SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE YEAR ENDED: DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-12802
EL CHICO RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-0982250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12200 STEMMONS, SUITE 100
DALLAS, TEXAS 75234
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 241-5500
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 4, 1997 was $24,495,109. As of that date, there were
3,697,375 shares of the registrant's Common Stock, par value $.10, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be furnished to
shareholders in connection with its Annual Meeting of Shareholders to be held on
May 8, 1997, are incorporated by reference in Parts I and III of this Form 10-K.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE>
PART I
ITEM 1. BUSINESS.
El Chico Restaurants, Inc. (generally referred to herein together with
its predecessor and subsidiaries as the "Company" unless the context otherwise
requires) was incorporated in Texas in 1957 as a successor to a restaurant
business operated since 1940. The Company's primary business is operating and
franchising full-service, family-style restaurants under the name "El Chico"
that offer moderately priced, high quality, Mexican-style cuisine and alcoholic
beverages. As of December 31, 1996, a total of 95 restaurants were in operation
in Alabama, Arkansas, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana,
Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, and Texas, of which
67 were Company-operated and 28 were franchised. Included in the 67
Company-owned restaurants were one restaurant under the name "Casa Rosa
Restaurante", and two restaurants under the name "Cantina Laredo." During 1996,
the Company opened two Company-owned El Chico restaurants, one of which was a
replacement store for a store closed earlier in the year, and converted two
Company-owned El Chico restaurants to franchise stores. In addition, four
Company-owned stores were closed, and three franchised stores closed, including
one destroyed by fire that is expected to be reopened in 1997. The Company also
is engaged in designing and supplying food-service equipment through its Pronto
Design and Supply, Inc.
subsidiary.
EL CHICO RESTAURANTS
In addition to offering Mexican-style cuisine, El Chico restaurants
offer a limited number of non-Mexican and children's items. The Company
continually evaluates and revises its menu to improve its products.
The restaurants, which cater to families, are open daily for lunch and
dinner and offer entrees that generally range from $3.99 to $10.99. Alcoholic
beverages, which are served primarily with meals (as opposed to bar service),
generated approximately 8 percent of all restaurant revenues for 1996.
The average El Chico restaurant seats approximately 200 people, and the
average restaurant size is approximately 5,700 square feet. The decor generally
features painted stucco walls, complementary furnishings, and a bar area. The
exterior of the freestanding restaurants reflects a style of Mexican
architecture. The Company believes that periodic remodels are important to
maintaining the competitiveness of its restaurants. During 1995 and 1996, the
Company began to remodel the interiors and exteriors of certain new restaurants
opened in 1993 and 1994, including retrofitting of full-service bars, as well as
extensive upgrades of older restaurants. The Company anticipates continuing
these remodeling programs in 1997 and thereafter.
The Company makes centralized purchasing arrangements for the basic
ingredients of its menu items in order to secure favorable prices and uniform
quality specifications. The Company currently purchases most ingredients and
supplies through a single distributor under a contract that may be terminated
upon 12 months' written notice to its distributor. In the event that for any
reason the Company's primary distributor ceases to meet the Company's needs, the
Company does not anticipate that it would have significant difficulty in
obtaining food items and supplies at competitive prices from other sources.
The Company utilizes local advertising for individual restaurants and
broadcast advertising where market penetration is efficient as well as public
relations activities aimed at individual restaurants and entire markets. The
Company's advertising campaigns emphasize freshness, quality food, good service
and value. During 1996, the Company's expenditures for advertising were 2.8
percent of Company-owned restaurant revenues.
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<PAGE>
FRANCHISED RESTAURANTS
Generally, the El Chico restaurants franchised by the Company operate
for an initial term of 15 years, require an initial franchise fee of $35,000, a
continuing royalty fee of 4 percent of the franchisee's gross revenues, and a
marketing fee of 1 percent of such gross revenues.
The Company exercises stringent qualification criteria in selecting its
franchisees. Among the criteria for selection are the franchisee's financial
strength, successful history of restaurant business management, and commitment
to the Company's high standards of business conduct. The Company's franchisees
are required to comply with the Company's standards and operating guidelines.
The Company regularly reviews the performance of its franchisees to ensure such
compliance.
SPECIALTY RESTAURANTS
As of December 31, 1996, the Company owned and operated two types of
specialty restaurants consisting of two Cantina Laredo restaurants and one Casa
Rosa Restaurante. The Company plans to open a third Cantina Laredo in fall 1997.
NEW RESTAURANT CONSTRUCTION
Management estimates that the cost of building, equipping, and opening
a new freestanding El Chico restaurant will range from $1,425,000 to $2,350,000,
including approximately $290,000 to $830,000 for land, approximately $600,000 to
$760,000 for sitework, construction, and landscaping, and approximately $535,000
to $760,000 for equipment, furniture, and opening costs. The cost of developing
new Company restaurants will vary, primarily because of varying costs of land,
sitework, signage, pre-opening, and labor.
During 1996, two Company-owned El Chico restaurants were opened. By the
end of 1997, the Company expects to open two to four additional restaurants and
remodel approximately ten El Chico restaurants.
SERVICE MARKS
The Company has obtained federal registration of the service mark "El
Chico", the El Chico design, and other related service marks. The El Chico
service mark is also currently registered in 9 states. These service marks are
of material importance to the operation of the Company's business. The Company
has also federally registered service marks for "Casa Rosa Restaurante" and
"Cantina Laredo" as well as various other phrases related to its restaurants.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 3,600
persons (including full-time and part-time personnel), of whom 3,500 were
restaurant employees and 100 were restaurant supervision and corporate
employees. Company restaurants employ an average of approximately 50 to 60
full-time or part-time employees. None of the Company's employees are covered by
collective bargaining agreements, and the Company has never experienced a major
work stoppage, strike, or labor dispute. The Company considers its employee
relations to be good.
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<PAGE>
COMPETITION
The restaurant business is highly competitive, and competition among
restaurants serving Mexican cuisine is increasing. The Company believes that the
principal competitive factors in its restaurant business are quality, value,
service, atmosphere, and location. The Company's restaurants compete with many
food service operations in the vicinity of each restaurant, including
restaurants specializing in Mexican food. The Company believes that its
competitive position in certain markets is enhanced by regional name recognition
and by its moderately priced menu, quality food, and a comfortable,
full-service, family-oriented dining atmosphere. Other companies, however,
continue to open restaurants similar to the Company's restaurants, and certain
of these competitors have greater resources than the Company.
GOVERNMENTAL REGULATION
The Company is subject to various federal, state, and local laws
affecting its business. Many stringent and varied requirements of local
governmental bodies with respect to zoning, land use, and environmental factors
have increased and can be expected to continue to increase both the cost of and
the time required for constructing new restaurants as well as the cost of
operating Company restaurants. The Company's restaurants are subject to various
health, sanitation, and safety standards and are also subject to state and local
licensing and regulation with respect to the service of alcoholic beverages. The
service of alcoholic beverages is material to the business of the Company. The
failure to receive or retain, or a delay in obtaining, a liquor license in a
particular location could adversely affect the Company's operations in that
location. Liquor licenses must be renewed annually. The Company has not
encountered any significant problems relating to alcoholic beverage licenses and
permits to date.
The Company may be subject in certain states to "dram-shop" statutes,
which may establish liability for improper alcoholic beverage service. The
Company carries liquor liability coverage as part of its existing comprehensive
general liability insurance.
The Company is also subject to state and federal labor laws. These
include the Fair Labor Standards Act, which governs such matters as minimum
wages, overtime, and other working conditions; the Immigration and
Naturalization Act, which governs employee citizenship requirements; and the
Americans with Disabilities Act, which governs non-discriminating employment
practices and reasonable accommodations for disabled persons, both employees and
customers. A significant portion of the Company's food service personnel are
paid at rates related to the federal minimum wage; and, accordingly, increases
in the minimum wage increase the Company's labor costs. The Company has managed
cost increases from past minimum wage increases by adjusting prices, adding and
deleting menu items, and changing plate presentations. The Company increased
prices 1.5 percent to compensate for an increase in minimum wage effective
October 1, 1996 and will increase prices, if necessary for an anticipated
increase in minimum wage effective September 1, 1997. Minimum wage will increase
from $4.75 an hour to $5.15 an hour. However, the ability to manage future
increases depend on the size of the increases, their timing, and the competitive
environment.
In recent years many states have enacted laws regulating franchise
operations. Much of this legislation requires detailed disclosure in the offer
and sale of franchises and the registration of the franchisor with state
administrative agencies. The Company is also subject to Federal Trade Commission
regulations relating to disclosure requirements in the sale of franchises.
Additionally, certain states have enacted, and others may enact, legislation
governing the termination and non-renewal of franchises and other aspects of the
franchise relationship that are intended to protect franchisees. The foregoing
matters may result in some modifications in the Company's franchising activities
and some delays or failures in enforcing certain of its rights and remedies
under license and lease agreements. The laws applicable to franchise operations
and relationships are developing rapidly, and the Company is unable to predict
the
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effect on its intended operations of additional requirements or restrictions
that may be enacted or promulgated or of court decisions that may be adverse to
franchisors.
Effective September 1, 1991, the Company elected to become a
non-subscriber of the Texas Workers' Compensation Act. Upon this election,
excess liability insurance was acquired, and an employee benefit trust was
established to provide for benefits in the event of injury. Indications are that
this election has been favorable; however, the Texas Workers' Compensation Act
has undergone certain favorable reforms, with further changes expected.
Management reviews this election periodically.
ITEM 2. PROPERTIES.
As of December 31, 1996, the Company owned 20 of its restaurant
locations and leased the remaining 47 restaurant locations. The leases have
terms that expire between 1997 and 2010, excluding renewal options not yet
exercised, and have an average remaining term of approximately eight years. The
leases generally provide for rentals ranging from 3 percent to 6 percent of
gross restaurant sales, with a stated minimum rental. Under substantially all of
its leases, the Company is required to pay real estate taxes, insurance, and
maintenance expenses. Construction is in process on a leased site in Round Rock,
Texas with an April 1997 opening date. A lease has been executed for a location
in Dallas, Texas for a new Cantina Laredo, with a fall 1997 anticipated opening
date.
Of the 67 restaurants operated by the Company as of December 31, 1996,
49 were freestanding buildings, nine were located in strip shopping centers, and
nine were located in shopping malls. As of the same date, one of the Company's
28 franchised locations was leased by the Company and subleased to a franchisee,
and 27 were directly leased or owned by the franchisees.
As of March 4, 1997, the Company owned four tracts of raw land, which
are located (i) adjacent to two open and operating Company-owned locations, (ii)
adjacent to a former Company restaurant presently leased to a non-related
business, and (iii) in a market where the Company has deferred indefinitely its
plans for further development. As of the same date, the Company owned two
parcels of real estate, one of which is leased to a non-related business. In
addition, there are seven locations that are leased by the Company but not used
in Company operations; two are subleased to non-related businesses, two are
previously impaired Company-owned restaurants operated by franchisees, and three
are closed restaurant sites for which the Company is in the process of locating
subleases or other dispositions.
During 1993, the Company purchased a 67,665 square foot office
facility, where it had been leasing approximately 20,000 square feet of space.
The Company continues to office in the facility and is leasing the majority of
the remaining square footage to unrelated businesses. A 15,000 square foot
warehouse is leased which houses restaurant equipment and is located in close
proximity to the office facility. The Company also owns a tract of land
consisting of approximately one acre and an 8,000 square foot building in
Carrollton, Texas. This property is utilized primarily for the training of
restaurant management and for test kitchen operations, with a portion leased to
another party.
ITEM 3. LEGAL PROCEEDINGS.
Although the Company is a defendant in various lawsuits arising out of
the ordinary course of its business, in the opinion of management, these
lawsuits will not have a material adverse effect upon the Company's business or
financial position.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of the year ended December 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
As of March 4, 1997, the executive officers of the Company were as
follows:
Name Age Position with Company
Wallace A. Jones 45 President, Chief Executive
Officer and Director
Lawrence E. White 46 Executive Vice President and
Chief Financial Officer
Charles A. Coope 45 Senior Vice President, Franchising and
Development
Mark P. Lamm 39 Vice President, Operations
Michael E. Sick 42 Vice President, Marketing
Susan R. Holland 40 Vice President, Treasurer, Controller
and Secretary
The terms of office and biographical data with respect to Mr. Wallace A.
Jones, as set forth under the heading "Election of Directors" in the definitive
Proxy Statement regarding the Annual Meeting of Shareholders of the Company to
be held on May 8, 1997, are incorporated herein by reference.
Lawrence E. White joined the Company as Chief Financial Officer in May
1992. During the period from September 1994 to January 1995, Mr. White held the
interim position of Chief Operating Officer in addition to his duties as Chief
Financial Officer. From September 1989 to April 1992, Mr. White served as Senior
Vice President and Treasurer of Metromedia Steakhouses, Inc., having
responsibility for financial management of both Ponderosa Steakhouses and
Bonanza Family Restaurants as well as a meat-processing and food-distribution
subsidiary. From February 1987 to September 1989, Mr. White was employed by TGI
Friday's, Inc., where he served as Director of Financial Planning and Analysis,
and later served as Treasurer. Prior to Mr. White's tenure at TGI Friday's, he
held financial positions at Lone Star Technologies, Inc., and at Ford Motor
Company.
Charles A. Cooper assumed his present position as Senior Vice President,
Franchising and Development in November 1996. Previously, Mr. Cooper was Vice
President, Development since February 1993. Mr. Cooper joined the Company in
April 1991 as Director of Real Estate and in April 1992 assumed responsibilities
as Director of Franchising and Development. From September 1988 to April 1991,
Mr. Cooper served as Director of Marketing with S.W.S. Realty, Inc. From
December 1977 to August 1988, Mr. Cooper served in various capacities including
President of National Retail Properties Corporation, a subsidiary of Southland
Investment Properties.
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<PAGE>
Mark P. Lamm assumed his present position as Vice President, Operations in
November 1996. Mr. Lamm joined the Company in September 1984 as a general
manager and since 1985 has served in various capacities as a multi-unit
supervisor, his latest being Regional Vice President from January 1996 to
November 1996, at which time he was promoted to Vice President, Operations.
Michael E. Sick joined the Company as Vice President, Marketing in February
1995. From July 1994 until January 1995, Mr. Sick served as Vice President of
Marketing for Pearle Vision. From November 1986 to July 1994, Mr. Sick was
employed by Jack in the Box Restaurants, initially as Director- Field Marketing
and Promotion and from April 1991 as Vice President-Field Marketing and
Promotion.
Susan R. Holland has been Vice President, Treasurer, Controller and
Secretary since October 1996. Ms. Holland joined the Company as Controller in
November 1985 and has served as Treasurer since August 1990. From December 1984
to November 1985, Ms. Holland was self-employed as a Certified Public
Accountant. From August 1978 to December 1984, Ms. Holland was with Grant
Thornton, with her last position being Audit Manager.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market System
under the symbol "ELCH". The following table sets forth the high and low sale
prices as reported on the NASDAQ National Market System for the periods
indicated.
High Low
Calendar Year 1996
First Quarter $ 9.50 $ 7.63
Second Quarter $ 9.13 $ 7.00
Third Quarter $ 8.25 $ 7.13
Fourth Quarter $ 8.75 $ 6.88
Calendar Year 1995
First Quarter $ 11.75 $ 7.63
Second Quarter $ 9.88 $ 7.63
Third Quarter $ 12.63 $ 9.38
Fourth Quarter $ 12.13 $ 9.00
To date, the Company has not paid any cash dividends on shares of
common stock. It is the general policy of the Company to retain earnings to
support the Company's growth.
On February 15, 1996, the Board of Directors authorized the repurchase
of up to 409,000 shares of the Company's outstanding common stock from time to
time in the open market. As of December 4, 1996, 409,000 shares had been
purchased at an average price of $7.84, for a total purchase of $3,208,000.
On December 29, 1994 the Board of Directors authorized the repurchase
of up to 210,000 shares of the Company's outstanding common stock in the open
market. As of March 15, 1995, 210,000 shares had been purchased at an average
price of $10.35, for a total purchase of $2,173,975.
As of March 4, 1997, the number of record holders of the Company's
common stock was approximately 300, and the Company estimates that as of that
date there were 1,100 beneficial owners of its stock.
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ITEM 6. SELECTED FINANCIAL DATA.
The following summary of selected financial data has been derived from
the more detailed Consolidated Financial Statements and Notes thereto of the
Company contained elsewhere in this report or previous reports.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR TRANSITION FISCAL YEAR
ENDED ENDED ENDED ENDED PERIOD ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 1,
1996 1995 1994 1993 1992 (2) 1992 (4)
(In Thousands Except Per Share Amounts)
INCOME STATEMENT INFORMATION:
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................$ 104,481 $ 104,618 $ 97,826 $ 88,465 $ 51,257 $ 90,818
=========== ============ =========== ============ =========== =============
Income (loss) before income taxes....$ (5,051)(1) $ 5,592 $ 5,581 $ 4,339 $ 2,912(3) $ (1,568)(5)
=========== ============ =========== ============ =========== ============
Net earnings (loss)..................$ (3,062)(1) $ 3,958 $ 3,728 $ 2,713 $ 2,135(3) $ (969)
=========== ============ =========== ============ =========== ============
Net earnings (loss) per share........$ (0.79) $ 0.98 $ 0.88 $ 0.64 $ 0.49 $ (0.22)
=========== ============ =========== ============ =========== ============
BALANCE SHEET INFORMATION:
Total assets.........................$ 47,527 $ 51,039 $ 43,964 $ 37,347 $ 31,730 $ 32,499
Long-term debt.......................$ 9,765 $ 8,435 $ 5,533 $ 3,303 $ 1,109 $ 1,215
Stockholders' equity.................$ 26,285 $ 32,497 $ 28,882 $ 24,844 $ 21,900 $ 22,679
<FN>
(1) DURING 1996, THE COMPANY RECORDED A PRE-TAX SPECIAL CHARGE OF $9,421,000
TO PROVIDE FOR THE IMPAIRMENT AND EXIT PLANS OF SIX UNITS SLATED FOR
CLOSING, THE IMPAIRMENT OF THE CARRYING VALUES OF THREE OTHER STORES THAT
WILL CONTINUE OPERATING AS WELL AS A WRITE-DOWN OF CERTAIN OTHER ASSETS.
IN ADDITION, THREE PARCELS OF REAL ESTATE WERE SOLD RESULTING IN PRE-TAX
GAINS OF $1,203,000. EXCLUDING THE NON-RECURRING IMPAIRMENT CHARGE AND
PROPERTY GAINS, NET EARNINGS FOR THE FULL YEAR WOULD HAVE BEEN
$2,363,000, OR $0.61 PER SHARE.
(2) ON NOVEMBER 6, 1992, THE COMPANY CHANGED ITS FISCAL YEAR FROM THE MONDAY
NEAREST MAY 31 TO DECEMBER 31.
(3) INCLUDES A TAX-FREE GAIN OF $847,000 ON DISPOSITION OF ONE OF THE
COMPANY'S SPECIALTY RESTAURANTS.
(4) FISCAL 1992 INCLUDES 53 WEEKS OF OPERATIONS.
(5) DURING FISCAL 1992, THE COMPANY RECORDED A PRE-TAX SPECIAL CHARGE OF
$3,977,000 TO PROVIDE FOR: WRITE-DOWNS OF UNDERPERFORMING RESTAURANTS AND
OTHER PROPERTIES AND ASSETS, HIGHER THAN EXPECTED INSURANCE COSTS, AND
COSTS ASSOCIATED WITH PERSONNEL CHANGES.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Forward-looking statements regarding management's present plans or
expectations for new restaurant openings, remodels, other capital expenditures,
the financing thereof, and disposition of impaired restaurants involve risks and
uncertainties relative to return expectations and related allocation of
resources, and changing economic or competitive conditions, as well as the
negotiation of agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such differences could be
material. Similarly, forward-looking statements regarding management's present
expectations for operating results involve risks and uncertainties relative to
these and other factors, such as advertising effectiveness and the ability to
achieve cost reductions, which also would cause actual results to differ from
present plans. Such differences could be material. Management does not expect to
update such forward- looking statements continually as conditions change, and
readers should consider that such statements speak only as to the date hereof.
RESULTS OF OPERATIONS
The Consolidated Statements of Operations reported herein represent
results of operations for the years ended December 31, 1996, 1995, and 1994. The
following table summarizes key results of operations:
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------- ---------------- --------------
(Dollar Amounts in Thousands)
<S> <C> <C> <C>
Number of Company-owned restaurants.............. 67 72 65
Number of franchised restaurants................. 28 29 29
Weighted average annual sales per
Company-owned restaurant....................... $ 1,494 $ 1,479 $ 1,600
Revenues from Company operations................. $ 104,481 $ 104,816 $ 97,826
Net sales from Company operations................ $ 101,698 $ 101,628 $ 94,901
Income (loss) before taxes....................... $ (5,051) $ 5,592 $ 5,581
Net (loss) income................................ $ (3,062) $ 3,958 $ 3,728
Profit margin.................................... (2.9%) 3.8% 3.8%
</TABLE>
COMPARATIVE PERFORMANCE 1996 VS 1995
Net sales for Company-owned restaurants increased approximately $70,000
or 0.7 percent to $101,698,000 in 1996 from $101,628,000 in 1995. The average
number of stores operating throughout 1996 versus 1995 increased and weighted
average annual sales per Company-owned restaurant opened the full year increased
1.0 percent. These increases were offset by a decrease in same-store sales of
2.3 percent including a decrease in El Chico concept same-store sales of 2.8
percent. As of January 1, 1996, the Company adopted a new convention that added
new stores to the same-store sales comparison in the quarter in which they reach
their 18-month anniversary. During 1996, the Company opened two Company-owned El
Chico restaurants, one of which was a replacement store for a store closed
earlier in the year, and converted two Company-owned El Chico restaurants to
franchise stores. In addition, four Company-owned stores were closed.
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Franchise revenue decreased from $2,082,000 to $1,958,000 as a result
of a decrease in the average number of stores operating throughout 1996 versus
1995 and a decrease in franchise same-store sales of 2.8 percent. During 1996,
three franchise stores were closed including one closed temporarily due to fire,
and two Company-owned stores were converted to franchise stores. The converted
stores are operating under special franchise agreements under which payment of
fees will not begin until certain sales objectives are achieved.
Food costs increased from 25.4 percent of sales to 26.6 percent due to
an increase in ingredient costs, primarily cheese and beef, and certain menu mix
changes. These increases were partly offset by a decline in avocado cost.
Labor costs increased from 33.1 percent of sales to 33.2 percent.
Management compensation expense increased as a percentage of sales due to an
increase in management base pay. This increase was partly offset by a decrease
in hourly labor. During 1995, the Company eliminated the restaurant cashier
position by changing to a server-banking system, and converted certain
restaurant employees from minimum wage to tipped compensation. Minimum wage
increased on October 1, 1996, but did not have a material effect on labor costs.
Operating costs increased from 28.6 percent to 29.3 percent due to an
increase in advertising and ongoing insurance expenses. These increases were
partly offset by a decrease in preopening amortization and a one-time insurance
class action settlement.
Pronto Design and Supply, Inc. ("Pronto") is a wholly owned subsidiary
in the business of designing food-service kitchens and supplying the related
equipment. Equipment sales decreased from $908,000 in 1995 to $825,000 in 1996.
The 1995 amount included sales to a new franchise restaurant. Equipment cost of
sales as a percentage of sales remained basically stable at 84.8 percent versus
86.1 percent a year ago.
General and administrative costs increased from $9,227,000 to
$9,421,000 as a result of increased employee costs, an increase in the number of
multi-unit restaurant supervisors and new training seminars for existing
managers. These increases were partly offset by decreased professional fees.
Interest expense increased from $602,000 to $686,000, primarily as a
result of increased borrowings and interest rates. Interest income decreased
from $78,000 to $75,000 due to a decline in average invested cash balances.
The income tax provision reflects an increase in the FICA tip credit
and higher state taxes.
COMPARATIVE PERFORMANCE 1995 VS 1994
Net sales for Company-owned restaurants increased 7.1 percent to
$101,628,000 in 1995 from $94,901,000 in 1994. The increase in sales is due to
an increase in the average number of stores operating throughout 1995 versus
1994. Weighted average annual sales per Company-owned restaurant decreased 7.6
percent and same-store sales decreased 2.2 percent including a decrease in El
Chico concept same-store sales of 2.5 percent. As a result of mix changes and
certain menu price increases associated with a new menu introduction, the
Company's check-average increased approximately 1.7 percent in 1995. During
1995, the Company used a same-store sales convention that reflected new stores
beginning when they were opened for the full quarter of the prior year.
Franchise revenue decreased from $2,093,000 to $2,082,000 as a result
of a decrease in the average number of stores operating throughout 1995 versus
1994. This decrease was partly offset by an increase in franchise same-store
sales of 0.7 percent. During 1995, the Company purchased an El Chico restaurant
from a franchisee and opened one new franchise store.
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Food costs decreased from 25.6 percent of sales to 25.4 percent due to
a decrease in the cost of beef, avocados and beans.
Labor costs remained unchanged at 33.1 percent of sales. Hourly labor
cost decreased as a percentage of sales as a result of eliminating the
restaurant cashier position by changing to a server-banking system, and from
converting certain restaurant employees from minimum wage to tipped
compensation. This decrease was offset by management compensation expense, which
increased as a percentage of sales as a result of lower weighted average sales
per restaurant.
Operating costs increased from 28.3 percent of sales to 28.6 percent
due to an increase in supplies, repair and maintenance and property taxes partly
offset by decreased laundry and insurance costs. At the end of 1994, the Company
converted from cloth napkins to paper napkins which resulted in reduced laundry
costs, partly offset by an increase in supply costs.
