SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended March 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from _______to
Commission File Number 0-13007
NPC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0817298
(State of Incorporation) (IRS Employer Identification Number)
720 W. 20th Street, Pittsburg, KS 66762
(Address of principal executive offices)
Registrant's telephone number, including area code (316) 231-3390
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of stock held by non-affiliates of the
registrant as of May 18, 1999.
Common Stock, $0.01 par value - $162,463,826
The number of shares outstanding of each of the registrant's
classes of common stock as of May 18, 1999.
Common Stock, $0.01 par value - 24,543,250
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year
ended March 30, 1999 are incorporated by reference in Part II,
Items 5 - 8.
Portions of the Proxy Statement for the Annual Stockholders'
Meeting to be held July 13, 1999, are incorporated by reference in
Part III, Items 10 - 13.
NPC INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I
ITEM PAGE
1. Business 3
2. Properties 10
3. Legal Proceedings 12
4. Submission of Matters to a Vote
of Security Holders 12
4A. Executive Officers of the Registrant 12
PART II
5. Market for Registrant's Common Stock
and Related Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 13
7A. Quantitative and Qualitative Disclosures
About Market Risk 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure 14
PART III
10. Directors and Executive Officers
of the Registrant 14
11. Executive Compensation 14
12. Security Ownership of Certain
Beneficial Owners and Management 15
13. Certain Relationships and Related Transactions 15
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 15
NPC INTERNATIONAL, INC.
Pittsburg, Kansas
Annual Report to Securities and Exchange Commission
March 30, 1999
PART I
ITEM 1.BUSINESS
General
The Company. NPC International, Inc. and Subsidiaries
(the "Company" or "Registrant"), formerly National Pizza Company,
is the successor to certain Pizza Hut operations commenced in 1962
by O. Gene Bicknell, the Chairman of the Board of the Company.
At March 30, 1999, the Company operated 573 Pizza Hut
restaurants and 162 delivery units in 26 states pursuant to
franchise agreements with Pizza Hut, Inc. ("PHI"), a wholly-owned
subsidiary of Tricon Global Restaurants, Inc. ("TRICON").
On February 4, 1999 the Company acquired 99 units from
PHI.
On June 8, 1993, the Company completed the acquisition of
Romacorp, Inc. (formerly NRH Corporation). Romacorp, Inc.
("Romacorp") is the operator and franchisor of Tony Roma's Famous
For Ribsr restaurants. Effective June 30, 1998 the Company
completed the recapitalization of Romacorp. Romacorp redeemed
stock held by the Company so that the Company held a minority
interest in Romacorp. Following the transaction, Romacorp changed
its name to Roma Restaurant Holdings, Inc. ("RRH").
The Company is a Kansas corporation incorporated in 1974
under the name Southeast Pizza Huts, Inc. In 1984, the name of
the Company was changed to National Pizza Company and was
subsequently renamed NPC International, Inc. on July 12, 1994.
Its principal office is located at 720 W. 20th Street, Pittsburg,
Kansas and its telephone number is (316) 231-3390.
Pizza Hut Operations
Pizza Hut Restaurant System. The first Pizza Hut
restaurant was opened in 1958 in Wichita, Kansas by the original
founders of the Pizza Hut system. PHI, the franchisor of the
Company, was formed in 1959.
In 1977, PHI was acquired by PepsiCo, Inc., which
continued expanding the Pizza Hut system. In 1997, PepsiCo, Inc.
completed its spin-off of its restaurant group. PHI is now a
wholly-owned subsidiary of TRICON. The Pizza Hut system is the
largest pizza chain in the world, both in sales and number of
units. As of December 31, 1998 the Pizza Hut system had
approximately 7,000 units and approximately 42% of the Pizza Hut
units were operated by PHI.
Pizza Hut restaurants generally offer full table service
and a menu featuring pizza, pasta, sandwiches, a salad bar, soft
drinks and, in most restaurants, beer. Most dough products are
made fresh at least twice per day, and only 100% natural cheese
products are used. All product ingredients are of a high quality
and are prepared in accordance with proprietary formulas
established by PHI. The restaurants offer pizza in three sizes
with a variety of toppings. Customers may also choose among thin
crust, traditional hand-tossed, stuffed-crust and thick crust pan
pizza. Additionally, the Big New Yorker Pizza is a 16"
traditional crust pizza. With the exception of the Personal Pan
Pizza and food served at the luncheon buffet, food products are
prepared at the time of order.
Pizza sales account for approximately 85% of the
Company's Pizza Hut operations revenues. Sales of alcoholic
beverages are less than 1% of net sales.
New product introduction is vital to the continued
success of any restaurant system, and PHI maintains a research and
development department which develops new products and recipes,
tests new procedures and equipment, and approves suppliers for
Pizza Hut products. All new products are developed by PHI, and
franchisees are prohibited from offering any other products in
their restaurants unless approved by PHI.
Pizza Hut also delivers pizza products to their
customers. Prior to 1985, most delivery was done out of existing
restaurants. In 1985, the system began to aggressively pursue
home delivery through delivery/carryout kitchens. Customer orders
are processed through a computerized customer service center
("CSC"), a "single unit solution" ("SUS", a computer system
similar to that operated in a CSC, but smaller in scale), or
directly to the kitchen.
A successful delivery operation typically yields lower
profit margins as a percentage of sales than the Company's Pizza
Hut restaurants due to higher labor costs, but the return on
invested capital is greater.
The Company's Pizza Hut Operations. The Company is the
largest Pizza Hut franchisee in the world. The franchise
agreements, under which the Company operates, grant exclusive
right to operate Pizza Hut restaurants in certain designated
areas. States of operation are indicated in the table below based
on unit count by state.
Company-
owned
Pizza Huts at
State March 30, 1999
Alabama 97
Arizona 1
Arkansas 66
Colorado 7
Delaware 10
Florida 30
Georgia 34
Illinois 32
Indiana 15
Kansas 19
Kentucky 9
Louisiana 35
Minnesota 8
Mississippi 110
Missouri 28
North Carolina 47
North Dakota 18
Nevada 4
Oklahoma 27
Oregon 21
South Carolina 10
South Dakota 26
Tennessee 50
Texas 22
Utah 5
Washington 4
Company Total 735
The Company provides delivery service utilizing a CSC
operation in ten metropolitan markets: Springfield, Missouri;
Montgomery and Birmingham, Alabama; Shreveport, Louisiana; Jackson
and Long Beach, Mississippi; Little Rock, Arkansas; Tulsa,
Oklahoma; Portland, Oregon and Memphis, Tennessee. Under the CSC
system, all customers within the trade area place telephone orders
through a single clearing number, and the pizza is dispatched from
the Company's delivery kitchen nearest the customer. Customers in
other markets call the restaurant delivery kitchens directly.
Relationships with Pizza Hut, Inc. The Company's
franchise agreements with PHI (the "Franchise Agreements") provide
for, among other things, standards of operation and physical
condition of the Company's restaurants, the provision of services,
the geographical territories in which the Company has exclusive
rights to open and operate Pizza Hut restaurants and delivery
kitchens, the terms of the franchise and renewal options, the
Company's development rights and obligations and various
provisions relating to the transfer of interests in the Company's
franchise rights.
PHI determines standards of operation for all Pizza Hut
restaurants, including standards of quality, cleanliness and
service. Further, the Franchise Agreements allow the franchisor
to set specifications for all furnishings, interior and exterior
decor, supplies, fixtures and equipment. (See "Business - Supplies
and Equipment.") PHI also has the right to determine and change
the menu items offered by, and to inspect all restaurants of its
franchisees, including the Company. All such standards may be
revised from time to time. Upon the failure to comply with such
standards, PHI has various rights, including the right to term-
inate the applicable Franchise Agreements, redefine the franchise
territory or terminate the Company's rights to
establish additional restaurants in that franchise territory. The
Franchise Agreements may also be terminated upon the occurrence of
certain events, such as the insolvency or bankruptcy of the
Company or the commission by the Company or any of its officers,
directors or principal stockholders (other than its public
stockholders) of a felony or other crime that, in the sole
judgment of PHI is reasonably likely to adversely affect the Pizza
Hut system, its trademark, the goodwill associated therewith or
PHI's interest therein. At no time during the Company's history
has PHI sought to terminate any of the Company's Franchise
Agreements, redefine its franchise territories or otherwise limit
the Company's franchise rights. The Company believes it is in
compliance with all material provisions of the Franchise
Agreements.
Under the Franchise Agreements, extensive structural
changes, major remodeling and renovation and substantial
modifications to the Company's restaurants necessary to conform to
the then current Pizza Hut system image may be required by PHI,
but not more often than once every seven years. The Company has
not been required to make any such changes, renovations or
modifications. PHI may also request the Company to introduce new
food products that could require remodeling or equipment changes.
PHI can require changes of decor or products only after it has
tested such changes in at least 5% of Pizza Hut system
restaurants.
PHI is required to provide certain continuing services to
the Company, including training programs, the furnishing of
operations manuals and assistance in evaluating and selecting
locations for restaurants.
In early 1990, PHI offered franchisees the opportunity to
sign a new twenty-year franchise agreement (the "1990 Franchise
Agreement"). The 1990 Franchise Agreement required franchise fees
of 4% of sales, as defined, for all restaurants and delivery
kitchens and increases in certain advertising contributions. The
1990 Franchise Agreement also sought to redefine certain rights
and obligations of the franchisee and franchisor. The 1990
Franchise Agreement did not alter the franchisee's territorial
rights and maintained, subject to some minor limitations, the
exclusivity of the Pizza Hut brand within the geographical limits
of the territory defined by each franchise agreement. On June 7,
1994, the Company conformed its existing Franchise Agreements to
the 1990 Franchise Agreement.
The 1990 Franchise Agreement grants to the Company the
exclusive right to develop and operate restaurants within
designated geographic areas through February 28, 2010. The Company
has the option to renew each Franchise Agreement prior to its
expiration for a single renewal term of 15 years by entering into
the then-current form of the PHI franchise agreement, including
the then-current fee schedules, provided the Company is not then
in default of its obligations under that Franchise Agreement,
including the development schedule, and has complied with the
requirements thereof throughout the term of the agreement.
The Franchise Agreements under which the Company operates
require the payment of monthly fees to PHI. Under the 1990
Franchise Agreement (as it applies to the Company), the Company's
royalty payments for all units owned increased to 4% of gross
sales in July, 1996, from the Company's prior effective rate of
approximately 2.25%. This rate reflects the royalty rate which
was proposed by PHI to Pizza Hut franchisees as part of the 1990
Franchise Agreement and is lower than the rate under PHI's current
franchise agreement.
Franchise agreements covering units acquired from PHI
operate under the new franchise agreement ("Location
Franchise Agreement") which has a twenty year term from the
date of the acquisition. The Company has the option to renew each
Franchise Agreement prior to its expiration for a single renewal
term of 15 years by entering into the then-current agreement and
fee schedules, provided the Company is not then in default of its
obligations under that franchise agreement, including the
development schedule, if any, and has complied with the
requirements thereof throughout the term of the agreement. The
franchise agreement, as amended, is similar to the 1990 agreement
for all acquisitions completed prior to fiscal 1999.
The Location Franchise Agreement, as amended, for the 99
units acquired in fiscal 1999, requires fees of 6.5% of gross
sales, as defined. The Agreement has a 500 yard radius protection
for each restaurant operated under the agreement and does not
contain exclusive territorial rights as are available in the
Company's other Franchise Agreements.
The Company has the option to renew each of the above
Franchise Agreements prior to their expiration for single renewal
terms of not less than 15 years by entering into the then-current
agreements and fee schedules, provided the Company is not then
in default of its obligations under those franchise agreements,
including the development schedules, if any, and has complied with
the requirements thereof throughout the terms of the agreements.
The Company can obtain a new 20 year franchise agreement
("1998 Location Franchise Agreement") with a fee requirement of
4.0% of gross sales, as defined, upon completing a qualified
rebuild or remodel of a dine-in restaurant. This agreement
provides a one mile radius protection for personal pan pizzas and
a larger variable radius protection for dinner size pizzas based
upon the surrounding population. This agreement can be renewed
for a term of not less than 15 years without any renewal fee and
continuing fees of 4.0% of gross sales, as defined, if the Company
is not in default under the agreement and the Company has made an
approved investment, as defined, in the location. Excluding the
reduced fee requirement, a different radius protection and renewal
provisions, the 1998 Location Franchise Agreement, as amended, is
similar to the Location Franchise agreement governing the
aforementioned 99 unit acquisition.
Pizza Huts acquired from other franchisees will continue
to be subject to the terms and conditions of the respective
Franchise Agreement covering the acquired unit(s).
For the fiscal years ended March 30, 1999, March 31,
1998, and March 25, 1997 the Company incurred total franchise fees
of approximately $15,476,000, $14,586,000 and $7,535,000,
respectively. The Franchise Agreements require the Company to pay
initial franchise fees to PHI in amounts of up to $15,000 for each
new restaurant opened ($25,000 for locations granted under the
Location Franchise Agreement). The Company is required to
contribute or expend a certain percentage of its sales for local
and national advertising and promotion. See "Business -
Advertising and Promotion."
Failure to develop a franchise territory as required
would give PHI the right to operate or franchise Pizza Hut
restaurants in that territory. Such failure would not affect the
Company's rights with respect to the Pizza Hut restaurants then in
operation or under development by the Company in any such
territory. As of March 30, 1999, the Company had no commitments
for future development under any franchise agreement.
The Franchise Agreements prohibit the transfer or
assignment of any interest in the franchise rights granted
thereunder or in the Company without the prior written consent of
PHI, which consent may not be unreasonably withheld if certain
conditions are met. All franchise agreements also give PHI a
right of first refusal to purchase any interest in the franchise
rights or in the Company if a proposed transfer by the Company or
a controlling person would result in a change of control of the
Company. PHI also has a right of first refusal with respect to
any Pizza Hut franchise right proposed to be acquired by the
Company from any other Pizza Hut franchisee. The right of first
refusal, if exercised, would allow PHI to purchase the interest
proposed to be transferred upon the same terms and conditions and
for the same price as offered by the proposed transferee.
The Company has the right to develop additional Pizza Hut
restaurants and delivery kitchens in its exclusive franchise
territories. However, since becoming a public company, expansion
by acquisition has been one of the Company's primary methods of
growth. Between 1990 and 1993, PHI exercised its right of first
refusal as described above on all proposed transactions between
the Company and other Pizza Hut franchisees; as a result the
Company acquired no units during this period. Between March, 1994
(when the Company announced its intention to sign a new Franchise
Agreement) and March, 1999, the Company acquired a total of 454
Pizza Hut units including 300 from PHI. Effective in 1995, PHI
changed its strategy to embrace refranchising and TRICON has
stated its goal of selling down to approximately 20% to 25% of the
Pizza Hut system. PHI nevertheless retains the right of first
refusal on any proposed acquisition in the future, and the Company
cannot be assured it will continue to receive such permission on
proposed future acquisitions, if any.
Pursuant to an amendment to the Franchise Agreements Mr.
Bicknell is required to maintain ownership of at least 20% of the
Company's common stock.
Advertising and Promotion. The Company is required under
its Franchise Agreements to be a member of the International Pizza
Hut Franchise Holders Association, Inc. ("IPHFHA"), an independent
association of substantially all PHI franchisees. IPHFHA requires
its members to pay dues, which are spent primarily for national
advertising and promotion. Dues are 2% of restaurant net sales
and net delivery sales. Dues may be increased up to a maximum of
3% by the affirmative vote of 51% of the members. A joint
advertising committee, consisting of two representatives each from
PHI and IPHFHA, directs the national advertising campaign. PHI is
not a member of IPHFHA but has agreed to make contributions with
respect to those restaurants it owns on a per-restaurant basis to
the joint advertising committee at the same rate as its
franchisees (less IPHFHA overhead).
The Franchise Agreements also require the Company to
participate in cooperative advertising associations designated by
PHI on the basis of certain marketing areas defined by PHI. Each
Pizza Hut restaurant, including restaurants operated by PHI,
contributes to such cooperative advertising associations 2% of
gross sales. Certain of the Company's Franchise Agreements
provide that the amount of the required contribution may be
increased at the sole discretion of PHI. The cooperative
advertising associations are required to use their funds to
purchase only broadcast media advertising within their designated
marketing areas. All advertisements must be approved in writing
by PHI, except with respect to product or menu item prices.
Supplies and Equipment. The Franchise Agreements require
the Company to purchase all equipment, supplies and other products
and materials required in the operation of its restaurants and
delivery kitchens from suppliers who have been approved by PHI.
Purchasing is substantially provided by the Unified Foodservice
Purchasing Cooperative to all members who consist of Taco Bell,
KFC, and Pizza Hut franchisees and the restaurants operated by
TRICON. Prior to the PepsiCo, Inc. spin-off of its restaurant
division, substantially all distribution services were provided by
PepsiCo Food Systems, Inc., which was a wholly-owned subsidiary of
PepsiCo, Inc.
Distribution. The Company entered into a two-year
exclusive food and supplies distribution agreement with AmeriServe
Food Distribution, Inc. ("AmeriServe") effective November 1, 1998.
The initial term of the agreement will expire December 31, 2000
and provides two automatic renewal options for two years, each at
market rates, not to exceed current rates. The terms of the
contract provide incentives for using more efficient distribution
practices and results in a reduction in the distribution costs
incurred by the Company. AmeriServe acquired PepsiCo Food Systems
("PFS") in July 1997 and has been providing substantially all of
the distribution services to the Company through its PFS
relationship since the acquisition.
Supervision and Control. Pizza Hut restaurants are open
seven days a week and serve both lunch and dinner. Each of the
restaurants has a manager, and in most units, an assistant manager
who are responsible for daily operations of the restaurant,
including food preparation, quality control, service, maintenance,
personnel, and record keeping. All of the restaurant managers
have completed a comprehensive management training program. Each
area general manager is responsible for approximately five to
eleven restaurants. Detailed operations manuals reflecting
current operations and control procedures are provided to each
restaurant and district manager as well as others in the
organization. Currently, the Company's Pizza Huts operate in ten
regions ranging from 40 to 100 stores per region. Each region is
supervised by a regional manager. Oversight of the ten regions is
provided by three divisional vice presidents who are supported by
administrative, marketing, construction and human resource staff.
A point-of-sale ("POS") cash register system is installed
in all Company-operated restaurants. This POS system provides
effective communication between the kitchen and the server,
allowing employees to serve customers in a quick and consistent
manner while still maintaining a high level of control. It feeds
data to the back office system that provides support for
inventory, payroll, accounts payable and cash management. The
back office system also provides management reporting and a
communications interface to the corporate systems.
Accounting is centralized in Pittsburg, Kansas.
Additional financial and management controls are maintained at the
individual restaurants, where inventory, labor and food data are
recorded to monitor food usage, food waste, labor costs, and other
controllable costs.
Competition. The restaurant business is highly
competitive with respect to price, service, location, food quality
and presentation, and is affected by changes in taste and eating
habits of the public, local and national economic conditions and
population and traffic patterns. The Company competes with a
variety of restaurants offering moderately priced food to the
public, including other pizza restaurants. The Company also
competes with locally-owned restaurants which offer similar pizza,
pasta and sandwich products. The Company believes other companies
can easily enter its market segment, which could result in the
market becoming saturated, thereby adversely affecting the
Company's revenues and profits. There is also active competition
for competent employees and for the type of commercial real estate
sites suitable for the Company's restaurants.
Employees. At March 30, 1999, the Company's Pizza Hut
operations had approximately 15,000 employees, including 195
headquarters and staff personnel, three divisional operational
vice presidents, ten regional managers, 91 area general managers,
1,396 restaurant management employees and approximately 13,300
restaurant employees (of whom approximately 72% are part-time).
The Company experiences a high rate of turnover of its part-time
employees, which it believes to be normal in the restaurant
industry. The Company is not a party to any collective bargaining
agreements and believes its employee relations to be satisfactory.
The maintenance and expansion of the Company's restaurant business
is dependent on attracting and training competent employees. The
Company believes that the restaurant manager plays a significant
role in the success of its business. Accordingly, the Company has
established bonus plans pursuant to which certain of its
supervisory employees may earn cash bonuses based upon both the
sales and profits of their restaurants.
Trade Names, Trademarks and Service Marks. The trade name
"Pizza Hut" and all other trademarks, service marks, symbols,
slogans, emblems, logos and designs used in the Pizza Hut system
are owned by PHI. All of the foregoing are of material importance
to the Company's business and are licensed to the Company under
its Franchise Agreements for use with respect to the operation and
promotion of the Company's restaurants.
Seasonality. The Company's Pizza Hut operations have not
experienced significant seasonality in its sales; however, sales
are largely driven through advertising and promotion and are
adversely impacted in economic times that generally negatively
impact consumer discretionary income such as back-to-school and
holiday seasons.
Government Regulation
All of the Company's operations are subject to various
federal, state and local laws that affect its business, including
laws and regulations relating to health, sanitation, alcoholic
beverage control and safety standards. To date, federal and state
environmental regulations have not had a material effect on the
Company's operations, but more stringent and varied requirements
of local governmental bodies with respect to zoning, building
codes, land use and environmental factors have in the past
increased, and can be expected in the future to increase, the cost
of, and the time required for opening new restaurants.
Difficulties or failures in obtaining required licenses or
approvals could delay or prohibit the opening of new restaurants.
In some instances, the Company may have to obtain zoning variances
and land use permits for its new restaurants. The Company
believes it is operating in material compliance with all laws and
regulations governing its operations.
The Company is also subject to the Fair Labor Standards
Act which governs such matters as minimum wages, overtime and
other working conditions. A substantial majority of the Company's
food service personnel are paid at rates related to the minimum
wage and other employment laws and regulations, accordingly,
increases in the minimum wage result in higher labor costs.
Legislation mandating health coverage for all employees,
if passed, will increase benefit costs since most hourly
restaurant employees are not currently covered under Company
plans. The Company cannot always effect immediate price increases
to offset higher costs, and no assurance can be given that the
Company will be able to do so in the future.
Cautionary Factors That May Affect Future Results,
Financial Condition or Business
In order to take advantage of the safe harbor provisions
for forward-looking statements adopted by the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying
important risks, uncertainties and other factors that could affect
the Company's actual results of operations, financial condition or
business and could cause the Company's actual results of
operations, financial condition or business to differ materially
from its historical results of operations, financial condition or
business or the results of operation, financial condition or
business contemplated by forward-looking statements made herein or
elsewhere orally or in writing, by, or on behalf of, the Company.
Except for the historical information contained herein, the
statements made in this Report on Form 10-K are forward-looking
statements that involve such risks, uncertainties and other
factors that could cause or contribute to such differences
including, but not limited to, those described below.
Consumer Demand and Market Acceptance. Food service
businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions and demographic
trends. The performance of individual restaurants may be
adversely affected by factors such as traffic patterns,
demographic considerations and the type, number and location of
competing restaurants. Multi-unit food service chains such as the
Company's can also be materially and adversely affected by
negative publicity resulting from food quality, illness, injury
and other health concerns or operating issues stemming from one
restaurant or a limited number of restaurants, including
restaurants operated by the franchisor or another franchisee.
Effectiveness of Franchisor Advertising Programs and the
Overall Success of the Franchisor. The success of the Company is
substantially dependent upon the effectiveness of PHI's
advertising programs and development of new and successful
products, and the overall success of Pizza Hut.
Training and Retention of Skilled Management and Other
Restaurant Personnel. The Company's success depends substantially
upon its ability to recruit, train and retain skilled management
and other restaurant personnel. There can be no assurance that
labor shortages, economic conditions or other factors will not
adversely affect the ability of the Company to satisfy its
requirements in this area.
Ability to Locate and Secure Acceptable Restaurant Sites.
The success of restaurants is significantly influenced by
location. There can be no assurance that current locations will
continue to be attractive, or additional locations can be located
and secured, as demographic patterns change. It is possible that
the current locations or economic conditions where restaurants are
located could decline in the future, resulting in potentially
reduced sales in those locations. There is also no assurance that
further sites will produce the same results as past sites.
Competition. The Company's future performance will be
subject to a number of factors that affect the restaurant industry
generally, including competition. The restaurant business is
highly competitive and the competition can be expected to
increase. Price, restaurant location, food quality, quality and
speed of service and attractiveness of facilities are important
aspects of competition as are the effectiveness of marketing and
advertising programs. The competitive environment is also often
affected by factors beyond the Company's or a particular
restaurant's control. The Company's restaurants compete with a
wide variety of restaurants ranging from national and regional
restaurant chains (some of which have substantially greater
financial resources than the Company) to locally owned
restaurants. There is also active competition for advantageous
commercial real estate sites suitable for restaurants.
Unforeseeable Events and Conditions. Unforeseeable
events and conditions, many of which are outside the control of
the Company, can impact consumer patterns in the restaurant
industry. These events include weather patterns, severe storms
and power outages, natural disasters and other acts of God. There
can be no assurance that the Company's operations will not be
adversely affected by such events in the future.
Commodities Costs, Labor Shortages and Costs and other
Risks. Dependence on frequent deliveries of fresh produce and
groceries subjects food service businesses to the risk that
shortages or interruptions in supply, caused by adverse weather or
other conditions, could adversely affect the availability, quality
and cost of ingredients. Specifically, certain ingredients such
as cheese constitute a large percentage of the total cost of the
Company's food products. Unforeseeable increases in the cost of
these specific ingredients could significantly increase the
Company's cost of sales and correspondingly decrease the Company's
operating income. In addition, unfavorable trends or developments
concerning factors such as inflation, increased food, labor and
employee benefit costs (including increases in hourly wage and
minimum unemployment tax rates), regional weather conditions,
interest rates and the availability of experienced management and
hourly employees may also adversely affect the food service
industry in general and the Company's results of operations and
financial condition in particular.
ITEM 2. PROPERTIES
Pizza Hut Operations
Pizza Hut restaurants historically have been built
according to identification specifications established by PHI
relating to exterior style and interior decor. Variation from
such specifications is permitted only upon request and if required
by local regulations or to take advantage of specific
opportunities in a market area.
The distinctive Pizza Hut red roof is the identifying
feature of Pizza Hut restaurants throughout the world. Pizza Hut
restaurants are generally freestanding, one-story buildings, with
wood, brick or stucco exteriors, and are substantially uniform in
design and appearance. A new unit type, main path, which has no
red roof and has a stucco exterior is targeted for metro markets
and has a quick service platform. Property sites range from
25,000 to 45,000 square feet and accommodates parking for 30 to 70
cars. Typically, Pizza Hut restaurants contain from 1,800 to
3,600 square feet, including a kitchen area, and have seating
capacity for 70 to 125 persons.
The cost of land, building and equipment for a typical
Pizza Hut restaurant varies with location, size, construction
costs and other factors. The Company currently estimates that the
average cost to construct and equip a new restaurant in its
existing franchise territories is approximately $500,000 to
$650,000, or $650,000 to $1,100,000 including the cost of land
acquisition.
The Company continually renovates and upgrades its
existing restaurants. Such improvements generally include new
interior and exterior decor, expansion of seating areas, and
installation of more modern equipment.
The Company anticipates that the capital investment
necessary for each delivery-only kitchen is approximately $90,000
in equipment and $120,000 in leasehold improvements. The cost of
a customer service center is approximately $150,000 in equipment
and improvements.
The Pizza Hut restaurants and delivery units operated by
the Company at March 30, 1999, are owned or leased as follows:
Leased from unrelated third parties 554
Land and building owned by the Company 129
Building owned by the Company and land leased 52
735
The amount of rent paid to unrelated persons is
determined on a flat rate basis or as a percentage of sales or as
a combination of both. Generally, the percentage rate is
approximately 5% to 6% where both land and buildings are leased.
Approximately 432 leases have initial terms which will expire
within the next five years. Nearly all of these leases contain
provisions allowing for the extension of the lease term. Some
leases contain provisions requiring cost of living adjustments.
The Company leases parking lot space for one Pizza Hut
unit from an officer of the Company. The rent is paid monthly as
a flat rate.
The Company owns its principal office in Pittsburg,
Kansas, containing approximately 46,000 square feet of commercial
office space. Currently, the Company leases from third parties
office space for its regional offices in Birmingham, AL, Vestavia,
AL, Little Rock, AR, Evansville, IN, Lenexa, KS, Shreveport, LA,
Brandon, MS, Springfield, MO, Winston-Salem, NC, Portland, OR,
Sioux Falls, SD, and Memphis, TN.
Properties Held For Sale or Liquidation
Effective March 25, 1996, the Company sold the stock of
the wholly-owned subsidiary Skipper's, Inc. ("Skipper's"), a quick
service seafood chain, to a Seattle investment group. In
conjunction with the sale of Skipper's, the Company retained 19
fee simple properties that had previously been operated by
Skipper's and had been closed prior to the sale. Through March
30, 1999 the Company sold 13 fee simple properties leaving six
properties for sale. At March 30, 1999, three of the six fee
simple properties were occupied by tenants.
In addition to the properties held for sale, the Company
had obligations related to 39 properties under operating leases
that had previously been operated as Skipper's restaurants.
Through March 30, 1999 the Company had bought out of 11 leases and
six leases expired. At March 30, 1999, the Company remained
obligated for 22 properties under operating leases, of which 19
have been subleased. The Company continues to market the
properties to other potential subtenants, while also pursuing
alternative methods of extinguishing these commitments.
In March 1998 the Company committed to an asset re-
imaging strategy (Pizza Huts) involving the consolidation and
relocation of 53 units to 45 new locations, the consolidation of
11 units into existing locations, and the closure of 31
underperforming units. In conjunction with this strategy, the
Company closed one fee simple property during fiscal 1998. During
fiscal 1999, the Company closed four fee simple properties leaving
five fee simple properties for sale at March 30, 1999. At March
30, 1999 no fee simple properties were occupied by tenants.
In addition to the properties held for sale, the Company
had obligations related to two properties at the beginning of the
year under operating leases and during fiscal 1999, the Company
closed 40 additional leased properties. The Company bought out of
eight leases and twelve leases expired during fiscal 1999. At
March 30, 1999 the Company was still obligated for 22 properties
under operating leases, four of which have been subleased. The
Company continues to market the properties to other potential
subtenants, while also pursuing alternative methods of
extinguishing these commitments.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are engaged in ordinary
and routine litigation incidental to its business, but management
does not anticipate that any amounts which it may be required to
pay by reason thereof, net of insurance reimbursements, will have
a materially adverse effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders during the fourth quarter of the fiscal year ended March
30, 1999.
