<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
For the Quarterly Period Ended MARCH 29, 2000
Commission File Number 333-62775
NE RESTAURANT COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1311266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5 CLOCK TOWER PLACE, MAYNARD, MASSACHUSETTS 01754
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 897-1400
Indicate by check mark whether the registrant (1) has filed all reports required
to be filled by Section 13 or 15(d) of the Securities Exchange Act of the 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
Yes _X_ No ___
2,986,622 shares of the registrant's Common Stock were outstanding on May 15,
2000.
<PAGE>
NE RESTAURANT COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
1) Consolidated Balance Sheets
March 29, 2000 and December 29, 1999 3
2) Consolidated Statements of Operations
For the Three Months Ended March 29, 2000
and March 31, 1999 4
3) Consolidated Statement of Shareholders'
Equity for the Three Months Ended March 29, 2000 5
4) Consolidated Statements of Cash
Flows for the Three Months Ended March 29, 2000
and March 31, 1999 6
5) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II: OTHER INFORMATION 13
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 14
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
NE RESTAURANT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 29, December 29,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 2,867,926 7,578,632
Credit card receivables 1,298,138 1,630,844
Inventories 1,855,402 1,804,346
Prepaid expenses and other current assets 298,925 668,698
Short-term assets held for sale 457,417 1,847,584
Prepaid and current deferred income taxes 8,647,600 8,647,600
------------ -------------
Total current assets 15,425,407 22,177,704
------------ ------------
PROPERTY AND EQUIPMENT, AT COST:
Land and land right 8,402,915 8,422,025
Buildings 12,454,927 12,199,895
Leasehold improvements 79,923,595 76,017,712
Furniture and equipment 46,500,793 44,732,345
------------ ------------
147,282,230 141,371,977
Less-Accumulated depreciation (30,755,112) (27,662,046)
------------ ------------
116,527,118 113,709,930
Construction work in process 1,995,600 4,300,112
------------ ------------
Net property and equipment 118,522,718 118,010,042
Goodwill, net 30,112,637 30,682,037
Deferred Finance Costs, net 8,575,362 8,761,004
Liquor licenses 3,057,235 3,057,235
Restricted investments 63,715 1,177,685
Deferred taxes, noncurrent 4,294,982 4,294,982
Other assets, net 1,411,410 1,417,140
------------ ------------
$181,463,465 $189,577,830
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITES:
Current portion of mortgage loan and bonds payable 1,255,406 1,255,406
Accounts Payable 13,810,126 13,720,971
Accrued Expenses 17,064,948 23,337,877
Capital lease obligation-current portion 72,647 72,647
------------ ------------
Total current liabilities 32,203,127 38,386,901
Capital lease obligation, net of current portion 34,109 57,861
Mortgage Loan Payable, net of current portion 38,793,722 38,017,489
Bonds Payable, net of current portion 100,000,000 100,000,000
Deferred Rent and Other Long-Term Liabilities 4,378,727 5,590,011
------------ ------------
Total liabilities 175,409,685 182,052,261
Commitments and Contingencies
Stockholders' Equity:
Common stock 36,760 36,774
Less Treasury stock--689,344 shares at cost (8,017,070) (8,017,070)
Additional paid in capital 29,003,920 29,003,920
Accumulated deficit (14,969,830) (13,489,055)
------------ ------------
Total stockholders' equity (deficit) 6,053,780 7,525,569
------------ ------------
$181,463,465 $189,577,830
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NE RESTAURANT COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net Sales $ 67,034,661 $ 63,034,185
------------ ------------
Cost of Sales and Expenses
Cost of Sales 17,563,051 17,353,337
Operating expenses 38,957,634 36,992,233
General and administrative expenses 4,488,004 3,688,604
Deferred rent, depreciation and
amortization and preopening expenses 4,529,443 4,232,789
------------ ------------
Total cost of sales and expenses 65,538,132 62,266,963
------------ ------------
Income from operations 1,496,529 767,222
Interest Expense, net 3,673,804 3,363,344
------------ ------------
Loss before benefit for income taxes and
change in accounting principle (2,177,275) (2,596,122)
Income Tax Benefit (705,500) (944,611)
------------ ------------
Loss before change in accounting principle (1,471,775) (1,651,511)
Change in accounting principle (net of tax) -- (677,968)
------------ ------------
Net Loss $ (1,471,775) $ (2,329,479)
============ ============
Basic and diluted loss per share before change
in accounting principle $ (0.49) $ (0.55)
Change in accounting principle per share -- (0.23)
------------- ------------
Basic and diluted loss per share $ (0.49) $ (0.78)
============ ============
Weighted Average Shares Outstanding 2,986,622 2,977,026
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NE RESTAURANT COMPANY, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
(Unaudited)
For the three months ended March 29, 2000
<TABLE>
<CAPTION>
Common Stock Treasury Stock Total
---------------------------------------------------- Stockholders'
Number of $.01 per Number of Additional Paid Accumulated (Deficit)
Shares Share Shares Amount In Capital Deficit Equity
---------------------------------------------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1999 3,675,966 $ 36,760 (689,344) $(8,017,070) $ 29,003,920 $ (13,498,055) $ 7,525,555
Net (Loss) -- -- -- -- -- (1,471,775) (1,471,775)
--------- -------- -------- ----------- ------------ ------------- -----------
Balance March 29, 2000 3,675,966 $ 36,760 (689,344) $(8,017,000) $ 29,003,920 $ (14,969,830) $ 6,053,780
========= ======== ======== =========== ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NE RESTAURANT COMPANY, INC.
Notes To Consolidated Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements (the "Unaudited Financial
Statements") presented herein have been prepared by NE Restaurant Co., Inc. and
include all of its subsidiaries (collectively, the "Company") after elimination
of intercompany accounts and transactions, without audit, and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of the interim periods presented. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles ("GAAP") have been
omitted, although the Company believes that the disclosures included are
adequate to make the information presented not misleading. It is suggested that
the Unaudited Financial Statements be read in conjunction with the financial
statements and notes included in the Company's Form 10K.
In 1998, the Company changed its fiscal year to the 52 or 53 week period ended
on the Wednesday closest to December 31st. The Company's fiscal quarters end
March 29, June 28, September 27, 2000 and January 3, 2001. In 1999, the
Company's fiscal quarters ended March 31, June 30, September 29 and December 29,
1999.
2. In April 1988, the AICPA issued its Statement of Position 98-5 ("SOP 98-5"),
REPORTING ON THE COSTS OF START-UP ACTIVITIES. SOP 98-5 requires that costs
incurred during start-up activities, including organization costs, be expensed
as incurred. SOP 98-5 was effective for financial statements for fiscal years
beginning after December 15, 1998. The Company adopted SOP 98-5 on December 31,
1998, the first day of fiscal 1999. Upon adoption, the Company incurred a
cumulative effect of a change in accounting principle of approximately $678,000,
net of tax. This includes unamortized preopening costs which were previously
amortized over the 12-month period subsequent to restaurant openings.
3. In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities.
This statement established accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts and for hedging activities) be recorded in the balance sheet
as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedging accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS 133, as amended by SFAS 137, is effective
for fiscal years beginning after June15, 2000. A company may also implement the
Statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot be
applied retroactively. The Company has not determined the timing of adoption,
but does not anticipate the adoption of this new standard to have a material
impact on the Company's fiscal position or results of operations.
4. Under the terms of the corporation agreements, the stockholders have
consented to the payment of an ongoing financial consulting fee to Jacobson
Partners, Limited Partnership ("Jacobson Partners"), a stockholder of the
corporation. Under this agreement, Jacobson Partners will provide various
financial advisory services to the Company, including, among other things,
assistance in preparing internal budgets, performing cash management activities,
maintaining and improving accounting and other management information systems,
negotiating financing arrangements, complying with public reporting and
disclosure requirements and communicating with creditors and investors. In
consideration of these services, the Company has entered into an agreement with
Jacobson Partners whereby the Company would pay Jacobson Partners $500,000 per
year together with reimbursement of certain travel and other incidental
expenses. During 1999, Jacobson Partners agreed to reduce its annual fee to
$250,000 until further notice. Effective with the beginning of fiscal year 2000,
the Company has agreed to reinstate the annual fee of $500,000 retroactive to
July 1, 1999 which required an additional payment in the first fiscal quarter
2000 of $125,000.
5. Certain prior year amounts have been reclassified to conform to the current
year presentation.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements of NE Restaurant Company, Inc. ("The Company")
and the notes thereto included herein. All mentions of period data refer to the
Company's fiscal periods as defined in Note #1 to the consolidated financial
statements.
GENERAL
The Company was founded in 1991 as a Massachusetts corporation, serving
first as a general partner to a Massachusetts limited partnership and then as
the successor entity to such partnership and two other limited partnerships, and
was re-incorporated in Delaware on October 20, 1994. The Company was formed to
acquire 15 Chili's restaurants from a prior franchisee.
The Company is an operator of full-service, casual dining restaurants
in the northeastern United States. The Company's wholly owned subsidiary,
Bertucci's Restaurant Corp. ("Bertucci's") owns and operates a restaurant
concept under the name Bertucci's Brick Oven Pizzeria(R).
In July 1998, the Company completed its acquisition of Bertucci's'
parent entity, Bertucci's, Inc., a publicly-owned restaurant company for a
purchase price, net of cash received, of approximately $89.4 million (the
"Acquisition"). The Company financed the Acquisition primarily through the
issuance of $100 million of 10 3/4% senior notes due 2008 (the "Senior Notes").
The Acquisition included 90 Bertucci's restaurants and one Sal & Vinnie's
restaurant. During 1999, the Company closed the Bertucci's test kitchen
restaurant in Wakefield, Massachusetts and closed ten under performing
Bertucci's restaurants. Between December 29, 1999 and January 31, 2000, the
Company closed seven additional under performing Bertucci's restaurants, thereby
completing the planned closings identified shortly after the Acquisition. As of
March 29, 2000, Bertucci's owned and operated 72 full-service, casual dining,
Italian-style restaurants under the name Bertucci's Brick Oven Pizzeria(R)
located primarily in New England and Mid-Atlantic United States and one Sal and
Vinnie's Sicilian Steakhouse(TM) ("Sal and Vinnie's") located in Massachusetts.
The Company also develops and operates two distinct restaurant
franchises, Chili's Grill & Bar(R) ("Chili's") and On The Border Mexican Cafe(R)
("On The Border"), under franchise agreements with Brinker International, Inc.,
a publicly-owned company ("Brinker" or the "Franchisor"). The Company is the
world's largest Chili's franchisee and as of March 29, 2000, the Company
operated 38 Chili's and 7 On The Border restaurants in five New England states.