Pronto equipment sales increased from $832,000 to $908,000 primarily
reflecting sales to a new franchise restaurant. Equipment cost of sales
increased as a percentage of sales due to a decrease in vendor rebate income
relative to sales. Vendor rebate income includes rebates on outside sales as
well as rebates on equipment purchases for El Chico restaurants.
General and administrative costs increased from $8,967,000 to
$9,227,000 as a result of increased employee costs, an increase in the number of
multi-unit restaurant supervisors and increased training wages. These increases
were partly offset by decreased professional fees, incentive bonuses and travel.
Interest expense increased from $146,000 to $602,000, primarily as a
result of increased borrowings, partly offset by a decline in interest rates.
Interest income decreased from $88,000 to $78,000 due to a decline in average
invested cash balances.
The income tax provision decreased as a percent of income before taxes
due to an increase in the FICA tip credit and lower state taxes.
RESTAURANT CLOSINGS
During the second quarter of 1996 the Company incurred a special charge
of $9.4 million to provide for the impairment and exit plans of six units slated
for closing, the impairment of the carrying values of three other stores that
will continue operating as well as a write-down of certain other assets. One of
the six stores was an older store that was closed and replaced with a new
prototype which opened during the third quarter of 1996. The Company entered
into agreements with two separate existing franchisees to operate two of the
impaired stores. The remaining three impaired stores were closed and are held
for sale. The effect of the impairment during 1996, excluding the replaced
store, reduced depreciation and amortization expense by $452,000. Management
reviews each restaurant regularly to determine that expected undiscounted cash
flows are adequate to recover the related investment. When expected cash flows
are inadequate, the Company writes down the asset to its fair value.
LIQUIDITY AND CAPITAL RESOURCES
The Company has an unsecured credit facility with a $16,000,000
commitment comprised of a $15,000,000 revolving line of credit and a $1,000,000
letter of credit facility. The line of credit matures on December 31, 1997, and
may be converted to a term loan, payable quarterly on a 10-year amortization
schedule, and maturing on December 31, 1999. Both the line of credit and the
term loan bear interest at the Company's option of prime rate or up to six-month
LIBOR plus .75 percent. Both rates are subject to maintaining certain financial
covenants, and interest is payable upon maturity of the LIBOR advances or
quarterly for prime rate advances. Principally because of the special charge,
the interest on the line of credit has been at LIBOR plus 1.75 percent and/or
prime plus 0.50 percent since August 14, 1996 until
-11-
<PAGE>
certain financial results are met. In addition, the Company has entered into an
interest rate swap on a notional balance of $5 million, under which a fixed rate
of 6.61 percent is paid against a floating rate equal to three-month LIBOR. A
commitment fee of .25 percent is payable quarterly on any unused commitments. As
of December 31, 1996, $9,730,000 was outstanding under the line of credit. The
credit facility was obtained for the funding of the construction of new
Company-owned restaurants, remodeling existing restaurants, and the purchase of
the Company's headquarters facility during 1993 and has been used for repurchase
of the Company's common stock subject to certain limitations. The Company plans
to open two to four restaurants and remodel approximately ten El Chico
restaurants and estimates capital expenditures during 1997 to be approximately
$11,000,000, which will be funded by internal operations and the existing credit
facility.
Working capital decreased from a deficit of $4,696,000 at December 31,
1995 to a deficit of $5,670,000 at December 31, 1996, primarily as a result of a
$1,638,000 reserve to provide for future rent and lease buyouts related to
closed restaurants. Cash flows generated from operations of new and existing
restaurants and borrowings were offset by capital expenditures and repurchase of
common stock on the open market.
During 1996, menu prices were increased approximately 1.5 percent as a
result of an increase in minimum wage effective September 1, 1996. Additional
menu price adjustments to the extent permitted by competition, changes in menu
mix or increases in minimum wage may be required to offset increased costs.
ACCOUNTING MATTERS
During 1996, the Company adopted Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recovered and Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based employee compensation plans
(See Footnote F and G to the Consolidated Financial Statements). At this time,
there are no other accounting standards to be adopted which would have a
material impact on the consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS.
The Financial Statements are set forth herein commencing on page F-1.
-12-
<PAGE>
PART III
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The information set forth under the heading "Election of Directors"
contained in the definitive Proxy Statement regarding the Annual Meeting of
Shareholders of the Company to be held on May 8, 1997 (the "Definitive Proxy
Statement") sets forth certain information with respect to the directors of the
Company, some of whom are also executive officers, and is incorporated herein by
reference. Certain information with respect to the remaining executive officers
of the Company is set forth under the caption "Executive Officers" in Part I of
this Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from
the Definitive Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is incorporated by reference from
the Definitive Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
the Definitive Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
10-K.
(a) The following documents are being filed as part of this Annual Report on
Form 10-K:
1. Financial Statements: The Financial Statements are listed in the Index
to Consolidated Financial Statements on Page 16 of this Report.
2. Exhibits.
-13-
<PAGE>
Exhibit No. Exhibit
3.1(1) Restated Articles of Incorporation of the Company, as amended.
3.2(2) Bylaws of the Company, as currently in effect.
4.1(3) Specimen certificate evidencing Common Stock.
4.1(4) Rights Agreement, dated February 9, 1995, by and between the
Company and Society National Bank, as Rights Agent.
10.1(1) Description of Executive Short-Term Bonus Plan. (a)
10.2(3) Incentive Stock Option Plan. (a)
10.3(5) Amendment to Stock Option Plan (formerly the Incentive Stock
Option Plan). (a)
10.4(6) Amendment No. 2 to Stock Option Plan. (a)
10.5(6) Amendment No. 3 to Stock Option Plan. (a)
10.6(5) Form of Stock Option Agreement, as amended--Stock Option Plan.(a)
10.7 Profit Sharing Plan and Trust Agreement. (a)
10.9(5) Lease dated May 15, 1985, between the Company, as lessee, and
Frank Cuellar and Sons, Inc., as lessor, as corrected February
25, 1986, and amended July 18, 1986.
10.10 Distribution Service Agreement dated July 11, 1996, by and
between The SYGMA Network and the Company.
10.11(7) Stock Option Plan for Non-employee Directors and Form of Stock
Option Agreement. (a)
10.12(8) 1990 Long-Term Incentive Plan. (a)
10.14(9) 1992 Stock Option Plan. (a)
10.15(1) Employment Agreement with Wallace A. Jones dated
November 10, 1994. (a)
10.16(10) Loan Agreement between El Chico Restaurants, Inc. and Texas
Commerce Bank, National Association.
10.17(2) El Chico Restaurants, Inc. 1995 Stock Plan. (a)
10.18 El Chico Restaurants, Inc. Excess Savings Plan. (a)
11 Earnings Per Share Calculations.
-14-
<PAGE>
Exhibit No. - Continued Exhibit
21 List of Subsidiaries.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
- ----------------------
(1) Filed as an exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1994, and incorporated herein by reference.
(2) Filed as an exhibit to the Company's quarterly report on Form 10-Q for
the quarter ended June 30, 1996.
(3) Filed as an exhibit to the Company's registration Statement on Form S-1
(No. 2-83955) effective June 30, 1983, and incorporated herein by
reference.
(4) Incorporated by reference from Exhibit 1 of the Company's Registration
Statement on Form 8-A, filed by the Company with the Securities and
Exchange Commission on February 21, 1995.
(5) Filed as an exhibit to the Company's annual report on Form 10-K for the
fiscal year ended May 29, 1987, and incorporated herein by reference.
(6) Filed as an exhibit to the Company's annual report on Form 10-K for the
fiscal year ended May 28, 1990, and incorporated herein by reference.
(7) Filed as an exhibit to the Company's annual report on Form 10-K for the
fiscal year ended May 30, 1988, and incorporated herein by reference.
(8) Filed as an exhibit to the Company's annual report on Form 10-K for the
fiscal year ended May 27, 1991, and incorporated herein by reference.
(9) Filed as an exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1993, and incorporated herein by reference.
(10) Incorporated by reference from the Company's current report on Form 8-K
filed on August 30, 1996.
(a) Compensation plan, benefit plan or employment contract or arrangement.
-15-
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated Financial Statements:
Independent Auditors' Report F-1
Consolidated Balance Sheets at December 31, 1996 and 1995 F-2
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994 F-3
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1996, 1995, and 1994 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994 F-5
Notes to Consolidated Financial Statements F-6
All schedules have been omitted as the required information is not applicable,
not required, or the information is included in the consolidated financial
statements or notes thereto.
-16-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
El Chico Restaurants, Inc.:
We have audited the consolidated financial statements of El Chico
Restaurants, Inc. and subsidiaries as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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 financial position of El Chico
Restaurants, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 6, 1997
F-1
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Expect Par Value Amounts)
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1995
------------ -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 216 $ 266
Accounts receivable 1,154 979
Income tax receivable -- 66
Inventories 976 1,100
Prepaid expenses and other 1,330 1,346
Deferred income taxes (Note I) 824 71
------------ -------------
Total current assets 4,500 3,828
PROPERTY AND EQUIPMENT, NET (Note B) 40,535 46,209
OTHER ASSETS AND DEFERRED COSTS 681 1,002
DEFERRED INCOME TAXES (Note I) 1,946 --
------------ -------------
TOTAL ASSETS $47,662 $51,039
============ =============
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Current maturities of long-term debt (Note D) $ 27 $ 25
Trade accounts payable 4,459 4,384
Accrued liabilities (Note C) 5,114 4,115
Income taxes payable 570 --
------------ -------------
Total current liabilities 10,170 8,524
LONG-TERM DEBT, less current maturities (Note D) 9,765 8,435
OTHER LONG-TERM LIABILITIES 1,442 1,240
DEFERRED INCOME TAXES (Note I) -- 343
COMMITMENTS AND CONTINGENCIES (Note E)
STOCKHOLDERS' EQUITY (Note F):
Preferred stock - authorized 1,000,000 shares
of $.10 par value; none issued -- --
Common stock - authorized 10,000,000 shares of $.10 par value;
issued 4,750,142 and 4,746,975 shares in 1996 and 1995, respectively 475 475
Additional paid-in capital 15,925 15,895
Retained earnings 18,876 21,938
Unamortized value of restricted stock issued (37) (59)
------------ -------------
35,239 38,249
Less treasury stock - at cost 1,057,760 and 651,744 shares in
1996 and 1995, respectively (8,954) (5,752)
------------ -------------
Total stockholders' equity 26,285 32,497
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $47,662 $51,039
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1996 1995 1994
--------------- ------------ -----------
Revenues:
<S> <C> <C> <C>
Sales from Company-owned restaurants $ 101,698 $ 101,628 $ 94,901
Equipment sales 825 908 832
Franchise revenues 1,958 2,082 2,093
104,481 104,618 97,826
--------------- --------------- ---------------
Costs and expenses:
Restaurant cost of sales - food and beverage 27,016 25,772 24,273
Restaurant cost of sales - labor 33,725 33,637 31,435
Restaurant operating expenses 29,794 29,084 26,881
Cost of equipment sales 700 782 590
General and administrative 9,468 9,227 8,967
Special Charge (Note G) 9,421 -- --
(Gain) loss on sale or disposition of assets (Note H) (1,203) -- 41
Interest expense 686 602 146
Interest income (75) (78) (88)
--------------- --------------- ---------------
109,532 99,026 92,245
--------------- --------------- ---------------
Income (loss) before income taxes (5,051) 5,592 5,581
Income tax provision (benefit) (Note I) (1,989) 1,634 1,853
--------------- --------------- ---------------
NET EARNINGS (LOSS) $ (3,062) $ 3,958 $ 3,728
=============== =============== ===============
Net earnings (loss) per common share $ (0.79) $ 0.98 $ 0.88
=============== =============== ===============
Weighted average number of shares and share
equivalents outstanding 3,892,461 4,046,489 4,260,292
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Unamortized
Additional Value of
Common Stock Paid-In Retained Restricted Treasury
Shares Amount Capital Earnings Stock Issue Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 4,719,973 $472 $14,263 $14,252 $(67) $(4,076) $24,844
Net earnings -- -- -- 3,728 -- -- 3,728
Issuance of common stock under
stock bonus plan, net -- -- 71 -- (57) (11) 3
Issuance of common stock pursuant
to stock option plan 23,667 2 249 -- -- -- 251
Amortization of restricted stock issue -- -- -- -- 56 -- 56
--------- ----- -------- -------- ------ ------- --------
Balances at December 31, 1994 4,743,640 474 14,583 17,980 (68) (4,087) 28,882
Net earnings -- -- -- 3,958 -- -- 3,958
Purchase of treasury stock -- -- -- -- -- (2,174) (2,174)
Issuance of common stock under
stock bonus plan, net -- -- 52 -- (53) 9 8
Issuance of common stock pursuant
to stock option plan 3,335 1 1,260 -- -- 500 1,761
Amortization of restricted stock issue -- -- -- -- 62 -- 62
--------- ----- -------- -------- ------ ------- --------
Balances at December 31, 1995 4,746,975 475 15,895 21,938 (59) (5,752) 32,497
Net loss -- -- -- (3,062) -- -- (3,062)
Purchase of treasury stock -- -- -- -- -- (3,208) (3,208)
Issuance of common stock under
stock bonus plan, net -- -- 16 -- (40) 6 (18)
Issuance of common stock pursuant
to stock option plan 3,167 -- 14 -- -- -- 14
Amortization of restricted stock issue -- -- -- -- 62 -- 62
------------ -------- ---------- ---------- ------------ ----------- ----------
Balances at December 31, 1996 4,750,142 $475 $15,925 $18,876 $(37) $(8,954) $26,285
============ ======== ========== ========== ============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1996 1995 1994
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) earnings $ (3,062) $ 3,958 $ 3,728
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Special Charge 9,421 -- --
Depreciation and amortization of property and equipment 5,315 5,107 4,831
Amortization of deferred costs 697 1,333 1,257
(Gain) loss on sale or disposition of assets (1,203) -- 41
Deferred income taxes (3,042) 23 419
Increase in accounts receivable (175) (127) (155)
Decrease (increase) in income tax receivable 66 (66) 792
Decrease in inventories 124 89 120
Decrease (increase) in prepaid expenses and other 16 (103) (385)
Increase in other assets and deferred costs (401) (1,242) (1,133)
Increase (decrease) in trade accounts payable and accrued
liabilities (822) 376 (353)
Increase (decrease) in income taxes payable 570 (173) 173
Increase in other long-term liabilities 202 314 254
Other 238 412 125
Net cash provided by operating activities 7,944 9,901 9,714
------------- ------------ ------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 1,445 -- 1,449
Purchases of property and equipment (7,595) (13,015) (13,784)
Net cash used in investing activities (6,150) (13,015) (12,335)
------------- ------------ ------------
Cash flows from financing activities:
Borrowings of long-term debt 1,355 2,925 2,250
Repayment of long-term debt (23) (20) (18)
Purchase of treasury stock (3,208) (2,174) --
Proceeds from note receivable -- 245 --
Issuance of common stock 32 1,677 273
------------- ------------ ------------
Net cash (used in) provided by financing activities (1,844) 2,653 2,505
------------- ------------ ------------
NET DECREASE IN CASH (50) (461) (116)
Cash and cash equivalents at beginning of year 266 727 843
------------- ------------ ------------
Cash and cash equivalents at end of year $ 216 $ 266 $ 727
============= ============ ============
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest (net of amount capitalized) $ 593 $ 551 $ 99
============= ============ ============
Income taxes $ 477 $ 1,911 $ 1,010
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation
of the accompanying consolidated financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts of El Chico
Restaurants, Inc. and its subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Inventories
Inventories, which consist primarily of food products, are stated at the
lower of cost or market. Cost is determined using the first-in, first-out
method.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are provided in amounts sufficient to amortize the cost of depreciable
assets to operations over their estimated service lives of three to 30
years. Leasehold improvements are amortized over the lives of the
respective leases, including renewal periods when the Company intends to
exercise renewal options, or the service lives of the improvements,
whichever is shorter. The straight-line method of depreciation is followed
for substantially all assets for financial reporting purposes, while
accelerated methods are used for tax purposes.
Interest is capitalized with the construction of new restaurants as part of
the asset to which it relates. Interest capitalized during 1996, 1995 and
1994 was not material.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, on January 1, 1996. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the estimated
fair value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or estimated fair value less costs to sell.
F-6
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Preopening Costs
Restaurant preopening costs, comprised primarily of the cost of hiring and
training restaurant employees, are amortized over the initial twelve months
of a restaurant's operations.
Franchise Fee Revenue
Franchise fee revenue is recognized when all material services or
conditions relating to the sale have been substantially performed or
satisfied by the Company, but no sooner than the commencement of operations
by the franchisee. Franchise revenues for each period presented in the
consolidated statement of operations relate substantially to royalties paid
by franchisees.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Earnings Per Common Share
Earnings per common share are based on the weighted average number of
shares and common share equivalents outstanding during each period
determined using the treasury stock method. Primary common share
equivalents are determined based on the average market price exceeding the
exercise price of the stock options while fully diluted are determined
based on the higher of the average or the ending market price exceeding the
exercise price of the stock options.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted SFAS
No. 123, Accounting for Stock-Based Compensation, which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years
as if the fair-value-based method defined in SFAS No. 123 has been applied.
The Company has elected to continue to apply the provisions of APB Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
F-7
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
NOTE B - PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995
------------ ------------
(In Thousands)
<S> <C> <C>
Land $ 7,125 $ 7,732
Buildings and improvements 16,918 16,136
Leasehold improvements 24,230 27,878
Equipment, furniture and fixtures 18,777 17,871
Construction in progress 492 438
------------ ------------
67,542 70,055
Less accumulated depreciation
and amortization (27,007) (23,846)
------------ ------------
$40,535 $46,209
============ ============
</TABLE>
NOTE C - ACCRUED LIABILITIES
Accrued liabilities consist of:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995
------------ -------------
(In Thousands)
<S> <C> <C>
Compensation and related taxes $1,119 $1,689
Special charge 1,638 --
Taxes, other than income and payroll 979 838
Insurance claims and administration 607 750
Rent 232 353
Other 539 485
------------ -------------
$5,114 $4,115
============ =============
</TABLE>
F-8
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE D - LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1996 1995
------------ -------------
(In Thousands)
<S> <C> <C>
Note payable to a bank under credit facility (see below) $9,730 $8,375
Other 62 85
------------ -------------
9,792 8,460
Less current maturities (27) (25)
------------ -------------
$9,765 $8,435
============ =============
</TABLE>
The Company has an unsecured credit facility with a $16,000,000 commitment
comprised of a $15,000,000 revolving line of credit and a $1,000,000 letter
of credit facility. The line of credit matures on December 31, 1997, and
may be converted to a term loan, payable quarterly on a 10-year
amortization schedule, and maturing on December 31, 1999, and accordingly
has been classified as non-current in the accompanying balance sheet. Both
the line of credit and the term loan bear interest at the Company's option
of prime rate or up to six-month LIBOR plus .75 percent. Both rates are
subject to maintaining certain financial covenants, and interest is payable
upon maturity of the LIBOR advances or quarterly for prime rate advances.
Principally because of the special charge, the interest on the line of
credit has been at LIBOR plus 1.75 percent and/or prime plus 0.50 percent
since August 14, 1996 until certain financial results are met. In addition,
the Company has entered into an interest rate swap (not for trading
purposes, but to manage well defined interest rate risks) on a notional
balance of $5 million, under which a fixed rate of 6.61 percent is paid
against a floating rate equal to three-month LIBOR. A commitment fee of .25
percent is payable quarterly on any unused commitments.
As of December 31, 1996, the line of credit bore interest as follows:
$5,000,000 8.34% LIBOR plus 1.75 percent plus 1.06 (SWAP)
4,000,000 7.28% LIBOR plus 1.75 percent
730,000 8.75% Prime plus 0.5 percent
- -----------
$9,730,000
===========
Scheduled maturities of long-term debt as of December 31, 1996 are as
follows (in thousands):
Fiscal Year
1997 $ 27
1998 1,001
1999 8,764
$9,792
===========
F-9
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - COMMITMENTS AND CONTINGENCIES
The Company leases land, buildings and equipment under noncancellable
operating leases expiring at various dates through 2010. The following is a
schedule of minimum rental payments under such leases (in thousands):
1997 3,622
1998 3,027
1999 2,748
2000 2,247
2001 1,890
Thereafter 6,288
$19,822
============
Most land and building lease agreements provide for contingent rentals
based on sales. Rental expense for all leases was as follows (in
thousands):
Year Ended December 31,
---------------------------------------------------
1996 1995 1994
------------- ------------ ------------
Minimum rentals $3,487 $3,262 $2,805
Contingent rentals 368 510 645
$3,855 $3,772 $3,450
============= ============ ============
The Company is a defendant in various lawsuits arising in the ordinary
course of its business. The majority of these suits are covered by
insurance. In the opinion of management, none of these lawsuits will have a
material adverse effect, individually or in the aggregate, upon the
Company's financial position or results of operations.
F-10
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - STOCKHOLDERS' EQUITY
On May 2, 1996, the shareholders approved the El Chico Restaurants, Inc.
1995 Stock Plan ("the 1995 Plan"), which replaced and canceled all previous
shares and options available for grant and reserved 400,000 shares for
future grant. As of December 31, 1996 there were 207,062 shares available
for grant and options covering 366,609 were exercisable at prices ranging
from $3.16 to $12.13.
Transactions during 1996, 1995, and 1994 were as follows:
Weighted
Average
Shares Exercise Price
------------ --------------
Options outstanding at December 31, 1993 825,670 $ 9.23
Granted 260,000 12.08
Exercised (23,667) 7.77
Forfeited (342,001) 9.62
------------ --------------
Options outstanding at December 31, 1994 720,002 10.12
Granted 98,500 10.46
Exercised (170,001) 9.50
Forfeited (10,000) 11.00
Options outstanding at December 31, 1995 638,501 10.33
Granted 219,225 9.62
Exercised (3,167) 3.35
Forfeited (75,000) 9.99
Options outstanding at December 31, 1996 779,559 $ 10.19
============ ==============
The per share weighted-average fair value of stock options granted during
1996 and 1995 was $4.56 and $4.90 on the date of grant using the Black
Scholes option-pricing model with the following weighted-average
assumptions: risk-free interest rate of 6.5 percent, an expected life of 10
years, no expected dividend yield, volatility rate of 19 percent, and a
forfeiture rate of 57.5 percent based upon historic data.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options
in the financial statements. Had the Company determined compensation cost
based on the fair value at the grant date for its 1996 and 1995 stock
options under SFAS No. 123, there would have been no material impact on the
consolidated financial statements. The compensation cost for options
granted prior to January 1, 1995 is not considered as it is not required
under SFAS No. 123.
F-11
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - STOCKHOLDERS' EQUITY - Continued
In February 1995, the Company's Board of Directors adopted a Shareholder
Rights Plan pursuant to which purchase rights (the "Rights") were issued to
holders of its common stock at the rate of one Right for each share of
common stock. The Rights will trade with the Company's common stock until
exercisable. The Rights become exercisable ten days after any person or
group acquires 20 percent or more of the Company's outstanding common stock
or announces a tender offer for 30 percent or more of the Company's
outstanding common stock. The Rights thereafter entitle the holder to
purchase one one-thousandth of a share of Preferred Stock for $48.00, and,
under certain circumstances, would be modified to entitle certain holders
to purchase additional Common Stock of the Company having a market value of
two times the $48.00 exercise price of the Right, or to purchase common
stock of an acquiring company having a market value of two times the $48.00
exercise price of the Right. The Rights expire on December 31, 2004 and may
be redeemed by the Company for one cent per Right under certain
circumstances.
NOTE G - SPECIAL CHARGE
During the second quarter of 1996 the Company incurred a special charge of
$9.4 million to provide for the impairment and exit plans of six units
slated for closing, the impairment of the carrying values of three other
stores that will continue operating as well as a write-down of certain
other assets. One of the six stores is an older store that was closed and
replaced with a new prototype which opened during the third quarter of
1996. The Company entered into agreements with two separate existing
franchisees to operate two of the impaired stores. The remaining three
impaired stores were closed and are held for sale. The effect of the
impairment during 1996, excluding the replaced store, reduced depreciation
and amortization expense by $452,000. Management reviews each restaurant
regularly to determine that expected undiscounted cash flows are adequate
to recover the related investment. When expected cash flows are inadequate,
the Company writes down the asset to its recoverable value.
NOTE H - SALE OR DISPOSITION OF ASSETS
During 1996, the Company sold three parcels of real estate including two
stores previously leased to two franchisees which were sold to those
franchisees and the sale of a vacant, underdeveloped piece of land adjacent
to a franchise store resulting in gains of $1,203,000. During 1994, asset
values for two restaurants were written-down $220,000 as future operations
were not expected to provide sufficient cash flow to recover the related
investments. In addition, during 1994, the Company closed six restaurants.
One restaurant was sold resulting in a gain of $439,000, one was closed at
a loss of $202,000, one was closed with minimal costs and the remaining
three closings were provided for in 1993.
F-12
<PAGE>
El Chico Restaurants, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE I - INCOME TAXES
The provision for income taxes consists of the following (in thousands):
Year Ended December 31,
------------------------------------------------------
1996 1995 1994
-------------- -------------- --------------
Expense (Benefit)
Federal:
Current $934 $1,536 $1,258
Deferred (3,042) 23 419
State 119 75 176
($1,989) $1,634 $1,853
============== ============== ==============
The types of temporary differences between the tax and financial reporting
bases of assets and liabilities that give rise to the deferred income tax
assets (liabilities) and their related tax effects are as follows (in
thousands):
December 31,
---------------------------
1996 1995
---------- -----------
Deferred tax assets:
Special charge (Note G) $3,026 $--
FICA tip credit 252 --
Insurance reserves 235 362
Deferred compensation 161 125
Provision for restaurant closings 65 65
Other 119 12
---------- -----------
Total deferred tax assets 3,858 564
---------- -----------
Deferred tax liabilities:
Property and equipment (1,073) (747)
Restaurant preopening costs (15) (89)
---------- -----------
Total deferred tax liabilities (1,088) (836)
---------- -----------
Net deferred tax asset (liability) $2,770 ($272)
========== ===========
The Company believes that the deferred tax assets at December 31,1996 and
1995 will be realized based upon historical levels of income and through
reversals of existing taxable temporary differences during the carryforward
period.