ITEM 4A.EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are elected by the
Board of Directors and serve until their successors are duly
elected and qualified or until their earlier resignation or
removal. The executive officers of the Company and their current
positions and ages are as follows:
Name Position Age
O. Gene Bicknell Chairman of the Board,
Chief Executive,
Officer and Director 66
James K. Schwartz President, Chief Operating 37
Officer and Director
Troy D. Cook Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary 36
Marty D. Couk Senior Vice President
Pizza Hut Operations,
Eastern Division 44
D. Blayne Vaughn Vice President
Pizza Hut Operations,
Western Division 42
L. Bruce Sharp Vice President
Pizza Hut Operations,
Southern Division 41
Alan L. Salts Vice President Restaurant
Services, Chief Accounting
Officer and Assistant
Secretary 33
O. Gene Bicknell founded the Company and has served as
Chairman of the Board since 1962. He also served as Chief
Executive Officer of the Company before July 1993 and after
January 30, 1995.
James K. Schwartz joined the Company in December 1991 as
Vice President of Accounting and Administration. He was promoted
to Vice President Finance, Treasurer and Chief Financial Officer
in 1993. In January 1995 he was promoted to President and Chief
Operating Officer. Mr. Schwartz is a board member of the IPHFHA
and the Unified Foodservice Purchasing Cooperative.
Troy D. Cook joined the Company in February 1995 as Vice
President Finance, Chief Financial Officer, Treasurer and
Assistant Secretary. During fiscal 1999 he was named Secretary and
in March 1999 he was promoted to Senior Vice President. Prior to
that he was Vice President and Chief Operating Officer of Oread
Laboratories from 1991 to 1995. Mr. Cook is a certified public
accountant.
Marty D. Couk joined the Company as a restaurant manager
trainee in April 1979. He served in various capacities at the
Company including Field Specialist (1982), Area General Manager
(1983) and Regional Manager (1987). He was promoted to Vice
President of Pizza Hut Operations in December 1992 and Senior Vice
President of Pizza Hut Operations in September 1993. In May 1997
he became the Senior Vice President of Pizza Hut operations for
the Eastern Division.
D. Blayne Vaughn joined the Company in November 1985 as
an Area General Manager. He was promoted to Regional Manager in
1990 and then Regional Vice President in 1993. In May 1997 he was
promoted to Vice President of Pizza Hut operations for the Western
Division.
L. Bruce Sharp joined the Company in May 1987 as an Area
General Manager. He was promoted to Regional Manager in 1989 and
Vice President of Pizza Hut operations for the Southern Division
in May 1997.
Alan L. Salts joined the Company in November 1995 as
Chief Accounting Officer and was promoted to Vice President
Restaurant Services in October 1997 and in 1999 was named
Assistant Secretary. Prior to joining the Company he was a manager
with Coopers & Lybrand LLP from 1987 to 1995. Mr. Salts is a
certified public accountant.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated
herein by reference from page 25 of the Company's 1999 Annual
Report to Stockholders, included herein as Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated
herein by reference from page 9 of the Company's 1999 Annual
Report to Stockholders, included herein as Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is incorporated
herein by reference from pages 10 through 14 of the Company's 1999
Annual Report to Stockholders, included herein as Exhibit 13.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company does not believe it has any material exposure
associated with market risk sensitive instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated
herein by reference from pages 15 through 23 of the Company's 1999
Annual Report to Stockholders, included herein as Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Audit Committee recommended and the Board of
Directors approved the selection of PricewaterhouseCoopers LLP as
independent public accountants of the Company for the fiscal year
ended March 30, 1999. PricewaterhouseCoopers LLP audited the
financial statements of the Company for the most recent completed
fiscal year. A representative of PricewaterhouseCoopers LLP will
be present at the Annual Meeting with the opportunity to make a
statement if he desires to do so and will be available to respond
to appropriate questions. The Audit Committee has not made a
recommendation with respect to PricewaterhouseCoopers LLP for
fiscal 2000 because meetings regarding such services have not yet
occurred.
Effective July 27, 1998, as discussed in the Company's
filing on Form 8-K dated July 30, 1998, the Company's Audit
Committee recommended and the Board of Directors approved a
change in independent accountants from Ernst & Young LLP to
PricewaterhouseCoopers LLP.
Ernst & Young LLP's report on the Company's financial
statements for the fiscal years ended March 25, 1997, and March 31,
1998, contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope
or accounting principles.
During the fiscal years ended March 25, 1997, and March 31,
1998, and during subsequent interim periods though June 30, 1998,
there were no disagreements with Ernst & Young LLP on any matter
of accounting principles or practices, financial statement
disclosures, or auditing scope or procedures, which disagreements,
if not resolved to the satisfaction of Ernst & Young LLP, would
have caused it to make a reference to the subject matter of the
disagreements in connection with its audit reports.
During the fiscal years ended March 25, 1997, and March 31,
1998, and during subsequent interim period through June 30, 1998,
there were no reportable events (as defined in Securities and
Exchange Commission Regulations S-K Item 304(a)(1)(v).
During the fiscal year ended March 30, 1999, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principle or practice, financial statement disclosure,
or auditing scope or procedure, which disagreement,if not resolved
to the satisfaction of PricewaterhouseCoopers LLP, would have
caused it to make a reference to the subject matter of the
disagreement in connection with their audit report.
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item (except for the
information set forth in Item 4A of Part I hereof with respect to
the Registrant's executive officers) is incorporated herein by
reference from the Company's definitive Proxy Statement for its
Annual Meeting of Stockholders to be held July 13, 1999, to be
filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
ITEM 11.EXECUTIVE COMPENSATION
The information required by this Item concerning
remuneration of the Company's officers and Directors and
information concerning material transactions involving such
officers and Directors is incorporated herein by reference from
the Company's definitive Proxy Statement for its Annual Meeting of
Stockholders, to be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last
fiscal year.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item concerning the
stock ownership of management and five percent beneficial owners
is incorporated herein by reference from the Company's definitive
Proxy Statement for its Annual Meeting of Stockholders, to be
filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item concerning certain
relationships and related transactions is incorporated herein by
reference from the Company's definitive Proxy Statement for its
Annual Meeting of Stockholders, to be filed with the Commission
pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year.
PART IV
ITEM 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of Documents filed as part of this Report
1) Financial Statements
The following financial statements of the Registrant and
report of the Registrant's independent accountants,
included in the Registrant's Annual Report to
Stockholders for the year ended March 30, 1999, are
incorporated by reference in Item 8 to this report:
Report of Independent Accountants
Consolidated Balance Sheets as of March 30, 1999 and
March 31, 1998.
Consolidated Statements of Income for the years ended
March 30, 1999, March 31, 1998 and March 25, 1997.
Consolidated Statements of Stockholders' Equity for the
years ended March 30, 1999, March 31, 1998 and March 25,
1997.
Consolidated Statements of Cash Flows for the years ended
March 30, 1999, March 31, 1998 and March 25, 1997.
Notes to Consolidated Financial Statements.
2) No schedules are filed as part of this Report because
they are not required or are not applicable, or the
required information is shown in the financial statements
or notes thereto.
3) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Page Number or
Exhibit Incorporation
Number Description by Reference from
2.1 Recapitalization Agreement Exhibit 2-A to Form 8-K
among Romacorp, Inc., filed May 8, 1998
NPC International, Inc., NPC. EDGAR 927025-98-000081
Restaurant Holdings, Inc and
Sentinel Capital Partners, L.P.
3.1 Restated Articles of Exhibit 3(a) to Form S-1
Incorporation Registration Statement
effective August 14, 1984
File #2-91885
3.2 Certificate of Amended by Form 8-K
Amendment to Restated filed May 30, 1991
Articles of Incorporation
dated August 7, 1986,
Certificate of Amendment to
Restated Articles of
Incorporation dated July 31,
1987 and Certificate of
Change of Location of
Registered Office dated
October 20, 1987
3.3 Bylaws Exhibit 3(b) to Form S-1
Registration Statement
effective August 14,1984
File #2-91885
3.4 Certificate of Exhibit B to Proxy
Amendment to Restated Statement for Annual
Articles of Incorporation Meeting filed
of National Pizza Company June 13, 1994
Effective July 12, 1994 EDGAR 748714-94-000007
4.1 Specimen Stock Exhibit 1 to Form 8-A
Certificate for Common filed July 31, 1995
Stock EDGAR 748714-94-000016
10.01 Franchise Agreement Exhibit 10.01 to Form 10-Q
between Pizza Hut, Inc. and filed August 1, 1994
NPC International, Inc. EDGAR 748714-94-000016
(sample document)
effective March 30, 1994
10.02 Assignment of and Exhibit 10.02 to Form 10-K
Blanket Amendment filed June 6, 1997
to Franchise Agreements EDGAR 748714-97-000017
10.03 1995 Franchise Agreement Exhibit 10.03 to Form 10-K
between Pizza Hut, Inc. filed June 6, 1997
and NPC Management, Inc. EDGAR 748714-97-000017
10.04 Profit Sharing Plan of Exhibit 10.25 to Form 10-K
NPC International, Inc. dated for the year ended
July 1, 1992, as amended March 30, 1993
Exhibit 10.29 to Form 10-K
for the year ended
March 29, 1994
EDGAR 748714-94-000009
Exhibit 10.33 to Form 10-Q
filed August 1, 1994
EDGAR 748714-94-000016
10.05 Fourth Amendment to the Exhibit 10.05 to Form 10-K
NPC International, Inc. filed June 6, 1997
Profit Sharing Plan EDGAR 748714-97-000017
dated July 1, 1992
10.06 Fifth Amendment to the Exhibit 10.06 to Form 10-K
NPC International, Inc. filed June 6, 1997
Profit Sharing Plan EDGAR 748714-97-000017
effective July 12, 1994
10.07 Sixth Amendment to the. Exhibit 10.07 to Form 10-K
NPC International, Inc filed June 6, 1997
Profit Sharing Plan EDGAR 748714-97-000017
dated January 1, 1997
10.08 Seventh Amendment to Exhibit 10.08 to Form 10-K
the NPC International, Inc. filed June 6, 1997
Profit Sharing Plan EDGAR 748714-97-000017
effective January 1, 1997
10.09 NPC International, Inc. Exhibit 10(t) to Form 10-K
1984 Amended and filed June 25, 1990
Restated Stock Option Plan
10.10 NPC International, Inc. Exhibit A to Proxy
1994 Stock Option Plan Statement to Annual
dated May 3, 1994 Meeting of Stockholders
filed June 13, 1994
EDGAR 748714-94-000007
10.11 Senior Note Purchase Exhibit 10.26 to Form 10-K
Agreement made by and for the year ended
between Pacific Mutual March 30, 1993
Life Insurance Company,
Pacific Corinthian Exhibit 10.39 to Form 10-K
Life Insurance Company, for the year ended
Lutheran Brotherhood March 28, 1995
and NPC International,
Inc.,as amended Exhibit 10.43 to Form 10-K
for the year ended
March 28, 1995
Exhibit 10.44 to Form 10-K
for the year ended
March 28, 1995
10.12 Amendment to the Exhibit 10.12 to Form 10-K
Senior Note Purchase filed June 6, 1997
Agreement made by and EDGAR 748714-97-000017
between Pacific Mutual
Life Insurance Company,
Pacific Corinthian Life
Insurance Company,
Lutheran Brotherhood and
NPC International, Inc.
dated May 29, 1996
10.13 Amendment to the Exhibit 10.13 to Form 10-K
Senior Note Purchase filed June 6, 1997
Agreement made EDGAR 748714-97-000017
by and between Pacific
Mutual Life Insurance
Company, Pacific
Corinthian Life Insurance
Company, Lutheran
Brotherhood and
NPC International, Inc.
dated March 3, 1997
10.14 Amendment to the Exhibit 10.14 to Form 10-K
Senior Note filed June 6, 1997
Purchase Agreement EDGAR 748714-97-000017
made by and between
Pacific Mutual Life
Insurance Company,
Pacific Corinthian
Life Insurance
Company, Lutheran
Brotherhood and
NPC International, Inc.
dated May 8, 1997
10.15 NPC Management, Inc. Exhibit 10.15 to Form 10-K
$50 million 7.94% filed June 6, 1997
Senior Guaranteed EDGAR 748714-97-000017
Notes due May 1, 2006,
dated May 1, 1997
10.16 $160 million Revolving Exhibit 10.16 to Form 10-K
Credit Agreement dated filed June 6, 1997
as of March 5, 1997 EDGAR 748714-97-000017
among NPC International,
Inc., various banks and
Texas Commerce Ba nk
National Association as
Agent and NationsBank
of Texas, N.A. as
Documentation Agent
10.17 Amended and Restated Exhibit 10.17 to Form 10-K
Revolving Credit filed June 6, 1997
Agreement dated EDGAR 748714-97-000017
May 8, 1997, effective
March 26, 1997, among
NPC Management, Inc.,
various banks and Texas
Commerce Bank National
Association as Agent
and NationsBank of
Texas, N.A. as
Documentation Agent
10.18 $15 Million Revolving Exhibit 10.18 to Form 10-K
Credit Agreement filed June 6, 1997
dated as of EDGAR 748714-97-000017
March 5, 1997 among
NPC International,Inc.,
various banks and Texas
Commerce Bank National
Association as Agent
10.19 $15 Million Amended Exhibit 10.19 to Form 10-K
and Restated Revolving filed June 6, 1997
Credit Agreement dated EDGAR 748714-97-000017
as of May 8, 1997
among NPC International,
Inc., various banks
and Texas Commerce
Bank National
Association as Agent
10.20 Amended and Restated d Exhibit 10.20 to Form 10-K
Master Shelf an filed June 6, 1997
Assumption Agreement EDGAR 748714-97-000017
dated May 8, 1997,
effective March 26,
1997, between NPC
Management, Inc. and
The Prudential Insurance
Company of America
10.21 Leases between the Exhibit 10(e) to Form S-1
Company and Messrs. Registration Statement
Bicknell and Elliott effective August 14, 1984
File #2-91885
10.22 Employment Agreement Exhibit 10.45 to Form 10-K
between NPC for the year ended
International, Inc. and March 28, 1995
James K. Schwartz
dated January 27, 1995
10.23 Acquisition agreement Exhibit 2.0 to Form 8-K
by and among filed March 28, 1996
Seattle Crab Co., NPC
International, Inc. and
Skipper's, Inc. dated as
of March 25, 1996
10.24 Lease Indemnification Exhibit 2.1 to Form 8-K
Agreement filed March 28, 1996
10.25 Liability Assumption Exhibit 2.2 to Form 8-K
Agreement filed March 28, 1996
10.26 Environmental Compliance Exhibit 2.3 to Form 8-K
Agreement filed March 28, 1996
10.27 Non-Competition Exhibit 2.5 to Form 8-K
Agreement filed March 28, 1996
10.28 Amendment to Assignment Exhibit 10.29 to Form 10-K
of and Blanket for the year ended
Amendment to March 31, 1998
Franchise Agreements
10.29 Amendment to the Exhibit 10.29 to Form 10-K
Adoption Agreement for the year ended
of the Existing Retirement March 30, 1999
Plan to Activate
the 401(k) Plan
effective January 1, 1999
10.30 NPC International, Inc. Exhibit 10.30 to Form 10-K
Non-Qualified for the year ended
Executive Deferred
Compensation Plan
Effective December 1, 1998 March 30,1 999
10.31 NPC International, Inc. Exhibit 10.31 to Form 10-K
Deferred Compensation for the year ended
and Retirement Plan March 30,1 999
Established January 1, 1999
10.32 Pizza Hut National Exhibit 10.32 to Form 10-K
Purchasing Coop, Inc. for the year ended
Membership Subscription March 30,1 999
and Commitment Agreement
11 Statement Regarding Exhibit 11 to Form 10-K
Computation of Per for the year ended
Share Earnings March 30, 1999
13 1999 Annual Report to Exhibit 13 to Form 10-K
Stockholders for the year ended
(only those portions of March 30, 1999
such Annual Report to
Stockholders which are
specifically incorporated
by reference into this Form 10-K
shall be deemed to be
filed with the Commission)
16 Letter Regarding Change Exhibit 16 to Form 8-K
in Certifying Accountants filed July 30, 1998
21 List of Subsidiaries Exhibit 21 to Form 10-K
for the year ended
March 30, 1999
23 Consent of Independent Exhibit 23 to Form 10-K
Accountants and Consent for the year ended
of Independent Auditors March 30, 1999
27 Financial Data Schedule Exhibit 27 to Form 10-K
for the year ended
March 30, 1999
(b) Reports on Form 8-K
The following forms were filed on Form 8-K during the
quarter ended March 30, 1999:
Announcement of 99 unit Filed January 7, 1999
acquisition from
Pizza Hut, Inc.
Announcement of Distribution Filed January 19, 1999
Agreement with AmeriServe
Asset Sales Agreement Filed February 17, 1999
for 99 unit acquisition
from Pizza Hut, Inc.
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 the 25th day of May, 1999 on its
behalf by the undersigned, thereunto duly authorized.
NPC INTERNATIONAL, INC.
By
Troy D. Cook
Senior Vice President, Chief Financial Officer,
Treasurer, Secretary
(Principal Financial Officer)
By
Alan L. Salts
Vice President Restaurant Services,
Chief Accounting Officer and Assistant Secretary
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on the
25th day of May, 1999.
O. Gene Bicknell Chairman of the Board,
Chief Executive Officer and
Director (Principal
Executive Officer)
James K. Schwartz President, Chief Operating
Officer and Director
Troy D. Cook Senior Vice President, Chief
Financial Officer, Treasurer
and Secretary (Principal
Financial Officer)
Fran D. Jabara Director
Robert E. Cressler Director
Michael Braude Director
William A. Freeman Director
Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Fiscal Year Ended
(Dollars in thousands, March 30, March 31, March 25,
except share data) 1999 1998 1997
Numerator:
Net income $47,946 $10,330 $17,811
Denominator:
Denominator for basic
earnings per share-
weighted average shares 24,622 24,694 24,646
Effect of dilutive
securities:
employee stock options 370 415 228
Denominator for diluted
earnings per share-
adjusted weighted
average shares
and assumed conversions 24,992 25,109 24,874
Earnings per share
-basic $ 1.95 $ .42 $ .72
Earnings per share
-dilutive $ 1.92 $ .41 $ .72
Exhibit 21
NPC International, Inc.
List of Subsidiaries
NPC Management, Inc.
NPC Restaurant Holdings, Inc.
NPC Restaurants LP
National Catering Company, Inc.
Seattle Restaurant Equipment Company, Inc.
Exhibit 23
NPC International, Inc.
Consent of Independent Accountants
We hereby consent to the incorporation by reference in
the Registration Statements on Form S-8 (No. 33-2233,
No. 33-37354 and No. 33-56399) of NPC International,
Inc. and Subsidiaries of our report dated May 4, 1999
relating to the financial statements, which appears in
the Annual Report to Shareholders, which is incorporated
in this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
Kansas City, Missouri
May 25, 1999
NPC International, Inc.
Consent of Independent Auditors
We consent to the incorporation by reference in this
Annual Report (Form 10-K) of NPC International, Inc. of
our report dated May 5, 1998 included in the 1999 Annual
Report to Stockholders of NPC International, Inc.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8 No. 33-2233 and Form S-
8 No. 33-37354) pertaining to the NPC International,
Inc. 1984 Non-Qualified Stock Option Plan, As Amended,
and the Registration Statement (Form S-8 No. 33-56399)
pertaining to the NPC International, Inc. 1994 Non-
Qualified Stock Option Plan of our report dated May 5,
1998, with respect to the consolidated financial
statements, incorporated herein by reference in the
Annual Report (Form 10-K) of NPC International, Inc.
ERNST & YOUNG LLP
Kansas City, Missouri
May 25, 1999
NPC INTERNATIONAL, INC. PROFIT SHARING
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY
2.3 POWERS AND DUTIES OF THE ADMINISTRATOR
2.4 RECORDS AND REPORTS
2.5 APPOINTMENT OF ADVISERS
2.6 PAYMENT OF EXPENSES
2.7 CLAIMS PROCEDURE
2.8 CLAIMS REVIEW PROCEDURE
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
3.2 EFFECTIVE DATE OF PARTICIPATION
3.3 DETERMINATION OF ELIGIBILITY
3.4 TERMINATION OF ELIGIBILITY
3.5 OMISSION OF ELIGIBLE EMPLOYEE
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
3.7 ELECTION NOT TO PARTICIPATE
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
4.9 MAXIMUM ANNUAL ADDITIONS
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
4.11 TRANSFERS FROM QUALIFIED PLANS
4.12 DIRECTED INVESTMENT ACCOUNT
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
5.2 METHOD OF VALUATION
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
6.2 DETERMINATION OF BENEFITS UPON DEATH
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
6.5 DISTRIBUTION OF BENEFITS
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
6.7 TIME OF SEGREGATION OR DISTRIBUTION
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
6.10 PRE-RETIREMENT DISTRIBUTION
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
7.3 OTHER POWERS OF THE TRUSTEE
7.4 LOANS TO PARTICIPANTS
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
7.7 ANNUAL REPORT OF THE TRUSTEE
7.8 AUDIT
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
7.10 TRANSFER OF INTEREST
7.11 DIRECT ROLLOVER
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
8.2 TERMINATION
8.3 MERGER OR CONSOLIDATION
ARTICLE IX
TOP HEAVY
9.1 TOP HEAVY PLAN REQUIREMENTS
9.2 DETERMINATION OF TOP HEAVY STATUS
ARTICLE X
MISCELLANEOUS
10.1 PARTICIPANT'S RIGHTS
10.2 ALIENATION
10.3 CONSTRUCTION OF PLAN
10.4 GENDER AND NUMBER
10.5 LEGAL ACTION
10.6 PROHIBITION AGAINST DIVERSION OF FUNDS
10.7 BONDING
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
10.9 INSURER'S PROTECTIVE CLAUSE
10.10 RECEIPT AND RELEASE FOR PAYMENTS
10.11 ACTION BY THE EMPLOYER
10.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
10.13 HEADINGS
10.14 APPROVAL BY INTERNAL REVENUE SERVICE
10.15 UNIFORMITY
NPC INTERNATIONAL, INC. PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this
__________ day of _________________________, 19____, by and
between NPC International, Inc. (herein referred to as the
"Employer") and Troy Cook (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 July 1, 1992, (hereinafter
called the "Effective Date") known as NPC International, Inc.
Profit Sharing Plan (herein referred to as the "Plan") in
recognition of the contribution made to its successful operation
by its employees and for the exclusive benefit of its eligible
employees; and
WHEREAS, under the terms of the Plan, the Employer has
the ability to amend the Plan, provided the Trustee joins in such
amendment if the provisions of the Plan affecting the Trustee are
amended;
NOW, THEREFORE, effective January 1, 1999, 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 Employer unless another
person or entity has been designated by the Employer pursuant to
Section 2.2 to administer the Plan on behalf of the Employer.
1.3 "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).
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 9.2.
1.5 "Anniversary Date" means December 31.
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) excluding gains from sale of stock
options.
(b) including amounts which are contributed
by the Employer pursuant to a salary reduction
agreement and which are not includible in the gross
income of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee
contributions described in Code Section 414(h)(2) that
are treated as Employer contributions.
For a Participant's initial year of participation,
Compensation shall be recognized as of such Employee's effective
date of participation pursuant to Section 3.2.
Compensation in excess of $150,000 ($200,000 for Plan
Years beginning prior to the first day of the first Plan Year
beginning after December 31, 1993) shall be disregarded. Such
amount shall be adjusted for increases in the cost of living in
accordance with Code Section 401(a)(17), except that the dollar
increase in effect on January 1 of any calendar year shall be
effective for the Plan Year beginning with or within such
calendar year. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the
calendar year in which the Plan Year begins multiplied by the
ratio obtained by dividing the number of full months in the short
Plan Year by twelve (12). In applying this limitation, the family
group of a Highly Compensated Participant who is subject to the
Family Member aggregation rules of Code Section 414(q)(6) because
such Participant is either a "five percent owner" of the Employer
or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as
a single Participant, except that for this purpose Family Members
shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before
the close of the year. If, as a result of the application of such
rules the adjusted limitation is exceeded, then the limitation
shall be prorated among the affected Family Members in proportion
to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be
adjusted in accordance with any other method permitted by
Regulation.
If, as a result of such rules, the maximum "annual
addition" limit of Section 4.9(a) would be exceeded for one or
more of the affected Family Members, the prorated Compensation of
all affected Family Members shall be adjusted to avoid or reduce
any excess. The prorated Compensation of any affected Family
Member whose allocation would exceed the limit shall be adjusted
downward to the level needed to provide an allocation equal to
such limit. The prorated Compensation of affected Family Members
not affected by such limit shall then be adjusted upward on a pro
rata basis not to exceed each such affected Family Member's
Compensation as determined prior to application of the Family
Member rule. The resulting allocation shall not exceed such
individual's maximum "annual addition" limit. If, after these
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.
If, in connection with the adoption of this amendment
and restatement, the definition of Compensation has been
modified, then, for Plan Years prior to the Plan Year which
includes the adoption date of this amendment and restatement,
Compensation means compensation determined pursuant to the Plan
then in effect.
1.9 "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
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(b) which is used to
satisfy the "Actual Deferral Percentage" tests shall be
considered an Elective Contribution for purposes of the Plan. Any
contributions deemed to be Elective Contributions (whether or not
used to satisfy the "Actual Deferral Percentage" tests) shall be
subject to the requirements of Sections 4.2(b) and 4.2(c) and
shall further be required to satisfy the nondiscrimination
requirements of Regulation 1.401(k)-1(b)(5), the provisions of
which are specifically incorporated herein by reference.
1.13 "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
of 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.
Highly Compensated Employees shall not be eligible to
participate in this Plan.
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
States (within the meaning of Code Section 861(a)(3)) shall not
be eligible to participate in this Plan.
Regional Managers 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.
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 NPC International, Inc. and any
successor which shall maintain this Plan; and any predecessor
which has maintained this Plan. The Employer is a corporation,
with principal offices in the State of Kansas.
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 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan
Year, the excess of Elective Contributions used to satisfy the
"Actual Deferral Percentage" tests made on behalf of Highly
Compensated Participants for the Plan Year over the maximum
amount of such contributions permitted under Section 4.5(a).
Excess Contributions 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 9.2 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).
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" means that portion of a Participant's
Account that is not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested
portion of a Terminated Participant's Account, or
(b) the last day of the Plan Year in which
the Participant incurs five (5) consecutive 1-Year
Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in
the case of a Terminated Participant whose Vested benefit is
zero, such Terminated Participant shall be deemed to have
received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall
occur pursuant to Section 6.4(g)(2). In addition, the term
Forfeiture shall also include amounts deemed to be Forfeitures
pursuant to any other provision of this Plan.
1.23 "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(e)(3), 402(h)(1)(B),
403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $150,000 ($200,000
for Plan Years beginning prior to the first day of the first Plan
Year beginning after December 31, 1993) shall be disregarded.
Such amount shall be adjusted for increases in the cost of living
in accordance with Code Section 401(a)(17), except that the
dollar increase in effect on January 1 of any calendar year shall
be effective for the Plan Year beginning with or within such
calendar year. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit
for the calendar year in which the Plan Year begins multiplied by
the ratio obtained by dividing the number of full months in the
short Plan Year by twelve (12). In applying this limitation, the
family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the
Employer or one of the ten (10) Highly Compensated Employees paid
the greatest "415 Compensation" during the year, shall be treated
as a single Participant, except that for this purpose Family
Members shall include only the affected Participant's spouse and
any lineal descendants who have not attained age nineteen (19)
before the close of the year.
If, in connection with the adoption of this amendment
and restatement, the definition of "414(s) Compensation" has been
modified, then, for Plan Years prior to the Plan Year which
includes the adoption date of this amendment and restatement,
"414(s) Compensation" means compensation determined pursuant to
the Plan then in effect.
1.26a "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 1.57(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.
If an Employee is, during a "determination year" or
"look-back year", a Family Member of either a "five percent
owner" (whether active or former) or a Highly Compensated
Employee who is one of the 10 most Highly Compensated Employees
ranked on the basis of "415 Compensation" paid by the Employer
during such year, then the Family Member and the "five percent
owner" or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and "five percent
owner" or top-ten Highly Compensated Employee shall be treated as
a single Employee receiving "415 Compensation" and Plan
contributions or benefits equal to the sum of such "415
Compensation" and contributions or benefits of the Family Member
and "five percent owner" or top-ten Highly Compensated Employee.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts which are
contributed by the Employer pursuant to a salary reduction
agreement and which are not includible in the gross income of the
Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B),
403(b) or 457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer contributions.
Additionally, the dollar threshold amounts specified in (b) and
(c) above shall be adjusted at such time and in such manner as is
provided in Regulations. In the case of such an adjustment, the
dollar limits which shall be applied are those for the calendar
year in which the "determination year" or "look-back year"
begins.
In determining who is a Highly Compensated Employee,
Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the
Employer constituting United States source income within the
meaning of Code Section 861(a)(3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken
into account as a single employer and Leased Employees within the
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, for purposes of eligibility
for participation, vesting and benefit accrual, (1) each hour for
which an Employee is directly or indirectly compensated or
entitled to compensation by the Employer for the performance of
duties (these hours will be credited to the Employee for the
computation period in which the duties are performed); (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 (these hours
will be calculated and credited pursuant to Department of Labor
regulation 2530.200b-2 which is incorporated herein by
reference); (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); (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.
For purposes of this Section, 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, Excess Contributions or Excess Aggregate
Contributions 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 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)(1)(B),
403(b) or 457(b), 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:
(1) a non-integrated employer
contribution rate of at least 10% of compensation,
as defined in Code Section 415(c)(3), but
including amounts which are contributed by the
Employer pursuant to a salary reduction agreement
and which are not includible in the gross income
of the Participant under Code Sections 125,
402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and
Employee contributions described in Code Section
414(h)(2) that are treated as Employer
contributions.
(2) immediate participation; and
(3) full and immediate vesting; and
(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
contributions to the Plan excluding, however, contributions made
pursuant to the Participant's deferral election provided for in
Section 4.2 and any Qualified Non-Elective Contribution used in
the "Actual Deferral Percentage" tests.
1.36 "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 65
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, for purposes of
eligibility for participation and vesting, 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 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 and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant Direction Procedures" means such
instructions, guidelines or policies, the terms of which are
incorporated herein, as shall be established pursuant to Section
4.12 and observed by the Administrator and applied to
Participants who have Participant Directed Accounts.
1.43 "Participant's Account" means the account established
and maintained by the Administrator for each Participant with
respect to his total interest in the Plan and Trust resulting
from the Employer Non-Elective Contributions.