The Company offers its targeted customer base three distinct yet
complementary casual dining menus: Italian at Bertucci's,
"American/southwestern" at Chili's and "Tex-Mex" at On The Border.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to net
sales, unless otherwise indicated, of certain items included in the Company's
income statement, as well as certain operating data, for the periods indicated:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended:
MARCH 29, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Net Sales 100.0% 100.0%
--------- ---------
Cost of sales and expenses
Cost of sales 26.2 27.5
Operating expenses 58.1 58.7
General and administrative expenses 6.7 5.9
Deferred rent, depreciation, amortization and preopening expenses 6.8 6.7
--------- ---------
Total cost of sales and expenses 97.8 98.8
--------- ---------
Income from operations 2.2 1.2
Interest expense, net 5.5 5.3
--------- ---------
Income (loss) before income tax expense (benefit) (3.2) (4.1)
Income tax expense (benefit) (1.1) (1.5)
--------- ---------
Income (loss) before cumulative effect of change in
accounting principle (2.2) (2.6)
========= =========
Cumulative effect of change in accounting principle (net of tax) - (1.1)
--------- ---------
Net Income (2.2) (3.7)
========= =========
</TABLE>
RESTAURANT OPERATING DATA (DOLLARS IN THOUSANDS):
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
EBITDA (a) $ 6,026 $ 5,000
Comparable restaurant sales (b) 5.6% -0.7%
Number of restaurants - Brinker restaurants:
Restaurants open at beginning of period 43 37
Restaurants opened 2 1
--------- ---------
Total restaurants open at end of period 45 38
Number of restaurants - Bertucci's restaurants: (c)
Restaurants open at beginning of period 79 90
Restaurants opened - -
Restaurants closed 7 -
--------- ---------
Total restaurants open at end of period 72 90
</TABLE>
(a) "EBITDA" is defined as income from operations before deferred rent,
depreciation, amortization and preopening costs. EBITDA is not a
measure of performance defined by Generally Accepted Accounting
Principles ("GAAP"). EBITDA should not be considered in isolation or as
a substitute for net income or the statement of cash flows which have
been prepared in accordance with GAAP. The Company believes EBITDA
provides useful information regarding the Company's ability to service
its debt and the Company understands that such information is
considered by certain investors to be an additional basis for
evaluating a company's ability to pay interest and repay debt. The
EBITDA measures presented herein may not be comparable to similarly
titled measures of other companies.
(b) The Company defines comparable restaurant sales as net sales from
restaurants that have been open for at least one full fiscal year.
(c) Does not include Sal & Vinnie's.
<PAGE>
THREE MONTHS ENDED MARCH 29, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET SALES. Net sales increased $4.0 million, or 6.3%, to $67.0 million
during the first quarter 2000 from $63.0 million during the first quarter 1999.
The increase in net sales primarily was due to increased comparable restaurant
sales and the addition of five new Chili's and three new On The Border
restaurants. This increase was partially offset by closing 18 Bertucci's
restaurants. Approximately $4.8 million of the increase in net sales was
attributable to the additional Chili's and On The Border restaurants. Last
year's sales included the 18 Bertucci's restaurants that have subsequently been
closed. Comparable restaurant sales for the Bertucci's restaurants increased by
5.2% in the first quarter 2000 as compared to the comparable period in 1999.
Comparable restaurant sales increased by 5.8% for the Brinker concept
restaurants operated by the Company in the first quarter 2000 as compared to the
first quarter 1999. Faced with increases in the minimum wage in some states and
the increasing upward pressure on hourly labor rates, the Company raised menu
prices early in the first quarter 2000. The Company believes that the majority
of the sales increases were the result of increased guest satisfaction resulting
in repeat visits and the aforementioned menu price increases that took effect in
late January 2000.
COST OF SALES. Cost of sales increased by approximately $210,000, or
1.2%, to $17.6 million during the first quarter 2000 from $17.4 million during
the first quarter 1999. The dollar increase in cost of sales primarily was due
to increased sales volume partially offset by the closing of the Bertucci's
restaurants, most of which closed during 1999. Expressed as a percentage of net
sales, overall cost of sales decreased to 26.2% during the first quarter 2000
from 27.5% during the first quarter 1999. This percentage decrease was due to
several factors, namely, cost control measures at Bertucci's, a reduced cheese
price slightly offset by increased prices of beef and pork, the favorable impact
of closing the Bertucci's restaurants and menu price increases.
OPERATING EXPENSES. Operating expenses increased by $2.0 million, or
5.3%, to $39.0 million during the first quarter 2000 from $37.0 million during
the first quarter 1999. Expressed as a percentage of net sales, operating
expenses decreased to 58.1% in the first quarter 2000 from 58.7% during the
first quarter 1999. The dollar increase in operating expenses primarily was due
to an increase in advertising expense and from the additional Chili's and On The
Border restaurants ("Brinker concept restaurants") but partially offset by the
closing of the Bertucci's restaurants. Furthermore, the dollar increase was
partially because of increased hourly labor costs driven by a tight labor market
that was a result of low unemployment and mandated state minimum wage increases.
The percentage decrease primarily was attributable to increased efficiency at
the restaurants as well as menu price increases.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by approximately $800,000, or 21.7%, to $4.5 million during
the first quarter 2000 from $3.7 million during the first quarter 1999. The
dollar increase in general and administrative expenses was due to rent
associated with the new corporate office, higher costs of staffing new
positions, higher incentive payout accruals based on improved performance,
higher professional fees and one-time start-up costs of a new point of sale
system for Bertucci's. Expressed as a percentage of net sales, general and
administrative costs increased to 6.7% during the first quarter 2000 from 5.9%
during the first quarter 1999. The increase was attributable to the
aforementioned dollar increases.
<PAGE>
DEFERRED RENT, DEPRECIATION, AMORTIZATION AND PREOPENING EXPENSES.
Deferred rent, depreciation, amortization and preopening expenses increased by
approximately $300,000 or 7.0%, to $4.5 million during the first quarter 2000
from $4.2 million during the first quarter 1999. The increase was primarily due
to additional depreciation on new restaurant development as well as capital
improvements made to existing restaurants in 1999. Preopening costs of
approximately $375,000 in the first quarter 2000 were almost $115,000 favorable
to the approximate $490,000 expensed in the first quarter 1999.
INTEREST EXPENSE. Interest expense increased by approximately $300,000
to $3.7 million during the first quarter 2000 from $3.4 million during the first
quarter 1999. This increase was primarily attributable to approximately $10.4
million of additional mortgage loan financing for new restaurant development.
Interest was approximately $2.7 million on the Senior Notes, $912,000 on the
mortgage loans and $82,000 on the Company's revolving credit facility, during
the first quarter 2000.
INCOME TAXES. The effective income tax benefit rate decreased to 32.4%
during the first quarter 2000 from 36.4% during the first quarter 1999. The
difference in rate was mainly due to timing differences in estimated taxes
during 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its capital expenditures and working
capital needs through a combination of operating cash flow, mortgage loan
financing and borrowing under the Company's revolving credit facility, which
provides for borrowings of up to $20.0 million.
Net cash flows used by operating activities were $3.2 million for the
first quarter 2000 or $2.7 million more than the $504,000 used during the first
quarter 1999. A primary reason for the change was a decrease in accrued expenses
of approximately $6.3 million during the first quarter this year versus a
decrease of approximately $4.5 million during the first quarter last year. The
change was due mainly to reductions of deferred compensation accruals, accrued
bonus and accrued exit costs associated with closed restaurants. In addition,
the Company showed a change in accounts payable to account for most of the
remaining variance.
The Company's capital expenditures decreased by $1.3 million to $3.6
million for the first quarter 2000 compared to $4.9 million of capital
expenditures for the first quarter 1999. The decrease in capital expenditures
was primarily due to less new construction of restaurants (approximately
$600,000 variance) and a change in accounting principle whereby the company
accounted for almost $700,000 of preopening costs in capital expenditures during
the first quarter 1999 but none during the first quarter 2000. The Company
received almost $1.4 million of proceeds from the sale of five previously closed
Bertucci's restaurants in the first quarter 2000 as a result of adopting the new
accounting required for preopening costs.
As of March 29, 2000, the Company had approximately $140.2 million in
consolidated indebtedness, including $100.0 million of indebtedness pursuant to
the Senior Notes, $40.1 million of mortgage loan financing and $0.1 million of
capital lease obligations. Significant liquidity demands will arise from debt
service on the Senior Notes, the mortgage loans and borrowings under the Senior
Bank Facility.
<PAGE>
The Company believes that the cash flow generated from its operations,
together with available borrowings under the Senior Bank Facility and mortgage
loan financing and similar secured indebtedness, should be sufficient to fund
its debt service requirements, lease obligations, current expected capital
expenditures and other operating expenses for the next twelve months. The Senior
Bank Facility provides the Company with available borrowing up to an aggregate
amount of $20.0 million. As of March 29, 2000, there were no borrowings under
the Senior Bank Facility. The Company's future operating performance and ability
to service or refinance the Senior Notes, mortgage loan financing, and the
Senior Bank Facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond the Company's
control.
SEASONALITY
The Company's quarterly results of operations have fluctuated and are
expected to continue to fluctuate depending on a variety of factors, including
the timing of new restaurant openings and related pre-opening and other startup
expenses, net sales contributed by new restaurants, increases or decreases in
comparable restaurant sales, competition and overall economic conditions. The
Company's business is also subject to seasonal influences of consumer spending,
dining out patterns and weather. As is the case with many restaurant companies,
the Company typically experiences lower net sales and net income during the
first and fourth quarters. Because of these fluctuations in net sales and net
income (loss), the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full year or any future
quarter.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in
this Quarterly Report on Form 10-Q, including, without limitation, statements
set forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" regarding the Company's future financial position,
business strategy, budgets, projected costs and plans and objectives of
management for future operations, are forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate" or "believe" or the negative thereof or variations
thereon or similar terminology. Although the Company believes that the
expectations reflected in such forward-looking statements will prove to have
been correct, it can give no assurance that such expectations will prove to have
been correct. Factors including those set forth herein, as well as those set
forth in the Company's Form 10K filed with the Securities and Exchange
Commission ("SEC") on March 28, 2000 and other filings with the SEC may affect
such expectations. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company has market risk associated with interest rate risk. The Company
manages its exposure through its regular financing activities. Interest rate
changes would result in a change in the fair value of the Company's debt
facilities due to the difference between the market interest rate and the rate
at the date
<PAGE>
of issuance of the debt facilities. Furthermore, the Company has no
exposure to specific risks related to derivatives or other "hedging" types of
financial instruments.
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings from time to time
incidental to the conduct of its business. In the opinion of management, any
ultimate liability arising out of such proceedings will not have a material
adverse effect on the financial condition or results of operations of the
Company.
Management is not aware of any litigation to which the Company is a
party that is likely to have a material adverse effect on the Company.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.24 Second Amendment to the On The Border Restaurant Development Agreement
as of May 30, 1999 by and between Brinker International, Inc. and NERCO
10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between
Maine's Paper & Food Service, Inc. and NERCO
10.26 NERCO Savings and Investment Plan dated as of April 29, 1999
10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated
September 2, 1999
27.1 Financial Data Schedule
(b) The Company did not file a Current Report on Form 8-K during the first
quarter 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NE RESTAURANT COMPANY, INC.
(Registrant)
Date: May 15, 2000 BY: /S/ BENJAMIN R. JACOBSON
-----------------------------
Benjamin R. Jacobson
Chairman of the Board of Directors
Date: May 15, 2000 BY: /S/ DAVID J. NACE
------------------------------
David J. Nace
Chief Financial Officer and
Executive Vice President
<PAGE>
Exhibit Index
10.24 Second Amendment to the On The Border Restaurant Development Agreement
as of May 30, 1999 by and between Brinker International, Inc. and NERCO
10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between
Maines Paper & Food Service, Inc. and NERCO
10.26 NERCO Savings and Investment Plan dated as of April 29, 1999
10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated
September 2, 1999
27.1 Financial Data Schedule
<PAGE>
EXHIBIT 10.24
SECOND AMENDMENT TO
ON THE BORDER RESTAURANT
DEVELOPMENT AGREEMENT
This Second Amendment to On The Border Restaurant Development Agreement
(hereinafter, the "Amendment") is made and entered into as of May 30, 1999,
between BRINKER INTERNATIONAL, INC., a Delaware corporation (hereinafter
"Brinker"), NE RESTAURANT COMPANY, INC., a Delaware corporation (hereinafter
"Developer").