The Company's effective income tax rate differs from the expected federal
statutory income tax rate as a result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994
------------- ------------ -----------
<S> <C> <C> <C>
Expected income tax provision (34.0%) 34.0% 34.0%
State income taxes 1.7 0.5 3.3
FICA tip and TJTC tax credits (7.0) (5.9) (5.1)
Other (0.1) 0.6 1.0
Income tax provision (39.4%) 29.2% 33.2%
============= ============ ===========
</TABLE>
F-13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
EL CHICO RESTAURANTS, INC.
By: /s/ Wallace A. Jones
----------------------
Wallace A. Jones, President and
Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Wallace A. Jones President and Chief Executive Officer March 26, 1997
- ------------------------- (Principal Executive Officer)
Wallace A. Jones
/s/ Lawrence E. White Executive Vice President and Chief March 26, 1997
- ------------------------- Financial Officer (Principal Financial
Lawrence E. White and Accounting Officer)
/s/ Grahame N. Clark, Jr. Director March 26, 1997
- -------------------------
Grahame N. Clark, Jr.
/s/ Jack D. Knox Director March 26, 1997
- --------------------------
Jack D. Knox
/s/ Joseph V. Mariner, Jr. Director March 26, 1997
- --------------------------
Joseph V. Mariner, Jr.
/s/ Joseph S. Thomson Chairman of the Board March 26, 1997
- --------------------------
Joseph S. Thomson
THE EL CHICO
SAVINGS PLAN
CORPDAL:63487.1 14047-00001
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS...................................................1
ARTICLE II
TOP HEAVY AND ADMINISTRATION..........................................16
<S> <C> <C>
2.1 TOP HEAVY PLAN REQUIREMENTS...........................................................16
2.2 DETERMINATION OF TOP HEAVY STATUS.....................................................16
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER...........................................19
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY...............................................19
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES.........................................20
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR...............................................20
2.7 RECORDS AND REPORTS...................................................................21
2.8 APPOINTMENT OF ADVISERS...............................................................21
2.9 INFORMATION FROM EMPLOYER.............................................................21
2.10 PAYMENT OF EXPENSES...................................................................22
2.11 MAJORITY ACTIONS......................................................................22
2.12 CLAIMS PROCEDURE......................................................................22
2.13 CLAIMS REVIEW PROCEDURE...............................................................22
ARTICLE III
ELIGIBILITY..................................................23
3.1 CONDITIONS OF ELIGIBILITY.............................................................23
3.2 APPLICATION FOR PARTICIPATION.........................................................23
3.3 EFFECTIVE DATE OF PARTICIPATION.......................................................23
3.4 DETERMINATION OF ELIGIBILITY..........................................................23
3.5 TERMINATION OF ELIGIBILITY............................................................24
3.6 OMISSION OF ELIGIBLE EMPLOYEE.........................................................24
3.7 INCLUSION OF INELIGIBLE EMPLOYEE......................................................24
3.8 ELECTION NOT TO PARTICIPATE...........................................................24
ARTICLE IV
CONTRIBUTION AND ALLOCATION..........................................25
4.1 FORMULA FOR DETERMINING EMPLOYER'S
CONTRIBUTION..........................................................................25
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION...............................................25
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION............................................29
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS...............................................29
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS......................................................33
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS........................................35
CORPDAL:63487.1 14047-00001
(ii)
<PAGE>
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS..................................................37
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE
TESTS.................................................................................39
4.9 MAXIMUM ANNUAL ADDITIONS..............................................................41
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS.............................................44
4.11 TRANSFERS FROM QUALIFIED PLANS........................................................45
4.12 DIRECTED INVESTMENT ACCOUNT...........................................................47
ARTICLE V
VALUATIONS...................................................47
5.1 VALUATION OF THE TRUST FUND...........................................................47
5.2 METHOD OF VALUATION...................................................................47
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS...................................48
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT.............................................48
6.2 DETERMINATION OF BENEFITS UPON DEATH..................................................48
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY......................................49
6.4 DETERMINATION OF BENEFITS UPON TERMINATION............................................49
6.5 DISTRIBUTION OF BENEFITS..............................................................51
6.6 DISTRIBUTION OF BENEFITS UPON DEATH...................................................53
6.7 TIME OF SEGREGATION OR DISTRIBUTION...................................................54
6.8 DISTRIBUTION FOR MINOR BENEFICIARY....................................................54
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN........................................55
6.10 PRE-RETIREMENT DISTRIBUTION...........................................................55
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP.....................................................55
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION.......................................57
ARTICLE VII
TRUSTEE....................................................57
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE.................................................57
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE...........................................57
7.3 OTHER POWERS OF THE TRUSTEE...........................................................58
7.4 LOANS TO PARTICIPANTS.................................................................60
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS..............................................62
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES.........................................62
7.7 ANNUAL REPORT OF THE TRUSTEE..........................................................62
7.8 AUDIT.................................................................................63
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE........................................63
7.10 TRANSFER OF INTEREST..................................................................64
7.11 DIRECT ROLLOVER.......................................................................64
CORPDAL:63487.1 14047-00001
(iii)
<PAGE>
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS.......................................65
8.1 AMENDMENT.............................................................................65
8.2 TERMINATION...........................................................................66
8.3 MERGER OR CONSOLIDATION...............................................................66
ARTICLE IX
MISCELLANEOUS.................................................67
9.1 PARTICIPANT'S RIGHTS..................................................................67
9.2 ALIENATION............................................................................67
9.3 CONSTRUCTION OF PLAN..................................................................68
9.4 GENDER AND NUMBER.....................................................................68
9.5 LEGAL ACTION..........................................................................68
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS................................................68
9.7 BONDING...............................................................................69
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE............................................69
9.9 INSURER'S PROTECTIVE CLAUSE...........................................................69
9.10 RECEIPT AND RELEASE FOR PAYMENTS......................................................69
9.11 ACTION BY THE EMPLOYER................................................................70
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY....................................70
9.13 HEADINGS..............................................................................70
9.14 APPROVAL BY INTERNAL REVENUE SERVICE..................................................70
9.15 UNIFORMITY............................................................................71
ARTICLE X
PARTICIPATING EMPLOYERS............................................71
10.1 ADOPTION BY OTHER EMPLOYERS...........................................................71
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS...............................................71
10.3 DESIGNATION OF AGENT..................................................................72
10.4 EMPLOYEE TRANSFERS....................................................................72
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION.................................................72
10.6 AMENDMENT.............................................................................73
10.7 DISCONTINUANCE OF PARTICIPATION.......................................................73
10.8 ADMINISTRATOR'S AUTHORITY.............................................................73
</TABLE>
CORPDAL:63487.1 14047-00001
(iv)
<PAGE>
THE EL CHICO
SAVINGS PLAN
THIS AGREEMENT, hereby made and entered into this 1st day of
October, 1995, by and between El Chico Restaurants, Inc., El Chico
Restaurants of Louisiana, Inc., El Chico Corporation of Oklahoma, Inc., El Chico
Restaurant No. 20, Inc., Southwest Cafes of Tennessee, Inc., El Chico
Corporation (Georgia), El Chico Corporation of Alabama, El Chico Corporation of
Florida and Pronto Design & Supply, Inc. (herein collectively referred to as the
"Employer") and Profit Sharing Plan Administration Committee (herein referred to
as the "Trustee").
W I T N E S S E T H :
WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective January 1, 1985, (hereinafter called the "Effective Date") known
as the El Chico Savings Plan Para Su Futuro and which plan shall hereinafter be
known as The El Chico Savings Plan (herein referred to as the "Plan") in
recognition of the contribution made to its successful operation by its
employees and for the exclusive benefit of its eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective October 1, 1995, except as otherwise
provided, the Employer and the Trustee in accordance with the provisions of the
Plan pertaining to amendments thereof, hereby amend the Plan in its entirety and
restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.2 "Administrator" means the person or entity designated by the
Employer pursuant to Section 2.4 to administer the Plan on behalf of the
Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
CORPDAL:63487.1 14047-00001
1
<PAGE>
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Code Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made by:
(a) including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which
are not includible in the gross income of the Participant
under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or
457, and Employee contributions described in Code Section
414(h)(2) that
are treated as Employer contributions.
For a participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation pursuant to
Section 3.3.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted as the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the
CORPDAL:63487.1 14047-00001
2
<PAGE>
close of the year. If, as a result of the application of such rules the adjusted
$200,000 limitation is exceeded, then the limitation shall be prorated among the
affected Family Members in proportion to each such Family Member's Compensation
prior to the application of limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition" limit of
Section 4.9(a) would be exceeded for one or more of the affected Family Members,
the prorated Compensation of all affected Family Members shall be adjusted to
avoid or reduce any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted downward to the
level needed to provide an allocation equal to such limit. The prorated
Compensation of affected Family Members are not affected by such limit shall
then be adjusted upward on a pro rata basis not to exceed each such affected
Family Member's Compensation as determined prior to application of the Family
Member rule. The resulting allocation shall not exceed such individual's maximum
"annual addition" limit. If, after these adjustments, an "excess amount" still
results, such "excess amount" shall be disposed of in the manner described in
Section 4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
$200,000 limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement,
the definition of Compensation has been modified, then, for Plan Years prior to
the Plan Year which includes the
CORPDAL:63487.1 14047-00001
3
<PAGE>
adoption date of this amendment and restatement, Compensation means compensation
determined pursuant to the Plan then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
1.11 "Early Retirement Date": this Plan does not provide for a
retirement date prior to Normal Retirement Date.
1.12 "Elective Contribution" means the Employer's contributions to the
Plan of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.6 shall be
considered an Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a
collective bargaining agreement between Employee representatives (within the
meaning of Code Section 7701(a)(46)) and the Employer under which retirement
benefits were the subject to good faith bargaining between the parties will not
be eligible to participate in this Plan unless such agreement expressly provides
for coverage in this Plan or two percent or more of the Employees of the
Employer who are covered pursuant to that agreement are professionals as defined
in Regulation 1.410(b)-9.
Employees who are nonresident aliens (within the meaning of
Code Section 7701(b)(1)(B)) and who receive no earned income (within the meaning
of Code Section 911(d)(2)) from the Employer which constitutes income from
sources within the United Stated (within the meaning of Code Section 861(a)(3))
shall not be eligible to participate in this Plan.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
CORPDAL:63487.1 14047-00001
4
<PAGE>
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.15 "Employer" means El Chico Restaurants, Inc., El Chico Restaurants
of Louisiana, Inc., El Chico Corporation of Oklahoma, Inc., El Chico Restaurant
No. 20, Inc., Southwest Cafes of Tennessee, Inc., El Chico Corporation
(Georgia), El Chico Corporation of Alabama, El Chico Corporation of Florida and
Pronto Design & Supply, Inc., El Chico Service Company, Texas El Chico
Restaurants, L.P., El Chico Restaurants of Kentucky, Inc. and El Chico
Restaurants of Indiana, Inc. and any Participating Employer (as defined in
Section 10.1) which shall adopt this Plan; any successor which shall maintain
this Plan; and any predecessor which has maintained this Plan. The Employers are
corporations with principal offices in the State of Texas.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of the aggregate amount of the Employer matching contributions
made pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.79(a).
1.17 "Excess Contribution" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions shall be treated as an
"annual addition" pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(g), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant,
such Participant's spouse and such Participant's lineal descendants and
ascendants and their spouses, all as described in Code Section 414(q)(6)(B).
CORPDAL:63487.1 14047-00001
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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 January 1st of each year and ending the following December 31st.
1.22 "Forfeiture." Under this Plan, Participant accounts are 100%
Vested at all times. Any amounts that may otherwise be forfeited under the Plan
pursuant to Section 3.7 or 6.9 shall be used to reduce the contribution of the
Employer.
1.23 "Former Participant" means a person who has been a Participant,
but who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages as defined in Code Section 3401(a) and all other payments of
compensation by the Employer (in the course of the Employer's trade or business)
for a Plan Year for which the Employer is required to furnish the Participant a
written statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415
Compensation" must be determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and
restatement, the definition of "415 Compensation" has been modified, then, for
Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "415 Compensation" means compensation determined
pursuant to the Plan then in effect.
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(c)(3),.
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
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"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and in such manner
as permitted under Code Section 415(d), except that the dollar increase in
effect on January 1 of any calendar year shall be effective for the Plan Year
beginning with or within such calendar year and the first adjustment to the
$200,000 Limitation shall be effective on January 1, 1990. For any short Plan
Year the "414(s) Compensation" limit shall be an amount equal to the "414(s)
Compensation" Limit for the calendar year in which the Plan Year begins
multiplied by the ratio obtained by dividing the number of full months in the
short Plan Year by twelve (12). In applying this limitation, the family group of
a Highly Compensated Participant who is subject to the Family Member aggregation
rules of Code Section 414(q)(6) because such Participant is either a "five
percent owner" of the Employer or one of the ten (10) Highly Compensated
Employees paid the greatest "415 Compensation" during the year, shall be treated
as a single Participant, except that for this purpose Family Members shall
include only the affected Participant's spouse and any lineal descendants who
have not attained age nineteen (19) before the close of the year.
In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA '93
annual compensation limit. The OBRA '93 annual compensation limit is $150,000,
as adjusted by the Commissioner for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost of living adjustment in
effect for a calendar year applies to any period, not exceeding 12 months, over
which Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12 months, the
OBRA '93 annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the Limitation under Code Section 401(a)(17) shall
mean the OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken
into account in determining an Employee's benefits accruing in the current Plan
Year, the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93
annual compensation limit is $150,000.
If, in connection with the adoption of this amendment and
restatement, the definition of "414(s) Compensation" has been modified, then,
for Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "414(s) Compensation" means compensation determined
pursuant to the Plan then in effect.
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1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year"
or "look-back year" were "five percent owners" as defined in Section
1.32(c).
(b) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were in the
Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of
the Employer (as that term is defined within the meaning of the
Regulations under Code Section 416) and received "415 Compensation"
during the "look-back year" from the Employer greater than 50 percent
of the limit in effect under Code Section 415(b)(1)(A) for any such
Plan Year. The number of officers shall be limited to the lesser of (i)
50 employees; or (ii) the greater of 3 employees or 10 percent of all
employees. For the purpose of determining the number of officers,
Employees described in Section 1.55(a), (b), (c) and (d) shall be
excluded, but such Employees shall still be considered for the purpose
of identifying the particular Employees who are officers. If the
Employer does not have at least one officer whose annual "415
Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will
be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the determination
year" and are also described in (b), (c) or (d) above when these
paragraphs are modified to substitute "determination year" for
"look-back year."
The "determination year" shall be the Plan Year for which
testing is being performed, and the "look-back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions. Additionally, the
dollar threshold amounts specified in (b) and (c) above shall be adjusted at
such time and in such manner as is provided in Regulations. In the case of such
an adjustment, the dollar limits which shall be applied are those for the
calendar year in which the 'determination year" or "look-back year" begins.
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In determining who is a Highly Compensated Employee, Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 91 l(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year."
1.27 "Highly Compensated Former Employee" means a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner."
For purposes of this Section, "determination year," `415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.26. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.29 "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
relationship 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. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period);
CORPDAL:63487.1 14047-00001
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(ii) an hour for which an Employee is directly or indirectly paid, or entitled
to payment, on account of a period during which no duties are performed is not
required to be credited to the Employee if such payment is made or due under a
plan maintained solely for the purpose of complying with applicable worker's
compensation, or unemployment compensation or disability insurance laws; and
(iii) Hours of Service are not required to be credited for a payment which
solely reimburses an Employee for medical or medically related expenses incurred
by the Employee.
For purposes of this Section, a payment shall be deemed to be
made by or due from the Employer regardless of whether such payment is made by
or due from the Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or are on behalf of a
group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of
determining a Year of Service, a year of participation for purposes of accrued
benefits, a 1-Year Break in Service, and employment commencement date (or
reemployment commencement date). In addition, Hours of Service will be credited
for employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to Excess Deferred
Compensation which amount shall be allocated in the same manner as income or
losses are allocated pursuant to Section 4.4(f).
1.31 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within
the meaning of the Regulations under Code Section 416) having annual
"415 Compensation" greater than 50 percent of the amount in effect
under Code Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation"
from the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in which
such Plan Year ends and owning (or
CORPDAL:63487.1 14047-00001
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considered as owning within the meaning of Code Section 318) both more
than one-half percent interest and the largest interests in the
Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Employer or stock possessing more than five
percent (5%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than five percent (5%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual
"415 Compensation" from the Employer of more than $150,000. "One
percent owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than one percent (1%) of
the outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000,
"415 Compensation" from each employer required to be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(l)(B), 403(b) or 457, and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension
plan providing:
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(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(b) if Leased Employees do not constitute more than 20%
of the recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to
the Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and maternity and paternity leaves
of absence." Years of Service and 1-Year Breaks in Service shall be measured on
the same computation period.
"Authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
A "maternity or paternity leave of absence" means, for Plan
Years beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement of
a child with the Employee in connection
CORPDAL:63487.1 14047-00001
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with the adoption of such child, or any absence for the purpose of caring for
such child for a period immediately following such birth or placement. For this
purpose, Hours of Service shall be credited for the computation period in which
the absence from work begins, only if credit therefore is necessary to prevent
the Employee from incurring a 1-Year Break in Service, or, in any other case, in
the immediately following computation period. The Hours of Service credited for
a "maternity or paternity leave of absence" shall be those which would normally
have been credited but for such absence, or, in any case in which the
Administrator is unable to determine such hours normally credited, eight (8)
Hours of Service per day. The total Hours of Service required to be credited for
a "maternity or paternity leave of absence" shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the
Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Non-Elective
Contributions.
A separate accounting shall be maintained with respect to that
portion of the Participant's Account attributable to Employer matching
contributions made pursuant to Section 4.l(b) and Employer discretionary
contributions made pursuant to Section 4.1(c).
1.43 "Participant's Combined Account" means the total aggregate amount
of each Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.45 "Plan" means this instrument, including all amendments thereto.
1.46 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.47 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are
made pursuant to Section 4.8(h) which are used to satisfy the "Actual
Contribution Percentage" tests shall be considered Qualified Non-Elective
Contributions and be subject to the provisions of Sections 4.2(b) and 4.2(c).
CORPDAL:63487.1 14047-00001
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1.48 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to time.
1.49 "Retired Participant" means a person who has been a Participant,
but who has become entitled to retirement benefits under the Plan.
1.50 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
1.51 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.52 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.
1.53 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.54 "Top Heavy Plan Year" means a Plan Year during which the Plan
is a Top Heavy Plan.
1.55 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked according
to the amount of "415 Compensation" (determined for this purpose in accordance
with Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, such Employees shall still be
considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours
per week;
(c) Employees who normally work less than six (6) months
during a year, and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the
Employer are covered under agreements the Secretary of Labor finds to be
collective bargaining agreements between
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Employee representatives and the Employer, and the Plan covers only Employees
who are not covered under such agreements, then Employees covered by such
agreements shall be excluded from both the total number of active Employees as
well as from the identification of particular Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be
applied on a uniform and consistent basis for all purposes for which the Code
Section 414(q) definition is applicable.
1.56 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing any gainful occupation and
which condition constitutes total disability under the federal Social Security
Acts.
1.57 "Trustee" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.58 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.59 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.60 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the Employee first
performs an Hour of Service. The participation computation period beginning
after a 1-Year Break in Service shall be measured from the date on which an
Employee again performs an Hour of Service. The participation computation period
shall shift to the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service. An Employee who is credited
with the required Hours of Service in both the initial computation period (or
the computation period beginning after a 1-Year Break in Service) and the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service, shall be credited with two (2) Years of Service
for purposes of eligibility to participate.
For all other purposes, the computation period shall be the
Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c).
Years of Service with any Affiliated Employer shall be
recognized.
CORPDAL:63487.1 14047-00001
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ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the
special vesting requirements of Code Section 416(b) pursuant to Section 6.4 of
the Plan and the special minimum allocation requirements of Code Section 416(c)
pursuant to Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan
Year, but such Participant was a Key Employee for any prior Plan Year,
such Participant's Present Value of Accrued Benefit and/or Aggregate
Account balance shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super Top Heavy Plan
(or whether any Aggregation Group which includes this Plan is a Top
Heavy Group). In addition, if a Participant or Former Participant has
not performed any services for any Employer maintaining the Plan at any
time during the five year period ending on the Determination Date, any
accrued benefit for such Participant or Former Participant shall not be
taken into account for the purposes of determining whether this Plan is
a Top Heavy or Super Top Heavy Plan.
(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 Combined Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any contributions actually made after the
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valuation date but due on or before the Determination Date,
except for the first Plan Year when such adjustment shall also
reflect the amount of any contributions made after the
Determination Date that are allocated as of a date in that
first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions for
top heavy purposes to the extent that such distributions are
already included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and distributions
under a terminated plan which if it had not been terminated
would have been required to be included in an Aggregation
Group, will be counted. Further, distributions from the Plan
(including the cash value of life insurance policies) of a
Participant's account balance because of death shall be
treated as a distribution for the purposes of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate Account
balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always consider
such rollovers or plan- to-plan transfers as a distribution
for the purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it shall
not consider such rollovers or plan-to-plan transfers as part
of the Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section. If
this Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account
balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are
to be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and
(o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation
Group or a Permissive Aggregation Group as hereinafter
determined.
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(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 41 l(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the most
recent valuation date that falls within or ends with the 12- month
period ending on the Determination Date except as provided in Code
Section 416
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and the Regulations thereunder for the first and second plan years of a
defined benefit plan.
(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.
2.3 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 establish a "funding policy and
method," i.e., it shall determine whether the Plan has a short run need
for liquidity (e.g., to pay benefits) or whether liquidity is a long
run goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. The
Employer or its delegate shall communicate such needs and goals to the
Trustee, who shall coordinate such Plan needs with its investment
policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of
the Trust Funds. Such "funding policy and method" shall be consistent
with the objectives of this Plan and with the requirements of Title I
of the Act.
(c) The Employer shall periodically review the performance of
any Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the
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<PAGE>
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.
2.5 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.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a
Participant hereunder and to receive benefits under the Plan;
(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;
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(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;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from which
such Contract shall be purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be
contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the
Trustee can exercise any investment discretion in a manner designed to
accomplish specific objectives;
(i) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation
deferred or paid to them in cash;
(j) to assist any Participant regarding his rights, benefits,
or elections available under the Plan.
2.7 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.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 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
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<PAGE>
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.
2.10 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.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, 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
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing
with the Administrator. Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the application is filed. In the
event the claim is denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood by the claimant,
pertinent provisions of the Plan shall be cited, and, where appropriate, an
explanation as to how the claimant can perfect the claim will be provided. In
addition, the claimant shall be furnished with an explanation of the Plan's
claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to Section
2.12 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 its
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the written notification provided for in Section 2.12. 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
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<PAGE>
full expense of any such court reporter and such transcripts shall be borne by
the party causing the court reporter to attend the hearing. A final decision as
to the allowance of the claim shall be made by the Administrator within 60 days
of receipt of the appeal (unless there has been an extension of 60 days due to
special circumstances, provided the delay and the special circumstances
occasioning it are communicated to the claimant within the 60 day period). Such
communication shall be written in a manner calculated to be understood by the
claimant and shall include specific reasons for the decision and specific
references to the pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of
Service and has attained age 21 shall be eligible to participate hereunder as of
the date he has satisfied such requirements. However, any Employee who was a
Participant in the Plan prior to the effective date of this amendment and
restatement shall continue to participate in the Plan. The Employer shall give
each prospective Eligible Employee written notice of his eligibility to
participate in the Plan prior to the close of the Plan Year in which he first
becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible
Employee shall make application to the Employer for participation in the Plan
and agree to the terms hereof. Upon the acceptance of any benefits under this
Plan, such Employee shall automatically be deemed to have made application and
shall be bound by the terms and conditions of the Plan and all amendments
hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as
of the first day of the month coinciding with or next following the date on
which such Employee met the eligibility requirements of Section 3.1, provided
said Employee was still employed as of such date (or if not employed on such
date, as of the date of rehire if a 1-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible
class of Employees becomes a member of an eligible class, such Employee will
participate immediately if such Employee has satisfied the minimum age and
service requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be
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<PAGE>
conclusive and binding upon all persons, as long as the same is made pursuant to
the Plan and the Act. Such determination shall be subject to review per Section
2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification
of an Eligible Employee to an ineligible Employee, such Former
Participant shall continue to vest in his interest in the Plan for each
Year of Service completed while a noneligible Employee, until such time
as his Participant's Account shall be forfeited or distributed pursuant
to the terms of the Plan. Additionally, his interest in the Plan shall
continue to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate but
has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of the
Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or not a deduction
is allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer,
elect voluntarily not to participate in the Plan. The election not to
participate must be communicated to the Employer, in writing, at least thirty
(30) days before the beginning of a Plan Year.
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ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be
deemed an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in
matching contributions for the Plan Year, a matching contribution equal
to 20% of each such Participant's Deferred Compensation plus a
discretionary percentage of each such Participant's Deferred
Compensation, the exact percentage to be determined each year by the
Employer, which amount shall be deemed an Employer's Non-Elective
Contribution.