1.44 "Participant's Combined Account" means the total
aggregate amount of each Participant's Elective Account and
Participant's Account.
1.45 "Participant's Directed Account" means that portion of
a Participant's interest in the Plan with respect to which the
Participant has directed the investment in accordance with the
Participant Direction Procedure.
1.46 "Participant's Elective Account" means the account
established and maintained by the Administrator for each
Participant with respect to his total interest in the Plan and
Trust resulting from the Employer Elective Contributions used to
satisfy the "Actual Deferral Percentage" tests. A separate
accounting shall be maintained with respect to that portion of
the Participant's Elective Account attributable to such Elective
Contributions pursuant to Section 4.2 and any Employer Qualified
Non-Elective Contributions.
1.47 "Plan" means this instrument, including all amendments
thereto.
1.48 "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.
1.49 "Qualified Non-Elective Contribution" means any
Employer contributions made pursuant to Section 4.6(b) and
Section 4.8(h). Such contributions shall be considered an
Elective Contribution for the purposes of the Plan and used to
satisfy the "Actual Deferral Percentage" tests or the "Actual
Contribution Percentage" tests.
1.50 "Regulation" means the Income Tax Regulations as
promulgated by the Secretary of the Treasury or his delegate, and
as amended from time to time.
1.51 "Retired Participant" means a person who has been a
Participant, but who has become entitled to retirement benefits
under the Plan.
1.52 "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).
1.53 "Super Top Heavy Plan" means a plan described in
Section 9.2(b).
1.54 "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.
1.55 "Top Heavy Plan" means a plan described in Section
9.2(a).
1.56 "Top Heavy Plan Year" means a Plan Year during which
the Plan is a Top Heavy Plan.
1.57 "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 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.
1.58 "Total and Permanent Disability" means a physical or
mental condition of a Participant resulting from bodily injury,
disease, or mental disorder which renders him incapable of
continuing his usual and customary employment with the Employer.
The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. The determination shall be
applied uniformly to all Participants.
1.59 "Trustee" means the person or entity named as trustee
herein or in any separate trust forming a part of this Plan, and
any successors.
1.60 "Trust Fund" means the assets of the Plan and Trust as
the same shall exist from time to time.
1.61 "USERRA" means the Uniformed Services Employment and
Reemployment Rights Act of 1994. Notwithstanding any provision of
this Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be
provided in accordance with Code Section 414(u).
1.62 "Valuation Date" means the Anniversary Date and such
other date or dates deemed necessary by the Administrator. The
Valuation Date may include any day during the Plan Year that the
Trustee, any transfer agent appointed by the Trustee or the
Employer and any stock exchange used by such agent are open for
business.
1.63 "Vested" means the nonforfeitable portion of any
account maintained on behalf of a Participant.
1.64 "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
computation periods shall be measured from the date on which the
Employee first performs an Hour of Service and anniversaries
thereof. The participation computation periods beginning after a
1-Year Break in Service shall be measured from the date on which
an Employee again performs an Hour of Service and anniversaries
thereof.
For vesting purposes, the computation periods shall be
the Plan Year, including periods prior to the Effective Date of
the Plan.
The computation period shall be the Plan Year if not
otherwise set forth herein.
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). However, in determining whether an
Employee has completed a Year of Service for benefit accrual
purposes in the short Plan Year, the number of the Hours of
Service required shall be proportionately reduced based on the
number of full months in the short Plan Year.
Years of Service with R&W Pizza Huts, Inc. shall be
recognized.
Years of Service with any Affiliated Employer shall be
recognized.
ARTICLE II
ADMINISTRATION
2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) In addition to the general powers and
responsibilities otherwise provided for in this Plan,
the Employer shall be empowered to appoint and remove
the Trustee and the Administrator from time to time as
it deems necessary for the proper administration of the
Plan to ensure that the Plan is being operated for the
exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan,
the Code, and the Act. The Employer may appoint
counsel, specialists, advisers, agents (including any
nonfiduciary agent) and other persons as the Employer
deems necessary or desirable in connection with the
exercise of its fiduciary duties under this Plan. The
Employer may compensate such agents or advisers from
the assets of the Plan as fiduciary expenses (but not
including any business (settlor) expenses of the
Employer), to the extent not paid by the Employer.
(b) The Employer may, by written
agreement or designation, appoint at its option an
Investment Manager (qualified under the Investment
Company Act of 1940 as amended), investment adviser, or
other agent to provide direction to the Trustee with
respect to any or all of the Plan assets. Such
appointment shall be given by the Employer in writing
in a form acceptable to the Trustee and shall
specifically identify the Plan assets with respect to
which the Investment Manager or other agent shall have
authority to direct the investment.
(c) 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.
(d) 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.
2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall be the Administrator. The Employer
may appoint any person, including, but not limited to, the
Employees of the Employer, to perform the duties of the
Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. Upon
the resignation or removal of any individual performing the
duties of the Administrator, the Employer may designate a
successor.
2.3 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;
(c) to authorize and direct the Trustee
with respect to all nondiscretionary 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.
2.4 RECORDS AND REPORTS
The Administrator shall keep a record of all actions
taken and shall keep all other books of account, records,
policies, and other data that may be necessary for proper
administration of the Plan and shall be responsible for supplying
all information and reports to the Internal Revenue Service,
Department of Labor, Participants, Beneficiaries and others as
required by law.
2.5 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of
the Administrator, may appoint counsel, specialists, advisers,
agents (including nonfiduciary agents) and other persons as the
Administrator or the Trustee deems necessary or desirable in
connection with the administration of this Plan, including but
not limited to agents and advisers to assist with the
administration and management of the Plan, and thereby to
provide, among such other duties as the Administrator may
appoint, assistance with maintaining Plan records and the
providing of investment information to the Plan's investment
fiduciaries and to Plan Participants.
2.6 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, or any person or persons retained or appointed by
any Named Fiduciary incident to the exercise of their duties
under the Plan, including, but not limited to, fees of
accountants, counsel, Investment Managers, agents (including
nonfiduciary agents) appointed for the purpose of assisting the
Administrator or the Trustee in carrying out the instructions of
Participants as to the directed investment of their accounts and
other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute
a liability of the Trust Fund.
2.7 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.
2.8 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of
either, who has been denied a benefit by a decision of the
Administrator pursuant to Section 2.7 shall be entitled to
request the Administrator to give further consideration to his
claim by filing with the Administrator (on a form which may be
obtained from the Administrator) a request for a hearing. Such
request, together with a written statement of the reasons why the
claimant believes his claim should be allowed, shall be filed
with the Administrator no later than 60 days after receipt of the
written notification provided for in Section 2.7. The
Administrator shall then conduct a hearing within the next 60
days, at which the claimant may be represented by an attorney or
any other representative of his choosing and at which the
claimant shall have an opportunity to submit written and oral
evidence and arguments in support of his claim. At the hearing
(or prior thereto upon 5 business days written notice to the
Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the
Administrator which are pertinent to the claim at issue and its
disallowance. Either the claimant or the Administrator may cause
a court reporter to attend the hearing and record the
proceedings. In such event, a complete written transcript of the
proceedings shall be furnished to both parties by the court
reporter. The full expense of any such court reporter and such
transcripts shall be borne by the party causing the court
reporter to attend the hearing. A final decision as to the
allowance of the claim shall be made by the Administrator within
60 days of receipt of the appeal (unless there has been an
extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are
communicated to the claimant within the 60 day period). Such
communication shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for
the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE 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.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant
effective as of the earlier of the first day of the Plan Year or
the first day of the seventh month of such Plan Year coinciding
with or next following the date 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.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of
each Employee for participation in the Plan based upon
information furnished by the Employer. Such determination shall
be conclusive and binding upon all persons, as long as the same
is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.8.
3.4 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, such Employee will
participate immediately upon returning to an eligible
class of Employees.
3.5 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.
3.6 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.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the
Employer, elect voluntarily not to participate in the Plan. The
election not to participate must be communicated to the Employer,
in writing, at least thirty (30) days before the beginning of a
Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER 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 Elective Contribution.
(b) On behalf of each Participant who is
eligible to share in fixed matching contributions for
the Plan Year, a matching contribution equal to 50% of
each such Participant's Deferred Compensation plus a
uniform discretionary percentage of each such
Participant's Deferred Compensation, the exact
percentage, if any, to be determined each year by the
Employer, which amount, if any, shall be deemed an
Employer Non-Elective Contribution.
Except, however, in applying the
fixed matching percentage specified above, only salary
reductions up to 4% of payroll period Compensation
shall be considered. In applying the discretionary
matching contribution specified above, annual
Compensation shall be considered.
(c) Additionally, to the extent
necessary, the Employer shall contribute to the Plan
the amount necessary to provide the top heavy minimum
contribution. All contributions by the Employer shall
be made in cash.
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. For
purposes of this Section, Compensation shall be
determined prior to any reductions made pursuant to
Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or
457(b), and Employee contributions described in Code
Section 414(h)(2) that are treated as Employer
contributions.
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.
(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) Notwithstanding anything in the Plan
to the contrary, amounts held in the Participant's
Elective Account may not be distributable (including
any offset of loans) earlier than:
(1) a Participant's separation
from service, Total and Permanent Disability, or
death;
(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, 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(b) or
pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any
other plan maintained by the Employer, then such
Participant shall not be permitted to elect to have
Deferred Compensation contributed to the Plan on his
behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar
limitation under Code Section 402(g) shall be reduced,
with respect to the Participant's taxable year
following the taxable year in which the hardship
distribution was made, by the amount of such
Participant's Deferred Compensation, if any, pursuant
to this Plan (and any other plan maintained by the
Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred
Compensation under this Plan together with any elective
deferrals (as defined in Regulation 1.402(g)-1(b))
under another qualified cash or deferred arrangement
(as defined in Code Section 401(k)), a simplified
employee pension (as defined in Code Section 408(k)), a
salary reduction arrangement (within the meaning of
Code Section 3121(a)(5)(D)), a deferred compensation
plan under Code Section 457(b), or a trust described in
Code Section 501(c)(18) cumulatively exceed the
limitation imposed by Code Section 402(g) (as adjusted
annually in accordance with the method provided in Code
Section 415(d) pursuant to Regulations) for such
Participant's taxable year, the Participant may, not
later than March 1 following the close of the
Participant's taxable year, notify the Administrator in
writing of such excess and request that his Deferred
Compensation under this Plan be reduced by an amount
specified by the Participant. In such event, the
Administrator may direct the Trustee to distribute such
excess amount (and any Income allocable to such excess
amount) to the Participant not later than the first
April 15th following the close of the Participant's
taxable year. Any distribution of less than the entire
amount of Excess Deferred Compensation and Income shall
be treated as a pro rata distribution of Excess
Deferred Compensation and Income. The amount
distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year (and
any Income allocable to such excess amount). Any
distribution on or before the last day of the
Participant's taxable year must satisfy each of the
following conditions:
(1) the distribution must be made
after the date on which the Plan received the
Excess Deferred Compensation;
(2) the Participant shall
designate the distribution as Excess Deferred
Compensation; and
(3) the Plan must designate the
distribution as a distribution of Excess Deferred
Compensation.
Any distribution made pursuant to
this Section 4.2(f) shall be made first from unmatched
Deferred Compensation and, thereafter, from Deferred
Compensation which is matched. Matching contributions
which relate to such Deferred Compensation shall be
forfeited.
(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.
(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) 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.
(j) The Employer and the Administrator
shall implement the salary reduction elections provided
for herein in accordance with the following:
(1) A Participant must make his
initial salary deferral election within a
reasonable time, not to exceed thirty (30) days,
after entering the Plan pursuant to Section 3.2.
If the Participant fails to make an initial
salary deferral election within such time, then
such Participant may thereafter make an election
in accordance with the rules governing
modifications. The Participant shall make such an
election by entering into a 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 semi-annually, during election
periods established by the Administrator prior to
the first day of a Plan Year and the first day of
the seventh month of a Plan Year. Any
modification shall not have retroactive effect
and shall remain in force until revoked.
(3) 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 immediately following the close
of the pay period within which such termination
or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION
The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year within the time
prescribed by law, including extensions of time, for the filing
of the Employer federal income tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated
through payroll deductions shall be paid to the Trustee as of the
earliest date on which such contributions can reasonably be
segregated from the Employer general assets, but in any event
within 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 contributions for each Plan Year. Within a
reasonable period of time after the date of receipt by
the Administrator of such information, the
Administrator shall allocate such contribution as
follows:
(1) With respect to the Employer
Elective Contribution made pursuant to Section
4.1(a), to each Participant's Elective Account in
an amount equal to each such Participant's
Deferred Compensation for the year.
(2) With respect to the Employer
Non-Elective Contribution made pursuant to
Section 4.1(b), to each Participant's Account in
accordance with Section 4.1(b).
Participants employed at any time
during the Plan Year shall be eligible to share
in the fixed matching contribution for the year.
Only Participants who have completed a Year of
Service during the Plan Year and are actively
employed on the last day of the Plan Year shall
be eligible to share in the discretionary
matching contribution for the year.
(c) As of each Anniversary Date any
amounts which became Forfeitures since the last
Anniversary Date shall first be made available to
reinstate previously forfeited account balances of
Former Participants, if any, in accordance with Section
6.4(g)(2). The remaining Forfeitures, if any, shall be
used to reduce the contribution of the Employer
hereunder for the Plan Year in which such Forfeitures
occur.
(d) 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).
(e) Notwithstanding the foregoing,
Participants who are not actively employed on the last
day of the Plan Year due to Retirement (Normal or
Late), Total and Permanent Disability or death shall
share in the allocation of contributions for that Plan
Year.
(f) As of each Valuation Date, before the
current valuation period allocation of Employer
contributions and after allocation of Forfeitures, any
earnings or losses (net appreciation or net
depreciation) of the Trust Fund shall be allocated in
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. Earnings or
losses with respect to a Participant's Directed Account
shall be allocated in accordance with Section 4.12.
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
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 contributions allocated to the
Participant's Combined Account of each Key Employee for
such Top Heavy Plan Year is less than three percent
(3%) of each Key Employee's "415 Compensation" and (2)
this Plan is not required to be included in an
Aggregation Group to enable a defined benefit plan to
meet the requirements of Code Section 401(a)(4) or 410,
the sum of the Employer contributions allocated to the
Participant's Combined Account of each 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.
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 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 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 $150,000
($200,000 for Plan Years beginning prior to the first
day of the first Plan Year beginning after December 31,
1993). Such amount shall be adjusted for increases in
the cost of living in accordance with Code Section
401(a)(17), except that the dollar increase in effect
on January 1 of any calendar year shall be effective
for the Plan Year beginning with or within such
calendar year. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the
"415 Compensation" limit for the calendar year in which
the Plan Year begins multiplied by the ratio obtained
by dividing the number of full months in the short Plan
Year by twelve (12).
(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.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each
Plan Year, the annual allocation derived from Employer
Elective Contributions to a Participant's Elective
Account shall satisfy one of the following tests:
(1) The "Actual Deferral
Percentage" for the Highly Compensated
Participant group shall not be more than the
"Actual Deferral Percentage" of the Non-Highly
Compensated Participant group multiplied by 1.25,
or
(2) The excess of the "Actual
Deferral Percentage" for the Highly Compensated
Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated
Participant group shall not be more than two
percentage points. Additionally, the "Actual
Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual
Deferral Percentage" for the Non-Highly
Compensated Participant group multiplied by 2.
The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-1(b) are incorporated herein
by reference.
However, in order to prevent the
multiple use of the alternative method described
in (2) above and in Code Section 401(m)(9)(A),
any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2
and to make Employee contributions or to receive
matching contributions under this Plan or under
any other plan maintained by the Employer or an
Affiliated Employer shall have a combination of
his actual deferral ratio and his actual
contribution ratio reduced pursuant to Section
4.6(a) and Regulation 1.401(m)-2, the provisions
of which are incorporated herein by reference.
(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.
Employer Elective Contributions allocated to each Non-
Highly Compensated Participant's Elective Account shall
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 $150,000 ($200,000 for Plan Years beginning
prior to the first day of the first Plan Year
beginning after December 31, 1993) limit to
"414(s) Compensation," Family Members shall
include only the affected Employee's spouse and
any lineal descendants who have not attained age
19 before the close of the Plan Year.
(2) The Employer Elective
Contributions and "414(s) Compensation" of all
Family Members shall be disregarded for purposes
of determining the "Actual Deferral Percentage"
of the Non-Highly Compensated Participant group
except to the extent taken into account in
paragraph (1) above.
(3) If a Participant is required
to be aggregated as a member of more than one
family group in a plan, all Participants who are
members of those family groups that include the
Participant are aggregated as one family group in
accordance with paragraphs (1) and (2) above.
(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)), the cash or deferred arrangements
included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred
arrangements may be considered as a single arrangement
for purposes of determining whether or not such
arrangements satisfy Code Sections 401(a)(4), 410(b)
and 401(k). In such a case, the cash or deferred
arrangements included in such plans and the plans
including such arrangements shall be treated as one
arrangement and as one plan for purposes of this
Section and Code Sections 401(a)(4), 410(b) and 401(k).
Plans may be aggregated under this paragraph (e) only
if they have the same plan year.
Notwithstanding the above, an
employee stock ownership plan described in Code Section
4975(e)(7) or 409 may not be combined with this Plan
for purposes of determining 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) of the Employer or an
Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred
arrangement for the purpose of determining the actual
deferral ratio with respect to such Highly Compensated
Participant. However, if the cash or deferred
arrangements have different plan years, this paragraph
shall be applied by treating all cash or deferred
arrangements ending with or within the same calendar
year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the
Employer Elective Contributions made pursuant to Section 4.4 do
not satisfy one of the tests set forth in Section 4.5(a), the
Administrator shall adjust Excess Contributions pursuant to the
options set forth below:
(a) On or before the fifteenth day of the
third 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 used to satisfy the
"Actual Deferral Percentage" tests 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
pursuant to Section 4.2(f) 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:
(i) may be postponed but not
later than the close of the Plan Year
following the Plan Year to which they are
allocable;
(ii) shall be adjusted for Income;
and
(iii) shall be designated by
the Employer as a distribution of Excess
Contributions (and Income).
(2) 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.
(4) Matching contributions which
relate to Excess Contributions shall be forfeited
unless the related matching contribution is
distributed as an Excess Aggregate Contribution
pursuant to Section 4.8.
(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).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage"
for the Highly Compensated Participant group shall not
exceed the greater of:
(1) 125 percent of such
percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of
such percentage for the Non-Highly Compensated
Participant group, or such percentage for the Non-
Highly Compensated Participant group plus 2
percentage points. However, to prevent the
multiple use of the alternative method described
in this paragraph and Code Section 401(m)(9)(A),
any Highly Compensated Participant eligible to
make elective deferrals pursuant to Section 4.2
or any other cash or deferred arrangement
maintained by the Employer or an Affiliated
Employer and to make Employee contributions or to
receive matching contributions under this Plan or
under any plan maintained by the Employer or an
Affiliated Employer shall have a combination of
his actual deferral ratio and his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2 and Section 4.8(a). The provisions of
Code Section 401(m) and Regulations 1.401(m)-1(b)
and 1.401(m)-2 are incorporated herein by
reference.
(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
contributed to the Plan prior to the end of the
succeeding Plan Year shall be considered. In addition,
the Administrator may elect to take into account, with
respect to Employees eligible to have Employer matching
contributions pursuant to Section 4.1(b) allocated to
their accounts, elective deferrals (as defined in
Regulation 1.402(g)-1(b)) and qualified non-elective
contributions (as defined in Code Section 401(m)(4)(C))
contributed to any plan maintained by the Employer.
Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching
contributions subject to Regulation 1.401(m)-1(b)(5)
which is incorporated herein by reference. However, the
Plan Year must be the same as the plan year of the plan
to which the elective deferrals and the qualified non-
elective contributions are made.
(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 $150,000 ($200,000 for Plan Years beginning
prior to the first day of the first Plan Year
beginning after December 31, 1993) limit to
"414(s) Compensation", Family Members shall
include only the affected Employee's spouse and
any lineal descendants who have not attained age
19 before the close of the Plan Year.
(2) The Employer matching
contributions made pursuant to Section 4.1(b) 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)), such plans shall be treated
as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee
contributions, or both, are made may be considered as a
single plan for purposes of determining whether or not
such plans satisfy Code Sections 401(a)(4), 410(b) and
401(m). In such a case, the aggregated plans must
satisfy this Section and Code Sections 401(a)(4),
410(b) and 401(m) as though such aggregated plans were
a single plan. Plans may be aggregated under this
paragraph (e) only if they have the same plan year.
Notwithstanding the above, an
employee stock ownership plan described in Code Section
4975(e)(7) or 409 may not be aggregated with this Plan
for purposes of determining whether the employee stock
ownership plan or this Plan satisfies this Section and
Code Sections 401(a)(4), 410(b) and 401(m).
(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) which are maintained by the
Employer or an Affiliated Employer to which matching
contributions, Employee contributions, or both, are
made, all such contributions on behalf of such Highly
Compensated Participant shall be aggregated for
purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, if
the plans have different plan years, this paragraph
shall be applied by treating all plans ending with or
within the same calendar year as a single plan.
(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 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.
If the correction of Excess Aggregate
Contributions attributable to Employer matching
contributions is not in proportion to the Vested and
non-Vested portion of such contributions, then the
Vested portion of the Participant's Account
attributable to Employer matching contributions after
the correction shall be subject to Section 6.5(f).
(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.
(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. 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 non-elective contributions or
elective deferrals taken into account pursuant to
Section 4.7(c) on behalf of such Highly Compensated
Participant for such Plan Year.
(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.
(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 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
Account of each Non-Highly Compensated Participant in
the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the
total Compensation of all Non-Highly Compensated
Participants. A separate accounting of any special
Qualified Non-Elective Contribution shall be maintained
in the Participant's Account.
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). However, for "limitation years"
beginning after December 31, 1994, the dollar amount in
(1) above shall be adjusted annually as provided in
Code Section 415(d) pursuant to the Regulations.
(b) For purposes of applying the
limitations of Code Section 415, "annual additions"
means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions,
(2) Employee contributions, (3) forfeitures, (4)
amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code Section
415(l)(2) which is part of a pension or annuity plan
maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are
attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as
defined in Code 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(e)(6), 403(a)(4), 403(b)(8) and 408(d)(3)); (2)
repayments of loans made to a Participant from the
Plan; (3) repayments of distributions received by an
Employee pursuant to Code Section 411(a)(7)(B) (cash-
outs); (4) repayments of distributions received by an
Employee pursuant to Code Section 411(a)(3)(D)
(mandatory contributions); and (5) Employee
contributions to a simplified employee pension
excludable from gross income under Code Section
408(k)(6).
(d) For purposes of applying the
limitations of Code Section 415, the "limitation year"
shall be the Plan Year.
(e)) For "limitation years" beginning
prior to January 1, 1995, 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, each Employer
who maintains this Plan will be considered to be a
separate 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 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 will not
be less than 125 percent of the sum of the annual
benefits under such plans which the Participant had
accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all
"limitation years" beginning before January 1, 1987.
(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.
If the Employee was a Participant as
of the end of the first day of the first "limitation
year" beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator
of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of
(1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Code Section 415 limitation applicable to the
first "limitation year" beginning on or after January
1, 1987. The annual addition for any "limitation year"
beginning before January 1, 1987 shall not be
recomputed to treat all Employee contributions as
annual additions.
(m) 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 "annual additions"
under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the
Administrator shall (1) distribute any elective
deferrals (within the meaning of Code Section
402(g)(3)) or return any Employee contributions
(whether voluntary or mandatory), and for the
distribution of gains attributable to those elective
deferrals and Employee contributions, to the extent
that the distribution or return would reduce the
"excess amount" in the Participant's accounts (2) hold
any "excess amount" remaining after the return of any
elective deferrals or voluntary Employee contributions
in a "Section 415 suspense account" (3) use the
"Section 415 suspense account" in the next "limitation
year" (and succeeding "limitation years" if necessary)
to reduce Employer contributions for that Participant
if that Participant is covered by the Plan as of the
end of the "limitation year," or if the Participant is
not so covered, allocate and reallocate the "Section
415 suspense account" in the next "limitation year"
(and succeeding "limitation years" if necessary) to all
Participants in the Plan before any Employer or
Employee contributions which would constitute "annual
additions" are made to the Plan for such "limitation
year" (4) reduce Employer contributions to the Plan for
such "limitation year" by the amount of the "Section
415 suspense account" allocated and reallocated during
such "limitation year."
(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 Eligible Employees, provided that
the trust from which such funds are transferred permits
the transfer to be made and the transfer will not
jeopardize the tax exempt status of the Plan or Trust
or create adverse tax consequences for the Employer.
The amounts transferred shall be set up in a separate
account herein referred to as a "Participant's Rollover
Account." Such account shall be fully Vested at all
times and shall not be subject to Forfeiture for any
reason.
(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) The Administrator, at the election of
the Participant, shall direct the Trustee to distribute
all or a portion of the amount credited to the
Participant's Rollover Account. 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.
(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) For purposes of this Section, the
term "qualified plan" shall mean any tax qualified plan
under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i)
amounts transferred to this Plan directly from another
qualified plan; (ii) distributions from another
qualified plan which are eligible rollover
distributions and which are either transferred by the
Employee to this Plan within sixty (60) days following
his receipt thereof or are transferred pursuant to a
direct rollover; (iii) amounts transferred to this Plan
from a conduit individual retirement account provided
that the conduit individual retirement account has no
assets other than assets which (A) were previously
distributed to the Employee by another qualified plan
as a lump-sum distribution (B) were eligible for tax-
free rollover to a qualified plan and (C) were
deposited in such conduit individual retirement account
within sixty (60) days of receipt thereof and other
than earnings on said assets; and (iv) amounts
distributed to the Employee from a conduit individual
retirement 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.
(g) 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.
(h) 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.
(i) 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.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) Participants may, subject to a
procedure established by the Administrator (the
Participant Direction Procedures) and applied in a
uniform nondiscriminatory manner, direct the Trustee to
invest all of their accounts in specific assets,
specific funds or other investments permitted under the
Plan and the Participant Direction Procedures. That
portion of the interest of any Participant so directing
will thereupon be considered a Participant's Directed
Account.
(b) As of each Valuation Date, all
Participant Directed Accounts shall be charged or
credited with the net earnings, gains, losses and
expenses as well as any appreciation or depreciation in
the market value using publicly listed fair market
values when available or appropriate.
(1) To the extent that the assets
in a Participant's Directed Account are accounted
for as pooled assets or investments, the
allocation of earnings, gains and losses of each
Participant's Directed Account shall be based
upon the total amount of funds so invested, in a
manner proportionate to the Participant's share
of such pooled investment.
(2) To the extent that the assets
in the Participant's Directed Account are
accounted for as segregated assets, the
allocation of earnings, gains and losses from
such assets shall be made on a separate and
distinct basis.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each
Valuation Date, to determine the net worth of the assets
comprising the Trust Fund as it exists on the Valuation Date. In
determining such net worth, the Trustee shall value the assets
comprising the Trust Fund at their fair market value as of the
Valuation Date and shall deduct all expenses for which the
Trustee has not yet obtained reimbursement from the Employer or
the Trust Fund. The Trustee may update the value of any shares
held in the Participant Directed Account by reference to the
number of shares held by that Participant, priced at the market
value as of the Valuation Date.
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 Valuation
Date. Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on
the Valuation Date, which bid price shall be obtained from a
registered broker or an investment banker. In determining the
fair market value of assets other than securities for which
trading or bid prices can be obtained, the Trustee may appraise
such assets itself, or in its discretion, employ one or more
appraisers for that purpose and rely on the values established by
such appraiser or appraisers.
ARTICLE 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 his 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, at the election of the Participant, 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
(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) If a Participant's employment with
the Employer is terminated for any reason other than
death, Total and Permanent Disability or retirement,
such Participant shall be entitled to such benefits as
are provided hereinafter pursuant to this Section 6.4.
Distribution of the funds due to a
Terminated Participant shall be made on the occurrence
of an event which would result in the distribution had
the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and
Permanent Disability or Normal Retirement). However, at
the election of the Participant, the Administrator
shall direct the Trustee to cause the entire Vested
portion of the Terminated Participant's Combined
Account to be payable to such Terminated Participant.
Any distribution under this paragraph shall be made in
a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited
to, all notice and consent requirements of Code Section
411(a)(11) and the Regulations thereunder.
If the value of a Terminated
Participant's Vested benefit derived from Employer and
Employee contributions does not exceed $3,500 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) The Vested portion of any
Participant's Account shall be a percentage of the
total amount credited to his Participant's Account
determined on the basis of the Participant's number of
Years of Service according to the following schedule:
Vesting Schedule
Years of Service Percentage
1 25 %
2 50 %
3 75 %
4 100 %
(c) Notwithstanding the vesting schedule
above, the Vested percentage of a Participant's Account
shall not be less than the Vested percentage attained
as of the later of the effective date or adoption date
of this amendment and restatement.
(d) Notwithstanding the vesting schedule
above, upon the complete discontinuance of the Employer
contributions to the Plan or upon any full or partial
termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100%
Vested and shall not thereafter be subject to
Forfeiture.
(e) 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 and restatement. 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.
Except, however, any Employee who was
a Participant as of the later of the effective date or
adoption date of this amendment and restatement and who
completed three (3) Years of Service shall be subject
to the pre-amendment vesting schedule provided such
schedule is more liberal than the new vesting schedule.
Pre-Amendment Vesting Schedule
The vesting schedule was 100% full and immediate for profit
sharing.
The plan originally contained a profit sharing feature only.
Effective January 1, 1999, this restatement, the plan will no
longer contain a profit sharing feature. It has been amended to
add a salary reduction feature and matching feature.
SPECIAL PRE-AMENDMENT TABLE INSERT
(f) 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.
(g) (1) If any Former Participant shall be
reemployed by the Employer before a 1-Year Break in
Service occurs, he shall continue to participate in the
Plan in the same manner as if such termination had not
occurred.
(2) If any Former Participant
shall be reemployed by the Employer before five
(5) consecutive 1-Year Breaks in Service, and
such Former Participant had received a
distribution of his entire Vested interest prior
to his reemployment, his forfeited account shall
be reinstated only if he repays the full amount
distributed to him before the earlier of five (5)
years after the first date on which the
Participant is subsequently reemployed by the
Employer or the close of the first period of five
(5) consecutive 1-Year Breaks in Service
commencing after the distribution. In the event
the Former Participant does repay the full amount
distributed to him, the undistributed portion of
the Participant's Account must be restored in
full, unadjusted by any gains or losses occurring
subsequent to the Valuation Date coinciding with
or preceding his termination. The source for such
reinstatement shall first be any Forfeitures
occurring during the year. If such source is
insufficient, then the Employer shall contribute
an amount which is sufficient to restore any such
forfeited Accounts.