W I T N E S S E T H
WHEREAS, Brinker and Developer entered into a certain On The Border
Development Agreement as of June 23, 1997 (the "Development Agreement").
WHEREAS, Brinker and Developer wish to modify the development
schedule in Paragraph 3.2 of the Development Agreement.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
Brinker and Developer hereby agree as follows:
1. The schedule contained in Paragraph 3.2 of the Development Agreement is
replaced with the following schedule:
- ------------------------------------ ---------------------------------------
By (Date) Cumulative Total Number
Of On The Border Restaurants
Which Developer Shall Have Open
And in Operation in the Territory
- ------------------------------------ ---------------------------------------
January 1, 1998 2
January 1, 1999 4
January 1, 2000 6
January 1, 2001 10
January 1, 2002 13
January 1, 2003 16
January 1, 2004 21
- ------------------------------------ ---------------------------------------
Developer agrees that, of the twenty-one (21) On The Border Restaurants it is
obligated to have open and in operation by January 1, 2004, fifteen (15) On
The Border Restaurants shall be open and in operation in the New England
Territory and six (6) On The Border Restaurants shall be open and in
operation in the Upstate New York Territory. Failure by Developer to adhere
to the development schedule set forth above shall constitute a material event
of default under this Agreement as provided IN SECTION 7.4 hereof.
2. Except as amended herein, all other terms of the Development Agreement
shall remain unchanged.
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed this Amendment
as of the day and year first above written.
BRINKER:
--------
[S E A L] Brinker International, Inc.
A Delaware corporation
ATTEST:
- -------
/s/ Barbara L. Mahoney
- ---------------------------- By: /s/ David Tyner
By: Assistant Secretary --------------------------
David Tyner
Its: Vice President
DEVELOPER:
----------
[S E A L] N. E. Restaurant Company, Inc.
a Delaware corporation
ATTEST:
- -------
/s/ Paul Hoagland
- ---------------------------- By: /s/ Paul Hoagland
By: Assistant/Secretary ----------------------------
Its: Vice President
---------------------------
<PAGE>
EXHIBIT 10.25
PRIMARY DISTRIBUTION AGREEMENT
Primary Distribution Agreement dated May 13, 1999, between MAINES PAPER & FOOD
SERVICE, INC. (MAINES), and NE RESTAURANT COMPANY, INC. (NERCO).
BACKGROUND
A. Maines performs purchasing, warehousing, product research &
development, transportation and distribution services for foodservice
customers.
B. NERCO currently operates the establishments listed in Exhibit "A" (all
such establishments operated by NERCO, and open for business are
collectively referred to herein as the "Customer Locations").
C. NERCO desires to contract with Maines as its primary distributor for
foodservice products to all of its Customer Locations and Maines
desires to perform these services.
In consideration of the mutual obligations set forth below, the parties agree
as follows:
1. APPOINTMENT OF DISTRIBUTOR
NERCO appoints Maines to serve as its primary distributor to NERCO's
locations for foodservice products within the product categories described in
Article 2 ("Products"). The service benefits for this program are
automatically extended to any other NERCO System Restaurant Concept(s) that
are developed in the future, provided all parameters and requirements of the
agreement are met. Mark-up schedules however, will need to be discussed and
mutually agreed upon in advance for these new concepts.
2. PRODUCTS COVERED BY THIS AGREEMENT
<TABLE>
<CAPTION>
Bertucci's Brick Oven Pizzeria Chili's Grill & Bar/On the Border
------------------------------ ---------------------------------
<S> <C>
Cheese, including frozen mozzarella Cheese
Dairy Dairy
Dry Groceries Dry Groceries
Refrigerated Refrigerated
Meat, Poultry, Seafood Meat, Poultry, Seafood
Paper, Plastic & Disposables Paper, Plastic & Disposables
Beverages, including Coke Syrups Beverages, including Coke Syrups
Prepared Foods Prepared Foods
Desserts Desserts
Chemical & Cleaning Supplies Chemical & Cleaning Supplies
Store Operating Supplies Store Operating Supplies
Economics Laboratories Economics Laboratories
Equipment & Smallwares Equipment & Smallwares
Produce Produce
</TABLE>
Products will include Maines Brand, National Brand, and other products
as specified by NERCO and stocked by Maines.
All products in any of the product categories specified in Section 2
will be priced using the mark-up schedule set forth in Exhibits "B" & "C" for
that product category.
<PAGE>
2.1 SALE AND DISTRIBUTION OF PRODUCE FOR BERTUCCI'S LOCATIONS -
Maines will begin the distribution of produce provided Maines
meets quality and distribution standards for all Bertucci's
locations within Maines primary distribution territory
(excludes Atlanta/Chicago locations), within thirty days of
the execution of this agreement.
3. SERVICE OBLIGATIONS OF MAINES
3.1 ACCOUNT EXECUTIVE - Maines will assign a dedicated Account
Executive and Customer Service Representatives to service
NERCO accounts. The Account Executive and the Customer Service
Representatives will maintain contact with NERCO Corporate
offices on a monthly basis to review service requirements.
3.2 POLICIES AND PROCEDURES - A policies and procedures guide will
be provided by Maines to all Customer Locations, as mutually
agreed upon. Reasonable notice will be given to Customer
Locations when policies and procedures are changed by Maines.
Credits, pick-ups, re-stocking charges, and other requests for
service will be initiated by location personnel according to
the guide. The mutually agreed upon guide will become part of
this agreement when executed by both parties.
3.3 DAMAGES, SHORTAGES AND ERRORS ON DELIVERY - Any damage,
shortage, or error shall be noted on the invoice and signed by
Customer Location receiving personnel. Credit for damages,
shorts, or errors will be noted by Maines delivery personnel
and will be final. All reasonable efforts will be expended in
determining the root cause of the damage, shortage, or error.
If the error is determined to be that of Maines, Maines will
be responsible for the cost of replenishing that product to
the respective location as soon as the next delivery is
scheduled. If the situation is determined to be the error of
NERCO personnel, NERCO will be responsible for replenishing
that product at their cost, with authorization at NERCO
Corporate if delivery cost exceeds $150.00. For purchases that
are returned for credit that are determined to be the result
of a Customer Location's excessive ordering or other ordering
errors, a 15% re-stocking fee will be assessed with advanced
notice to NERCO Corporate.
3.4 SHIPMENT OF PRODUCTS NOT APPROVED BY NERCO - Any products not
approved at NERCO Corporate Offices cannot be sold to the
individual Customer Locations by Maines.
3.5 PROPRIETARY PRODUCTS - Maines will not sell or deliver any
NERCO proprietary products to any location not approved by
NERCO Corporate.
3.6 MAINES CURRENT VENDOR BASE - NERCO agrees to review Maines
current vendor base for future product needs or product
changes where possible.
3.7 INVENTORY - Maines will inventory and deliver NERCO items as
requested. Inventory of these items shall not exceed five
weeks on-hand inventory, which will be regulated by Maines
based on supplied or actual usage figures. In the event the
level exceeds this period, NERCO will be notified. If any
product requested by NERCO results in greater than four weeks
on-hand inventory a definitive action plan will be provided to
Maines from NERCO's Corporate Purchasing Management. The
written plan will detail the actions that will be taken to
lower the level to a maximum of four weeks supply within
twenty-one days of notification. For inventory that remains
on-hand thirty days after notification, Maines will charge
NERCO the current fair market storage fee then in effect.
<PAGE>
4. DELIVERY OBLIGATIONS OF MAINES
4.1 NO SKIP DAY DELIVERIES - There will be no skip day deliveries
for any Chili's or On the Border locations, with the exception
of: West Lebanon, NH, and S. Portland, ME. All skip day
deliveries for the Bertucci's locations in New England will be
eliminated by December 15, 1999.
4.2 Maines will establish a delivery schedule acceptable to NERCO
for each Customer Location and will use reasonable good faith
efforts to make on time deliveries. Mutually agreed windows
for non-key drop locations will be 6:30 am until 11:00 am and
2:00 pm until 5:00 pm. Deliveries must be completed, and
delivery equipment off premises by close of window.
4.3 TWO DELIVERIES PER WEEK - Each Customer Location will be
serviced by Maines with two deliveries per week utilizing one
Maines driver. The exception to this delivery schedule are the
Bertucci's locations in the Chicago and Atlanta Markets. These
units will receive one delivery per week. The Chicago and
Atlanta trucks will also have a delivery surcharge of three
thousand six hundred seventy eight dollars ($3,678) per
trailer per week.
4.4 DELIVERY SCHEDULE CHANGES - Maines reserves the right to make
changes to existing or proposed delivery schedules by
providing fourteen days notice to the appropriate NERCO
Corporate Personnel, the affected NERCO Regional Managers and
the affected Customer Location Managers. All such changes must
keep to the provisions outlined in Section 4.1 of this
Agreement and must be acceptable to NERCO.
5. INFORMATION SYSTEMS TECHNOLOGY OBLIGATIONS OF MAINES
5.1 FOR CHILI'S AND ON THE BORDER
a. Upon Maines review and approval of NERCO's lease agreement with
Alliant of 40 computers and associated peripherals, Maines
shall buy-out the remaining lease. As of March 1, 1999 Maines
is told that amount is $71,548. At the time of start-up (May
17, 1999), this amount is expected to be reduced. Maines will
then accrue one-half (1/2) of this final amount from NERCO by
offsetting the expense against the 0.5% discount for off-day
deliveries, as outlined in Section 6.4. The cost of this lease
buy-out will be amortized over a five-year period based on a
straight line method. In the event this agreement is terminated
before this period, the remaining balance will be due from each
restaurant will be paid Maines within 30 days of termination of
this agreement.
b. Maines agrees to have the REMACS interface testing in place for
Chili's and On the Border by August 1, 1999.
c. Maines agrees to have the REMACS interface system complete and
usable for all Chili's and On the Border locations by September
1, 1999.
d. Maines agrees to provide the funding for PC hardware for any
new Chili's and On the Border locations. Each window-based
pentium PC will include the following configuration:
- Pentium 300 MHZ or above processor
- 32 Meg of Ram Memory
<PAGE>
- 2.5 Gig of Hard Drive or larger
- 56 BPS Modem
The cost of this hardware will be amortized over a
five year period based on a straight line method. In the event
this agreement is terminated before this period, the remaining
balance due from each restaurant will be paid to Maines within
thirty (30) days of termination of this agreement.
e. Any Y2K upgrades for existing Chili's or On the Border units
will be the responsibility of NERCO.
f. Maines will pay for the actual per unit cost for items 5.1,
a-d, which is not to exceed $1,500.00.
g. Maines agrees to provide periodic reporting of Chili's data to
NERCO in the same format and frequency as the current
Bertucci's reporting.
h. All PC maintenance and repair costs will be the responsibility
of NERCO. i. All REMACs (help desk) support and maintenance
costs will be the responsibility of NERCO.