Except, however, in applying the matching percentage
specified above, only salary reductions up to 3% of Compensation shall
be considered.
(c) A discretionary amount, which amount shall be deemed an
Employer's Non-Elective Contribution.
(d) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or
in such property as is acceptable to the Trustee.
(e) Except, however, to the extent necessary to provide the
top heavy minimum allocations, the Employer shall make a contribution
even if it exceeds the amount which is deductible under Code Section
404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 20% of his
Compensation which would have been received in the Plan Year, but for
the deferral election. A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which is
currently available on or before the date the Participant executed such
election.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer
Elective Contribution and allocated to that Participant's Elective
Account.
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(b) The balance in each Participant's Elective Account shall
be fully Vested at all times and shall not be subject to Forfeiture for
any reason.
(c) Amounts held in the Participant's Elective Account may not
be distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in
Regulation 1.401(k)-1(d)(3);
(4) the date of disposition by the Employer to an entity that
is not an Affiliated Employer of substantially all of the
assets (within the meaning of Code Section 409(d)(2)) used in
a trade or business of such corporation if such corporation
continues to maintain this Plan after the disposition with
respect to a Participant who continues employment with the
corporation acquiring such assets;
(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a
subsidiary (within the meaning of Code Section 409(d)(3)) to
an entity which is not an Affiliated Employer but only with
respect to a Participant who continues employment with such
subsidiary; or
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.11.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the
beginning of such taxable year. If such dollar limitation is exceeded,
a Participant will be deemed to have notified the Administrator of such
excess amount which shall be distributed in a manner consistent with
Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance
with Regulations.
(e) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 6.11 or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any
other plan maintained by the Employer, then such Participant shall not
be permitted to elect to have Deferred Compensation contributed to the
Plan on his behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar Limitation under
Code Section 402(g) shall be reduced, with respect to the Participant's
taxable year following the taxable year in which
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<PAGE>
the hardship distribution was made, by the amount of such Participant's
Deferred Compensation, if any, pursuant to this Plan (and any other
plan maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-l(b)) under another qualified cash or deferred arrangement (as
defined in Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction arrangement (within
the meaning of Code Section 3121(a)(5)(D)), a deferred compensation
plan under Code Section 457, or a trust described in Code Section
501(c)(18) cumulatively exceed the limitation imposed by Code Section
402(g) (as adjusted annually in accordance with the method provided in
Code Section 415(d) pursuant to Regulations) for such Participant's
taxable year, the Participant may, not later than March 1 following the
close of the Participant's taxable year, notify the Administrator in
writing of such excess and request that its Deferred Compensation under
this Plan be reduced by an amount specified by the Participant. In such
event, the Administrator may direct the Trustee to distribute such
excess amount (and any Income allocable to such excess amount) to the
Participant not later than the first April 15th following the close of
the Participant's taxable year. Distributions in accordance with this
paragraph may be made for any taxable year of the Participant which
begins after December 31, 1986. Any distribution of less than the
entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the Participant's
Deferred Compensation under the Plan for the taxable year. Any
distribution on or before the last day of the Participant's taxable
year must satisfy each of the following conditions:
(1) the distribution must be made after the date on which
the Plan received the Excess Deferred Compensation;
(2) the Participant, shall designate the distribution as
Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a
distribution of Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f)
shall be made first from unmatched Deferred Compensation and,
thereafter, simultaneously from Deferred Compensation which is
matched and matching contributions which relate to such
Deferred Compensation. However, any such matching
contributions which are not Vested shall be forfeited in lieu
of being distributed.
(g) Notwithstanding Section 4.2(f) above, a Participant's
Excess Deferred Compensation shall be reduced, but not below zero, by
any distribution of Excess Contributions pursuant to Section 4.6(a) for
the Plan Year beginning with or within the taxable year of the
Participant.
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(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's Elective Account shall be used to provide
additional benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account
may be treated as a Directed Investment Account pursuant to Section
4.12.
(j) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each Participant
in a federally insured savings account, certificate of deposit in a
bank or savings and loan association, money market certificate, or
other short-term debt security acceptable to the Trustee until such
time as the allocations pursuant to Section 4.4 have been made.
(k) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with the
following:
(1) A Participant may commence making elective deferrals to
the Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However,
the Participant must make its initial salary deferral election
within a reasonable time, not to exceed thirty (30) days,
after entering the Plan pursuant to Section 3.3. If the
Participant fails to make an initial salary deferral election
within such time, then such Participant may thereafter make an
election in accordance with the rules governing modifications.
The Participant shall make such an election by entering into a
written salary reduction agreement with the Employer and
filing such agreement with the Administrator. Such election
shall initially be effective beginning with the pay period
following the acceptance of the salary reduction agreement by
the Administrator, shall not have retroactive effect and shall
remain in force until revoked.
(2) A Participant may modify a prior election during the Plan
Year and concurrently make a new election by filing a written
notice with the Administrator within a reasonable time before
the pay period for which such modification is to be effective.
However, modifications to a salary deferral election shall
only be permitted quarterly, during election periods
established by the Administrator prior to the first day of
each Plan Year quarter. Any modification shall not have
retroactive effect and shall remain in force until revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the
Plan Year by providing the Administrator with thirty (30) days
written notice of such revocation (or upon such shorter notice
period as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning of the
first pay period coincident with or next following the
expiration of the notice period. Furthermore, the termination
of the Participant's employment, or the cessation of
participation for any reason, shall be deemed to revoke any
salary reduction agreement then in effect, effective
CORPDAL:63487.1 14047-00001
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<PAGE>
immediately following the close of the pay period within which
such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year within the time prescribed by law,
including extensions of time, for the filing of the Employer's federal income
tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated through
payroll deductions shall be paid to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from the Employer's general
assets, but in any event within ninety (90) days from the date on which such
amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated herein
by reference. Furthermore, any additional Employer contributions which are
allocable to the Participant's Elective Account for a Plan Year shall be paid to
the Plan no later than the twelve-month period immediately following the close
of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS
(a) The Administrator shall establish and maintain an account
in the name of each Participant to which the Administrator shall credit
as of each Anniversary Date all amounts allocated to each such
Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation
of the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
(1) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(b), to each Participant's Account
in accordance with Section 4.1(b).
Only Participants who are actively employed on the last day of
the Plan Year shall be eligible to share in the matching
contribution for the year.
(3) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(c), to each Participant's Account
in the same proportion that each such Participant's
Compensation for the year bears to the total Compensation of
all Participants for such year.
CORPDAL:63487.1 14047-00001
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<PAGE>
Only Participants who are actively employed on the last day of
the Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) For any Top Heavy Plan Year, Non-Key Employees not
otherwise eligible to share in the allocation of contributions as
provided above, shall receive the minimum allocation provided for in
Section 4.4(g) if eligible pursuant to the provisions of Section
4.4(i).
(d) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Total and
Permanent Disability or death shall share in the allocation of
contributions for that Plan Year.
(e) Participants who are not actively employed on the last day
of the Plan Year due to Retirement (Normal or Late) shall share in the
allocation of contributions for that Plan Year only if otherwise
eligible in accordance with this Section.
(f) As of each Anniversary Date or other valuation date,
before allocation of one-half of the Employer contributions for the
entire Plan Year, any earnings or losses (net appreciation or net
depreciation) of the Trust Fund shall be allocated in the same
proportion that each Participant's and Former Participant's
nonsegregated accounts bear to the total of all Participants' and
Former Participants' nonsegregated accounts as of such date.
Participants' transfers from other qualified plans
deposited in the general Trust Fund shall share in any earnings and
losses (net appreciation or net depreciation) of the Trust Fund in the
same manner provided above. Each segregated account maintained on
behalf of a Participant shall be credited or charged with its separate
earnings and losses.
(g) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to at least three
percent (3%) of such Non-Key Employee's "415 Compensation" (reduced by
contributions and forfeitures, if any, allocated to each Non-Key
Employee in any defined contribution plan included with this plan in a
Required Aggregation Group). However, if (1) the sum of the Employer's
contributions allocated to the Participant's Combined Account of each
Key Employee for such Top Heavy Plan Year is less than three percent
(3%) of each Key Employee's "415 Compensation" and (2) this Plan is not
required to be included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section 401(a)(4) or 410,
the sum of the Employer's contributions allocated to the Participant's
Combined Account of each Non-Key Employee shall be equal to the largest
percentage allocated to the Participant's Combined Account of any Key
Employee. However, in determining whether a Non-Key Employee has
received the required minimum allocation, such Non-Key Employee's
Deferred Compensation and matching contributions needed to satisfy the
"Actual Contribution Percentage" tests pursuant to Section 4.7(a) shall
not be taken into account.
CORPDAL:63487.1 14047-00001
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However, no such minimum allocation shall be required
in this Plan for any Non-Key Employee who participates in another
defined contribution plan subject to Code Section 412 providing such
benefits included with this Plan in a Required Aggregation Group.
(h) For purposes of the minimum allocations set forth above,
the percentage allocated to the Participant's Combined Account of any
Key Employee shall be equal to the ratio of the sum of the Employer's
contributions allocated on behalf of such Key Employee divided by the
"415 Compensation" for such Key Employee.
(i) For any Top Heavy Plan Year, the minimum allocations set
forth above shall be allocated to the Participant's Combined Account of
all Non-Key Employees who are Participants and who are employed by the
Employer on the last day of the Plan Year, including Non-Key Employees
who have (1) failed to complete a Year of Service; and (2) declined to
make mandatory contributions (if required) or, in the case of a cash or
deferred arrangement, elective contributions to the Plan.
(j) For the purposes of this Section, "415 Compensation" shall
be limited to $200,000. Such amount shall be adjusted at the same time
and in the same manner as permitted under Code Section 415(d), except
that the dollar increase in effect on January 1 of any calendar year
shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall
be effective on January 1, 1990. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the "415 Compensation"
limit for the calendar year in which the Plan Year begins multiplied by
the ratio obtained by dividing the number of full months in the short
Plan Year by twelve (12). However, for Plan Years beginning prior to
January 1, 1989, the $200,000 limit shall apply only for Top Heavy Plan
Years and shall not be adjusted.
In addition to other applicable limitations set forth
in the Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual Compensation of each Employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994,
any reference in this Plan to the limitation under Code Section
401(a)(17) shall mean the OBRA '93 annual compensation limit set forth
in this provision.
CORPDAL:63487.1 14047-00001
31
<PAGE>
If Compensation for any prior determination period is
taken into account in determining an Employee's benefits accruing in
the current Plan Year, the Compensation for that prior determination
period is subject to the OBRA '93 annual compensation limit in effect
for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first Plan
Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation Limit is $150,000.
(k) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the Plan
Year shall share in the salary reduction contributions made by the
Employer for the year of termination without regard to the Hours of
Service credited.
(l) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall be
maintained as follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan
attributable to post-break service.
(m) Notwithstanding anything to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would
otherwise fail to meet the requirements of Code Sections 401(a)(26),
410(b)(1) or 410(b)(2)(A)(i) and the Regulations thereunder because
Employer contributions would not be allocated to a sufficient number or
percentage of Participants for a Plan Year, then the following rules
shall apply:
(1) The group of Participants eligible to share in the
Employer's contribution for the Plan Year shall be expanded to
include the minimum number of Participants who would not
otherwise be eligible as are necessary to satisfy the
applicable test specified above. The specific Participants who
shall become eligible under the terms of this paragraph shall
be those who are actively employed on the last day of the Plan
Year and, when compared to similarly situated Participants,
have completed the greatest number of Hours of Service in the
Plan Year.
(2) If after application of paragraph (1) above, the
applicable test is still not satisfied, then the group of
Participants eligible to share in the Employer's contribution
for the Plan Year shall be further expanded to include the
minimum number of Participants who are 'not actively employed
on the last day of the Plan Year as are necessary to satisfy
the applicable test. The specific Participants who shall
become eligible to share shall be those Participants, when
compared to similarly situated Participants, who have
completed the greatest number of Hours of Service in the Plan
Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants
CORPDAL:63487.1 14047-00001
32
<PAGE>
may not be reallocated to satisfy these requirements. In such
event, the Employer shall make an additional contribution
equal to the amount such affected Participants would have
received had they been included in the allocations, even if it
exceeds the amount which would be deductible under Code
Section 404. Any adjustment to the allocations pursuant to
this paragraph shall be considered a retroactive amendment
adopted by the last day of the Plan Year.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning
after December 31, 1986, the annual allocation derived from Employer
Elective Contributions to a Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than the
"Actual Deferral Percentage" of the Non-Highly Compensated
Participant group multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
shall not be more than two percentage points. Additionally,
the "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual Deferral
Percentage" for the Non- Highly Compensated Participant group
multiplied by 2. The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-l(b) are incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2, the provisions of
which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated Participant
group and Non-Highly Compensated Participant group for a Plan Year, the
average of the ratios, calculated separately for each Participant in
such group, of the amount of Employer Elective Contributions allocated
to each Participant's Elective Account for such Plan Year, to such
Participant's "414(s) Compensation" for such Plan Year. The actual
deferral ratio for each Participant and the "Actual Deferral
Percentage" for each group shall be calculated to the nearest
one-hundredth of one percent for Plan Years beginning after December
31, 1988. Employer Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective
CORPDAL:63487.1 14047-00001
33
<PAGE>
Account shaft be reduced by Excess Deferred Compensation to the extent
such excess amounts are made under this Plan or any other plan
maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio
of a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all eligible Family
Members (including Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s) Compensation," for
Plan Years beginning after December 31, 1988, Family Members
shall include only the affected Employee's spouse and any
lineal descendants who have not attained age 19 before the
close of the Plan Year. Notwithstanding the foregoing, with
respect to Plan Years beginning prior to January 1, 1990,
compliance with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for
purposes of determining the "Actual Deferral Percentage" of
the Non-Highly Compensated Participant group except to the
extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the
Participant are aggregated as one family group in accordance
with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall
include any Employee eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was made or
suspended pursuant to Section 4.2.
(e) For the purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(k), if two or more plans which include cash
or deferred arrangements are considered one plan for the purposes of
Code Section 401(a)(4) or 410(b) (other than Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), the cash or deferred arrangements included in such plans
shall be treated as one arrangement. In addition, two or more cash or
deferred arrangements may be considered as a single arrangement for
purposes of determining whether or not such arrangements satisfy Code
Sections 401(a)(4), 410(b) and 401(k). In such a case, the cash or
deferred arrangements included in such plans and the plans including
such arrangements shall be treated as one arrangement and as one plan
for purposes of this Section and Code Sections 401(a)(4),
CORPDAL:63487.1 14047-00001
34
<PAGE>
410(b) and 401(k). Plans may be aggregated under this paragraph (e) for
Plan Years beginning after December 31, 1989 only if they have the same
plan year.
Notwithstanding the above, for Plan Years beginning
after December 31, 1988, an employee stock ownership plan described in
Code Section 4975(e)(7) or 409 may not be combined with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part
of an employee stock ownership plan as defined in Code Section
4975(e)(7) or 409 for Plan Years beginning after December 31, 1988) of
the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred arrangement for
the purpose of determining the actual deferral ratio with respect to
such Highly Compensated Participant. However, for Plan Years beginning
after December 31, 1988, if the cash or deferred arrangements have
different plan years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar
year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's
Elective Contributions made pursuant to Section 4.4 do not satisfy one of the
tests set forth in Section 4.5(a) for Plan Years beginning after December 31,
1986, the Administrator shall adjust Excess Contributions pursuant to the
options set forth below:
(a) On or before the fifteenth day of the third month
following the end of each Plan Year, the Highly Compensated Participant
having the highest actual deferral ratio shall have his portion of
Excess Contributions distributed to him until one of the tests set
forth in Section 4.5(a) is satisfied, or until his actual deferral
ratio equals the actual deferral ratio of the Highly Compensated
Participant having the second highest actual deferral ratio. This
process shall continue until one of the tests set forth in Section
4.5(a) is satisfied. For each Highly Compensated Participant, the
amount of Excess Contributions is equal to the Elective Contributions
on behalf of such Highly Compensated Participant (determined prior to
the application of this paragraph) minus the amount determined by
multiplying the Highly Compensated Participant's actual deferral ratio
(determined after application of this paragraph) by his "414(s)
Compensation." However, in determining the amount of Excess
Contributions to be distributed with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be
reduced by any Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
CORPDAL:63487.1 14047-00001
35
<PAGE>
(i) may be postponed but not later than the close
of the Plan Year following the Plan Year to which
they are allocable;
(ii) shall be made fast from unmatched Deferred
Compensation and, thereafter, simultaneously from
Deferred Compensation which is matched and matching
contributions which relate to such Deferred
Compensation. However, any such matching
contributions which are not Vested shall be forfeited
in lieu of being distributed;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a
distribution of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata. distribution of
Excess Contributions and Income.
(3) The determination and correction of Excess Contributions
of a Highly Compensated Participant whose actual deferral
ratio is determined under the family aggregation rules shall
be accomplished by reducing the actual deferral ratio as
required herein, and the Excess Contributions for the family
unit shall then be allocated among the Family Members in
proportion to the Elective Contributions of each Family Member
that were combined to determine the group actual deferral
ratio. Notwithstanding the foregoing, with respect to Plan
Years beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance
with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year,
the Employer may make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.5(a). Such
contribution shall be allocated to the Participant's Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.
(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.5(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.6(a) each affected Highly Compensated
Participant's deferral election made pursuant to Section 4.2 by an
amount necessary to satisfy one of the tests set forth in Section
4.5(a).
CORPDAL:63487.1 14047-00001
36
<PAGE>
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years
beginning after December 31, 1986 for the Highly Compensated
Participant group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group; or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group, or such percentage
for the Non-Highly Compensated Participant group plus 2
percentage points. However, for Plan Years beginning after
December 31, 1988, to prevent the multiple use of the
alternative method described in this paragraph and Code
Section 401(m)(9)(A), any highly Compensated Participant
eligible to make elective deferrals pursuant to Section 4.2 or
any other cash or deferred arrangement maintained by the
Employer or an Affiliated Employer and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2. The provisions of
Code Section 401(m) and Regulations 1.401(m)-1(b) and
1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8,. "Actual
Contribution Percentage" for a Plan Year means, with respect, to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately for
each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant
to Section 4.1(b) on behalf of each such Participant for such
Plan Year; to
(2) the Participant's "414(s)Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant
to Section 4.8(d), only Employer matching contributions (excluding
Employer matching contributions forfeited or distributed pursuant to
Sections 4.2(f) and 4.6(a)(1)) contributed to the Plan prior to the end
of the succeeding Plan Year shall be considered. In addition, the
Administrator may elect to take into account, with respect to Employees
eligible to have Employer matching contributions pursuant to Section
4.l(b) allocated to their accounts, elective deferrals (as defined in
Regulation 1.402(g)-1(b)) and qualified non-elective contributions (as
defined in Code Section 401(m)(4)(C)) contributed to any plan
maintained by the Employer. Such elective deferrals and qualified
non-elective contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(5) which is
incorporated herein by reference. However, for Plan Years beginning
after December 31, 1988, the Plan Year
CORPDAL:63487.1 14047-00001
37
<PAGE>
must be the same as the plan year of the plan to which the elective
deferrals and the qualified non-elective contributions are made.
(d) For the purpose of determining the actual contribution
ratio of a Highly Compensated Employee who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such
Employee is either a "five percent owner" of the Employer or one of the
ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, the following shall apply:
(1) The combined actual contribution ratio for the family
group (which shall be treated as one Highly Compensated
Participant) shall be determined by aggregating Employer
matching contributions made pursuant to Section 4.1(b) and
"414(s) Compensation" of all eligible Family Members
(including Highly Compensated Participants). However, in
applying the $200,000 limit to "414(s) Compensation" for Plan
Years beginning after December 31, 1988, Family Members shall
include only the affected Employee's spouse and any lineal
descendants who have not attained age 19 before the close of
the Plan Year. Notwithstanding the foregoing, with respect to
Plan Years beginning prior to January 1, 1990, compliance with
the Regulations then in effect shall be deemed to be
compliance with this paragraph.
(2) The Employer matching contributions made pursuant to
Section 4.1(b) and "414(s) Compensation" of all Family Members
shall be disregarded for purposes of determining the "Actual
Contribution Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.
(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the
Participant are aggregated as one family group in accordance
with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which
matching contributions, Employee contributions, or both, are made are
treated as one plan for purposes of Code Sections 401(a)(4) or 410(b)
(other than the average benefits test under Code Section
410(b)(2)(A)(ii) as in effect for Plan Years beginning after December
31, 1988), such plans shall be treated as one plan. In addition, two or
more plans of the Employer to which matching contributions, Employee
contributions, or both, are made may be considered as a single plan for
purposes of determining whether or not such plans satisfy Code Sections
401(a)(4), 410(b) and 401(m). In such a case, the aggregated plans must
satisfy this Section and Code Sections 401(a)(4), 410(b) and 401(m) as
though such aggregated plans were a single plan. Plans may be
aggregated under this paragraph (e) for Plan Years beginning after
December 31, 1988, only if they have the same plan year.
CORPDAL:63487.1 14047-00001
38
<PAGE>
Notwithstanding the above, for Plan Years beginning
after December 31, 1988, an employee stock ownership plan described in
Code Section 4975(e)(7) or 409 may not be aggregated with this Plan for
purposes of determining whether the employee stock ownership plan or
this Plan satisfies this Section and Code Sections 401(a)(4), 410(b)
and 401(m).
(f) If a Highly Compensated Participant is a Participant under
two or more plans (other than an employee stock ownership plan as
defined in Code Section 4975(e)(7) or 409 for Plan Years beginning
after December 31, 1988) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of
such Highly Compensated Participant shall be aggregated for purposes of
determining such Highly Compensated Participant's actual contribution
ratio. However, for Plan Years beginning after December 31, 1988, if
the plans have different plan years, this paragraph shall be applied by
treating all plans ending with or within the same calendar year as a
single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant shall
include any Employee eligible to have Employer matching contributions
pursuant to Section 4.1(b) (whether or not a deferral election was made
or suspended pursuant to Section 4.2(e)) allocated to his account for
the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December
31, 1986, the "Actual Contribution Percentage" for the Highly
Compensated Participant group exceeds the "Actual Contribution
Percentage" for the Non-Highly Compensated Participant group pursuant
to Section 4.7(a), the Administrator (on or before the fifteenth day of
the third month following the end of the Plan Year, but in no event
later than the close of the following Plan Year) shall direct the
Trustee to distribute to the Highly Compensated Participant having the
highest actual contribution ratio, his Vested portion of Excess
Aggregate Contributions (and Income allocable to such contributions)
and, if forfeitable, forfeit such non-Vested Excess Aggregate
Contributions attributable to Employer matching contributions (and
Income allocable to such forfeitures) until either one of the tests set
forth in Section 4.7(a) is satisfied, or until his actual contribution
ratio equals the actual contribution ratio of the Highly Compensated
Participant having the second highest actual contribution ratio. This
process shall continue until one of the tests set forth in Section
4.7(a) is satisfied.
(b) Any distribution and/or forfeiture of less than the entire
amount of Excess Aggregate Contributions (and Income) shall be treated
as a pro rata distribution and/or forfeiture of Excess Aggregate
Contributions and Income. Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution of
Excess Aggregate Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance with Section
4.4.
CORPDAL:63487.1 14047-00001
39
<PAGE>
(c) Excess Aggregate Contributions, including forfeited
matching contributions, shall be treated as Employer contributions for
purposes of Code Sections 404 and 415 even if distributed from the
Plan.
Forfeited matching contributions that are reallocated to Participants'
Accounts for the Plan Year in which the forfeiture occurs shall be
treated as an "annual addition" pursuant to Section 4.9(b) for the
Participants to whose Accounts they are reallocated and for the
Participants from whose Accounts they are forfeited.
(d) For each highly Compensated Participant, the amount of
Excess Aggregate Contributions is equal to the Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application
of this paragraph) by his "414(s) Compensation." The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent for Plan Years beginning after December 31, 1988. In no case
shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
nonelective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) on behalf of such Highly Compensated
Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as
voluntary Employee contributions due to recharacterization for the plan
year of any other qualified cash or deferred arrangement (as defined in
Code Section 401(k)) maintained by the Employer that ends with or
within the Plan Year.
(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules,
then the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) of each Family Member that were combined to
determine the group actual contribution ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then in effect shall be deemed to
be compliance with this paragraph.
(g) If during a Plan Year the projected aggregate amount of
Employer matching contributions to be allocated to all Highly
Compensated Participants under this Plan would, by virtue of the tests
set forth in Section 4.7(a), cause the Plan to fail such tests, then
the Administrator may automatically reduce proportionately or in the
order provided in
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Section 4.8(a) each affected Highly Compensated Participant's projected
share of such contributions by an amount necessary to satisfy one of
the tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve (12) months after
the end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 4.7(a). Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total Compensation
of all Non-Highly Compensated Participants. A separate accounting shall
be maintained for the purpose of excluding such contributions from the
"Actual Deferral Percentage" tests pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's accounts for any "limitation
year" shall equal the lesser of: (1) $30,000 (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." For any short
"limitation year," the dollar limitation in (1) above shall be reduced
by a fraction, the numerator of which is the number of full months in
the short "limitation year" and the denominator of which is twelve
(12).
(b) For purposes of applying the limitations of Code Section
415, if annual additions" means the sum credited to a Participant's
accounts for any "limitation year" of (1) Employer contributions, (2)
Employee contributions for "limitation years" beginning after December
31, 1986, (3) forfeitures, (4) amounts allocated, after March 31, 1984,
to an individual medical account, as defined in Code Section 415(l)(2)
which is part of a pension or annuity plan maintained by the Employer
and (5) amounts derived from contributions paid or accrued after
December 31, 1985, in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage limitation referred to in paragraph (a)(2)
above shall not apply to: (1) any contribution for medical benefits
(within the meaning of Code Section 419A(f)(2)) after separation from
service which is otherwise treated as an "annual addition," or (2) any
amount otherwise treated as an "annual addition" under Code Section
415(l)(1).