(3) If any Former Participant is
reemployed after a 1-Year Break in Service has
occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service
subject to the following rules:
(i) If a Former Participant has a
1-Year Break in Service, his pre-break and
post-break service shall be used for
computing Years of Service for eligibility
and for vesting purposes only after he has
been employed for one (1) Year of Service
following the date of his reemployment with
the Employer;
(ii) Any Former Participant who
under the Plan does not have a
nonforfeitable right to any interest in the
Plan resulting from Employer contributions
shall lose credits otherwise allowable under
(i) above if his consecutive 1-Year Breaks
in Service equal or exceed the greater of
(A) five (5) or (B) the aggregate number of
his pre-break Years of Service;
(iii) After five (5)
consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance
attributable to pre-break service shall not
be increased as a result of post-break
service;
(iv) If a Former Participant is
reemployed by the Employer, he shall
participate in the Plan immediately on his
date of reemployment;
(v) If a Former Participant (a 1-
Year Break in Service previously occurred,
but employment had not terminated) is
credited with an Hour of Service after the
first eligibility computation period in
which he incurs a 1-Year Break in Service,
he shall participate in the Plan
immediately.
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
lump-sum payment in cash.
(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
occurs 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
distribution 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 date the distribution commences.
(3) Written consent of the
Participant to the distribution must not be made
before the Participant receives the notice and
must not be made more than 90 days before the
date the distribution commences.
(4) No consent shall be valid if
a significant detriment is imposed under the Plan
on any Participant who does not consent to the
distribution.
Any such distribution may commence less than
30 days after the notice required under Regulation
1.411(a)-11(c) is given, provided that: (1) the
Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if
applicable, a particular distribution option), and (2)
the Participant, after receiving the notice,
affirmatively elects a distribution.
(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 or must begin to be
distributed to him not later than April 1st of
the calendar year following the later of (i) the
calendar year in which the Participant attains
age 70 1/2 or (ii) the calendar year in which the
Participant retires, provided, however, that this
clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at
any time during the five (5) Plan Year period
ending in the calendar year in which he attains
age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any
subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be
the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year
ends. Such distributions shall be equal to or
greater than any required distribution.
Notwithstanding the foregoing, 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.
(d) For purposes of this Section, the
life expectancy of a Participant and a Participant's
spouse may, at the election of the Participant or the
Participant's spouse, be redetermined in accordance
with Regulations. The election, once made, shall be
irrevocable. If no election is made by the time
distributions must commence, then the life expectancy
of the Participant and the Participant's spouse shall
not be subject to recalculation. Life expectancy and
joint and last survivor expectancy shall be computed
using the return multiples in Tables V and VI of
Regulation 1.72-9.
(e) 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.
(f) If a distribution is made at a time
when a Participant is not fully Vested in his
Participant's Account and the Participant may increase
the Vested percentage in such account:
(1) a separate account shall be
established for the Participant's interest in the
Plan as of the time of the distribution; and
(2) at any relevant time, the
Participant's Vested portion of the separate
account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula:
P is the Vested percentage at the relevant time,
AB is the account balance at the relevant time, D
is the amount of distribution, and R is the ratio
of the account balance at the relevant time to
the account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) The death benefit payable pursuant to
Section 6.2 shall be paid to the Participant's
Beneficiary in one lump-sum payment in cash subject to
the rules of Section 6.6(b).
(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 his date of death. If a Participant
dies before he has begun to receive any distributions
of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then
his death benefit shall be distributed to his
Beneficiaries by December 31st of the calendar year in
which the fifth anniversary of his date of death
occurs.
However, 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 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.
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 the distribution may be made as
soon as is practicable. However, unless a Former Participant
elects in writing to defer the receipt of benefits (such election
may not result in a death benefit that is more than incidental),
the payment of benefits shall occur 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
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 unadjusted for earnings or losses.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the
age of 59.5 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. However, no distribution from the
Participant's Account shall occur prior to 100% vesting. 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 Vested Participant's Elective
Account and Participant's Account valued as of the last
Valuation Date or the amount necessary to satisfy the
immediate and heavy financial need of the Participant.
Any distribution made pursuant to this Section shall be
deemed to be made as of the first day of the Plan Year
or, if later, the Valuation Date immediately preceding
the date of distribution, and the Participant's
Elective Account and Participant's Account shall be
reduced accordingly. Withdrawal under this Section
shall be authorized only if the distribution is on
account of:
(1) Expenses for medical care
described in Code Section 213(d) previously
incurred by the Participant, his spouse, or any
of his dependents (as defined in Code Section
152) or necessary for these persons to obtain
medical care;
(2) The costs directly related to
the purchase of a principal residence for the
Participant (excluding mortgage payments);
(3) Payment of tuition, related
educational fees, and room and board expenses for
the next twelve (12) months of post-secondary
education for the Participant, his spouse,
children, or dependents; or
(4) Payments necessary to prevent
the eviction of the Participant from his
principal residence or foreclosure on the
mortgage of the Participant's principal
residence.
(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,
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.
(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
(a) The Trustee shall have the following
categories of responsibilities:
(1) Consistent with the "funding
policy and method" determined by the Employer, to
invest, manage, and control the Plan assets
subject, however, to the direction of a
Participant with respect to his Participant
Directed Accounts, the Employer or an Investment
Manager appointed by the Employer or any agent of
the Employer;
(2) At the direction of the
Administrator, to pay benefits required under the
Plan to be paid to Participants, or, in the event
of their death, to their Beneficiaries; and
(3) To maintain records of
receipts and disbursements and furnish to the
Employer and/or Administrator for each Plan Year
a written annual report per Section 7.7.
(b) In the event that the Trustee shall
be directed by a Participant (pursuant to the
Participant Direction Procedures), or the Employer, or
an Investment Manager or other agent appointed by the
Employer with respect to the investment of any or all
Plan assets, the Trustee shall have no liability with
respect to the investment of such assets, but shall be
responsible only to execute such investment
instructions as so directed.
(1) The Trustee shall be entitled
to rely fully on the written instructions of a
Participant (pursuant to the Participant
Direction Procedures), or the Employer, or any
Fiduciary or nonfiduciary agent of the Employer,
in the discharge of such duties, and shall not be
liable for any loss or other liability, resulting
from such direction (or lack of direction) of the
investment of any part of the Plan assets.
(2) The Trustee may delegate the
duty to execute such instructions to any
nonfiduciary agent, which may be an affiliate of
the Trustee or any Plan representative.
(3) The Trustee may refuse to
comply with any direction from the Participant in
the event the Trustee, in its sole and absolute
discretion, deems such directions improper by
virtue of applicable law. The Trustee shall not
be responsible or liable for any loss or expense
which may result from the Trustee's refusal or
failure to comply with any directions from the
Participant.
(4) Any costs and expenses
related to compliance with the Participant's
directions shall be borne by the Participant's
Directed Account, unless paid by the Employer.
(c) 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 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) o vote upon any stocks, bonds, or
other securities; to give general or special proxies or
powers of attorney with or without power of
substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any
payments incidental thereto; to oppose, or to consent
to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and
to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers
of an owner with respect to stocks, bonds, securities,
or other property. However, the Trustee shall not vote
proxies relating to securities for which it has not
been assigned full investment management
responsibilities. In those cases where another party
has such investment authority or discretion, the
Trustee will deliver all proxies to said party who will
then have full responsibility for voting those proxies;
(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 Trustee, and to secure the repayment
thereof by pledging all, or any part, of the Trust
Fund; and no person lending money to the Trustee shall
be bound to see to the application of the money lent or
to inquire into the validity, expediency, or propriety
of any borrowing;
(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 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 appoint a nonfiduciary agent or
agents to assist the Trustee in carrying out any
investment instructions of Participants and of any
Investment Manager or Fiduciary, and to compensate such
agent(s) from the assets of the Plan, to the extent not
paid by the Employer;
(s) 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.
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:
(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 considered one plan.
(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. For this purpose, a
principal residence has the same meaning as a principal
residence under Code Section 1034. Loan repayments will
be suspended under this Plan as permitted under Code
Section 414(u)(4).
(d) Any loans granted or renewed 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
(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 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
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 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 the 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 distributee may elect, at the time and in
the manner prescribed by the Administrator, to have any
portion of an eligible rollover distribution that is
equal to at least $500 paid directly to an eligible
retirement plan specified by the distributee in a
direct rollover.
(b) For purposes of this Section the
following definitions shall apply:
(1) An eligible rollover
distribution is any distribution of all or any
portion of the balance to the credit of the
distributee, except that an eligible rollover
distribution does not include: any distribution
that is one of a series of substantially equal
periodic payments (not less frequently than
annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint
life expectancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such distribution is
required under Code Section 401(a)(9); the
portion of any other distribution that is not
includible in gross income (determined without
regard to the exclusion for net unrealized
appreciation with respect to employer
securities); and any other distribution that is
reasonably expected to total less than $200
during a year.
(2) An eligible retirement plann
eligible retirement plan is an individual
retirement account described in Code Section
408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified
trust described in Code Section 401(a), that
accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual
retirement account or individual retirement
annuity.
(3) A distributee includes an
Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a
qualified domestic relations order, as defined in
Code Section 414(p), are distributees with regard
to the interest of the spouse or former spouse.
(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. However, any amendment which affects
the rights, duties or responsibilities of the Trustee
and Administrator, other than an amendment to remove
the Trustee or Administrator, may only be made with the
Trustee's and Administrator's written consent. Any such
amendment shall become effective as provided therein
upon its execution. The Trustee shall not be required
to execute any such amendment unless the Trust
provisions contained herein are a part of the Plan and
the amendment affects the duties of the Trustee
hereunder.
(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 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).
ARTICLE IX
TOP HEAVY
9.1 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.
9.2 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 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 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.
(1) Required Aggregation Group:
In determining a Required Aggregation Group
hereunder, each plan of the Employer in which a
Key Employee is a participant in the Plan Year
containing the Determination Date or any of the
four preceding Plan Years, and each other plan of
the Employer which enables any plan in which a
Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or 410,
will be required to be aggregated. Such group
shall be known as a Required Aggregation Group.
In the case of a Required Aggregation
Group, each plan in the group will be considered
a Top Heavy Plan if the Required Aggregation
Group is a Top Heavy Group. No plan in the
Required Aggregation Group will be considered a
Top Heavy Plan if the Required Aggregation Group
is not a Top Heavy Group.
(2) Permissive Aggregation Group:
The Employer may also include any other plan not
required to be included in the Required
Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the
provisions of Code Sections 401(a)(4) and 410.
Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive
Aggregation Group, only a plan that is part of
the Required Aggregation Group will be considered
a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the
Permissive Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation
Group is not a Top Heavy Group.
(3) Only those plans of the
Employer in which the Determination Dates fall
within the same calendar year shall be aggregated
in order to determine whether such plans are Top
Heavy Plans.
(4) An Aggregation Group shall
include any terminated plan of the Employer if it
was maintained within the last five (5) years
ending on the Determination Date.
(e) "Determination Date" means (a) the
last day of the preceding Plan Year, or (b) in the case
of the first Plan Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In
the case of a defined benefit plan, the Present Value
of Accrued Benefit for a Participant other than a Key
Employee, shall be as determined using the single
accrual method used for all plans of the Employer and
Affiliated Employers, or if no such single method
exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate
permitted under Code Section 411(b)(1)(C). 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 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.
ARTICLE X
MISCELLANEOUS
10.1 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.
10.2 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 2.7 and 2.8.
(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.
10.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced
according to the Act and the laws of the State of Kansas, other
than its laws respecting choice of law, to the extent not
preempted by the Act.
10.4 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.
10.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought
regarding the Trust and/or Plan established hereunder to which
the Trustee, the Employer or the Administrator may be a party,
and such claim, suit, or proceeding is resolved in favor of the
Trustee, the Employer or the Administrator, they shall be
entitled to be reimbursed from the Trust Fund for any and all
costs, attorney's fees, and other expenses pertaining thereto
incurred by them for which they shall have become liable.
10.6 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.
10.7 BONDING
Every Fiduciary, except a bank or an insurance company,
unless exempted by the Act and regulations thereunder, shall be
bonded in an amount not less than 10% of the amount of the funds
such Fiduciary handles; provided, however, that the minimum bond
shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan
Year by the amount of funds handled by such person, group, or
class to be covered and their predecessors, if any, during the
preceding Plan Year, or if there is no preceding Plan Year, then
by the amount of the funds to be handled during the then current
year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary
alone or in connivance with others. The surety shall be a
corporate surety company (as such term is used in 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.
10.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer, the Administrator, nor the
Trustee, nor their successors shall be responsible for the
validity of any Contract issued hereunder or for the failure on
the part of the insurer to make payments provided by any such
Contract, or for the action of any person which may delay payment
or render a Contract null and void or unenforceable in whole or
in part.
10.9 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.
10.10 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.
10.11 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.
10.12 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 or as accepted by or assigned to them pursuant to
any procedure provided under the Plan, including but not limited
to any agreement allocating or delegating their responsibilities,
the terms of which are incorporated herein by reference. In
general, unless otherwise indicated herein or pursuant to such
agreements, the Employer shall have the duties specified in
Article II hereof, as the same may be allocated or delegated
thereunder, including but not limited to the responsibility for
making the contributions provided for under Section 4.1; and
shall have the authority to appoint and remove the Trustee and
the Administrator; to formulate the Plan's "funding policy and
method"; and to amend or terminate, in whole or in part, the
Plan. The Administrator shall have the responsibility for the
administration of the Plan, including but not limited to the
items specified in Article II of the Plan, as the same may be
allocated or delegated thereunder. The Trustee shall have the
responsibility of management and control of the assets held under
the Trust, except to the extent directed pursuant to Article II
or with respect to those assets, the management of which has been
assigned to an Investment Manager, who shall be solely
responsible for the management of the assets assigned to it, all
as specifically provided in the Plan and any agreement with the
Trustee. Each named Fiduciary warrants that any directions given,
information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or
providing for such direction, information or action. Furthermore,
each named Fiduciary may rely upon any such direction,
information or action of another named Fiduciary as being proper
under the Plan, and is not required under the Plan to inquire
into the propriety of any such direction, information or action.
It is intended under the Plan that each named Fiduciary shall be
responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan as specified or
allocated herein. No named Fiduciary shall guarantee the Trust
Fund in any manner against investment loss or depreciation in
asset value. Any person or group may serve in more than one
Fiduciary capacity. In the furtherance of their responsibilities
hereunder, the "named Fiduciaries" shall be empowered to
interpret the Plan and Trust and to resolve ambiguities,
inconsistencies and omissions, which findings shall be binding,
final and conclusive.
10.13 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.
10.14 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 3.5, 3.6, and 4.1(c), any
contribution by the Employer to the Trust Fund is
conditioned upon the deductibility of the contribution
by the Employer under the Code and, to the extent any
such deduction is disallowed, the Employer may, within
one (1) year following the disallowance of the
deduction, demand repayment of such disallowed
contribution and the Trustee shall return such
contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the
Employer, but any losses attributable thereto must
reduce the amount so returned.
10.15 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.
IN WITNESS WHEREOF, this Plan has been executed the day
and year first above written.
NPC International, Inc.
By__________________________
EMPLOYER
___________________________
TRUSTEE
FIVE-YEAR FINANCIAL SUMMARY
(Dollars in thousands,
except per share data)
Fiscal Year Ended
March 30, March 31, March 25, March 26, March 28,
1999 1998(5) 1997 1996 1995
INCOME STATEMENT
DATA:
Revenue $ 401,159 $ 455,297 $295,285 $ 324,986 $ 317,467
Cost of sales 107,821 125,365 80,618 93,977 92,332
Direct labor 111,468 129,133 81,086 87,293 89,964
Other operating
expenses 110,339 120,272 75,523 83,280 84,659
Income from
restaurant
operations 71,531 80,527 58,058 60,436 50,512
General and
administrative
expenses 20,983 23,930 17,710 21,084 21,066
Depreciation and
amortization 8,922 11,475 6,121 5,648 5,506
Operating income
Before impair-
ment and loss
provision and
recapitalization
gain 41,626 45,122 34,227 33,704 23,940
Asset impairment
and loss
provision(1) -- 14,100 -- 23,500 35,000
Operating income
(loss) 41,626 31,022 34,227 10,204 (11,060)
Interest expense (10,177) (15,655) (5,455) (6,317) (6,252)
Miscellaneous
income
(expense) 1,089 526 311 (341) (140)
Income before
recapitalization
gain 32,538 15,893 29,083 3,546 (17,452)
Recapitalization
gain(2) 39,400 -- -- -- --
Income (loss)
Before income
taxes 71,938 15,893 29,083 3,546 (17,452)
Provision (benefit)
For income taxes 23,992 5,563 11,272 1,403 (1,838)
Net income (loss) 47,946 10,330 17,811 2,143 (15,614)
Earnings (loss)
per share:
Basic 1.95 .42 .72 .09 (.63)
Diluted 1.92 .41 .72 .09 (.63)
Cash dividend
per share(3) -- -- -- .421875 --
(Dollars in thousands)
Fiscal Year Ended
March 30, March 31, March 25, March 26, March 28,
1999 1998(5) 1997 1996 1995
YEAR END DATA:
Working capital
deficit $(27,929) $(30,837) $(15,405) $ (1,782) $ (7,061)
Total assets 344,083 382,492 259,907 197,829 211,712
Long-term debt 123,500 204,033 116,777 73,328 82,850
Stockholders'
equity 152,988 107,036 95,793 77,320 80,287
Number of Company-
owned units(4) 735 725 513 405 481
Number of
franchised
units(4) -- 147 140 142 157
Number of
employees 16,000 16,000 12,000 9,800 10,300
(1) The 1998 charge relates to the Pizza Hut re-imaging strategy.
The 1996 charge relates to the sale of Skipper's Inc., effective
March 1996, and the closure of certain Tony Roma's restaurants.
The 1995 charge relates to the closure of 77 Skipper's
restaurants.
(2) Effective June 30, 1998 the Company completed the
recapitalization of its previously wholly-owned subsidiary,
Romacorp. (See Note 6 to Consolidated Financial Statements)
(3) Declared August 8, 1995 related to Class A shares concurrent
with the approval of a stock recapitalization plan.
(4) Does not include two Tony Roma units operated as joint
ventures by the Company through June 30, 1998.
(5) Fiscal 1998 contained 53 weeks of operation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is the largest Pizza Hut franchisee in the world. Based
on unit count at year-end, the Company's Pizza Hut operations
account for approximately 18% of all Pizza Hut franchised units and
11% of the entire Pizza Hut system. The Company operated its Pizza
Hut units in 26 states during fiscal 1999.
The Company, through its wholly-owned subsidiary, Romacorp was also
the owner/franchisor of the Tony Roma's concept, from its
acquisition in June 1993 through June 30, 1998 when Romacorp was
recapitalized. (See Note 6 to Consolidated Financial Statements)
Products & Service-Pizza Hut's main product is high quality,
innovative and moderately priced pizza. Additionally, the menu
contains pasta, sandwiches, salad bar and a luncheon buffet. Pizza
Hut provides a buffet with table service for beverages during lunch
and full table service for dinner, with delivery and carryout
available throughout the day.
Period of Operation-The Company operates on a 52 or 53 week fiscal
year ending the last Tuesday in March. The fiscal years ended March
30, 1999 and March 25, 1997 each contained 52 weeks. The fiscal
year ended March 31, 1998 contained 53 weeks.
DEVELOPMENT AND RE-IMAGING
Consistent with the strategy initiated last year, the Company
acquired 99 units from PHI and continued to pursue the acquisition
of additional Pizza Hut units.
In the fourth quarter of fiscal 1998 the Company initiated an asset
re-imaging strategy. This plan calls for the closure of 31 units,
the consolidation of 11 units into existing locations and the
consolidation and relocation of 53 Pizza Hut units to 45 new
locations to redefine trade areas, improve market presence and to
upgrade certain assets to more competitive formats. Relocated units
will be moved to improved trade areas and fall into the following
categories: relocation of delivery units to more visible locations
and formats; relocation of older dine-in assets in rural markets to
new prototype units; and conversion of certain metro markets to
main-path restaurants. Of the 95 units to be closed as part of
this strategy, 50 units have been closed to date and the remaining
45 units are expected to be closed in fiscal 2000. The Company
remains committed to the re-imaging strategy and expects to
complete the plan on or about the original targeted completion
date.
The 1998 impairment and loss provision included $11.4 million
related to the Company's re-imaging plan. Below is a summary of the
utilization of amounts provided.
Provision/Liability
(Dollars in millions)
At plan implementation $ 11.4
Utilization (6.9)
Balance at March 30, 1999 4.5
The remaining liability is included in "closure reserves" on the
Company's balance sheet. Management believes the remaining balance
is adequate to complete the re-imaging plan. However, the estimate
includes assumptions regarding the Company's ability to sub-lease
properties and/or buy out of lease obligations; accordingly actual
results could differ from our estimates. Through March 30, 1999
the amounts utilized apply only to actions provided for in the
plan. See Note 5 to the Consolidated Financial Statements for
additional disclosure related to the components of the 1998 Asset
Impairment and Loss Provision.
The Company expects to continue to accrue future closure costs,
and, if appropriate, impair asset values at the time the decision
to close a store is made. However, closure decisions under future
phases of the Company's asset re-imaging initiative are expected to
be made as often as quarterly, which is more frequent than the
Company's past practice.
Activity with respect to unit count during the year is set forth in
the table below.
FISCAL 1999 ACTIVITY
Change
Temp in
Company Beginn- Conver- Devel Acquir- Clo- Clo- Owner- End-
Owned ing sions oped(2) ed sed(3) sed(2) ship ing
Pizza Hut
Restaurant 536 (2) 7 60 (2) (26) -- 573
Delivery 144 2 1 39 -- (24) -- 162
Total
Pizza Hut 680 -- 8 99 (2) (50) -- 735
Tony
Roma's(1) 45 -- -- -- -- -- (45) --
Total
Company
Owned 725 -- 8 99 (2) (50) (45) 735
Franchised
Tony Roma's 147 -- 2 -- -- (2) (147) --
Total System 872 -- 10 99 (2) (52) (192) 735
(1)Excludes 2 units operated as joint ventures by the Company.
(2)Includes 2 Pizza Hut replacement units.
(3)Unit temporarily closed for remodel.
(4)Effective June 30, 1998, NPC International, Inc. owns a minority
interest in Roma Restaurant Holdings, Inc. and, therefore, no
longer controls the operations of Roma Restaurant Holdings, Inc.
and subsidiaries. (See Note 6 to Consolidated Financial
Statements)
RESULTS OF OPERATIONS
The "operations summaries" set forth an overview of revenue and
operating expenses as a percent of revenue for the last three
fiscal years (dollars in thousands) for each concept operated by
the Company. Cost of sales includes the cost of food and beverage
products sold. Direct labor represents the salary and related
fringe benefit costs associated with restaurant based personnel.
Other operating expenses include rent, depreciation, advertising,
utilities, supplies, franchise fees (Pizza Hut only), and insurance
among other costs directly associated with operating a restaurant
facility.
PIZZA HUT OPERATIONS SUMMARY
Fiscal Year Ended March
1999 1998 1997
Revenue:
Restaurant Sales $ 297,639 $ 286,631 $ 168,688
Delivery Sales 78,893 73,776 49,293
Total Revenue $ 376,532 $ 360,407 $ 217,981
Restaurant Operating
Expenses as a
Percentage of Revenue:
Total Expenses:(1)
Cost of Sales 26.6% 26.7% 26.5%
Direct Labor 27.8% 28.4% 27.3%
Other 27.9% 27.5% 27.0%
Total Operating Expenses 82.3% 82.6% 80.8%
Restaurant Based Income 17.7% 17.4% 19.2%
Restaurant Expenses:(2)
Cost of Sales 26.7% 26.8% 26.7%
Direct Labor 26.7% 27.2% 26.0%
Other 28.8% 28.1% 27.4%
Total Operating Expenses 82.2% 82.1% 80.1%
Restaurant Based Income 17.8% 17.9% 19.9%
Delivery Expenses:(3)
Cost of Sales 26.0% 26.4% 25.6%
Direct Labor 32.1% 33.1% 32.0%
Other 24.5% 25.4% 25.6%
Total Operating Expenses 82.6% 84.9% 83.2%
Restaurant Based Income 17.4% 15.1% 16.8%
(1)As a percent of total revenue
(2)As a percent of restaurant sales
(3)As a percent of delivery sales
PIZZA HUT RESULTS OF OPERATIONS
Revenue-Revenue was $376.5 million for the fifty-two weeks ended
March 30, 1999 for an increase of $16.1 million or 4.5% over the
$360.4 million reported during the fifty-three weeks ended March
31, 1998. The growth was primarily due to an increase in
comparable sales of 4.4% and a late year acquisition of 99 units
from PHI, which offset the impact of store closure activity
throughout the year. Comparable sales posted steady improvement in
all asset types throughout fiscal 1999 culminating with a 10.5%
comparable sales index in the Company's fourth fiscal quarter. The
comparable sales growth achieved during the fourth fiscal quarter
was primarily due to the introduction of The Big New Yorker Pizza
which fueled growth across all asset types after its launch on
January 28, 1999. This new pizza reached a peak sales mix of
approximately 22% of net pizza sales and averaged 19% during the
nine weeks it was promoted during the Company's fourth fiscal
quarter. The fiscal 1999 comparable sales trend was a continuation
of improved comparable sales that began with the implementation of
the Company's Delivery Dominance Program in the third quarter of
fiscal 1998. Focus on this program continued in fiscal 1999 and
increased marketing efforts, as well as, improved couponing
strategies resulted in continued comparable sales growth. For
fiscal 1999, delivery units generated comparable sales growth of
9.2% and peaked at 15.6% during the Company's fourth fiscal
quarter. The Company's restaurant units also contributed to the
improved comparable sales trend with 3.2% comparable sales growth.
Average unit volumes for all asset types increased 5.7% during
fiscal 1999 due to sales growth and the favorable effects of the
asset re-imaging program.
Revenue for fiscal 1998 totaled $360 million and was $142 million
or 65% higher than the prior year. The growth was largely due to
the revenue contributed from the acquisition of 222 units during
fiscal 1998 and the acquisition of 91 units during the second half
of fiscal 1997 which more than offset a decline in comparable sales
of 5.6%. As mentioned previously, comparable sales improved
gradually throughout fiscal 1998. This improvement was largely due
to new product news with the introduction of The Edge Pizza in the
third fiscal quarter and increased delivery service levels
associated with the implementation of the Delivery Dominance
program.
Costs and Expenses-Cost of sales as a percent of revenue was 26.6%
in fiscal 1999 compared to 26.7% in fiscal 1998 despite an increase
in the average cost of cheese for the year of approximately 15%.
This was achieved due to more normalized ingredient costs (except
cheese), the benefit of supply contract negotiations, improved
operational control in the stores acquired during fiscal 1998 and
reduced distribution costs related to a new distribution contract
entered into late in the fiscal year.
Cost of sales as a percent of revenue increased from 26.5% to 26.7%
during fiscal 1998 primarily due to increased topping specification
on all products effective in May 1997. Furthermore, the low
introductory pr ice point used for promotion of The Edge Pizza
combined with a higher ingredient cost contributed to higher costs
as a percent of revenue. These factors more than offset an 11%
reduction in the average cost of cheese for the prior year.
Direct labor as a percent of revenue improved from 28.4% during
fiscal 1998 to 27.8% during fiscal 1999. This decline results from
leverage associated with positive com parable sales volumes, labor
efficiencies primarily achieved in stores acquired during fiscal
1998 and a reduction in workers' compensation expense. This
improvement was achieved despite fourth fiscal quarter training
costs incurred due to launch of The Big New Yorker Pizza and higher
labor costs in the 99 units acquired February 4, 1999 due to
training, transitional issues and historically higher labor costs.
Direct labor as a percent of revenue increased to 28.4% during
fiscal 1998 from 27.3% in fiscal 1997. Factors impacting this
increase included de-leveraging from negative comparable sales
results, higher labor costs in acquired stores, increases in the
federal minimum wage, an increase in the ratio of units providing
delivery service (from 44% to 55% of total units) and the
acquisition of units located in states with minimum wage rates in
excess of the federal minimum wage and no available tip credit.
Other operating costs increased to 27.9% of revenue in fiscal 1999
from 27.5% in fiscal 1998. This increase is largely attributable
to increased store manager bonuses due to improvements in
controllable profit and increased couponing costs which were
partially offset by the aforementioned leverage on fixed costs and
a reduction in net delivery expenses.
In fiscal 1998 other operating expenses increased to 27.5% from 27%
in fiscal 1997 due to de-leveraging from negative comparable sales
experienced during the fiscal year and an increase in occupancy
costs as a higher percentage of units were leased than in the prior
fiscal year. Additionally, a higher franchise fee paid to PHI,
which increased from 2.25% to 4% in July 1996, was in effect for
all of fiscal 1998. These increases were partially offset by a
reduction in net delivery expenses.
TONY ROMA'S OPERATIONS SUMMARY
Thirteen Weeks Ended Fiscal Year Ended March
June 30, 1998(2) 1998 1997
Revenue:
Restaurant Sales $ 22,513 $ 86,408 $68,778
Net Franchise Revenue 2,114 8,482 8,526
Total Revenue $ 24,627 $ 94,890 $77,304
Restaurant Operating
Expenses as a
Percentage of Sales:
Cost of Sales 34.8% 33.6% 33.3%
Direct Labor 30.2% 30.9% 31.2%
Other 23.5% 24.3% 24.2%
Total Operating Expenses 88.5% 88.8% 88.7%
Restaurant Based Income 11.5% 11.2% 11.3%
Income from
System Operations (1) 19.1% 19.1% 21.0%
(1) Net franchise revenue and restaurant based income as a
percent of total revenue
(2) Due to the recapitalization of Romacorp, effective June 30,
1998, information reflects activity through that date.
(See Note 6 to Consolidated Financial Statements)
TONY ROMA'S RESULTS OF OPERATIONS
Fiscal 1999 to Fiscal 1998
As a result of the recapitalization of Romacorp effective June 30,
1998, Romacorp's results of operations are only included in fiscal
1999 results through the date of recapitalization. During the
thirteen weeks ended June 30, 1998 restaurant sales were $22.5
million, and income from restaurant operations, which included net
franchise revenue, was $4.7 million.
