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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended January 2, 2000
Commission File Number: 333-71593
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CARROLS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 16-0958146
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 James Street Syracuse, New York 13203
(Address of principal executive (Zip Code)
office)
Registrant's telephone number, including area code: (315) 424-0513
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant: No voting stock is held by non-affiliates.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of March 24, 2000: 10.
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The Company uses a 52-53 week fiscal year ending on the Sunday closest to
December 31. All references herein to the fiscal years ended December 28,
1997, January 3, 1999 and January 2, 2000 will hereinafter be referred to as
the fiscal years ended December 31, 1997, 1998 and 1999, respectively.
PART I
This 1999 Annual Report on Form 10-K contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Those statements include statements regarding the intent,
belief or current expectations of the Registrant and its management team.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-
looking statements. Such risks and uncertainties include, among other things,
competitive conditions, economic and regulatory factors, general economic
conditions, fluctuations in commodity prices, availability of restaurant
supply and distribution of product, liquidity of major distributors, labor
costs, the ability of the Registrant to manage its growth and successfully
implement its business strategy and other risks and uncertainties that are
discussed herein.
Item 1. Business
Overview
Who We Are
We are an operator of quick-service restaurants. We are one of the largest
Burger King(R) franchisees in the world and have operated Burger King
restaurants since 1976 and Pollo Tropical restaurants since July 1998. As of
December 31, 1999, we operated 352 Burger King restaurants located in 13
Northeastern, Midwestern and Southeastern states. We also own and operate the
Pollo Tropical(R) restaurant chain which at December 31, 1999 included 45
company owned restaurants in Florida and 23 franchised restaurants primarily
located in Puerto Rico. Over the last five years, we expanded our operations
through the acquisition and construction of restaurants while also enhancing
the quality of operations and the competitive position and financial
performance of our existing restaurants.
As a result of our growth strategy, we increased the total number of Burger
King restaurants we operate by over 60% from 1995 to 1999. In July 1998, we
completed our purchase of Pollo Tropical for a cash purchase price of
approximately $95 million. Pollo Tropical is a regional quick-service
restaurant chain featuring grilled marinated chicken and authentic "made from
scratch" side dishes. From fiscal 1995 to fiscal 1999, we grew our annual
revenues from $226.3 million to $456.5 million. See Note 6 "Summarized
Financial Information of Certain Subsidiaries" in Item 14.
The Burger King System
Burger King is the second largest quick-service hamburger restaurant chain
in the world, with approximately 10,900 restaurants located throughout the
U.S. and in 57 foreign countries. In fiscal 1999, BKC reported worldwide sales
of approximately $10.9 billion including $8.2 billion from its restaurants in
the U.S. Burger King restaurants are quick-service restaurants of distinctive
design which feature flame-broiled hamburgers and serve several widely known,
trademarked products, the most popular being the WHOPPER(R) sandwich. Burger
King restaurants are generally located in high traffic areas throughout the
U.S. We believe that the primary competitive advantages of Burger King
restaurants are:
. convenience of location;
. speed of service;
. quality; and
. price.
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Pollo Tropical
We operate and franchise Pollo Tropical quick-service restaurants featuring
fresh grilled chicken marinated in a proprietary blend of tropical fruit
juices and spices and authentic "made from scratch" side dishes. The menu
emphasizes freshness and quality, with a focus on flavorful chicken served
"hot off the grill." Pollo Tropical restaurants combine high quality,
distinctive menu items and an inviting tropical setting with the convenience
and value of quick-service restaurants.
Pollo Tropical opened its first company-owned restaurant in 1988 in Miami
and its first international franchised restaurant in 1995 in Puerto Rico. As
of December 31, 1999, we owned and operated 45 Pollo Tropical restaurants, all
located in south and central Florida, and we franchise 22 Pollo Tropical
restaurants located in Puerto Rico and Ecuador and one in Miami. For the
fiscal year ended December 31, 1999, Pollo Tropical's average restaurant has
sales of approximately $2 million, which we believe is among the highest in
the quick-service restaurant industry.
Our acquisition of Pollo Tropical has allowed us to:
. broaden our opportunities to build additional restaurants;
. expand our geographic presence;
. diversify our revenue base;
. increase our cash flow; and
. enhance our operating margins.
The Industry
The quick-service restaurant industry, which includes hamburgers, pizza,
chicken, various types of sandwiches and Mexican and other ethnic foods, has
experienced consistent growth. The National Restaurant Association estimates
that sales at quick-service restaurants will reach approximately $114.7
billion in 2000, compared with approximately $61.4 billion in 1988.
This growth in the quick-service restaurant industry reflects consumers'
increasing desire for a convenient, reasonably priced restaurant experience.
In addition, consumer need for meals and snacks prepared outside of the home
has increased as a result of the greater numbers of working women and single
parent families. According to the National Restaurant Association, the
percentage of the average family's food budget spent on meals consumed "away
from home" will have grown from approximately 25% of the food budget in 1955
to a projected 44% in 1999.
Competitive Strengths
We attribute our success in the quick-service restaurant industry to the
following competitive strengths:
One of the Largest Burger King Franchisees. We are one of the largest Burger
King franchisees in the world. We believe that our leadership position,
together with our experienced management team, effective management
information systems, an extensive infrastructure and a proven track record for
integrating acquisitions and new restaurants, provide us with attractive
opportunities to build and acquire additional restaurants. In addition, we
believe that these factors enable us to enhance restaurant margins and overall
performance and allow us to operate more efficiently than other Burger King
franchisees.
Strong Brand Names. Since the formation of BKC in 1954, the Burger King
brand has become one of the most recognized brands in the restaurant industry.
BKC spends between 4% and 5% of total system sales on advertising per year
(approximately $470 million in 1998 and approximately $1.8 billion over the
past five years). The strong Burger King brand, coupled with the quality and
value of the food and convenience of its restaurants, has provided the Burger
King system with consistent growth.
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Pollo Tropical provides us with one of the most recognized quick-service
restaurant brands in Pollo Tropical's core markets of south and central
Florida. We believe that the following factors have led to the success of the
Pollo Tropical concept:
. strong brand awareness in Pollo Tropical's markets;
. high frequency of visits and loyalty among our Hispanic customers; and
. positioning of our menu to capitalize on the growing consumer preference
for both healthier and ethnic foods.
Stable Cash Flows. We believe that the stability of our operating cash flow
is due to the proven success of our Burger King and Pollo Tropical restaurant
concepts and our consistent focus on restaurant operations. During the past
five years, our restaurant level EBITDA (EBITDA before general and
administrative expenses) margins for our Burger King restaurants ranged
between 14.5% and 18.2% and averaged 16.2%. In addition, over the same period,
restaurant level EBITDA margins for Pollo Tropical restaurants has ranged
between 19.4% and 25.8% and averaged 23.7%. Aggregate cash flow from
operations has increased from $16.7 million in 1995 to $38.2 million in 1999
and has averaged $22.5 million over this five year period. We believe that the
strength of our cash flow provides us with liquidity to pursue our growth
strategy.
Diversified Locations and Restaurant Concepts. Over the past five years, we
have increased the number of Burger King restaurants we own by over 60% and we
have increased our geographic presence from nine states to 13 states. Our
acquisition of Pollo Tropical further expanded our geographic presence through
the location of Pollo Tropical restaurants in Florida, the Caribbean and
Central and South America. We believe that this geographic expansion and
continual growth in restaurants enables us to capitalize on a region that has
a rapidly growing population and to further reduce our dependence on the
economic performance of any one particular region or restaurant concept.
Experienced Management Team with a Significant Equity Stake. Our senior
management team, headed by Chairman and Chief Executive Officer Alan Vituli
and President and Chief Operating Officer Daniel T. Accordino, has a long and
successful history of developing, acquiring and operating quick-service
restaurants. Under their leadership and direction, we have become one of the
world's largest Burger King franchisees. Mr. Accordino leads a team of five
regional operating directors who have an average of 25 years of restaurant
industry experience and 47 district managers who have an average of 17 years
of restaurant management experience in the Burger King system. In addition,
Nicholas A. Castaldo, President and Chief Operating Officer of our Pollo
Tropical Division has over 19 years in the restaurant industry. Our management
owns (on a fully diluted basis) approximately 12% of the voting common stock
of Carrols Holdings, which owns 100% of our stock. Our regional and district
managers also hold options to acquire equity in Carrols Holdings.
Business Strategy
Our business strategy is to continue to increase revenues and cash flow
through the construction of new restaurants, acquisitions, franchising and
increasing operating efficiencies. Based on our historical performance, we
believe that our business strategy represents a low-risk growth plan. Our
strategy is based on the following components:
Leverage Brand Names. We realize significant benefits as a Burger King
franchisee and the owner of the Pollo Tropical restaurant business. These
benefits are the result of the following:
. widespread recognition of the Burger King brand;
. the size and penetration of BKC's advertising;
. BKC's management of the Burger King brand, including new product
development; and
. strong recognition of the Pollo Tropical brand in its core markets.
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We believe that the Burger King and Pollo Tropical brands provide
opportunities to expand our operations both within and outside our existing
geographic markets.
Develop Additional Restaurants in Existing Markets. We believe that our
existing markets will continue to provide opportunities for the development of
new restaurants. We look to develop restaurants in those of our markets that
we believe are underpenetrated and where the demographic characteristics are
favorable for the development of new restaurants. Our own staff of real estate
and construction professionals conduct our new restaurant development. Before
developing a new restaurant, we conduct an extensive site selection and
evaluation process which includes in-depth demographic, market and financial
analysis. By selectively increasing the number of restaurants we operate in a
particular market, we can effectively leverage our management, corporate
infrastructure and local marketing while increasing brand awareness.
Selectively Acquire Burger King Restaurants. The Burger King system is
highly fragmented in the U.S., with approximately 7,700 Burger King
restaurants being operated by approximately 1,600 franchisees. We expect to
continue to be a buyer of Burger King restaurants and we believe that
opportunities for selective acquisitions will continue in both existing and
new geographic markets as smaller franchisees seek liquidity through the sale
of their restaurants. As one of the largest Burger King franchisees with a
demonstrated ability to effectively integrate acquisitions, we believe that we
are better positioned to capitalize on potential acquisitions than many other
Burger King franchisees. We believe that by acquiring additional Burger King
restaurants, we can achieve operating efficiencies from our ability to improve
controls over restaurant food costs, more efficiently utilize labor, and
achieve economies of scale by leveraging our corporate infrastructure.
Achieve Operating Efficiencies. We maintain a disciplined commitment to
increasing the profitability of our existing restaurants. Our large base of
restaurants, centralized management structure and management information
systems enable us to optimize operating efficiencies for our new and existing
restaurants. We are able to control restaurant and corporate level costs,
capture economies of scale by leveraging our existing corporate infrastructure
and use our sophisticated management information and point-of-sale systems to
more efficiently manage our restaurant operations and to ensure consistent
application of operating controls. Our size enables us to realize benefits
with improved bargaining power for purchasing and cost management activities.
We believe these factors provide the basis for increased unit and company
profitability.
Consistently Provide Superior Customer Satisfaction. Our operations are
focused on achieving a high level of customer satisfaction through quick,
accurate and high-quality customer service. We and BKC have uniform operating
standards and specifications relating to the following:
. quality;
. preparation and selection of menu items;
. maintenance and cleanliness; and
. employee conduct.
We closely supervise the operation of all of our restaurants to help ensure
that standards and policies are followed and that product quality, customer
service and cleanliness of the restaurants are maintained at high levels.
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Overview of Restaurant Concepts
Burger King Restaurants
"Have It Your Way"(R) service, flame-broiling, generous portions and
competitive prices characterize the Burger King system marketing strategy.
Burger King restaurants feature flame-broiled hamburgers, the most popular of
which is the WHOPPER(R) sandwich. The WHOPPER is a large, flame-broiled
hamburger on a toasted bun garnished with a combination of mayonnaise, lettuce,
onions, pickles and tomatoes. The basic menu of all Burger King restaurants
consists of hamburgers, cheeseburgers, chicken and fish sandwiches, breakfast
items, french fried potatoes, salads, shakes, desserts, soft drinks, milk and
coffee. In addition, promotional menu items are introduced periodically for
limited periods. BKC continually seeks to develop new products as it endeavors
to enhance the menu and service of Burger King restaurants.
Our Burger King restaurants are typically open seven days per week with
minimum operating hours from 6:00 AM to 11:00 PM. Burger King restaurants are
quick-service restaurants of distinctive design and are generally located in
high-traffic areas throughout the U.S. We believe that the primary competitive
advantages of Burger King restaurants are:
. convenience of location;
. quality;
. price; and
. speed of service.
Burger King restaurants appeal to a broad spectrum of consumers, with multiple
day-part meal segments that appeal to different groups of consumers.
Our Burger King restaurants consist of one of several building types with
various seating capacities. BKC's traditional restaurant contains approximately
2,800 to 3,200 square feet with seating capacity for 90 to 100 customers, has
drive-thru service windows, and has adjacent parking areas. At December 31,
1999, 334 of our 352 Burger King restaurants were free-standing.
Pollo Tropical Restaurants
Pollo Tropical restaurants combine high quality, distinctive taste and an
inviting tropical setting with the convenience and value pricing of quick-
service restaurants. Pollo Tropical restaurants offer a unique selection of
food items reflecting tropical and Caribbean influences and feature grilled
fresh chicken marinated in a proprietary blend of tropical fruit juices and
spices. Chicken is grilled in view of customers on large, custom, open-flame
grills. Pollo Tropical broadened its selection in 1996 by adding "island" pork
to the menu, and in 1997 by adding a line of "TropiChops(R)," a bowl containing
rice, black beans, chicken or pork and other ingredients at an attractive price
point to the menu. In 1998, grilled shrimp was added to the menu. We also
feature an array of distinctive and popular side dishes, including black beans
and rice, yucatan fries and sweet plantains, as well as more traditional fare
such as french fries, corn, and tossed and caesar salads. We also offer freshly
prepared tropical desserts, such as flan and tres leches.
Our Pollo Tropical restaurants incorporate high ceilings, large windows,
tropical plants, light colored woods, decorative tiles, a visually distinctive
exterior entrance tower, lush landscaping and other signature architectural
features, all designed to create an airy, inviting and tropical atmosphere. We
design our restaurants to conveniently serve a high volume of customer traffic
while retaining an inviting, casual atmosphere.
Our Pollo Tropical restaurants are open for lunch and dinner seven days per
week from 11:00 AM to 10:00 PM (11:00 PM on Friday and Saturday) and offer sit-
down dining, counter take-out and drive-thru service to accommodate the varied
schedules of families, business people, students and other time-sensitive
individuals. Our menu offers a variety of portion sizes to accommodate a single
customer, family or large group. Pollo Tropical restaurants also offer an
economical catering menu, with special prices and portions to serve 25 to 500
persons.
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Our Pollo Tropical restaurants typically provide seating for 80 to 100
customers and provide drive-thru service. All of our Pollo Tropical
restaurants are free-standing buildings except for three end-cap locations in
strip shopping centers and one street-level storefront in an office building.
Our current prototypical free-standing Pollo Tropical restaurant ranges
between 2,800 and 3,200 square feet in size.
Restaurant Economics
Burger King Restaurants
For fiscal 1999, our Burger King restaurants generated average sales of
approximately $1,082,000 and average restaurant level EBITDA of $157,000.
Drive-thru sales contributed 56.3% of restaurant sales. In all but 18
locations, which are primarily in malls, our Burger King restaurants have a
drive-thru window. Percentages of total sales by day part are as follows:
<TABLE>
<S> <C>
Breakfast........................................................ 14.7%
Lunch............................................................ 33.3%
Dinner........................................................... 26.9%
Late Afternoon & Late Night...................................... Remainder
</TABLE>
The average sales transaction was $3.88 in 1999.
The cost of the franchise fee, equipment, seating, signage and other
interior costs of a standard new Burger King restaurant is approximately
$265,000 (excluding the cost of the land, building, and site improvements).
The cost of land generally ranges from $200,000 to $500,000. The cost of
building and site improvements generally ranges from $500,000 to $550,000. We
typically lease the building and land components of our restaurants.
Pollo Tropical Restaurants
For fiscal 1999, our Pollo Tropical restaurants generated average sales of
approximately $1,952,000 and average restaurant level EBITDA of $470,000.
Pollo Tropical restaurant sales are well balanced by method of service and by
day part. For 1999, drive-thru sales contributed 36.6% of restaurant sales and
take-out sales accounted for 23.2% of total sales. Percentages of total sales
by day part are as follows:
<TABLE>
<S> <C>
Lunch................................................................ 46.8%
Dinner............................................................... 53.2%
</TABLE>
The average sales transaction was $7.70 in 1999.
The cost of equipment, seating signage and other interior costs of a
standard new Pollo Tropical restaurant is approximately $240,000 (excluding
the cost of the land, building, and site improvements). The cost of land
generally ranges from $450,000 to $700,000. The cost of building and site
improvements generally ranges from $550,000 to $650,000. We typically lease
the real estate associated with our Pollo Tropical restaurants.
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Restaurant Locations
Burger King
The following table sets forth the locations of the 352 Burger King
restaurants in our system at December 31, 1999.
<TABLE>
<CAPTION>
Total
State Restaurants
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<S> <C>
Connecticut.................................................... 1
Indiana........................................................ 5
Kentucky....................................................... 10
Maine.......................................................... 4
Massachusetts.................................................. 2
Michigan....................................................... 26
New Jersey..................................................... 2
New York....................................................... 155
North Carolina................................................. 38
Ohio........................................................... 73
Pennsylvania................................................... 13
South Carolina................................................. 22
Vermont........................................................ 1
---
Total........................................................ 352
===
</TABLE>
Pollo Tropical
As of December 31, 1999, we owned and operated 45 Pollo Tropical
restaurants, all located in Florida. In addition, of our 23 franchised Pollo
Tropical restaurants, 19 are located in Puerto Rico, 3 are located in Ecuador
and one is in Miami.
Operations
Management Structure
We conduct substantially all of our executive management, finance, marketing
and operations support functions from either our corporate headquarters in
Syracuse, New York or our Pollo Tropical headquarters in Miami, Florida. With
respect to our Burger King operations, we currently have five regional
directors with an average of 25 years of restaurant industry experience, three
of whom are vice presidents. Each of our regional directors are responsible
for the operations of our Burger King restaurants in their assigned region.
Four of our regional directors have been employed by us for over 20 years.
Forty-seven district supervisors who have an average of 17 years of restaurant
management experience in the Burger King system support the regional
directors. Each district supervisor is responsible for the direct oversight of
the day-to-day operations of an average of seven restaurants. The management
structure for Pollo Tropical consists of a Director of Operations who is
supported by 5 District Supervisors. Typically, district supervisors have
previously served as restaurant managers at one of our restaurants. Both
regional directors and district supervisors are compensated with a fixed
salary plus an incentive bonus based upon the performance of the restaurants
under their supervision. Typically, our restaurants are staffed with hourly
employees who are supervised by a salaried manager and two or three salaried
assistant managers.
Training
We maintain a comprehensive training and development program for all of our
personnel and provide both classroom and in-restaurant training for our
salaried and hourly personnel. This program emphasizes system-wide operating
procedures, food preparation methods and customer service standards for each
of the concepts. In addition, BKC's training and development programs are also
available to us.
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Management Information Systems
We believe that our management information systems, which are more
sophisticated than those typically utilized by smaller Burger King franchisees
and other small quick-service restaurant operators, provide us with the
ability to more efficiently manage our restaurants and to ensure consistent
application of operating controls throughout the chain. We also believe that
our size affords us the ability to maintain an in-house staff of information
and restaurant systems professionals dedicated to continuously enhancing our
existing systems. These capabilities also allow us to quickly integrate newly
acquired restaurants and to leverage our investments in information technology
over a large base of restaurants.
Our Burger King restaurants employ state-of-the-art, touch-screen point-of-
sale (POS) systems from Micros Systems, Inc. that are designed to facilitate
accuracy and speed of order-taking. These systems are user-friendly, require
limited cashier training and improve speed-of-service and order accuracy
through the use of conversational order-taking techniques. The POS systems are
integrated with PC-based applications at the restaurant that are designed to
facilitate financial and management control of our restaurant operations.
Our systems provide daily tracking and reporting of traffic counts, menu
item sales, labor and food data, and other key operating information for each
restaurant. We have the ability to electronically communicate with our Burger
King restaurants on a daily basis enabling us to collect this information for
use in our corporate application and decision support systems. Our
headquarters house a client/server based PeopleSoft ERP system that centrally
supports all of our corporate accounting, information and reporting systems.
We also operate a 24-hour, 7-day help desk at our headquarters enabling us to
provide systems and operational support to our restaurant operations as
required. Among other things, our systems provide us with the ability to:
. monitor labor utilization and sales trends on a real-time basis at each
restaurant enabling the store manager to effectively manage to corporate
established labor standards on a timely basis;
. minimize shrinkage using restaurant-level inventory management and
centralized standard costing systems;
. analyze sales and product mix data to help restaurant management
personnel forecast production levels;
. systematically communicate payroll transactions and human resource data
to our corporate office for efficient centralized management of labor
costing and payroll processing;
. employ centralized control over price, menu and inventory management
activities at the restaurant utilizing the remote access capabilities of
our systems;
. take advantage of electronic commerce including our ability to place
orders with suppliers and to integrate detailed invoice, receiving and
product data with our inventory and accounting systems; and,
. provide analyses, reporting and tools to enable all levels of management
to review a wide-range of financial and operating data.
Information from our systems is available daily to the restaurant manager,
who is expected to react quickly to trends or situations in his or her
restaurant. Our district supervisors also receive daily information for all
restaurants under their control and have access to key operating data on a
remote basis using laptop computers. Each management level, from the
restaurant manager through senior management, monitors key restaurant
performance indicators.
The Micros POS systems are currently implemented in over 60% of our Burger
Kings, with the remainder scheduled to be installed by the end of our 2000
second quarter. The balance of POS systems being replaced are also integrated
with our restaurant-level application systems and with our corporate office.
Our Pollo Tropical restaurants utilize in-store computerized point-of-sale
systems to control cash, collect customer and sales statistics, and to track
labor and other restaurant data. We believe that we have the ability to
continue improving the operating efficiencies of the Pollo Tropical
restaurants as we deploy systems and technology with capabilities similar to
those in our Burger King restaurants. Since our acquisition of Pollo Tropical
in 1998, we have begun to establish the foundation for these systems by
installing new versions of POS
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software, implementing recipe files to capture inventory costing data, and by
the initial introduction of PC-based applications for the restaurant managers.
Site Selection
We believe that the location of our restaurants is a critical component of
each restaurant's success. We evaluate potential new development sites based
upon accessibility, visibility, costs, surrounding traffic patterns,
competition and demographic characteristics. Our senior management determines
the acceptability of all acquisition and new development sites, based upon
analyses prepared by our real estate professionals and operations personnel.
Burger King Franchise Agreements
Each of our Burger King restaurants operates under a separate franchise
agreement. Our franchise agreements with BKC require, among other things, that
all restaurants be of standardized design and be operated in a prescribed
manner, including utilization of the standard Burger King menu. Our franchise
agreements with BKC generally provide for an initial term of 20 years and
currently have an initial fee of $40,000 and is increasing to $50,000 on July
1, 2000. BKC may grant a successor franchise agreement (renewal) for an
additional 20-year term, provided the restaurant meets the then current BKC
operating standards. Our franchise agreements with BKC are non-cancelable
except for failure to abide by their terms. We are not in default under our
current franchise agreement with BKC. The successor BKC franchise agreement fee
is currently $40,000 and is increasing to $50,000 on July 1, 2000.
In order to obtain a successor franchise agreement with BKC, a franchisee is
typically required to make capital improvements to the Burger King restaurant
to bring the Burger King restaurant up to BKC's then-current design standards.
The required capital improvements will vary widely depending upon the magnitude
of the required changes and the degree to which we have made interim changes to
the restaurant. Our average remodeling cost, for the 95 restaurants we have
remodeled in the past three years, was approximately $230,000. We have 12
franchise agreements expiring in 2000, nine franchise agreements expiring in
2001 and 12 franchise agreements expiring in 2002.
We believe that we enjoy a good relationship with BKC and that we will
satisfy BKC's normal successor franchise agreement policies. Accordingly, we
believe that successor franchise agreements with BKC will be granted on a
timely basis by BKC at the expiration of our existing franchise agreements with
BKC. Historically, BKC has granted each of our requests for a successor
franchise agreement for our restaurants. We cannot assure you, however, that
BKC will continue to grant each of our requests for successor franchise
agreements.
In addition to the initial franchise fee, we currently pay a monthly royalty
of 3 1/2% of the gross revenues from our Burger King restaurants to BKC. We
currently also contribute 4% of gross revenues from our Burger King restaurants
to fund BKC's national and regional advertising. BKC engages in substantial
national advertising and promotional activities and other efforts to maintain
and enhance the Burger King brand. We supplement BKC's marketing with local
advertising and promotional campaigns. See "Business--Advertising and
Promotion."
Our franchise agreements with BKC do not give us exclusive rights to operate
a Burger King restaurant in any defined territory. We believe that BKC
generally seeks to ensure that newly granted franchises do not materially
adversely affect the operations of existing Burger King restaurants. There is
no assurance that a franchise given by BKC to a third party will not adversely
effect any single Burger King restaurant that we operate.
We are required to obtain BKC's consent before we acquire or develop new
Burger King restaurants. BKC also has the right of first refusal to purchase
any Burger King restaurant which is the subject of a contract of sale. BKC has
granted its approval to all of our historic acquisitions of Burger King
restaurants, except for two instances when it exercised its right of first
refusal.
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Fee Changes and Early Successor Program
Beginning July 1, 2000, BKC will increase its royalty and franchise fees for
most new restaurants. At that time, the franchise fee for new restaurants will
increase from $40,000 to $50,000 for a 20-year agreement and the royalty rate
will increase from 3 1/2% of sales to 4 1/2% of sales, after a transitional
period. For franchise agreements entered into during the transitional period,
the royalty rate will be 4% of sales for the first 10 years and 4 1/2% of sales
for the balance of the term.
For new restaurants, the transitional period will be from July 1, 2000
through June 30, 2003. As of July 1, 2003, the royalty rate will become 4 1/2%
of sales for the full term of new restaurant franchise agreements. For renewals
of existing franchise agreements, the transitional period will be from July 1,
2000 through June 30, 2001. As of July 1, 2001, existing restaurants that renew
their franchise agreements will pay a royalty of 4 1/2% of sales for the full
term of the renewed agreement. The advertising contribution will remain at 4%
of sales. The royalty rates under existing franchise agreements are not
affected by these changes until the time of renewal.
BKC is also offering a voluntary program to incent franchisees to accelerate
the renewal of their franchise agreements. Franchisees that elect to
participate in the Early Successor Incentive Program will be required to make
capital improvements in the restaurants to bring them up to BKC's current
design image. Franchise agreements entered into under this program will have
special provisions regarding the royalty rates including a reduction in the
royalty for a period of time.
For commitments made prior to June 30, 2000 to renew franchise agreements
under BKC's Fiscal 2000 early successor program, the renewal franchise fee will
remain at $40,000. The royalty rate will remain at 3 1/2% through March 31,
2002, at which time it will then be reduced to 2 3/4% for the following five-
year period. The royalty rate reverts back to 3 1/2% effective April 1, 2007
for the remainder of any of the initial franchise term, and then increases to 4
1/2% for the balance of the new agreement. The renewal franchise fees under
this program must be paid by June 30, 2000 (less credits for the unexpired term
of the existing franchise agreement) and the capital improvements required in
conjunction with the successor franchise renewal under this program must be
completed by December 31, 2001.
For commitments made between July 1, 2000 and June 30, 2001 to renew
franchise agreements under BKC's Fiscal 2001 early successor program, the
renewal franchise fee will increase to $50,000. The royalty rate will remain at
3 1/2% through September 30, 2002, at which time it will be reduced to 3% for a
three-year period. The royalty rate reverts back to 3 1/2% effective October 1,
2005 for the remainder of any of the initial franchise term, and then increases
to 4 1/2% for the balance of the new agreement. The capital improvements
required in conjunction with the successor franchise renewal under this program
must be completed by June 30, 2002.
After evaluating the applicable royalty reductions and the acceleration of
the required capital improvements, we have elected to renew approximately 60
franchise agreements under BKC's fiscal 2000 early successor program. The
capital investments and franchise fees related to these renewals are estimated
to be approximately $13 to $14 million which will be invested in 2000 and 2001.
Transformation Initiatives
BKC has initiatives underway to encourage and facilitate franchisees'
investment in certain upgrades to their restaurants. These transformation
initiatives include the installation of new signage with the new Burger King
logos, and where necessary, expenditures for painting, parking lot maintenance
and landscaping. In addition, BKC is in the process of approving a drive-thru
equipment package. BKC is also evaluating potential changes to the kitchen
including a new flexible broiler capable of cooking at different speeds and
temperatures facilitating the preparation of a wider variety of menu items. By
an amendment to our franchise agreement, we have committed:
. to install the new signage in substantially all of our restaurants by
December 31, 2001;
. to "spruce up" our restaurants to the extent necessary including
painting, parking lot sealing/striping, and landscaping by September 30,
2000;
. to install the drive-thru package, once mandated for use by BKC, no later
than December 31, 2001; and,
. to roll-out and install the new kitchen initiatives if and when approved
and mandated by BKC.
11
<PAGE>
BKC has also arranged for the Coca-Cola Company and Dr. Pepper/Seven-Up,
Inc. to make funds available to franchisees to be used in connection with the
transformation initiatives. By agreeing to make the investments associated
with the transformation initiatives, we will be entitled to receive $56,000
per restaurant, or approximately $20.0 million in the aggregate, from the fund
established by Coca-Cola and Dr. Pepper. The funds are to be received in two
installments of $28,000 per restaurant payable March 15, 2000 and September
30, 2000 based on the number of eligible stores that we are operating on those
dates. We received the first installment, which totaled $9.9 million, in March
2000.
We are presently evaluating, in detail, the nature, timing and amount of the
required capital investments. Other than the changes to the kitchen, which
have not been finalized, we anticipate that we will make these investments
over the course of the next two years.
Pollo Tropical Franchise Program
As part of our growth strategy for our Pollo Tropical restaurants, we intend
to complement the development of additional restaurants owned by us in the
U.S. with a multi-unit area development franchise program as a means of
accelerating our penetration into international markets. We offer area
development agreements to qualified and experienced area developers in the
Caribbean and Central and South American markets who are committed to the
development of multiple units in such areas on an expedited basis.
Our standard franchise agreement under which we franchise Pollo Tropical
restaurants to independent restaurant operators has a 15-year term (with one
15-year renewal option) and provides for an initial payment by the franchisee
of a portion of all franchise fees upon signing of the area development and
franchise agreements, with the remainder due before the opening of the
franchisee's Pollo Tropical restaurants. The franchisee also pays a continuing
royalty, based upon gross sales. The terms and conditions of these franchise
agreements will vary depending upon a number of factors, including:
. the experience and resources of the franchisee;
. the size and density of the covered territory;
. the number of units to be developed;
. the schedule for development;
. capital requirements; and
. fee and royalty arrangements.
All franchisees are required to operate their restaurants in compliance with
certain methods, standards and specifications developed by Pollo Tropical
regarding such matters as menu items, recipes, food preparation, materials,
supplies, services, fixtures, furnishings, decor and signs, although the
franchisee has discretion to determine the prices to be charged to customers.
In addition, all franchisees are required to purchase substantially all food,
ingredients, supplies and materials from suppliers approved by us.
Advertising and Promotion
The efficiency and quality of advertising and promotional programs can
significantly affect quick-service restaurant businesses. We believe that one
of the major advantages of being a Burger King franchisee is the value of the
extensive regional and national advertising and promotional programs conducted
by BKC. In addition to the benefits derived from BKC's advertising spending,
which according to information published by BKC was approximately $470 million
for 1998, we supplement BKC's advertising and promotional activities with
local advertising and promotions, including the purchase of additional
television, radio and print advertising. Our concentration of restaurants in
many of our markets permits us to leverage advertising in those markets. We
also utilize promotional programs, such as combination value meals and
discounted prices, targeted to our customers, in order to create a flexible
and directed marketing program.
We are generally required to contribute 4% of gross revenues from restaurant
operations to an advertising fund utilized by BKC for its advertising,
promotional programs and public relations activities. BKC's advertising
12
<PAGE>
programs consist of national campaigns supplemented by local advertising.
BKC's advertising campaigns are generally carried on television, radio and in
circulated print media (national and regional newspapers and magazines).
We believe that brand awareness for our Pollo Tropical restaurants is
extremely high because of the concentration of our restaurants in the south
Florida markets. Pollo Tropical restaurants are clustered in target markets in
order to maximize the effectiveness of our advertising efforts. Pollo Tropical
advertises in both English and Spanish throughout the year, including
television, radio and print advertising. Pollo Tropical also has marketed at
the individual restaurant level through special price offerings, coupon
discounts and unique promotional and public relations programs. Pollo Tropical
spent approximately 4.0%, 4.1% and 4.3% of restaurant sales on advertising in
fiscal 1999, 1998 and 1997, respectively.
Supplies and Distribution
We are a member of a national purchasing cooperative created for the Burger
King system known as Restaurant Services, Inc. Restaurant Services is a non-
profit independent cooperative which acts as the purchasing agent for approved
distributors to the system and serves to negotiate the lowest cost for the
Burger King system. We use our purchasing power to negotiate directly with
certain other vendors, to obtain favorable pricing and terms for supplying our
restaurants.
We are required to purchase all of our foodstuffs, paper goods and packaging
materials from BKC-approved suppliers. We may purchase non-food items such as
kitchen utensils, equipment maintenance tools and other supplies from any
suitable source provided that such items meet BKC product uniformity
standards. All BKC-approved suppliers are required to purchase foodstuffs and
supplies from BKC-approved manufacturers and purveyors. BKC is responsible for
monitoring quality control and supervision of these manufacturers and conducts
regular visits to observe the preparation of foodstuffs, and to run various
tests to ensure that only high quality foodstuffs are sold to BKC-approved
suppliers. In addition, BKC coordinates and supervises audits of approved
suppliers and distributors to determine continuing product specification
compliance and to ensure that manufacturing plant and distribution center
standards are met.
For our Pollo Tropical restaurants, we have negotiated directly with local
and national suppliers for the purchase of food and beverage products and
supplies to ensure consistent quality and freshness and to obtain competitive
prices. Each Pollo Tropical restaurant's food and supplies are ordered from
approved suppliers and are shipped directly to the restaurants.
AmeriServe Food Distribution, Inc.
We currently obtain substantially all of our foodstuffs for our Burger King
restaurants (other than bread products which we purchase from local bakeries),
paper goods, promotional premiums and packaging materials from AmeriServe Food
Distribution, Inc. under a supply agreement which, as amended on November 22,
1999, expires on May 15, 2000.
On January 31, 2000, AmeriServe filed for protection under Chapter 11 of the
U.S. Bankruptcy Code. Subsequently, on February 2, 2000 the Delaware
Bankruptcy Court approved a $150 million debtor in possession financing loan
to AmeriServe from BKC and Tricon Global Restaurants. Since AmeriServe's
bankruptcy filing, we have periodically had some minor disruptions in
receiving supplies however, in general, this has not had a material effect on
the operation of our restaurants. If a significant disruption in service or
supply by AmeriServe were to occur, it could create disruptions in the
operations of our Burger King restaurants, which could have a material adverse
effect on us.
There are other BKC-approved suppliers/distributors which compete with
AmeriServe that we believe can provide reliable alternative sources for our
restaurant supplies. We are actively exploring long-term supply alternatives
in conjunction with BKC and Restaurant Services, Inc. Although we believe that
such arrangements will be attained at competitive prices, it currently appears
that such prices will be somewhat higher than what we currently pay under our
contract with AmeriServe.
13
<PAGE>
Quality Assurance
We focus our operations on achieving a high level of customer satisfaction
with speed, accuracy and quality of service closely monitored. Our senior
management and restaurant management staff are principally responsible for
ensuring compliance with our and BKC's operating procedures. We and BKC have
uniform operating standards and specifications relating to the quality,
preparation and selection of menu items, maintenance and cleanliness of the
premises and employee conduct. In order to help maintain compliance with these
operating standards and specifications, we tabulate and distribute to our
restaurant management team detailed reports from our management information
system and surveys that are conducted by us or BKC.
