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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 25, 1994
Commission file number 0-7961
TPI ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1899681
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or
organization)
3950 RCA BOULEVARD
SUITE 5001
PALM BEACH GARDENS, FLORIDA 33410
(Address of principal (Zip Code)
executive office)
(407) 691-8800
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON SHARES, PAR VALUE $.01 PER SHARE
(Title of Class)
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 (Sec.229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in
definitive proxy or information statement incorporated by
reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-----
The aggregate market value of the voting stock held by non-
affiliates of the Registrant is $87,294,004 (as of March
15, 1995).
The number of shares outstanding of the Registrant's common
stock is 20,419,719 (as of March 15, 1995).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement (pursuant to
Regulation 14A) concerning the Annual Meeting of Shareholders is
incorporated by reference to Part III of this Form 10-K.
Although such Proxy Statement is not
currently available, it will be filed with the Commission by
April 3, 1995.
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . .12
EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . 12
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . 14
Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . 15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . 16
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . 22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 53
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . 53
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . 53
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . 53
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . 53
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . S-1
FINANCIAL STATEMENTS OF SUBSIDIARY . . . . . . . . . . . . . . . W-1
FINANCIAL STATEMENT SCHEDULES OF SUBSIDIARY . . . . . . . . . . WS-1
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . .
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PART I
Item 1. BUSINESS
General
TPI Enterprises, Inc. (the "Company") is a New Jersey
Corporation, incorporated in 1970. Its principal executive
offices are located at 3950 RCA Boulevard, Suite 5001, Palm Beach
Gardens, Florida 33410, telephone (407) 691-8800.
Continuing Operations
General
The Company, through TPI Restaurants, Inc. ("Restaurants") is
one of the largest restaurant franchisees in the United States.
As of March 15, 1995, Restaurants owns and operates 256
restaurants including 187 Shoney's and 69 Captain D's in eleven
states, primarily in the southern United States. TPI Restaurants
is the largest Shoney's and Captain D's franchisee, operating
more than four times as many Shoney's as the next largest
Shoney's franchisee and more than three times as many Captain D's
as the next largest Captain D's franchisee. The Company operates
its Shoney's and Captain D's restaurants under license agreements
with Shoney's, Inc., an unaffiliated public company.
Approximately 83% and 17% of the Company's revenues from
continuing operations in 1994 were from its Shoney's and Captain
D's restaurants, respectively. "Shoney's" and "Captain D's" are
registered trademarks of Shoney's, Inc. References to the
Company include the operations of Restaurants.
Shoney's
Concept and Strategy. Shoney's are full-service, family-style
restaurants which are generally open 18 hours per day, seven days
per week, serving breakfast, lunch and dinner. Shoney's varied
menu includes hamburgers, chicken, steaks, seafood and
sandwiches, as well as salad bars and breakfast bars. Shoney's
offers a high quality dining experience at attractive prices; the
average check per customer at the Company's Shoney's restaurants
(based on entrees served at a sampling of restaurants) was
approximately $5.84 for the year ending December 25, 1994.
Shoney's has sought to differentiate themselves from similarly
priced restaurants by providing a superior dining experience,
excellent service and warm hospitality. Customers are greeted
upon their arrival by a dining room manager who escorts them to
their tables, where they are served by friendly waiters and
waitresses. Shoney's restaurants are attractively styled. The
Company places major emphasis on the quality, preparation and
service of its food, the maintenance and repair of its premises
and the appearance and conduct of its employees.
Menu. Shoney's varied menu is designed to appeal to a broad
spectrum of customers. Shoney's restaurants offer health-
oriented soup and salad bars, which allow customers to prepare
fresh salads using over 30 different items, and to choose from
home-made soups. Shoney's popular breakfast bars, containing 40
different items, feature a variety of fresh fruits and
traditional breakfast selections, including eggs, bacon, sausage,
grits, home-fried potatoes, gravy, biscuits, muffins and
specially prepared preserves. The breakfast bars have helped
secure Shoney's position as a leader in the breakfast segment of
the market, enabling Shoney's restaurants to have significant
sales during all three daily meal periods. Pie shops are also
included in most of the Company's recently constructed Shoney's
and are being added to most stores that are remodeled. TPI's
Shoney's menu has been enhanced to add customer requested items
such as rotisserie chicken, caesar salads, and chicken caesar
salads.