Fiscal 1998 to Fiscal 1997
Revenue-Restaurant sales increased 25.6% in fiscal 1998 due to the
development of six units and a comparable sales growth of 0.9%.
Also impacting the change in sales for fiscal 1998 was a new menu
introduced late in the third quarter of fiscal 1998 featuring new
items, increased portion sizes and price increases on certain
items, and an overall 2% price increase in the third quarter of
fiscal 1997. Royalty revenue in fiscal 1998 was 7% higher than
1997 amounts due to improvement and growth of the franchise system
and an incremental week of revenue as 1998 contained 53 weeks
compared to 52 weeks in the prior year. However, 1998 net
franchise revenue was slightly below 1997 results as 1997 reflected
the sale of certain international rights which more than offset
this increase.
Costs and Expenses-Cost of sales as a percent of restaurant sales
increased to 33.6% in fiscal 1998 from 33.3% in fiscal 1997 largely
due to an increase in the average price of baby-back ribs of 23%
for the year. This increase was partially offset by menu
enhancements implemented in fiscal 1998 and 1997 which caused
favorable sales mix changes and included price increased on select
items.
Direct labor fell to 30.9% of restaurant sales in fiscal 1998
despite an increase in the minimum wage rate in September 1997 as
the number of new store openings decreased from 13 units in fiscal
1997 to seven units in fiscal 1998. Store openings are generally
accompanied by significant, planned labor inefficiencies due to
training and staffing levels to ensure a favorable dining
experience for first visit customers.
Other operating expenses in 1998 were relatively flat compared to
1997. This was due to the incremental week of revenue in fiscal
1998, offset by increased depreciation charges. The increase in
depreciation occurred because during the fourth quarter of fiscal
1996 the Company recorded an impairment charge related to eight
restaurants to be closed. Seven of these restaurants were closed
during fiscal 1997 and one closed in May 1997. In accordance with
the provisions of SFAS No. 121, no depreciation was recorded for
these units in fiscal 1997 benefiting other operating expenses for
that year. Normalized for the impairment charge fiscal 1997 other
operating expenses as a percent of revenue would have been 27 basis
points higher than the amounts recorded.
CONSOLIDATED RESULTS OF OPERATIONS
During the 52 weeks ended March 30, 1999 consolidated revenue was
$401.2 million, which was 11.9% or $54.1 million below the $455.3
million reported during the 53 weeks ended March 31, 1998. The
decline in revenue resulted primarily due to the recapitalization
of Romacorp. Specifically, during fiscal 1999 revenue from Romacorp
of $24.6 million was recorded during the thirteen weeks prior its
recapitalization compared to revenue of $94.9 million recorded in
fiscal 1998. Also contributing to the decrease in revenue was the
closure of Pizza Hut units related to the Company's re-imaging
strategy and the impact of an extra week of operations during
fiscal 1998. The decline in consolidated revenue was partially
offset by an increase in comparable sales for the year-to-date at
Pizza Hut of approximately 4.4% and the acquisition of 99 units.
Consolidated revenue in fiscal 1998 was $455.3 million for an
increase of $160 million or 54.2% over 1997 results. The increase
was largely due to growth through the consolidation of the Pizza
Hut system, and expansion of the Tony Roma's concept.
Consolidated income from restaurant operations was $71.5 million or
17.8% of revenue for fiscal 1999 compared to $80.5 million or 17.7%
in fiscal 1998. Income from restaurant operations as a percent of
revenue increased over the prior year due to improved margin
performance in the Company's Pizza Hut operations. The decrease in
consolidated income from restaurant operations in nominal dollars
was largely attributable to the loss of earnings from Romacorp
which was recapitalized at the end of the Company's first fiscal
quarter and the extra week of operations in fiscal 1998 results.
Consolidated income from restaurant operations was $80.5 million or
17.7% of revenue in fiscal 1998 compared to $58 million or 19.7% of
revenue in fiscal 1997. The increase in nominal dollars was due to
growth in unit count, while the decrease as a percent of revenue
was due to lower unit margins of the Pizza Hut units acquired in
fiscal 1998, de-leveraging of fixed costs resulting from negative
comparable sales in the Company's Pizza Hut division during fiscal
1998, increases in the minimum wage and increased cost of sales for
the year in both concepts.
General and administrative expenses were $21 million during fiscal
1999 compared to $23.9 million in fiscal 1998 for a decrease of
$2.9 million or 12.3%. As a percent of revenue these costs were
5.2% during fiscal 1999 compared to 5.3% in fiscal 1998. The
nominal dollar decrease and the decrease in these costs as a
percent of revenue were due to the recapitalization of Romacorp,
which historically had a higher percentage of such costs as a
percentage of revenue.
Leverage from the Pizza Hut expansion resulted in a decrease in
general and administrative expenses as a percent of revenue from 6%
in fiscal 1997 to 5.3% in fiscal 1998. In terms of nominal dollars,
general and administrative costs increased to $23.9 million in
fiscal 1998 from $17.7 million a year ago, due to increased
staffing levels associated with the acquisition of Pizza Hut units.
Deprecation and amortization includes depreciation of field and
corporate equipment and facilities as well as the amortization of
goodwill, franchise rights and pre-opening costs. These costs
declined in nominal dollars and as a percent of revenue during
fiscal 1999 due to the reduction in amortization expense as a
result of the recapitalization of Romacorp. Romacorp historically
had a higher percentage of depreciation and amortization than the
Company's Pizza Hut division resulting from amortization of
goodwill and more significant amortization of pre-opening expenses.
In fiscal 1998 depreciation and amortization costs increased
primarily due to increased franchise rights amortization at Pizza
Hut, combined with the amortization of pre-opening costs related to
the development at Tony Roma's.
Interest expense decreased to $10.2 million in fiscal 1999 from
$15.7 million in fiscal 1998 due to debt reduction early in the
year from the proceeds of the Romacorp recapitalization. As the
fiscal 1998 Pizza Hut acquisitions were financed with debt,
interest costs grew to $15.7 million in fiscal 1998 compared to
$5.5 million in fiscal 1997.
Miscellaneous income was $1.1 million during fiscal 1999 compared
to $526 thousand reported in fiscal 1998 and $311 thousand reported
in fiscal 1997. The increase for fiscal 1999 was due to the gain
on sale or disposition of assets and business interruption
proceeds.
Net income for fiscal 1999 was $47.9 million compared to $10.3
million reported during fiscal 1998. Fiscal 1999 net income
included a gain from the recapitalization of Romacorp of $39.4
million (pre-tax) or $26.8 million, net of tax. (See Note 6 to
Consolidated Financial Statements) Additionally, the increase in
net income over fiscal 1998 results was due to a $14.1 million pre-
tax, or $9.2 million net of tax, impairment charge recorded in the
fourth quarter of fiscal 1998. Normalized for these items, net
income was approximately 8.5% higher in fiscal 1999 compared to
fiscal 1998 results which was primarily due to improved margins in
the Company's Pizza Hut units.
Net income for fiscal 1998 was $10.3 million compared to $17.8
million in fiscal 1997. This decline was due to the aforementioned
impairment charge and was primarily offset by income contributed by
the Pizza Hut units acquired late in fiscal 1997 and units acquired
throughout fiscal 1998.
The Company's income tax provision for the fiscal years 1999, 1998
and 1997 resulted in effective tax rates of 33.4%, 35.0%, and
38.8%, respectively. The reduction of the rate in fiscal 1999
resulted from a lower tax rate associated with the Romacorp
recapitalization gain. The reduction in the fiscal 1998 tax rate
resulted from the realization of tax benefits associated with the
implementation of a corporate reorganization and the realization of
various tax credits. (See Note 6 to Consolidated Financial
Statements)
LIQUIDITY AND CAPITAL RESOURCES
On March 30, 1999 the Company had a working capital deficit of
$27.9 million compared to a $30.8 million deficit at March 31,
1998. The decline in the deficit was due to the recapitalization of
Romacorp which, like Pizza Hut, had a working capital deficit. The
decline was partially offset by the fiscal 1999 Pizza Hut
acquisition. Like most restaurant companies, the Company is able to
operate with a working capital deficit because substantially all of
its sales are for cash, while it generally receives credit from
trade suppliers. Further, receivables are not a significant asset
in the restaurant business and inventory turnover is rapid.
Therefore, the Company uses all available liquid assets to reduce
borrowings under its revolving line of credit.
At March 30, 1999 the Company had a $15 million and a $185 million
unsecured revolving credit facility, of which $43.5 million was
outstanding on the combined facilities. Availability under these
facilities is reduced by outstanding letters of credit of which
$5.9 million was issued at year-end.
The Company anticipates cash flow from operations and capacity
under its existing line of credit will be sufficient to fund
continuing expansion, acquisitions and improvements and to service
debt obligations. The Company's ability to make additional
acquisitions is subject to certain financial covenants or, if
necessary and warranted, the Company's ability to obtain additional
equity capital.
CASH FLOWS
Net cash provided by operating activities was $32.3 million in
fiscal 1999 compared to $65 million in fiscal 1998. Cash from
operations in fiscal 1999 was positively impacted by acquired
stores, which like the Company, operate with a working capital
deficit. Offsetting this positive impact to cash flows was the
exclusion of cash provided by operations from Romacorp for the
second through fourth quarter of fiscal 1999.
Cash flows from operations increased $19.9 million in fiscal 1998
from fiscal 1997, largely due to growth in unit count during fiscal
1998.
Investing activities include normal maintenance capital
expenditures and include the development of restaurant units
including relocations and conversions. Acquisitions consist of 99
Pizza Hut units in fiscal 1999, 222 Pizza Hut units in fiscal 1998
and 91 Pizza Huts in fiscal 1997. Proceeds from the sale of fee
simple properties associated primarily with the Skipper's and Pizza
Hut's closure and disposition strategies have resulted in cash
received of $3.7 million in fiscal 1999 and $2.3 million in fiscal
1998.
The fiscal 1999 acquisition and fiscal 1997 acquisitions were
funded through the Company's unsecured revolving credit facility.
Acquisitions completed during fiscal 1998 were funded through the
revolving credit facility and the issuance of $50 million in senior
unsecured notes.
During fiscal 1999 the Company increased the number of shares
authorized by the Board of Directors for repurchase by one million
shares. During the year the Company expended $3.8 million for the
purchase of treasury stock. There were 967,700 shares that remained
authorized for repurchase at March 30, 1999.
SEASONALITY
As a result of the diversification in restaurant concepts, the
Company has not experienced significant seasonal sales
fluctuations. Pizza Hut sales are largely driven through
advertising and promotion and are adversely impacted in economic
times that generally require high cash flow from consumers such as
back-to-school and holiday seasons.
EFFECTS OF INFLATION AND FUTURE OUTLOOK
Inflationary factors such as increases in food and labor costs
directly affect the Company's operations. Because most of the
Company's employees are paid on an hourly basis, changes in rates
related to federal and state minimum wage and tip credit laws will
effect the Company's labor costs. The Company cannot always effect
immediate price increases to offset higher costs and no assurance
can be given that the Company will be able to do so in the future.
Cheese represents approximately 40% of the cost of a pizza. The
price of this commodity changes throughout the year due to changes
in demand and supply resulting from school lunch programs, weather
and other factors. Significant change in the price of cheese would
have an impact on the Company's food cost as a percent of revenue.
Based upon available forecasts, management expects cheese costs to
be below last year's levels by approximately 10% with the primary
benefit realized in the second and third quarters of fiscal 2000.
Meat ingredient costs are expected to be at or slightly below
fiscal 1999 levels during fiscal 2000.
Increases in interest rates would directly affect the Company's
financial results. Under the Company's revolving credit agreements
alternative interest rate options are available which can be used
to limit the Company's exposure to fluctuating rates.
The Company is required to pay a franchise fee of 6.5% on the sales
of certain of the 99 units acquired on February 4, 1999 in
accordance with the terms of the amended franchise agreement. This
rate is 2.5% higher than the Company's current rate of 4%. The
effect of this fee arrangement is expected to increase other
operating costs by 30 to 40 basis points during fiscal 2000.
FORWARD LOOKING COMMENTS
The statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other statements
which are not historical facts contained herein are forward looking
statements that involve risks and uncertainties, including but not
limited to: consumer demand and market acceptance risk; the
effectiveness of franchisor advertising programs, and the overall
success of the Company's franchisor; the integration and
assimilation of acquired restaurants; training and retention of
skilled management and other restaurant personnel; the Company's
ability to locate and secure acceptable restaurant sites; the
effect of economic conditions, including interest rate
fluctuations, the impact of competing restaurants and concepts, the
cost of commodities and other food products, labor shortages and
costs and other risks detailed in the Company's Securities and
Exchange Commission filings.
OTHER
Recently Issued Accounting Pronouncements - In June 1998, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133"). The adoption of SFAS 133 with respect to existing
interest rate swaps is not expected to have a material impact on
the Company's results of operations, financial position or cash
flows.
In May 1998 Statement of Position (SOP) 98-5 "Accounting for Start-
up Activities" was issued. The SOP requires the Company to expense
pre-opening costs as incurred and to report the initial adoption as
a cumulative effect of a change in accounting principle. The
cumulative effect upon adoption will result in a one-time charge to
income in an amount equal to the net book value of the Company's
pre-opening costs. This change will also result in the
discontinuance of amortization of pre-opening cost expense in
subsequent periods. At March 30, 1999 the balance of pre-opening
costs was $175 thousand.
In June 1997 the FASB issued SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information". This new
standard required companies to disclose segment data, based on how
management makes decisions about allocating resources to segments
and how it measures performance. Based on this criteria, the
Company has one segment.
Year 2000 Readiness-The Company is in the process of evaluating and
modifying its computer systems and applications for Year 2000
issues. The final phase of a four-phase readiness program was
completed as scheduled in December 1998. This plan included all
development and testing of internally developed systems and
certification of vendor provided equipment and systems. During
calendar 1999, the Company will be installing new equipment or
upgrades to vendor systems that were previously scheduled for
replacement. As a result of these replacements and upgrades, these
systems will be Year 2000 ready. The Company does not believe that
the costs of equipment or upgrades will be material. Throughout
1999 the Company will continue the testing of both the existing and
newly developed or installed systems. This plan addresses all of
the Company's significant computer systems including the Point-of-
Sale ("POS"), its proprietary "back-office" system, and its
financial reporting system, which includes sub-modules for various
applications such as payroll and accounts payable.
Additionally, the Company is in the process of evaluating third-
party vendors for Year 2000 readiness. The Company completed an
inventory of its large suppliers and has mailed letters requesting
information on their Year 2000 status. Of approximately 220
inquiries made, 53% have been received. The Company has sent
letters requesting status information from lending and cash
management banks. Of approximately 750 inquires sent, 88% have
been received. Responses received to date have not identified any
suppliers or banks considered to be high risk. The Company is
continuing the process of collecting the responses from the
suppliers and banks and will continue to follow up throughout
calendar 1999.
The Company is also in the process of reviewing non-information
technology equipment. Based on information gathered to date, the
Company believes that any necessary upgrades or replacements will
be minimal, and, if necessary, will be funded out of existing cash
flows from operations.
The Company does not believe costs related to Year 2000 readiness
will be material to its financial position or results of operation.
However, the costs of the project and the date on which the Company
plans to complete the Year 2000 modifications are based on
management's best estimates. These estimates were derived based on
numerous assumptions of future events including the continued
availability of resources, third-party modification plans and other
factors. Failures by significant vendors and/or failure by the
Company to satisfactorily complete it own plans could adversely
impact the project's cost and its completion date. Consequently,
there is no assurance that the forward looking estimates will be
realized and actual costs and vendor compliance could be
significantly different than anticipated, which could result in
material financial risk.
The failure to correct a material Year 2000 problem could result in
an interruption in, or a failure of, certain normal business
activities or operations. Such failures could materially and
adversely affect the Company's results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in the
Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party suppliers and customers, the
Company is unable to provide assurance at this time that the
consequences of Year 2000 failures will not have a material impact
on the Company's results of operations, liquidity or financial
condition. Given the Company's best efforts and execution of
remediation, replacement and testing, it is still possible that
there will be disruptions and unexpected business problems during
the early months of fiscal 2000. The Company will make diligent,
reasonable efforts to assess Year 2000 readiness and will
ultimately develop contingency plans for business critical systems
prior to the end of calendar 1999. However, no contingency plans
are being developed for the availability of key public services and
utilities. The Company is heavily dependant on the continued
normal operations of not only key suppliers of cheese and other raw
materials and major food and supplies distributor, but also on
other entities such as lending, depository and disbursement banks
and third party administrators of benefit plans. Despite the
Company's diligent preparation, unanticipated third party failures,
general public infrastructure failures, or failure to successfully
conclude remediation efforts as planned could have a material
adverse impact on the results of operations, financial condition or
cash flows in 1999 and beyond. Lack of publicly available hard
currency or credit card processing capability supporting the retail
sales stream could also have a material adverse impact on the
results of operations, financial condition or cash flows. The
Company's Year 2000 project is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in
particular, about the Year 2000 readiness of its material external
agents. The Company believes that, with the implementation of new
business systems and completion of the project as scheduled, the
possibility of significant interruptions of normal operations
should be reduced.
NPC International, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
ASSETS March 30, March 31,
1999 1998
Current assets:
Cash and cash equivalents $ 4,021 $ 4,548
Accounts receivable, net 1,817 2,375
Inventories of food and supplies 2,972 4,177
Deferred income tax asset 3,064 3,245
Prepaid insurance premiums 963 675
Prepaid rent payments 1,486 1,255
Prepaid expenses and
other current assets 1,429 1,944
Total current assets 15,752 18,219
Facilities and equipment, net 95,228 138,779
Notes receivable, net 58 465
Franchise rights, less accumulated
amortization of $25,122 and $l7,867,
respectively 217,995 198,917
Goodwill, less accumulated amortization
Of $1,432 and $5,752, respectively 2,708 17,364
Investments, at cost 6,750 --
Deferred income tax asset -- 344
Other assets 5,592 8,404
Total assets $ 344,083 $382,492
NPC International, Inc. and Subsidiaries
Consolidated Balance Sheets, Continued
(Dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 30, March 31,
1999 1998
Current liabilities:
Accounts payable $ 12,506 $18,143
Payroll taxes 2,046 1,742
Sales taxes 2,174 2,561
Accrued interest 3,088 4,130
Accrued payroll 9,042 8,669
Income tax payable 1,889 650
Current portion of closure reserve 2,260 1,360
Insurance reserves 4,934 5,613
Other accrued liabilities 5,742 6,188
Total current liabilities 43,681 49,056
Long-term debt 123,500 204,033
Deferred income tax liability 4,386 --
Closure reserve 5,691 8,936
Other deferred items 5,837 4,431
Insurance reserves 8,000 9,000
Stockholders' Equity
Stockholders' equity, net
27,592,510 shares outstanding,
$.01 par value 152,988 107,036
Total liabilities and
stockholders' equity $ 344,083 $382,492
The accompanying notes are an integral part of these consolidated
financial statements.
NPC International, Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except share data)
For the Fiscal Year Ended
March 30, March 31, March 25,
1999 1998 1997
Net sales $399,045 $446,815 $286,759
Net franchise revenue 2,114 8,482 8,526
Total revenue 401,159 455,297 295,285
Cost of sales 107,821 125,365 80,618
Direct labor 111,468 129,133 81,086
Other 110,339 120,272 75,523
Total operating expenses 329,628 374,770 237,227
Income from restaurant
operations 71,531 80,527 58,058
General and administrative
expenses 20,983 23,930 17,710
Depreciation and amortization 8,922 11,475 6,121
Operating income before asset
impairment
and loss provision 41,626 45,122 34,227
Asset impairment and loss
provision -- 14,100 --
Operating income 41,626 31,022 34,227
Other income (expense):
Interest expense (10,177) (15,655) (5,455)
Miscellaneous 1,089 526 311
Gain on recapitalization
of Romacorp 39,400 -- --
Income before income taxes 71,938 15,893 29,083
Provision for income taxes 23,992 5,563 11,272
Net income $ 47,946 $ 10,330 $ 17,811
Earnings per share - basic $1.95 $.42 $.72
Earnings per share - diluted $1.92 $.41 $.72
Weighted average shares
outstanding - basic 24,621,914 24,693,764 24,646,003
Weighted average shares
outstanding - diluted 24,992,304 25,108,988 24,873,624
The accompanying notes are an integral part of these consolidated
financial statements.
NPC International, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
Total
Stock-
Common Paid-in Retained Treasury holders'
Stock Capital Earnings Stock Equity
Balance,
March 26, 1996 $ 276 $21,829 $77,016 $(21,801) $ 77,320
Net income -- -- 17,811 -- 17,811
Acquisition of
treasury stock -- -- -- (904) (904)
Exercise of
stock options -- (851) -- 2,417 1,566
Balance,
March 25, 1997 276 20,978 94,827 (20,288) 95,793
Net income -- -- 10,330 -- 10,330
Exercise of
stock options -- 55 -- 858 913
Balance,
March 31, 1998 276 21,033 105,157 (19,430) 107,036
Net income -- -- 47,946 -- 47,946
Acquisition
of treasury stock -- -- -- (3,837) (3,837)
Exercise of
stock options -- 894 -- 949 1,843
Balance,
March 30, 1999 $ 276 $21,927 $153,103 $(22,318) $152,988
Common stock, $.01 par value, of 100 million shares is authorized,
with 27,592,510 shares issued.
Treasury stock is stated at cost and represents 3,063,074 and
2,846,926 shares at March 30, 1999 and March 31, 1998,
respectively.
The accompanying notes are an integral part of these consolidated
financial statements.
NPC International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
For the Fiscal Year Ended
March 30, March 31, March 25,
1999 1998 1997
Operating Activities
Net income $ 47,946 $ 10,330 $17,811
Non-cash items included in net income:
Depreciation and amortization 22,842 25,775 16,618
Amortization of start-up costs 661 3,074 1,875
Deferred income taxes 2,905 (5,662) 10,278
Non-cash portion of asset
impairment and loss provision -- 14,100 --
Non-cash gain on recapitalization
of Romacorp (38,758) -- --
Change in assets and liabilities,
net of acquisitions and
recapitalization:
Accounts receivable, net (653) (840) 969
Inventories of food and supplies (548) (771) 1,153
Prepaid expenses and other
current assets (1,680) (2,528) (3,289)
Notes receivable, net 345 110 256
Accounts payable (4,522) 5,264 1,214
Payroll taxes 637 (73) 168
Accrued interest (1,014) 2,133 (162)
Accrued payroll 1,170 4,257 27
Income tax payable 1,239 2,387 (1,452)
Insurance reserves 771 3,242 1,057
Other accrued liabilities 945 4,158 (1,420)
Net cash flows provided by
operating activities 32,286 64,956 45,103
NPC International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
(Dollars in thousands)
For the Fiscal Year Ended
March 30, March 31, March 25,
Investing Activities
Net proceeds from
recapitalization of Romacorp 101,237 -- --
Capital expenditures (22,644) (28,795) (41,466)
Changes in other assets, net (2,875) (614) (2,098)
Proceeds from sale of
capital assets 3,663 2,308 8,808
Acquisitions, net of cash (31,000) (121,232) (55,595)
Net cash flows provided
by (used in) investing
activities 48,381 (148,333) (90,351)
Financing Activities
Purchase of treasury stock (3,837) -- (904)
Net change in revolving
credit agreements (69,200) 48,700 52,713
Proceeds from issuance of
long-term debt -- 49,756 --
Payment of long-term debt (10,000) (11,444) (9,711)
Exercise of stock options 1,843 913 1,566
Net cash flows provided
by (used in) financing
activities (81,194) 87,925 43,664
Net change in cash and
cash equivalents (527) 4,548 (1,584)
Cash and cash equivalents
at beginning of year 4,548 -- 1,584
Cash and cash equivalents
at end of year $ 4,021 $ 4,548 $ --
The accompanying notes are an integral part of these consolidated
financial statements.
(1) Summary of Significant Accounting Policies
Basis of Presentation and Consolidation-The financial statements
include the accounts of NPC International, Inc. and its wholly-
owned subsidiaries (the "Company"). Romacorp, a wholly-owned
subsidiary of the Company until June 30, 1998 was recapitalized.
These financial statements include Romacorp's results of
operations for the fiscal years ended March 1997, 1998 and the
quarter ended June 30, 1998.
Fiscal Year-The Company operates on a 52 or 53 week fiscal year
ending the last Tuesday in March. The fiscal years ended March 30,
1999 and March 25, 1997 each contained 52 weeks. The fiscal year
ended March 31, 1998 contained 53 weeks.
Cash Equivalents-For purposes of the Consolidated Statements of
Cash Flows, the Company considers all highly liquid debt
instruments with an original maturity of three months or less to
be cash equivalents. At March 30, 1999 substantially all cash was
in the form of depository accounts.
Inventories-Inventories of food and supplies are carried at the
lower of cost (first-in, first-out method) or market.
Franchise Rights-The Company's Pizza Hut franchise agreements
generally provide franchise rights for a period of 15 to 20 years
and are renewable at the option of the Company for an additional
15 years. Franchise rights are capitalized for accounting purposes
and are amortized over their estimated economic life (original
term plus option renewal period) on a straight-line basis.
Periodic franchise fees, generally provided for in the agreements
as a percent of gross sales, as defined, are recorded as operating
expenses as incurred.
Net Franchise Revenue-The franchise agreements for Tony Roma's
restaurants provide for an initial fee and continuing royalty
payments based upon gross sales, in return for certain services.
Net franchise revenue is presented net of direct expenses. The
reserve for uncollectable accounts at March 31, 1998 related
solely to franchise receivables and consisted of $344 thousand.
Goodwill-Goodwill is amortized over periods ranging from 30 to 40
years.
Use of Estimates-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Advertising Costs-Advertising costs are expensed as incurred. The
Company incurred $23.7 million of such costs in fiscal 1999 and
$23.8 million and $14.3 million in fiscal 1998 and fiscal 1997,
respectively.
Related Party Transactions-During fiscal 1999 an officer of the
Company purchased real estate from the Company in the amount of
$511 thousand. Additionally, the Company utilized a corporate
aircraft from a related party and incurred expense of
approximately $100 thousand during fiscal 1999. Management
believes amounts paid were at least as favorable as could be
obtained from unrelated parties.
Effective July 1, 1998 the Company entered into a services
agreement with an unconsolidated entity, Roma Restaurant Holdings,
Inc. ("RRH") (See Note 6 to Consolidated Financial Statements).
In accordance with this agreement, as amended, the Company will
provide accounting, management reporting and information services
to RRH through July 29, 2001. Fees earned under this agreement
were $564 thousand during fiscal 1999.
Reclassifications-Certain amounts have been reclassified to
conform the prior year financial statements to the current year
presentation.
(2) Facilities and Equipment
Facilities and equipment are recorded at cost. Depreciation is
charged on the straight-line basis for buildings, furniture and
equipment. Leasehold improvements are amortized on the straight-
line basis over the economic life of the lease or the life of the
improvements, whichever is shorter. Facilities and equipment
consist of the following:
Estimated March 30, March 31,
(Dollars in thousands) Useful Life 1999 1998
Land $ 17,972 $ 31,715
Buildings 15-20 years 37,708 63,149
Leasehold improvements 5-20 years 37,112 40,593
Furniture and equipment 3-10 years 62,979 72,526
Construction in progress 3,960 3,785
159,731 211,768
Less accumulated depreciation
and amortization (64,503) (72,989)
Net facilities and equipment $95,228 $138,779
(3) Bank Debt and Senior Notes
The Company's debt consists of revolving credit facilities and
senior notes. At March 30, 1999 debt totaled $123.5 million which
consisted of $43.5 million of revolving credit and $80 million of
senior notes. At March 31, 1998 total debt was $204 million,
including $112.7 million of revolving credit and $91.3 million of
senior notes.
The Company's unsecured revolving credit facilities total $200
million until May 2001 and provide the option to pay interest at
"LIBOR" or the "fed funds" rate plus a margin (5.738%-5.875% at
March 30, 1999). Availability under these facilities is reduced by
letters of credit, of which $5.9 million were issued at March 30,
1999. Commitment fees of .25% per annum are paid on the unused
balance of the facilities and are included in interest expense.
The Company's senior notes are unsecured and bear interest at
various rates from 6.35% to 9.09%. The senior notes have scheduled
maturities through May 2006 with aggregate maturities as follows:
fiscal 2000-$10 million, fiscal 2001-$10 million, fiscal 2002-$6
million, fiscal 2003-$14 million, fiscal 2004-$10 million and $30
million in years beyond. The Company has the ability and intent
to refinance the principal payments due under its senior notes
through its revolving credit agreement. Accordingly, such amounts
are classified as long-term debt.
The debt facilities contain restrictions on additional borrowing
and dividend payments as well as requirements to maintain various
financial ratios, and a minimum net worth. The average amount
outstanding on the revolving credit and senior note facilities for
the year ended March 30, 1999 was $128.5 million and the maximum
borrowings were approximately $210 million. Weighted average
interest rates during fiscal years 1999, 1998 and 1997 were 7.40%,
7.52%, and 7.02%, respectively. Based on current market interest
rates, management believes that the carrying amounts of its debt
facilities approximates fair value.
Cash paid for interest in fiscal years 1999, 1998 and 1997 was $11
million, $13.7 million, and $6 million, respectively.
(4) Employee Benefit Plans
The Company's defined contribution plans include a Profit Sharing
Plan, a 401(k) Plan and a Deferred Compensation Plan. In
accordance with the provisions of the plans, the Company provides
a matching contribution to the 401(k) and the Deferred
Compensation Plan. Contributions made by the Company for these
plans were $1 million, $831 thousand and $611 thousand for fiscal
years 1999, 1998 and 1997, respectively.
In addition, the Company established a defined benefit plan for
certain key executives during fiscal 1999. Funding of this plan
is not required. Cost incurred under the plan was $90 thousand
for fiscal 1999.
(5) Asset Impairment and Loss Provision
In March 1998 the Company committed to an asset re-imaging
strategy involving the consolidation and relocation of 53 Pizza
Hut units to 45 new locations, the consolidation of 11 units into
existing locations, and the closure of 31 underperforming units.
This initiative resulted in a pre-tax charge of $11.4 million in
fiscal 1998. Significant components of the charge included $5.7
million related to the loss on disposition of assets, $5.0 million
related to obligations under long term lease arrangements, and $.7
million related to de-identification and other miscellaneous
costs. Assets to be disposed of were recorded at fair value.
