our concepts and standards, which could reduce their sales
and correspondingly, our franchise royalties, and could adversely affect our operating income and
our ability to leverage the Famous Daves brand. In addition, there can be no assurance that our
franchisees will have access to financial resources necessary to open the restaurants required by
their respective area development agreements.
The Inability to Develop and Construct Our Restaurants Within Projected Budgets and Time
Periods Could Adversely Affect Our Business and Financial Condition.
Many factors may affect the costs associated with the development and construction of our
restaurants, including landlord delays, weather interference, unforeseen engineering problems,
environmental problems, construction or zoning problems, local government regulations,
modifications in design to the size and scope of the project, and other unanticipated increases in
costs, any of which could give rise to delays or cost overruns. We have realized pre-construction
permitting and zoning delays that are outside of our control. If we are not able to develop
additional restaurants within anticipated budgets or time periods, our business, financial
condition, results of operations and cash flows could be adversely affected.
The Restaurant Industry is Subject to Extensive Government Regulation That Could Negatively
Impact Our Business.
The restaurant industry is subject to extensive state and local government regulation by
various government agencies, including state and local licensing, zoning, land use, construction
and environmental regulations and various regulations relating to the preparation and sale of food
and alcoholic beverages, sanitation, disposal of refuse and waste products, public health, safety
and fire standards, minimum wage requirements, workers compensation and citizenship requirement.
Due to the
16
fact that we offer and sell franchises, we are also subject to federal regulation and certain
state laws which govern the offer and sale of franchises. Many state franchise laws impose
substantive requirements on franchise agreements, including limitations on non-competition
provisions and termination or non-renewal of a franchise. We may also be subject in certain states
to dram-shop statutes, which provide a person injured by an intoxicated person the right to
recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated
person.
Any change in the current status of such regulations, including an increase in Associate
benefits costs, any and all insurance rates, or other costs associated with Associates, could
substantially increase our compliance and labor costs. Because we pay many of our restaurant-level
Associates rates based on either the federal or the state minimum wage, increases in the minimum
wage would lead to increased labor costs. In addition, our operating results would be adversely
affected in the event we fail to maintain our food and liquor licenses. Furthermore, restaurant
operating costs are affected by increases in unemployment tax rates and similar costs over which we
have no control.
We Are Subject to the Risks Associated With the Food Services Industry, Including the Risk
That Incidents of Food-borne Illnesses or Food Tampering Could Damage Our Reputation and
Reduce Our Restaurant Sales.
Our industry is susceptible to the risk of food-borne illnesses. As with any restaurant
operation, we cannot guarantee that our internal controls and training will be fully effective in
preventing all food-borne illnesses. Furthermore, our reliance on third-party food suppliers and
distributors increases the risk that food-borne illness incidents could be caused by third-party
food suppliers and distributors outside of our control and/or multiple locations being affected
rather than a single restaurant. New illnesses resistant to any precautions may develop in the
future, or diseases with long incubation periods could arise that could give rise to claims or
allegations on a retroactive basis. Reports in the media of one or more instances of food-borne
illness in one of our corporate-owned restaurants, one of our franchise-operated restaurants or in
one of our competitors restaurants could negatively affect our restaurant sales, force the closure
of some of our restaurants and conceivably have a national impact if highly publicized. This risk
exists even if it were later determined that the illness had been wrongly attributed to the
restaurant. Furthermore, other illnesses could adversely affect the supply of some of our food
products and significantly increase our costs. A decrease in guest traffic as a result of these
health concerns or negative publicity could materially harm our business, results of operations and
financial condition.
Our Ability to Exploit Our Brand Depends on Our Ability to Protect Our Intellectual Property,
and If Any Third Parties Make Unauthorized Use Of Our Intellectual Property, Our Competitive
Position and Business Could Suffer.
We believe that our trademarks and other intellectual proprietary rights are important to our
success and our competitive position. Accordingly, we have registered various trademarks and make
use of various unregistered marks. However, the actions we have taken or may take in the future to
establish and protect our trademarks and other intellectual proprietary rights may be inadequate to
prevent others from imitating our products and concept or claiming violations of their trademarks
and proprietary rights by us. Although we intend to defend against any improper use of its marks
to the fullest extent allowable by law, litigation related to such defense, regardless of the merit
or resolution, may be costly and time consuming and divert the efforts and attention of our
management.
17
Our Financial Performance is Affected By Our Ability to Contract with Reliable Suppliers At
Competitive Prices.
In order to maximize operating efficiencies, we have entered into arrangements with food
manufacturers and distributors pursuant to which we obtain approximately 88% of the products used
by the Company, including pork, poultry and beef. We believe that our relationships with our food
manufacturers and distributors are excellent, anticipate no interruption in the supply of product
delivered by these companies, and have arrangements with several secondary suppliers in the case of
a potential supply disruption. Although we may be able to obtain competitive products and prices
from alternative suppliers, an interruption in the supply of products delivered by our food
suppliers could adversely affect our operations in the short term.
Pursuant to its Authority to Designate and Issue Shares of Our Stock as it Deems Appropriate,
Our Board of Directors May Assign Rights and Privileges to Currently Undesignated Shares Which
Could Adversely Affect the Rights of Existing Shareholders.
Our authorized capital consists of 100,000,000 shares of capital stock. Our Board of
Directors, without any action by the shareholders, may designate and issue shares in such classes
or series (including classes or series of preferred stock) as it deems appropriate and establish
the rights, preferences and privileges of such shares, including dividends, liquidation and voting
rights. As of March 7, 2008, we had 9,631,275 shares of common stock outstanding.
The rights of holders of preferred stock and other classes of common stock that may be issued
could be superior to the rights granted to the current holders of our common stock. Our Boards
ability to designate and issue such undesignated shares could impede or deter an unsolicited tender
offer or takeover proposal. Further, the issuance of additional shares having preferential rights
could adversely affect the voting power and other rights of holders of common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The development cost of our restaurants varies depending primarily on the size and style of
the restaurant, whether the property is purchased or leased, and whether it is a conversion of an
existing building or a newly constructed restaurant. Our current restaurant prototype is
approximately 6,000 square feet in size and represents a consistent brand image across all markets
while still allowing for new construction and the renovation of pre-existing restaurants. We
opened four company-owned restaurants in fiscal 2007: Fredericksburg, Virginia opened in September
2007, Owings Mills, Maryland and Bolingbrook, Illinois opened in November 2007, and Oswego,
Illinois opened in December 2007. We expect to open up to six additional company-owned restaurants
during fiscal 2008.
Our leased restaurant facilities are occupied under agreements with remaining terms ranging
from 1 to 40 years, including renewal options. Such leases generally provide for fixed rental
payments plus operating expenses associated with the properties. Several leases also require the
payment of percentage rent based on net sales. We have three sublease arrangements with a
franchisee. These leases are our responsibility, but we have offered them to our franchisee on
substantially equal terms to the original leases.
18
Our executive offices are currently located in approximately 26,000 square feet in Minnetonka,
Minnesota, under a lease that terminates in August 2013, with two five-year renewal options. The
minimum annual rent commitment remaining over the lease term is approximately $4.3 million. We
believe that our current restaurant properties will be suitable for our needs and adequate for
operations for the foreseeable future. We also believe that our corporate office leased space is
adequate for our operations for the foreseeable future.
19
The following table sets forth certain information about our existing company-owned restaurant
locations, as of December 30, 2007, sorted by opening date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square
|
|
Interior
|
|
Owned
|
|
|
|
|
Location
|
|
Footage
|
|
Seats
|
|
or Leased
|
|
Date Opened
|
1
|
|
Roseville, MN
(5)
|
|
|
4,800
|
|
|
|
105
|
|
|
Leased
|
|
June 1996
|
2
|
|
Calhoun Square (Minneapolis, MN)
|
|
|
10,500
|
|
|
|
380
|
|
|
Leased
|
|
September 1996
|
3
|
|
Maple Grove, MN
(3)
|
|
|
6,100
|
|
|
|
146
|
|
|
Leased
(1)
|
|
April 1997
|
4
|
|
Highland Park (St. Paul, MN)
(5)
|
|
|
5,200
|
|
|
|
125
|
|
|
Leased
|
|
June 1997
|
5
|
|
Stillwater, MN
|
|
|
5,200
|
|
|
|
130
|
|
|
Leased
(1)
|
|
July 1997
|
6
|
|
Apple Valley, MN
(5)
|
|
|
3,800
|
|
|
|
90
|
|
|
Leased
(1)
|
|
July 1997
|
7
|
|
Forest Lake, MN
(5)
|
|
|
4,500
|
|
|
|
100
|
|
|
Leased
|
|
October 1997
|
8
|
|
Minnetonka, MN
|
|
|
5,500
|
|
|
|
140
|
|
|
Owned
(2)
|
|
December 1997
|
9
|
|
Plymouth, MN
(5)
|
|
|
2,100
|
|
|
|
49
|
|
|
Owned
(4)
|
|
December 1997
|
10
|
|
West St. Paul, MN
(5)
|
|
|
6,800
|
|
|
|
140
|
|
|
Leased
|
|
January 1998
|
11
|
|
West Des Moines, IA
|
|
|
5,700
|
|
|
|
150
|
|
|
Leased
|
|
April 1998
|
12
|
|
Des Moines, IA
|
|
|
5,800
|
|
|
|
150
|
|
|
Leased
|
|
April 1998
|
13
|
|
Naperville, IL
|
|
|
5,500
|
|
|
|
170
|
|
|
Leased
|
|
April 1998
|
14
|
|
Cedar Falls, IA
|
|
|
5,400
|
|
|
|
130
|
|
|
Leased
|
|
September 1998
|
15
|
|
Bloomington, MN
|
|
|
5,400
|
|
|
|
140
|
|
|
Leased
|
|
October 1998
|
16
|
|
Woodbury, MN
|
|
|
5,900
|
|
|
|
180
|
|
|
Owned
(2)
|
|
October 1998
|
17
|
|
Lincoln, NE
|
|
|
6,200
|
|
|
|
185
|
|
|
Owned
(4)
|
|
December 1999
|
18
|
|
Columbia, MD
|
|
|
7,200
|
|
|
|
270
|
|
|
Leased
|
|
January 2000
|
19
|
|
Annapolis, MD
|
|
|
6,800
|
|
|
|
219
|
|
|
Leased
|
|
January 2000
|
20
|
|
Frederick, MD
|
|
|
5,600
|
|
|
|
180
|
|
|
Leased
|
|
January 2000
|
21
|
|
Woodbridge, VA
|
|
|
6,000
|
|
|
|
219
|
|
|
Leased
|
|
January 2000
|
22
|
|
Vernon Hills, IL
|
|
|
6,660
|
|
|
|
222
|
|
|
Leased
|
|
February 2000
|
23
|
|
Addison, IL
|
|
|
5,000
|
|
|
|
135
|
|
|
Owned
(4)
|
|
March 2000
|
24
|
|
Lombard, IL
|
|
|
6,500
|
|
|
|
233
|
|
|
Leased
|
|
July 2000
|
25
|
|
North Riverside, IL
|
|
|
4,700
|
|
|
|
150
|
|
|
Leased
|
|
August 2000
|
26
|
|
Sterling, VA
|
|
|
5,800
|
|
|
|
200
|
|
|
Leased
|
|
December 2000
|
27
|
|
Carpentersville, IL
|
|
|
6,000
|
|
|
|
191
|
|
|
Leased
|
|
February 2001
|
28
|
|
Oakton, VA
|
|
|
4,400
|
|
|
|
184
|
|
|
Leased
|
|
May 2001
|
29
|
|
Laurel, MD
|
|
|
5,200
|
|
|
|
165
|
|
|
Leased
|
|
August 2001
|
30
|
|
Palatine, IL
|
|
|
9,100
|
|
|
|
249
|
|
|
Leased
|
|
August 2001
|
31
|
|
Richmond I (Richmond, VA)
|
|
|
5,400
|
|
|
|
180
|
|
|
Owned
(2)
|
|
December 2001
|
32
|
|
Gaithersburg, MD
|
|
|
5,000
|
|
|
|
170
|
|
|
Leased
|
|
May 2002
|
33
|
|
Richmond II (Richmond, VA)
|
|
|
5,200
|
|
|
|
158
|
|
|
Owned
(2)
|
|
June 2002
|
34
|
|
Orland Park, IL
|
|
|
5,400
|
|
|
|
158
|
|
|
Leased
|
|
June 2002
|
35
|
|
Tulsa, OK
|
|
|
4,700
|
|
|
|
180
|
|
|
Owned
|
|
September 2002
|
36
|
|
Virginia Commons, VA
|
|
|
5,600
|
|
|
|
186
|
|
|
Owned
(2)
|
|
June 2003
|
37
|
|
Chantilly, VA
|
|
|
6,400
|
|
|
|
205
|
|
|
Leased
|
|
January 2006
|
38
|
|
Florence, KY
|
|
|
5,900
|
|
|
|
217
|
|
|
Leased
|
|
January 2006
|
39
|
|
Waldorf, MD
|
|
|
6,600
|
|
|
|
200
|
|
|
Leased
|
|
June 2006
|
40
|
|
Coon Rapids, MN
|
|
|
6,300
|
|
|
|
160
|
|
|
Owned
(4)
|
|
December 2006
|
41
|
|
Fredericksburg, VA
|
|
|
6,500
|
|
|
|
219
|
|
|
Leased
|
|
September 2007
|
42
|
|
Owings Mills, MD
|
|
|
6,700
|
|
|
|
219
|
|
|
Leased
|
|
November 2007
|
43
|
|
Bolingbrook, IL
|
|
|
6,600
|
|
|
|
219
|
|
|
Leased
|
|
November 2007
|
44
|
|
Oswego, IL
|
|
|
6,600
|
|
|
|
219
|
|
|
Leased
|
|
December 2007
|
|
|
|
All seat count and square footage amounts are approximate.
|
|
|
|
(1)
|
|
Restaurant is collateral in a financing lease.
|
|
(2)
|
|
Restaurant is subject to a mortgage.
|
|
(3)
|
|
Restaurant was converted in October 2005 from counter-service to full-service
and its square footage and interior seat
counts were increased.
|
|
(4)
|
|
Restaurant land and building is owned by the Company.
|
|
(5)
|
|
Counter service restaurant
|
20
ITEM 3. LEGAL PROCEEDINGS
From time-to-time, we are involved in various legal actions arising in the ordinary course of
business. In the opinion of our management, the ultimate dispositions of these matters will not
have a material adverse effect on our consolidated financial position and results of operations.
Currently, there are no significant legal matters pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of our security holders during the fourth quarter of the
fiscal year ended December 30, 2007.
21
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock has traded on the Nasdaq Global Market (periodically on the NASDAQ National
Market
SM
) under the symbol DAVE since July 24, 1997. The following table summarizes
the high and low closing sale prices per share of our common stock for the periods indicated, as
reported on the NASDAQ Global Market
SM
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
Period
|
|
High
|
|
Low
|
|
High
|
|
Low
|
1st Quarter
|
|
$
|
19.33
|
|
|
$
|
16.21
|
|
|
$
|
13.99
|
|
|
$
|
11.10
|
|
2nd Quarter
|
|
$
|
23.37
|
|
|
$
|
17.27
|
|
|
$
|
16.00
|
|
|
$
|
12.80
|
|
3rd Quarter
|
|
$
|
23.09
|
|
|
$
|
15.58
|
|
|
$
|
15.34
|
|
|
$
|
12.17
|
|
4th Quarter
|
|
$
|
18.14
|
|
|
$
|
11.03
|
|
|
$
|
17.24
|
|
|
$
|
14.34
|
|
Holders
As of March 7, 2008, we had approximately 370 shareholders of record and an estimated 5,400
beneficial shareholders.
Dividends
Our Board of Directors has not declared any dividends on our common stock since our inception,
and does not intend to pay out any cash dividends on our common stock in the foreseeable future. We
presently intend to retain all earnings, if any, to provide for our growth. The payment of cash
dividends in the future, if any, will be at the discretion of the Board of Directors and will
depend upon such factors as earnings levels, capital requirements, loan agreement restrictions, our
financial condition and other factors deemed relevant by our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
The Company maintains the 1995 Stock Option and Compensation Plan (the Management Plan), the
1997 Employee Stock Option Plan (the Employee Plan), the 1998 Director Stock Option Plan (the
Director Plan) and the 2005 Stock Incentive Plan (the 2005 Plan). We have also granted stock
incentives outside of these equity compensation plans in limited situations. The Management Plan
prohibits the granting of incentives after December 29, 2005, the tenth anniversary of the date the
Management Plan was approved by the Companys shareholders. Similarly, the Employee Plan prohibits
the granting of incentives after June 24, 2007, the tenth anniversary of the date the Employee Plan
was approved by the Companys board of directors. As such, no further grants of incentives may be
made under the Management Plan or the Employee Plan. Nonetheless, the Management Plan and the
Employee Plan will remain in effect until all outstanding incentives granted thereunder have either
been satisfied or terminated.
The purpose of the Director Plan is to encourage share ownership by Company directors who are
not employed by the Company in order to promote long-term shareholder value through continuing
ownership of the Companys common stock. The Director Plan prohibits the granting of incentives,
after
22
June 10, 2008, the tenth anniversary of the date of Director Plan was approved by the
Companys shareholders. As such, no further grants may be made under the Director Plan after such
date.
The purpose of the 2005 Plan, which was approved by the Companys shareholders at the May 2005
annual shareholders meeting, is to increase shareholder value and to advance the interests of the
Company by furnishing a variety of economic incentives designed to attract, retain and motivate
associates (including officers), certain key consultants and directors of the Company.
The Management Plan, the Director Plan and the 2005 Plan have each been approved by the
Companys shareholders. The Employee Plan was not submitted for approval to the Companys
shareholders. The following table sets forth certain information as of December 30, 2007 with
respect to the Management Plan, the Employee Plan, the Director Plan and the 2005 Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
Weighted-
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Average
|
|
|
Equity Compensation
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options
|
|
|
Outstanding
|
|
|
Securities Reflected in
|
|
|
|
Warrants and Rights
|
|
|
Options
|
|
|
Column (A))
|
|
Plan Category
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
Equity compensation plans approved by
shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1995 Stock Option and Compensation Plan
|
|
|
167,556
|
(1)
|
|
$
|
5.23
|
|
|
|
-0-
|
|
1998 Director Stock Option Plan
|
|
|
180,500
|
|
|
$
|
5.77
|
|
|
|
19,500
|
|
2005 Stock Incentive Plan
|
|
|
75,800
|
(1)
|
|
$
|
10.98
|
|
|
|
329,400
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
423,856
|
|
|
$
|
5.74
|
|
|
|
348,900
|
|
|
Equity compensation plans not approved
by shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
1997 Employee Stock Option Plan
|
|
|
223,273
|
(1)
|
|
$
|
4.85
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
647,129
|
|
|
$
|
5.57
|
|
|
|
348,900
|
|
|
|
|
(1)
|
|
Includes stock options and shares reserved for issuance under the Companys existing
Performance Share Programs: 56,056 shares under the Management Plan, 126,113 shares under the
Employee Plan and 65,800 shares under the 2005 Plan.
|
Stock Performance Graph
The Securities and Exchange Commission requires that the Company include in this Form 10-K, a
line-graph presentation comparing the cumulative, five-year return to the Companys shareholders
(based on appreciation of the market price of the Companys common stock) on an indexed basis with
(i) a broad equity market index and (ii) an appropriate published industry or line-of-business
index, or peer group index constructed by the Company. The following presentation compares the
Companys common stock price for the period from December 29, 2002 through December 30, 2007, to
the S&P 500 Stock Index and to the S&P Small Cap Restaurant Index.
The Company has elected to use the S&P Small Cap Restaurant Index in compiling its stock
performance graph because it believes the S&P Small Cap Restaurant Index represents a comparison to
competitors with similar market capitalization to the Company.
The presentation assumes that the value of an investment in each of the Companys common
stock, the S&P 500 Index and the S&P Small Cap Restaurant Index was $100 on December 29, 2002, and
that any dividends paid were reinvested in the same security.
23
Comparison of Five-Year Cumulative Total Return
Among Famous Daves Of America, Inc., The S&P 500 Index,
And The S&P Small Cap Restaurant Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Return Analysis
|
|
|
12/29/2002
|
|
|
12/28/2003
|
|
|
1/2/2005
|
|
|
1/1/2006
|
|
|
12/31/2006
|
|
|
12/30/2007
|
|
|
Famous Daves of America
|
|
|
$
|
100.00
|
|
|
|
$
|
166.29
|
|
|
|
$
|
429.16
|
|
|
|
$
|
379.36
|
|
|
|
$
|
555.06
|
|
|
|
$
|
433.21
|
|
|
|
S&P Small Cap Restaurants
|
|
|
$
|
100.00
|
|
|
|
$
|
142.92
|
|
|
|
$
|
174.51
|
|
|
|
$
|
178.01
|
|
|
|
$
|
197.15
|
|
|
|
$
|
143.44
|
|
|
|
S&P 500
|
|
|
$
|
100.00
|
|
|
|
$
|
127.39
|
|
|
|
$
|
143.92
|
|
|
|
$
|
150.99
|
|
|
|
$
|
174.64
|
|
|
|
$
|
184.50
|
|
|
|
Source:
|
|
CTA Integrated Communications www.ctaintegrated.com (303) 665-4200. Data from ReutersBRIDGE Data Networks
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER
On May 9, 2006, our Board of Directors adopted a stock repurchase plan that authorized the
repurchase of up to 1.0 million shares of our common stock. The plan authorized us to purchase
shares from time-to-time in both the open market or through privately negotiated transactions.
Repurchases have been funded from the Companys available working capital and through sources such
as the Companys credit facility.
As of December 31, 2006, we had completed the purchase of 611,430 shares under this plan at an
average market price of $15.20, excluding commissions. We repurchased the remaining 388,570 shares
under this plan between January 1 and September 30, 2007, at an average market price of $19.28,
excluding commissions. All share repurchases under this plan were made pursuant to open-market
transactions under the publicly announced repurchase program approved by our Board of Directors,
and funded from our working capital.
On September 27, 2007, our Board of Directors adopted a further stock repurchase plan that
authorized the repurchase of up to an additional 1.0 million shares of our common stock. The plan
authorized us to purchase shares from time-to-time in both the open market or through privately
negotiated transactions. We expect to fund repurchases from the Companys available working
capital
and through sources such as the Companys credit facility.
24
As of December 30, 2007, we had repurchased 482,000 shares under this program for
approximately $6.9 million, or an average market price per share of $14.38, excluding commissions.
All share repurchases under this plan were made pursuant to open-market transactions under the
publicly announced repurchase program approved by our Board of Directors, and funded from our
working capital.
The following table includes information about our share repurchases for the fourth quarter
ended December 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
(or Approximate Dollar
|
|
|
Total
|
|
|
|
|
|
(or Units)
|
|
Value) of Shares
|
|
|
Number of
|
|
Average
|
|
Purchased as Part
|
|
(or Units)
|
|
|
Shares
|
|
Price Paid
|
|
of Publicly
|
|
that May Yet be
|
|
|
(or Units)
|
|
per Share
(1)
|
|
Announced Plans
|
|
Purchased Under the
|
Period
|
|
Purchased
|
|
(or Unit)
|
|
or Programs
|
|
Plans or Programs
|
Month #10
(October 1, 2007 October 28, 2007)
|
|
|
-0-
|
|
|
$
|
|
|
|
|
-0-
|
|
|
|
1,000,000
|
|
Month #11
(October 29, 2007 November 25, 2007)
|
|
|
286,852
|
|
|
$
|
14.91
|
|
|
|
286,852
|
|
|
|
713,148
|
|
Month #12
(November 26, 2007 December 30, 2007)
|
|
|
195,604
|
|
|
$
|
13.60
|
|
|
|
482,456
|
|
|
|
517,544
|
|
|
|
|
(1)
|
|
Excluding Commissions
|
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below should be read in conjunction with the
consolidated financial statements and notes included elsewhere in this Form 10-K, and in
conjunction with Managements Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Form 10-K.
The selected financial data as of and for the fiscal years ended December 30, 2007 (fiscal
year 2007), December 31, 2006 (fiscal year 2006), January 1, 2006 (fiscal year 2005), January 2,
2005 (fiscal year 2004) and December 28, 2003 (fiscal year 2003) have been derived from our
consolidated financial statements as audited by Grant Thornton LLP, independent registered public
accounting firm.
25
FINANCIAL HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL YEAR
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
(1)
|
|
|
2003
|
|
($s in 000s, except per share data and average weekly sales)
|
|
STATEMENTS OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
125,873
|
|
|
$
|
116,621
|
|
|
$
|
102,354
|
|
|
$
|
99,325
|
|
|
$
|
97,740
|
|
Asset impairment and estimated lease
termination and other closing costs
(2)
|
|
$
|
(596
|
)
|
|
$
|
(1,136
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(4,238
|
)
|
Income (loss) from operations
|
|
$
|
10,436
|
|
|
$
|
9,243
|
|
|
$
|
8,735
|
|
|
$
|
7,437
|
|
|
$
|
(193
|
)
|
Equity in loss of unconsolidated
affiliate
(3)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(2,155
|
)
|
Income tax (expense) benefit
|
|
$
|
(3,100
|
)
|
|
$
|
(2,737
|
)
|
|
$
|
(2,719
|
)
|
|
$
|
(1,922
|
)
|
|
$
|
1,647
|
|
Net income (loss)
|
|
$
|
6,070
|
|
|
$
|
4,954
|
|
|
$
|
4,425
|
|
|
$
|
3,538
|
|
|
$
|
(2,666
|
)
|
Basic net income (loss) per common
share
|
|
$
|
0.61
|
|
|
$
|
0.47
|
|
|
$
|
0.41
|
|
|
$
|
0.30
|
|
|
$
|
(0.23
|
)
|
Diluted net income (loss) per common
share
|
|
$
|
0.59
|
|
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
$
|
0.29
|
|
|
$
|
(0.23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA (at year end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,538
|
|
|
$
|
1,455
|
|
|
$
|
4,410
|
|
|
$
|
11,170
|
|
|
$
|
9,964
|
|
Total assets
|
|
$
|
73,942
|
|
|
$
|
65,859
|
|
|
$
|
67,426
|
|
|
$
|
71,761
|
|
|
$
|
73,767
|
|
Long-term debt less current
maturities
(4)
|
|
$
|
11,693
|
|
|
$
|
13,025
|
|
|
$
|
16,374
|
|
|
$
|
16,840
|
|
|
$
|
17,276
|
|
Total shareholders equity
|
|
$
|
30,400
|
|
|
$
|
36,171
|
|
|
$
|
38,194
|
|
|
$
|
43,757
|
|
|
$
|
47,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of restaurants open at year end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned restaurants
|
|
|
44
|
|
|
|
41
|
|
|
|
38
|
|
|
|
38
|
|
|
|
38
|
|
Franchise-operated restaurants
|
|
|
120
|
|
|
|
104
|
|
|
|
88
|
|
|
|
66
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total restaurants
|
|
|
164
|
|
|
|
145
|
|
|
|
126
|
|
|
|
104
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned comparable store
Sales increase (decrease)
(5)
|
|
|
2.1
|
%
|
|
|
2.9
|
%
|
|
|
2.1
|
%
|
|
|
1.1
|
%
(6)
|
|
|
(3.0
|
)%
|
|
Average weekly sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned restaurants
|
|
$
|
50,385
|
|
|
$
|
47,894
|
|
|
$
|
45,072
|
|
|
$
|
44,164
|
|
|
$
|
42,491
|
|
Franchise-operated restaurants
|
|
$
|
56,729
|
|
|
$
|
58,334
|
|
|
$
|
55,011
|
|
|
$
|
51,538
|
|
|
$
|
47,400
|
|
|
|
|
(1)
|
|
Fiscal 2004 consisted of 53 weeks. Fiscal 2007, 2006, 2005, and 2003 all consisted of 52 weeks.
|
|
(2)
|
|
Fiscal 2007 reflects impairment charges associated with one restaurant that is still operating. Fiscal 2006 reflects impairment charges associated with one restaurant and
land held for sale one of which was subsequently sold. The other of which continues to operate. Fiscal 2003 charges reflect impairment and restructuring costs associated with five
restaurants: two of which were subsequently sold, two of which were subsequently closed, and one that was fully impaired, but still operating.
|
|
(3)
|
|
Represents our 40% unconsolidated interest in a joint venture. Fiscal 2003 expenses represent operating losses and transaction costs related to our divestiture. We have no
further obligation regarding this joint venture.
|
|
(4)
|
|
Long-term debt consists of total debt, including capital lease obligations and financing leases, less current maturities.
|
|
(5)
|
|
Our comparable store sales base includes company-owned restaurants that are open year round and have been open more than 18 months.
|
|
(6)
|
|
For purposes of computing comparable store sales, this computation assumes fiscal 2004 was a 52-week year.
|
26
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements contained in this Annual Report on Form 10-K include forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. All
forward-looking statements in this Annual Report on Form 10-K are based on information currently
available to us as of the date of this Annual Report on Form 10-K, and we assume no obligation to
update any forward-looking statements. Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results to differ materially from any
future results, performance or achievements expressed or implied by such forward-looking
statements. Such factors may include, among others, those factors listed in Item 1A of this Annual
Report on Form 10-K, and elsewhere in this Annual Report on Form 10-K, and our other filings with
the Securities and Exchange Commission. The following discussion should be read in conjunction
with Selected Financial Data above (Item 6 of this Annual Report on Form 10-K) and our financial
statements and related footnotes appearing elsewhere in this Annual Report on Form 10-K.
Overview
Famous Daves of America, Inc. was incorporated as a Minnesota corporation in March 1994 and
opened its first restaurant in Minneapolis in June 1995. As of December 30, 2007, there were 164
Famous Daves restaurants operating in 35 states, including 44 company-owned restaurants and 120
franchise-operated restaurants. An additional 143 franchise restaurants were committed to be
developed through signed area development agreements at December 30, 2007.
Fiscal Year
Our fiscal year ends on the Sunday closest to December 31
st
. Our
fiscal year is generally 52 weeks; however it periodically consists of 53 weeks. Fiscal 2007,
Fiscal 2006 and Fiscal 2005, which ended on December 30, 2007, December 31, 2006 and January 1,
2006, respectively, consisted of 52 weeks.
Basis of Presentation
The financial results presented and discussed herein reflect our
results and the results of our wholly-owned and majority-owned consolidated subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Application of Critical Accounting Policies and Estimates
The following discussion and
analysis of the Companys financial condition and results of operations is based upon its financial
statements, which have been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amount of assets, liabilities and expenses, and
related disclosures. On an on-going basis, management evaluates its estimates and judgments. By
their nature, these estimates and judgments are subject to an inherent degree of uncertainty.
Management bases its estimates and judgments on historical experience, observance of trends in the
industry, information provided by customers and other outside sources and on various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or
conditions. Management believes the following critical accounting policies reflect its more
significant judgments and estimates used in the preparation of the Companys consolidated financial
statements. Our Companys significant accounting policies are described in Note 1 to the
consolidated financial statements included herein.
27
We have discussed the development and selection of the following critical accounting estimates
with the Audit Committee of our Board of Directors and the Audit Committee has reviewed our
disclosures relating to such estimates in this Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Recognition of Franchise-Related Revenue
Initial franchise revenue is recognized when we
have performed substantially all of our obligations as franchisor. Franchise royalties are
recognized when earned as promulgated by Statement of Financial Accounting Standards (SFAS) No. 45,
Accounting for Franchise Fee Revenue
.
Our franchise-related revenue consists of area development fees, initial franchise fees and
continuing royalty payments. Our area development fee consists of a one-time, non-refundable
payment equal to $10,000 per restaurant in consideration for the services we perform in preparation
of executing each area development agreement. Substantially all of these services which include,
but are not limited to, conducting market and trade area analysis, a meeting with Famous Daves
Executive Team, and performing potential franchise background investigation, all of which are
completed prior to our execution of the area development agreement and receipt of the corresponding
area development fee. As a result, we recognize this fee in full upon receipt. Our initial,
non-refundable, franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized
immediately when a franchise agreement is signed, reflecting the commission earned and expenses
incurred related to the sale. The remaining $35,000 is included in deferred franchise fees and is
recognized as revenue, when we have performed substantially all of our obligations. The franchise
agreement represents a separate and distinct earnings process from the area development agreements.
Franchisees are also required to pay us a monthly royalty equal to a percentage of their net
sales, which has historically varied from 4% to 5%. Currently, new franchises pay us a monthly
royalty of 5% of their net sales.
Franchise-related revenue for fiscal 2007 was approximately $17.0 million, a 9.1% increase
compared to franchise-related revenue of approximately $15.6 million for the same period in fiscal
2006, reflecting increased royalties. Royalties, which are based on a percent of
franchise-operated restaurant net sales, increased 13.9%, reflecting the annualization of franchise
restaurants that opened in fiscal 2006 in addition to the franchise-operated restaurants that
opened during fiscal 2007. During fiscal 2007, 18 franchised-operated restaurants opened, 3 closed
and one was sold to a franchisee. There were 120 franchise-operated restaurants open at December
30, 2007, compared to 104 at December 31, 2006. Up to 19 franchise restaurants are anticipated to
open throughout fiscal 2008.
Asset Impairment and Restructuring Charges
In accordance with SFAS No. 144
Accounting for
the Impairment or Disposal of Long-Lived Assets,
we evaluate restaurant sites and long-lived assets
for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured
by a comparison of the carrying amount of the restaurant site to the undiscounted future net cash
flows expected to be generated on a restaurant-by-restaurant basis. If a restaurant is determined
to be impaired, the loss is measured by the amount by which the carrying amount of the restaurant
site exceeds its fair value. Fair value is estimated based on the best information available
including estimated future cash flows, expected growth rates in comparable restaurant sales,
remaining lease terms and other factors. If these assumptions change in the future, we may be
required to take additional impairment charges for the related assets. Considerable management
judgment is necessary to estimate future cash flows. Accordingly, actual results could vary
significantly from such estimates. Restaurant sites that are operating but have been previously
impaired are reported at the lower of their carrying amount or fair value less estimated costs to
sell. During fiscal 2007, we recorded an asset impairment charge of approximately $596,000 in the
fourth quarter, the majority of which, was for an underperforming company-owned restaurant in the
Chicago, Illinois market. This impairment charge reflects the non-cash
28
write-down of the net book value of the assets of that restaurant. We also eliminated the
deferred rent for this location for approximately $184,000 since we do not expect to execute lease
option renewals. In 2006, we recorded an asset impairment charge for the non-cash, write-down of
the net book value of the assets of approximately $502,000 for an underperforming company-owned
restaurant in the Chicago, Illinois market that closed on July 28, 2006. We sublease the real
property on which the closed restaurant is located under a lease that expires in November 2010. We
also recorded an additional charge of approximately $332,000, which included estimated lease
termination costs, net of deferred rent, and other closure costs. We are currently marketing this
restaurant for sub-lease and as of December 30, 2007, and have a balance of approximately $171,000
in the reserve for this location. In 2006, we also consummated the sale of a restaurant that had
been previously closed. This location had been previously impaired to $1.3 million and then
subsequently written down to its sale price of $1.0 million in 2006.
Lease Accounting
In accordance with SFAS No. 13,
Accounting for Leases,
we recognize lease
expense for our operating leases over the entire lease term including lease renewal options where
the renewal is reasonably assured and the build-out period takes place prior to the restaurant
opening or lease commencement date. We account for construction allowances by recording a
receivable when its collectibility is considered probable, depreciating the leasehold improvements
over the lesser of their useful lives or the full term of the lease, including renewal options and
build-out periods, amortizing the construction allowance as a credit to rent expense over the full
term of the lease, including renewal options and build-out periods, and relieving the receivable
once the cash is obtained from the landlord for the construction allowance. We record rent expense
during the build-out period and classify this expense as pre-opening expenses in our consolidated
statements of operations.
Results of Operations
Revenue
Our revenue consists of four components: company-owned restaurant sales,
franchise-related revenues from royalties and franchise fees, licensing revenue from the retail
sale of our sauces and rubs, and other revenue from the opening assistance we provide to franchise
partners. We record restaurant sales at the time food and beverages are served. We record sales
of merchandise items at the time items are delivered to the customer. We have detailed below our
revenue recognition policies for franchise and licensing agreements. Our franchise-related revenue
consists of area development fees, initial franchise fees and continuing royalty payments. Our
area development fee consists of a one-time, non-refundable payment equal to $10,000 per restaurant
in consideration for the services we perform in preparation of executing each area development
agreement. Substantially all of these services which include, but are not limited to, conducting
market and trade area analysis, a meeting with Famous Daves Executive Team, and performing
potential franchise background investigation, all of which are completed prior to our execution of
the area development agreement and receipt of the corresponding area development fee. As a result,
we recognize this fee in full upon receipt. Our initial, non-refundable, franchise fee is
typically $40,000 per restaurant, of which $5,000 is recognized immediately when a franchise
agreement is signed, reflecting the commission earned and expenses incurred related to the sale.
The remaining $35,000 is included in deferred franchise fees and is recognized as revenue, when we
have performed substantially all of our obligations. The franchise agreement represents a separate
and distinct earnings process from the area development agreements. Franchisees are also required
to pay us a monthly royalty equal to a percentage of their net sales, which has historically varied
from 4% to 5%. Currently, new franchises pay us a monthly royalty of 5% of their net sales.
We have a licensing agreement for our retail products, the initial term of which expires in
April 2010 with renewal options of five years, subject to the licensees attainment of identified
minimum product sales levels.
29
Periodically, we provide additional services, beyond the general franchise agreement, to our
franchise operations, such as new restaurant training and décor installation services. The
cost of these services is billed to the respective franchisee, is recorded as other income, and is
generally payable on a net 30-day terms.
Costs and Expenses
Restaurant costs and expenses include food and beverage costs, operating
payroll, associate benefits, restaurant level supervision, occupancy costs, repair and maintenance
costs, supplies, advertising and promotion, and restaurant depreciation and amortization. Certain
of these costs and expenses are variable and will increase or decrease with sales volume. The
primary fixed costs are corporate and restaurant management salaries and occupancy costs. Our
experience is that when a new restaurant opens, it incurs higher than normal levels of labor and
food costs until operations stabilize, usually during the first 12-14 weeks of operation. As
restaurant Management and Associates gain experience following a restaurants opening, labor
scheduling, food cost management and operating expense control are improved to levels similar to
those at our more established restaurants.
General and Administrative Expenses
General and administrative expenses include all
corporate and administrative functions that provide an infrastructure to support existing
operations and support future growth. Salaries, bonuses, Associate benefits, legal fees, accounting
fees, consulting fees, travel, rent, and general insurance are major items in this category. We
record expenses for Managers in Training (MITs) in this category for approximately six weeks
prior to a restaurant opening. We also provide franchise services, the revenue of which are
included in other revenue and the expenses of which are included in general and administrative
expenses.
The following table presents items in our consolidated statements of operations as a
percentage of total revenue or net restaurant sales, as indicated, for the following fiscal years
(3)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Food and beverage costs
(1)
|
|
|
30.1
|
%
|
|
|
30.4
|
%
|
|
|
30.6
|
%
|
Labor and benefits
(1)
|
|
|
30.3
|
%
|
|
|
30.0
|
%
|
|
|
29.3
|
%
|
Operating expenses
(1)
|
|
|
25.6
|
%
|
|
|
25.3
|
%
|
|
|
25.0
|
%
|
Depreciation & amortization (restaurant level)
(1)
|
|
|
4.2
|
%
|
|
|
3.9
|
%
|
|
|
4.4
|
%
|
Depreciation & amortization (corporate level)
(2)
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
|
|
0.4
|
%
|
General and administrative
(2)
|
|
|
12.4
|
%
|
|
|
13.2
|
%
|
|
|
13.1
|
%
|
Asset impairment and estimated lease termination
and other closing costs
(1)
|
|
|
0.6
|
%
|
|
|
1.1
|
%
|
|
|
|
|
Pre-opening expenses & net loss on disposal of property
(1)
|
|
|
1.5
|
%
|
|
|
0.8
|
%
|
|
|
0.1
|
%
|
Total costs and expenses
(2)
|
|
|
91.7
|
%
|
|
|
92.1
|
%
|
|
|
91.5
|
%
|
Income from operations
(2)
|
|
|
8.3
|
%
|
|
|
7.9
|
%
|
|
|
8.5
|
%
|
|
|
|
(1)
|
|
As a percentage of restaurant sales, net
|
|
(2)
|
|
As a percentage of total revenue
|
|
(3)
|
|
Data regarding our restaurant operations as presented in the table, includes sales,
costs and expenses associated with our Rib Team, which netted to net losses of $60,000, $7,000, and
$48,000, respectively in fiscal years 2007, 2006, and 2005. Our Rib Team travels around the country
introducing people to our brand of barbeque and builds brand awareness.
|
30
Fiscal Year 2007 Compared to Fiscal Year 2006
Total Revenue
Total revenue of approximately $125.9 million for fiscal 2007 increased
approximately $9.3 million or 7.9% over total revenue of approximately $116.6 million for fiscal
2006. Fiscal 2007 and fiscal 2006 both consisted of 52 weeks.
Restaurant Sales
Restaurant sales were approximately $107.8 million for fiscal 2007 and
approximately $100.0 million for fiscal 2006. Fiscal 2007 sales results included the impact of
four new company-owned restaurants opened during the year, and a comparable sales increase of 2.1%,
primarily reflecting growth in off-premise sales from catering and TO-GO. Additionally the increase
reflects a weighted average price increase during fiscal 2007 of approximately 1.5%. Fiscal 2006
sales reflected a 2.9% comparable sales growth, primarily from an increase in our catering and TO
GO business, and the impact of weighted-average price increases equal to approximately 1.7%. Our
category leadership in off-premise sales continues to strengthen, as catering and TO GO accounted
for approximately 33.5% of sales in fiscal 2007, compared with approximately 32.6% of sales in
fiscal 2006.
Franchise-Related Revenue
Franchise-related revenue consists of royalty revenue and
franchise fees, which include initial franchise fees and area development fees. Franchise-related
revenue for fiscal 2007 was approximately $17.0 million, a 9.1% increase when compared to
franchise-related revenue of approximately $15.6 million for the same period in fiscal 2006,
reflecting increased royalties. Royalties, which are based on a percent of franchise-operated
restaurants net sales, increased 13.9% reflecting the annualization of franchise restaurants that
opened in fiscal 2006 in addition to the net 15 new franchise restaurants opened during fiscal
2007. Fiscal 2007 included 5,654 franchise operating weeks, compared to 4,837 franchise operating
weeks in fiscal 2006, representing an increase of approximately 16.9%. There were 120
franchise-operated restaurants open at December 30, 2007, compared to 104 at December 31, 2006.
Licensing and Other Revenue
Licensing revenue includes royalties from a retail line of
business, including sauces, rubs, marinades, seasonings, and other items. Other revenue includes
opening assistance and training we provide to our franchise partners. For fiscal 2007, the
licensing royalty income was approximately $334,000 compared to approximately $279,000 for fiscal
2006. During fiscal 2008, as a result of continued growth in our restaurant base and expanded
markets, we expect to see licensing revenue increase slightly compared to fiscal 2007 levels.
Other revenue for fiscal 2007 was approximately $678,000, compared to approximately $695,000
in fiscal 2006. The amount of other revenue has declined slightly due to a greater use in fiscal
2007 of other franchise associate trainers with the increased number of openings. The amount of
other revenue is expected to remain essentially flat to fiscal 2007 based on the level of opening
assistance we expect to provide for the up to 19 franchise openings planned for fiscal 2008.
Same Store Net Sales
It is our policy to include in our same store net sales base,
restaurants that are open year round and have been open for at least 18 months. At the end of
fiscal 2007 and fiscal 2006, there were 38 and 37 restaurants, respectively, included in this base.
Same store net sales for fiscal 2007 increased approximately 2.1%, compared to fiscal 2006s
increase of approximately 2.9%. We believe that the increase in same store net sales reflects the
combination of our advertising initiatives, the success of our LTOs, weighted average price
increases of approximately 1.5% for 2007, growth in off-premise sales from catering and TO GO and
a focus on operational excellence and execution in our restaurants. Same store net sales for
franchise-operated restaurants for fiscal 2007 decreased approximately 4.0%, compared to a decrease
of approximately 1.6% for the prior year comparable period. Much of the decline in fiscal 2007 can
be explained by weak regional economies. Restaurants in six states accounted for almost 80% of the
decline of our franchise comps. Non-geographic factors affecting the decline reflect a
31
number of franchise restaurants entering the comparable sales base that are still impacted by
what we consider to be a longer than normal honeymoon period. Many of our restaurants open at much
higher levels than other casual dining concepts and are still settling in even after 12 months.
Almost two-thirds of the decline reflects new restaurants coming into the comparable sales base in
which their 18 month sales number is compared to their 6 month sales number. For fiscal 2007 and
fiscal 2006, there were 68 and 49 restaurants, respectively, included in franchise-operated
comparable sales.
Average Weekly Net Sales
The following table shows company-owned and franchise-operated
average weekly net sales for fiscal 2007 and fiscal 2006:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
December 30,
|
|
December 31,
|
|
|
2007
|
|
2006
|
Company-Owned
|
|
$
|
50,385
|
|
|
$
|
47,894
|
|
Full-Service
|
|
$
|
52,326
|
|
|
$
|
49,482
|
|
Counter-Service
|
|
$
|
39,051
|
|
|
$
|
38,887
|
|
Franchise-Operated
|
|
$
|
56,729
|
|
|
$
|
58,334
|
|
Food and Beverage Costs
Food and beverage costs for fiscal 2007 were approximately $32.4
million or 30.1% of net restaurant sales compared to approximately $30.4 million or 30.4% of net
restaurant sales for fiscal 2006. Results for fiscal 2007 reflect the favorable impact from the
realization of vendor rebates of approximately $360,000 in the fourth quarter that had previously
been given to the National Ad Fund, and favorable contract pricing for many of our core proteins.
As a percentage of dine-in sales, our adult beverage sales at our company-owned restaurants were
approximately 9.4%. We have determined that we are limited in our ability to grow the bar in the
majority of our locations due to the fact that many of our locations have little to no designated
bar, and some restaurants only have beer and wine licenses. Our recently opened company-owned
restaurants have achieved rates slightly higher than our Company average for their adult beverage
sales as a percentage of dine-in sales. Approximately 88% of our purchases are on contract. Pork
represents approximately 33% of our total purchases, while chicken is approximately 12%, and beef
is approximately 9%.
We anticipate that food costs, as a percent of net restaurant sales, will be 30-40 basis
points higher for the first five months of 2008 over the prior year comparable period. Our annual
pork contract renewal extends through December 2008, and resulted in a 1.0% price increase for
fiscal 2008. Our poultry contract pricing negotiated in January 2008 for January to September 2008,
resulted in an increase of 12% for fiscal 2008 and our brisket contract which runs from January to
July 2008 and hamburger which runs from January to December 2008, is essentially flat to 2007. For
the remainder of the year, we expect to minimize the impact from these higher costs through rebates
from food and beverage vendors that had previously gone to the National Ad fund, by offering LTOs
and bundling products with higher margins, in addition to taking a price increase in June.
Labor and Benefits
Labor and benefits at the restaurant level were approximately $32.7
million or 30.3% of net restaurant sales in fiscal 2007 compared to approximately $30.0 million or
30.0% of net restaurant sales in fiscal 2006. The increase in labor and benefits reflects higher
labor costs, partially due to health insurance claims and increased management wages slightly
offset by lower workers compensation insurance costs of $120,000. Also, higher labor costs were
associated with opening four new company-owned restaurants late in fiscal 2007. For 2008, we
expect labor and benefit costs as a percentage of net restaurant sales to increase slightly over
2007 levels primarily as a result of higher
32
healthcare costs, periods of higher labor costs due to inefficiencies during the first 12-14
weeks of operation for our 2008 openings, in addition to increases in the federal, and various
state minimum wage rates.
Operating Expenses
Operating expenses for fiscal 2007 were approximately $27.5 million or
25.6% of net restaurant sales, compared to approximately $25.3 million or 25.3% of net restaurant
sales for fiscal 2006. The increase in fiscal 2007 restaurant level operating expenses is
primarily due to inefficiencies during the first 12-14 weeks from the four new restaurants opened
late in fiscal 2007. In addition, restaurant operating expenses reflect costs associated with the
hiring of new Managers in preparation for company-owned restaurant openings that were originally
slated to open in the second and third quarters of 2007. During fiscal 2008, operating expenses as
a percentage of net restaurant sales are expected to be relatively flat from the percentage for
fiscal 2007.
Depreciation and Amortization
Depreciation and amortization for fiscal 2007 was
approximately $5.0 million, or 4.0% of total revenue, compared to approximately $4.4 million, or
3.8% of total revenue for fiscal 2006. The increase in depreciation and amortization expense as a
percent of total revenue in fiscal 2007 compared to fiscal 2006 is primarily due to the recapture
of depreciation from the reclassification of assets for two restaurants from an assets held for
sale category to assets held and used, resulting in additional expense of approximately $371,000 in fiscal 2007.
During fiscal 2008, depreciation and amortization is expected to increase from fiscal 2007 levels
due to expected capital expenditures of approximately $17.5 million for new and existing
company-owned restaurants and other infrastructure projects.
General and Administrative Expenses
General and administrative expenses totaled
approximately $15.6 million or 12.4% of total revenue in fiscal 2007 compared to approximately
$15.4 million or 13.2% of total revenue in fiscal 2006. In fiscal 2007, general and administrative
expenses included approximately $820,000, or $0.05 per diluted share, for stock-based compensation
expense as related to our performance share programs, options expense from SFAS No. 123R, the
issuance of shares to our Board of Directors for service during fiscal 2007, and our deferred stock
unit plan. In fiscal 2006, general and administrative expenses
included approximately $1.4 million
for stock-based compensation expense, or $0.09 per diluted share. The departure of our CEO in
December 2007 resulted in the recapture of approximately $920,000 in stock-based compensation.