(c) For purposes of applying the limitations of Code Section
415, the transfer of funds from one qualified plan to another is not an
"annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.9(b)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5),
403(a)(4),403(b)(8) and 408(d)(3)); (2) repayments of loans made to a
Participant from the Plan; (3) repayments
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of distributions received by an Employee pursuant to Code Section
411(a)(7)(B) (cash- outs); (4) repayments of distributions received by
an Employee pursuant to Code Section 411(a)(3)(D) (mandatory
contributions); and (5) Employee contributions to a simplified employee
pension excludable from gross income under Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section
415, the "limitation year" shall be the Plan Year.
(e) 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.
(f) 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.
(g) For the purpose of this Section, if the Employer is a
member of a controlled group of corporations, trades or businesses
under common control (as defined by Code Section 1563(a) or Code
Section 414(b) and (c) as modified by Code Section 415(h)), is a member
of an affiliated service group (as defined by Code Section 414(m)), or
is a member of a group of entities required to be aggregated pursuant
to Regulations under Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus
any "annual additions" previously credited to such Participant's
accounts during the "limitation year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained by the
Employer which have the same Anniversary Date, "annual additions" will
be credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the defined
contribution plan not subject to Code Section 412.
(3) If a Participant participates in more than one
defined contribution plan not subject to Code Section 412 maintained by
the Employer which have the same
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Anniversary Date, the maximum "annual additions" under this Plan shall
equal the product of (A) the maximum "annual additions" for the
"limitation year" minus any annual additions" previously credited under
subparagraphs (1) or (2) above, multiplied by (B) a fraction (i) the
numerator of which is the "annual additions" which would be credited to
such Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which is
such "annual additions" for all plans described in this subparagraph.
(j) 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.
(k) The defined benefit plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the
Participant's projected annual benefits under all the, defined benefit
plans (whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125 percent of the dollar
limitation determined for the "limitation year" under Code Sections
415(b) and (d) or 140 percent of the highest average compensation,
including any adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year"
beginning after December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6, 1986, the
denominator of this fraction win not be less than 125 percent of the
sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last "limitation year" beginning before
January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied
the requirements of Code Section 415 for all "limitation years"
beginning before January 1, 1987.
(l) The defined contribution plan fraction. for any
"limitation year" is a fraction, the numerator of which is the sum of
the annual additions to the Participant's Account under all the defined
contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior "limitation years" (including
the annual additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Code Section
419(e), and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
"limitation years" of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The
maximum aggregate amount in any "limitation year" is the lesser of 125
percent of the dollar limitation determined under Code Sections 415(b)
and (d) In effect under Code Section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
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If the Employee was a Participant as of the end of
the first day of the first "limitation year" beginning after December
31, 1986, in one or more defined contribution plans maintained by the
Employer which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the denominator
of this fraction, will be permanently subtracted from the numerator of
this fraction The adjustment is calculated using the fractions as they
would be computed as of the end of the last "limitation year" beginning
before January 1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first "Limitation year"
beginning on or after January 1, 1987. The annual addition for any
"limitation year" beginning on or before January 1, 1987 shall not be
recomputed to treat all Employee contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year"
in which the Plan is a Top Heavy Plan, 100 percent shall be substituted
for 125 percent in Sections 4.9(k) and 4.9(l) unless the extra minimum
allocation is being provided pursuant to Section 4.4. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(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.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in estimating a
Participant's Compensation, a reasonable error in determining the
amount of elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any Participant under the
limits of Section 4.9 or other facts and circumstances to which
Regulation 1.415-6(b)(6) shall be applicable, the of annual additions"
under this Plan would cause the maximum "annual additions" to be
exceeded for any Participant, the Administrator shall (1) distribute
any elective deferrals (within the meaning of Code Section 402(g)(3))
or return any voluntary Employee contributions credited for the
"limitation year" to the extent that the return would reduce the
"excess amount" in the Participant's accounts (2) hold any "excess
amount" remaining after the return of any elective deferrals or
voluntary Employee contributions in a "Section 415 suspense account"
(3) use the "Section 415 suspense account" in the next "limitation
year" (and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that Participant is
covered by the Plan as of the end of the "limitation year," or if the
Participant is not so covered, allocate and reallocate the "Section 415
suspense account" in the next "limitation year" (and succeeding
"limitation years" if necessary) to all Participants in the Plan before
any Employer or Employee contributions which would constitute "annual
additions" are made to the Plan
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<PAGE>
for such "limitation year" (4) reduce Employer contributions to the
Plan for such "limitation year" by the amount of the "Section 415
suspense account" allocated and reallocated during such "limitation
year."
(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 4.9.
(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.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Employees, provided that the
trust from which such funds are transferred permits the transfer to be
made and the transfer will not jeopardize the tax exempt status of the
Plan or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall
be fully Vested at all times and shall not be subject to Forfeiture for
any reason.
(b) Amounts in a Participant's Rollover Account shall be held
by the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined
in Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall be
used to provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.5, including, but not limited to,
all notice and consent requirements of Code Section 411(a)(11) and the
Regulations thereunder. Furthermore, such amounts shall be considered
as part of a Participant's benefit in determining whether an
involuntary cash-out of benefits without Participant consent may be
made.
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(e) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account
may be treated as a Directed Investment Account pursuant to Section
4.12.
(g) For purposes of this Section, the term "qualified plan"
shall mean any tax qualified plan under Code Section 401(a). The term
to amounts transferred from other qualified plans" shall mean: (i)
amounts transferred to this Plan directly from another qualified plan;
(ii) distributions from another qualified plan which are eligible
rollover distributions and which are either transferred by the Employee
to this Plan within sixty (60) days following his receipt thereof or
are transferred pursuant to a direct rollover, (iii) amounts
transferred to this Plan from a conduit individual retirement account
provided that the conduit individual retirement account has no assets
other than assets which (A) were previously distributed to the Employee
by another qualified plan as a lump-sum distribution (B) were eligible
for tax-free rollover to a qualified plan and (C) were deposited in
such conduit individual retirement account within sixty (60) days of
receipt thereof and other than earnings on said assets; and (iv)
amounts distributed to the Employee from a conduit individual
retirement account meeting the requirements of clause (iii) above, and
transferred by the Employee to this Plan within sixty (60) days of his
receipt thereof from such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of
this Section and may also require the Employee to provide an opinion of
counsel satisfactory to the Employer that the amounts to be transferred
meet the requirements of this Section.
(i) This Plan shall not accept any direct or indirect
transfers (as that term is defined and interpreted under Code Section
401(a)(11) and the Regulations thereunder) from a defined benefit plan,
money purchase plan (including a target benefit plan), stock bonus or
profit sharing plan which would otherwise have provided for a life
annuity form of payment to the Participant.
(j) Notwithstanding anything herein to the contrary, a
transfer directly to this Plan from another qualified plan (or a
transaction having the effect of such a transfer) shall only be
permitted if it will not result in the elimination or reduction of any
"Section 411(d)(6) protected benefit" as described in Section 8.1.
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4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine,
that all Participants be permitted to direct the Trustee as to the
investment of all or a portion of the interest in any one or more of
their individual account balances. If such authorization is given,
Participants may, subject to a procedure established by the
Administrator and applied in a uniform nondiscriminatory manner, direct
the Trustee in writing to invest any portion of their account in
specific assets, specific funds or other investments permitted under
the Plan and the directed investment procedure. That portion of the
account of any Participant so directing will thereupon be considered a
Directed Investment Account, which shall not share in Trust Fund
earnings.
(b) A separate Directed Investment Account shall be
established for each Participant who has directed an investment
Transfers between the Participant's regular account and his Directed
Investment Account shall be charged and credited as the case may be to
each account. The Directed Investment Account shall not share in Trust
Fund earnings, but it shall be charged or credited as appropriate with
the net earnings, gains, losses and expenses as well as any
appreciation or depreciation in market value during each Plan Year
attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed necessary by the
Administrator, herein called "valuation date," to determine the net worth of the
assets comprising the Trust Fund as it exists on the to valuation date." In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date" and shall
deduct all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the
Trust Fund which are listed on a registered stock exchange, the Administrator
shall direct the Trustee to value the same at the prices they were last traded
on such exchange preceding the close of business on the "valuation date." If
such securities were not traded on the "valuation date," or if the exchange on
which they are traded was not open for business on the "valuation date," then
the securities shall be valued at the prices at which they were last traded
prior to the of valuation date," Any unlisted security held in the Trust Fund
shall be valued at its bid price next preceding the close of business on the
"valuation date," which bid price shall be obtained from a registered broker or
an investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its
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discretion, employ one or more appraisers for that purpose and rely on the
values established by such appraiser or appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the
Employer and retire for the purposes hereof on its Normal Retirement Date.
However, a Participant may postpone the termination of his employment with the
Employer to a later date, in which event the participation of such Participant
in the Plan, including the right to receive allocations pursuant to Section 4.4,
shall continue until his Late Retirement Date. Upon a Participant's Retirement
Date or attainment of his Normal Retirement Date without termination of
employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Combined
Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the value of the
deceased Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections
6.6 and 6.7, to distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the death benefit.
(d) 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.
(e) The Beneficiary of the death benefit payable pursuant to
this Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the Participant's
Beneficiary, or
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(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p)
which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall
be made on a form satisfactory to the Administrator. A Participant may
at any time revoke his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation or change with
the Administrator. However, the Participant's spouse must again consent
in writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall
be payable to his estate.
(f) 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 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability
prior to his Retirement Date or other termination of his employment, all amounts
credited to such Participant's Combined Account shall become fully Vested. In
the event of a Participant's Total and Permanent Disability, the Trustee, in
accordance with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Combined Account and
invest the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit, common or collective trust
fund of a bank or a deferred annuity. In the event the Vested portion
of a Participant's Combined Account is not segregated, the amount shall
remain in a separate account for the Terminated Participant and share
in
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allocations pursuant to Section 4.4 until such time as a distribution
is made to the Terminated Participant.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event which would
result in the distribution had the Terminated Participant remained in
the employ of the Employer (upon the Participant's death, Total and
Permanent Disability or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the Trustee to cause
the entire Vested portion of the Terminated Participant's Combined
Account to be payable to such Terminated Participant. Any distribution
under this paragraph shall be made in a mariner which is consistent
with and satisfies the provisions of Section 6.5, including, but not
limited to, all notice and consent requirements of Code Section
411(a)(11) and the Regulations thereunder.
If the value of a Terminated Participant's Vested
benefit derived from Employer and Employee contributions does not
exceed $3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator shall direct the Trustee to cause the
entire Vested benefit to be paid to such Participant in a single lump
sum.
(b) A Participant shall become fully Vested in his
Participant's Account immediately upon entry into the Plan.
(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 Plan. For this
purpose, the Plan shall be treated as having been amended if the Plan
provides for an automatic change in vesting due to a change in top
heavy status. In the event that the Plan is amended to change or modify
any vesting schedule, a Participant with at least three (3) Years of
Service as of the expiration date of the election period may elect to
have his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such election,
then such Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of
the amendment from the Employer or Administrator.
(d) (1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
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(2) If a Former Participant completes one (1) Year of
Service for eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively from his date
of reemployment.
(3) If a Former Participant completes a Year of
Service (a 1-Year Break in Service previously occurred, but employment
had not terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he completes one (1)
Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in
one or more of the following methods:
(1) One lump-sum payment in cash;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide
such installment payments, the Administrator may (A) segregate
the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit in a bank or savings
and loan association, money market certificate or other liquid
short-term security or (B) purchase a nontransferable annuity
contract for a term certain (with no life contingencies)
providing for such payment. The period over which such payment
is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his
designated Beneficiary).
(b) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution commences prior to the later of his Normal Retirement Age
or age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit. However, any election
to defer the receipt of benefits shall not apply with respect
to distributions which are required under Section 6.5(c).
(2) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days
before the first day on which all events have occurred which
entitle the Participant to such benefit.
(3) Written consent of the Participant to the distribution
must not be made before the Participant receives the notice
and must not be made more than 90 days
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before the first day on which all events have occurred which
entitle the Participant to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent
to the distribution.
If a distribution is one to which Code Sections 401(a)(11) and
417 do not apply, such distribution may commence less than 30
days after the notice required under Regulation 1.411 (a)-11
(c) is given, provided that: (1) the Administrator clearly
informs the Participant that the Participant has a right to a
period of at least 30 days after receiving the notice to
consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution
option), and (2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(c) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)(2), the provisions of which are incorporated
herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (H) shall no longer
apply and the required beginning date shall be the April 1st
of the calendar year following the calendar year in which such
subsequent Plan Year ends. Alternatively, distributions to a
Participant must begin no later than the applicable April 1st
as determined under the preceding sentence and must be made
over a period certain measured by the Life expectancy of the
Participant (or the life expectancies of the Participant and
His designated Beneficiary) in accordance with Regulations.
Notwithstanding the foregoing, clause (ii) above shall not
apply to any Participant unless the Participant had attained
age 70 1/2 before January 1, 1988 and was not a "five (5)
percent owner" at any time during the Plan Year ending with or
within the calendar year in which the Participant attained age
66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
Additionally, for calendar years beginning before 1989,
distributions may also be made under an alternative method
which provides that the then present value of the
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payments to be made over the period of the Participant's life
expectancy exceeds fifty percent (50%) of the then present
value of the total payments to be made to the Participant and
his Beneficiaries.
(d) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any
annuity Contract purchased and distributed to a Participant or spouse
shall comply with all of the requirements of the Plan.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) (1) The death benefit payable pursuant to Section 6.2
shall be paid to the Participant's Beneficiary within a reasonable time
after the Participant's death by either of the following methods, as
elected by the Participant (or if no election has been made prior to
the Participant's death, by his Beneficiary) subject, however, to the
rules specified in Section 6.6(b):
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly, semi-annual, or
annual cash installments over a period to be
determined by the Participant or his Beneficiary.
After periodic installments commence, the Beneficiary
shall have the right to direct the Trustee to reduce
the period over which such periodic installments
shall be made, and the Trustee shall adjust the cash
amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to
segregate the death benefit into a separate account, and the
Trustee shelf invest such segregated account separately, and
the funds accumulated in such account shall be used for the
payment of the installments.
(b) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of its date
of death. If a Participant dies before he has begun to receive any
distributions of its interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death
occurs.
However, the 5-year distribution requirement of the
preceding paragraph shall not apply to any portion of the deceased
Participant's interest which is payable to or
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for the benefit of a designated Beneficiary. In such event, such
portion may, at the election of the Participant (or the Participant's
designated Beneficiary), be distributed over a period not extending
beyond the life expectancy of such designated Beneficiary provided such
distribution begins not later than December 31st of the calendar year
immediately following the calendar year in which the Participant died.
However, in the event the Participant's spouse (determined as of the
date of the Participant's death) is his Beneficiary, the requirement
that distributions commence within one year of a Participant's death
shall not apply. In lieu thereof, distributions must commence on or
before the later of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died; or (2)
December 31st of the calendar year in which the Participant would have
attained age 70 1/2. If the surviving spouse dies before distributions
to such spouse begin, then the 5-year distribution requirement of this
Section shall apply as if the spouse was the Participant.
(c) For purposes of Section 6.6(b), the election by a
designated Beneficiary to be excepted from the 5-year distribution
requirement must be made no later than December 31st of the calendar
year following the calendar year of the Participant's death. Except,
however, with respect to a designated Beneficiary who is the
Participant's surviving spouse, the election must be made by the
earlier of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died or, if later,
the calendar year in which the Participant would have attained age 70
1/2; or (2) December 31st of the calendar year which contains the fifth
anniversary of the date of the Participant's death. An election by a
designated Beneficiary must be in writing and shall be irrevocable as
of the last day of the election period stated herein. In the absence of
an election by the Participant or a designated Beneficiary, the 5-year
distribution requirement shall apply.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the
Trustee is to make a distribution or to commence a series of payments on or as
of an Anniversary Date, the distribution or series of payments may be made or
begun on such date or as soon thereafter as is practicable. However, unless a
Former Participant elects in writing to defer the receipt of benefits (such
election may not result in a death benefit that is more than incidental), the
payment of benefits shall begin not later than the 60th day after the close of
the Plan Year in which the latest of the following events occurs: (a) the date
on which the Participant attains the earlier of age 65 or the Normal Retirement
Age specified herein; (b) the 10th anniversary of the year in which the
Participant commenced participation in the Plan, or (c) the date the Participant
terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if
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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
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution
payable to a Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of
59 1/2 years, the Administrator, at the election of the Participant, shall
direct the Trustee to distribute all or a portion of the amount then credited to
the accounts maintained on behalf of the Participant. In the event that the
Administrator makes such a distribution, the Participant shall continue to be
eligible to participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any one
Plan Year up to the lesser of 100% of his Participant's Elective
Account valued as of the last Anniversary Date or other valuation date
or the amount necessary to satisfy the immediate and heavy financial
need of the Participant. Any distribution made pursuant to this Section
shall be deemed to be made as of the first day of the Plan Year or, if
later, the valuation date immediately preceding the date of
distribution, and the Participant's Elective Account shall be reduced
accordingly. Withdrawal under this Section shall be authorized only if
the distribution is on account of.
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of
his dependents (as defined in Code Section 152) or necessary
for these persons to obtain medical care;
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(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition and related educational fees for the
next twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's representation
and such other facts as are known to the Administrator, determines that
all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The
amount of the immediate and heavy financial need may include
any amounts necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated to result
from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by
the Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and
voluntary Employee contributions will be suspended for at
least twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a legally
enforceable agreement, will suspend His elective deferrals and
voluntary Employee contributions to the Plan and all other
plans maintained by the Employer for at least twelve (12)
months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals
for the Participant's taxable year immediately following the
taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's elective
deferrals for the taxable year of the hardship distribution.
(c) Notwithstanding the above, for Plan Years beginning after
December 31, 1988, distributions from the Participant's Elective
Account pursuant to this Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as of the end of
the last Plan Year ending before July 1, 1989, plus the total
Participant's Deferred Compensation after such date, reduced by the
amount of any previous distributions pursuant to this Section and
Section 6.10.
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(d) Any distribution made pursuant to this Section shall be
made in a manner which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order." Furthermore, a
distribution to an "alternate payee" shall be permitted if such distribution is
authorized by a "qualified domestic relations order," even if the affected
Participant has not separated from service and has not reached the "earliest
retirement age" under the Plan. For the purposes of this Section, "alternate
payee," "qualified domestic relations order" and "earliest retirement age" shall
have the meaning set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of
responsibilities:
(a) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets
subject, however, to the direction of an Investment Manager if the
Trustee should appoint such manager as to all or a portion of the
assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a
written annual report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by
a majority of their number, but may authorize one or more of them to
sign papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to
keep the Trust Fund invested without distinction between principal and
income and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein. The
Trustee shall at all
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times in making investments of the Trust Fund consider, among other
factors, the short and long-term financial needs of the Plan on the
basis of information furnished by the Employer. In making such
investments, the Trustee shall not be restricted to securities or other
property of the character expressly authorized by the applicable law
for trust investments; however, the Trustee shall give due regard to
any limitations imposed by the Code or the Act so that at all times the
Plan may qualify as a qualified Profit Sharing Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under
common law, statutory authority, including the Act, and other provisions of the
Plan, shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with or without
advertisement;
(c) To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes affecting
corporate securities, and to delegate discretionary powers, and to pay
any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property;
(d) To cause any securities or other property to be registered
in the Trustee's own name or in the name of one or more of the
Trustee's nominees, and to hold any investments in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in
such amount, and upon such terms and conditions, as the Trustee shall
deem advisable; and for any sum so borrowed, to issue a promissory note
as the Trustee, and to secure the repayment thereof
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by pledging all, or any part, of the Trust Fund; and no person lending
money to the Trustee shall be bound to see to the application of the
money lent or to inquire into the validity, expediency, or propriety of
any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the Plan, to commence
or defend suits or legal or administrative proceedings, and to
represent the Plan in all suits and legal and administrative
proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper, to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United
States government obligations;
(n) To invest in shares of investment companies registered
under the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities
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Exchange Act of 1934, as amended, or, if the options are not traded on
a national securities exchange, are guaranteed by a member firm of the
New York Stock Exchange;
(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time,
with assets belonging to any other qualified employee pension benefit
trust created by the Employer or an affiliated company of the Employer,
and to commingle such assets and make joint or common investments and
carry joint accounts on behalf of this Plan and such other trust or
trusts, allocating undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts in accordance
with their respective interests;
(r) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the
Trustee shall be exercised in the sole fiduciary discretion of the
Trustee. However, if Participants are so empowered by the
Administrator, each Participant may direct the Trustee to separate and
keep separate all or a portion of his account, and further each
Participant is authorized and empowered, in his sole and absolute
discretion, to give directions to the Trustee pursuant to the procedure
established by the Administrator and in such form as the Trustee may
require concerning the investment of the Participant's Directed
Investment Account. The Trustee shall comply as promptly as practicable
with directions given by the Participant hereunder. The Trustee may
refuse to comply with any direction from the Participant in the event
the Trustee, in its sole and absolute discretion, deems such directions
improper by virtue of applicable law. The Trustee shall not be
responsible or liable for any loss or expense which may result from the
Trustee's refusal or failure to comply with any directions from the
Participant. Any costs and expenses related to compliance with the
Participant's directions shall be borne by the Participant's Directed
Investment Account.
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans
to Participants and Beneficiaries under the following circumstances:
(1) loans shall be made available to all Participants and Beneficiaries
on a reasonably equivalent basis; (2) loans shall not be made available
to Highly Compensated Employees in an amount greater than the amount
made available to other Participants and Beneficiaries; (3) loans shall
bear a reasonable rate of interest; (4) loans shall be adequately
secured; and (5) shall provide for repayment over a reasonable period
of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
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(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date
on which such loan is made, over the outstanding balance of
loans from the Plan to the Participant on the date on which
such loan was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer
shall be one plan. Additionally, with respect to any loan made prior to
January 1, 1987, the $50,000 limit specified in (1) above shall be
unreduced.
(c) Loans shall provide for level amortization with payments
to be made not less frequently than quarterly over a period not to
exceed five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years. Notwithstanding the foregoing, loans made
prior to January 1, 1987 which are used to acquire, construct,
reconstruct or substantially rehabilitate any dwelling unit which,
within a reasonable period of time is to be used (determined at the
time the loan is made) as a principal residence of the Participant or a
member of his family (within the meaning of Code Section 267(c)(4)) may
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years. Additionally, loans made prior to January 1,
1987, may provide for periodic payments which are made less frequently
than quarterly and which do not necessarily result in level
amortization.
(d) Any loans granted or renewed on or after the last day of
the first Plan Year beginning after December 31, 1988 shall be made
pursuant to a Participant loan program. Such loan program shall be
established in writing and must include, but need not be limited to,
the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of
loans offered;
(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a
Participant loan; and
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(7) the events constituting default and the steps that
will be taken to preserve Plan assets.
Such Participant loan program shall be contained in a
separate written document which, when properly executed, is hereby
incorporated by reference and made a part of the Plan. Furthermore,
such Participant loan program may be modified or amended in writing
from time to time without the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from
time to time, in accordance with the terms of the Plan, make payments out of the
Trust Fund. The Trustee shall not be responsible in any way for the application
of such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as
shall from time to time be agreed upon in writing by the Employer and the
Trustee. An individual serving as Trustee who already receives full-time pay
from the Employer shall not receive compensation from the Plan. In addition, the
Trustee shall be reimbursed for any reasonable expenses, including reasonable
counsel fees incurred by it as Trustee. Such compensation and expenses shall be
paid from the Trust Fund unless paid or advanced by the Employer. All taxes of
any kind and all kinds whatsoever that may be levied or assessed under existing
or future laws upon, or in respect of, the Trust Fund or the income thereof,
shall be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the
Anniversary Date or receipt of the Employer's contribution for each Plan Year,
the Trustee shall furnish to the Employer and Administrator a written statement
of account with respect to the Plan Year for which such contribution was made
setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon
sales or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust
Fund;
(d) all payments and distributions made from the Trust
Fund; and
(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer, forthwith upon its
receipt of each such statement of account, shall acknowledge receipt
thereof in writing and advise the Trustee and/or Administrator
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of its approval or disapproval thereof. Failure by the Employer to
disapprove any such statement of account within thirty (30) days after
its receipt thereof shall be deemed an approval thereof. The approval
by the Employer of any statement of account shall be binding as to all
matters embraced therein, as between the Employer and the Trustee to
the same extent as if the account of the Trustee had been settled by
judgment or decree in an action for a judicial settlement of its
account in a court of competent jurisdiction in which the Trustee, the
Employer and all persons having or claiming an interest in the Plan
were parties; provided, however, that nothing herein contained shall
deprive the Trustee of its right to have its accounts judicially
settled if the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan
in accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a
written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by
registered or certified mail, addressed to such Trustee at his last
known address, at least thirty (30) days before its effective date, a
written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer, and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with
all the estate, rights, powers, discretions, and duties of his
predecessor
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with like respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 7.7 for the approval by the Employer of
annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 7.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty
or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan,
the Trustee at the direction of the Administrator shall transfer the Vested
interest, if any, of such Participant in his account to another trust forming
part of a pension, profit sharing or stock bonus plan maintained by such
Participant's new employer and represented by said employer in writing as
meeting the requirements of Code Section 401(a), provided that tile trust to
which such transfers are made permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributes may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributes in a direct rollover.