Additionally, in March, 1998 the Company recorded a charge of $1.6
million related to the impairment of 10 locations where the
Company will continue to operate Pizza Hut units, and a charge of
$1.1 million to accelerate depreciation of back-of-house software
and hardware systems, which are being replaced with a newly
developed windows-based package. Of the total $14.1 million
provision, $8.3 was utilized during fiscal 1998 and $1.3 million
was utilized in fiscal 1999. Through March 30, 1999 the amounts
utilized apply only to actions provided for in the plan.
(6) Recapitalization
On June 30, 1998 the Company completed the recapitalization of
Romacorp resulting in a net gain of $39.4 million. The Company's
remaining minority interest is carried at cost. Romacorp was a
wholly-owned subsidiary of the Company throughout the Company's
first fiscal quarter ended June 30, 1998; its results of
operations through that date have been consolidated and reflected
in the Consolidated Statements of Income for the fiscal year ended
March 30, 1999.
(7) Income Taxes
The provision (benefit) for income taxes consisted of the
following:
For the fiscal year ended
March 30, March 31, March 25,
(Dollars in thousands) 1999 1998 1997
Current:
Federal $20,405 $ 9,856 $ 604
State/Foreign 576 1,369 390
20,981 11,225 994
Deferred:
Federal 2,934 (4,972) 8,596
State/Foreign 77 (690) 1,682
3,011 (5,662) 10,278
Provision for income taxes $23,992 $ 5,563 $11,272
The differences between the provision for income taxes and the
amount computed by applying the statutory federal income tax rate
to earnings before income taxes are as follows:
For the fiscal year ended
March 30, March 31, March 25,
(Dollars in thousands) 1999 1998 1997
Tax computed at statutory
rate $ 25,178 $ 5,563 $ 10,179
State taxes, net of federal
effect, and other,
including goodwill
amortization, the
impact of the Romacorp
recapitalization
and tax credits (1,186) -- 1,093
Provision for income taxes $ 23,992 $ 5,563 $ 11,272
Significant components of the Company's deferred tax assets and
liabilities are as follows:
March 30, March 31,
(Dollars in thousands) 1999 1998
Deferred tax assets:
Insurance reserves $ 4,478 $ 5,204
Closure reserves 2,970 3,655
Other, net 1,159 1,554
Total deferred tax assets 8,607 10,413
Deferred tax liabilities:
Depreciation and amortization (8,817) (6,630)
Other, net (1,112) (194)
Total deferred tax liabilities (9,929) (6,824)
Net deferred tax asset (liability) (1,322) 3,589
Current 3,064 3,245
Non-current (4,386) 344
Cash paid for income taxes in fiscal 1999, 1998 and 1997 was $19
million, $8.5 million and $2,4 million, respectively.
(8) Commitments
The Company leases certain restaurant equipment and buildings
under operating leases. Rent expense for fiscal 1999, 1998, and
1997 was $16.8 million, $19.3 million, and $11 million,
respectively, including contingent rents of approximately $1.1
million, $1.4 million and $1.3 million, respectively. The majority
of the Company's leases contain renewal options for 1 to 5 years.
The remaining leases may be renewed upon negotiations. Minimum
lease payments for the next five years, including non-operating
assets, at March 30, 1999 consisted of:
Fiscal Year (Dollars in thousands)
2000 $ 15,366
2001 13,392
2002 11,255
2003 9,485
2004 8,073
Thereafter 34,235
Total minimum lease commitments $ 91,806
Total minimum lease payments have not been reduced by minimum
sublease rentals of $5.2 million under operating leases due in the
future under noncancelable subleases.
(9) Earnings per Share
The following table sets forth the computation of basic and
diluted earnings per share:
Fiscal Year Ended
(Amounts in thousands, March 30, March 31, March 25,
except share data) 1999 1998 1997
Numerator:
Net income $ 47,946 $ 10,330 $ 17,811
Denominator:
Weighted average shares 24,622 24,694 24,646
Employee stock options 370 415 228
Denominator for diluted
earnings per share 24,992 25,109 24,874
Earnings per share - basic $ 1.95 $ .42 $ .72
Earnings per share - diluted $ 1.92 $ .41 $ .72
(10) Stock Options
A summary of the Company's stock option activity, and related
information is presented below:
March 30, 1999 March 31, 1998March 25, 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Options Options Price Options Price Options Price
in thousands)
Outstanding-
beginning
of year 1,857 $ 7.77 1,763 $ 7.36 1,840 $ 7.07
Granted 203 $ 11.17 258 $ 9.76 229 $ 8.22
Canceled (176) $ 8.81 (51) $ 6.56 (109) $ 6.06
Exercised (318) $ 7.20 (113) $ 6.49 (197) $ 6.40
Outstanding-
end of year 1,566 $ 8.21 1,857 $ 7.77 1,763 $ 7.36
Exercisable-
end of year 1,157 $ 7.65 1,263 $ 7.51 1,192 $ 7.53
Weighted
average
fair value
of options
granted during
the year $ 3.93 $ 3.77 $ 3.12
Exercise prices for options outstanding as of March 30, 1999
ranged from $5.00 to $14.75 and the weighted average remaining
contractual life is 5.1 years.
The Company has a 1994 Non-Qualified Stock Option Plan under which
3,291,450 shares of common stock are reserved for issuance to
employees and officers at an exercise price equal to the fair
market value of the common stock on the date of grant and vest
over a four-year period in equal annual amounts and expire 10
years from the date of grant.
Under APB No. 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying
stock on the date of the grant, no compensation expense is
recognized.
The Company measures pro forma compensation expense of its
employee stock options using the intrinsic value based method of
accounting. Pro forma information regarding net income and
earnings per share is required by Statement 123. The fair value
for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998 and 1997; risk-free interest rate of
4.87%, 5.96% and 6.78%, respectively; volatility factor of the
expected market price of the Company's common stock of 29.8%,
28.9% and 29%, respectively, and an average expected life of the
option of 5 years.
The following table summarizes information about stock options as
of March 30, 1 999:
(Shares in thousands)
Outstanding Exercisable
Stock Options Stock Options
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of of Contractual Exercise of Exercise
Exercise Prices Shares Life Price Shares Price
$5.00 to $6.875 677 5.1 years $6.14 636 $6.10
$7.875 to $11.50 800 4.6 years $9.51 521 $9.56
$12.00 to $14.750 89 9.4 years $12.32 * *
*No stock options in this range are exercisable at March 30, 1999.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting
period. The Company's pro forma information follows:
(Dollars in thousands, except per share data)
1999 1998 1997
As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma
Net income $47,946 $47,656 $10,330 $10,070 $17,811 $17,661
Earnings
per share-
basic $1.95 $1.94 $.42 $.41 $.72 $.71
Earnings
per share-
diluted $1.92 $1.91 $.41 $.40 $.72 $.71
(11) Acquisitions
Between October 1996 and February 1999 the Company acquired 412
Pizza Hut units, including 277 from PHI and 135 from other
franchisees. These acquisitions were funded through the Company's
revolving credit facility or the issuance of senior notes. The
purchase price of these acquisitions were allocated between
facilities and equipment and franchise rights. The following table
summarizes these acquisitions:
(Dollars in millions)
# Units Purchased
Purchase Fiscal Fiscal Fiscal
Acquired Date Price 1999 1998 1997
From
PHI: 3/6/97 $27.3 60
3/27/97 $28.1 66
6/5/97 $31.0 52
2/4/99 $31.0 99
Other
Franchisees: 10/31/96 $27.5 31
4/16/97 $ 2.5 4
5/15/97 $57.0 100
Total Units
Acquired 99 222 91
The following table indicates the pro forma results of the 99 unit
acquisition completed February 4, 1999.
Pro Forma Results (unaudited)
(Dollars in thousands, March 30, March 31,
except per share data) 1999 1998
As reported:
Total revenues $401,159 $455,297
Net income 47,946 10,330
Net income per share-basic 1.95 .42
Net income per share-diluted 1.92 .41
Pro forma:
Total revenues 449,098 510,854
Pro forma net income 48,502 11,098
Pro forma net income
per share-basic 1.97 .45
Pro forma net income
per share-diluted 1.94 .44
The table presents unaudited pro forma results for fiscal 1999 and
1998 assuming all units had been acquired as of the beginning of
the periods presented and reflects certain adjustments.
The unaudited pro forma results shown are not necessarily
indicative of the consolidated results that would have occurred
had the acquisitions taken place at the beginning of the
respective periods or results that may occur in the future.
(12) Quarterly Results (unaudited)
First Second Third Fourth Annual
(Dollars, Fiscal Fiscal Fiscal Fiscal Fiscal
in thousands
except per Quarter Quarter Quarter Quarter Total
share data)
Year Ended
March 30, 1999
Revenue $ l15,502 $ 90,407 $ 89,429 $105,821 $401,159
Income from
restaurant
operations 22,187 15,473 14,324 19,547 71,531
Gain on
recapitali-
zation 39,400 -- -- -- 39,400
Net income 33,150 4,686 3,889 6,221 47,946
Earnings per
share-basic 1.34 .19 .16 .25 1.95
Earnings per
share-diluted 1.31 .19 .16 .25 1.92
Year Ended
March 31, 1998
Revenue $ 103,117 $114,693 $112,926 $124,560 $455,297
Income from
restaurant
operations 19,291 20,101 17,643 23,492 80,527
Asset impairment
and loss
provision -- -- -- 14,100 14,100
Net income 5,723 4,742 3,058 (3,193) 10,330
Earnings per
share - basic .23 .19 .12 (.13) .42
Earnings per
share - diluted .23 .19 .12 (.13) .41
Report of Management
The management of NPC International, Inc. has prepared the
consolidated financial statements and related financial information
included in this Annual Report. Management has the primary
responsibility for the integrity of the consolidated financial
statements and other financial information. The consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied in
all material respects and reflect estimates and judgments by
management where necessary. Financial information included
throughout this Annual Report is consistent with the consolidated
financial statements. Management of the Company has established a
system of internal accounting controls that provides reasonable
assurance that assets are properly safeguarded and accounted for
and that transactions are executed in accordance with management's
authorization.
The consolidated financial statements have been audited by our
independent accountants, PricewaterhouseCoopers LLP, whose
unqualified report is presented herein. Their opinion is based upon
procedures performed in accordance with generally accepted auditing
standards, including tests of the accounting records, obtaining an
understanding of the system of internal accounting controls and
such other tests as deemed necessary in the circumstances to
provide them reasonable assurance that the consolidated financial
statements are fairly presented. The Audit Committee of the Board
of Directors, consisting solely of outside directors, meets with
the independent accountants at least twice per year to discuss the
scope and major findings of the audit. The independent accountants
have access to the Audit Committee at any time.
O. Gene Bicknell
Chairman of the Board and
Chief Executive Officer
James K. Schwartz
President and
Chief Operating Officer
Troy D. Cook
Senior Vice President and
Chief Financial Officer
Report of Independent Accountants
The Board of Directors and Stockholders
NPC International, Inc. and Subsidiaries
In our opinion, the accompanying consolidated balance sheet as of
March 30, 1999 and the related consolidated statements of income,
stockholders' equity, and cash flows present fairly, in all
material respects, the financial position of NPC International,
Inc. and Subsidiaries (the "Company") at March 30, 1999, and the
results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of materiel misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above. The financial statements of
the Company as of March 31, 1998 and for each of the two years in
the period then ended were audited by other independent
accountants whose report dated May 5, 1998 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Kansas City, Missouri
May 4, 1999
Report of Independent Auditors
The Board of Directors and Stockholders
NPC International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of NPC
International, Inc. and Subsidiaries (the "Company") as of March
31, 1998 and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal years ended
March 25, 1997 and March 31, 1998. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 out
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of NPC International, Inc. and Subsidiaries at March 31,
1998 and the consolidated results of their operations and their
cash flows for the fiscal years ended March 25, 1997 and March 31,
1998, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Kansas City, Missouri
May 5, 1998
STOCKHOLDER DATA
Registrar and Transfer Agent
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Inquiries regarding stock transfers, lost certificates or address
changes should be directed to the Stock Transfer Department of
American Stock Transfer at the above address.
Stock Information-NPC International, Inc.'s common shares are
traded on the NASDAQ Stock Market under the symbol "NPCI".
For the calendar periods indicated, the table below sets forth the
range of high and low closing sale prices.
NPC International, Inc.'s policy is to retain earnings to fund
development and grow the business. The Company does not
contemplate payment of cash dividends in future periods.
As of May 20, 1999 there were approximately 809 shareholders of
record.
Calendar Period
High Low
1997
First Quarter 10 7/8 8 1/4
Second Quarter 11 7/8 9 1/4
Third Quarter 12 1/2 11 1/4
Fourth Quarter 15 3/8 10 1/8
1998
First Quarter 14 3/8 9 5/8
Second Quarter 14 3/16 12
Third Quarter 12 8 7/8
Fourth Quarter 12 5/8 10
1999
First Quarter 17 3/8 10 1/2
DIRECTORS, CORPORATE OFFICERS AND KEY PERSONNEL
O. Gene Bicknell
Chairman of the Board,
Chief Executive Officer and Director
James K. Schwartz
President, Chief Operating Officer, and Director
Troy D. Cook
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
Marty D. Couk
Senior Vice President, Pizza Hut Operations
D. Blayne Vaughn
Vice President, Pizza Hut Operations
L. Bruce Sharp
Vice President, Pizza Hut Operations
LaVonne K. Walbert
Vice President, Human Resources
Linda K. Lierz
Vice President, Marketing
Alan L. Salts
Vice President, Restaurant Services,
Chief Accounting Officer and Assistant Secretary
Frank S. Covvey
Vice President, Information and Communication Systems
James K. Villamaria
Risk and Regulatory Counsel
Fran D. Jabara, Director
President of Jabara Ventures Group
Robert E. Cressler, Director
Partner in Diverse Direction, Inc.
Michael Braude, Director
President and Chief Executive Officer
of the Kansas City Board of Trade
William A. Freeman, Director
Vice President and Chief Financial
Officer of Semitool, Inc.
Independent Accountants
PricewaterhouseCoopers LLP
1055 Broadway, 10th Floor
Kansas City, MO 64105
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-30-1999
<PERIOD-END> MAR-30-1999
<CASH> 4,021,000
<SECURITIES> 0
<RECEIVABLES> 1,817,000
<ALLOWANCES> 0
<INVENTORY> 2,972,000
<CURRENT-ASSETS> 15,752,000
<PP&E> 159,731,000
<DEPRECIATION> 64,503,000
<TOTAL-ASSETS> 344,083,000
<CURRENT-LIABILITIES> 43,681,000
<BONDS> 0
0
0
<COMMON> 276,000
<OTHER-SE> 152,712,000
<TOTAL-LIABILITY-AND-EQUITY> 344,083,000
<SALES> 399,045,000
<TOTAL-REVENUES> 401,159,000
<CGS> 107,821,000
<TOTAL-COSTS> 107,821,000
<OTHER-EXPENSES> 212,312,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,177,000
<INCOME-PRETAX> 71,938,000
<INCOME-TAX> 23,992,000
<INCOME-CONTINUING> 47,946,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,946,000
<EPS-BASIC> 1.95
<EPS-DILUTED> 1.92
</TABLE>
NPC INTERNATIONAL, INC
NON-QUALIFIED EXECUTIVE DEFERRED COMPENSATION PLAN
NPC International, Inc. (the "Company") establishes the NPC
International, Inc. Non-Qualified Executive Deferred Compensation
Plan, as set forth herein, effective December 1, 1998. The
purpose of the Plan is to provide additional incentive and
retirement security for the benefit of certain key management
employees of the Company.
The Plan is an unfunded plan of deferred compensation for a
select group of management and/or highly compensated employees of
the Company intended to be is exempt from the provisions of Parts
2, 3 and 4 Title I, Subtitle B of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
ARTICLE I
DEFINITIONS
As used herein, the following words and phrases shall have
the meaning indicated unless otherwise defined or required by the
context:
"Account" shall mean the total amount credited to a
Participant under the Plan.
"Administrator" shall mean the Stock Option and Compensation
Committee of the Board of Directors.
"Beneficiary" shall mean such person or persons designated by
a Participant in writing, on forms provided by the Administrator,
to receive any benefit payable under the Plan upon the death of
such Participant. If the Administrator has received no valid
Beneficiary designation prior to the death of a particular
Participant or no such designated Beneficiary survives such
Participant, any such benefit shall be payable in a lump sum to
the estate of such Participant.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Company" shall mean NPC International, Inc., its successors
and assigns.
"Due Cause" shall mean, with respect to the basis for
Termination of Employment: (i) the conviction (by plea bargain,
trial or otherwise) of a particular Participant for fraud,
embezzlement, theft, misappropriation or any other crime or act
involving moral turpitude; or (ii) a civil judgment against a
particular Participant and for the Company and/or its
shareholders, officers or directors, for fraud, embezzlement, or
similar act.
"Effective Date" of the Plan shall mean December 1, 1998.
"Executive" shall mean any highly compensated and/or
management employee of the Company who has been identified by the
Administrator, from time to time, as eligible to become a
Participant, as indicated at Schedule A of the Plan.
"Participant" shall mean an Executive who has become a
Participant as provided under Article II.
"Payment Schedule" shall mean the document bearing that
heading attached to this Plan describing the terms under which
distributions shall be made to each individual Participant.
"Plan" shall mean the NPC International, Inc. Non-Qualified
Executive Deferred Compensation Plan as contained herein and as
amended from time to time.
"Plan Year" shall mean the twelve month period, beginning
June 1 and ending May 31, with the initial year being a short
period beginning December 1, 1998 and ending May 31, 1999.
"Termination of Employment" shall occur when a Participant's
employment by the Company ceases for any reason, including due to
mental and/or physical disability.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
The Board in its sole discretion shall select and notify
those Executives who are eligible to become Participants.
ARTICLE III
ACCOUNTS
The Administrator shall establish and maintain an Account for
bookkeeping purposes in the name of each Participant, to which the
Administrator shall reflect Participant credits from time to time
in accordance with this Plan and the Payment Schedules.
ARTICLE IV
BENEFITS
Section 4.01 General. Except as otherwise provided below,
a Participant shall be entitled to payment of a benefit as
described in the Payment Schedule for that particular Participant.
Section 4.02 Death Benefit. In the event of the
Termination of Employment of a Participant by reason of his death,
his Beneficiary thereupon shall be entitled to a benefit amount
(net of tax withholding and loan repayments described at Section
5.02 hereof) equal to the sum of: (i) the vested portion of his
Account as described in the Payment Schedule for that particular
Participant, and (ii) the proceeds of policies owned by the
Company pursuant to this Plan and/or the Payment Schedules
insuring the life of said Participant. Participant's Beneficiary
is not entitled to receive or share in the proceeds, or receive an
amount equivalent to the proceeds, of any other insurance policies
on the life of the Participant owned by the Company, such as, but
not limited to, key-man insurance.
ARTICLE V
PAYMENT OF BENEFITS
Section 5.01 Receipt or Release. Before payment of any
benefit hereunder, the Administrator may require that the subject
Participant or Beneficiary apply for the benefit in writing, and
the Administrator may require such Participant, Beneficiary or
legal representative, as a condition precedent to such payment, to
execute a receipt and release therefor.
Section 5.02 Payments to Plan Participants and Their
Beneficiaries.
(a) The Company shall deliver to each
Participant a schedule (the "Payment
Schedule") that indicates: (i) the amount
payable in respect of said Plan Participant
(and his or her Beneficiaries), which will be
reduced by any amount to be withheld for the
payment of any federal, state or local income,
F.I.C.A., Medicare, excise or other applicable
taxes, including but not limited to "golden"
or excess parachute payment taxes under Code
Section 4999; (ii) the form in which such
amount is to be paid (as provided or available
under this Plan); and (iii) the time of
commencement for payment of such amounts.
Except as otherwise provided herein, the
Administrator shall make the net payments to
the Plan Participants and their Beneficiaries
in accordance with such Payment Schedules. The
Administrator shall withhold or cause to be
withheld the applicable taxes for F.I.C.A.,
Medicare, income, excise, etc. (as determined
by the Company) from the amounts described in
the Payment Schedules, and the Company shall
make provision and be responsible for the
reporting of the withheld taxes to the
appropriate taxing authorities.
(b) It is recognized by the Company and all
Participants that some of the taxes described
in the immediately preceding paragraph (a) may
become due and payable prior to the date
distributions are made pursuant to this Plan
and the Payment Schedule(s) (i.e., due to
vesting of benefits) ("Phantom Taxes"). In
that event, the Company shall make an interest-
free loan to each affected Participant equal
to the total amount of the employee portion of
such Phantom Taxes. The principal amount of
said loan shall be deducted from the Vested
Benefit Amount (without any adjustment for the
time value of money) prior to the distribution
described in paragraph D of the Payment
Schedule for the affected Participant. At the
end of each year such a loan is outstanding,
the Participant shall have added to said
Participant's IRS Form W-2 an amount equal to
the imputed interest at the Applicable Federal
Rate ("AFR") compounded annually for said loan
amount. For example the AFR for a long-term
loan (a term exceeding 9 years) compounded
annually was 5.25% in the month of December
1998.
(c) The entitlement of a Plan Participant
and/or his or her Beneficiaries to benefits
under the Plan shall be determined by the
Administrator or such party as it shall
designate, and any claim for such benefits
shall be considered and reviewed under the
procedures set out in Article VI hereof.
(d) With the exception of the death benefit
described in Section 4.02 of the Plan, in no
event shall the Company be obligated to pay a
"total amount" exceeding the "Vested Benefit
Amount" (as defined in the Payments Schedules)
plus the employer's portion of F.I.C.A. and
Medicare taxes. For purposes of this
paragraph, the "total amount" paid by the
Company shall include all net amounts
distributed to a Participant, his successors
and assigns, plus all amounts withheld by the
Company for payment to tax authorities.
ARTICLE VI
PLAN ADMINISTRATION
Section 6.01 Authority of Administrator. The Administrator
shall administer, construe and interpret the Plan, in its sole
discretion. The construction and interpretation of any provision
of the Plan by the Administrator shall be final and binding upon
all persons.
Section 6.02 Delegation. The Administrator may, in its sole
discretion, delegate any of its duties under the Plan to a
committee comprised of no fewer than three officers or other
employees of the Company.
Section 6.03 Records and Rules. The Administrator shall
keep written records sufficient to reflect the identity of all
Participants and their Account balances. It shall adopt such rules
as it shall deem reasonable and appropriate to the administration
of the Plan.
Section 6.04 Claims Procedure. Claims for benefits under
the Plan shall be filed with the Administrator on forms supplied
by the Administrator. If the Administrator determines that a
claim of a Participant or Beneficiary shall be denied, then the
following provisions shall govern:
(a) Disposition of Claim. Written notice of
the disposition of a claim shall be furnished
to the claimant with ninety (90) days after
the application is filed. If special
circumstances require an extension of time
beyond an additional sixty (60) days for
processing the initial claim, a written notice
of the extension and the reason therefore
shall be furnished to the claimant before the
end of the initial ninety-day period. In no
event shall such extension extend beyond the
additional sixty (60) days. If a claim is
denied, the Administrator shall provide the
claimant with written notice setting forth (i)
the specific reason for the denial, (ii)
specific reference to pertinent Plan
provisions upon which the denial is based,
(iii) a description of any additional material
or information necessary for the claimant to
perfect the claim, and (iv) an explanation of
the claimant's rights with respect to the
claims review procedure.
(b) Claims Review. If a claim for benefits
is denied or if the claimant has had no
response to such claim within ninety (90) days
of its submission (in which case the claim for
benefits shall be deemed to have been denied),
the claimant or his duly authorized
representative shall, upon written notice of
such denial, have the right to (i) request a
review of the denial of benefits by written
notice delivered to the Administrator within
sixty (60) days of the receipt of written
notice of denial or sixty (60) days from the
date the claim is deemed to be denied, (ii)
review pertinent documents, and (3) submit
issues and comments in writing.
(c) Decision on Review. The Administrator
shall, upon receipt of a request for review
submitted by the claimant in accordance with
subsection (b), appoint such person or persons
(review panel), in its complete discretion, to
conduct such review, and to provide the
claimant with written notice of the decision
reached by the review panel setting forth the
specific reasons for the decision and
references to the provisions of the Plan upon
which the decision is based. Such notice
shall be delivered to the claimant not later
than sixty (60) days following the receipt of
the claimant's request, unless the
Administrator determines that a hearing is
needed. If an extension of time is required
to conduct a hearing, written notice of the
extension shall be furnished to the claimant
before the end of the original sixty (60) day
period. If the decision on review is not
furnished within the time specified above, the
claim shall be deemed denied on review.
Section 6.05 Correction of Errors. If an error in
calculation or administration results in any Participant and/or
Beneficiary receiving from the Plan more or less than he should
receive, the Administrator, upon discovery of such error, shall
correct the error by adjusting, as far as is practicable, the
payments in such a manner that the benefits to which such person
was correctly entitled shall be paid.
ARTICLE VII
PLAN AMENDMENT AND TERMINATION
The Board, in its discretion, shall have the right at any
time to modify, alter, and/or amend the Plan in whole or in part
by resolution communicated to all then current Participants not
later than sixty (60) days following adoption. No amendment shall
have the effect of reducing a Participant's benefit accrued/vested
(as provided in the Payment Schedule for that Participant) to the
date of the amendment, including but not limited to lengthening
the vesting schedule or reducing the Full Benefit Amount (as
defined in the Payment Schedule for that Participant); except that
this Plan cannot be terminated without the prior written consent
of all persons who are then Participants. If there are no
Participant Accounts at a given point in time, then the Board may
terminate the Plan in its sole discretion.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Employment Rights. No provision of the Plan
shall be deemed to amend, alter, abridge or limit any managerial
right of the Company, including but not limited to Company's right
to terminate the employment of any employee and/or Participant at
any time and for any reason. Further, no provision of the Plan
shall be deemed to give any employee and/or Participant the right
to be retained in employment. By participation in the Plan, each
Participant, on behalf of himself, his heirs, assigns and
Beneficiary, shall be deemed conclusively to have agreed to and
accepted the terms and conditions of the Plan.
Section 8.02 Nonalienation of Benefits. Except as
otherwise provided by law, no benefit or distribution under the
Plan shall be subject either to the claim of any creditor of a
Participant and/or Beneficiary, or to attachment, garnishment,
levy, execution or other legal or equitable process by any
creditor of such person, and no such person shall have any right
to alienate, anticipate or assign all or any portion of any
benefit or distribution under the Plan. The Plan shall not be
liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to benefits hereunder.
If benefits of any Participant and/or Beneficiary are
garnished or attached, the Administrator may seek a declaratory
judgment in a court of competent jurisdiction to determine the
proper recipient of the benefits to be paid by the Plan. During
the pendency of such action, any benefits that become payable may
be paid into the court to be distributed by the court as it deems
proper at the conclusion of the action.
Section 8.03 Withholding and Deductions. As noted in
Section 5.02(a) hereof, all payments made by the Company or
Trustee under the Plan to any Participant and/or Beneficiary shall
be subject to applicable withholding and to such other deductions
as shall at the time of such payment be required under any income
tax or other law, whether of the United States or any other
jurisdiction, and, in the case of payments to a Beneficiary, the
delivery to the Administrator of all necessary waivers,
qualifications and other documentation. Determinations by the
Administrator as to withholding with respect thereto shall be
binding on the Participant and any Beneficiary.
Section 8.04 Incapacity. If any Beneficiary is a minor, or
is in the judgment of the Administrator otherwise legally
incapable of receiving and giving a valid receipt for any payment
due him hereunder, the Administrator may, unless and until a claim
shall have been made by a guardian or conservator of such person
duly appointed by a court of competent jurisdiction, make payment
to such person's spouse, child, patent, brother or sister, or
other person deemed by the Administrator to be a proper person to
receive such payment. Any payment so made shall be a complete
discharge of any liability under the Plan for such payment.
Section 8.05 Effect of Invalidity of Provision. If any
provision of the Plan is held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other
provisions hereof, and the Plan shall be construed and enforced as
if such provision had not been included.
Section 8.06 Rights of Participants and Beneficiaries. The
Plan shall at all times constitute an unsecured promise of the
Company to pay benefits under the Plan as they come due. The
right of a Participant or Beneficiary to receive benefits
hereunder shall be solely an unsecured claim against the general
assets of the Company. A Participant or Beneficiary shall have no
claim against or rights in any specific assets of the Company and
all assets that may be titled or denominated as being held by or
for the Plan shall be deemed general assets of the Company.
Section 8.07 Discretion of Administrator. The
Administrator shall have the sole and absolute discretion to take
or not to take such actions as may be necessary or appropriate for
the administration of the Plan. The exercise of such discretion
shall not be subject to question or review by any person, unless
the Administrator's exercise of discretion was arbitrary and
capricious.
Section 8.08 Construction. In the construction of the
Plan, the masculine shall include the feminine and the singular
the plural in all cases where such meanings would be appropriate.
Section 8.09 Controlling Law. The Law of the State of
Kansas shall be the controlling state law in all matters relating
to the Plan and shall apply to the extent that it is not preempted
by federal law.
IN WITNESS WHEREOF, the Company has caused this Plan to be
signed by its duly authorized officer and adopted this _____ day
of _______________, 1999.
NPC INTERNATIONAL, INC.
By:
Title:
ATTEST:
___________________________________
SCHEDULE A
NPC INTERNATIONAL, INC.
NON-QUALIFIED EXECUTIVE DEFERRED COMPENSATION PLAN
The following are Executives eligible to become Participants
under the NPC International, Inc. Non-Qualified Executive Deferred
Compensation Plan with respect to Plan Years beginning with the
Effective Date and thereafter:
JAMES K. SCHWARTZ
TROY D. COOK
PAYMENT SCHEDULE
A. The full benefit amount potentially distributable to
James K. Schwartz ("Participant") or his successors and assigns,
from the NPC International, Inc. ("Company") Non-Qualified
Executive Deferred Compensation Plan ("Plan") shall be Ten Million
and 00/100 Dollars ($10,000,000.00) ("Full Benefit Amount"). All
references herein to "years of service" refer to the time period
subsequent to the effective date of the Plan, and this term only
includes years in which Participant is employed by Company
(whether under current ownership or new ownership, as described in
Paragraph C) on the last day of the Plan year, with the initial
Plan year beginning December 1, 1998 and ending May 31, 1999 (for
which Participant would be credited 1/2 year of service), and all
subsequent Plan years being twelve-month periods ending May 31.