Excluding stock-based compensation expense, the percentage would have been 11.7% for fiscal 2007
and 11.9% for fiscal 2006. The decrease in the percentage excluding stock based compensation
compared to prior year, primarily reflects the recapture of bonus related to our CEO who left the
company in December, another position at the executive level that has remained open for the entire
fourth quarter of 2007, in addition to other savings. During fiscal 2008, we expect general and
administrative expenses, as a percentage of total revenue, to be flat to slightly lower than 2007
levels due to revenue leverage, in addition to G&A savings related to key executive positions that
will remain open at least through the first quarter of fiscal 2008. At this time we do not know
what the compensation will be for our new CEO in 2008, once hired, so the following information is
only an estimate. We expect stock-based compensation to be approximately $1.3 million in fiscal
2008, as follows (in thousands):
|
|
|
|
|
|
|
Performance
|
|
Board of Directors
|
|
Unvested Stock
|
|
|
Shares
|
|
Shares
|
|
Options
|
|
Total
|
$920
|
|
$270
|
|
$85
|
|
$1,275
|
33
Asset Impairment and Estimated Lease Termination and Other Closing Costs
During fiscal 2007,
we recorded an asset impairment charge of approximately $569,000 for our Palatine, Illinois
restaurant which included the write-down of its assets reflected in impairment and estimated lease
termination and other closing costs. This impairment also resulted in a reduction in rent expense
of approximately $185,000 reflected in operating expenses, for the write-off of the deferred rent
balance for this location, as it was determined that lease option periods will not be executed.
Additionally, we recorded a write-off of approximately $395,000 for a software development project
that was determined to have no future value. This write-off is reflected in loss on disposal of
property in the consolidated statements of operations. During fiscal 2006, we recorded lease
termination and closing costs of approximately $1.1 million for the closure of our Streamwood,
Illinois restaurant and the write-down of our Mesquite, Texas location to fair market value prior
to its sale in December 2006.
Pre-opening Expenses
During fiscal 2007, we had approximately $1.2 million in pre-opening
expenses, including pre-opening rent, related to the opening of four company-owned restaurants in
2007 and pre-opening rent for a restaurant that opened in early fiscal 2008. Each restaurant will
have pre-opening rent for approximately 16 weeks prior to opening, but this could vary based on
their lease terms. We expect to open up to 6 company-owned restaurants in fiscal 2008, with total
pre-opening expenses, including rent, of approximately $275,000 per restaurant.
Loss on Early Extinguishment of Debt
During fiscal 2007, we repaid early, approximately $1.0
million in notes payable related to our Tulsa, Oklahoma company-owned restaurant which resulted in
an approximate $12,000 non-cash charge to write-off deferred financing fees. On May 31, 2006, we
elected to repay two notes early related to our Lincoln, Nebraska and Addison, Illinois
company-owned restaurants, and paid approximately $3.0 million to retire the notes early. This
repayment resulted in a $148,000 non-cash charge to write-off deferred financing fees in the second
quarter of fiscal 2006, which was essentially offset by interest savings from the date of the
transaction through the end of fiscal 2006.
Interest Expense
Interest expense totaled approximately $1.6 million or 1.3% of total
revenue for fiscal 2007, compared to approximately $1.7 million or 1.5% of total revenue for fiscal
2006. This category includes interest expense for notes payable, financing lease obligations and a
company match for deferrals made under our non-qualified deferred compensation plan. For fiscal
2008, we expect interest expense to be higher than fiscal 2007 levels due to the interest resulting
from the use of our line of credit which had a balance of $13.0 million as of December 30, 2007.
Interest Income
Interest income was approximately $293,000 and $331,000 for fiscal 2007 and
fiscal 2006, respectively. Interest income reflects interest received on short-term cash and cash
equivalent balances. We expect fiscal 2008 interest income to decrease compared to fiscal 2007
levels due to lower cash balances with cash being utilized for the construction of up to six
company-owned restaurants, our share buy-back program, and other general capital needs.
Income Tax Expense
We recorded expense for income taxes during fiscal 2007 of approximately
$3.1 million which compares to expense of approximately $2.7 million in fiscal 2006. We utilized
approximately $2.4 million of federal and state net operating loss carry forwards in fiscal 2007 as
compared to approximately $11.0 million in fiscal 2006. Utilization of federal net operating losses
will be achieved through offsetting tax liabilities generated through earnings, increased by
payments of current taxes to state authorities. We also utilized $1.3 million of general business
credit carryforwards in fiscal 2007. We utilized no credit carryforwards in fiscal 2006. We had
an effective tax rate of 33.8% for fiscal 2007 compared to 35.6% for fiscal 2006. The reduction in
rate reflects the cumulative impact of an adjustment to permanent deductions that had not been
utilized in prior years, the effects of a state income tax audit, and a prior year adjustment of
the rate used to calculate deferred tax assets. We estimate a tax rate of 35.0% for fiscal 2008.
34
Basic and Diluted Net Income Per Common Share
Net income for fiscal 2007 was approximately
$6.1 million or $0.61 per basic common share on approximately 9,960,000 weighted average basic
shares outstanding compared to net income of approximately $5.0 million or $0.47 per basic common
share on approximately 10,453,000 weighted average basic shares outstanding for fiscal 2006.
Diluted net income per common share for fiscal 2007 was $0.59 per common share on
approximately 10,298,000 weighted average diluted shares outstanding compared to $0.46 per common
share on approximately 10,801,000 weighted average diluted shares outstanding for fiscal 2006.
Fiscal Year 2006 Compared to Fiscal Year 2005
Total Revenue
Total revenue of approximately $116.6 million for fiscal 2006 increased
approximately $14.3 million or 13.9% over total revenue of approximately $102.4 million for fiscal
2005. Fiscal 2006 and fiscal 2005 both consisted of 52 weeks.
Restaurant Sales
Restaurant sales were approximately $100.0 million for fiscal 2006 and
approximately $89.2 million for fiscal 2005. Fiscal 2006 sales results included the impact of
three new company-owned restaurants opened during the period and a comparable sales increase of
2.9%. In addition, there was a positive impact from a weighted average price increase during
fiscal 2006 equal to approximately 1.7%. Fiscal 2005 sales reflected a 2.1% comparable sales
growth, primarily from an increase in our catering and TO GO business, and the impact of
weighted-average price increases equal to less than 2.0%. Fiscal 2005 sales results reflect the
two-week closure of our Maple Grove, Minnesota location during the third quarter of fiscal 2005 for
conversion from counter-service to full-service, which negatively impacted fiscal 2005 sales by
approximately $100,000. Catering and TO GO accounted for approximately 32.6% of sales in fiscal
2006, compared with approximately 32.0% of sales in fiscal 2005.
Franchise-Related Revenue
Franchise-related revenue consists of royalty revenue and
franchise fees, which include initial franchise fees and area development fees. Franchise-related
revenue for fiscal 2006 was approximately $15.6 million, a 30.2% increase when compared to
franchise-related revenue of approximately $12.0 million for the same period in fiscal 2005,
primarily reflecting increased royalties. Royalties, which are based on a percent of
franchise-operated restaurants net sales, increased 32.6% reflecting the annualization of
franchise restaurants that opened in fiscal 2005 in addition to the net 16 new franchise
restaurants opened during fiscal 2006. Fiscal 2006 included 4,837 franchise operating weeks,
compared to 3,885 franchise operating weeks in fiscal 2005, representing an increase of
approximately 24.5%. There were 104 franchise-operated restaurants open at December 31, 2006,
compared to 88 at January 1, 2006.
Licensing and Other Revenue
Licensing revenue includes royalties from a retail line of
business, including sauces, rubs, marinades, seasonings, and other items. Other revenue includes
opening assistance and training we provide to our franchise partners. For fiscal 2006, the
licensing royalty income was approximately $279,000 compared to approximately $285,000 for fiscal
2005. Other revenue for fiscal 2006 was approximately $695,000, compared to approximately $820,000
in fiscal 2005. The amount of other revenue declined due to a greater use in fiscal 2006 of other
franchise associate trainers.
Same Store Net Sales
It is our policy to include in our same store net sales base,
restaurants that are open year round and have been open for at least 18 months. At the end of
fiscal 2006 and fiscal 2005, there were 37 and 38 restaurants, respectively, included in this base.
Same store net sales for fiscal 2006 increased approximately 2.9%, compared to fiscal 2005s
increase of approximately 2.1%. We believe that the increase in same store net sales reflects the
combination of our advertising initiatives, the success of our LTOs, weighted average price
increases of approximately 1.7% and a focus on operational
35
excellence and execution in our restaurants. Same store net sales for franchise-operated
restaurants for fiscal 2006 decreased approximately 1.6%, compared to a decrease of approximately
1.2% for the prior year comparable period. For fiscal 2006 and fiscal 2005, there were 49 and 36
restaurants, respectively, included in franchise-operated comparable sales.
Average Weekly Net Sales
The following table shows company-owned and franchise-operated
average weekly net sales for fiscal 2006 and fiscal 2005:
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
January 1,
|
|
|
2006
|
|
2006
|
Company-Owned
|
|
$
|
47,894
|
|
|
$
|
45,072
|
|
Full-Service
|
|
$
|
49,482
|
|
|
$
|
46,114
|
|
Counter-Service
|
|
$
|
38,887
|
|
|
$
|
40,431
|
|
Franchise-Operated
|
|
$
|
58,334
|
|
|
$
|
55,011
|
|
Food and Beverage Costs
Food and beverage costs for fiscal 2006 were approximately $30.4
million or 30.4% of net restaurant sales compared to approximately $27.3 million or 30.6% of net
restaurant sales for fiscal 2005. Results reflect the impact of contract price decreases in our
core proteins during fiscal 2006, in addition to our ability to leverage our menu and offset higher
food costs through usage of our LTOs. As a percentage of dine-in sales, our adult beverage sales
at our company-owned restaurants were approximately 10.0%. Approximately 86% of our purchases were
on contract. Our annual pork contract renewal in October 2006 resulted in a 2.7% price decrease
for fiscal 2007, our poultry contract pricing resulted in an increase of 4% represented for fiscal
2007 and our brisket contract had a 6% increase for a five month period that expired in May 2007.
Pork represented 32% of our total purchases, while chicken represented 10%, and beef represented
10%.
Labor and Benefits
Labor and benefits at the restaurant level were approximately $30.0
million or 30.0% of net restaurant sales in fiscal 2006 compared to approximately $26.2 million or
29.3% of net restaurant sales in fiscal 2005. The increase in labor and benefits reflected higher
labor costs, partially due to a minimum wage increase in Maryland, higher labor costs associated
with opening three new restaurants in fiscal 2006, in addition to higher workers compensation
expense.
Operating Expenses
Operating expenses for fiscal 2006 were approximately $25.3 million or
25.3% of net restaurant sales, compared to approximately $22.3 million or 25.0% of net restaurant
sales for fiscal 2005. The increase in fiscal 2006 restaurant level operating expenses was
primarily due to increased supplies expense from catering and TO GO sales, and increased
utilities costs. Additionally, advertising expenses for fiscal 2006 were 3.5% of net restaurant
sales compared to 3.2% in fiscal 2005, including 1.0% to the national advertising fund.
Depreciation and Amortization
Depreciation and amortization for fiscal 2006 was
approximately $4.4 million, or 3.8% of total revenue, compared to approximately $4.4 million, or
4.3% of total revenue for fiscal 2005. The decrease in depreciation and amortization expense as a
percent of total revenue in fiscal 2006 compared to fiscal 2005 was primarily due to the closure of
our Streamwood, Illinois restaurant, and the reclassification to assets held for sale.
General and Administrative Expenses
General and administrative expenses totaled
approximately $15.4 million or 13.2% of total revenue in fiscal 2006 compared to approximately
$13.4 million or 13.1% of total revenue in fiscal 2005. In fiscal 2006, general and administrative
expenses
36
included
approximately $1.4 million, or $0.09 per diluted share, for stock-based compensation
expense as related to our performance share programs, options expense from the adoption of SFAS No.
123R, the issuance of shares to our Board of Directors for service during fiscal 2006 and our
deferred stock unit plan. In fiscal 2005, general and administrative expenses included
approximately $566,000 for stock-based compensation expense, or $0.03 per diluted share. Excluding
stock-based compensation expense, the percentage would have been 12.0% for fiscal 2006 and 12.6%
for fiscal 2005.
Asset Impairment and Estimated Lease Termination and Other Closing Costs
During fiscal 2006
we recorded lease termination and closing costs of approximately $1.1 million for the closure of
our Streamwood, Illinois restaurant and the write-down of our Mesquite, Texas location to fair
market value prior to its sale in December 2006. During fiscal 2005, we did not record any asset
impairment or restructuring charges.
Pre-opening Expenses
We had approximately $625,000 in pre-opening expenses for fiscal 2006
related primarily to the opening of three company-owned restaurants in fiscal 2006. We had
approximately $96,000 in pre-opening expenses for fiscal 2005 related primarily to our Chantilly,
Virginia restaurant, which opened in January 2006, and our Maple Grove, Minnesota restaurant
conversion.
Loss on Early Extinguishment of Debt
In fiscal 2006, we elected to repay two notes prior to
their expiration, and paid approximately $3.0 million to retire the notes early. This repayment
resulted in a $148,000 non-cash charge to write-off deferred financing fees in the second quarter
of fiscal 2006, which was essentially offset by interest savings from the date of the transaction
through the end of fiscal 2006.
Interest Expense
Interest expense totaled approximately $1.7 million or 1.5% of total
revenue for fiscal 2006, compared to approximately $1.9 million or 1.9% of total revenue for fiscal
2005. This category includes interest expense for notes payable, financing lease obligations and a
company match for deferrals made under our non-qualified deferred compensation plan.
Interest Income
Interest income was approximately $331,000 and $270,000 for fiscal 2006 and
fiscal 2005, respectively. Interest income reflects interest received on short-term cash and cash
equivalent balances.
Income Tax Expense
We recorded expense for income taxes during fiscal 2006 of approximately
$2.7 million which compares to expense of approximately $2.7 million in fiscal 2005. We utilized
approximately $11.0 million of federal and state net operating loss carry forwards in fiscal 2006
as compared to approximately $8.0 million in fiscal 2005. At December 31, 2006, we had a remaining
deferred tax asset of approximately $3.9 million. We had an effective tax rate of 35.6% for fiscal
2006 compared to 38.0% for fiscal 2005. The lower effective tax rate was primarily due to a change
in methodology in computing the overall state tax rate.
Basic and Diluted Net Income Per Common Share
Net income for fiscal 2006 was approximately
$5.0 million or $0.47 per basic common share on approximately 10,453,000 weighted average basic
shares outstanding compared to a net income of approximately $4.4 million or $0.41 per basic common
share on approximately 10,825,000 weighted average basic shares outstanding for fiscal 2005.
Diluted net income per common share for fiscal 2006 was $0.46 per common share on
approximately 10,801,000 weighted average diluted shares outstanding compared to $0.40 per common
share on approximately 11,173,000 weighted average diluted shares outstanding for fiscal 2005.
37
Recently Issued Accounting Pronouncements
On February 15, 2007, the FASB issued FASB Statement No. 159,
The Fair Value Option for
Financial Assets and Financial Liabilities
-
Including an Amendment of FASB Statement No. 115
. This
standard permits an entity to choose to measure many financial instruments and certain other items
at fair value. The fair value option established by SFAS 159 permits all entities to choose to
measure eligible items at fair value at specified election dates. SFAS 159 is effective for the
Company as of December 31, 2007. There is expected to be no impact on the consolidated financial
statements, as a result of the adoption of this pronouncement.
On December 4, 2007,
the FASB issued FASB Statement No. 141(R),
Business Combinations
(SFAS
141(R)), and FASB Statement No. 160,
Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB
No. 51 (SFAS 160). These new standards will significantly change
the accounting for and reporting for business combination transactions and noncontrolling
(minority) interests in consolidated financial statements. SFAS 141(R) and SFAS 160 are required
to be adopted simultaneously and are effective for the first annual reporting period beginning on
or after December 15, 2008. These standards will impact us if we complete an acquisition or obtain
minority interests after the effective date.
In September 2006,
the FASB issued FASB Statement No. 157,
Fair Value Measurements
(SFAS 157) which is
effective for fiscal years beginning after November 15, 2007 and for interim periods within those
years. This statement defines fair value, establishes a framework for measuring fair value, and
expands the related disclosure requirements. However, on December 14, 2007, the FASB issued
proposed FSP FAS 157-b which would delay the effective date of SFAS 157 for all nonfinancial assets
and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). This proposed FSP partially defers
the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. Effective for 2008, we
will adopt SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities
as noted in proposed FSP FAS 157-b. The partial adoption of SFAS 157 will not have a material
impact on our consolidated financial statements.
Financial Condition, Liquidity and Capital Resources
As of December 30, 2007, our Company held unrestricted cash and cash equivalents of
approximately $1.5 million compared to approximately $1.5 million as of December 31, 2006. Our
cash balance reflects net borrowings of $13.0 million, the use of approximately $14.2 million for
the repurchase of common stock, including commissions, the purchases of property, equipment, and
leasehold improvements for approximately $14.3 million, and early repayment of debt of $1.0
million. This was partially offset by cash generated from operations of approximately $13.0
million, and $1.8 million received for the sale of our Rogers, Arkansas restaurant to a franchisee.
Our quick ratio, which measures our immediate short-term liquidity, was 0.25 at December 30,
2007 compared to 0.37 at December 31, 2006. The quick ratio is computed by adding unrestricted
cash and cash equivalents with accounts receivable, net and dividing by total current liabilities
less restricted marketing fund liabilities. The change in our quick ratio was primarily due to a
balance of $13.0 million on our line of credit, at December 30, 2007, compared with no outstanding
balance for the prior year.
Net cash provided by operations for each of the last three fiscal years was approximately
$13.0 million in fiscal 2007, $15.9 million in fiscal 2006, and $10.3 million in fiscal 2005. Cash
generated in fiscal 2007 was primarily from net income of approximately $6.1 million, depreciation
and amortization of approximately $5.0 million, the utilization of our deferred tax asset of
approximately $1.8 million, an
38
increase in stock-based compensation of approximately $838,000, an asset impairment of
approximately $600,000 related to one company-owned location, and a loss on disposal of
approximately $500,000. These increases were partially offset by an increase in accounts
receivable of approximately $1.8 million due to 15 additional franchisees on a net basis since last
year-end.
Cash generated in fiscal 2006 was primarily from net income of approximately $5.0 million,
depreciation and amortization of approximately $4.4 million, the utilization of our deferred tax
asset of approximately $1.6 million, an increase in stock-based compensation of approximately $1.4
million, a $1.2 million increase in accrued compensation and benefits, an asset impairment of $1.2
million related to two company-owned locations, and an increase in accounts payable of
approximately $1.4 million. These increases were partially offset by an increase in accounts
receivable of approximately $672,000 due to 16 additional franchises on a net basis since last
year-end.
Cash generated in fiscal 2005 was primarily from net income of approximately $4.4 million,
depreciation and amortization of approximately $4.4 million, and the utilization of our deferred
tax asset of approximately $2.1 million. These increases were partially offset by an approximate
$1.2 million increase in restricted cash, which includes amounts related to our national
advertising fund, and approximately $528,000 related to our self-funded benefit plans and an
increase in accounts receivable of approximately $1.1 million due to 22 additional franchisees on a
net basis since last year-end.
Net cash used for investing activities for each of the last three fiscal years was
approximately $12.3 million in fiscal 2007, $7.0 million in fiscal 2006, and $5.7 million in fiscal
2005. In fiscal 2007, we used approximately $14.3 million primarily for the construction of our
Fredericksburg Virginia, Oswego Illinois, Bolingbrook Illinois, Owings Mills Maryland and
Alexandria Virginia restaurants and other infrastructure projects. This was partially off-set by
proceeds of approximately $1.8 million from the sale of our Rogers Arkansas company-owned
restaurant to a franchisee. In fiscal 2006, we used approximately $8.2 million primarily for the
construction of our Waldorf Maryland and Coon Rapids Minnesota restaurants and other infrastructure
projects. This was partially offset by approximately $900,000 in proceeds from the sale of
property, plant, and equipment. In fiscal 2005, we used approximately $6.8 million for capital
expenditures primarily related to the construction of our new Chantilly Virginia restaurant, the
purchase of our Plymouth Minnesota restaurant, the purchase of land for a restaurant in Coon Rapids
Minnesota, a new test kitchen, training center and office space, and POS and other computer
equipment for use in the restaurants and at our corporate office. This was partially offset by
proceeds from the sale of assets of approximately $636,000, and by payments received on notes
receivable of approximately $457,000. In fiscal 2008, we expect capital expenditures to be
approximately $17.5 million, which will consist of costs related to the construction of up to six
new company-owned restaurants, a new back-of-the-house management system, and normal capital
expenditures for existing restaurants.
Net cash used for financing activities was approximately $586,000 in fiscal 2007, $11.8
million in fiscal 2006, and $11.4 million in fiscal 2005. In fiscal 2007, we repurchased 871,000
of our shares, representing the culmination of our third authorization and approximately half of
the fourth, for approximately $14.2 million, including commissions. We had draws of approximately
$19.5 million on our line of credit and had repayments of approximately $6.5 million. In addition,
we repaid $1.4 million of debt. We also received approximately $1.4 million from the exercise of
stock options upon the departure of our Chief Executive Officer in December 2007. During fiscal
2006, we repurchased 611,430 shares of our common stock under our third share repurchase program,
and paid approximately $9.3 million, including commissions. We also repaid $3.0 million of
long-term debt early along with normal payments of an additional $389,000. During fiscal 2005, we
completed our 1.0 million share authorization and bought back the remaining 954,900 shares of our
common stock and paid approximately $11.5 million, including commissions. Other uses of cash for
fiscal 2005 included
39
payments on long-term debt and capital lease obligations of approximately $549,000. This was
partially offset by approximately $730,000 in proceeds from the exercise of stock options.
On July 31, 2006, the Company and certain of its subsidiaries (collectively known as the
Borrower) entered into an amendment and restatement of an existing Credit Agreement with Wells
Fargo Bank, National Association, as administrative agent and lender (the Lender). The Credit
Agreement, which amended and restated an agreement previously entered into by the Company on
January 28, 2005, increased the Companys existing revolving credit facility from $10.0 million to
$20.0 million (the Facility). Principal amounts outstanding under the Facility will bear
interest either at an adjusted Eurodollar rate plus an applicable margin or at a Base Rate plus an
applicable margin. The Base Rate is defined in the agreement as either the Federal Funds Rate
(4.25% at December 30, 2007) plus 0.5% or Wells Fargos prime rate (7.25% at December 30, 2007).
The applicable margin will depend on the Companys Adjusted Leverage Ratio, as defined, at the end
of the previous quarter and will range from 1.75% to 2.50% for Euro Dollar Rate Loans and from
-0.25% to +0.50% for Base Rate loans. Unused portions of the Facility will be subject to an unused
Facility fee equal to either 0.25% or 0.375% of the unused portion, depending on the Companys
Adjusted Leverage Ratio. Our rate for the unused portion of the Facility as of December 30, 2007,
was 0.25%.
Under the agreements governing our long-term debt obligations, we are subject to two main
financial covenants. We must maintain a 1.5 to 1.0 fixed charge coverage ratio and a 3.5 to 1.0
leverage ratio during each fiscal year. As of December 30, 2007 and December 31, 2006, we were in
compliance with all of the covenants.
The Company expects to use borrowings under the Facility for general working capital purposes,
as well as for the repurchase of shares under the Companys share repurchase authorization. The
Company expects to satisfy its letter of credit obligation through cash flows from operations or
alternative fund sources before its due date of July 31, 2011. Under the Facility, the Borrower
has granted the Lender a security interest in all current and future personal property of the
Borrower.
The Facility contains customary affirmative and negative covenants for credit facilities of
this type, including limitations on the Borrower with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of
the Borrower, among others. The Facility also includes various financial covenants. We were in
compliance with all covenants under the Facility as of December 30, 2007 and December 31, 2006.
In addition to changes in the aggregate loan amount and applicable interest rates, the Amended
and Restated Credit Agreement provides for up to $3.0 million in letters of credit to be used by
the Company, with any amounts outstanding, reducing our availability for general corporate purposes
and also allows for the termination of the Facility by the Borrower without penalty at any time
after the second anniversary of the effective date. The maturity date for this Facility is July
31, 2011. We had $13.0 million in borrowings under this Facility, and had $500,000 in Letters of
Credit as of December 30, 2007, as required by our fiscal 2005 self-funded medical insurance
policy. As of December 31, 2006 we had no borrowings under this Facility and had $500,000 in
Letters of Credit, as required for our fiscal 2005 self-funded medical insurance policy. The
letters of credit reduced our borrowing capacity under the line as of December 30, 2007 and
December 31, 2006.
In addition
to commitments we have related to our operating lease obligations, we also have required
payments on our outstanding debt and financing leases, including principal and interest. The following table provides aggregate information about our
contractual payment obligations and the periods in which payments are due:
40
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
Total
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Thereafter
|
|
Long Term Debt
|
|
$
|
12,797
|
|
|
$
|
939
|
|
|
$
|
939
|
|
|
$
|
939
|
|
|
$
|
939
|
|
|
$
|
939
|
|
|
$
|
8,102
|
|
Financing Leases
|
|
|
7,266
|
|
|
|
580
|
|
|
|
597
|
|
|
|
603
|
|
|
|
622
|
|
|
|
628
|
|
|
|
4,236
|
|
Operating Leases
|
|
|
107,604
|
|
|
|
4,759
|
|
|
|
5,044
|
|
|
|
5,083
|
|
|
|
5,003
|
|
|
|
5,037
|
|
|
|
82,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Sublease rental
income
|
|
|
(8,006
|
)
|
|
|
(440
|
)
|
|
|
(441
|
)
|
|
|
(441
|
)
|
|
|
(441
|
)
|
|
|
(441
|
)
|
|
|
(5,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
119,661
|
|
|
$
|
5,838
|
|
|
$
|
6,139
|
|
|
$
|
6,184
|
|
|
$
|
6,123
|
|
|
$
|
6,163
|
|
|
$
|
89,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes 7, 8, and 9 to our Consolidated Financial Statements included in this Annual Report
on Form 10-K for details of our contractual obligations.
Off-Balance Sheet Arrangements
Our Company
does not have any off-balance sheet arrangements (as such
term is defined in Item 303 of regulation S-K) that are reasonably likely to have a current or future effect on our
financial condition or changes in financial condition, operating results, or liquidity.
Income Taxes
At December 30, 2007, we had cumulative net operating loss carry-forwards for tax reporting
purposes of approximately $3.2 million for state purposes, which if not used will begin to expire
in fiscal 2018. These will be adjusted when we file our fiscal 2007 income tax returns in 2008.
In addition, we had cumulative tax credit carry-forwards of approximately $2.2 million, which if
not used, will begin to expire in fiscal 2019.
Inflation
The primary inflationary factors affecting our operations include food, beverage, and labor
costs. In addition, our leases require us to pay taxes, maintenance, repairs and utilities and
these costs are subject to inflationary increases. In some cases, some of our lease commitments are
tied to consumer price index (CPI) increases. We are also subject to interest rate changes based
on market conditions.
We believe that relatively low inflation rates have contributed to relatively stable costs.
There is no assurance, however, that low inflation rates will continue.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our Companys financial instruments include cash and cash equivalents and long-term debt. Our
Company includes as unrestrictive cash and cash equivalents investments with original maturities of
three months or less when purchased and which are readily convertible into known amounts of cash.
Our Companys unrestricted cash and cash equivalents are not subject to significant interest rate
risk due to the short maturities of these instruments. We have no derivative financial instruments
or derivative commodity instruments in our cash and cash equivalents. The total outstanding
long-term debt of our Company as of December 30, 2007 was approximately $11.7 million, including
financing lease obligations. Of the outstanding long-term debt, all was subject to a fixed interest
rate. On July 31, 2006, the Company and certain of its subsidiaries (collectively known as the
Borrower) entered into an amendment and restatement of an existing Credit Agreement with Wells
Fargo Bank, National Association, as administrative agent and lender (the Lender). The Credit
Agreement, which amended and restated an agreement previously entered into by the Company on
January 28, 2005, increased the
41
Companys existing revolving credit facility from $10.0 million to
$20.0 million (the Facility).
Principal amounts outstanding under the Facility will bear interest either at an adjusted
Eurodollar rate plus an applicable margin or at a Base Rate plus an applicable margin. The Base
Rate is defined in the agreement as either the Federal Funds Rate (4.25% at December 30, 2007) plus
0.5% or Wells Fargos prime rate (7.25% at December 30, 2007). The applicable margin will depend
on the Companys Adjusted Leverage Ratio, as defined, at the end of the previous quarter and will
range from 1.75% to 2.50% for Euro Dollar Rate Loans and from -0.25% to +0.50% for Base Rate loans.
Unused portions of the Facility will be subject to an unused Facility fee equal to either 0.25% or
0.375% of the unused portion, depending on the Companys Adjusted Leverage Ratio. Our rate for the
unused portion of the Facility as of December 30, 2007, was 0.25%.
The Company expects to use borrowings under the Facility for general working capital purposes,
as well as for the repurchase of shares under the Companys share repurchase authorization. Under
the Facility, the Borrower has granted the Lender a security interest in all current and future
personal property of the Borrower.
The Facility contains customary affirmative and negative covenants for credit facilities of
this type, including limitations on the Borrower with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of
the Borrower, among others. The Facility also includes various financial covenants. We were in
compliance with all covenants under the Facility as of December 30, 2007 and December 31, 2006.
In addition to changes in the aggregate loan amount and applicable interest rates, the Amended
and Restated Credit Agreement provides for up to $3.0 million in letters of credit to be used by
the Company, with any amounts outstanding, reducing our availability for general corporate purposes
and also allows for the termination of the Facility by the Borrower without penalty at any time
after the second anniversary of the effective date. The maturity date for this Facility is July
31, 2011. We had $13.0 million in borrowings under this Facility, and had $500,000 in Letters of
Credit as of December 30, 2007 as required by our fiscal 2005 self-funded medical insurance policy.
As of December 31, 2006 we had no borrowings under this Facility and had $500,000 in Letters of
Credit as required for our fiscal 2005 self-funded medical insurance policy. The letters of credit
reduced our borrowing capacity under the line as of December 30, 2007 and December 31, 2006. We do
not see the variable interest rate long-term debt as a significant interest rate risk.
Some of the food products purchased by us are affected by commodity pricing and are,
therefore, subject to price volatility caused by weather, production problems, delivery
difficulties and other factors that are outside our control. To control this risk in part, we have
fixed-priced purchase commitments for food from vendors. In addition, we believe that
substantially all of our food is available from several sources, which helps to control food
commodity risks. We believe we have the ability to increase menu prices, or vary the menu options
offered, if needed, in response to a food product price increase.
42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of Famous Daves of America, Inc. are included herein,
beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Interim
Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the
Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.
Based on this evaluation, our Interim Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective.
Managements Report on Internal Control over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as
amended). Our Management assessed the effectiveness of our internal control over financial
reporting as of December 30, 2007. In making this assessment, our Management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Our Management has concluded that, as of December 30, 2007, our
internal control over financial reporting is effective based on these criteria. Our independent
registered public accounting firm, Grant Thornton LLP, has issued an audit report on the
effectiveness of our internal control over financial reporting, which is included herein.
There were no changes in our internal controls over financial reporting during our most
recently-completed fiscal quarter, and year ended December 30, 2007 that have materially affected,
or are reasonably likely to materially affect our internal controls over financial reporting.
Our Management, including our Interim Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal controls will prevent
all errors and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within Famous Daves of America have been
detected.
ITEM 9B. OTHER INFORMATION
None.
43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this Item is incorporated herein by reference to our definitive
proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal
year covered by this form 10-K. The Company has adopted a Code of Ethics specifically applicable
to its CEO, CFO and Key Financial & Accounting Management. In addition, there is a more general
Code of Ethics applicable to all Associates. The Code of Ethics is available on our website at
www.famousdaves.com and a copy is available free of charge to anyone requesting it.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this Item is incorporated herein by reference to our definitive
proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal
year covered by this form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Information in response to this Item is incorporated herein by reference to our definitive
proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal
year covered by this form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this Item is incorporated herein by reference to our definitive
proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal
year covered by this form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item appears in our definitive proxy statement for our fiscal
2007 annual meeting of shareholders under the captions Fees Billed to Company by Its Independent
Registered Public Accounting Firm and Pre-approval Policy, which information is incorporated
herein by reference.
44
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Documents filed as part of this Form 10-K:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibits:
|
|
See exhibit index on the page following the consolidated financial statements and
related footnotes
|
45
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Famous Daves of America, Inc.
We have audited the accompanying consolidated balance sheets of Famous Daves of America, Inc. and
subsidiaries (the Company) as of December 30, 2007 and December 31, 2006, and the related
consolidated statements of operations, shareholders equity, and cash flows for each of the three
years in the period ended December 30, 2007. Our audits of the basic consolidated financial statements included
the financial statement schedule listed in the index appearing under Item 15. These
financial statements and financial statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards 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. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all
material respects, the consolidated financial position of Famous Daves of America, Inc. and subsidiaries as of
December 30, 2007 and December 31, 2006 and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 30, 2007 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, the Company adopted Financial
Accounting Standards Board Statement No. 123(R),
Share-Based Payment
(SFAS 123R) effective January
2, 2006.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the Companys internal control over financial reporting as of December 30,
2007, based on the criteria established in
Internal Control Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March
12, 2008 expressed an unqualified opinion on the effectiveness of the Companys internal control
over financial reporting.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 12, 2008
F-1
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Famous Daves of America, Inc.
We have audited the internal control over financial reporting of Famous Daves of America, Inc. and
subsidiaries (the Company) as of December 30, 2007, based on the criteria established in
Internal
ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Companys management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Managements Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion
on the effectiveness of the Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Famous
Daves of America, Inc. and subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 30, 2007, based on criteria established in
Internal
ControlIntegrated Framework
issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Famous Daves of America, Inc. and
subsidiaries as of December 30, 2007 and December 31, 2006, and the related consolidated statements
of operations, shareholders equity, and cash flows and financial statement schedule for each of the three years in the period ended
December 30, 2007 and our report dated March 12, 2008 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 12, 2008
F-2
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 2007 AND DECEMBER 31, 2006
(
in thousands, except share and per-share data
)
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,538
|
|
|
$
|
1,455
|
|
Restricted cash
|
|
|
2,420
|
|
|
|
1,425
|
|
Accounts receivable, net
|
|
|
5,098
|
|
|
|
3,337
|
|
Inventories
|
|
|
1,987
|
|
|
|
1,765
|
|
Deferred tax asset
|
|
|
1,643
|
|
|
|
3,234
|
|
Prepaid expenses and other current assets
|
|
|
1,477
|
|
|
|
1,576
|
|
Notes receivable
|
|
|
92
|
|
|
|
544
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
14,255
|
|
|
|
13,336
|
|
|
|
|
|
|
|
|
|
|
Property, equipment and leasehold improvements, net
|
|
|
57,243
|
|
|
|
50,037
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Notes receivable, less current portion
|
|
|
1,165
|
|
|
|
1,183
|
|
Deferred tax asset, less current portion
|
|
|
511
|
|
|
|
700
|
|
Other assets
|
|
|
768
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
$
|
73,942
|
|
|
$
|
65,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
13,000
|
|
|
$
|
|
|
Current portion of long-term debt
|
|
|
270
|
|
|
|
302
|
|
Accounts payable
|
|
|
6,647
|
|
|
|
5,654
|
|
Accrued compensation and benefits
|
|
|
3,011
|
|
|
|
3,399
|
|
Other current liabilities
|
|
|
5,157
|
|
|
|
3,954
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
28,085
|
|
|
|
13,309
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
Long-term debt, less current portion
|
|
|
6,899
|
|
|
|
8,119
|
|
Financing leases
|
|
|
4,794
|
|
|
|
4,906
|
|
Other liabilities
|
|
|
3,764
|
|
|
|
3,354
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
43,542
|
|
|
|
29,688
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 100,000,000 shares authorized
9,606,000 and 10,130,000 shares issued and outstanding
at December 30, 2007 and December 31, 2006,
respectively
|
|
|
96
|
|
|
|
101
|
|
Additional paid-in capital
|
|
|
21,028
|
|
|
|
32,864
|
|
Retained earnings
|
|
|
9,276
|
|
|
|
3,206
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
30,400
|
|
|
|
36,171
|
|
|
|
|
|
|
|
|
|
|
$
|
73,942
|
|
|
$
|
65,859
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-3
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED
DECEMBER 30, 2007, DECEMBER 31, 2006 AND JANUARY 1, 2006
(
in thousands, except share and per-share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales, net
|
|
$
|
107,820
|
|
|
$
|
100,026
|
|
|
$
|
89,248
|
|
Franchise royalty revenue
|
|
|
15,718
|
|
|
|
13,796
|
|
|
|
10,406
|
|
Franchise fee revenue
|
|
|
1,323
|
|
|
|
1,825
|
|
|
|
1,595
|
|
Licensing and other revenue
|
|
|
1,012
|
|
|
|
974
|
|
|
|
1,105
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
125,873
|
|
|
|
116,621
|
|
|
|
102,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and beverage costs
|
|
|
32,419
|
|
|
|
30,403
|
|
|
|
27,297
|
|
Labor and benefits
|
|
|
32,673
|
|
|
|
29,960
|
|
|
|
26,151
|
|
Operating expenses
|
|
|
27,547
|
|
|
|
25,311
|
|
|
|
22,339
|
|
Depreciation and amortization
|
|
|
4,980
|
|
|
|
4,419
|
|
|
|
4,359
|
|
General and administrative
|
|
|
15,603
|
|
|
|
15,381
|
|
|
|
13,430
|
|
Asset impairment and estimated
lease termination
and other closing costs
|
|
|
596
|
|
|
|
1,136
|
|
|
|
|
|
Pre-opening expenses
|
|
|
1,154
|
|
|
|
625
|
|
|
|
96
|
|
Loss (gain) on disposal of property
|
|
|
465
|
|
|
|
143
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
115,437
|
|
|
|
107,378
|
|
|
|
93,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
10,436
|
|
|
|
9,243
|
|
|
|
8,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
(12
|
)
|
|
|
(148
|
)
|
|
|
|
|
Interest expense
|
|
|
(1,577
|
)
|
|
|
(1,721
|
)
|
|
|
(1,879
|
)
|
Interest income
|
|
|
293
|
|
|
|
331
|
|
|
|
270
|
|
Other income (expense), net
|
|
|
30
|
|
|
|
(14
|
)
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
(1,266
|
)
|
|
|
(1,552
|
)
|
|
|
(1,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
9,170
|
|
|
|
7,691
|
|
|
|
7,144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(3,100
|
)
|
|
|
(2,737
|
)
|
|
|
(2,719
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,070
|
|
|
$
|
4,954
|
|
|
$
|
4,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
$
|
0.61
|
|
|
$
|
0.47
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share
|
|
$
|
0.59
|
|
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding-basic
|
|
|
9,960,000
|
|
|
|
10,453,000
|
|
|
|
10,825,000
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding-diluted
|
|
|
10,298,000
|
|
|
|
10,801,000
|
|
|
|
11,173,000
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED
DECEMBER 30, 2007, DECEMBER 31, 2006 AND JANUARY 1, 2006
(
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Earnings/
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
(Accumulated)
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit)
|
|
|
Total
|
|
Balance-January 2, 2005
|
|
|
11,340
|
|
|
$
|
113
|
|
|
$
|
49,817
|
|
|
$
|
(6,173
|
)
|
|
$
|
43,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
214
|
|
|
|
2
|
|
|
|
728
|
|
|
|
|
|
|
|
730
|
|
Tax benefit for stock options
exercised
|
|
|
|
|
|
|
|
|
|
|
244
|
|
|
|
|
|
|
|
244
|
|
Repurchase of common stock
|
|
|
(955
|
)
|
|
|
(9
|
)
|
|
|
(11,520
|
)
|
|
|
|
|
|
|
(11,529
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
567
|
|
|
|
|
|
|
|
567
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,425
|
|
|
|
4,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-January 1, 2006
|
|
|
10,599
|
|
|
$
|
106
|
|
|
$
|
39,836
|
|
|
$
|
(1,748
|
)
|
|
$
|
38,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
123
|
|
|
|
1
|
|
|
|
449
|
|
|
|
|
|
|
|
450
|
|
Tax benefit for stock options
exercised
|
|
|
|
|
|
|
|
|
|
|
469
|
|
|
|
|
|
|
|
469
|
|
Common stock issued
|
|
|
19
|
|
|
|
|
|
|
|
303
|
|
|
|
|
|
|
|
303
|
|
Repurchase of common stock
|
|
|
(611
|
)
|
|
|
(6
|
)
|
|
|
(9,303
|
)
|
|
|
|
|
|
|
(9,309
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
1,110
|
|
|
|
|
|
|
|
1,110
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,954
|
|
|
|
4,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-December 31, 2006
|
|
|
10,130
|
|
|
$
|
101
|
|
|
$
|
32,864
|
|
|
$
|
3,206
|
|
|
$
|
36,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
305
|
|
|
|
3
|
|
|
|
1,442
|
|
|
|
|
|
|
|
1,445
|
|
Tax benefit for stock options
exercised
|
|
|
|
|
|
|
|
|
|
|
473
|
|
|
|
|
|
|
|
473
|
|
Common stock issued
|
|
|
41
|
|
|
|
|
|
|
|
325
|
|
|
|
|
|
|
|
325
|
|
Repurchase of common stock
|
|
|
(870
|
)
|
|
|
(8
|
)
|
|
|
(14,436
|
)
|
|
|
|
|
|
|
(14,444
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
360
|
|
|
|
|
|
|
|
360
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,070
|
|
|
|
6,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance-December 30, 2007
|
|
|
9,606
|
|
|
$
|
96
|
|
|
$
|
21,028
|
|
|
$
|
9,276
|
|
|
$
|
30,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 30, 2007, DECEMBER 31, 2006 AND JANUARY 1, 2006
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 1,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,070
|
|
|
$
|
4,954
|
|
|
$
|
4,425
|
|
Adjustments to reconcile net income to cash flows
provided by operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,980
|
|
|
|
4,419
|
|
|
|
4,359
|
|
Amortization of deferred financing costs
|
|
|
56
|
|
|
|
57
|
|
|
|
70
|
|
Loss on early extinguishment of debt
|
|
|
12
|
|
|
|
148
|
|
|
|
|
|
Loss (gain) on disposal of property
|
|
|
465
|
|
|
|
143
|
|
|
|
(53
|
)
|
Asset impairment and estimated lease termination
and other
closing costs
|
|
|
596
|
|
|
|
1,170
|
|
|
|
|
|
Tax benefit of stock-options exercised
|
|
|
|
|
|
|
|
|
|
|
244
|
|
Deferred income taxes
|
|
|
1,781
|
|
|
|
1,646
|
|
|
|
2,068
|
|
Deferred rent
|
|
|
370
|
|
|
|
398
|
|
|
|
702
|
|
Stock-based compensation
|
|
|
838
|
|
|
|
1,413
|
|
|
|
567
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
(995
|
)
|
|
|
(204
|
)
|
|
|
(1,182
|
)
|
Accounts receivable, net
|
|
|
(1,761
|
)
|
|
|
(672
|
)
|
|
|
(1,062
|
)
|
Inventories
|
|
|
(261
|
)
|
|
|
(177
|
)
|
|
|
(65
|
)
|
Prepaid expenses and other current assets
|
|
|
99
|
|
|
|
(250
|
)
|
|
|
(444
|
)
|
Deposits
|
|
|
(234
|
)
|
|
|
61
|
|
|
|
25
|
|
Accounts payable
|
|
|
993
|
|
|
|
1,418
|
|
|
|
(328
|
)
|
Accrued compensation and benefits
|
|
|
(507
|
)
|
|
|
1,196
|
|
|
|
237
|
|
Other current liabilities
|
|
|
497
|
|
|
|
152
|
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by operations
|
|
|
12,999
|
|
|
|
15,872
|
|
|
|
10,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, equipment and leasehold
improvements
|
|
|
(14,263
|
)
|
|
|
(8,159
|
)
|
|
|
(6,754
|
)
|
Sale of property, equipment and leasehold
improvements
|
|
|
1,753
|
|
|
|
900
|
|
|
|
636
|
|
Payments received on notes receivable
|
|
|
180
|
|
|
|
245
|
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for investing activities
|
|
|
(12,330
|
)
|
|
|
(7,014
|
)
|
|
|
(5,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from draws on line of credit
|
|
|
19,500
|
|
|
|
|
|
|
|
|
|
Payments on line of credit
|
|
|
(6,500
|
)
|
|
|
|
|
|
|
|
|
Payments for debt issuance costs
|
|
|
|
|
|
|
(34
|
)
|
|
|
(85
|
)
|
Payments on long-term debt and capital lease obligations
|
|
|
(1,350
|
)
|
|
|
(3,389
|
)
|
|
|
(549
|
)
|
Proceeds from exercise of stock options
|
|
|
1,447
|
|
|
|
450
|
|
|
|
730
|
|
Tax benefit of stock-options exercised
|
|
|
473
|
|
|
|
469
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(14,156
|
)
|
|
|
(9,309
|
)
|
|
|
(11,529
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows used for financing activities
|
|
|
(586
|
)
|
|
|
(11,813
|
)
|
|
|
(11,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
83
|
|
|
|
(2,955
|
)
|
|
|
(6,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
|
1,455
|
|
|
|
4,410
|
|
|
|
11,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
1,538
|
|
|
$
|
1,455
|
|
|
$
|
4,410
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
We, Famous Daves of America, Inc. (Famous Daves or the Company),
were incorporated in Minnesota on March 14, 1994. We develop, own, operate and franchise
restaurants under the name Famous Daves. As of December 30, 2007, there were 164 restaurants
operating in 35 states, including 44 company-owned restaurants and 120 franchise-operated
restaurants. An additional 143 franchise restaurants were committed to be developed through signed
area development agreements at December 30, 2007.
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned subsidiaries. Any inter-company
transactions and balances have been eliminated in consolidation.
Managements use of estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America requires us 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 and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from
those estimates.
Reclassifications
Certain reclassifications have been made to prior year amounts to conform
to the current years presentation.
Financial instruments
Due to their short-term nature, the carrying value of our current
financial assets and liabilities approximates their fair value. The fair value of long-term debt
approximates the carrying amount based upon our expected borrowing rate for debt with similar
remaining maturities and comparable risk.
Segment reporting
We have company-owned and franchise-operated restaurants in the United
States, and operate within the single industry segment of foodservice. Because we manage
company-owned and franchise-operated restaurants in a similar manner and allocate resources to each
based upon their relative size to the Company we have aggregated our operating segments into a
single reporting segment.
Fiscal year
Our fiscal year ends on the Sunday nearest December 31st of each year. Our
fiscal year is generally 52 weeks; however it periodically consists of 53 weeks. The fiscal years
ended December 30, 2007, (fiscal 2007), December 31, 2006 (fiscal 2006) and January 1, 2006 (fiscal
2005) consisted of 52 weeks.
Unrestricted cash and cash equivalents
Cash equivalents include all investments with
original maturities of three months or less or which are readily convertible into known amounts of
cash and are not legally restricted. Accounts at each institution are insured by the Federal
Deposit Insurance Corporation up to $100,000, while the remaining balances are uninsured at
December 30, 2007. The Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on cash and cash equivalents.
Accounts receivable, net
We provide an allowance for uncollectible accounts on accounts
receivable. The allowance for uncollectible accounts was approximately $16,000 and $14,000 at
December 30, 2007 and December 31, 2006, respectively. We believe all accounts receivable in
excess of the allowance are fully collectible. If accounts receivable in excess of the provided
allowance are
determined uncollectible, they are charged to expense in the year that determination is made.
Accounts receivable are written off when they become uncollectible, and payments subsequently
received on such
F-7
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
receivables are credited to the allowance for doubtful accounts. Account receivable balances
written off have not exceeded allowances provided. Outstanding accounts receivable are subject to a
monthly interest charge on unpaid balances which is recorded as interest income in our consolidated
statements of operations. In accessing recoverability of these receivables, we make judgments
regarding the financial condition of the franchisees based primarily on past and current payment
trends and periodic financial information, which the franchisees are required to submit to us.
Inventories
Inventories consist principally of food, beverages, retail goods, smallwares and
supplies, and are recorded at the lower of cost (first-in, first-out) or market.
Property, equipment and leasehold improvements, net
Property
,
equipment and leasehold
improvements are capitalized at a level of $250 or greater and are recorded at cost. Repair and
maintenance costs are charged to operations when incurred. Furniture, fixtures, equipment and
decor are depreciated using the straight-line method over estimated useful lives ranging from 3-7
years, while buildings are depreciated over 30 years. Leasehold improvements are amortized using
the straight-line method over the shorter of the lease term, including renewal options, or the
estimated useful life of the assets. Décor that has been installed in the restaurants is recorded
at cost and is depreciated using the straight-line method over seven years.
Debt issuance costs
Debt issuance costs are amortized to interest expense over the term of
the related financing on a straight-line basis, which approximates the interest method. In the
event of early debt re-payment, the capitalized debt issuance costs are written-off as a loss on
early extinguishment of debt. The carrying value of our deferred debt issuance costs is
approximately $333,000 and $402,000, respectively, net of accumulated amortization
of $291,000 and $447,000, respectively, as of December 30, 2007
and December 31, 2006.
Construction overhead and capitalized interest
We capitalize construction overhead costs at
the time a building is turned over to operations, which is approximately two weeks prior to
opening. We capitalized construction overhead costs of approximately $185,000 and $78,000 in
fiscal 2007 and fiscal 2006, respectively. There was no capitalized interest in fiscal years 2007,
2006 or 2005, respectively. We depreciate and amortize construction overhead and capitalized
interest over the same useful life as leasehold improvements.
Advertising costs
Advertising costs are charged to expense as incurred. Advertising costs
were approximately $3.9 million, $3.5 million, and $2.9 million for fiscal years 2007, 2006 and
2005 respectively, and are included in operating expenses in the consolidated statements of
operations.
Software implementation costs
We capitalize labor costs associated with the implementation
of significant information technology infrastructure projects. This is based on actual labor rates
per person including benefits, for all the time spent in the implementation of software in
accordance with Statement of Position (SOP) No. 98-1,
Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use.
In fiscal 2007 and fiscal 2006, we capitalized
approximately $45,000 and $193,000, respectively, in software implementation costs related to a
specific project. In December of 2007, it was decided that one of the projects had no future value
to the company. The capitalized costs, along with other amounts spent on software licenses for the
project were written off in fiscal 2007 in the amount of
approximately $395,000 and are included in loss on disposal of property in the consolidated
statements of operations.
Research and development costs
Research and development costs represent salaries and expenses of
personnel engaged in the creation of new menu and Limited-Time Offering (LTO) items, recipe
F-8
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
enhancements and documentation activities. Research and development costs were approximately
$301,000, $292,000, and $265,000, for fiscal years 2007, 2006 and 2005, respectively, and are
included in general and administrative expenses in the consolidated statements of operations.
Pre-opening expenses
All start-up and pre-opening costs are expensed as incurred. We had
pre- opening expenses of approximately $1.2 million in fiscal 2007 related to four new
company-owned restaurants that opened in 2007, $625,000 in fiscal 2006 related to three new
corporate restaurants that opened in 2006, and $96,000 in fiscal 2005 related to the conversion of
a counter-service restaurant to a full-service restaurant and one new corporate restaurant that was
preparing to open in early 2006. Included in pre-opening expenses is pre-opening rent during the
build-out period.
Lease accounting
In accordance with Statement of Financial Accounting Standards (SFAS) No.
13,
Accounting for Leases,
we recognize lease expense for our operating leases over the entire
lease term including lease renewal options and build-out periods where the renewal is reasonably
assured and the build-out period takes place prior to the restaurant opening or lease commencement
date. Rent expense recorded during the build-out period is reported as pre-opening expense. We
account for construction allowances by recording a receivable when its collectability is considered
probable, amortizing the leasehold improvements over the lesser of their useful lives or the full
term of the lease, including renewal options and build-out periods, amortizing the construction
allowance as a credit to rent expense over the full term of the lease, including renewal options
and build-out periods, and relieving the receivable once the cash is obtained from the landlord for
the construction allowance.
Recoverability of property, equipment and leasehold improvements and asset retirement
obligations
In accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of
Long-Lived Assets
, we evaluate restaurant sites and long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of
the carrying amount of the restaurant site to the undiscounted future net cash flows expected to be
generated on a restaurant-by-restaurant basis. If a restaurant is determined to be impaired the
loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair
value. Fair value as determined by the discounted future net cash flows, is estimated based on the
best information available including estimated future cash flows, expected growth rates in
comparable restaurant sales, remaining lease terms and other factors. If these assumptions change
in the future, we may be required to take additional impairment charges for the related assets.
Considerable management judgment is necessary to estimate future cash flows. Accordingly, actual
results could vary significantly from the estimates.
Our December 30, 2007 consolidated balance sheet reflected no assets held for sale. Our
December 31, 2006 consolidated balance sheet reflected approximately $4.7 million of assets held
for sale, which included three company restaurants being marketed to potential franchisees and
other purchasers. As of December 30, 2007, two of the restaurants that had not been sold were
reclassified to assets held for use in property, leasehold improvements, net. The third restaurant
in Rogers, Arkansas was sold in June 2007 to a franchisee. As a result of the change in
classification in the fourth quarter of fiscal 2007, we recorded approximately $371,000 of
depreciation and amortization expense that would have been recognized had the
asset been continuously classified as held for use.
During the fourth quarter of 2007, we recorded an asset impairment charge of approximately
$569,000 for an underperforming company-owned restaurant in the Chicago, Illinois market. This
impairment charge reflects the non-cash write-down of the net book value of the assets of that
restaurant.
F-9
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
In June 2006, we recorded an asset impairment charge of approximately $282,000 on the assets
of a company-owned restaurant in Mesquite, Texas to reflect them at their fair market value, based
on a pending sale. On December 29, 2006, the Company sold its interest in this property for $1.0
million resulting in net proceeds of $900,000 after real estate taxes and broker commissions.
During fiscal 2006, we also recorded
an asset impairment charge of approximately $502,000 during the second quarter for an
underperforming company-owned restaurant in the Chicago, Illinois market that closed on July 28,
2006. This impairment charge reflected the non-cash write-down of the net book value of the assets
at that restaurant. In the third quarter, we recorded an additional charge of approximately
$332,000, which included estimated lease termination costs, net of deferred rent, and other closure
costs. In the fourth quarter, we recorded an additional $20,000 for miscellaneous costs. We
currently sublease the real property on which the closed restaurant is located under a lease that
expires in November 2010, and are currently marketing this location for a company to assume our
sublease. There were no impairment charges recorded during fiscal 2005.
We account for
asset retirement obligations under Financial Accounting Standards Board
(FASB) Interpretation No. 47 (FIN 47),
Accounting for
Conditional Asset Retirement Obligations
an interpretation of FASB Statement No. 143
, which was adopted at the end of fiscal 2006. FIN
47 requires recognition of a liability for the fair value of a required asset retirement obligation
(ARO) when such obligation is incurred. The Companys AROs are primarily associated with
leasehold improvements which, at the end of a lease, he Company is contractually obligated to
remove in order to comply with the lease agreement. The net ARO liability included in other
longer term liabilities was $73,000 at December 30, 2007.
Public Relations, Marketing Development Fund and Restricted Cash
In fiscal 2004, we
established a system-wide Public Relations and Marketing Development Fund. Company-owned
restaurants, in addition to franchise-operated restaurants on which franchise agreements were
signed after December 17, 2003, are required to contribute a percentage of net sales, currently
1.0%, to the fund that is used for Public Relations and Marketing Development Fund efforts
throughout the system. The assets held by this fund are considered restricted. Accordingly, we
reflected the cash related to this fund in restricted cash and the liability is included in
accounts payable on our consolidated financial statements as of December 30, 2007 and December 31,
2006. As of December 30, 2007 and December 31, 2006, we had approximately $2.4 million and $1.4
million in this fund, respectively.
Gift cards
We record a liability in the period in which a gift card is issued and proceeds
are received. As gift cards are redeemed, this liability is reduced and revenue is recognized. We
recognize gift card breakage income as an offset to operating expense based on a stratified
breakage rate per year when the likelihood of the redemption of the card becomes remote, generally
after five years.
Interest income
We recognize interest income as earned.
Net income per common share
Basic net income per common share (EPS) is computed by dividing
net income by the weighted average number of common shares outstanding for the reporting period.
Diluted EPS equals net income divided by the sum of the weighted average number of shares of common
stock outstanding plus all additional common stock equivalents relating to stock options and
warrants when dilutive.
F-10
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Following is a reconciliation of basic and diluted net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
(in thousands, except per share data)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Net income per common share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,070
|
|
|
$
|
4,954
|
|
|
$
|
4,425
|
|
Weighted average shares outstanding
|
|
|
9,960
|
|
|
|
10,453
|
|
|
|
10,825
|
|
Net income per common share basic
|
|
$
|
0.61
|
|
|
$
|
0.47
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,070
|
|
|
$
|
4,954
|
|
|
$
|
4,425
|
|
Weighted average shares outstanding
|
|
|
9,960
|
|
|
|
10,453
|
|
|
|
10,825
|
|
Dilutive impact of common stock equivalents outstanding
|
|
|
338
|
|
|
|
348
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average shares outstanding
|
|
|
10,298
|
|
|
|
10,801
|
|
|
|
11,173
|
|
Net income per common share diluted
|
|
$
|
0.59
|
|
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
All options outstanding as of December 30, 2007, December 31, 2006 and January 1, 2006 were
used in the computation of diluted EPS for fiscal years 2007, 2006 and 2005.
Stock-based compensation
On January 2, 2006, we adopted the provisions of SFAS No. 123R
(revised 2004)
Share-Based Payment
, which requires us to recognize compensation cost for
share-based awards granted to Associates based on their fair values at the time of grant over the
requisite service period. Our pre-tax compensation cost for stock options is included in general
and administrative expenses in our consolidated statements of operations (see Note 11).
As of December 30, 2007, we had approximately $108,000 of unrecognized compensation cost
related to stock option awards, which is expected to be recognized over a period of approximately
1.5 years.
Prior to the adoption of SFAS No. 123R, we accounted for stock-based compensation awards using
the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25,
Accounting for
Stock Issued to Employees.
Accordingly, we did not recognize compensation expense in our
consolidated statements of operations for options that were granted that had an exercise price
equal to or greater than the market value of the underlying common stock on the date of grant. As
required by SFAS No. 123, we provided certain pro forma disclosures for stock-based awards as if
the fair-value-based approach of SFAS No. 123 had been applied.
We elected to use the modified prospective transition method as permitted by SFAS No. 123R and
therefore did not restate our financial results for prior periods. Under this transition method,
we apply the provisions of SFAS No. 123R to new awards and to awards modified, repurchased, or
cancelled after January 1, 2006. These awards of stock options qualify for equity-based treatment
under SFAS No. 123R. Additionally, we recognize compensation cost for the portion of awards that
were outstanding as of January 1, 2006 for which the requisite service has not been rendered
(unvested awards) over the remaining service
F-11
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
period. The compensation cost that we record for these awards is based on their grant-date fair
value as calculated for the pro forma disclosures required by SFAS No. 123. We use the
Black-Scholes option pricing model to value all option grants.
Prior to the adoption of SFAS No. 123R, we presented all tax benefits resulting from the
exercise of stock options as cash flows from operating activities in our consolidated statements of
cash flows. SFAS No. 123R requires that cash flows from the exercise of stock options resulting
from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) be
classified as cash flows from financing activities.
The following table illustrates the effect on net income and net income per common share as if
we had applied the fair value recognition provisions of SFAS No. 123 to stock-based awards for
fiscal year 2005.
|
|
|
|
|
(in thousands, except per share data)
|
|
2005
|
|
Net income as reported
|
|
$
|
4,425
|
|
Less: Compensation expense
determined under the fair
value method, net of tax
|
|
$
|
(425
|
)
|
|
|
|
|
Pro forma net income
|
|
$
|
4,000
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
Basic EPS as reported
|
|
$
|
0.41
|
|
Basic EPS pro forma
|
|
$
|
0.37
|
|
|
|
|
|
|
Diluted EPS as reported
|
|
$
|
0.40
|
|
Diluted EPS pro forma
|
|
$
|
0.36
|
|
There were no stock options granted during the fiscal years ending December 30, 2007 or
December 31, 2006.
Revenue recognition
We record restaurant sales at the time food and beverages are served.
We record sales of merchandise items at the time items are delivered to the customer. All sales
taxes are presented on a net basis and are excluded from revenue. We have detailed below our
revenue recognition policies for franchise and licensing agreements.
Franchise arrangements
Our franchise-related revenue consists of area development fees,
initial franchise fees and continuing royalty payments. Our area development fee consists of a
one-time, non-refundable payment equal to $10,000 per restaurant in consideration for the services
we perform in preparation of executing each area development agreement. Substantially all of these
services which include, but are not limited to, conducting market and trade area analysis, a
meeting with Famous Daves Executive Team, and performing potential franchise background
investigation, all of which are completed prior to our execution of the area development agreement
and receipt of the corresponding area development fee. As a result, we recognize this fee in full
upon receipt. Our initial, non-refundable, franchise fee is typically $40,000 per restaurant, of
which $5,000 is recognized immediately when a franchise agreement is signed, reflecting the
commission earned and expenses incurred related to the sale. The remaining non-refundable fee of
$35,000 is included in deferred franchise fees and is recognized as revenue, when we have performed
substantially all of our obligations, which generally occurs upon the franchise entering into a
lease agreement for the restaurant(s). The franchise agreement represents a separate and distinct
earnings process from the area development agreements. Franchisees are also required
F-12
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(1) NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (continued)
to pay us a monthly royalty equal to a percentage of their net sales, which has historically varied
from 4% to 5%. Currently, new franchises pay us a monthly royalty of 5% of their net sales.
Licensing and other revenue
We have a licensing agreement for our retail products, the
initial term of which expires in April 2010 with renewal options of five years, subject to the
licensees attainment of identified minimum product sales levels. Licensing revenue is recorded
based on royalties earned by the company in accordance with our agreement. Licensing revenue for
fiscal years 2007, 2006, and 2005 was approximately $334,000, $279,000, and $285,000, respectively.
Periodically, we provide additional services, beyond the general franchise agreement, to our
franchise operations, such as new restaurant training and décor installation services. The cost of
these services is recognized upon completion and is billed to the respective franchisee and is
generally payable on net 30-day terms. Other revenue related to these services for fiscal years
2007, 2006, and 2005 was approximately $678,000, $695,000, and $820,000, respectively.
Recently Issued Accounting Pronouncements
On February 15, 2007, the FASB issued FASB
Statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities
-
Including
an Amendment of FASB Statement No. 115
. This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. The fair value option established by
SFAS 159 permits all entities to choose to measure eligible items at fair value at specified
election dates. SFAS 159 is effective for the Company as of December 31, 2007. There is expected
to be no impact on the consolidated financial statements, as a result of the adoption of this
pronouncement.
On
December 4, 2007, the FASB issued FASB Statement No. 141(R),
Business Combinations
(SFAS
141(R)), and FASB Statement No. 160,
Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB
No. 51 (SFAS 160). These new standards will significantly change
the accounting for and reporting for business combination transactions and noncontrolling
(minority) interests in consolidated financial statements. SFAS 141(R) and SFAS 160 are required
to be adopted simultaneously and are effective for the first annual reporting period beginning on
or after December 15, 2008. These standards will impact us if we complete an acquisition or obtain
minority interests after the effective date.
In September 2006, the
FASB issued FASB Statement No. 157,
Fair Value Measurements
(SFAS 157) which is
effective for fiscal years beginning after November 15, 2007 and for interim periods within those
years. This statement defines fair value, establishes a framework for measuring fair value, and
expands the related disclosure requirements. However, on December 14, 2007, the FASB issued
proposed FSP FAS 157-b which would delay the effective date of SFAS 157 for all nonfinancial assets
and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). This proposed FSP partially defers
the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years for items within the scope of this FSP. Effective for 2008, we
will adopt SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities
as noted in proposed FSP FAS 157-b. The partial adoption of SFAS 157 will not have a material
impact on our consolidated financial statements.
F-13
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(2) INVENTORIES
Inventories consisted approximately of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
(In thousands)
|
|
2007
|
|
|
2006
|
|
Smallwares and supplies
|
|
$
|
1,241
|
|
|
$
|
1,121
|
|
Food and beverage
|
|
|
706
|
|
|
|
620
|
|
Retail goods
|
|
|
40
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
$
|
1,987
|
|
|
$
|
1,765
|
|
|
|
|
|
|
|
|
(3) NOTES RECEIVABLE
Notes receivable consisted approximately of the following at:
|
|
|
|
|
|
|
|
|
|
|
December
|
|
|
December
|
|
|
|
30,
|
|
|
31,
|
|
(
in thousands
)
|
|
2007
|
|
|
2006
|
|
Famous Ribs of Georgia, LLC, Famous Ribs of
Snellville, LLC, Famous Ribs of Marietta, LLC,
Famous Ribs of Alpharetta, LLC, and Famous Ribs of
Lawrenceville, LLC, $1,300 amortized over 9 years
at 3.27% interest, due November 2012, secured by
property and equipment and guaranteed by the
franchise owner.
(1)
|
|
$
|
982
|
|
|
$
|
1,300
|
|
|
|
|
|
|
|
|
|
|
Old School BBQ, Inc. monthly installments of
approximately $5.7 including interest at 9.0%, due
November 2012, secured by property and equipment
and guaranteed by the franchise owners.
|
|
|
270
|
|
|
|
311
|
|
|
|
|
|
|
|
|
|
|
Utah BBQ, Inc. monthly installments of
approximately $0.9 and $8.6 including interest at
9.5%, due July 2007, secured by property and
equipment and guaranteed by the franchise owners.
|
|
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
Rivervalley BBQ, Inc. line of credit for up to
$50.0 with monthly interest only though December
2007 with total outstanding balance due December
2007 including interest at prime (7.25% at December
30, 2007 and 8.25% at January 31, 2006) plus 1.50%,
unsecured.
|
|
|
5
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Competition BBQ, Inc. monthly installments of
approximately $0.4 including interest at 7.0%, due
January 2008, unsecured.
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes receivable
|
|
|
1,257
|
|
|
|
1,727
|
|
|
|
|
|
|
|
|
|
|
Less: current maturities
|
|
|
(92
|
)
|
|
|
(544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term portion of notes receivable
|
|
$
|
1,165
|
|
|
$
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On February 12, 2007 the Company amended a promissory note receivable with
Famous Ribs, Georgia, LLC, Famous Ribs of Snellville, LLC, Famous Ribs of Marietta, LLC,
Famous Ribs of Alpharetta LLC, and Famous Ribs of Lawrenceville, LLC. The terms of the
note were amended from February 1, 2007 to November 17, 2012 to require a minimum
installment payment of $5,000 each month. In addition, a one-time principal payment of
$10,000 was required and paid on February 1, 2007. On July 1, 2007, an additional
principal payment of $300,000 was required and paid through the redemption of Famous
Daves of America, Inc. common stock. This $300,000 payment was allowed to be applied to
future principal amounts outstanding under the amended promissory note which reduced the
principal and interest amount due until 2012 to $5,000/month. On the maturity date, the
Borrower shall be required to pay the entire remaining principal balance together with
any unpaid accrued interest.
|
F-14
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(3) NOTES RECEIVABLE (continued)
Future principal payments to be received on notes receivable are approximately as follows:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Fiscal Year
|
|
|
|
|
2008
|
|
$
|
92
|
|
2009
|
|
|
86
|
|
2010
|
|
|
85
|
|
2011
|
|
|
91
|
|
2012
|
|
|
903
|
|
Thereafter
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,257
|
|
|
|
|
|
(4) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Property, equipment and leasehold improvements, net, consisted approximately of the following
at:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
Land, buildings and improvements
|
|
$
|
58,987
|
|
|
$
|
48,619
|
|
Furniture, fixtures and equipment
|
|
|
26,745
|
|
|
|
21,679
|
|
Antiques
|
|
|
2,552
|
|
|
|
2,227
|
|
Construction in progress
|
|
|
3,325
|
|
|
|
1,439
|
|
Assets held for sale
|
|
|
|
|
|
|
4,746
|
|
Accumulated depreciation and amortization
|
|
|
(34,366
|
)
|
|
|
(28,673
|
)
|
|
|
|
|
|
|
|
Property, equipment and leasehold improvements, net
|
|
$
|
57,243
|
|
|
$
|
50,037
|
|
|
|
|
|
|
|
|
(5) OTHER CURRENT LIABILITIES
Other current liabilities consist of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
Gift cards payable
|
|
$
|
1,617
|
|
|
$
|
1,378
|
|
Other liabilities
|
|
|
813
|
|
|
|
883
|
|
Sales tax payable
|
|
|
662
|
|
|
|
575
|
|
Accrued property and equipment purchases
|
|
|
1,533
|
|
|
|
742
|
|
Deferred franchise fees
|
|
|
420
|
|
|
|
280
|
|
Financing lease
|
|
|
112
|
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
$
|
5,157
|
|
|
$
|
3,954
|
|
|
|
|
|
|
|
|
F-15
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(6) CREDIT FACILITY AND DEBT COVENANTS
On July 31, 2006, the Company and certain of its subsidiaries (collectively known as the
Borrower) entered into an amendment and restatement of an existing Credit Agreement with Wells
Fargo Bank, National Association, as administrative agent and lender (the Lender). The Credit
Agreement, which amended and restated an agreement previously entered into by the Company on
January 28, 2005, increased the Companys existing revolving credit facility from $10.0 million to
$20.0 million (the Facility). Principal amounts outstanding under the Facility bear interest
either at an adjusted Eurodollar rate plus an applicable margin or at a Base Rate plus an
applicable margin. The Base Rate is defined in the agreement as either the Federal Funds Rate
(4.25% at December 30, 2007) plus 0.5% or Wells Fargos prime rate (7.25% at December 30, 2007).
The applicable margin will depend on the Companys Adjusted Leverage Ratio, as defined, at the end
of the previous quarter and will range from 1.75% to 2.50% for Euro Dollar Rate Loans and from
-0.25% to +0.50% for Base Rate loans. Unused portions of the Facility will be subject to an unused
Facility fee equal to either 0.25% or 0.375% of the unused portion, depending on the Companys
Adjusted Leverage Ratio. Our rate for the unused portion of the Facility as of December 30, 2007,
was 0.25%.
The Company expects to use borrowings under the Facility for general working capital purposes,
as well as for the repurchase of shares under the Companys share repurchase authorization. Under
the Facility, the Borrower has granted the Lender a security interest in all current and future
personal property of the Borrower.
The Facility contains customary affirmative and negative covenants for credit facilities of
this type, including limitations on the Borrower with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates of
the Borrower, among others. The Facility also includes various financial covenants. We were in
compliance with all covenants under the Facility as of December 30, 2007 and December 31, 2006.
In addition to changes in the aggregate loan amount and applicable interest rates, the Amended
and Restated Credit Agreement provides for up to $3.0 million in letters of credit to be used by
the Company, with any amounts outstanding, reducing our availability for general corporate purposes
and also allows for the termination of the Facility by the Borrower without penalty at any time
after the second anniversary of the effective date. The maturity date for this Facility is July
31, 2011. We had $13.0 million in borrowings under this Facility, and had $500,000 in Letters of
Credit as of December 30, 2007 as required by our fiscal 2005 self-funded medical insurance policy.
As of December 31, 2006 we had no borrowings under this Facility and had $500,000 in Letters of
Credit as required for our fiscal 2005 self-funded medical insurance policy. The letters of credit
reduced our borrowing capacity under the line as of December 30, 2007 and December 31, 2006.
(7) LONG-TERM DEBT
Under the agreements governing our long-term debt obligations, we are subject to two main
financial covenants. We must maintain a 1.25 to 1.0 fixed charge coverage ratio and a 3.5 to 1.0
leverage ratio during each fiscal year. As of December 30, 2007 and December 31, 2006, we were in
compliance with all of our covenants.
F-16
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(7) LONG-TERM DEBT (continued)
Long-term debt consisted approximately of the following at:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
($s in thousands)
|
|
2007
|
|
|
2006
|
|
Notes payable GE Capital Franchise
Finance Corporation monthly installments
from approximately $13 to $20 including
interest between 8.10% and 10.53%, due
between January 2020 and October 2023,
secured by property and equipment.
|
|
$
|
7,169
|
|
|
$
|
7,416
|
|
|
|
|
|
|
|
|
|
|
Notes payable GE Capital Franchise
Finance Corporation monthly installment
of approximately $12 including interest of
3.80% plus the monthly LIBOR rate
(effective rate between 4.57% and 5.33% at
December 31, 2006), secured by property and
equipment.
(1)
|
|
|
|
|
|
|
1,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
7,169
|
|
|
|
8,421
|
|
|
|
|
|
|
|
|
|
|
Less current maturities
|
|
|
(270
|
)
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt net of current maturities
|
|
$
|
6,899
|
|
|
$
|
8,119
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During the first quarter of fiscal 2007, we repaid approximately $1.0
million in notes payable related to our Tulsa, Oklahoma company-owned restaurant in
advance, which resulted in an approximate $12,000 non-cash charge to write-off
deferred financing fees.
|
|
|
|
On May 31, 2006, we elected to repay two notes prior to their expiration, related to
our Addison, Illinois and Lincoln Nebraska company-owned restaurants. A total of
approximately $3.0 million was paid to retire these notes early. We recorded a
non-cash charge of approximately $148,000 to write-off deferred financing fees as a
result of the early payoff.
|
Required principal payments on long-term debt over the next five years, are as follows:
|
|
|
|
|
(In thousands)
|
|
|
|
|
Fiscal Year
|
|
|
|
|
2008
|
|
$
|
270
|
|
2009
|
|
|
299
|
|
2010
|
|
|
329
|
|
2011
|
|
|
361
|
|
2012
|
|
|
397
|
|
Thereafter
|
|
|
5,513
|
|
|
|
|
|
Total
|
|
$
|
7,169
|
|
|
|
|
|
(8) FINANCING LEASE OBLIGATION
On March 31, 1999, the company completed a $4.5 million financing obligation, involving three
existing restaurants as a result of a sale/leaseback transaction. Under this financing, we are
obligated to make monthly payments of $46,454 (which increases 4.04% every two years) for a minimum
of 20 years. At the end of the 20 year lease term we may extend the lease for up to two additional
five year terms. We also have the option to purchase the leased restaurants on the 10
th
and 20
th
anniversaries of the lease term
F-17
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(8) FINANCING LEASE OBLIGATION (continued)
and between the first and second five year option terms. The option purchase price is the greater
of $4.5 million or the fair market value, as defined, of the properties at the time the purchase
option is exercised. Based upon our continued involvement in the leased property and its purchase
option, the transaction has been accounted for as a financing arrangement. Accordingly, the three
existing restaurants are included in property, equipment and leasehold improvements, and had been
depreciated over a 30 year term until fiscal 2007 when it was determined that it was likely that we
would not renew the lease at the end of the original term. This resulted in a change in accounting
estimate for the useful life of the restaurants assets revised to 20 years from 30 years.
Accelerated depreciation of $61,000 was recorded in 2007 and will continue to be recorded on an
accelerated basis prospectively. In addition, as the monthly lease payments are made, the
obligation will be reduced by the revised 20 year amortization table.
In fiscal 2007, it was determined that accruing a deferred rent liability for this lease was
incorrect since the beginning of the agreement in fiscal 1999. This correction of an accounting
error was evaluated under the guidance of SAB No. 108, using both the iron curtain and rollover
methods. It was determined that the correct amounts would not be material to any year presented
under either method but would be corrected in the companys consolidated financial statements for
all periods presented. The impact of the correction of the accounting error in fiscal 2007 was an
increase of $0.01 to fully diluted earnings per share. The cumulative impact to prior years was an
increase of $0.03 to fully diluted earnings per share shown in the companys fiscal 2006
consolidated balance sheet.
(9) OPERATING LEASE OBLIGATIONS
We have various operating leases for existing and future restaurants and corporate office
space with remaining lease terms ranging from 1 to 40 years, including lease renewal options. Ten
of the leases require percentage rent of between 4% and 7% of annual gross sales, typically above a
natural breakeven point, in addition to the base rent. All of these leases contain provisions for
payments of real estate taxes, insurance and common area maintenance costs. Total occupancy lease
costs for fiscal years 2007, 2006, and 2005 including rent, common area maintenance costs, real
estate taxes and percentage rent, were approximately $5.5 million, $5.4 million and $4.9 million,
respectively. Rent expenses only (excluding percentage rent) were approximately $3.8 million, $3.7
million, and $3.2 million for fiscal years 2007, 2006, and 2005, respectively. Percentage rent was
approximately $172,000, $179,000 and $102,000 for fiscal years 2007, 2006 and 2005, respectively.
We have three sublease arrangements with franchisees. These leases are our responsibility,
but we have offered them to our franchisees on substantially equal terms to the original leases.
These amounts are shown in the table below within the caption sublease income.
F-18
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(9) OPERATING LEASE OBLIGATIONS (continued)
Future minimum lease payments (including renewal options) existing at December 30, 2007 were:
|
|
|
|
|
(in thousands)
|
|
|
|
|
Fiscal Year
|
|
|
|
|
2008
|
|
|
4,759
|
|
2009
|
|
|
5,044
|
|
2010
|
|
|
5,083
|
|
2011
|
|
|
5,003
|
|
2012
|
|
|
5,037
|
|
Thereafter
|
|
|
82,678
|
|
|
|
|
|
Total future minimum lease commitments
|
|
$
|
107,604
|
|
Less: sublease income
|
|
|
(8,006
|
)
|
|
|
|
|
Total operating lease obligations
|
|
$
|
99,598
|
|
|
|
|
|
(10) RELATED PARTY TRANSACTIONS
Famous Ribs of Georgia, Snellville, Marietta and Alpharetta, LLC
In fiscal 2007, 2006, and
2005, we sublet three restaurants to our former President and CEO, Martin ODowd, for a total of
$496,000, $432,000, and $435,000, respectively, in lease and real estate tax payments for which he
reimbursed us an equal amount to offset our rent expense for these three locations. See the related
note receivable in Note 3.
On December 13, 2007, our Chief Executive Officer resigned. In accordance with our Company
by-laws and succession policy, F. Lane Cardwell, Jr. became the Interim-Chief Executive Officer
effective immediately. In conjunction with these new interim responsibilities, he was paid $18,000
in 2007. In addition, he is a member of our Board of Directors and has received stock compensation
for his service on our Board of Directors. His interim employment agreement is filed as Exhibit
10.21 to this Form 10-K.
F-19
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11) STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION, AND COMMON SHARE REPURCHASES
We recognized stock-based compensation expense in our consolidated statements of operations
for the fiscal years 2007 and 2006, respectively, as follows:
Stock-based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 1,
|
|
(in thousands)
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
Performance Share Programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2004 2006
|
|
$
|
|
|
|
$
|
38
|
|
|
$
|
91
|
|
Fiscal 2005 2007
(1)
|
|
|
(286
|
)
|
|
|
423
|
|
|
|
473
|
|
Fiscal 2006 2008
(1)
|
|
|
14
|
|
|
|
271
|
|
|
|
3
|
|
Fiscal 2007 2009
(1)
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Shares
|
|
$
|
77
|
|
|
$
|
732
|
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director Shares
|
|
|
478
|
|
|
|
303
|
|
|
|
|
|
Stock Options
(1)
|
|
|
283
|
|
|
|
378
|
|
|
|
|
|
Deferred Stock Units
|
|
|
(18
|
)
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
820
|
|
|
$
|
1,447
|
|
|
$
|
567
|
|
|
|
|
|
|
|
|
|
|
|
We have adopted a 1995 Stock Option and Compensation Plan, a 1997 Employee Stock Option Plan,
a 1998 Director Stock Option Plan and a 2005 Stock Incentive Plan (the Plans), pursuant to which we
may grant stock options, stock appreciation rights, restricted stock, performance shares, and other
stock and cash awards to eligible participants. We have also granted stock options outside of the
Plans prior to 1996 in limited situations. All of these grants have been previously exercised.
Under the Plans, an aggregate of 348,900 shares of our Companys common stock remained unreserved
and available for issuance at December 30, 2007. In general, the stock options we have issued
under the Plans vest over a period of 3 to 5 years and expire 10 years from the date of grant. The
1995 Stock Option and Compensation Plan expired on December 29, 2005 and the 1997 Employee Stock
Option Plan expired on June 24, 2007, but both plans will remain in effect until all outstanding
incentives granted hereunder have either been satisfied or terminated.
|
|
|
(1)
|
|
In December 2007, our Chief Executive Officer ceased employment with the
Company. As a result, we adjusted our performance share expense under these programs and stock option expense to
reflect the cancellation of these unearned grants.
|
F-20
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11)
STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION, AND COMMON SHARE REPURCHASES
(continued)
Information regarding our Companys stock options is summarized below:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
(
number of options in thousands
)
|
|
Options
|
|
|
Exercise Price
|
|
Options outstanding January 2, 2005
|
|
|
1,132
|
|
|
$
|
4.72
|
|
Granted
|
|
|
28
|
|
|
|
10.20
|
|
Canceled or expired
|
|
|
(46
|
)
|
|
|
5.79
|
|
Exercised
|
|
|
(214
|
)
|
|
|
3.41
|
|
|
|
|
|
|
|
|
|
Options outstanding at January 1, 2006
|
|
|
900
|
|
|
|
5.14
|
|
Canceled or expired
|
|
|
(43
|
)
|
|
|
6.11
|
|
Exercised
|
|
|
(130
|
)
|
|
|
4.28
|
|
Options previously cancelled
|
|
|
1
|
|
|
|
2.84
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 31, 2006
|
|
|
728
|
|
|
|
5.24
|
|
Canceled or expired
|
|
|
(24
|
)
|
|
|
6.01
|
|
Exercised
|
|
|
(305
|
)
|
|
|
4.75
|
|
|
|
|
|
|
|
|
|
Options outstanding at December 30, 3007
|
|
|
399
|
|
|
$
|
5.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable January 1, 2006
|
|
|
539
|
|
|
$
|
4.66
|
|
|
|
|
|
|
|
|
Options exercisable December 31, 2006
|
|
|
580
|
|
|
$
|
5.05
|
|
|
|
|
|
|
|
|
Options exercisable December 30, 2007
|
|
|
359
|
|
|
$
|
5.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of options
granted during the year ended January 1,
2006
|
|
|
|
|
|
$
|
10.98
|
|
The following table summarizes information about stock options outstanding at December 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
(number outstanding and number exercisable in thousands)
|
|
Total outstanding
|
|
|
Exercisable
|
|
|
|
|
|
|
|
Weighted-average
|
|
|
Weighted-
|
|
|
|
|
|
|
Weighted-
|
|
Exercise
|
|
Number
|
|
|
remaining
|
|
|
average
|
|
|
Number
|
|
|
average
|
|
prices
|
|
outstanding
|
|
|
contractual life
|
|
|
exercise price
|
|
|
exercisable
|
|
|
exercise price
|
|
$2.00 $ 3.00
|
|
|
15
|
|
|
1.76 years
|
|
$
|
2.27
|
|
|
|
15
|
|
|
$
|
2.27
|
|
$3.19 $ 4.78
|
|
|
109
|
|
|
3.18 years
|
|
$
|
3.80
|
|
|
|
109
|
|
|
$
|
3.80
|
|
$4.82 $ 7.23
|
|
|
245
|
|
|
5.84 years
|
|
$
|
5.94
|
|
|
|
205
|
|
|
$
|
5.93
|
|
$8.07 $12.11
|
|
|
30
|
|
|
6.89 years
|
|
$
|
10.50
|
|
|
|
30
|
|
|
$
|
10.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
399
|
|
|
5.04 years
|
|
$
|
5.57
|
|
|
|
359
|
|
|
$
|
5.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of options (the amount by which the market price of the stock on
the date of exercise exceeded the exercise price of the option) exercised during fiscal 2007 was
approximately $3.0 million.
As of December 30, 2007, the aggregate intrinsic value of options outstanding was approximately
$2.9 million and the aggregate intrinsic value of options exercisable was approximately $2.6
million.
F-21
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11) STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION, AND COMMON SHARE REPURCHASES
(continued)
2005 Stock Incentive Plan
On May 12, 2005, the Companys shareholders approved the adoption of the Famous Daves of
America, Inc. 2005 Stock Incentive Plan (the 2005 Plan). The purpose of the 2005 Plan is to
increase shareholder value and to advance the interests of the Company by furnishing a variety of
economic incentives designed to attract, retain and motivate Associates, certain key consultants
and directors of the Company. The maximum number of shares of common stock which may be issued
under the 2005 Plan is 450,000 shares, subject to adjustment. The Compensation Committee of the
Companys Board of Directors administers the 2005 Plan. Awards may be granted to Associates
(including officers), members of the Board of Directors and consultants or other independent
contractors. Awards that may be granted under the 2005 Plan include performance shares, incentive
and non-statutory stock options, stock appreciation rights, stock awards, and restricted stock.
The 2005 Plan shall remain in effect until all incentives granted under the 2005 Plan have either
been satisfied by the issuance of shares of common stock, the payment of cash, or have been
terminated under the terms of the 2005 Plan and all restrictions imposed on shares of common stock
in connection with their issuance under the 2005 Plan have lapsed. No incentives may be granted
under the 2005 Plan after the tenth anniversary of the date the 2005 Plan was approved by the
shareholders of the Company.
Performance Shares
Beginning in fiscal 2005, all stock incentive awards for Associates of the Company, including
officers, have taken the form of performance shares.
We have a program under which management and certain director-level Associates may be granted
performance shares under the 2005 Stock Incentive Plan, subject to certain contingencies. Issuance
of the shares underlying the performance share grants are contingent upon the Company achieving a
specified minimum percentage of the cumulative earnings per share goals (as determined by the
Compensation Committee) for each of the three fiscal years covered by the grant. Upon achieving
the minimum percentage, and provided that the recipient remains an Associate during the entire
three-year performance period, the Company will issue the recipient a percentage of the performance
shares that is equal to the percentage of the cumulative earnings per share goals achieved. No
portion of the shares will be issued if the specified percentage of earnings per share goals is
achieved in any one or more fiscal years but not for the cumulative three-year period.
No recipient will have any rights as a shareholder based on the performance share grants
unless and until the conditions have been satisfied and the shares have been issued to the
recipient. In accordance with this program, we recognize as compensation expense, the value of
these stock grants as they are earned in our consolidated statements of operations throughout the
performance period.
As of December 30, 2007, we have three performance share programs in progress. All of these
performance share awards qualify for equity-based treatment under SFAS No. 123R. Accordingly, we
recognize compensation cost for these share-based awards based on their fair value, which is the
closing stock price at the time of grant, over the requisite service period (i.e. fixed treatment).
On February 18, 2004 our Board of Directors awarded 33,500 (subsequently reduced to 27,500 due to
associate departures) performance share grants to eligible associates for the fiscal 2004-fiscal
2006 timeframe. During the first quarter of fiscal 2007, we issued 24,683 shares out of this
2004-2006 performance share program, representing the achievement of approximately 90% of the
target payout for this program. Recipients elected to forfeit 8,307 of those shares to satisfy tax
withholding obligations, resulting in a net issuance of 16,376 shares.
F-22
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11) STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION,
AND COMMON SHARE REPURCHASES (continued)
On February 25, 2005, our Board of Directors awarded 134,920 (subsequently reduced to 59,569
due to Associate departures) performance share grants to eligible associates for the fiscal
2005-fiscal 2007 timeframe. Under this program, if the Company achieves at least 80% of the
Cumulative EPS Goal, each recipient shall be entitled to receive a percentage of the Performance
Shares equal to the percentage of the Cumulative EPS Goal achieved by the Company, up to a maximum
of 100%. We will be awarding the earned portion of these shares during the first quarter of fiscal
2008. On December 29, 2005, our Board of Directors awarded 83,200 (subsequently reduced to 38,400
due to associate departures) performance share grants to eligible associates for the fiscal
2006-fiscal 2008 timeframe. Similar to the fiscal 2005-fiscal 2007 program, if the Company
achieves at least 80% of the Cumulative EPS Goal, each recipient shall be entitled to receive a
percentage of the Performance Shares equal to the percentage of the Cumulative EPS Goal achieved by
the Company. However, if the Company achieves between 100% and 150% of the Cumulative EPS Goal,
each recipient will be entitled to receive an additional percentage of the Target number of
performance shares granted equal to twice the incremental percentage increase in the Cumulative EPS
Goal over 100% (e.g., if the Company achieves 120% of the Cumulative EPS Goal, then the recipient
will be entitled to receive 140% of his or her Target performance share amount). On February 21,
2007, our Board of Directors awarded 96,100 (subsequently reduced to 55,800 due to associate
departures) performance share grants to eligible associates for the fiscal 2007-fiscal 2009
timeframe. Similar to the fiscal 2006-fiscal 2008 program, if the Company achieves at least 80% of
the Cumulative EPS Goal, each recipient shall be entitled to receive a percentage of the
Performance Shares equal to the percentage of the Cumulative EPS Goal achieved by the Company, and
each recipient will be entitled to receive an additional percentage of the Target number of
performance shares granted equal to twice the incremental percentage increase in the Cumulative EPS
Goal over 100% if the Company achieves between 100% and 150% of the Cumulative EPS Goal.
Deferred Stock Unit Plan
We have an Executive Elective Deferred Stock Unit Plan (Deferred Stock Unit Plan), in which
executives can elect to defer all or part of their compensation or commissions, if applicable, for
a specified period of time. The amount of compensation that is deferred is converted into a number
of stock units, as determined by the share price of our common stock on the date the annual bonuses
are approved by the Board of Directors. In accordance with SFAS No. 123R, this plan qualifies for
liability treatment. Accordingly, we recognize compensation expense throughout the deferral period
to the extent that the share price of our common stock increases, and reduce compensation expense
throughout the deferral period to the extent that the share price of our common stock decreases.
(i.e. mark-to-market).
Several of our executives elected to defer a portion of their fiscal 2004 bonuses, the amount
of which was determined on February 25, 2005, totaling approximately $77,000, (of which
approximately $25,000 had been subsequently paid out), in accordance with the Deferred Stock Unit
Plan discussed above. Two executives deferred for a one-year period and two executives deferred
for a two-year period. As a result of our end-of-year stock price being essentially equal to the
stock price at the time of the election, we recognized no expense in our consolidated statements of
operations for fiscal 2005, related to this plan for the fiscal 2004 bonus year deferral. In
fiscal 2006, we recognized compensation expense of approximately $24,000 in our consolidated
statements of operations, as related to the second year deferral of the fiscal 2004 bonus.
F-23
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11) STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION,
AND COMMON SHARE REPURCHASES (continued)
Several of our executives elected to defer for one year a portion of their fiscal 2005
bonuses, the amount of which was determined on February 22, 2006, totaling approximately $56,000
(of which approximately $9,000 had been subsequently paid out), in accordance with the Deferred
Stock Unit Plan discussed above. We recognized compensation expense of approximately $2,000 in our
consolidated statements of operations for fiscal 2006, as related to this plan for the fiscal 2005
bonus year deferrals. These bonuses, including the original amount deferred and the amounts earned
over the deferred period, were paid out during the first quarter of fiscal 2007. One of our
executives elected to defer for a two-year period, a portion of their fiscal 2006 bonus, the amount
of which was determined on February 21, 2007, totaling approximately $71,000, in accordance with
the Deferred Stock Unit Plan discussed above. We recognized income of approximately $19,000 in our
consolidated statements of operations for fiscal 2007, as related to this plan. The executive left
the company in December 2007 and in accordance with the plan document, was paid out in February
2008.
Common Share Repurchases
On November 2, 2004, our Board of Directors authorized a stock repurchase plan that authorized
the repurchase of up to 1.0 million shares of our common stock to be repurchased from time-to-time
in both the open market or through privately negotiated transactions. During fiscal 2004, we had
purchased 45,100 outstanding shares under this program at an average price of $9.70, excluding
commissions. As of June 20, 2005 we had completed the repurchase of this 1.0 million share
repurchase program. The remaining 954,900 shares were purchased between January 2005 and June 2005
for approximately $11.5 million at an average market price of $11.93, excluding commissions.
On May 9, 2006, our Board of Directors authorized a stock repurchase program that authorized
the repurchase of up to 1.0 million shares of our common stock to be repurchased from time to time
in both the open market or through privately negotiated transactions. As of December 31, 2006, we
had repurchased 611,400 shares under the program for approximately $9.3 million at an average
market price of $15.20, excluding commissions.
As of September 30, 2007, we had repurchased all of the shares under the program for
approximately $16.8 million at an average market price of $16.79, excluding commissions. During
fiscal 2007, we repurchased 388,600 of these shares under the program for approximately $7.5
million at an average market price of $19.28, excluding commissions.
On September 27, 2007, our Board of Directors authorized another stock repurchase program that
authorized the repurchase of up to 1.0 million shares of our common stock from time to time in both
the open market or through privately negotiated transactions. As of December 30, 2007 we had
repurchased 482,000 shares under this program for approximately $6.9 million at an average market
price per share of $14.38, excluding commissions.
Board of Directors Compensation
In February 2007, we awarded our independent board members shares of common stock for their service
on our board for fiscal 2007. These shares were fully vested upon grant and were unrestricted, but
require repayment of the prorated portion or equivalent value thereof, in cash, in the event of a
board member not fulfilling their term of service. In total, 25,500 shares were issued on February
21, 2007, on which date the price of our common stock at the close of market was $18.74. The total
compensation cost of approximately $478,000 is reflected in general and administrative expenses in
our consolidated statements of operations for fiscal 2007, equally by quarter.
F-24
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(11) STOCK OPTIONS, PERFORMANCE SHARES, OTHER FORMS OF COMPENSATION,
AND COMMON SHARE REPURCHASES (continued)
In May 2006, we awarded our independent board members shares of common stock for their service
on our board for fiscal 2006. These shares were fully vested upon grant and were unrestricted, but
require reimbursement of the prorated portion or equivalent value thereof in the event of a board
member not fulfilling their term of service. In total, 19,300 shares were issued on May 11, 2006,
on which date the price of our common stock at the close of market was $15.71. The compensation
cost of approximately $303,000 was reflected in general and administrative costs in our
consolidated statements of operations for fiscal 2006.
Warrants
As part of our acquisition of four restaurants during fiscal year 1999, we issued 200,000
warrants which were set to expire in December 2004. All stock warrants had been exercised or
redeemed prior to their expiration. During fiscal 2004, 10,000 of the warrants were exercised at a
price of $6.00 per share and we redeemed the remainder of the warrants for approximately $143,000
which represents the difference between the original exercise price of the warrants and the closing
market price of the Companys stock on the date of the transactions. These warrants were paid for
in 2007.
(12) INCOME TAXES
At December 30, 2007, we had cumulative net operating loss carry-forwards of approximately
$3.2 million for state tax purposes, which will begin to expire in fiscal 2019 if not used. We
also had cumulative tax credit carry-forwards of approximately $2.2 million which, if not used,
will begin to expire in fiscal 2018. Upon utilization of approximately $455,000 of the tip credit
carry forward, the credit will go to additional paid in capital.
The following table summarizes the provision for income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
758
|
|
|
$
|
859
|
|
|
$
|
175
|
|
State
|
|
|
367
|
|
|
|
248
|
|
|
|
496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,125
|
|
|
|
1,107
|
|
|
$
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,982
|
|
|
|
1,327
|
|
|
|
1,797
|
|
State
|
|
|
(7
|
)
|
|
|
303
|
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,975
|
|
|
|
1,630
|
|
|
|
2,048
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provision
|
|
$
|
3,100
|
|
|
$
|
2,737
|
|
|
$
|
2,719
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes, detailed below, recognize the impact of temporary differences between the amounts
of assets and liabilities recorded for financial statement purposes and such amounts measured in
accordance with tax laws. Realization of the net operating loss carry forwards and other deferred
tax temporary differences are contingent on future taxable earnings. During fiscal years 2007 and
2006, our deferred tax asset was reviewed for expected utilization using a more likely than not
approach as required by SFAS
F-25
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(12) INCOME TAXES (continued)
No. 109,
Accounting for Income Taxes
, by assessing the available positive and negative evidence
surrounding its recoverability. We believe that the realization of the deferred tax asset is more
likely than not based on our taxable income for fiscal 2007 and fiscal 2006 and based on the
expectation that our Company will generate the necessary taxable income in future years. For fiscal
2007, we have no material uncertain tax positions to be accounted for in our consolidated financial
statements under the principles of FIN No. 48, Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109. We classify income tax related interest and penalties
in interest and other expense, respectively, when incurred.
Our Companys deferred tax assets (liabilities) were as follows at:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
(
in thousands
)
|
|
2007
|
|
|
2006
|
|
Current deferred tax assets (liabilities):
|
|
|
|
|
|
|
|
|
Tax credit carryover
|
|
$
|
1,720
|
|
|
$
|
3,057
|
|
Net operating loss carry-forwards
|
|
|
83
|
|
|
|
198
|
|
Prepaid expenses
|
|
|
(397
|
)
|
|
|
(530
|
)
|
Inventories
|
|
|
(434
|
)
|
|
|
(372
|
)
|
Other
|
|
|
427
|
|
|
|
209
|
|
Financing lease
|
|
|
(259
|
)
|
|
|
|
|
Accrued and deferred compensation
|
|
|
503
|
|
|
|
672
|
|
|
|
|
|
|
|
|
Total short-term deferred tax assets
|
|
$
|
1,643
|
|
|
$
|
3,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term deferred tax assets:
|
|
|
|
|
|
|
|
|
Property and equipment basis difference
|
|
$
|
374
|
|
|
$
|
550
|
|
Other
|
|
|
137
|
|
|
|
150
|
|
|
|
|
|
|
|
|
Total long-term deferred tax assets:
|
|
$
|
511
|
|
|
$
|
700
|
|
|
|
|
|
|
|
|
Reconciliation between the statutory rate and the effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
Federal statutory tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
State taxes, net of federal benefit
|
|
|
2.7
|
|
|
|
2.2
|
|
|
|
4.3
|
|
Tax effect of permanent differences
|
|
|
2.4
|
|
|
|
2.7
|
|
|
|
2.5
|
|
Tax effect of general business credits
|
|
|
(5.0
|
)
|
|
|
(5.0
|
)
|
|
|
(5.2
|
)
|
Other
|
|
|
(0.3
|
)
|
|
|
1.7
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
33.8
|
%
|
|
|
35.6
|
%
|
|
|
38.0
|
%
|
|
|
|
|
|
|
|
|
|
|
F-26
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(13) SUPPLEMENTAL CASH FLOWS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
(in thousands)
|
|
2007
|
|
2006
|
|
2005
|
Cash paid for interest
|
|
$
|
1,477
|
|
|
$
|
1,606
|
|
|
$
|
1,698
|
|
Cash paid for taxes
|
|
$
|
1,446
|
|
|
$
|
927
|
|
|
$
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of other current assets to
assets held for sale
|
|
$
|
|
|
|
$
|
776
|
|
|
$
|
|
|
Reclassification of accounts receivable to
assets held for sale
|
|
$
|
|
|
|
$
|
178
|
|
|
$
|
508
|
|
Accrued property and equipment purchases
|
|
$
|
791
|
|
|
$
|
295
|
|
|
$
|
447
|
|
Deferred tax asset related to tax benefit of
stock options exercised
|
|
$
|
(473
|
)
|
|
$
|
(469
|
)
|
|
$
|
(244
|
)
|
Issuance of common stock to independent
board members
|
|
$
|
478
|
|
|
$
|
303
|
|
|
$
|
|
|
Redemption of note receivable by common
stock buyback
|
|
$
|
289
|
|
|
$
|
|
|
|
$
|
|
|
(14) RETIREMENT SAVINGS PLANS
401(k) Plan
We have a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k)
of the Internal Revenue Code, which covers Associates meeting certain eligibility requirements.
Employee contributions were approximately $556,000, $469,000 and $461,000 for fiscal years 2007,
2006 and 2005, respectively. During fiscal 2007, 2006 and 2005, we matched 50.0% of the
Associates contribution up to 4.0% of their earnings. Employer matching contributions were
approximately $171,000, $169,000 and $148,000 for fiscal years 2007, 2006 and 2005, respectively.
There were no discretionary contributions to the plan during fiscal years 2007, 2006 or 2005.
Non-Qualified Deferred Compensation Plan
We have a Non-Qualified Deferred Compensation Plan that has been effective since February 25,
2005 (the Plan). Eligible participants are those Associates who are at the director level and
above; and who are selected by the Company to participate in the Plan. Participants must complete
a deferral election each year to indicate the level of compensation (salary, bonus and commissions)
they wish to have deferred for the coming year. This deferral election is irrevocable except to
the extent permitted by the Plan Administrator, and the Regulations promulgated by the IRS. The
Company currently matches 50.0% of the first 4.0% contributed and currently pays a declared
interest rate of 8.0% on balances outstanding. The Board of Directors administers the Plan and
could change the Company match or the rate or any other aspect of the Plan at any time.
Deferral periods are defined as the earlier of termination of employment or not less than
three calendar years following the end of the applicable Plan Year. Extensions of the deferral
period for a minimum of five years are allowed provided the election is made at least one year
before the first payment
affected by the change. Payments can be in a lump sum or in equal payments over a two-, five-
or ten-year period, plus interest from the commencement date.
F-27
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
(14) RETIREMENT SAVINGS PLANS (continued)
The Plan assets are kept in an unsecured account that has no trust fund. In the event of
bankruptcy, any future payments would have no greater rights than that of an unsecured general
creditor of the Company and they confer no legal rights for interest or claim on any assets of the
Company. Benefits provided by the Plan are not insured by the Pension Benefit Guaranty Corporation
(PBGC) under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), because the
pension insurance provisions of ERISA do not apply to the Plan.
For the Plan year ended December 30, 2007, eligible participants contributed approximately
$243,000 to the Plan and the Company provided matching funds and interest of approximately $90,000
net of distributions of approximately $24,000, due to an Associates departure. Due to the CEOs
departure in December 2007, and in accordance with our plan, a distribution of approximately
$135,000 will be made in fiscal 2008. For the Plan year ended December 31, 2006, eligible
participants contributed approximately $241,000 to the Plan and the Company provided matching funds
and interest of approximately $66,000, net of distributions of $21,000, due to an Associates
departure.
(15) SELECTED QUARTERLY DATA (Unaudited)
The following
represents selected quarterly financial information for fiscal years 2007 and
2006 (see Note 9):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
(in thousands, except per share data)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
Revenue
|
|
$
|
29,003
|
|
|
$
|
27,088
|
|
|
$
|
33,535
|
|
|
$
|
30,740
|
|
|
$
|
31,902
|
|
|
$
|
30,812
|
|
|
$
|
31,433
|
|
|
$
|
27,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
$
|
2,417
|
|
|
$
|
1,581
|
|
|
$
|
3,469
|
|
|
$
|
2,936
|
|
|
$
|
2,904
|
|
|
$
|
2,896
|
|
|
$
|
1,646
|
|
|
$
|
1,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,402
|
|
|
$
|
742
|
|
|
$
|
2,139
|
|
|
$
|
1,524
|
|
|
$
|
1,732
|
|
|
$
|
1,597
|
|
|
$
|
797
|
|
|
$
|
1,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
per common share
|
|
$
|
0.14
|
|
|
$
|
0.07
|
|
|
$
|
0.21
|
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
$
|
0.15
|
|
|
$
|
0.08
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per common share
|
|
$
|
0.13
|
|
|
$
|
0.07
|
|
|
$
|
0.21
|
|
|
$
|
0.14
|
|
|
$
|
0.17
|
|
|
$
|
0.15
|
|
|
$
|
0.08
|
|
|
$
|
0.10
|
|
(16) LITIGATION
In the normal course of business, the Company is involved in a number of litigation matters
that are incidental to the operation of the business. These matters generally include, among other
things, matters with regard to employment and general business-related issues. The Company
currently believes that the resolution of any of these pending matters will not have a material
adverse effect on its financial position or liquidity, but an adverse decision in more than one of
the matters could be material to its consolidated results of operations.
F-28
FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED
)
Financial Statement Schedule
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
Deductions
|
|
|
|
|
|
|
|
|
|
|
|
|
Credits to Costs
|
|
|
|
|
|
|
|
|
Charged to
|
|
and Expenses
|
|
|
|
|
Balance at
|
|
Costs and
|
|
and Other
|
|
Balance at End
|
(In thousands)
|
|
Beginning of Period
|
|
Expenses
|
|
Accounts
|
|
of Period
|
Year ended January 1, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts
|
|
$
|
9.6
|
|
|
$
|
65.8
|
|
|
$
|
(38.6
|
)
|
|
$
|
36.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts
|
|
$
|
36.8
|
|
|
$
|
28.2
|
|
|
$
|
(50.8
|
)
|
|
$
|
14.2
|
|
Reserve for lease
termination costs
|
|
$
|
|
|
|
$
|
398.0
|
|
|
$
|
(68.0
|
)
|
|
$
|
330.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 30,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts
|
|
$
|
14.2
|
|
|
$
|
19.6
|
|
|
$
|
(17.9
|
)
|
|
$
|
15.9
|
|
Reserve for lease
termination costs
|
|
$
|
330.0
|
|
|
$
|
|
|
|
$
|
(159.0
|
)
|
|
$
|
171.0
|
|
F-29
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
FAMOUS DAVES OF AMERICA, INC.
(Registrant)
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|
Dated: March 14, 2008
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By:
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/s/ F. Lane Cardwell, Jr.
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|
|
|
F. Lane Cardwell, Jr.
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|
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Interim President and Chief Executive Officer
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|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed on March 14, 2008 by the following persons on behalf of the Registrant, in the capacities
indicated.
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|
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Signature
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Title
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/s/ Diana Garvis Purcel
Diana Garvis Purcel
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|
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Chief Financial Officer and Secretary
(principal financial and accounting officer)
|
|
|
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/s/ K. Jeffrey Dahlberg
K. Jeffrey Dahlberg
|
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Director
|
|
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/s/ Mary L. Jeffries
Mary L. Jeffries
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Director
|
|
|
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/s/ Richard L. Monfort
Richard L. Monfort
|
|
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Director
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|
|
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/s/ Dean A. Riesen
Dean A. Riesen
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|
|
Director
|
EXHIBITS
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|
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Exhibit No.
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|
Description
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|
3.1
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|
Articles of Incorporation, incorporated by reference
from Exhibit 3.1 to our Registration Statement on Form
SB-2 (File No. 333-10675) filed with the Securities and
Exchange Commission on August 23, 1996
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|
|
|
3.2
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|
Bylaws, incorporated by reference from Exhibit 3.2 to
the Registration Statement on Form SB-2 (File No.
333-10675) filed on August 23, 1996
|
|
|
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10.1
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|
Trademark License Agreement between Famous Daves of
America, Inc. and Grand Pines Resorts, Inc.,
incorporated by reference from Exhibit 10.11 to the
Registration Statement on Form SB-2 (File No.
333-10675) filed on August 23, 1996
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|
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10.2
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|
Loan Agreement, dated as of January 21, 2000, by and
between FFCA Acquisition Corporation and MinWood
Partners, Inc., incorporated by reference from Exhibit
10.21 to Form 10-Q filed May 16, 2000
|
|
|
|
10.3
|
|
Master Lease, dated as of January 21, 2000, by and
between MinWood Partners, Inc. and Famous Daves of
America, Inc., incorporated by reference from Exhibit
10.22 to Form 10-Q filed May 16, 2000
|
|
|
|
10.4
|
|
Loan Agreement, dated as of August 4, 2000, by and
between FFCA Funding Corporation and FDA Properties,
Inc., incorporated by reference from Exhibit 10.13 to
Form 10-K filed March 29, 2001
|
|
|
|
10.5
|
|
Master Lease, dated as of August 4, 2000, by and
between FDA Properties, Inc. and Famous Daves of
America, Inc., incorporated by reference from Exhibit
10.5 to Form 10-K filed March 29, 2001
|
|
|
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10.7
|
|
1995 Employee Stock Option Plan (as amended through May
22, 2002), incorporated by reference from Exhibit 10.1
to Form 10-Q filed August 14, 2002
|
|
|
|
10.8
|
|
1997 Stock Option and Compensation Plan (as amended
through May 22, 2002), incorporated by reference from
Exhibit 10.2 to Form 10-Q filed August 14, 2002
|
|
|
|
10.9
|
|
1998 Director Stock Option Plan (as amended through May
22, 2002), incorporated by reference from Exhibit 10.3
to Form 10-Q filed August 14, 2002
|
|
|
|
10.10
|
|
2005 Stock Incentive Plan, incorporated by reference to
Ex 10.10 to Form 10-K filed March 17, 2006
|
|
|
|
10.11
|
|
First Amended and Restated Executive Elective Deferred
Stock Unit Plan dated January 1, 2008
|
EXHIBITS (continued)
|
|
|
Exhibit No.
|
|
Description
|
|
10.12
|
|
Amended and Restated Credit Agreement by and between Wells
Fargo Bank, National Association and Famous Daves of America,
Inc., dated July 31, 2006, incorporated by reference to
Exhibit 10.1 to Form 8-K filed August 2, 2006
|
|
|
|
10.13
|
|
Employment Agreement dated February 25, 2005 by and between
David Goronkin, incorporated by reference to Exhibit 10.1 to
Form 8-K filed March 2, 2005
|
|
|
|
10.14
|
|
Form of Amended and Restated 2004-2006 Performance Share
Agreement and Schedule of Grants under such form, incorporated
by reference to Exhibits 10.1 and 10.2 to Form 10-Q filed May
13, 2005
|
|
|
|
10.15
|
|
Form of Amended and Restated 2005-2007 Performance Share
Agreement and Schedule of Grants under such form, incorporated
by reference to Exhibits 10.3 and 10.4 to Form 10-Q filed May
13, 2005
|
|
|
|
10.16
|
|
Second Amended and Restated Non-Qualified Deferred
Compensation Plan, dated January 1, 2008
|
|
|
|
10.17
|
|
Form of 2006-2008 Performance Share Agreement and Schedule of
Grants under such form, incorporated by reference to Exhibits
10.1 and 10.2 to Form 8-K filed December 29, 2005
|
|
|
|
10.18
|
|
Amendment to 1995 Employee Stock Option and Compensation Plan,
effective November 7, 2006, incorporated by reference to
Exhibit 10.2 to Form 10-Q filed November 9, 2006
|
|
|
|
10.19
|
|
Form of 2007 2009 Performance Share Agreement and Schedule
of Grants under such form, incorporated by reference to
Exhibits 10.1 and 10.2 to Form 8-K filed February 27, 2007
|
|
|
|
10.20
|
|
Form of Director Stock Grant, incorporated by reference to
Exhibit 10.3 to Form 8-K filed February 27, 2007
|
|
|
|
10.21
|
|
Interim Employment Agreement dated as of December 13, 2007
between Famous Daves of America, Inc. and F. Lane Cardwell,
Jr.
|
|
|
|
10.22
|
|
Form of Severance Agreement dated January 4, 2008, between
Famous Daves of America, Inc. and each of Diana G. Purcel and
Christopher ODonnell, incorporated by reference to Exhibit
10.1 for Form 8-K filed January, 8, 2008
|
|
|
|
10.23
|
|
Form of 2008 2010 Performance Share Agreement and Schedule
of Grants under such form, incorporated by reference to
Exhibits 10.1 and 10.2 to Form 8-K filed January 18, 2008
|
|
10.24
|
|
Form of Director Stock Grant, incorporated by reference to
Exhibit 10.3 to Form 8-K filed February 21, 2008
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
21.0
|
|
Subsidiaries of Famous Daves of America, Inc.
|
|
|
|
23.1
|
|
Consent of Grant Thornton LLP
|
|
|
|
31.1
|
|
Certification of Interim Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification of Interim Chief Executive Officer pursuant to
18 U.S.C. 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
Exhibit 10.11
FAMOUS DAVES OF AMERICA, INC.
FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
THIS FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN (the Plan) is
adopted effective as of the 1st day of January, 2008, by Famous Daves of America, Inc., a
Minnesota corporation (the Company), as follows:
RECITALS
The Company established the FAMOUS DAVES OF AMERICA, INC. EXECUTIVE ELECTIVE DEFERRED STOCK UNIT
PLAN effective February 18, 2004 to provide additional retirement benefits and income tax deferral
opportunities for eligible employees; and
The Company wishes to amend and restate the FAMOUS DAVES OF AMERICA, INC. EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN as the FAMOUS DAVES OF AMERICA, INC. FIRST AMENDED AND RESTATED EXECUTIVE
ELECTIVE DEFERRED STOCK UNIT PLAN in order to comply with the Applicable Tax Law (defined below);
and
The amendments made by this FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
shall not apply to any Bonus Deferred Compensation or Stock Grant Deferred Compensation deferred
prior to January 1, 2005, except as required under the Applicable Tax Law.
The Company intends that the Plan shall at all times be administered and interpreted in such a
manner as to constitute an unfunded nonqualified deferred compensation plan for a select group of
management or highly compensated employees and to qualify for all available exemptions from the
provisions of ERISA, where the benefits payable pursuant to this Plan are not subject to taxation
until they are paid to the Participant (defined below) or the Participants Beneficiary (defined
below).
NOW, THEREFORE, the Company hereby adopts the following Plan.
ARTICLE 1
DEFINITIONS
Certain words and phrases are defined when first used in later sections of this plan. Whenever any
words are used herein in the masculine, they shall be construed as though they were in the feminine
in all cases where they would so apply; and whenever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the plural or the singular, as
the case may be, in all cases where they would so apply. In addition, the following words and
phrases when used herein, unless the context clearly requires otherwise, shall have the following
respective meanings:
1.1
402(g) Amount.
The maximum amount of deferrals permitted in a particular year under Code
Section 402(g) ($15,500 in 2007).
1.2
Accrued Benefit.
The sum of all of a Participants Deferral Accounts.
1.3
Affiliate.
Any corporation, partnership, joint venture, association, or similar organization
or entity, which is a member of a controlled group of companies which includes, or which is under
common control with, the Company under Section 414 of the Code.
1.4
Aggregated Arrangement.
All agreements, methods, programs, or other arrangements of the
Employer Group with respect to which deferrals of compensation are treated as having been deferred
under a single deferred compensation plan that includes the Deferral Elections under this Plan
pursuant to §1.409A-1(c)(2) of the Applicable Tax Law.
1.5
Annual Deferral Election.
A written notice other than an Initial Deferral Election filed by
the Participant with the Plan Administrator in accordance with Section 3.1.2 and in substantially
the form attached hereto as Exhibit A, or such other form as is acceptable to the Plan
Administrator, specifying the amount (if any) of the Bonus Deferred Compensation and Stock Grant
Deferred Compensation to be deferred, the Deferral Period and the Payout Period of the Deferred
Compensation which is deferred under the election. Such Annual Deferral Election shall be
effective for the Plan Years indicated on the Annual Deferral Election.
1.6
Annual Deferral Election Deadline.
Except with respect to an Participant making an Initial
Deferral, the Deferral Election Deadline is the earlier of (a) December 31 of the year prior to the
year in which the personal services giving rise to the Compensation to be deferred under the
Deferral Election or (b) the date set by the Plan Administrator as the last day that a Participant
can file a Deferral Election with respect to Compensation to be paid for Services to be rendered by
the Participant in a calendar year after the calendar year in which the Deferral Election is filed.
1.7
Applicable Tax Law.
Section 409A of the Code, the regulations issued by the Department of the
Treasury pursuant thereto, and such other rulings and guidance issued by the IRS concerning Section
409A of the Code.
1.8
Beneficiary.
The persons or entities determined in accordance with the following provisions.
1.8.1
Beneficiary Designation
. The Participant shall have the right, at any time, to
submit a Beneficiary Designation Form specifying one (1) or more persons or entities as the
Participants Beneficiary. If a Participant files a duly executed Beneficiary Designation Form
with the Plan Administrator, the Beneficiary shall be the one (1) or more persons or entities
designated on such Beneficiary Designation Form to receive the Participants Accrued Benefit. No
Beneficiary Designation Form shall be effective unless it is submitted to the Plan Administrator
prior to the Participants death and the Beneficiary Designation Form is approved by the Plan
Administrator. The Participant may change the persons or entities who are the Participants
Beneficiary named in any Beneficiary Designation Form at any time by filing a new duly executed
Beneficiary Designation Form with the Plan Administrator without the consent of any person or
entity then designated as a Beneficiary. Any attempt to designate a Beneficiary other than as
provided in this Section shall be ineffective.
2
1.8.2
Deceased Beneficiary
. If a person designated as a Beneficiary on a Beneficiary
Designation Form predeceases the Participant, the interest in the Participants Accrued Benefit
that would have been payable to such deceased Beneficiary shall pass to those persons or entities
as specified on the Beneficiary Designation Form. If the Beneficiary Designation Form is either
ambiguous or fails to specify who is to receive the interest in the Participants Accrued Benefit
that would have been paid to the deceased Beneficiary, the interest of the deceased Beneficiary
shall be distributed to the deceased Beneficiarys descendants by right of representation if the
deceased Beneficiary is a descendant or sibling of the Participant and, if not, the interest of the
deceased Beneficiary shall lapse and the interest of the deceased Beneficiary shall pass as if the
deceased Beneficiary had not been listed as a Beneficiary. For purposes of any Beneficiary
Designation Form, no person shall be deemed to have survived the Participant if that person dies
within thirty (30) days of the Participants death.
1.8.3
Revocation of Spouses Interest
. A Participants designation of the
Participants Spouse as a beneficiary shall be automatically revoked if the Participant or the
Spouse subsequently files for divorce or legal separation or if the Spouse dies prior to the
Participant. Without limiting the generality of the foregoing, the interest in the benefits
hereunder of a Spouse of a Participant who has predeceased the Participant or where either have
filed for divorce or a legal separation shall automatically pass to the Participant and shall not
be transferable by such Spouse in any manner, including, but not limited to, such Spouses will.
1.8.4
No Surviving Beneficiaries
. If all of the persons named on the Beneficiary
Designation Form are deceased and there are no entities listed which are still in existence on the
date of Payment of the Participants unpaid Accrued Benefit under the Plan, then the Beneficiary
shall be the Participants surviving Spouse, if any, provided neither the Participant nor the
Participants Spouse has filed for divorce or legal separation. If the Participant is not survived
by a Spouse or if the Participant or Participants Spouse has filed for divorce, the Participants
descendants by right of representation shall be the Beneficiary. If there are no surviving
descendants, the legal representative of the Participants estate shall be the Beneficiary.
1.8.5
No Beneficiary Designation Form
. If no duly executed Beneficiary Designation
Form has been received by the Company, the Beneficiary shall be the Participants surviving Spouse,
if any, provided neither the Participant nor the Participants Spouse has filed for divorce or
legal separation. If the Participant is not survived by a Spouse or if the Participant or
Participants Spouse has filed for divorce, the Participants descendants by right of
representation shall be the Beneficiary. If there are no surviving descendants, the legal
representative of the Participants estate shall be the Beneficiary.
1.9
Beneficiary Designation Form.
The form attached hereto as Exhibit B, or such other
substantially similar form as the Plan Administrator acknowledges in writing as an acceptable
substitute, which is duly executed by the Participant and received by the Company or the Plan
Administrator prior to the Participants death.
1.10
Board.
The Board means the Board of Directors of the Company.
3
1.11
Bonus Compensation.
The bonus which a Participant is entitled to receive but for the election
by the Participant pursuant to this Plan to defer the receipt of all or a portion of the
Participants Bonus Compensation.
1.12
Bonus Deferred Compensation.
The portion of the Participants Bonus Compensation which a
Participant has elected to defer pursuant to this Plan.
1.13
Change in Control Event.
Except as otherwise provided under the Applicable Tax Law, a Change
in Control Event is the occurrence of any of the events described in Sections 1.13.1, 1.13.2, or
1.13.3, provided that such event relates to (i) the corporation for whom the Participant is
performing services at the time of the Change in Control Event, (ii) the corporation that is liable
for the payment of the deferred compensation (or all corporations liable for the payment if more
than one corporation is liable) but only if either the deferred Compensation is attributable to the
performance of service by the Participant for such corporation (or corporations) or there is a bona
fide business purpose for such corporation or corporations to be liable for such payment and, in
either case, no significant purpose of making such corporation or corporations liable for such
payment is the avoidance of Federal income tax, or (iii) a corporation that is a majority
shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of
corporations in which each corporation is a majority shareholder of another corporation in the
chain, ending in a corporation identified in (i) or (ii). For purposes of this Section 1.13, a
majority shareholder is a shareholder owning more than fifty percent (50%) of the total fair market
value and total voting power of such corporation.
1.13.1
A Change In The Ownership Of A Corporation
.
1.13.1.1 A Change In The Ownership Of A Corporation occurs on the date that any one (1)
person, or more than one (1) person acting as a group (as defined in Section 1.13.1.2),
acquires ownership of stock of the corporation that, together with stock held by such person
or group, constitutes more than fifty percent (50%) of the total fair market value or total
voting power of the stock of such corporation. However, if any one (1) person or more than
one (1) person acting as a group, is considered to own more than fifty percent (50%) of the
total fair market value or total voting power of the stock of a corporation, the acquisition
of additional stock by the same person or persons is not considered to cause a change in the
ownership of the corporation (or to cause a change in the effective control of the
corporation (within the meaning of Section 1.13.2)). An increase in the percentage of stock
owned by any one (1) person, or Persons Acting As A Group, as a result of a transaction in
which the corporation acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this section. This Section 1.13.1 applies only when
there is a transfer of stock of a corporation (or issuance of stock of a corporation) and
stock in such corporation remains outstanding after the transaction (see Section 1.13.3 for
rules regarding the transfer of assets of a corporation).
1.13.1.2 For purposes of this Section 1.13.1, persons will not be considered to be
acting as a group solely because they purchase or own stock of the same corporation at the
same time, or as a result of the same public offering. However, persons will be considered
to be acting as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
4
with the corporation. If a person, including an entity, owns stock in both
corporations that enter into a merger, consolidation, purchase or acquisition of stock, or
similar transaction, such shareholder is considered to be acting as a group with other
shareholders in a corporation prior to the transaction giving rise to the change and not
with respect to the ownership interest in the other corporation.
1.13.2
A Change In Effective Control Of A Corporation
.
1.13.2.1
Definition
. A Change In Effective Control Of A Corporation occurs
only on either of the following dates :
(a) The date any one (1) person, or more than one (1) person acting as a group
(as determined under Section 1.13.2.4), acquires (or has acquired during the twelve
(12)-month period ending on the date of the most recent acquisition by such person
or persons) ownership of stock of the corporation possessing thirty-five percent
(35%) or more of the total voting power of the stock of such corporation; or
(b) The date a majority of members of the corporations Board is replaced
during any twelve (12)-month period by directors whose appointment or election is
not endorsed by a majority of the members of the Board prior to the date of the
appointment or election, provided that for purposes of this Section the term
corporation refers solely to the relevant corporation identified in Section 1.13 for
which no other corporation is a majority shareholder for purposes of that Section.
1.13.2.2
Multiple Change in Control Events
. A Change In Effective Control also
may occur in any transaction in which either of the two (2) corporations involved in the
transaction has a Change in Control Event.
1.13.2.3
Acquisition Of Additional Control
. If any one (1) person, or more
than one (1) person acting as a group, is considered to effectively control a corporation,
the acquisition of additional control of the corporation by the same person or persons is
not considered to cause a change in the effective control of the corporation (or to cause a
change in the ownership of the corporation).
1.13.2.4
Persons Acting As A Group
. Persons will not be considered to be
acting as a group solely because they purchase or own stock of the same corporation at the
same time, or as a result of the same public offering. However, persons will be considered
to be acting as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction with the
corporation. If a person, including an entity, owns stock in both corporations that enter
into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in a corporation
only with respect to the ownership in that corporation prior to the transaction giving rise
to the change and not with respect to the ownership interest in the other corporation.
5
1.13.3
A Change In The Ownership Of A Substantial Portion Of The Assets Of A
Corporation.
A Change In The Ownership Of A Substantial Portion Of The Assets of A Corporation
occurs on the date that any one (1) person, or more than one (1) person acting as a group (as
determined in Section 1.13.3.3), acquires (or has acquired during the twelve (12)-month period
ending on the date of the most recent acquisition by such person or persons) assets from the
corporation that have a total gross fair market value equal to or more than forty percent (40%) of
the total gross fair market value of all of the assets of the corporation immediately prior to such
acquisition or acquisitions. For this purpose, gross fair market value means the value of the
assets of the corporation, or the value of the assets being disposed of, determined without regard
to any liabilities associated with such assets.
1.13.3.1
Transfers to a Related Person
. There is no Change in Control Event
when there is a transfer to an entity that is controlled by the shareholders of the
transferring corporation immediately after the transfer, as provided in this Section
1.13.3.1. A transfer of assets by a corporation is not treated as a change in the ownership
of such assets if the assets are transferred to
(a) a shareholder of the corporation (immediately before the asset transfer) in
exchange for or with respect to its stock;
(b) an entity, fifty percent (50%) or more of the total value or voting power
of which is owned, directly or indirectly, by the corporation;
(c) a person, or more than one (1) person acting as a group, that owns,
directly or indirectly, fifty percent (50%) or more of the total value or voting
power of all the outstanding stock of the corporation; or
(d) an entity, at least fifty percent (50%) of the total value or voting power
of which is owned, directly or indirectly, by a person described in paragraph (c)
above.
1.13.3.2
Status
. For purposes of Section 1.13.3.1 and except as otherwise
provided, a persons status is determined immediately after the transfer of the assets.
1.13.3.3
Persons Acting As A Group
. Persons will not be considered to be
acting as a group solely because they purchase assets of the same corporation at the same
time. However, persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition of assets, or
similar business transaction with the corporation. If a person, including an entity
shareholder, owns stock in both corporations that enter into a merger, consolidation,
purchase or acquisition of assets, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only to the extent of the
ownership in that corporation prior to the transaction giving rise to the change and not
with respect to the ownership interest in the other corporation.
1.13.4
Stock Attribution Rules
. Code §318(a) shall apply for purposes of determining
stock ownership. Stock underlying a vested option is considered owned by the individual who
6
holds the vested option (and the stock underlying an unvested option is not considered owned
by the individual who holds the unvested option). For purposes of the preceding sentence, however,
if a vested option is exercisable for stock that is not substantially vested (as defined by Code
Sections 1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the
individual who holds the option. In addition, mutual and cooperative corporations are treated as
having stock for purposes of this section.
1.14
|
|
Code.
The Internal Revenue Code of 1986, as amended from time to time.
|
|
1.15
|
|
Commencement Date.
|
1.15.1 If a Participant is not a Key Employee, the first day of the third month beginning
after the first to occur of any of the Permissible Payment Events.
1.15.2 If a Participant is a Key Employee,
1.15.2.1 Unless the first Permissible Payment Event is a Termination of Employment, the
first day of the third month beginning after the first of the Permissible Payment Events to
occur, other than a Termination of Employment;
1.15.2.2 If the first Permissible Payment Event to occur is a Termination of
Employment, the earlier of (a) the date which is six (6) months and one (1) day after the
Participants Termination of Employment where the first Permissible Payment Event to occur
is Termination of Employment, or (b) the first day of the third month beginning after the
date of the Participants death.
1.16
Company Stock.
The Companys common stock, which is registered and publicly traded in
accordance with applicable securities laws.
1.17
Compensation.
The Bonus Compensation and the Stock Grant Compensation payable by the Employer
Group to a Participant during a Plan Year but for any Deferral Election pursuant to this Plan
deferring the receipt of such Bonus Compensation and the Stock Grant Compensation.
1.18
Contingent Beneficiary.
The Contingent Beneficiary, if any, designated on a Participants
Beneficiary Designation Form.
1.19
Declared Rate.
The percentage rate established from time to time by the Company, which rate
may be determined by reference to a rate established by an unrelated third party.
1.20
Deferral Account.
Book entries maintained by the Company reflecting the amount of the
Participants Accrued Benefit attributable to the Participants Deferred Contributions pursuant to
the Participants Deferral Elections, the Investment Adjustments with respect to the balance of the
Deferral Account, the Plan Expenses allocated thereto (if any), provided, however, that the
existence of such book entries shall not create, and shall not be deemed to create a trust of any
kind or a fiduciary relationship between the Company and the Participant and the Participants
Beneficiaries. The Plan Administrator shall maintain a separate Deferral Account for each
Participant for each Plan Year in which the Participant makes a Deferral Election. The Plan
7
Administrator may maintain additional Deferral Accounts or sub-accounts as it deems necessary to
accurately track and reflect the Participants Accrued Benefit.
1.21
Deferral Account Balance.
The amount of the Deferral Account as of a given Determination Date
as determined under Section 4.2.
1.22
Deferral Election.
An Initial, Annual or Revised Deferral Election as applicable.
1.23
Deferral Election Form.
The form specified by or otherwise acceptable to the Plan
Administrator for making a Deferral Election.
1.24
Deferral Period.
The period elected by the Participant on the Participants Deferral Election
Form and approved by the Company during which the Participant is not entitled to receive the
Compensation the Participant has elected to defer for a Plan Year pursuant to a Deferral Election.
Each Deferral Period begins on the date specified by the Company prior to the beginning of the Plan
Year and shall end on the last day of the Deferral Period as specified by the Company prior to the
beginning of the Plan Year. Unless otherwise designated by the Company, if the Deferral Period is
specified in terms of Plan Year or calendar years, the Deferral Period for an Initial Deferral
Election begins on the first day of the first Plan Year beginning after the end of the Initial Plan
Year and shall end on the last day of the last Plan Year which is the same number of Plan Years
after the Initial Plan Year as the number of Plan Years of calendar years specified in the Deferral
Election. Unless otherwise designated by the Company, if the Deferral Period is specified in terms
of Plan Years or calendar years, the Deferral Period for an Annual Deferral Election shall begin on
the first day of the second Plan Year beginning after Plan Year in which the Annual Deferral
Election is made and shall end on the last day of the last Plan Year which is the same number of
Plan Years after the Plan Year in which the Deferral Election is made as the number of Plan Years
or calendar years specified in the Annual Deferral Election as the Deferral Period. For example:
if the Annual Deferral Election is made in the Plan Year ending December 31, 2004 and the Deferral
Period of four (4) calendar years is elected, the first year of the Deferral Period is Plan Year
ending December 31, 2006, and the last Plan Year of the Deferral Period is the Plan Year ending on
December 31, 2009, with the Deferral Account being paid beginning on the Commencement Date in 2010.
1.25
Deferred Compensation.
The Bonus Deferred Compensation and the Stock Grant Deferred
Compensation deferred pursuant to a Deferral Election.
1.26
Designated Employee.
An Eligible Employee designated by the Board or its designee as eligible
to participate in the Plan and make Deferral Elections under this Plan. Once an Eligible Employee
becomes a Designated Employee, the Eligible Employee shall remain a Designated Employee until the
earlier of (a) the Designated Employees Separation From Service, (b) the date the Eligible
Employee ceases to be an Eligible Employee, or (c) the date the Board or its designee declares the
Designated Employee is no longer a Designated Employee.
1.27
Determination Date.
The last day of the last month ending on or before the first to occur of
an applicable Permissible Payment Event.
8
1.28
Disability.
A Participant has a Disability if any of the following apply:
1.28.1 The Participant is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected to result in death or
can be expect to last for a continuous period of not less than twelve (12) months.
1.28.2 The Participant is, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, receiving income replacement benefits for a period of
not less than three (3) months under an accident and health plan covering employees of the Company.
1.28.3 The Participant is determined to be totally disabled by the Social Security
Administration.
1.29
Effective Date.
January 1, 2008.
1.30
Eligible Employee.
Any employee of the Employer Group who is (a) a director level and above
employee (as defined by the Company from time to time), and (b) a member of a select group of
management or highly compensated employees, as defined by ERISA.
1.31
Employer Group.
The Company and all other business entities or other persons with whom the
Company would be treated as a single employer as part of either (a) a controlled group of
corporations described in Code Section 414(b), or (b) a group of trades or businesses (whether or
not incorporated) that are under common control as described in Code Section 414(c), or some
combination of such groups; and such groups shall be determined in each case by applying an eighty
percent (80%) ownership test.
1.32
ERISA.
The Employee Retirement Income Security Act of 1974, as amended from time to time.
1.33
Initial Deferral Election.
A written notice filed by an Initial Designated Employee with the
Plan Administrator in accordance with Section 3.1.1 and in substantially the form attached hereto
as Exhibit A, or such other form as is acceptable to the Plan Administrator, whereby the Initial
Designated Employee elects to defer the receipt of a specified amount or percentage of the Initial
Designated Employees Initial Year Compensation earned in the Initial Year of Participation after
the date the Participant files the Initial Deferral Election to be deferred, the Deferral Period
and the Payout Period of the Compensation which is deferred under the election. Such Deferral
Election shall be effective for the Plan Years indicated on the Deferral Election.
1.34
Initial Deferral Election Deadline.
The Initial Deferral Election Deadline is the earlier of:
(a) the date which is thirty (30) days after the date an Initial Designated Employee first becomes
an Initial Designated Employee in the Plan, or (b) the date set by the Plan Administrator as the
last day that a Initial Designated Employee can file an Initial Deferral Election with respect to
Initial Designated Employees Initial Year Compensation.
9
1.35
Initial Designated Employee.
1.35.1 A Designated Employee during the period beginning on the first day the Designated
Employee becomes a Designated Employee and ending on the last day of the Plan Year in which the
Designated Employee becomes a Designated Employee, who, except as otherwise provided in the
Applicable Tax Law, has not previously been eligible to participate in any deferred compensation
arrangement sponsored by any member of the Employer Group which is of the same type of deferred
compensation arrangement as the Plan as determined under the Applicable Tax Law.
1.35.2 Such other Designated Employee during any Plan Year in which such Designated Employee
is entitled to make an initial deferral election as such term is used under the Applicable Tax
Law.
1.36
Initial Year Compensation.
The Compensation to be earned by the Initial Designated Employee
during the period (i) beginning after the later of (a) date Initial Designated Employee files the
Initial Deferral Election or (b) such later date as specified by the Plan Administrator and (ii)
ending on the last day of the Initial Year of Participation.
1.37
Initial Year of Participation.
The Plan Year in which the Participant is an Initial
Designated Employee in the Plan.
1.38
Investment Adjustments.
The amount to be added to the Participants Accounts based upon the
Declared Rate established by the Company from time to time.
1.39
IRS.
The Internal Revenue Service of the Department of the Treasury.
1.40
Key Employee.
1.40.1 A Participant is a Key Employee if (a) the Companys stock is publicly tradable on an
established stock exchange or otherwise, and (b) the Participant either (i) holds a position with
the Employer Group at the vice president level or above in accordance with the Companys employment
policies established from time to time, or (ii) is a key employee as defined in Section 416(i) of
the Code (without regard to paragraph (5) thereof). Generally, the term key employee for
purposes of Section 416(i) of the Code means an employee who, at any time during the Plan Year, is
(i) an officer of the Company having an annual compensation greater than $130,000 (as adjusted
under the Code), (ii) a five percent (5%) owner of the Company, or (iii) a one percent (1%) owner
of the Company having an annual compensation from the employer of more than $150,000 (as adjusted
under the Code).
1.40.2 The determination shall be based upon the twelve (12)-month period ending on December
31 of each Plan Year. Participants who meet the definition of Key Employee on such date shall be
considered key employees for the twelve (12)-month period commencing on the first day of the 4th
month following the end of the twelve (12)-month period.
1.41
Participant.
An employee of the Employer Group who satisfies the conditions of Section 2.1.
1.42
Payment.
In general, except as provided in Sections 1.42.1 and 1.42.2 of this section, the
term Payment refers to each separately identified amount to which a Participant is entitled to
10
payment under the Plan on a determinable date, and includes amounts applied for the benefit of the
Participant. An amount is separately identified only if the amount may be objectively determined.
For example, an amount identified as ten percent (10%) of the account balance as of a specified
Payment Date would be a separately identified amount. A payment includes the provision of any
taxable benefit, including payment in cash or in kind. In addition, a payment includes, but is not
limited to, the transfer, cancellation or reduction of an amount of deferred compensation in
exchange for benefits under a welfare benefit plan, fringe benefit excludible under Code §§119 or
132, or any other benefit that is excluded from gross income.
1.42.1
Life Annuities
. The entitlement to a life annuity is treated as the
entitlement to a single payment. For purposes of this paragraph, the term life annuity means a
series of substantially equal periodic payments, payable not less frequently than annually, for the
life (or life expectancy) of the Participant or the joint lives (or life expectancies) of the
Participant and the Participants designated beneficiary. A change in the form of a payment from
one type of life annuity to another type of life annuity before any annuity payment has been made
is not considered a change in the time and form of a payment, provided that the annuities are
actuarially equivalent applying reasonable actuarial assumptions.
1.42.2
Installment Payments
. The entitlement to a series of installment payments that
is not a life annuity is treated as the entitlement to a series of separate payments, unless the
arrangement provides at all times with respect to the amount deferred that the right to the series
of installment payments is to be treated as a right to a single payment. For purposes of this
paragraph 1.42.2, a series of installment payments refers to an entitlement to the payment of a
series of substantially equal periodic amounts to be paid over a predetermined period of years,
except to the extent any increase in the amount reflects reasonable earnings through the date the
amount is paid.
1.43
Payment Date.
Any date upon which a Payment is due under the terms of this Plan.
1.44
Payout Period.
The period of time chosen by the Participant on the Participants Deferral
Election or such other period over which the Participants Accrued Benefit will be paid in
accordance with the provisions of the Plan and the Applicable Tax Law.
1.45
Permissible Payment Event.
Any of the following events:
1.45.1 the Participants Separation from Service;
1.45.2 the Participants Disability;
1.45.3 the occurrence of a Change in Control Event; or
1.45.4 the expiration of the Deferral Period selected by the Participant on a Deferral
Election Form with respect to a Deferral Account established for a Plan Year.
1.46
Per Phantom Share Value.
The last sale price of the Companys Stock on the stock exchange on
which it is regularly traded on the last trading day immediately prior to the date on which the Per
Phantom Share Value is being determined.
11
1.47
Phantom Shares.
The fictitious shares of the Companys Stock used solely for the purpose of
determining the amount distributable to a Participant pursuant to this Plan. Phantom Shares are
not actual shares of stock of the Company and carry no voting or other rights or privileges of any
kind or nature.
1.48
Plan.
The Famous Daves of America, Inc. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN, as herein stated, together with any and all amendments or supplements
thereto.
1.49
Plan Administrator.
The Board of Directors of the Company or their designee. A Participant
in the Plan shall not serve alone as Plan Administrator. If a Participant is part of a group or
committee designated as Plan Administrator, then the Participant may not participate in any
activity or decision relating solely to the Participants individual benefits under the Plan.
Matters solely affecting the applicable Participant will be resolved by the remaining committee
members or by the Board of Directors.
1.50
Plan Expenses.
Any expense incurred in connection with the formation and/or operation of the
Plan.
1.51
Plan Year.
The calendar year.
1.52
Revised Deferral Election.
A written notice filed by the Participant with the Plan
Administrator and in substantially the form attached hereto as Exhibit 1.52, or such other form as
is acceptable to the Plan Administrator, specifying a change to the Initial Deferral Election or an
Annual Deferral Election with respect to the Deferral Period or the Payout Period of the
Compensation which was deferred under the Initial Deferral Election or an Annual Deferral Election
as applicable. Such Revised Deferral Election shall be effective only as and to the extent
permitted under the Applicable Tax Law.
1.53
Spouse.
An individual who is married, for Federal income tax law purposes, to another
individual of the opposite sex. The Plan Administrator may, from time to time, require documentary
evidence that any individual covered as the Spouse of a Participant under the Plan satisfies this
definition.
1.54
Separation from Service.
Any of the following:
1.54.1 The Participants death; or
1.54.2 The Participants Termination of Employment.
1.55
Stock Grant Compensation.
Any grant of Company Stock which a Participant is entitled to
receive pursuant to any of the Companys stock grant plans or otherwise.
1.56
Stock Grant Deferred Compensation.
The portion of the Participants Stock Grant Compensation
which the Participant has elected to defer pursuant to this Plan.
12
1.57
Termination of Employment.
1.57.1 The date the Participant completely ceases to provide any services to the Employer
Group (both as an employee or as an independent contractor and whether such cessation is voluntary
or involuntary, other than by reason of death) under circumstances where the Employer Group and the
Participant reasonably anticipate that no further services would be performed by the Participant
for any member of the Employer Group after such date
.
1.57.2 The date of the reduction of the average level of bona fide services performed by the
Participant for the Employer Group (whether as an employee or an independent contractor and whether
such reduction is voluntary or involuntary), to no more than twenty percent (20%) of the level
during the immediately preceding thirty-six (36) month period (or the full period of services to
the Employer Group if the Participant has been providing services to the Employer Group for less
than thirty-six (36) months) under circumstances in which the Participant and the Employer Group
reasonably anticipated that the average level of bona fide services to be performed after a
specified date would be no more than twenty percent (20%) of the level during the immediately
preceding thirty-six (36) month period (or the full period of services to the Employer Group if the
Participant has been providing services to the Employer Group for less than thirty-six (36)
months).
1.57.3 A cessation or reduction in services shall not include any reduction due to an approved
leave of absence, military leave, sick leave, or other bona fide leave of absence (such as
temporary employment by the government) if the period of such leave does not exceed six (6) months,
or if longer, so long as the Participants right to reemployment with the Company is provided
either by statute or by contract. If the period of leave exceeds six (6) months and the
Participants right to reemployment is not provided either by statute or by contract, the
Termination of Employment will be deemed to have occurred on the first date immediately following
such six (6)-month period.
1.57.4 For periods during which the Participant is on a paid bona fide leave of absence and
has not otherwise terminated employment whether voluntarily or involuntarily, the Participant shall
be treated as providing bona fide services at a level equal to the level of services that the
Participant would have been required to perform to receive the compensation paid with respect to
such leave of absence. Periods during which a Participant is on an unpaid bona fide leave of
absence and has not otherwise terminated the employment relationship are disregarded for purposes
of this section (including for purposes of determining the applicable thirty-six (36)-month (or
shorter) period).
1.58
Unforeseeable Emergency.
1.58.1 A severe financial hardship to the Participant resulting from an illness or accident of
the Participant, the Participants spouse, the Participants beneficiary, or the Participants
dependent (as defined in Code §152, without regard to §§152(b)(1), (b)(2), and (d)(1)(B)); loss of
the Participants property due to casualty (including the need to rebuild a home following damage
to a home not otherwise covered by insurance; for example, not as a result of a natural disaster);
other similar extraordinary and unforeseeable circumstances arising as a result of
13
events beyond the control of the Participant, and such other circumstances as permitted under
the Applicable Tax Law.
1.58.2 Whether a Participant is faced with an Unforeseeable Emergency permitting a
distribution under this Plan is to be determined based on the relevant facts and circumstances of
each case, but, in any case, a distribution on account of Unforeseeable Emergency may not be made
to the extent that such emergency is or may be relieved through reimbursement or compensation from
insurance or otherwise, by liquidation of the Participants assets, to the extent the liquidation
of such assets would not cause severe financial hardship, or by cessation of deferrals under the
plan. An Unforeseeable Emergency may include: the imminent foreclosure of or eviction from the
Participants primary residence; the need to pay for medical expenses, including non-refundable
deductibles, as well as for the costs of prescription drug medication; the need to pay for the
funeral expenses of a spouse, a beneficiary, or a dependent (as defined in Code Section 152,
without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)). The purchase of a home and the
payment of college tuition are not Unforeseeable Emergencies.
1.59
Valuation Date.
The last day of each quarter of the calendar year, each Determination Date,
and such other dates as may be specified by the Plan Administrator from time to time.
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.1
Eligibility; Participation.
A Designated Employee shall become a Participant in the Plan
immediately upon becoming a Designated Employee unless a different date is specified by the
Company. Once a Designated Employee becomes a Participant, the Eligible Employee shall remain a
Participant until the later of (a) the date the Eligible Employee ceases to be a Designated
Employee or (b) the payment of all of the Participants Accrued Benefits.
ARTICLE 3
DEFERRALS AND CONTRIBUTIONS
3.1
Deferral Elections.
3.1.1
Initial Deferral Election
.
3.1.1.1 An Initial Designated Employee may make an Initial Deferral Election by filing
a Deferral Election Form with the Plan Administrator on or before the Initial Deferral
Election Deadline.
3.1.1.2 Such a Initial Deferral Election shall apply only to Initial Year Compensation.
If Initial Designated Employee fails to file an Initial Deferral Election by the Initial
Deferral Election Deadline, no part of the Initial Designated Employees Initial Year
Compensation may be deferred.
3.1.1.3 No Initial Deferral Election shall be effective until accepted by the Plan
Administrator. The Plan Administrator may, before the Initial Deferral Election Deadline,
limit the amount of an Initial Designated Employees Initial Year
14
Compensation that the Initial Designated Employee can defer during a Plan Year pursuant
to any Initial Deferral Election.
3.1.2
Annual Deferral Elections
. A Participant who is a Designated Employee may make
an Annual Deferral Election by filing a Deferral Election Form with the Plan Administrator on or
before the Annual Deferral Election Deadline. Each such Annual Deferral Election shall apply only
to Compensation earned with respect to services rendered during a Plan Year beginning after the
date the Annual Deferral Election is filed with the Plan Administrator. No Annual Deferral
Election shall be effective until accepted in writing by the Plan Administrator. The Plan
Administrator may, before the beginning of a Plan Year, limit the amount of the Participants
Compensation that the Participant can defer during a Plan Year pursuant to any Annual Deferral
Election.
3.1.3
Payroll Adjustment
. Upon receipt of a Deferral Election, the Plan Administrator
shall notify the Company to adjust the Participants Compensation otherwise payable to the
Participant as necessary to take into account the amount of the Participants Compensation that the
Participant has elected to defer pursuant to a Deferral Election. On the Deferral Election Form,
the Participant shall specify the amount of the Participants Compensation to be deferred, which
specification may be separate and distinct for the individual components of Compensation, and may
be expressed as percentages or fixed dollar amounts as and to the extent approved by the Plan
Administrator.
3.1.4
Revocation or Change of Deferral Election
.
3.1.4.1 Except as otherwise permitted under the Applicable Tax Law and by the Plan
Administrator, this Section 3.1.4 and Section 3.1.5, each Deferral Election shall be
irrevocable.
3.1.4.2 No revocation or change of any Deferral Election shall be effective unless and
until it complies with the Applicable Tax Law and unless and until it is accepted by the
Plan Administrator in writing.
3.1.4.3 Notwithstanding the foregoing, a Deferral Election Form, which is filed with
the Plan Administrator prior to the Initial Deferral Election Deadline or the Annual
Deferral Election Deadline, as applicable, may be revoked or changed at anytime prior to the
Initial Deferral Election Deadline or the Annual Deferral Election Deadline, as applicable.
3.1.4.4 A Participant who has incurred an Unforeseeable Emergency as determined by the
Plan Administrator may revoke the Participants Deferral Election as applicable with the
consent of the Plan Administrator as and to the extent permitted under the Applicable Tax
Law.
15
3.1.5
Revised Deferral Elections Changes to the Deferral Period, Payout Period, or Time
and Form of Payment
.
3.1.5.1
Reduction of Deferral Period/Acceleration of Time of Payment
. Except
as provided below or as otherwise permitted herein, under the Applicable Tax Law, and by the
Plan Administrator, neither the Deferral Period nor the Payout Period may be reduced nor may
the time of any Payment be otherwise accelerated.
3.1.5.2
Extensions/Delays
. With the consent of the Plan Administrator and to
the extent permitted under the Applicable Tax Law, the Deferral Period may be extended, the
Payout Period increased, and the time for any Payment delayed at the written election of the
Participant by submitting a Revised Deferral Election to the Plan Administrator, provided
that
3.1.5.2.1 any Revised Deferral Election may not be made with respect to any
Payment which would be paid on a date which is less than twelve (12) months after
the date the Revised Deferral Election is filed with the Plan Administrator without
regard to the Revised Deferral Election (or, in the case of a life annuity or
installment payments treated as a single Payment, less than twelve (12) months after
the date the Revised Deferral Election is filed with the Plan Administrator without
regard to the Revised Deferral Election);
3.1.5.2.2 the Payment which is to be deferred pursuant to such Revised Deferral
Election is deferred for a period of not less than five (5) years from the date such
Payment would otherwise have been paid but for the Revised Deferral Election (or, in
the case of a life annuity or installment payments treated as a single Payment, five
(5) years from the date the first amount was scheduled to be paid); and
3.1.5.2.3 such extension of the Deferral Period or the Payout Period or delay
in the time of any Payment is in accordance with the Applicable Tax Law.