5.2 FOR BERTUCCI'S BRICK OVEN PIZZERIA'S
a. Maines will provide funding for the purchase of DOS REMACS
software for all existing Bertucci's units. Because Maines can
not own the REMACS software, NERCO must be the licensee of
record. Maines will therefore prepare a five (5) year
amortization schedule based on a straight-line method. In the
event this agreement is terminated before this period, any
remaining balance will be paid to Maines by NERCO within thirty
(30) days of termination.
b. Maines agrees to purchase minimum configuration upgrades for
existing PC's at the Bertucci's locations. The cost of these
upgrades will be amortized over a five (5) year period using a
straight line method. In the event this agreement is terminated
before this period, the remaining balance due from each
restaurant will be paid to Maines within thirty (30) days of
termination of this agreement.
c. Maines agrees to provide electronic order entry integrated with
REMACS.
d. Maines agrees to provide electronic price changes to NERCO
Corporate in usable file format for REMACS.
e. Maines and NERCO Corporate IS Management will jointly provide
systems training for Bertucci's unit location managers.
f. Maines will pay for the actual per unit cost for items 5.2 a-e,
which is not to exceed $1,500.
g. Systems testing to be completed by August 1, 1999.
h. Ten units in production by October 1, 1999.
i. All units in production by December 31, 1999.
j. Maines agrees to provide funding for REMACS software for any
new Bertucci's locations with the same provisions as are stated
in item 5.2a.
k. All REMACs (help desk) support and maintenance costs will be
the responsibility of NERCO.
6. PRICING
6.1 DEFINITION OF COST - The price to NERCO for all products sold under
this agreement (the
<PAGE>
"Sell Price") will be calculated on the basis of Cost. "Cost" is
defined as the invoice cost to Maines plus applicable freight. The
invoice used to determine cost will be the invoice issued to Maines by
the vendor. Cost is not reduced by cash discounts for prompt payment
or earned performance allowances available to Maines.
APPLICABLE FREIGHT - In those cases where the invoice cost to
Maines is not a delivered cost, applicable freight charges will be
added to invoice cost. Freight charges may include common or contract
carrier charges by the product vendor or by Maines fleet back-haul,
or by charges billed by third party carriers. Applicable freight for
any product will not exceed the rate charged by nationally recognized
carriers operating in the same market for the same type of freight
service. Earned back-haul efficiencies are retained by Maines and do
not reduce product cost.
6.2. L.I.F.O ACCOUNTING PRINCIPLES - Pricing to NERCO will be based upon
L.I.F.O. Accounting Principles. Pricing for mutually agreed upon market
sensitive items (primarily commodities) will be effective Friday of
each week. Pricing for all other products to NERCO will be set the
first calendar day of each month.
6.3. CALCULATION OF SELL PRICE - The Sell Price for each product sold under
this agreement as provided in Section 2 will equal the Cost of such
product plus applicable freight plus the percentage mark-up as
specified in Exhibits "B" & "C" (pricing schedules).
6.4. DISCOUNT FOR "OFF-DAY DELIVERY - For Chili's and On the Border
locations only, Maines will offer NERCO a 0.5% discount for one
"off-day delivery" per week, per location. An "off-day delivery" is
defined by Maines as a delivery day when there is excess delivery
equipment and/or delivery personnel available for routing deliveries to
NERCO's Chili's and On the Border locations. Maines will establish this
"off-day delivery" information per location and provide it to NERCO
before start up. This 0.5% discount on the one "off-day delivery" per
week will be calculated and accrued by Maines and used as defined in
Section 5.1a to off-set costs incurred by Maines. After the expense is
recovered in Section 5.1a, then this credit will be issued quarterly to
NERCO Corporate Offices. The second "non" off-day delivery is not
eligible for this discount. Maines reserves the right to make changes
to this schedule periodically by providing fourteen days notice to
NERCO Corporate Personnel.
6.5. SUBSTITUTIONS - Should a substitution be necessary and approved by
NERCO, Maines will ship a comparable product at a sell price calculated
using the same percentage of mark-up as on the original product.
6.6. TERMINATION OF AGREEMENT - If Maines and NERCO cease doing business for
any reason, NERCO will purchase, or cause a third party to purchase all
remaining proprietary, special order, and dedicated inventory items in
Maines inventory at Maines cost plus a reasonable transfer and ware
house handling charge. In such an event NERCO will purchase or cause to
be purchased and transferred all perishables within five (5) days of
termination of this agreement and all frozen and dry items within
fifteen days of the termination of this agreement. NERCO further agrees
to pay interest and storage fees in effect at the time of termination
on any or all product(s) not purchased and transferred by the time line
set forth herein. In the event the successor distributor fails to make
payments to Maines within thirty days of transfer of products, NERCO
shall, upon demand, immediately make such payment.
6.7. HOLD HARMLESS AGREEMENT - Maines policy is that all suppliers provide
indemnity agreements and insurance coverage for products purchased by
Maines. In order to protect
<PAGE>
Maines when it stocks propriety/special order items at NERCO's request
and the vendor of such items will not provide an indemnity, NERCO will
defend, indemnify, and hold harmless Maines and its employees, and
officers from all actions, claims and proceedings, and any judgments,
damages and expenses resulting in the delivery, sale, re-sale, use or
consumption of any NERCO proprietary/special order item.
6.8. ADJUSTMENT IN MARGINS FOR UNANTICIPATED PROBLEMS - If the operating
costs of Maines are increased as a direct result of a significant
regional or national economic problem, including but not limited to:
fuel cost increases, and power shortages, Maines may, with the prior
consent and agreement of NERCO, increase the mark-up schedule specified
in Exhibits "B" & "C" to compensate for such increased costs during the
period such increases are experienced. Both parties must agree to any
and all changes.
6.9. VENDOR/NERCO AGREEMENTS - NERCO will provide Maines with written
evidence of existence of agreements with products manufacturers in
which the manufacturers have agreed on prices they will charge Maines
for products to be resold to NERCO. NERCO must notify Maines in writing
of the existence of any additional agreements of this sort. Maines will
not be responsible for the failure to purchase under such additional
agreements in the absence of written notice from NERCO of the existence
of such agreements.
6.10. PAYMENT TERMS - Payment terms will be net fourteen days for all NERCO
locations. Payment will be remitted each Wednesday via ACH Transfer for
invoices according to a fourteen day term schedule. Attached as Exhibit
"D" is a twelve month calendar of invoice weeks and due dates (Example:
Sunday 1st to Saturday 7th, Sunday 8th to Saturday 15th. Payment for
1st - 7th will be remitted by ACH transfer on Wednesday the 18th).
7. PRICE VERIFICATION
NERCO throughout the term of this agreement, will be allowed audit
privileges which will include up to 25 items maximum and can be reviewed
thirteen weeks back with fifteen days written notice to Maines.
8. TERM OF AGREEMENT
The term of this agreement will begin on the first day of deliveries
(May 17, 1999) and continue for five years (sixty months). Unless terminated
earlier as follows:
a. Either party may cancel pursuant to breech of this agreement after sixty day
advance written notice to correct issues, if said issues remain unresolved.
b. Maines may terminate at any time, following thirty day prior written notice,
for non-payment by NERCO of its payment obligations.
c. Due to capital Investments made by Maines in the equipment necessary to
deliver to the Bertucci's locations in the Atlanta/Chicago markets, NERCO
will honor a one-year term from the date of first delivery to the
Atlanta/Chicago Bertucci's units. If NERCO decides to terminate the
deliveries by Maines to the Bertucci's units in Atlanta and Chicago after
the initial twelve months of deliveries, sixty days notice of termination
will be provided by NERCO. If the distribution agreement is terminated in
accordance with the terms stated in Section 8 prior to the completion of the
first twelve months of deliveries to the Atlanta/Chicago locations, NERCO
will remit to Maines a flat rate of $25,000 per month for the period between
the date of termination and the twelve month period from the first delivery
date. NERCO may periodically review delivery charges.
<PAGE>
d. Upon such termination as described in 8, a-c, NERCO agrees to pay its
obligations under this agreement and to pay all outstanding invoices within
fourteen days from the date of the last shipment to each location.
In witness whereof: the parties have hereto caused this agreement to be
executed, delivered, and signed as if under this 13th day of May, 1999 by
themselves or their duty authorized agent or representatives.
As evidence of this agreement:
Signed: /s/ David J. Maines Date: 5/14/1999
------------------------------ -----------
David J. Maines
Title: Executive Vice President
Company: Maines Paper & Food Services, Inc.
Witness: /s/ Amy B. Legg Date: 5/14/1999
------------------------------ -----------
Title: Administrative Assistant
Company:
Signed: /s/ Paul Joseph Seidman Date: 5/13/1999
------------------------------ -----------
Paul Joseph Seidman
Title: Vice President
Company: NE Restaurant Company, Inc.
Witness: /s/ Kathleen M. Gee Date: 5/13/1999
------------------------------ -----------
Title: Executive Assistant
to the President
Company:
<PAGE>
EXHIBIT 10.26
002 (NON-STANDARDIZED)
NE RESTAURANT COMPANY, INC. SAVINGS AND INVESTMENT PLAN
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS OMITTED
I. INTRODUCTION
This is a summary of the NE Restaurant Company, Inc. Savings and
Investment Plan (the "Plan") which has recently been amended. The purpose of
the Plan is to provide retirement income for those eligible to participate by
permitting employees to make pre-tax contributions to the Plan. The effective
date of this amendment is April 29, 1999.
We prepared this Summary to comply with a legal requirement for a
"summary plan description," describing your rights and obligations as a
Participant in the Plan in language which should be easy for you to
understand.
This Plan is intended to comply with Section 404(c) of the Employee
Retirement Income Security Act of 1974 (ERISA). Under Section 404(c),
employees who make investment decisions for the Plan assets are responsible
for those investment decisions. Plan fiduciaries (including the Employer and
the Plan Trustee) may be relieved of liability for any losses which are the
result of investment decisions made by you. Also, since you make the
investment decisions, any proxies relating to any of the investment choices
will be forwarded to you for your vote.
Under the NE Restaurant Company, Inc. Savings and Investment Plan,
you are responsible for investing all Contributions made to the Plan on your
behalf.
The current investment choices are:
Scudder Cash Investment Trust
Scudder Income Fund
Scudder Pathway Series - Balanced Portfolio
Scudder Large Company Value Fund
Scudder Large Company Growth Fund
Scudder International Fund
<PAGE>
The following information about these investment choices is provided in
the Plan materials with which you have been provided:
- investment objectives
- risk and return characteristics.
Investment instructions may be made by calling Pilot, Scudder's Voice
Response System, at 1-800-541-7705 or by any other means acceptable to the Plan
Administrator. For more information, including any of the following, please
contact Human Resources:
- Annual operating expenses and expense ratios for investment
alternatives;
- Copies of prospectuses, reports, and financial statements of
investment alternatives;
- List of assets within an investment alternative (other than mutual
funds);
- Information on the share/unit value of each investment alternative;
- Information on the performance of the investment alternatives; and
- Information on the value of shares/units in the investment
alternatives held by you.
Please remember that this is only a Summary and therefore cannot
cover all the details of the Plan or act as a substitute for the Plan
document, which contains all of the provisions of the Plan. In addition, we
may have unintentionally left out or misstated some items. If there is any
inconsistency between this Summary and the actual provisions of the Plan, the
actual provisions set forth in the Plan document will control.
If you have any questions about the Plan or about your benefits under
the Plan, please contact your Plan Administrator.
2. DEFINITIONS
Listed below are definitions for some terms that are used throughout
this Summary and the Plan. Since these words may have technical meanings
slightly different from their ordinary meanings, please refer to these
definitions when you are reading this Summary or the Plan document.
<PAGE>
"COMPENSATION"
Compensation can have different meanings for different purposes
under the Plan.
CONTRIBUTIONS: For purposes of determining or allocating the Salary
Reduction Contributions, Employer Profit Sharing Contributions and
Employer Matching Contributions.
Compensation means NON-SAFE HARBOR ALTERNATIVE DEFINITION (I.E., W-2,
the definition of Compensation, for federal tax withholding BUT
excluding the bonuses; commissions; such other items as car allowances,
fuel reimbursement, stock options and moving expenses.