The vested benefit schedule ("Vested Benefit Schedule") for
Participant is as follows:
Years of Service Completed
After Plan Effective Date Vested Percentage
Less than 4 1/2 0%
4 1/2 15%
9 1/2 50%
12 62.5%
14 1/2 75%
17 87.5%
19 1/2 100%
This Vested Benefit Schedule shall apply even if
Participant's employment with Company is terminated for Due Cause
(as defined in the Plan document). There is no interim year
vesting other than stated above. For example, if Participant has
completed 9 years of service, his vested percentage is still 15%
until he completes 9 1/2 years of service.
B. Upon a change of control of Company, as defined in
Paragraph C below, the Vested Benefit Schedule shall be superceded
by the following:
(1) If Participant's employment is terminated by Company's new
ownership for any reason, including Due Cause, and Partici-
pant has completed 9 1/2 years of service, Participant is
automatically 100% vested.
(2) If Participant's employment is terminated by Company's new
ownership and Participant has completed at least 4 1/2
years of service, but less than 9 1/2 years of service
(the "5 Year Interim Period"), Participant is automatic-
ally 100% vested in the event either of the following
occurs during the 5 Year Interim Period:
(a) Company terminates Participant's employment
for any reason other than for Due Cause; or
(b) Company's new ownership does not retain
Participant at a position and compensation
level that is equal to or greater than
what Participant enjoys immediately prior
to the change of control.
(3) If Participant's employment is terminated by Company's
new ownership before Participant has completed 4 1/2
years of service (the "4 1/2 Year Initial Period"),
Participant will be automatically 15% vested in the
event either of the following events occur during the
4 1/2 Year Initial Period:
(a) Company's new ownership terminates Participant's
employment for any reason other than for Due
Cause; or
(b) Company's new ownership does not retain Partici-
pant at a position and compensation level that
is equal to or greater than what Participant
enjoys immediately prior to the change of control.
C. A "change of control", for purposes of the Plan and this
Payment Schedule, occurs when the interests in Company owned by
Gene Bicknell, his spouse, any of his lineal descendants, and any
entity at least 50% owned by any of such persons, are reduced
(regardless of whether by merger, sale, or other means) to less
than 10% of the level of such interests as of December 1, 1998,
and the proceeds of any such reduction are distributed to
Company's shareholders. This provision will also be effective if
substantially all (i.e., 90% or more) of the assets of Company are
sold or refinanced, and either: (i) a majority of the asset sale
or refinancing proceeds are distributed to the Company's
shareholders, or (ii) the Company is liquidated.
D. The Full Benefit Amount multiplied by Participant's
vested percentage (as provided above, with the product of that
calculation being Participant's "Vested Benefit Amount") shall be
distributable to Participant net of any (i) taxes withheld as
described in Section 5.02(a) of the Plan, and (ii) interest free
loan repayments as described in Section 5.02(b) of the Plan. This
net amount shall be distributed as soon as administratively
feasible after termination of Participant's employment with
Company (including by death, in which case the Vested Benefit
Amount shall be distributed to the beneficiary or beneficiaries
designated by Participant). If Participant completes 19 1/2 years
of service but continues beyond that period as an employee of
Company, then the Full Benefit Amount shall be increased to
include any earnings subsequent to completion of 19 1/2 years of
service on the assets held by Company with respect to
Participant's Plan account, reduced by any taxes paid by Company
with respect to said earnings. However, Participant shall have no
right to withdraw any of these funds or the earnings therefrom,
and said funds shall continue to be subject to the claims of
Company's general creditors, until the termination of
Participant's employment with Company. If any portion of the Full
Benefit Amount remains in a Plan account attributable to this
particular Participant, as distinguished from Plan account(s)
attributable to other Plan participants, after distribution of the
Vested Benefit Amount to Participant (with this remainder referred
to as the "Excess Benefit"), then said Excess Benefit shall be
released by the Plan to Company as soon as administratively
feasible. If there are insufficient assets in Participant's Plan
account to pay the full Vested Benefit Amount when due, the
Company shall make up the shortfall from its other assets. In the
event Participant dies while Participant is participating in the
Plan, Company shall distribute to Participant's designated
beneficiary an amount equal to the death benefit described at
Section 4.02 of the Plan.
E. Company shall keep in force at all times Participant is
an employee of Company, one or more insurance policies insuring
Participant's life, which policy or policies shall collectively
represent a death benefit of no less than Five Million and 00/100
Dollars ($5,000,000.00). However, Company shall be the sole
applicant, owner and beneficiary of all such life insurance
policies, and said policies (including their cash surrender
values, if any, and death benefits) shall be subject to the claims
of Company's general creditors. Further, no representation has
been made to Participant by the Plan Administrator or Company that
said policy or policies will be used only to provide Plan
benefits. Company shall at all times have sole discretion
regarding the amount and timing of premium payments for said
policy or policies on Participant's life.
PAYMENT SCHEDULE
A. The full benefit amount potentially distributable to
Troy D. Cook ("Participant") or his successors and assigns, from
the NPC International, Inc. ("Company") Non-Qualified Executive
Deferred Compensation Plan ("Plan") shall be Seven Million and
00/100 Dollars ($7,000,000.00) ("Full Benefit Amount"). All
references herein to "years of service" refer to the time period
subsequent to the effective date of the Plan, and this term only
includes years in which Participant is employed by Company
(whether under current ownership or new ownership, as described in
Paragraph C) on the last day of the Plan year, with the initial
Plan year beginning December 1, 1998 and ending May 31, 1999 (for
which Participant would be credited 1/2 year of service), and all
subsequent Plan years being twelve-month periods ending May 31.
The vested benefit schedule ("Vested Benefit Schedule") for
Participant is as follows:
Years of Service Completed
After Plan Effective Date Vested Percentage
Less than 4 1/2 0%
4 1/2 15%
9 1/2 50%
12 62.5%
14 1/2 75%
17 87.5%
19 1/2 100%
This Vested Benefit Schedule shall apply even if
Participant's employment with Company is terminated for Due Cause
(as defined in the Plan document). There is no interim year
vesting other than stated above. For example, if Participant has
completed 9 years of service, his vested percentage is still 15%
until he completes 9 1/2 years of service.
B. Upon a change of control of Company, as defined in
Paragraph C below, the Vested Benefit Schedule shall be superceded
by the following:
(1) If Participant's employment is terminated by Company's
new ownership for any reason, including Due Cause, and
Participant has completed 9 1/2 years of service,
Participant is automatically 100% vested.
(2) If Participant's employment is terminated by Company's
new ownership and Participant has completed at least
4 1/2 years of service, but less than 9 1/2 years of
service (the "5 Year Interim Period"), Participant is
automatically 100% vested in the event either of the
following occurs during the 5 Year Interim Period:
(a) Company terminates Participant's employment for
any reason other than for Due Cause; or
(b) Company's new ownership does not retain Partici-
pant at a position and compensation level that
is equal to or greater than what Participant
enjoys immediately prior to the change of control.
If neither (a) nor (b) applies, the original Vested
Benefit Schedule in paragraph A above shall continue
to apply.
(3) If Participant's employment is terminated by Company's new
ownership before Participant has completed 4 1/2 years of
service (the "4 1/2 Year Initial Period"), Participant
will be automatically 15% vested in the event either of
the following events occur during the 4 1/2 Year Initial
Period:
(a) Company's new ownership terminates Participant's
employment for any reason other than for Due Cause;
or
(b) Company's new ownership does not retain Participant
at a position and compensation level that is equal
to or greater than what Participant enjoys immediat-
ely prior to the change of control.
C. A "change of control", for purposes of the Plan and this
Payment Schedule, occurs when the interests in Company owned by
Gene Bicknell, his spouse, any of his lineal descendants, and any
entity at least 50% owned by any of such persons, are reduced
(regardless of whether by merger, sale, or other means) to less
than 10% of the level of such interests as of December 1, 1998,
and the proceeds of any such reduction are distributed to
Company's shareholders. This provision will also be effective if
substantially all (i.e., 90% or more) of the assets of Company are
sold or refinanced, and either: (i) a majority of the asset sale
or refinancing proceeds are distributed to the Company's
shareholders, or (ii) the Company is liquidated.
D. The Full Benefit Amount multiplied by Participant's
vested percentage (as provided above, with the product of that
calculation being Participant's "Vested Benefit Amount") shall be
distributable to Participant net of any (i) taxes withheld as
described in Section 5.02(a) of the Plan, and (ii) interest free
loan repayments as described in Section 5.02(b) of the Plan. This
net amount shall be distributed as soon as administratively
feasible after termination of Participant's employment with
Company (including by death, in which case the Vested Benefit
Amount shall be distributed to the beneficiary or beneficiaries
designated by Participant). If Participant completes 19 1/2 years
of service but continues beyond that period as an employee of
Company, then the Full Benefit Amount shall be increased to
include interest at a rate determined by the Plan Administrator.
However, Participant shall have no right to demand any of these
funds, and said funds shall continue to be subject to the claims
of Company's general creditors, until the termination of
Participant's employment with Company. If any portion of the Full
Benefit Amount remains credited to a Plan account attributable to
this particular Participant, as distinguished from Plan account(s)
attributable to other Plan participants, after distribution of the
Vested Benefit Amount to Participant (with this remainder referred
to as the "Excess Benefit"), then said Excess Benefit shall be
released by the Plan to Company as soon as administratively
feasible. In the event Participant dies while Participant is
participating in the Plan, Company shall distribute to
Participant's designated beneficiary an amount equal to the death
benefit described at Section 4.02 of the Plan.
E. Company shall keep in force at all times Participant is
an employee of Company, one or more insurance policies insuring
Participant's life, which policy or policies shall collectively
represent a death benefit of no less than Five Million and 00/100
Dollars ($5,000,000.00). However, Company shall be the sole
applicant, owner and beneficiary of all such life insurance
policies, and said policies (including their cash surrender
values, if any, and death benefits) shall be subject to the claims
of Company's general creditors. Further, no representation has
been made to Participant by the Plan Administrator or Company that
said policy or policies, or any other specific assets of Company,
will be used only to provide Plan benefits. Company shall at all
times have sole discretion regarding (1) the amount and timing of
premium payments for said policy or policies on Participant's
life, and (2) whether any specific assets are anticipated or
nonbindingly designated to be used to satisfy Company's
obligations under the Plan and this Payment Schedule.
Nevertheless, Company recognizes and acknowledges that its
obligations to Participant pursuant to the Plan and this Payment
Schedule, are now and remain binding on Company even if no
specific assets are designated for purposes of satisfying said
obligations.
NPC INTERNATIONAL, INC.
DEFERRED COMPENSATION
AND
RETIREMENT PLAN
Established January 1, 1999
Table of Contents
Section 1. Establishment 1
Section 2. Definitions 1
Section 3. Eligibility for Participation 4
Section 4. Deferral of Compensation and Bonus Compensation 5
Section 5. Company Matching Contributions and
Company Discretionary Contributions 6
Section 6. Elections of Timing and Form of Payment 8
Section 7. Investment of Deferral and Vesting Accounts 12
Section 8. Vesting 13
Section 9. Designation of Beneficiaries 15
Section 10. Merger, Consolidation and Sale of Assets 16
Section 11. Rights of Participants 16
Section 12. Administration 16
Section 13. Claims and Appeals 17
Section 14. Amendments and Termination 17
Section 15. Applicable Laws 18
Section 16. Incompetency 18
Section 17. Expenses 19
Section 18. Notices 19
Section 19. Withholding and Deductions 19
Section 20. Invalidity of Provisions 19
Section 21. Tax Advantages Not Guaranteed 20
Section 22. Return of Company Contributions 20
NPC INTERNATIONAL, INC.
DEFERRED COMPENSATION AND RETIREMENT PLAN
Section 1. Establishment
NPC INTERNATIONAL, INC. hereby establishes, effective as of
January 1, 1999, a deferred compensation and retirement plan for
executives as described herein, which shall be known as the "NPC
INTERNATIONAL, INC. DEFERRED COMPENSATION AND RETIREMENT PLAN"
(hereinafter called the "Plan"). The Plan is intended to
constitute an unfunded plan maintained primarily to provide
deferred compensation to a select group or management or highly
compensated employees.
Section 2. Definitions
2.1 Definitions. Whenever used herein, the following terms
shall have the meanings set forth below:
(a) The term "Board" means the Board of Directors of
the Company.
(b) The term "Beneficiary" means the persons or
entities designated pursuant to Section 9 who are
to receive, upon a Participant's death, payment of
the amounts credited to the Participant's Deferral
Account and the Nonforfeitable amounts credited his
Vesting Account as of the date of his death.
(c) The term "Bonus Compensation" with respect to an
active Participant or eligible Executive means the
active Participant's or eligible Executive's bonus
compensation, as determined by Company, for the
period to which his relevant Bonus Compensation
Deferral Election relates.
(d) The term "Bonus Compensation Deferral Election"
means the election made by an active Participant or
eligible Executive, pursuant to Section 4.2, to
defer receipt of a portion of his Bonus
Compensation earned by him in the calendar year to
which the election relates.
(e) The term "Change of Control" means:
(1) a change in ownership of the Company to the
extent that more than 90 percent of the total
combined voting power of all classes of
Company stock, or more than 90 percent of the
total value of shares of all classes of
Company stock, is owned by persons and/or
entities other than (i) Gene Bicknell, (ii)
his spouse, (iii) his lineal descendants, and
(iv) any entity with respect to which Gene
Bicknell, his spouse, and/or his lineal
descendants own at least 50 percent of the
total combined voting power of all classes of
the entity's stock, or at least 50 percent of
the total value of shares of all classes of
the entity's stock (or, where the entity is a
partnership, at least 50 percent of the
capital interest or profits interest of the
partnership);
(2) a merger or similar combination following
which the Company's shareholders prior to the
merger are no longer in control of the
surviving entity; or
(3) a distribution to shareholders upon or as a
result of the sale of at least 80 percent of
the Company's assets, or a liquidation of the
Company.
(f) The term "Committee" means the Stock Option and
Compensation Committee of and appointed by the
Board.
(g) The term "Company" means NPC International, Inc.,
a Kansas corporation, and any successor thereto.
(h) The term "Company Discretionary Contribution" means
the amount deposited by the Company and credited by
the Trustee pursuant to Section 5.2 to the Deferral
Account or Vesting Account maintained by the
Trustee on behalf of an active Participant or
eligible Executive. Company Discretionary
Contributions may be Class A Contributions or Class
B Contributions. Unless otherwise so designated in
writing, all Company Discretionary Contributions
shall be Class A Contributions. See Section 8 for
a discussion concerning the treatment, for vesting
purposes, accorded Class A Contributions and Class
B Contributions.
(i) The term "Company Matching Contribution" means the
amount deposited by the Company and credited by the
Trustee pursuant to Section 5.1 to the Deferral
Account or Vesting Account maintained by the
Trustee on behalf of an active Participant or
eligible Executive.
(j) The term "Compensation" with respect to an
Executive means the Executive's taxable wages
reportable on Form W-2, less (i) Bonus
Compensation, and (ii) gains from the exercise of
stock options granted by the Company, payable to
the Executive during the pay period to which the
relevant Compensation Deferral Election relates.
(k) The term "Compensation Deferral Election" means the
election made by an active Participant or eligible
Executive, pursuant to Section 4.1, to defer
receipt of all or a portion of his Compensation
earned in the calendar year to which the election
relates.
(l) The term "Deferral Account" means the account
maintained by the Trustee under the Trust, on
behalf of a Participant, to which the Company
deposits and the Trustee credits at the direction
of the Company (i) the Compensation and Bonus
Compensation the Participant elects to defer
pursuant to his Compensation Deferral Election
and/or Bonus Compensation Deferral Election, and
(ii) the Company Matching Contributions and Company
Discretionary Contributions pursuant to Sections
5.1 and 5.2 which are entirely Nonforfeitable when
made. Although this Plan may refer to a Deferral
Account as "the Participant's Deferral Account" or
as "his Deferral Account," the amounts credited to
such Deferral Account shall at all times be subject
to the terms and conditions of the agreement and
declaration establishing the Trust, and thus
subject to the claims of the Company's general
creditors.
(m) The term "Executive" means an employee of the
Company who is:
(1) in a select group of management or highly paid
employees;
(2) exempt from the minimum wage and maximum hour
requirements of the Fair Labor Standards Act,
as described in 29 U.S.C. 213(a) and
regulations promulgated thereunder; and
(3) a "highly compensated employee" within the
meaning of Internal Revenue Code Section
414(q), or a regional manager, or both. With
respect to a newly hired employee, if the
employee's annualized projected Compensation
and Bonus Compensation for his first calendar
year of employment exceed the limit described
in Section 414(q)(1)(B)(i), he shall be
considered a "highly compensated employee" for
such first calendar year of employment, for
purposes of this Plan.
(n) The term "Nonforfeitable," as applied to Company
Matching Contributions and Company Discretionary
Contributions (and earnings thereon) deposited by
the Company and credited by the Trustee at the
direction of the Company to a Participant's
Deferral Account or Vesting Account, means the
portion of such deposits and credits to which the
Participant or his Beneficiary are "vested" in
accordance with the vesting rules described in
Section 8 and the other terms and conditions of the
Plan, subject only to the claims of the Company's
general creditors as described in the agreement and
declaration establishing the Trust.
(o) The term "Participant" means a person who has
amounts currently deposited and credited to a
Deferral Account or Vesting Account, or both,
maintained by the Trustee on his behalf pursuant to
the terms of the Plan. An active Participant is a
Participant who is actively employed by the Company
as an Executive and who is actively participating
in the Plan.
(p) The term "Trust" means, with regard to (i)
Compensation and/or Bonus Compensation deposited by
the Company and credited by the Trustee on behalf
of a Participant pursuant to his Compensation
Deferral Election and/or Bonus Compensation
Deferral Election, as the case may be, and (ii) the
Company Matching Contributions and Company
Discretionary Contributions deposited by the
Company and credited by the Trustee pursuant to
Sections 5.1 and 5.2 and which are entirely
Nonforfeitable when made, the NPC International,
Inc. Deferred Compensation and Retirement Plan
Group Trust.
With regard to Company Matching Contributions and
Company Discretionary Contributions deposited with
and credited by the Trustee on behalf of a
Participant pursuant to Sections 5.1 and 5.2 and
which are not entirely Nonforfeitable when made,
the term "Trust" means the individual trust
established to account for such credits solely on
behalf of the individual Participant and his
Beneficiaries (but subject to the rights of the
Company's general creditors, pursuant to the terms
and conditions of the agreement and declaration
establishing the trust).
(q) The term "Trustee" means A.G. Edwards Trust Company
or the bank or trust company designated as its
successor trustee under the agreement and
declaration establishing the Trust.
(r) The term "Vesting Account" with respect to a
Participant means the account maintained by the
Trustee under the Trust, on behalf of the
Participant, to which the Company deposits and the
Trustee credits at the direction of the Company the
Company Matching Contributions and/or Company
Discretionary Contributions (if any) pursuant to
Sections 5.1 and 5.2 and which are not entirely
Nonforfeitable when made. Although this Plan may
refer to a Vesting Account as "the Participant's
Vesting Account" or as "his Vesting Account," the
amounts credited to such Vesting Account shall at
all times be subject to the terms and conditions of
the agreement and declaration establishing the
Trust, and thus subject to the claims of the
Company's general creditors.
(s) The term "Vesting Service" with respect to a
Participant means the aggregate total of the
Participant's whole years (and fractional portions
of years) of employment by the Company, its
predecessors and successors. The Committee may
designate, from time to time and in its sole
discretion, such other service (either for the
Company or otherwise) that shall be considered
Vesting Service with respect to any particular
Participant or eligible Executive.
2.2 Gender and Number. Except when otherwise indicated by
the context, any masculine terminology used herein shall also
include the feminine gender, and the definition of any term herein
in the singular shall also include the plural.
Section 3. Eligibility for Participation
3.1 Eligibility. An employee of the Company shall be
eligible to participate in the Plan with respect to a calendar
year if:
(a) He qualifies as an Executive with respect to such
year; and
(b) The Committee has selected such Executive to
participate with respect to such year.
Notwithstanding the foregoing, an active Participant or
eligible Executive shall not be eligible to have Company Matching
Contributions deposited and credited to his Vesting Account until
the later of (i) the first pay period beginning after the date on
which he is first credited with a year of service and (ii) the
first pay period beginning after the date on which he commences
participation in this Plan. A "year of service" for this purpose
means a 12-consecutive month period, beginning on the active
Participant's or eligible Executive's employment commencement date
or any anniversary of that date, during which he has at least
1,000 hours of service. An "hour of service" for this purpose
means an hour with respect to which an active Participant or
eligible Executive is entitled to payment for the performance of
services for the Company, or entitled to payment even though no
services are performed for the Company (e.g., for periods of paid
leave of absence, illness, holiday, layoff, jury duty, etc.). A
Participant who satisfies this requirement, terminates employment,
and then again becomes an eligible Executive on account of
reemployment shall be eligible for Company Matching Contributions
upon again becoming an active Participant.
The initial Participants in the Plan are listed on the
attached Schedule A. The Committee may add additional
Participants or remove existing Participants from time to time by
written action.
3.2 Inactive Participants. If at a future date an active
Participant no longer meets the requirements for participation in
this Plan for reasons other than termination of employment, the
Participant shall become an inactive Participant, retaining all of
the rights accorded Participants by this Plan, except the right to
make additional deferrals of Compensation and/or Bonus
Compensation pursuant to Section 4, and to have additional Company
Matching Contributions and/or Company Discretionary Contributions
deposited and credited to his Deferral Account or Vesting Account.
Such an individual shall remain an inactive Participant unless and
until he again becomes an active Participant by again qualifying
as an Executive entitled to participate in this Plan.
Amounts deposited and credited to an active Participant's
Vesting Account which are not considered Nonforfeitable shall be
forfeited pursuant to Section 8 at the time the Participant no
longer meets the requirements for participation on account of
termination of employment.
Section 4. Deferral of Compensation and Bonus Compensation
4.1 Deferral of Compensation. At the times and in the manner
specified below, an active Participant or an eligible Executive
may make an irrevocable election in writing to defer all or a
portion of his Compensation until a specified date in the future.
(a) Timing and Nature of Compensation Deferral
Election. An active Participant or eligible
Executive described in the preceding paragraph may
make a Compensation Deferral Election, prior to
December 31 of any calendar year, to defer receipt
of any percentage of his Compensation, in whole
numbers (e.g., 1%, 7%, etc.), earned during pay
periods occurring between January 1 and December 31
of the following calendar year.
(b) Elections by Newly Eligible Executives.
Notwithstanding anything in this Section 4.1 to the
contrary, an Executive who first becomes an
eligible Executive during a calendar year may make
the election described in subsection (a) above, as
applicable, within 30 days after the date he first
becomes an eligible Executive. Such an election
shall be effective only with respect to
Compensation earned after the date of the election.
(c) Uniform Payroll Deductions. Amounts deferred
pursuant to this Section shall be deducted from the
Participant's Compensation on a uniform basis for
each pay period during the portion of the calendar
year to which the Compensation Deferral Election
relates.
(d) Crediting of Deferred Amounts. As soon as
practicable after Compensation subject to a
Compensation Deferral Election would, but for the
provisions of this Plan, be payable to an active
Participant or eligible Executive, the Company
shall deposit with the Trustee, and direct the
Trustee to credit to his Deferral Account, the
amount of the Compensation that the active
Participant or eligible Executive elected to defer.
4.2 Deferral of Bonus Compensation. At the times and in the
manner specified below, an active Participant or an eligible
Executive may make an irrevocable election in writing to defer all
or a portion of his Bonus Compensation until a specified date in
the future.
(a) Timing and Nature of Bonus Compensation Deferral
Election. An active Participant or eligible
Executive described in the preceding paragraph may
make a Bonus Compensation Deferral Election, prior
to December 31 of any calendar year, to defer
receipt of any percentage (up to 90%) of his Bonus
Compensation, in whole numbers (e.g., 1%, 7%,
etc.), earned in and payable with respect to the
following calendar year. An active Participant or
eligible Executive who elects to defer more than
90% of his Bonus Compensation shall be deemed to
have elected to defer 90% of his Bonus
Compensation.
(b) Elections by Newly Eligible Executives.
Notwithstanding anything in this Section 4.2 to the
contrary, when an Executive first becomes an
eligible Executive, he may make the election
described in subsection (a) above, as applicable
(to be applied to the Bonus Compensation earned by
payable to him with respect to the calendar year in
which he is first an eligible Executive), within 30
days after the date he first becomes an eligible
Executive, provided that at the time the election
is made the amount of the Bonus Compensation
payable to him with respect to such calendar year
has not been fixed and determined.
(c) Crediting of Deferred Amounts. As soon as
practicable after Bonus Compensation subject to a
Bonus Compensation Deferral Election would, but for
the provisions of this Plan, be payable to an
active Participant or eligible Executive, the
Company shall deposit with the Trustee, and direct
the Trustee to credit to his Deferral Account, the
amount of the Bonus Compensation the active
Participant or eligible Executive elected to defer.
Section 5. Company Matching Contributions and Company
Discretionary Contributions
5.1 Company Matching Contributions. At the time, or as soon
as practicable after, the Company deposits with the Trustee, and
directs the Trustee to credit on behalf of an active Participant
or eligible Executive, the amounts described in Sections 4.1(d)
and 4.2(c), the Company shall deposit with the Trustee a Company
Matching Contribution in the amount determined below, and direct
the Trustee to credit such Company Matching Contribution to such
active Participant's or eligible Executive's (i) Deferral Account,
if the Company Matching Contribution is entirely Nonforfeitable
when made, or (ii) Vesting Account, if the Company Matching
Contribution is not entirely Nonforfeitable when made. See
Section 8 for rules concerning whether an amount is considered
Nonforfeitable.
The Company Matching Contribution shall be in an amount equal
to the lesser of:
(a) The sum of the deferred Compensation and deferred
Bonus Compensation deposited with and credited by
the Trustee on behalf of the active Participant or
eligible Executive for the applicable pay period;
or
(b) An amount equal to four percent (4%) of the sum of
the Compensation and Bonus Compensation payable to
the active Participant or eligible Executive for
the pay period to which the Compensation Deferral
Election (and/or Bonus Compensation Deferral
Election) giving rise to the deposits and credits
described in (a) above relates.
EXAMPLE: Participant B is not 100% vested pursuant to
the rules in Section 8. He has on file a Compensation
Deferral Election calling for the deferral of 10 percent
of his Compensation, per pay period, earned between
January 1 and December 31, 1999. For the first pay
period in February, 1999, the Company owes Participant B
$4,000 in Compensation. Pursuant to his Deferral
Election, the Company deposits $400 with the Trustee,
directs the Trustee to credit the $400 to Participant
B's Deferral Account, and pays the balance to
Participant B (less applicable withholdings). The
Company also deposits with the Trustee, and the Trustee
credits to Participant B's Vesting Account, a Company
Matching Contribution equal to $160, or four percent of
the Compensation payable to Participant B for the
applicable pay period. Note that if Participant B had
been 100% vested pursuant to the rules in Section 8, the
Matching Contribution would have been deposited and
credited to his Deferral Account.
EXAMPLE: Assume the same facts as above, except that
Participant B also has on file a Bonus Compensation
Deferral Election calling for the deferral of 50 percent
of his Bonus Compensation earned in 1999. For the first
pay period in April, the Company owes Participant B
$4,000 in Compensation, and $8,000 in Bonus Compensation
as the Participant's bonus for the first calendar
quarter of 1999. Pursuant to Participant B's Deferral
Elections, the Company deposits $4,400 ($400 in
Compensation plus $4,000 in Bonus Compensation) with the
Trustee, and directs the Trustee to credit this amount
to Participant B's Deferral Account, and pays the
balance to Participant B (less applicable withholdings).
The Company also deposits $480 (four percent of the sum
of the Compensation and Bonus Compensation payable to
Participant B for the applicable pay period) with the
Trustee, and directs the Trustee to credit that amount
to Participant B's Vesting Account.
5.2 Company Discretionary Contribution. At such times and
in such amounts as the Company in its sole discretion may decide,
the Company may deposit with the Trustee, and in writing direct
the Trustee to credit, a Company Discretionary Contribution to the
Deferral Account or Vesting Account maintained by the Trustee on
behalf of one or more Participants. The Company Discretionary
Contribution shall be deposited and credited to a Participant's
Deferral Account if the Company Discretionary Contribution is
entirely Nonforfeitable when made, and shall be deposited and
credited to his Vesting Account in other cases.
Section 6. Elections of Timing and Form of Payment
6.1 Electing the Time of Payment.
(a) Compensation and Bonus Compensation. An active
Participant or eligible Executive shall, in his
Compensation Deferral Election and/or Bonus
Compensation Deferral Election (as the case may
be), elect to receive payment of the deferred
amount (and earnings thereon):
(1) 90 days after termination of employment;
(2) on a specified deferral ending date at least
two years after the calendar year to which the
deferral election applies;
(3) the earlier of the dates specified in (1) and
(2) above;
(4) the earlier of the date specified in (1)
above, or the date 90 days after a Change of
Control; or
(5) the earlier of (i) the date specified in (3)
above, or (ii) the date 90 days after a Change
of Control.
EXAMPLE: Participant A completes a
Compensation Deferral Election on December 1,
1998, for deferral of a portion of his
Compensation payable for 1999. Participant A
elects to receive his deferred Compensation on
July 1, 2002. The election is permissible
because his deferral ending date is a date
certain, after the second calendar year that
follows the 1999 calendar year, which is the
year to which the deferral election relates.
Participant B similarly completes a
Compensation Deferral Election form, but
elects to receive her deferred Compensation 90
days after termination of her employment. The
election is permissible.
Participant C similarly completes a
Compensation Deferral Election form and, like
Participant A, selects a deferral ending date
of July 1, 2002. But Participant C further
elects to receive his deferred Compensation on
the earlier of (i) 90 days after his
termination of employment, and (ii) the July
1, 2002, deferral ending date. The election
is permissible.
Participant D similarly completes a
Compensation Deferral Election form and, like
Participant A, selects a deferral ending date
of July 1, 2002. But Participant D further
elects to receive his deferred Compensation on
the earlier of (i) 90 days after his
termination of employment, (ii) the July 1,
2002, deferral ending date, or (iii) 90 days
after a Change of Control. The election is
permissible.
(b) Company Matching Contributions and Discretionary
Contributions.
(1) Company Matching Contributions. Any Company
Matching Contribution (and earnings thereon)
deposited with the Trustee and credited on
behalf of a Participant on account of his
deferral of Compensation and/or Bonus
Compensation shall be paid at the time at
which is paid the deferred Compensation and/or
deferred Bonus Compensation to which such
Company Matching Contribution relates.