3.1.5.3
Separate Payments
. To the extent provided under the Applicable Tax
Law, each payment to be made to the Participant shall be treated as a Separate Payment.
Consistent with the Applicable Tax Law and with the consent of the Plan Administrator, the
Participant may extend the Deferral Period or the date of Payment separately with respect
each Separate Payment.
3.1.5.4
Conflict of Interest Payments
. Notwithstanding the foregoing, the time
or schedule of a Payment under the Plan may be modified as may be necessary to comply with a
certificate of divestiture (as defined in Code § 1043(b)(2)) as and to the extent permitted
under the Applicable Tax Law.
16
ARTICLE 4
DEFERRAL ACCOUNTS AND ALLOCATIONS TO DEFERRAL ACCOUNTS
4.1
Deferral Accounts.
The Plan Administrator shall establish a separate Deferral Account for each
Participant for each Plan Year for which the Participant makes a timely Deferral Election.
4.2
Allocations and Adjustments to Deferral Accounts.
The Company shall adjust a Participants
Deferral Account as provided below:
4.2.1
Bonus Deferrals
.
4.2.1.1
Crediting of Bonus Deferred Compensation
. The Participants Bonus
Deferred Compensation that the Participant elects to defer on the Participants Deferral
Election Form for the Plan Year shall be credited to the Participants Deferral Account for
such Plan Year as of the date the Participant would otherwise have received such Bonus
Deferred Compensation. The Company shall deduct from the Participants Compensation that is
not deferred pursuant to this Plan, any amounts it is required to withhold under any state,
federal or local law for taxes or other charges relating to any Bonus Deferred Compensation.
4.2.1.2
Conversion of Bonus Deferred Compensation to Phantom Shares
. The
amount of any Bonus Deferred Compensation allocated to the Deferral Account for any Plan
Year shall be converted immediately into a number of Phantom Shares determined by dividing
the amount of Bonus Deferred Compensation which the Participant elects to defer by the Per
Phantom Share Value as of the date the Bonus Deferred Compensation is credited to the
Deferral Account.
4.2.2
Stock Grant Deferrals
. The Participants Stock Grant Deferred Compensation that
the Participant elects to defer on the Participants Deferral Election Form for the Plan Year shall
be credited to the Participants Deferral Account as of the date the Participant would otherwise
have received such Stock Grant Deferred Compensation. The Company shall deduct from the
Participants Stock Grant Compensation otherwise payable to the Participant but for the Deferral
Election the amount of Stock Grant Deferred Compensation. The Company may deduct from the
Participants Compensation that is not deferred pursuant to this Plan, any amounts it is required
to withhold under any state, federal or local law for taxes or other charges relating to the Stock
Grant Deferred Compensation. The Participants Deferral Account shall be credited with the same
number of Phantom Shares as the number of shares of Company Stock that the Participant elects not
to receive pursuant to the Participants Deferral Election.
4.2.3
Reduction of Phantom Shares in Deferral Account for Distributions
.
4.2.3.1 If a Participant elects to receive a distribution of all or a part of his
Deferral Account in the form of Company Stock, the number of Phantom Shares in the
Participants Deferral Account will be reduced by the number of shares of the Company Stock
distributed to the Participant as a distribution of all or part of the value of the
Participants Deferral Account.
17
4.2.3.2 If the Participant elects to receive a distribution of all or a part of his
Deferral Account in the form of cash, the number of Phantom Shares in a Deferral Account
shall be reduced by an amount equal to (a) the amount of the distribution divided by (b) the
Per Phantom Share Value as of the Valuation Date.
4.3
Value of Deferral Accounts.
The value of a Participants Deferral Account as of a Valuation
Date shall be equal to the product of (a) the number of Phantom Shares credited to such Deferral
Account multiplied by (b) the Per Phantom Share Value as of the Valuation Date.
4.4
Determination of Accounts.
A Participants Accrued Benefit as of each Valuation Date shall
consist of the balance of the Participants Deferral Accounts, adjusted as provided in Section 4.2
through such date.
4.5
Statement of Accounts.
The Company shall provide to each Participant, within one hundred
twenty (120) days after the close of each Plan Year, a statement in such form as the Company
selects setting forth the amount of each of the Participants Deferral Accounts as of the last day
of the Plan Year just ended.
4.6
Accounting Device Only.
A Participants Deferral Accounts shall be utilized solely as a device
for the measurement and determination of the amounts to be paid to the Participant under this Plan.
A Participants Deferral Account shall not constitute or be treated as a trust fund of any kind or
give any Participant any right to any of the assets of the Company other than as a general creditor
of the Company.
ARTICLE 5
PAYMENT OF BENEFITS
5.1
Payment Events.
Except as otherwise provided below in this ARTICLE 5, the Deferral Account
Balance of a Participants Deferral Account shall be payable after the occurrence of a Permissible
Payment Event at the time and in the manner specified below.
5.2
Commencement of Payment.
Except as otherwise provided in this ARTICLE 5 and Sections 7.2 and
8.2, beginning on the Commencement Date of any Deferral Account, the Company shall pay to the
Participant the value of the Participants Deferral Account (determined as of the applicable
Determination Date as provided herein).
5.3
Form of Payment.
5.3.1
General
. Except as otherwise provided in this ARTICLE 5, the value of such
Deferral Account shall be paid in the manner and over the Payout Period specified in the
Participants applicable Deferral Election. Any Deferral Election which provides for the payment
of the Deferral Account over a Payout Period shall be paid in substantially equal monthly,
quarterly or annual payments over the Payout Period as elected by the Participant in the
Participants Deferral Election. If the Deferral Election does not specify the frequency of the
Payments, such Payments shall be monthly. A Participant may elect on the Deferral Election Form to
have all or part of the Participants Deferral Account paid in cash or in shares of Company Stock.
18
5.3.2
Change in Control
. Notwithstanding the foregoing, upon the occurrence of a
Change in Control Event, the Participants Accrued Benefit shall be paid to the Participant in a
lump sum notwithstanding any Deferral Election to the contrary.
5.3.3
Death of Participant
.
5.3.3.1 In the event of the Participants death, the Company shall pay the
Participants entire unpaid Accrued Benefit to the Participants Beneficiary in a single
lump sum Payment notwithstanding any Deferral Period or Payout Period specified in a
Deferral Election.
5.3.3.2 If the Beneficiary consists of more than one (1) person or entity, then the
Payment shall be divided among such person or entities designated as the Beneficiary on the
Beneficiary Designation Form as and to the extent provided in the Beneficiary Designation
Form. In the event of any ambiguity in the Beneficiary Designation Form, the Plan
Administrators interpretation of the Beneficiary Designation Form shall be final and
conclusive as to the persons or entities who are entitled to received the Participants
unpaid Accrued Benefit under the Plan and the amount which each such person or entity is
entitled to receive.
5.3.3.3 If any Payment shall be payable to any trust, the Company shall not be liable
to see to the application by the trustee of any Payment hereunder at any time, and may rely
upon the sole signature of the Trustee to any receipt, release or waiver, or to any transfer
or other instrument to whomsoever made purporting to affect this nomination or any right
hereunder.
5.4
Permitted Delay of Payments.
Except as otherwise provided in this Section 5.4, and except as
otherwise permitted pursuant to a timely Revised Deferral Election, the Payment Date may not be
delayed. A Payment may be delayed to a date after the Commencement Date or other applicable
Payment Date under any of the circumstances described in this Section 5.4, provided the Company
treats all Payments to similarly situated Participants on a reasonably consistent basis.
5.4.1
Payments Subject To Section 162(m)
. A Payment may be delayed to the extent that
the Participant reasonably anticipates that if the Payment were made as scheduled, the
Participants deduction with respect to such Payment would not be permitted due to the application
of Code Section 162(m), provided that the Payment is made either during the Participants first
taxable year in which the Participant reasonably anticipates, or should reasonably anticipate, that
if the Payment is made during such year, the deduction of such Payment will not be barred by
application of Code Section 162(m) or during the period beginning with the date of the
Participants Separation From Service and ending on the later of (a) the last day of the taxable
year of the Participant in which the Participant has a Separation From Service or (b) the 15th day
of the third month following the Participants Separation From Service, and provided further that
where any scheduled Payment to a specific Participant in a Participants taxable year is delayed in
accordance with this Section, the delay in Payment will be treated as a Revised Deferral Election
unless all scheduled Payments to that Participant that could be delayed in accordance with this
Section are also delayed.
19
5.4.2
Payments That Would Violate Federal Securities Laws Or Other Applicable Law
. A
Payment may be delayed where the Participant reasonably anticipates that the making of the Payment
will violate Federal securities laws or other applicable law; provided that the Payment is made at
the earliest date at which the Participant reasonably anticipates that the making of the Payment
will not cause such violation. The making of a Payment that would cause inclusion in gross income
or the application of any penalty provision or other provision of the Code is not treated as a
violation of applicable law.
5.4.3
USERRA Rights
. Any change in the time or form of a Payment necessary to satisfy
the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, as
amended, 38 U.S.C. 4301-4344.
5.5
Payments Deemed Made on Specified Date.
5.5.1 A Payment is treated as made upon the Payment Date specified under the Plan if (a) the
Payment is made at such date or a later date within the same taxable year of the Participant or, if
later, by the 15th day of the third calendar month following the date specified under the Plan and
(b) the Participant is not permitted, directly or indirectly, to designate the taxable year of the
Payment.
5.5.2 In addition, a Payment is treated as made upon the date specified under the Plan and is
not treated as an accelerated Payment if (a) the Payment is made no earlier than thirty (30) days
before the date specified in the Plan and (b) the Participant is not permitted, directly or
indirectly to designate the taxable year of the Payment.
5.5.3 For purposes of this paragraph, if the date specified is only a designated taxable year
of the Participant, or a period of time during such a taxable year, the date specified under the
Plan for a Payment is treated as the first day of such taxable year or the first day of the period
of time during such taxable year, as applicable.
5.6
Permitted Acceleration of Payments.
Except as otherwise provided in this Section, and
Applicable Tax Law, a Payment Date may not be accelerated.
5.6.1
Cash-out of De Minimus Accrued Benefit
. Notwithstanding the foregoing, if the
Participants entire Accrued Benefit under the Plan and all Aggregated Arrangements is less than
the 402(g) Amount, or such lesser amount specified by the Company, then, notwithstanding the Payout
Periods elected by the Participant or the other terms of this Plan, the Company may, in its sole
discretion, pay to the Participant the Participants entire Accrued Benefit in a lump sum provided
that the Participant receives the Participants entire Accrued Benefit under the Aggregated
Arrangements.
5.6.2
Domestic Relations Order
. Notwithstanding the foregoing provisions of this Plan
or the Participants Deferral Election, the Plan Administrator may accelerate the time or schedule
of a Payment under this Plan to an individual other than the Participant, or a Payment may be made
to an individual other than the Participant, to the extent necessary to fulfill a domestic
relations order (as defined in section 414(p)(1)(B) of the Code).
20
5.6.3
Conflicts Of Interest
.
5.6.3.1
Compliance With Ethics Agreements With The Federal Government
. The
Plan Administrator may accelerate the time or schedule of a Payment under this Plan, or a
Payment may be made under this Plan, to the extent necessary for any Federal officer or
employee in the executive branch to comply with an ethics agreement with the Federal
government.
5.6.3.2
Compliance With Ethics Laws Or Conflicts Of Interest Laws
. The Plan
Administrator may accelerate the time or schedule of a Payment under this Plan, or a Payment
may be made under this Plan, to the extent reasonably necessary to avoid the violation of an
applicable Federal, state, local, or foreign ethics law or conflicts of interest law
(including where such Payment is reasonably necessary to permit the Participant to
participate in activities in the normal course of his or her position in which the
Participant would otherwise not be able to participate under an applicable rule). A Payment
is reasonably necessary to avoid the violation of a Federal, state, local, or foreign ethics
law or conflicts of interest law if the Payment is a necessary part of a course of action
that results in compliance with a Federal, state, local, or foreign ethics law or conflicts
of interest law that would be violated absent such course of action, regardless of whether
other actions would also result in compliance with the Federal, state, local, or foreign
ethics law or conflicts of interest law. For this purpose, a provision of foreign law is
considered applicable only to foreign earned income (as defined under section 911(b)(1) of
the Code without regard to section 911(b)(1)(B)(iv) of the Code and without regard to the
requirement that the income be attributable to services performed during the period
described in section 911(d)(1)(A) or (B) of the Code) from sources within the foreign
country that promulgated such law.
5.6.4
Payment Of Employment Taxes
.
5.6.4.1 The Plan Administrator may accelerate the time or schedule of a Payment, or a
Payment may be made under this Plan, to pay the Federal Insurance Contributions Act (FICA)
tax imposed under section 3101, section 3121(a), and section 3121(v)(2) of the Code, or the
Railroad Retirement Act tax imposed under section 3201, section 3211, section 3231(e)(1),
and section 3231(e)(8) of the Code, where applicable, on Compensation deferred under the
Plan (the FICA or RRTA Amount).
5.6.4.2 The Plan Administrator may also accelerate the time or schedule of a Payment,
or a Payment may be made under this Plan, to pay the income tax at source on wages imposed
under section 3401 of the Code or the corresponding withholding provisions of applicable
state, local, or foreign tax laws as a result of the Payment of the FICA or RRTA Amount, and
to pay the additional income tax at the source on wages attributable to the pyramiding
section 3401 of the Code wages and taxes.
5.6.4.3 Notwithstanding the foregoing, the total Payment under this Section 5.6.4
provision must not exceed the aggregate of the FICA or RRTA Amount, and the income tax
withholding related to such FICA or RRTA Amount.
21
5.6.5
Payment Upon Income Inclusion Under Section 409A
. The Plan Administrator may
accelerate the time or schedule of a Payment, or a Payment under this Plan may be made, at any time
the Plan fails to meet the requirements of the Applicable Tax Law. Such Payment may not exceed the
amount required to be included in income as a result of the failure to comply with the requirements
of the Applicable Tax Law.
5.6.6
Withdrawals for Unforeseeable Emergencies
.
5.6.6.1
Amount of Withdrawal
. In the event that the Plan Administrator, upon
written request of a Participant, determines, in its sole discretion in compliance with the
Applicable Tax Law, that the Participant has suffered an Unforeseeable Emergency, the Plan
Administrator shall pay to the Participant from the Participants Deferral Accounts as soon
as practicable following such determination, an amount equal to the lesser of (a) the amount
requested by the Participant, (b) the balance of such Participants Deferral Accounts as of
the Determination Date immediately preceding such Payment, or (c) the amount, as determined
under the Applicable Tax Law necessary to satisfy such Unforeseeable Emergency, plus amounts
necessary to pay any Federal, state, or local income taxes or penalties reasonably
anticipated to result from the distribution, determined after taking into account the extent
to which such Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participants assets (to the
extent the liquidation of such assets would not itself cause severe financial hardship) or a
reduction in the Participants Deferral Election, if any, then in effect for the Plan Year
in which the request is made and any subsequent Plan Years. Distributions because of an
Unforeseeable Emergency must be limited to the amount necessary to satisfy the emergency
need (which may include amounts necessary to pay any Federal, state, or local income taxes
or penalties reasonably anticipated to result from the distribution). A distribution on
account of an Unforeseeable Emergency may not be made to the extent that such emergency is
or may be relieved through reimbursement or compensation from insurance or otherwise, by
liquidation of the Participants assets (to the extent the liquidation of such assets would
not cause severe financial hardship), or by cessation of deferrals under the arrangement.
5.6.6.2
Determination of Unforeseeable Emergency
. Whether a Participant is
faced with an Unforeseeable Emergency permitting a distribution under this Section is to be
determined based on the relevant facts and circumstances of each case.
5.6.6.3
Rules Adopted by Plan Administrator
. The Plan Administrator shall have
the authority to adopt additional rules relating to Withdrawals for Unforeseeable
Emergencies provided such rules are consistent with the Applicable Tax Law. In
administering these rules, the Plan Administrator shall act in accordance with the
Applicable Tax Law, the principle being that the primary purpose of this Plan is to provide
additional retirement income, not additional funds for current consumption. Such rules may
limit the ability of a Participant receiving a distribution as a result of a Withdrawal for
Unforeseeable Emergencies to make Deferral Elections.
5.6.6.4
Cancellation Of Deferrals Following An Unforeseeable Emergency Or Hardship
Distribution
. The Plan Administrator may cancel a Participants Deferral
22
Election, or such a cancellation may be made, due to an Unforeseeable Emergency or a
hardship distribution pursuant to §1.401(k)-1(d)(3) of the Treasury Regulations. The
Deferral Election shall be cancelled and not merely postponed or otherwise delayed. Any
later Deferral Election will be subject to the provisions governing Initial Deferral
Elections under Section 3.1.1 and §1.409A-2(a) of the Applicable Tax Law.
5.6.7
Certain Distributions To Avoid A Nonallocation Year Under Section 409(p)
. The
Plan Administrator may accelerate the time and form of a Payment, or a Payment may be made under
this Plan, to prevent the occurrence of a nonallocation year (within the meaning of Code Section
409(p)(3)) in a Plan Year of an employee stock ownership plan next following the Plan Year in which
such Payment is made, provided that the amount distributed may not exceed one hundred twenty-five
percent (125%) of the minimum amount of distribution necessary to avoid the occurrence of a
nonallocation year. For purposes of determining permissible distributions under this Section,
synthetic equity (within the meaning of section 409(p)(6)(C) of the Code and §1.409(p)-1(f) of the
Applicable Tax Law) granted during the Plan Year of the employee stock ownership plan in which such
Payment is made is disregarded for purposes of determining whether the subsequent Plan Year would
result in a nonallocation year.
5.6.8
Payment Of State, Local, Or Foreign Taxes
.
5.6.8.1 The Plan Administrator may accelerate the time and form of a Payment, or a
Payment may be made under this Plan, to reflect payment of state, local, or foreign tax
obligations arising from participation in the Plan that apply to an amount of Compensation
deferred under this Plan before the amount is paid or made available to the Participant (the
state, local, or foreign tax amount). Such Payment may not exceed the amount of such taxes
due as a result of participation in the Plan. Such Payment may be made by distributions to
the Participant in the form of withholding pursuant to provisions of applicable state,
local, or foreign law or by distribution directly to the Participant.
5.6.8.2 The Plan Administrator may also accelerate the time or schedule of Payment, or
a Payment may be made under this Plan, to pay the income tax at source on wages imposed
under section 3401 of the Code as a result of such Payment and to pay the additional income
tax at source on wages imposed under section 3401 of the Code attributable to such
additional section 3401 wages and taxes.
5.6.8.3 Notwithstanding the foregoing, the total Payment under this Section 5.6.8 must
not exceed the aggregate of the state, local, and foreign tax amount, and the income tax
withholding related to such state, local, and foreign tax amount.
5.6.9
Cancellation Of Deferral Elections Due To Disability
. The Plan Administrator may
cancel a Participants Deferral Election, or cancellation of such Deferral Election may be made,
where such cancellation occurs by the later of (a) the end of the taxable year of the Participant
or (b) the 15th day of the third month following the date the Participant incurs a disability as
defined below. For purposes of this Section, a disability is any medically determinable physical
or mental impairment resulting in the Participants inability to perform the duties of the
Participants position or any substantially similar position, where such impairment
23
can be expected to result in death or can be expected to last for a continuous period of not
less than six (6) months.
5.6.10
Certain offsets
. The Plan Administrator may accelerate the time or schedule of
a Payment, or a Payment may be made under the Plan, as satisfaction of a debt of the Participant to
the Company, where such debt is incurred in the ordinary course of the employment or independent
contractor relationship between the Company and the Employer Group, provided that the entire amount
of reduction in any of the Companys taxable years does not exceed five thousand dollars ($5,000),
and the reduction is made at the same time and in the same amount as the debt otherwise would have
been due and collected from the Participant.
5.6.11
Bona Fide Disputes As To A Right To A Payment
. The Plan Administrator may
accelerate the time or schedule of one or more Payments, or a Payment may be made under the Plan,
where such Payments occur as part of a settlement between the Participant and the Employer Group of
an arms length, bona fide dispute as to the Participants right to the Accrued Benefit as provided
under the Applicable Tax Law. The Plan Administrator may not exercise any discretion to accelerate
Payments other than due to an arms length settlement of a bona fide dispute as to the
Participants right to the Accrued Benefit. Under Applicable Tax Law, (a) a Payment will be
presumed not to meet the foregoing requirements unless the Payment is a substantial reduction to
the amount that would have been payable had there been no dispute as to the Participants right to
the Payment, (b) a reduction that is less than twenty-five percent (25%) of the present value of
the Accrued Benefit in dispute is not a substantial reduction, and (c) a Payment is presumed not to
qualify under this Section 5.6.11 if the Payment is made proximate to a downturn in the financial
health of the Company.
5.6.12
Changes In Elections Under A Cafeteria Plan
. A change in an election under a
cafeteria plan (as defined in section 125(d)) of the Code does not result in an accelerated Payment
of an amount deferred under this Plan to the extent that the change in the amount deferred under
the Plan results solely from the application of the change in amount eligible to be treated as
Compensation under the terms of the Plan resulting from the election change under the cafeteria
plan, to a benefit formula under the Plan based upon the Participants eligible Compensation, and
only to the extent that such change applies in the same manner as any other increase or decrease in
Compensation would apply to such benefit formula.
5.6.13
Termination of Plan
5.6.13.1 Except as provided below and to the extent permitted under the Applicable Tax
Law, upon the termination of the Plan as provided for herein, the Plan Administrator shall
pay to the Participant or the Participants Beneficiary, as the case may be, the
Participants Accrued Benefit at the times and in the amounts specified in the Participants
Deferral Election.
5.6.13.2 Notwithstanding the foregoing, the time and form of a Payment under this Plan
may be accelerated upon a termination and liquidation of the Plan provided that the
acceleration of the Payment is made in accordance with one of the following:
24
5.6.13.2.1 The Companys termination and liquidation of the Plan within twelve
(12) months of a corporate dissolution taxed under section 331 of the Code, or with
the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided
that the Accrued Benefits are included in the Participants gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount
is actually or constructively received):
(1) The calendar year in which the Plan termination and
liquidation occurs.
(2) The first calendar year in which the amount is no longer
subject to a substantial risk of forfeiture.
(3) The first calendar year in which the Payment is
administratively practicable.
5.6.13.2.2 The irrevocable termination and liquidation of the Plan within the
thirty (30) days preceding or the twelve (12) months following a Change In Control
Event, provided that this Section will only apply to a Payment under the Plan if all
Aggregated Arrangements are terminated and liquidated with respect to each
Participant that experienced the Change In Control Event, so that under the terms of
the termination and liquidation all such Participants are required to receive all
amounts of compensation deferred under the Aggregated Arrangements within twelve
(12) months of the date the Company irrevocably takes all necessary action to
terminate and liquidate the Aggregated Arrangements.
5.6.13.2.3 The termination and liquidation of the Plan, provided that:
(1) The termination and liquidation does not occur proximate to
a downturn in the financial health of the Company;
(2) The Employer Group terminates and liquidates all Aggregated
Arrangements;
(3) No Payments in liquidation of the Plan are made within
twelve (12) months of the date the Company takes all necessary action
to irrevocably terminate and liquidate the Plan other than Payments
that would be payable under the terms of the Plan if the action to
terminate and liquidate the Plan had not occurred;
(4) All Payments are made within twenty-four (24) months of the
date the Company takes all necessary action to irrevocably terminate
and liquidate the Plan; and
(5) The Company does not adopt a new plan that would be
aggregated with any terminated and liquidated Aggregated
25
Arrangement, at any time within three (3) years following the
date the Company takes all necessary action to irrevocably terminate
and liquidate the plan.
5.7
Interest on Deferral Account.
If and to the extent that a Participant elects to receive the
Participants Deferral Account in cash, then, after the applicable Determination Date, the unpaid
balance of a Participants Deferral Account shall be increased by an amount equal to the product of
the principal balance of the Deferral Account as of the Valuation Date multiplied by the Declared
Rate (or such other rate as the Company may specify in advance in accordance with the Applicable
Tax Law) then in effect for the applicable period from the time of the last Payment or such other
rate as the Company may specify. Such accrued interest shall be paid with the next Payment then
due.
5.8
Facility of Payment.
If a distribution is to be made to a minor, or to a person who is
otherwise incompetent, then the Plan Administrator may, in its discretion, make such distribution
(i) to the legal guardian or, if none, to a parent of a minor payee with whom the payee maintains a
residence, or (ii) to the conservator or committee or, if none, to the person having custody of an
incompetent payee. Any such distribution shall fully discharge the Plan Administrator, the
Company, and the Plan from further liability on account thereof.
5.9
Withholding.
Any and all Payments to be made to a Participant or a Participants Beneficiary
pursuant to this Plan shall be subject to all federal, state and local income and employment taxes.
The Company may withhold such taxes from the Payments under this Plan or from salary, bonuses or
other amounts due to the Participant as determined by the Plan Administrator as and to the extent
required by Applicable Tax Law.
ARTICLE 6
PLAN ADMINISTRATION
6.1
Responsibility for Administration of the Plan.
6.1.1 The Plan Administrator shall be responsible for the management, operation, and
administration of the Plan. The Plan Administrator may employ others to render advice with regard
to its responsibilities under this Plan. It may also allocate its responsibilities to others and
may exercise any other powers necessary for the discharge of its duties. The Plan Administrator
shall be entitled to rely conclusively upon all tables, valuations, certifications, opinions and
reports furnished by any actuary, accountant, controller, counsel or other person employed or
engaged by the Plan Administrator with respect to the Plan.
6.1.2 The primary responsibility of the Plan Administrator is to administer the Plan for the
benefit of the Participants and their beneficiaries, subject to the specific terms of the Plan.
The Plan Administrator shall administer the Plan in accordance with its terms and shall have the
power to determine all questions arising in connection with the administration, interpretation, and
application of the Plan. Any such determination shall be conclusive and binding upon all persons
and their heirs, executors, beneficiaries, successors and assigns. The Plan Administrator shall
have all powers necessary or appropriate to accomplish its duties under the Plan. The Plan
Administrator shall also have the discretion and authority to make, amend, interpret, and enforce
26
all appropriate rules and regulations for the administration of this Plan and decide or
resolve any and all questions, including, but not limited to, interpretations of this Plan and
entitlement to or amount of benefits under this Plan, as may arise in connection with the Plan.
6.2
Claims and Appeal Procedure.
6.2.1
Claims Procedure
.
6.2.1.1 If a Participant, Beneficiary or other person claiming eligibility or benefits
under this Plan (a Claimant) believes that he or she is eligible for benefits under the
Plan, or is entitled to benefits different from those being provided by the Company, the
Claimant may make a claim for eligibility or for benefits (as defined below) by submitting a
written claim (a Claim) for benefits on such forms as the Company may reasonably specify
from time to time and shall provide such information as the Plan Administrator may
reasonably require to support such Claim. Such Claim shall be reviewed by a committee of
one or more individuals serving as Claim Administrator. Except as provided below, the
Claim Administrator shall notify a Claimant in writing within ninety (90) days of receipt of
the Claimants written Claim whether the Claim Administrator has approved or denied such
Claim in whole or in part.
6.2.1.2 If the Claim Administrator determines that there are special circumstances
requiring additional time to make a decision, the Claim Administrator shall notify the
Claimant of the special circumstances and the date by which a decision is expected to be
made, and may extend the time for up to an additional ninety (90)-day period. If the Claim
Administrator determines that any request for Plan benefits does not comply with the Plans
applicable procedure, the Claim Administrator shall notify the Claimant that the request
does not comply with the applicable procedure and what must be done to comply. If the Claim
Administrator requires more information to review a claim for benefits, the Claim
Administrator shall request the specified information from the Claimant within a reasonable
time after receiving the request. The Claimant shall have up to one hundred eighty (180)
days to provide the missing information. From the beginning of that period until the
missing information is provided (or the end of that period, if earlier), the time period
provided in the preceding paragraph for the Claim Administrators decision shall be
extended. After receiving any such information from the Claimant or, if earlier, at the end
of such one hundred eighty (180) days, the Claim Administrator shall review the information
and notify the Claimant of the Claim Administrators decision within the extended time
period for that decision.
6.2.1.3 If the Claim Administrator determines that a Claimant is not eligible for the
benefits claimed, the notice shall set forth, in a manner calculated to be understood by the
Claimant: (a) the specific reasons for such denial, (b) a specific reference to the
provisions of the Plan on which the denial is based, (c) a description of any additional
information or material necessary for the Claimant to perfect his or her claim, and a
description of why it is needed, and (d) an explanation of the Plans claims review
procedure and other appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed, including the time limits that apply to such claims
review procedure, description of the Plans review procedures, and the time limits
27
applicable to such procedures, including a statement of the Claimants right to bring a
civil action under section 502(a) of ERISA following an adverse benefit determination on
review, to the extent such Section requires the Claimant to bring a civil suit that is not
subject to arbitration under Section 6.2.2.2.
6.2.2
Appeal Procedure for Denied Benefits
.
6.2.2.1 If a Claimant disagrees with the Claim Administrators determination, the
Claimant shall have the opportunity to have such claim reviewed by filing a petition for
review with the Plan Administrator within sixty (60) days after receipt of the notice issued
by the Claim Administrator. The petition shall state the specific reasons the Claimant
believes he or she is entitled to benefits or greater or different benefits. Such petition
shall be reviewed by a committee of one or more individuals who are not under the
supervision of any person serving as Claim Administrator (the Reviewer). The Claimant may
submit written comments, documents, records, and other information relating to the Claim and
will be provided, upon request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relevant to the Claimants Claim.
6.2.2.2 Within sixty (60) days after receipt by the Plan Administrator of said
petition, the Reviewer shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Reviewer orally or in writing, and the Claimant (or
counsel) shall have the right, upon request and free of charge, for reasonable access to,
and copies of, all documents, records, and other information relevant to the Claimants
Claim; and the Reviewer shall take into account all comments, documents, records, and other
information submitted by the Claimant relating to the Claim, without regard to whether such
information was submitted or considered in the initial benefit determination. The Reviewer
shall notify the Claimant of its decision in writing within the sixty (60)-day period,
stating (in a manner calculated to be understood by the Claimant) the specific basis for its
decision and the specific provisions of the Plan on which the decision is based. If,
because of the need for a hearing, the sixty (60)-day period is not sufficient, the decision
may be deferred for up to another sixty (60)-day period at the election of the Reviewer, but
notice of this deferral shall be given to the Claimant. In the case of any extension under
this paragraph, the notice of extension shall specifically explain the standards on which
entitlement to a benefit is based, the unresolved issues that prevent a decision on the
claim, and the additional information needed to resolve those issues, and the Claimant shall
be afforded at least forty-five (45) days within which to provide the specified information.
ARTICLE 7
AMENDMENT OR TERMINATION
7.1
Amendment.
7.1.1 Any other provision of this Plan to the contrary notwithstanding, the Plan may be
amended by the Company at any time, to the extent that, in the sole opinion of the Company, such
amendment shall be necessary in order to ensure that (a) the Plan will be characterized as a
28
plan maintained for a select group of management or highly compensated employees, as described
in sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, (b) the Plan conforms to the requirements of
any applicable law, including, but not limited to, ERISA and the Code, (c) the Accrued Benefit of
any Participant is not taxable to the Participant or his/her Beneficiary earlier than the date it
is actually received by the Participant or the Beneficiary, as the case may be, and (d) no excise
tax, penalty or additional tax is imposed on the Participant or the Company under the Applicable
Tax Law or any other applicable provision of the Code. No such amendment shall be considered
prejudicial to any interest of a Participant or Beneficiary hereunder even if it reduces the
Accrued Benefit of any Participant or the amount, date or form of any Payment to the Participant.
7.1.2 In addition, this Plan may be amended at any time as and to the extent permitted under
Applicable Tax Law provided that no such amendment shall reduce the Accrued Benefit of any
Participant without the consent of the Participant unless such reduction is required under, or is
necessary in order to comply with, the Applicable Tax Law.
7.2
Termination.
7.2.1 This Plan may be terminated at any time provided such termination satisfies the
requirements of the Applicable Tax Law.
7.2.2 Except as otherwise permitted herein and the Applicable Tax Law, upon the termination of
the Plan as provided for herein, the Plan Administrator shall pay to the Participant or a deceased
Participants Beneficiary, as the case may be, the Participants Accrued Benefit at the times and
in the amounts specified in the Participants Deferral Election.
ARTICLE 8
MISCELLANEOUS
8.1
Purpose.
The purpose of this Plan is to allow a Participant to defer the receipt of part of
the Participants Compensation until a later date without having to pay taxes on the amount of such
Compensation until the Participant actually receives the amount of such Compensation, at which time
it will be subject to taxation as ordinary gain. The Company makes no guaranties that such
Compensation will not be taxed until it is received and the Company shall not be liable for any
damages because such Compensation is taxed to the Participant before it is received by the
Participant.
8.2
Benefits Not Transferable.
No benefit payable at any time under this Plan shall be subject in
any manner to alienation, sale, transfer, pledge, attachment or encumbrance of any kind; provided,
however, that:
8.2.1 in the event that, at the time of a Participants Commencement Date, the Participant is
indebted to the Company or any Affiliate, the Company shall have the right to offset any such
indebtedness (including any interest thereon) against any benefits otherwise due under this Plan
with respect to the Participant, by applying such indebtedness (including any interest thereon)
pro-rata to each successive benefit Payment due thereafter, until the full amount of the debt and
any interest owed has been paid; and
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8.2.2 all or any portion of a Participants unpaid benefits under this Plan may be assigned by
court order to the Participants former spouse in connection with a dissolution of their marriage,
but only if the Plan Administrator determines, in its sole discretion, that the order satisfies the
requirements of a domestic relations order as defined in Code Section 414(p)(1)(B). The federal
income taxation of any Plan benefits assigned as provided in the preceding sentence shall be
governed by Revenue Ruling 2002-22, or any applicable guidance subsequently published by the
Internal Revenue Service or the Department of the Treasury.
8.3
No Trust Created.
Nothing contained in this Plan, and no action taken pursuant to its
provisions by any person, shall create, or be construed to create, a trust of any kind, or a
fiduciary relationship between the Company and any other person.
8.4
Benefits Payable Only From General Corporate Assets; Unsecured General Creditor Status of
Participant.
Payment to the Participant or any Beneficiary hereunder shall be made from assets
that shall continue, for all purposes, to be part of the general, unrestricted assets of the
Company. No person shall have any interest in any such asset by virtue of any provision of this
Plan. The Companys obligation hereunder shall be an unfunded and unsecured promise to pay money
in the future. To the extent that any person acquires a right to receive Payments from the Company
under the provisions hereof, such right shall be no greater than the right of any unsecured general
creditor of the Company; no such person shall have or acquire any legal or equitable right,
interest or claim in or to any property or assets of the Company.
8.5
Plan Expenses.
The Participants shall bear all of the Plan Expenses except for those Plan
Expenses that the Company elects to pay. Any such expenses that are not paid by the Company shall
be promptly paid by the Participant or the Participants Beneficiary, as applicable, or the Plan
Administrator shall deduct such expenses from the Participants Accrued Benefit.
8.6
Entire Agreement.
The Plan, Deferral Election, Beneficiary Designation, and other
administrative forms shall constitute the total agreement between the Company and the Participant.
No oral statement regarding the Plan may be relied upon by the Participant. In the event that
there is a discrepancy between the Plan and the administrative forms and summary descriptions, the
Plan will control.
8.7
Invalidity of Provisions.
If any provision of this Plan shall be for any reason invalid or
unenforceable, the remaining provisions shall nevertheless be carried into effect.
8.8
Unclaimed Benefits.
In the case of a benefit payable on behalf of such Participant, if the
Plan Administrator is unable to locate the Participant or Beneficiary by the earlier of the date
that is (a) ten (10) years following the Termination of Employment of the Participant, or (b) five
(5) years following the date the Participants last benefit Payment was scheduled to be made, such
Plan benefit may be forfeited to the Company upon the Plan Administrators determination.
Notwithstanding the foregoing, if, subsequent to any such forfeiture, the Participant or
Beneficiary to whom such Plan benefit is payable makes a valid claim for such Plan benefit, such
forfeited Plan benefit shall be paid by the Plan Administrator to the Participant or Beneficiary,
without interest, from the date it would have otherwise been paid.
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8.9
Governing Law/Interpretation.
The Plan and the rights and obligations of all persons hereunder
shall be governed by and construed in accordance with the laws of the State of Minnesota, other
than its laws regarding choice of law, to the extent that such state law is not preempted by
federal law. The Plan shall be interpreted so as to comply to the fullest extent possible with the
Applicable Tax Law such that the Accrued Benefit of any Participant is not includible in income for
United States income tax purposes prior to the actual receipt of such Accrued Benefit in cash by
the Participant or the Beneficiary, as the case may be.
8.10
No Right to Employment.
Nothing contained herein shall be construed to be a contract of
employment for any term of years, or as conferring upon the Plan Participant the right to continue
to be employed by the Company in the Participants present capacity, or in any capacity. It is
expressly understood by the parties hereto that this Plan relates to the payment of deferred
compensation for the Participants services, generally payable after Termination of Employment with
the Company, and is not intended to be an employment contract.
8.11
Effective Date
. The amendments made by this FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN shall not apply to any Deferral Election made or Deferral Account
established prior to January 1, 2005, except as and to the extent required in order to comply with
the Applicable Tax Law.
IN WITNESS WHEREOF, the Company has executed this Plan as of the day and year first written above.
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FAMOUS DAVES OF AMERICA, INC.
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By:
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Title:
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EXHIBIT 1.5
FAMOUS DAVES OF AMERICA, INC.
FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
Participant Deferral Election Form
Declared Rate: ______ Percent (__%) (the Declared Rate)
This Agreement
is entered into this ___ day of ___, 20___ between
FAMOUS DAVES OF
AMERICA, INC.
, hereinafter referred to as the Company, and
, hereinafter
referred to as the Participant.
I acknowledge that as a Designated Employee I have been offered an opportunity to participate in
the Famous Daves of America, Inc. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK
UNIT PLAN (the Plan).
PLAN YEARS
This Deferral Election shall be effective for the following Plan Years [
Check
one
]:
o
the Plan Year beginning January 1, 20___
o
all Plan Years beginning on or after January 1, 20___ unless and until I complete a different
Deferral Election Form for a particular Plan Year not later than the Annual Deferral Election
Deadline for such Plan Year .
DEFERRAL ELECTION
[
Please complete one or more of the following choices.
]
I hereby elect to defer receipt of that portion of my Compensation which is
earned by me with respect to services rendered by me to the Company after the
date this Deferral Election is filed with the Company as set forth below.
o
[___%] of my
Bonus Compensation
earned by me with respect to
services rendered by me to the Company during the Plan Year and
after the date this Deferral Election is filed with the Company,
even if payable after the end of the Plan Year.
o
[___%] of my
Stock Grant Compensation
earned by me with respect to
services rendered by me to the Company during the Plan Year and
after the date this Deferral Election is filed with the Company,
even if payable after the end of the Plan Year.
NOTE
: This Deferral Election is irrevocable except to the extent permitted by the Plan
Administrator and the Applicable Tax Law.
DISTRIBUTION OF BENEFITS ELECTION
A.
Deferral Period
.
I hereby elect to have my Deferral Account for the Plan Years
specified above distributed to me beginning on the first day of the third month beginning after
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the end of the following Deferral Period (the Commencement Date), unless the Plan provides for an
earlier Commencement Date [
Select one of the following
]:
o
[
insert number
] calendar years following the end of the applicable Plan Year
(December 31)
(May not be less than three (3) calendar years and must be a whole number of years;
for example: if the Plan Year ends December 31, 2005, and you elect a Deferral Period of four (4)
calendar years, the Deferral Period ends on December 31, 2009, and your Deferral Account will be
paid beginning March 1, 2010),
or
o
the period beginning on the first day of the applicable Plan Year set forth above and ending
on the date of my Termination of Employment.
NOTE
: Except as provided below, you may extend the Deferral Period by filing a Revised
Deferral Election Form with the Plan Administrator, but only if (a) you file the Revised Deferral
Election Form at least one (1) year before the due date of the first Payment affected by the
Revised Deferral Election Form, (b) the extension is for a period of not less than five (5) years
from the date the Payment would have been made but for the extension, and (c) such extension is in
accordance with the Applicable Tax Law (as defined in the Plan). The Deferral Period may be
shortened only with the consent of the Plan Administrator and then only as and to the extent
permitted by and in accordance with the Applicable Tax Law which, except as provided below,
prohibits a reduction in the Deferral Period. Any such change must be made by written notice to
the Plan Administrator and will not be effective until accepted in writing by the Plan
Administrator.
Notwithstanding the above, this Deferral Election may be changed and the foregoing requirements
will not apply if you file a Revised Deferral Election Form with the Plan Administrator on or
before December 31, 2008, so long as the Revised Deferral Election does not (i) delay a Payment
that would be payable in 2008 if the Revised Deferral Election had not been made, and (ii) cause a
Payment to be made in 2008 which would not have been made absent the Revised Deferral Election.
B
.
Payout Period
.
I hereby elect the following Payout Period over which my Deferral
Account for the Plan Years specified above will be distributed to me in substantially equal
payments at the frequency specified below (check one):
o
Lump Sum
o
Twelve (12) Month period.
o
Twenty-four (24) Month period
.
o
Thirty-six (36) Month period.
NOTE: Unless a Revised Deferral Election Form is submitted to the Company prior to December 31,
2008, you may lengthen, but not shorten, the Payout Period for any Plan Year in accordance with the
rules set forth above under Deferral Period. If a Revised Deferral Election Form is submitted to
the Company prior to December 31, 2008, you may shorten your Deferral Period, provided that the
Revised Deferral Election does not (i) delay
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a Payment that would be payable in 2008 if this Revised Deferral Election had not been made, and
(ii) cause a Payment to be made in 2008 which would not have been made absent the Revised Deferral
Election.
C.
Form of Payment
.
% in
cash
% in shares of
Company Stock
NOTE: The form of payment may be changed by filing a Revised Deferral Election Form with the
Company not later than one (1) year prior to the date of payment.
NOTE
: If your Accrued Benefit is less than the 402(g) Amount ($15,000 in 2007), your
Accrued Benefit, may, at the Companys discretion, be paid in a lump sum or over a shorter period
as and to the extent permitted under the Applicable Tax Law.
Unavailability of Deferred Compensation
.
I understand that except as otherwise permitted
under the Plan and the Applicable Tax Law, no part of any Deferral Account is payable prior to the
Commencement Date as defined in the Plan.
Amount Payable
.
I understand that the amount payable to me will be based upon the value of
my Deferral Account that will depend on the amount of my Deferral Elections and the Declared Rate
in effect at the time of this Deferral Election.
Representations and Warranties
.
By executing and delivering this Deferral Election Form,
and, as a condition to participating in the Plan, I hereby acknowledge, warrant and represent to
the Company as follows:
I have, either alone or with the assistance of a professional advisor, sufficient knowledge
and experience in financial and business matters that I believe myself capable of evaluating the
merits and risks of my participation in the Plan and the suitability of such participation in light
of my financial condition and investment needs, and legal, tax and accounting maters.
I have been given access to full and complete information regarding the Company and have
utilized such access to my satisfaction for the purpose of obtaining information in addition to, or
verifying information included in, the Companys documents publicly filed with the Securities
Exchange Commission (Disclosure Documents). Particularly, I have been given reasonable
opportunity to meet with and/or contact Company representatives for the purpose of asking questions
of, and receiving answers from, such representatives concerning the terms and conditions of my
participation in the Plan and to obtain any additional information to the extent reasonably
available, necessary to verify the accuracy of information provided in the Disclosure Documents.
If applicable, I am an accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the Securities Act). This
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representation is based on the representation and information provided below (check all that
apply):
o
I have had an individual income in excess of $200,000 in each of the two most recent years or
joint income with my spouse in excess of $300,000 in each of the two most recent years, and
reasonably expect reaching the same income level in the current year;
o
As of the date hereof, I (either individually or with my spouse) have a net worth exceeding
$1,000,000;
o
I am a director or executive officer of the Company.
I understand that the value of my participation in the Plan will depend solely on the value of
the Company Stock, and will be subject to all liabilities of the Company, and will be of lesser
priority than all secured financing that the Company now has or in the future obtains. I recognize
that my participation in the Plan involves a high degree of risk, including, but not limited to,
the risk of losing my entire investment.
No federal or state agency, including the United States Securities and Exchange Commission or
the securities commission or authority of any state, has approved or disapproved any participation
in the Plan, passed upon or endorsed the merits of such participation or the accuracy or adequacy
of the Disclosure Documents.
I have been encouraged to rely upon the advice of my legal counsel and accountants or other
financial advisors with respect to tax and other considerations relating to my participation in the
Plan. I am not relying upon the Company with respect to the economic considerations involved in
determining to participate in the Plan.
I have no need for immediate liquidity with respect to my participation in the Plan and have
sufficient income to meet my current and anticipated obligations. The loss of the value of my
participation in the Plan would not cause financial hardship to me and would not adversely affect
my current standard of living. I understand that my participation in the Plan is not transferable,
and I will have no right to access the value of my participation in the Plan except under specific
conditions.
I understand that any shares of Company Stock I received pursuant to the Plan may be sold or
transferred only as and to the extent permitted under the applicable securities laws of the United
States and as a result there may a substantial period of time during which I may not be able to
transfer the shares of Company Stock which could result in the loss of all or some of the value of
the shares of Company Stock.
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Date:
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Participants Name:
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Participants Signature:
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Date Received:
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Date Accepted:
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Famous Daves of America, Inc.
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By:
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Its:
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EXHIBIT 1.9
FAMOUS DAVES OF AMERICA, INC.
FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
Beneficiary Designation Form
TO: Famous Daves of America, Inc.
(hereinafter referred to as the Company)
In accordance with the rights granted to me in the Famous Daves of America, Inc. FIRST AMENDED AND
RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN (the Plan) and subject to the terms and
conditions specified below in this Beneficiary Designation Form, I hereby designate the following
persons and/or entities as my Primary and Contingent Beneficiaries under the Plan to receive, in
the event of my death, in accordance with the terms of the Plan, the Payments that would otherwise
be paid to me absent my death:
Primary Beneficiaries
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Contingent Beneficiaries
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I understand that this Designation of Beneficiary shall not be effective unless received by the
Plan Administrator prior to my death. This designation cancels and supersedes any Designation of
Beneficiary heretofore made by me with respect to the Plan and the right to receive Payments
hereunder.
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Date:
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Participants Name:
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Participants Signature:
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Date Received:
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Received and accepted
this
day of
,
20
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Famous Daves of America, Inc.
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By:
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EXHIBIT 1.52
FAMOUS DAVES OF AMERICA, INC.
FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
PARTICIPANT REVISED DEFERRAL ELECTION FORM
This Agreement
is entered into this ___day of ___, 20___ between
FAMOUS DAVES OF
AMERICA, INC.
, hereinafter referred to as the Company, and
, hereinafter referred to as the Participant.
I acknowledge that as an Eligible Employee of the Company I have been offered an opportunity
to participate in the FAMOUS DAVES OF AMERICA, INC. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN (the Plan).
A.
Revised Deferral Period
.
I hereby elect the following Deferral Periods for my Accounts
for the Plan Years indicated below:
o
20___, 20___, 20___, 20___, 20___ [
insert year(s)
]
:
o
___ [
insert number
] Plan Years
following the end of the applicable Plan Year (December 31) or
o
the period beginning on the first
day of the applicable Plan Year set forth above and ending on the date of my Termination of
Employment.
[See the NOTE below for rules regarding the number of permissible Plan Years.]
o
20___, 20___, 20___, 20___, 20___ [
insert year(s)
]
:
o
___ [
insert number
] Plan Years
following the end of the applicable Plan Year (December 31) or
o
the period beginning on the first
day of the applicable Plan Year set forth above and ending on the date of my Termination of
Employment.
[See the NOTE below for rules regarding the number of permissible Plan Years.]
o
all Plan Years: ___ [
insert number
] Plan Years following the end of the applicable
Plan Year (December 31) or
o
the period beginning on the first day of the applicable Plan Year set
forth above and ending on the date of my Termination of Employment.
[See the NOTE below for rules
regarding the number of permissible Plan Years.]
NOTE
: Except as provided below, you may extend the Deferral Period by filing a Revised
Deferral Election Form with the Plan Administrator, but only if (a) you file the Revised Deferral
Election Form at least one (1) year before the due date of the first Payment affected by the
Revised Deferral Election Form, (b) the extension is for a period of not less than five (5) years
from the date the Payment would have been made but for the extension, and (c) such extension is in
accordance with the Applicable Tax Law (as defined in the Plan). The Deferral Period may be
shortened only with the consent of the Plan Administrator and then only as and to the extent
permitted by and in accordance with the Applicable Tax Law which, except as provided below,
prohibits a reduction in the Deferral Period. Any such change must be made by written notice to
the Plan Administrator and will not be effective until accepted in writing by the Plan
Administrator.
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Notwithstanding the above, this Deferral Election may be changed and the foregoing requirements
will not apply if you file a Revised Deferral Election Form with the Plan Administrator on or
before December 31, 2008, so long as the Revised Deferral Election does not (i) delay a Payment
that would be payable in 2008 if this Revised Deferral Election had not been made, and (ii) cause a
Payment to be made in 2008 which would not have been made absent the Revised Deferral Election.
B
.
Revised Payout Period
.
I hereby elect the following Payout Period over which my
Accounts for the Plan Years specified below will be distributed to me in substantially equal
payments annually plus interest at the Declared Rate from the Commencement Date as specified below:
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Lump Sum:
- Plan Years beginning in 20___, 20___, 20___, 20___, 20___ [
insert
year(s)
].
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Two (2) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
].
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Five
(
5) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
].
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Ten
(
10) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
].
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NOTE
: Unless this Revised Deferral Election Form is submitted to the Company prior to
December 31, 2008, you may lengthen, but not shorten the Payout Period for any Plan Year in
accordance with the rules set forth above under Revised Deferral Period. If this Revised
Deferral Election Form is submitted to the Company prior to December 31, 2008, you may shorten your
Deferral Period, provided that this Revised Deferral Election will not be effective to the extent
that it would (i) delay a Payment that would be payable in 2008 if this Revised Deferral Election
had not been made, and (ii) cause a Payment to be made in 2008 which would not have been made
absent this Revised Deferral Election. C.
C.
Form of Payment
.
% in
cash
% in shares of
Company Stock
NOTE: A change in the form of payment will be effective only with respect to a Payment made more
than one (1) year after the date this Revised Deferral Election Form is filed with the Plan
Administrator.
Early Payment of
De Minimus
Amounts
.
If your Accrued Benefit is less than the 402(g)
Amount ($15,000 in 2007), your Vested Accrued Benefit, may, at the Companys discretion, be paid in
a lump sum or over a shorter period as and to the extent permitted under the Applicable Tax Law.
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Unavailability of Deferred Compensation
.
I understand that, except as otherwise permitted
under the Plan and the Applicable Tax Law, no part of any Deferral Account is payable prior to the
Commencement Date as defined in the Plan.
Amount Payable
.
I understand that the amount payable to me will be based upon the value of
my Account(s) which will depend on the amount of my Deferral Elections, any Discretionary
Contribution, the Investment Options I choose, and the Declared Rate in effect in accordance with
the provisions of the Plan.
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Participants Name:
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Participants Signature:
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Date Received:
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Date Accepted:
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FAMOUS DAVES OF AMERICA, INC.
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SUMMARY PLAN DESCRIPTION
OF
FAMOUS DAVES OF AMERICA, INC.
FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN
INTRODUCTION
Famous Daves of America, Inc. (the Company) established the Famous Daves of America, Inc.
EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN effective as of February 18, 2004 (the Plan) and
amended and restated the Plan as the FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK
UNIT PLAN effective as of January 1, 2008.
THIS SUMMARY IS INTENDED TO SUMMARIZE THE PRINCIPAL TERMS OF THE PLAN. IN THE EVENT OF A CONFLICT
BETWEEN THIS SUMMARY AND THE TERMS OF THE PLAN, THE TERMS OF THE PLAN SHALL CONTROL. A COPY OF THE
PLAN IS AVAILABLE UPON REQUEST. DEFINED TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE MEANING GIVEN
THEM UNDER THE TERMS OF THE PLAN.
WHAT DOES THE PLAN MEAN TO ME?
The Plan was established to provide retirement and other benefits to Eligible Employees of the
Company to assist them in saving for retirement and encourage their continued interest in the
success of the Company. The Plan is intended to allow you to defer the receipt of some of your,
Bonus Compensation and Stock Grant Compensation until a later date. The Company will pay for all
of the Plans benefits and administration costs. The Plan records are kept on a calendar year
basis.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any employee of the Company or an Affiliate who is a director level and above employee (as
defined by the Company from time to time); one of a select group of management or highly
compensated employees, as defined by ERISA; and who is designated by the Company to participate in
the Plan (Designated Employee) is eligible to participate in the Plan. You will cease to be a
Designated Employee if you cease to be a director level and above employee (as defined by the
Company from time to time); cease to be one of a select group of management or highly compensated
employees, as defined by ERISA; or the Company specifies that you are no longer a Designated
Employee.
HOW CAN I PARTICIPATE IN THE PLAN?
If you are a Designated Employee, you can participate in the Plan by making a Deferral Election in
accordance with the terms of the Plan to defer the receipt of all or some part of your Bonus and/or
Stock Grant Compensation to a later date.
HOW DO I MAKE A DEFERRAL ELECTION AND WHEN DO I MAKE AN ELECTION?
Making a Deferral Election.
If you are a Designated Employee, you can make a Deferral Election by
completing and delivering to the Plan Administrator, a Deferral Election Form that you can obtain
from the Plan Administrator. On the Deferral Election form you will specify (a) the amount of your
Bonus and/or Stock Grant Compensation you wish to defer, (b) the Deferral Period during which you
will not be able to receive any of the Compensation you deferred except as specifically proved in
the Plan, and (c) the manner in which your Deferral Account Balance will be paid (e.g., in a lump
sum or over one of the permitted Payout Periods).
Initial Deferral Election.
If you become an Initial Designated Employee during a Plan Year you may
make an Initial Deferral Election with respect to your Bonus Compensation and Stock Grant
Compensation earned during the Plan Year in which you become an Initial Designated Employee
provided that such Initial Deferral Election is filed with the Plan Administrator within thirty
(30) days after you first become eligible to be an Initial Designated Employee in the Plan. An
Initial Designated Employee is an Eligible Employee who is not or has not previously participated
in a similar deferred compensation plan of the Company or certain related entities as determined
under the Applicable Tax Law. The Initial Deferral Election will be effective beginning on the
payroll date that is at least two (2) weeks after the delivery of the Initial Deferral Election to
the Plan Administrator, or such other date as specified by the Plan Administrator. The Initial
Deferral Election will apply only to Bonus Compensation and Stock Grant Compensation earned with
respect to services you perform after the date of the Initial Deferral Election and prior to the
end of the Plan Year in which you become an Initial Designated Employee in the Plan. If you fail
to file an Initial Deferral Election within thirty (30) days after you first become an Initial
Designated Employee in the Plan, no part of your Compensation earned with respect to services
performed during the Plan Year in which you first become an Initial Designated Employee in the Plan
may be deferred. However, if you do not qualify as an Initial Designated Employee or if you do
qualify but do not make an Initial Deferral Election by the Initial Deferral Election Deadline, you
may make an Annual Deferral Election not later than the Annual Deferral Election Deadline for the
Plan Year following the Plan Year in which you became an Initial Designated Employee and for each
Plan Year thereafter while you are an Designated Employee unless the Company specified that you are
not eligible to make an Annual Deferral Election. No Deferral Election will be effective until
accepted by the Plan Administrator.
Annual Deferral Election.
Except for an Initial Deferral Election for the Plan Year in which you
became an Initial Designated Employee, each year you are a Designated Employee you may make an
Annual Deferral Election to defer the receipt of all or some of your Bonus Compensation and Stock
Grant Compensation earned with respect to services performed in a Plan Year(s) beginning after the
date you file the Annual Deferral Election. An Annual Deferral Election is made by filing a
Deferral Election Form acceptable to the Plan Administrator with the Plan Administrator not later
than the Annual Deferral Election Deadline (the earlier of (a) the day before the first day of the
Plan Year, or (b) the date specified by the Plan Administrator or Company). No Annual Deferral
Election will be effective until accepted in writing by the Plan Administrator. For example, to
defer Compensation earned in 2009, your Annual Deferral
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Election must be filed with the Plan Administrators not later than December 31, 2008, or such
earlier date as is specified by the Plan Administrator.
Revocation or Change of Deferral Elections Revised Deferral Elections.
Except as otherwise
permitted under the Applicable Tax Law and by the Plan Administrator, each Deferral Election is
irrevocable. Certain permitted changes to a Deferral Election are discussed below. No change of
any Deferral Election will be effective until accepted by the Plan Administrator in writing. A
permissible change to a Deferral Election is made by filing a Revised Deferral Election with the
Plan Administrator on forms acceptable to the Plan Administrator.
DOES THE COMPANY MAKE CONTRIBUTIONS TO THE PLAN FOR ME?
No. The Company does not make any contributions to the Plan on your behalf.
HOW ARE MY BENEFITS UNDER THE PLAN DETERMINED?
Accounts
. The Plan Administrator will establish accounts on its books (Deferral Accounts) for
you for each Plan Year for which you make a Deferral Election. The Deferral Accounts are for
accounting purposes only and used solely to determine the amount you are entitled to be paid under
the Plan and are not actual deposit or investment accounts.
Allocations.
Your Deferral Accounts will be increased by the amount of Bonus Deferred Compensation
that you elect to defer under your Deferral Election. The amount deferred will be added to the
Deferral Account on the date and in the amount that the Bonus Deferred Compensation would otherwise
have been paid to you but for the Deferral Election. The Bonus Deferred Compensation is converted
to Phantom Shares equal in number to (a) the Bonus Deferred Compensation divided by (b) the Per
Phantom Share Value as of the date of Bonus Deferred Compensation is credited to your Deferral
Account. The Per Phantom Share Value is the last sale price of the Companys Stock on the stock
exchange on which it is regularly traded on the last trading day immediately prior to the date on
which the Per Phantom Share Value is being determined.. If you elect to defer any Stock Grant
Compensation, the number of Phantom Shares in your Deferral Account will be increased by the number
of shares of Company Stock constituting the part of your Stock Grant Compensation that you elect to
defer.
Each Deferral Account will be reduced by the amount of all Payments made to you or your Beneficiary
from your Deferral Account. If you elect to receive your Deferral Account Balance in Company
Stock, the number of Phantom Shares in your Deferral Account will be reduced by the number of
shares of Company Stock distributed to you or your Beneficiary. If and to the extent you elect to
receive all or part of your Deferral Account in cash, the number of Phantom Shares in your Deferral
Account will be reduced by the number determined by dividing (a) amount distributed to you or your
Beneficiary by (b) the Per Phantom Share Value as of the Valuation Date.
WHEN AND HOW WILL MY ACCRUED BENEFITS BE PAID?
Commencement of Benefits.
The balance of each of your Deferral Accounts will be paid to you
beginning on the Commencement Date and will be paid to you over the Payout Period you selected
on your Deferral Election Form.
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If you are not a Key Employee (see the definition below), the Commencement Date is the first day of
the third month beginning after the earliest the following Permissible Payment Events to occur:
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your death,
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your Termination of Employment,
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your Disability,
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the occurrence of a Change in Control Event,
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January 1st of the first year beginning after the end of the Deferral Period
selected by you with respect to each of your Deferral Accounts, or
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such other event as permitted under the Applicable Tax Law.
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If you are a Key Employee your Commencement Date will be the same as if you were not a Key
Employee, except that if you have a Termination of Employment prior to any other Permissible
Payment Event, your Commencement Date will be the date which is six (6) months and one (1) day
after your Termination of Employment. However, if you die after your Termination of Employment and
before the end of such six (6) month period, the Commencement Date will be the first day of the
third month beginning after your death, if earlier.
Termination of Employment
means (a) your ceasing to provide services to the Company or any
member of the Employer Group (whether as an employee or independent contractor) for any
reason whatsoever, voluntary or involuntary, other than by reason of an approved leave of
absence or (b) an eighty percent (80%) reduction in your average hours of service to the
Company or any member of the Employer Group (whether as an employee or independent
contractor).
You are a
Key Employee
if (a) the Companys stock is publicly tradable on an established
stock exchange or otherwise, and (b) you either (i) hold a position with the Employer Group
at the vice president level or above in accordance with the Companys employment policies
established from time to time, or (ii) are a key employee as defined in Section 416(i) of
the Code (without regard to paragraph (5) thereof). Generally, the term key employee for
purposes of Section 416(i) of the Code means an employee who, at any time during the plan
year, is (i) an officer of the Company having an annual compensation greater than $130,000
(as adjusted under the Code), (ii) a five percent (5%) owner of the Company, or (iii) a one
percent (1%) owner of the Company having an annual compensation from the employer of more
than $150,000 (as adjusted under the Code).
Disability
means that you are:
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unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or
can be expect to last for a continuous period of not less than twelve (12) months.
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by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of
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not less than twelve (12) months, receiving income replacement benefits for a period
of not less than three (3) months under an accident and health plan covering
employees of the Company.
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determined to be totally disabled by the Social Security Administration.
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Change in Control Event
is generally either the sale of the Companys assets or the
acquisition of the majority of the voting rights in the Companys stock by a person or group
of people acting in concert.
The
Deferral Period
is the time period you specify in each Deferral Election (measured in
full Plan Years) during which you will not be entitled to receive the Compensation you elect
to defer unless you die, suffer from a Disability, incur a Termination of Employment, suffer
from a Unforeseeable Emergency (discussed below) or the Company has a Change in Control
Event (discussed above).
Form of Payment.
The balance of a Deferral Account will generally be paid to you in either a lump
sum or in substantially equal Payments over the Payout Period you chose on your Deferral Election.
You may elect to receive all or part of your Deferral Account in cash or Company Stock. The
maximum amount you are entitled to receive from a Deferral Account in cash is equal to the product
of the number of Phantom Shares in your Deferral Account multiplied by the Per Phantom Share Value
as of the Valuation Date. The maximum number of shares of Company Stock you are entitled to
receive from a Deferral Account is equal to the number of Phantom Shares in your Deferral Account.
Death.
However, in the event of your death, any of your Accrued Benefit remaining unpaid
will be paid in a lump sum to your Beneficiary. (See
WHAT HAPPENS TO MY ACCRUED BENEFIT IF
I DIE?
below).
Change In Control Event.
In addition, upon a Change In Control Event, the balance of your
Deferral Account will be paid to you in a lump sum.
Cash Out for Small Accounts.
Further, if your entire Accrued Benefit (the balance of all of
your Deferral Accounts) under the Plan and any Aggregated Arrangement is less than the
amount under Section 402(g) of the Code ($15,500 for 2007), or such lesser amount specified
by the Company in accordance with the Applicable Tax Law, the Company, may, in its sole
discretion, pay you your entire Accrued Benefit in a lump sum rather than the Payout Periods
you elected, provided that you are paid your entire benefit under all Aggregated
Arrangements.
Payout Period.
In your Deferral Election you will specify the Payout Period over which your
Accrued Benefit attributable to that Deferral Election will be paid to you.
Changes to the Deferral Period or Payout Period or the Time or Form of Payment of Your Accrued
Benefit.
Reductions in Deferral Period/Acceleration of Payments.
Except as provided below, or as
otherwise permitted in the Applicable Tax Law and by the Plan Administrator,
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neither the Deferral Period nor the Payout Period may be reduced, nor may the date of any
Payment be accelerated.
Extensions/Delays.
Except as described below under
Special Rule for 2007 and 2008"
, with
the consent of the Plan Administrator and to the extent permitted under the Applicable Tax
Law, the Deferral Period may be extended, the Payout Period increased and the time for any
Payment delayed at your written election, by filing a Revised Election From with the Plan
Administrator, provided that:
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such election does not apply to any Payment which would be paid on a date
which is less than twelve (12) months after the date the Revised Deferral
Election is filed with the Plan Administrator without regard to the Revised
Deferral Election (or, in the case of a life annuity or installment payments
treated as a single Payment, less than twelve (12) months after the date the
Revised Deferral Election is filed with the Plan Administrator without regard
to the Revised Deferral Election); and
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the Payment with respect to which such election is made is deferred for a
period of not less than five (5) years from the date such Payment would
otherwise have been paid (or in the case of a life annuity or installment
payments treated as a single Payment, five (5) years from the date the first
amount was scheduled to be paid).
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Special Rule for 2008.
If a Revised Deferral Election is provided to the Plan Administrator
on or before December 31, 2008, the foregoing restrictions will not apply provided that the
Revised Deferral Election does not (i) cause the delay of a Payment that would be payable in
2008 if the Revised Deferral Election had not been made, nor (ii) cause a Payment to be made
in 2008 if such Payment would not have been made absent the Revised Deferral Election.
Separate Payments.
To the extent provided under the Applicable Tax Law, you may treat each
payment to be made to you as a Separate Payment. Consistent with the Applicable Tax Law
and with the consent of the Plan Administrator, you may extend the Deferral Period or the
date of payment separately with respect to each Separate Payment.
WHAT HAPPENS TO MY ACCRUED BENEFIT IF I DIE?
Payment of Accrued Benefit.
In the event you die prior to receipt of your entire Accrued Benefit,
the Company will pay your unpaid Accrued Benefit in a lump sum to your Beneficiary designated by
you on a Beneficiary Designation Form provided to the Company and accepted by the Company.
Unless otherwise specified by you on a Beneficiary Designation Form, if more than one (1)
Beneficiary is named, then the payments of your Accrued Benefit will be made equally to such
Beneficiaries. Unless otherwise specified by you on a Beneficiary Designation Form, if any such
Beneficiary dies while receiving payments under the Plan, any and all remaining payments will
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continue to be made to the descendants of a deceased Beneficiary if the Beneficiary is your
descendant, otherwise the payments will be made to the remaining Beneficiaries
Unless otherwise provided by you on a Beneficiary Designation Form, if none of the Beneficiaries
named are living on any payment date and there are no descendants of a deceased Beneficiary who is
your descendant, or if you fail to complete a Beneficiary Designation Form, the remaining payments
will be made to your spouse unless either of you have filed for divorce or legal separation and, if
so, then to your descendants and, if none, to the executors or administrators of your estate.
Beneficiary Designation.
General.
You may, at any time, submit a Beneficiary Designation Form specifying one (1) or
more individuals or entities as your Beneficiary. Each Beneficiary Designation Form will
become effective only when accepted in writing by the Company. The Company has the right,
in its sole discretion, to reject any Beneficiary Designation Form which is not in
substantially the form provided by the Plan Administrator. For purposes of any Beneficiary
Designation Form, no person will be deemed to have survived you if that person dies within
thirty (30) days of your death. You may change the Beneficiary named in any Beneficiary
Designation Form at any time by filing a new duly executed Beneficiary Designation Form with
the Company or the Plan Administrator without the consent of any person or entity then
designated as a Beneficiary.
Spouses Interest.
Your designation of your spouse as a beneficiary will be automatically
revoked if you or your spouse subsequently file for divorce or legal separation or if your
spouse dies prior to you.
WHAT IF I SUFFER AN UNFORESEEABLE EMERGENCY?
Withdrawals for Unforeseeable Emergencies.
If you suffer an Unforeseeable Emergency, the Plan
Administrator will, upon receipt of your written request, pay to you from your Deferral Accounts an
amount equal to the lesser of (a) the amount you requested, (b) the balance of your Deferral
Accounts as of the date of such payment, or (c) the amount, as determined under the Applicable Tax
Law
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necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, determined after taking into account the
extent to which such Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of your assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship).
Unforeseeable Emergency.
An Unforeseeable Emergency is a severe financial hardship to you
resulting from a sudden and unexpected illness or accident of you, your spouse, or one of your
dependents (as defined in section 152(a) of the Code), your loss of property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising as a result of events beyond
your control and meeting such other requirements as may be set forth in any Applicable Tax Law.
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Rules Adopted by Plan Administrator.
The Plan Administrator may adopt additional rules relating to
withdrawals for Unforeseeable Emergencies provided such rules are consistent with the Applicable
Tax Law. In administering these rules, the Plan Administrator will act in accordance with any
Applicable Tax Law, the principle being that the primary purpose of this Plan is to provide
additional retirement income, not additional funds for current consumption.
ARE THERE OTHER SITUATIONS WHERE THE COMPANY CAN DISTRIBUTE MY ACCRUED BENEFIT?
Yes. In the event there is a determination by the Internal Revenue Service, or in the event of a
final determination by a court of competent jurisdiction, that all or any part of your Accrued
Benefit hereunder is includable in your gross income, the Plan Administrator will distribute so
much of your Accrued Benefit to you as is includible in your gross income or your Beneficiarys and
the Plan Administrator will in its sole discretion cause the termination of future Deferral
Contributions by you, provided this provision does not in and of itself cause your Accrued Benefit
to be includible in income for United States income tax purposes prior to your actual receipt of
such Accrued Benefit in cash.
In the event that there is a determination by the Department of Labor, or a final determination of
a court of competent jurisdiction, that the Plan is subject to Part 2, 3 or 4 of Title I of ERISA,
the Plan Administrator may, in its sole discretion, distribute each Participants Accrued Benefit
to the Participant, or, in the case of a deceased Participant, to the Participants Beneficiary,
and cause the termination of future Deferral Contributions by Participants.
In the event of a termination of the Plan, the Plan Administrator may, in its sole discretion,
distribute each Participants Accrued Benefit to the Participant in accordance with the Applicable
Tax Law.
CAN MY BENEFITS BE PAID TO SOMEONE OTHER THAN ME?
Payment of Employment Taxes.
Yes. To the extent permitted under the Applicable Tax Law, the Plan
Administrator or the Company may permit the acceleration of the time or schedule of a payment under
the Plan to pay the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101
and 3121(v)(2) on Compensation deferred under the Plan (the FICA Amount). Additionally, the Plan
Administrator or the Company may permit the acceleration of the time or schedule of a payment to
pay the income tax at source on wages imposed under Code Section 3401 on the FICA Amount, and to
pay the additional income tax at source on wages attributable to the pyramiding Code Section 3401
wages and taxes. However, the total payment under this Section will not exceed the aggregate of
the FICA Amount, and the income tax withholding related to such FICA Amount.
Withholding.
In addition, any and all Payments to be made to you or your Beneficiary pursuant to
this Plan will be subject to all federal, state and local income and employment taxes and such
taxes will be withheld accordingly by the Company from your Accrued Benefits under this Plan or
from salary, bonuses or other amounts due to you as determined by the Plan Administrator as and to
the extent required by Applicable Tax Law.
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Domestic Relations Order.
In addition, all or part of your Accrued Benefit may be paid to a former
spouse in connection with a dissolution of your marriage, pursuant to an order satisfies the
requirements of a domestic relations order as defined in Code Section 414(p)(1)(B).
WILL I EARN INTEREST ON MY DEFERRAL ACCOUNT WHILE ITS IS BEING PAID TO ME?
If you elect to receive part of any Deferral Account in cash, the unpaid balance of your Deferral
Account which is payable in cash will earn interest at the Declared Rate then in effect on the
unpaid cash portion of the Deferral Account. The accrued interest will be paid with the next
payment then due. The Declared Rate on other deferrals may be changed at the discretion of the
Company.
CAN BENEFITS BE FORFEITED?
Your benefits under the Plan are fully vested and cannot be forfeited except to the extent you have
an unpaid obligation to the Company, in which case the Company may apply your Accrued Benefit to
the unpaid obligation.
CAN THE PLAN BE AMENDED OR TERMINATED?
The Plan may be amended at any time provided that no such amendment may reduce the Deferral Account
then credited to you without your consent unless such reduction is required by the Applicable Tax
Law. The Plan and/or your Deferral Elections may be terminated at any time; provided, that no such
termination will reduce your Deferral Account without your consent unless such reduction is
required by the Applicable Tax Law.
ARE MY ACCRUED BENEFITS ASSIGNABLE?
Benefits Not Transferable.
Except as provided below, none of the benefits payable at any time
under this Plan can be assigned or transferred or subjected in any manner to alienation, pledge,
attachment or encumbrance of any kind; except that:
Indebtedness to Company.
If a you are indebted to the Company or any Affiliate, the Company
and the Affiliate will have the right to offset such indebtedness (including any interest
thereon) against any benefits otherwise due to you or your Beneficiary under the Plan, by
applying such indebtedness (including any interest thereon) pro-rata to each successive
benefit payment due thereafter, until the full amount of the debt and any interest owed has
been paid; and
Domestic Relations Order.
All or any portion of your unpaid benefits under this Plan may be
assigned by court order to your former spouse in connection with a dissolution of your
marriage, but only if the Plan Administrator determines, in its sole discretion, that the
order satisfies the requirements of a domestic relations order as defined in Code Section
414(p)(1)(B).
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ARE MY ACCRUED BENEFITS AT RISK?
Only if the Company is unable to pay its obligation when due. Your Accrued Benefits are payable
only out of the assets of the Company and are, for all purposes, an unfunded and unsecured promise
to pay money in the future. Your Accrued Benefit is not held in any trust and none of the
provisions of the Plan create, or will be construed to create, a trust of any kind, or a fiduciary
relationship between the Company and any other person. To the extent that you have a right to
receive payments from the Company under the Plan, such right will be no greater than the right of
any unsecured general creditor of the Company; and you will not have or acquire any legal or
equitable right, interest or claim in or to any property or assets of the Company.
WHAT CAN I DO IF I AM DENIED PLAN BENEFITS?
If you or another person claiming eligibility or benefits under this Plan (a Claimant) believes
that he or she is eligible for benefits under the Plan, or is entitled to benefits different from
those being provided by the Company, the Claimant may make a claim for eligibility or for benefits
(as defined below) by submitting a written claim (a Claim) for benefits on such forms as the
Company may reasonably specify from time to time and will provide such information as the Plan
Administrator may reasonably require to support such Claim. Such Claim will be reviewed by a
committee of one or more individuals serving as Claim Administrator. Except as provided below, the
Claim Administrator will notify a Claimant in writing within ninety (90) days of receipt of the
Claimants written Claim whether the Claim Administrator has approved or denied such Claim in whole
or in part.
If the Claim Administrator determines that there are special circumstances requiring additional
time to make a decision, the Claim Administrator will notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may extend the time for
up to an additional ninety (90)-day period. If the Claim Administrator determines that any request
for Plan benefits does not comply with the Plans applicable procedure, the Claim Administrator
must notify the Claimant that the request does not comply with the applicable procedure and what
must be done to comply. If the Claim Administrator requires more information to review a claim for
benefits, the Claim Administrator will request the specified information from the Claimant within a
reasonable time after receiving the request. The Claimant will have up to one hundred eighty (180)
days to provide the missing information. From the beginning of that period until the missing
information is provided (or the end of that period, if earlier), the time period provided in the
preceding paragraph for the Claim Administrators decision will be extended. After receiving any
such information from the Claimant or, if earlier, at the end of such one hundred eighty (180)
days, the Claim Administrator will review the information and notify the Claimant of the Claim
Administrators decision within the extended time period for that decision.
If the Claim Administrator determines that a Claimant is not eligible for the benefits claimed, the
notice will set forth, in a manner calculated to be understood by the Claimant: (a) the specific
reasons for such denial, (b) a specific reference to the provisions of the Plan on which the denial
is based, (c) a description of any additional information or material necessary for the Claimant to
perfect his or her claim, and a description of why it is needed, and (d) an explanation of the
Plans claims review procedure and other appropriate information as to the steps to be taken if
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the Claimant wishes to have the claim reviewed, including the time limits that apply to such claims
review procedure, description of the Plans review procedures, and the time limits applicable to
such procedures, including a statement of the Claimants right to bring a civil action under
section 502(a) of ERISA following an adverse benefit determination on review, to the extent such
Section requires the Claimant to bring a civil suit that is not subject to arbitration under
Section 6.2.2.2.
Appeal Procedure for Denied Benefits.
If a Claimant disagrees with the Claim Administrators
determination, the Claimant will have the opportunity to have such claim reviewed by filing a
petition for review with the Plan Administrator within sixty (60) days after receipt of the notice
issued by the Claim Administrator. The petition must state the specific reasons the Claimant
believes he or she is entitled to benefits or greater or different benefits. Such petition will be
reviewed by a committee of one or more individuals who are not under the supervision of any person
serving as Claim Administrator (the Reviewer). The Claimant may submit written comments,
documents, records, and other information relating to the Claim and will be provided, upon request
and free of charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimants Claim.
Within sixty (60) days after receipt by the Plan Administrator of said petition, the Reviewer must
afford the Claimant (and counsel, if any) an opportunity to present his or her position to the
Reviewer orally or in writing, and the Claimant (or counsel) will have the right, upon request and
free of charge, for reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimants Claim; and the Reviewer must take into account all comments,
documents, records, and other information submitted by the Claimant relating to the Claim, without
regard to whether such information was submitted or considered in the initial benefit
determination. The Reviewer must notify the Claimant of its decision in writing within the sixty
(60)-day period, stating (in a manner calculated to be understood by the Claimant) the specific
basis for its decision and the specific provisions of the Plan on which the decision is based. If,
because of the need for a hearing, the sixty (60)-day period is not sufficient, the decision may be
deferred for up to another sixty (60)-day period at the election of the Reviewer, but notice of
this deferral must be given to the Claimant. In the case of any extension under this paragraph,
the notice of extension must specifically explain the standards on which entitlement to a benefit
is based, the unresolved issues that prevent a decision on the claim, and the additional
information needed to resolve those issues, and the Claimant must be afforded at least forty-five
(45) days within which to provide the specified information.
WHAT RIGHTS DO I HAVE UNDER ERISA?
As a participant in Famous Daves of America, Inc. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN you are entitled to certain rights and protections under the Employee
Retirement Income Security Act of 1974 (ERISA). ERISA provides that all plan participants shall be
entitled to:
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Receive information about your Plan and benefits.
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Examine, without charge, at the plan administrators office and at other specified
locations, such as worksites and union halls, all documents governing the plan,
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including insurance contracts and collective bargaining agreements, and a copy of the
latest annual report (Form 5500 Series) filed by the plan with the U.S. Department of
Labor and available at the Public Disclosure Room of the Pension and Welfare Benefit
Administration.
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Obtain, upon written request to the plan administrator, copies of documents
governing the operation of the plan, including insurance contracts and collective
bargaining agreements, and copies of the latest annual report (Form 5500 Series) and
updated summary plan description. The administrator may make a reasonable charge for
the copies.
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Receive a summary of the plans annual financial report. The plan administrator is
required by law to furnish each participant with a copy of this summary annual report.
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Obtain a statement telling you whether you have a right to receive a pension at
normal retirement age and if so, what your benefits would be at normal retirement age
if you stop working under the plan now. If you do not have a right to a pension, the
statement will tell you how many more years you have to work to get a right to a
pension. This statement must be requested in writing and is not required to be given
more than once every twelve (12) months. The plan must provide the statement free of
charge.
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Prudent Actions by Plan Fiduciaries.
In addition to creating rights for plan participants, ERISA imposes duties upon the people who are
responsible for the operation of the employee benefit plan. The people who operate your plan,
called fiduciaries of the plan, have a duty to do so prudently and in the interest of you and
other plan participants and beneficiaries. No one, including your employer, your union, or any
other person, may fire you or otherwise discriminate against you in any way to prevent you from
obtaining a (pension, welfare) benefit or exercising your rights under ERISA.
Enforce Your Rights.
If your claim for a (pension, welfare) benefit is denied or ignored, in whole or in part, you have
a right to know why this was done, to obtain copies of documents relating to the decision without
charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps
you can take to enforce the above rights. For instance, if you request a copy of plan documents or
the latest annual report from the plan and do not receive them within thirty (30) days, you may
file suit in a Federal court. In such a case, the court may require the plan administrator to
provide the materials and pay you up to One Hundred Ten Dollars ($110) a day until you receive the
materials, unless the materials were not sent because of reasons beyond the control of the
administrator. If you have a claim for benefits which is denied or ignored, in whole or in part,
you may file suit in a state or Federal court. In addition, if you disagree with the plans
decision or lack thereof concerning the qualified status of a domestic relations order or a medical
child support order, you may file suit in Federal court. If it should happen that plan fiduciaries
misuse the plans money, or if you are discriminated against for asserting your rights, you may
seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The
court
12
will decide who should pay court costs and legal fees. If you are successful, the court may order
the person you have sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees; for example, if it finds your claim is frivolous.
Assistance with Your Questions.
If you have any questions about your plan, you should contact the plan administrator. If you have
any questions about this statement or about your rights under ERISA, or if you need assistance in
obtaining documents from the plan administrator, you should contact the nearest office of the
Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
You may also obtain certain publications about your rights and responsibilities under ERISA by
calling the publications hotline of the Employee Benefits Security Administration.
WHO ADMINISTERS THE PLAN?
The Plan Administrator for the Plan is the Company, Famous Daves of America, Inc. Service of
legal process, or any request for information concerning eligibility, participation, contributions,
or other aspects of the operation of the Plan should be in writing and directed to the Plan
Administrator, Famous Daves of America, Inc. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE
DEFERRED STOCK UNIT PLAN, c/o Famous Daves of America, Inc., 12701 Whitewater Drive, Suite 200,
Minnetonka, MN 55343.
ARE THE BENEFITS INSURED BY THE PENSION BENEFIT GUARANTY CORPORATION?
Benefits provided by the Plan are not insured by the Pension Benefit Guaranty Corporation (PBGC)
under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), because the
pension insurance provisions of ERISA do not apply to the Plan.
This Summary Plan Description has outlined only some of the terms of the Famous Daves of America,
Inc. FIRST AMENDED AND RESTATED EXECUTIVE ELECTIVE DEFERRED STOCK UNIT PLAN. In the event of a
conflict between this Summary and the Plan, the terms of the Plan will control. We will be happy
to answer any questions you might have. We are proud to be able to contribute toward your security
and well being through the adoption of this Plan.
Yours truly,
FAMOUS DAVES OF AMERICA, INC.
Company Identification Number:
Plan No.
13
Exhibit 10.16
FAMOUS DAVES OF AMERICA, INC.
SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN
THIS SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN (the Plan) is adopted
effective as of the 1st day of January, 2008, by Famous Daves of America, Inc., a Minnesota
corporation (the Company), as follows:
RECITALS
The Company established the Famous Daves of America, Inc. NON-QUALIFIED DEFERRED COMPENSATION PLAN
effective February 25, 2005 to provide additional retirement benefits and income tax deferral
opportunities for eligible employees; and
The Company amended and restated the Famous Daves of America, Inc. Non-qualified Deferred
Compensation Plan as the FIRST AMENDED AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN in
order to comply with the Internal Revenue Code and the Regulations promulgated thereunder; and
The Company wishes to amend and restate the Famous Daves of America, Inc. FIRST AMENDED AND
RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN as the SECOND AMENDED AND RESTATED NON-QUALIFIED
DEFERRED COMPENSATION PLAN in order to comply with the Applicable Tax Law (defined below); and
The Company intends that the Plan shall at all times be administered and interpreted in such a
manner as to constitute an unfunded nonqualified deferred compensation plan for a select group of
management or highly compensated employees and to qualify for all available exemptions from the
provisions of ERISA, where the benefits payable pursuant to this Plan are not subject to taxation
until they are paid to the Participant (defined below) or the Participants Beneficiary (defined
below).
NOW, THEREFORE, the Company hereby adopts the following Plan.
ARTICLE 1
DEFINITIONS
Certain words and phrases are defined when first used in later sections of this plan. Whenever any
words are used herein in the masculine, they shall be construed as though they were in the feminine
in all cases where they would so apply; and whenever any words are used herein in the singular or
in the plural, they shall be construed as though they were used in the plural or the singular, as
the case may be, in all cases where they would so apply. In addition, the following words and
phrases when used herein, unless the context clearly requires otherwise, shall have the following
respective meanings:
1.1
402(g) Amount.
The maximum amount of deferrals permitted in a particular year under Code
Section 402(g) ($15,500 in 2007).
1.2
Accrued Benefit.
The sum of all of a Participants Deferral Accounts.
1.3
Affiliate.
Any corporation, partnership, joint venture, association, or similar organization
or entity, which is a member of a controlled group of companies which includes, or which is under
common control with, the Company under Section 414 of the Code.
1.4
Aggregated Arrangement.
All agreements, methods, programs, or other arrangements of the
Employer Group with respect to which deferrals of compensation are treated as having been deferred
under a single deferred compensation plan that includes the Deferral Elections under this Plan
pursuant to §1.409A-1(c)(2) of the Applicable Tax Law.
1.5
Annual Deferral Election.
A written notice other than an Initial Deferral Election filed by
the Participant with the Plan Administrator in accordance with Section 3.1.2 and in substantially
the form attached hereto as Exhibit 1.5, or such other form as is acceptable to the Plan
Administrator, specifying the amount (if any) of Compensation to be deferred, the Deferral Period
and the Payout Period of the Deferred Compensation which is deferred under the election. Such
Annual Deferral Election shall be effective for the Plan Years indicated on the Annual Deferral
Election.
1.6
Annual Deferral Election Deadline.
Except with respect to an Participant making an Initial
Deferral, the Deferral Election Deadline is the earlier of (a) December 31 of the year prior to the
year in which the personal services giving rise to the Compensation to be deferred under the
Deferral Election or (b) the date set by the Plan Administrator as the last day that a Participant
can file a Deferral Election with respect to Compensation to be paid for personal services to be
rendered by the Participant in a calendar year after the calendar year in which the Deferral
Election is filed.
1.7
Applicable Tax Law.
Section 409A of the Code, the regulations issued by the Department of the
Treasury pursuant thereto, and such other rulings and guidance issued by the IRS concerning Section
409A of the Code.
1.8
Beneficiary.
The persons or entities determined in accordance with the following provisions.
1.8.1
Beneficiary Designation
. The Participant shall have the right, at any time, to
submit a Beneficiary Designation Form specifying one (1) or more persons or entities as the
Participants Beneficiary. If a Participant files a duly executed Beneficiary Designation Form
with the Plan Administrator, the Beneficiary shall be the one (1) or more persons or entities
designated on such Beneficiary Designation Form to receive the Participants Accrued Benefit. No
Beneficiary Designation Form shall be effective unless it is submitted to the Plan Administrator
prior to the Participants death and the Beneficiary Designation Form is approved by the Plan
Administrator. The Participant may change the persons or entities who are the Participants
Beneficiary named in any Beneficiary Designation Form at any time by filing a new duly executed
Beneficiary Designation Form with the Plan Administrator without the consent of any person or
entity then designated as a Beneficiary. Any attempt to designate a Beneficiary other than as
provided in this Section shall be ineffective.
2
1.8.2
Deceased Beneficiary
. If a person designated as a Beneficiary on a Beneficiary
Designation Form predeceases the Participant, the interest in the Participants Accrued Benefit
that would have been payable to such deceased Beneficiary shall pass to those persons or entities
as specified on the Beneficiary Designation Form. If the Beneficiary Designation Form is either
ambiguous or fails to specify who is to receive the interest in the Participants Accrued Benefit
that would have been paid to the deceased Beneficiary, the interest of the deceased Beneficiary
shall be distributed to the deceased Beneficiarys descendants by right of representation if the
deceased Beneficiary is a descendant or sibling of the Participant and, if not, the interest of the
deceased Beneficiary shall lapse and the interest of the deceased Beneficiary shall pass as if the
deceased Beneficiary had not been listed as a Beneficiary. For purposes of any Beneficiary
Designation Form, no person shall be deemed to have survived the Participant if that person dies
within thirty (30) days of the Participants death.
1.8.3
Revocation of Spouses Interest
. A Participants designation of the
Participants Spouse as a beneficiary shall be automatically revoked if the Participant or the
Spouse subsequently files for divorce or legal separation or if the Spouse dies prior to the
Participant. Without limiting the generality of the foregoing, the interest in the benefits
hereunder of a Spouse of a Participant who has predeceased the Participant or where either have
filed for divorce or a legal separation shall automatically pass to the Participant and shall not
be transferable by such Spouse in any manner, including, but not limited to, such Spouses will.
1.8.4
No Surviving Beneficiaries
. If all of the persons named on the Beneficiary
Designation Form are deceased and there are no entities listed which are still in existence on the
date of Payment of the Participants unpaid Accrued Benefit under the Plan, then the Beneficiary
shall be the Participants surviving Spouse, if any, provided neither the Participant nor the
Participants Spouse has filed for divorce or legal separation. If the Participant is not survived
by a Spouse or if the Participant or Participants Spouse has filed for divorce, the Participants
descendants by right of representation shall be the Beneficiary. If there are no surviving
descendants, the legal representative of the Participants estate shall be the Beneficiary.
1.8.5
No Beneficiary Designation Form
. If no duly executed Beneficiary Designation
Form has been received by the Company, the Beneficiary shall be the Participants surviving Spouse,
if any, provided neither the Participant nor the Participants Spouse has filed for divorce or
legal separation. If the Participant is not survived by a Spouse or if the Participant or
Participants Spouse has filed for divorce, the Participants descendants by right of
representation shall be the Beneficiary. If there are no surviving descendants, the legal
representative of the Participants estate shall be the Beneficiary.
1.9
Beneficiary Designation Form.
The form attached hereto as Exhibit 1.9, or such other
substantially similar form as the Plan Administrator acknowledges in writing as an acceptable
substitute, which is duly executed by the Participant and received by the Company or the Plan
Administrator prior to the Participants death.
1.10
Board.
The Board means the Board of Directors of the Company.
1.11
Change in Control Event.
Except as otherwise provided under the Applicable Tax Law, a Change
in Control Event is the occurrence of any of the events described in Sections 1.11.1,
3
1.11.2, or 1.11.3, provided that such event relates to (i) the corporation for whom the Participant
is performing services at the time of the Change in Control Event, (ii) the corporation that is
liable for the payment of the deferred compensation (or all corporations liable for the payment if
more than one corporation is liable) but only if either the deferred Compensation is attributable
to the performance of service by the Participant for such corporation (or corporations) or there is
a bona fide business purpose for such corporation or corporations to be liable for such payment
and, in either case, no significant purpose of making such corporation or corporations liable for
such payment is the avoidance of Federal income tax, or (iii) a corporation that is a majority
shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of
corporations in which each corporation is a majority shareholder of another corporation in the
chain, ending in a corporation identified in (i) or (ii). For purposes of this Section 1.11, a
majority shareholder is a shareholder owning more than fifty percent (50%) of the total fair market
value and total voting power of such corporation.
1.11.1
A Change In The Ownership Of A Corporation
.
1.11.1.1 A Change In The Ownership Of A Corporation occurs on the date that any one (1)
person, or more than one (1) person acting as a group (as defined in Section 1.11.1.2),
acquires ownership of stock of the corporation that, together with stock held by such person
or group, constitutes more than fifty percent (50%) of the total fair market value or total
voting power of the stock of such corporation. However, if any one (1) person or more than
one (1) person acting as a group, is considered to own more than fifty percent (50%) of the
total fair market value or total voting power of the stock of a corporation, the acquisition
of additional stock by the same person or persons is not considered to cause a change in the
ownership of the corporation (or to cause a change in the effective control of the
corporation (within the meaning of Section 1.11.2)). An increase in the percentage of stock
owned by any one (1) person, or Persons Acting As A Group, as a result of a transaction in
which the corporation acquires its stock in exchange for property will be treated as an
acquisition of stock for purposes of this section. This Section 1.11.1 applies only when
there is a transfer of stock of a corporation (or issuance of stock of a corporation) and
stock in such corporation remains outstanding after the transaction (see Section 1.11.3 for
rules regarding the transfer of assets of a corporation).
1.11.1.2 For purposes of this Section 1.11.1, persons will not be considered to be
acting as a group solely because they purchase or own stock of the same corporation at the
same time, or as a result of the same public offering. However, persons will be considered
to be acting as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction with the
corporation. If a person, including an entity, owns stock in both corporations that enter
into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in a corporation
prior to the transaction giving rise to the change and not with respect to the ownership
interest in the other corporation.
4
1.11.2
A Change In Effective Control Of A Corporation
.
1.11.2.1
Definition
. A Change In Effective Control Of A Corporation occurs
only on either of the following dates:
(a) The date any one (1) person, or more than one (1) person acting as a group
(as determined under Section 1.11.2.4), acquires (or has acquired during the twelve
(12)-month period ending on the date of the most recent acquisition by such person
or persons) ownership of stock of the corporation possessing thirty-five percent
(35%) or more of the total voting power of the stock of such corporation; or
(b) The date a majority of members of the corporations Board is replaced
during any twelve (12)-month period by directors whose appointment or election is
not endorsed by a majority of the members of the Companys Board prior to the date
of the appointment or election, provided that for purposes of this Section the term
corporation refers solely to the relevant corporation identified in Section 1.11 for
which no other corporation is a majority shareholder for purposes of that Section.
1.11.2.2
Multiple Change in Control Events
. A Change In Effective Control also
may occur in any transaction in which either of the two (2) corporations involved in the
transaction has a Change in Control Event.
1.11.2.3
Acquisition Of Additional Control
. If any one (1) person, or more
than one (1) person acting as a group, is considered to effectively control a corporation,
the acquisition of additional control of the corporation by the same person or persons is
not considered to cause a change in the effective control of the corporation (or to cause a
change in the ownership of the corporation).
1.11.2.4
Persons Acting As A Group
. Persons will not be considered to be
acting as a group solely because they purchase or own stock of the same corporation at the
same time, or as a result of the same public offering. However, persons will be considered
to be acting as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction with the
corporation. If a person, including an entity, owns stock in both corporations that enter
into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such
shareholder is considered to be acting as a group with other shareholders in a corporation
only with respect to the ownership in that corporation prior to the transaction giving rise
to the change and not with respect to the ownership interest in the other corporation.
1.11.3
A Change In The Ownership Of A Substantial Portion Of The Assets Of A
Corporation.
A Change In The Ownership Of A Substantial Portion Of The Assets Of A Corporation
occurs on the date that any one (1) person, or more than one (1) person acting as a group (as
determined in Section 1.11.3.3), acquires (or has acquired during the twelve (12)-month period
ending on the date of the most recent acquisition by such person or persons) assets
5
from the corporation that have a total gross fair market value equal to or more than forty
percent (40%) of the total gross fair market value of all of the assets of the corporation
immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value
means the value of the assets of the corporation, or the value of the assets being disposed of,
determined without regard to any liabilities associated with such assets.
1.11.3.1
Transfers to a Related Person
. There is no Change in Control Event
when there is a transfer to an entity that is controlled by the shareholders of the
transferring corporation immediately after the transfer, as provided in this Section
1.11.3.1. A transfer of assets by a corporation is not treated as a change in the ownership
of such assets if the assets are transferred to
(a) a shareholder of the corporation (immediately before the asset transfer) in
exchange for or with respect to its stock;
(b) an entity, fifty percent (50%) or more of the total value or voting power
of which is owned, directly or indirectly, by the corporation;
(c) a person, or more than one (1) person acting as a group, that owns,
directly or indirectly, fifty percent (50%) or more of the total value or voting
power of all the outstanding stock of the corporation; or
(d) an entity, at least fifty percent (50%) of the total value or voting power
of which is owned, directly or indirectly, by a person described in paragraph (c)
above.
1.11.3.2
Status
. For purposes of Section 1.11.3.1 and except as otherwise
provided, a persons status is determined immediately after the transfer of the assets.
1.11.3.3
Persons Acting As A Group
. Persons will not be considered to be
acting as a group solely because they purchase assets of the same corporation at the same
time. However, persons will be considered to be acting as a group if they are owners of a
corporation that enters into a merger, consolidation, purchase or acquisition of assets, or
similar business transaction with the corporation. If a person, including an entity
shareholder, owns stock in both corporations that enter into a merger, consolidation,
purchase or acquisition of assets, or similar transaction, such shareholder is considered to
be acting as a group with other shareholders in a corporation only to the extent of the
ownership in that corporation prior to the transaction giving rise to the change and not
with respect to the ownership interest in the other corporation.
1.11.4
Stock Attribution Rules
. Code §318(a) shall apply for purposes of determining
stock ownership. Stock underlying a vested option is considered owned by the individual who holds
the vested option (and the stock underlying an unvested option is not considered owned by the
individual who holds the unvested option). For purposes of the preceding sentence, however, if a
vested option is exercisable for stock that is not substantially vested (as defined by Code
Sections 1.83-3(b) and (j)), the stock underlying the option is not treated as owned by the
individual who holds the option. In addition, mutual and cooperative corporations are treated as
having stock for purposes of this section.
6
1.12
Code.
The Internal Revenue Code of 1986, as amended from time to time.
1.13
Commencement Date.
1.13.1 If a Participant is not a Key Employee, the first day of the third month beginning
after the first to occur of any of the Permissible Payment Events.
1.13.2 If a Participant is a Key Employee,
1.13.2.1 Unless the first Permissible Payment Event is a Termination of Employment, the
first day of the third month beginning after the first of the Permissible Payment Events to
occur, other than a Termination of Employment;
1.13.2.2 If the first Permissible Payment Event to occur is a Termination of
Employment, the earlier of (a) the date which is six (6) months and one (1) day after the
Participants Termination of Employment where the first Permissible Payment Event to occur
is a Termination of Employment, or (b) the first day of the third month beginning after the
date of the Participants death.
1.14
Compensation.
The salary, bonuses, and commissions which would be payable by the Employer
Group to a Participant during a Plan Year but for any Deferral Election pursuant to this Plan
deferring the receipt of such salary, bonuses, and commissions.
1.15
Contingent Beneficiary.
The Contingent Beneficiary, if any, designated on a Participants
Beneficiary Designation Form.
1.16
Declared Rate.
The percentage rate established from time to time by the Company, which rate
may be determined by reference to a rate established by an unrelated third party.
1.17
Deferral Account.
Book entries maintained by the Company reflecting the amount of the
Participants Accrued Benefit attributable to the Participants Deferred Contributions pursuant to
the Participants Deferral Elections, the Investment Adjustments with respect to the balance of the
Deferral Account, the Plan Expenses allocated thereto (if any), and the Discretionary Contributions
allocated thereto, if any, provided, however, that the existence of such book entries shall not
create, and shall not be deemed to create a trust of any kind or a fiduciary relationship between
the Company and the Participant and the Participants Beneficiaries. The Plan Administrator shall
maintain a separate Deferral Account for each Participant for each Plan Year in which the
Participant makes a Deferral Election or in which the Participant is allocated a Discretionary
Contribution. The Plan Administrator may maintain additional Deferral Accounts or sub-accounts as
it deems necessary to accurately track and reflect (a) the Investment Adjustments, and (b) any
conditions established by the Company with respect to any Discretionary Contributions, e.g.
vesting.
1.18
Deferral Account Balance.