(b) For purposes of this Section the following definitions
shall apply:
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(1) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the
distributes, 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
distributes or the joint lives (or joint life expectancies) of
the distributes 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 includible 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 Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a qualified
trust described in Code Section 401(a), that accepts the
distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributes includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse or
former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. Any such amendment
shall be adopted by formal action of the Employer's board of directors
and executed by an officer authorized to act on behalf of the Employer.
However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be made with
the Trustee's and Administrator's written consent. Any such amendment
shall become effective as provided therein upon its execution. The
Trustee shall not be required to execute any such amendment unless the
Trust provisions contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than such part
as is required to pay taxes and administration
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<PAGE>
expenses) to be used for or diverted to any purpose other than for the
exclusive benefit of the Participants or their Beneficiaries or
estates; or causes any reduction in the amount credited to the account
of any Participant; or causes or permits any portion of the Trust Fund
to revert to or become property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 411(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated
to the accounts of all Participants in accordance with the provisions
hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Section 6.5. Distributions to a Participant shall be made in cash or
through the purchase of irrevocable nontransferable deferred
commitments from an insurer. Except as permitted by Regulations, the
termination of the Plan shall not result in the reduction of "Section
411(d)(6) protected benefits" in accordance with Section 8.1(c).
8.3 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, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
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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 the extent a Participant
or Beneficiary is indebted to the Plan, as a result of a loan from the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall be paid by the
Trustee to the Trustee or the Administrator, at the direction of the
Administrator, to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or Beneficiary must
be given written notice by the Administrator that such loan
indebtedness is to be so paid in whole or part from his Participant's
Combined Account. If the Participant or Beneficiary does not agree that
the loan indebtedness is a valid claim against his Vested Participant's
Combined Account, he shall be entitled to a review of the validity of
the claim in accordance with procedures provided in Sections 2.12 and
2.13.
(c) 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.
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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 Texas, 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, attorney's 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 an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (1) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
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
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the funds such Fiduciary handles; provided, however, that the minimum bond shall
be $1,000 and the maximum bond, $500,000. The amount of funds handled shall be
determined at the beginning of each Plan Year by the amount of funds handled by
such person, group, or class to be covered and their predecessors, if any,
during the preceding Plan Year, or if there is no preceding Plan Year, then by
the amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the Fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Act Section
412(a)(2)), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything in the Plan to the contrary, the cost of such bonds
shall be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors,
shall be responsible for the validity of any Contract issued hereunder or for
the failure on the part of the insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment or render a
Contract null and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have
any responsibility for the validity of this Plan or for the tax or legal aspects
of this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 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.
9.11 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.
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9.12 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, to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
9.13 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.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(e), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution by
the Employer under the Code and, to the extent any
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such deduction is disallowed, the Employer may, within one (1) year
following the disallowance of the deduction, demand repayment of such
disallowed contribution and the Trustee shall return such contribution
within one (1) year following the disallowance. Earnings of the Plan
attributable to the excess contribution may not be returned to the
Employer, but any losses attributable thereto must reduce the amount so
returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied
in a uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
ARTICLE 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) Each such Participating Employer shall be required to use
the same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle,
hold and invest as one Trust Fund all contributions made by
Participating Employers, as well as all increments thereof. However,
the assets of the Plan shall, on an ongoing basis, be available to pay
benefits to all Participants and Beneficiaries under the Plan without
regard to the Employer or Participating Employer who contributed such
assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer
or a Participating Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such Participant's Combined
Account as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall
continue to his credit.
(d) All rights and values forfeited by termination of
employment shall inure only to the benefit of the Participants of the
Employer or Participating Employer by which the forfeiting Participant
was employed, except if the Forfeiture is for an Employee whose
Employer is an Affiliated Employer, then said Forfeiture shall inure to
the benefit of the Participants of those Employers who are Affiliated
Employers. Should an Employee of
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one ("First") Employer be transferred to an associated ("Second")
Employer which is an Affiliated Employer, such transfer shall not cause
his account balance (generated while an Employee of "First" Employer)
in any manner, or by any amount to be forfeited. Such Employee's
Participant Combined Account balance for all purposes of the Plan,
including length of service, shall be considered as though he had
always been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) 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 party to
this Plan; provided, however, that with respect to all of its relations with the
Trustee and Administrator for the purpose of this Plan, each Participating
Employer shall be deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates the contrary, the word
"Employer" shall be deemed to include each Participating Employer as related to
its adoption of the Plan.
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 Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan Year
shall be allocated only among those Participants of the Employer or
Participating Employer making the contribution, except if the contribution is
made by an Affiliated Employer, in which event such contribution shall be
allocated among all Participants of all Participating Employers who are
Affiliated Employers in accordance with the provisions of this Plan. On the
basis of the information furnished by the Administrator, the Trustee shall keep
separate books and records concerning the affairs of each Participating Employer
hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
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10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there
shall be a Participating Employer hereunder shall only be by the written action
of each and every Participating Employer and with the consent of the Trustee
where such consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue
or revoke its participation in the Plan. At the time of any such discontinuance
or revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees, provided however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d)(6) protected benefits" in accordance with Section 8.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof
in no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
10.8 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.
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El Chico Corporation (Georgia)
By/s/Susan R. Holland
-------------------------------
EMPLOYER
El Chico Corporation of Alabama
By/s/Susan R. Holland
-------------------------------
EMPLOYER
El Chico Corporation of Florida
By/s/Susan R. Holland
-------------------------------
EMPLOYER
Pronto Design & Supply, Inc.
By/s/Lawrence E. White
-------------------------------
EMPLOYER
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TRUSTEE
Profit Sharing Plan Administration Committee
/s/Lawrence E. White
-------------------------------
Lawrence E. White
/s/Susan R. Holland
-------------------------------
Susan R. Holland
/s/Alice M. Kain
-------------------------------
Alice M. Kain
/s/John A. Cuellar
-------------------------------
John A. Cuellar
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75
SYGMA/EL CHICO RESTAURANTS, INC.
DISTRIBUTION SERVICE AGREEMENT
I. RECITALS
A. El Chico Restaurants, Incorporated (hereinafter "El Chico")
is the owner, operator and manager of El Chico, Casa Rosa
and Cantina Laredo restaurants;
B. El Chico desires to designate The SYGMA Network, Inc., a
wholly-owned subsidiary of SYSCO Corporation, (hereinafter
"SYGMA") as its primary distributor for products to all of
its restaurants;
C. SYGMA is a firm which will carry and distribute products
required by El Chico restaurants;
D. SYGMA desire to perform the function of purchasing,
warehousing, and distributing of products for El Chico
restaurants.
II. BASIC AGREEMENT
A. El Chico agrees to purchase from SYGMA and SYGMA agrees to
purchase, warehouse, and distribute for and to sell, to El
Chico the complete needs of El Chico's restaurants for all
products ("Products") used in its restaurant operations
including but not limited to fresh dairy products, meat
products, other frozen and refrigerated items, including
avocado pulp, canned and dry goods, beverages, paper and
disposables, chemical and janitorial products, and other
non-food products requiring frequent replacement. The only
products to be exceptions from SYGMA distribution are
produce, coffee, gas products, beer, wine and other liquor.
SYGMA shall not sell or distribute any proprietary El Chico
products to other SYGMA customers without prior consent by
El Chico.
B. Those concept restaurants owned by El Chico, but operating
under other trade names, have the right to purchase products
from SYGMA under the same terms and conditions as specified
in the Agreement, but they are not obligated to do so.
Similarly, SYGMA is obligated to provide service to those
restaurants only from its regular inventory.
III. PRODUCT DESIGNATION
A. Product Selection - El Chico may designate the brands and/or
suppliers of Products it prefers to have SYGMA supply. El
Chico reserves the right to select all Product
CORPDAL:63523.1 14047-00001 1
<PAGE>
suppliers and to negotiate price and terms with all
suppliers of Products and all freight service suppliers.
B. Inventory Management - SYGMA shall use reasonable,
good-faith effort to utilize proper inventory management to
assure a continuous supply of Products while minimizing the
risk of inventory obsolescence. SYGMA will provide El Chico
with a quarterly status report of slow-moving or close-coded
Products. Within two weeks of receipt of the quarterly
status report of slow-moving or close-coded products, El
Chico and SYGMA agree to review all products whose risk of
obsolescence is apparent. Joint resolutions to assign and
reduce obsolete inventory exposure will be initiated.
El Chico will communicate with SYGMA regarding anticipated
menu or Product mix changes to help avoid obsolete inventory
issues and will assist SYGMA in removal or disposition of
slow-moving and close-coded Products. If SYGMA purchases a
Product in reasonable anticipation of sale to El Chico and
the use of such Product by all or any of the Restaurants is
discontinued by El Chico or the volume of purchases of a
Product declines substantially to the point where El Chico
and SYGMA agree the risk of obsolescence is apparent, El
Chico will either: 1) assume financial responsibility for
the cost to return any unsold inventory of such product to
the supplier; unless the inventory obsolescence or a portion
thereof was caused by SYGMA in which case SYGMA will be
responsible for the cost of any unsold inventory of such
products; or 2) designate a specific restaurant or
restaurants to purchase and use the subject product
inventory within a reasonable period of time; or 3)
implement other disposal alternatives, to be mutually
determined; or 4) if such Product is not sold or otherwise
disposed of in accordance with this paragraph IIIB, El Chico
shall within 30 days, pay SYGMA the Cost herein defined of
any unsold inventory of such product. SYGMA will make such
Product available for pick up by El Chico or its designee.
Notwithstanding, anything to the contrary in this Agreement,
El Chico will not be responsible for SYGMA orders of
discontinued product after El Chico has given SYGMA written
notice of discontinuance of such product. SYGMA will use
reasonable good faith efforts to cancel or return vendor
product on order or in transit to reduce El Chico liability.
IV. SERVICE
A. On order and delivery schedules determined by SYGMA and
agreed upon by El Chico, SYGMA will make two deliveries per
week to new or existing El Chico Restaurants in the dark
grey shaded area depicted in Exhibit 1. SYGMA will make one
delivery per week to new or existing El Chico Restaurants in
the light grey shaded area depicted in Exhibit 1.
CORPDAL:63523.1 14047-00001 2
<PAGE>
B. SYGMA will also provide regular distribution service, special
distribution service or expanded delivery frequency to future
Restaurants El Chico may own or franchise outside the once per
week or twice per week boundaries of this Agreement as
depicted in Exhibit 1 but at an additional charge for all
incremental round-trip mileage
CORPDAL:63523.1 14047-00001 3
<PAGE>
or other additional costs due to extraordinary routing SYGMA
may incur from its closest customer to the new Restaurants.
The rate per mile will be negotiated in good faith between
both parties.
C. Delivery may be scheduled seven days per week during the
following times:
11:00 p.m. - 11:00 a.m.
1:30 p.m. - 5:00 p.m.
During the meal windows of 11:00 a.m. to 1:30 p.m. and 5:00
p.m. to 11:00 p.m., there should be no SYGMA trucks on the
lot so as not to conflict with customer traffic.
D. For those El Chico Restaurants receiving more than one
delivery per week, it is understood that El Chico Restaurant
managers will reasonably balance the orders to within a 10%
weekly variance from the weekly average order, such that all
deliveries consist of approximately the same number of cases
(excluding holiday weeks). For those restaurants not
achieving this variance requirement, El Chico Restaurant
management and SYGMA will work in good faith to reduce
variances in excess of 10%. If after 30 days following
notification of such variance, a Restaurant has not
reasonably balanced at least three of the next four weeks'
orders, SYGMA shall have the option to add a $50.00 drop
charge to subsequent orders that are not reasonably
balanced, until such time as the Restaurant is reasonably
balancing at least 75% of their orders.
E. SYGMA delivery drivers will bring all products into all El
Chico Restaurants where it is possible to roll a two-wheel
cart. Further, where it is possible to roll a two-wheel
cart, the SYGMA delivery drivers will separate the order to
the Restaurants' freezer, cooler, and storeroom.
V. PRICING
A. SYGMA will price all products to El Chico on the basis of
the following pricing formula:
All Meat Products, including $0.10 per pound over cost
Ground Beef, Seafood and
Poultry
All Cheese products $0.10 per pound over cost
CORPDAL:63523.1 14047-00001 4
<PAGE>
Avocado Pulp $1.75 mark-up over cost
All other Fresh Produce 16% gross margin on selling price
Soft Drink Syrups Coca-Cola and Dr. Pepper
National Account Pricing
Chile Con Carne Concentrate $0.1425 per pound over cost
Proprietary Products 12.5% gross margin on selling price
All other food products 12.5% gross margin on selling price
including Fresh Dairy
Canned and Dry Goods 12% gross margin on selling price
Ecolab Products National Account Pricing
Equipment/Smallwares 12% gross margin on selling price
All other Non-Food Products 16% gross margin on selling price
CORPDAL:63523.1 14047-00001 5
<PAGE>
SYGMA and El Chico agree to monitor gross margins with the
goal of achieving an overall 9.5% gross margin on selling
price prior to any discount or rebates in Sections V.D., V.E.
and VIII. If in any period of three consecutive months, the
overall gross margin on selling price exceeds 9.6% or is below
9.4%, both parties agree that pricing will be adjusted on
mutually agreed upon categories with the goal of achieving a
9.5% overall gross margin on selling price.
B. Definition of Cost - The price to El Chico for all products
sold under this Distribution Service Agreement will be
calculated on the basis of cost. Cost is defined as the cost
of the product as shown on the invoice to SYGMA plus
applicable freight. The invoice used to determine cost will be
the invoice issued to SYGMA by the vendor or by the
Merchandising Services Department of SYSCO Corporation.
Cost is not reduced by cash discounts for prompt payment
available to SYGMA. Promotional allowances reflected on
invoices to SYGMA will be passed along as a temporary
reduction in cost for the term of the promotion.
Applicable freight, in those cases where the invoice cost to
SYSCO is not a delivered cost, means that a reasonable freight
charge for delivering products to SYGMA has been added.
Freight charges may include common or contract charges by the
product vendor or a carrier, or charges billed by Alfmark,
SYSCO Corporation's freight management service, or charges for
shipments back hauled via SYGMA truck.
CORPDAL:63523.1 14047-00001 6
<PAGE>
Applicable freight for any product will not exceed the rate
charged by reputable carriers operating in the same market
with the same type of freight service.
SYGMA and SYSCO Corporation perform value-added services for
suppliers of SYSCO brand and other products over and above
procurement activities typically provided. These value-added
services include regional and national marketing, freight
management, consolidated warehousing, quality assurance and
performance based product marketing. SYGMA and SYSCO
Corporation may be reimbursed for the costs of providing these
services and may also be compensated for these services and
consider this compensation to be earned income, but such
reimbursements and compensation shall not reduce SYGMA's
invoice cost for the related product. Receipt of such cost
recovery or earned income for such services does not diminish
SYGMA's commitment to provide competitive prices to its
customers. Notwithstanding such cost recovery or earned income
for such services, (i) promotional allowances reflected on
invoices to SYGMA will continue to reduce SYGMA's cost and
(ii) SYGMA's cost will continue to reflect volume bracket
pricing discounts made available to SYGMA by vendors, and
(iii) SYGMA represents that its margins used to calculate
prices under this agreement reflect promotional allowances or
volume discounts realized by SYGMA through SYSCO purchasing
programs.
C. Pricing assumes that SYGMA investment in inventory will
average 14 days of sales. No one item is assumed to be
purchased in excess of three weeks inventory with the
exception of smallwares. The parties will mutually agree upon
order quantities for new items.
In those cases where SYGMA is requested to purchase in
quantities exceeding three weeks, except for smallwares, El
Chico will compensate SYGMA for any additional costs incurred
in carrying the additional inventory.
D. A SYGMA item selection rebate will be paid on a quarterly
basis on all items purchased from a mutually agreed upon list
of products for which SYGMA has discretion to choose the
source. To qualify, El Chico must be purchasing a full line of
products and must be remitting payment within the stated
terms.
Mutually agreed upon dry items 0.75%
Mutually agreed upon frozen or refrigerated items 1.5%
E. All SYSCO branded items qualify for a 1% rebate paid
quarterly. To qualify, El Chico must be purchasing a full line
of products and must be remitting payment within the stated
terms.
F. All restaurants will be served from SYGMA-Dallas.
CORPDAL:63523.1 14047-00001 7
<PAGE>
G. El Chico agrees to require its restaurants to purchase a full
line of all products previously identified in Section II,
Paragraph A.
VI. AUDIT AND FINANCIAL REPORTING
A. El Chico's authorized representative shall have the right at
all reasonable times to examine SYGMA's product cost records
and invoices. El Chico will provide reasonable notice of its
intent to conduct any such examination and shall conduct such
examination so as to not unreasonably interfere with SYGMA's
operations.
B. SYGMA will deliver to El Chico quarterly reports of SYSCO
Corporation's financial position.
C. El Chico will deliver to SYGMA quarterly reports of its
financial position and any other public reports filed (i.e.,
10-K's, etc.).
VII. REPORTING
SYGMA will provide El Chico with regular product pricing reports,
product usage reports, and other managerial information reports similar
to those SYGMA currently provides its other chain restaurant customers.
VIII. PAYMENT TERMS
El Chico will remit weekly to SYGMA's Dallas lockbox. El Chico will
mail the remittance in sufficient time to allow SYGMA's receipt at the
lockbox. every Wednesday, and the remittance will pay for all SYGMA
invoices from the week ended two Saturdays prior, thereby effectively
resulting in 14-day payment terms. SYGMA will ensure that El Chico
receives by Wednesday of every week a complete register of invoices and
credits, by Restaurants, detailing all such transactions for the week
ended the prior Saturday.
SYGMA offers El Chico the flexibility to remit on a 7 day, or cash
equivalent basis and receive an early-payment discount, provided that
the payment for a particular week's shipments (Sunday through Saturday)
is received at SYGMA's designated bank by:
A. The first Wednesday after shipment week a rebate for one
quarter of one percent (0.25%) of the invoice amount early
payment allowance for net 7 day payment determined as follows:
(S M T W TH F S) (shipment week)
7 days S M T W TH F S
^
^
Receipt of payment
CORPDAL:63523.1 14047-00001 8
<PAGE>
B. The second Wednesday after a shipment week provided cash
collateral equal to two weeks' worth of purchases is on
deposit with SYGMA, a rebate for one half of one percent
(0.5%) early payment allowance for cash equivalent payment.
(S M T W TH F S) (shipment week)
Net 0 days S M T W TH F S
S M T W TH F S
^
^
Receipt of payment
IX. FRANCHISEE PARTICIPATION
SYGMA will extend service and pricing to any El Chico franchisees equal
to that offered to El Chico as specified in this agreement, provided
those franchisees perform their obligations equal to those required of
El Chico, as specified in this Agreement. At SYGMA's ' election, El
Chico franchisees will provide to SYGMA either standby irrevocable
letters of credit or personal guarantees supported by acceptable
personal financial statements. In no case shall El Chico be responsible
for the debts of its franchisees. It is SYGMA's responsibility to
establish an independent good faith relationship with all franchisees.
El Chico will formally designate to SYGMA the extent of all franchisee
participation in El Chico product contracts. SYGMA reserves the right
to grant less liberal payment terms to any franchisee whose financial
condition does not warrant it.
X. INDEMNIFICATION AGAINST FRANCHISEES
El Chico is a franchisor and permits distribution under this
Distribution Service Agreement to franchisees of El Chico. If for any
reason El Chico terminates this Distribution Service Agreement and
directs SYGMA to cease distribution or sales of proprietary items
bearing trademarks or trade dress owned by El Chico to one or more of
such franchisees, El Chico will defend, indemnify and hold SYGMA
harmless from and against any and all losses, damages or claims by
terminated franchisees which may arise from SYGMA ceasing further sales
to such franchisees under this Distribution Service Agreement.
XI. CONFIDENTIAL INFORMATION
It is understood that SYGMA may be privy, in the course of performing
its role as El Chico's exclusive distributor, to certain information as
to product ingredients, specifications, and restaurant volumes which
are confidential to El Chico. It is understood that El Chico may be
privy, in the course of the parties' relationship hereunder, including,
without limitation, in the course of conducting examinations the
parties' relationship hereunder, including, certain confidential
financial information of SYGMA.
A. This Confidential Information is and shall remain the sole,
exclusive and valuable property of the disclosing party (the
"Discloser"), and the receiving party (the "Recipient") shall
acquire no right, title or interest therein. Unless the
Recipient can
CORPDAL:63523.1 14047-00001 9
<PAGE>
prove that such Confidential Information came to the
Recipient's attention or was in the public domain prior to the
Discloser having disclosed such Confidential Information,
directly or indirectly, to the Recipient, the Recipient
covenants and agrees that it shall hold in confidence all
Confidential Information and shall not, without the
Discloser's prior written consent, use Confidential
Information which may come to its attention, or authorize or
permit the use of, any Confidential Information (except as may
be required by applicable law or as may be necessary for SYGMA
to act as El Chico's exclusive distributor) or disclose or
otherwise make available, directly or indirectly, any
Confidential Information to any person (except to such
employees or agents of the Recipient or SYSCO Corporation as
must have access to such information in order to permit SYGMA
to act or attempt to act as El Chico's exclusive distributor).
The Recipient's obligations hereunder, with respect to the
Confidential Information, shall continue for so long as this
Agreement remains in effect and following the termination
hereof . The Recipient's obligations hereunder with respect to
any particular Confidential Information shall in any event
cease at such time as such part of the Confidential
Information is or becomes a part of the public domain through
publication or communication by others, through no fault of
the Recipient. The Recipient shall take all such other steps
reasonably necessary to ensure that the Confidential
Information is not disclosed by any of the Recipient's
officers, directors, employees, or agents to any other person
or entity.
B. The Recipient covenants that it will not copy or reproduce in
whole or in part, any of the Confidential Information, and
upon termination of this Agreement for any reason whatsoever,
the Recipient will promptly deliver to the Discloser's all
documents, data, records, and other written Confidential
Information.
C. The Recipient acknowledges that, irrespective of other causes
for terminations specified elsewhere in this Agreement, the
Recipient's breach of protection of the Discloser's
Confidential Information shall constitute sufficient cause of
termination of this Agreement at any time with ninety days
written notice.
XII. CONTINUATION
In the event that either El Chico or SYGMA should sell its stock or
assets to another entity or be merged into another entity, this
contract shall remain in full force and effect.
XIII. SPECIAL PRODUCT INDEMNIFICATION
SYGMA's policy is that all suppliers provide indemnity agreements and
insurance coverage for products purchased by SYGMA. In order to protect
SYGMA when stocks proprietary/special order items at El Chico's request
and the vendor of such items will not provide a reasonable indemnity
and/or insurance coverage, El Chico will defend, Indemnify and hold
harmless SYGMA and its employees, officers and directors from all
actions, claims and proceedings, and any judgments, damages and
expenses resulting therefrom, brought by any person or entity for
injury, illness and/or death or for damage to property in either case
CORPDAL:63523.1 14047-00001 10
<PAGE>
arising out of the delivery, sale, resale, use or consumption of' any
proprietary/special order item except to the extent such claims are
caused by the negligence of SYGMA, its agents or employees.
XIV. FORCE MAJEURE
If SYGMA is unable to perform its obligations under this agreement by
reason of labor disputes, strikes, fire, flood, accident, weather,
civil disturbances, war, acts of God, failure of sources of supply, and
like causes, El Chico may secure its requirements from other sources
for such periods of time as are reasonable under the circumstances.
XV. NOTICES
All notices required or permitted to be given hereunder shall be in
writing and sent by United States registered or certified mail, postage
prepaid, return receipt requested or (b) reputable express delivery
service, such as Federal Express, Express Mail, DHL or UPS, addressed
to the parties as follows: to El Chico Restaurants, Inc., 12200
Stemmons Freeway, Dallas, Texas 75234, Attention: Larry White and to
The SYGMA Network, Inc., 7125 West Jefferson Avenue, Suite 400,
Lakewood, Colorado 80235, Attention: Jerry J. Eggebrecht. All notices
shall be effective on receipt.
XVI. WARRANTY
SYGMA hereby expressly warrants that all goods furnished hereunder
shall conform to applicable specifications, brands, samples or other
rendered descriptions, that they shall be unadulterated and of high
quality and they shall be merchantable and fit for the purpose for
which they are intended.
XVII. TERM OF AGREEMENT
This Agreement will be remain in effect for a minimum three-year term
beginning June 30, 1996. This Agreement terminates and supersedes all
prior agreements of the parties, whether written or oral.
XVIII. TERMINATION
A. After the initial three-year term of this Agreement, this
Agreement can be terminated by either party with written
notice one year in advance of termination.
B. El Chico has the right to terminate this Agreement upon the
following circumstances:
1. If El Chico has information and knowledge that SYGMA or
SYSCO Corporation has significant financial problems
and will have difficulty meeting the terms of this
Agreement, or
CORPDAL:63523.1 14047-00001 11
<PAGE>
2. If SYGMA has significantly breached the terms of this
Agreement and has failed to cure such breach within 30
days following written notice thereof.
C. SYGMA has the right to terminate this Agreement upon the
following circumstances:
1. If SYGMA has information and knowledge that El Chico
has significant financial problems and will have
difficulty meeting the payment terms of this Agreement,
or
2. If El Chico has significantly breached the terms of
this Agreement and has failed to cure such breach
within 30 days following written notice thereof, with
respect to non-monetary breaches, or within one week
following written notice thereof, with respect to
monetary breaches.
D. Upon termination, El Chico agrees to purchase, at SYGMA's
invoice cost plus freight to SYGMA's distribution centers, all
products in SYGMA's inventory which SYGMA has purchased for
distribution to El Chico. El Chico also agrees to absorb all
freight costs, if any, associated with removing such inventory
from the SYGMA distribution centers.