(2) Company Discretionary Contributions. Prior to
a calendar year with respect to which the
Company may deposit with the Trustee, and
direct the Trustee to credit, a Company
Discretionary Contribution on behalf of a
Participant, an active Participant or eligible
Employee may elect, with respect to any such
credit of a Company Discretionary
Contribution, to receive payment thereof (and
earnings thereon) on a date described in
subsections (1), (2), (3), (4) or (5) of
subsection (a) above. Such an election will
be effective only with respect to a Company
Discretionary Contribution that becomes fixed
and determined after the date of such
election. In the event no such election is
made, the active Participant or eligible
Executive shall be deemed to have elected to
receive payment of such Company Discretionary
Contribution upon termination of employment.
Notwithstanding the preceding paragraph, an
Executive who first becomes an eligible
Executive during a calendar year may make the
election described in the preceding paragraph
within 30 days after the date he first becomes
an eligible Executive. Such an election will
be effective only with respect to a Company
Discretionary Contribution that becomes fixed
and determined after the date of such
election.
(3) No Payment of Forfeitable Amounts.
Notwithstanding anything in this Section 6.1
to the contrary, payment of Company Matching
Contributions or Company Discretionary
Contributions deposited with the Trustee and
credited to a Participant's Vesting Account
shall be made to the Participant or his
Beneficiary only to the extent such
Contributions (and earnings thereon) are
considered Nonforfeitable at the time such
payment is otherwise due.
(c) Exceptions. Notwithstanding anything in
subsections (a) or (b) above, or in any other
provision of the Plan, the following additional
rules apply to the time at which amounts are
payable by this Plan:
(1) Death of Participant. The balance of a
Participant's Deferral Account, and the
Nonforfeitable balance of his Vesting Account,
shall be paid to the Participant's Beneficiary
as soon as practicable after the Participant's
death.
(2) Disability of Participant. The balance of a
Participant's Deferral Account, and the
Nonforfeitable balance of his Vesting Account,
shall be paid to the Participant upon the
Participant's total and permanent disability.
For this purpose, a "total and permanent
disability" is a physical or mental condition
that entitles the Participant to Social
Security disability benefits. Payment shall be
made to the Participant as soon as practicable
after the Participant files with the Committee
proof of his disability determination by the
Social Security Administration.
(3) Hardship. In the event of great financial
hardship or unforeseen emergency occurring in
the personal affairs of the Participant, the
Committee, upon application by the
Participant, may accelerate the payment of all
or a portion of the balance of his Deferral
Account and/or the Nonforfeitable balance of
his Vesting Account.
A great financial hardship or unforeseen
emergency will be deemed to have occurred if
the payment of benefits is for or on account
of:
(i) unemployment of the Participant, or
employment at a salary fifty percent
(70%) or less than the sum of his prior
Compensation and Bonus Compensation with
the Company,
(ii) expenses for medical care previously
incurred by the Participant, his spouse,
or any of his other dependents,
(iii) costs directly related to the Partici-
pant's purchase of his principal
residence (excluding mortgage payments),
(iv) bankruptcy of the Participant,
(v) payment of tuition, related educational
fees, and room and board expenses, for
the next 12 months of post-secondary
education for the Participant, his
spouse, or other dependents,
(vi) payments necessary to prevent the
eviction of the Participant from his
principal residence or the foreclosure on
the mortgage on that residence, or
(vii) other events of a similar magnitude.
The accelerated payment made pursuant to this
subsection shall not exceed the amount the
Committee, in its complete discretion,
determines is necessary to satisfy the great
financial hardship or unforeseen emergency.
(d) Final Payment from Trust. The final payment
from the Trust to a Participant or Beneficiary
may be adjusted to account for prior
overpayments or underpayments attributable to
estimates of earnings allocable to prior
distributions of deferred Compensation,
deferred Bonus Compensation, Company Matching
Contributions, and/or Company Discretionary
Contributions.
6.2 Electing the Form of Payment.
(a) Compensation and Bonus Compensation. Each active
Participant or eligible Executive shall, in his
Compensation and Bonus Compensation Deferral
Elections, elect the form in which the Plan shall
pay his deferred Compensation and Bonus
Compensation (and earnings thereon). Such an
active Participant or eligible Executive may elect
that such amounts be paid:
(1) in a single lump sum;
(2) in five substantially equal annual
installments, adjusted annually for earnings
on the unpaid balance; or
(3) in ten substantially equal annual
installments, adjusted annually for earnings
on the unpaid balance.
In addition, upon application to the Committee at
least 60 days prior to the date such amounts first
become payable, and with the approval in its sole
discretion of the Committee, a Participant may
elect to receive payment of deferred Compensation
and/or Bonus Compensation (and earnings thereon) in
any of the forms listed above, notwithstanding the
initial election as to form as reflected in the
pertinent Compensation and/or Bonus Compensation
Deferral Election(s).
(b) Company Matching Contributions and Discretionary
Contributions.
(1) Company Matching Contributions. Any Company
Matching Contribution (and earnings thereon)
deposited with the Trustee and credited on
behalf of a Participant on account of his
deferral of Compensation and/or Bonus
Compensation shall be paid in the form in
which is paid the deferred Compensation and/or
deferred Bonus Compensation to which such
Company Matching Contribution relates.
(2) Company Discretionary Contributions. Each
active Participant or eligible Executive
shall, in the annual deferral election
concerning Company Discretionary Contributions
that the Company may make on his behalf, elect
the form in which the Plan shall pay any
Company Discretionary Contribution (and
earnings thereon) made with respect to the
year to which the election relates. The
active Participant or eligible Executive may
elect that such amounts be paid in any of the
forms described in subsections (1), (2) or (3)
in subsection (a) above. In the event no such
election is made, such amounts shall be paid
in a lump sum.
In addition, upon application to the Committee
at least 60 days prior to the date such
amounts first become payable, and with the
approval in its sole discretion of the
Committee, a Participant may elect to receive
payment of a Company Discretionary
Contribution (and earnings thereon) in any of
the forms listed above, notwithstanding the
initial election as to form as reflected in
the pertinent deferral election(s).
(c) Exceptions. Notwithstanding anything in
subsections (a) or (b) above, or any other
provision of the Plan, the following additional
rules apply to the form in which amounts are
payable by this Plan:
(1) Death of Participant. A Participant may
designate, in his Beneficiary designation on
file with the Committee, the form in which
payments on account of his death should be
made to his Beneficiary. The Participant may
elect to have such payments made in any of the
forms described in subsections (1), (2) or (3)
of subsection (a) above. In the event the
Participant fails to designate a form of death
benefits, death benefits shall be paid in a
single lump sum.
(2) Disability of Participant. Upon application
to the Committee at least 60 days prior to the
date such amounts first become payable, and
with the approval of the Committee in its sole
discretion, a Participant may elect to receive
payments made pursuant to subsection 6.1(c)(2)
in any of the forms described in subsections
(1), (2) or (3) of subsection (a) above. If
the Participant fails to timely make an
election concerning the form of payment,
payment shall be made in a single lump sum.
(3) Hardship. Payments made pursuant to
subsection 6.1(c)(3) shall be made in a single
lump sum.
Section 7. Investment of Deferral and Vesting Accounts
The Deferral Account and Vesting Account maintained by the
Trustee on behalf of a Participant shall be credited with earnings
(and losses) resulting from investment by the Trustee.
Participants may request that amounts deposited and credited to
their respective Deferral Accounts and/or Vesting Accounts be
invested in particular investments, chosen from a set of options
established by the Committee. The Participants' requests shall
not be binding, however, and the Committee, in its sole
discretion, may elect to:
(a) instruct the Trustee to decline to honor
Participant's requests,
(b) direct the Trustee to invest amounts deposited and
credited to Deferral Accounts and/or Vesting
Accounts in another manner, or
(c) permit the Trustee to invest amounts deposited and
credited to Deferral Accounts and/or Vesting
Accounts in the manner the Trustee considers most
appropriate.
Section 8. Vesting
8.1 Deferral Account. Deferred Compensation, Bonus
Compensation, Company Matching Contributions and Company
Discretionary Contributions (and earnings thereon) deposited and
credited to an active Participant's or eligible Executive's
Deferral Account shall at all times be considered entirely
Nonforfeitable (that is, 100% vested).
(a) Deferred Compensation and Bonus Compensation. In
no event shall a Participant's Deferred
Compensation or Bonus Compensation be deposited and
credited other than to his Deferral Account.
(b) Company Matching Contributions. Company Matching
Contributions shall be deposited and credited to an
active Participant's or eligible Executive's
Deferral Account only if at the time such Company
Matching Contributions are made (i) the active
Participant or eligible Executive is 100% vested
pursuant to the vesting schedule set forth in
Section 8.2(a) below, and the Committee has not
elected to apply additional vesting requirements to
such Company Matching Contributions (as described
below), or (ii) the active Participant or eligible
Executive is not 100% vested pursuant to the
vesting schedule set forth in Section 8.2(a) below,
but the Committee has elected to treat such Company
Matching Contributions as entirely Nonforfeitable
when made, in which event such accelerated vesting
of the Company Matching Contributions shall be
described by the Committee in writing, and such
writing shall thereafter be considered a part of
this Plan.
(c) Company Discretionary Contributions. Class A
Company Discretionary Contributions shall be
deposited and credited to an active Participant's
or eligible Executive's Deferral Account only if at
the time such Company Matching Contributions are
made the active Participant or eligible Executive
is 100% vested pursuant to the vesting schedule set
forth in Section 8.2(a) below.
Class B Company Discretionary Contributions shall
be deposited and credited to an active
Participant's or eligible Executive's Deferral
Account only if at the time such Company
Discretionary Contributions are made the Committee
has elected to treat such Company Discretionary
Contributions as entirely Nonforfeitable when made,
in which event such accelerated vesting of the
Company Discretionary Contributions shall be
described by the Committee in writing, and such
writing shall thereafter be considered a part of
this Plan.
8.2 Vesting Account. Company Matching Contributions and
Company Discretionary Contributions (and earnings thereon) not
deposited and credited to an active Participant's or eligible
Executive's Deferral Account shall be deposited and credited to
his Vesting Account. Such amounts shall be considered
Nonforfeitable (i.e., "vested") according to the rules set forth
below.
(a) Company Matching Contributions. Company Matching
Contributions (and earnings thereon) deposited and
credited to a Participant's Vesting Account shall
be considered Nonforfeitable (that is, the
Participant shall be considered "vested" in such
amounts) according to the following vesting
schedule:
Years of Vestin Service Nonforfeitable
Percentage
Fewer than 1 0%
At least 1 but fewer than 2 25%
At least 2 but fewer than 3 50%
At least 3 but fewer than 4 75%
4 or more 100%
Notwithstanding the foregoing, the Committee
reserves the discretion to apply, with respect to
one or more Participants, and/or with respect to
such Matching Contributions as the Committee shall
designate, a different vesting schedule
("discretionary vesting schedule") which the
Committee shall articulate in writing and which
shall thereafter be considered part of this Plan.
(b) Company Discretionary Contributions. Class A
Company Discretionary Contributions (and earnings
thereon) deposited and credited to a Participant's
Vesting Account shall be considered Nonforfeitable
according the schedule described in (a) above
(without regard to the last paragraph thereof).
Class B Company Discretionary Contributions (and
earnings thereon) deposited and credited to a
Participant's Vesting Account shall be considered
Nonforfeitable at the time and in the manner
prescribed by the Committee in the writing
designating such Contributions as Class B
Contributions. Such writing shall thereafter be
considered part of this Plan.
(c) Termination Prior to Vesting. In the event a
Participant terminates employment (by death, total
and permanent disability, retirement or otherwise)
prior to the date on which the Company Matching
Contributions and/or Company Discretionary
Contributions (and earnings thereon) deposited and
credited to his Vesting Account are considered
Nonforfeitable, such forfeitable Contributions
shall thereafter be considered forfeited by the
Participant and, to the extent permitted by the
agreement and declaration establishing the Trust,
shall immediately revert to the Employer. A
Participant shall not be deemed to have terminated
his employment, notwithstanding his failure to
perform services for the Company, to the extent he
remains on the Company's rolls during a period of
authorized paid or unpaid leave of absence.
(d) Payment of Forfeitable Contributions. In the event
amounts deposited and credited to an active
Participant's Vesting Account would, but for this
subsection, be payable to him prior to the date on
which such Contributions are considered
Nonforfeitable pursuant to subsections (a) or (b)
above, payment of such Contributions shall be
deferred until the date on which such Contributions
are considered Nonforfeitable due to additional
Vesting Service accrued by the active Participant.
In the event the Participant's employment is
terminated (by death, total and permanent
disability, retirement or otherwise) prior to the
date on which such Contributions (and earnings
thereon) are considered so Nonforfeitable, such
Contributions shall thereafter be considered
forfeited by the Participant and, to the extent
permitted by the agreement and declaration
establishing the Trust, shall immediately revert to
the Employer. A Participant shall not be deemed to
have terminated his employment, notwithstanding his
failure to perform services for the Company, to the
extent he remains on the Company's rolls during a
period of authorized paid or unpaid leave of
absence.
8.3 Vesting Determinations. The Committee's determination
concerning the extent to which a Participant or eligible Executive
is considered "vested," and the extent to which the Company
Matching Contributions and/or Company Discretionary Contributions
(and earnings thereon) deposited and credited to a Participant's
Vesting Account are considered Nonforfeitable shall be final and
binding on all Participants and their Beneficiaries, as described
in Section 12.
Section 9. Designation of Beneficiaries
9.1 General Rule. A Participant may designate a Beneficiary
or Beneficiaries who are to receive upon his death the payments
that otherwise would have been paid to him. Such Beneficiary
designation may include an election concerning the form in which
death benefits are to be paid by the Plan to the Beneficiary or
Beneficiaries. All designations shall be in writing and shall be
effective only if and when delivered to the Committee or its
designee during the lifetime of the Participant.
9.2 Special Rule for Married Participants. Notwithstanding
Section 9.1, the spouse of a married Participant shall be deemed
to be the Participant's sole primary Beneficiary. The Participant
may designate a primary Beneficiary other than his spouse only if
the spouse consents in writing, on a form the Committee or its
designee shall provide, and the spouse's signature is notarized.
9.3 Changing Beneficiary Designations. Subject to Section
9.2, a Participant may, from time to time during his lifetime,
change his Beneficiary or Beneficiaries by a written instrument
delivered to the Committee or its designee. The term
"Beneficiary" may include a trust, so long as the trust survives
the Participant's death.
9.4 Failure to Designate a Beneficiary. In the event that a
Participant is not survived by a Beneficiary, or if for any reason
a Beneficiary designation shall be ineffective in whole or in
part, the distribution that otherwise would have been paid to such
Participant shall be paid to his estate, and in such event the
term "Beneficiary" shall include his estate.
Section 10. Merger, Consolidation and Sale of Assets
10.1 Merger. In the event the Company desires to consolidate
with, merge into, or transfer all or substantially all of its
assets to another entity (hereinafter referred to as a "Successor
Employer"), the Company and such Successor Employer may agree that
the Successor Employer shall assume the Company's obligations
under this Plan in whole or in part. In no event shall such
merger, consolidation or transfer extinguish the Company's or the
Successor Employer's obligations to Participants and their
Beneficiaries under this Plan.
10.2 Acquisition by Another Employer. In the event the
Company is sold to another corporation or other party(ies) ("New
Company"), the Company may agree with such New Company that the
New Company shall assume the obligations under this Plan in whole
or in part. In no event shall such sale extinguish the Company's
or New Company's obligations to Participants and their
Beneficiaries under this Plan.
Section 11. Rights of Participants
Notwithstanding the depositing and crediting of amounts to
the Deferral Account and/or Vesting Account maintained by the
Trustee on behalf of a Participant, the right of the Participant,
or his Beneficiary, to receive a distribution under this Plan
shall be an unsecured claim against the general assets of the
Company. Participants and Beneficiaries shall have the status of
general unsecured creditors of the Company. This Plan constitutes
a mere promise by the Company to make benefit payments in the
future.
The Deferral Account or Vesting Account maintained by the
Trustee on behalf of a Participant may not in any way be
encumbered or assigned by a Participant or his Beneficiary.
Nothing in this Plan shall give any Participant the right to
be retained as an Executive or an employee of the Company, affect
the right of the Company to remove any Executive or employee, or
give any Executive or employee (or his Beneficiary) the right to
receive a particular amount of Compensation, Bonus Compensation or
Company Discretionary Contribution from the Company.
12.1 Administrative Committee. The Committee shall
administer the Plan. The Committee may appoint an administrative
committee (the "Administrative Committee") to assist it in the
administration of the Plan. The Administrative Committee may act
on behalf of the Committee with respect to all matters concerning
the Plan, except for those matters the Committee specifically
reserves, in this Plan or otherwise, for its own action. The
initial members of the Administrative Committee shall be Troy D.
Cook and James K. Schwartz. The Board or the Committee may
remove, replace, or appoint members of the Administrative
Committee at any time.
12.2 Powers of Administrative Committee. The Committee shall
have the power to interpret the Plan and to determine all
questions that arise under it. Such power includes, for example,
the administrative discretion necessary to determine whether an
individual meets the Plan's written eligibility requirements, and
to interpret any other term contained in this document. All
payments of benefits under the Plan shall be made by the Company
or by the Trustee in accordance with the terms of this Plan and
the agreement and declaration establishing the Trust. The
decision of the compensation committee upon all matters within the
scope of its authority shall be final and binding on all parties,
shall be subject to the most deferential standard on review, and
shall not be affected by any actual or alleged conflict of
interest. No member of the Committee or the Administrative
Committee may act, in his capacity as a member of the Committee or
Administrative Committee, with respect to a matter concerning his
eligibility or benefits under the Plan.
Section 13. Claims and Appeals
13.1 Claims for Benefits; Initial Processing. Claims for
benefits under the Plan normally will be approved or denied by the
Committee within 90 calendar days after they are received by the
Committee or its designee. If an extension of time is required to
process the claim, the extension will not exceed 90 calendar days,
and the claimant shall be provided notice of any extension. The
notice shall explain the reason for the extension and when a
decision will be made. Claims not resolved prior to the end of
the extension may be deemed denied.
13.2 Claim Denial. If a claim for benefits is denied (or
deemed denied), the Committee or its designee shall provide the
claimant with written notice reflecting the reasons for the
denial, with a specific reference to the Plan provisions upon
which the decision was based. The notice shall also reflect any
additional information that may be necessary for the claimants
claim to be approved.
13.3 Appealing a Denied Claim. A claimant may appeal the
denial of a claim by writing the Committee and stating that he
wishes to appeal. In order to be considered, the appeal must be
received by the Committee or its designee no more than 90 calendar
days after notice of the denial is provided (or, if no notice is
provided, then after the earliest date on which the claimant is
entitled to deem the claim denied).
13.4 Processing Appeals. If a claimant appeals a denial of a
claim, the Board shall review the claim and any additional
information furnished by the claimant. The Board shall decide the
appeal within 60 calendar days after it is received, but in
unusual circumstances may delay resolution of the appeal for an
additional 60 calendar days. The claimant shall be notified of any
delay within 60 calendar days after the appeal is received by the
Committee or its designee. After the appeal is decided, the Board
shall notify the claimant in writing of its decision, and explain
how the appeal was decided and what Plan provisions were relied
upon.
Section 14. Amendments and Termination
14.1 Amendment. The Company in its absolute discretion,
without notice, may at any time and from time to time, modify or
amend, in whole or in part, any or all of the provisions of the
Plan. No such modification or amendment may, without the consent
of a Participant (or his Beneficiary in the case of his death)
reduce the right of a Participant (or his Beneficiary, as the case
may be) to the payment of any amount deposited and credited to his
Deferral Account and any Nonforfeitable amount deposited and
credited to his Vesting Account under the Plan as of the date of
such modification or amendment. And modification or amendment of
the vesting schedule described in Section 8.2 shall not apply to
any amounts deposited and credited to a Participant's Vesting
Account as of the date of such modification or amendment, unless
the Participant otherwise consents in writing.
14.2 Suspension and Termination. The Company in its absolute
discretion, without notice, at any time may suspend or terminate
the Plan. In addition, the Committee may suspend or terminate an
active Participant's further participation in the Plan at any
time. Other than earnings on a Participant's Deferral Account or
Vesting Account credited under Section 7, no additional
Compensation or Bonus Compensation may be deferred, and no
additional Company Matching Contributions or Company Discretionary
Contributions shall be deposited or credited to the Deferral
Account and/or Vesting Account of any Participant following
suspension or termination of the Plan, or to such Accounts of an
inactive Participant following termination of his or her
participation in the Plan. Upon termination of a Participant's
participation in the Plan, distribution of a Participant's Plan
benefit shall be made in the manner and at the time described
under the Plan's normal provisions.
Upon suspension of the Plan, distribution of a Participant's
Plan benefit shall be made in the manner and at the time described
under the Plan's provisions, and the Trust shall not terminate
until all monies on deposit thereunder are either paid to
Participants and their Beneficiaries, or returned to the Employer,
as provided for under the agreement and declaration establishing
the Trust. Upon suspension of the Plan, a Participant whose
Vesting Account balance includes amounts that are not
Nonforfeitable under Section 8 hereof, shall continue to be
credited with vesting service, for purposes of Section 8, for and
on account of his service with the Company after suspension of the
Plan.
In the event the Company elects to terminate the Plan, all
forfeitable amounts then on deposit with and credited to
Participants' Vesting Accounts shall be deemed Nonforfeitable and,
notwithstanding anything herein to the contrary, shall be paid as
soon as practicable to the Participants (or their Beneficiaries,
as the case may be) in a lump sum.
Section 15. Applicable Laws
The Plan shall be construed, administered, and governed in
all respects under and by the laws of the State of Kansas, to the
extent federal law does not apply.
Section 16. Incompetency
Every person receiving or claiming payments under this Plan
shall be conclusively presumed to be mentally competent until the
date on which the Committee or its designee receives written
notice, in a form and manner acceptable to the Committee, that
such person is incompetent and that a guardian, conservator, or
other person legally vested with the care of his estate has been
appointed. In the event a guardian or conservator of the estate
of any person receiving or claiming payments under this Plan shall
be appointed by a court of competent jurisdiction, benefit
payments may be made to such guardian or conservator, provided
that proper proof of appointment and continuing qualification are
furnished in a form and manner acceptable to the Committee or its
designee. Any such payment so made shall be a complete discharge
of any liability therefor.
Section 17. Expenses
Costs of administration of the Plan and all taxes imposed on
the Plan or Trust shall be paid by the Company. Participants'
Deferral Accounts or Vesting Accounts shall not be reduced for
these amounts. Notwithstanding the foregoing, Participants'
Deferral Accounts and Vesting Accounts shall bear the expense of
any and all transaction costs and fees associated with the
investment of their Accounts and any per capita Trustee's fee.
The aggregate total of any Trustee's fees based on the aggregate
value of assets in the Trust (both the Group Trust and individual
Trusts) may be apportioned among the Accounts of Participants on a
pro rata (in the proportion that a Participant's Account balances
bear to the Account balances of other Participants) or per capita
basis, in the discretion of the Committee.
Section 18. Notices
Any notice or election required or permitted to be given
hereunder shall be in writing, in the form prescribed by the
Committee, and shall be deemed to be filed with the Committee:
(a) On the date it is personally delivered to the Committee
(or its designee), or
(b) Five business days after it is sent by registered or
certified mail, addressed to the Committee (or its
designee) at the Company's address.
Section 19. Withholding and Deductions
All payments made under the Plan by the Company or the
Trustee to any Participant or Beneficiary, shall be subject to
applicable withholding and to such other deductions that are
required by applicable law, and to the delivery to the Committee
(or its designee) or the Trustee of any documents, applications or
other information deemed necessary by the Committee or the
Trustee, in their sole discretion, as a condition precedent to
payment.
Section 20. Invalidity of Provisions
If any provision of the Plan is held or found to be invalid
or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be
construed and enforced as if such provision had not been included.
Similarly, in the event any provision of the Plan is held or found
to be ineffective or unenforceable with respect to allowing for
the deferral of income taxation as intended by the Plan, such
provision shall be severed from the provisions of the Plan that
are so effective or enforceable, and such latter provisions shall
be considered to constitute a separate arrangement.
21. Tax Advantages Not Guaranteed
Neither the Company, the Committee, the Administrative
Committee, nor any other person guarantees that any particular
Participant or Beneficiary will achieve the tax advantages
contemplated by this Plan, and neither the Company, the Committee,
the Administrative Committee or any other person indemnifies or
holds harmless a Participant or Beneficiary with respect to
liability, whether or not unintended or unforeseen, for income
taxes, excise taxes, interest and/or penalties, or any other
liability, arising from or incurred in connection with this Plan.
In the event any benefits payable hereunder to a Participant
or Beneficiary are subjected to taxation prior to the date such
benefits are payable under the terms of the Plan, the payment of
such benefits shall be accelerated so that, to the extent
practicable, the Participant or Beneficiary receives such benefits
in the taxable year in which such amounts are subjected to
taxation.
22. Return of Company Contributions
Nothing in this Plan nor the agreement and declaration
establishing the Trust shall be construed to prevent the return to
the Company of amounts contributed to the Trust by the Company due
to a mistake of fact or law, including (but not limited to)
erroneous calculations or erroneous determinations of eligibility.
IN WITNESS WHEREOF, the Company hereby adopts this NPC
International, Inc. Deferred Compensation and Retirement Plan
this _______ day of __________, 1998.
NPC INTERNATIONAL, INC.
By:_________________________________
Title:______________________________
ATTEST:
______________________________
PIZZA HUT NATIONAL PURCHASING COOP, INC.
MEMBERSHIP SUBSCRIPTION AND COMMITMENT AGREEMENT
This is a Membership Subscription and Commitment Agreement
(the "Agreement") between the Pizza Hut National Purchasing Coop,
Inc. (the "Pizza Hut Coop") and the undersigned member (the
"Member"). In consideration of the transactions contemplated
herein, including the issuance by the Pizza Hut Coop to the
Member of shares of Pizza Hut Coop Common Stock, the Pizza Hut
Coop and the Member, intending to be legally bound, hereby make
this Agreement and set forth the terms and conditions of the
purchase and sale of membership interests in the Pizza Hut Coop.
1. Subscription. The Member desires to become a
stockholder member of the Pizza Hut Coop. To become a
stockholder member, the Member hereby subscribes for and agrees
to purchase, as more particularly described in the current
Membership Information Packet:
X One share of Pizza Hut National Purchasing Coop,
Inc. Membership Common Stock, no par value. (No
more than one share of Membership Common Stock may
be issued to any one person, entity or corporation
or to certain groups of affiliated persons,
entities or corporations.)
X Share(s) of Pizza Hut National Purchasing Coop,
Inc. Store Common Stock, no par value. (Each
franchisee Member must purchase one share of Store
Common Stock for each and every Pizza Hut retail
outlet which such stockholder member owns and
operates. Each licensee Member must purchase one
share of Store Common Stock for each and every two
non-traditional units which such stockholder
member owns and operates, rounded up to the
nearest whole number. Only holders of Membership
Common Stock may purchase shares of Store Common
Stock.)
The Member represents that the Member is eligible to
purchase the foregoing shares under the Pizza Hut Coop Bylaws.
2. Payment for Shares. The Member has enclosed payment
for the full purchase price of the shares subscribed for above,
in the amount of $10 for the share of Membership Common Stock
plus $400 per share for each share of Store Common Stock.
3. Receipt of Disclosure. The Member acknowledges receipt
of a current Membership Information Packet relating to the Pizza
Hut Coop's shares of Common Stock.
4. Purchase for Own Account. The Member represents that
(i) the Member has such knowledge and experience in financial and
business matters that the Member is capable of evaluating the
merits and risks of a purchase of the shares of Common Stock and
(ii) the shares of Common Stock will be purchased for the
Member's own account and not with a view toward distribution
which is prohibited.
5. Commitments.
(a) The Member understands, acknowledges and agrees to
coordinate all requests to Tricon Global Restaurants, Inc., and
its affiliates, for supplier and distributor approval through the
Pizza Hut Coop and/or the Unified FoodService Purchasing Coop,
LLC (the "Unified Coop").
(b) The Member understands, acknowledges and agrees to
abide by the terms of the Pizza Hut Coop Bylaws, as amended from
time to time, including the provisions regarding the distribution
of any patronage dividends, as set forth in the Membership
Information Packet. The Member further understands, acknowledges
and agrees that the Member is hereby making certain purchase and
other commitments to the Pizza Hut Coop and the Unified Coop and
that the Member agrees to abide by and to fulfill such
commitments in all respects. These commitments include
purchasing "virtually all" of the Member's Goods and Equipment
for use in the Member's Pizza Hut retail outlets, as set forth in
the Bylaws and Membership Information Packet.
6. Acceptance of Subscriptions. The Pizza Hut Coop
reserves the right to accept or reject subscriptions for
Membership and/or Store Common Stock in its sole discretion. If
the Pizza Hut Coop rejects a subscription, the Pizza Hut Coop
will promptly refund all subscription payments, without interest.
7. Construction. This Agreement shall be governed by and
construed (i) in accordance with the laws of the United States,
and (ii) in accordance with the Pizza Hut Coop Certificate of
Incorporation and Bylaws, as amended from time to time.
8. Offering Made Only by Membership Information Packet.
This is neither an offer to sell nor a solicitation of an offer
to buy the common stock described in the Membership Information
Packet. The offering is made only by the Pizza Hut Coop's
current Membership Information Packet.
9. Effective Date. This Agreement is effective upon
execution by a duly authorized officer of the Pizza Hut Coop.
10. Severability. If any provision of this Agreement shall
be adjudged by any court of competent jurisdiction to be invalid,
illegal or unenforceable, in any respect, the validity, legality
and enforceability of that provision and of all other provisions
of this Agreement shall in no other way be affected or impaired.
11. Terms and Conditions. The Member is aware of and
agrees to all of the terms and conditions of the offer and sale
of the Pizza Hut Coop's Common Stock, as described in this
Agreement and the Membership Information Packet, including the
prohibition on the transfer to a third party of shares of Common
Stock by virtue of the Pizza Hut Coop's Certificate of
Incorporation and Bylaws and the provisions of applicable law.
The Member consents to the placement on the stock certificates
representing the shares of Common Stock purchased hereby of a
legend concerning these restrictions on transfer.
Dated February 9, 1999 NPC Management,
Inc.
Member (Name to Appear
on Certificates)
By: (Signature & Title,
if appropriate)
Social Security or Street Address or P.O. Box
Federal Tax ID Number
City/State/Zip
Phone Number Fax Number
ACCEPTED AND AGREED TO:
PIZZA HUT NATIONAL PURCHASING COOP, INC.
By
Name:
Title:
Date:
