SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995
OR
[] TRANSITION REPORT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4183
CHOCK FULL O' NUTS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-0697025
(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
370 Lexington Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
(212) 532-0300
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title Of Each Class On Which Registered
Common Stock, par value $.25 per share New York Stock Exchange
8% Convertible Subordinated Debentures, American Stock Exchange
due September 15, 2006
7% Convertible Senior Subordinated Debentures, New York Stock Exchange
due April 1, 2012
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.Yes x No
Aggregate market value of the Common Stock ($.25 par value) held by
nonaffiliates of the registrant as of October 13 , 1995: $59,190,000
Number of Shares of Common Stock ($.25 par value) outstanding as of October
13, 1995: 10,736,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement for the year ended July 31, 1995 are
incorporated by reference into Part III.
PART I
Item 1. BUSINESS
Item 101 (a) and (c) of Regulation S-K
The Company's primary business is the roasting, packing and marketing
of a broad range of regular and decaffeinated, ground roast, instant and
specialty coffees for the Foodservice and Retail Grocery Industries. These
products are sold regionally throughout the United States and Canada under
various well known trademarks, including Chock full o' Nuts, LaTouraine and
Cain's. Best known among its products is Chock full o' Nuts brand premium,
vacuum packed, all-method grind coffee. The Company is also one of the
largest marketers of foodservice and private label coffees. The balance of
the Company's business is derived from its developing Retail Restaurant and
Cafe Division (commencing in fiscal 1994) and from real estate operations.
Incorporated in 1932, for many years, the Company's primary business was the
operation of counter service restaurants, under the Chock full o' Nuts name.
In 1953, the Company expanded its business by marketing the coffee made
famous in its restaurants to consumers via supermarkets and other Retail
Grocery outlets. Impactful advertising, featuring the "Heavenly Coffee"
jingle, made Chock full o' Nuts brand premium coffee a market leader. In
1983, Management discontinued the Company's restaurant operations and
concentrated its efforts on the sale of coffee and related food products.
Since 1984, the Company's overall strategy has been to diversify within its
core areas of strength, thereby lessening its dependence on any single
business area.
In March 1994, the Company acquired all the assets and liabilities of a
company ("Quikava") whose menu features a full assortment of the most
popular specialty coffee beverages, plus a broad variety of freshly
prepared foods and snacks. Quikava's unique "double drive-thru" format
targets the consumer "on the go" and adds a new dimension to the concept
of take out foods and beverages. Quikava and the more traditionally
formatted Cafes, which conmenced operation in June 1994, represent a
renewed commitment to leverage the Company's restaurant heritage while
taking advantage of the growth of Speciality Coffees,"away from home",
where annual growth rates are significant.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cain's") and certain trademarks related to that business. Cain's
primary business is the direct sale and distribution of coffee and
related products under the Cain's label to Foodservice customers in
twelve states primarily West of the Mississippi. Cain's also sells
coffee and tea to Retail Grocery Customers, using a direct store
distribution system.
In November 1992, the Company acquired a controlling interest in a
partnership, which owns Dana Brown Private Brands, Inc., a company
which markets and sells private label coffee and tea products to
food retailers and distributors, located primarily in the Midwest.
In December 1986, the Company acquired Greenwich Mills Company
("Greenwich"). Established in 1912, Greenwich is a leading
manufacturer and supplier of coffee, tea and allied products
to Foodservice and private label customers. The majority of
their customers are located in markets East of the Mississippi.
Greenwich's best known trademark is LaTouraine.
In November 1993, the Company sold Hillside Coffee of California,
Inc., whose business consisted of roasting, packing, distributing
and marketing specialty coffee under the Hillside name, primarily
to supermarkets. See Note 6 of notes to conolidated financial
statements.
In July 1993, the Company sold its interest in Jimbo's Jumbos,
Incorporated ("JJI"). The business of JJI consisted primarily of
(1) shelling farmers' stock peanuts into commercial
and seed grades of raw peanuts for sale to commercial processors of
peanuts, seed dealers and farmers and (2) processing and packaging of
in-the-shell peanuts and nuts, and shelled peanuts and nuts, for sale
to supermarkets. See Note 5 of notes to consolidated financial
statements.
Corporate Management is currently focused on the following growth
initiatives: (1) Expansion of its developing Retail Restaurant and
Cafe Division; (2) Maximizing the Company's Foodservice franchise
by significantly broadening its customer base for Cain's, Chock full
o' Nuts and LaTouraine brand coffee, tea and allied products; (3)
Increasing Retail Grocery Market shares for such higher margin
products as Chock full o' Nuts brand Cafe Blend, decaffeinated,
instant and Rich French Roast coffees and (4) Selectively pursuing
new business development opportunities that will deliver
significant volume and profit growth.
The following table sets forth revenues and operating results from
continuing operations before interest and corporate expenses
attributable to the Company's food products sales and real estate
operations, for the fiscal years ended July 31, 1995, 1994 and 1993:
Fiscal Years Ended July 31,
1995 1994 1993
(In Thousands)
Revenues
Net Sales - Food Products $328,378 $263,638 $251,641
Rentals from Real Estate 2,061 2,060 1,876
Operating Profit:
Food Products (1) 15,552 10,389 11,532 (2)
Real Estate Operations 490 317 (9)
(1) See Note 6 of notes to consolidated financial statements regarding
product line sold.
(2) Includes restructuring charge of $3,598,000 and officers' termination
benefits of $818,000 (see Notes 11(c) and 11(d) of notes to consolidated
financial statements).
COFFEE AND RELATED PRODUCTS
Description of Coffee Market
According to certain available industry surveys and Company estimates,
total United States coffee sales by manufacturers in 1994 were
approximately $6 billion. Approximately 35% of total United States coffee
sales in 1994 were to Foodservice customers.
Foodservice Sales and Marketing
In January 1985, the Company began using Company sales personnel and
independent food brokers to market its coffee and allied products to
foodservice customers. These include chain and independent
restaurants, hospitals, airlines, schools, governmental institutions,
vending and office coffee service operators and other institutional
distributors. In December 1986, the Company acquired Greenwich, which
is a major direct sales and distribution supplier in the Eastern
United States of coffee, tea and allied products to Foodservice
Customers and private label customers. Greenwich's best-known
label is LaTouraine, which enjoys a reputation for high quality.
LaTouraine also distributes spices, international coffee mixes,
speciality coffees, whole bean and pod Espresso, hot chocolate,
iced and hot tea, powdered soft drinks, soup bases, and portion
controlled jams, jellies and condiments.
In December 1992, the Company acquired Cain's, which is a major supplier
in the Midwest and Southwest of products similar to those sold by
Greenwich and LaTouraine to Foodservice Customers.
In fiscal 1995, approximately 44% of sales were derived from processing
and marketing coffee and allied products for sale to Foodservice Customers.
Sales of coffee products to Foodservice Customers have traditionally been
less price-sensitive and depend more on the level of customer service
provided. They also tend to generate higher operating margins, due to
lower marketing and advertising expenses, than do sales of such products
to Retail Customers. In addition, the absence of competitors with a
dominant market position, makes the Company's pricing to Foodservice
Customers less susceptible, as compared to pricing to Retail Customers,
to changes in price in response to pricing actions of any single
competitor.
Retail Sales and Marketing
The Company currently sells most of its Retail Grocery coffee products to
supermarket chains, wholesalers and independent food outlets ("Retail
Customers") through independent food brokers. The Company's retail
products include coffees sold under the Chock full o' Nuts, Cain's and
Safari labels. The Company's best known product, Chock full o' Nuts
premium, vacuum packed, all-method grind coffee, is superior to most
competitors in being able to produce a more consistent, better tasting,
finished brew from a single, "all-method grind", regardless of the
coffee maker used. The Company also sells an "extended yield" coffee,
which produces more cups than equivalent quantities of standard yield
coffee. Additionally, the Company sells decaffeinated roast and ground
coffee, instant coffees, a premium quality Cafe blend and a Rich French
Roast coffee, as well as a ready-to-drink iced cappuccino product,
called Chock o'ccino.
The Company and Greenwich roast, pack and market regular, decaffeinated
and instant coffees for sale by others under a variety of private labels.
In fiscal 1995 the Company's coffee sales to Retail Customers accounted
for approximately 48% of sales and represented approximately 4% of total
Retail Grocery coffee sales in the United States.
Chock full o' Nuts all-method grind coffee is sold in most major
metropolitan areas of the United States and in the provinces of
Ontario and Quebec, Canada. Sales are concentrated in the New
York metropolitan area, upstate New York, New England, Philadelphia,
Washington, D.C. and Florida. The Company believes that its
distinctive packaging design and one grind concept are important
factors in the marketing of its coffee products. Marketing a single
important factors in the marketing of its coffee products. Marketing
a single grind coffee has enabled the Company's all-method grind coffee
to be consistently one of the fastest moving items off supermarket
shelves in its core markets.
The sales of Cain's and Safari brand products are concentrated in the
Midwest and Southwest.
Suppliers and Manufacturing
The Company's coffee is primarily a blend of readily available Central and
South American coffees. The Company purchases approximately 100 million
pounds of green coffee beans annually. All such coffee is purchased from
approximately 25 importers located in New York City, New Orleans and Miami,
who assume the risk of delivering beans that meet the Company's quality
requirements at a guaranteed price. The Company generally buys its coffee
pursuant to contracts providing for delivery in 4 to 12 weeks and
supplements such contracts with purchases on the spot market. All
purchases are subject to inspection and approval by the United States Food
and Drug Administration.
Manufacturing activities for coffee and related products are presently
conducted at the following facilities:
Location Principal Use
Brooklyn, New York............Coffee Roasting Plant, Warehouse
St. Louis, Missouri...........Coffee Roasting Plant, Warehouse
Hialeah, Florida..............Coffee Roasting Plant, Warehouse
Rochester, New York...........Coffee Roasting Plant, Warehouse
Oklahoma City, Oklahoma.......Coffee Roasting Plant and Processing
Plant for Tea and Related Food
Products, Warehouse
Springfield, Missouri.........Processing Plant for Spices, Warehouse
All of the above facilities are owned, except the Rochester, New York
and Springfield, Missouri facilities, which are leased. The Company rents
executive office space in New York City and maintains warehousing facilities
in over forty-five locations throughout the United States. The Company
believes that it has sufficient production capacity to meet its current
and future needs.
Competition
The coffee business is highly competitive. The Company competes for Retail
Customers with a number of nationally and regionally established brands.
Its largest competitors are Kraft Foods (Maxwell House, Yuban and Sanka
coffees), Procter & Gamble (Folger's coffees) and The Nestle Company (Hills,
MJB and Chase & Sanborn coffees), with combined annual sales accounting for
approximately 80% of the United States coffee market. The profitability of
the Company's coffee sales to Retail Customers is largely dependent on
competitive pricing conditions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
There are many competitors in the business of selling coffee to Foodservice
Customers. However, the Company believes that no single competitor's sales
constitute more than 15% of this market. Sales of coffee, tea and allied
products to Foodservice Customers have traditionally been less price-
sensitive and more dependent on the level of service provided to such
customers than sales of such products to Retail Customers. In addition,
the absence of direct competitors with a dominant market position has
traditionally made the Company's pricing to Foodservice Customers less
susceptible, as compared to pricing to Retail Customers, to changes in
price in response to pricing actions of any single competitor.
Retail Restaurant and Cafe Division
In June 1994, with the opening of a flagship store in Midtown Manhattan,
the Company began to develop the business of operating retail cafes which
offer moderately priced specialty coffees, sandwiches, salads, bakery
products, snacks, and other assorted food and beverage products. The cafe
has an upscale motif, featuring a rich wood and granite interior and
utilizes a quick-service format.
The Company has developed a number of formats for expansion of this retail
cafe concept, including the full cafe (2500 to 3500 square feet with seating
for 45-75), the mini-cafe (400-1000 square feet with limited seating), and
Chock Full O'Nuts EXPRESS-Osm (a modular kiosk of 150 square feet). The
Company intends to open additional locations utilizing the above formats,
in central business districts and high-volume public locations.
In March 1994, the Company acquired Quikava, Inc., an operator and
franchisor of double-drive thru buildings, which offer a variety of
specialty coffees, espresso-based drinks, baked goods, and snacks.
Quikava units are situated on major commuter thoroughfares and offer
quick-service of quality beverages and snacks. The Company intends to
develop additional Quikava units, both company-operated and franchised.
RESEARCH AND DEVELOPMENT
The Company invested a nominal amount in research and development for the
three years ended July 31, 1995.
EMPLOYEES
The Company employs approximately 1,150 employees, 15% of whom are
represented by labor unions. The Company believes that its relations
with both union and non-union employees are good.
REAL ESTATE OPERATIONS
The Company is both lessor and lessee on certain properties and an owner
of one property in New York City. Such properties had been part of the
Company's former restaurant operations. Additionally, the Company owns a
coffee roasting facility in Castroville, California which it leases to the
owner of Hillside Coffee of California, Inc.
OTHER MATTERS
Reference is made to Notes 2, 5 and 6 of notes to consolidated financial
statements with respect to the acquisition and disposition of certain
assets.
Item 101 (b) of Regulation S-K
Segment Information is incorporated herein by reference.
Item 101 (d) of Regulation S-K
All of the Company's operations are located in the United States.
Export sales are not significant.
Item 2. PROPERTIES
The Company leases certain premises which are under long-term leases
expiring on various dates through 2009 and certain of which contain
renewal options. Reference should be made to Note 7 of the notes to
consolidated financial statements for additional information about these
leases. The following table sets forth the location and certain information
with respect to the Company's plants and certain other properties as of
October 13, 1995, all of which premises the Company considers adequate for
its present and anticipated needs.
PLANTS AND OTHER PROPERTIES
Approximate Whether
Square Feet Owned
of Or
Location Principal Use Floor Space Leased (1)
Brooklyn, New York Coffee Roasting Plant,
Warehouse 55,000 Owned
St. Louis, Missouri Coffee Roasting Plant,
Warehouse 77,000 Owned
Secaucus, New Jersey Warehouse and Offices 104,000 Owned
Hialeah, Florida Coffee Roasting Plant,
Warehouse 50,000 Owned
Rochester, New York Coffee Roasting Plant,
Warehouse 50,000 Leased
Oklahoma City, Oklahoma Coffee Roasting Plant
and Processing Plant for
Tea and Related Food
Products, Warehouse 150,000 Owned
Springfield, Missouri Processing Plant for
Spices, Warehouse 30,000 Leased
574 Fifth Avenue Real Estate
New York, New York Operation 13,000 Leased
422 Madison Avenue Real Estate and Restaurant
New York, New York Operation 8,750 Leased
532 Madison Avenue Real Estate
New York, New York Operation 12,250 Leased
49 Broadway Real Estate
New York, New York Operation 12,000 Leased
1420 Broadway Real Estate
New York, New York Operation 6,750 Leased
370 Lexington Avenue Corporate
New York, New York Headquarters 11,000 Leased
Waverly Place corner
Green Street Real Estate
New York, New York Operation 2,500 Leased
336 Broadway Real Estate
New York, New York Operation 10,500 Owned
Castroville, California Real Estate 66,000 Owned
Operation
512 Seventh Avenue Restaurant Operation 2,500 Leased
New York, New York
1114 Avenue of the
Americas Restaruant Operation 2,800 Leased
New York, New York
43 West 42 Street Restaurant Operation 340 Leased
New York, New York
Chelsea Piers Restaurant Operation 4,300 Leased
Pier 61 Hudson River
New York, New York
Expo Design Center Restaurant Operation 3,000 Leased
Westbury, New York
Queen Ann Plaza Restaurant Operation 250 Leased
Norwell, Mass
Brown Avenue
Manchester,
New Hampshire Restaurant Operation 500 Leased
Natick Crossing Mall Restaurant Operation 1,500 Leased
Natick, Mass.
190 Old Derby Street Headquarters, Quikava 1,196 Leased
Hingham, Mass.
(1) -- No Company-leased premises are owned by any officer or director of
the Company. See
Note 7 of notes to the consolidated financial statements.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
"Common Share Prices" and related security holder matters are incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
"Selected Financial Data" is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
and
Item 11. EXECUTIVE COMPENSATION
and
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
and
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted, per General Instruction G. The information required by Part III
shall be incorporated by reference from the Registrant's definitive proxy
statement pursuant to Regulation 14A for the fiscal year ended July 31,
1995 which is to be filed with the Commission.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) The response to this portion of Item 14 is submitted as a separate
section of this report (see below).
(b) Reports on Form 8-K:
None
(c) The response to this portion of Item 14 is submitted as a separate
section of this report (see below).
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
Pursuant to Regulation S-K Item 601, following is a list of Exhibits.
Exhibit 3 Articles of incorporation and by laws.
(a) Articles of incorporation filed as an Exhibit to Form
10-K for the fiscal year ended July 31, 1994 is incorporated herein
by reference.
(b) By-laws filed as an Exhibit to Form 10-K for the fiscal year
ended July 31, 1994 is incorporated herein by reference.
Exhibit 4 Instruments defining the rights of security holders, including
indentures.
(a) Indenture dated as of September 15, 1986 between the Company
and Manufacturers Hanover Trust Company ("Manufacturers") filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(b) Form of the Company's 8% Convertible Subordinated Debenture
included in Exhibit 4(a) filed as an Exhibit to Form 10-K for the
fiscal year ended July 31, 1994 is incorporated herein by reference.
(c) Instrument of resignation, appointment and acceptance dated
August 9, 1993 among the Company, Manufacturers and Liberty Bank and
Trust Company of Oklahoma City filed as an Exhibit to Form 10-K for
the fiscal year ended July 31, 1994 is incorporated herein by
reference.
(d) Indenture dated as of April 1, 1987 between the Company and
IBJ Schroder Bank and Trust Company filed as an Exhibit to
Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(e) Form of the Company's 7% Convertible Senior Subordinated
Debenture included in Exhibit 4(d) filed as an Exhibit to Form
10-K for the fiscal year ended July 31, 1994 is incorporated
herein by reference.
Exhibit 9 Voting Trust Agreement, not applicable.
Exhibit 10 Material contracts
(a) Rights Agreement, dated as of December 30, 1987, with IBJ Schroder
Bank and Trust Company, as Rights Agent, the form of Rights Certificate
and Summary of Rights to Purchase Common Stock filed as an Exhibit to
Form 10-K for the fiscal year ended July 31, 1994 is incorporated herein
by reference.
(b) Benefits protection trust with National Westminster Bank USA filed
as an Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(c) Resolution of the Board of Directors adopting severance policy
filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1994
is incorporated herein by reference.
(d) Chock full o' Nuts Corporation Employees' Stock Ownership Plan
dated December 16, 1988 filed herein.
(e) Stock purchase agreement dated October 16, 1992 by and between
Chock full o' Nuts Corporation and Nestle' Beverage Corporation filed as
an Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(f) Amended and Restated Credit Agreement dated December 4, 1992 among
Chock full o' Nuts Corporation and its Subsidiaries and National
Westminster Bank USA and Chemical Bank filed as an Exhibit to Form 8-K
dated December 10, 1992 is incorporated herein by reference.
(g) Agreement and Plan of Merger by and among JJJ Acquisition Corp.,
Chock full o' Nuts Corporation and Jimbo's Jumbos, Incorporated dated
April 22, 1993 filed as an Exhibit to Form 8-K dated July 8, 1992 is
incorporated herein by reference.
(h) Agreement with Joseph Breslin dated August 5, 1993 filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1993 is
incorporated herein by reference.
(i) Stock Purchase Agreement between Chock full o' Nuts Corporation,
Hillside Holding Corporation and Gourmet Coffees of America, Inc. dated
October 8, 1993 filed as an Exhibit to Form 10-K for the fiscal year
ended July 31, 1993 is incorporated herein by reference.
(j) Agreement dated November 7, 1989 by and between Chock full o'Nuts
Corporation and Tetley, Inc. for the purchase of Tetley's instant coffee
business filed as an Exhibit to Form 10K for the fiscal year ended July
31, 1990 is incorporated herein by reference.
(k) Standstill agreement by and among Chock full o'Nuts Corporation
and Steven Schulman and Leon Pordy, M.D. dated June 21, 1991 filed as
an Exhibit to Form 10K for the fiscal year ended July 31, 1991 is
incorporated herein by reference.
(l) Form of restricted stock agreement dated January 2, 1988 with
key employees (including certain officers and directors) filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorportated herein by reference.
Exhibit 11 Statement re: Computation of Per Share Earnings
Exhibit 12 Statement re: Computation of ratios, not applicable.
Exhibit 13 Not applicable.
Exhibit 18 Letter rechange in accounting principles, not applicable.
Exhibit 21 Subsidiaries of the registrant.
Exhibit 22 Published report regarding matter submitted to vote of security
holders, not applicable.
Exhibit 23 Consent of experts and counsel, not applicable.
Exhibit 24 Power of attorney, not applicable.
Exhibit 27 Financial Data Schedule.
Exhibit 99 Additional exhibits, not applicable.
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.
CHOCK FULL O' NUTS CORPORATION
(Registrant)
October 13, 1995 /s/Howard M. Leitner
Howard M. Leitner, Vice President,
Chief Financial and Accounting
Officer and Director
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.
October 13, 1995 /s/Norman E. Alexander October 13, 1995
Norman E. Alexander Mark A. Alexander
Chairman of the Board Director
October 13, 1995 October 13, 1995 /s/Martin J. Cullen
Virgil Gladieux Martin J. Cullen
Director Vice President and
Director
October 13, 1995 /s/Stuart Z. Krinsly October 13, 1995 /s/Marvin I. Haas
Stuart Z. Krinsly Marvin I. Haas
Director President and
Chief Executive
Officer
and Director
October 13, 1995 /s/Howard M. Leitner October 13, 1995
Howard M. Leitner Henry Salzhauer
Vice President and Director
Chief Financial Officer
and Director
October 13, 1995 /s/R. Scott Schafler October 13, 1995
R. Scott Schafler David S. Weil
Director Director
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS, SUPPLEMENTARY DATA
AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED JULY 31, 1995
CHOCK FULL O' NUTS CORPORATION
NEW YORK, NEW YORK
FORM 10-K--ITEM 14(a)(1) and (2)
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries are included in Item 8:
Page
Report of Independent Auditors..................................... 17
Consolidated Balance Sheets--July 31, 1995 and 1994................ 18 and 19
Consolidated Statements of Operations--Years Ended
July 31, 1995, 1994 and 1993..................................... 20
Consolidated Statements of Cash Flows--
Years Ended July 31, 1995, 1994 and 1993......................... 21 and 22
Consolidated Statements of Stockholders' Equity--
Years Ended July 31, 1995, 1994 and 1993......................... 23 and 24
Notes to Consolidated Financial Statements......................... 25 to 35
The following consolidated financial statement schedule of the registrant
and its subsidiaries is included in Item 14(d):
Page
Schedule II -- Valuation and Qualifying Accounts................... 41
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
Ernst & Young LLP
Report of Independent Auditors
The Board of Directors and Stockholders
Chock Full o'Nuts Corporation
New York, NY
We have audited the accompanying consolidated balance sheets of Chock Full
o'Nuts Corporation and subsidiaries as of July 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended July 31, 1995.
Our audits also included the financial statement schedule listed in the
index at Item 14(a). 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 schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Chock Full o'Nuts Corporation and subsidiaries at July 31, 1995
and 1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended July 31, 1995 in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, NY
October 5, 1995
CONSOLIDATED BALANCE SHEETS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995 and 1994
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 8,386,620 $5,939,456
Receivables, principally trade, less
allowances for doubtful accounts and
discounts of $1,251,000 and $928,000--
Notes 3 and 11(a) 37,703,214 31,935,437
Inventories--Notes 1 and 3 60,576,420 45,543,048
Investments in marketable securities,
at cost (market value of $6,975,000) 6,972,928 25,786,080
Prepaid expenses and other -- Note 4 2,916,690 3,466,246
TOTAL CURRENT ASSETS 116,555,872 112,670,267
PROPERTY, PLANT AND EQUIPMENT, at cost-
Note 3:
Land 3,114,889 3,754,639
Buildings and improvements 14,457,466 18,652,07
Leaseholds and leasehold improvements 2,443,678 1,795,326
Machinery and equipment 71,022,693 72,603,462
91,038,726 96,805,506
Less allowances for depreciation and
amortization 39,273,602 41,510,772
51,765,124 55,294,734
REAL ESTATE HELD FOR SALE OR DEVELOPMENT,
at cost - Note 3 7,747,107 5,404,243
OTHER ASSETS AND DEFERRED CHARGES, net--Note 11(b) 25,099,333 29,367,430
EXCESS OF COST OVER NET ASSETS
ACQUIRED, net --Notes 1 and 2 5,869,138 6,070,268
$207,036,574 $208,806,942
See notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995 and 1994
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,937,578 $ 11,851,998
Accrued expenses 12,438,512 17,381,839
Income taxes--Note 4 1,530,543 1,698,293
TOTAL CURRENT LIABILITIES 26,906,633 30,932,130
LONG-TERM DEBT -- Note 3 106,568,896 110,427,265
OTHER NON-CURRENT LIABILITIES--
Notes 9 and 11(c) 1,468,358 4,743,855
DEFERRED INCOME TAXES -- Note 4 7,156,000 4,442,000
STOCKHOLDERS' EQUITY--Notes 3, 8 and 9:
Common stock, par value $.25 per share;
Authorized 50,000,000 shares;
Issued 11,211,068 and 10,898,130
shares 2,802,767 2,724,533
Additional paid-in capital 51,357,008 49,322,585
Retained earnings 18,970,435 16,217,803
73,130,210 68,264,921
Deduct:
Cost of 475,522 shares in treasury (6,573,719) (6,573,719)
Deferred compensation under stock
bonus plan and employees' stock
ownership plan (1,619,804) (1,663,510)
Unfunded pension losses (1,766,000)
TOTAL STOCKHOLDERS' EQUITY 64,936,687 58,261,692
LEASES--Note 7 ___________
$207,036,574 $208,806,942
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Revenues:
Net sales $328,377,727 $263,638,453 $251,641,474
Rentals from real estate 2,061,015 2,059,647 1,875,578
330,438,742 265,698,100 253,517,052
Costs and expenses:
Cost of sales 235,146,454 175,664,343 157,206,889
Selling, general and
administrative expenses 78,101,749 77,851,623 78,687,340
Expenses of real estate 1,571,090 1,742,462 1,884,106
Restructuring charge -- Note 11(c) 3,597,769
Officer's termination benefits
-- Note 11 (d) ___________ 817,535
314,819,293 255,258,428 242,193,639
OPERATING PROFIT--Note 6 15,619,449 10,439,672 11,323,413
Interest and dividend income 903,887 867,517 861,076
Interest expense (9,191,495) (8,802,413) (10,228,159)
Gain on sale of product line -- Note 6 12,475,246
Gain on sales of marketable securities 455,558
Other income/(deductions)-- Note 11(f)532,447 775,292 (1,063)
INCOME BEFORE INCOME TAXES 7,864,288 15,755,314 2,410,825
Income taxes--Note 4:
Current:
Federal 2,267,000 6,742,000 1,648,000
State and local 161,000 348,000 348,000
Deferred 573,000 781,000 (647,000)
3,001,000 7,871,000 1,349,000
INCOME FROM CONTINUING
OPERATIONS 4,863,288 7,884,314 1,061,825
Discontinued operations -- Note 5:
Income from operations, net of income
taxes of $1,339,000 1,103,029
Loss on disposition (3,171,240)
(2,068,211)
NET INCOME/(LOSS) $4,863,288 $7,884,314 $(1,006,386)
Earnings/(loss) per share--Note 1:
Primary:
Continuing operations $.45 $ .73 $ .10
Discontinued operations (.19)
Net income/(loss) $.45 $.73 $(.09)
Fully diluted:
Continuing operations $.42 $.54 $ .10
Discontinued operations ____ (.19)
Net income/(loss) $.42 $.54 $(.09)
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
1995 1994 1993
Operating Activities - Continuing Operations:
Net income $4,863,288 $ 7,884,314 $ 1,061,825
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, plant and equipment 6,006,989 6,187,476 6,983,539
Amortization of deferred compensation
and deferred charges 4,646,287 4,430,010 5,311,264
Restructuring charge 2,900,000
(Gain) on sale of property,plant
and equipment (589,137)
(Gain) on sales of marketable securities (455,558)
Deferred income taxes 573,000 781,000 (647,000)
Gain on sale of product line (12,475,246)
Other, net 1,850 (1,533,353) (2,844,800)
Changes in operating assets and
liabilities, net of effects from
acquired companies:
(Increase)in accounts receivable (6,090,777) (4,226,971) (307,577)
(Increase) in inventory (15,033,372) (7,151,651) (3,631,870)
(Increase)/decrease in prepaid
expenses (1,481,444) 617,452 149,693
(Decrease)/increase in accounts
payable,
accrued expenses and income
taxes (780,497) 659,932 4,309,899
__________ __________ __________
NET CASH (USED IN)/PROVIDED BY OPERATING
ACTIVITIES (7,883,813) (4,827,037)(1)12,829,415
Investing Activities - Continuing Operations:
Purchases of marketable securities (11,473,787) (29,117,568) (275,591)
Proceeds from sale and collection of
principal of marketable securities 31,086,939 3,331,488 23,595,522
Purchases of property, plant and
equipment (9,004,570) (5,680,956) (8,057,739)
Acquisition of businesses (473,788)(56,019,777)
Proceeds from sale of product line 38,055,704
Increase in net assets of product line sold (1,265,892)
Sale of business 32,917,500
Proceeds from sale of property, plant and
equipment 4,078,764 _________
NET CASH PROVIDED BY/(USED IN)
INVESTING ACTIVITIES 14,687,346 4,848,988 (7,840,085)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
FINANCING ACTIVITIES - Continuing Operations:
Loan to employees' stock ownership plan (500,000)
Purchase of treasury stock (1,850,000)
Principal payments of long-term
debt (3,856,369) (35,497,348)
Proceeds from long-term debt 2,355,091 36,578,345
Other (56,745) (2,400,459)
NET CASH (USED IN)/PROVIDED BY
FINANCING ACTIVITIES (4,356,369) 448,346 (1,319,462)
INCREASE IN CASH AND CASH
EQUIVALENTS - CONTINUING OPERATIONS 2,447,164 470,297 3,669,868
Cash and cash equivalents at beginning
of year - continuing operations 5,939,456 5,469,159 2,529,123
CASH AND CASH EQUIVALENTS AT END OF YEAR
- - CONTINUING OPERATIONS $8,386,620 $5,939,456 $6,198,991(2)
Supplemental Information
Cash paid during the year: 1995 1994 1993
Interest $8,532,841 $8,103,742 $9,769,319
Income taxes 1,080,706 5,129,630 1,611,825
(1) Net cash used in operating activities in 1994 is, in large part, due
to income taxes of approximately $6,000,000 related to the gain on sale of
product line. Under FASB Statement No. 95, "Statement of Cash Flows", the
pre-tax gain on sale of the product line was deducted in arriving at cash
flow from operating activities but the related income taxes were not similarly
treated.
(2) Includes $729,832 of cash and cash equivalents included in net assets of
product line sold.
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
Common Stock
Issued In Treasury
Shares Amount Shares Amount
In Thousands
Balance at July 31, 1992 10,192 $2,548 276 $4,724
Net (loss)
3% stock dividend 300 75
Conversion of debentures 100 25
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Other
Increase in unfunded pension losses _____ _____
Balance at July 31, 1993 10,592 2,648 276 4,724
Net income
3% stock dividend 303 76
Conversion of debentures 3 1
Purchase of treasury stock 200 1,850
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Increase in unfunded pension losses ______ ___ ______
Balance at July 31, 1994 10,898 2,725 476 $6,574
Net income
3% stock dividend 313 78
Conversion of debentures
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Loan to employees' stock ownership
plan
Decrease in unfunded pension losses _____
Balance at July 31, 1995 11,211 $2,803 476 $6,574
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994, and 1993
Deferred
Compensation
Under Stock
Bonus Plan
and Employees' Unfunded Additional
Stock Ownership Pension Paid-In Retained
Plan Losses Capital Earnings
In Thousands
Balance at July 31, 1992 $3,089 $150 $43,868 $13,953
Net (loss) (1,006)
3% stock dividend 2,415 (2,490)
Conversion of debentures 825
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (862)
Other 148
Increase in unfunded pension losses 275 ______
Balance at July 31, 1993 2,227 425 47,256 10,457
Net income 7,884
3% stock dividend 2,048 (2,123)
Conversion of debentures 19
Purchase of treasury stock
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (563)
Increase in unfunded pension losses 1,341
Balance at July 31, 1994 1,664 1,766 49,323 16,218
Net income 4,863
3% stock dividend 2,032 (2,111)
Conversion of debentures 2
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (544)
Loan to employees' stock
ownership plan 500
Decrease in unfunded pension losses (1,766)
Balance at July 31, 1995 $1,620 $ - $51,357 $18,970
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995, 1994 and 1993
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Fiscal year: During fiscal 1995, the Company elected to use a year ending
on the Friday closest to July 31. Fiscal years are designated as ending
July 31 for convenience of reference.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.
Receivables - Concentration of Credit Risk: The Company's primary business
is the roasting, packing and marketing of a broad range of regular and
decaffeinated, ground roast, instant and specialty coffees for the
Foodservice and Retail Grocery Industries. These products are sold
regionally throughout the United States and Canada. The Company performs
periodic credit evaluations of its customers' financial condition and
generally does not require collateral. Credit losses relating to customers
consistently have been within management's expectations.
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 and consist of:
July 31, 1995 1994
Finished goods $37,194,809 $24,684,609
Raw materials 19,928,214 16,889,428
Supplies 3,453,397 3,969,011
$60,576,420 $45,543,048
Property, Plant and Equipment: Depreciation and amortization of property,
plant and equipment are computed by the straight-line method for financial
reporting purposes and by accelerated methods for income tax purposes.
Pre-opening Costs: Retail restaurant and cafe pre-opening costs are charged
to operations as incurred.
Excess of Cost over Net Assets Acquired: Excess of cost over net assets
acquired is being amortized on a straight-line basis over periods of 40
and 15 years. Accumulated amortization amounted to $1,554,000 and
$1,353,000 at July 31, 1995 and 1994, respectively.
Other Intangibles: Other intangibles consist principally of trademarks,
covenants not to compete and customer lists. Such items are being amortized
on a straight-line basis over periods of 40, 5 and 7.5 years, respectively.
Per Share Data: Primary per share data is based on the following weighted
average number of common shares outstanding during each year retroactively
adjusted for stock dividends:10,736,000 in 1995, 10,797,000 in 1994 and
10,884,000 in 1993.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Fully diluted per share data, assuming conversion of debentures, is based on
22,557,000 and 22,619,000 common shares outstanding for the years ended July
31, 1995 and 1994. Assumed conversion of debentures would have had an
anti-dilutive effect for the year ended July 31, 1993.
NOTE 2--ACQUISITIONS
On March 11, 1994, the Company acquired, for approximately $467,000 in cash,
all the operating assets and liabilities of a company engaged in the
commercial franchising and operation of drive-through food service
establishments primarily engaged in the sale of gourmet coffee complimented
by fresh bakery goods, sandwiches and ancillary products. The acquisition
is being accounted for as a purchase. The excess of cost over net assets
acquired (approximately $360,000) is being amortized over a period of 15
years using the straight-line method. The pro forma effects on the Company's
operations as if this business had been acquired on August 1, 1992 are not
material.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cains") and certain trademarks related to that business from Nestle'
Beverage Company and an affiliate for approximately $52,000,000 in cash.
Cain's business consists primarily of sales of coffee and related products
to food service customers in parts of the Midwest and Southwest. In
connection with the acquisition, which has been accounted for as a purchase
transaction, the Company acquired assets with a fair value of approximately
$55,750,000 (including trademarks, covenant not to compete and customer list
of $20,900,000, included in other assets and deferred charges on the
consolidated balance sheets) and assumed liabilities of approximately
$3,750,000. The Company used the proceeds (approximately $20,500,000)
from the sale of a substantial portion of its marketable securities to
finance a portion of the purchase price and financed the remainder through
additional borrowings from its banks.
In November 1992, the Company acquired a controlling interest in a
partnership which owns Dana Brown Private Brands, Inc., a company which
markets and sells coffee and tea products, servicing food retailers and
distributors located primarily in the Midwest. The purchase price was
$2,000,000, plus approximately $2,500,000 for the cost of inventory.
The pro forma effects on the Company's operations as if this business had
been acquired on August 1, 1992 are not material.
The following pro forma unaudited results of operations assume the
acquisition of Cain's occurred at the beginning of fiscal 1993 and gives
effect to certain adjustments, including depreciation of property, plant
and equipment, amortization of intangibles and interest expense, resulting
from the acquisition and related financing. Amounts for 1993 include the
pre-acquisition results of operations for Cain's for the four months ended
October 31, 1992.
Year Ended July 31 1993
Net sales $275,000,000
Income from continuing operations 1,269,000
Income from continuing operations per share .12
Net (loss) (799,000)
Net (loss) per share (.07)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 3--LONG TERM DEBT
Long-term debt consists of the following:
July 31
1995 1994
7% Convertible senior subordinated
debentures due 2012 $ 51,693,000 $ 51,693,000
8% Convertible subordinated debentures
due 2006 43,266,000 43,268,000
Revolving credit and term loan 11,609,896 15,466,265
___________
$106,568,896 $110,427,265
The 7% and 8% debentures require annual sinking fund payments of $3,000,000
and $3,750,000, respectively, which after giving effect to previous
conversions and redemptions, commence April 1, 2000 and March 15, 1998,
respectively, and provide for balloon payments of $18,000,000 and $12,500,000
on April 1, 2012 and September 15, 2006, respectively. The debentures are
convertible at the option of the debenture holders into shares of the Company's
common stock at a price of $8.23 per share and $7.81 per share, respectively
(subject to adjustment).
During the years ended July 31,1995 and 1993, $2,000 and $437,000 of 8%
debentures were converted into 248 and 51,000 shares of common stock,
respectively. During the years ended July 31,1994 and 1993, $20,000 and
$438,000 of 7% debentures were converted into 2,000 and 49,000 shares of
common stock, respectively. As of July 31, 1995, approximately 11,821,000
common shares are reserved for issuance upon conversion of debentures
Under the Company's amended and restated revolving credit and term loan
agreements (collectively the "Loan Agreements") with National Westminster
Bank USA and Chemical Bank (the "Banks"), the Company may, from time to time,
borrow funds from the Banks, provided that the total principal amount of all
such loans outstanding at any time may not exceed $40,000,000. Interest
(8.75% at July 31, 1995) on all such loans is equal to the prime rate,
subject to adjustment based on the level of loans outstanding. Outstanding
borrowings under the Loan Agreements may not exceed certain percentages of
and are collateralized by, among other things, the trade accounts receivable
and inventories, and substantially all of the machinery and equipment and
real estate of the Company and its subsidiaries. All loans made under the
term loan agreement ($10,000,000 at July 31, 1995) are to be repaid in
December 1997. Outstanding loans under the revolving credit agreements are
to be repaid in December 1997. Pursuant to the terms of the Loan Agreements,
the Company and its subsidiaries, among other things, must maintain a minimum
net worth and meet ratio tests for liabilities to net worth and coverage of
fixed charges and interest, all as defined. The Loan Agreements also provide,
among other things, for restrictions on dividends (except for stock
dividends) and requires repayment of outstanding loans with excess cash flow,
as defined.
As of July 31, 1995, long-term debt matures as follows: $12,269,896 (year
ending July 31, 1998), $3,750,000 (year ending July 31, 1999), $4,443,000
(year ending July 31, 2000) and $86,000,000 thereafter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 4--INCOME TAXES
The provision for income taxes for continuing operations differs from the
expected Federal income tax for the reasons shown in the following table:
1995 1994 1993
Federal income tax provision
expected at the statutory rate $2,673,858 $5,514,360 $ 819,681
Effect on Federal income tax of:
Difference between tax and book
basis of product line sold 1,721,214
State and local income taxes,
net of Federal income tax
benefit 106,260 226,200 229,680
Amortization of excess of cost over
net assets acquired 68,000 88,200 178,160
Other 152,882 321,026 121,479
$3,001,000 $7,871,000 $1,349,000
Deferred tax liabilities and assets are comprised of the following at July
31,
1995 1994
Net deferred non-current tax liabilities:
Net difference between tax and book basis
of property, plant and equipment $7,668,000 $6,216,000
Unfunded pension liabilities 250,000 (931,000)
Compensation under stock bonus plan and
employees' stock ownership plan (332,000) (358,000)
Other (430,000) (485,000)
$7,156,000 $4,442,000
Net deferred current tax assets:
Restructuring charges $ 130,000 $1,767,000
Net difference between tax and book
basis of inventory 317,000 410,000
Officers' termination benefits 91,000 211,000
Allowance for doubtful accounts and
discounts 343,000 400,000
Other 45,000 (166,000)
Accrued cash bonus 190,000
Payment of underfunded pension plan (525,000)
$ 591,000 $2,622,000
Under the Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes", the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 5--DISCONTINUED OPERATIONS
In April 1993, the Company and Jimbo's Jumbos, Incorporated ("JJI") entered
into an agreement and plan of merger to merge JJI with and into JJJ
Acquisition Corp. (a company controlled by John W. Kluge and his affiliates).
Pursuant to the merger, which was consummated on July 8, 1993, the Company,
as well as all other stockholders of JJI, received $6.93 per share for each
share owned. The proceeds ($32,917,500) were used to reduce outstanding bank
debt incurred for the acquisition of Cain's (see Note 2). A loss of
$3,171,000 was incurred in connection with the sale and was charged to
discontinued operations for the year ended July 31, 1993. The business of
JJI consisted primarily of (1) shelling farmers' stock peanuts into
commercial and seed grades of raw peanuts for sale to commercial processors
of peanuts, seed dealers and farmers and (2) processing and packaging of
in-shell peanuts and nuts, and shelled peanuts and nuts, for sale to
supermarkets.
The Company restated its financial statements to present the operating results
of JJI as a discontinued operation.
Operating profits from discontinued operations were as follows:
1993
Net sales $45,722,099
Costs and expenses:
Cost of sales 37,240,237
Selling, general and administrative expenses 5,413,440
42,653,677
Operating profit $ 3,068,422
NOTE 6--PRODUCT LINE SOLD
In October 1993, the Company and Gourmet Coffees of America ("GCA") entered
into an agreement to sell Hillside Coffee of California, Inc. ("Hillside")
to GCA. Hillside's business consisted of roasting, packing, distributing and
marketing specialty coffee to supermarkets. Pursuant to the agreement which
was consummated on November 19, 1993, the Company received (a) $38,500,000
and (b) shares of stock representing approximately one-half of one percent
of the equity of GCA. The Company recorded an approximate $6,200,000 after
tax gain upon consummation of the sale. The operating profits of Hillside,
before intercompany management charges, for the period August 1, 1993 to
November 19, 1993 and fiscal 1993 included in the results of operations are
as follows:
Period From
August 1, 1993 to July 31,
November 19, 1993 1993
Net sales $9,556,000 $ 27,720,163
Costs and expenses:
Cost of sales 4,089,000 10,974,986
Selling, general and administrative
expenses 3,288,000 11,240,716
7,377,000 22,215,702
Operating profit $2,179,000 $ 5,504,461
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 7 -- LEASES
The Company and subsidiaries lease manufacturing plants, warehouses, office
space and restaurant locations and related premises. Leases which provide
for payment of property taxes, utilities and certain other expenses, expire
on various dates through 2009 and contain renewal options. As of July 31,
1995, the Company's obligation for future minimum rental payments, assuming
the exercise of renewal options, aggregated $15,897,000. Payments required
in the following five fiscal years amount to $3,698,000 (1996), $2,972,000
(1997), $2,308,000 (1998), $2,307,000 (1999) and $1,334,000 (2000). Rental
expense charged to continuing operations under operating leases for the years
ended July 31, 1995, 1994 and 1993 was $4,893,000, $4,496,000 and $1,797,000,
respectively.
As of July 31, 1995, future minimum rental payments due from tenants under
sub-leases of retail facilities and related premises aggregated $10,790,000.
Amounts receivable in the following five fiscal years amount to $1,621,000
(1996), $1,403,000 (1997), $1,395,000 (1998), $1,326,000 (1999) and
$1,058,000 (2000).
NOTE 8 -- STOCKHOLDERS' EQUITY
A non-contributory employee stock ownership plan ("ESOP") has been
established to acquire shares of the Company's common stock for the benefit
of all eligible employees. The Company has made loans to the ESOP to be
repaid in equal annual installments over 8 years with interest primarily at
9% and 10%. Deferred compensation equal to the loans has been recorded as a
reduction of stockholders' equity representing the Company's prepayment of
future compensation expense. As the Company makes annual contributions to
the ESOP, these contributions will be used to repay the loans to the Company,
together with accrued interest. As the loans are repaid, common stock is
allocated to ESOP participants and deferred compensation is reduced by the
amount of the principal payment on the loans.
The Company has a Warrant Dividend Plan which provides for distribution to
shareholders of a right to purchase one share of the Company's common stock
currently for $24.13 (subject to anti-dilution adjustments) as a dividend on
each of the Company's outstanding common shares. These rights are not
currently exercisable and will only become exercisable upon the happening of
certain events. Under certain circumstances, the rights entitle the holders
to receive, upon payment of the then current exercise price of the right,
that number of shares of Company common stock having a market value of two
times the then current exercise price of the right. The rights will expire
on December 30, 1997 and are redeemable at $.05 per right at any time prior
to the occurrence of certain events.
The Company's incentive compensation plan provides, among other things,
for incentive or non-qualified stock options, stock appreciation rights,
performance units, restricted stock and incentive bonus awards. During
the years ended July 31, 1995 and 1994, respectively, non-qualified stock
options for the purchase of 250,000 and 109,000 shares, at prices of $5.75
and $8.50 per share, were granted to key executives under the plan. During
the year ended July 31, 1995 options to purchase 8,500 shares were
forefeited. At July 31, 1995, there were outstanding options for 350,500
shares. The 1995 options were granted to the Chief Executive Officer.
Options granted are exercisable at the fair market value at date of grant
and, subject to termination of employment, expire ten years from the date
of grant, are non-transferable other than on death, and are exercisable in
three equal annual installments commencing three years from date of grant.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 8--STOCKHOLDERS EQUITY--continued
Under the incentive compensation plan, as of July 31, 1995, 47,000 common
shares are outstanding which were issued to key executives in 1987 and 1988.
These shares are subject to restricted stock agreements which provide that
the shares will vest ratably over periods through 2001. Such shares are
subject, upon the occurrence of certain events, to either forfeiture or
accelerated vesting. The fair value of the shares on the dates of issuance
is being charged to operations as compensation during the period the
restrictions remain in effect. At July 31, 1995, 137,000 shares were
available under the plan.
NOTE 9--PENSION PLANS
The Company has non-contributory defined benefit pension plans covering all
employees who have completed one year of service, have attained age twenty
and one-half and are not covered by union-sponsored plans. The benefits are
based on years of service and the employee's compensation during the last
60 months of employment. The pension plans are funded to accumulate
sufficient assets to provide for accrued benefits. In addition,
contributions are made to multi-employer plans which provide defined
benefits to union employees.
A summary of the components of net periodic pension cost for the defined
benefit plans for the three years ended July 31, 1995 and total
contributions charged to pension expense for the union-sponsored plans
follows (in thousands):
1995 1994 1993
Service cost-benefits earned
during the year $1,813 $1,471 $1,058
Interest cost on projected benefit
obligation 1,961 1,782 1,599
Actual return on plan assets (1,723) (1,654) (1,600)
Net amortization and deferral 253 156 (4)
NET PENSION COST OF DEFINED BENEFIT
PLANS 2,304 1,755 1,053
UNION-SPONSORED PLANS 287 422 505
TOTAL PENSION EXPENSE $2,591 $2,177 $1,558
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 9--PENSION PLANS--Continued
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet at July 31, for the defined benefit pension
plans (in thousands):
1995 1995 1994
Plan Whose Assets Plans Whose Accumulated
Exceed Accumulated Benefits Exceed Assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $(20,659) $(2,306) $(21,780)
Accumulated benefit
obligation $(20,973) $(2,309) $(22,124)
Projected benefit
obligation $(23,075) $(2,309) $(24,320)
Plan assets, consisting
primarily of U.S. treasury
notes, other U.S. agency
issues, guaranteed insurance
contracts and corporate obli-
gations, at fair value 21,056 2,046 20,202
Projected benefit obligation
(in excess of)plan assets (2,019) (263) (4,118)
Unrecognized prior service cost 270 124 395
Unrecognized net loss 4,414 39 5,884
Unrecognized net asset at
August 1, 1987; net of amortization (593) (65) (745)
Adjustment required to recognize
minimum liability (3,338)
Net pension asset(liability)
recognized in the consolidated
balance sheet $2,072 $(165) $(1,922)
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 4% and 8.25% and 4%, respectively,
at July 31, 1995 and 1994. The expected long-term rate of return on plan
assets was 8.0%, 8.5% and 8.5% in 1995, 1994 and 1993, respectively.
Provisions of FASB Statement No. 87 (the Statement) require the Company,
under certain circumstances, to record a minimum pension liability relating
to unfunded accumulated benefit obligations, establish an intangible asset
relating thereto and reduce stockholders' equity, net of future tax benefits.
During fiscal 1995, minimum pension liability recorded in prior years related
to this matter was eliminated due to the current relationship of plan assets
and accumulated benefit obligations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 10--QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended July 31, 1995 and 1994:
Fiscal 1995
Three Months Ended
October 31 January 31 April 30 July 31
(Thousands of Dollars Except Per Share Data)
Net sales $73,572 $91,704 $81,005 $82,097
Gross profit $22,713 $25,225 $23,323 $21,970
NET INCOME $ 942 $ 1,295 $ 1,414 $ 1,213
Per share:
Primary $ .09 $ .12 $ .13 $ .11
Fully diluted $ .09 $ .11 $ .11 $ .11
Fiscal 1994
Three Months Ended
October 31 January 31 April 30 July 31
(Thousands of Dollars Except Per Share Data)
Net sales $70,936 $62,108 $61,467 $69,127
Gross profit $25,505 $20,662 $20,160 $21,647
NET INCOME/(LOSS) $ 506 $ 7,244(1) $ (270) $ 404(2)
Per share:
Primary $ .05 $ .67(1) $ (.03) $ .04(2)
Fully diluted $ .05 $ .37 $ (.03) $ .04
(1) Includes gain on sale of Hillside Coffee of California, Inc. of
$7,068,000 ($.65 per share). See Note 6.
(2) Includes reduction of aforementioned gain of $844,000 ($.08 per share).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 11--OTHER ITEMS
a. Receivables other than trade at July 31, 1995 and 1994 amount to
$2,656,000 and $3,242,000, respectively. See Note 11(c).
b. Other assets and deferred charges consist of (in thousands):
July 31, 1995 1994
Deferred financing costs (1) $3,412 $ 4,065
Non-compete agreements 4,468 6,170
Trademarks 4,667 4,793
Customer lists 5,819 6,972
Real estate and equipment held for rental, at
cost net of accumulated depreciation and
amortization of $705 and $1,654 677 617
Other 6,056 6,750
$25,099 $29,367
(1) Being amortized over the terms of the related indebtedness (see Note 3).
c. The Company recorded a charge in the fourth quarter of fiscal 1993
of $3,598,000 to provide for the estimated cost of consolidating and closing
certain production facilities. Such charge consisted primarily of accrued
expenses related to closing such facilities. The Company substantially
completed the restructuring during fiscal 1995. The after tax charge for
such restructuring was $2,232,000 ($.21 per share) in fiscal 1993.
In connection with closing a business and termination of a pension plan the
Company has paid a liability for an underfunded pension plan of approximately
$1,500,000 and recorded a similar amount receivable from the previous owner
of such business pursuant to the acquisition agreement. The previous owner
of the business is contesting the liability to the Company. The Company,
based upon its interpretation of the acquisition agreement and after
consultation with counsel, believes the previous owner of the business is
responsible for an amount approximating the underfunded pension liability
and has commenced litigation seeking such amount.
d. In August 1993 Joseph Breslin then Chairman of the Board and Chief
Executive Officer terminated his employment with the Company. In connection
therewith, $818,000 was charged to operations in the fourth quarter of fiscal
1993 for compensation benefits (including 5,714 restricted shares of the
Company's common stock which became subject to accelerated vesting) to which
he was entitled as a result of his termination. The after-tax charge for
such benefits was $507,000 ($.05 per share).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 11--OTHER ITEMS--Continued
e. The Company believes that the fair value of its 7% and 8%
convertible subordinated debentures approximates $49,625,000 and
$43,266,000, respectively, as indicated by the public trading prices of
such debt.
f. In fiscal 1995, other income includes $589,000 from the sale of a
former manufacturing plant. In fiscal 1994, other income includes $700,000
from the sale of the Company's private label tea and drink mix business.
NOTE 12 -- INDUSTRY SEGMENT INFORMATION
The Company's financial information by industry segment for 1995, 1994 and
1993 may be found on page 39 and is incorporated herein.
SELECTED FINANCIAL DATA
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
YEAR ENDED JULY 31
1995 1994 1993 1992 1991
(Dollar Amounts in Thousands, Except Per Share Amounts)
Net sales $328,378 $263,638 $251,641 $203,640 $200,037
Income/(loss) from
continuing operations 4,863 7,884 1,062 (5,822) 1,380
Working capital 89,649 81,738 72,022 45,027(1) 44,947(1)
Working capital ratio 4.3 to 1 3.6 to 1 3.8 to 1 3.2 to 1 3.9 to 1
Total assets 207,037 208,807 195,304 184,648 183,260
Long-term debt 106,569 110,427 108,092 107,053 108,862
Stockholders' equity 64,937 58,262 52,985 52,406 58,445
Per common share (2):
Income/(loss) from
continuing operations .45 .73 .10 (.56) .14
Stock dividends declared 3% 3% 3% 3% 3%
Stockholders' equity 6.05 5.43 4.84 4.84 5.43
(1) Does not include $23,053 in 1992 and $23,184 in 1991 of marketable
securities classified as non current.
(2) Per share data has been retroactively adjusted for a 3% stock dividend
in July of each year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
RESULTS OF OPERATIONS
In October 1993, the Company and Gourmet Coffees of America, Inc. ("GCA")
entered into an agreement to sell Hillside Coffee of California, Inc.
("Hillside") to GCA. Pursuant to the agreement, which was consummated on
November 19, 1993, the Company received (a) $38,500,000 in cash and
(b) 75,000 shares of stock representing approximately one-half of one
percent of the equity of GCA. A pre-tax gain of approximately $12,475,000
was recorded on the sale. Hillside's business consisted of roasting,
packing, distributing and marketing specialty coffee to supermarkets.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cains") and certain trademarks related to that business from Nestle'
Beverage Co. and an affiliate for $52,000,000 in cash. The business of
Cains consists primarily of sales of coffee and related products to Food
service customers in parts of the Midwest and Southwest.
In November 1992, the Company acquired a controlling interest in a
partnership which owns Dana Brown Private Brands, Inc. ("Dana Brown"), a
company which markets and sells coffee and tea products, servicing food
retailers and distributors located primarily in the Midwest. The purchase
price was $2,000,000, plus approximately $2,500,000 for the cost of
inventory.
In July 1993, the Company consummated the sale of its interest in Jimbo's
Jumbos, Incorporated ("JJI"). The Company has presented the operating
results of JJI as a discontinued operation in the consolidated financial
statements for the year ended July 31, 1993.
The discussion and analysis that follows relates solely to continuing
operations of the Company, including those of specialty coffee (see Note 6
of notes to consolidated financial statements).
Net sales increased $64,739,000 or 24.6% for the year ended July 31, 1995,
compared to the prior year. The increase in net sales was due to an
increase in the average selling price of coffee, partially offset by a
decrease in coffee pounds sold and the loss of $9,557,000 of sales from
Hillside (due to its disposition).
Operating profits from food products were $15,552,000 an increase of 50% for
the year ended July 31, 1995, compared to $10,389,000 for the prior year.
The increase resulted primarily from increased gross profit margins partially
offset by increased selling, general and administrative expenses and the loss
of operating profits of $2,179,000 from Hillside (due to its disposition).
Increased gross margins were due to an increase in the average selling price
of coffee greater than the increase in the average cost of green coffee,
partially offset by decreased coffee pounds sold. The price of green coffee
has been volatile during the year ended July 31, 1995 and green coffee prices
ranged from a low of $1.21 per pound to a high of $2.31 per pound. The
Company consistently values its inventory and commitments at the lower of
cost or market. Selling, general and administrative expenses increased
primarily due to the Company's investment in its Cafe and Quikava operations,
which are currently in the development stage and are currently not
profitable, and increased advertising and payroll costs, partially offset by
reduced coupon costs.
Net income was $4,863,000 or $.45 per share for the year ended July 31, 1995,
compared to $7,884,000 or $.73 per share for the prior year. The difference
was primarily due to increased operating profits, offset by increased income
taxes on such operating profits and the gain on sale of Hillside Coffee of
California, Inc. (the Company's specialty coffee product line) of $6,224,000
after income taxes or $.58 per share in the prior year.
Net sales increased $11,997,000 or 4.8% for the year ended July 31, 1994,
compared to the prior year. The increase in net sales was primarily due to
sales of Cains and Dana Brown (both acquired in the second quarter of the
prior fiscal year)and increased selling prices on operations included in
both the current and prior year, partially offset by the loss of sales from
Hillside (due to its disposition) and reduced coffee pounds sold in
operations included in both the current and the prior year. Cain's and
Dana Brown were accounted for as purchases, and, therefore, were not included
prior to their respective dates of acquisition.
Operating profits from food products were $10,389,000, a decrease of 35% for
the year ended July 31, 1994, compared to $15,948,000 for the prior year
before deducting restructuring charges and officer's termination benefits.
The decrease in operating profits resulted primarily from decreased gross
margins in operations included in both the current and prior year and
reduced operating profits from Hillside (due to its disposition), partially
offset by the operations of Cain's (included for the entire period for the
current year) and reduced selling, general and adminstrative expenses for
operations included in both the current and prior year. The reduced gross
margins were attributable to the inability to increase selling prices (due
to competition) commensurate with the increased costs of coffee and a
decrease in coffee pounds sold. Selling, general and administrative expenses
decreased due to reduced advertising, brokerage and payroll costs.
Income from continuing operations was $7,884,000 or $.73 per share, compared
to $1,062,000 or $.10 per share for the prior year. The difference was
primarily due to the gain on sale of Hillside Coffee of California, Inc.
(the Company's specialty coffee product line) in fiscal 1994 of $6,224,000
after tax effect or $.58 per share, the restructuring charges and officer's
termination benefits in fiscal 1993 aggregating $2,737,000 after tax effect
or $.27 per share and reduced interest expense, partially offset by decreased
operating profits from food products and reduced income taxes on the income
excluding the gain on sale in fiscal 1994 and the aforementioned unusual
charges in fiscal 1993.
General inflation has been relatively low for the last several years;
however, green coffee prices have changed significantly during fiscal 1994
and 1995. While the Company manages its inventory to have rapid turnover,
the changes in green coffee prices have impacted the company's gross profit
percentage.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1995, working capital was approximately $89,650,000 and the
ratio of current assets to current liabilities was 4.3 to 1.
As of July 31, 1995, the Company had unused borrowing capacity of
approximately $28 million under its credit facilities of $40 million with
National Westminster Bank USA and Chemical Bank (see Note 3 of notes to
consolidated financial statements).
The Company plans on expanding its cafe and Quikava, company operated and
franchised operations, which in total are currently operating in 12
locations. The sales of these operations, which are in the development
stage, are not material to the Company's consolidated sales.
As a result of the rise in price of green coffee, the Company has financed
increased inventories and receivables through the sale of marketable
securities. The Company believes that its cash flow from operations, its
marketable securities and cash equivalents and its amended and restated
revolving credit andterm loan agreements with its Banks provide sufficient
liquidity to meet its working capital, expansion and capital requirements.
SEGMENT INFORMATION
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Year Ended July 31
1995 1994 1993
(Amounts in Thousands)
Net sales - food products $328,378 $263,638 $ 251,641
Rental revenues $ 2,061 $ 2,060 $ 1,876
Operating profit/(loss):
Food products $ 15,552 $ 10,389 $ 11,532(1)
Real estate 490 317 (9)
Eliminations (423) (266) (200)
$15,619 $ 10,440 $ 11,323
Identifiable assets:
Food products $169,380 $153,751 $ 170,287
Real estate 9,564 9,913 7,356
Corporate 28,093 45,143 17,661
$207,037 $208,807 $ 195,304
Depreciation and amortization:
Food products $ 5,804 $ 6,133 $ 6,925
Corporate 203 55 59
$ 6,007 $ 6,188 $ 6,984
Capital expenditures:
Food products $ 8,991 $ 5,643 $ 7,887
Corporate 14 38 171
$ 9,005 $ 5,681 $ 8,058
(1) Includes restructuring charge of $3,598,000 and officer's termination
benefits of $818,000.
The food products segment is engaged in the (a) roasting, packing and marketing
of regular, instant, decaffeinated and specialty coffees and (b) packing and
marketing of regular and decaffeinated tea for sale to retail, Foodservice
and private label customers. Additionally, other related food products are
marketed and sold to Foodservice customers. See Notes 5 and 6. Operations
of real estate represent rental and other income principally from the
Company's former restaurant facilities.
All of the Company's operations are located in the United States. Export sales
are not significant.
Identifiable assets under the caption "Corporate" include cash and cash
equivalents, investments in marketable securities and short-term investments
of $15,360,000 (1995), $31,726,000 (1994) and $5,469,000 (1993).
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
COMMON SHARE PRICES
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CHF. The Company has approximately 14,000 shareholders of record as
of October 15, 1995.
1995 1994
High Low High Low
1st Quarter 6 1/4 5 1/8 9 5/8 7 1/8
2nd Quarter 6 1/4 5 1/4 10 1/4 7 1/2
3rd Quarter 6 5/8 5 3/8 8 3/8 6 7/8
4th Quarter 7 6 3/8 7 3/8 5 5/8
The Company distributed a 3% stock dividend on July 27, 1995,and July 29, 1994.
The Pursuant to certain provisions of a revolving credit and term loan
agreement, the Company may not declare or pay any dividend (except for stock
dividends).
Item 14 (d)
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Other Deductions(1) of Period
Year ended July 31,
1995:
Allowance for doubtful
accounts and discounts $ 928,000 $2,597,705 $2,274,705 $1,251,000
Year ended July,
1994:
Allowance for doubtful
accounts and discounts $1,081,000 $1,940,779 $ 24,664 $2,118,443 $ 928,000
Year ended July 31,
1993:
Allowance for doubtful
accounts and discounts $1,043,000 $1,787,000 $142,000(2)$1,891,000 $1,081,000
(1) Discounts taken by customers and uncollectible accounts written-off,
net of recoveries.
(2) Net addition due to acquisition of Cain's Coffee Co. and reclassification
to net assets held for sale.
EXHIBIT 11 - STATMENT RE: COMPUTATION OF PER SHARE EARNINGS
YEAR ENDED JULY 31,
1995 1994 1993
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
PRIMARY
AVERAGE SHARES OUTSTANDING 10,736 10,797 10,884
INCOME FROM CONTINUING
OPERATIONS $4,863 $7,884 $1,062
NET INCOME/(LOSS) $4,863 $7,884 $(1,006)
PER SHARE AMOUNTS:
INCOME FROM CONTINUING
OPERATIONS $.45 $0.73 $0.10
NET INCOME/(LOSS) $.45 $0.73 $(0.09)
FULLY DILUTED
AVERAGE SHARES OUTSTANDING 10,736 10,797 10,884
ASSUMED CONVERSION OF
CONVERTIBLE DEBENTURES 11,821 11,822 11,542
TOTAL 22,557 22,619 22,426
INCOME FROM CONTINUING
OPERATIONS $4,863 $7,884 $1,062
ADD CONVERTIBLE DEBENTURES
INTEREST AND AMORTIZATION
OF DEFERRED CHARGES, NET
OF INCOME TAXES 4,670 4,373 4,796
TOTAL $9,533 $12,257 $5,858
NET INCOME/(LOSS) $4,863 $7,884 $(1,006)
ADD CONVERTIBLE DEBENTURES
INTEREST AND AMORTIZATION
OF DEFERRED CHARGES, NET
OF INCOME TAXES 4,670 4,373 4,796
TOTAL $9,533 $12,257 $3,790
PER SHARE AMOUNTS:
INCOME FROM CONTINUING
OPERATIONS $.42 $.54 $.26
NET INCOME $.42 $.54 $.17
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT
As of October 13, 1995, the Company had directly and indirectly the following
active subsidiaries, all of which are included in the Company's consolidated
financial statements furnished herewith:
Subsidiaries of
Chock full o'Nuts Corporation
Chock Realty Corporation California 100%
CFN of New York, Inc. New York 100%
Cain's Coffee Co. Delaware 100%
Cain's Holding Company Delaware 100%
Quikava, Inc. Massachusetts 100%
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 8386620
<SECURITIES> 6972928
<RECEIVABLES> 37703214
<ALLOWANCES> 1251000
<INVENTORY> 60576420
<CURRENT-ASSETS> 116555872
<PP&E> 91038726
<DEPRECIATION> 39273602
<TOTAL-ASSETS> 207036574
<CURRENT-LIABILITIES> 26909633
<BONDS> 106568896
<COMMON> 2802767
0
0
<OTHER-SE> 62133920
<TOTAL-LIABILITY-AND-EQUITY> 207036574
<SALES> 328377727
<TOTAL-REVENUES> 330438742
<CGS> 235146454
<TOTAL-COSTS> 236717544
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2597705
<INTEREST-EXPENSE> 9191495
<INCOME-PRETAX> 7864288
<INCOME-TAX> 3001000
<INCOME-CONTINUING> 4863288
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4863288
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.42
</TABLE>
CHOCK FULL O'NUTS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
AS AMENDED AND RESTATED
THROUGH JUNE 30, 1994
CHOCK FULL O'NUTS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
ARTICLE CONTENTS PAGE
PREAMBLE
I DEFINITIONS 1
II ELIGIBILITY AND SERVICE
2.1 Conditions of Eligibility 8
2.2 Termination of Eligibility 8
2.3 Crediting Service on
Reemployment 8
2.4 Status of Reemployed
Participants 8
III CONTRIBUTION AND ALLOCATION
3.1 Formula for Determining Employer's
Contribution 10
3.2 Time of Payment of Employer's
Contribution 10
3.3 Allocation of Contribution, Forfeitures
and Earnings 10
3.4 Maximum Annual Additions 13
3.5 Adjustment for Excessive
Additions 16
IV INVESTMENT POLICY
4.1 Investment Policy 18
4.2 Application of Cash 18
4.3 Loans to the Trust 18
V VALUATIONS
5.1 Valuation of the Trust Fund 20
5.2 Method of Valuation 20
VI DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 Determination of Benefits Upon
Retirement 21
6.2 Determination of Benefits Upon
Death 21
6.3 Disability Retirement Benefits 22
6.4 Determination of Benefits Upon
Termination 22
6.5 Distribution of Benefits 24
6.6 How Plan Benefits Will be
Distributed 25
6.7 Distributions For Minor
Beneficiaries 25
6.8 Location of Participant or
Beneficiary Unknown 26
6.9 Limitations on Benefits and
Distributions 26
6.10 Direct Rollovers 26
6.11 Directed Investment Account 28
VII AMENDMENT, TERMINATION, AND MERGERS
7.1 Amendments 29
7.2 Termination 29
7.3 Merger or Consolidation 30
VIII ADMINISTRATION
8.1 Powers and Responsibilities of
the Employer 31
8.2 Assignment and Designation of
Administrative Authority 31
8.3 Allocation and Delegation of
Responsibilities 31
8.4 Powers and Duties of the
Administrator 32
8.5 Records and Reports 33
8.6 Appointment of Advisors 33
8.7 Information from Employer 33
8.8 Payment of Expenses 34
8.9 Majority Actions 34
8.10 Claims Procedure 34
8.11 Claims Review Procedure 34
IX MISCELLANEOUS
9.1 Participant's Rights 36
9.2 Alienation 36
9.3 Construction of Plan 37
9.4 Gender and Number 37
9.5 Legal Action 37
9.6 Prohibition Against Diversion
of Funds 37
9.7 Bonding 38
9.8 Receipt and Release for
Payments 38
9.9 Action by the Employer 38
9.10 Named Fiduciaries and
Allocation of Responsibility 39
9.11 Headings 39
9.12 Notices and Deliveries 39
9.13 Uniformity 40
9.14 Indemnification 40
9.15 Voting Passthroughs, Tender
Offers; Rights 40
X PARTICIPATING EMPLOYERS
10.1 Adoption by Other Employers 42
10.2 Requirements of Participating
Employers 42
10.3 Designation of Agent 42
10.4 Employee Transfers 43
10.5 Participating Employer's
Contribution 43
10.6 Discontinuance of
Participation 43
10.7 Administrator's Authority 43
CHOCK FULL O'NUTS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
PREAMBLE
The purpose of this Plan is to enable
Participants to acquire stock ownership interests in
the Employer and thereby share in the growth and
prosperity of the Employer and accumulate capital for
their future economic security. Therefore, it is
intended that the assets of the Trust established under
the Plan be invested primarily in Company Stock.
The Plan, adopted effective as of January 1,
1988 and hereby amended and restated effective as of
January 1, 1992 (except for those provisions which
contain a different effective date), is a stock bonus
plan constituting an employee stock ownership plan
under Section 4975(e)(7) of the Code intended to
qualify under Section 401(a) of the Code.
The Plan is administered by the Administrator
for the exclusive benefit of Participants (and their
Beneficiaries), and all assets held under the Plan are
administered, distributed, forfeited and otherwise
governed by the provisions of this Plan and the related
Trust.
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income
Security Act of 1974, as amended from time to
time.
1.2 "Administrator" means the person or persons
designated by the Employer pursuant to
Section 8.1 to administer the Plan on behalf
of the Employer.
1.3 "Affiliated Employer" means the Employer and
any corporation which is a member of a
controlled group of corporations (as defined
in Code Section 414(b)) which includes the
Employer; any trade or business (whether or
not incorporated) which is under common
control (as defined in Code Section 414(c))
with the Employer; any organization (whether
or not incorporated) which is a member of an
affiliated service group (as defined in Code
Section 414(m)) which includes the Employer;
and any other entity required to be
aggregated with the Employer pursuant to
Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to
each Participant, the value of all accounts
maintained on behalf of a Participant.
1.5 "Anniversary Date" means January 1.
1.6 "Beneficiary" means the Participant's spouse
unless the Participant designate another
person to whom the share of a deceased
Participant's total account is payable.
1.7 "Code" means the Internal Revenue Code of
1986, as amended from time to time.
1.8 "Company Stock" means common stock issued by
the Employer which is readily tradeable on an
established securities market.
1.9 "Company Stock Account" means the account of
a Participant which is credited with the
shares of Company Stock purchased and paid
for by the Trust Fund or contributed to the
Trust Fund.
1.10 "Compensation" means a Participant's total
remuneration paid by the Employer as wages
and salary for a calendar year, including
incentive pay, bonuses, overtime pay, and
amounts from the exercise of non-qualified
stock options, but specifically excluding
employer contributions to a plan of deferred
compensation which are not includable in the
Employee's gross income for the taxable year
in which contributed. For all Plan Years
beginning on or after January 1, 1989 and
ending on or before December 31, 1993,
Compensation in excess of $200,000 (as
adjusted at the same time and in such manner
as permitted under Code Section 415(d)) shall
be disregarded.
For all Plan Years beginning on or after
January 1, 1994, the annual Compensation of
each Employee taken into account under the
Plan for a Plan Year shall not exceed
$150,000, as adjusted for increases in the
cost of living in accordance with
Section 401(a)(17)(B) of the Code. In
determining the Compensation of a Participant
for purposes of these limitations, Section
414(q)(6) of the Code shall apply, except
that the term "family" shall include only the
spouse of a Participant and any lineal
descendants of the Participant who have not
attained the age of 19 before the close of
the year.
1.11 "Credited Service" means Periods of Service
credited to a Participant for all purposes
according to the provisions of Article 2
herein. For vesting purposes hereunder
Service prior to January 1, 1988 shall be
excluded. Service with any Affiliated
Employer shall be recognized for eligibility
and vesting purposes of this Plan. Service
rendered prior to the date on which a
subsidiary or division becomes affiliated
with the Employer, shall not be recognized
for any Plan purposes, unless expressly
provided for in an appendix hereunder.
1.12 "Current Obligations" means Trust obligations
arising from extension of credit to the Trust
and payable in cash within one (1) year from
the date an Employer contribution is due.
1.13 "Eligible Employee" means any Employee other
than (a) an Employee whose employment is
governed by the terms of a collective
bargaining agreement between Employee
representatives and the Employer under which
retirement benefits were the subject of good
faith bargaining between the parties, unless
such agreement expressly provides for such
coverage in this Plan, (b) any person who is
a "leased employee" within the meaning of
Section 414(n) of the Code and (c) any
Employee who is employed at a rate of less
than 1,000 Hours of Service per year and who
does not complete 1,000 Hours of Service with
the Employer in a Plan Year.
1.14 "Employee" means any person who is employed
by the Employer, including any person who is
a "leased employee" within the meaning of
Section 414(n) of the Code, or who is
employed as an independent contractor.
1.15 "Employer" means Chock Full O'Nuts
Corporation and any Participating Employer
(as defined in Section 10.1) with the
approval of the Board of Directors of Chock
Full O'Nuts Corporation pursuant to Section
10.1 herein which shall adopt this Plan.
1.16 "Employment Commencement Date" or
"Reemployment Commencement Date" means the
date on which an Employee first performs, or
again performs (after a Period of Severance)
an Hour of Service with respect to the
Employer.
1.17 "ESOP" means an employee stock ownership plan
that meets the requirements of Code Section
4975(e)(7) and Regulation Section 54.4975-11.
1.18 "Exempt Loan" means a loan made to the Plan
by a disqualified person or a loan to the
Plan which is guaranteed by a disqualified
person and which satisfies the requirements
of Section 2550.408b-3 of the Department of
Labor Regulations, Section 54.4975-7(b) of
the Treasury Regulations and Section 4.3
hereof.
1.19 "Family Member" means an individual described
in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a)
exercises any discretionary authority or
discretionary control respecting management
of the Plan or exercises any authority or
control respecting management or disposition
of its assets, (b) renders investment advice
for a fee or other compensation, direct or
indirect, with respect to any monies or other
property of the Plan or has any authority or
responsibility to do so, or (c) has any
discretionary authority or discretionary
responsibility in the administration of the
Plan, including, but not limited to, the
Trustee, the Employer and its representative
body, and the Administrator.
1.21 "Fiscal Year" means the Employer's accounting
year of 12 months commencing on August 1 of
each year and ending the following July 31.
1.22 "Forfeiture" means that portion of a
Participant's Account that is not Vested.
1.23 "Former Participant" means a person who has
been a Participant, but who has ceased to be
a Participant for any reason. For purposes
of this Section 1.23, a "Former Participant"
shall be treated as a Highly Compensated
Participant if such "Former Participant" was
a Highly Compensated Participant when he
separated from service with the Employer or
was a Highly Compensated Participant at any
time after attaining age 55.
1.24 "415 Compensation" means compensation as
defined in Section 4.4(d).
1.25 "Highly Compensated Participant" means any
Participant or Former Participant who is a
highly compensated employee as defined in
Code Section 414(q). Generally, any
Participant or Former Participant is
considered a Highly Compensated Participant
if during the Plan Year or the preceding Plan
Year such Participant or Former Participant:
(a) was at any time a "five percent owner"
as defined in Code Section 414(q)(3);
(b) received "415 Compensation" from the
Employer in excess of $75,000. In
determining whether an individual has
"415 Compensation" of more than $75,000,
"415 Compensation" from each employer
required to be aggregated under Code
Sections 414(b), (c), and (m) shall be
taken into account; or
(c) received "415 Compensation" from the
Employer in excess of $50,000 and was in
the top-paid group of Employees for the
Plan Year. An Employee is in the top-paid
group of Employees for any Plan
Year if such Employee is in the group
consisting of the top twenty (20)
percent of the Employees when ranked on
the basis of "415 Compensation" paid
during the Plan Year. In determining
whether an individual has "415
Compensation" of more than $50,000, "415
Compensation" from each employer
required to be aggregated under Code
Sections 414(b), (c), and (m) shall be
taken into account.
1.26 "Hour of Service" means (1) each hour for
which an Employee is directly or indirectly
compensated or entitled to compensation by
the Employer for the performance of duties
during the applicable computation period; (2)
each hour for which an Employee is directly
or indirectly compensated or entitled to
compensation by the Employer (irrespective of
whether the employment elationship has
terminated) for reasons other than
performance of duties (such as vacation,
holidays, sickness, jury duty, disability,
lay-off, military duty or leave of absence)
during the applicable computation period; (3)
each hour for which back pay is awarded or
agreed to by the Employer without regard to
mitigation of damages. All Hours of Service
hereunder shall be counted for the purpose of
determining a Month of Service, a year of
Audited Service, a one year Period of
Severance, and employment commencement date
(or reemployment commencement date). The
provisions of Department of Labor Regulations
Sections 2530.200b-2(b) and (c) are
incorporated herein by reference.
1.27 "Late Retirement Date" means a Participant's
actual Retirement Date after having reached
his Normal Retirement Date.
1.28 "Maternity or Paternity Leave of Absence"
means an Employee's absence from work by
reason of pregnancy of the Employee, by
reason of birth of a child of the Employee,
by reason of the placement of a child with
the Employee in connection with adoption of
such child by such Employee, or for purposes
of caring for such child for a period
beginning immediately following such birth or
placement.
1.29 "Month of Service" means a calendar month
during any part of which an Employee
completed an Hour of Service.
1.30 "Non-Highly Compensated Participant" means
any Participant or Former Participant who is
neither a Highly Compensated Participant nor
a Family Member.
1.31 "Normal Retirement Date" means the later of
the date on which a Participant attains the
age of 65 years, or the fifth anniversary of
the Participant's Employment Commencement
Date.
A Participant shall become fully Vested in
his Account upon attaining his Normal
Retirement Date.
1.32 "One Year Period of Severance" means a twelve
(12) consecutive month period following an
Employee's Severance From Service Date during
which an Employee does not perform an Hour of
Service.
1.33 "Other Investment Account" means the account
of a Participant which is credited with his
share of the net gain (or loss) of the Plan,
Forfeitures and Employer contributions in
other than Company Stock and which is debited
with payments made to pay for Company Stock.
1.34 "Participant" means any Eligible Employee who
has become a Participant pursuant to Section
3.1 and where participation has not
terminated pursuant to Section 3.2.
1.35 "Participant's Account" means the Company
Stock Account and the Other Investments
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's
contributions.
1.36 "Period of Service" or "Service" means a
period of service commencing on the
Employee's Employment Commencement Date or
Reemployment Commencement Date, whichever is
applicable, and ending on the Severance From
Service Date.
1.37 "Period of Severance" shall mean the period
of time commencing on the Severance From
Service Date and ending on the date on which
the Employee again performs an Hour of
Service.
1.38 "Plan" means this instrument, including all
amendments thereto.
1.39 "Plan Year" means the Plan's accounting year
of twelve (12) months commencing on January 1
of each year and ending the following
December 31.
1.40 "Regulation" means the Income Tax Regulations
as promulgated by the Secretary of the
Treasury or his delegate, and as amended from
time to time.
1.41 "Retired Participant" means a person who has
been a Participant, but who has become
entitled to retirement benefits under the
Plan.
1.42 "Retirement Date" means the date as of which
a Participant retires whether retirement
occurs on a Participant's Normal Retirement
Date or Late Retirement Date.
1.43 "Severance from Service Date" shall mean the
earlier of:
(a) the date on which an Employee's Service
is terminated by reason of his resignation,
retirement, discharge or death; or
(b) the first anniversary of the first date
of a period in which an Employee remains
absent from Service (with or without
Compensation) with the Employer for reasons
other than those listed in (a) above, such as
vacation, holiday, sickness, layoff,
disability or an authorized leave of absence;
or
(c) in the case of a Maternity or Paternity
Leave of Absence, the second anniversary of
the first date of such absence. The period
between the first and second anniversaries is
neither a Period of Service nor a Period of
Severance.
1.44 "Suspense Account" means a Former
Participant's Account which has not Vested.
1.45 "Terminated Participant" means a person who
has been a Participant, but whose employment
has been terminated other than by retirement.
1.46 "Trust" means the legal entity resulting from
the Trust Agreement between the Company and
the Trustee who receives the Company's
contributions to the Plan and holds, invests,
and disburses funds to or for the benefit of
Participants and their Beneficiaries.
1.47 "Trust Fund" means the assets of the Plan and
Trust as the same shall exist from time to
time.
1.48 "Unallocated Company Stock Suspense Account"
means an account containing Company Stock
acquired with the proceeds of an Exempt Loan
and which has not been released from such
account and allocated to the Participants'
Company Stock Accounts.
1.49 "Vested" means the portion of a Participant's
Account that is nonforfeitable.
ARTICLE II
ELIGIBILITY AND SERVICE
2.1 Conditions of Eligibility
Each Eligible Employee shall become a
Participant in the Plan as of the Anniversary
Date next following the date he shall have
completed six Months of Service, provided
that he had (a) attained age 20-1/2 on or
prior to such Anniversary Date, and (b) is
still employed as an Eligible Employee on
such Anniversary Date.
2.2 Termination of Eligibility
In the event that the classification of a
Participant shall change from that of an
Eligible Employee to a ineligible Employee,
such Former Participant shall continue to
accrue Service under the Plan while an
ineligible Employee. Additionally, his
Participant's Account under the Plan shall
continue to share in the earnings of the
Trust Fund.
2.3 Crediting Service on Reemployment
(a) If an Employee severs from Service by
reason of a quit, discharge, disability or
retirement, and performs an Hour of Service
within twelve months after the Severance from
Service Date, such Period of Severance shall
be considered a Period of Service.
(b) If a Participant who is granted an
authorized leave of absence, incurred a
Severance from Service Date within twelve
months of the date of such authorized leave
of absence, by reason of a quit, discharge,
retirement or death, and again performs an
Hour of Service within twelve months of the
date on which the Employee was first absent
from service, such Period of Severance shall
be considered a Period of Service.
2.4 Status of Reemployed Participants
In the event that a Participant has a one
year Period of Severance and is subsequently
reemployed by the Employer his status in the
Plan shall be determined as follows:
(a) If such Participant was Vested in
his Account at the time he incurred such One
Year Period of Severance, he shall resume
participation in the Plan effective as of his
Reemployment Commencement Date.
(b) If such Participant was not Vested
in his Account at the time he incurred such
One Year Period of Severance and his Period
of Severance exceeds his prior Period of
Service, he shall be treated as a new
Employee as of his Reemployment Commencement
Date.
ARTICLE III
CONTRIBUTION AND ALLOCATION
3.1 Formula for Determining Employer's
Contribution
(a) For each Plan Year, the Employer shall
contribute to the Plan such amount as may be
determined by its board of directors.
(b) Employer contributions for each Plan
Year shall never be less than the amount
required to enable the Plan to discharge its
Current Obligations, notwithstanding whether
some or all of such contributions may fail to
qualify for income tax deductions by the
Employer.
(c) The Employer's contribution for any Plan
Year, subject to the limitation provided
above, shall not exceed the maximum amount
allowable as a deduction to the Employer
under the provisions of Code Section 404.
3.2 Time of Payment of Employer's Contribution
Employer contributions will be paid in cash,
Company Stock or other property as the
Employer's board of directors may from time
to time determine. Company Stock and other
property will be valued at their then fair
market value. The Employer's contribution
will be paid to the Plan on or before the
date required to make such contribution a
deduction on the Employer's federal income
tax return for the year.
3.3 Allocation of Contribution, Forfeitures and
Earnings
(a) The Administrator shall establish and
maintain a Participant's Account in the name
of each Participant to which the
Administrator shall credit as of the last day
of each Plan Year all amounts allocated to
each such Participant as set forth herein.
(b) The Employer shall provide the
Administrator with all information required
by the Administrator to make a proper
allocation of the Employer's contribution for
each Plan Year and following the receipt by
the Administrator of such information, the
Administrator shall allocate such
contribution to the Participant's Account of
each Participant in the employ of the
Employer on the last day of the Plan Year
with respect to which such contribution
pertains in the same proportion that each
such Participant's Compensation for such year
bears to the total Compensation of all
Participants for such year.
(c) The Company Stock Account of each
Participant shall be credited as of the last
day of each Plan Year with his allocable
share of Forfeitures of Company Stock and of
Company Stock (including fractional shares)
purchased and paid for by the Plan or
contributed in kind by the Employer. Stock
dividends on Company Stock held in his
Company Stock Account shall be credited to
his Company Stock Account when paid.
Company Stock acquired with the proceeds
of any Exempt Loan shall be an asset of the
Trust Fund and maintained in the Unallocated
Company Stock Suspense Account, and shall
only be allocated to each Participant's
Company Stock Account upon release from the
Unallocated Company Stock Suspense Account as
provided in Section 4.3(e) herein.
Company Stock received by the Trust
during a Plan Year with respect to a
contribution by the Employer for the
preceding Plan Year shall be allocated to the
accounts of Participants as of the end of
such preceding Plan Year.
(d) As of each June 30 and December 31,
before allocation of Employer contributions
and Forfeitures, any earnings or losses of
the Trust Fund shall be allocated in the same
proportion that each Participant's and Former
Participant's nonsegregated accounts (other
than each Participant's Company Stock
Account) bear to the total of all
Participants' and Former Participants'
nonsegregated accounts (other than
Participants' Company Stock Accounts) as of
such date. Cash dividends on Company Stock
allocated to each Participant's or Former
Participant's nonsegregated accounts after
the first month of the Plan Year shall not
share in any earnings or losses of the Trust
Fund for such year.
Earnings or losses include the increase
(or decrease) in the fair market value of
assets of the Trust Fund (other than Company
Stock in the Participants' Company Stock
Accounts) since the preceding Valuation Date
(as defined in Section 6.1 hereof). Earnings
or losses do not include the interest paid
under any installment contract for the
purchase of Company Stock by the Trust Fund
or on any loan used by the Trust Fund to
purchase Company Stock, nor does it include
income received by the Trust Fund with
respect to Company Stock acquired with the
proceeds of an Exempt Loan to the extent such
income is used to repay the loan.
(e) All Company Stock acquired by the Plan
with the proceeds of an Exempt Loan must be
added to and maintained in the Unallocated
Company Stock Suspense Account. For each
Plan Year during the duration of the loan,
the number of shares of Company Stock
released shall equal the number of shares
held immediately before release for the
current Plan Year multiplied by a fraction,
the numerator of which is the amount of
principal and interest paid for the Plan Year
and the denominator of which is the sum of
the numerator plus the principal and interest
to be paid for all future Plan Years
(assuming level interest payments in the case
of a varying rate loan, for purposes of the
foregoing computations). As of each December
31, the Plan must consistently allocate to
each Participant's Account in the same manner
as Employer discretionary contributions are
allocated shares and fractional shares of
Company Stock representing each Participant's
interest in assets withdrawn from the
Unallocated Company Stock Suspense Account.
Income earned with respect to Company Stock
in the Unallocated Company Stock Suspense
Account shall be used to repay the Exempt
Loan used to purchase such Company Stock.
Any income which is not so used must be
allocated as income of the Plan.
(f) As of the last day of each Plan Year,
any amounts which became Forfeitures within
that Plan Year shall be allocated among the
Participants' Accounts in the same proportion
that each such Participant's Compensation for
the year bears to the total Compensation of
all Participants for the year. In the event
the allocation of Forfeitures provided herein
shall cause the "annual addition" (as defined
in Section 3.4) to any Participant's Account
to exceed the amount allowable by the Code,
the excess shall be reallocated in accordance
with Section 3.4. However, a Participant
shall not share in the Plan Forfeitures for a
Plan Year unless employed by the Employer on
the last day of such Plan Year.
(g) Notwithstanding the foregoing, the terms
set forth in Appendix 3.3(g) attached hereto
and incorporated herein shall govern the
minimum allocations required for all Plan
Years in which the Plan is "Top Heavy" or
"Super Top Heavy", as such terms are defined
therein.
(h) For the purposes of this Section, "415
Compensation", as defined in Section 3.4(d),
shall be limited in accordance with the
provisions of Section 1.10 hereof.
(i) Any Participant who terminated
employment during the Plan Year for reasons
other than retirement shall share only in the
allocations of earnings or losses as provided
in this Section.
3.4 Maximum Annual Additions
(a) Notwithstanding the foregoing, the
maximum "annual additions" credited to a
Participant's Account for any "limitation
year" shall equal the lesser of: (1) $30,000
(or, if greater, one-fourth of the dollar
limitation in effect under Code Section
415(b)(1)(A)) or (2) twenty-five percent
(25%) of the Participant's "415 Compensation"
for such "limitation year".
(b) The dollar amount provided above shall
be increased by the lesser of the dollar
amount determined above or the amount of
Company Stock contributed, or purchased with
cash contributed. The dollar amount shall be
increased provided no more than one-third of
the Employer's contributions for the year are
allocated to Highly Compensated Participants.
(c) For purposes of applying the limitations
of Code Section 415, "annual additions" means
the sum credited to a Participant's Account
for any "limitation year" of Employer
contributions and Forfeitures, and the
following shall not be deemed "annual
additions": (1) transfer of funds from one
qualified plan to another; (2) Forfeitures of
Company Stock purchased with the proceeds of
an Exempt Loan; and (3) Employer
contributions applied to the payment of
interest on an Exempt Loan if no more than
one-third of the Employer contributions for
the year are allocated to Highly Compensated
Participants.
(d) For purposes of applying the limitations
of Code Section 415, "415 Compensation" shall
include Participant's wages, salaries, fees
for professional service and other amounts
for personal services actually rendered in
the course of employment with an Employer
maintaining the Plan paid during the
"limitation year", but shall exclude (1)(A)
contributions made by the Employer to a plan
of deferred compensation to the extent that,
before the application of Code Section 415
limitations to the Plan, the contributions
are not includable in the gross income of the
Employee for the taxable year in which
contributed, (B) any distributions from a
plan of deferred compensation to the extent
such amounts are includable in the gross
income of the Employee; (2) amounts realized
from the exercise of a non-qualified stock
option or when restricted stock (or property)
held by an Employee either becomes freely
transferrable or is no longer subject to
substantial risk of Forfeiture; (3) amounts
realized from the sale, exchange or other
disposition of stock acquired under a
qualified stock option; and (4) other amounts
which receive special tax benefits, such as
premiums for group term life insurance (but
only to the extent that the premiums are not
includable in the gross income of the
Employee). For "limitation years" beginning
after December 31, 1988, "415 Compensation"
shall be limited in accordance with the
provisions of Section 1.10 hereof.
(e) For purposes of applying the limitations
of Code Section 415, the "limitation year"
shall be the calendar year.
(f) The dollar limitation under Code Section
415(b)(1)(A) stated in paragraph (a)(1) above
shall be adjusted annually as provided in
Code Section 415(d) pursuant to the
Regulations. The adjusted limitation is
effective as of January 1st of each calendar
year and is applicable to "limitation years"
ending with or within that calendar year.
(g) 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.
(h) 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 Sections 414(b) and (c) as
modified by Code Section 415(h) or is a
member of an affiliated service group (as
defined by Code Section 414(m)), all
Employees of such Employers shall be
considered to be employed by a single
Employer.
(i) Subject to the exception in Section
4.4(m) below, 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.
(j) (1) The defined benefit plan fraction
for any "limitation year" is a
fraction (A) the numerator of which
is the "projected annual benefit"
of the Participant under the Plan
(determined as of the close of the
"limitation year"), and (B) the
denominator of which is the greater
of the product of 1.25 multiplied
by the "protected current accrued
benefit" or the lesser of: (i) the
product of 1.25 multiplied by the
maximum dollar limitation provided
under Code Section 415(b)(1)(A) for
such "limitation year", or (ii) the
product of 1.4 multiplied by the
amount which may be taken into
account under Code Section
415(b)(1)(B) for such "limitation
year".
(2) For purposes of applying the
limitations of Code Section 415,
the "projected annual benefit" for
any Participant is the benefit,
payable annually, under the terms
of the Plan determined pursuant to
Regulation 1.415-7(b)(3).
(k) The defined contribution plan fraction
for any "limitation year" is a fraction (A)
the numerator of which is the sum of the
"annual additions" to the Participant's
accounts as of the close of the "limitation
year", adjusted pursuant to Regulation 1.415-7(d)(1),
and (B) the denominator of which is
the sum of the lesser of the following
amounts determined for such year and each
prior year of service with the Employer:
(i) the product of 1.25 multiplied by the
dollar limitation in effect under Code
Section 415(c)(1)(A) for such "limitation
year" (determined without regard to Code
Section 415(c)(6)), or (ii) the product of
1.4 multiplied by the amount which may be
taken into account under Code Section
415(c)(1)(B) for such "limitation year".
(l) if the sum of the defined benefit plan
fraction and the defined contribution plan
fraction shall exceed 1.0 in any "limitation
year" for any Participant in this Plan for
reasons other than described in 3.4(m) below,
the Administrator shall limit, to the extent
necessary, the "annual additions" to such
Participant's accounts for such "limitation
year". If, after limiting the "annual
additions" to such Participant's Accounts for
the "limitation year", the sum of the defined
benefit plan fraction and the defined
contribution plan fraction still exceed 1.0,
the Administrator shall then, in conjunction
with the person or persons appointed to
administer the defined benefit plan,
effectuate an adjustment of the numerator of
the defined benefit plan fraction so that the
sum of both fractions shall not exceed 1.0 in
any "limitation year" for such Participant.
(m) If (1) the substitution of 1.00 for 1.25
and $41,500 for $51,875 above or (2) the
excess benefit accruals or "annual additions"
provided for in Internal Revenue Service
Notice 82-19 cause the 1.0 limitation to be
exceeded for any Participant in any
"limitation year", such Participant shall be
subject to the following restrictions for
each future "limitation year" until the 1.0
limitation is satisfied: (A) the
Participant's accrued benefit under the
defined benefit plan shall not increase, (B)
no "annual additions" may be credited to a
Participant's Accounts, and (C) no Employee
contributions (voluntary or mandatory) shall
be made under any defined benefit plan or any
defined contribution plan of the Employer.
(n) 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.
3.5 Adjustment for Excessive Additions
(a) If as a result of the allocation of
Forfeitures, a reasonable error in
estimating a Participant's Compensation, 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) hold any "excess
amount" in a "Section 415 suspense account",
(2) 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 contributions which would constitute
"annual additions" are made to the Plan for
such "limitation year", or (3) 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".
(b) 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
3.4.
(c) For purposes of this Section, "Section
415 suspense account" shall mean an
unallocated account equal to the sum of
"excess amounts" for all Participants in the
Plan during the "limitation year". The
"Section 415 suspense account" shall not
share in any earnings or losses of the Trust
Fund.
(d) The Plan may not distribute "excess
amounts" to Participants or Former
Participants.
ARTICLE IV
INVESTMENT POLICY
4.1 Investment Policy
(a) The Plan is a stock bonus plan intended
to invest primarily in Company Stock.
(b) With due regard to subparagraph (a)
above, funds under the Plan may also be
invested in other property the ownership of
which under the Code and the Regulations is
permissible by the Trust.
4.2 Application of Cash
Employer contributions in cash and other cash
received by the Trust Fund shall first be
applied to pay any Current Obligations of the
Trust Fund.
4.3 Loans to the Trust
(a) The Plan may borrow money, provided, the
proceeds of an Exempt Loan are used within a
reasonable time after receipt only for any or
all of the following purposes:
(1) To acquire Company Stock.
(2) To repay such loan.
(3) To repay a prior Exempt Loan.
(b) All loans to the Trust which are made or
guaranteed by a disqualified person must
satisfy all requirements applicable to Exempt
Loans including but not limited to the
following:
(1) The loan must be at a reasonable
rate of interest;
(2) Any collateral pledged to the
creditor by the Plan shall consist only
of Company Stock purchased with the
borrowed funds;
(3) Under the terms of the loan, any
pledge of Company Stock shall provide
for the release of shares so pledged on
a pro-rata basis pursuant to Article
III;
(4) Under the terms of the loan, the
creditor shall have no recourse against
the Plan except with respect to such
collateral, earnings attributable to
such collateral, Employer contributions
(other than contributions of Company
Stock) that are made to meet Current
Obligations and earnings attributable to
such contributions;
(5) The loan must be for a specific
term and may not be payable at the
demand of any person except in the case
of default;
(6) In the event of default upon an
Exempt Loan, the value of the Trust Fund
transferred in satisfaction of the
Exempt Loan shall not exceed the amount
of default. If the lender is a
disqualified person, an Exempt Loan
shall provide for a transfer of Trust
Funds upon default only upon and to the
extent of the failure of the Plan to
meet the payment schedule of the Exempt
Loan;
(7) Exempt Loan payments during a Plan
Year must not exceed an amount equal to:
(A) the sum, over all Plan Years, of all
contributions made by the Employer to
the Plan with respect to such Exempt
Loan and earnings on such Employer
contributions, less (B) the sum of the
Exempt Loan payments in all preceding
Plan Years. A separate accounting shall
be maintained for such Employer
contributions and earnings until the
Exempt Loan is repaid.
(c) For purpose of this Section, the term
"disqualified person" shall have the meaning
ascribed to it in Section 4975(e) of the
Code.
ARTICLE V
VALUATIONS
5.1 Valuation of the Trust Fund
The Administrator shall direct the Trustee,
as of each June 30 and December 31, and at
such other date or dates deemed necessary by
the Administrator (herein called the
"Valuation Date"), to determine the net worth
of the assets comprising the Trust Fund as it
exists on the Valuation Date prior to taking
into consideration any contribution to be
allocated for that Plan Year. 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.
5.2 Method of Valuation
In determining the fair market value of
shares of Company Stock held in the Trust
Fund, the Administrator shall direct the
Trustee to value the same at the prices they
were last traded on such exchange as of the
close of business on the Valuation Date.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 Determination of Benefits Upon Retirement
Upon the Normal Retirement Date of a
Participant, all amounts credited to such
Participant's Account (and not theretofore
distributed pursuant to the election provided
under the terms of Section 6.11 hereof) shall
become distributable in accordance with the
terms of Sections 6.5 and 6.6 hereof.
However, a Participant may postpone the
termination of his employment with the
Employer to a later date, in which event the
participation of such Participant in the Plan
shall continue until his Late Retirement
Date, and thereupon, all amounts credited to
such Participant's Account (and not
theretofore distributed pursuant to the
election provided under the terms of
Section 6.11 hereof) shall become
distributable in accordance with the terms of
Sections 6.5 and 6.6 hereof.
6.2 Determination of Benefits Upon Death
(a) Upon the death of a Participant before
his Retirement Date or other termination of
employment, all amounts credited to such
Participant's Account shall become fully
Vested. On or before the last day of the
Plan Year coinciding with or next following
such death, the Administrator shall direct
the Trustee, in accordance with the
provisions of Sections 6.5 and 6.6, to
distribute the value of the deceased
Participant's Account to the Participant's
Beneficiary.
(b) On or before the last day of the Plan
Year coinciding with or next following the
death of a Former Participant, the Trustee,
in accordance with the provisions of Sections
6.5 and 6.6, shall distribute any remaining
amounts credited to the account of such
deceased Former Participant to such Former
Participant's Beneficiary.
(c) 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.
(d) 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 her right to
be the Participant's Beneficiary,
or
(2) the Participant has no spouse, or
(3) 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 such change or
revocation. 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.
(e) 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.
6.3 Disability Retirement Benefits
No disability benefits, other than those
payable upon termination of employment, are
provided in this Plan.
6.4 Determination of Benefits Upon Termination
(a) On or before the last day of the Plan
Year coinciding with or subsequent to the
termination of a Participant's employment for
any reason other than death or retirement,
the Administrator shall direct the Trustee to
segregate such Terminated Participant's
Account, if the amount therein is Vested,
which amount shall remain in a separate
account for the Terminated Participant until
such time as a distribution is made to the
Terminated Participant. If the Terminated
Participant's Account is not Vested, the
amount therein shall be allocated to the
accounts of the remaining Participants in
accordance with the terms of the Plan as a
Forfeiture as of the next succeeding
Valuation Date.
Subject to the provisions of Section 6.5(d)
hereof, unless the Terminated Participant
otherwise elects in writing a later
distribution date, distribution of a
Terminated Participant's Account shall
commence as soon as practicable following the
termination of his employment (provided that
a Terminated Participant's Vested benefit
derived from Employer contributions may not
be paid without his written consent if the
value exceeds $3,500).
(b) Subject to Appendix 6.4(b), the
determination as to whether a Participant's
Account is Vested shall be made on the basis
of the Participant's number of years of
Credited Service according to the following
schedule:
Vesting Schedule
Years of
Credited Service Percentage
0-4 0%
5 100%
(c) 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
Article. In the event that the Plan is
amended to change or modify the Vesting
Schedule of Section 6.4(b) hereof, a
Participant with at least three (3) years of
Credited 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, if more favorable to him
than the Vesting Schedule provided under
Section 6.4(b) hereof. 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.
(d) If any Former Participant is reemployed
after a one year Period of Severance has
occurred, his Credited Service shall include
Service prior to his one year Period of
Severance subject to the following rules:
(1) Such Service shall be recognized
for vesting purposes only after he has
been employed for six Months of Service
following the date of his Reemployment
Commencement Date; and
(2) Nonvested Former Participants shall
lose credits otherwise allowable under
(1) above if their consecutive one year
Periods of Severance equal or exceed the
greater of five (5) or the aggregate
number of their pre-severance Service.
6.5 Distribution of Benefits
(a) The Administrator, pursuant to the
election of the Participant (or if no
election has been made prior to the
Participant's death, by his Beneficiary), in
his sole discretion, shall direct the Trustee
to distribute to a Participant or his
Beneficiary all amounts to which he is
entitled under the Plan in one lump-sum
payment.
(b) Notwithstanding anything herein to the
contrary, cash dividends on shares of Company
Stock allocable to Participants' Accounts may
be paid to Participants or their
Beneficiaries, as determined in the sole
discretion of the Administrator, within 90
days after the close of the Plan Year in
which the dividend is paid.
(c) Except as limited by Sections 6.5 and
6.6, whenever the Trustee is to make a
distribution on or before an Anniversary
Date, the distribution may be made on such
date or as soon thereafter as is practicable,
but in no event later than 180 days after the
Anniversary Date. Except, 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 no later than one (1) year after
the close of the Plan Year:
(1) in which occurs the date on which
the Participant separates from Service
by reason of death, disability or
attainment of his Normal Retirement
Rate, or,
(2) which is the fifth Plan Year
following the Plan Year in which the
Participant otherwise separates from
Service with the Employer (except that
this clause (2) shall not apply if the
Participant is reemployed by the
Employer before such year).
For purposes of this Section 6.5(c), a
Participant's benefits shall not include any
portion of his Company Stock Account acquired
with the proceeds of an Exempt Loan until the
close of the Plan Year in which such loan is
repaid in full.
(d) Notwithstanding any provision in the
Plan to the contrary, a Participant's
benefits shall be distributed to him not
later than April 1 of the calendar year
following the calendar year in which the
Participant attains age 70-1/2.
6.6 How Plan Benefits Will be Distributed
(a) Distribution of a Participant's benefit
will be made entirely in whole shares or
other units of Company Stock. Any balance in
a Participant's Other Investments Account
will be applied to acquire for distribution
the maximum number of whole shares or other
units of Company Stock at the then fair
market value. Any fractional unit value
unexpended will be distributed in cash.
(b) The Trustee will make distribution from
the Trust only on instructions from the
Administrator.
(c) Except as otherwise provided in this
Article, a Participant is not entitled to any
payment, withdrawal or distribution under the
Plan during his participation.
6.7 Distributions For Minor Beneficiaries
In the event a distribution is to be made to
a minor, then the Administrator may in the
Administrator's sole discretion, 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.
6.8 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 expiration
of five (5) years after it shall become
payable, 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; provided, however, that any such
forfeited amount shall be reinstated as a
payable benefit in the event a claim therefor
is subsequently made by the Participant or
his Beneficiary.
6.9 Limitations on Benefits and Distributions
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 or has not reached the
"earliest retirement age" under the Plan.
For purposes of this Section, "alternate
payee," "qualified domestic relations order"
and "earliest retirement age" shall have the
respective meanings set forth in Code Section
414(p).
6.10 Direct Rollovers
(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 paid directly
to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) This Section 6.10 shall be effective
with respect to distributions made on or
after January 1, 1993.
(c) For purposes of this Section the
following definitions shall apply:
(1) An eligible rollover distribution
is any distribution of all or any
portion of the balance to the credit of
the distributee, except that an eligible
rollover distribution does not include:
any distribution that is one of a series
of substantially equal periodic payments
(not less frequently than annually) made
for the life (or life expectancy) of the
distributee or the joint lives (or joint
life expectancies) of the distributee
and the distributee's designated
beneficiary, or for a specified period
of ten years or more; any distribution
to the extent such distribution is
required under Code Section 401(a)(9);
and the portion of any distribution that
is not includable in gross income
(determined without regard to the
exclusion for net unrealized
appreciation with respect to employer
securities).
(2) An eligible retirement plan is an
individual retirement account described
in Section 408(a) of the Code, an
individual retirement annuity described
in Code Section 408(b), an annuity plan
described in Code Section 403(a) or a
qualified trust described in Code
Section 401(a), that accepts the
distributee's eligible rollover
distribution. However, in the case of
an eligible rollover distribution to the
surviving spouse, an eligible retirement
plan is an individual retirement account
or individual retirement annuity.
(3) A distributee includes an Employee
or former Employee. In addition, the
Employee's or former Employee's
surviving spouse and the Employee's or
former Employee's spouse or former
spouse who is the alternate payee under
a qualified domestic relations order, as
defined in Code Section 414(p), are
distributees with regard to the interest
of the spouse or former spouse.
(4) A direct rollover is a payment by
the Plan to the eligible retirement plan
specified by the distributee.
(d) If, after receiving a notice pursuant to
Section 402(f) of the Code ("Section 402(f)
Notice"), a Participant elects to make or not
make a direct rollover, a distribution may be
made less than 30 days after the
Section 402(f) Notice 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 Section 402(f)
Notice to consider the decision of
whether or not to elect a distribution,
and
(2) the Participant, after receiving
the Section 402(f) Notice, affirmatively
elects a distribution.
6.11 Directed Investment Account
(a) Each "Qualified Participant" may elect
within 180 days after the close of each Plan
Year during the "Qualified Election Period"
to direct the Trustee in writing to
distribute to him at least 25 percent of the
Participant's Company Stock Account (to the
extent such portion exceeds the amount to
which a prior election under this Section
6.11 applies). In the case of the election
year in which the Participant can make his
last election, the preceding sentence shall
be applied by substituting "50 percent" for
"25 percent".
(b) For the purposes of this Section the
following definitions shall apply:
(1) "Qualified Participant" means any
Participant or Former Participant who
has completed ten (10) Plan Years of
Service as a Participant and has
attained age 55.
(2) "Qualified Election Period" means
the six (6) Plan Year period beginning
with the Plan Year after the Plan Year
in which the Participant attains age 55
or if later, beginning with the Plan
Year after the first Plan Year in which
the Participant first became a
"Qualified Participant").
ARTICLE VII
AMENDMENT, TERMINATION, AND MERGERS
7.1 Amendments
The Employer shall have the right at any time
to amend the Plan by written instrument duly
adopted by the Board. However, no such
amendment shall authorize or permit 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
purposes other than for the exclusive benefit
of the Participants or their Beneficiaries or
estates; no such amendment shall cause any
reduction in the amount credited to the
account of any Participant or cause or permit
any portion of the Trust Fund to revert to or
become the property of the Employer; and no
such amendment which affects the rights,
duties or responsibilities of the Trustee and
Administrator may be made without 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.
In addition, no such amendment shall have the
effect of terminating the protections and
rights set forth in Section 6.4(c), unless
such termination shall then be permitted
under the applicable provisions of the Code
and Regulations.
7.2 Termination
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 termination (full
or partial) or a complete discontinuance of
contributions, all amounts theretofore
credited to the affected Participants'
Accounts shall become 100% Vested and shall
not thereafter be subject to forfeiture.
Subject to the limitations of Section 3.4
hereof, all amounts outstanding in the
Unallocated Company Stock Suspense Account at
such time not used in repayment of any Exempt
Loan then outstanding shall be allocated in
accordance with the provisions of Section 3.3
and this Section 7.2. Upon such termination
of the Plan, the Employer, by written notice
to the Trustee and Administrator, may direct
either:
(a) complete distribution of the assets
in the Participants' Accounts to the
Participants in a manner consistent with
the requirements of Article VI,
(b) continuation of the Trust created
by this agreement and the distribution
of benefits at such time and in such
manner as though the Plan had not been
terminated, or
(c) conversion of the Plan to another
form of qualified defined contribution
plan.
7.3 Merger or Consolidation
This Plan and Trust may be merged or
consolidated with, or its assets and/or
liabilities may be transferred to any other
Plan and Trust only if the benefits which
would be received by a Participant of this
Plan, in the event of a termination of the
Plan immediately after such transfer, merger
or consolidation, are at least equal to the
benefits the Participant would have received
if the Plan had terminated immediately before
the transfer, merger or consolidation.
ARTICLE VIII
ADMINISTRATION
8.1 Powers and Responsibilities of the Employer
(a) 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 assure 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.
(b) The Employer shall furnish the Trustee
with all necessary cooperation to effectuate
the exercise of the voting rights of the
Trustee and the Participants under the terms
of the Trust and to insure the confidential-
ity of votes cast by the Participants with
respect to company stock notices and
information statements when voting rights
must be exercised.
8.2 Assignment and Designation of Administrative
Authority
The Employer shall appoint one or more
Administrators. Any person, including, but
not limited to, one or more Employees of the
Employer, shall be eligible to serve as an
Administrator. Any person so appointed shall
signify his acceptance by filing a written
acceptance with the Employer. An
Administrator may resign by delivering his
written resignation to the Employer or be
removed by the Employer by delivery of
written notice of removal, to take effect at
a date specified therein, or upon delivery to
the Administrator if no date is specified.
The Employer, upon the resignation or removal
of an Administrator, shall promptly designate
in writing a successor to this position. If
the Employer does not appoint an
Administrator, the Employer will function as
the Administrator.
8.3 Allocation and Delegation of Responsibilities
If more than one person is appointed as
Administrator, the responsibilities of each
Administrator may be specified by the
Employer and accepted in writing by each
Administrator. In the event that no such
delegation is made by the Employer, the
Administrators may allocate the
responsibilities among themselves, in which
event the Administrators shall notify the
Employer and the Trustee in writing of such
action and specify the responsibilities of
each Administrator. The Trustee thereafter
shall accept and rely upon any documents
executed by the appropriate Administrator
until such time as the Employer or the
Administrators file with the Trustee a
written revocation of such designation.
8.4 Powers and Duties of the Administrator
The primary responsibility of the
Administrator is to administer the Plan for
the exclusive benefit of the Participants and
their Beneficiaries, subject to the specific
terms of the Plan. The Administrator shall
administer the Plan in accordance with its
terms and shall have the power to determine
any questions arising in connection with the
administration, interpretation, and
application of the Plan. Any such
determination by the Administrator shall be
conclusive and binding upon all persons. The
Administrator may establish procedures,
correct any defect, supply any information,
or reconcile any inconsistency in such manner
and to such extent as shall be deemed
necessary or advisable to carry out the
purpose of the Plan; provided, however, that
any procedure, discretionary act,
interpretation or construction shall be done
in a nondiscriminatory manner based upon
uniform principles consistently applied and
shall be consistent with the intent that the
Plan shall continue to be deemed a qualified
plan under the terms of Code Section 401(a),
and shall comply with the terms of the Act
and all regulations issued pursuant thereto.
The Administrator shall have all powers
necessary or appropriate to accomplish his
duties under this Plan.
The Administrator shall be charged with the
duties of the general administration of the
Plan, including, but not limited to, the
following:
(a) to determine all questions relating to
the eligibility of Employees to participate
or remain a Participant hereunder;
(b) 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;
(c) to authorize and direct the Trustee with
respect to all non-discretionary or otherwise
directed disbursements from the Trust;
(d) to maintain all necessary records for
the administration of the Plan;
(e) 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; and
(f) to assist any Participant regarding his
rights, benefits, or elections available
under the Plan.
8.5 Records and Reports
The Administrator shall keep a record of all
actions taken and shall keep all other books
of account, records, 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.
8.6 Appointment of Advisors
The Administrator may appoint counsel,
advisers, and other persons as the
Administrator deems necessary or desirable in
connection with the administration of this
Plan.
8.7 Information from Employer
To enable the Administrator to perform his
functions, the Employer shall supply full and
timely information to the Administrator on
all matters relating to the Compensation of
all Participants, their Hours of Service,
their Years of Service, their retirement,
death, disability, or termination of
employment, and such other pertinent facts as
the Administrator may require; and the
Administrator shall advise the Trustee of
such of the foregoing facts as may be
pertinent to the Trustee's duties under the
Plan. The Administrator may rely upon such
information as is supplied by the Employer
and shall have no duty or responsibility to
verify such information.
8.8 Payment of Expenses
All expenses of administration may be paid
out of the Trust Fund unless paid by the
Employer. Such expenses shall include any
expenses incident to the functioning of the
Administrator, including, but not limited to,
fees of accountants, counsel, 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. However, the Employer may
reimburse the Trust Fund for any
administration expense incurred. Any
administration expense paid to the Trust Fund
as a reimbursement shall not be considered an
Employer contribution under Article IV
hereof.
8.9 Majority Actions
Except where there has been an allocation and
delegation of administrative authority
pursuant to Section 8.3, if there shall be
more than one Administrator, they shall act
by a majority of their number, but may
authorize one or more of them to sign all
papers on their behalf.
8.10 Claims Procedure
Claims for benefits under the Plan may be
filed with the Administrator on forms
supplied by the Employer. Written notice of
the disposition of a claim shall be furnished
to the claimant within 90 days after the
application is filed. In the event the claim
is denied, the reasons for the denial shall
be specifically set forth in the notice in
language calculated to be understood by the
claimant, pertinent provisions of the Plan
shall be cited, and, where appropriate, an
explanation as to how the claimant can
perfect the claim will be provided. In
addition, the claimant shall be furnished
with an explanation of the Plan's claims
review procedure.
8.11 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 8.10 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 8.10. The Administrator shall
then conduct a hearing within the next 60
days, at which the claimant may be
represented by an attorney or any other
representative of his choosing and at which
the claimant shall have an opportunity to
submit written and oral evidence and
arguments in support of his claim. At the
hearing (or prior thereto upon 5 business
days' written notice to the Administrator)
the claimant or his representative shall have
an opportunity to review all documents in the
possession of the Administrator which are
pertinent to the claim at issue and its
disallowance. Either the claimant or the
Administrator may cause a court reporter to
attend the hearing and record the
proceedings. In such event, a complete
written transcript of the proceedings shall
be furnished to both parties by the court
reporter. The full expense of any such court
reporter and such transcripts shall be borne
by the party causing the court reporter to
attend the hearing. A final decision as to
the allowance of the claim shall be made by
the Administrator within 60 days of receipt
of the appeal (unless there has been an
extension of said 60 days' limitation 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 IX
MISCELLANEOUS
9.1 Participant's Rights
This Plan shall not be deemed to constitute a
contract between the Employer and any
Participant or to be a consideration or an
inducement for the employment of any
Participant or Employee. Nothing contained
in this Plan shall be deemed to give any
Participant or Employee the right to be
retained in the service of the Employer or to
interfere with the right of the Employer to
discharge any Participant or Employee at any
time regardless of the effect which such
discharge shall have upon him as a
Participant of this Plan.