The amount of the Deferral Account as of a given Determination Date
as determined under Section 4.2.
1.19
Deferral Contribution.
The amount of Compensation a Participant elects to defer under this
Plan for a specific Plan Year.
7
1.20
Deferral Election.
An Initial, Annual or Revised Deferral Election as applicable.
1.21
Deferral Election Form.
The form specified by or otherwise acceptable to the Plan
Administrator for making a Deferral Election.
1.22
Deferral Period.
The period elected by the Participant on the Participants Deferral Election
Form and approved by the Company during which the Participant is not entitled to receive the
Compensation the Participant has elected to defer for a Plan Year pursuant to a Deferral Election.
Each Deferral Period begins on the date specified by the Company prior to the beginning of the Plan
Year and shall end on the last day of the Deferral Period as specified by the Company prior to the
beginning of the Plan Year. Unless otherwise designated by the Company, if the Deferral Period is
specified in terms of Plan Year or calendar years, the Deferral Period for an Initial Deferral
Election begins on the first day of the first Plan Year beginning after the end of the Initial Plan
Year and shall end on the last day of the last Plan Year which is the same number of Plan Years
after the Initial Plan Year as the number of Plan Years of calendar years specified in the Deferral
Election. Unless otherwise designated by the Company, if the Deferral Period is specified in terms
of Plan Years or calendar years, the Deferral Period for an Annual Deferral Election shall begin on
the first day of the second Plan Year beginning after Plan Year in which the Annual Deferral
Election is made and shall end on the last day of the last Plan Year which is the same number of
Plan Years after the Plan Year in which the Deferral Election is made as the number of Plan Years
or calendar years specified in the Annual Deferral Election as the Deferral Period. For example:
if the Annual Deferral Election is made in the Plan Year ending December 31, 2004 and the Deferral
Period of four (4) calendar years is elected, the first year of the Deferral Period is Plan Year
ending December 31, 2006, and the last Plan Year of the Deferral Period is the Plan Year ending on
December 31, 2009, with the Deferral Account being paid beginning on the Commencement Date in 2010.
1.23
Deferred Compensation.
The Compensation deferred pursuant to a Deferral Election.
1.24
Designated Employee.
An Eligible Employee designated by the Board or its designee as eligible
to participate in the Plan and make Deferral Elections under this Plan. Once an Eligible Employee
becomes a Designated Employee, the Eligible Employee shall remain a Designated Employee until the
earlier of (a) the Designated Employees Separation From Service, (b) the date the Eligible
Employee ceases to be an Eligible Employee, or (c) the date the Board or its designee declares the
Designated Employee is no longer a Designated Employee.
1.25
Determination Date.
The last day of the last month ending on or before the first to occur of
an applicable Permissible Payment Event.
1.26
Disability.
A Participant has a Disability if any of the following apply:
1.26.1 The Participant is unable to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment that can be expected to result in death or
can be expect to last for a continuous period of not less than twelve (12) months.
1.26.2 The Participant is, by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months, receiving income replacement benefits for a period of
8
not less than three (3) months under an accident and health plan covering employees of the
Company.
1.26.3 The Participant is determined to be totally disabled by the Social Security
Administration.
1.27
Discretionary Contributions.
Contributions made to the Plan by the Company as it may
determine from time to time, and allocated pursuant to Section 3.2 at the Companys discretion.
1.28
Effective Date.
January 1, 2008.
1.29
Eligible Employee.
Any employee of the Employer Group who is (a) a director level and above
employee (as defined by the Company from time to time), and (b) a member of a select group of
management or highly compensated employees, as defined by ERISA.
1.30
Employer Group.
The Company and all other business entities or other persons with whom the
Company would be treated as a single employer as part of either (a) a controlled group of
corporations described in Code Section 414(b), or (b) a group of trades or businesses (whether or
not incorporated) that are under common control as described in Code Section 414(c), or some
combination of such groups; and such groups shall be determined in each case by applying an eighty
percent (80%) ownership test.
1.31
ERISA.
The Employee Retirement Income Security Act of 1974, as amended from time to time.
1.32
Initial Deferral Election.
A written notice filed by an Initial Designated Employee with the
Plan Administrator in accordance with Section 3.1.1 and in substantially the form attached hereto
as Exhibit 1.5, or such other form as is acceptable to the Plan Administrator, whereby the Initial
Designated Employee elects to defer the receipt of a specified amount or percentage of the Initial
Designated Employees Initial Year Compensation earned in the Initial Year of Participation after
the date the Participant files the Initial Deferral Election to be deferred, the Deferral Period
and the Payout Period of the Compensation which is deferred under the election. Such Deferral
Election shall be effective for the Plan Years indicated on the Deferral Election.
1.33
Initial Deferral Election Deadline.
The Initial Deferral Election Deadline is the earlier of:
(a) the date which is thirty (30) days after the date an Initial Designated Employee first becomes
an Initial Designated Employee in the Plan, or (b) the date set by the Plan Administrator as the
last day that a Initial Designated Employee can file an Initial Deferral Election with respect to
Initial Designated Employees Initial Year Compensation.
1.34
Initial Designated Employee.
1.34.1 A Designated Employee during the period beginning on the first day the Designated
Employee becomes a Designated Employee and ending on the last day of the Plan Year in which the
Designated Employee becomes a Designated Employee, who, except as otherwise provided in the
Applicable Tax Law, has not previously been eligible to participate in any deferred compensation
arrangement sponsored by any member of the Employer Group
9
which is of the same type of deferred compensation arrangement as the Plan as determined under
the Applicable Tax Law.
1.34.2 Such other Designated Employee during any Plan Year in which such Designated Employee
is entitled to make an initial deferral election as such term is used under the Applicable Tax
Law.
1.35
Initial Year Compensation.
The Compensation to be earned by the Initial Designated Employee
during the period (i) beginning after the later of (a) date Initial Designated Employee files the
Initial Deferral Election or (b) such later date as specified by the Plan Administrator and (ii)
ending on the last day of the Initial Year of Participation.
1.36
Initial Year of Participation.
The Plan Year in which the Participant is an Initial
Designated Employee in the Plan.
1.37
Investment Adjustments.
The amount to be added to the Participants Accounts based upon the
Declared Rate established by the Company from time to time.
1.38
IRS.
The Internal Revenue Service of the Department of the Treasury.
1.39
Key Employee.
1.39.1 A Participant is a Key Employee if (a) the Companys stock is publicly tradable on an
established stock exchange or otherwise, and (b) the Participant either (i) holds a position with
the Employer Group at the vice president level or above in accordance with the Companys employment
policies established from time to time, or (ii) is a key employee as defined in Section 416(i) of
the Code (without regard to paragraph (5) thereof). Generally, the term key employee for
purposes of Section 416(i) of the Code means an employee who, at any time during the Plan Year, is
(i) an officer of the Company having an annual compensation greater than $130,000 (as adjusted
under the Code), (ii) a five percent (5%) owner of the Company, or (iii) a one percent (1%) owner
of the Company having an annual compensation from the employer of more than $150,000 (as adjusted
under the Code).
1.39.2 The determination shall be based upon the twelve (12)-month period ending on December
31 of each Plan Year. Participants who meet the definition of key employee on such date shall be
considered key employees for the twelve (12)-month period commencing on the first day of the 4th
month following the end of the twelve (12)-month period.
1.40
Participant.
An employee of the Employer Group who satisfies the conditions of Section 2.1.
1.41
Payment.
In general, except as provided in Sections 1.41.1 and 1.41.2 of this section, the
term Payment refers to each separately identified amount to which a Participant is entitled to
payment under the Plan on a determinable date, and includes amounts applied for the benefit of the
Participant. An amount is separately identified only if the amount may be objectively determined.
For example, an amount identified as ten percent (10%) of the account balance as of a specified
Payment Date would be a separately identified amount. A payment includes the provision of any
taxable benefit, including payment in cash or in kind. In addition, a payment
10
includes, but is not limited to, the transfer, cancellation or reduction of an amount of deferred
compensation in exchange for benefits under a welfare benefit plan, fringe benefit excludible under
Code §§119 or 132, or any other benefit that is excluded from gross income.
1.41.1
Life annuities
. The entitlement to a life annuity is treated as the
entitlement to a single payment. For purposes of this paragraph, the term life annuity means a
series of substantially equal periodic payments, payable not less frequently than annually, for the
life (or life expectancy) of the Participant or the joint lives (or life expectancies) of the
Participant and the Participants designated beneficiary. A change in the form of a payment from
one type of life annuity to another type of life annuity before any annuity payment has been made
is not considered a change in the time and form of a payment, provided that the annuities are
actuarially equivalent applying reasonable actuarial assumptions.
1.41.2
Installment payments
. The entitlement to a series of installment payments that
is not a life annuity is treated as the entitlement to a series of separate payments, unless the
arrangement provides at all times with respect to the amount deferred that the right to the series
of installment payments is to be treated as a right to a single payment. For purposes of this
paragraph 1.41.2, a series of installment payments refers to an entitlement to the payment of a
series of substantially equal periodic amounts to be paid over a predetermined period of years,
except to the extent any increase in the amount reflects reasonable earnings through the date the
amount is paid.
1.42
Payment Date.
Any date upon which a Payment is due under the terms of this Plan.
1.43
Payout Period.
The period of time chosen by the Participant on the Participants Deferral
Election or such other period over which the Participants Accrued Benefit will be paid in
accordance with the provisions of the Plan and the Applicable Tax Law.
1.44
Permissible Payment Event.
Any of the following events:
1.44.1 the Participants Separation from Service;
1.44.2 the Participants Disability;
1.44.3 the occurrence of a Change in Control Event; or
1.44.4 the expiration of the Deferral Period selected by the Participant on a Deferral
Election Form with respect to a Deferral Account established for a Plan Year.
1.45
Plan.
The Famous Daves of America, Inc. SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN, as herein stated, together with any and all amendments or supplements thereto.
1.46
Plan Administrator.
The Board of Directors of the Company or their designee. A Participant
in the Plan shall not serve alone as Plan Administrator. If a Participant is part of a group or
committee designated as Plan Administrator, then the Participant may not participate in any
activity or decision relating solely to the Participants individual benefits under the Plan.
11
Matters solely affecting the applicable Participant will be resolved by the remaining committee
members or by the Board of Directors.
1.47
Plan Expenses.
Any expense incurred in connection with the formation and/or operation of the
Plan.
1.48
Plan Year.
The calendar year.
1.49
Revised Deferral Election.
A written notice filed by the Participant with the Plan
Administrator and in substantially the form attached hereto as Exhibit 1.49, or such other form as
is acceptable to the Plan Administrator, specifying a change to the Initial Deferral Election or an
Annual Deferral Election with respect to the Deferral Period or the Payout Period of the
Compensation which was deferred under the Initial Deferral Election or an Annual Deferral Election
as applicable. Such Revised Deferral Election shall be effective only as and to the extent
permitted under the Applicable Tax Law.
1.50
Spouse.
An individual who is married, for Federal income tax law purposes, to another
individual of the opposite sex. The Plan Administrator may, from time to time, require documentary
evidence that any individual covered as the Spouse of a Participant under the Plan satisfies this
definition.
1.51
Separation from Service.
Any of the following:
1.51.1 The Participants death; or
1.51.2 The Participants Termination of Employment.
1.52
Termination of Employment.
1.52.1 The date the Participant completely ceases to provide any services to the Employer
Group (both as an employee or as an independent contractor and whether such cessation is voluntary
or involuntary, other than by reason of death) under circumstances where the Employer Group and the
Participant reasonably anticipate that no further services would be performed by the Participant
for any member of the Employer Group after such date
.
1.52.2 The date of the reduction of the average level of bona fide services performed by the
Participant for the Employer Group (whether as an employee or an independent contractor and whether
such reduction is voluntary or involuntary), to no more than twenty percent (20%) of the level
during the immediately preceding thirty-six (36) month period (or the full period of services to
the Employer Group if the Participant has been providing services to the Employer Group for less
than thirty-six (36) months) under circumstances in which the Participant and the Employer Group
reasonably anticipated that the average level of bona fide services to be performed after a
specified date would be no more than twenty percent (20%) of the level during the immediately
preceding thirty-six (36) month period (or the full period of services to the Employer Group if the
Participant has been providing services to the Employer Group for less than thirty-six (36)
months).
12
1.52.3 A cessation or reduction in services shall not include any reduction due to an approved
leave of absence, military leave, sick leave, or other bona fide leave of absence (such as
temporary employment by the government) if the period of such leave does not exceed six (6) months,
or if longer, so long as the Participants right to reemployment with the Company is provided
either by statute or by contract. If the period of leave exceeds six (6) months and the
Participants right to reemployment is not provided either by statute or by contract, the
Termination of Employment will be deemed to have occurred on the first date immediately following
such six (6)-month period.
1.52.4 For periods during which the Participant is on a paid bona fide leave of absence and
has not otherwise terminated employment whether voluntarily or involuntarily, the Participant shall
be treated as providing bona fide services at a level equal to the level of services that the
Participant would have been required to perform to receive the compensation paid with respect to
such leave of absence. Periods during which a Participant is on an unpaid bona fide leave of
absence and has not otherwise terminated the employment relationship are disregarded for purposes
of this section (including for purposes of determining the applicable thirty-six (36)-month (or
shorter) period).
1.53
Unforeseeable Emergency.
1.53.1 A severe financial hardship to the Participant resulting from an illness or accident of
the Participant, the Participants spouse, the Participants beneficiary, or the Participants
dependent (as defined in Code §152, without regard to §§152(b)(1), (b)(2), and (d)(1)(B)); loss of
the Participants property due to casualty (including the need to rebuild a home following damage
to a home not otherwise covered by insurance; for example, not as a result of a natural disaster);
other similar extraordinary and unforeseeable circumstances arising as a result of events beyond
the control of the Participant, and such other circumstances as permitted under the Applicable Tax
Law.
1.53.2 Whether a Participant is faced with an Unforeseeable Emergency permitting a
distribution under this Plan is to be determined based on the relevant facts and circumstances of
each case, but, in any case, a distribution on account of Unforeseeable Emergency may not be made
to the extent that such emergency is or may be relieved through reimbursement or compensation from
insurance or otherwise, by liquidation of the Participants assets, to the extent the liquidation
of such assets would not cause severe financial hardship, or by cessation of deferrals under the
plan. An Unforeseeable Emergency may include: the imminent foreclosure of or eviction from the
Participants primary residence; the need to pay for medical expenses, including non-refundable
deductibles, as well as for the costs of prescription drug medication; the need to pay for the
funeral expenses of a spouse, a beneficiary, or a dependent (as defined in Code Section 152,
without regard to Code Sections 152(b)(1), (b)(2), and (d)(1)(B)). The purchase of a home and the
payment of college tuition are not Unforeseeable Emergencies.
1.54
Valuation Date.
The last day of each quarter of the calendar year, each Determination Date,
and such other dates as may be specified by the Plan Administrator from time to time.
13
ARTICLE 2
ELIGIBILITY AND PARTICIPATION
2.1
Eligibility; Participation.
A Designated Employee shall become a Participant in the Plan
immediately upon becoming a Designated Employee unless a different date is specified by the
Company. Once a Designated Employee becomes a Participant, the Eligible Employee shall remain a
Participant until the later of (a) the date the Eligible Employee ceases to be a Designated
Employee or (b) the payment of all of the Participants Accrued Benefits.
ARTICLE 3
DEFERRALS AND CONTRIBUTIONS
3.1
Deferral Elections.
3.1.1
Initial Deferral Election
.
3.1.1.1 An Initial Designated Employee may make an Initial Deferral Election by filing
a Deferral Election Form with the Plan Administrator on or before the Initial Deferral
Election Deadline.
3.1.1.2 An Initial Deferral Election shall apply only to Initial Year Compensation. If
Initial Designated Employee fails to file an Initial Deferral Election by the Initial
Deferral Election Deadline, no part of the Initial Designated Employees Initial Year
Compensation may be deferred.
3.1.1.3 No Initial Deferral Election shall be effective until accepted by the Plan
Administrator. The Plan Administrator may, before the Initial Deferral Election Deadline,
limit the amount of an Initial Designated Employees Initial Year Compensation that the
Initial Designated Employee can defer during a Plan Year pursuant to any Initial Deferral
Election.
3.1.2
Annual Deferral Elections
. A Participant who is a Designated Employee may make
an Annual Deferral Election by filing a Deferral Election Form with the Plan Administrator on or
before the Annual Deferral Election Deadline. Each such Annual Deferral Election shall apply only
to Compensation earned with respect to services rendered during a Plan Year beginning after the
date the Annual Deferral Election is filed with the Plan Administrator. No Annual Deferral
Election shall be effective until accepted in writing by the Plan Administrator. The Plan
Administrator may, before the beginning of a Plan Year, limit the amount of the Participants
Compensation that the Participant can defer during a Plan Year pursuant to any Annual Deferral
Election.
3.1.3
Payroll Adjustment
. Upon receipt of a Deferral Election, the Plan Administrator
shall notify the Company to adjust the Participants Compensation otherwise payable to the
Participant as necessary to take into account the amount of the Participants Compensation that the
Participant has elected to defer pursuant to a Deferral Election. On the Deferral Election Form,
the Participant shall specify the amount of the Participants Compensation to be deferred, which
specification may be separate and distinct for the individual components of
14
Compensation, and may be expressed as percentages or fixed dollar amounts as and to the extent
approved by the Plan Administrator.
3.1.4
Revocation or Change of Deferral Election
.
3.1.4.1 Except as otherwise permitted under the Applicable Tax Law and by the Plan
Administrator, this Section 3.1.4 and Section 3.1.5, each Deferral Election shall be
irrevocable.
3.1.4.2 No revocation or change of any Deferral Election shall be effective unless and
until it complies with the Applicable Tax Law and unless and until it is accepted by the
Plan Administrator in writing.
3.1.4.3 Notwithstanding the foregoing, a Deferral Election, which is filed with the
Plan Administrator prior to the Initial Deferral Election Deadline or the Annual Deferral
Election Deadline, as applicable, may be revoked or changed at anytime prior to the Initial
Deferral Election Deadline or the Annual Deferral Election Deadline, as applicable.
3.1.4.4 A Participant who has incurred an Unforeseeable Emergency as determined by the
Plan Administrator may revoke the Participants Deferral Election as applicable with the
consent of the Plan Administrator as and to the extent permitted under the Applicable Tax
Law.
3.1.5
Revised Deferral Elections Changes to the Deferral Period, Payout Period, or Time
and Form of Payment
.
3.1.5.1
Reduction of Deferral Period/Acceleration of Time of Payment
. Except
as provided below or as otherwise permitted herein, under the Applicable Tax Law, and by the
Plan Administrator, neither the Deferral Period nor the Payout Period may be reduced nor may
the time of any Payment be otherwise accelerated.
3.1.5.2
Extensions/Delays
. With the consent of the Plan Administrator and to
the extent permitted under the Applicable Tax Law, the Deferral Period may be extended, the
Payout Period increased, and the time for any Payment delayed at the written election of the
Participant by submitting a Revised Deferral Election to the Plan Administrator, provided
that
3.1.5.2.1 any Revised Deferral Election may not be made with respect to any
Payment which would be paid on a date which is less than twelve (12) months after
the date the Revised Deferral Election is filed with the Plan Administrator without
regard to the Revised Deferral Election (or, in the case of a life annuity or
installment payments treated as a single Payment, less than twelve (12) months after
the date the Revised Deferral Election is filed with the Plan Administrator without
regard to the Revised Deferral Election);
3.1.5.2.2 the Payment which is to be deferred pursuant to such Revised Deferral
Election is deferred for a period of not less than five (5) years
15
from the date such Payment would otherwise have been paid but for the Revised
Deferral Election (or, in the case of a life annuity or installment payments treated
as a single Payment, five (5) years from the date the first amount was scheduled to
be paid); and
3.1.5.2.3 such extension of the Deferral Period or the Payout Period or delay
in the time of any Payment is in accordance with the Applicable Tax Law.
3.1.5.3
Separate Payments
. To the extent provided under the Applicable Tax
Law, each payment to be made to the Participant shall be treated as a Separate Payment.
Consistent with the Applicable Tax Law and with the consent of the Plan Administrator, the
Participant may extend the Deferral Period or the date of Payment separately with respect
each Separate Payment.
3.1.5.4
Conflict of Interest Payments
. Notwithstanding the foregoing, the time
or schedule of a Payment under the Plan may be modified as may be necessary to comply with a
certificate of divestiture (as defined in Code § 1043(b)(2)) as and to the extent permitted
under the Applicable Tax Law.
3.2
Discretionary Contributions.
3.2.1 The Company may allocate Discretionary Contributions to the Plan and may direct that
such contributions be allocated among the Deferral Accounts of those Participants that it may
select in the manner specified by the Company. In the event of Disability or death, a Participant
shall be entitled to the Participants share of the Discretionary Contributions (if any) for the
Plan Year in which the Participant incurs a Disability or dies.
3.2.2 A Participants share of the Discretionary Contributions for a Plan Year shall be
deferred for the Deferral Period applicable to Deferral Elections made by the Participant for the
Plan Year.
3.2.3 A Participants share of Discretionary Contributions shall be added to the Participants
Deferral Account for the Plan Year for which the Discretionary Contribution is made.
3.2.4 No Participant shall have a right to compel the Company to make a contribution under
this Section 3.2 and no Participant shall have the right to share in the allocation of any such
contribution for any Plan Year unless selected by the Company, in its sole discretion.
ARTICLE 4
DEFERRAL ACCOUNTS AND ALLOCATIONS TO DEFERRAL ACCOUNTS
4.1
Deferral Accounts.
The Plan Administrator shall establish a separate Deferral Account for each
Participant for each Plan Year for which the Participant makes a timely Deferral Election or
receives a Discretionary Contribution from the Company.
16
4.2
Allocations and Adjustments to Deferral Accounts.
4.2.1 The Deferral Account of each Participant shall be increased by the amount of
Compensation that the Participant would have received but for the Deferral Election, which amount
shall be added to the Deferral Account on the date and in the amount that the Compensation which is
deferred would otherwise have been paid to the Participant but for the Deferral Election or such
other date as established by the Plan Administrator in compliance with the Applicable Tax Law.
4.2.2 Company Discretionary Contributions (if any) shall be added to the Participants
Deferral Account at such time as directed by the Plan Administrator.
4.2.3 Each Deferral Account shall be reduced by the amount of all Payments from such Deferral
Account made to the Participant. All amounts paid from a Deferral Account are assumed to be paid
on the first day of the month or such other time as specified by the Plan Administrator.
4.2.4 The Participants Deferral Account shall be increased by the Investment Adjustments at
such times as may be specified by the Company, but not less often than quarterly.
4.2.5 The Company may, at any time, change the timing or methods for adding Investment
Adjustments, Deferral Contributions and Discretionary Contributions to the Deferral Accounts, and
reduce such Deferral Accounts by payments of benefits and Withdrawals for Unforeseen Emergencies
under this Plan; provided, however, that the times and methods for increasing or decreasing the
Deferral Accounts for such items in effect at any particular time shall be uniform among all
similarly situated Participants and Beneficiaries as determined by the Company in its sole
discretion. and provided further than any such change shall be permitted under the Applicable Tax
Law.
4.3
Determination of Accounts.
A Participants Accrued Benefit as of each Valuation Date shall
consist of the balance of the Participants Deferral Accounts, adjusted as provided in Section 4.2
through such date.
4.4
Statement of Accounts.
The Company shall provide to each Participant, within one hundred
twenty (120) days after the close of each Plan Year, a statement in such form as the Company
selects setting forth the amount of each of the Participants Deferral Accounts as of the last day
of the Plan Year just ended.
4.5
Accounting Device Only.
A Participants Deferral Accounts shall be utilized solely as a device
for the measurement and determination of the amounts to be paid to the Participant under this Plan.
A Participants Deferral Account shall not constitute or be treated as a trust fund of any kind or
give any Participant any right to any of the assets of the Company other than as a general creditor
of the Company.
17
ARTICLE 5
PAYMENT OF BENEFITS
5.1
Payment Events.
Except as otherwise provided below in this ARTICLE 5, the Deferral Account
Balance of a Participants Deferral Account shall be payable after the occurrence of a Permissible
Payment Event at the time and in the manner specified below.
5.2
Commencement of Payment.
Except as otherwise provided in this ARTICLE 5 and Sections 7.2 and
8.2, beginning on the Commencement Date of any Deferral Account, the Company shall pay to the
Participant the value of the Participants Deferral Account (determined as of the applicable
Determination Date as provided herein).
5.3
Form of Payment.
5.3.1
General
. Except as otherwise provided in this ARTICLE 5, the value of such
Deferral Account shall be paid in the manner and over the Payout Period specified in the
Participants applicable Deferral Election. Any Deferral Election which provides for the payment
of the Deferral Account over a Payout Period shall be paid in substantially equal monthly,
quarterly or annual payments over the Payout Period as elected by the Participant in the
Participants Deferral Election. If the Deferral Election does not specify the frequency of the
Payments, such Payments shall be monthly.
5.3.2
Change in Control
. Notwithstanding the foregoing, upon the occurrence of a
Change in Control Event, the Participants Accrued Benefit shall be paid to the Participant in a
lump sum notwithstanding any Deferral Election to the contrary.
5.3.3
Death of Participant
.
5.3.3.1 In the event of the Participants death, the Company shall pay the
Participants entire unpaid Accrued Benefit to the Participants Beneficiary in a single
lump sum Payment notwithstanding any Deferral Period or Payout Period specified in a
Deferral Election.
5.3.3.2 If the Beneficiary consists of more than one (1) person or entity, then the
Payment shall be divided among such person or entities designated as the Beneficiary on the
Beneficiary Designation Form as and to the extent provided in the Beneficiary Designation
Form. In the event of any ambiguity in the Beneficiary Designation Form, the Plan
Administrators interpretation of the Beneficiary Designation Form shall be final and
conclusive as to the persons or entities who are entitled to received the Participants
unpaid Accrued Benefit under the Plan and the amount which each such person or entity is
entitled to receive.
5.3.3.3 If any Payment shall be payable to any trust, the Company shall not be liable
to see to the application by the trustee of any Payment hereunder at any time, and may rely
upon the sole signature of the Trustee to any receipt, release or waiver, or to any transfer
or other instrument to whomsoever made purporting to affect this nomination or any right
hereunder.
18
5.4
Permitted Delay of Payments.
Except as otherwise provided in this Section 5.4, and except as
otherwise permitted pursuant to a timely Revised Deferral Election, the Payment Date may not be
delayed. A Payment may be delayed to a date after the Commencement Date or other applicable
Payment Date under any of the circumstances described in this Section 5.4, provided the Company
treats all Payments to similarly situated Participants on a reasonably consistent basis.
5.4.1
Payments Subject To Section 162(m)
. A Payment may be delayed to the extent that
the Participant reasonably anticipates that if the Payment were made as scheduled, the
Participants deduction with respect to such Payment would not be permitted due to the application
of Code Section 162(m), provided that the Payment is made either during the Participants first
taxable year in which the Participant reasonably anticipates, or should reasonably anticipate, that
if the Payment is made during such year, the deduction of such Payment will not be barred by
application of Code Section 162(m) or during the period beginning with the date of the
Participants Separation From Service and ending on the later of (a) the last day of the taxable
year of the Participant in which the Participant has a Separation From Service or (b) the 15th day
of the third month following the Participants Separation From Service, and provided further that
where any scheduled Payment to a specific Participant in a Participants taxable year is delayed in
accordance with this Section, the delay in Payment will be treated as a Revised Deferral Election
unless all scheduled Payments to that Participant that could be delayed in accordance with this
Section are also delayed.
5.4.2
Payments That Would Violate Federal Securities Laws Or Other Applicable Law
. A
Payment may be delayed where the Participant reasonably anticipates that the making of the Payment
will violate Federal securities laws or other applicable law; provided that the Payment is made at
the earliest date at which the Participant reasonably anticipates that the making of the Payment
will not cause such violation. The making of a Payment that would cause inclusion in gross income
or the application of any penalty provision or other provision of the Code is not treated as a
violation of applicable law.
5.4.3
USERRA Rights
. Any change in the time or form of a Payment necessary to satisfy
the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994, as
amended, 38 U.S.C. 4301-4344.
5.5
Payments Deemed Made on Specified Date.
5.5.1 A Payment is treated as made upon the Payment Date specified under the Plan if (a) the
Payment is made at such date or a later date within the same taxable year of the Participant or, if
later, by the 15th day of the third calendar month following the date specified under the Plan and
(b) the Participant is not permitted, directly or indirectly, to designate the taxable year of the
Payment.
5.5.2 In addition, a Payment is treated as made upon the date specified under the Plan and is
not treated as an accelerated Payment if (a) the Payment is made no earlier than thirty (30) days
before the date specified in the Plan and (b) the Participant is not permitted, directly or
indirectly to designate the taxable year of the Payment.
19
5.5.3 For purposes of this paragraph, if the date specified is only a designated taxable year
of the Participant, or a period of time during such a taxable year, the date specified under the
Plan for a Payment is treated as the first day of such taxable year or the first day of the period
of time during such taxable year, as applicable.
5.6
Permitted Acceleration of Payments.
Except as otherwise provided in this Section, and
Applicable Tax Law, a Payment Date may not be accelerated.
5.6.1
Cash-out of De Minimus Accrued Benefit
. Notwithstanding the foregoing, if the
Participants entire Accrued Benefit under the Plan and all Aggregated Arrangements is less than
the 402(g) Amount, or such lesser amount specified by the Company, then, notwithstanding the Payout
Periods elected by the Participant or the other terms of this Plan, the Company may, in its sole
discretion, pay to the Participant the Participants entire Accrued Benefit in a lump sum provided
that the Participant receives the Participants entire Accrued Benefit under the Aggregated
Arrangements.
5.6.2
Domestic Relations Order
. Notwithstanding the foregoing provisions of this Plan
or the Participants Deferral Election, the Plan Administrator may accelerate the time or schedule
of a Payment under this Plan to an individual other than the Participant, or a Payment may be made
to an individual other than the Participant, to the extent necessary to fulfill a domestic
relations order (as defined in section 414(p)(1)(B) of the Code).
5.6.3
Conflicts Of Interest
.
5.6.3.1
Compliance With Ethics Agreements With The Federal Government
. The
Plan Administrator may accelerate the time or schedule of a Payment under this Plan, or a
Payment may be made under this Plan, to the extent necessary for any Federal officer or
employee in the executive branch to comply with an ethics agreement with the Federal
government.
5.6.3.2
Compliance With Ethics Laws Or Conflicts Of Interest Laws
. The Plan
Administrator may accelerate the time or schedule of a Payment under this Plan, or a Payment
may be made under this Plan, to the extent reasonably necessary to avoid the violation of an
applicable Federal, state, local, or foreign ethics law or conflicts of interest law
(including where such Payment is reasonably necessary to permit the Participant to
participate in activities in the normal course of his or her position in which the
Participant would otherwise not be able to participate under an applicable rule). A Payment
is reasonably necessary to avoid the violation of a Federal, state, local, or foreign ethics
law or conflicts of interest law if the Payment is a necessary part of a course of action
that results in compliance with a Federal, state, local, or foreign ethics law or conflicts
of interest law that would be violated absent such course of action, regardless of whether
other actions would also result in compliance with the Federal, state, local, or foreign
ethics law or conflicts of interest law. For this purpose, a provision of foreign law is
considered applicable only to foreign earned income (as defined under section 911(b)(1) of
the Code without regard to section 911(b)(1)(B)(iv) of the Code and without regard to the
requirement that the income be attributable to services performed
20
during the period described in section 911(d)(1)(A) or (B) of the Code) from sources
within the foreign country that promulgated such law.
5.6.4
Payment Of Employment Taxes
.
5.6.4.1 The Plan Administrator may accelerate the time or schedule of a Payment, or a
Payment may be made under this Plan, to pay the Federal Insurance Contributions Act (FICA)
tax imposed under section 3101, section 3121(a), and section 3121(v)(2) of the Code, or the
Railroad Retirement Act tax imposed under section 3201, section 3211, section 3231(e)(1),
and section 3231(e)(8) of the Code, where applicable, on Compensation deferred under the
Plan (the FICA or RRTA Amount).
5.6.4.2 The Plan Administrator may also accelerate the time or schedule of a Payment,
or a Payment may be made under this Plan, to pay the income tax at source on wages imposed
under section 3401 of the Code or the corresponding withholding provisions of applicable
state, local, or foreign tax laws as a result of the Payment of the FICA or RRTA Amount, and
to pay the additional income tax at the source on wages attributable to the pyramiding
section 3401 of the Code wages and taxes.
5.6.4.3 Notwithstanding the foregoing, the total Payment under this Section 5.6.4
provision must not exceed the aggregate of the FICA or RRTA Amount, and the income tax
withholding related to such FICA or RRTA Amount.
5.6.5
Payment Upon Income Inclusion Under Section 409A
. The Plan Administrator may
accelerate the time or schedule of a Payment, or a Payment under this Plan may be made, at any time
the Plan fails to meet the requirements of the Applicable Tax Law. Such Payment may not exceed the
amount required to be included in income as a result of the failure to comply with the requirements
of the Applicable Tax Law.
5.6.6
Withdrawals for Unforeseeable Emergencies
.
5.6.6.1
Amount of Withdrawal
. In the event that the Plan Administrator, upon
written request of a Participant, determines, in its sole discretion in compliance with the
Applicable Tax Law, that the Participant has suffered an Unforeseeable Emergency, the Plan
Administrator shall pay to the Participant from the Participants Deferral Accounts as soon
as practicable following such determination, an amount equal to the lesser of (a) the amount
requested by the Participant, (b) the balance of such Participants Deferral Accounts as of
the Determination Date immediately preceding such Payment, or (c) the amount, as determined
under the Applicable Tax Law necessary to satisfy such Unforeseeable Emergency, plus amounts
necessary to pay any Federal, state, or local income taxes or penalties reasonably
anticipated to result from the distribution, determined after taking into account the extent
to which such Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of the Participants assets (to the
extent the liquidation of such assets would not itself cause severe financial hardship) or a
reduction in the Participants Deferral Election, if any, then in effect for the Plan Year
in which the request is made and any subsequent Plan Years. Distributions because of an
Unforeseeable Emergency must
21
be limited to the amount necessary to satisfy the emergency need (which may include
amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably
anticipated to result from the distribution). A distribution on account of an
Unforeseeable Emergency may not be made to the extent that such emergency is or may be
relieved through reimbursement or compensation from insurance or otherwise, by liquidation
of the Participants assets (to the extent the liquidation of such assets would not cause
severe financial hardship), or by cessation of deferrals under the arrangement.
5.6.6.2
Determination of Unforeseeable Emergency
. Whether a Participant is
faced with an Unforeseeable Emergency permitting a distribution under this Section is to be
determined based on the relevant facts and circumstances of each case.
5.6.6.3
Rules Adopted by Plan Administrator
. The Plan Administrator shall have
the authority to adopt additional rules relating to Withdrawals for Unforeseeable
Emergencies provided such rules are consistent with the Applicable Tax Law. In
administering these rules, the Plan Administrator shall act in accordance with the
Applicable Tax Law, the principle being that the primary purpose of this Plan is to provide
additional retirement income, not additional funds for current consumption. Such rules may
limit the ability of a Participant receiving a distribution as a result of a Withdrawal for
Unforeseeable Emergencies to make Deferral Elections.
5.6.6.4
Cancellation Of Deferrals Following An Unforeseeable Emergency Or Hardship
Distribution
. The Plan Administrator may cancel a Participants Deferral Election, or
such a cancellation may be made, due to an Unforeseeable Emergency or a hardship
distribution pursuant to §1.401(k)-1(d)(3) of the Treasury Regulations. The Deferral
Election shall be cancelled and not merely postponed or otherwise delayed. Any later
Deferral Election will be subject to the provisions governing Initial Deferral Elections
under Section 3.1.1 and §1.409A-2(a) of the Applicable Tax Law.
5.6.7
Certain Distributions To Avoid A Nonallocation Year Under Section 409(p)
. The
Plan Administrator may accelerate the time and form of a Payment, or a Payment may be made under
this Plan, to prevent the occurrence of a nonallocation year (within the meaning of Code Section
409(p)(3)) in a Plan Year of an employee stock ownership plan next following the Plan Year in which
such Payment is made, provided that the amount distributed may not exceed one hundred twenty-five
percent (125%) of the minimum amount of distribution necessary to avoid the occurrence of a
nonallocation year. For purposes of determining permissible distributions under this Section,
synthetic equity (within the meaning of section 409(p)(6)(C) of the Code and §1.409(p)-1(f) of the
Applicable Tax Law) granted during the Plan Year of the employee stock ownership plan in which such
Payment is made is disregarded for purposes of determining whether the subsequent Plan Year would
result in a nonallocation year.
5.6.8
Payment Of State, Local, Or Foreign Taxes
.
5.6.8.1 The Plan Administrator may accelerate the time and form of a Payment, or a
Payment may be made under this Plan, to reflect payment of state, local, or foreign tax
obligations arising from participation in the Plan that apply to an amount of Compensation
deferred under this Plan before the amount is paid or made available to the
22
Participant (the state, local, or foreign tax amount). Such Payment may not exceed the
amount of such taxes due as a result of participation in the Plan. Such Payment may be made
by distributions to the Participant in the form of withholding pursuant to provisions of
applicable state, local, or foreign law or by distribution directly to the Participant.
5.6.8.2 The Plan Administrator may also accelerate the time or schedule of Payment, or
a Payment may be made under this Plan, to pay the income tax at source on wages imposed
under section 3401 of the Code as a result of such Payment and to pay the additional income
tax at source on wages imposed under section 3401 of the Code attributable to such
additional section 3401 wages and taxes.
5.6.8.3 Notwithstanding the foregoing, the total Payment under this Section 5.6.8 must
not exceed the aggregate of the state, local, and foreign tax amount, and the income tax
withholding related to such state, local, and foreign tax amount.
5.6.9
Cancellation Of Deferral Elections Due To Disability
. The Plan Administrator may
cancel a Participants Deferral Election, or cancellation of such Deferral Election may be made,
where such cancellation occurs by the later of (a) the end of the taxable year of the Participant
or (b) the 15th day of the third month following the date the Participant incurs a disability as
defined below. For purposes of this Section, a disability is any medically determinable physical
or mental impairment resulting in the Participants inability to perform the duties of the
Participants position or any substantially similar position, where such impairment can be expected
to result in death or can be expected to last for a continuous period of not less than six (6)
months.
5.6.10
Certain offsets
. The Plan Administrator may accelerate the time or schedule of
a Payment, or a Payment may be made under the Plan, as satisfaction of a debt of the Participant to
the Company, where such debt is incurred in the ordinary course of the employment or independent
contractor relationship between the Company and the Employer Group, provided that the entire amount
of reduction in any of the Companys taxable years does not exceed five thousand dollars ($5,000),
and the reduction is made at the same time and in the same amount as the debt otherwise would have
been due and collected from the Participant.
5.6.11
Bona Fide Disputes As To A Right To A Payment
. The Plan Administrator may
accelerate the time or schedule of one or more Payments, or a Payment may be made under the Plan,
where such Payments occur as part of a settlement between the Participant and the Employer Group of
an arms length, bona fide dispute as to the Participants right to the Accrued Benefit as provided
under the Applicable Tax Law. The Plan Administrator may not exercise any discretion to accelerate
Payments other than due to an arms length settlement of a bona fide dispute as to the
Participants right to the Accrued Benefit. Under Applicable Tax Law, (a) a Payment will be
presumed not to meet the foregoing requirements unless the Payment is a substantial reduction to
the amount that would have been payable had there been no dispute as to the Participants right to
the Payment, (b) a reduction that is less than twenty-five percent (25%) of the present value of
the Accrued Benefit in dispute is not a substantial reduction, and (c) a Payment is presumed not to
qualify under this Section 5.6.11 if the Payment is made proximate to a downturn in the financial
health of the Company.
23
5.6.12
Changes In Elections Under A Cafeteria Plan
. A change in an election under a
cafeteria plan (as defined in section 125(d)) of the Code does not result in an accelerated Payment
of an amount deferred under this Plan to the extent that the change in the amount deferred under
the Plan results solely from the application of the change in amount eligible to be treated as
Compensation under the terms of the Plan resulting from the election change under the cafeteria
plan, to a benefit formula under the Plan based upon the Participants eligible Compensation, and
only to the extent that such change applies in the same manner as any other increase or decrease in
Compensation would apply to such benefit formula.
5.6.13
Termination of Plan
5.6.13.1 Except as provided below and to the extent permitted under the Applicable Tax
Law, upon the termination of the Plan as provided for herein, the Plan Administrator shall
pay to the Participant or the Participants Beneficiary, as the case may be, the
Participants Accrued Benefit at the times and in the amounts specified in the Participants
Deferral Election.
5.6.13.2 Notwithstanding the foregoing, the time and form of a Payment under this Plan
may be accelerated upon a termination and liquidation of the Plan provided that the
acceleration of the Payment is made in accordance with one of the following:
5.6.13.2.1 The Companys termination and liquidation of the Plan within twelve
(12) months of a corporate dissolution taxed under section 331 of the Code, or with
the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided
that the Accrued Benefits are included in the Participants gross incomes in the
latest of the following years (or, if earlier, the taxable year in which the amount
is actually or constructively received):
(1) The calendar year in which the Plan termination and
liquidation occurs.
(2) The first calendar year in which the amount is no longer
subject to a substantial risk of forfeiture.
(3) The first calendar year in which the Payment is
administratively practicable.
5.6.13.2.2 The irrevocable termination and liquidation of the Plan within the
thirty (30) days preceding or the twelve (12) months following a Change In Control
Event, provided that this Section will only apply to a Payment under the Plan if all
Aggregated Arrangements are terminated and liquidated with respect to each
Participant that experienced the Change In Control Event, so that under the terms of
the termination and liquidation all such Participants are required to receive all
amounts of compensation deferred under the Aggregated Arrangements within twelve
(12) months of the date the Company irrevocably
takes all necessary action to terminate and liquidate the Aggregated
Arrangements.
24
5.6.13.2.3 The termination and liquidation of the Plan, provided that:
(1) The termination and liquidation does not occur proximate to
a downturn in the financial health of the Company;
(2) The Employer Group terminates and liquidates all Aggregated
Arrangements;
(3) No Payments in liquidation of the Plan are made within
twelve (12) months of the date the Company takes all necessary action
to irrevocably terminate and liquidate the Plan other than Payments
that would be payable under the terms of the Plan if the action to
terminate and liquidate the Plan had not occurred;
(4) All Payments are made within twenty-four (24) months of the
date the Company takes all necessary action to irrevocably terminate
and liquidate the Plan; and
(5) The Company does not adopt a new plan that would be
aggregated with any terminated and liquidated Aggregated Arrangement,
at any time within three (3) years following the date the Company
takes all necessary action to irrevocably terminate and liquidate the
plan.
5.7
Interest on Deferral Account.
After the applicable Determination Date, the unpaid balance of a
Participants Deferral Account shall be increased by an amount equal to the product of the
principal balance of the Deferral Account multiplied by the Declared Rate then in effect for the
applicable period since the time of the last Payment or such other rate as the Company may specify.
Such accrued interest shall be paid with the next Payment then due.
5.8
Facility of Payment.
If a distribution is to be made to a minor, or to a person who is
otherwise incompetent, then the Plan Administrator may, in its discretion, make such distribution
(i) to the legal guardian or, if none, to a parent of a minor payee with whom the payee maintains a
residence, or (ii) to the conservator or committee or, if none, to the person having custody of an
incompetent payee. Any such distribution shall fully discharge the Plan Administrator, the
Company, and the Plan from further liability on account thereof.
5.9
Withholding.
Any and all Payments to be made to a Participant or a Participants Beneficiary
pursuant to this Plan shall be subject to all federal, state and local income and employment taxes.
The Company may withhold such taxes from the Payments under this Plan or from salary, bonuses or
other amounts due to the Participant as determined by the Plan Administrator as and to the extent
required by Applicable Tax Law.
25
ARTICLE 6
PLAN ADMINISTRATION
6.1
Responsibility for Administration of the Plan.
6.1.1 The Plan Administrator shall be responsible for the management, operation, and
administration of the Plan. The Plan Administrator may employ others to render advice with regard
to its responsibilities under this Plan. It may also allocate its responsibilities to others and
may exercise any other powers necessary for the discharge of its duties. The Plan Administrator
shall be entitled to rely conclusively upon all tables, valuations, certifications, opinions and
reports furnished by any actuary, accountant, controller, counsel or other person employed or
engaged by the Plan Administrator with respect to the Plan.
6.1.2 The primary responsibility of the Plan Administrator is to administer the Plan for the
benefit of the Participants and their beneficiaries, subject to the specific terms of the Plan.
The Plan Administrator shall administer the Plan in accordance with its terms and shall have the
power to determine all questions arising in connection with the administration, interpretation, and
application of the Plan. Any such determination shall be conclusive and binding upon all persons
and their heirs, executors, beneficiaries, successors and assigns. The Plan Administrator shall
have all powers necessary or appropriate to accomplish its duties under the Plan. The Plan
Administrator shall also have the discretion and authority to make, amend, interpret, and enforce
all appropriate rules and regulations for the administration of this Plan and decide or resolve any
and all questions, including, but not limited to, interpretations of this Plan and entitlement to
or amount of benefits under this Plan, as may arise in connection with the Plan.
6.2
Claims and Appeal Procedure.
6.2.1
Claims Procedure
.
6.2.1.1 .If a Participant, Beneficiary or other person claiming eligibility or benefits
under this Plan (a Claimant) believes that he or she is eligible for benefits under the
Plan, or is entitled to benefits different from those being provided by the Company, the
Claimant may make a claim for eligibility or for benefits (as defined below) by submitting a
written claim (a Claim) for benefits on such forms as the Company may reasonably specify
from time to time and shall provide such information as the Plan Administrator may
reasonably require to support such Claim. Such Claim shall be reviewed by a committee of
one or more individuals serving as Claim Administrator. Except as provided below, the
Claim Administrator shall notify a Claimant in writing within ninety (90) days of receipt of
the Claimants written Claim whether the Claim Administrator has approved or denied such
Claim in whole or in part.
6.2.1.2 If the Claim Administrator determines that there are special circumstances
requiring additional time to make a decision, the Claim Administrator shall notify the
Claimant of the special circumstances and the date by which a decision is expected to be
made, and may extend the time for up to an additional ninety (90)-day period. If the Claim
Administrator determines that any request for Plan benefits does not comply with the Plans
applicable procedure, the Claim Administrator shall notify the Claimant that
26
the request does not comply with the applicable procedure and what must be done to
comply. If the Claim Administrator requires more information to review a claim for
benefits, the Claim Administrator shall request the specified information from the Claimant
within a reasonable time after receiving the request. The Claimant shall have up to one
hundred eighty (180) days to provide the missing information. From the beginning of that
period until the missing information is provided (or the end of that period, if earlier),
the time period provided in the preceding paragraph for the Claim Administrators decision
shall be extended. After receiving any such information from the Claimant or, if earlier,
at the end of such one hundred eighty (180) days, the Claim Administrator shall review the
information and notify the Claimant of the Claim Administrators decision within the
extended time period for that decision.
6.2.1.3 If the Claim Administrator determines that a Claimant is not eligible for the
benefits claimed, the notice shall set forth, in a manner calculated to be understood by the
Claimant: (a) the specific reasons for such denial, (b) a specific reference to the
provisions of the Plan on which the denial is based, (c) a description of any additional
information or material necessary for the Claimant to perfect his or her claim, and a
description of why it is needed, and (d) an explanation of the Plans claims review
procedure and other appropriate information as to the steps to be taken if the Claimant
wishes to have the claim reviewed, including the time limits that apply to such claims
review procedure, description of the Plans review procedures, and the time limits
applicable to such procedures, including a statement of the Claimants right to bring a
civil action under section 502(a) of ERISA following an adverse benefit determination on
review, to the extent such Section requires the Claimant to bring a civil suit that is not
subject to arbitration under Section 6.2.2.2.
6.2.2
Appeal Procedure for Denied Benefits
.
6.2.2.1 If a Claimant disagrees with the Claim Administrators determination, the
Claimant shall have the opportunity to have such claim reviewed by filing a petition for
review with the Plan Administrator within sixty (60) days after receipt of the notice issued
by the Claim Administrator. The petition shall state the specific reasons the Claimant
believes he or she is entitled to benefits or greater or different benefits. Such petition
shall be reviewed by a committee of one or more individuals who are not under the
supervision of any person serving as Claim Administrator (the Reviewer). The Claimant may
submit written comments, documents, records, and other information relating to the Claim and
will be provided, upon request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relevant to the Claimants Claim.
6.2.2.2 Within sixty (60) days after receipt by the Plan Administrator of said
petition, the Reviewer shall afford the Claimant (and counsel, if any) an opportunity to
present his or her position to the Reviewer orally or in writing, and the Claimant (or
counsel) shall have the right, upon request and free of charge, for reasonable access to,
and copies of, all documents, records, and other information relevant to the Claimants
Claim; and the Reviewer shall take into account all comments, documents, records, and other
information submitted by the Claimant relating to the Claim, without regard to
27
whether such information was submitted or considered in the initial benefit
determination. The Reviewer shall notify the Claimant of its decision in writing within the
sixty (60)-day period, stating (in a manner calculated to be understood by the Claimant) the
specific basis for its decision and the specific provisions of the Plan on which the
decision is based. If, because of the need for a hearing, the sixty (60)-day period is not
sufficient, the decision may be deferred for up to another sixty (60)-day period at the
election of the Reviewer, but notice of this deferral shall be given to the Claimant. In
the case of any extension under this paragraph, the notice of extension shall specifically
explain the standards on which entitlement to a benefit is based, the unresolved issues that
prevent a decision on the claim, and the additional information needed to resolve those
issues, and the Claimant shall be afforded at least forty-five (45) days within which to
provide the specified information.
ARTICLE 7
AMENDMENT OR TERMINATION
7.1
Amendment.
7.1.1 Any other provision of this Plan to the contrary notwithstanding, the Plan may be
amended by the Company at any time, to the extent that, in the sole opinion of the Company, such
amendment shall be necessary in order to ensure that (a) the Plan will be characterized as a plan
maintained for a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, (b) the Plan conforms to the requirements of any
applicable law, including, but not limited to, ERISA and the Code, (c) the Accrued Benefit of any
Participant is not taxable to the Participant or his/her Beneficiary earlier than the date it is
actually received by the Participant or the Beneficiary, as the case may be, and (d) no excise tax,
penalty or additional tax is imposed on the Participant or the Company under the Applicable Tax Law
or any other applicable provision of the Code. No such amendment shall be considered prejudicial
to any interest of a Participant or Beneficiary hereunder even if it reduces the Accrued Benefit of
any Participant or the amount, date or form of any Payment to the Participant.
7.1.2 In addition, this Plan may be amended at any time as and to the extent permitted under
Applicable Tax Law provided that no such amendment shall reduce the Accrued Benefit of any
Participant without the consent of the Participant unless such reduction is required under, or is
necessary in order to comply with, the Applicable Tax Law.
7.2
Termination.
7.2.1 This Plan may be terminated at any time provided such termination satisfies the
requirements of the Applicable Tax Law.
7.2.2 Except as otherwise permitted herein and the Applicable Tax Law, upon the termination of
the Plan as provided for herein, the Plan Administrator shall pay to the Participant or a deceased
Participants Beneficiary, as the case may be, the Participants Accrued Benefit at the times and
in the amounts specified in the Participants Deferral Election.
28
ARTICLE 8
MISCELLANEOUS
8.1
Purpose.
The purpose of this Plan is to allow a Participant to defer the receipt of part of
the Participants Compensation until a later date without having to pay taxes on the amount of such
Compensation until the Participant actually receives the amount of such Compensation, at which time
it will be subject to taxation as ordinary gain. The Company makes no guaranties that such
Compensation will not be taxed until it is received and the Company shall not be liable for any
damages because such Compensation is taxed to the Participant before it is received by the
Participant.
8.2
Benefits Not Transferable.
No benefit payable at any time under this Plan shall be subject in
any manner to alienation, sale, transfer, pledge, attachment or encumbrance of any kind; provided,
however, that:
8.2.1 in the event that, at the time of a Participants Commencement Date, the Participant is
indebted to the Company or any Affiliate, the Company shall have the right to offset any such
indebtedness (including any interest thereon) against any benefits otherwise due under this Plan
with respect to the Participant, by applying such indebtedness (including any interest thereon)
pro-rata to each successive benefit Payment due thereafter, until the full amount of the debt and
any interest owed has been paid; and
8.2.2 all or any portion of a Participants unpaid benefits under this Plan may be assigned by
court order to the Participants former spouse in connection with a dissolution of their marriage,
but only if the Plan Administrator determines, in its sole discretion, that the order satisfies the
requirements of a domestic relations order as defined in Code Section 414(p)(1)(B). The federal
income taxation of any Plan benefits assigned as provided in the preceding sentence shall be
governed by Revenue Ruling 2002-22, or any applicable guidance subsequently published by the
Internal Revenue Service or the Department of the Treasury.
8.3
No Trust Created.
Nothing contained in this Plan, and no action taken pursuant to its
provisions by any person, shall create, or be construed to create, a trust of any kind, or a
fiduciary relationship between the Company and any other person.
8.4
Benefits Payable Only From General Corporate Assets; Unsecured General Creditor Status of
Participant.
Payment to the Participant or any Beneficiary hereunder shall be made from assets
that shall continue, for all purposes, to be part of the general, unrestricted assets of the
Company. No person shall have any interest in any such asset by virtue of any provision of this
Plan. The Companys obligation hereunder shall be an unfunded and unsecured promise to pay money
in the future. To the extent that any person acquires a right to receive Payments from the Company
under the provisions hereof, such right shall be no greater than the right of any unsecured general
creditor of the Company; no such person shall have or acquire any legal or equitable right,
interest or claim in or to any property or assets of the Company.
8.5
Plan Expenses.
The Participants shall bear all of the Plan Expenses except for those Plan
Expenses that the Company elects to pay. Any such expenses that are not paid by the
29
Company shall be promptly paid by the Participant or the Participants Beneficiary, as applicable,
or the Plan Administrator shall deduct such expenses from the Participants Accrued Benefit.
8.6
Entire Agreement.
The Plan, Deferral Election, Beneficiary Designation, and other
administrative forms shall constitute the total agreement between the Company and the Participant.
No oral statement regarding the Plan may be relied upon by the Participant. In the event that
there is a discrepancy between the Plan and the administrative forms and summary descriptions, the
Plan will control.
8.7
Invalidity of Provisions.
If any provision of this Plan shall be for any reason invalid or
unenforceable, the remaining provisions shall nevertheless be carried into effect.
8.8
Unclaimed Benefits.
In the case of a benefit payable on behalf of such Participant, if the
Plan Administrator is unable to locate the Participant or Beneficiary by the earlier of the date
that is (a) ten (10) years following the Termination of Employment of the Participant, or (b) five
(5) years following the date the Participants last benefit Payment was scheduled to be made, such
Plan benefit may be forfeited to the Company upon the Plan Administrators determination.
Notwithstanding the foregoing, if, subsequent to any such forfeiture, the Participant or
Beneficiary to whom such Plan benefit is payable makes a valid claim for such Plan benefit, such
forfeited Plan benefit shall be paid by the Plan Administrator to the Participant or Beneficiary,
without interest, from the date it would have otherwise been paid.
8.9
No Right to Employment.
Nothing contained herein shall be construed to be a contract of
employment for any term of years, or as conferring upon the Plan Participant the right to continue
to be employed by the Company in the Participants present capacity, or in any capacity. It is
expressly understood by the parties hereto that this Plan relates to the payment of deferred
compensation for the Participants services, generally payable after Termination of Employment with
the Company, and is not intended to be an employment contract.
8.10
Governing Law/Interpretation.
The Plan and the rights and obligations of all persons
hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota,
other than its laws regarding choice of law, to the extent that such state law is not preempted by
federal law. The Plan shall be interpreted so as to comply to the fullest extent possible with the
Applicable Tax Law such that the Accrued Benefit of any Participant is not includible in income for
United States income tax purposes prior to the actual receipt of such Accrued Benefit in cash by
the Participant or the Beneficiary, as the case may be.
IN WITNESS WHEREOF, the Company has executed this Plan as of the day and year first written above.
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FAMOUS DAVES OF AMERICA, INC.
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By:
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Title:
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30
EXHIBIT 1.5
FAMOUS DAVES OF AMERICA, INC.
SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN
Participant Deferral Election Form
Declared Rate: ___ Percent (___%) (the Declared Rate)
Matching Contribution Rate: ___ Percent (___%) (the Matching Contribution Rate)
This Agreement
is entered into this ___day of
, 20___ between
FAMOUS DAVES OF
AMERICA, INC.
, hereinafter referred to as the Company, and
, hereinafter referred to as the Participant.
I acknowledge that as a Designated Employee of the Company I have been offered an opportunity to
participate in the Famous Daves of America, Inc. SECOND AMENDED AND RESTATED NON-QUALIFIED
DEFERRED COMPENSATION PLAN (the Plan).
PLAN YEARS
. This Deferral Election shall be effective for the following Plan Years [
Check
one
]:
o
the Plan Year beginning January 1, 20___
o
all Plan Years beginning on or after January 1, 20 ___ unless and until I complete a different
Deferral Election Form for a particular Plan Year not later than the Annual Deferral Election
Deadline for such Plan Year .
DEFERRAL ELECTION
[
Please complete one or more of the following choices.
]
I hereby elect to defer receipt of that portion of my Compensation which is
earned by me with respect to services rendered by me to the Company after the
date this Deferral Election is filed with the Company as set forth below.
o
[___%] of my
salary
earned by me with respect to services rendered
by me to the Company during the Plan Year and after the date this
Deferral Election is filed with the Company even if payable after
the end of the Plan Year.
o
[___%] of my
bonus(es)
earned by me with respect to services
rendered by me to the Company during the Plan Year and after the
date this Deferral Election is filed with the Company even if
payable after the end of the Plan Year.
o
[___%] of my
commissions
earned by me with respect to services
rendered by me to the Company during the Plan Year and after the
date this Deferral Election is filed with the Company even if
payable after the end of the Plan Year.
NOTE
: This Deferral Election is irrevocable except to the extent permitted by the Plan
Administrator and the Applicable Tax Law.
31
Investment Return; Declared Rate:
I understand that each quarter during the Deferral Period I
select below, my Deferral Account for the above Plan Years will be increased by an amount equal to
the product of the Declared Rate for the Plan Year and the balance of my Deferral Account as of the
end of the quarter.
Matching Discretionary Contribution:
I understand that my Deferral Account for the above Plan Years
will also be increased one (1) time by an additional matching Discretionary Contribution equal to
the product of the Matching Contribution Rate specified above and the amount of my Compensation
which I elected to defer for the above Plan Years. For example, if the Matching Contribution Rate
was fifty percent (50%) and I elected to defer two percent (2%) of my Compensation I will have an
amount equal to one percent (1%) of my Compensation (50% x 2%) added to my Deferral Account. If I
defer four percent (4%) of my Compensation I will have an amount equal to two percent (2%) of my
Compensation (50% x 4%) added to my Deferral Account.
DISTRIBUTION OF BENEFITS ELECTION
A.
Deferral Period
.
I hereby elect to have my Deferral Account for the Plan Years
specified above distributed to me beginning on the first day of the third month beginning after the
end of the following Deferral Period (the Commencement Date), unless the Plan provides for an
earlier Commencement Date [
Select one of the following
]:
o
[
insert number
] calendar years following the end of the applicable Plan Year
(December 31)
(May not be less than three (3) calendar years and must be a whole number of years;
for example: if the Plan Year ends December 31, 2008, and you elect a Deferral Period of four (4)
calendar years, the Deferral Period ends on December 31, 2012, and your Deferral Account will be
paid beginning March 1, 2013),
or
o
the period beginning on the first day of the applicable Plan Year set forth above and ending
on the date of my Termination of Employment.
NOTE
: Except as provided below, you may extend the Deferral Period by filing a Revised
Deferral Election Form with the Plan Administrator, but only if (a) you file the Revised Deferral
Election Form at least one (1) year before the due date of the first Payment affected by the
Revised Deferral Election Form, (b) the extension is for a period of not less than five (5) years
from the date the Payment would have been made but for the extension, and (c) such extension is in
accordance with the Applicable Tax Law (as defined in the Plan). The Deferral Period may be
shortened only with the consent of the Plan Administrator and then only as and to the extent
permitted by and in accordance with the Applicable Tax Law which, except as provided below,
prohibits a reduction in the Deferral Period. Any such change must be made by written notice to
the Plan Administrator and will not be effective until accepted in writing by the Plan
Administrator.
Notwithstanding the above, this Deferral Election may be changed and the foregoing requirements
will not apply if you file a Revised Deferral Election Form with the Plan Administrator on or
before December 31, 2008, so long as the Revised Deferral Election does not (i) delay a Payment
that would be payable in 2008 if the Revised Deferral Election
32
had not been made, and (ii) cause a Payment to be made in 2008 which would not have been made
absent the Revised Deferral Election.
B
.
Payout Period
.
I hereby elect the following Payout Period over which my Deferral
Account for the Plan Years specified above will be distributed to me in substantially equal
payments at the frequency specified below (check one):
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Lump Sum
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o
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Two (2) year period
with (check one)
o
monthly,
o
quarterly, or
o
annual Payments plus
interest at the Declared Rate from the Commencement Date
.
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o
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Five
(
5) year period
with (check one)
o
monthly,
o
quarterly, or
o
annual Payments plus
interest at the Declared Rate from the Commencement Date.
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o
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Ten
(
10) year period
with (check one)
o
monthly,
o
quarterly, or
o
annual Payments plus
interest at the Declared Rate from the Commencement Date.
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NOTE: Unless a Revised Deferral Election Form is submitted to the Company prior to December 31,
2008, you may lengthen, but not shorten the Payout Period for any Plan Year in accordance with the
rules set forth above under Deferral Period. If a Revised Deferral Election Form is submitted to
the Company prior to December 31, 2008, you may shorten your Deferral Period, provided that the
Revised Deferral Election does not (i) delay a Payment that would be payable in 2008 if the Revised
Deferral Election had not been made, and (ii) cause a Payment to be made in 2008 which would not
have been made absent the Revised Deferral Election.
NOTE
: If your Accrued Benefit is less than the 402(g) Amount ($15,000 in 2007), your
Accrued Benefit, may, at the Companys discretion, be paid in a lump sum or over a shorter period
as and to the extent permitted under the Applicable Tax Law.
Unavailability of Deferred Compensation
.
I understand that except as otherwise permitted
under the Plan and the Applicable Tax Law, no part of any Deferral Account is payable prior to the
Commencement Date as defined in the Plan.
Amount Payable
.
I understand that the amount payable to me will be based upon the value of
my Deferral Account that will depend on the amount of my Deferral Elections, any Discretionary
Contribution, and the Declared Rate in effect at the time of this Deferral Election.
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Date:
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Participants Name:
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Participants Signature:
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Date Received:
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Date Accepted:
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Famous Daves of America, Inc.
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By:
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Its:
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34
EXHIBIT 1.49
FAMOUS DAVES OF AMERICA, INC.
SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN
PARTICIPANT REVISED DEFERRAL ELECTION FORM
This Agreement
is entered into this ___ day of
, 20___ between
FAMOUS DAVES OF
AMERICA, INC.
, hereinafter referred to as the Company, and
, hereinafter referred to as the Participant.
I acknowledge that as an Eligible Employee of the Company I have been offered an opportunity
to participate in the FAMOUS DAVES OF AMERICA, INC. SECOND AMENDED AND RESTATED NON-QUALIFIED
DEFERRED COMPENSATION PLAN (the Plan).
A.
Revised Deferral Period
.
I hereby elect the following Deferral Periods for my Accounts
for the Plan Years indicated below:
o
20___, 20___, 20___, 20___, 20___ [
insert year(s)
]
:
o
[
insert number
] Plan Years
following the end of the applicable Plan Year (December 31) or
o
the period beginning on the first
day of the applicable Plan Year set forth above and ending on the date of my Termination of
Employment.
[See the NOTE below for rules regarding the minimum number of Plan Years.]
o
20___, 20___, 20___, 20___, 20___ [
insert year(s)
]
:
o
[
insert number
] Plan Years
following the end of the applicable Plan Year (December 31) or
o
the period beginning on the first
day of the applicable Plan Year set forth above and ending on the date of my Termination of
Employment.
[See the NOTE below for rules regarding the minimum number of Plan Years.]
o
all Plan Years:
[
insert number
] Plan Years following the end of the applicable
Plan Year (December 31) or
o
the period beginning on the first day of the applicable Plan Year set
forth above and ending on the date of my Termination of Employment.
[See the NOTE below for rules
regarding the minimum number of Plan Years.]
NOTE
: Unless this Revised Deferral Election is made on or before December 31, 2008, (a)
this Revised Deferral Election Form will apply only to those Payments under the Plan which are
scheduled to be made more than twelve (12) months after the date this Revised Deferral Election is
submitted to the Company, (b) the new Deferral Period ends at least five (5) years after the end of
current Deferral Period, and (c) this Revised Election Form complies with the Applicable Tax Law
(as defined in the Plan). Unless this Revised Deferral Election is made on or before December 31,
2008, a Deferral Period may be shortened only with the consent of the Plan Administrator and then
only as and to the extent permitted by and in accordance with the Applicable Tax Law.
If this Revised Deferral Election is provided to the Plan Administrator on or before December 31,
2008, the foregoing requirements do not apply so long as this Revised Deferral Election does not
(i) delay a Payment that would be payable in 2008 if this Revised
Deferral Election had not been made, and (ii) cause a Payment to be made in 2008 which would not
have been made absent this Revised Deferral Election.
B
.
Revised Payout Period
.
I hereby elect the following Payout Period over which my
Accounts for the Plan Years specified below will be distributed to me in substantially equal
payments annually plus interest at the Declared Rate from the Commencement Date as specified below:
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o
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Lump Sum:
- Plan Years beginning in 20___, 20___, 20___, 20___, 20___ [
insert
year(s)
]
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o
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Two (2) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
]
.
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o
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Five
(
5) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
].
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o
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Ten
(
10) year period:
Plan Years beginning in 20___, 20___, 20___, 20___, 20___
[
insert year(s)
].
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NOTE
: Unless this Revised Deferral Election Form is submitted to the Company prior to
December 31, 2008, you may lengthen, but not shorten the Payout Period for any Plan Year in
accordance with the rules set forth above under Revised Deferral Period. If this Revised
Deferral Election Form is submitted to the Company prior to December 31, 2008, you may shorten your
Payout Period, provided that this Revised Deferral Election does not cause a Payment to be made in
2008 which would not have been made absent this Revised Deferral Election.
Early Payment of
De Minimus
Amounts
.
If your Accrued Benefit is less than the 402(g)
Amount ($15,000 in 2007), your Vested Accrued Benefit, may, at the Companys discretion, be paid in
a lump sum or over a shorter period as and to the extent permitted under the Applicable Tax Law.
Unavailability of Deferred Compensation
.
I understand that, except as otherwise permitted
under the Plan and the Applicable Tax Law, no part of any Deferral Account is payable prior to the
Commencement Date as defined in the Plan.
Amount Payable
.
I understand that the amount payable to me will be based upon the value of
my Account(s) which will depend on the amount of my Deferral Elections, any Discretionary
Contribution, the Investment Options I choose, and the Declared Rate in effect in accordance with
the provisions of the Plan.
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Date:
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Participants Name:
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Participants Signature:
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36
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Date Received:
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Date Accepted:
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FAMOUS DAVES OF AMERICA, INC.
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By:
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Its:
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37
EXHIBIT 1.9
FAMOUS DAVES OF AMERICA, INC.
SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN
Beneficiary Designation Form
TO: Famous Daves of America, Inc.
(hereinafter referred to as the Company)
In accordance with the rights granted to me in the Famous Daves of America, Inc. SECOND AMENDED
AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN (the Plan) and subject to the terms and
conditions specified below in this Beneficiary Designation Form, I hereby designate the following
persons and/or entities as my Primary and Contingent Beneficiaries under the Plan to receive, in
the event of my death, in accordance with the terms of the Plan, the Payments that would otherwise
be paid to me absent my death:
Primary Beneficiaries
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Name
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Relationship
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Percentage
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Contingent Beneficiaries
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Name
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Relationship
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Percentage
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I understand that this Designation of Beneficiary shall not be effective unless received by the
Plan Administrator prior to my death. This designation cancels and supersedes any Designation of
Beneficiary heretofore made by me with respect to the Plan and the right to receive Payments
hereunder.
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Date:
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Participants Name:
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Participants Signature:
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Date Received:
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Received and accepted
this
day of
,
20
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Famous Daves of America, Inc.
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By:
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Its:
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SUMMARY PLAN DESCRIPTION OF
FAMOUS DAVES OF AMERICA, INC.
SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN
INTRODUCTION
Famous Daves of America, Inc. (the Company) established the Famous Daves of America, Inc.
NON-QUALIFIED DEFERRED COMPENSATION PLAN effective as of February 25, 2005 (the Plan) and amended
and restated the Plan as the SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN
effective as of January 1, 2008.
THIS SUMMARY IS INTENDED TO SUMMARIZE THE PRINCIPAL TERMS OF THE PLAN. IN THE EVENT OF A CONFLICT
BETWEEN THIS SUMMARY AND THE TERMS OF THE PLAN, THE TERMS OF THE PLAN SHALL CONTROL. A COPY OF THE
PLAN IS AVAILABLE UPON REQUEST. DEFINED TERMS NOT OTHERWISE DEFINED HEREIN HAVE THE MEANING GIVEN
THEM UNDER THE TERMS OF THE PLAN.
WHAT DOES THE PLAN MEAN TO ME?
The Plan was established to provide retirement and other benefits to Eligible Employees of the
Company to assist them in saving for retirement and encourage their continued interest in the
success of the Company. The Plan is intended to allow you to defer the receipt of some of your
salary, bonuses, and commissions (Compensation) until a later date. The Company will pay for all
of the Plans benefits and administration costs. The Plan records are kept on a calendar year
basis.
WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?
Any employee of the Company or an Affiliate who is: a director level and above employee (as
defined by the Company from time to time); one of a select group of management or highly
compensated employees, as defined by ERISA; and who is designated by the Company to participate in
the Plan (Designated Employee) is eligible to participate in the Plan. You will cease to be a
Designated Employee if you cease to be a director level and above employee (as defined by the
Company from time to time); cease to be one of a select group of management or highly compensated
employees, as defined by ERISA; or the Company specifies that you are no longer a Designated
Employee.
HOW CAN I PARTICIPATE IN THE PLAN?
If you are a Designated Employee, you can participate in the Plan by making a Deferral Election in
accordance with the terms of the Plan to defer the receipt of all or some part of your Compensation
to a later date. As discussed below you will receive interest on the amount you defer at the
Deferral Rate until it is paid to you or your beneficiary.
HOW DO I MAKE A DEFERRAL ELECTION AND WHEN DO I MAKE AN
ELECTION?
Making a Deferral Election.
If you are a Designated Employee, you can make a Deferral Election by
completing and delivering to the Plan Administrator, a Deferral Election Form that you can obtain
from the Plan Administrator. On the Deferral Election form you will specify (a) the amount of your
Compensation you wish to defer, (b) the Deferral Period during which you will not be able to
receive any of the Compensation you deferred except as specifically proved in the Plan, and (c) the
manner in which your Deferral Account Balance will be paid (e.g., in a lump sum or over one of the
permitted Payout Periods).
Initial Deferral Election.
If you become an Initial Designated Employee during a Plan Year you may
make an Initial Deferral Election with respect to your Compensation earned during the Plan Year in
which you become an Initial Designated Employee provided that such Initial Deferral Election is
filed with the Plan Administrator within thirty (30) days after you first become eligible to be an
Initial Designated Employee in the Plan. An Initial Designated Employee is an Eligible Employee
who is not or has not previously participated in a similar deferred compensation plan of the
Company or certain related entities as determined under the Applicable Tax Law. The Initial
Deferral Election will be effective beginning on the payroll date that is at least two (2) weeks
after the delivery of the Initial Deferral Election to the Plan Administrator, or such other date
as specified by the Plan Administrator. The Initial Deferral Election will apply only to
Compensation earned with respect to services you perform after the date of the Initial Deferral
Election and prior to the end of the Plan Year in which you become an Initial Designated Employee
in the Plan. If you fail to file an Initial Deferral Election within thirty (30) days after you
first become an Initial Designated Employee in the Plan, no part of your Compensation earned with
respect to services performed during the Plan Year in which you first become an Initial Designated
Employee in the Plan may be deferred. However, if you do not qualify as an Initial Designated
Employee or if you do qualify but do not make an Initial Deferral Election by the Initial Deferral
Election Deadline, you may make an Annual Deferral Election not later than the Annual Deferral
Election Deadline for the Plan Year following the Plan Year in which you became an Initial
Designated Employee and for each Plan Year thereafter while you are an Designated Employee unless
the Company specified that you are not eligible to make an Annual Deferral Election. No Deferral
Election will be effective until accepted by the Plan Administrator.
Annual Deferral Election.
Except for an Initial Deferral Election for the Plan Year in which you
became an Initial Designated Employee, each year you are a Designated Employee you may make an
Annual Deferral Election to defer the receipt of all or some of your Compensation earned with
respect to services performed in a Plan Year(s) beginning after the date you file the Annual
Deferral Election. An Annual Deferral Election is made by filing a Deferral Election Form
acceptable to the Plan Administrator with the Plan Administrator not later than the Annual Deferral
Election Deadline (the earlier of (a) the day before the first day of the Plan Year, or (b) the
date specified by the Plan Administrator or Company). No Annual Deferral Election will be
effective until accepted in writing by the Plan Administrator. For example, to defer Compensation
earned in 2009, your Annual Deferral Election must be filed with the Plan Administrators not later
than December 31, 2008, or such earlier date as is specified by the Plan Administrator.
2
Revocation or Change of Deferral Elections Revised Deferral Elections.
Except as otherwise
permitted under the Applicable Tax Law and by the Plan Administrator, each Deferral Election is
irrevocable. Certain permitted changes to a Deferral Election are discussed below. No change of
any Deferral Election will be effective until accepted by the Plan Administrator in writing. A
permissible change to a Deferral Election is made by filing a Revised Deferral Election with the
Plan Administrator on forms acceptable to the Plan Administrator.
DOES THE COMPANY MAKE CONTRIBUTIONS TO THE PLAN FOR ME?
The Company may, but is not required to, make Discretionary Contributions to the Plan on your
Deferral Account. The Company anticipates making matching Discretionary Contributions each year
for those Participants who make Deferral Elections in much the same way that the Company makes or
can make matching contributions to the Companys 401(k) Plan.
HOW ARE MY BENEFITS UNDER THE PLAN DETERMINED?
Accounts
. The Plan Administrator will establish accounts on its books (Deferral Accounts) for
you for each Plan Year for which you make a Deferral Election. The Deferral Accounts are for
accounting purposes only and used solely to determine the amount you are entitled to be paid under
the Plan and are not actual deposit or investment accounts.
Allocations.
Your Deferral Accounts will be increased by the amount of Compensation that you elect
to defer under your Deferral Election. The amount deferred will be added to the Deferral Account
on the date and in the amount that the Compensation would otherwise have been paid to you but for
the Deferral Election.
In addition, Company Discretionary Contributions (if any) such as the matching contributions will
be added to your Deferral Account at such time as directed by the Plan Administrator or the
Company.
Each Deferral Account will be reduced by the amount of all Payments made to you or your Beneficiary
from your Deferral Account.
Your Deferral Account will be increased by Investment Adjustments at such times as may be specified
by the Company, but not less often than quarterly. The Investment Adjustments are like interest
and are based upon the Declared Rate established by the Company and communicated to you from time
to time. The Declared Rate will be set by the Company for each years Deferral Election and will
be set forth in the Deferral Election Form for each Plan Year.
WHEN AND HOW WILL MY ACCRUED BENEFITS BE PAID?
Commencement of Benefits.
The balance of each of your Deferral Accounts will be paid to you
beginning on the Commencement Date and will be paid to you over the Payout Period you selected
on your Deferral Election Form.
3
If you are not a Key Employee (see the definition below), the Commencement Date is the first day of
the third month beginning after the earliest the following Permissible Payment Events to occur:
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your death,
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your Termination of Employment,
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your Disability,
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¨
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the occurrence of a Change in Control Event,
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¨
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January 1st of the first year beginning after the end of the Deferral Period
selected by you with respect to each of your Deferral Accounts, or
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¨
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such other event as permitted under the Applicable Tax Law.
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If you are a Key Employee your Commencement Date will be the same as if you were not a Key
Employee, except that if you have a Termination of Employment prior to any other Permissible
Payment Event, your Commencement Date will be the date which is six (6) months and one (1) day
after your Termination of Employment. However, if you die after your Termination of Employment and
before the end of such six (6) month period, the Commencement Date will be the first day of the
third month beginning after your death, if earlier.
Termination of Employment
means (a) your ceasing to provide services to the Company or any
member of the Employer Group (whether as an employee or independent contractor) for any
reason whatsoever, voluntary or involuntary, other than by reason of an approved leave of
absence or (b) an eighty percent (80%) reduction in your average hours of service to the
Company or any member of the Employer Group (whether as an employee or independent
contractor).
You are a
Key Employee
if (a) the Companys stock is publicly tradable on an established
stock exchange or otherwise, and (b) you either (i) hold a position with the Employer Group
at the vice president level or above in accordance with the Companys employment policies
established from time to time, or (ii) are a key employee as defined in Section 416(i) of
the Code (without regard to paragraph (5) thereof). Generally, the term key employee for
purposes of Section 416(i) of the Code means an employee who, at any time during the plan
year, is (i) an officer of the Company having an annual compensation greater than $130,000
(as adjusted under the Code), (ii) a five percent (5%) owner of the Company, or (iii) a one
percent (1%) owner of the Company having an annual compensation from the employer of more
than $150,000 (as adjusted under the Code).
Disability
means that you are:
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unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or
can be expect to last for a continuous period of not less than twelve (12) months.
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by reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a period of not
less than three (3) months under an accident and health plan covering employees of the
Company.
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determined to be totally disabled by the Social Security Administration.
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A
Change in Control Event
is generally either the sale of the Companys assets or the
acquisition of the majority of the voting rights in the Companys stock by a person or group
of people acting in concert.
The
Deferral Period
is the time period you specify in each Deferral Election (measured in
full Plan Years) during which you will not be entitled to receive the Compensation you elect
to defer unless you die, suffer from a Disability, incur a Termination of Employment, suffer
from a Unforeseeable Emergency (discussed below) or the Company has a Change in Control
Event (discussed above).
Form of Payment.
The balance of a Deferral Account will generally be paid to you in either a lump
sum or in substantially equal Payments over the Payout Period you chose on your Deferral Election.
Death.
However, in the event of your death, any of your Accrued Benefit remaining unpaid
will be paid in a lump sum to your Beneficiary. (See
WHAT HAPPENS TO MY ACCRUED BENEFIT IF
I DIE?
below).
Change In Control Event.
In addition, upon a Change In Control Event, the balance of your
Deferral Account will be paid to you in a lump sum.
Cash Out for Small Accounts.
Further, if your entire Accrued Benefit (the balance of all of
your Deferral Accounts) under the Plan and any Aggregated Arrangement is less than the
amount under Section 402(g) of the Code ($15,500 for 2007), or such lesser amount specified
by the Company in accordance with the Applicable Tax Law, the Company, may, in its sole
discretion, pay you your entire Accrued Benefit in a lump sum rather than the Payout Periods
you elected, provided that you are paid your entire Accrued Benefit under all Aggregated
Arrangements.
Payout Period.
In your Deferral Election you will specify the Payout Period over which your
Accrued Benefit attributable to that Deferral Election will be paid to you.
Changes to the Deferral Period or Payout Period or the Time or Form of Payment of Your Accrued
Benefit.
Reductions in Deferral Period/Acceleration of Payments.
Except as provided below, or as
otherwise permitted in the Applicable Tax Law and by the Plan Administrator, neither the
Deferral Period nor the Payout Period may be reduced, nor may the date of any Payment be
accelerated.
Extensions/Delays.
Except as described below under
Special Rule for 2008"
, with the
consent of the Plan Administrator and to the extent permitted under the Applicable Tax Law,
the Deferral Period may be extended, the Payout Period increased and the time for any
Payment delayed at your written election, by filing a Revised Election From with the Plan
Administrator, provided that:
5
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such election does not apply to any Payment which would be paid on a date
which is less than twelve (12) months after the date the Revised Deferral
Election is filed with the Plan Administrator without regard to the Revised
Deferral Election (or, in the case of a life annuity or installment payments
treated as a single Payment, less than twelve (12) months after the date the
Revised Deferral Election is filed with the Plan Administrator without regard
to the Revised Deferral Election); and
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the Payment with respect to which such election is made is deferred for a
period of not less than five (5) years from the date such Payment would
otherwise have been paid (or in the case of a life annuity or installment
payments treated as a single Payment, five (5) years from the date the first
amount was scheduled to be paid).
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For example, if the Deferral Period ends on December 31, 2010, you could extend the
Deferral Period so it will end on December 31, 2015, provided that you make the
request before December 31, 2009.
Special Rule for 2008.
If a Revised Deferral Election is provided to the Plan Administrator
on or before December 31, 2008, the foregoing restrictions will not apply provided that the
Revised Deferral Election does not (i) cause the delay of a Payment that would be payable in
2008 if the Revised Deferral Election had not been made, nor (ii) cause a Payment to be made
in 2008 if such Payment would not have been made absent the Revised Deferral Election.
Separate Payments
. To the extent provided under the Applicable Tax Law, you may treat each
payment to be made to you as a Separate Payment. Consistent with the Applicable Tax Law
and with the consent of the Plan Administrator, you may extend the Deferral Period or the
date of payment separately with respect to each Separate Payment.
WHAT HAPPENS TO MY ACCRUED BENEFIT IF I DIE?
Payment of Accrued Benefit.
In the event you die prior to receipt of your entire Accrued Benefit,
the Company will pay your unpaid Accrued Benefit in a lump sum to your Beneficiary designated by
you on a Beneficiary Designation Form provided to the Company and accepted by the Company.
Unless otherwise specified by you on a Beneficiary Designation Form, if more than one (1)
Beneficiary is named, then the payments of your Accrued Benefit will be made equally to such
Beneficiaries. Unless otherwise specified by you on a Beneficiary Designation Form, if any such
Beneficiary dies while receiving payments under the Plan, any and all remaining payments will
continue to be made to the descendants of a deceased Beneficiary if the Beneficiary is your
descendant, otherwise the payments will be made to the remaining Beneficiaries
Unless otherwise provided by you on a Beneficiary Designation Form, if none of the Beneficiaries
named are living on any payment date and there are no descendants of a deceased Beneficiary who is
your descendant, or if you fail to complete a Beneficiary Designation Form,
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the remaining payments will be made to your spouse unless either of you have filed for divorce or
legal separation and, if so, then to your descendants and, if none, to the executors or
administrators of your estate.
Beneficiary Designation
.
General.
You may, at any time, submit a Beneficiary Designation Form specifying one (1) or
more individuals or entities as your Beneficiary. Each Beneficiary Designation Form will
become effective only when accepted in writing by the Company. The Company has the right,
in its sole discretion, to reject any Beneficiary Designation Form which is not in
substantially the form provided by the Plan Administrator. For purposes of any Beneficiary
Designation Form, no person will be deemed to have survived you if that person dies within
thirty (30) days of your death. You may change the Beneficiary named in any Beneficiary
Designation Form at any time by filing a new duly executed Beneficiary Designation Form with
the Company or the Plan Administrator without the consent of any person or entity then
designated as a Beneficiary.
Spouses Interest.
Your designation of your spouse as a beneficiary will be automatically
revoked if you or your spouse subsequently file for divorce or legal separation or if your
spouse dies prior to you.
WHAT IF I SUFFER AN UNFORESEEABLE EMERGENCY?
Withdrawals for Unforeseeable Emergencies.
If you suffer an Unforeseeable Emergency, the Plan
Administrator will, upon receipt of your written request, pay to you from your Deferral Accounts an
amount equal to the lesser of (a) the amount you requested, (b) the balance of your Deferral
Accounts as of the date of such payment, or (c) the amount, as determined under the Applicable Tax
Law
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necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, determined after taking into account the
extent to which such Unforeseeable Emergency is or may be relieved through reimbursement or
compensation by insurance or otherwise or by liquidation of your assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship).
Unforeseeable Emergency.
An Unforeseeable Emergency is a severe financial hardship to you
resulting from a sudden and unexpected illness or accident of you, your spouse, or one of your
dependents (as defined in section 152(a) of the Code), your loss of property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising as a result of events beyond
your control and meeting such other requirements as may be set forth in any Applicable Tax Law.
Rules Adopted by Plan Administrator.
The Plan Administrator may adopt additional rules relating to
withdrawals for Unforeseeable Emergencies provided such rules are consistent with the Applicable
Tax Law. In administering these rules, the Plan Administrator will act in accordance with any
Applicable Tax Law, the principle being that the primary purpose of this Plan is to provide
additional retirement income, not additional funds for current consumption.
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ARE THERE OTHER SITUATIONS WHERE THE COMPANY CAN DISTRIBUTE MY
ACCRUED BENEFIT?
Yes. In the event there is a determination by the Internal Revenue Service, or in the event of a
final determination by a court of competent jurisdiction, that all or any part of your Accrued
Benefit hereunder is includable in your gross income, the Plan Administrator will distribute so
much of your Accrued Benefit to you as is includible in your gross income or your Beneficiarys and
the Plan Administrator will in its sole discretion cause the termination of future Deferral
Contributions by you, provided this provision does not in and of itself cause your Accrued Benefit
to be includible in income for United States income tax purposes prior to your actual receipt of
such Accrued Benefit in cash.
In the event that there is a determination by the Department of Labor, or a final determination of
a court of competent jurisdiction, that the Plan is subject to Part 2, 3 or 4 of Title I of ERISA,
the Plan Administrator may, in its sole discretion, distribute each Participants Accrued Benefit
to the Participant, or, in the case of a deceased Participant, to the Participants Beneficiary,
and cause the termination of future Deferral Contributions by Participants.
In the event of a termination of the Plan, the Plan Administrator may, in its sole discretion,
distribute each Participants Accrued Benefit to the Participant in accordance with the Applicable
Tax Law.
CAN MY BENEFITS BE PAID TO SOMEONE OTHER THAN ME?
Payment of Employment Taxes.
Yes. To the extent permitted under the Applicable Tax Law, the Plan
Administrator or the Company may permit the acceleration of the time or schedule of a payment under
the Plan to pay the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101
and 3121(v)(2) on Compensation deferred under the Plan (the FICA Amount). Additionally, the Plan
Administrator or the Company may permit the acceleration of the time or schedule of a payment to
pay the income tax at source on wages imposed under Code Section 3401 on the FICA Amount, and to
pay the additional income tax at the source on wages attributable to the pyramiding Code Section
3401 wages and taxes. However, the total payment under this Section will not exceed the aggregate
of the FICA Amount, and the income tax withholding related to such FICA Amount.
Withholding.
In addition, any and all Payments to be made to you or your Beneficiary pursuant to
this Plan will be subject to all federal, state and local income and employment taxes and such
taxes will be withheld accordingly by the Company from your Accrued Benefits under this Plan or
from salary, bonuses or other amounts due to you as determined by the Plan Administrator as and to
the extent required by Applicable Tax Law.
Domestic Relations Order.
In addition, all or part of your Accrued Benefit may be paid to a former
spouse in connection with a dissolution of your marriage, pursuant to an order satisfies the
requirements of a domestic relations order as defined in Code Section 414(p)(1)(B).
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WILL I EARN INTEREST ON MY DEFERRAL ACCOUNT WHILE IT IS BEING PAID
TO ME?
Yes. Once you are entitled to receive payment of a Deferral Account, the unpaid balance of your
Deferral Account will earn interest at the Declared Rate then in effect on the unpaid balance of
the Deferral Account. The accrued interest will be paid with the next payment then due. The
Declared Rate on other deferrals may be changed at the discretion of the Company.
CAN BENEFITS BE FORFEITED?
Your benefits under the Plan are fully vested and cannot be forfeited except to the extent you have
an unpaid obligation to the Company, in which case the Company may apply your Accrued Benefit to
the unpaid obligation.
CAN THE PLAN BE AMENDED OR TERMINATED?
The Plan may be amended at any time provided that no such amendment may reduce the Deferral Account
then credited to you without your consent unless such reduction is required by the Applicable Tax
Law. The Plan and/or your Deferral Elections may be terminated at any time; provided, that no such
termination will reduce your Deferral Account without your consent unless such reduction is
required by the Applicable Tax Law.
ARE MY ACCRUED BENEFITS ASSIGNABLE?
Benefits Not Transferable.
Except as provided below, none of the benefits payable at any time
under this Plan can be assigned or transferred or subjected in any manner to alienation, pledge,
attachment or encumbrance of any kind; except that:
Indebtedness to Company.
If a you are indebted to the Company or any Affiliate, the Company
and the Affiliate will have the right to offset such indebtedness (including any interest
thereon) against any benefits otherwise due to you or your Beneficiary under the Plan, by
applying such indebtedness (including any interest thereon) pro-rata to each successive
benefit payment due thereafter, until the full amount of the debt and any interest owed has
been paid; and
Domestic Relations Order.
All or any portion of your unpaid benefits under this Plan may be
assigned by court order to your former spouse in connection with a dissolution of your
marriage, but only if the Plan Administrator determines, in its sole discretion, that the
order satisfies the requirements of a domestic relations order as defined in Code Section
414(p)(1)(B).
ARE MY ACCRUED BENEFITS AT RISK?
Only if the Company is unable to pay its obligation when due. Your Accrued Benefits are payable
only out of the assets of the Company and are, for all purposes, an unfunded and unsecured promise
to pay money in the future. Your Accrued Benefit is not held in any trust and none of the
provisions of the Plan create, or will be construed to create, a trust of any kind, or a fiduciary
relationship between the Company and any other person. To the extent that you have a
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right to receive payments from the Company under the Plan, such right will be no greater than the
right of any unsecured general creditor of the Company; and you will not have or acquire any legal
or equitable right, interest or claim in or to any property or assets of the Company.
WHAT CAN I DO IF I AM DENIED PLAN BENEFITS?
If you or another person claiming eligibility or benefits under this Plan (a Claimant) believes
that he or she is eligible for benefits under the Plan, or is entitled to benefits different from
those being provided by the Company, the Claimant may make a claim for eligibility or for benefits
(as defined below) by submitting a written claim (a Claim) for benefits on such forms as the
Company may reasonably specify from time to time and will provide such information as the Plan
Administrator may reasonably require to support such Claim. Such Claim will be reviewed by a
committee of one or more individuals serving as Claim Administrator. Except as provided below, the
Claim Administrator will notify a Claimant in writing within ninety (90) days of receipt of the
Claimants written Claim whether the Claim Administrator has approved or denied such Claim in whole
or in part.
If the Claim Administrator determines that there are special circumstances requiring additional
time to make a decision, the Claim Administrator will notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may extend the time for
up to an additional ninety (90)-day period. If the Claim Administrator determines that any request
for Plan benefits does not comply with the Plans applicable procedure, the Claim Administrator
must notify the Claimant that the request does not comply with the applicable procedure and what
must be done to comply. If the Claim Administrator requires more information to review a claim for
benefits, the Claim Administrator will request the specified information from the Claimant within a
reasonable time after receiving the request. The Claimant will have up to one hundred eighty (180)
days to provide the missing information. From the beginning of that period until the missing
information is provided (or the end of that period, if earlier), the time period provided in the
preceding paragraph for the Claim Administrators decision will be extended. After receiving any
such information from the Claimant or, if earlier, at the end of such one hundred eighty (180)
days, the Claim Administrator will review the information and notify the Claimant of the Claim
Administrators decision within the extended time period for that decision.
If the Claim Administrator determines that a Claimant is not eligible for the benefits claimed, the
notice will set forth, in a manner calculated to be understood by the Claimant: (a) the specific
reasons for such denial, (b) a specific reference to the provisions of the Plan on which the denial
is based, (c) a description of any additional information or material necessary for the Claimant to
perfect his or her claim, and a description of why it is needed, and (d) an explanation of the
Plans claims review procedure and other appropriate information as to the steps to be taken if the
Claimant wishes to have the claim reviewed, including the time limits that apply to such claims
review procedure, description of the Plans review procedures, and the time limits applicable to
such procedures, including a statement of the Claimants right to bring a civil action under
section 502(a) of ERISA following an adverse benefit determination on review, to the extent such
Section requires the Claimant to bring a civil suit that is not subject to arbitration under
Section 6.2.2.2.
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Appeal Procedure for Denied Benefits.
If a Claimant disagrees with the Claim Administrators
determination, the Claimant will have the opportunity to have such claim reviewed by filing a
petition for review with the Plan Administrator within sixty (60) days after receipt of the notice
issued by the Claim Administrator. The petition must state the specific reasons the Claimant
believes he or she is entitled to benefits or greater or different benefits. Such petition will be
reviewed by a committee of one or more individuals who are not under the supervision of any person
serving as Claim Administrator (the Reviewer). The Claimant may submit written comments,
documents, records, and other information relating to the Claim and will be provided, upon request
and free of charge, reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimants Claim.
Within sixty (60) days after receipt by the Plan Administrator of said petition, the Reviewer must
afford the Claimant (and counsel, if any) an opportunity to present his or her position to the
Reviewer orally or in writing, and the Claimant (or counsel) will have the right, upon request and
free of charge, for reasonable access to, and copies of, all documents, records, and other
information relevant to the Claimants Claim; and the Reviewer must take into account all comments,
documents, records, and other information submitted by the Claimant relating to the Claim, without
regard to whether such information was submitted or considered in the initial benefit
determination. The Reviewer must notify the Claimant of its decision in writing within the sixty
(60)-day period, stating (in a manner calculated to be understood by the Claimant) the specific
basis for its decision and the specific provisions of the Plan on which the decision is based. If,
because of the need for a hearing, the sixty (60)-day period is not sufficient, the decision may be
deferred for up to another sixty (60)-day period at the election of the Reviewer, but notice of
this deferral must be given to the Claimant. In the case of any extension under this paragraph,
the notice of extension must specifically explain the standards on which entitlement to a benefit
is based, the unresolved issues that prevent a decision on the claim, and the additional
information needed to resolve those issues, and the Claimant must be afforded at least forty-five
(45) days within which to provide the specified information.
WHAT RIGHTS DO I HAVE UNDER ERISA?
As a participant in Famous Daves of America, Inc. SECOND AMENDED AND RESTATED NON-QUALIFIED
DEFERRED COMPENSATION PLAN you are entitled to certain rights and protections under the Employee
Retirement Income Security Act of 1974 (ERISA). ERISA provides that all plan participants will be
entitled to:
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Receive information about your Plan and benefits.
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Examine, without charge, at the plan administrators office and at other specified
locations, such as worksites and union halls, all documents governing the plan,
including insurance contracts and collective bargaining agreements, and a copy of the
latest annual report (Form 5500 Series) filed by the plan with the U.S. Department of
Labor and available at the Public Disclosure Room of the Pension and Welfare Benefit
Administration.
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Obtain, upon written request to the plan administrator, copies of documents
governing the operation of the plan, including insurance contracts and collective
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bargaining agreements, and copies of the latest annual report (Form 5500 Series) and
updated summary plan description. The administrator may make a reasonable charge for
the copies.
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Receive a summary of the plans annual financial report. The plan administrator is
required by law to furnish each participant with a copy of this summary annual report.
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Obtain a statement telling you whether you have a right to receive a pension at
normal retirement age and if so, what your benefits would be at normal retirement age
if you stop working under the plan now. If you do not have a right to a pension, the
statement will tell you how many more years you have to work to get a right to a
pension. This statement must be requested in writing and is not required to be given
more than once every twelve (12) months. The plan must provide the statement free of
charge.
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Prudent Actions by Plan Fiduciaries.
In addition to creating rights for plan participants, ERISA imposes duties upon the people who are
responsible for the operation of the employee benefit plan. The people who operate your plan,
called fiduciaries of the plan, have a duty to do so prudently and in the interest of you and
other plan participants and beneficiaries. No one, including your employer, your union, or any
other person, may fire you or otherwise discriminate against you in any way to prevent you from
obtaining a (pension, welfare) benefit or exercising your rights under ERISA.
Enforce Your Rights.
If your claim for a (pension, welfare) benefit is denied or ignored, in whole or in part, you have
a right to know why this was done, to obtain copies of documents relating to the decision without
charge, and to appeal any denial, all within certain time schedules. Under ERISA, there are steps
you can take to enforce the above rights. For instance, if you request a copy of plan documents or
the latest annual report from the plan and do not receive them within thirty (30) days, you may
file suit in a Federal court. In such a case, the court may require the plan administrator to
provide the materials and pay you up to One Hundred Ten Dollars ($110) a day until you receive the
materials, unless the materials were not sent because of reasons beyond the control of the
administrator. If you have a claim for benefits which is denied or ignored, in whole or in part,
you may file suit in a state or Federal court. In addition, if you disagree with the plans
decision or lack thereof concerning the qualified status of a domestic relations order or a medical
child support order, you may file suit in Federal court. If it should happen that plan fiduciaries
misuse the plans money, or if you are discriminated against for asserting your rights, you may
seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The
court will decide who should pay court costs and legal fees. If you are successful, the court may
order the person you have sued to pay these costs and fees. If you lose, the court may order you
to pay these costs and fees; for example, if it finds your claim is frivolous.
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Assistance with Your Questions.
If you have any questions about your plan, you should contact the plan administrator. If you have
any questions about this statement or about your rights under ERISA, or if you need assistance in
obtaining documents from the plan administrator, you should contact the nearest office of the
Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
You may also obtain certain publications about your rights and responsibilities under ERISA by
calling the publications hotline of the Employee Benefits Security Administration.
WHO ADMINISTERS THE PLAN?
The Plan Administrator for the Plan is the Company, Famous Daves of America, Inc. Service of
legal process, or any request for information concerning eligibility, participation, contributions,
or other aspects of the operation of the Plan should be in writing and directed to the Plan
Administrator, Famous Daves of America, Inc. SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED
COMPENSATION PLAN, c/o Famous Daves of America, Inc., 12701 Whitewater Drive, Suite 200,
Minnetonka, MN 55343.
ARE THE BENEFITS INSURED BY THE PENSION BENEFIT GUARANTY
CORPORATION?
Benefits provided by the Plan are not insured by the Pension Benefit Guaranty Corporation (PBGC)
under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), because the
pension insurance provisions of ERISA do not apply to the Plan.
This Summary Plan Description has outlined only some of the terms of the Famous Daves of America,
Inc. SECOND AMENDED AND RESTATED NON-QUALIFIED DEFERRED COMPENSATION PLAN. In the event of a
conflict between this Summary and the Plan, the terms of the Plan will control. We will be happy
to answer any questions you might have. We are proud to be able to contribute toward your security
and well being through the adoption of this Plan.
Yours truly,
FAMOUS DAVES OF AMERICA, INC.
Company Identification Number:
Plan No. ___
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