We operate in accordance with quality assurance and health standards set by
BKC, as well as standards set by Federal, state and local governmental laws and
regulations. These standards include food preparation rules regarding, among
other things, minimum cooking times and temperatures, sanitation and
cleanliness. The "conveyor belt" cooking system utilized in all Burger King
restaurants, which is calibrated to carry hamburgers through the flame broiler
at regulated speeds, is one of the safest cooking systems among major quick-
service restaurants and helps to ensure that the standardized minimum times and
temperatures for cooking are met. In addition, BKC has set maximum time
standards for holding prepared food.
We closely supervise the operation of all of our Burger King restaurants to
help ensure that the restaurants follow standards and policies and maintain
product quality, customer service and cleanliness. In addition, BKC may conduct
unscheduled inspections of Burger King restaurants throughout the nationwide
system.
Our Pollo Tropical restaurant managers are actively involved in all aspects
of operations, with an emphasis on supervising the food preparation process as
well as food safety while insuring prompt and precise order fulfillment at both
the front counter and drive-thru windows. Orders typically are filled within
two minutes through the use of a computer display and communications system.
Managers conduct internal inspections for taste, quality, cleanliness and food
safety several times a day in order to provide a consistent level of customer
service.
Trademarks
Pollo Tropical has registered its principal trademarks for "Pollo
Tropical(R)," "TropiGrill(R)" and "TropiChops(R)" in the United States and
presently has applications pending or registrations granted in various foreign
countries in which it conducts business or may conduct business through its
franchise system. In certain foreign countries, Pollo Tropical has been
involved in trademark opposition proceedings to defend its rights to register
certain trademarks. We intend to protect these trademarks by appropriate legal
action whenever necessary.
Other than the Pollo trademarks, we have no proprietary intellectual property
other than the logo and trademark of Carrols Corporation. As a franchisee of
Burger King, we also have contractual rights to use certain BKC-owned
trademarks, servicemarks and other intellectual property relating to the Burger
King concept.
Government Regulation
Various Federal, state and local laws affect our business, including various
health, sanitation, fire and safety standards. Restaurants to be constructed or
remodeled are subject to state and local building code and zoning requirements.
In connection with the construction and remodeling of our restaurants, we may
incur costs to meet certain Federal, state and local regulations, including
regulations promulgated under the Americans with Disabilities Act.
We are subject to the Federal Fair Labor Standards Act and various state laws
governing such matters as:
. minimum wage requirements;
. overtime; and
. other working conditions and citizenship requirements.
14
<PAGE>
In September 1997, we implemented the second phase of an increase in the
minimum wage in accordance with a 1996 amendment to the Federal Fair Labor
Standards Act. A significant number of our food service personnel are paid at
rates related to the Federal minimum wage and, accordingly, increases in the
minimum wage have increased wage rates at our restaurants.
We are also subject to various Federal, state and local environmental laws,
rules and regulations. We believe that we conduct our operations in
substantial compliance with applicable environmental laws and regulations. In
an effort to prevent and, if necessary, to correct environmental problems, we
conduct environmental audits of proposed restaurant sites and restaurants we
seek to acquire. None of the applicable environmental laws or regulations have
had a material adverse effect on our operations or financial condition.
With respect to the franchising of Pollo Tropical restaurants, we are
subject to franchise and related regulations in the U.S. and certain foreign
jurisdictions where we offer and sell franchises. These regulations include
obligations to provide disclosure about Pollo Tropical, the franchise
agreements and the franchise system. The regulations also include obligations
to register certain franchise documents in the U.S. and foreign jurisdictions,
and obligations to disclose the substantive relationship between the parties
to the agreements.
Competition
The quick-service restaurant industry is highly competitive with respect to
price, service, location and food quality. In each of our markets, our
restaurants compete with a large number of national and regional restaurant
chains, as well as locally-owned restaurants, offering low and medium-priced
fare. Convenience stores, grocery store delicatessens and food counters,
cafeterias and other purveyors of moderately priced and quickly prepared foods
also compete with us.
With respect to our Burger King restaurants, our largest competitors in the
quick-service hamburger restaurant segment are McDonald's and Wendy's.
According to publicly available information, as of December 31, 1998,
McDonald's U.S. operations comprised 12,472 restaurants and had U.S.
systemwide sales for the year ended December 31, 1998 of $18.1 billion. As of
December 31, 1998, Wendy's U.S. operations comprised 4,676 restaurants and had
total U.S. systemwide sales for the year ended December 31, 1998 of $5.0
billion. In addition to the quick-service hamburger restaurant chains, Pollo
Tropical's competitors include international and regional chicken theme
chains, such as Boston Market and KFC, as well as other types of quick-service
restaurants.
We believe that:
. product quality and taste;
. national brand recognition;
. convenience of location;
. speed of service;
. menu variety;
. price; and
. ambiance
are the most important competitive factors in the quick-service restaurant
industry and that our Burger King and Pollo Tropical restaurants effectively
compete in each category. We also believe that the strong brand awareness of
our Pollo Tropical restaurants combined with the relatively high costs
associated with starting a quick-service chain in Pollo Tropical's core
markets will make it difficult for new competitors to effectively compete with
our Pollo Tropical restaurants in these markets.
15
<PAGE>
Employees
At December 31, 1999, we employed approximately 13,200 persons of which
approximately 280 were supervisory and administrative personnel and 12,900 were
restaurant operating personnel. None of our employees are covered by collective
bargaining agreements. Approximately 10,300 of our restaurant operating
personnel at December 31, 1999 were part-time employees. We believe that our
relations with our employees are good.
Item 2. Properties
At December 31, 1999 we owned or leased the following restaurant properties:
<TABLE>
<CAPTION>
Owned Land; Leased land; Leased Land;
Owned Owned Leased
Building Building Building Total
----------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Restaurants--operating............. 23 41 333(a) 397
Restaurants under construction..... 3 3
Excess properties:
Leased to others................. -- -- 6 6
Available for sale or lease...... 1 -- -- 1
--- --- --- ---
Total restaurant properties........ 27 41 339 407
=== === === ===
</TABLE>
- --------
(a) Includes 18 restaurants located in mall shopping centers.
We lease 94% of our Burger King restaurants and 93% of our Pollo Tropical
restaurants. We typically enter into leases (including options to renew) from
20 to 40 years. The average remaining term on all leases, including options, is
approximately 25 years. Generally, we have been able to renew leases, upon or
prior to their expiration, at the prevailing market rates.
Most of our Burger King restaurant leases are coterminous with the related
Franchise Agreements. We believe that we generally will be able to renew, at
commercially reasonable rates, the leases whose terms expire prior to the
subject Burger King Franchise Agreements.
Most leases require us, as lessee, to pay utility and water charges, premiums
on insurance and real estate taxes. Certain leases also require contingent
rentals based upon a percentage of gross sales that exceed specified minimums.
In addition to the restaurant locations set forth under "Business--Restaurant
Locations," we own an approximately 22,000 square foot building at 968 James
Street, Syracuse, New York, which houses our executive offices and most of our
administrative operations for our Burger King restaurants. We lease 13,449
square feet at 7300 North Kendall Drive, 8th Floor, Miami, Florida, which
houses most of our administrative operations for our Pollo Tropical
restaurants. We also lease five small regional offices that serve as the bases
for regional management.
Item 3. Legal Proceedings
On November 16, 1998, the Equal Employment Opportunity Commission ("EEOC")
filed suit in the United States District Court for the Northern District of New
York, under Title VII of the Civil rights Act of 1964, as amended, against us,
on behalf of "Wendy McFarlan and other similarly situated individuals affected
by sexual harassment by Carrols Corporation". The suit seeks injunctive relief
as well as unspecified compensatory and punitive damages.
16
<PAGE>
The case is in the early phase of discovery; written discovery is required to
be completed by May 22, 2000, at which time the parties may file motions for
summary judgement. It is too early to make an evaluation of the likelihood of
an unfavorable outcome and/or an estimate of the amount or range of potential
loss. We intend to contest the case vigorously and believes it is without
merit.
We are a party to various other litigation matters incidental to the conduct
of our business. We do not believe that the outcome of any of these matters
will have a material adverse effect on our financial condition or results of
operations and cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
On November 3, 1999, we amended the Restated Certificate of Incorporation of
Carrols Holdings Corporation, pursuant to a Certificate of Amendment to the
Restated Certificate of Incorporation of Holdings, which was approved and
adopted by unanimous written consent of Holdings' stockholders. We are a wholly
owned subsidiary of Holdings. This amendment resulted in the following actions:
. 7,250 shares of Holdings' Class A 10% Cumulative Redeemable Preferred
Stock which were authorized but unissued, were canceled;
. Holdings' authorized common stock was increased from 3,000,000 shares to
5,000,000 shares; and
. 100,000 shares of "blank check" Preferred Stock, par value $0.01, were
authorized with such designation, rights and preferences as may be
determined from time to time by the Board of Directors
Holdings' common stock was designated to consist of two series comprised of
3,000,000 shares of Carrols Stock, par value $0.01 per share, and 2,000,000
shares of Pollo Tropical Stock, par value $0.01 per share. The existing common
stock and all shares subject to option under the 1996 Long-Term Incentive Plan
and the 1998 Directors Stock Option Plan were redesignated, on a share for
share basis, for shares of the Carrols class of common stock. The holders of
Carrols Stock will have the exclusive right to vote for the election of
directors and on all matters requiring action by or submission to the
stockholders. No holder of shares of the Pollo Tropical Stock will be entitled
to vote or participate in any meeting of the stockholders of Holdings and its
existing Carrols class shareholders, unless otherwise required by Delaware law.
Both the Carrols Stock and the Pollo Tropical Stock are considered a tracking
stock, which is a class of stock intended to track the separate performance of
a separate business unit or group of assets. The Pollo Tropical Stock tracks
the separate performance of the Pollo Tropical Group which consists of all of
the assets and liabilities of our Pollo Tropical division. One of the reasons
that we implemented this tracking stock as a separate series of equity
securities was to provide a framework for structuring employee incentive plans
for our Pollo Tropical division in a way that we could directly tie such
incentives to the business results and performance of the division.
The Carrols Stock consists of the interest of Holdings in all of its assets,
liabilities and businesses, other than the assets, liabilities and businesses
attributed to the Pollo Tropical Group. Until the issuance of any Pollo
Tropical Stock, 100% of the rights, preferences and liabilities of the Pollo
Tropical Stock will be retained by Holdings. To the extent that less than 100%
of the authorized shares of Pollo Tropical Stock are issued, the rights,
preferences and liabilities of the shares not issued remain with Holdings and
its existing Carrols class stockholders.
The number of shares of Pollo Tropical Stock that initially represents 100%
of the common stockholders' equity of Holdings attributable to the Pollo
Tropical Group, was established at 1,000,000 shares by the Board of Directors.
Of the 1,000,000 shares that are issuable, none have been issued, and 100,000
have been reserved for grants under the 1998 Pollo Tropical Long-Term Incentive
Plan, which is a Holdings stock option plan.
17
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
There is no established trading market for our capital stock. Carrols
Holdings Corporation owns 10 shares of our common stock (representing 100% of
our outstanding capital stock).
There were no cash dividends paid during 1999. Cash dividends paid during
1998 by Carrols to Holdings were as follows:
<TABLE>
<CAPTION>
Per Share Total
----------- ----------
<S> <C> <C>
January 1998........................................ $ 9,081.70 $ 90,817
April 1998.......................................... $ 9,081.70 $ 90,817
May 1998............................................ $227,715.60 $2,277,156
June 1998........................................... $141,911.20 $1,419,112
</TABLE>
Our loan agreements contain certain restrictive covenants which limit
dividend payments.
Item 6. Selected Financial Data
The selected historical financial information presented below at the end of
and for each of the fiscal years ended December 31, 1995, 1996, 1997, 1998 and
1999 have been derived from the audited consolidated financial statements of
Carrols. Our acquisition of Pollo Tropical was completed in July 1998 and, as a
result, Carrols' audited financial statements as of and for the year ended
December 31, 1998 include the results of operations for the Pollo Tropical
restaurants since July 10, 1998. The following selected financial information
should be read in conjunction with Carrols' Consolidated Financial Statements
and accompanying Notes as of December 31, 1998 and 1999 and for the fiscal
years ended December 31, 1997, 1998 and 1999 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1996 1997 1998(1) 1999
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Restaurant sales.............. $226,257 $240,809 $295,436 $416,190 $455,440
Franchise revenues............ -- -- -- 395 1,039
-------- -------- -------- -------- --------
Total revenues.............. 226,257 240,809 295,436 416,585 456,479
Costs and expenses:
Cost of sales................. 63,629 68,031 85,542 122,620 137,279
Restaurant wages and related
expenses..................... 65,932 70,894 89,447 121,732 134,125
Other restaurant operating
expenses..................... 45,635 48,683 61,691 82,710 89,093
Advertising expense........... 9,764 10,798 13,122 18,615 20,618
General and administrative.... 10,434 10,387 13,121 19,219 23,102
Depreciation and
amortization................. 11,263 11,015 15,102 20,005 23,898
Other costs(2)................ -- 509 -- -- --
-------- -------- -------- -------- --------
Total costs and expenses.... 206,657 220,317 278,025 384,901 428,115
-------- -------- -------- -------- --------
Income from operations.......... 19,600 20,492 17,411 31,684 28,364
Refinancing expenses............ -- -- -- 1,639 --
Interest expense, net........... 14,500 14,209 14,598 21,068 22,386
-------- -------- -------- -------- --------
Income before income taxes and
extraordinary loss............. 5,100 6,283 2,813 8,977 5,978
Provision (benefit) for income
taxes.......................... (9,826) 3,100 655 4,847 3,826
-------- -------- -------- -------- --------
Income before extraordinary
loss........................... 14,926 3,183 2,158 4,130 2,152
Extraordinary loss on
extinguishment of debt, net of
tax............................ -- -- -- 3,701 1,099
-------- -------- -------- -------- --------
Net income...................... $ 14,926 $ 3,183 $ 2,158 $ 429 $ 1,053
======== ======== ======== ======== ========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1996 1997 1998(1) 1999
-------- -------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (At
Period End):
Total assets............. $135,064 $138,588 $215,328 $ 318,810 $320,027
Working capital
deficiency.............. (13,602) (15,004) (18,293) (10,633) (21,696)
Total long-term debt(3).. 120,578 121,265 160,287 261,522 253,494
Stockholder's equity
(deficit)............... (12,916) (11,662) 17,447 13,998 15,051
Other Financial Data:
EBITDA(4)................ $ 30,863 $ 31,507 $ 32,513 $ 45,411 $ 52,262
Adjusted EBITDA(5)....... 30,863 32,016 32,513 51,689 52,262
Adjusted EBITDA margin... 13.6% 13.3% 11.0% 12.4% 11.4%
Cash provided by
operating activities.... 16,682 14,322 19,940 23,273 38,173
Cash used in investing
activities.............. (12,348) (20,238) (95,383) (126,504) (48,935)
Cash provided by
financing activities.... 4,581 5,767 76,381 107,756 5,886
Capital expenditures,
excluding acquisitions.. 8,022 15,255 18,210 33,295 45,332
Operating Statistics:
Total number of
restaurants............. 219 232 335 383 397
Burger King:
Number of restaurants
(at end of period).... 219 232 335 343 352
Average number of
restaurants........... 219 225 280 339 344
Average annual sales
per restaurant........ $ 1,033 $ 1,070 $ 1,055 $ 1,124 $ 1,082
Percentage change in
comparable restaurant
sales(1).............. 3.8% 3.2% (1.4)% 6.2% (2.5)%
Pollo Tropical(6):
Number of restaurants
(at end of period).... 36 35 36 40 45
Average number of
restaurants........... 33 38 35 37 42
Average annual sales
per restaurant........ $ 1,681 $ 1,677 $ 1,861 $ 1,985 $ 1,952
Percentage change in
comparable restaurant
sales(7).............. (5.6)% 7.9% 4.2% 7.8% 0.7%
</TABLE>
- --------
(1) The year ended December 31, 1998 includes 53 weeks. All other years
presented include 52 weeks. The percentage change in comparable restaurant
sales for the year ended December 31, 1998 has been calculated using a
comparable number of weeks from the prior year. The percentage change in
comparable Burger King restaurant sales using the actual number of weeks in
the year ended December 31, 1998 is 7.9%. The percentage change in
comparable restaurant sales is calculated using only those restaurants that
have been open since the beginning of the earliest period being compared.
(2) Other costs represent costs associated with a change in control associated
with the sale of the Company to BIB Holdings.
(3) Includes capital lease obligations and other debt which was $2.4 million at
December 31, 1999.
(4) EBITDA is defined as income before income taxes, interest, depreciation and
amortization, non-cash extraordinary items and non-cash other costs. EBITDA
is presented because we believe it is a useful financial indicator for
measuring a company's ability to service and/or incur indebtedness;
however, EBITDA should not be considered as an alternative to net income as
a measure of operating results or to cash flows as a measure of liquidity
in accordance with generally accepted accounting principles.
(5) Adjusted EBITDA is defined as EBITDA plus $509,000 of other costs in 1996
associated with the sale of the Company to BIB Holdings, refinancing
expenses of $1,639,000 in 1998 and the redemption premium of $4,639,000
associated with the retirement of debt in 1998.
(6) Pollo Tropical was acquired in July, 1998. Average restaurants, average
sales and comparable sales data for Pollo Tropical for 1995-1998 is
presented for informational purposes only.
(7) The percentage change in comparable restaurant sales has been calculated
using a comparable number of weeks in all years.
19
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overview
We are one of the largest Burger King franchisees in the world, and we have
operated Burger King restaurants since 1976. As of December 31, 1999, we
operated 352 Burger King restaurants located in 13 Northeastern, Midwestern and
Southeastern states. Over the last five years, we expanded our operations
through the acquisition and construction of additional Burger King restaurants
while also enhancing the quality of operations and the competitive position and
financial performance of our existing restaurants. As a result of our growth
strategy, we increased the total number of restaurants we operate by over 60%
from 1995 to 1999. In July 1998, we completed our acquisition of Pollo Tropical
for a cash purchase price of approximately $95 million. Pollo Tropical is a
regional quick-service restaurant chain featuring grilled marinated chicken and
authentic "made from scratch" side dishes. At December 31, 1999, we owned and
operated 45 Pollo Tropical restaurants in Florida and franchised an additional
23 restaurants primarily in Puerto Rico. Due to our acquisition of Pollo
Tropical in July 1998, our results for the year ended December 31, 1998 include
the operations of Pollo Tropical from July 10, 1998.
Results of Operations of Carrols
The following table sets forth, for fiscal years 1997, 1998 and 1999,
selected operating results of Carrols as a percentage of restaurant sales:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Restaurant Sales:
Burger King restaurants....................... 100.0% 91.6% 81.8%
Pollo Tropical................................ -- % 8.4% 18.2%
------- ------- -------
Total restaurant sales.......................... 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales................................. 29.0% 29.5% 30.1%
Restaurant wages and related expenses......... 30.3% 29.2% 29.4%
Other restaurant expenses including
advertising.................................. 25.3% 24.3% 24.1%
General and administrative.................... 4.4% 4.6% 5.1%
Depreciation and amortization................. 5.1% 4.8% 5.2%
------- ------- -------
Income from operations.......................... 5.9% 7.6% 6.2%
======= ======= =======
</TABLE>
Fiscal 1999 Compared to Fiscal 1998
The results of operations and cash flows for the years ended December 31,
1999 and 1998 include 52 and 53 weeks, respectively. During 1999, we opened
eight Burger King restaurants, acquired six Burger King restaurants and closed
five underperforming Burger King restaurants. Also during 1999, we opened five
Pollo Tropical restaurants.
Restaurant Sales. Total revenues increased 9.6% from $416.6 million in 1998
to $456.5 in 1999 due to the increase in the number of restaurants and due to
the inclusion of Pollo Tropical for a full year in 1999. Burger King restaurant
sales for the year ended December 31, 1999 decreased 2.2% to $372.7 million
from $381.0 million in 1998 due, in part, to the additional week included in
1998. Sales at our 299 comparable Burger King restaurants (those units
operating for the entirety of the compared periods) decreased 2.5% in 1999,
using a comparable number of weeks from the year ended December 31, 1998 due to
a decrease in customer traffic. In 1999, Burger King national promotional
activities did not generate a similar level of incremental traffic as in 1998.
Pollo Tropical restaurant sales for the year ended December 31, 1999 were $82.8
million as compared to $35.1 million in 1998, due to our acquisition of Pollo
Tropical in July 1998. Compared to the twelve months ended December 31, 1998,
1999 Pollo Tropical sales increased 13.8%, in total, and 0.7% on a comparable
store basis.
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<PAGE>
Operating Costs and Expenses. Cost of sales, as a percentage of sales, were
30.1% in 1999 compared to 29.5% in 1998. The increase in 1999 was due to
higher food costs as a percentage of sales, at our Pollo Tropical restaurants,
relative to our Burger King restaurants, and due to the inclusion of Pollo
Tropical in all of 1999 operating results as compared to six months in 1998.
This increased total cost of sales in 1999 by 0.5%. Pollo Tropical's cost of
sales, as a percentage of sales, were 34.8% in 1999 and 35.1% in 1998. For our
Pollo Tropical restaurants lower food costs in 1999, as a percentage of sales,
were primarily due to a 3.5% decrease in whole chicken prices. Cost of sales,
as a percentage of sales, at our Burger King restaurants were 29.1% in 1999
and 28.9% in 1998. This increase was due to a 3.7% increase in beef costs over
1998 levels and higher promotional discounts in 1999, as compared to 1998,
which were offset, in part, by menu price increases of approximately 1% of
sales late in the third quarter of 1999.
Restaurant wages and related expenses, as a percentage of sales, increased
from 29.2% in 1998 to 29.4% in 1999. For our Burger King restaurants,
restaurant wages and related expenses, as a percentage of sales, were 30.8% in
1999 compared to 29.8% in 1998. The Burger King percentage increase was due to
a 3.7% increase in productive hourly wage rates in 1999 and the effect of
lower Burger King sales on fixed management costs, offset in part, by menu
price increases late in 1999. The effect of the Burger King increase, as a
percentage of total Company sales, was partially offset by the inclusion of
Pollo Tropical in all of 1999 operating results as compared to six months in
1998. Pollo Tropical's restaurant wages and related expenses, as well as other
operating expenses, are lower than those of our Burger King restaurants due to
Pollo Tropical's higher per unit sales volumes. Pollo Tropical restaurant
wages and related expenses, as a percentage of sales, were 23.2% in 1999 and
23.5% in 1998. This caused a 0.5% decrease, as a percentage of sales, in
combined restaurant wages and related expenses in 1999. The decrease, as a
percentage of sales, for Pollo Tropical for 1999 compared to 1998 was due to
lower worker's compensation payroll insurance.
Other restaurant operating expenses, including advertising, as a percentage
of sales, decreased from 24.3% in 1998 to 24.1% in 1999 due to the inclusion
of Pollo Tropical operating results in all of 1999 as compared to six months
in 1998. This caused a 0.5% decrease, as a percentage of sales, in combined
other restaurant operating expenses in 1999. This decrease was partially
offset by higher occupancy costs in 1999, as a percentage of sales, due to the
effect of lower sales volumes on fixed costs at our Burger King restaurants
and due to the sale and leaseback of eight Burger King and five Pollo Tropical
restaurant properties in 1999.
Administrative expenses, as a percentage of sales, increased from 4.6% in
1998 to 5.1% in 1999. This increase is due to lower sales volumes in our
Burger King restaurants in 1999 and administrative functions acquired in the
July 1998 acquisition of Pollo Tropical.
EBITDA. EBITDA increased from $45.4 million in 1998 to $52.3 million in
1999. Included in EBITDA for the year ended December 31, 1998 are refinancing
expenses of $1.6 million and a redemption premium of $4.6 million associated
with the retirement of debt. EBITDA, as adjusted for these items, was $51.7
million for the year ended December 31, 1998. As a percentage of total
revenues, EBITDA, as adjusted, decreased from 12.4% in 1998 to 11.4% in 1999
as a result of the factors discussed above.
Depreciation and Amortization. Depreciation and amortization increased $3.9
million in 1999 compared to 1998 due to the increase in goodwill, purchased
intangibles and other fixed assets associated with the purchase of Pollo
Tropical in July 1998. This increased depreciation and amortization by $2.1
million in 1999 compared to 1998. The remainder of the increase is due
primarily to new restaurant construction and remodeling of Burger King
restaurants in 1998 and 1999.
Interest Expense. Interest expense was $22.4 million in 1999 compared to
$21.1 million in 1998. The increase in 1999 was due to higher average debt
balances in 1999 compared to 1998 due to the acquisition of Pollo Tropical in
July 1998, offset, in part, by the favorable impact of refinancing our senior
subordinated notes in the fourth quarter of 1998. Our weighted average
interest rate was 8.9% in 1999 compared to 9.9% in 1998.
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<PAGE>
Income Taxes. The provision for income taxes of $3.8 million in 1999 is based
on an estimated effective income tax rate for 1999 of 64.0%. This rate is
higher than the Federal statutory tax rate due to state franchise and income
taxes and non-deductible amortization of certain franchise rights and
intangible assets pertaining to our acquisitions.
Net Income. Net income was $1,053,000 in 1999 compared to $429,000 in 1998.
Net income in 1999 includes an extraordinary loss of $1,099,000, which is net
of tax, for the write-off of unamortized debt issue costs related to the
Company's previous senior credit facility. Net income in 1998 includes an
extraordinary loss of $3,701,000, which is net of tax pertaining to the
redemption of our 11.5% senior notes.
Fiscal 1998 Compared to Fiscal 1997
The results of operations and cash flows for the years ended December 31,
1998 and 1997 include 53 and 52 weeks, respectively. During 1998, we opened 11
Burger King restaurants, acquired 2 Burger King restaurants and closed 5
underperforming Burger King restaurants.
Restaurant Sales. Burger King restaurant sales for the year ended December
31, 1998 increased 29.0% to $381.0 million from $295.4 million in 1997. Sales
at our 223 comparable Burger King restaurants (those units operating for the
entirety of the compared periods) increased 6.2% in 1998, using a comparable
number of weeks from the year ended December 31, 1997. Comparable Burger King
restaurant sales increased 7.9% using the actual number of weeks in both fiscal
years. Burger King sales increases were also due to increased sales from our
$.99 Great Tastes Menu and the additional week in 1998. Pollo Tropical
restaurant sales for the period July 10, 1998 to December 31, 1998 totaled
$35.1 million.
Operating Costs and Expenses. Cost of sales, as a percentage of sales, were
29.5% in 1998 compared to 29.0% in 1997. The increase in 1998 was due to higher
cost of sales at our Pollo Tropical restaurants, whose cost of sales was 35.1%
in 1998, and which affected total cost of sales, as a percentage of sales, by
0.5%. A 24% increase in costs associated with the new french fry product,
introduced in January 1998 at our Burger King restaurants, and higher food and
paper costs at recently acquired Burger King restaurants was offset by a 5.7%
decrease in beef costs.
Restaurant wages and related expenses, as a percentage of sales, decreased
from 30.3% in 1997 to 29.2% in 1998 due to Pollo Tropical restaurant wages and
related expenses being 23.5% of sales. Pollo Tropical's restaurant wages and
related expenses are lower than those of the Burger King restaurants due to
Pollo Tropical's higher per unit sales volumes. This caused a 0.5% decrease, as
a percentage of sales, in combined restaurant wages and related expenses. The
remainder of the decrease is due to the effect of increased Burger King sales
on fixed management costs and lower unemployment tax rates in New York State
and Ohio.
Other restaurant operating expenses, including advertising, decreased from
25.3% of sales in 1997 to 24.3% in 1998 due to Pollo Tropical's other
restaurant operating expenses being 16.9% of sales. This caused a 0.7% decrease
as a percentage of sales, in total other restaurant operating expenses. In
addition, reduced utility costs associated with a milder winter in our Burger
King operating areas contributed 0.2%, as a percentage of sales, to the
decrease from 1997 to 1998.
Administrative expenses, as a percentage of sales, increased from 4.4% in
1997 to 4.6% in 1998. The increase in 1998 is due to the addition of field
supervision and corporate support as a result of the 1997 acquisition of 93
Burger King restaurants, administrative functions acquired in the July 1998
acquisition of Pollo Tropical, and increased corporate expenses to support our
plans for continued expansion.
EBITDA. EBITDA increased from $32.5 million in 1997 to $45.4 million in 1998.
Included in EBITDA for the year ended December 31, 1998 are refinancing
expenses of $1.6 million and a redemption premium of $4.6 million associated
with the retirement of debt. EBITDA, as adjusted for these items, was $51.7
million for the year ended December 31, 1998. As a percentage of total
revenues, EBITDA, as adjusted, increased from 11.0% in 1997 to 12.4% in 1998 as
a result of the factors discussed above.
22
<PAGE>
Depreciation and Amortization. Depreciation and amortization increased $4.9
million in 1998 compared to 1997 due primarily to the increase in goodwill and
purchased intangibles associated with the purchase of Pollo Tropical in July
1998 and the purchase of Burger King restaurants in 1997.
Interest Expense. Interest expense was $21.1 million in 1998 compared to
$15.6 million in 1997. The increase in 1998 was due to higher average debt
balances from funding the acquisition of Pollo Tropical in July 1998 and the
acquisition of Burger King restaurants in 1997.
Income Taxes. The provision for income taxes of $4.8 million in 1998 is based
on an estimated effective income tax rate for 1998 of 53.9%. This rate is
higher than the Federal statutory tax rate due to state franchise and income
taxes and non-deductible amortization of franchise rights and intangible assets
pertaining to our acquisitions.
Net Income. Net income was $429,000 in 1998 compared to $2,158,000 in 1997.
Net income in 1998 includes an extraordinary loss of $3,701,000, which is net
of tax, pertaining to the redemption of our 11.5% senior notes.
Liquidity and Capital Resources
We do not have significant receivables or inventory and receive trade credit
based upon negotiated terms in purchasing food products and other supplies. We
are able to operate with a substantial working capital deficit because:
. restaurant operations are conducted on a cash basis;
. rapid turnover results in a limited investment in inventories; and
. cash from sales is usually received before related accounts for food,
supplies and payroll become due.
Our cash requirements arise primarily from:
. the need to finance the opening and equipping of new restaurants;
. ongoing capital reinvestment in our existing restaurants;
. the acquisition of existing Burger King restaurants; and
. servicing our debt.
Our 1999 operations generated approximately $38.2 million in cash, compared
to $23.3 million during 1998 and $19.9 million in 1997.
Our capital expenditures included acquisitions of $3.8 million in 1999, $95.3
million in 1998 and $78.5 million in 1997. We acquired Pollo Tropical in July
1998 for approximately $95 million. We also acquired six Burger King
restaurants in 1999, two Burger King restaurants in 1998 and 93 Burger King
restaurants in 1997.
Capital expenditures, excluding acquisitions, totaled $45.3 million in 1999
as compared to $33.3 million in 1998 and $18.2 million in 1997. Capital
expenditures in 1999 included construction costs for eleven new Burger King
restaurants, eight of which were open in 1999, and five Pollo Tropical
restaurants opened in 1999. Capital expenditures in 1998 included construction
costs for twelve new Burger King restaurants, eleven of which were open in
1998, and for five new Pollo Tropical restaurants, four of which were open in
1998. Capital expenditures in 1997 included construction costs for 15 new
Burger King units, 11 of which were opened in 1997. Our capital expenditures
also include remodeling costs and capital maintenance projects for the ongoing
reinvestment and enhancement of our restaurants. These expenditures increased
in 1999 and 1998 due to growth in the number of restaurants and investments
being made to enhance the operations of the 95 Burger King restaurants that we
have acquired since the beginning of 1997. During 1999, we completed the
remodeling of 11 Burger King restaurants in conjunction with the renewal of
franchises that were scheduled to expire between 1999 and 2004. In 1999, we
substantially completed the upgrade of corporate information and decision
support systems as well as the purchase of restaurant point-of-sale and
management systems for our Burger King restaurants. These projects have
resulted in incremental capital investments which totaled $11.9 and $4.2
million in 1999 and 1998, respectively.
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<PAGE>
During 1999, we generated $14.8 million from the sale and leaseback of eight
Burger King restaurant properties and five Pollo Tropical restaurant
properties. During 1998, the sale and leaseback of two Burger King restaurant
properties and 13 Pollo Tropical restaurant properties generated $20.5
million. During 1997, the sale and leaseback of 15 Burger King restaurant
properties generated $13.0 million. The proceeds from these transactions were
used to reduce outstanding debt. We also paid dividends to our parent totaling
$3.9 million in 1998 and $4.3 million in 1997 for our parent's payment of
dividends on and for the redemption of its preferred stock. In 1998 this
included the early redemption of the remaining $3.6 million in preferred stock
which was scheduled for mandatory redemption in December 1998 and December
1999.
At December 31, 1999, we had total outstanding borrowings of $253.5 million
comprised of the $170.0 million principal amount of outstanding senior
subordinated notes, borrowings under our senior credit facility of $81.1
million and other debt, including capital leases, of $2.4 million. In total,
our borrowings were $8.0 million lower than at December 31, 1998 due to the
application of cash generated from the sale and leaseback of 13 restaurant
properties in 1999.
On November 24, 1998, we issued $170 million of unsecured senior
subordinated notes that bear interest at an annual rate of 9.5% payable on
June 1 and December 1. The notes mature on December 1, 2008 and are
redeemable, at our option, in whole or in part on or after December 1, 2003.
In connection with the issuance of the 9.5% senior subordinated notes, we
redeemed all of our outstanding 11.5% senior notes. This redemption included
aggregate principal amounts of $107,637,000, a redemption premium of
$4,639,000, and accrued interest to December 24, 1998 of $4,436,000. In
addition, we used the proceeds of the 9.5% notes to repay $47.9 million of our
previous senior credit facility.
On February 12, 1999 we entered into a new senior credit facility. Under our
new senior credit facility, Chase Bank of Texas, National Association, as
agent, along with a syndicate of six other lenders, provided a term loan
facility of $50 million, $47.0 million of which is outstanding at December 31,
1999, and a revolving credit facility under which we may borrow up to $105
million (including a standby letter of credit facility for up to $5 million).
At December 31, 1999, $68,250,000 was available for borrowings under our
revolving credit facility, after reserving $2,650,000 for a letter of credit
guaranteed by the facility.
The revolving credit facility expires on December 31, 2003, subject to a
one-year extension upon request and unanimous approval of the lenders, and the
term loan facility is repayable in quarterly installments through September
30, 2003 with a final payment due December 31, 2003. Principal repayments
required in 2000 total $4.0 million. Borrowings under our credit facility bear
interest, at our option, of either:
(1) the greater of the prime rate, or the Federal Funds Rate plus .50%,
plus a margin ranging from 0% to .75%, based on debt to cash flow
ratios; or,
(2) LIBOR plus a margin ranging from 1.00% to 2.25%, based on debt to cash
flow ratios.
Both the senior subordinated notes and the senior credit facility contain
certain restrictive covenants, including limitations on certain restricted
payments and dividends. The senior credit facility also requires maintaining
certain financial ratios.
In 2000, we anticipate total capital expenditures of approximately $40
million, excluding the cost of any acquisitions that we may make. These
amounts include approximately $11 million for construction of new Burger King
restaurants, including certain real estate; $4 million for construction of new
Pollo Tropical restaurants; approximately $8.5 million for remodeling existing
Burger King restaurants; and approximately $6 million for expenditures related
to Burger King transformation initiatives, which include new signage and other
improvements such as painting, parking lot improvements and landscaping. See
Transformation Initiatives on page 11. Remodeling activities in 2000 include
approximately $4 million of expenditures related to the Burger King Early
Successor Incentive Program. See Fee Changes and Early Successor Program on
page 10. Other anticipated Burger King restaurant capital expenditures in 2000
for ongoing reinvestment are approximately $6 million. We are also in the
process of completing the rollout of new restaurant point-of-sale systems and
anticipate that we will incur related expenditures of approximately $2.5
million. We were committed at December 31, 1999 to purchase approximately $1.6
million of restaurant point-of-sale systems.