9.2 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.
(b) This provision shall not apply to a
"qualified domestic relations order" defined
in Code Section 414(p), and those other
domestic relations orders permitted to be so
treated by the Administrator under the
provisions of the Retirement Equity Act of
1984. The Administrator shall establish a
written procedure to determine the qualified
status of domestic relations orders and to
administer distributions under such qualified
orders. Further, to the extent provided
under a "qualified domestic relations order",
a former spouse of a Participant shall be
treated as the spouse or surviving spouse for
all purposes under the Plan.
9.3 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.
9.4 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.
9.5 Legal Action
In the event any claim, suit, or proceeding
is brought regarding the Trust and/or Plan
established hereunder to which the Trustee or
the Administrator may be a party, and such
claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they
shall be entitled to be reimbursed from the
Trust Fund for any and all costs, attorneys'
fees, and other expenses pertaining thereto
incurred by them for which they shall have
become liable.
9.6 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.
(b) In the event the Employer shall make a
contribution under a mistake of fact pursuant
to Section 403(c)(2)(A) of the Act, the
Employer may demand repayment of such
excessive contribution at any time within one
(1) year following the time of payment and
the Trustee shall return such amount to the
Employer within the one (1) year period.
Earnings of the Plan attributable to the
excess contributions may not be returned to
the Employer but any losses attributable
thereto must reduce the amount so returned.
9.7 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 Section
412(a)(2) of the Act), 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.
9.8 Receipt and Release for Payments
Any payment to any Participant, his legal
representative, Beneficiary, or to any
guardian or committee appointed for such
Participant or Beneficiary in accordance with
the provisions of the Plan, shall, to the
extent thereof, be in full satisfaction of
all claims hereunder against the Trustee and
the Employer, either of whom may require such
Participant, legal representative,
Beneficiary, guardian or committee, as a
condition precedent to such payment, to
execute a receipt and release thereof in such
form as shall be determined by the Trustee or
Employer.
9.9 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.
9.10 Named Fiduciaries and Allocation of
Responsibility
The "named Fiduciaries" of this Plan are (1)
the Employer, (2) the Administrator and (3)
the Trustee. The named Fiduciaries shall
have only those specific powers, duties,
responsibilities, and obligations as are
specifically given them under the Plan. In
general, the Employer shall have the sole
responsibility for making the contributions
provided for under Section 4.1; and shall
have the sole authority to appoint and remove
the Trustee and the Administrator; and to
amend or terminate, in whole or in part, the
Plan. The Administrator shall have the sole
responsibility for the administration of the
Plan, which responsibility is specifically
described in the Plan. The Trustee shall
have the sole responsibility for holding the
assets under the Trust. Each named Fiduciary
warrants that any directions given, informat-
ion 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. Further-
more, 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. 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.
9.11 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.
9.12 Notices and Deliveries
All notices hereunder shall be in writing.
Any notices, payments or deliveries to the
Employer shall be directed to the Human
Resources Department of the Employer at the
following address:
Chock Full O'Nuts Corporation
370 Lexington Avenue
New York, New York 10017
Any notices, payments or deliveries to the
Trustee shall be directed to the Trustee
Chock Full O'Nuts Corporation Employee Stock
Ownership Plan at the above address.
Any notices, payments or deliveries (other
than to the Employer or Trustee) shall be
directed to the addressee at the address
designated by said addressee by notice to the
Employer and the Trustee, or at such other
address set forth herein. The Employer or
the Trustee may designate a new address for
the purpose of this Plan by notice to the
other and to all Participants, Former
Participants and Beneficiaries. Unless
otherwise specified herein, notices shall be
sent by registered or certified mail.
9.13 Uniformity
All provisions of this Plan shall be
interpreted and applied in a uniform,
nondiscriminatory manner.
9.14 Indemnification
Neither the Employer, any of its officers or
directors, nor the Administrator shall be
personally liable for any action or inaction
with respect to any duty or responsibility
imposed upon such person by the terms of the
Plan, unless such action or inaction is
judicially determined to be a breach of that
person's fiduciary responsibility with
respect to the Plan under any applicable law.
The Employer shall indemnify or purchase
insurance to underwrite indemnity for the
Administrator and/or the Employer's board of
directors against any personal liability or
expense except for his own gross negligence.
9.15 Voting Passthroughs, Tender Offers; Rights
(a) On all proposals on which the holders of
shares of Company Stock are entitled to vote,
each Participant shall have the right to
direct the Trustee as to the manner in which
to vote the Company Stock allocated to his
Company Stock Account under the Plan.
(b) In the case of a tender for any Company
Stock, each Participant shall have the right
to direct the Trustee whether to accept or
reject such tender in connection with all or
any part of the Company Stock allocated to
his Company Stock Account under the Plan.
(c) With respect to any conversion or
subscription or other right appurtenant to
Company Stock, each Participant shall have
the right to direct the Trustee whether or
not to exercise such right in connection with
all or any part of the Company Stock
allocated to his Company Stock Account under
the Plan.
(d) The Employer shall neither interfere
with nor in any way attempt to influence any
direction conveyed by a Participant to the
Trustee pursuant to the preceding subsections
(a), (b) or (c) of this Section 9.15, which
direction shall be kept confidential at all
times from the Employer by the Trustee.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 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.
10.2 Requirements of Participating Employers
(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
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.
(b) Any expenses of the Trust which are to
be paid by the Employer or borne by the Trust
Fund shall be paid by each Participating
Employer in the same proportion that the
total amount standing to the credit of all
Participants employed by such Employer bears
to the total standing to the credit of all
Participants.
10.3 Designation of Agent
Each Participating Employer shall be deemed
to be a part of 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 irrevocably
designated 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.
10.4 Employee Transfers
It is anticipated that an Employee may be
transferred between Participating Employers,
and in the event of any such transfer, the
Participating Employer to which the Employee
is transferred shall thereupon become
obligated hereunder with respect to such
Employee in the same manner as was the
Participating Employer from whom the Employee
was transferred.
10.5 Participating Employer's 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 paid to
and held by the Trustee for the exclusive
benefit of the Employees of such
Participating Employer and the Beneficiaries
of such Employees, subject to all the terms
and conditions of this Plan.
10.6 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 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. 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 for purposes other than for the
exclusive benefit of the Employees of such
Participating Employer.
10.7 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.<PAGE>
IN WITNESS WHEREOF, this Plan has been
executed by a duly authorized officer of the Company as
of this ________ day of August, 1994.
CHOCK FULL O'NUTS CORP.
By:___________________________
Howard M. Leitner
President
SECRETARY'S CERTIFICATE
I, Howard M. Leitner, Secretary of the June
27, 1994 meeting of the Board of Directors of Chock
Full O'Nuts Corporation hereby certify that the
foregoing document comprises the Chock Full O'Nuts
Corporation Employee Stock Ownership Plan, as amended
and restated, adopted pursuant to resolution duly
adopted by the Board of Directors of said Corporation,
and that said Plan is currently in full force and
effect.
Dated:___________________ _____________________________
Howard M. Leitner
Secretary of the
Meeting
CHOCK FULL O'NUTS CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
APPENDIX 1.11
Any employees of the Cain's Coffee Co. who
became employees of the Employer pursuant to
the Stock Purchase Agreement dated as of
October 16, 1992 between the Employer and
Nestle' Beverage Company shall have all
service rendered to Cain's Coffee Co. prior
to such acquisition recognized for
eligibility for benefit commencement and
vesting purposes hereunder.
No service with Cain's Coffee Co. shall be
recognized for purposes of eligibility to
participate or allocations of Company Stock.
Accordingly, such employees shall not be
eligible to participate before January 1,
1994.
Appendix 3.4(g)
TOP HEAVY REQUIREMENTS
1.1 In General
The terms of this Appendix 3.4(g) shall take effect
with respect to the Chock Full o'Nuts Corporation
Employee Stock Ownership Plan (the "Plan") in any Plan
Year (as defined in the Plan) in which the Plan is Top
Heavy or Super Top Heavy (as defined herein).
Hereafter, any term that is defined in the Plan shall
have in this Appendix 3.4(g) the same meaning ascribed
to it in the Plan, unless the context clearly indicates
a different meaning.
1.2 Definitions
(a) "Key Employee" means an Employee as
defined in Code Section 416(i) and the Regulations
thereunder. Generally, an Employee or former
Employee (as well as each of his Beneficiaries) is
considered a Key Employee if he, at any time
during the Plan Year or any of the preceding four
(4) Plan Years, has been included in one of the
following categories:
1. an officer of the Employer (as that term is
deemed within the meaning of the Regulations
under Code Section 416) having annual "415
Compensation" greater than 150 percent of the
amount in effect under Code Section
415(c)(1)(A) for any such Plan Year.
2. one of the 10 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 one
of the ten largest interests in the Employer.
3. 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
(5 %) percent of the total of all stock of
the Employer, or, in the case of an
unincorporated business, any person who owns
more than five percent (5%) of the capital or
profits interests in the Employer. In
determining percentage ownership hereunder,
employers that would otherwise be aggregated
under Code Sections 414(b), (c), and (m)
shall be treated as separate employers.
4. 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 (1%) percent
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 interests in the Employer. In
determining percentage ownership hereunder,
employers that would otherwise be aggregated
under Code Sections 414(b), (c), and (m)
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), and (m) shall be taken into
account.
5. "Non-Key Employee" means any Employee or
former Employee (and his Beneficiaries) who
is not a Key Employee.
6. "Super Top Heavy Plan" means a plan described
in Section 1.4(b) of this Appendix 3.4(g).
7. "Top Heavy Plan" means a plan described in
Section 1.4(a) of this Appendix 3.4(g).
8. "Top Heavy Plan Year" means that, for a
particular Plan Year, the Plan is a Top Heavy
Plan.
1.3 Plan Requirements
For any Top Heavy Plan Year, the Plan shall provide
special minimum allocation requirements in accordance
with Code Section 416(c) pursuant to the terms hereof.
1.4 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 (as defined herein), (1) the Present Value of
Accrued Benefits (as defined herein) of Key
Employees and (2) the sum of the Aggregate
Accounts (as defined herein) of Key Employees
under this Plan and all plans of an Aggregation
Group (as defined herein), exceeds sixty percent
(60%) of the Present Value of Accrued Benefits and
the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for
any Plan Year, but such Participant was a Key
Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit
and/or Aggregate Account balance shall not be
taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top
Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant
has not performed any services for any Employer
maintaining the Plan at any time during the five-year
period ending on the Determination Date, any
accrued benefit for such Participant or Former
Participant shall not be taken into account for
the purposes of determining whether this Plan is a
Top Heavy or Super Top Heavy Plan.
(b) 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.
(c) "Aggregate Account": A Participant's
Aggregate Account as of the Determination Date is
the sum of:
(1) his Participant's 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 on or before the
Determination Date, except for the first
Plan Year when such adjustment shall
also reflect the amount of any
contributions made after the
Determination Date that are allocated as
of a date in that first Plan Year;
(3) any Plan distributions made within the
Plan Year that includes the
Determination Date or within the four
(4) preceding Plan Years. However, in
the case of distributions made after the
valuation date and prior to the
Determination Date, such distributions
are not included as distributions for
top heavy purposes to the extent that
such distributions are already included
in the Participant's Aggregate Account
balance as of the valuation date.
Notwithstanding anything herein to the
contrary, all distributions, including
distributions made prior to January 1,
1984, and distributions under a
terminated plan which if it had not been
terminated would have been required to
be included in an Aggregation Group,
will be counted. Further, distributions
from the Plan (including the cash value
of life insurance policies) of a
Participant's account balance because of
death shall be treated as a distribution
for the purposes of this paragraph;
(4) any Employee contributions, whether
voluntary or mandatory. However,
amounts attributable to tax deductible
qualified deductible 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 purpose of this Section.
(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) or (m) are treated as the
same employer.
(d) "Aggregation Group" means either a
Required Aggregation Group or a Permissive
Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In
determining a Required Aggregation Group
hereunder, each plan of the Employer in
which a Key Employee is a participant in
the Plan Year containing the
Determination Date or any of the four
preceding Plan Years, and each other
plan of the Employer which enables any
plan in which a Key Employee
participates to meet the requirements of
Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group
shall be known as a Required Aggregation
Group.
In the case of a Required Aggregation
Group, each plan in the group will be
considered a Top Heavy Plan if the
Required Aggregation Group is a Top
Heavy Group. No plan in the Required
Aggregation Group will be considered a
Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy
Group.
(2) Permissive Aggregation Group: The
Employer may also include any other plan
not required to be included in the
Required Aggregation Group, provided the
resulting group, taken as a whole, would
continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such
group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation
Group, only a plan that is part of the
Required Aggregation Group will be
considered a Top Heavy Plan if the
Permissive Aggregation Group is a Top
Heavy Group. No plan in the Permissive
Aggregation Group will be considered a
Top Heavy Plan if the permissive
Aggregation Group is not a Top Heavy
Group.
(3) Only those plans of the Employer in
which the Determination Dates fall
within the same calendar year shall be
aggregated in order to determine whether
such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any
terminated plan of the Employer if it
was maintained within the last five (5)
years ending on the Determination Date.
(e) "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.
(f) 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).
(g) "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.
1.5 Minimum Allocations Required For Top Heavy Plan
Years
(a) Notwithstanding the provisions of
Section 3.4 of the Plan, for any Top Heavy Plan
Year, the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Account
of each Non-Key Employee shall be equal to at
least three percent (3 %) of such Non-Key
Employee's "415 Compensation". However, if (i)
the sum of the Employer's contributions and
Forfeitures allocated to the Participant's 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 (ii) 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's contributions and
Forfeitures allocated to the Participant's Account
of each Non-Key Employee shall be equal to the
largest percentage allocated to the Participant's
Account of any Key Employee.
(b) For any Plan Year when (1) the Plan is a
Top Heavy Plan but not a Super Top Heavy Plan and
(2) a Key Employee is a Participant in both this
Plan and a defined benefit plan included in a
Required Aggregation Group which is top heavy, the
extra minimum allocation shall be provided for
each Non-Key Employee who is a Participant only in
this Plan by substituting four percent (4%) for
three percent (3%) in the Section above.
(c) For purposes of the minimum allocations
set forth above, the percentage allocated to the
Participant's Account of any Key Employee shall be
equal to the ratio of the sum of the Employer's
contributions and Forfeitures allocated on behalf
of such Key Employee divided by the "415
Compensation" for such Key Employee.
(d) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to
the Participant's Account of all Non-Key Employees
who are Participants and who are employed by the
Employer on the last day of the Plan Year.
(e) In lieu of the above, in any Plan Year
in which a Non-Key Employee is a Participant in
both this Plan and a defined benefit pension plan
included in a Required Aggregation Group which is
top heavy, the Employee shall not be required to
provide such Non-Key Employee with both the full
separate defined benefit plan minimum benefit and
the full separate defined contribution plan
minimum allocation. Therefore, for any Plan Year
when the Plan is a Top Heavy Plan, Non-Key
Employees who are participating in this Plan and a
defined benefit plan maintained by the Employer
shall receive a minimum monthly accrued benefit in
the defined benefit plan equal to the product of
(1) one-twelfth (1/12th) of "415 Compensation"
averaged over five (5) consecutive "limitation
years" (or actual "limitation years" if less)
which produce the highest average and (i) two per-
cent (2%) multiplied by years of Credited Service
when the Plan is top heavy, or (ii) twenty percent
(20%).
1.6 Limitation Year
Notwithstanding the foregoing, for any "limitation
year" in which the Plan is a Top Heavy Plan, 1.0 shall
be substituted for 1.25 in Sections 4.40(j)(1) and
4.4(k) of the Plan unless the extra minimum allocation
is being provided pursuant to Section 1.5(b) of this
Appendix 3.4(g). However, for any "limitation year" in
which the Plan is a Super Top Heavy Plan, 1.0 shall be
substituted for 1.25 in any event.
1.7 Vesting
Notwithstanding the provisions of Section 7.4(b) of the
Plan, for any Top Heavy Plan Year, the determination as
to whether a Participant's Account is Vested shall be
made on the basis of the Participant's number of years
of Credited Service according to the following
schedule:
Vesting Schedule
Years of Credited Service Percentage
2 20
3 40
4 60
5 80
6 or more 100
Appendix 7.4(b)
Notwithstanding the provisions of
Section 7(b) of the Plan, all Employees of Hillside
Coffee of California, Inc. who were Participants in the
Plan as of the date on which ownership of the stock of
Hillside Coffee of California, Inc. was acquired by
Gourmet Coffees of America, Inc., shall be fully vested
in their Participant's Accounts under the Plan.