This definition of Compensation shall include a Participant's Salary
Reduction Contributions, and other amounts, which are excluded from an
Employee's gross income pursuant to Code Sections 125, 402(a)(8),
402(h)(1)(B) and 403(b).
For the purpose of determining or allocating Employer Profit Sharing
Contributions and/or Employer Matching Contributions the definition of
Compensation shall be determined by not taking into account amounts paid
during that portion of the Plan Year during which the Employee is not
eligible to participate in the Plan.
NON-DISCRIMINATION TESTING: For purposes of the various
non-discrimination tests required under the Internal Revenue Code, the above
definition Compensation shall not take into account amounts paid during that
portion of the Plan Year during which the Employee is not eligible to make a
salary reduction election.
LIMITATION ON TOTAL ALLOCATIONS: FOR PURPOSES OF THE IRS'S
LIMITATION ON TOTAL ALLOCATIONS (WHICH COULD LIMIT THE TOTAL AMOUNT,
INCLUDING ALL CONTRIBUTIONS AND ANY FORFEITURES ALLOCATED TO A PARTICIPANT'S
ACCOUNT(S) UNDER THE PLAN IN ONE YEAR), THE MAXIMUM AMOUNT OF COMPENSATION,
WHICH MAY BE CONSIDERED UNDER THE PLAN IS LIMITED TO $150,000, AS INDEXED FOR
INFLATION ($160,000 FOR 1999, INCREASING TO $170,000 FOR 2000).
If you are self-employed, Compensation means "earned income" as
defined by the Internal Revenue Code.
"EMPLOYER"
Employer means NE Restaurant Company, Inc., any successor organization
adopting this Plan, (including Bertucci's Restaurant Corp.) and all
organizations and entities that are required by the Internal Revenue
Code to be aggregated with NE Restaurant Company, Inc.
<PAGE>
"HIGHLY COMPENSATED EMPLOYEE"
Highly Compensated Employee is an employee who:
- owns or owned more than 5% of the Employer during the Plan Year or
the preceding Plan Year; or
- earned more than $80,000 (as indexed for inflation) in annual
Compensation from the Employer during the preceding Plan Year.
"HOURS OF SERVICE"
Hours of Service means any hours for which you are either paid or
entitled to be paid by the Employer for performing duties or for other
reasons such as vacation, holidays, sick days, maternity or paternity
leave, disability, jury or military duty, layoff or authorized leave of
absence. When calculating your Hours of Service for each week, during
which you work at least one hour for the Employer, your Employer will
credit you with the actual number of hours for which you performed
services for the Employer during that week.
Please note any Hours of Service that you may have accumulated for
reasons other than performing duties, such as vacation, maternity
leave, etc., cannot exceed 501 hours for each continuous period during
which you do not perform any duties.
"KEY EMPLOYEE"
Key Employee is an employee who at any time during the Plan Year, or
any of the preceding four Plan Years, is one or more of the following:
- An individual owning more than 5% of the business;
- An individual owning more than 1% of the business and earning more
than $150,000;
- An officer of the business earning more than $45,000 (as indexed for
inflation; $65,000 for 1999); or
- One of the 10 employees earning more than $30,000 and owning the
largest interest in the business.
"ONE-YEAR BREAK IN SERVICE"
For the purpose of determining Years of Service on the Elapsed Time
Method, a One-Year Break in Service is a 12 consecutive month Period of
Severance, beginning on your Severance from Service Date. The Severance
from Service Date of an Employee who is absent from Service by reason
of maternity/paternity leave of absence is the second anniversary of
the first date of such absence.
<PAGE>
For the purpose of determining Years of Service on the 1,000 Hours of
Service Method, a One-Year Break in Services is 12 month period during
which you fail to complete 500 or more Hours of Service. The 12 month
periods are measured from the day you began working for the Employer or
an anniversary of that date.
"PARTICIPANT"
Participant means an employee who has satisfied the eligibility
requirements of the Plan and is thereby eligible to participate in the
Plan. See Section 3 of this Summary for the Plan's eligibility
requirements.
"PERIOD OF SERVICE"
Period of Service means the Employer-Employee relationship, which begins
on your date of employment and continues until your Severance from Service Date.
(Note: Your Period of Service will include any Period of Severance beginning on
your Severance from Service Date that is less than 12 months.)
"PERIOD OF SEVERANCE"
Period of Severance equals the period of time commencing on your
Severance from Service Date and ending on the date you are re-employed.
Your Severance from Service Date will be the earlier of 1, 2, or 3
below:
1. The date you terminate employment.
2. The second anniversary of the first day you are absent from Service
for maternity or paternity leave of absence.
3. The first anniversary of the first day you separate from service
for any other reason such as authorized leave of absence, sickness,
vacation, etc., after which you do not return to work.
"PLAN YEAR"
Plan Year means the 12-month period ending on the last day of December
over which Plan records are maintained.
"TOP HEAVY"
Top Heavy describes a Plan in which the sum of account balances of Key
Employees (defined above) exceeds 60% of
<PAGE>
the sum of account balances of all Participants.
"VESTING YEAR"
You will be credited with a Vesting Year for each Year of Service you
accrue on the vesting schedule. (See "Vesting of Contributions" on page
12).
When calculating your Vesting Years, the Employer will include your
employment:
- before this Plan or predecessor plan was established.
- before the first Plan Year in which you reached the age of 18.
"YEAR OF SERVICE"
A Year of Service is typically used to determine Vesting and
Forfeitures under the Plan and is measured beginning on your date of
employment (or reemployment) with the Employer or an anniversary of
that date.
For the purpose of determining a Vesting Year, calculated on the
Elapsed Time Method, a Year of Service is a Period of Service equaling
12 months. Service counted in computing Years of Service need not be
consecutive or continuous, and all fractional Periods of Service Shall
be aggregated.
For the purpose of determining a Vesting Year, calculated on the Hours
of Service Method, a Year of Service is a 12 consecutive month period
during which you have worked at least 1,000 Hours of Service. Prior to
April 29, 1999, this method was used to calculate the Vesting Years for
employees who were formerly in the N.E. Restaurant Company, Inc. 401(k)
Profit Sharing Plan.
Effective April 29, 1999, Vesting Years will be calculated by the
Elapsed Time Method for all eligible employees. It is intended that each
Employee will have a vesting percentage equal to the percentage earned under
the document prior to April 29, 1999. In order to measure Years of Service
under the Elapsed Time Method, the "deemed date of employment" will be set
for employees who were formerly in the N.E. Restaurant Company, Inc. 401(k)
Profit Sharing Plan. The "deemed date of employment" will be the earlier of
(1) the employee's first Hour of Service or (2) the first day of the Plan
Year in which the employee earned credit for his first Year of Service under
the 1,000 Hours of Service Method.
<PAGE>
3. BELONGING TO THE PLAN
Before you become a Participant in the Plan, you must satisfy
certain eligibility requirements. These requirements are explained in this
section.
You have the right to make Salary Reduction to the Plan after you
complete four (4) consecutive Months of Service for the Employer.
You will also have the right to receive Employer Profit Sharing and
Matching Contributions made to the Plan after you complete four (4)
consecutive Months of Service for the Employer.
All employees who have completed the necessary length of service
stated above and who are at least 21 years of age are eligible to participate
except:
- Non-resident aliens who work for the Employer outside of the United
States;
- Individuals covered by a collective bargaining contract (please refer
to the Plan document for specific details);
- Hourly Employees, who are not considered Corporate Administrative
Employees;
- Leased Employees;
- Individuals defined as Highly Compensated Employees.
You will become a Participant in the Plan on the first day of the
next month after you complete all of the above applicable requirements.
If you terminate employment with the Employer after you begin
participating in the Plan, or after meeting the Plan's eligibility
requirements but before becoming a Participant in the Plan, and are later
rehired by the Employer (as an employee eligible to participate in the Plan)
you may begin participating in the Plan immediately upon rehire.
4. CONTRIBUTIONS TO THE PLAN
EMPLOYEE CONTRIBUTIONS
SALARY REDUCTION CONTRIBUTIONS
You may elect to have part of your Compensation contributed to the Plan
through the salary reduction agreement.
<PAGE>
These contributions are called "Salary Reduction Contributions." The minimum
percent of your Compensation that you may contribute is 1%, and the maximum
percent of your Compensation that you are allowed to contribute is 20%.
Your Salary Reduction Contributions are limited for each calendar
year to $7,000, as indexed for inflation. For 1999, the indexed limit was
$10,000 and for 2000, the limit is $10,500. If you contribute more than is
allowed for any year, you should notify the Employer between January 1 and
March 1 of the following year so that the Employer will be able to have the
excess removed by April 15th of that same following year to avoid any tax
penalty.
ROLLOVER CONTRIBUTIONS
If the Plan Administrator allows it, you may make a Rollover
Contribution to the Plan from another tax-qualified plan. You must either
make a Rollover Contribution within 60 days of receiving the Rollover amount
or have the amount directly rolled over from your prior plan (or a conduit
IRA). In most cases, the Plan Administrator will require that you state in
writing that the amount is eligible for a Rollover according to the Internal
Revenue Code requirements. Any Rollover Contributions and their earnings are
always 100% vested.
EMPLOYER CONTRIBUTIONS
PROFIT SHARING CONTRIBUTIONS
Each Plan Year, the Employer, at its discretion, may make a Profit
Sharing Contribution to the Plan.
You will qualify to receive an allocation of any discretionary
Profit Sharing Contributions if you are a Participant who received
Compensation during the Plan Year and if you were employed on the last day of
the Plan Year, or your retired, became disabled or died during the Plan Year.
The Employer's Profit Sharing Contribution will be allocated to
eligible Participants in the ratio that each Participant's Compensation (see
Definition Section of this Summary) for the Plan Year bears to the Total
Compensation paid to all Participants for the Plan Year. For Example:
<TABLE>
<CAPTION>
<S> <C> <C>
Total Profit Participant's Compensation for Amount Credited to the
Sharing the Plan Year Participant's Account
Contribution X ----------------------------- =
Total Compensation for the Plan
Year of all eligible Participants
</TABLE>
<PAGE>
EMPLOYER MATCHING CONTRIBUTIONS
Each Plan Year, the Employer will make a Matching Contribution which
will be determined based on the Plan Year.
Your Employer will match 25% of your Salary Reduction Contribution.
The Employer will not, however match any contributions you have made in
excess of 6% of your Compensation.
TAXATION OF CONTRIBUTIONS
All contributions made to your Account are not currently subject to
federal, and most state, income taxes, but will be subject to federal, and
possibly state and local, income taxation along with their earnings when
benefits are later paid to you or your beneficiaries. Also, any distributions
you receive before reaching the age of 59 1/2 will be subject to a 10% IRS
early withdrawal penalty, unless the distribution is:
1) Paid on account of your disability;
2) Paid to you after you separate from service, in substantially
equal payments based on your life expectancy or the joint life
expectancy of you and your beneficiary (provided that the
payments continue without modification until the later of 5
years or age 59 1/2);
3) Paid to you on account of a separation from service after you
have reached age 55;
4) Paid on account of your death;
5) Paid to a spouse, ex-spouse or other party pursuant to a
qualified domestic relations order; or
6) Paid for medical expenses (only to the extent such expenses
would be deductible).
VESTING OF CONTRIBUTIONS
All contributions that YOU make to the Plan and any earnings thereon,
are fully vested and non-forfeitable when made. To the extent assets are
"vested," they are "non-forfeitable" and may not be lost or taken away, even if
you leave your job.
Unless, you were formerly in the N.E. Restaurant Company, Inc. 401(k)
Profit Sharing Plan, all Profit Sharing Contributions and Matching Contributions
made by the Employer on your behalf, and any earnings on those contributions,
will vest and become non-forfeitable at the following rate:
Vesting Years Percentage Vested
1 25%
2 50%
3 75%
4 100%
<PAGE>
For Employees who were formerly in the N.E. Restaurant Company, Inc.
401(k) Profit Sharing Plan, the following vesting schedule applies to
Employer Profit Sharing and Matching Contributions:
Vesting Years Percentage Vested
1 25%
2 50%
3 100%
Contact your Plan Administrator if you want further detail on how Years of
Service or Vesting Years are counted under the Plan.
TERMINATION OF EMPLOYMENT
CONTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT AND ELIGIBILITY UPON REHIRE
If you are a Plan Participant and you leave your job with the
Employer, you will no longer be eligible to participate in the Plan. You may,
however, be entitled to receive an allocation of any Employer Contributions
for the Plan Year during which you terminated employment. If you return to
work for the Employer, you will immediately become a Participant in the Plan
again (provided you are a member of an eligible class of employees) and will
be able to make Salary Reduction Contributions again. The extent to which you
may be eligible to receive an allocation of any Employer Contributions either
for the Plan Year during which you terminated employment or during which you
are rehired will depend on the Plan's allocation requirements (see "EMPLOYER
CONTRIBUTIONS," above).
VESTING AND FORFEITURES
If you separate from service before you are 100% vested, you will be
entitled to take distribution of only the VESTED portion of your account(s).
The non-vested portion will be forfeited. However, if you return to work
within a certain period of time, generally 5 years, and repay to the Plan the
amount of Employer Contributions and earnings you previously received, the
Employer will reinstate your account with the amount that was forfeited. You
will generally have 5 years measured from the date you originally separated
from service to repay to the Plan the amount you took as a distribution.
You should check with the Plan Administrator for more detailed
information concerning these rules and their application to your situation.
If you decide to leave your account balance(s) in the Plan, the
Employer will not forfeit the non-vested portion until
<PAGE>
you have incurred five (5) consecutive One-Year Breaks in Service (refer to
the definition of "One-Year Break in Service" above, as it relates to Vesting
and Forfeitures), or until you elect to take a distribution of your vested
portion, whichever is earlier.
Forfeitures will be applied to reduce the Employer's obligation to
make a fixed contribution (E.G., Matching or fixed Profit Sharing
Contributions) for the Plan Year following the Plan Year in which the
forfeiture occurred.
If you return to work for the Employer, and again participate in the
Plan, any Vesting Years you accumulated before you left your job will be used
in determining the vested portion of any subsequent Employer Contributions
you may receive. The extent to which your future service with the Employer
may be used to increase the vested portion of Employer Contributions you
received PRIOR TO separation (assuming these amounts either remained in the
Plan or were repaid to the Plan following your rehire) depends on how many
One-Year Breaks in Service (refer to the definition of One-Year Break in
Service, above, as it relates to Vesting and Forfeitures) you incurred before
you were re-hired. If you were not fully vested at the time you left your job
but you did not incur five (5) consecutive One-Year Breaks in Service, any
Vesting Service you accumulate after re-hire will be counted in determining
the vested portion of the Employer Contributions you received prior to your
separation from service. If you did incur five (or more) consecutive One-Year
Breaks in Service, the vested portion of the Employer Contributions you
received prior to separation will not be increased on account of your
subsequent service and the non-vested portion will remain forfeited.
5. BENEFITS AND DISTRIBUTIONS FROM THE PLAN
TIMING OF DISTRIBUTIONS
NORMAL DISTRIBUTION TIME
Your Normal Retirement Date will occur when you reach the age of 59
1/2. Unless you elect otherwise, distribution of your account balance
generally will begin following the end of the Plan Year in which you either
reach your Normal Retirement Date or you stop working for the Employer,
whichever is later.
In certain circumstances, however, you may be required to begin
receiving distributions even though you are still working for the Employer.
If you are NOT a 5% owner, you are required to begin receiving required
minimum distributions ("RMDs") not later than April 1st of the calendar year
following the LATER of (i) the date you attain age 70 1/2, or (ii) the date
you retire from service for the Employer. If yOU are a 5% owner, however, you
are required to begin receiving RMDs not later than April 1st of the calendar
year following the year in which you attain age 70 1/2 -- regardless of
whether you
<PAGE>
are still employed by the Employer. In any event, you must continue receiving
RMDs by December 31st of each year following the year in which you attained
age 70 1/2 or retired.
If you do not receive your RMD for any year, you will be subject to
an IRS penalty equal to 50% of the amount you did not receive by the deadline.
OTHER DISTRIBUTION TIMES
As a general rule, you may elect an earlier time for distribution to
begin, provided that distributions do not begin before you have reached your
Normal Retirement Date, become disabled, or separated from service with the
Employer. (Note: in certain circumstances you may have earlier access to your
benefits under the Plan as described in "IN-SERVICE WITHDRAWALS" or "HARDSHIP
WITHDRAWALS", below.)
CONSENT TO DISTRIBUTION
If your Plan account balance (excluding your Rollover Account) is
$5,000 or less, the Plan Administrator may authorize distribution of your
Plan accounts in a single lump sum payment without your consent, once you
have reached a time when distributions can begin (E.G., your termination of
employment). If your account balance (excluding your Rollover Account) is
over $5,000, distributions cannot be made without your consent (except in the
case of required minimum distributions, described in "NORMAL DISTRIBUTION
TIME," above, or if necessary, to correct contributions made to your
account(s) in excess of certain limits imposed by the Internal Revenue Code).
FORMS OF DISTRIBUTIONS
NORMAL DISTRIBUTION FORM
Your vested account balance under the Plan will be distributed in the
form of a single lump sum payment unless it exceeds $5,000 and you request one
of the Optional Distribution Forms (described below).
OPTIONAL DISTRIBUTION FORMS
Instead of the Normal Distribution Form, described above, you may
elect to receive distribution of your vested account balance in one (or a
reasonable combination) of the following Optional Distribution Forms:
- Monthly installments over a period equal to the shorter of (i) 120
months or (ii) of your life expectancy (or the joint life
expectancies of you and your spouse);
- Installment payments in a fixed amount until the vested account
balance are exhausted.
<PAGE>
IN-SERVICE WITHDRAWALS
AGE 59 1/2
You may withdraw all or a portion of your vested account balance
once you have attained age 59 1/2, including the earnings, at any time,
provided you give at least 30 days written notice to the Plan Administrator.
ROLLOVER CONTRIBUTIONS
You may withdraw all or a portion of your Rollover Contributions, if
any, as well as any earnings on those contributions at any time, provided you
give at least 30 days written notice to the Plan Administrator.
EMPLOYER CONTRIBUTIONS
If you are still employed by the Employer, you may request an
in-service withdrawal from your Employer Profit Sharing Contributions Account
and Employer Matching Contributions Account, provided you are 100% vested in
those accounts and you are experiencing a financial hardship (see "HARDSHIP
WITHDRAWALS" below) even if you have not yet attained your Normal Retirement
Date.
SALARY REDUCTION CONTRIBUTIONS
If you are still employed by the Employer, you may request an
in-service withdrawal from your Salary Reduction Contribution Account (but
not any earnings), provided you are experiencing a financial hardship (see
"HARDSHIP WITHDRAWALS" below) even if you have not yet attained your Normal
Retirement Date.
HARDSHIP WITHDRAWALS
You are also eligible to receive an in-service withdrawal from your
account in the event of an immediate and heavy financial need resulting from
one or more of the following circumstances:
1. Certain medical expenses for you, your spouse, or any of your
dependents;
2. Purchase of your principal residence (this does not include mortgage
payments);
3. Payment of tuition and certain related expenses for the next twelve
months of post-secondary education for you, your spouse, your
children or other dependents; or
4. Payment to prevent your eviction from your principal residence or to
prevent foreclosure on the mortgage on
<PAGE>
your principal residence.
Hardship Withdrawals will be made in the form of a single, lump sum
payment.
Hardship Withdrawals may be taken from your Salary Reduction
Contributions, Employer Profit Sharing Contributions and Employer Matching
Contributions
In the case of Salary Reduction Contributions, a Hardship Withdrawal
may NOT include earnings on these contributions after December 31, 1988. In
the case of Employer Profit Sharing Contributions and/or Employer Matching
Contributions, a Hardship Withdrawal may include earnings (if any) on the
contributions, but you must be 100% vested in your Employer Profit Sharing
and/or Matching Contributions account(s) to receive a Hardship Withdrawal
from those accounts.
You must also satisfy the following conditions to receive a Hardship
Withdrawal:
1. You must have taken all other permissible distributions or
nontaxable loans from this Plan or any other plan of the
Employer.
2. You will not be permitted to make Salary Reduction Contributions
for twelve months after you receive a hardship distribution.
3. The Hardship Withdrawal may not exceed the amount of your
immediate and heavy financial need (but may also include amounts
necessary to pay any federal, state, or local income taxes or
penalties likely to result from the distribution).
4. For the year following the year in which you took the Hardship
Withdrawal, the maximum amount that you will be allowed to
contribute to the Plan as your Salary Reduction Contributions
will be the difference between (a) the limit on Salary Reduction
Contributions for that year ($7,000 as indexed for inflation;
$10,500 for 2000) and (b) the amount you contributed to the Plan
by Salary Reduction Contributions in the year you took the
hardship distribution.
WITHHOLDING ON DISTRIBUTIONS
Most distributions paid directly to you will be subject to a 20%
federal income tax withholding requirement. (Certain
<PAGE>
state income tax withholding obligations may also apply.) This requirement
cannot be waived. The withholding requirement may, however, be avoided under the
following circumstances:
1. If you receive substantially equal installment payments designed:
a) to be paid over a period of at least 10 years or
b) to be paid for the duration of your life (or life
expectancy) or the joint lives (or joint life
expectancies) of you and your beneficiary,
the 20% withholding requirement will not apply.
2. If all or a portion of the distribution is a "required minimum
distribution" under Section 401(a)(9) of the Internal Revenue
Code, the 20% withholding requirement will not apply to the
portion that is a required minimum distribution.
3. If your distribution is eligible for rollover treatment, you may
have the distribution directly rolled over into an IRA or
another qualified retirement plan (I.E., not paid to you) and
the distribution will not be subject to the 20% withholding.
Check with the Human Resources Department for further information on
these rules.
DISTRIBUTIONS OF BENEFITS UPON YOUR DEATH
PRE-RETIREMENT DEATH BENEFITS
If you are married and you die before distribution of your vested
account balance has begun, your vested account balance will be distributed to
your spouse, unless you designate an alternative Beneficiary (or
Beneficiaries) for all or a portion of your account. To designate a
Beneficiary (or Beneficiaries) other than your spouse, you must obtain your
spouse's written consent. If you are unmarried at the time of your death,
your vested account balance will be paid to your designated Beneficiary (or
Beneficiaries).
Distribution(s) to your spouse or Beneficiary (or Beneficiaries)
will be made in the form(s) elected by your spouse or each Beneficiary.
POST-RETIREMENT DEATH BENEFITS
If you die after the distribution of your vested account balance has
commenced, the remainder of the distributions will continue to be paid, in
the same manner, to your spouse or any Beneficiary (or Beneficiaries) you
properly designated before your death.
<PAGE>
6. MISCELLANEOUS
NONDISCRIMINATION AND OTHER TESTING
Each year the Employer is required to test the Plan for
nondiscrimination. The test is performed by comparing the average percentage
of Compensation contributed on behalf of the Highly Compensated Employees
with the average percentage of Compensation contributed on behalf of the
non-Highly Compensated Employees. The average percentage for the Highly
Compensated cannot exceed the average percentage for the non-Highly
Compensated by more than a certain amount prescribed by law.
If the Plan fails the nondiscrimination test, or any other test
required by the IRS, the Employer will be required to take steps, such as
returning some of the contributions made on behalf of certain Highly
Compensated Employees, to bring the Plan into compliance with the various
nondiscrimination and related rules. You will be informed if any
contributions need to be removed from the Plan and paid to you.
INVESTMENT OF THE TRUST FUND
All contributions made on your behalf are held in a Trust Fund, in a
separate account maintained in your name and invested by the Trustee. The
Trust Fund is maintained strictly for the benefit of Participants and their
Beneficiaries; the Trustee is required to act only in their interests. You
will make decisions with respect to the investment of the assets in your
particular account.
LOANS
Loans are permitted. Loans are made only from your account and are
subject to the nondiscriminatory terms and conditions prescribed by the
Administrator, as described in the loan policy.
QUALIFIED DOMESTIC RELATIONS ORDERS
While Federal law protects your Plan assets from creditors,
qualified domestic relations orders are an exception. A qualified domestic
relations order is a court order that gives an alternate payee (such as a
spouse, former spouse, or child) a right to part or all of your Plan assets.
Such an order can force payment of benefits while you are working even though
the Plan may otherwise prohibit distributions earlier than retirement,
termination, death or disability. The Plan Administrator will notify you if
the Plan receives a domestic relations order relating to you and must
determine, within a reasonable time, if the order is qualified. If you have
any questions about qualified domestic relations orders, you should contact
the Plan Administrator.
<PAGE>
TOP-HEAVY PLAN
For any Plan Year the Plan is determined to be Top-Heavy, the
Employer may be required to make additional contributions on behalf of the
non-Key Employees and/or to accelerate vesting.
AMENDMENT AND TERMINATION OF PLAN
The Employer intends to maintain the Plan indefinitely.
Nevertheless, the Employer does have the right to amend or terminate the Plan
at any time. In the event the Plan is ever amended or terminated, the Plan
contains the following provisions designed to protect your benefits: Once the
Employer has made a valid contribution to the Trust, the Employer cannot
recover it. Similarly, once you have a vested benefit, it cannot be taken
away. Finally, unless the law requires it, or the government gives special
permission, the amount in your account cannot be reduced and the Plan's
distribution options cannot be restricted.
Once you become a Participant in the Plan, you will maintain your
interest in all future Employer contributions regardless of whether the
Employer changes the Plan's eligibility and/or vesting requirements. If the
Plan's vesting schedule is changed, Participants with three (3) or more
Vesting Years (five (5) or more Vesting Years for Participants who have not
been credited with an Hour of Service in a Plan Year beginning after
12/31/88) may choose to keep the old vesting schedule for their accounts.
If the Plan is combined in any way with another plan, your benefit
under the combined plan will not be less than it would have been if the Plan
had terminated, instead of being combined with the other plan.
If the Plan terminates or the Employer completely discontinues
contributions, the Plan Administrator will instruct the Trustee as to whether
and how to distribute Participants' accounts.
The Employer has delegated a limited power to amend the Plan to
Scudder Investor Services, Inc.
ADMINISTRATION
The individual or entity whose name appears on page 28 will serve as
Plan Administrator. It is the Plan Administrator's job to keep lists of
Participants and their Beneficiaries, to process disbursement orders, to take
care of bookkeeping and recordkeeping, and to prepare reports for employees
and government agencies. The Plan Administrator will also have the authority
to decide all questions about the interpretation of Plan provisions and to
hold hearings on disputed claims for benefits.
<PAGE>
CLAIMS AND REVIEW PROCEDURE
The Plan Administrator will administer the Plan to provide benefits to
you as soon as you are entitled to receive them. The following procedure is,
however, available to you if you feel that you are entitled to a benefit you are
not receiving: MAKING A CLAIM You must make a claim to the Plan Administrator IN
WRITING unless the Plan Administrator agrees that this formality is not
required.
NOTICE OF REASON FOR DENIAL
If the Plan Administrator denies your claim to a benefit, you must
receive written notice of the denial within 60 days after the day you filed your
claim. This notice must give you the reasons for the denial and a description of
what your rights are for review of the denial.
REVIEW
You will have 60 days from the day you received a denial from the Plan
Administrator to make a written application for review. You may have a hearing
at that review session if you ask for it. If you request a hearing, you may have
a lawyer with you, you may examine the Plan documents, and you may submit your
own comments in writing.
The Plan Administrator must make a decision on the review within 60
days of your application, except that up to 60 more days may be taken if the
Plan Administrator finds that special circumstances exist, such as the need to
hold a hearing. You will receive the Plan Administrator's decision in writing,
including reasons for that decision.
"SPENDTHRIFT" PROVISIONS
Generally, the Plan does not allow you to pledge, give away or sell
your rights to your account. Except as expressly permitted under the Internal
Revenue Code (I.E., you default on a Plan loan, a portion of your benefits are
assigned pursuant to a qualified domestic relations order, contributions were
made to your account(s) in excess of certain limits, etc.), your account balance
may not be reduced.
TRUST FUND NOT INSURED
The funds in the Plan are not insured because insurance is not
available for this type of retirement plan. Pension
<PAGE>
insurance is available only for plans in which the actual dollar amount of the
benefits is known. In this Plan, the actual dollar amount of the contributions
varies from year to year, and the amount in your account depends on the
investment results in the Trust Fund. The value in dollars of your benefits will
therefore not be known until you are entitled to receive them. Consequently, the
Plan is not eligible for insurance.
INABILITY TO LOCATE PERSON TO RECEIVE PAYMENT, INCOMPETENT BENEFICIARY
If the person eligible to receive any benefit from the Plan is
unable to be located or identified, the Plan Administrator, in his/her
discretion, may direct the Trustee to: (1) forfeit and reallocate the benefit
to the remaining Participants, (2) retain the benefit in the Trust, or (3)
pay the benefit to a court pending judicial determination of who is entitled
to the benefit. If the benefit is forfeited and reallocated, however, the
Employer will be required to reinstate the benefit if the person eligible to
receive the benefit is later located or identified.
If the Plan Administrator decides that any person to whom a benefit
is payable is physically or mentally incapable of handling his or her
financial affairs, the Plan Administrator may direct the Trustee to make
payments that would normally be due to that individual, either to the
individual's legal representative or custodian, or to apply such payments
directly for the individual's support and maintenance.
SPECIAL RIGHTS UNDER ERISA
As a participant in the Plan, you are entitled to certain rights and
protection under ERISA (Employee Retirement Income Security Act of 1974). ERISA
provides that all participants will be entitled to:
(a) Examine without charge, at the Plan Administrator's office, all
Plan documents including insurance contracts and copies of all
documents filed by the Plan with the U.S. Department of Labor,
such as annual reports and Plan descriptions.
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Plan
Administrator may make a reasonable charge for the copies.
(c) Receive a summary of the Plan's annual financial report. The
Plan Administrator is required by law to furnish each
participant with a copy of this summary financial report.
<PAGE>
(d) 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 benefit, the
statement will tell you how many more years you have to work to
have a right to a benefit. You must request this statement in
writing. The Plan Administrator is not required to provide this
statement more than once a year, but must provide the statement
free of charge.
(e) 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
the Plan, the Plan Administrator and the Trustee, are called
"fiduciaries" of the Plan, and have a duty to act prudently and
in the interest of you and other Plan Participants and
Beneficiaries.
No one, including the fiduciaries, 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 benefit
or exercising your rights under ERISA. If your claim for a
pension benefit is denied in whole or in part, the Plan
Administrator must provide you with a written explanation of the
reason for the denial. You also have the right to have the Plan
Administrator review and reconsider your claim.
You can take the following steps to enforce the above rights
under ERISA:
1. If you request materials from the Plan Administrator and
do not receive them within 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 $100 a day until you receive the materials, unless the
materials were not sent because of reasons beyond the
control of the Plan Administrator.
2. 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.
<PAGE>
3. If the Plan fiduciaries misuse the Plan's money, or if you
are discriminated against for asserting your rights, you
may ask for 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 if, for example,
it finds your claim is frivolous.
If you have any questions about the Plan, you should contact the
Plan Administrator. If you have any questions about this statement or about
your rights under ERISA, you should contact the nearest Area Office of the
U.S. Labor-Management Services Administration, Department of Labor OR the
Division of Technical Assistance and Inquiries, Pension and Welfare Benefits
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210.
7. REFERENCES
NAME OF PLAN: NE Restaurant Company, Inc.
Savings and Investment Plan
PLAN NUMBER: ???
PLAN YEAR: The 12-month period
ending on the last day of
December.
NAME, ADDRESS AND PHONE NUMBER
OF EMPLOYER: NE Restaurant Company, Inc. 5
Clock Tower Place, Suite 200
Maynard, MA 01754 978.897.1400
EMPLOYER IDENTIFICATION NUMBER: 06-1311266
EMPLOYER'S FISCAL YEAR: The 12-month period ending on
the last day of December.
NAME AND ADDRESS OF PLAN ADMINISTRATOR: NE Restaurant Company, Inc. 5
Clock Tower Place, Suite 200
Maynard, MA 01754
NAME AND ADDRESS OF AGENT FOR
SERVICE OF LEGAL PROCESS: NE Restaurant Company, Inc. 5
Clock Tower Place, Suite 200
Maynard, MA 01754
NAME AND ADDRESS OF TRUSTEE: Scudder Trust Company
11 Northeastern Boulevard
Salem, NH 03079
<PAGE>
EXHIBIT 10.27
NE RESTAURANT COMPANY, INC.
EXECUTIVE SAVINGS AND INVESTMENT PLAN
-------------------------------------------
A SUMMARY OF PLAN TERMS
SEPTEMBER 2, 1999
A SUMMARY FOR OUR PARTICIPANTS
Here are the highlights of our Executive Savings and Investment Plan ("ESIP").
ELIGIBILITY: Only Executives who have been named by the Plan
Administrator may participate.
TAX BENEFIT: We designed ESIP so that Executives
would be able to elect tax-deferred savings
without the restrictions of the limits which
apply in our employees' 401(k) Plan. Amounts you
save will not be reported as taxable income to
you. Earnings on your investments will also not
be taxed. You pay tax eventually, of course, but
not until you are paid from ESIP.
WE CONTRIBUTE: To encourage you to save with ESIP,
we match 25% of your "matchable" savings
deposits. Savings deposits up to 6% of your base
compensation as a participant are "matchable."
The Board of Directors has the right to change
or suspend the match.
PAYMENT: You receive payment after you terminate
employment. Payments will normally be at a rate
equal to 40% of your final pay rate until you
have received all of the amount in your ESIP
Account.
The Plan provides for hardship distributions.
TRUSTEE: To ensure careful handling of our Executives'
money, we have appointed Scudder Trust Company
as Plan Trustee. If we change Trustees, a bank
or institution with Trust powers will serve.
INVESTMENT CHOICES: You may select from various investment choices
managed by Kemper-Scudder Funds.
Your choices will always include:
<PAGE>
-- at least one stock fund, made up mainly of
high quality common stocks, which may result in
higher returns but which is also accompanied by
a degree of risk, and
-- a balanced fund, which is a diversified fund
made up of stocks, bonds and short term
investments, and
-- a money market fund providing for safety of
principal and a money market rate of interest.
Read the prospectus for any fund before you
invest.
EFFECT OF COMPANY INSOLVENCY: We think it highly unlikely that we would ever
be insolvent. If this ever occurred, however,
money in ESIP would revert to the Company and
you would be a general creditor. IRS insists on
this rule for "Executive-only" Plans. It is the
price for the extra flexibility which ESIP
provides to our Executives.
SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
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TABLE OF CONTENTS OMITTED.
GENERAL INFORMATION.
Name of Plan: The Plan name is the NE RESTAURANT COMPANY, INC.
EXECUTIVE SAVINGS AND INVESTMENT PLAN.
Effective Date: This booklet describes the Plan, as in effect on
September 2, 1999.
Company: Our name and address is:
NE Restaurant Company, Inc.
5 Clocktower Place
Suite 200
Maynard, MA 01754
Tel No. (978) 897-1400
Fed ID No. 06-1311266
<PAGE>
As determined by the Board, employees of any
related company may be designated as
Participants.
Plan Administrator: A Committee designated by NE Restaurant Company,
Inc. is the Plan Administrator. Those persons
holding the offices of Vice President-Finance
and Vice President-Human Resources serve on the
Committee. Additional Committee members may be
added at the direction of the Board of
Directors.
Plan Year: The Plan Year is the calendar year. The first
Plan Year begins on September 2, 1999.
Trustee: The Company appoints the Trustee. The Trustee is
Scudder Trust Company. The Trustee may change in
the future consistent with the needs of the Plan
as determined by the Company. The Trustee must
always be a bank or an institution with Trust
powers.
Year of Service You are credited with a Year of Service for each
"annual period" in which you are credited with
1,000 or more hours of paid service. "Annual
periods" are measured from your employment date
and anniversaries of that date.
ELIGIBILITY FOR PARTICIPATION.
Executives at any Company location are eligible, but only if selected for
Participation by the Plan Administrator. The Plan Administrator reserves the
right to suspend participation of any Executive, with or without cause.
IF YOU CONTRIBUTE, YOU SAVE TAXES AND WILL ALSO QUALIFY FOR MATCHING COMPANY
CONTRIBUTIONS.
ESIP allows you to defer income taxes on amounts you elect to save.
ESIP election rules are a bit different than under the employee 401(k) plan:
a. LARGER DEFERRALS PERMITTED. The 401(k) rules limited deferrals to $10,000 or,
if less, the amount determined based on a complicated test. Under ESIP, you have
total flexibility to determine the amount which is right for you and your
family, subject to these limits:
<TABLE>
<CAPTION>
DEFERRAL ALLOWED 1999 LATER YEARS
<S> <C> <C>
Base salary 80% 40%
Bonus 100% 100%
</TABLE>
<PAGE>
b. TIMING OF ELECTION. Your ESIP election must be made before the Plan Year
starts and must remain in effect for the entire year without change. The Plan
Administrator provides a special form for this purpose. We recommend that you
return the election form at least two weeks before the start of the Plan Year so
that it will go into effect for the first salary check of the Plan Year.
c. ELECT BEFORE YOU PERFORM THE SERVICES. Your deferral applies to salary and
bonus earned for SERVICES DURING THE YEAR AFTER YOU MAKE THE ELECTION, not for
services during a previous year. For example, in December, 1999, you will make
your election for the year 2000 services, including bonuses you may receive in
2000 and 2001 for those services. ELECTIONS MAY NOT BE CHANGED DURING THE PLAN
YEAR.
d. PAYMENTS MAY NOT BE ROLLED OVER TO AN IRA. Because rollovers are not allowed
for executive plans, you must pay tax in the year when you receive your payment.
Because of this, we give you the right to keep your money in the Plan after you
retire. Section 0 describes the retirement payment choices in more detail.
e. IRS EARLY PAYMENT PENALTY TAXES DO NOT APPLY. When you receive payments from
this Executive Plan, you pay income taxes, of course. But there is no 10% early
payment penalty if you receive the money when you are less than age 59 & 1/2.
THE COMPANY MATCHING CONTRIBUTIONS.
25% MATCH. For each year in which you are a Participant, provided that you are
also employed on the last day of the year, we will match 25% of your "matchable"
savings. "Matchable" savings are amounts you save up to 6% of your base
compensation as a Participant in any payroll period. The Board reserves the
right to change or suspend the match.
EXAMPLE:
JACK X HAS BASE COMPENSATION OF $80,000 DURING A YEAR AND ELECTS TO
SAVE 6% OF THAT AMOUNT, OR $4,800. THE COMPANY MATCHING CONTRIBUTION
FOR THE YEAR IS 25% OF JACK'S SAVINGS, OR $1,200. IF JACK SAVED MORE
THAN 6% OF HIS BASE COMPENSATION, WE WOULD STILL CONTRIBUTE $1,200
BECAUSE OUR 25% MATCH DOES NOT APPLY TO SAVINGS WHICH ARE HIGHER THAN
6% OF COMPENSATION.
VESTING.
If you terminate employment, your Company Matching Contribution Account will be
forfeited to the extent you have not "vested."
You vest according to this schedule:
Retirement due to death or
permanent and total disability or age 65 100%
Other termination 25% per Year of Service
<PAGE>
PAYMENT RULES.
IRS does not allow Executives to select lump sum or installment
payments at the time of retirement, so we have designed a payment policy which
we think will meet the needs of most Executives.
1.) THE NORMAL CHOICE. Unless you choose otherwise, payments normally
will start shortly after you retire or terminate employment. You will be paid
annual payments equal to the LESSER of 40% of your final base pay rate or your
vested Plan balance. (The payment for the year you retire will be prorated based
on the number of non-working months in the year.)
EXAMPLE:
JACK X RETIRES ON FEBRUARY 28 WITH $200,000 IN HIS ACCOUNT. HIS BASE
COMPENSATION IS $120,000. IN HIS FIRST RETIREMENT YEAR, HE RECEIVES
$40,000, WHICH IS 40% X $120,000 X 10 /12. THE PAYOUT IN THE SECOND
YEAR IS $48,000, WHICH IS 40% X $120,000. PAYMENTS CONTINUE AT $48,000
PER YEAR UNTIL THE ACCOUNT IS DEPLETED.
2.) THE LUMP SUM CHOICE. At least 12 months before the payment starting
date, you may elect that all of your account be paid in a lump sum at retirement
even if the amount is substantially larger than the payment under the "normal
choice." This election requires the Plan Administrator's consent.
3.) THE DEFERRED CHOICE. If you do not want payments to start when you
retire, you must make a written election to that effect at least 3 months before
retirement and you should specify the year when you want payments to start (e.g.
the "later of retirement or my 62nd birthday").
YOUR INVESTMENT CHOICES.
The Trustee will keep separate record of your accounts in the Plan. You will
receive a report on the value of your accounts on a periodic basis.
You have investment choices under the Plan, and the Trustee will invest all
amounts AS YOU DIRECT. The Plan Administrator will provide you up-to-date
information (prepared by Kemper Scudder Funds) describing the investment
choices.
You may select the investment funds in which you want your account invested at
any time. Your election applies to all of your Plan accounts. For example, you
may select that 20% of your account be invested in each of 2 funds with 60% in a
third. Or you may select that all of your accounts be invested in just 1 fund.
It is your choice.
Kemper Scudder Funds provide a voice messaging service similar to our employee
401(k) Plan. The amount payable from your account will be calculated by a
professional recordkeeper.
Note: If you read the Plan document, you will note that the Plan reserves to the
Plan Administrator the right to designate investments. This is a tax law
requirement to keep you from being in taxable receipt of
<PAGE>
the money (causing premature taxation). It is highly unlikely that the Plan
Administrator would second-guess your investment selection, so be sure to make
your investment choices carefully.
HARDSHIP WITHDRAWALS.
Upon application to the Plan Administrator, you may receive a taxable withdrawal
of all or a portion of your Account to cover hardship expenses. Hardships
include such items as purchase of your home, tuition for children, and other
non-frivolous emergency-type expenditures as determined by the Plan
Administrator in its sole discretion. You must suspend participation for 12
months following a hardship withdrawal.
PRE-RETIREMENT DEATH BENEFITS.
If you die, your Account will be paid to the person, or persons, you choose. You
must execute an official Plan beneficiary form and deliver it to the Plan
Administrator in order that your choice be effective. Death benefits will be
paid in the same form (lump sum or installments) as would be paid to you if you
had retired on the day prior to your death.
AMENDMENT OR TERMINATION OF THE PLAN.
The Company has reserved the right, of course, to change the Plan or to stop it.
However, Trust fund money must be used for Participants and may not be returned
to the Company, except in the event of its insolvency.
EFFECT OF COMPANY INSOLVENCY.
In order for us to provide this special tax benefit to Executives, IRS requires
that the Trust contain a special provision which technically treats the Trust
fund as if it were still the property of the Company. The Plan and Trust
accordingly provides that if the Company were ever to be bankrupt or the subject
of judicial insolvency proceedings that the money would be returned to the
Company for the benefit of creditors. In that event, you would be an unsecured
creditor of the Company and would most likely lose a substantial portion, if not
all, of your ESIP benefits. In all other events, Plan money is solely for the
Participants and may not be used for any other Company purpose.
CLAIMS PROCEDURES.
Should you have a question on your Plan status in the case of termination or
some other significant event, you should ask for your Plan benefits in writing.
Our written answer will let you know if you are entitled to a benefit, the
amount of your benefit, and the approximate date of payment.
We hope there will always be agreement regarding your Plan account. However, if
there is a disagreement, you must follow the Plan's claims procedure or you may
forfeit certain legal rights to contest the decision.
If your request is denied, the Plan Administrator will provide you a written
response detailing the reasons
<PAGE>
for its decision. After receiving this decision, you have 90 days in which you
or your legal representative may file such additional exhibits or written
arguments with the Plan Administrator as you deem appropriate. Based upon these
materials, the Plan Administrator will issue a final written decision and, if
you still do not agree, you may take such additional legal action as you and
your attorney consider proper. Legal process may be served on the Trustee or on
Paul Hoagland, our Vice President-Finance. Mr. Hoagland may be contacted at the
Company address listed in Section 0.
However, the best way to avoid this type of problem is to make sure you
understand the Plan and the way it works at this time. Remember, if you have
questions, the Plan Administrator will assist you.
We have done our best to summarize the way the Plan works in this booklet.
However, if there is a conflict or uncertainty the actual Plan documents will
control.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR QUARTERLY PERIOD ENDED MARCH 29, 2000
</LEGEND>
<CIK> 0001061588
<NAME> NE RESTAURANT COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-2001
<PERIOD-START> DEC-30-1999
<PERIOD-END> MAR-29-2000
<CASH> 2,868
<SECURITIES> 0
<RECEIVABLES> 1,298
<ALLOWANCES> 0
<INVENTORY> 1,855
<CURRENT-ASSETS> 15,425
<PP&E> 149,278
<DEPRECIATION> 30,755
<TOTAL-ASSETS> 181,463
<CURRENT-LIABILITIES> 32,203
<BONDS> 100,000
0
0
<COMMON> 37
<OTHER-SE> 6,017
<TOTAL-LIABILITY-AND-EQUITY> 181,463
<SALES> 67,035
<TOTAL-REVENUES> 67,035
<CGS> 17,563
<TOTAL-COSTS> 65,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,674
<INCOME-PRETAX> (2,177)
<INCOME-TAX> (705)
<INCOME-CONTINUING> (1,472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,472)
<EPS-BASIC> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