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Interest payments under our senior subordinated notes and other existing debt
obligations represent significant liquidity requirements for us. We believe
that cash generated from our operations and availability under our revolving
credit facility will provide sufficient cash availability to cover our working
capital needs, capital expenditures, planned development and debt service
requirements for fiscal 2000.
Inflation
The inflationary factors which have historically affected our results of
operations include increases in food and paper costs, labor and other operating
expenses. Wages paid in our restaurants are impacted by changes in the Federal
or state minimum hourly wage rates. Accordingly, changes in the Federal or
states minimum hourly wage rate directly affect our labor cost. We and the
restaurant industry typically attempt to offset the effect of inflation, at
least in part, through periodic menu price increases and various cost reduction
programs. However, no assurance can be given that we will be able to offset
such inflationary cost increases in the future.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
To the extent applicable, see note 1 to the Financial Statements.
Item 8. Financial Statements and Supplementary Data
The Index to Financial statements attached hereto is set forth in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's independent
accountants on accounting or financial disclosures.
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<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth information about our directors, executive
officers and other officers:
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Alan Vituli............. 58 Chairman of the Board and Chief Executive Officer
Daniel T. Accordino..... 49 President, Chief Operating Officer and Director
Paul R. Flanders........ 43 Vice President--Finance and Treasurer
Joseph A. Zirkman....... 39 Vice President, General Counsel and Secretary
Timothy J. LaLonde...... 43 Vice President--Controller
John M. Lukas........... 38 Vice President--Information Systems
Michael A. Biviano...... 42 Vice President--Regional Director
James A. Doan........... 42 Regional Director
Joseph W. Hoffman....... 37 Regional Director
David R. Smith.......... 50 Vice President--Regional Director
James E. Tunnessen...... 44 Vice President--Regional Director
Nicholas A. Castaldo.... 48 President and Chief Operating Officer--Pollo Tropical
Benjamin D. Chereskin... 41 Director
James M. Conlon......... 32 Director
David J. Mathies, Jr. .. 52 Director
Robin P. Selati......... 33 Director
Clayton E. Wilhite...... 54 Director
</TABLE>
Certain biographical information regarding our directors, executive officers
and other officers is set forth below:
Alan Vituli has been Chairman of the Board since 1986 and Chief Executive
Officer since March 1992. He is also a Director and Chairman of the Board of
Holdings. Between 1983 and 1985, Mr. Vituli was employed by Smith Barney,
Harris Upham & Co., Inc. as a Senior Vice President responsible for real estate
transactions. From 1966 until joining Smith Barney, Mr. Vituli was associated
with the accounting firm of Coopers & Lybrand, first as an employee and for the
last ten years as a partner. Among the positions held by Mr. Vituli at Coopers
& Lybrand was National Director of Mergers and Acquisitions. Before joining
Coopers & Lybrand, Mr. Vituli was employed in a family-owned restaurant
business. From 1993 through our acquisition of Pollo Tropical, Mr. Vituli
served on the Board of Directors of Pollo Tropical.
Daniel T. Accordino has been President, Chief Operating Officer and a
Director since February 1993. Before that, Mr. Accordino served as Executive
Vice President--Operations from December 1986 and as Senior Vice President from
April 1984. From 1979 to April 1984 he was Vice President responsible for
restaurant operations, having previously served as our Assistant Director of
Restaurant Operations. Mr. Accordino has been employed by us since 1972.
Paul R. Flanders has been Vice President--Finance and Treasurer since April
1997. Before joining us, he was Vice President--Corporate Controller of Fay's
Incorporated, a retailing chain, from 1989 to 1997, and Vice President--
Controller for Computer Consoles, Inc., a computer systems manufacturer, from
1982 to 1989. Mr. Flanders was also associated with the accounting firm of
Touche Ross & Co. from 1977 to 1982.
Joseph A. Zirkman became Vice President and General Counsel in January 1993.
He was appointed Secretary in February 1993. Before joining us, Mr. Zirkman was
an associate with the New York City law firm of Baer Marks & Upham beginning in
1986.
Timothy J. LaLonde has been Vice President--Controller since July 1997.
Before joining us, he was a controller at Fay's Incorporated, a retailing
chain, from 1992 to 1997. Before that he was a Senior Audit Manager with the
accounting firm of Deloitte & Touche LLP, where he was employed since 1978.
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<PAGE>
John M. Lukas has been Vice President--Information systems since December
1999. Mr. Lukas joined us in 1994 and served in the capacity of Director--
Information Systems from 1994 to 1999.
Michael A. Biviano is Vice President--Regional Director. Mr. Biviano has been
Regional Director of Operations since October 1989, having served as District
Supervisor from December 1983 to October 1989. Mr. Biviano has been employed by
us since 1973.
James A. Doan has been Regional Director since July, 1999, having served as
District Supervisor from 1983 to 1999. Mr. Doan has been employed by us since
1980.
Joseph W. Hoffman has been Regional Director since July 1997. Mr. Hoffman
joined us in 1993 in connection with one of our acquisitions and served in the
capacity of District Supervisor from 1993 to 1997. Before 1993 Mr. Hoffman was
in a similar capacity with Community Food Service, Inc.
David R. Smith is Vice President--Regional Director. Mr. Smith has been
Regional Director of Operations since 1984, having served as District
Supervisor from 1975 to 1984. Mr. Smith has been employed by us since 1972.
James E. Tunnessen is Vice President--Regional Director. He has been Regional
Director of Operations since August 1988, having served as District Supervisor
from 1979 to August 1988. Mr. Tunnessen has been employed by us since 1972.
Nicholas A. Castaldo has been the President and Chief Operating Officer of
the Pollo Tropical Division since our acquisition of Pollo Tropical, Inc. in
July 1998. At that time, Mr. Castaldo had been the President of Pollo Tropical,
Inc. since October 1995 and its Chief Operating Officer since November 1, 1996.
Before joining Pollo Tropical and since August 1993, Mr. Castaldo was employed
as Vice President of Marketing for Denny's Inc., a restaurant company. From
1986 to 1993, Mr. Castaldo was employed by S&A Restaurant Corp., which includes
Steak & Ale and Bennigan's restaurant chains, and ultimately served as Senior
Vice President of Marketing and Business Development. Mr. Castaldo's career
spans 20 years and includes management positions at Burger King, Citicorp, and
Clairol Inc.
Benjamin D. Chereskin has served as a Director since March 1997. Mr.
Chereskin is a Managing Director of Madison Dearborn Partners, Inc., a venture
capital firm, and co-founded the firm in 1993. Before that, Mr. Chereskin was
with First Chicago Venture Capital for nine years. Mr. Chereskin also serves on
the Board of Directors of Cornerstone Brands, Inc.; Tuesday Morning
Corporation; NWL Holdings, Inc.; Family Christian Stores, Inc.; i Believe.com,
Inc. and Agweb.com, Inc.
James M. Conlon has served as a Director since 1998. Mr. Conlon has served as
Managing Director of Dilmun Investments, Inc., an investment advisory firm,
since 1992. Since 1997, Mr. Conlon has been the Co-Head of the bank's U.S.
Merchant Banking group. Before joining Dilmun Investments, Inc., Mr. Conlon was
employed as an Investment Analyst in the Securities Division of TIAA-CREF. Mr.
Conlon also serves on the Boards of Directors of Capital Recovery Holdings,
Inc; Thompson Products, Inc; Independent Pictures, Inc.; Intimates Holdings,
Inc; and Springfield Services Corporation.
David J. Mathies, Jr. has served as a Director since 1996. Mr. Mathies has
served as President of Dilmun Investments, Inc., an investment advisory firm,
since its inception in 1988. From 1971 to 1988, he was employed by Mellon Bank,
where he was head of their Pension Management Group, providing investment
management services to middle market clients.
Robin P. Selati has served as a Director since March 1997. Mr. Selati is a
Managing Director of Madison Dearborn Partners, Inc., a venture capital firm,
and joined the firm in 1993. Before 1993, Mr. Selati was associated with Alex
Brown & Sons Incorporated in the consumer/retail investment banking group. Mr.
Selati also serves on the Board of Directors of Peter Piper, Inc., Tuesday
Morning Corporation; NWL Holdings, Inc.; Beverages & More, Inc.; Family
Christian Stores, Inc.; i Believe.com, Inc. and Ruth U. Fertel, Inc.
27
<PAGE>
Clayton E. Wilhite has served as a Director since July 1997. Since January
1998, Mr. Wilhite has been with CFI Group, Inc., has been its Managing Partner
since May 1998, and has served on its Board of Directors since September 1998.
CFI Group, Inc. is an international marketing and consulting firm specializing
in measuring customer satisfaction. Between 1996 and 1998, he was the Chairman
of Thurloe Holdings, L.L.C. Before 1996, Mr. Wilhite was with the advertising
firm of D'Arcy Masius Benton & Bowles, Inc. having served as its Vice Chairman
from 1995 to 1996, as President of DMB&B/North America from 1988 to 1995, and
as Chairman and Managing Director of DMB&B/St. Louis from 1985 to 1988. From
August 1996 through our acquisition of Pollo Tropical, Mr. Wilhite served on
the Board of Directors of Pollo Tropical, Inc.
All directors hold office until the next annual meeting of stockholders or
until their successors have been elected and qualified. Our executive officers
are chosen by the Board and serve at its discretion. All of our directors also
serve as directors of Holdings.
Item 11. Executive Compensation
The following tables set forth certain information for the fiscal years ended
December 31, 1999, 1998 and 1997 for our Chief Executive Officer and our next
four most highly compensated executive officers who were serving as executive
officers at December 31, 1999 and whose annual compensation exceeded $100,000.
Stock option data refers to the stock options of Holdings.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------- -------------
Securities
Underlying
Name and Principal Position Year Salary Bonus(a) Options(#)(c)
--------------------------- ---- -------- -------- -------------
<S> <C> <C> <C> <C>
Alan Vituli............................... 1999 $450,000 $ -- --
Chairman of the Board and Chief Executive
Officer 1998 425,004 297,503 --
1997 392,758 -- 72,830
Daniel T. Accordino....................... 1999 $340,000 $ -- --
President, Chief Operating Officer and
Director 1998 320,004 192,002 --
1997 288,386 -- 31,479
Nicholas A. Castaldo(b)................... 1999 $300,000 $300,000 --
President and Chief Operating Officer, 1998 144,230 150,000 50,000
Pollo Tropical Division 1997 -- -- --
Paul R. Flanders.......................... 1999 $152,503 $ -- 300
Vice President, Finance and Treasurer 1998 143,759 71,880 500
1997 105,925 -- 1,500
Joseph A. Zirkman......................... 1999 $140,000 $ -- 272
Vice President, General Counsel and
Secretary 1998 131,000 65,500 400
1997 120,436 -- 1,118
</TABLE>
- --------
(a) We provide bonus compensation to executive officers based on an
individual's achievement of certain specified objectives and our
achievement of specified increases in stockholder value.
(b) Under the bonus plan for Mr. Castaldo, 50% of the amount earned is paid
within ninety days following the end of the year. The balance is deferred
and paid out in equal installments over each of three succeeding years
provided that stockholder value of the Pollo Tropical division in the
payout year is at least equal to what it was in the year that the bonus was
earned. Of the bonus earned in 1999 by Mr. Castaldo, 50% or $150,000, is
subject to deferral. The deferral for 1998 was waived by the Compensation
Committee.
(c) These amounts represent stock options granted for Holdings' Carrols stock
with the exception of Mr. Castaldo, whose options have been granted for
Holdings' Pollo Tropical stock pursuant to the 1998 Pollo Tropical Long-
Term Incentive Plan.
28
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Number of % of Total Value at Assumed Rates
Securities Options of Stock Appreciation
Underlying Granted to for Option Term(b)
Options Employees in Exercise Price Expiration -----------------------
Name Granted(a) 1999 (Price per Share) Date 5% 10%
---- ---------- ------------ ----------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Flanders........ 300 4.8 $126.00 2/24/2007 $ 18,048 $ 43,228
Joseph A. Zirkman....... 272 3.9 $126.00 2/24/2007 16,363 39,193
</TABLE>
- --------
(a) Stock option grants were granted under the 1996 Long-Term Incentive Plan.
These options become exercisable at the rate of 25% per year beginning on
December 31, 1999.
(b) Potential realizable value is based on an assumption that the price of
Holdings' common shares appreciate at 5% and 10% annually (compounded)
from the date of grant until the end of the option term. These
calculations are based on requirements promulgated by the Commission and
are not intended to forecast possible future appreciation of the stock
price.
Option Exercises in Last Fiscal Year and Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Options at
Shares Year-End(#) Value of Unexercised In-
Acquired on Value ------------------------- the-Money Options at
Exercise Realized Exercisable/unexercisable Year-End($)(c)
----------- -------- ------------------------- ------------------------
<S> <C> <C> <C> <C>
Alan Vituli............. -- -- 43,922/28,908
Daniel T. Accordino..... -- -- 22,452/ 9,027
Nicholas A. Castaldo.... -- -- 20,000/30,000
Paul R. Flanders........ -- -- 1,450/ 850
Joseph A. Zirkman....... -- -- 979/ 811
</TABLE>
- --------
(c) This required information is not presented because we are privately owned
and therefore the market value of our common stock is not readily
ascertainable.
Compensation Committee Interlocks and Insider Participation
During the last fiscal year, no executive officer of ours served as a
director of or member of a compensation committee of any entity for which any
of the persons serving on our Board of Directors or on the Compensation
Committee of the Board of Directors is an executive officer. The Compensation
Committee is comprised of Messrs. Chereskin, Mathies and Wilhite.
Board of Directors
Directors' Compensation. Directors who are our employees do not receive any
additional compensation for serving as directors. Directors who are not our
employees receive a fee of $15,000 per annum. All directors are reimbursed for
all reasonable expenses they incur while acting as directors, including as
members of any committee of the Board of Directors.
Liability Limitation. As permitted under the Delaware General Corporation
Law, our Restated Certificate of Incorporation provides that a director will
not be personally liable to us or our stockholders for monetary damages for
breach of a fiduciary duty owed to us or our stockholders. By its terms and in
accordance with the laws of the State of Delaware, however, this provision
does not eliminate or limit the liability of any of our directors:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law;
. for any transaction from which the director derived an improper personal
benefit; or
. for an improper declaration of dividends or purchase or redemption of our
securities.
29
<PAGE>
Indemnification. Our Restated Certificate of Incorporation provides that we
will indemnify our directors and officers to the fullest extent permitted by
Delaware law.
Description of Plans
Employee Retirement Plan. We offer salaried employees, excluding those of
Pollo Tropical, the option to participate in the Carrols Corporation Retirement
Savings Plan, which as amended April 1, 1999, offers both a post-tax savings
option and a savings option pursuant to section 401(k) of the Internal Revenue
Code. Participating employees may contribute up to 18% of their salary annually
to either savings option, subject to certain limitations. In accordance with
the plan, we match up to $1,040 of an employee's mandatory contributions by
contributing $0.50 for each dollar contributed by the employee. Employees are
fully vested in their own contributions; employees become vested in our
contributions beginning in the fourth year of service and are fully vested
after seven years of service or upon retirement at age 65 with five years
service, death, or permanent or total disability. If any of the foregoing
events occurs, benefits may be paid out in a single cash lump sum or in
periodic installments over not more than the employee's assumed life
expectancy. The employee's contributions may be withdrawn at any time, subject
to restrictions on future contributions. Our matching contributions may be
withdrawn under certain conditions of financial necessity or hardship as
defined in the plan. Our contributions to the plan totaled $245,000, $216,000
and $208,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Pollo Tropical 401(k) Savings Plan. Pollo Tropical has an employee savings
plan pursuant to Section 401(k) of the Internal Revenue Code. All employees who
are age 21 or older and who have been credited with at least 1,000 hours of
service within twelve consecutive months are eligible to participate in the
plan. Employees may elect to contribute to the plan through payroll deductions
in an amount not to exceed the amount permitted under the Internal Revenue
Code. We make discretionary matching contributions, which are allocated to
participants based on the participant's eligible deferrals during the plan
year. Employees are fully vested in their contributions. Our contributions vest
at a rate of 33% for each complete year of service. Our contributions to the
401(k) plan totaled $29,000 and $17,000 for the years ended December 31, 1999
and 1998, respectively.
Bonus Plans. We have cash bonus plans designed to promote and reward
excellent performance by providing employees with incentive compensation. Key
senior management executives of each operating division can be eligible for
bonuses equal to varying percentages of their respective annual salaries
determined by our performance as well as the division's performance.
1996 Long-Term Incentive Plan. In connection with the investment by Madison
Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
in 1997, Holdings adopted the Carrols Holdings Corporation 1996 Long-Term
Incentive Plan pursuant to which we may grant awards such as "Incentive Stock
Options" (as defined under Section 422 of the Internal Revenue Code),
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units and other stock-based awards to
certain of our and our subsidiaries' officers and employees. The 1996 Long-Term
Incentive Plan replaced a prior long-term incentive plan which was adopted
December 26, 1996. The plan is designed to advance our interests and the
interests of Holdings by providing an additional incentive to attract, retain
and motivate qualified and competent persons through the encouragement of stock
ownership or stock appreciation rights in Holdings.
The 1996 Long-Term Incentive Plan permits the Compensation Committee of the
Board of Directors of Holdings to grant, from time to time, options to purchase
an aggregate of up to 106,250 shares of Holdings' Carrols common stock. The
vesting periods for options and the expiration dates for exercisability of
options granted under the 1996 Long-Term Incentive Plan are determined by
Holdings' Compensation Committee; however, the exercise period for an option
granted under the 1996 Long-Term Incentive Plan may not exceed ten years from
the date of the grant. Holdings' Compensation Committee is authorized to grant
options under the plan to all of our and our subsidiaries' eligible officers
and employees, including executive officers and directors (other than outside
directors and members of Holdings' Compensation Committee).
30
<PAGE>
Holdings' Compensation Committee determines the option exercise price per
share of any option granted under the 1996 Long-Term Incentive Plan; however,
the option price per share of an option intended to qualify as an Incentive
Stock Option shall not be less than the fair market value of the Holdings'
Carrols common stock of Holdings on the date such option is granted. Payment of
such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Carrols common stock already owned by
the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms
of the 1996 Long-Term Incentive Plan, the applicable stock option
agreement and any applicable guidelines of Holdings' Compensation
Committee in effect at the time; or
(5) by any other means approved by Holdings' Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the
exercise price of such option by delivering a promissory note, such promissory
note may be either:
(1) unsecured and fully recourse against the holder of such option; or
(2) nonrecourse but secured by the shares of Holdings' Carrols common stock
being purchased by such exercise and by other assets having a fair
market value equal to not less than 40% of the exercise price of such
option. In either event, such note shall mature on the fifth
anniversary of the date of the note and bear interest at the rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as
amended from time to time.
Pursuant to the 1996 Long-Term Incentive Plan, in the event of a Change of
Control (as defined in the plan) any and all options issued and outstanding
will vest and become exercisable in full on the date of such Change of Control.
In addition, as soon as practicable but no later than thirty days before such
Change of Control, Holdings' Compensation Committee shall notify any holder of
an option granted under the plan of such Change of Control. Further, upon a
Change of Control that qualifies as an Approved Sale (as defined in the plan)
in which the outstanding Holdings' Carrols common stock is converted or
exchanged for or becomes a right to receive any cash, property or securities
other than Illiquid Consideration (as defined in the plan),
(1) each option granted under the plan shall become exercisable solely for
the amount of such cash, property or securities that the holder of such
option would have been entitled to had such option been exercised
immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale
and participate in such sale as a holder of Holdings' Carrols
common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for
such option consideration equal to the amount determined by
multiplying:
(x) the same amount of consideration per share of Holdings' Carrols
common stock received by the holders in connection with the
Approved Sale less the exercise price per share of such option
to acquire Holdings' Carrols common stock by
(y) the number of shares of Holdings' Carrols common stock
represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous
with such Approved Sale, any such option shall be canceled.
1998 Directors' Stock Option Plan. During 1998, Holdings adopted the Carrols
Holdings Corporation 1998 Directors' Stock Option Plan pursuant to which we may
grant "Incentive Stock Options" (as defined under Section 422 of the Internal
Revenue Code), nonqualified stock options, stock appreciation rights,
restricted stock, and other stock-based awards to certain non-employee
directors of Holdings. The plan is designed to advance the interests of
Holdings and us by providing an additional incentive to attract, retain and
motivate non-employee individuals as directors of our Board and the Board of
Holdings.
31
<PAGE>
The 1998 Directors' Stock Option Plan permits Holdings' Compensation
Committee to grant, from time to time, options to purchase an aggregate of up
to 10,000 shares of Holdings' Carrols common stock. The vesting periods for
these options and the expiration dates for exercisability of the options
granted under the plan are determined by the Compensation Committee; however,
the exercise period for an option granted under the plan may not exceed ten
years from the date of the grant. Holdings' Compensation Committee is
authorized to grant options under the plan to all eligible non-employee
directors of Holdings. Directors that are our employees or employees of
Holdings, Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital
Partners II, L.P. or BIB Holdings, or any of their respective affiliates are
not eligible under the plan.
The option exercise price per share of any option granted under the 1998
Directors' Stock Option Plan is determined by Holdings' Compensation Committee;
however, the option price per share of an option intended to qualify as an
Incentive Stock Option shall not be less than the fair market value of
Holdings' Carrols common stock on the date such option is granted. Payment of
such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Carrols common stock already owned by
the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms
of the plan, the applicable stock option agreement and any applicable
guidelines of the Holdings Compensation Committee in effect at the
time; or
(5) by any other means approved by the Holdings Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the
exercise price of such option by delivering a promissory note, such promissory
note may be either:
(1) unsecured and fully recourse against the holder of such options; or
(2) nonrecourse but secured by the shares of Holdings' Carrols common stock
being purchased by such exercise and by other assets having a fair
market value equal to not less than 40% of the exercise price of such
option.
In either event, such note shall mature on the fifth anniversary of the date of
the note and bear interest at the rate provided under Section 1274(d) of the
Internal Revenue Code of 1986, as amended from time to time.
Pursuant to the 1998 Directors' Stock Option Plan, in the event of a Change
of Control (as defined in the plan), any and all options issued and outstanding
shall vest and become exercisable in full on the date of such Change of
Control. In addition, as soon as practicable but in no event later than 30 days
prior to a Change of Control, Holdings' Compensation Committee shall notify any
holder of an option granted under the plan of such Change of Control. Further,
upon a Change of Control that qualifies as an Approved Sale (as defined in the
1998 Directors' Plan) in which the outstanding Holdings' Carrols common stock
is converted or exchanged for or becomes a right to receive any cash, property
or securities other than Illiquid Consideration (as defined in the 1998
Directors' Plan):
(1) each option granted under the plan shall become exercisable solely for
the amount of such cash, property or securities that the holder of such
award would have been entitled to had such award been exercised
immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale
and participate in such sale as a holder of Holdings' Carrols
common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for
such award consideration equal to the amount determined by
multiplying:
32
<PAGE>
(x) the same amount of consideration per share of Holdings' Carrols
common stock received by the holders in connection with the
Approved Sale less the exercise price per share of such award to
acquire Holdings' Carrols common stock by
(y) the number of shares of Holdings' Carrols common stock
represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous
with such Approved Sale, any such award will be canceled.
1998 Pollo Tropical Long-Term Incentive Plan. Holdings has also adopted the
Carrols Holdings Corporation 1998 Pollo Tropical Long-Term Incentive Plan
pursuant to which we may grant awards such as "Incentive Stock Options" (as
defined under Section 422 of the Internal Revenue Code), nonqualified stock
options, stock appreciation rights, restricted stock, performance shares and
performance units and other stock-based awards to certain of our and our
subsidiaries' officers and employees. The plan is designed to advance our
interests and the interests of Holdings by providing an additional incentive to
attract, retain and motivate qualified and competent persons through the
encouragement of stock ownership or stock appreciation rights in Holdings.
The 1998 Pollo Tropical Long-Term Incentive Plan permits the Compensation
Committee of the Board of Directors of Holdings to grant, from time to time,
options to purchase an aggregate of up to 100,000 shares of Holdings' Pollo
Tropical class of common stock. The vesting periods for options and the
expiration dates for exercisability of options granted under the 1998 Pollo
Tropical Long-Term Incentive Plan are determined by Holdings' Compensation
Committee; however, the exercise period for an option granted under the 1998
Pollo Tropical Long-Term Incentive Plan may not exceed ten years from the date
of the grant. Holdings' Compensation Committee is authorized to grant options
under the plan to all of our and our subsidiaries' eligible officers and
employees, including executive officers and directors (other than outside
directors and members of Holdings' Compensation Committee).
Holdings' Compensation Committee determines the option exercise price per
share of any option granted under the 1998 Pollo Tropical Long-Term Incentive
Plan; however, the option price per share of an option intended to qualify as
an Incentive Stock Option shall not be less than the fair market value of the
Holdings' Pollo Tropical class of common stock on the date such option is
granted. Payment of such option exercise price shall be made:
(1) in cash;
(2) by delivering shares of Holdings' Pollo Tropical class of common stock
already owned by the holder of such options;
(3) by delivering a promissory note;
(4) by a combination of any of the foregoing, in accordance with the terms
of the 1998 Pollo Tropical Long-Term Incentive Plan, the applicable
stock option agreement and any applicable guidelines of Holdings'
Compensation Committee in effect at the time; or
(5) by any other means approved by Holdings' Compensation Committee.
If the holder of an option issued pursuant to the plan elects to pay the
exercise price of such option by delivering a promissory note, such promissory
note may be either:
(1) unsecured and fully recourse against the holder of such option; or
(2) nonrecourse but secured by the shares of Holdings' Pollo Tropical class
of common stock being purchased by such exercise and by other assets
having a fair market value equal to not less than 40% of the exercise
price of such option. In either event, such note shall mature on the
fifth anniversary of the date of the note and bear interest at the rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as
amended from time to time.
Pursuant to the 1998 Pollo Tropical Long-Term Incentive Plan, in the event of
a Change of Control (as defined in the plan) any and all options issued and
outstanding will vest and become exercisable in full on the
33
<PAGE>
date of such Change of Control. Under the terms of the 1998 Pollo Tropical
Long-Term Incentive Plan a Change of Control includes both a change of control
of Holdings or a sale of the Pollo Tropical Group. In addition, as soon as
practicable but no later than thirty days before such Change of Control,
Holdings' Compensation Committee shall notify any holder of an option granted
under the plan of such Change of Control. Further, upon a Change of Control
that qualifies as an Approved Sale (as defined in the plan) in which the
outstanding common stock of Holdings is converted or exchanged for or becomes a
right to receive any cash, property or securities other than Illiquid
Consideration (as defined in the plan),
(1) each option granted under the plan shall become exercisable solely for
the amount of such cash, property or securities that the holder of such
option would have been entitled to had such option been exercised
immediately prior to such event;
(2) the holder of such option shall be given an opportunity to either:
(a) exercise such option prior to the consummation of the Approved Sale
and participate in such sale as a holder of Holdings' Pollo
Tropical common stock; or
(b) upon consummation of the Approved Sale, receive in exchange for
such option consideration equal to the amount determined by
multiplying:
(x) the same amount of consideration per share of Holdings' Pollo
Tropical common stock received by the holders of Holdings' Pollo
Tropical common stock in connection with the Approved Sale less
the exercise price per share of Holdings' Pollo Tropical common
stock of such option to acquire Holdings' Pollo Tropical common
stock by
(y) the number of shares of Holdings' Pollo Tropical common stock
represented by such option; and
(3) to the extent such option is not exercised prior to or simultaneous
with such Approved Sale, any such option shall be canceled.
Description of Employment Agreements
Vituli Employment Agreement. On March 27, 1997, in connection with the
investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn
Capital Partners II, L.P., we entered into a Second Amended and Restated
Employment Agreement with Alan Vituli, which amended and restated an Amended
and Restated Employment Agreement dated April 3, 1996 between us and Mr.
Vituli. Pursuant to the amended employment agreement, Mr. Vituli will continue
to serve as our Chairman of the Board and Chief Executive Officer. The amended
employment agreement will be for an initial term of four years, commencing on
March 27, 1997 and will be subject to automatic renewals for successive one-
year terms unless either we or Mr. Vituli elect not to renew by giving written
notice to the other at least 90 days before a scheduled expiration date.
Pursuant to the amended employment agreement, Mr. Vituli will receive a base
salary of $400,000 for the first year of the term, which amount increases
annually by at least $25,000 subject to additional increases that may be
authorized by the Compensation Committee. Pursuant to the amended employment
agreement, Mr. Vituli will participate in our Executive Bonus Plan and any of
our stock option plans applicable to executive employees. The amended
employment agreement also requires that we are responsible for maintaining the
premium payments on a split-dollar life insurance policy on the life of Mr.
Vituli providing a death benefit of $1.5 million payable to an irrevocable
trust designated by Mr. Vituli. The amended employment agreement provides that
if Mr. Vituli's employment is terminated without Cause (as defined in the
amended employment agreement) following a Change of Control (as defined in the
amended employment agreement),
(1) Mr. Vituli will receive a cash payment in the amount equal to 2.99
times his Five Year Compensation Average (as defined in the amended
employment agreement) if such Change of Control occurs during the first
two years of the initial term of the amended employment agreement; and
(2) a cash lump sum equal to his salary during the previous 12 months if
terminated thereafter. The amended employment agreement includes non-
competition and non-solicitation provisions effective during the term
of the amended employment agreement and for two years following its
termination.
34
<PAGE>
Accordino Employment Agreement. On March 27, 1997, in connection with the
investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn
Capital Partners II, L.P., we entered into a Second Amended and Restated
Employment Agreement with Daniel T. Accordino, which amended and restated an
Amended and Restated Employment Agreement dated April 3, 1996 between us and
Mr. Accordino. Pursuant to the amended employment agreement, Mr. Accordino will
continue to serve as our President and Chief Operating Officer. The amended
employment agreement will be for an initial term of four years, commencing on
March 27, 1997 and will be subject to automatic renewal for successive one-year
terms unless either we or Mr. Accordino elect not to renew by giving written
notice to the other at least 90 days before a scheduled expiration date.
Pursuant to the amended employment agreement, Mr. Accordino will receive a base
salary of $300,000 for the first year of the term, which amount increases
annually by at least $20,000 subject to additional increases that may be
authorized by the Compensation Committee. Pursuant to the amended employment
agreement, Mr. Accordino will participate in our Executive Bonus Plan and any
of stock option plans applicable to executive employees. The amended employment
agreement also will require that we are responsible for maintaining the premium
payments on a split-dollar life insurance policy on the life of Mr. Accordino
providing a death benefit of $1.0 million payable to an irrevocable trust
designated by Mr. Accordino. The amended employment agreement provides that if
Mr. Accordino's employment is terminated without Cause (as defined in the
amended employment agreement) following a Change of Control (as defined in the
amended employment agreement),
(1) Mr. Accordino will receive a cash payment in the amount equal to 2.99
times his Five Year Compensation Average (as defined in the amended
employment agreement) if such change of control occurs during the first
two years of the agreement; and
(2) a cash lump sum equal to his salary during the previous 12 months if
terminated thereafter. The agreement includes non-competition and non-
solicitation provisions effective during the term of the amended
employment agreement and for two years following its termination.
Castaldo Employment Agreement. Effective July 20, 1998, in connection with
our acquisition of Pollo Tropical, we entered into an Amended and Restated
Employment Agreement with Nicholas A. Castaldo, which amended and restated an
Employment Agreement dated September 19, 1995, as amended May 5, 1997, between
Pollo Tropical and Mr. Castaldo. Pursuant to the amended agreement, Mr.
Castaldo serves as the President and Chief Operating Officer of our Pollo
Tropical Division. The agreement is for an initial term commencing on July 20,
1998 and ending September 30, 2003, and is subject to renewal for up to two
additional one-year periods at our option, exercisable by giving written notice
to Mr. Castaldo by no later than July 31, 2003 or 2004, as applicable. Pursuant
to the agreement, Mr. Castaldo receives a base salary of $300,000 per year
during the term, which amount increases on each January 1st during the term by
at least 5% subject to additional increases that may be authorized by our Board
of Directors. Pursuant to the agreement, Mr. Castaldo is eligible to receive an
annual bonus of up to 100% of his base salary (of which not more than 50% may
be subject to deferral provisions in our Executive Bonus Plan (as defined in
the agreement)), which bonus is payable in accordance with our Executive Bonus
Plan and is based solely upon the achievement by Mr. Castaldo of certain
corporate and individual performance standards during the relevant period as
reasonably established by us with Mr. Castaldo. Pursuant to the agreement, Mr.
Castaldo was granted non-qualified options to purchase 5% of Holdings' Pollo
Tropical common stock pursuant to the 1998 Pollo Tropical Long-Term Incentive
Plan. Mr. Castaldo's agreement provides that if Mr. Castaldo's employment is
terminated by us without Cause (as defined in the agreement) or by Mr. Castaldo
for Good Reason (as defined in the agreement), or if the term of the agreement
expires, then Mr. Castaldo is entitled to the following payments and benefits:
(1) An amount equal to the greater of:
(a) Mr. Castaldo's base salary then in effect, from the date on which
his employment is terminated or expires under the terms of the
agreement until 12 months after such termination date; or
(b) Mr. Castaldo's base salary from such termination date through the
end of the initial term. The foregoing will be payable as follows:
a lump sum equal to one year's then current base salary payable
within ten days of such termination date and the balance, if any,
payable in 24 equal monthly installments.
35
<PAGE>
(2) Mr. Castaldo's stock options granted under the Option Agreement (as
defined in the agreement) shall vest as set forth in and in accordance
with the terms and provisions of the Option Agreement;
(3) Mr. Castaldo's health and medical insurance benefits will be continued
at our expense through the date which is 24 months following the
termination date; and
(4) any portion of bonus that was deferred under the Pollo Tropical
Executive Bonus Plan will be payable in a lump sum within ten days of
the termination date.
Mr. Castaldo's agreement includes non-competition and non-solicitation
provisions effective during the term of the agreement and for two years
following its termination.
Option Agreements Pursuant to the 1996 Long-term Incentive Plan
Vituli Plan Option Agreement. On December 30, 1996, pursuant to the
Securities Purchase Agreement dated as of March 6, 1996 among Holdings, the
stockholders of Holdings, BIB Holdings and us, Holdings granted to Alan Vituli,
under the 1996 Long-Term Incentive Plan, an option to purchase 43,350 shares of
Holdings' common stock. The option:
(1) was immediately exercisable with regard to 15,300 shares of Holdings'
common stock at an exercise price of $110.00 per share; and
(2) was to become exercisable on June 1, 1997 with regard to:
(a) 15,300 shares of Holdings' common stock at an exercise price of
$130.00 per share; and
(b) 12,750 shares of Holdings' common stock at an exercise price of
$140.00 per share.
On January 22, 1997, Mr. Vituli contributed these options to the Vituli
Family Trust for the benefit of his children.
In connection with the investment by Madison Dearborn Capital Partners, L.P.
and Madison Dearborn Capital Partners II, L.P. in 1997, Holdings granted an
option to purchase 43,350 shares of Holdings' common stock under the 1996 Long-
Term Incentive Plan in exchange for the options held by the Vituli Family
Trust. The Vituli Family Trust agreed to reduce the exercise price to $101.7646
per share. The new option:
(1) has a term of ten years from the date of grant;
(2) became exercisable:
(a) on the date of grant with regard to 15,300 shares of Holdings'
common stock;
(b) on December 31, 1997 with regard to 5,610 shares of Holdings'
common stock;
(c) on December 31, 1998 with regard to 5,610 shares of Holdings'
common stock;
(d) on December 31, 1999 with regard to 5,610 shares of Holdings'
common stock; and
(3) will become exercisable:
(a) on December 31, 2000 with regard to 11,220 shares of Holdings'
common stock.
Accordino Plan Option Agreement. On December 30, 1996, pursuant to the
Securities Purchase Agreement dated as of March 6, 1996, Holdings granted to
Daniel T. Accordino, under the 1996 Long-Term Incentive Plan, an option to
purchase 28,900 shares of Holdings' common stock. The option:
(1) was immediately exercisable with regard to 10,200 shares of Holdings'
common stock at an exercise price of $110.00 per share; and
(2) was to become exercisable on December 31, 1997 with regard to:
(a) 10,200 shares of Holdings' common stock at an exercise price of
$130.00 per share; and
(b) 8,500 shares of Holdings' common stock at an exercise price of
$140.00 per share.
36
<PAGE>
In connection with the investment by Madison Dearborn Capital Partners, L.P.
and Madison Dearborn Capital Partners II, L.P. in 1997, the option granted to
Mr. Accordino was canceled and Holdings granted to Mr. Accordino, under the
1996 Long-Term Incentive Plan, an option to purchase 28,900 shares of Holdings'
common stock at an exercise price of $101.7646 per share. The new option:
(1) has a term of ten years from the date of grant;
(2) became exercisable:
(a) on the date of grant with regard to 10,200 shares of Holdings'
common stock;
(b) on December 31, 1997 with regard to 3,740 shares of Holdings'
common stock;
(c) on December 31, 1998 with regard to 3,740 shares of Holdings'
common stock;
(d) on December 31, 1999 with regard to 3,740 shares of Holdings'
common stock, and
(3) will become exercisable:
(a) on December 31, 2000 with regard to 7,480 shares of Holdings'
common stock.
Other Option Agreements
Vituli Non-Plan Option Agreement. In connection with the investment by
Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
in 1997, Holdings granted to Mr. Vituli a nonqualified stock option to purchase
29,480 shares of Holdings' common stock at an exercise price of $101.7646. The
option will have a term of ten years from the date of grant and will become
exercisable in five equal parts on the five consecutive anniversaries of the
date of grant. The option will have substantially the same terms as options
issued under the 1996 Long-Term Incentive Plan with respect to:
(1) the method of payment of the exercise price of the option; and
(2) the effect of a Change of Control (as defined in the 1996 Long-Term
Incentive Plan).
Accordino Non-Plan Option Agreement. In connection with the investment by
Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
in 1997, Holdings granted to Mr. Accordino a nonqualified stock option to
purchase 2,579 shares of Holdings' common stock at an exercise price of
$101.7646. The option will have a term of ten years from the date of grant and
will become exercisable in five equal parts on the five consecutive
anniversaries of the date of grant. The option will have substantially the same
terms as the option granted to Mr. Vituli.
Zirkman Non-Plan Option Agreement. In connection with the investment by
Madison Dearborn Partners, L.P. and Madison Dearborn Capital Partners II, L.P.
in 1997, Holdings granted to Mr. Zirkman a nonqualified stock option to
purchase 368 shares of Holdings' common stock at an exercise price of
$101.7646. The option will have a term of ten years from the date of grant and
will become exercisable in five substantially equal parts on the five
consecutive anniversaries of the date of grant. The option will have
substantially the same terms as the option granted to Mr. Vituli.
Castaldo Option Agreement. In conjunction with Mr. Castaldo's employment
agreement Holdings granted Mr. Castaldo a nonqualified stock option to purchase
50,000 shares of Holdings' Pollo Tropical class of common stock under the 1998
Pollo Tropical Long-Term Incentive Plan. The option:
(1) has a term of ten years from the date of grant;
(2) became exercisable on July 19, 1999 with regard to 20,000 shares of
Holdings' Pollo Tropical common stock at an exercise price of $77.50
per share; and
(3) will become exercisable:
(a) on July 19, 2000 with regard to 7,500 shares of Holdings' Pollo
Tropical common stock at an exercise price of $88.80 per share;
37
<PAGE>
(b) on July 19, 2001 with regard to 7,500 shares of Holdings' Pollo
Tropical common stock at an exercise price of $102.90 per share;
(c) on July 19, 2002 with regard to 7,500 shares of Holdings' Pollo
Tropical common stick at an exercise price of $119.50 per share;
and
(d) on July 19, 2003 with regard to 7,500 shares of Holdings' Pollo
Tropical common stock at an exercise price of $137.00 per share.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth the number and percentage of shares of our
voting stock and Holdings' voting common stock beneficially owned, as of March
15, 2000, by:
(1) all persons known by us to be the beneficial owners of more than 5% of
the shares of such voting common stock;
(2) each of our directors who owns shares of such voting common stock;
(3) each of our executive officers included in the Summary Compensation
Table above; and
(4) all of our executive officers and directors as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
----------------------------
Number Percentage
------------- --------------
<S> <C> <C> <C> <C>
Stockholders of Carrols
Corporation:
Carrols Holdings 10 100%
Corporation.............
968 James Street
Syracuse, New York 13203
<CAPTION>
Carrols Class Pollo Tropical Class
---------------------------- ------------------------
Number Percentage Number Percentage
------------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Stockholders of Carrols
Holdings Corporation(a):
BIB Holdings (Bermuda) 566,667 46.8% -- --
Ltd.(b).................
c/o Dilmun Investments
Metro Center
One Station Place
Stamford, CT 06902
Madison Dearborn Capital 283,333 23.4% -- --
Partners, L.P. .........
Three First National
Plaza
Suite 3800
Chicago, IL 60602
Madison Dearborn Capital 283,334 23.4% -- --
Partners II, L.P. ......
(Same address as Madison
Dearborn Capital
Partners, L.P.)
Executive Officers and
Directors:
Alan Vituli(c).......... 59,645 4.8%
Daniel T. Accordino..... 23,828 1.9%
Nicholas A. Castaldo.... -- -- 20,000 2.0%
Paul R. Flanders........ 1,450 *
Joseph A. Zirkman....... 1,175 *
Clayton E. Wilhite...... 625 *
Directors and executive
officers of Carrols as
a group (11 persons)... 87,291 7.1% 20,000 2.0%
</TABLE>
- --------
* Less than one percent.
38
<PAGE>
(a) The number of shares shown in the table includes stock options which are
currently exercisable or exercisable within 60 days to purchase: 49,818
shares held by Mr. Vituli; 22,968 shares held by Mr. Accordino; 20,000 held
by Mr. Castaldo; 1,450 shares held by Mr. Flanders; 1,052 shares held by
Mr. Zirkman; and 625 shares held by Mr. Wilhite.
(b) These 566,667 shares of Holdings' common stock were previously owned by
Atlantic Restaurants, Inc. which was formed to effect the acquisition of
the company in 1996. Atlantic Restaurants, Inc., which was a wholly-owned
subsidiary of BIB Holdings, was merged into BIB Holdings on February 10,
1999.
(c) Includes 32,130 vested stock options contributed to and held by the Vituli
Family Trust.
Item 13. Certain Relationships and Related Transactions
Stockholders Agreement. On March 27, 1997, in connection with the investment
by Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital
Partners II, L.P., all holders of Holdings' voting common stock entered into a
Stockholders Agreement. The agreement provides that all holders of Holdings'
voting common stock will vote their common stock in order to cause the
following individuals to be elected to the Board of Directors of Holdings and
each of its subsidiaries (including us):
(a) three representatives designated collectively by Madison Dearborn
Capital Partners, L.P. and Madison Dearborn Capital Partners II, L.P.;
(b) three representatives designated by BIB Holdings; and
(c) two representatives designated by Mr. Vituli as long as Mr. Vituli is
our Chief Executive Officer, subject in each case to adjustment if the
percentage holdings of each decreases below a certain threshold.
In addition, the agreement provides for certain limitations on the ability of
holders of Holdings' common stock to sell, transfer, assign, pledge or
otherwise dispose of their common stock. The agreement contains covenants
requiring us to obtain the prior consent of Madison Dearborn Capital Partners,
L.P., Madison Dearborn Capital Partners II, L.P., and BIB Holdings before
taking certain actions including the redemption, purchase or other acquisition
of Holdings' capital budget approved by Holdings' Board of Directors for that
year or the entry into the ownership, active management or operation of any
business other than Burger King franchise restaurants.
Registration Rights Agreement. On March 27, 1997, in connection with the
investment by Madison Dearborn Capital Partners, L.P. and Madison Dearborn
Capital Partners II, L.P., those entities, BIB Holdings, Alan Vituli, Daniel T.
Accordino and Joseph A. Zirkman entered into a registration agreement with
Holdings. The registration agreement provides for demand and piggyback rights
with respect to Holdings' common stock. The Madison Dearborn Capital Partners,
L.P. and Madison Dearborn Capital Partners II, L.P. or BIB Holdings may demand
registration under the Securities Act of all or any portion of their shares of
Holdings' common stock or options for shares of Holdings' common stock (the
"Registrable Securities"), provided that:
(1) in the case of the first demand registration, Madison Dearborn Capital
Partners, L.P., and Madison Dearborn Capital Partners II, L.P. and BIB
Holdings must consent to a demand registration unless Holdings has
completed a registered public offering of the Holdings' common stock;
and
(2) all demand registrations on Form S-1 must be underwritten.
Madison Dearborn Capital Partners, L.P. and Madison Dearborn Capital Partners
II, L.P., collectively, and BIB Holdings are each entitled to request:
(1) three demand registrations on Form S-1 in which Holdings will pay all
registration expenses, provided that the offering value of the
Registrable Securities is at least $15 million; and
(2) an unlimited number of demand registrations on Form S-3 in which
Holdings will pay all registration expenses, provided that the offering
value of the Registrable Securities is at least $5 million with an
underwritten offering equal to at least $10 million.
39
<PAGE>
Whenever Holdings proposes to register any of its securities (other than
pursuant to a demand registration) and the registration form may be used for
the registration of Registrable Securities, Holdings shall give prompt written
notice to all holders of Registrable Securities of its intention to effect such
a registration and shall include in such registration all Registrable
Securities to which Holdings has received written requests for inclusion in
such registration within 20 days after receipt of Holdings' notice. Holdings
shall pay the registration expenses of the holders of Registrable Securities in
all such piggyback registrations. The Registration Agreement contains typical
"cut back" provisions in connection with both demand registrations and
piggyback registrations. We will provide the holders of the Registrable
Securities with typical indemnification in the event of certain misstatements
or omissions made in connection with both demand registrations and piggyback
registrations.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
CARROLS CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants............. F-1
Financial Statements:
Consolidated Balance Sheets.................................. F-2
Consolidated Statements of Operations........................ F-3
Consolidated Statements of Stockholder's Equity.............. F-4
Consolidated Statements of Cash Flows........................ F-5
Notes to Consolidated Financial Statements................... F-6 to F-19
</TABLE>
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule Description Page
-------- ----------- ----
<C> <S> <C>
II Valuation and Qualifying Accounts F-20
</TABLE>
Schedules other than those listed are omitted for the reason that they are
not required, not applicable, or the required information is shown in the
financial statements or notes thereto.
Separate financial statements of the Company are not filed for the reasons
that (1) consolidated statements of the Company and its consolidated
subsidiaries are filed and (2) the Company is primarily an operating Company
and all subsidiaries included in the consolidated financial statements filed
are wholly-owned, and indebtedness of all subsidiaries included in the
consolidated financial statements to any person other than the Company does not
exceed 5% of the total assets as shown by the Consolidated Balance Sheet at
December 31, 1999.
Reports on Form 8-K--No current reports on Form 8-K were filed during the
quarter ended January 2, 2000.
40
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated June 3, 1998 by and between Carrols
Corporation and Pollo Tropical, Inc. (incorporated by reference to
Exhibit (c)(1) to the Tender Offer Statement on Schedule 14 (d)(1)
dated July 3, 1998)
3.1 Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.(3)(a) to Carrols Corporation's 1987 Annual Report on Form
10-K)
3.2 Certificate of Amendment of the Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.2 to Carrols Corporation's
Amendment No. 1 to Form S-4 filed March 24, 1999)
3.3 Restated By-laws (incorporated by reference to Exhibit 3.(3)(b) to
Carrols Corporation's 1986 Annual Report on Form 10-K)
3.4 Certificate of Amendment to the Restated Certificate of Incorporation
of Carrols Holdings Corporation (incorporated by reference to Exhibit
3.1 to Carrols Corporation's September 30, 1999 Quarterly Report on
Form 10-Q)
4.1 Indenture, dated as of November 24, 1998, between Carrols Corporation,
the Guarantors named therein and IBJ Schroder Bank & Trust Company, as
Trustee (incorporated by reference to Exhibit 4.1 to Carrols
Corporation's Form S-4 filed February 2, 1999)
4.2 Exchange and Registration Rights Agreement, dated as of November 24,
1998, among Carrols Corporation and Chase Securities Inc. and
NationsBanc Montgomery Securities LLC (incorporated by reference to
Exhibit 4.2 to Carrols Corporation's Form S-4 filed on February 2,
1999
4.3 Form of 9 1/2% Senior Subordinated Note due 2008 (incorporated by
reference to Exhibit 4.3 to Carrols Corporation's Form S-4 filed
February 2, 1999)
10.1 Loan Agreement dated as of May 12, 1997 by and among Carrols
Corporation, Texas Commerce Bank National Association, Heller
Financial, Inc., First Union National Bank of North Carolina, and the
other lenders now or thereafter parties thereto (incorporated by
reference to Exhibit 10.1 to Carrols Corporation's Form S-4 filed
February 2, 1999)
10.2 Stock Purchase Agreement dated as of February 25, 1997 by and among
Madison Dearborn Capital Partners, L.P., Madison Dearborn Capital
Partners II, L.P., Atlantic Restaurants, Inc. and Carrols Holdings
Corporation (incorporated by reference to Exhibit 10.12 to Carrols
Corporation's 1996 Annual Report on Form 10-K)
(2)10.3 1994 Regional Directors Bonus Plan (incorporated by reference to
Exhibit 10.19 to Carrols Corporation's 1994 Annual Report on Form 10-K)
(2)10.4 Amended and Restated Employment Agreement dated as of April 3, 1996 by
and between Carrols Corporation and Alan Vituli (incorporate reference
to Exhibit 10.23 to Carrols Corporation's Current Report on Form 8-K
filed on April 10, 1996)
(2)10.5 Amended and Restated Employment Agreement dated as of April 3, 1996 by
and between Carrols Corporation and Daniel T. Accordino (incorporated
by reference to Exhibit 10.24 to Carrols Corporation's Current Report
on Form 8-K filed on April 10, 1996)
(2)10.6 Amended and Restated Employment Agreement dated as of July 20, 1998 by
and between Carrols Corporation and Nicholas A. Castaldo (incorporated
by reference to Exhibit 10.11 to Carrols Corporation's Form S-4 filed
February 2, 1999)
(2)10.7 Carrols Corporation 1996 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.20 to Carrols Corporation's 1996 Annual Report
on Form 10-K)
(2)10.8 Stock Option Agreement dated as of December 30, 1996 by and between
Carrols Corporation and Alan Vituli (incorporated by reference to
Exhibit 10.21 to Carrols Corporation's 1996 Annual Report on Form 10-K)
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
(2)10.9 Stock Option Agreement dated as of December 30, 1996 by and between
Carrols Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.22 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.10 Form of Stockholders Agreement by and among Carrols Holdings
Corporation, Madison Dearborn Capital Partners, L.P., Madison
Dearborn Capital Partners II, L.P., Atlantic Restaurants, Inc.,
Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman (incorporated
by reference to Exhibit 10.23 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.11 Form of Registration Agreement by and among Carrols Holdings
Corporation, Atlantic Restaurants, Inc., Madison Dearborn Capital
Partners, L.P., Madison Dearborn Capital Partners II, L.P.,
Alan Vituli, Daniel T. Accordino and Joseph A. Zirkman (incorporated
by reference to Exhibit 10.24 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.12 Form of Second Amended and Restated Employment Agreement by and
between Carrols Corporation and Alan Vituli (incorporated by
reference to Exhibit 10.25 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.13 Form of Second Amended and Restated Employment Agreement by and
between Carrols Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.26 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
10.14 Form of Carrols Holdings Corporation 1996 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.27 to Carrols Corporation's
1996 Annual Report on Form 10-K)
(2)10.15 Form of Stock Option Agreement by and between Carrols Holdings
Corporation and Alan Vituli (incorporated by reference to Exhibit
10.28 to Carrols Corporation's 1996 Annual Report on Form 10-K)
(2)10.16 Form of Stock Option Agreement by and between Carrols Holdings
Corporation and Daniel T. Accordino (incorporated by reference to
Exhibit 10.29 to Carrols Corporation's 1996 Annual Report on Form 10-
K)
(2)10.17 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Alan Vituli (incorporated by reference to
Exhibit 10.30 to Carrols Corporation's 1996 Annual Report on Form 10-
K)
(2)10.18 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Daniel T. Accordino (incorporated by
reference to Exhibit 10.31 to Carrols Corporation's 1996 Annual
Report on Form 10-K)
(2)10.19 Form of Unvested Stock Option Agreement by and between Carrols
Holdings Corporation and Joseph A. Zirkman (incorporated by reference
to Exhibit 10.32 to Carrols Corporation's 1996 Annual Report on Form
10-K)
10.20 First Amendment to the Stock Purchase Agreement dated March 27, 1997
by and among Carrols Holdings Corporation, Atlantic Restaurants,
Inc., Madison Dearborn Capital Partners, L.P. and Madison Dearborn
Capital Partners II, L.P. (incorporated by reference to Exhibit 10.38
to Carrols Corporation's current report on Form 8-K filed March 27,
1997)
10.21 Purchase and Sale Agreement dated as of January 15, 1997 by and
between Carrols Corporation, as Purchaser, Omega Services, Inc. as
Seller and Mr. Harold W. Hobgood as Omega's Agent (incorporated by
reference to Exhibit 10.39 to Carrols Corporation's current report on
Form 8-K filed March 27, 1997)
10.22 Purchase and Sale Agreement dated as of January 15, 1997 by and
between Carrols Corporation, as Purchaser, Omega Services, Inc. as
Seller and Mr. Harold W. Hobgood as Omega's Agent (incorporated by
reference to Exhibit 10.40 to Carrols Corporation's current report on
Form 8-K filed March 27, 1997)
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.23 Purchase Agreement dated as of July 7, 1997 among Carrols
Corporation, as Purchaser, and the individuals and trusts listed
on Exhibit A attached thereto, as Sellers, the individuals and
entities listed on Exhibit B attached thereto, as Affiliated Real
Property Owners, and Richard D. Fors, Jr. and Charles J. Mund, as
the Seller's representatives (incorporated by reference to Exhibit
10.41 to Carrols Corporation's current report on Form 8-K filed
August 20, 1997)
(2)10.24 Carrols Holdings Corporation 1998 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10.29 to Carrols
Corporation's 1998 Annual Report on Form 10-K)
10.25 Loan Agreement dated as of February 12, 1999 by and among Carrols
Corporation, each of the Lenders party thereto, Manufacturers and
Traders Trust Company, as Co-Agent, Nationsbank, N.A., as Co-
Agent, Suntrust Bank, Atlanta, as Co-Agent and Chase Bank of
Texas, National Association, as Agent (incorporated by reference
to Exhibit 10.30 to Carrols Corporation's Amendment No. 1 to Form
S-4 filed March 24, 1999)
10.26 Supply Agreement between AmeriServe Food Distribution, Inc. and
Carrols Corporation dated January 31, 1999 (incorporated by
reference to Exhibit 10.31 to Carrols Corporation's June 30, 1999
Quarterly Report on Form 10-Q)
10.27 Amendment to Loan Agreement dated as of May 17, 1999 by and among
Carrols Corporation, each of the Lenders party thereto,
Manufacturers and Traders Trust Company, as Co-Agent, Nationsbank,
N.A., as Co-Agent, Suntrust Bank, Atlanta, as Co-Agent and Chase
Bank of Texas, National Association, as Agent (incorporated by
reference to Exhibit 10.32 to Carrols Corporation's June 30, 1999
Quarterly Report on Form 10-Q)
(2)10.28 Carrols Holdings Corporation 1998 Pollo Tropical Long-Term
Incentive Plan (incorporated by reference to Exhibit 10.1 to
Carrols Corporation's September 30, 1999 Quarterly Report on
Form 10-Q)
(1)(2)10.29 Carrols Corporation Retirement Savings Plan dated April 1, 1999.
21.1 List of Subsidiaries (incorporated by reference to Exhibit 21.1 to
Carrols Corporation's Form S-4 filed February 2, 1999)
(1)27 Financial Data Schedule
</TABLE>
- --------
(1)Filed herewith.
(2) Management contract or compensatory plan or arrangement identified pursuant
to this report.
43
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholder of Carrols Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholder's equity, cash flows, and
supplemental schedule present fairly, in all material respects, the financial
position of Carrols Corporation (a wholly owned subsidiaries of Carrols
Corporation) and its Subsidiaries at December 31, 1999 and December 31, 1998,
and the results of their operations and their cash flows for the three years
ended in the period December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
and schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provided a reasonable basis for the opinion expressed above.
/s/ Pricewaterhousecoopers LLP
Syracuse, New York
February 25, 2000
F-1
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 1,901,000 $ 6,777,000
Trade and other receivables, net of reserves of
$53,000 and $93,000, respectively 787,000 1,060,000
Inventories....................................... 4,211,000 3,431,000
Prepaid rent...................................... 1,829,000 1,370,000
Prepaid expenses and other current assets......... 1,629,000 1,398,000
Refundable income taxes (Note 7).................. 682,000 4,588,000
Deferred income taxes (Note 7).................... 6,475,000 3,956,000
------------ ------------
Total current assets............................... 17,514,000 22,580,000
------------ ------------
Property and equipment, at cost (Notes 3 and 4):
Land.............................................. 9,280,000 9,497,000
Buildings and improvements........................ 27,044,000 22,275,000
Leasehold improvements............................ 61,034,000 57,148,000
Equipment......................................... 102,647,000 81,630,000
Capital leases.................................... 14,407,000 14,570,000
------------ ------------
214,412,000 185,120,000
Less accumulated depreciation and amortization..... (91,599,000) (77,451,000)
------------ ------------
Net property and equipment......................... 122,813,000 107,669,000
------------ ------------
Franchise rights, at cost less accumulated
amortization of $34,174,000 and $29,785,000,
respectively...................................... 101,927,000 105,045,000
Intangible assets, at cost less accumulated
amortization of $11,328,000 and $9,630,000,
respectively...................................... 67,545,000 69,167,000
Other assets....................................... 10,228,000 11,363,000
Deferred income taxes (Note 7)..................... -- 2,986,000
------------ ------------
$320,027,000 $318,810,000
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................. $ 19,345,000 $ 11,162,000
Accrued interest.................................. 1,920,000 2,012,000
Accrued payroll, related taxes and benefits....... 7,267,000 9,390,000
Other liabilities................................. 6,302,000 7,153,000
Current portion of long-term debt (Note 4)........ 4,120,000 3,200,000
Current portion of capital lease obligations (Note
3)............................................... 256,000 296,000
------------ ------------
Total current liabilities.......................... 39,210,000 33,213,000
Long-term debt, net of current portion (Note 4).... 247,661,000 256,285,000
Capital lease obligations, net of current portion
(Note 3).......................................... 1,457,000 1,741,000
Deferred income--sale/leaseback of real estate
(Note 3).......................................... 4,463,000 4,274,000
Accrued postretirement benefits (Note 12).......... 1,913,000 1,708,000
Deferred income taxes (Note 7)..................... 1,208,000 --
Other liabilities.................................. 9,064,000 7,591,000
------------ ------------
Total liabilities.................................. 304,976,000 304,812,000
Commitments and contingencies (Notes 3 and 10)
Stockholder's equity (Note 8):
Common stock, par value $1; authorized 1,000
shares, issued and outstanding--10 shares......... 10 10
Additional paid-in capital......................... 24,484,990 24,484,990
Accumulated deficit................................ (9,434,000) (10,487,000)
------------ ------------
Total stockholder's equity......................... 15,051,000 13,998,000
------------ ------------
$320,027,000 $318,810,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant sales.................... $455,440,000 $416,190,000 $295,436,000
Franchise fees and royalty
revenues........................... 1,039,000 395,000 --
------------ ------------ ------------
Total revenues...................... 456,479,000 416,585,000 295,436,000
------------ ------------ ------------
Costs and expenses:
Cost of sales....................... 137,279,000 122,620,000 85,542,000
Restaurant wages and related
expenses........................... 134,125,000 121,732,000 89,447,000
Other restaurant operating
expenses........................... 89,093,000 82,710,000 61,691,000
Advertising expense................. 20,618,000 18,615,000 13,122,000
General and administrative.......... 23,102,000 19,219,000 13,121,000
Depreciation and amortization....... 23,898,000 20,005,000 15,102,000
------------ ------------ ------------
Total operating expenses............ 428,115,000 384,901,000 278,025,000
------------ ------------ ------------
Income from operations................ 28,364,000 31,684,000 17,411,000
Interest expense.................... 22,386,000 21,068,000 15,581,000
Interest income (Note 7)............ -- -- (983,000)
Refinancing expenses (Note 5)....... -- 1,639,000 --
------------ ------------ ------------
Income before income taxes and
extraordinary loss................... 5,978,000 8,977,000 2,813,000
Provision for income taxes (Note 7)... 3,826,000 4,847,000 655,000
------------ ------------ ------------
Income before extraordinary loss...... 2,152,000 4,130,000 2,158,000
Extraordinary loss on extinguishment
of debt, net of tax benefit (Note
4)................................... 1,099,000 3,701,000 --
------------ ------------ ------------
Net income............................ $ 1,053,000 $ 429,000 $ 2,158,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Additional Total
Common Paid-In- Accumulated Notes Stockholder's
Stock Capital Deficit Receivable Equity (Deficit)
------ ----------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1997................... 10 $ 1,411,990 $(10,574,000) $(2,500,000) $(11,662,000)
Net income............ 2,158,000 2,158,000
Dividends declared.... (4,338,000) (4,338,000)
Capital contribution.. 30,382,000 30,382,000
Tax benefit from sale
of stock options due
to change of
control.............. 907,000 907,000
Redemption of
warrants............. (2,500,000) 2,500,000
--- ----------- ------------ ----------- ------------
Balance at December 31,
1997................... 10 28,362,990 (10,916,000) -- 17,447,000
Net income............ 429,000 429,000
Dividends declared.... (3,878,000) (3,878,000)
--- ----------- ------------ ----------- ------------
Balance at December 31,
1998................... 10 24,484,990 (10,487,000) -- 13,998,000
Net income............ 1,053,000 1,053,000
--- ----------- ------------ ----------- ------------
Balance at December 31,
1999................... 10 $24,484,990 $ (9,434,000) $ -- $ 15,051,000
=== =========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- ------------
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income......................... $ 1,053,000 $ 429,000 $ 2,158,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Loss (gain) on disposal of property
and equipment..................... 102,000 (96,000) (344,000)
Depreciation and amortization...... 23,898,000 20,005,000 15,102,000
Extraordinary loss on
extinguishment of debt, net of
tax............................... 1,099,000 3,701,000 --
Deferred income taxes.............. 1,675,000 854,000 860,000
Changes in operating assets and
liabilities:
Refundable income taxes............ 4,632,000 2,204,000 (2,141,000)
Accounts payable................... 8,183,000 (3,169,000) 2,631,000
Accrued payroll, related taxes and
benefits.......................... (2,123,000) 2,128,000 1,286,000
Accrued income taxes............... -- -- (1,058,000)
Other liabilities--current......... (851,000) 383,000 1,229,000
Accrued interest................... (92,000) (2,758,000) 29,000
Other liabilities--long-term....... 1,953,000 -- 1,593,000
Other.............................. (1,356,000) (408,000) (1,405,000)
------------ ------------- ------------
Net cash provided from operating
activities......................... 38,173,000 23,273,000 19,940,000
------------ ------------- ------------
Cash Flows for Investing
Activities:
Capital expenditures:
Purchase of Pollo Tropical, Inc.
net of cash acquired............. -- (94,632,000) --
New restaurant development........ (14,085,000) (13,297,000) (9,732,000)
Restaurant remodeling............. (9,795,000) (9,500,000) (3,807,000)
Corporate and restaurant
information systems.............. (11,883,000) (4,246,000) (320,000)
Other capital expenditures........ (9,569,000) (6,252,000) (4,351,000)
Acquisition of restaurants........ (3,833,000) (629,000) (78,485,000)
Payments received on notes and
mortgages......................... -- 715,000 88,000
Proceeds from dispositions of
property and equipment............ 230,000 1,337,000 1,224,000
------------ ------------- ------------
Net cash used for investing
activities......................... $(48,935,000) $(126,504,000) $(95,383,000)
------------ ------------- ------------
Cash Flows from Financing
Activities:
Proceeds from long-term debt, net.. $ -- $ 245,000,000 $ 65,206,000
Principal payments and retirements
of long-term obligations.......... (8,028,000) (143,851,000) (26,184,000)
Proceeds from sale-leaseback
transactions...................... 14,800,000 20,532,000 13,000,000
Dividends paid..................... -- (3,878,000) (4,338,000)
Financing costs associated with
issuance of debt.................. (886,000) (5,408,000) (2,592,000)
Redemption premium on retirement of
debt.............................. -- (4,639,000) --
Exercise of employee stock options
and related tax benefits.......... -- -- 907,000
Capital contribution............... -- -- 30,382,000
------------ ------------- ------------
Net cash provided from financing
activities......................... 5,886,000 107,756,000 76,381,000
------------ ------------- ------------
Net increase (decrease) in cash and
cash equivalents................... (4,876,000) 4,525,000 938,000
Cash and cash equivalents, beginning
of year............................ 6,777,000 2,252,000 1,314,000
------------ ------------- ------------
Cash and cash equivalents, end of
year............................... $ 1,901,000 $ 6,777,000 $ 2,252,000
============ ============= ============
Supplemental disclosures:
Interest paid on debt.............. $ 22,739,000 $ 23,826,000 $ 15,552,000
Income taxes paid.................. $ 1,594,000 $ 3,652,000 $ 1,456,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies
Basis of Consolidation. The consolidated financial statements include the
accounts of Carrols Corporation and its Subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated in consolidation.
The Company is a wholly-owned subsidiary of Carrols Holdings Corporation
("Holdings").
At December 31, 1999 the Company operated, as franchisee, 352 quick-service
restaurants under the trade name "Burger King" in thirteen Northeastern,
Midwestern and Southeastern states. As described in Note 13, during 1998, the
Company purchased Pollo Tropical, Inc. ("Pollo Tropical"). At December 31,
1999 the Company also owned and operated 45 Pollo Tropical restaurants located
in Florida and franchised 23 restaurants in Puerto Rico, Ecuador and Florida.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Inventories. Inventories are stated at the lower of cost (first-in, first-
out) or market. Inventories are primarily comprised of food and paper.
Property and Equipment. Property and equipment are recorded at cost.
Depreciation and amortization is provided using the straight-line method over
the following estimated useful lives:
<TABLE>
<C> <S>
Buildings and improvements...... 5 to 20 years
Leasehold improvements.......... Remaining life of lease including renewal
options or life of asset whichever is
shorter
Equipment....................... 3 to 10 years
Computer hardware and software.. 3 to 7 years
Capital leases.................. Remaining life of lease
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998 and 1997
was $15,314,000, $12,737,000 and $9,718,000, respectively.
Burger King Franchise Rights. Fees for initial franchises and renewals are
amortized using the straight-line method over the term of the agreement,
generally twenty years. Acquisition costs allocated to franchise rights are
amortized using the straight-line method, principally over the remaining lives
of the acquired leases including renewal options, but not in excess of 40
years.
Intangible Assets. Intangible assets consist of the excess purchase price
over net assets acquired, beneficial leases and trademarks. The excess
purchase price over net assets acquired and trademarks are amortized using the
straight line method over 40 years. Beneficial leases are amortized using the
straight-line method over the lives of the leases including renewal options,
but not in excess of 40 years.
Long-Lived Assets. The Company assesses the recoverability of property and
equipment, franchise rights and intangible assets by determining whether the
amortization of these assets, over their respective remaining lives, can be
recovered through undiscounted future operating cash flows. Impairment is
reviewed whenever events or changes in circumstances indicate the carrying
amounts of these assets may not be fully recoverable.
Deferred Financing Costs. Financing costs, which are included in other
assets, were incurred in obtaining long-term debt are capitalized and
amortized over the life of the related debt on an effective interest basis for
F-6
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
costs associated with the Company's unsecured senior subordinated notes and on
a straight-line basis for costs associated with the Company's senior credit
facility.
Franchise Fees and Royalty Revenues associated with Pollo Tropical
restaurants. Franchise fees are typically collected upon execution of an area
development and/or franchise agreement. Royalty revenues are based on a
percent of gross sales. Franchise fees are initially recorded as deferred
revenue and are recognized in earnings when the franchised restaurants are
opened, or upon forfeiture of such fees by the franchisees pursuant to the
terms of the franchise development agreements.
Income Taxes. The Company and its subsidiaries have filed separate federal
income tax returns for the year ended December 31, 1997 and a consolidated
federal income tax return for the years ended December 31, 1998 and 1999.
Advertising Costs. All advertising costs are expensed as incurred.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Self Insurance. The Company is generally self-insured for workers
compensation and general liability insurance. The Company maintains stop loss
coverage for both individual and aggregate claim amounts. Losses are accrued
based upon the Company's estimates of the aggregate liability for claims based
on Company experience and certain actuarial methods used to measure such
estimates.
Fair Value of Financial Instruments. The following methods were used to
estimate the fair value of each class of financial instruments for which it is
practicable to estimate that fair value:
. Current Assets and Liabilities. The carrying value of cash and cash
equivalents and accrued liabilities approximates fair value because of
the short maturity of those instruments.
. Senior Subordinated Notes. The fair values of outstanding senior
subordinated notes and senior notes are based on quoted market prices.
The fair values at December 31, 1999 and 1998 are approximately
$153,850,000, and $171,275,000, respectively.
. Revolving and Term Loan Facilities. Rates currently available to the
Company for debt with similar terms and remaining maturities are used to
estimate fair value. The recorded amounts, as of December 31, 1999 and
1998, approximated fair value.
Stock-Based Compensation. Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," (SFAS 123) permits entities to
recognize as an expense over the vesting period the fair value of all stock-
based awards on the date of grant. Alternatively, SFAS 123 also allowed
entities to continue to apply the provisions of APB 25 and provide pro forma
net income disclosures for employee stock option grants as if the fair-value-
based method defined in SFAS 123 has been applied. The Company has elected to
continue to apply the provisions of APB 25 and provide the pro forma
disclosure provisions of SFAS 123.
Fiscal Year. The Company uses a 52-53 week fiscal year ending on the Sunday
closest to December 31. The financial statements included herein are as of
January 2, 2000 (52 weeks), January 3, 1999 (53 weeks) and December 28, 1997
(52 weeks).
F-7
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Reclassifications. Certain amounts for prior years have been reclassified to
conform to the current year presentation.
2. Intangible Assets
Intangible assets at December 31, net of accumulated amortization, consist
of the following:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Excess cost over net assets acquired................ $61,912,000 $62,961,000
Beneficial leases................................... 5,192,000 5,665,000
Trademarks.......................................... 421,000 315,000
Other............................................... 20,000 226,000
----------- -----------
$67,545,000 $69,167,000
=========== ===========
</TABLE>
3. Leases
The Company utilizes land and buildings in its operations under various
lease agreements. These leases are generally for initial terms of twenty years
and, in most cases, contain renewal options for two to four additional five
year periods. The rent payable under such leases is generally a percentage of
sales with a provision for minimum rent. In addition, most leases require
payment of property taxes, insurance and utilities.
Deferred gains have been recorded as a result of sale/leaseback transactions
and are being amortized over the lives of the leases. These leases are
operating leases, with a twenty year primary term with four five-year renewal
options. Accumulated amortization pertaining to capital leases for the years
ended December 31, 1999 and 1998 was $10,898,000 and $10,580,000,
respectively.
Minimum rent commitments under capital and non-cancelable operating leases
at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Years Ending Capital Operating
------------ ---------- ------------
<S> <C> <C>
2000............................................... $ 466,000 $ 25,533,000
2001............................................... 455,000 25,003,000
2002............................................... 425,000 23,977,000
2003............................................... 288,000 22,852,000
2004............................................... 229,000 21,577,000
2005 and thereafter................................ 812,000 167,134,000
---------- ------------
Total minimum lease payments....................... 2,675,000 $286,076,000
========== ============
Less amount representing interest................ 962,000
----------
Total obligations under capital leases............. 1,713,000
Less current portion............................. (256,000)
----------
Long-term obligations under capital leases......... $1,457,000
==========
</TABLE>
F-8
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
Total rent expense on operating leases, including percentage rent on both
operating and capital leases, for the past three years was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rent on real property.......... $25,775,000 $22,441,000 $15,303,000
Additional rent based on a percentage
of sales.............................. 3,901,000 4,328,000 3,099,000
Equipment rent......................... 226,000 39,000 162,000
----------- ----------- -----------
$29,902,000 $26,808,000 $18,564,000
=========== =========== ===========
</TABLE>
4. Long-Term Debt
Long-term debt at December 31 consisted of:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Collateralized:
Revolving credit facility.................... $ 34,100,000 $ 38,619,000
Term loan facility........................... 47,000,000 50,000,000
Other notes payable with interest rates to
10%......................................... 681,000 866,000
Unsecured 9.5% senior subordinated notes....... 170,000,000 170,000,000
------------ ------------
251,781,000 259,485,000
Less current portion........................... (4,120,000) (3,200,000)
------------ ------------
$247,661,000 $256,285,000
============ ============
</TABLE>
On February 12, 1999, the Company entered into a new senior credit facility
with Chase Bank of Texas, National Association, as agent and lender, and other
lenders as parties thereto. This facility provides for total borrowings of
$155 million and consists of a $105 million revolving credit facility
(including a standby letter of credit facility for up to $5 million) and a $50
million term loan facility.
In connection with the new senior credit facility above, the Company has
recognized an extraordinary loss of $1,099,000 in 1999 which is net of a
$726,000 income tax benefit. This loss represents the write off of unamortized
debt issue costs related to the previous senior credit facility.
Borrowings under the revolving credit facility may be used to finance
permitted acquisitions and new store development, or for working capital and
general corporate purposes. At December 31, 1999, $68,250,000 was available
for borrowings under the revolving credit facility, after reserving $2,650,000
for a letter of credit guaranteed by the facility.
Borrowings under the revolving credit facility and the term loan facility
bear interest at a per annum rate, at the Company's option, of either:
1) the greater of the prime rate or the federal funds rate plus .50% plus
a margin ranging from 0% to .75%, based on debt to cash flow ratios;
or
2) LIBOR plus a margin ranging from 1.00% to 2.25%, based on debt to cash
flow ratios.
F-9
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The revolving credit facility expires on December 31, 2003 (subject to a
one-year extension upon request and unanimous approval of the lenders).
Remaining amounts under the term loan facility are repayable as follows:
1) an aggregate of $4.0 million payable in four quarterly installments in
2000;
2) an aggregate of $5.0 million payable in four quarterly installments in
2001;
3) an aggregate of $6.0 million payable in four quarterly installments in
2002;
4) an aggregate of $7.0 million payable in four quarterly installments in
2003; and
5) a final payment of $25.0 million payable upon the term loan facility's
maturity on December 31, 2003.
In general, the Company's obligations under the senior credit facility are
secured by all of the Company's assets, a pledge of the Company's common stock
and the stock of each of the Company's subsidiaries.
The Company issued $170 million of unsecured senior subordinated notes on
November 24, 1998. The senior subordinated notes bear interest at a rate of
9.5% payable semi-annually on June 1 and December 1 and mature on December 1,
2008. The notes are redeemable at the option of the Company in whole or in
part on or after December 1, 2003 at a price of 104.75% of the principal
amount if redeemed before December 1, 2004, 103.167% of the principal amount
if redeemed after December 1, 2004 but before December 1, 2005, 101.583% of
the principal amount if redeemed after December 1, 2005 but before December 1,
2006 and at 100% of the principal amount after December 1, 2006.
In connection with the issuance of the 9.5% senior subordinated notes, the
Company redeemed all of its outstanding 11.5% senior notes. This redemption
included aggregate principal amounts of $107,637,000, a redemption premium of
$4,639,000, and accrued interest to December 24, 1998 of $4,436,000. In
addition, the Company used the proceeds of the 9.5% notes to repay $47.9
million of its previous senior credit facility.
In connection with the redemption of the 11.5% senior notes in the fourth
quarter of 1998, the Company recognized an extraordinary loss of $3,701,000,
which is net of a $3,281,000 income tax benefit, for the redemption premium
and the write-off of $2,343,000 in unamortized debt issue costs related to the
11.5% notes.
Restrictive covenants of the senior subordinated notes and the senior credit
facility include limitations with respect to the Company's ability to issue
additional debt, incur liens, sell or acquire assets or businesses, pay
dividends and make certain investments. In addition, the senior credit
facility requires the Company to meet certain financial ratio tests.
At December 31, 1999, principal payments required on all long-term debt,
including the new senior credit facility, are as follows:
<TABLE>
<S> <C>
2000............................................................ $ 4,120,000
2001............................................................ 5,000,000
2002............................................................ 6,000,000
2003............................................................ 66,100,000
2004............................................................ --
Thereafter...................................................... 170,561,000
------------
$251,781,000
============
</TABLE>
F-10
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The weighted average interest rate for the years ended December 31, 1999 and
1998 was 8.9% and 9.9%, respectively.
5. Refinancing Expenses
The Company expensed all costs associated with its efforts to refinance its
existing debt in the third quarter of 1998 as the timing of any future
refinancing was then uncertain and the related activities had ceased.
Approximately $1.2 million of these costs related to losses on interest rate
hedge transactions.
6. Summarized Financial Information of Certain Subsidiaries
The following table presents summarized combined financial information for
the wholly-owned subsidiaries that unconditionally guarantee the $170 million
senior subordinated notes of the Company. These subsidiaries are Carrols
Realty Holdings, Carrols Realty I Corp., Carrols Realty II Corp., Carrols J.G.
Corp., Quanta Advertising Corp., Pollo Franchise Inc. and Pollo Operations,
Inc. The Statement of Operations for the year ended December 31, 1998 includes
the operations of Pollo Operations, Inc. and Pollo Franchise Inc. for the
period July 10, 1998 (date of acquisition) through December 31, 1998.
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
----------- -----------
<S> <C> <C> <C>
Balance sheet:
Current assets.................................... $ 2,657,000 $ 910,000
Non-current assets................................ 89,527,000 89,922,000
Current liabilities............................... 5,734,000 7,401,000
Non-current liabilities........................... 78,549,000 79,129,000
<CAPTION>
Year Ended December 31,
-----------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Statement of Operations:
Revenues.............................. $84,271,000 $35,543,000 $ 283,000
Operating expenses.................... 71,719,000 30,576,000 283,000
Income from operations................ 12,552,000 4,967,000 --
Net income............................ 2,048,000 805,000 --
</TABLE>
7. Income Taxes
The income tax provision was comprised of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.................................. $ 288,000 $ 152,000 $ 887,000
Foreign.................................. 239,000 114,000 --
State.................................... 744,000 471,000 628,000
---------- ---------- ----------
1,271,000 737,000 1,515,000
---------- ---------- ----------
Deferred:
Federal.................................. 2,188,000 3,602,000 (672,000)
State.................................... 367,000 508,000 (188,000)
---------- ---------- ----------
2,555,000 4,110,000 (860,000)
---------- ---------- ----------
$3,826,000 $4,847,000 $ 655,000
========== ========== ==========
</TABLE>
F-11
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The components of deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Current Deferred Tax Assets:
Accounts receivable and other reserves........... $ 260,000 $ 206,000
Accrued vacation benefits........................ 827,000 649,000
Other non-deductible accruals.................... 723,000 695,000
Loss on disposal of assets....................... -- 259,000
Reserve for closed restaurants................... 149,000 450,000
Net operating loss carrryforwards................ 4,516,000 1,697,000
---------- ----------
Total Current Deferred Tax Assets.................. 6,475,000 3,956,000
---------- ----------
Long Term Deferred Tax Assets/(Liabilities):
Deferred income on sale/leaseback of real
estate.......................................... 1,782,000 1,265,000
Postretirement benefit expenses.................. 764,000 723,000
Capital leases................................... 361,000 412,000
Property and equipment depreciation.............. (3,987,000) (1,216,000)
Net operating loss carryforwards................. 5,190,000 7,388,000
Amortization of franchise rights................. (6,772,000) (6,443,000)
Non-deductible rent expense...................... 762,000 843,000
Tax credit carryforwards......................... 471,000 --
Other............................................ 221,000 14,000
---------- ----------
Total Long-Term Net Deferred Tax
Assets/(Liabilities).............................. (1,208,000) 2,986,000
---------- ----------
Total Net Deferred Tax Assets...................... $5,267,000 $6,942,000
========== ==========
</TABLE>
The Company has net operating loss carryforwards for income tax purposes of
approximately $25 million, at December 31, 1999. The net operating loss
carryforwards expire in varying amounts beginning in 2003 through 2010. Due to
a change in ownership the Company is generally limited, for Federal income tax
purposes, to an annual utilization of net operating losses of $4,641,000. The
Company has net operating losses of approximately $11.7 million available to
be utilized in 2000 due to this limit not being fully utilized in prior years.
In addition, the Company has available Federal alternative minimum tax credit
carryforwards with no expiration date and other Federal tax credit
carryforwards which begin to expire in 2018. Realization of the deferred
income tax assets relating to net operating losses and tax credit
carryforwards is dependent on generating sufficient taxable income prior to
the expiration of these carryforwards. Based upon results of operations,
management believes it is more likely than not that the Company will generate
sufficient future taxable income to fully realize the benefit of deferred tax
assets, although there can be no assurance of this.
In connection with a tax appeals settlement, the Company recognized $983,000
of interest income in 1997.
F-12
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
A reconciliation of the statutory federal income tax rate to the effective
tax rates for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income
tax rate................. $2,034,000 34.0% $3,053,000 34.0% $ 957,000 34.0%
State income taxes, net of
federal benefit.......... 526,000 8.8 515,000 5.7 266,000 9.5
Nondeductible expenses.... 956,000 16.0 611,000 6.8 197,000 7.0
Tax appeals settlement.... -- -- -- -- (806,000) (28.7)
Foreign taxes............. 158,000 2.6 114,000 1.3 -- --
Miscellaneous............. 152,000 2.6 554,000 6.1 41,000 1.4
---------- ---- ---------- ---- --------- -----
$3,826,000 64.0% $4,847,000 53.9% $ 655,000 23.2%
========== ==== ========== ==== ========= =====
</TABLE>
Nondeductible expenses consist primarily of amortization of certain
franchise rights and other intangibles.
8. Stockholder's Equity
The Company
The Company has 1,000 shares of common stock authorized of which 10 shares
are issued and outstanding. The Company is 100% owned by Holdings. Dividends
on the Company's common stock are restricted to amounts permitted by various
loan agreements.
Holdings
During 1999, Holdings amended its Restated Certificate of Incorporation and
its stockholders approved and adopted the following actions: (1) 7,250 shares
of Holdings' Class A 10% Cumulative Redeemable Preferred Stock which were
authorized but unissued, were canceled; (2) Holdings' authorized common stock
was increased from 3,000,000 shares to 5,000,000 shares; and, (3) 100,000
shares of Preferred Stock, par value $0.01, were authorized.
Holdings' common stock was designated to consist of two series comprising of
3,000,000 shares of Carrols Stock, par value $0.01 per share, and 2,000,000
shares of Pollo Tropical Stock, par value $0.01 per share. The existing common
stock of Holdings was redesignated, on a share for share basis, for shares of
the Carrols class of common stock. The holders of the Carrols Stock have
exclusive voting rights; no holders of the Pollo Tropical Stock have voting
rights, except as may be required pursuant to Delaware law.
The Pollo Tropical class of Holdings' stock is considered a tracking stock,
which is a class of stock intended to track the separate performance of the
Company's Pollo Tropical division. This tracking stock was adopted as a
separate series of equity securities in order to provide a framework for
structuring employee incentive plans and to tie such incentives to the
business results and performance of the Pollo Tropical division.
The number of shares of Pollo Tropical class stock that initially represents
100% of the common stockholders' equity of Holdings attributable to the Pollo
Tropical Group, was established at 1,000,000 shares by the Board of Directors.
Of the 1,000,000 shares that are issuable, none have been issued, and 100,000
have been reserved for grants under the 1998 Pollo Tropical Long-Term
Incentive Plan, which is a Holdings stock option plan.
F-13
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
The Carrols class of Holdings' stock consists of the interest of Holdings in
all of its assets, liabilities and businesses, other than the assets,
liabilities and businesses attributed to the Pollo Tropical Group. Until the
issuance of any Pollo Tropical Stock, the rights, preferences and liabilities
of the Pollo Tropical Stock will be retained by Holdings. To the extent that
less than 100% of the authorized shares of Pollo Tropical Stock are issued,
the rights, preferences, assets and liabilities of the shares not issued
remain with Holdings and its existing Carrols class stockholders.
Of the 5,000,000 common shares authorized, 1,144,144 shares of Holdings'
Carrols common stock are issued and outstanding. In 1998, all preferred stock
was redeemed at the option of Holdings, at a price of $1,000 per share, plus
accrued dividends. In February 1997, a 1 for 3.701 reverse stock split was
effected to reduce the outstanding shares of common stock of Holdings to
850,000 shares. In 1997, Holdings also exercised its option to purchase
warrants at an aggregate price of $2,510,000 from a third party in exchange
for payment on a related loan.
On March 27, 1997, Holdings sold 283,334 shares of its common stock to
Madison Dearborn Capital Partners ("Madison Dearborn"), an independent third
party, for $30.4 million. On March 27, 1997, BIB Holdings (Bermuda) Ltd.
("BIB"), the then sole stockholder of Holdings, also sold 283,333 of its
shares of Holdings to Madison Dearborn resulting in both BIB and Madison
Dearborn having an equal interest in the Company.
Stock Options for Carrols Class Stock
In 1996, Holdings adopted a stock option plan entitled the 1996 Long-Term
Incentive Plan ("1996 Plan") and authorized a total of 106,250 shares to be
granted at prices ranging from $101.76 to $140.00 per share. Options under
this plan generally vest over a four year period. In 1998, Holdings adopted
the 1998 Directors' Stock Option Plan ("1998 Directors' Plan") authorizing to
grant up to 10,000 options to non-employee Directors. Options under this plan
are exercisable over four years. In addition, in conjunction with the 1997
sale of Holdings common stock to Madison Dearborn, additional options not part
of the 1996 Plan for 32,427 shares at a price of $101.76 were granted with
vesting over a five year period. As a result of the adoption of the Pollo
Tropical tracking stock, the stock options under these plans were redesignated
as options of Holdings' Carrols class common stock.
Stock Options for Pollo Tropical Tracking Stock
Holdings has also adopted the 1998 Pollo Tropical Long-Term Incentive Plan
("1998 Pollo Plan") authorizing to grant up to 100,000 shares of Holdings'
Pollo Tropical class of common stock. Options under this plan generally vest
over a five year period.
F-14
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
A summary of all option activity under Holdings' stock option plans for the
years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
NonPlan 1996 Directors Pollo
Options Plan Plan Plan
------- ---------- --------- --------
<S> <C> <C> <C> <C>
Shares Under Option:
Outstanding at December 31, 1996..... -- -- -- --
Granted............................ 32,427 86,710 -- --
Canceled........................... -- (570) -- --
------- ---------- ------ --------
Outstanding at December 31, 1997..... 32,427 86,140 -- --
Granted............................ -- 10,400 2,000 70,000
Canceled........................... -- (775) -- --
------- ---------- ------ --------
Outstanding at December 31, 1998..... 32,427 95,765 2,000 70,000
Granted............................ -- 6,245 500 6,250
Canceled........................... -- (3,587) (1,000) --
------- ---------- ------ --------
Outstanding at December 31, 1999..... 32,427 98,423 1,500 76,250
Grant Prices:
1997............................... $101.76 $101.76 to $ -- $ --
110.00
1998............................... -- 124.78 110.00 77.50 to
137.00
1999............................... -- 126.00 126.00 109.00
Average Option Price:
at December 31, 1997............... $101.76 $ 103.09 $ -- $ --
at December 31, 1998............... 101.76 105.32 110.00 92.31
at December 31, 1999............... 101.76 106.28 115.33 102.04
Options Exercisable:
at December 31, 1997............... -- 38,323 -- --
at December 31, 1998............... 6,486 53,474 500 --
at December 31, 1999............... 12,972 68,057 625 25,000
</TABLE>
Had compensation cost been determined based upon the fair value of the stock
options at grant date consistent with the method of SFAS 123, the Company's
pro-forma net income (loss) would have been $534,000, $(37,000) and $1,488,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
The fair value of each option grant was estimated using the minimum value
option pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 5.51% 5.60% 6.53%
Annual dividend yield............................. 0% 0% 0%
Expected life..................................... 5 years 5 years 5 years
</TABLE>
9. Business Segment Information
The Company is engaged in the quick-service restaurant industry, with two
restaurant concepts: Burger King operating as a franchisee and Pollo Tropical,
a Company owned concept. The Company's Burger King
F-15
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
restaurants are all located in the United States, primarily in the Northeast,
Southeast and Midwest. Pollo Tropical is a regional quick-service restaurant
chain featuring grilled marinated chicken and authentic "made from scratch"
side dishes. Pollo Tropical's core markets are located in south and central
Florida.
Segment information for December 31, 1997 is not presented, since the Pollo
Tropical acquisition did not occur until July 9, 1998 and previous to this the
Company operated its business as one segment whose results are reflected in
the 1997 Statement of Operations. For 1998, segment information includes
Burger King restaurants for the year ended December 31, 1998 and Pollo
Tropical for the period July 10, 1998 through December 31, 1998. Segment
information for 1999 and 1998 is shown in the following table. The "Other"
column includes corporate related items not allocated to reportable segments
and for income from operations, principally corporate depreciation and
amortization. Other identifiable assets consist primarily of franchise rights
and intangible assets. Non-operating expenses, comprised of interest expense,
interest income, and refinancing expenses and the extraordinary loss are
corporate related items and therefore have not been allocated to the
reportable segments.
<TABLE>
<CAPTION>
Burger King Pollo
Restaurants Tropical Other Consolidated
----------- -------- ------- ------------
($ in 000's)
<S> <C> <C> <C> <C>
Year Ended December 31, 1999:
Revenues........................ $372,689 $83,790 $ -- $456,479
Cost of sales................... 108,489 28,790 -- 137,279
Restaurant wages and related
expenses....................... 114,935 19,190 -- 134,125
Depreciation and amortization... 13,113 1,948 8,837 23,898
Income from operations.......... 22,742 14,459 (8,837) 28,364
Identifiable assets............. 199,907 24,168 95,952 320,027
Capital expenditures, excluding
acquisitions................... 32,159 9,522 3,651 45,332
Year Ended December 31, 1998:
Revenues........................ 381,042 35,543 -- 416,585
Cost of sales................... 110,269 12,351 -- 122,620
Restaurant wages and related
expenses....................... 113,456 8,276 -- 121,732
Depreciation and amortization... 11,620 1,018 7,367 20,005
Income from operations.......... 33,334 5,717 (7,367) 31,684
Identifiable assets............. 196,136 23,078 99,596 318,810
Capital expenditures, excluding
acquisitions................... 26,560 4,335 2,400 33,295
</TABLE>
10. Contingencies
On November 16, 1998, the Equal Employment Opportunity Commission ("EEOC")
filed suit in the United States District Court for the Northern District of
New York, under Title VII of the Civil rights Act of 1964, as amended, against
the Company.
The case is in the early phase of discovery; written discovery is required
to be completed by May 22, 2000, at which time the parties may file motions
for summary judgement. It is too early to make an evaluation of the likelihood
of an unfavorable outcome and/or an estimate of the amount or range of
potential loss. The Company intends to contest the case virorously and
believes it is without merit.
The Company is a party to various other legal proceedings arising from the
normal course of business. It is the Company's policy to accrue costs
associated with significant outstanding legal proceedings, which are able
F-16
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
to be estimated. Based on information currently available, management believes
adverse decisions relating to litigation and contingencies in the aggregate
would not materially affect the Company's results of operations, cash flows or
financial condition.
11. Retirement Plans
The Company offers two retirement plans, a savings plan for its salaried
Burger King employees (the "Carrols Corporation Retirement Savings Plan") and
a 401(k) plan for its Pollo Tropical employees (the "Pollo Tropical 401(k)
Retirement Savings Plan").
Effective April 1, 1999, the Carrols Corporation Retirement Savings Plan was
amended. Under this amendment, the plan was modified to include a savings
option pursuant to section 401(k) of the Internal Revenue Code in addition to
a post tax savings option. Under the amended plan, participating employees may
contribute up to 18% of their salary annually to either of the savings
options, subject to other limitations. The Company's contributions, which
begin to vest after three years and fully vest after seven years of service,
are equal to 50% of the employee's contributions to a maximum Company
contribution of $520 annually. The employees have various investment options
available under a trust established by the plan. The plan expense, including
Company contributions, was $245,000, $216,000 and $208,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Under the Pollo Tropical 401(k) Retirement Savings Plan, all employees who
are age 21 or older and who have been credited with at least 1,000 hours of
service within 12 consecutive months are eligible to participate in the 401K
Plan. The Company makes discretionary matching contributions, which are
allocated to participants based on the participant's eligible deferrals during
the plan year. Company contributions vest at a rate of 33% for each year of
service. Company contributions to the 401K Plan totaled $29,000 and $17,000,
for the years ended December 31, 1999 and 1998.
F-17
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
12. Postretirement Benefits
The Company provides postretirement medical and life insurance benefits
covering substantially all salaried employees. The following is the plan
status and accumulated postretirement benefit obligation (APBO) at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of
the year......................... $ 1,723,000 $ 1,361,000 $ 1,241,000
Service Cost...................... 141,000 107,000 69,000
Interest cost..................... 115,000 101,000 85,000
Plan participant's contributions.. 2,000 3,000 --
Amendments, curtailments, special
terminations..................... 8,000 69,000 --
Actuarial (gain) loss............. (262,000) 177,000 --
Benefits paid..................... (44,000) (95,000) (34,000)
----------- ----------- -----------
Benefit obligation at end of the
year............................. 1,683,000 1,723,000 1,361,000
Change in plan assets:
Fair value of plan assets at end
of year.......................... -- -- --
----------- ----------- -----------
Funded status..................... (1,683,000 (1,723,000) (1,361,000)
Unrecognized prior service cost... (160,000) (193,000) (286,000)
Unrecognized actuarial net (gain)
loss............................. (70,000) 208,000 20,000
----------- ----------- -----------
Accrued benefit cost.............. $(1,913,000) $(1,708,000) $(1,627,000)
=========== =========== ===========
Weighted average assumptions as of
December 31:
Discount rate..................... 7.5% 6.5% 7.0%
=========== =========== ===========
For measurement purposes, a 6.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999, gradually
decreasing to 5.5% by the year 2001 and remaining at that rate thereafter.
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Components of net periodic benefit
cost:
Service cost...................... $ 141,000 $ 107,000 $ 69,000
Interest cost..................... 115,000 101,000 85,000
Amortization of gains and losses.. 4,000 -- 4,000
Amortization of unrecognized prior
service cost..................... (24,000) (25,000) (29,000)
----------- ----------- -----------
Net periodic postretirement benefit
cost............................... $ 236,000 $ 183,000 $ 129,000
=========== =========== ===========
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage point change in
the health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
Increase Decrease
-------- ---------
<S> <C> <C>
Effect on total of service and interest cost
components.......................................... $ 57,000 $ (43,000)
Effect on postretirement benefit obligation.......... 293,000 (226,000)
</TABLE>
F-18
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1999, 1998 and 1997
13. Acquisitions
On July 9, 1998, the Company consummated the purchase of the outstanding
common stock of Pollo Tropical Inc. ("Pollo Tropical") for an approximate cash
purchase price of $94.6 million and on July 20, 1998 merged Pollo Tropical
into the Company. The Pollo Tropical acquisition has been accounted for by the
purchase method of accounting and, accordingly, the results of operations of
Pollo Tropical from July 10, 1998 are included in the accompanying
consolidated financial statements. The excess purchase price over net assets
acquired is included in intangible assets and is amortized over 40 years using
the straight-line method. The Company used its previous senior credit facility
to finance the Pollo Tropical acquisition.
On March 28, 1997, the Company purchased certain assets and franchise rights
of twenty-three Burger King restaurants in North and South Carolina for a cash
price of approximately $21 million. On August 20, 1997, the Company purchased
certain assets and franchise rights of sixty-three Burger King restaurants,
primarily in Western New York State, Indiana and Kentucky for a cash price of
approximately $52 million.
The following proforma results of operations for the periods presented below
assume these acquisitions occurred as of the beginning of the respective
period in which the acquisition occurred:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1998 1997
------------ ------------
(unaudited)
<S> <C> <C>
Revenues.......................................... $454,672,000 $407,819,000
============ ============
Income from operations............................ $ 37,313,000 $ 29,356,000
============ ============
Net income........................................ $ 1,206,000 $ 2,728,000
============ ============
</TABLE>
The preceding proforma financial information is not necessarily indicative
of the operating results that would have occurred had any of the acquisitions
been consummated as of the beginning of the respective periods, nor are they
necessarily indicative of future operating results.
Assets acquired and liabilities assumed in these acquisitions were as
follows:
<TABLE>
<CAPTION>
1998 1997
Acquisition Acquisition
of of
Pollo Burger King
Tropical Units
----------- -----------
<S> <C> <C>
Current assets, excluding cash..................... $ 2,422,000 $ --
Inventory.......................................... 298,000 604,000
Property and equipment............................. 38,005,000 12,778,000
Franchise rights................................... -- 65,496,000
Intangible assets including goodwill............... 64,011,000 --
Other non-current assets........................... 783,000 --
Accounts payable................................... (1,833,000) --
Accrued payroll, related taxes and benefits........ (963,000) (393,000)
Current liabilities................................ (3,944,000) --
Other non-current liabilities...................... (4,147,000) --
----------- -----------
$94,632,000 $78,485,000
=========== ===========
</TABLE>
F-19
<PAGE>
CARROLS CORPORATION AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ------ ---------- ---------- ---------- ----------
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Reserve for doubtful trade
accounts receivable....... $ 93,000 $ $(40,000)(b) $ 53,000
Other reserves(a).......... 974,000 1,501,000 (989,000)(b) 1,486,000
Year ended December 31, 1998:
Reserve for doubtful trade
accounts receivable....... 130,000 64,000(c) (101,000)(b) 93,000
Other reserves(a).......... 886,000 365,000 (277,000)(b) 974,000
Year ended December 31, 1997:
Reserve for doubtful trade
accounts receivable....... 310,000 -- (180,000)(b) 130,000
Other reserves(a).......... 753,000 133,000 -- 886,000
</TABLE>
- --------
(a) Included principally in other assets.
(b) Represents write-offs of accounts.
(c) Represents reserves acquired in the Pollo Tropical acquisition.
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized on the 29th day of
March, 2000.
Carrols Corporation
/s/ Alan Vituli
By: _________________________________
Alan Vituli,
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alan Vituli Director, Chairman and March 29, 2000
______________________________________ Chief Executive Officer
Alan Vituli (Principal Executive
Officer)
/s/ Daniel T. Accordino Director, President and March 29, 2000
______________________________________ Chief Operating Officer
Daniel T. Accordino
/s/ Benjamin D. Chereskin Director March 29, 2000
______________________________________
Benjamin D. Chereskin
/s/ James M. Conlon Director March 29, 2000
______________________________________
James M. Conlon
/s/ David J. Mathies, Jr. Director March 29, 2000
______________________________________
David J. Mathies, Jr.
/s/ Robin P. Selati Director March 29, 2000
______________________________________
Robin P. Selati
/s/ Clayton E. Wilhite Director March 29, 2000
______________________________________
Clayton E. Wilhite
/s/ Paul R. Flanders Vice President--Finance March 29, 2000
______________________________________ and Treasurer (Principal
Paul R. Flanders Financial Officer and
Principal Accounting
Officer)
/s/ Timothy J. LaLonde Vice President--Controller March 29, 2000
______________________________________
Timothy J. LaLonde
</TABLE>
<PAGE>
EXHIBIT 10.29
CARROLS CORPORATION RETIREMENT SAVINGS PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER................. 18
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY..................... 19
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR...................... 20
2.4 RECORDS AND REPORTS......................................... 21
2.5 APPOINTMENT OF ADVISERS..................................... 21
2.6 PAYMENT OF EXPENSES......................................... 22
2.7 CLAIMS PROCEDURE............................................ 22
2.8 CLAIMS REVIEW PROCEDURE..................................... 22
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY................................... 23
3.2 EFFECTIVE DATE OF PARTICIPATION............................. 23
3.3 DETERMINATION OF ELIGIBILITY................................ 23
3.4 TERMINATION OF ELIGIBILITY.................................. 23
3.5 OMISSION OF ELIGIBLE EMPLOYEE............................... 24
3.6 INCLUSION OF INELIGIBLE EMPLOYEE............................ 24
3.7 ELECTION NOT TO PARTICIPATE................................. 24
ARTICLE IV
CONTRIBUTION AND ALLOCATION
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION....................... 24
4.2 PARTICIPANT'S SALARY REDUCTION AND VOLUNTARY CONTRIBUTION ELECTION.. 25
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION............................ 29
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS............................. 30
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS.................................... 33
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS...................... 35
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS................................ 38
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS.................. 41
4.9 MAXIMUM ANNUAL ADDITIONS............................................ 44
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS........................... 48
4.11 TRANSFERS FROM QUALIFIED PLANS...................................... 49
4.12 MANDATORY CONTRIBUTIONS............................................. 52
4.13 VOLUNTARY CONTRIBUTIONS............................................. 53
4.14 DIRECTED INVESTMENT ACCOUNT......................................... 54
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND......................................... 56
5.2 METHOD OF VALUATION................................................. 57
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT........................... 57
6.2 DETERMINATION OF BENEFITS UPON DEATH................................ 57
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY.................... 59
</TABLE>
<PAGE>
<TABLE>
<S> <C>
6.4 DETERMINATION OF BENEFITS UPON TERMINATION...................... 59
6.5 DISTRIBUTION OF BENEFITS........................................ 63
6.6 DISTRIBUTION OF BENEFITS UPON DEATH............................. 66
6.7 TIME OF SEGREGATION OR DISTRIBUTION............................. 68
6.8 DISTRIBUTION FOR MINOR BENEFICIARY.............................. 68
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN.................. 68
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP............................... 69
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION................. 71
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE........................... 71
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE..................... 72
7.3 OTHER POWERS OF THE TRUSTEE..................................... 73
7.4 LOANS TO PARTICIPANTS........................................... 76
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS........................ 78
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES................... 78
7.7 ANNUAL REPORT OF THE TRUSTEE.................................... 78
7.8 AUDIT........................................................... 79
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.................. 79
7.10 TRANSFER OF INTEREST............................................ 81
7.11 DIRECT ROLLOVER................................................. 81
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT....................................................... 82
8.2 TERMINATION..................................................... 83
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.3 MERGER OR CONSOLIDATION........................................ 83
ARTICLE IX
TOP HEAVY
9.1 TOP HEAVY PLAN REQUIREMENTS.................................... 84
9.2 DETERMINATION OF TOP HEAVY STATUS.............................. 84
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS........................................... 88
10.2 ALIENATION..................................................... 88
10.3 CONSTRUCTION OF PLAN........................................... 89
10.4 GENDER AND NUMBER.............................................. 89
10.5 LEGAL ACTION................................................... 89
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS......................... 89
10.7 BONDING........................................................ 90
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE..................... 90
10.9 INSURER'S PROTECTIVE CLAUSE.................................... 90
10.10 RECEIPT AND RELEASE FOR PAYMENTS............................... 91
10.11 ACTION BY THE EMPLOYER......................................... 91
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY............. 91
10.13 HEADINGS....................................................... 92
10.14 APPROVAL BY INTERNAL REVENUE SERVICE........................... 92
10.15 UNIFORMITY..................................................... 93
ARTICLE XI
</TABLE>
<PAGE>
<TABLE>
<S> <C>
PARTICIPATING EMPLOYERS
11.1 ADOPTION BY OTHER EMPLOYERS.................................. 93
11.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS...................... 93
11.3 DESIGNATION OF AGENT......................................... 94
11.4 EMPLOYEE TRANSFERS........................................... 94
11.5 PARTICIPATING EMPLOYER CONTRIBUTION.......................... 94
11.6 AMENDMENT.................................................... 94
11.7 DISCONTINUANCE OF PARTICIPATION.............................. 95
11.8 ADMINISTRATOR'S AUTHORITY.................................... 95
</TABLE>
<PAGE>
CARROLS CORPORATION RETIREMENT SAVINGS PLAN
THIS AGREEMENT, hereby made and entered into this 1st day of April,
1999, by and between Carrols Corporation (herein referred to as the "Employer")
and Paul R. Flanders (herein referred to as the "Trustee"). Prior to June 4,
1997, the Trustee of the Plan was Richard V. Cross.
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective January 1, 1979, (hereinafter called the "Effective Date") known
as Carrols Corporation Corporate Employee Savings Plan and which plan shall
hereinafter be known as Carrols Corporation Retirement Savings Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective January 1, 1997, except as otherwise
provided, the Employer and the Trustee in accordance
<PAGE>
with the provisions of the Plan pertaining to amendments thereof, hereby amend
the Plan in its entirety and restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
.1 "Act" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
.1 "Administrator" means the Employer unless another person or entity has
been designated by the Employer pursuant to Section 2.2 to administer the Plan
on behalf of the Employer.
.1 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
2
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.1 "Aggregate Account" means, with respect to each Participant, the value
of all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 9.2.
.1 "Anniversary Date" means December 31.
.1 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
.1 "Code" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
.1 "Compensation" with respect to any Participant means such
Participant's wages for the Plan Year within the meaning of Code Section 3401(a)
(for the purposes of income tax withholding at the source) but determined
without regard to any rules that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
3
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(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.2.
Compensation in excess of $150,000 shall be disregarded. Such amount
shall be adjusted for increases in the cost of living in accordance with Code
Section 401(a)(17), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year. For any short Plan Year the Compensation limit shall be an
amount equal to the Compensation limit for the calendar year in which the Plan
Year begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12). In applying this limitation, the
family group of a Highly Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
4
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Compensated Employees paid the greatest "415 Compensation" during the year,
shall be treated as a single Participant, except that for this purpose Family
Members shall include only the affected Participant's spouse and any lineal
descendants who have not attained age nineteen (19) before the close of the
year. If, as a result of the application of such rules the adjusted limitation
is exceeded, then the limitation shall be prorated among the affected Family
Members in proportion to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members not affected by such limit shall then be
adjusted upward on a pro rata basis not to exceed each such affected Family
Member's Compensation as determined prior to application of the Family Member
rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these
5
<PAGE>
adjustments, an "excess amount" still results, such "excess amount" shall be
disposed of in the manner described in Section 4.10(a) pro rata among all
affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the adoption date of this amendment and
restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
.1 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
.1 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding
6
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any such amounts distributed as excess "annual additions" pursuant to Section
4.10(a).
.1 "Designated Investment Alternative" means a specific investment
identified by name by a Fiduciary as an available investment under the Plan
which may be acquired or disposed of by the Trustee pursuant to the investment
direction by a Participant.
.1 "Directed Investment Option" means one or more of the following:
(a) a Designated Investment Alternative.
(a) any other investment permitted by the Plan and the
Participant Direction Procedures and acquired or disposed of by the Trustee
pursuant to the investment direction of a Participant.
.1 "Early Retirement Date." This Plan does not provide for a retirement
date prior to Normal Retirement Date.
.1 "Elective Contribution" means the Employer contributions to the Plan
of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to
7
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Section 4.10(a). In addition, any Employer Qualified Non-Elective Contribution
made pursuant to Section 4.6(b) which is used to satisfy the "Actual Deferral
Percentage" tests shall be considered an Elective Contribution for purposes of
the Plan. Any contributions deemed to be Elective Contributions (whether or not
used to satisfy the "Actual Deferral Percentage" tests) shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the nondiscrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
.1 "Eligible Employee" means any Employee who is compensated on a salary
basis and any class of hourly employees who are eligible for all salaried
employee benefits.
Highly Compensated Employees shall not be eligible to participate in
this Plan, provided, however, that those Employees who, in any Plan Year, are
deemed Highly Compensated Employees solely because of the reimbursement to them
of moving expenses by the Employer, shall continue to participate in the Plan.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
8
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.1 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
.1 "Employer" means Carrols Corporation and any successor which shall
maintain this Plan; and any predecessor which has maintained this Plan. The
Employer is a corporation, with principal offices in the State of New York. In
addition, where appropriate, the term Employer shall include any Participating
Employer (as defined in Section 11.1) which shall adopt this Plan.
.1 "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b), voluntary Employee contributions made pursuant to
Section 4.13, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants
9
<PAGE>
for such Plan Year, over the maximum amount of such contributions permitted
under the limitations of Section 4.7(a).
.1 "Excess Contributions" means, with respect to a Plan Year, the excess
of Elective Contributions used to satisfy the "Actual Deferral Percentage" tests
made on behalf of Highly Compensated Participants for the Plan Year over the
maximum amount of such contributions permitted under Section 4.5(a). Excess
Contributions, including amounts recharacterized pursuant to Section 4.6(a)(2),
shall be treated as an "annual addition" pursuant to Section 4.9(b).
.1 "Excess Deferred Compensation" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 9.2 and 4.4(g), Excess Deferred Compensation shall continue
to be treated as Employer
10
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contributions even if distributed pursuant to Section 4.2(f). However, Excess
Deferred Compensation of Non-Highly Compensated Participants is not taken into
account for purposes of Section 4.5(a) to the extent such Excess Deferred
Compensation occurs pursuant to Section 4.2(d).
.1 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B). Commencing
January 1, 1997, all references in the Plan to family aggregation rules shall be
disregarded.
.1 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
11
<PAGE>
.1 "Fiscal Year" means the Employer's accounting year of 12 months ending
on the Sunday closest to December 31st.
.1 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Terminated Participant's Account, or
(a) the last day of the Plan Year in which the Participant
incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(g)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
.1 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
12
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.1 "415 Compensation" with respect to any Participant means such
Participant's wages for the Plan Year within the meaning of Code Section 3401(a)
(for the purposes of income tax withholding at the source) but determined
without regard to any rules that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement,
the definition of "415 Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
Notwithstanding any language contained in the Plan to the contrary, on
and after January 1, 1998, "415 Compensation" shall include any amount which is
contributed or deferred by the Employer at the election of the Participant and
which is not includible in the gross income of the Participant by reason of Code
Section 125 or 402(e)(3).
.1 "414(s) Compensation" with respect to any Participant means such
Participant's Elective Contributions attributable to
13
<PAGE>
Deferred Compensation recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) plus "415 Compensation" paid during a Plan Year. The
amount of "414(s) Compensation" with respect to any Participant shall include
"414(s) Compensation" for the entire twelve (12) month period ending on the last
day of such Plan Year, except that "414(s) Compensation" shall only be
recognized for that portion of the Plan Year during which an Employee was a
Participant in the Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $150,000 shall be disregarded. Such
amount shall be adjusted for increases in the cost of living in accordance with
Code Section 401(a)(17), except that the dollar increase in effect on January 1
of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year
14
<PAGE>
begins multiplied by the ratio obtained by dividing the number of full months in
the short Plan Year by twelve (12). In applying this limitation, the family
group of a Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is either a
"five percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, shall be treated
as a single Participant, except that for this purpose Family Members shall
include only the affected Participant's spouse and any lineal descendants who
have not attained age nineteen (19) before the close of the year.
If, in connection with the adoption of this amendment and
restatement, the definition of "414(s) Compensation" has been modified, then,
for Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "414(s) Compensation" means compensation determined
pursuant to the Plan then in effect.
.1 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
15
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(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section 1.34(c).
(a) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $75,000.
(a) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $50,000 and were in the Top Paid Group
of Employees for the Plan Year.
(a) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the "look-back
year" from the Employer greater than 50 percent of the limit in effect under
Code Section 415(b)(1)(A) for any such Plan Year. The number of officers shall
be limited to the lesser of (i) 50 employees; or (ii) the greater of 3 employees
or 10 percent of all employees. For the purpose of determining the number of
officers, Employees described in Section 1.61(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose of
identifying the particular Employees who are officers. If the
16
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Employer does not have at least one officer whose annual "415 Compensation" is
in excess of 50 percent of the Code Section 415(b)(1)(A) limit, then the highest
paid officer of the Employer will be treated as a Highly Compensated Employee.
(a) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the "determination year"
and are also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year."
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period.
If an Employee is, during a "determination year" or "look-back year",
a Family Member of either a "five percent owner" (whether active or former) or a
Highly Compensated Employee who is one of the 10 most Highly Compensated
Employees ranked on the basis of "415 Compensation" paid by the Employer during
such year, then the Family Member and the "five percent owner" or top-ten Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
"five percent owner" or top-ten Highly Compensated Employee shall be treated as
a single Employee receiving "415 Compensation" and Plan
17
<PAGE>
contributions or benefits equal to the sum of such "415 Compensation" and
contributions or benefits of the Family Member and "five percent owner" or top-
ten Highly Compensated Employee.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the
18
<PAGE>
meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered Employees
unless such Leased Employees are covered by a plan described in Code Section
414(n)(5) and are not covered in any qualified plan maintained by the Employer.
The exclusion of Leased Employees for this purpose shall be applied on a uniform
and consistent basis for all of the Employer's retirement plans. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees
without regard to whether they performed services during the "determination
year."
On and after January 1, 1998, "Highly Compensated Employee" means an
Employee described in Code Section 414(q) and the Regulations thereunder, and
generally means an Employee who performed services for the Employer during the
"determination year" and is in one or more of the following groups:
(f) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" of the Employer.
(g) Employees who received "415 Compensation" during the "look-
back year" from the Employer in excess of $80,000.
The "determination year" shall be the Plan Year for
19
<PAGE>
which testing is being performed, and the "look-back year" shall be the
immediately preceding twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includible in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amount specified in (b) above shall be adjusted at such time
and in the same manner as under Code Section 415(d), except that the base period
shall be the calendar quarter ending September 30, 1996.
In determining who is a Highly Compensated Employee, all Affiliated
Employers shall be taken into account as a single employer and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. The exclusion of Leased Employees for this purpose shall be applied on
a uniform and consistent basis for all of the Employer's retirement plans.
Highly Compensated Former Employees shall be treated as Highly Compensated
Employees without regard
20
<PAGE>
to whether they performed services during the "determination year."
.1 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.28. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
.1 "Highly Compensated Participant" means any Highly Compensated Employee
who is eligible to participate in the Plan.
21
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.1 "Hour of Service" means each hour for which an Employee is paid or
entitled to payment for the performance of duties for the Employer.
.1 "Income" means the income or losses allocable to "excess amounts"
which shall equal the allocable gain or loss for the "applicable computation
period". The income allocable to "excess amounts" for the "applicable
computation period" is determined by multiplying the income for the "applicable
computation period" by a fraction. The numerator of the fraction is the "excess
amount" for the "applicable computation period." The denominator of the fraction
is the total "account balance" attributable to "Employer contributions" as of
the end of the "applicable computation period", reduced by the gain allocable to
such total amount for the "applicable computation period" and increased by the
loss allocable to such total amount for the "applicable computation period". The
provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by substituting:
(1) "Excess Deferred Compensation" for "excess amounts";
22
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(2) "taxable year of the Participant" for "applicable
computation period";
(3) "Deferred Compensation" for "Employer contributions"; and
(4) "Participant's Elective Account" for "account balance."
(a) For purposes of Section 4.6(a), by substituting:
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Elective Contributions" for "Employer contributions"; and
(4) "Participant's Elective Account" for "account balance."
(a) For purposes of Section 4.8(a), by
23
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substituting:
(1) "Excess Aggregate Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Employer matching contributions made pursuant to Section
4.1(b), voluntary Employee contributions made pursuant to Section 4.13 and any
qualified non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c)" for "Employer contributions"; and
(4) "Participant's Account and Voluntary Contribution Account"
for "account balance."
Income allocable to any distribution of Excess Deferred Compensation
on or before the last day of the taxable year of the Participant shall be
calculated from the first day of the taxable year of the Participant to the date
on which the distribution is made pursuant to either the "fractional method" or
the "safe harbor method." Under such "safe harbor method," allocable Income for
such period shall be deemed to equal ten percent (10%) of the Income allocable
to such Excess Deferred Compensation multiplied
24
<PAGE>
by the number of calendar months in such period. For purposes of determining the
number of calendar months in such period, a distribution occurring on or before
the fifteenth day of the month shall be treated as having been made on the last
day of the preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next subsequent
month.
The Income allocable to Excess Aggregate Contributions resulting from
the recharacterization of Elective Contributions shall be determined and
distributed as if such recharacterized Elective Contributions had been
distributed as Excess Contributions.
.1 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
.1 "Key Employee" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
25
<PAGE>
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year.
(a) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in effect
under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of Code Section 318)
both more than one-half percent interest and the largest interests in the
Employer.
(a) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning of Code
Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than five
26
<PAGE>
percent (5%) of the capital or profits interest in the Employer. In determining
percentage ownership hereunder, employers that would otherwise be aggregated
under Code Sections 414(b), (c), (m) and (o) shall be treated as separate
employers.
(a) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent owner" means
any person who owns (or is considered as owning within the meaning of Code
Section 318) more than one percent (1%) of the outstanding stock of the Employer
or stock possessing more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than one percent (1%) of the capital or
profits interest in the Employer. In determining percentage ownership hereunder,
employers that would otherwise be aggregated under Code Sections 414(b), (c),
(m) and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated under Code Sections
414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the Employer
pursuant to a salary reduction
27
<PAGE>
agreement and which are not includible in the gross income of the Participant
under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are treated as Employer
contributions.
.1 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
.1 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
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(1) a non-integrated employer contribution rate of at least 10%
of compensation, as defined in Code Section 415(c)(3), but including amounts
which are contributed by the Employer pursuant to a salary reduction agreement
and which are not includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are treated as Employer
contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(a) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
.1 "Non-Elective Contribution" means the Employer contributions to the
Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution used in the "Actual Deferral Percentage" tests.
.1 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a
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Family Member.
.1 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
.1 "Normal Retirement Age" means the Participant's 65th birthday, or his
5th anniversary of joining the Plan, if later. A Participant shall become fully
Vested in his Participant's Account upon attaining his Normal Retirement Age.
.1 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
.1 "1-Year Break in Service" means a Period of Severance of at least 12
consecutive months.
.1 "Participant" means any Eligible Employee who participates in the Plan
and has not for any reason become ineligible to participate further in the Plan.
.1 "Participant Direction Procedures" means such instructions, guidelines
or policies, the terms of which are incorporated herein, as shall be established
pursuant to Section 4.14 and observed by the Administrator and applied and
provided
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to Participants who have Participant Directed Accounts.
.1 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer Non-Elective Contributions.
.1 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
.1 "Participant's Directed Account" means that portion of a Participant's
interest in the Plan with respect to which the Participant has directed the
investment in accordance with the Participant Direction Procedure.
.1 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer Elective
Contributions used to satisfy the "Actual Deferral Percentage" tests. A separate
accounting shall be maintained with respect to that portion of the Participant's
Elective Account attributable to such Elective Contributions pursuant to Section
4.2 and any Employer Qualified Non-Elective Contributions.
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.1 "Period of Service" means the aggregate of all periods commencing with
the Employee's first day of employment or reemployment with the Employer or
Affiliated Employer and ending on the date a 1-Year Break in Service begins. The
first day of employment or reemployment is the first day the Employee performs
an Hour of Service. An Employee will also receive partial credit for any Period
of Severance of less than 12 consecutive months. Fractional periods of a year
will be expressed in terms of days.
.1 "Period of Severance" means a continuous period of time during which
the Employee is not employed by the Employer. Such period begins on the date the
Employee retires, quits or is discharged, or if earlier, the 12 month
anniversary of the date on which the Employee was otherwise first absent from
service.
In the case of an individual who is absent from work for maternity or
paternity reasons, the 12-consecutive month period beginning on the first
anniversary of the first day of such absence shall not constitute a 1-Year Break
in Service. For purposes of this paragraph, an absence from work for maternity
or paternity reasons means an absence (a) by reason of the pregnancy of the
individual, (b) by reason of the birth of a child of the individual, (c) by
reason of the placement of a child with the individual in connection with the
adoption of such
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child by such individual, or (d) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
.1 "Plan" means this instrument, including all amendments thereto.
.1 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
.1 "Qualified Non-Elective Contribution" means any Employer contributions
made pursuant to Section 4.6(b) and Section 4.8(h). Such contributions shall be
considered an Elective Contribution for the purposes of the Plan and used to
satisfy the "Actual Deferral Percentage" tests or the "Actual Contribution
Percentage" tests.
.1 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
.1 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
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.1 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
.1 "Super Top Heavy Plan" means a plan described in Section 9.2(b).
.1 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
.1 "Top Heavy Plan" means a plan described in Section 9.2(a).
.1 "Top Heavy Plan Year" means a Plan Year during which the Plan is a Top
Heavy Plan.
.1 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.28) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2)
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and 414(o)(2) shall be considered Employees unless such Leased Employees are
covered by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer. Employees who are non-resident aliens
and who received no earned income (within the meaning of Code Section 911(d)(2))
from the Employer constituting United States source income within the meaning of
Code Section 861(a)(3) shall not be treated as Employees. Additionally, for the
purpose of determining the number of active Employees in any year, the following
additional Employees shall also be excluded; however, such Employees shall still
be considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(a) Employees who normally work less than 17 1/2 hours per week;
(a) Employees who normally work less than six (6) months during
a year; and
(a) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of
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the Employer are covered under agreements the Secretary of Labor finds to be
collective bargaining agreements between Employee representatives and the
Employer, and the Plan covers only Employees who are not covered under such
agreements, then Employees covered by such agreements shall be excluded from
both the total number of active Employees as well as from the identification of
particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
.1 "Total and Permanent Disability" means a physical or mental condition
of a Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with the
Employer. The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. The determination shall be applied
uniformly to all Participants.
.1 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
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.1 "Trust Fund" means the assets of the Plan and Trust as the same shall
exist from time to time.
.1 "USERRA" means the Uniformed Services Employment and Reemployment
Rights Act of 1994. Notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credit with respect to qualified military
service will be provided in accordance with Code Section 414(u).
.1 "Valuation Date" means the Anniversary Date and such other date or
dates deemed necessary by the Administrator. The Valuation Date may include any
day during the Plan Year that the Trustee, any transfer agent appointed by the
Trustee or the Employer and any stock exchange used by such agent are open for
business.
.1 "Vested" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
.1 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's nondeductible voluntary
contributions made pursuant to Sections 4.12 and 4.13.
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Amounts recharacterized as voluntary Employee contributions pursuant
to Section 4.6(a) shall remain subject to the limitations of Sections 4.2(b) and
4.2(c). Therefore, a separate accounting shall be maintained with respect to
that portion of the Voluntary Contribution Account attributable to voluntary
Employee contributions made pursuant to Section 4.13.
ARTICLE I
ADMINISTRATION
.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and responsibilities
otherwise provided for in this Plan, the Employer shall be empowered to appoint
and remove the Trustee and the Administrator from time to time as it deems
necessary for the proper administration of the Plan to ensure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and the Act.
The Employer may appoint counsel, specialists, advisers, agents (including any
nonfiduciary agent) and other persons as the Employer deems necessary or
desirable in connection with the exercise of its fiduciary duties under this
Plan. The Employer may compensate such agents or advisers from the assets of the
Plan as fiduciary expenses (but not including
38
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any business (settlor) expenses of the Employer), to the extent not paid by the
Employer.
(a) The Employer may, by written agreement or designation,
appoint at its option an Investment Manager (qualified under the Investment
Company Act of 1940 as amended), investment adviser, or other agent to provide
direction to the Trustee with respect to any or all of the Plan assets. Such
appointment shall be given by the Employer in writing in a form acceptable to
the Trustee and shall specifically identify the Plan assets with respect to
which the Investment Manager or other agent shall have authority to direct the
investment.
(a) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and investment
growth (and stability of same) is a more current need, or shall appoint a
qualified person to do so. The Employer or its delegate shall communicate such
needs and goals to the Trustee, who shall coordinate such Plan needs with its
investment policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of the
Trust Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of
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<PAGE>
the Act.
(a) The Employer shall periodically review the performance of
any Fiduciary or other person to whom duties have been delegated or allocated by
it under the provisions of this Plan or pursuant to procedures established
hereunder. This requirement may be satisfied by formal periodic review by the
Employer or by a qualified person specifically designated by the Employer,
through day-to-day conduct and evaluation, or through other appropriate ways.
.1 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer may appoint any
person, including, but not limited to, the Employees of the Employer, to perform
the duties of the Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. Upon the resignation
or removal of any individual performing the duties of the Administrator, the
Employer may designate a successor.
.1 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
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administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of the Plan; provided, however, that any procedure, discretionary
act, interpretation or construction shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
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(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder and to
receive benefits under the Plan;
(a) to compute, certify, and direct the Trustee with respect to
the amount and the kind of benefits to which any Participant shall be entitled
hereunder;
(a) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(a) to maintain all necessary records for the administration of
the Plan;
(a) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with the terms
hereof;
(a) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which such
Contract shall be purchased;
(a) to compute and certify to the Employer and
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<PAGE>
to the Trustee from time to time the sums of money necessary or desirable to be
contributed to the Plan;
(a) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish specific
objectives;
(a) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation deferred
or paid to them in cash;
(a) to act as the named Fiduciary responsible for communications
with Participants as needed to maintain Plan compliance with ERISA Section
404(c), including but not limited to the receipt and transmitting of
Participant's directions as to the investment of their account(s) under the Plan
and the formulation of policies, rules, and procedures pursuant to which
Participants may give investment instructions with respect to the investment of
their accounts;
(a) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
.1 RECORDS AND REPORTS
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<PAGE>
The Administrator shall keep a record of all actions taken and
shall keep all other books of account, records, policies, and other data that
may be necessary for proper administration of the Plan and shall be responsible
for supplying all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as required by law.
.1 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, agents (including
nonfiduciary agents) and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration of this Plan,
including but not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to provide, among such
other duties as the Administrator may appoint, assistance with maintaining Plan
records and the providing of investment information to the Plan's investment
fiduciaries and to Plan Participants.
.1 PAYMENT OF EXPENSES
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All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, or any person or persons retained or
appointed by any Named Fiduciary incident to the exercise of their duties under
the Plan, including, but not limited to, fees of accountants, counsel,
Investment Managers, agents (including nonfiduciary agents) appointed for the
purpose of assisting the Administrator or the Trustee in carrying out the
instructions of Participants as to the directed investment of their accounts and
other specialists and their agents, and other costs of administering the Plan.
Until paid, the expenses shall constitute a liability of the Trust Fund.
.1 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be
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furnished with an explanation of the Plan's claims review procedure.
.1 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.7
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator (on a form which may be obtained from
the Administrator) a request for a hearing. Such request, together with a
written statement of the reasons why the claimant believes his claim should be
allowed, shall be filed with the Administrator no later than 60 days after
receipt of the written notification provided for in Section 2.7. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause
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<PAGE>
a court reporter to attend the hearing and record the proceedings. In such
event, a complete written transcript of the proceedings shall be furnished to
both parties by the court reporter. The full expense of any such court reporter
and such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE I
ELIGIBILITY
.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on
the date of his employment with the Employer. However, any Employee who was a
Participant in the Plan prior to the effective date of this amendment and
restatement shall
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continue to participate in the Plan.
.1 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
date on which he satisfies the eligibility requirements of Section 3.1.
In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee would have otherwise previously become a
Participant.
.1 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.8.
.1 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
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classification of an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for each Period
of Service completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the terms of
the Plan. Additionally, his interest in the Plan shall continue to share in the
earnings of the Trust Fund.
(a) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate, such Employee
will participate immediately upon returning to an eligible class of Employees.
.1 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
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.1 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as
a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the Employer shall not be entitled to recover the contribution made with
respect to the ineligible person regardless of whether or not a deduction is
allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
.1 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year.
ARTICLE I
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CONTRIBUTION AND ALLOCATION
.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) Effective April 1, 1999, the amount of the total salary
reduction elections of all Participants made pursuant to Section 4.2(a), which
amount shall be deemed an Employer Elective Contribution.
(a) On behalf of each Participant who is eligible to share in
matching contributions for the Plan Year, a matching contribution equal to 50%
of each such Participant's mandatory contributions made on and before March 31,
1999 pursuant to Section 4.12, 50% of each such Participant's Deferred
Compensation made on and after April 1, 1999, plus, effective April 1, 1999, 50%
of each such Participant's Voluntary Contributions, pursuant to Section 4.13,
which amount shall be deemed an Employer Non-Elective Contribution. Only
Employee mandatory contributions, Elective Contributions and Employee Voluntary
Contributions which are made during the current Plan Year and are in the Trust
as of the last day of the Plan Year shall be eligible to receive an Employer
matching contribution.
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In applying the matching percentage specified above, only
mandatory contributions, salary reductions and, effective April 1, 1999,
Voluntary Contributions pursuant to Section 4.13, up to $20.00 per week combined
shall be considered.
(a) Additionally, to the extent necessary, the Employer shall
contribute to the Plan the amount necessary to provide the top heavy minimum
contribution. All contributions by the Employer shall be made in cash.
.1 PARTICIPANT'S SALARY REDUCTION AND VOLUNTARY CONTRIBUTION ELECTION
(a) Each Participant may elect to defer a percentage of his
Compensation which would have been received in the Plan Year. Additionally,
effective April 1, 1999, each Participant may elect to make after-tax Voluntary
Contributions to the Plan pursuant to Section 4.13. The combined total of
contributions shall not exceed 18% of Compensation, provided however, that for
purposes of this Section, any Employee shall not be permitted to defer or
contribute any amounts received from the Employer as a bonus. A deferral
election (or modification of an earlier election) or a voluntary contribution
may not be made
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with respect to Compensation which is currently available on or before the date
the Participant executed such election. For purposes of this Section,
Compensation shall be determined prior to any reductions made pursuant to Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that are treated as Employer
contributions, and as aforesaid, shall exclude bonuses.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
(a) The balance in each Participant's Elective Account shall be
fully Vested at all times and shall not be subject to Forfeiture for any reason.
(a) Notwithstanding anything in the Plan to the contrary,
amounts held in the Participant's Elective Account may not be distributable
(including any offset of loans) earlier than:
(1) a Participant's separation from service, Total and
Permanent Disability, or death;
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(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in Regulation
1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that is
not an Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) used in a trade or business of such
corporation if such corporation continues to maintain this Plan after the
disposition with respect to a Participant who continues employment with the
corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a subsidiary (within the
meaning of Code Section 409(d)(3)) to an entity which is not an Affiliated
Employer but only with respect to a Participant who continues employment with
such subsidiary; or
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.10.
(a) For each Plan Year, a Participant's Deferred
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Compensation made under this Plan and all other plans, contracts or arrangements
of the Employer maintaining this Plan shall not exceed, during any taxable year
of the Participant, the limitation imposed by Code Section 402(g), as in effect
at the beginning of such taxable year. If such dollar limitation is exceeded, a
Participant will be deemed to have notified the Administrator of such excess
amount which shall be distributed in a manner consistent with Section 4.2(f).
The dollar limitation shall be adjusted annually pursuant to the method provided
in Code Section 415(d) in accordance with Regulations.
(a) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to Section 6.10(b)
or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained
by the Employer, then such Participant shall not be permitted to elect to have
Deferred Compensation contributed to the Plan on his behalf for a period of
twelve (12) months following the receipt of the distribution. Furthermore, the
dollar limitation under Code Section 402(g) shall be reduced, with respect to
the Participant's taxable year following the taxable year in which the hardship
distribution was made, by the amount of such Participant's Deferred
Compensation, if any, pursuant to this Plan (and any other plan maintained by
the Employer) for the taxable year of the hardship distribution.
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(a) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation 1.402(g)-1(b))
under another qualified cash or deferred arrangement (as defined in Code Section
401(k)), a simplified employee pension (as defined in Code Section 408(k)), a
salary reduction arrangement (within the meaning of Code Section 3121(a)(5)(D)),
a deferred compensation plan under Code Section 457(b), or a trust described in
Code Section 501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to Regulations) for such Participant's taxable
year, the Participant may, not later than March 1 following the close of the
Participant's taxable year, notify the Administrator in writing of such excess
and request that his Deferred Compensation under this Plan be reduced by an
amount specified by the Participant. In such event, the Administrator may direct
the Trustee to distribute such excess amount (and any Income allocable to such
excess amount) to the Participant not later than the first April 15th following
the close of the Participant's taxable year. Any distribution of less than the
entire amount of Excess Deferred Compensation and Income shall be treated as a
pro rata distribution of Excess Deferred Compensation and Income. The amount
distributed shall not exceed the Participant's Deferred Compensation under the
Plan for the
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taxable year (and any Income allocable to such excess amount). Any distribution
on or before the last day of the Participant's taxable year must satisfy each of
the following conditions:
(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution
of Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall
be made first from unmatched Deferred Compensation and, thereafter, from
Deferred Compensation which is matched. Matching contributions which relate to
such Deferred Compensation shall be forfeited.
(a) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any distribution
and/or recharacterization of Excess Contributions pursuant to Section 4.6(a) for
the Plan Year beginning with or within the taxable year of the Participant.
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(a) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide additional benefits to
the Participant or his Beneficiary.
(a) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or savings
and loan association, money market certificate, or other short-term debt
security acceptable to the Trustee until such time as the allocations pursuant
to Section 4.4 have been made.
(a) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with the
following:
(1) A Participant must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30) days, after entering the
Plan pursuant to Section 3.2. If the Participant fails to make an initial salary
deferral election within such time, then such Participant may thereafter make an
election in accordance with the rules governing modifications. The Participant
shall make such an election by entering into a
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written salary reduction agreement with the Employer and filing such agreement
with the Administrator. Such election shall initially be effective beginning
with the pay period following the acceptance of the salary reduction agreement
by the Administrator, shall not have retroactive effect and shall remain in
force until revoked.
(2) A Participant may modify a prior election during the Plan
Year and concurrently make a new election by filing a written notice with the
Administrator within a reasonable time before the pay period for which such
modification is to be effective. However, modifications to a salary deferral
election shall only be permitted quarterly, during election periods established
by the Administrator prior to the first day of each Plan Year quarter. Any
modification shall not have retroactive effect and shall remain in force until
revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the Plan Year by
providing the Administrator with thirty (30) days written notice of such
revocation (or upon such shorter notice period as may be acceptable to the
Administrator). Such revocation shall become effective as of the beginning of
the first pay period coincident with or next following the expiration of the
notice period. Furthermore, the termination of the
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Participant's employment, or the cessation of participation for any reason,
shall be deemed to revoke any salary reduction agreement then in effect,
effective immediately following the close of the pay period within which such
termination or cessation occurs.
.1 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to
the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer federal income tax return for
the Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer general assets, but
in any event within 15 business days from the end of the month in which such
amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated herein
by reference. Furthermore, any additional Employer contributions which are
allocable to the Participant's Elective Account for a Plan Year shall be paid to
the Plan no later than the twelve-month period immediately following the close
of such Plan Year.
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.1 ALLOCATION OF CONTRIBUTION AND EARNINGS
(a) The Administrator shall establish and maintain an account in
the name of each Participant to which the Administrator shall credit as of each
Anniversary Date all amounts allocated to each such Participant as set forth
herein.
(a) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of the
Employer contributions for each Plan Year. Within a reasonable period of time
after the date of receipt by the Administrator of such information, the
Administrator shall allocate such contribution as follows:
(1) With respect to the Employer Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective Account in an amount
equal to each such Participant's Deferred Compensation for the year, and, on and
after April 1, 1999, with respect to the Participant's Voluntary Contributions
pursuant to Section 4.13, to each Participant's Voluntary Contribution account
in an amount equal to such Participant's Voluntary Contributions pursuant to
Section 4.13.
(2) With respect to the Employer Non-Elective Contribution made
pursuant to Section 4.1(b), to each
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Participant's Account in accordance with Section 4.1(b).
Only Participants who have completed a Period of Service during
the Plan Year, are actively employed on the last day of the Plan Year, and whose
contributions remain in the Trust as of the last day of the Plan Year shall be
eligible to share in the matching contribution for the year.
(a) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made available to
reinstate previously forfeited account balances of Former Participants, if any,
in accordance with Section 6.4(g)(2). The remaining Forfeitures, if any, shall
be used to reduce the contribution of the Employer hereunder for the Plan Year
in which such Forfeitures occur.
(a) For any Top Heavy Plan Year, Employees not otherwise
eligible to share in the allocation of contributions as provided above, shall
receive the minimum allocation provided for in Section 4.4(g) if eligible
pursuant to the provisions of Section 4.4(i).
(a) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement (Normal or
Late), Total and Permanent
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Disability or death shall share in the allocation of contributions for that Plan
Year, to the extent and provided that such affected Participants' deferrals and
contributions are in the Trust as of the last day of the Plan Year.
(a) As of each Valuation Date, before the current valuation
period allocation of Employer contributions and after allocation of Forfeitures,
any earnings or losses (net appreciation or net depreciation) of the Trust Fund
shall be allocated in accordance with the insurance contracts' normal methods as
provided in the riders to the respective insurance contracts.
Participants' transfers from other qualified plans and
voluntary contributions deposited in the general Trust Fund shall share in any
earnings and losses (net appreciation or net depreciation) of the Trust Fund in
the same manner provided above. Each segregated account maintained on behalf of
a Participant shall be credited or charged with its separate earnings and
losses.
(a) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the
Employer contributions allocated to the Participant's Combined Account of each
Employee shall be equal to at least three percent (3%) of such Employee's "415
Compensation"
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(reduced by contributions and forfeitures, if any, allocated to each Employee in
any defined contribution plan included with this plan in a Required Aggregation
Group). However, if (1) the sum of the Employer contributions allocated to the
Participant's Combined Account of each Key Employee for such Top Heavy Plan Year
is less than three percent (3%) of each Key Employee's "415 Compensation" and
(2) this Plan is not required to be included in an Aggregation Group to enable a
defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410,
the sum of the Employer contributions allocated to the Participant's Combined
Account of each Employee shall be equal to the largest percentage allocated to
the Participant's Combined Account of any Key Employee. However, in determining
whether a Non-Key Employee has received the required minimum allocation, such
Non-Key Employee's Deferred Compensation and matching contributions needed to
satisfy the "Actual Contribution Percentage" tests pursuant to Section 4.7(a)
shall not be taken into account.
However, no such minimum allocation shall be required in
this Plan for any Employee who participates in another defined contribution plan
subject to Code Section 412 included with this Plan in a Required Aggregation
Group.
(a) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's
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Combined Account of any Key Employee shall be equal to the ratio of the sum of
the Employer contributions allocated on behalf of such Key Employee divided by
the "415 Compensation" for such Key Employee.
(a) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account of all
Employees who are Participants and who are employed by the Employer on the last
day of the Plan Year, including Employees who have (1) failed to complete a
Period of Service; and (2) declined to make mandatory contributions (if
required) or, in the case of a cash or deferred arrangement, elective
contributions to the Plan.
(a) For the purposes of this Section, "415 Compensation" shall
be limited to $150,000. Such amount shall be adjusted for increases in the cost
of living in accordance with Code Section 401(a)(17), except that the dollar
increase in effect on January 1 of any calendar year shall be effective for the
Plan Year beginning with or within such calendar year. For any short Plan Year
the "415 Compensation" limit shall be an amount equal to the "415 Compensation"
limit for the calendar year in which the Plan Year begins multiplied by the
ratio obtained by dividing the number of full months in the short Plan Year by
twelve (12).
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(a) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the Plan Year shall
share in the salary reduction contributions made by the Employer for the year of
termination without regard to the Hours of Service credited.
(a) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be maintained
as follows:
(1) one account for nonforfeitable benefits attributable to pre-
break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
.1 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year, the annual
allocation derived from Employer Elective Contributions to a Participant's
Elective Account shall satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the
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Highly Compensated Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group multiplied by 1.25,
or
(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral Percentage" for
the Non-Highly Compensated Participant group shall not be more than two
percentage points. Additionally, the "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not exceed the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group multiplied by 2. The provisions
of Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are incorporated herein
by reference.
However, in order to prevent the multiple use of the alternative
method described in (2) above and in Code Section 401(m)(9)(A), any Highly
Compensated Participant eligible to make elective deferrals pursuant to Section
4.2 and to make Employee contributions or to receive matching contributions
under this Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have a combination of his actual deferral ratio and
his actual contribution ratio reduced pursuant to Section 4.6(a) and Regulation
1.401(m)-2, the provisions of which are incorporated herein by reference.
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(a) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the average of the
ratios, calculated separately for each Participant in such group, of the amount
of Employer Elective Contributions allocated to each Highly Compensated
Participant's Elective Account for such Plan Year and to each such Non-Highly
Compensated Participant's Elective Account for the preceding Plan Year, to such
Participant's "414(s) Compensation" for the applicable Plan Year. The actual
deferral ratio for each Participant and the "Actual Deferral Percentage" for
each group shall be calculated to the nearest one-hundredth of one percent.
Employer Elective Contributions allocated to each Non-Highly Compensated
Participant's Elective Account for the preceding Plan Year shall be reduced by
Excess Deferred Compensation for the preceding Plan Year to the extent such
excess amounts are made under this Plan or any other plan maintained by the
Employer.
(a) For the purpose of determining the actual deferral ratio of
a Highly Compensated Employee who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Participant is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid
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the greatest "415 Compensation" during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall be
determined by aggregating Employer Elective Contributions and "414(s)
Compensation" of all eligible Family Members (including Highly Compensated
Participants). However, in applying the $150,000 limit to "414(s) Compensation,"
Family Members shall include only the affected Employee's spouse and any lineal
descendants who have not attained age 19 before the close of the Plan Year.
(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for purposes of
determining the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are members of those
family groups that include the Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
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(a) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall include
any Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant to Section
4.2.
(a) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash or
deferred arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may be
considered as a single arrangement for purposes of determining whether or not
such arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such a
case, the cash or deferred arrangements included in such plans and the plans
including such arrangements shall be treated as one arrangement and as one plan
for purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(k).
Plans may be aggregated under this paragraph (e) only if they have the same plan
year.
Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be combined with this Plan
for purposes of determining
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whether the employee stock ownership plan or this Plan satisfies this Section
and Code Sections 401(a)(4), 410(b) and 401(k).
(a) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred arrangements
(other than a cash or deferred arrangement which is part of an employee stock
ownership plan as defined in Code Section 4975(e)(7) or 409) of the Employer or
an Affiliated Employer, all such cash or deferred arrangements shall be treated
as one cash or deferred arrangement for the purpose of determining the actual
deferral ratio with respect to such Highly Compensated Participant. However, if
the cash or deferred arrangements have different plan years, this paragraph
shall be applied by treating all cash or deferred arrangements ending with or
within the same calendar year as a single arrangement.
.1 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a), the Administrator shall adjust Excess Contributions
pursuant to the options set forth below:
(a) On or before the fifteenth day of the third
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month following the end of each Plan Year, the Highly Compensated Participant
having the greatest actual deferral ratio shall have his actual deferral ratio
reduced until one of the tests set forth in Section 4.5(a) is satisfied, or
until his actual deferral ratio equals the actual deferral ratio of the Highly
Compensated Participant having the second largest actual deferral ratio. This
process shall continue until one of the tests set forth in Section 4.5(a) is
satisfied. Once one of the tests set forth in Section 4.5(a) is satisfied, the
total dollar amount of Elective Contributions represented by such reduction or
reductions in actual deferral ratio or ratios shall be identified as the total
amount of Excess Contributions to be distributed. These Excess Contributions
will be attributed to and distributed from the accounts of Highly Compensated
Employees as follows. The Elective Contribution for the Highly Compensated
Employee with the largest Elective Contribution shall be reduced until either a)
the total amount of Excess Contributions is distributed, or b) the Elective
Contribution for the Highly Compensated Employee with the greatest Elective
Contribution is reduced to the level of the Elective Contribution for the Highly
Compensated Employee with the next greatest Elective Contribution. This process
shall continue until the total amount of Excess Contributions is distributed.
(1) With respect to the distribution of Excess
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Contributions pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are allocable;
(ii) shall be adjusted for Income; and
(iii) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess
Contributions pursuant to (a) above, such recharacterized amounts:
(i) shall be deemed to have occurred on the date on which
the last of those Highly Compensated Participants with Excess Contributions to
be recharacterized is notified of the recharacterization and the tax
consequences of such recharacterization;
(ii) shall not exceed the amount of Deferred Compensation
on behalf of any Highly Compensated Participant for any Plan Year;
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(iii) shall be treated as voluntary Employee contributions
for purposes of Code Section 401(a)(4) and Regulation 1.401(k)-1(b). However,
for purposes of Sections 9.2 and 4.4(g), recharacterized Excess Contributions
continue to be treated as Employer contributions that are Deferred Compensation.
Excess Contributions recharacterized as voluntary Employee contributions shall
continue to be nonforfeitable and subject to the same distribution rules
provided for in Section 4.2(c);
(iv) are not permitted if the amount recharacterized plus
voluntary Employee contributions actually made by such Highly Compensated
Participant, exceed the maximum amount of voluntary Employee contributions
(determined prior to application of Section 4.7(a)) that such Highly Compensated
Participant is permitted to make under the Plan in the absence of
recharacterization; and
(v) shall be adjusted for Income.
(3) Any distribution and/or recharacterization of less than the
entire amount of Excess Contributions shall be treated as a pro rata
distribution and/or recharacterization of Excess Contributions and Income.
(4) The determination and correction of Excess
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Contributions of a Highly Compensated Participant whose actual deferral ratio is
determined under the family aggregation rules shall be accomplished by reducing
the actual deferral ratio as required herein, and the Excess Contributions for
the family unit shall then be allocated among the Family Members in proportion
to the Elective Contributions of each Family Member that were combined to
determine the group actual deferral ratio.
(5) Matching contributions which relate to Excess Contributions
shall be forfeited unless the related matching contribution is distributed as an
Excess Aggregate Contribution pursuant to Section 4.8.
(a) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants electing salary reductions pursuant to
Section 4.2 in an amount sufficient to satisfy one of the tests set forth in
Section 4.5(a). Such contribution shall be allocated to the Participant's
Elective Account of each Non-Highly Compensated Participant electing salary
reductions pursuant to Section 4.2 in the same proportion that each such Non-
Highly Compensated Participant's Deferred Compensation for the year bears to the
total Deferred Compensation of all such Non-Highly Compensated Participants.
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(a) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated Participants
under this Plan would, by virtue of the tests set forth in Section 4.5(a), cause
the Plan to fail such tests, then the Administrator may automatically reduce
proportionately or in the order provided in Section 4.6(a) each affected Highly
Compensated Participant's deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth in Section 4.5(a).
.1 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for the Highly
Compensated Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group; or
(2) the lesser of 200 percent of such percentage for the Non-
Highly Compensated Participant group, or such percentage for the Non-Highly
Compensated Participant group plus 2 percentage points. However, to prevent the
multiple use of the alternative method described in this paragraph and Code
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Section 401(m)(9)(A), any Highly Compensated Participant eligible to make
elective deferrals pursuant to Section 4.2 or any other cash or deferred
arrangement maintained by the Employer or an Affiliated Employer and to make
Employee contributions or to receive matching contributions under this Plan or
under any plan maintained by the Employer or an Affiliated Employer shall have a
combination of his actual deferral ratio and his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2 and Section 4.8(a). The provisions of
Code Section 401(m) and Regulations 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(a) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the Highly
Compensated Participant group and Non-Highly Compensated Participant group, the
average of the ratios (calculated separately for each Participant in each group)
of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made pursuant to Sections 4.12
and 4.13 and Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) on behalf of each such Participant for
such Plan Year; to
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(2) the Participant's "414(s) Compensation" for such Plan Year.
(a) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant to Section
4.8(d), only Employer matching contributions contributed to the Plan prior to
the end of the succeeding Plan Year shall be considered. In addition, the
Administrator may elect to take into account, with respect to Employees eligible
to have Employer matching contributions pursuant to Section 4.1(b) or voluntary
Employee contributions pursuant to Sections 4.12 and 4.13 allocated to their
accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and
qualified non-elective contributions (as defined in Code Section 401(m)(4)(C))
contributed to any plan maintained by the Employer. Such elective deferrals and
qualified non-elective contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(5) which is incorporated
herein by reference. However, the Plan Year must be the same as the plan year of
the plan to which the elective deferrals and the qualified non-elective
contributions are made.
(a) For the purpose of determining the actual contribution ratio
of a Highly Compensated Employee who is
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subject to the Family Member aggregation rules of Code Section 414(q)(6) because
such Employee is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall be
determined by aggregating Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made pursuant to Sections 4.12
and 4.13, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and "414(s) Compensation" of all
eligible Family Members (including Highly Compensated Participants). However, in
applying the $150,000 limit to "414(s) Compensation", Family Members shall
include only the affected Employee's spouse and any lineal descendants who have
not attained age 19 before the close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section
4.1(b), voluntary Employee contributions made pursuant to Sections 4.12 and
4.13, Excess Contributions recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) and "414(s) Compensation" of all Family Members shall
be disregarded for purposes of determining the "Actual
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Contribution Percentage" of the Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are members of those
family groups that include the Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
(a) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as one plan
for purposes of Code Sections 401(a)(4) or 410(b) (other than the average
benefits test under Code Section 410(b)(2)(A)(ii)), such plans shall be treated
as one plan. In addition, two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not such plans satisfy Code
Sections 401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must
satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though
such aggregated plans were a single plan. Plans may be aggregated under this
paragraph (e) only if they have the same plan year.
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Notwithstanding the above, an employee stock ownership plan
described in Code Section 4975(e)(7) or 409 may not be aggregated with this Plan
for purposes of determining whether the employee stock ownership plan or this
Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(a) If a Highly Compensated Participant is a Participant under
two or more plans (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7) or 409) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee contributions, or
both, are made, all such contributions on behalf of such Highly Compensated
Participant shall be aggregated for purposes of determining such Highly
Compensated Participant's actual contribution ratio. However, if the plans have
different plan years, this paragraph shall be applied by treating all plans
ending with or within the same calendar year as a single plan.
(a) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Employer matching contributions pursuant to Section
4.1(b) (whether or not a deferral election was made or suspended pursuant to
Section 4.2(e)) or voluntary Employee contributions pursuant to Sections
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4.12 and 4.13 (whether or not voluntary Employee contributions are made)
allocated to his account for the Plan Year.
.1 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that the "Actual Contribution Percentage" for
the Highly Compensated Participant group exceeds the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group pursuant to Section
4.7(a), the Highly Compensated Participant having the greatest actual
contribution ratio shall have his actual contribution ratio reduced until one of
the tests set forth in Section 4.7(a) is satisfied, or until his actual
contribution ratio equals the actual contribution ratio of the Highly
Compensated Participant having the second largest actual contribution ratio.
This process shall continue until one of the tests set forth in Section 4.7(a)
is satisfied. Once one of the tests set forth in Section 4.7(a) is satisfied,
the total dollar amount of aggregate contributions represented by such reduction
or reductions in actual contribution ratio or ratios shall be identified as the
total amount of Excess Aggregate Contributions to be distributed and/or
forfeited. These Excess Aggregate Contributions will be attributed to and
distributed (with income), if vested, or forfeited (with income), if not vested
from the accounts of Highly Compensated Employees as follows. The matching
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contribution for the Highly Compensated Employee with the largest matching
contribution shall be reduced until either a) the total amount of Excess
Aggregate Contributions is distributed, or b) the matching contributions for the
Highly Compensated Employee with the greatest matching contributions is reduced
to the level of the matching contributions for the Highly Compensated Employee
with the next greatest matching contributions. This process shall continue until
all Excess Aggregate Contributions are eliminated. Excess Aggregate
Contributions shall be distributed to or forfeited by Highly Compensated
Participants on or before the fifteenth day of the third month following the end
of the Plan Year, but in no event later than the close of the following Plan
Year.
To the extent necessary to affect correction, distributions
and forfeitures shall occur proportionately from the vested
portion of a Highly Compensated Employee's aggregate
contributions (and Income allocable to such contributions)
and, if forfeitable, from the non-Vested Excess Aggregate
Contributions attributable to Employer matching contributions
(and Income allocable to such forfeitures).
If the correction of Excess Aggregate Contributions
attributable to Employer matching contributions is
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not in proportion to the Vested and non-Vested portion of such contributions,
then the Vested portion of the Participant's Account attributable to Employer
matching contributions after the correction shall be subject to Section 6.5(g).
(a) Any distribution and/or forfeiture of less than the entire
amount of Excess Aggregate Contributions (and Income) shall be treated as a pro
rata distribution and/or forfeiture of Excess Aggregate Contributions and
Income. Distribution of Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate Contributions (and Income).
Forfeitures of Excess Aggregate Contributions shall be treated in accordance
with Section 4.4.
(a) Excess Aggregate Contributions attributable to amounts other
than voluntary Employee contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of Code
Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to
Participants' Accounts for the Plan Year in which the forfeiture occurs shall be
treated as an "annual addition" pursuant to Section 4.9(b) for the Participants
to whose Accounts they are reallocated and for the Participants from whose
Accounts
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they are forfeited.
(a) For each Highly Compensated Participant, the amount of
Excess Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee contributions made pursuant
to Sections 4.12 and 4.13, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of the Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount determined by multiplying the
Highly Compensated Participant's actual contribution ratio (determined after
application of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one percent.
In no case shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b), voluntary Employee contributions
made pursuant to Sections 4.12 and 4.13, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6(a) and any qualified
non-elective contributions or elective deferrals taken into account pursuant to
Section 4.7(c) on behalf of such Highly Compensated Participant for such Plan
Year.
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(a) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section 401(k))
maintained by the Employer that ends with or within the Plan Year or which are
treated as voluntary Employee contributions due to recharacterization pursuant
to Section 4.6(a).
(a) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual contribution
ratio is determined under the family aggregation rules, then the actual
contribution ratio shall be reduced and the Excess Aggregate Contributions for
the family unit shall be allocated among the Family Members in proportion to the
sum of Employer matching contributions made pursuant to Section 4.1(b),
voluntary Employee contributions made pursuant to Sections 4.12 and 4.13, Excess
Contributions recharacterized as voluntary Employee contributions pursuant to
Section 4.6(a) and any qualified non-elective contributions or elective
deferrals taken into account pursuant to Section 4.7(c) of each Family Member
that were combined to determine the group actual contribution ratio.
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(a) If during a Plan Year the projected aggregate amount of
Employer matching contributions, voluntary Employee contributions and Excess
Contributions recharacterized as voluntary Employee contributions to be
allocated to all Highly Compensated Participants under this Plan would, by
virtue of the tests set forth in Section 4.7(a), cause the Plan to fail such
tests, then the Administrator may automatically reduce proportionately or in the
order provided in Section 4.8(a) each affected Highly Compensated Participant's
projected share of such contributions by an amount necessary to satisfy one of
the tests set forth in Section 4.7(a).
(a) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may make a special Qualified Non-Elective
Contribution on behalf of Non-Highly Compensated Participants in an amount
sufficient to satisfy one of the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total Compensation of all
Non-Highly Compensated Participants. A separate accounting of any special
Qualified Non-Elective Contribution shall be maintained in the Participant's
Account.
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.1 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 adjusted annually as provided in Code Section
415(d) pursuant to the Regulations, or (2) twenty-five percent (25%) of the
Participant's "415 Compensation" for such "limitation year." For any short
"limitation year," the dollar limitation in (1) above shall be reduced by a
fraction, the numerator of which is the number of full months in the short
"limitation year" and the denominator of which is twelve (12).
(a) For purposes of applying the limitations of Code Section
415, "annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee contributions,
(3) forfeitures, (4) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Code Section 415(l)(2) which is part of a pension
or annuity plan maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years ending
after such date, which are attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as defined in Code
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Section 419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415 Compensation"
percentage limitation referred to in paragraph (a)(2) above shall not apply to:
(1) any contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as an
"annual addition," or (2) any amount otherwise treated as an "annual addition"
under Code Section 415(l)(1).
(a) For purposes of applying the limitations of Code Section
415, the transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions for the
purposes of Section 4.9(b)(2): (1) rollover contributions (as defined in Code
Sections 402(e)(6), 403(a)(4), 403(b)(8) and 408(d)(3)); (2) repayments of loans
made to a Participant from the Plan; (3) repayments of distributions received by
an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section 411(a)(3)(D)
(mandatory contributions); and (5) Employee contributions to a simplified
employee pension excludable from gross income under Code Section 408(k)(6).
(a) For purposes of applying the limitations of
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Code Section 415, the "limitation year" shall be the Plan Year.
(a) For the purpose of this Section, all qualified defined
benefit plans (whether terminated or not) ever maintained by the Employer shall
be treated as one defined benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by the Employer shall be
treated as one defined contribution plan.
(a) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under common control
(as defined by Code Section 1563(a) or Code Section 414(b) and (c) as modified
by Code Section 415(h)), is a member of an affiliated service group (as defined
by Code Section 414(m)), or is a member of a group of entities required to be
aggregated pursuant to Regulations under Code Section 414(o), all Employees of
such Employers shall be considered to be employed by a single Employer.
(a) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, each Employer who maintains this Plan will be considered to
be a separate Employer.
(a)(1) If a Participant participates in more than one defined
contribution plan maintained by the
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Employer which have different Anniversary Dates, the maximum "annual
additions" under this Plan shall equal the maximum "annual additions"
for the "limitation year" minus any "annual additions" previously
credited to such Participant's accounts during the "limitation year."
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan not subject to
Code Section 412 maintained by the Employer which have the same Anniversary
Date, "annual additions" will be credited to the Participant's accounts under
the defined contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the defined contribution
plan not subject to Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by the Employer
which have the same Anniversary Date, the maximum "annual additions" under this
Plan shall equal the product of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions" previously credited under
subparagraphs (1) or (2) above, multiplied by (B) a fraction (i) the numerator
of which is the "annual additions" which would
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be credited to such Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which is such
"annual additions" for all plans described in this subparagraph.
(a) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans maintained by
the Employer, the sum of the defined benefit plan fraction and the defined
contribution plan fraction for any "limitation year" may not exceed 1.0.
(a) The defined benefit plan fraction for any "limitation year"
is a fraction, the numerator of which is the sum of the Participant's projected
annual benefits under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the "limitation year" under Code
Sections 415(b) and (d) or 140 percent of the highest average compensation,
including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year" beginning after
December 31, 1986, in one or more defined benefit plans maintained by the
Employer which were
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in existence on May 6, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such plans which the
Participant had accrued as of the close of the last "limitation year" beginning
before January 1, 1987, disregarding any changes in the terms and conditions of
the plan after May 5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the requirements of
Code Section 415 for all "limitation years" beginning before January 1, 1987.
(a) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual additions
to the Participant's Account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and all prior
"limitation years" (including the annual additions attributable to the
Participant's nondeductible Employee contributions to all defined benefit plans,
whether or not terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code Section 419(e),
and individual medical accounts, as defined in Code Section 415(l)(2),
maintained by the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior "limitation years" of
service with the Employer (regardless of whether a defined contribution plan
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was maintained by the Employer). The maximum aggregate amount in any "limitation
year" is the lesser of 125 percent of the dollar limitation determined under
Code Sections 415(b) and (d) in effect under Code Section 415(c)(1)(A) or 35
percent of the Participant's Compensation for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted if the
sum of this fraction and the defined benefit fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from the numerator
of this fraction. The adjustment is calculated using the fractions as they would
be computed as of the end of the last "limitation year" beginning before January
1, 1987, and disregarding any changes in the terms and conditions of the Plan
made after May 5, 1986, but using the Code Section 415 limitation applicable to
the first "limitation year" beginning on or after January 1, 1987. The annual
addition for any "limitation year" beginning before January 1, 1987 shall not be
recomputed to treat all Employee contributions as annual additions.
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(a) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed in this
Section shall at all times comply with the provisions of Code Section 415 and
the Regulations thereunder, the terms of which are specifically incorporated
herein by reference.
.1 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the amount of
elective deferrals (within the meaning of Code Section 402(g)(3)) that may be
made with respect to any Participant under the limits of Section 4.9 or other
facts and circumstances to which Regulation 1.415-6(b)(6) shall be applicable,
the "annual additions" under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the Administrator shall (1)
distribute any elective deferrals (within the meaning of Code Section 402(g)(3))
or return any Employee contributions (whether voluntary or mandatory), and for
the distribution of gains attributable to those elective deferrals and Employee
contributions, to the extent that the distribution or return would reduce the
"excess amount" in the Participant's accounts (2) hold any "excess
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amount" remaining after the return of any elective deferrals or voluntary
Employee contributions in a "Section 415 suspense account" (3) use the "Section
415 suspense account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to reduce Employer contributions for that Participant if
that Participant is covered by the Plan as of the end of the "limitation year,"
or if the Participant is not so covered, allocate and reallocate the "Section
415 suspense account" in the next "limitation year" (and succeeding "limitation
years" if necessary) to all Participants in the Plan before any Employer or
Employee contributions which would constitute "annual additions" are made to the
Plan for such "limitation year" (4) reduce Employer contributions to the Plan
for such "limitation year" by the amount of the "Section 415 suspense account"
allocated and reallocated during such "limitation year."
(a) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of (1) the
"annual additions" which would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section 415 over (2) the maximum
"annual additions" determined pursuant to Section 4.9.
(a) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the
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sum of "excess amounts" for all Participants in the Plan during the "limitation
year." The "Section 415 suspense account" shall not share in any earnings or
losses of the Trust Fund.
.1 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Eligible Employees, provided that the
trust from which such funds are transferred permits the transfer to be made and
the transfer will not jeopardize the tax exempt status of the Plan or Trust or
create adverse tax consequences for the Employer. The amounts transferred shall
be set up in a separate account herein referred to as a "Participant's Rollover
Account." Such account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason. Effective April 1, 1999, amounts in a
Participant's Rollover Account are subject to the loan provisions of Section
7.4.
(a) Amounts in a Participant's Rollover Account shall be held by
the Trustee pursuant to the provisions of this Plan and may not be withdrawn by,
or distributed to the Participant, in whole or in part, except as provided in
paragraphs (c) and (d) of this Section.
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(a) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a plan-to-
plan transfer shall be subject to the distribution limitations provided for in
Regulation 1.401(k)-1(d).
(a) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits, the fair
market value of the Participant's Rollover Account shall be used to provide
additional benefits to the Participant or his Beneficiary. Any distributions of
amounts held in a Participant's Rollover Account shall be made in a manner which
is consistent with and satisfies the provisions of Section 6.5, including, but
not limited to, all notice and consent requirements of Code Section 411(a)(11)
and the Regulations thereunder. Furthermore, such amounts shall be considered as
part of a Participant's benefit in determining whether an involuntary cash-out
of benefits without Participant consent may be made.
(a) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured
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savings account, certificate of deposit in a bank or savings and loan
association, money market certificate, or other short term debt security
acceptable to the Trustee until such time as the allocations pursuant to this
Plan have been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(a) For purposes of this Section, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts transferred to
this Plan directly from another qualified plan; (ii) distributions from another
qualified plan which are eligible rollover distributions and which are either
transferred by the Employee to this Plan within sixty (60) days following his
receipt thereof or are transferred pursuant to a direct rollover; (iii) amounts
transferred to this Plan from a conduit individual retirement account provided
that the conduit individual retirement account has no assets other than assets
which (A) were previously distributed to the Employee by another qualified plan
as a lump-sum distribution (B) were eligible for tax-free rollover to a
qualified plan and (C) were deposited in such conduit individual retirement
account within sixty (60) days of receipt thereof and other than earnings on
said assets; and (iv) amounts distributed to the Employee from a conduit
individual retirement
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account meeting the requirements of clause (iii) above, and transferred by the
Employee to this Plan within sixty (60) days of his receipt thereof from such
conduit individual retirement account.
(a) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion
of counsel satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.
(a) This Plan shall not accept any direct or indirect transfers
(as that term is defined and interpreted under Code Section 401(a)(11) and the
Regulations thereunder) from a defined benefit plan, money purchase plan
(including a target benefit plan), stock bonus or profit sharing plan which
would otherwise have provided for a life annuity form of payment to the
Participant.
(a) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction having the
effect of such a transfer)
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shall only be permitted if it will not result in the elimination or reduction of
any "Section 411(d)(6) protected benefit" as described in Section 8.1.
.1 MANDATORY CONTRIBUTIONS
(a) On and prior to March 31, 1999, as a condition of sharing in
Employer contributions, each Participant shall agree to contribute from $3.00 to
$20.00 per week of his Compensation to the Trustee. Such contribution shall be
credited to his "Employee Contribution Account" and shall share in Trust Fund
earnings and losses. "Employee Contribution Account" means the account
established by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's mandatory non-deductible
contributions made to pursuant to this Section 4.12.
(b) A Participant may increase or decrease his Employee
Contribution rate upon written notice to the Employer. The new rate shall become
effective in accordance with the procedures established by the Employer.
(c) The Employee Contribution Account shall be fully vested at
all times.
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(d) A Participant may elect to withdraw funds from his Employee
Contribution Account. In the event such a withdrawal is made, he shall be barred
from making any additional Employee Contributions to the Trust Fund for a period
of 12 months. A Participant may commence contributing on the January 1st or July
1st following the 12 month period.
Withdrawals from a Participant's Employee Contribution
Account shall not reduce the vested percentage of such Participant's
Account balance attributable to minimum contributions made pursuant to
Section 4.4.
(e) Withdrawals from Employee Contribution Accounts may be made
at any time during the Plan Year.
(f) In the event a Participant has received a hardship
distribution pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall be barred from making
any Employee Contributions to the Trust Fund for a period of 12 months after
receipt of the distribution. A Participant may commence contributing on the
January 1st or July 1st following the 12 month period.
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(g) A Participant may discontinue or reduce his Employee
Contributions by notifying the Employer of his election at least 10
days prior to the end of an applicable pay period in accordance with
procedures established by the Employer.
(h) Any Participant who has elected to discontinue his Employee
Contributions may resume making Employee Contributions on the
following January 1st or July 1st after the effective date of such
discontinuance.
(i) The Employer shall transfer Employee contributions to the
Trustee as of the earliest date on which such contributions can be
reasonably segregated from the Employer's general assets, but in any
event within 15 business days following the end of the month in which
such amounts would otherwise have been payable to the Participant in
cash.
(j) Upon attainment of Normal Retirement Age, or such other date
when the Participant or his Beneficiary shall be entitled to receive
benefits, the fair market value of the Employee Contribution Account
shall be used to provide additional benefits to the Participant
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or his Beneficiary.
Any distributions of amounts held in an Employee Contribution
Account shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.5, including, but not limited
to, all notice and consent requirements of Code Section 411(a)(11) and
the Regulations thereunder.
.1 VOLUNTARY CONTRIBUTIONS
(a) On and after April 1, 1999, in order to allow Participants
the opportunity to increase their retirement income, each Participant may, at
the discretion of the Administrator, elect to voluntarily contribute a portion
of his after-tax compensation earned while a Participant under this Plan. A
Participant may elect to contribute a percentage of his after-tax compensation
provided that the combined percentage of voluntary contributions and Employee
Elective Contributions may not exceed 18% of a Participant's Compensation. Such
contributions shall be paid to the Trustee within a reasonable period of time
after the Employer receives the contribution. The balance in each Participant's
Voluntary Contribution Account shall be fully Vested at all times and shall not
be subject to
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Forfeiture for any reason.
(a) A Participant may elect to withdraw his voluntary
contributions from his Voluntary Contribution Account and the actual earnings
thereon in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent requirements
of Code Section 411(a)(11) and the Regulations thereunder. If the Administrator
maintains sub-accounts with respect to voluntary contributions (and earnings
thereon) which were made on or before a specified date, a Participant shall be
permitted to designate which sub-account shall be the source for his withdrawal.
In the event such a withdrawal is made, or in the event a
Participant has received a hardship distribution from his
Participant's Elective Account pursuant to Section 6.10(b) or pursuant
to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan maintained
by the Employer, then such Participant shall be barred from making any
voluntary contributions to the Trust Fund for a period of twelve (12)
months after receipt of the withdrawal or distribution.
(a) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to
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receive benefits, the fair market value of the Voluntary Contribution Account
shall be used to provide additional benefits to the Participant or his
Beneficiary.
(a) The Administrator may direct that voluntary contributions
made after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of deposit in a
bank or savings and loan association, money market certificate, or other short
term debt security acceptable to the Trustee until such time as the allocations
pursuant to this Plan have been made, at which time they may remain segregated
or be invested as part of the general Trust Fund, to be determined by the
Administrator.
.1 DIRECTED INVESTMENT ACCOUNT
(a) Participants may, subject to a procedure established by the
Administrator (the Participant Direction Procedures) and applied in a uniform
nondiscriminatory manner, direct the Trustee to invest all of their accounts in
specific assets, specific funds or other investments permitted under the Plan
and the Participant Direction Procedures. That portion of the interest of any
Participant so directing will thereupon be considered a Participant's Directed
Account. On and before June 30, 1996, Mandatory Employee Contributions were
invested in the
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Guaranteed Long Term Account.
(a) As of each Valuation Date, all Participant Directed Accounts
shall be charged or credited with the net earnings, gains, losses and expenses
as well as any appreciation or depreciation in the market value using publicly
listed fair market values when available or appropriate.
(1) To the extent that the assets in a Participant's Directed
Account are accounted for as pooled assets or investments, the allocation of
earnings, gains and losses of each Participant's Directed Account shall be based
upon the total amount of funds so invested, in a manner proportionate to the
Participant's share of such pooled investment.
(2) To the extent that the assets in the Participant's Directed
Account are accounted for as segregated assets, the allocation of earnings,
gains and losses from such assets shall be made on a separate and distinct
basis.
(a) The Participant Direction Procedures shall provide an
explanation of the circumstances under which Participants and their
Beneficiaries may give investment instructions, including, but need not be
limited to, the following:
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(1) the conveyance of instructions by the Participants and their
Beneficiaries to invest Participant Directed Accounts in Directed Investments;
(2) the name, address and phone number of the Fiduciary (and, if
applicable, the person or persons designated by the Fiduciary to act on its
behalf) responsible for providing information to the Participant or a
Beneficiary upon request relating to the investments in Directed Investments;
(3) applicable restrictions on transfers to and from any
Designated Investment Alternative;
(4) any restrictions on the exercise of voting, tender and
similar rights related to a Directed Investment by the Participants or their
Beneficiaries;
(5) a description of any transaction fees and expenses which
affect the balances in Participant Directed Accounts in connection with the
purchase or sale of Directed Investments; and
(6) general procedures for the dissemination of investment and
other information relating to the Designated
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Investment Alternatives as deemed necessary or appropriate, including but not
limited to a description of the following:
(i) the investment vehicles available under the Plan,
including specific information regarding any Designated Investment Alternative;
(ii) any designated Investment Managers; and
(iii) a description of the additional information which may
be obtained upon request from the Fiduciary designated to provide such
information.
(a) Any information regarding investments available under the
Plan, to the extent not required to be described in the Participant Direction
Procedures, may be provided to the Participant in one or more written documents
which are separate from the Participant Direction Procedures and are not thereby
incorporated by reference into this Plan.
(a) The Administrator may, at its discretion, include in or
exclude by amendment or other action from the Participant Direction Procedures
such instructions, guidelines or policies as it deems necessary or appropriate
to ensure proper
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administration of the Plan, and may interpret the same accordingly.
ARTICLE I
VALUATIONS
.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Valuation
Date, to determine the net worth of the assets comprising the Trust Fund as it
exists on the Valuation Date. In determining such net worth, the Trustee shall
value the assets comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund. The Trustee may
update the value of any shares held in the Participant Directed Account by
reference to the number of shares held by that Participant, priced at the market
value as of the Valuation Date.
.1 METHOD OF VALUATION
In determining the fair market value of securities held in the
Trust Fund which are listed on a registered stock exchange, the Administrator
shall direct the Trustee to value the
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same at the prices they were last traded on such exchange preceding the close of
business on the Valuation Date. If such securities were not traded on the
Valuation Date, or if the exchange on which they are traded was not open for
business on the Valuation Date, then the securities shall be valued at the
prices at which they were last traded prior to the Valuation Date. Any unlisted
security held in the Trust Fund shall be valued at its bid price next preceding
the close of business on the Valuation Date, which bid price shall be obtained
from a registered broker or an investment banker. In determining the fair market
value of assets other than securities for which trading or bid prices can be
obtained, the Trustee may appraise such assets itself, or in its discretion,
employ one or more appraisers for that purpose and rely on the values
established by such appraiser or appraisers.
ARTICLE I
DETERMINATION AND DISTRIBUTION OF BENEFITS
.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer
and retire for the purposes hereof on his Normal Retirement Date. However, a
Participant may postpone the termination of his employment with the Employer to
a later date,
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in which event the participation of such Participant in the Plan, including the
right to receive allocations pursuant to Section 4.4, shall continue until his
Late Retirement Date. Upon a Participant's Retirement Date, or as soon
thereafter as is practicable, the Trustee shall distribute, at the election of
the Participant, all amounts credited to such Participant's Combined Account in
accordance with Section 6.5.
.1 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute the value of the deceased Participant's accounts to the
Participant's Beneficiary.
(a) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute any remaining Vested amounts credited to the accounts of a
deceased Former Participant to such Former Participant's Beneficiary.
(a) Any security interest held by the Plan by
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reason of an outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the death benefit.
(a) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value of the
account of a deceased Participant or Former Participant as the Administrator may
deem desirable. The Administrator's determination of death and of the right of
any person to receive payment shall be conclusive.
(a) The Beneficiary of the death benefit payable pursuant to
this Section shall be the Participant's spouse. Except, however, the Participant
may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court order to such
effect (and there is no "qualified domestic relations order" as defined in Code
Section 414(p) which provides otherwise), or
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(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be
made on a form satisfactory to the Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator. However, the
Participant's spouse must again consent in writing to any change in Beneficiary
unless the original consent acknowledged that the spouse had the right to limit
consent only to a specific Beneficiary and that the spouse voluntarily elected
to relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall be
payable to his estate.
(a) Any consent by the Participant's spouse to waive any rights
to the death benefit must be in writing, must acknowledge the effect
of such waiver, and be witnessed by a Plan representative or a notary
public. Further, the spouse's consent must be irrevocable and must
acknowledge the specific nonspouse Beneficiary.
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.1 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability
prior to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
.1 DETERMINATION OF BENEFITS UPON TERMINATION
(a) If a Participant's employment with the Employer is
terminated for any reason other than death, Total and Permanent Disability or
retirement, such Participant shall be entitled to such benefits as are provided
hereinafter pursuant to this Section 6.4.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event which would result in
the distribution had the Terminated Participant remained in the employ of the
Employer (upon the Participant's death, Total and Permanent Disability or Normal
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Retirement). However, at the election of the Participant, the Administrator
shall direct the Trustee to cause the entire Vested portion of the Terminated
Participant's Combined Account to be payable to such Terminated Participant. Any
distribution under this paragraph shall be made in a manner which is consistent
with and satisfies the provisions of Section 6.5, including, but not limited to,
all notice and consent requirements of Code Section 411(a)(11) and the
Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed $3,500 ($5,000
on and after January 1, 1998) and has never exceeded $3,500 ($5,000 on and after
January 1, 1998) at the time of any prior distribution, the Administrator shall
direct the Trustee to cause the entire Vested benefit to be paid to such
Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a
Terminated Participant's Vested benefit is zero, the Terminated Participant
shall be deemed to have received a distribution of such Vested benefit.
(a) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account determined
on the basis of the
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Participant's number of whole years of his Period of Service according to the
following schedule:
Vesting Schedule
Periods of Service Percentage
Less than 3
3 30 %
4 40 %
5 60 %
6 80 %
7 100 %
(a) Notwithstanding the vesting attributable to Employer
matching contributions provided for in paragraph 6.4(b) above, for any Top Heavy
Plan Year, the Vested portion of the Participant's Account attributable to
Employer matching contributions of any Participant who has an Hour of Service
after the Plan becomes top heavy shall be a percentage of the amount credited to
his Participant's Account attributable to Employer matching contributions
determined on the basis of the Participant's number of whole years of his Period
of Service according to the following schedule:
Vesting Schedule
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Periods of Service Percentage
Less than 20 %
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy
Plan, the Administrator shall revert to the vesting schedule in effect before
this Plan became a Top Heavy Plan. Any such reversion shall be treated as a Plan
amendment pursuant to the terms of the Plan.
(a) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption date of
this amendment and restatement.
(a) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the account of
any affected Participant shall
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become 100% Vested and shall not thereafter be subject to Forfeiture.
(a) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any direct or
indirect amendment to this Plan. For this purpose, the Plan shall be treated as
having been amended if the Plan provides for an automatic change in vesting due
to a change in top heavy status. In the event that the Plan is amended to change
or modify any vesting schedule, a Participant with at least three (3) whole
years of his Period of Service as of the expiration date of the election period
may elect to have his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule. The Participant's
election period shall commence on the adoption date of the amendment and shall
end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
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(a)(1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had not
occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service, and such Former
Participant had received, or was deemed to have received, a distribution of his
entire Vested interest prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to him before the
earlier of five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer or the close of the first period of five
(5) consecutive 1-Year Breaks in Service commencing after the distribution, or
in the event of a deemed distribution, upon the reemployment of such Former
Participant. In the event the Former Participant does repay the full amount
distributed to him, or in the event of a deemed distribution, the undistributed
portion of the Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Valuation Date coinciding with or
preceding his termination. The source for such reinstatement shall first be any
Forfeitures occurring during the year. If such source is insufficient, then the
Employer shall
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contribute an amount which is sufficient to restore any such forfeited Accounts.
(3) If any Former Participant is reemployed after a 1-Year Break
in Service has occurred, Periods of Service shall include Periods of Service
prior to his 1-Year Break in Service subject to the following rules:
(i) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be used for computing Periods of
Service for eligibility and for vesting purposes only after he has been employed
for one (1) Period of Service following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does not
have a nonforfeitable right to any interest in the Plan resulting from Employer
contributions shall lose credits otherwise allowable under (i) above if his
consecutive 1-Year Breaks in Service equal or exceed the greater of (A) five (5)
or (B) the aggregate number of his pre-break Periods of Service;
(iii) After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to pre-break service
shall not be increased as a
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result of post-break service;
(iv) If a Former Participant is reemployed by the Employer,
he shall participate in the Plan immediately on his date of reemployment;
(v) If a Former Participant (a 1-Year Break in Service
previously occurred, but employment had not terminated) is credited with an Hour
of Service after the first eligibility computation period in which he incurs a
1-Year Break in Service, he shall participate in the Plan immediately.
(a) In determining Periods of Service for purposes of vesting
under the Plan, Periods of Service prior to the Effective Date of the Plan shall
be excluded.
.1 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled under the Plan in one or more of
the following methods:
(1) One lump-sum payment in cash.
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(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide such installment
payments, the Administrator may (A) segregate the aggregate amount thereof in a
separate, federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate or other liquid short-
term security or (B) purchase a nontransferable annuity contract for a term
certain (with no life contingencies) providing for such payment. The period over
which such payment is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his designated
Beneficiary).
(a) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 ($5,000 on and after January 1, 1998) at
the time of any prior distribution shall require such Participant's consent if
such distribution commences prior to the later of his Normal Retirement Age or
age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any benefit. However,
any election to defer the receipt of benefits shall not apply with respect to
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distributions which are required under Section 6.5(c).
(2) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the date the
distribution commences.
(3) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must not be made more
than 90 days before the date the distribution commences.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
Any such distribution may commence less than 30 days after the
notice required under Regulation 1.411(a)-11(c) is given, provided that: (1) the
Administrator clearly informs the Participant that the Participant has a right
to a period of at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and (2) the Participant, after receiving the
notice, affirmatively elects a distribution.
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(a) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in accordance with
the following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder (including Regulation 1.401(a)(9)-2),
the provisions of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed or must begin
to be distributed to him not later than April 1st of the calendar year following
the later of (i) the calendar year in which the Participant attains age 70 1/2
or (ii) the calendar year in which the Participant retires, provided, however,
that this clause (ii) shall not apply in the case of a Participant who is a
"five (5) percent owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the case of a
Participant who becomes a "five (5) percent owner" during any subsequent Plan
Year, clause (ii) shall no longer apply and the required beginning date shall be
the April 1st of the calendar year following the calendar year in which such
subsequent Plan Year ends. Such distributions shall be equal to or greater than
any required distribution. Notwithstanding the foregoing, but only on and before
December 31, 1996, clause (ii) above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before January 1, 1988 and was not a
"five (5) percent
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owner" at any time during the Plan Year ending with or within the calendar year
in which the Participant attained age 66 1/2 or any subsequent Plan Year.
Alternatively, distributions to a Participant must begin no later
than the applicable April 1st as determined under the preceding paragraph and
must be made over a period certain measured by the life expectancy of the
Participant (or the life expectancies of the Participant and his designated
Beneficiary) in accordance with Regulations.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit requirements of
Code Section 401(a)(9)(G) and the Regulations thereunder.
(a) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the Participant
or the Participant's spouse, be redetermined in accordance with Regulations. The
election, once made, shall be irrevocable. If no election is made by the time
distributions must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life expectancy and
joint and last survivor expectancy shall be computed using the return multiples
in Tables
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V and VI of Regulation 1.72-9.
(a) The restrictions imposed by this Section shall not apply if
a Participant has, prior to January 1, 1984, made a written designation to have
his retirement benefit paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982. Any such written designation made by a Participant
shall be binding upon the Plan Administrator notwithstanding any contrary
provision of Section 6.5.
(a) All annuity Contracts under this Plan shall be non-
transferable when distributed. Furthermore, the terms of any annuity Contract
purchased and distributed to a Participant or spouse shall comply with all of
the requirements of the Plan.
(a) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account and the Participant may increase
the Vested percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the distribution; and
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(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested percentage
at the relevant time, AB is the account balance at the relevant time, D is the
amount of distribution, and R is the ratio of the account balance at the
relevant time to the account balance after distribution.
.1 DISTRIBUTION OF BENEFITS UPON DEATH
(a) (1) The death benefit payable pursuant to Section 6.2 shall
be paid to the Participant's Beneficiary within a reasonable time after the
Participant's death by either of the following methods, as elected by the
Participant (or if no election has been made prior to the Participant's death,
by his Beneficiary) subject, however, to the rules specified in Section 6.6(b):
(i) One lump-sum payment in cash.
(ii) Payment in monthly, quarterly,
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semi-annual, or annual cash installments over a period to be determined by the
Participant or his Beneficiary. After periodic installments commence, the
Beneficiary shall have the right to direct the Trustee to reduce the period over
which such periodic installments shall be made, and the Trustee shall adjust the
cash amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the Participant, the
Administrator may direct the Trustee to segregate the death benefit into a
separate account, and the Trustee shall invest such segregated account
separately, and the funds accumulated in such account shall be used for the
payment of the installments.
(a) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance with
the following requirements and shall otherwise comply with Code Section
401(a)(9) and the Regulations thereunder. If it is determined pursuant to
Regulations that the distribution of a Participant's interest has begun and the
Participant dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as rapidly as
under the method of distribution selected pursuant to Section 6.5 as of his date
of
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death. If a Participant dies before he has begun to receive any distributions of
his interest under the Plan or before distributions are deemed to have begun
pursuant to Regulations, then his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in which the fifth
anniversary of his date of death occurs.
However, in the event that the Participant's spouse
(determined as of the date of the Participant's death) is his Beneficiary, then
in lieu of the preceding rules, distributions must be made over a period not
extending beyond the life expectancy of the spouse and must commence on or
before the later of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died; or (2) December 31st
of the calendar year in which the Participant would have attained age 70 1/2. If
the surviving spouse dies before distributions to such spouse begin, then the 5-
year distribution requirement of this Section shall apply as if the spouse was
the Participant.
(a) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the Participant
or the Participant's spouse, be redetermined in accordance with Regulations. The
election, once made, shall be irrevocable. If no election is made by the time
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distributions must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life expectancy and
joint and last survivor expectancy shall be computed using the return multiples
in Tables V and VI of Regulation 1.72-9.
(a) Subject to the spouse's right of consent afforded under the
Plan, the restrictions imposed by this Section shall not apply if a Participant
has, prior to January 1, 1984, made a written designation to have his death
benefits paid in an alternative method acceptable under Code Section 401(a) as
in effect prior to the enactment of the Tax Equity and Fiscal Responsibility Act
of 1982.
.1 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments the distribution or
series of payments may be made or begun as soon as is practicable. However,
unless a Former Participant elects in writing to defer the receipt of benefits
(such election may not result in a death benefit that is more than incidental),
the payment of benefits shall begin not later than the 60th day after the close
of the Plan Year in which the latest of the following events occurs: (a) the
date on which the
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Participant attains the earlier of age 65 or the Normal Retirement Age specified
herein; (b) the 10th anniversary of the year in which the Participant commenced
participation in the Plan; or (c) the date the Participant terminates his
service with the Employer.
.1 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
.1 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to
a Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of
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age 62 or his Normal Retirement Age, remain unpaid solely by reason of the
inability of the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further diligent effort,
to ascertain the whereabouts of such Participant or his Beneficiary, the amount
so distributable shall be treated as a Forfeiture pursuant to the Plan. In the
event a Participant or Beneficiary is located subsequent to his benefit being
reallocated, such benefit shall be restored unadjusted for earnings or losses.
.1 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) On and before March 31, 1999, the Administrator, at the election
of the Participant, shall direct the Trustee to distribute to any Participant in
any one Plan Year, up to the lesser of 100% of his vested portion of his
Employer Non-Elective Account valued as of the last Valuation Date or the amount
necessary to satisfy the immediate and heavy financial need of the Participant,
and the Participant's Employer Non-Elective account shall be reduced
accordingly.
On and after April 1, 1999, the Administrator, at the
election of the Participant,
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shall direct the Trustee to distribute to any Participant in any one Plan
Year, in the following order, up to the lesser of 100% of his 1) Voluntary
Contribution account, 2) effective April 1, 1999, Participant's Rollover
Account, 3) Participant's Elective Account, and 4) vested portion of a
Participant's Employer Non-Elective Account, all valued as of the last
Valuation Date or the amount necessary to satisfy the immediate and heavy
financial need of the Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day of the Plan Year or,
if later, the Valuation Date immediately preceding the date of
distribution, and the Participant's Elective Account and Participant's
Rollover Account shall be reduced accordingly.
Withdrawal under this Section shall be authorized only if the distribution
is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his dependents (as
defined in Code Section 152) or necessary for these persons to obtain medical
care;
(2) The costs directly related to the purchase
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of a principal residence for the Participant (excluding mortgage payments);
(3) Payment of tuition, related educational fees, and room and board
expenses for the next twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of the Participant's
principal residence.
(5) Funeral expenses for a member of the Participant's family.
(a) No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such other facts
as are known to the Administrator, determines that all of the following
conditions are satisfied:
(1) The distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant. The amount of the immediate and
heavy financial need may include any amounts necessary to pay any federal,
state, or local income taxes or penalties reasonably anticipated to result
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from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer, provide
that the Participant's elective deferrals and voluntary Employee contributions
will be suspended for at least twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a legally enforceable agreement,
will suspend his elective deferrals and voluntary Employee contributions to the
Plan and all other plans maintained by the Employer for at least twelve (12)
months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer, provide
that the Participant may not make elective deferrals for the Participant's
taxable year immediately following the taxable year of the hardship distribution
in excess of the applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's elective deferrals for the
taxable year of the hardship distribution.
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(a) Notwithstanding the above, distributions from the
Participant's Elective Account pursuant to this Section shall be limited, as of
the date of distribution, to the Participant's Elective Account as of the end of
the last Plan Year ending before July 1, 1989, plus the total Participant's
Deferred Compensation after such date, reduced by the amount of any previous
distributions pursuant to this Section.
(a) Any distribution made pursuant to this Section shall be made
in a manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements of Code
Section 411(a)(11) and the Regulations thereunder.
.1 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of this Section, "alternate
payee," "qualified domestic relations
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order" and "earliest retirement age" shall have the meaning set forth under Code
Section 414(p).
ARTICLE I
TRUSTEE
.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
(a) The Trustee shall have the following categories of
responsibilities:
(1) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets subject,
however, to the direction of a Participant with respect to his Participant
Directed Accounts, the Employer or an Investment Manager appointed by the
Employer or any agent of the Employer;
(2) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of their
death, to their Beneficiaries; and
(3) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.7.
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(a) In the event that the Trustee shall be directed by a Participant
(pursuant to the Participant Direction Procedures), or the Employer, or an
Investment Manager or other agent appointed by the Employer with respect to the
investment of any or all Plan assets, the Trustee shall have no liability with
respect to the investment of such assets, but shall be responsible only to
execute such investment instructions as so directed.
(1) The Trustee shall be entitled to rely fully on the written
instructions of a Participant (pursuant to the Participant Direction
Procedures), or the Employer, or any Fiduciary or nonfiduciary agent
of the Employer, in the discharge of such duties, and shall not be
liable for any loss or other liability, resulting from such direction
(or lack of direction) of the investment of any part of the Plan
assets.
(2) The Trustee may delegate the duty to execute such instructions to
any nonfiduciary agent, which may be an affiliate of the Trustee or any Plan
representative.
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(3) The Trustee may refuse to comply with any direction from the
Participant in the event the Trustee, in its sole and absolute discretion, deems
such directions improper by virtue of applicable law. The Trustee shall not be
responsible or liable for any loss or expense which may result from the
Trustee's refusal or failure to comply with any directions from the Participant.
(4) Any costs and expenses related to compliance with the
Participant's directions shall be borne by the Participant's Directed Account,
unless paid by the Employer.
(a) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign papers
on their behalf.
.1 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income and in such
securities or property, real or personal, wherever situated, as the Trustee
shall deem advisable, including, but not limited to, stocks, common or
preferred, bonds and other evidences of indebtedness or ownership, and real
estate or any interest therein. The Trustee
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shall at all times in making investments of the Trust Fund consider, among other
factors, the short and long-term financial needs of the Plan on the basis of
information furnished by the Employer. In making such investments, the Trustee
shall not be restricted to securities or other property of the character
expressly authorized by the applicable law for trust investments; however, the
Trustee shall give due regard to any limitations imposed by the Code or the Act
so that at all times the Plan may qualify as a qualified Profit Sharing Plan and
Trust.
(a) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the duties
of such bank or trust company shall be of a custodial, clerical and record-
keeping nature.
(a) With respect to assets in a Participant's Directed Investment
Account, the Participant or Beneficiary shall direct the Trustee with regard to
any voting, tender and similar rights associated with the ownership of such
assets, (i.e., the "Stock Right(s)") as follows:
(1) Each Participant or Beneficiary shall direct the Trustee to vote
or otherwise exercise such
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Stock Rights in accordance with the provisions, conditions and terms
of any such Stock Right(s).
(2) Such directions shall be provided to the Trustee by the
Participant or Beneficiary in accordance with the procedure as established by
the Administrator. The Trustee shall vote or otherwise exercise such Stock
Right(s) with respect to which it has received directions to do so under this
Section.
(3) To the extent to which a Participant or Beneficiary does not
instruct the Trustee or does not issue valid directions to the Trustee to vote
or otherwise exercise such Stock Right(s), such Participants or Beneficiaries
shall be deemed to have directed the Trustee that such Stock Rights remain
nonvoted and unexercised.
.1 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same. In
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conjunction with the purchase of securities, margin accounts may be opened and
maintained;
(a) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the Trustee, by
private contract or at public auction. No person dealing with the Trustee shall
be bound to see to the application of the purchase money or to inquire into the
validity, expediency, or propriety of any such sale or other disposition, with
or without advertisement;
(a) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power of
substitution; to exercise any conversion privileges, subscription rights or
other options, and to make any payments incidental thereto; to oppose, or to
consent to, or otherwise participate in, corporate reorganizations or other
changes affecting corporate securities, and to delegate discretionary powers,
and to pay any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property. However, the Trustee shall not vote proxies
relating to securities for which it has not been assigned full investment
management responsibilities. In those cases where another party has such
investment authority or discretion, the Trustee will
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deliver all proxies to said party who will then have full responsibility for
voting those proxies;
(a) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's nominees, and
to hold any investments in bearer form, but the books and records of the Trustee
shall at all times show that all such investments are part of the Trust Fund;
(a) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem advisable;
and for any sum so borrowed, to issue a promissory note as Trustee, and to
secure the repayment thereof by pledging all, or any part, of the Trust Fund;
and no person lending money to the Trustee shall be bound to see to the
application of the money lent or to inquire into the validity, expediency, or
propriety of any borrowing;
(a) To keep such portion of the Trust Fund in cash or cash balances as
the Trustee may, from time to time, deem to be in the best interests of the
Plan, without liability for interest thereon;
(a) To accept and retain for such time as the
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Trustee may deem advisable any securities or other property received or acquired
as Trustee hereunder, whether or not such securities or other property would
normally be purchased as investments hereunder;
(a) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(a) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend suits or
legal or administrative proceedings, and to represent the Plan in all suits and
legal and administrative proceedings;
(a) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be agent or
counsel for the Employer;
(a) To apply for and procure from responsible insurance companies, to
be selected by the Administrator, as an investment of the Trust Fund such
annuity, or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time to time,
whatever
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rights and privileges may be granted under such annuity, or other Contracts; to
collect, receive, and settle for the proceeds of all such annuity or other
Contracts as and when entitled to do so under the provisions thereof;
(a) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(a) To invest in Treasury Bills and other forms of United States
government obligations;
(a) To invest in shares of investment companies registered under the
Investment Company Act of 1940;
(a) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange registered
under the Securities Exchange Act of 1934, as amended, or, if the options are
not traded on a national securities exchange, are guaranteed by a member firm of
the New York Stock Exchange;
(a) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
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(a) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust created
by the Employer or an affiliated company of the Employer, and to commingle such
assets and make joint or common investments and carry joint accounts on behalf
of this Plan and such other trust or trusts, allocating undivided shares or
interests in such investments or accounts or any pooled assets of the two or
more trusts in accordance with their respective interests;
(a) To appoint a nonfiduciary agent or agents to assist the Trustee in
carrying out any investment instructions of Participants and of any Investment
Manager or Fiduciary, and to compensate such agent(s) from the assets of the
Plan, to the extent not paid by the Employer;
(a) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem necessary to
carry out the purposes of the Plan.
.1 LOANS TO PARTICIPANTS
(a) Effective April 1, 1999, the Trustee may, in
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the Trustee's discretion, make loans to Participants and Beneficiaries under the
following circumstances: (1) loans shall be made available to all Participants
and Beneficiaries on a reasonably equivalent basis; (2) loans shall not be made
available to Highly Compensated Employees in an amount greater than the amount
made available to other Participants and Beneficiaries; (3) loans shall bear a
reasonable rate of interest; (4) loans shall be adequately secured; and (5)
shall provide for repayment over a reasonable period of time (6) loans shall
come first from a Participant's Rollover account, if any, and second from a
Participant's Elective Account. Loans may not be made from a Participant's
Employer Non-Elective Contributions.
(a) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans
from the Plan to the Participant on the date on which such loan
was made, or
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(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer shall be
considered one plan. Additionally, with respect to any loan made prior to
January 1, 1987, the $50,000 limit specified in (1) above shall be unreduced.
(a) Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed five (5)
years. Additionally, loans made prior to January 1, 1987, may provide for
periodic payments which are made less frequently than quarterly and which do not
necessarily result in level amortization. Loan repayments will be suspended
under this Plan as permitted under Code Section 414(u)(4).
(a) Any loans granted or renewed on or after the last day of the first
Plan Year beginning after December 31, 1988 shall be made pursuant to a
Participant loan program. Such loan program shall be established in writing and
must include, but need not be limited to, the following:
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(1) the identity of the person or positions authorized to administer
the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans offered;
(5) the procedure under the program for determining a reasonable rate
of interest;
(6) the types of collateral which may secure a Participant loan; and
(7) the events constituting default and the steps that will be taken
to preserve Plan assets.
Such Participant loan program shall be contained in a separate written
document which, when properly executed, is hereby incorporated by reference and
made a part of the Plan. Furthermore, such Participant loan program may be
modified or amended in writing from time to time without the
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necessity of amending this Section.
.1 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
.1 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
.1 ANNUAL REPORT OF THE TRUSTEE
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Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(a) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(a) the increase, or decrease, in the value of the Trust Fund;
(a) all payments and distributions made from the Trust Fund; and
(a) such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such statement of
account, shall acknowledge receipt thereof in writing and advise the Trustee
and/or Administrator of its approval or disapproval thereof. Failure by the
Employer to disapprove any such statement of account within thirty (30) days
after its receipt thereof shall
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be deemed an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between the
Employer and the Trustee to the same extent as if the account of the Trustee had
been settled by judgment or decree in an action for a judicial settlement of its
account in a court of competent jurisdiction in which the Trustee, the Employer
and all persons having or claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall deprive the Trustee of
its right to have its accounts judicially settled if the Trustee so desires.
.1 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Administrator shall direct the
Trustee to engage on behalf of all Participants an independent qualified public
accountant for that purpose. Such accountant shall, after an audit of the books
and records of the Plan in accordance with generally accepted auditing
standards, within a reasonable period after the close of the Plan Year, furnish
to the Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are required by
Act Section 103 or the Secretary of Labor to be filed
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with the Plan's annual report, are presented fairly in conformity with generally
accepted accounting principles applied consistently. All auditing and accounting
fees shall be an expense of and may, at the election of the Administrator, be
paid from the Trust Fund.
(a) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank, insurance
company, or similar institution, regulated and supervised and subject to
periodic examination by a state or federal agency, it shall transmit and certify
the accuracy of that information to the Administrator as provided in Act Section
103(b) within one hundred twenty (120) days after the end of the Plan Year or by
such other date as may be prescribed under regulations of the Secretary of
Labor.
.1 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer,
at least thirty (30) days before its effective date, a written notice of his
resignation.
(a) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at least
thirty (30) days
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before its effective date, a written notice of his removal.
(a) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such successor, upon
accepting such appointment in writing and delivering same to the Employer,
shall, without further act, become vested with all the estate, rights, powers,
discretions, and duties of his predecessor with like respect as if he were
originally named as a Trustee herein. Until such a successor is appointed, the
remaining Trustee or Trustees shall have full authority to act under the terms
of the Plan.
(a) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation, the
successor shall, without further act, become vested with all the estate, rights,
powers, discretions, and duties of his predecessor with the like effect as if he
were originally named as Trustee herein immediately upon the death, resignation,
incapacity, or removal of his predecessor.
(a) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account with
respect to the portion of the
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Plan Year during which he served as Trustee. This statement shall be either (i)
included as part of the annual statement of account for the Plan Year required
under Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than the due
date of the annual statement of account for the Plan Year. The procedures set
forth in Section 7.7 for the approval by the Employer of annual statements of
account shall apply to any special statement of account rendered hereunder and
approval by the Employer of any such special statement in the manner provided in
Section 7.7 shall have the same effect upon the statement as the Employer's
approval of an annual statement of account. No successor to the Trustee shall
have any duty or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by Section 7.7
and this subparagraph.
.1 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the
Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting
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the requirements of Code Section 401(a), provided that the trust to which such
transfers are made permits the transfer to be made.
.1 DIRECT ROLLOVER
(a) Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Section, a distributee
may elect, at the time and in the manner prescribed by the Administrator, to
have any portion of an eligible rollover distribution that is equal to at least
$500 paid directly to an eligible retirement plan specified by the distributee
in a direct rollover.
(a) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of all or
any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any distribution that is one of
a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to
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the extent such distribution is required under Code Section 401(a)(9); the
portion of any other distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized appreciation with
respect to employer securities); and any other distribution that is reasonably
expected to total less than $200 during a year.
(2) An eligible retirement plan is an individual retirement account
described in Code Section 408(a), an individual retirement annuity described in
Code Section 408(b), an annuity plan described in Code Section 403(a), or a
qualified trust described in Code Section 401(a), that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are distributees with regard to the interest of the spouse or former
spouse.
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(4) A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
ARTICLE I
AMENDMENT, TERMINATION AND MERGERS
.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan,
subject to the limitations of this Section. However, any amendment which affects
the rights, duties or responsibilities of the Trustee and Administrator, other
than an amendment to remove the Trustee or Administrator, may only be made with
the Trustee's and Administrator's written consent. Any such amendment shall
become effective as provided therein upon its execution. The Trustee shall not
be required to execute any such amendment unless the Trust provisions contained
herein are a part of the Plan and the amendment affects the duties of the
Trustee hereunder.
(a) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to any purpose
other than
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for the exclusive benefit of the Participants or their Beneficiaries or estates;
or causes any reduction in the amount credited to the account of any
Participant; or causes or permits any portion of the Trust Fund to revert to or
become property of the Employer.
(a) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective to the extent it eliminates
or reduces any "Section 411(d)(6) protected benefit" or adds or modifies
conditions relating to "Section 411(d)(6) protected benefits" the result of
which is a further restriction on such benefit unless such protected benefits
are preserved with respect to benefits accrued as of the later of the adoption
date or effective date of the amendment. "Section 411(d)(6) protected benefits"
are benefits described in Code Section 411(d)(6)(A), early retirement benefits
and retirement-type subsidies, and optional forms of benefit.
.1 TERMINATION
(a) The Employer shall have the right at any time to terminate the
Plan by delivering to the Trustee and Administrator written notice of such
termination. Upon any full or partial termination, all amounts credited to the
affected
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Participants' Combined Accounts shall become 100% Vested as provided in Section
6.4 and shall not thereafter be subject to forfeiture, and all unallocated
amounts shall be allocated to the accounts of all Participants in accordance
with the provisions hereof.
(a) Upon the full termination of the Plan, the Employer shall direct
the distribution of the assets of the Trust Fund to Participants in a manner
which is consistent with and satisfies the provisions of Section 6.5.
Distributions to a Participant shall be made in cash or through the purchase of
irrevocable nontransferable deferred commitments from an insurer. Except as
permitted by Regulations, the termination of the Plan shall not result in the
reduction of "Section 411(d)(6) protected benefits" in accordance with Section
8.1(c).
.1 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the
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transfer, merger or consolidation, and such transfer, merger or consolidation
does not otherwise result in the elimination or reduction of any "Section
411(d)(6) protected benefits" in accordance with Section 8.1(c).
ARTICLE I
TOP HEAVY
.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.4 of the Plan.
.1 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued Benefits
of Key Employees and (2) the sum of the Aggregate Accounts of Key Employees
under this Plan and all plans of an Aggregation Group, exceeds sixty percent
(60%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all
Key and Non-Key Employees under this Plan and all plans of an
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Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such Participant's
Present Value of Accrued Benefit and/or Aggregate Account balance shall not be
taken into account for purposes of determining whether this Plan is a Top Heavy
or Super Top Heavy Plan (or whether any Aggregation Group which includes this
Plan is a Top Heavy Group). In addition, if a Participant or Former Participant
has not performed any services for any Employer maintaining the Plan at any time
during the five year period ending on the Determination Date, any accrued
benefit for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
(a) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued Benefits
of Key Employees and (2) the sum of the Aggregate Accounts of Key Employees
under this Plan and all plans of an Aggregation Group, exceeds ninety percent
(90%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all
Key and Non-Key Employees under this Plan and all plans of an Aggregation Group.
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(a) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most recent
valuation occurring within a twelve (12) month period ending on the
Determination Date;
(2) an adjustment for any contributions due as of the Determination
Date. Such adjustment shall be the amount of any contributions actually made
after the Valuation Date but due on or before the Determination Date, except for
the first Plan Year when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are allocated as of a date
in that first Plan Year.
(3) any Plan distributions made within the Plan Year that includes the
Determination Date or within the four (4) preceding Plan Years. However, in the
case of distributions made after the Valuation Date and prior to the
Determination Date, such distributions are not included as distributions for top
heavy purposes to the extent that such distributions are already included in the
Participant's Aggregate Account balance as of the Valuation Date.
Notwithstanding anything herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and distributions under a
terminated plan which if it
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had not been terminated would have been required to be included in an
Aggregation Group, will be counted. Further, distributions from the Plan
(including the cash value of life insurance policies) of a Participant's account
balance because of death shall be treated as a distribution for the purposes of
this paragraph.
(4) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified voluntary employee
contributions shall not be considered to be a part of the Participant's
Aggregate Account balance.
(5) with respect to unrelated rollovers and plan-to-plan transfers
(ones which are both initiated by the Employee and made from a plan maintained
by one employer to a plan maintained by another employer), if this Plan provides
the rollovers or plan-to-plan transfers, it shall always consider such rollovers
or plan-to-plan transfers as a distribution for the purposes of this Section. If
this Plan is the plan accepting such rollovers or plan-to-plan transfers, it
shall not consider such rollovers or plan-to-plan transfers as part of the
Participant's Aggregate Account balance. However, rollovers or plan-to-plan
transfers accepted prior to January 1, 1984 shall be considered as part of the
Participant's Aggregate Account
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balance.
(6) with respect to related rollovers and plan-to-plan transfers (ones
either not initiated by the Employee or made to a plan maintained by the same
employer), if this Plan provides the rollover or plan-to-plan transfer, it shall
not be counted as a distribution for purposes of this Section. If this Plan is
the plan accepting such rollover or plan-to-plan transfer, it shall consider
such rollover or plan-to-plan transfer as part of the Participant's Aggregate
Account balance, irrespective of the date on which such rollover or plan-to-plan
transfer is accepted.
(7) For the purposes of determining whether two employers are to be
treated as the same employer in (5) and (6) above, all employers aggregated
under Code Section 414(b), (c), (m) and (o) are treated as the same employer.
(a) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required Aggregation
Group hereunder, each plan of the Employer in which a Key Employee is
a
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participant in the Plan Year containing the Determination Date or
any of the four preceding Plan Years, and each other plan of the
Employer which enables any plan in which a Key Employee participates
to meet the requirements of Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group shall be known as a Required
Aggregation Group.
In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation Group is a Top
Heavy Group. No plan in the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include any
other plan not required to be included in the Required Aggregation Group,
provided the resulting group, taken as a whole, would continue to satisfy the
provisions of Code Sections 401(a)(4) and 410. Such group shall be known as a
Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan that is
part of the Required Aggregation Group will be considered a Top Heavy Plan if
the Permissive Aggregation
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Group is a Top Heavy Group. No plan in the Permissive Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top
Heavy Group.
(3) Only those plans of the Employer in which the Determination Dates
fall within the same calendar year shall be aggregated in order to determine
whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years ending on the
Determination Date.
(a) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such Plan Year.
(a) Present Value of Accrued Benefit: In the case of a defined benefit
plan, the Present Value of Accrued Benefit for a Participant other than a Key
Employee, shall be as determined using the single accrual method used for all
plans of the Employer and Affiliated Employers, or if no such single method
exists, using a method which results in benefits accruing not more rapidly than
the slowest accrual rate permitted under Code Section 411(b)(1)(C). The
determination of the Present Value
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of Accrued Benefit shall be determined as of the most recent Valuation Date that
falls within or ends with the 12-month period ending on the Determination Date
except as provided in Code Section 416 and the Regulations thereunder for the
first and second plan years of a defined benefit plan.
(a) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group, exceeds sixty percent (60%) of a
similar sum determined for all Participants.
ARTICLE I
MISCELLANEOUS
.1 PARTICIPANT'S RIGHTS
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This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
.1 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable out of the Trust Fund to any person (including a Participant or his
Beneficiary) shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be void; and no such benefit shall in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or against
such person, and the same shall not be recognized by the Trustee, except to such
extent as may be required by law.
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(a) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, as a result of a loan from the Plan. At the
time a distribution is to be made to or for a Participant's or Beneficiary's
benefit, such proportion of the amount distributed as shall equal such loan
indebtedness shall be paid by the Trustee to the Trustee or the Administrator,
at the direction of the Administrator, to apply against or discharge such loan
indebtedness. Prior to making a payment, however, the Participant or Beneficiary
must be given written notice by the Administrator that such loan indebtedness is
to be so paid in whole or part from his Participant's Combined Account. If the
Participant or Beneficiary does not agree that the loan indebtedness is a valid
claim against his Vested Participant's Combined Account, he shall be entitled to
a review of the validity of the claim in accordance with procedures provided in
Sections 2.7 and 2.8.
(a) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic relations orders
permitted to be so treated by the Administrator under the provisions of the
Retirement Equity Act of 1984. The Administrator shall establish a written
procedure to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to
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the extent provided under a "qualified domestic relations order," a former
spouse of a Participant shall be treated as the spouse or surviving spouse for
all purposes under the Plan.
.1 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of New York, other than its laws respecting choice
of law, to the extent not preempted by the Act.
.1 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or
neuter gender, they shall be construed as though they were also used in another
gender in all cases where they would so apply, and whenever any words are used
herein in the singular or plural form, they shall be construed as though they
were also used in the other form in all cases where they would so apply.
.1 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee, the Employer or
the Administrator may be a party,
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and such claim, suit, or proceeding is resolved in favor of the Trustee, the
Employer or the Administrator, they shall be entitled to be reimbursed from the
Trust Fund for any and all costs, attorney's fees, and other expenses pertaining
thereto incurred by them for which they shall have become liable.
.1 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power of revocation or amendment, by the happening of
any contingency, by collateral arrangement or by any other means, for any part
of the corpus or income of any trust fund maintained pursuant to the Plan or any
funds contributed thereto to be used for, or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants, or their
Beneficiaries.
(a) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer may
demand repayment of such excessive contribution at any time within one (1) year
following the time of payment and the Trustees shall return such amount to the
Employer within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to
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the Employer but any losses attributable thereto must reduce the amount so
returned.
.1 BONDING
Every Fiduciary, except a bank or an insurance company, unless
exempted by the Act and regulations thereunder, shall be bonded in an amount not
less than 10% of the amount of the funds such Fiduciary handles; provided,
however, that the minimum bond shall be $1,000 and the maximum bond, $500,000.
The amount of funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or class to be
covered and their predecessors, if any, during the preceding Plan Year, or if
there is no preceding Plan Year, then by the amount of the funds to be handled
during the then current year. The bond shall provide protection to the Plan
against any loss by reason of acts of fraud or dishonesty by the Fiduciary alone
or in connivance with others. The surety shall be a corporate surety company (as
such term is used in Act Section 412(a)(2)), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything in the Plan to the
contrary, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
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<PAGE>
.1 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the Trustee, nor their
successors shall be responsible for the validity of any Contract issued
hereunder or for the failure on the part of the insurer to make payments
provided by any such Contract, or for the action of any person which may delay
payment or render a Contract null and void or unenforceable in whole or in part.
.1 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
.1 RECEIPT AND RELEASE FOR PAYMENTS
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<PAGE>
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
.1 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
.1 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them
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<PAGE>
under the Plan or as accepted by or assigned to them pursuant to any procedure
provided under the Plan, including but not limited to any agreement allocating
or delegating their responsibilities, the terms of which are incorporated herein
by reference. In general, unless otherwise indicated herein or pursuant to such
agreements, the Employer shall have the duties specified in Article II hereof,
as the same may be allocated or delegated thereunder, including but not limited
to the responsibility for making the contributions provided for under Section
4.1; and shall have the authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
responsibility for the administration of the Plan, including but not limited to
the items specified in Article II of the Plan, as the same may be allocated or
delegated thereunder. The Administrator shall act as the named Fiduciary
responsible for communicating with the Participant according to the Participant
Direction Procedures. The Trustee shall have the responsibility of management
and control of the assets held under the Trust, except to the extent directed
pursuant to Article II or with respect to those assets, the management of which
has been assigned to an Investment Manager, who shall be solely responsible for
the management of the assets assigned to it, all as specifically provided in the
Plan and any agreement with the Trustee. Each named Fiduciary
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<PAGE>
warrants that any directions given, information furnished, or action taken by it
shall be in accordance with the provisions of the Plan, authorizing or providing
for such direction, information or action. Furthermore, each named Fiduciary may
rely upon any such direction, information or action of another named Fiduciary
as being proper under the Plan, and is not required under the Plan to inquire
into the propriety of any such direction, information or action. It is intended
under the Plan that each named Fiduciary shall be responsible for the proper
exercise of its own powers, duties, responsibilities and obligations under the
Plan as specified or allocated herein. No named Fiduciary shall guarantee the
Trust Fund in any manner against investment loss or depreciation in asset value.
Any person or group may serve in more than one Fiduciary capacity. In the
furtherance of their responsibilities hereunder, the "named Fiduciaries" shall
be empowered to interpret the Plan and Trust and to resolve ambiguities,
inconsistencies and omissions, which findings shall be binding, final and
conclusive.
.1 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
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<PAGE>
.1 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan under Code
Section 401. If the Plan receives an adverse determination with respect to its
initial qualification, then the Plan may return such contributions to the
Employer within one year after such determination, provided the application for
the determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted, or such
later date as the Secretary of the Treasury may prescribe.
(a) Notwithstanding any provisions to the contrary, except Sections
3.5, 3.6, and 4.1(c), any contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution by the Employer under the
Code and, to the extent any such deduction is disallowed, the Employer may,
within one (1) year following the disallowance of the deduction, demand
repayment of such disallowed contribution and the Trustee shall return such
contribution within one (1) year following the disallowance. Earnings of the
Plan attributable to the excess contribution may not be returned to the
Employer, but any losses attributable thereto must reduce the amount so
returned.
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<PAGE>
.1 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
ARTICLE I
PARTICIPATING EMPLOYERS
.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of
the Employer and Trustee, any other corporation or entity, whether an affiliate
or subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
.1 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use
the same Trustee as provided in this Plan.
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<PAGE>
(a) The Trustee may, but shall not be required to, commingle, hold and
invest as one Trust Fund all contributions made by Participating Employers, as
well as all increments thereof. However, the assets of the Plan shall, on an
ongoing basis, be available to pay benefits to all Participants and
Beneficiaries under the Plan without regard to the Employer or Participating
Employer who contributed such assets.
(a) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or a
Participating Employer, shall not affect such Participant's rights under the
Plan, and all amounts credited to such Participant's Combined Account as well as
his accumulated service time with the transferor or predecessor, and his length
of participation in the Plan, shall continue to his credit.
(a) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Participants of the Employer or Participating
Employer by which the forfeiting Participant was employed.
(a) Any expenses of the Trust which are to be paid by the Employer or
borne by the Trust Fund shall be paid by
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<PAGE>
each Participating Employer in the same proportion that the total amount
standing to the credit of all Participants employed by such Employer bears to
the total standing to the credit of all Participants.
.1 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this
Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
.1 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such
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<PAGE>
Employee in the same manner as was the Participating Employer from whom the
Employee was transferred.
.1 PARTICIPATING EMPLOYER CONTRIBUTION
All contributions made by a Participating Employer, as provided for in
this Plan, shall be determined separately by each Participating Employer, and
shall be allocated only among the Participants eligible to share of the Employer
or Participating Employer making the contribution. On the basis of the
information furnished by the Administrator, the Trustee shall keep separate
books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
.1 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be
a Participating Employer hereunder shall only be by the written action of each
and every Participating Employer
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<PAGE>
and with the consent of the Trustee where such consent is necessary in
accordance with the terms of this Plan.
.1 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke
its participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 8.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
184
<PAGE>
.1 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
185
<PAGE>
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Carrols Corporation
By
EMPLOYER
/s/ Paul R. Flanders
------------------------------
TRUSTEE
186
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE 12 MONTHS ENDED DECEMBER 31,1999 OF CARROLS CORPORATION
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,901,000
<SECURITIES> 0
<RECEIVABLES> 787,000
<ALLOWANCES> (53,000)
<INVENTORY> 4,211,000
<CURRENT-ASSETS> 17,514,000
<PP&E> 214,412,000
<DEPRECIATION> (91,599,000)
<TOTAL-ASSETS> 320,027,000
<CURRENT-LIABILITIES> 39,210,000
<BONDS> 249,118,000
0
0
<COMMON> 0
<OTHER-SE> 15,051,000
<TOTAL-LIABILITY-AND-EQUITY> 320,027,000
<SALES> 455,440,000
<TOTAL-REVENUES> 456,479,000
<CGS> 137,279,000
<TOTAL-COSTS> 384,395,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,386,000
<INCOME-PRETAX> 5,978,000
<INCOME-TAX> 3,826,000
<INCOME-CONTINUING> 2,152,000
<DISCONTINUED> 0
<EXTRAORDINARY> 1,099,000
<CHANGES> 0
<NET-INCOME> 1,053,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