XIX. GOVERNING LAW
This Agreement shall be governed and construed in accordance with the
laws of Texas.
Accepted this day of , 19 .
------------- --------------------------- ----
EL CHICO RESTAURANTS, INC.
/s/Lawrence E. White
- --------------------
Lawrence E. White
Executive Vice President and Chief Financial Officer
THE SYGMA NETWORK, INC.
/s/Jerry J. Eggebrecht
- ----------------------
Jerry J. Eggebrecht
President
CORPDAL:63523.1 14047-00001 12
<PAGE>
EXHIBIT I
El Chico Service Area
[GRAPHIC OMITTED]
Twice a week delivery
Once a week delivery
Twice/Week Delivery Area
---------------------------
The Northern boundary to be Interstate 70 (1-70), extending East and West
between the boundaries of the Central Standard Time Zone (CST). From the
juncture of I-70 at each boundary of the CST, extending South to the Gulf of
Mexico on the East and US.-Mexico border on the West. The southern boundary is
the natural boundaries formed by the U.S.-Mexico border and/or the Gulf of
Mexico.
Once/Week-Delivery Area
-----------------------------
On the East, Interstate 25 (1-25) extending North from, El Paso, TX to
Denver, CO. On the North, Interstate 80 (I-80) extending East to Cleveland, OH.
On the East, Interstate 77 (1-77) extending South to Columbia, S.C. From
Columbia, Interstate 20 (1-20) west to U.S. Highway I (U.S. 1) at Augusta, GA;
and South on U.S. 1 to the juncture of U.S. 1 and U.S. 84. U. S. 84 extending
West to the Eastern boundary of the CST and from there, South to the Gulf of
Mexico. The Southern boundary is formed by the natural boundaries referred to in
the twice per week delivery area.
CORPDAL:63523.1 14047-00001 13
<PAGE>
SYGMA/ EL CHICO
FRANCHISEE PARTICIPATION AGREEMENT
I, the undersigned, by signature hereon, agree to all terms and conditions of
the Distribution Service Agreement (attached) (the Agreement) by and between The
SYGMA Network, Inc., (hereinafter "SYGMA") and El Chico Restaurants, Inc.
(hereinafter "El Chico") with respect to purchases of Products (as defined in
the Agreement) from SYGMA as if Franchisee were El Chico as such term is used in
the Agreement.
- ---------------------------- ------------------------------
Entity Name Number of Restaurants
- ----------------------------
Signed by
- ----------------------------
Title
- ----------------------------
Date
CORPDAL:63523.1 14047-00001 14
EL CHICO RESTAURANTS, INC.
EXCESS SAVINGS PLAN
W I T N E S S E T H:
WHEREAS, EL CHICO RESTAURANTS, INC. (the "Company") desires to adopt the EL
CHICO RESTAURANTS, INC. EXCESS SAVINGS PLAN effective as of January 1, 1994, for
the benefit of its eligible, highly compensated employees.
NOW, THEREFORE, the EL CHICO RESTAURANTS, INC. EXCESS SAVINGS PLAN shall be
and is hereby adopted effective as of January 1, 1994, to read as follows:
CORPDAL:63526.1 14047-00001 1
<PAGE>
DEFINITIONS AND CONSTRUCTION
1.01 Definitions. Where the following words and phrases appear in this
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary:
(1) Accounts: A Participant's Savings Account. This Account may be divided
into subaccounts as appropriate.
(2) Act: The "Employee Retirement Income Security Act of 1974", as amended
from time to time.
(3) Authorized Leave of Absence: Any absence authorized by the Company
under the Company's standard personnel practices, provided that all
persons under similar circumstances must be treated alike in the
granting of such Authorized Leaves of Absence.
(4) Benefit Disbursement Date: With respect to each Participant, the date
the first payment is made under this Plan to provide a benefit for such
Participant or his beneficiary. In general, this date shall occur
within thirty (30) days after the Participant's death, certified
disability or other severance from employment.
(5) Code: The Internal Revenue Code of 1986, as amended.
(6) Commencement Date: The date on which an employee first performs an
Hour of Service.
(7) Committee: The administrative committee appointed by the directors to
administer the Plan.
(8) Company: El Chico Restaurants, Inc., a Texas corporation whose
corporate offices are located in Dallas, Texas.
(9) Compensation: The total of all wages and other amounts paid by the
Company or any Employing Company (in the course of its business) to or
for the benefit of an employee for services rendered or labor performed
which is required to be reported on the employee's Form W-2, excluding,
however, amounts paid or reimbursed by the company or employing Company
for moving expenses incurred by the Employee (but only to the extent it
is reasonable to believe at the time of the payment that the moving
expenses will be deductible under Section 217 of the Code), and without
regard to any rules that limit the amount to be included in wages based
on the nature or location of the service performed. Notwithstanding the
foregoing, for purposes of Sections 1.01(11) and 4.01, a Participant's
Compensation shall include amounts which he could have received in cash
in lieu of a Savings Deferral under this Plan and any salary deferral
or elective contributions under any code Section 401(k) or cafeteria
plan.
(10) Directors: The Board of Directors of the Company.
CORPDAL:63526.1 14047-00001 2
<PAGE>
(11) Eligible Employee: Any Salaried Employee: (i) whose annual rate of
Compensation as determined on his commencement Date, is in excess of
the Fifty Thousand dollar ($50,000) amount set forth in section 414(q)
(1)(C) of the Code as adjusted from time to time by the Secretary of
the Treasury; or (ii) who, for any year after 1992 and immediately
before the year for which eligibility for participation is being
determined, earned Compensation in excess of the Fifty Thousand dollar
($50,000) amount set forth in section 414(q)(1)(C) of the Code, as
adjusted from time to time by the Secretary of the Treasury.
(12) Employee: Any individual employed by the Company, or by any other
employing Company.
(13) Employing Company: The Company and any other corporation, association,
partnership or proprietorship which adopts this Plan in accordance with
the consent of the Company shall be called an "Employing Company". Such
Employing Company shall be identified in Appendix A hereto.
(14) Enrollment Form: That form provided by the Committee pursuant to which
the Participant authorizes the Company to reduce his future
Compensation in the form of Savings Deferrals.
(15) Hours of Service: See Section 3.01(a) herein.
(16) Participant: Any employee who has met the eligibility requirements for
participation in this Plan as set forth in Article III herein and has
elected to participate by filing a properly executed Enrollment Form.
(17) Plan: El Chico Restaurants, Inc. Excess Savings Plan, which is a
nonqualified, unfunded plan of deferred compensation, as it may be
amended from time to time.
(18) Plan Quarter: Any three (3 consecutive month period commencing on
January 1, April 1, July 1 or October 1 of any Plan Year.
(19) Plan Year: Any twelve (12) consecutive month period commencing upon
January 1 of each year.
(20) Salaried Employee: An Employee who is listed in the Company's books
and paid on a salaried basis.
(21) Savings Account: An individual bookkeeping account for each Participant
to which is credited the Savings Deferrals made by such Participant and
to which is credited or debited such Account's allocation of net income
or net loss determined on the basis of the performance of the fund, or
funds, in which such account is considered to be invested. This account
will include both Savings Deferrals by participants and any
discretionary company matching contribution made pursuant to Section
4.02 hereof.
CORPDAL:63526.1 14047-00001 3
<PAGE>
(22) Savings Deferrals: Deferrals made under the Plan by a Participant in
accordance with the Participant's elections to defer Compensation under
the Plan's deferral arrangement as described in Section 4.01.
(23) Taxable Year: The annual accounting period adopted by the Company for
federal income tax purposes.
(24) Trust Agreement: Any agreement entered into between the Company and a
Trustee establishing a trust to hold and invest some or all of the
contributions made under the Plan and from which the benefits may be
distributed. Any such agreement must be a model trust agreement as
approved by the Internal revenue Service in Rev. Proc. 92-64 or its
successor.
(25) Trust Fund: Any funds and properties held pursuant to the provisions of
the Trust Agreement for the use and benefit of the Participants and
their beneficiaries, or the creditors of the Company in the event of
the Company's insolvency, together with all income, profits and
increments thereto.
(26) Trustee: The trustee or trustees qualified and acting under the Trust
Agreement that may, at any time, form part of this Plan.
(27) Valuation Date: The last day of any calendar month (or the next
preceding business day if such date falls on a weekend or holiday), and
such other date(s) as the Committee may designate from time to time.
1.02 Number and Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and the plural to include the
singular. The masculine gender, where appearing in this Plan, shall be deemed to
include the feminine gender.
1.03 Headings. The headings of Articles and Sections herein are
included solely for convenience and if there is any conflict between such
headings and the text of the Plan, the text shall control.
II.
ADMINISTRATION
2.01 Appointment of Committee. The general administration of the Plan
shall be vested in the Committee which shall be appointed by the directors and
shall consist of three (3) or more persons. Any individual, whether or not an
Employee, is eligible to become a member of the Committee. Each member of the
Committee shall, before entering upon the performance of his duties, qualify by
signing a consent to serve as a member of the Committee under and pursuant to
the Plan and by filing such consent with the records of the Committee.
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2.02 Term, Vacancies, Resignation and Removal. Each member of the
Committee shall serve for a term of one (1) year and thereafter until his
successor is appointed. The directors may, in their discretion, reappoint a
member of the Committee for a subsequent term or terms. If at any time and for
any reason there is a vacancy on the Committee, the Directors shall appoint a
substitute member to fill such vacancy for the remainder of the then current one
(1) year term.
At any time during his term of office, a member of the Committee may
resign by giving written notice to the directors and the Committee, such
resignation to become effective upon receipt by the Company. At any time during
his term of office, and for any reason, a member of the Committee may be removed
by the directors.
2.03 Officers, Records and Procedures. The Committee may select
officers and may appoint a secretary who need not be a member of the Committee.
The Committee shall keep appropriate records of its proceedings and the
administration of the Plan and shall make available for examination during
business hours to any Participant or beneficiary of a deceased participant such
records as pertain to that individual's interest in the Plan. The Committee
shall designate the person or persons who shall be authorized to sign for the
Committee and, upon such designation, the signature of such person or persons
shall bind the Committee.
2.04 Meetings. The Committee shall hold meetings upon such notice and
at such time and places as it may from time to time determine. Notice to a
member shall not be required if waived in writing by that member. A majority of
the members of the Committee duly appointed shall constitute a quorum for the
transaction of business. All resolutions or other actions taken by the Committee
at any meeting where a quorum is present shall be by vote of a majority of those
present at such meeting and entitled to vote. Resolutions may be adopted or
other action taken without a meeting upon written consent signed by all of the
members of the Committee.
2.05 Self-Interest of Participants. No member of the Committee shall
have any right to vote or decide upon any matter relating solely to himself
under the Plan or to vote in any case in which his individual right to claim any
benefit under the Plan is particularly involved. In any case in which a
Committee member is so disqualified to act, and the remaining members cannot
disagree, the directors shall decide the matter in which such Committee member
is disqualified.
2.06 Claims Review. Upon retirement, death or other severance of
employment, a Participant, his beneficiary or representative shall make
application to the Committee requesting payment of benefits due him and the
manner of payment. The Committee shall accept, reject or modify such request and
shall no later than sixty (60) days after receipt of the claim notify the
Participant, beneficiary or representative in writing, setting forth the
response of the Committee and, in the case of a denial or modification, the
Committee shall:
(a) state the specific reason or reasons for the denial or modification;
(b) provide specific reference to pertinent Plan provisions on which the
denial or modification is based;
CORPDAL:63526.1 14047-00001 5
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(c) provide a description of any additional material or information
necessary for the Participant, his beneficiary or representative to perfect the
claim and an explanation of why such material or information is necessary; and
(d) explain the Plan's claim review procedure as contained herein.
In the event the request is denied or modified, and the participant, beneficiary
or representative desires to have such denial or modification reviewed, he must,
within sixty (60) days following receipt of the notice of such denial or
modification, submit a written request for review by the Committee of its
initial decision. Within sixty (60) days following such request for review
(unless special circumstances, such as the need to hold a hearing, if necessary,
requires an extension of time for processing, in which case upon notice to the
claimant before the expiration of such sixty (60) day period, such period shall
be extended to one hundred twenty (120) days) the Committee shall, after
providing a full and fair hearing, render its final decision in writing to the
Participant, beneficiary or representative stating specific reasons for such
decision.
2.07 Compensation, Bonding and Expenses of Committee Members. The
members of the Committee shall not receive compensation with respect to their
services for the Committee. To the extent required by applicable law, or
required by the Company, members of the Committee shall furnish bond or security
for the performance of their duties hereunder. Any expenses properly incurred by
the Committee incident to the administration, termination, or protection of the
Plan and Trust, including the cost of furnishing any bond or security, shall be
paid as provided in Section 10.01.
2.08 Committee Powers and Duties. The Committee shall supervise the
administration and enforcement of the Plan according to the terms and provisions
hereof and shall have all powers necessary to accomplish these purposes,
including, but not by way of limitation, the right, power, authority and duty:
(a) to make rules, regulations and bylaws for the
administration of the Plan which are not inconsistent
with the terms and provisions hereof, provided such
rules, regulations and bylaws are evidenced in writing
and copies thereof are delivered to the Trustee and to
the Company;
(b) to construe all terms, provisions, conditions and
limitations of the Plan, and in all such cases, the
construction necessary for the Plan to qualify under
the applicable provisions of the Code shall control;
(c) to correct any defect or supply any omission or
reconcile any inconsistency that may appear in the
Plan, in such manner and to such extent as it shall
deem expedient to carry the Plan into effect for the
greatest benefit of all interested parties;
(d) to employ and compensate such accountants, attorneys,
investment advisors and other agents and employees as
the Committee may deem necessary or advisable in the
proper and efficient administration of the Plan;
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(e) to determine all questions relating to eligibility;
(f) to determine the amount, manner and time of payment of
any benefits hereunder and to prescribe procedures to
be followed by distributees in obtaining benefits;
(g) to make a determination as to the right of any person
to a benefit under the Plan; and
(i) to receive and review reports from the Trustee as to
the financial condition of the Trust Fund, including
its receipts and disbursements.
Every interpretation, choice, determination or other exercise, by the
Committee of its discretion, whether such discretion is either expressly or by
implication authorized in this Plan, shall be conclusive and binding on all
parties directly or indirectly affected without restriction, however, on the
right of the Committee in its sole and absolute discretion to reconsider and
redetermine such actions.
2.09 Investment Power. Notwithstanding anything to the contrary
contained herein, in addition to the power to appoint an investment manager, the
Committee shall have the power to direct the Trustee as to any investments which
otherwise are to be made in the Trustee's discretion; provided, however, that
should the Committee exercise this power, the Trustee shall be relieved of
liability with respect to investments to the extent permitted by law.
2.10 Company to Supply Information. The Company shall supply full and
timely information to the Committee relating to the compensation of all
Participants, their ages, their retirement, death or other cause for termination
of employment and such other pertinent facts as the Committee may require. The
Company shall advise the Trustee of such of the foregoing facts as are deemed
necessary for the Trustee to carry out the Trustee's duties under the Plan. When
making a determination in connection with the Plan, the Committee shall be
entitled to rely upon the aforesaid information furnished by the Company.
2.11 Company to Indemnify Committee. To the extent permitted by law,
the Company shall indemnify any member of the Committee, and any other person
who performs services to the Plan on an uncompensated basis, and hold him
harmless against any and all liabilities, losses, costs and expenses (including
legal fees and expenses) of whatsoever kind and nature which may be imposed on
or incurred by or asserted against him at any time by reason of his services to
the Plan if he did not act dishonestly or otherwise in willful violation of the
law under which such liability, cost or expense arises. This indemnity shall not
preclude such other indemnities as may be available under insurance purchased by
the Company or under any bylaw, agreement, action of shareholders or
disinterested directors or otherwise, to the extent permitted by law. Payments
of any indemnity, expenses or fees under this Section shall be made solely from
assets of the Company and not, directly or indirectly, from trust funds.
CORPDAL:63526.1 14047-00001 7
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III.
PARTICIPATION
3.01(a) Eligibility. Any Eligible Employee shall be entitled to become
a Participant commencing with the first pay period beginning on or after the
first day of the immediately following Plan Year provided such Eligible Employee
is at least 21 years of age and has completed one (1) Year of Service. A "Year
of Service" is defined as each Plan Year in which the Employee is credited with
one thousand (1,000) Hours of Service. An "Hour of Service" is defined as each
hour for which the Employee is paid or entitled to payment by the Company, an
Employing Company or any related employer under the Code. Hours of Service shall
be determined on the basis of months worked; an Employee shall be credited with
one hundred ninety (190) Hours of Service for a month if such Employee would be
credited with at least one (1) Hour of Service during that month.
Any Eligible Employee who was a Participant prior to a termination of
his employment shall be eligible to become a Participant immediately upon his
reemployment (or, if later attaining status) as an Eligible Employee.
Participation in the Plan is voluntary. Any Eligible Employee entitled
to become a Participant may do so upon the date on which he first becomes so
entitled by executing and filing with the Committee, prior to such date, the
Enrollment Form prescribed by the Committee. Any Eligible Employee who does not
become a Participant upon the date on which he first becomes entitled may become
a Participant with the first pay period beginning on or after the first day of
any subsequent Plan Year by executing and filing such Enrollment Form prior to
the first day of such Plan Year.
3.01(b) Effect of Change in Compensation. If a Participant's
Compensation in a subsequent year drops below the dollar limitation referred to
in Section 1.01(12)(ii), such Participant shall no longer be considered eligible
to participate (since he is no longer an Eligible Employee) for the next Plan
Year or any subsequent Plan Year until he again becomes an Eligible Employee.
Upon becoming an Eligible Employee in a Plan Year, the participant may again
make an election to participate commencing with the first pay period beginning
on or after the first day of the next following Plan Year.
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IV.
DEFERRED COMPENSATION
4.01 Savings Deferrals.
(a) An eligible Participant may elect to defer from four percent
(4%) to one hundred percent (100%) of Compensation to be
credited to his Savings Account under the Plan.
Compensation for a Plan Year not so deferred by such election
or by any other applicable deferral election [e.g., Section
125 of the Code] shall be received by such Participant in
cash. A Participant's initial election to defer an amount of
his Compensation pursuant to this Section 4.01 shall be made
by properly executing an Enrollment Form. The reduction in a
Participant's Compensation for a Plan Year pursuant to his
election under an enrollment Form shall be effected by
Compensation reductions as of each payroll period within such
Plan Year.
(b) An eligible Participant's Enrollment Form shall be effective
as to Compensation earned on and after the first pay period
commencing on or after the first day of the first Plan Year
after it is executed. An Enrollment Form, once executed,
shall remain in force and effect for all periods following the
date of its execution until modified or terminated or until
such Participant terminates his employment. A Participant who
has elected to defer a portion of his Compensation may change
his deferral election percentage within the percentage limits
set forth in Subsection (a) above, effective as of the first
pay period commencing on or after the first day of any future
Plan Year, by executing a New Enrollment Form prior to the
first day of such Plan Year.
(c) An eligible Participant may cancel his enrollment Form,
effective as of the first pay period commencing on or after
the first day of any future Plan Year, by executing the form
prescribed by the Committee for such purpose prior to the
beginning of such future Plan Year. An eligible Participant
who so cancels his Enrollment Form may resume active
participation in the Plan, effective as of the first pay
period commencing on or after the first day of any subsequent
Plan Year, by executing a new Enrollment Form prior to the
first day of such subsequent Plan Year.
4.02 Employer Contributions. The Company and any Employing Company may,
in its sole and absolute discretion, credit discretionary company matching
contributions under the Plan after the end of each Plan Year in such amounts and
percentages of Savings Deferrals of eligible Participants for the Plan Year as
determined by the Company and any Employing Company at that time. Any
discretionary company matching contributions shall be credited to each eligible
Participant's Savings Account in accordance with the matching scheme set forth
by the Company or an Employing Company.
CORPDAL:63526.1 14047-00001 9
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4.03 Payments to Trustee. Amounts credited under the Plan may only be
contributed directly to the Trust Fund at any time. On or about the date of any
such contribution, the Committee shall be informed as to the amount of such
contribution.
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V.
ALLOCATIONS, ADJUSTMENTS AND WITHDRAWALS
IN ACCOUNT VALUES OF FUNDS
5.01 Allocation of Deferrals.
(a) Savings Deferrals made by a Participant pursuant to Section
4.01 shall be credited to such Participant's Savings Account
as of the last day of the pay period in which they are
deferred.
(b) Each Participant's Accounts shall be divided into subaccounts
to reflect such Participant's investment designation in a
particular fund option(s) pursuant to Section 5.03, his
distribution designation made on the enrollment Form or Forms,
or for any other good administrative purpose.
5.02 Valuation of Accounts and Adjustment for Earnings and Losses.
(a) A Participant's Accounts shall be adjusted as of each
applicable Valuation Date to reflect the earnings and/or
losses that would have resulted if those Accounts had been
invested in accordance with the Participant's selection of the
mutual fund options described in Section 5.03. All Accounts
and subaccounts shall be valued at fair market value as of the
Valuation Date.
(b) If a Participant's employment is terminated for any reason or
he is no longer eligible to participate in this Plan, such
participant's Savings Account under this Plan shall continue
to receive periodic adjustments pursuant to this Section;
provided, however, that the value of such Account as of the
date of the preceding Valuation Date shall reduced by the
amount of any payments made therefrom since the date of such
preceding valuation.
5.03 Investment Options.
(a) Subject to any limitations in Section 5 of the Trust
Agreement, a Participant may designate how much of his Savings
Deferrals and Savings Account shall be considered to be
invested in each fund option. Subject to Subsection (c) below,
a Participant may designate all of his Savings Deferrals to
any one fund option or any combination of fund options so long
as the percentage designated to any one fund option is a
specified whole percentage of his Savings Deferrals of Savings
Account. No other type of designation will be permitted.
(b) Subject to any limitation in Section 5 of the Trust Agreement,
a Participant may change his option designation for his future
Savings Deferrals, at any time, effective as of the first day
of the first pay period beginning in the next Plan Quarter
and/or his designation for his existing Savings Account
balances, effective as of the first day of
CORPDAL:63526.1 14047-00001 11
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the next Plan Quarter, by instruction through a telephone
access system made before the beginning of such Plan Quarter.
Any and all changes in options shall be in whole percentages
of his Savings Deferrals or his Savings Account balance.
5.04 Withdrawals.
(a) A Participant who has an unforeseeable emergency, as
determined by the Committee, may withdraw from his Savings
Account an amount not to exceed the lesser of:
(i) the then value of his Savings Account as of the
Valuation Date coincident with or immediately
preceding the withdrawal, or
(ii) the lesser amount determined by the Committee under
the standards set forth herein, as being available
for withdrawal pursuant to this Section.
For purposes of this Section, "unforeseeable emergency" means
an unanticipated emergency that is caused by an event beyond
the control of the Participant and that would result in severe
financial hardship to the Participant if early withdrawal were
not permitted. A withdrawal based upon unforeseeable emergency
pursuant to this section shall not exceed the amount required
to meet the immediate financial need created by the
unforeseeable emergency (including the amount required to pay
taxes due on the withdrawal) and not reasonably available from
other resources of the Participant. The determination of the
existence of a Participant's unforeseeable emergency and the
amount required to be distributed to meet the need created by
the unforeseeable emergency shall be made by the Committee.
(b) A Participant may elect to withdraw the full value of his or
her Savings Account by making an election in accordance with
any uniform procedure prescribed by the Committee and in
effect from time to time, any such election must be made two
(2) years before the date the withdrawal is to be made and is
irrevocable once made. Commencing as of the beginning of the
Plan quarter after the withdrawal is received, the
Participant's right to make any Salary Deferrals under the
Plan shall be suspended for two (2) complete years.
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VI.
SEVERANCE BENEFITS
6.01 Severance Benefit. Each Participant whose employment is terminated
for any reason other than certified disability or death shall be paid a benefit
equal in value to the value of his savings Account (inclusive of any Savings
Deferrals credited after a Valuation Date), as of the Valuation Date coincident
with or immediately preceding his Benefit Disbursement Date.
A Participant shall at all times have a 100% fully vested
nonforfeitable interest in his Savings Account.
6.02 Termination of Employment. The following shall not constitute a
termination of employment for purposes of distribution of benefits under the
Plan:
(a) An Authorized Leave of Absence, provided, however, that
failure to return to the employ of the Company upon the
expiration of such authorized Leave of Absence shall
constitute a termination as of the date of such expiration; or
(b) Transfer to employment with any Employing Company.
6.03 Sale of Assets. Notwithstanding any other provision of the Plan to
the contrary, in the event that either the Company or other Employing Company
sells substantially all of its assets used by in its trade or business, an
Employee who continues employment with the entity acquiring such assets shall be
considered to have severed employment and shall be entitled to receive a
distribution in an amount equal in value to the value of his Account determined
as of the Valuation Date coincident with or immediately preceding his Benefit
Disbursement Date.
CORPDAL:63526.1 14047-00001 13
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VII.
DISABILITY BENEFITS
7.01 Disability Determined. Upon written request by the Participant or
upon the Committee's own initiative, the Committee shall determine whether a
participant has become unable to perform the duties of his position due to a
physical or mental disability and shall so notify such Participant within sixty
(60) days thereafter. A Participant shall be considered disabled if such
disability is so certified by the Committee and, unless waived by the Committee
as unnecessary, supported by a written medical opinion that such participant
will be incapable of performing his job for physical or mental reasons.
7.02 Disability Benefits. In the event of the disability of a
Participant, as of the Committee's certification thereof, such Participant and
shall be paid a benefit equal in value to the value of his Account as of the
Valuation Date coincident with or immediately preceding his Benefit Disbursement
Date.
CORPDAL:63526.1 14047-00001 14
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VIII.
DEATH BENEFITS
8.01 Death Benefits. Upon the death of a Participant, the Participant's
beneficiary shall be entitled to a benefit equal in value to the value of the
Participant's Savings Account as of the Valuation Date coincident with or
immediately preceding his Benefit Disbursement Date.
8.02 Designation of Beneficiaries.
(a) Each Participant shall have the unrestricted right to
designate the beneficiary or beneficiaries to receive
payment of his benefit. Each such designation shall be
made by executing a "Beneficiary Designation Form" and
filing same with the Committee. Any such designation
may be changed at any time by execution of a new
designation in accordance with this Section.
Notwithstanding the foregoing, if a Participant who is
married on the date of his death designates other than
his surviving spouse as his beneficiary, such
designation shall not be effective unless: (i) such
spouse has consented thereto in writing, and such
consent acknowledges the effect of such designation and
is witnessed by a Plan representative (other than the
Participant) or a notary public; or (ii) such consent
may not be obtained because such spouse cannot be
located or because of other circumstances described by
applicable Treasury regulations.
(b) If no such designation is on file with the Committee,
at the time of the death of the Participant or such
designation is not effective for any reason as
determined by the Committee, then the designated
beneficiary or beneficiaries to receive such benefit
shall be as follows:
(1) If a Participant leaves a surviving spouse, his
benefit shall be paid to such surviving spouse;
(2) If a Participant leaves no surviving spouse,
his benefit shall be paid to such Participant's executor
or administrator.
8.03 Benefits Payable to Minors or Other Persons with Limited Financial
Responsibility. If any amount is payable under this Plan either to a minor or to
any beneficiary who appears to have limited or restricted financial
responsibility, the Committee shall have the sole and absolute right to either
pay such benefits to such person or to pay such benefits to a custodial parent
or guardian or guardian ad litem of such minor or other person or to the trustee
of a Medicare support trust for such person, or to such other person or persons
as the committee shall determine. The Committee shall have the right but not the
duty to delay payments under this Plan until the committee's receipt of a court
order designating the person to whom such payments shall be made, the cost of
which shall be born by the beneficiary or guardian and not the Plan.
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IX.
TIME AND MANNER OF PAYMENT OF BENEFITS
9.01 Form of Benefits for Participants. For all purposes of the Plan,
benefits shall be paid in a lump sum in cash.
9.02 Death Benefits. For purposes of article VIII, the death benefit
for a deceased Participant shall be paid to his designated beneficiary in a lump
sum in cash.
CORPDAL:63526.1 14047-00001 16
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X.
ADMINISTRATION OF FUNDS
10.01 Payment of Expenses. All expenses incident to the administration
of the Plan and any related Trust may be paid by the company and, if not paid by
the Company, shall be paid by the Trustee from the Trust Fund and, until paid,
shall constitute a claim against the Trust Fund which is paramount to the claims
of Participants and beneficiaries.
10.02 Trust Fund Property. All income, profits, recoveries,
contributions, and any and all moneys, securities and properties of any kind at
any time received or held by the Trustee hereunder shall be held for investment
purposes in accordance with this Plan. The Committee shall maintain accounts in
the name of each Participant, but the maintenance of an account designated as
the account of a Participant shall not mean that such participant shall have a
greater or lesser interest than that due him by operation of the Plan and shall
not be considered as segregating any funds or property from any other funds or
property contained in the commingled funds. No Participant shall have any title
to any specific asset in the Trust Fund.
10.03 Distributions from Participants' Accounts. Distributions
representing any or all of the credit value of a Participant's Accounts shall be
made by the Company or the Trustee only if, when, and in the amount and manner
directed in writing by the Committee. Any distribution made to a Participant or
for his benefit shall be debited against such participant's Account value. The
trustee may make any payment required of the trustee hereunder by mailing or
delivering the Trustee's check to the person to whom such payment is to be made
or may make such payment by a distribution in kind or partly in kind and partly
in cash. The Company may act as the Trustee's agent in delivering the Trustee's
check (or other property) to the person to whom a benefit payment is to be made.
CORPDAL:63526.1 14047-00001 17
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XI.
TRUST FUND
11.01 Trust Must Be Grantor Trust. As a means of administering the
amounts credited to participants and anticipating the liability the Company will
incur under the terms of this Plan, the Company may enter into one or more Trust
Agreements with one or more Trustees and contribute to the Trust(s) assets that
shall be held therein subject to the claims of the Company's creditors in the
event of the Company's bankruptcy or insolvency until paid to participants and
their Beneficiaries in such manner and at such times as specified in this Plan;
provided, however, that any such Trust Agreement and any assets held by the
Trustee to assist it in meeting its obligations shall conform to the terms of
the Internal Revenue Service model grantor trust agreement as set forth in
Revenue Procedure 92-64 or its successor. The Trust Agreement may be amended
from time to time as the Company deems advisable, and as the Internal Revenue
Service may require or permit, in order to effectuate the purpose of the Plan.
In the event of the merger, acquisition, or reorganization of the Trustee, the
surviving entity, if still empowered with trust powers, shall continue as
Trustee unless and until removed as otherwise provided in the Trust Agreement.
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XII.
FIDUCIARY
12.01 Article Controls. This Article shall control over any contrary,
inconsistent or ambiguous provisions contained in the Plan.
12.02 General Allocation of Duties. each fiduciary with respect to the
Plan shall have only those specific powers, duties, responsibilities and
obligations as are specifically given him under the Plan. The Directors shall
have the sole responsibility for authorizing contributions under the Plan and
shall have the sole authority to appoint and remove members of the Committee and
to amend or terminate this Plan in whole or in part. The directors shall also
have the authority to appoint and remove the Trustee and to override the
authority of the Committee in this regard. Except as otherwise specifically
provided, the Trustee shall have the sole responsibility for the administration,
investment and management of the assets held under the Plan. It is intended
under the Plan that each fiduciary shall be responsible for the proper exercise
of his own powers, duties, responsibilities and obligations hereunder and shall
not be responsible for any act or failure to act of another fiduciary except to
the extent provided by law or as specifically provided herein.
12.03 Delegation and Allocation. The Committee may appoint
subcommittees, individuals or any other agents as it deems advisable and may
delegate to any of such appointees any or all of the powers and duties of the
Committee. Such appointment and delegation must be in writing, specifying the
powers or duties being delegated, and must be accepted in writing by the
delegatee. Upon such appointment, delegation and acceptance, the delegating
Committee members shall have no liability for the acts or omissions of any such
delegatee, as long as the delegating Committee members do not violate their
fiduciary responsibility in making or continuing such delegation.
CORPDAL:63526.1 14047-00001 19
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XIII.
AMENDMENTS
No amendment of the Plan may be made which would reduce any then
nonforfeitable interest of a Participant. Subject to these limitations, the
Company may make any amendment to the Plan including, but not limited to, an
increase or decrease of deferrals or contributions, a change or modification of
the method of allocation of contributions, or a change of the provisions
relating to the administration of the Plan.
In the event of an amendment, each employing company will be deemed to
have consented to and adopted the amendment unless the Employing Company
notifies El Chico Restaurants, Inc., the Committee and the Trustee to the
contrary in writing within thirty (30) days after receipt of a copy of the
amendment, in which case the rejection will constitute a withdrawal from the
Plan and Trust by that Employing Company.
CORPDAL:63526.1 14047-00001 20
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XIV.
DISCONTINUATION OF CONTRIBUTIONS AND TERMINATION
14.01 Declaration of Intent. The Company has established the Plan with
the bona fide intention and expectation that from year to year it will be able
to, and will deem it advisable to, maintain the Plan as herein provided.
However, the Company realizes that circumstances not now foreseen, or
circumstances beyond its control, may make it either impossible or inadvisable
to continue the Plan. Therefore, the Company shall have the power to discontinue
credits under the Plan, terminate the Plan or partially terminate the Plan at
any time hereafter. Each member of the Committee and the Trustee shall be
notified of such discontinuance, termination or partial termination.
14.02 Administration of Plan in Case of Discontinuance of Contributions
or Termination.
(a) Unless the Plan is otherwise amended prior to dissolution of
the Company, the Plan shall terminate as of the date of
dissolution of the Company.
(b) Upon discontinuance or termination, any previously unallocated
contributions, credits and net increment (or net decrement)
shall be allocated among the Accounts of the Participants on
such date of discontinuance or termination according to the
provisions of Article V, as if such date of discontinuance or
termination were a Valuation Date. Thereafter, the net
increments (or net decrements) shall continue to be allocated
to the Accounts of the Participants until the balances are
distributed. In the event of termination, the date of the
final distribution shall be treated as a Valuation Date.
CORPDAL:63526.1 14047-00001 21
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XV.
MISCELLANEOUS
15.01 Not Contract of Employment. The adoption and maintenance of this
Plan shall not be deemed to be a contract between the Company and any person or
to be consideration for the employment of any person. Nothing herein contained
shall be deemed to give any person the right to be retained in the employ of the
Company or to restrict the right of the Company to discharge any person at any
time nor shall the Plan be deemed to give the Company the right to require any
person to remain in the employ of the Company or to restrict any person's right
to terminate his employment at anytime .
15.02 Rights to Payments of a Claim Against General Assets of the
Company. This Plan is intended to be an unfunded plan for purposes of the Code
and Title I of the Act. A Participant's status to enforce his rights under the
Plan is that of a general unsecured creditor of the Company and the Plan
constitutes a mere promise by the Company or other Employing Company to make
benefit payments in the future.
15.03 Alienation of Interest Forbidden. No right or interest of any
kind in any benefit shall be transferable or assignable by any Participant or
any beneficiary or be subject to anticipation, adjustment, alienation,
encumbrance, garnishment, attachment, execution or levy or any other legal or
equitable process.
15.04 Severability. If any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
15.05 Jurisdiction. The situs of the Plan hereby created is Dallas
County, Texas. All provisions of the Plan shall be construed in accordance with
the laws of the State of Texas except to the extent preempted by federal law.
CORPDAL:63526.1 14047-00001 22
<PAGE>
IN WITNESS WHEREOF, El Chico Restaurants, Inc. has caused this Plan to
be executed this 1st day of January, 1994 .
EL CHICO RESTAURANTS, INC.
ATTEST:/s/John A. Cuellar By:/s/Lawrence E. White
------------------- --------------------------
Secretary Name:Lawrence E. White
------------------------
Its:
-------------------------
CORPDAL:63526.1 14047-00001 23
<PAGE>
FIRST AMENDMENT TO THE
EL CHICO RESTAURANTS, INC.
EXCESS SAVINGS PLAN
W I T N E S S E T H:
WHEREAS, EL CHICO RESTAURANTS, INC. (the "Company") adopted the EL
CHICO RESTAURANTS, INC. EXCESS SAVINGS PLAN effective as of January 1, 1994,
for the benefit of its eligible, highly compensated employees;
WHEREAS, the Company reserved the right to amend the Plan and desires
to amend the Plan, effective January 1, 1996;
NOW, THEREFORE, the EL CHICO RESTAURANTS, INC. EXCESS SAVINGS
PLAN is hereby amended as follows:
The first paragraph of Section 3.01(a) of the Plan is amended to read
as follows:
3.01(a) Eligibility. Any Eligible Employee shall be entitled
to become a Participant commencing with the first pay period beginning
on or after the first day of the immediately following Plan Year
provided such Eligible Employee is at least 21 years of age and
commenced employment with the Employing Company no later than July 1 of
the year.
IN WITNESS WHEREOF, El Chico Restaurants, Inc. has caused this First
Amendment to the Plan to be executed this 29th day of December, 1995.
EL CHICO RESTAURANTS, INC.
By:/s/Lawrence E. White
-----------------------
Name:Lawrence E. White
---------------------
Its:Executive Vice President
-------------------------
ATTEST:
- ----------------------------
Secretary
CORPDAL:63525.1 14047-00001
<PAGE>
AMENDMENT NUMBER ONE TO
THE EL CHICO SAVINGS PLAN
WITNESSETH:
WHEREAS, EL CHICO RESTAURANTS, INC. (the "Company") adopted The El Chico
Savings Plan effective as of January 1, 1985 and restated as of October 1,1995,
for the benefit of its eligible employees;
WHEREAS, the Company reserved the right to amend the restated Plan, and
desires to adopt this First Amendment to the Plan, effective January 1, 1997;
Section 1.8 of the Plan is amended to read as follows:
"Compensation" with respect to any participant means such participant's
wages as defined in Code Section 3401(a) and all other payments of compensation
by the Employer (in the course of the employer's trade or business) for a Plan
Year for which the Employer is required to furnish the participant a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052. "Compensation" shall
exclude amounts paid or reimbursed by the Employer for moving expenses incurred
by a Participant, but only to the extent that at the time of the payment it is
reasonable to believe that these amounts are deductible by the Participant under
Section 217. Compensation must be determined without regard to any rules under
Code Section 3401(a) that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
for purposes of this Section, the determination of compensation shall
be made by:
(a) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not includable in the
gross income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
(b) excluding amounts realized from the exercise of a
non-qualified stock option, or when restricted stock held by an employee either
becomes freely transferable or is no longer subject to a substantial risk of
forfeiture. Compensation shall be determined without regard to any rules that
limit the amount to be included in wages based on the nature or location of the
service performed.
(the balance of this section to remain as listed in the October 1, 1995
plan document).
IN WITNESS WHEREOF, El Chico Restaurants, Inc. has caused this First Plan
Amendment to the Plan be executed this 6th day of February, 1997.
EL CHICO RESTAURANTS, INC.
By:/s/Lawrence E. White
-----------------------
Name:Lawrence E. White
---------------------
Title:Executive Vice President
------------------------
CORPDAL:63525.1 14047-00001
<PAGE>
SECOND AMENDMENT TO THE
EL CHICO RESTAURANTS, INC.
EXCESS SAVINGS PLAN
W I T N E S S T H:
WHEREAS, EL CHICO RESTAURANTS, INC. (the "Company") adopted the EL CHICO
RESTAURANTS, INC. EXCESS SAVINGS PLAN effective as of January 1, 1994, for the
benefit of its eligible, highly compensated employees;
WHEREAS, the Company reserved the right to amend the Plan, and desires
to adopt this Second Amendment to the Plan, effective January 1, 1997;
NOW, THEREFORE the EL CHICO RESTAURANTS, INC. EXCESS SAVINGS PLAN is
hereby amended as follows:
F I R S T
Section 1.01(9) of the Plan is amended to read as follows:
(9) Compensation: The total of all wages and other
amounts paid by the Company or any Employing Company
(in the course of its business) to or for the benefit
of an Employee for services rendered or labor
performed which is required to be reported on the
Employee's Form W-2, excluding, however, (i) amounts
paid or reimbursed by the Company or Employing
Company for moving expenses incurred by the Employee
(but only to the extent it is reasonable to believe
at the time of the payment that the moving expenses
will be deductible under Section 217 of the Code),
and (ii) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock
held by an employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture. Compensation shall be determined
without regard to any rules that limit the amount to
be included in wages based on the nature or location
of the service performed. Notwithstanding the
foregoing, for purposes of Section 1.01(11) and 4.01,
a Participant's Compensation shall include amounts
which he could have received in cash in lieu of a
Savings Deferral under this Plan and any salary
deferral or elective contributions under any Code
Section 401(k) or cafeteria plan.
S E C O N D
Section 1.01(11) of the Plan is amended to read as follows:
(11) Eligible Employee: Any Salaried Employee who is
included within a "select group of management or
highly compensated employees," as such term is
CORPDAL:63576.1 14047-00001
<PAGE>
used in Section 401(a)(1) of ERISA, who is designated
by the Committee as eligible to participate in this
Plan; provided, however, that in the absence of a
written Committee resolution specifying the Eligible
Employees for a Plan Year, a Salaried Employee shall
be an Eligible Employee for a Plan year if the
Employee's annual rate of Compensation for the
preceding Plan Year (or, for a newly hired Employee,
determined on his Commencement Date) is in excess of
the Eighty Thousand Dollar ($80,000.00) amount set
forth in Section 414(q)(1)(B)(i) of the Code as
adjusted from time to time by the Secretary of the
treasury.
T H I R D
Section 4.01(a) of the Plan is amended to read as follows:
4.01 Savings Deferrals.
(a) An eligible Participant may elect to defer from three
percent (3%) to one hundred percent (100%) of
Compensation to be credited to his Savings Account
under the Plan.
Compensation for a Plan Year not so deferred by such
election or by any other applicable deferral election
[e.g., Section 125 of the Code] shall be received by
such Participant in cash. A Participant's initial
election to defer an amount of his Compensation
pursuant to this Section 4.01 shall be made by
properly executing an Enrollment Form. The reduction
in a Participant's Compensation for a Plan Year
pursuant to his election under an Enrollment Form
shall be effected by Compensation reductions as of
each payroll period within such Plan Year.
CORPDAL:63576.1 14047-00001
<PAGE>
IN WITNESS WHEREOF, El Chico Restaurants, Inc. has caused this Second
Amendment to the Plan to be executed this 12th day of December, 1996.
EL CHICO RESTAURANTS, INC.
By:/s/Lawrence E. White
-------------------------
Name:/s/Lawrence E. White
-----------------------
Its:Executive Vice President
------------------------
ATTEST:
/s/Susan R. Holland
- -------------------------
Secretary
CORPDAL:63576.1 14047-00001
<PAGE>
SECOND AMENDMENT TO THE
EL CHICO RESTAURANTS, INC.
EXCESS SAVINGS PLAN
W I T N E S S T H:
WHEREAS, EL CHICO RESTAURANTS, INC. (the "Company") adopted the EL CHICO
RESTAURANTS, INC. EXCESS SAVINGS PLAN effective as of January 1, 1994, for the
benefit of its eligible, highly compensated employees;
WHEREAS, the Company reserved the right to amend the Plan, and desires
to adopt this Second Amendment to the Plan, effective January 1, 1997;
NOW, THEREFORE the EL CHICO RESTAURANTS, INC. EXCESS SAVINGS PLAN is
hereby amended as follows:
F I R S T
Section 1.01(9) of the Plan is amended to read as follows:
(9) Compensation: The total of all wages and other
amounts paid by the Company or any Employing Company
(in the course of its business) to or for the benefit
of an Employee for services rendered or labor
performed which is required to be reported on the
Employee's Form W-2, excluding, however, (i) amounts
paid or reimbursed by the Company or Employing
Company for moving expenses incurred by the Employee
(but only to the extent it is reasonable to believe
at the time of the payment that the moving expenses
will be deductible under Section 217 of the Code),
and (ii) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock
held by an employee either becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture. Compensation shall be determined
without regard to any rules that limit the amount to
be included in wages based on the nature or location
of the service performed. Notwithstanding the
foregoing, for purposes of Section 1.01(11) and 4.01,
a Participant's Compensation shall include amounts
which he could have received in cash in lieu of a
Savings Deferral under this Plan and any salary
deferral or elective contributions under any Code
Section 401(k) or cafeteria plan.
S E C O N D
Section 1.01(11) of the Plan is amended to read as follows:
(11) Eligible Employee: Any Salaried Employee who is
included within a "select group of management or
highly compensated employees," as such term is
CORPDAL:63576.1 14047-00001
<PAGE>
used in Section 401(a)(1) of ERISA, who is designated
by the Committee as eligible to participate in this
Plan; provided, however, that in the absence of a
written Committee resolution specifying the Eligible
Employees for a Plan Year, a Salaried Employee shall
be an Eligible Employee for a Plan year if the
Employee's annual rate of Compensation for the
preceding Plan Year (or, for a newly hired Employee,
determined on his Commencement Date) is in excess of
the Eighty Thousand Dollar ($80,000.00) amount set
forth in Section 414(q)(1)(B)(i) of the Code as
adjusted from time to time by the Secretary of the
treasury.
T H I R D
Section 4.01(a) of the Plan is amended to read as follows:
4.01 Savings Deferrals.
(a) An eligible Participant may elect to defer from three
percent (3%) to one hundred percent (100%) of
Compensation to be credited to his Savings Account
under the Plan.
Compensation for a Plan Year not so deferred by such
election or by any other applicable deferral election
[e.g., Section 125 of the Code] shall be received by
such Participant in cash. A Participant's initial
election to defer an amount of his Compensation
pursuant to this Section 4.01 shall be made by
properly executing an Enrollment Form. The reduction
in a Participant's Compensation for a Plan Year
pursuant to his election under an Enrollment Form
shall be effected by Compensation reductions as of
each payroll period within such Plan Year.
CORPDAL:63576.1 14047-00001
<PAGE>
IN WITNESS WHEREOF, El Chico Restaurants, Inc. has caused this Second
Amendment to the Plan to be executed this __ day of __________, 1996.
EL CHICO RESTAURANTS, INC.
By:
-------------------------
Name:
-----------------------
Its:
------------------------
ATTEST:
- -------------------------
Secretary
CORPDAL:63576.1 14047-00001
Exhibit 11
El Chico Restaurants, Inc.
Computation of Per Share Data
(In thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994
----------- ----------- -----------
Computation of earnings per share:
<S> <C> <C> <C>
Net earnings (loss) $ (3,062) $ 3,958 $ 3,728
============= ============= =============
Weighted average number of common shares
outstanding during the year 3,885,710 4,017,086 4,108,910
Net effect of dilutive stock options based
on the treasury stock method using the
average market price 6,751 29,403 151,382
------------- ------------- -------------
Shares used for computation 3,892,461 4,046,489 4,260,292
============= ============= =============
Earnings (loss) per share $ (0.79) $ 0.98 $ 0.88
============= ============= =============
</TABLE>
EXHIBIT 21
LIST OF SUBSIDIARIES
JURISDICTION OF VOTING STOCK OWNED
NAME OF SUBSIDIARY FORMATION BY THE COMPANY
El Chico Realty Corporation Texas 100%
Concepts, Inc. Texas 100%
El Chico Bebidas Company Texas 23%
El Chico Restaurants of Louisiana, Inc. Delaware 100%
El Chico Corporation of Oklahoma, Inc. Oklahoma 100%
El Chico Restaurant No. 20, Inc. Delaware 100%
Southwest Cafes of Tennessee, Inc. Tennessee 100%
El Chico Corporation Georgia 100%
El Chico Corporation of Alabama Alabama 100%
El Chico Corporation of Florida Florida 100%
Pronto Design & Supply, Inc. Texas 100%
Nuevo Ventures, Inc. Texas 100%
El Chico Restaurants of Kentucky, Inc. Kentucky 100%
El Chico Restaurants of Ohio, Inc. Ohio 100%
El Chico Restaurants of Indiana, Inc. Indiana 100%
El Chico Restaurants of Illinois, Inc. Illinois 100%
El Chico Service Company Delaware 100%
ECRT, Inc. Delaware 100%
NOTE: Texas El Chico Restaurants, L.P. is a Limited Partnership between two
wholly owned subsidiaries - El Chico Service Company and ECRT, Inc.
SUBSIDIARIES OF CONCEPTS, INC.
JURISDICTION OF VOTING STOCK OWNED
NAME OF SUBSIDIARY FORMATION BY CONCEPTS, INC.
Concepts Beverages of Oklahoma City, Inc. Oklahoma 100%
Concepts Beverages of South Meridian, Inc. Oklahoma 100%
SUBSIDIARIES OF EL CHICO CORPORATION OF OKLAHOMA, INC.
VOTING STOCK OWNED BY
URISDICTION OF EL CHICO CORPORATION
NAME OF SUBSIDIARY INCORPORATION OF OKLAHOMA, INC.
Bebidas Company of Tulsa, Inc. Oklahoma 100%
Bebidas Company of Oklahoma City, Inc. Oklahoma 100%
Bebidas Company of Midwest City, Inc. Oklahoma 100%
Bebidas Company of Tulsa No. 65, Inc. Oklahoma 100%
Bebidas Company of Oklahoma City No. 36, Inc. Oklahoma 100%
Bebidas Company of Oklahoma City No. 101, Inc. Oklahoma 100%
Bebidas Company of Broken Arrow, Inc. Oklahoma 100%
Bebidas Company of Oklahoma City No. 37, Inc. Oklahoma 100%
Bebidas Company of Tulsa No. 23, Inc. Oklahoma 100%
Bebidas Company of Edmond, Inc. Oklahoma 100%
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
El Chico Restaurants, Inc.:
We consent to incorporation by reference in the registration statements (No.
333-16699 and No. 33-63474) on Form S-8 of El Chico Restaurants, Inc. of our
report dated February 6, 1997, relating to the consolidated balance sheets of El
Chico Restaurants, Inc. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for each of the years in the three year period ended
December 31, 1996, which report appears in the December 31, 1996 annual report
on Form 10-K of El Chico Restaurants, Inc.
KPMG Peat Marwick LLP
Dallas, Texas
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000719961
<NAME> EL CHICO RESTAURANTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 216
<SECURITIES> 0
<RECEIVABLES> 1,154
<ALLOWANCES> 0
<INVENTORY> 976
<CURRENT-ASSETS> 4,500
<PP&E> 67,542
<DEPRECIATION> 27,007
<TOTAL-ASSETS> 47,662
<CURRENT-LIABILITIES> 10,170
<BONDS> 0
0
0
<COMMON> 475
<OTHER-SE> 25,810
<TOTAL-LIABILITY-AND-EQUITY> 47,662
<SALES> 101,698
<TOTAL-REVENUES> 104,481
<CGS> 27,016
<TOTAL-COSTS> 108,921
<OTHER-EXPENSES> (75)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 686
<INCOME-PRETAX> (5,051)
<INCOME-TAX> (1,989)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,062)
<EPS-PRIMARY> (.79)
<EPS-DILUTED> (.79)
</TABLE>