The Company's menu strategy for its Shoney's restaurants is to
provide distinctive, quality meals that represent good value and
appeal to the varied dining preferences of its targeted
customers. Shoney's strives to be sensitive
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to emerging food trends in order to maximize their sales
potential. The restaurants feature separate menus for the three
meal periods, and offer a wide variety of selections. Each
restaurant offers a feature dessert which changes monthly and
home-made soups which change weekly. Shoney's provides a
complete dining experience, emphasizing value, speed of service,
hospitality and menu diversity to a broad spectrum of value-
conscious customers.
In addition to its core menu, the Company has implemented a
promotional program at its Shoney's restaurants offering a
special feature entree at various times throughout the year.
Successful promotional items may be later placed on the Shoney's
regular daily menu. The Company also offers a senior citizen's
discount and a children's menu at its Shoney's restaurants. The
Company (in conjunction with its franchisor) continually modifies
its Shoney's restaurant concept and menu in order to adapt to new
market trends and to maintain its appeal to its traditional broad
spectrum of customers. Management believes that, as a result of
its diverse menu, its Shoney's restaurants are less dependent on
the commercial success of any particular product than certain of
its competitors.
History. Shoney's restaurants have been in operation in the
southern United States since 1952 and enjoy a high level of name
recognition in that region. Shoney's restaurants (including
those operated by Shoney's, Inc. and other franchisees) are now
located in 34 states extending as far west as California. As of
February 19, 1995, there were 913 Shoney's in operation, 544 of
which are franchised.
The Company currently operates 187 Shoney's which is
approximately 34% of all franchised Shoney's restaurants and more
than four times as many as the next largest Shoney's, Inc.
franchisee. The Company's first Shoney's restaurant was opened
in 1963. During 1994, the Company opened five newly constructed
Shoney's restaurants. The Company closed fifteen underperforming
Shoney's and relocated one restaurant in 1994 to a higher traffic
location. Since December 25, 1994, no additional restaurants
have been constructed as the Company evaluates the results of its
test remodel program. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a
discussion of our progress on the closure of underperforming
Shoney's restaurants identified in 1993.
The Company has the exclusive right to develop Shoney's
restaurants in more than 80% of the geographic territory of
Texas, including the San Antonio, Corpus Christi, Austin,
Amarillo, El Paso and Fort Worth metropolitan areas, most of
Dallas County and portions of Houston. The Company also has
exclusive rights to build Shoney's restaurants in the Orlando,
Florida area and portions of Broward and Palm Beach Counties in
south Florida. In addition, the Company has agreed to develop a
territory in eastern Michigan jointly with Shoney's, Inc. The
Company also has exclusive rights to build Shoney's restaurants
in Maricopa County, Arizona. See "Reserved Area and License
Agreements" for additional discussions of the Company's reserved
areas.
Captain D's
Concept and Strategy. Captain D's are fast-service
restaurants, specializing in seafood meals, and are generally
open 11 hours per day, seven days per week. Captain D's
restaurants project a nautical theme, with a distinctive wood or
stucco exterior and an inviting interior decor featuring light
wood tones, interior plants and brass accessories. The Captain
D's concept also provides a take-out service including drive-
through window service representing approximately 44% of its 1994
sales at Captain D's. The average check per customer at the
Company's Captain D's (based on entrees served at a sampling of
restaurants), including take-out, was approximately $4.63 during
the year ended December 25, 1994.
The Company's operating strategy with respect to its Captain
D's restaurants is to seek to increase same store sales averages
through the continued introduction and promotion of distinctive,
high quality menu items, and through increased emphasis on
customer service, food quality and cost management.
Menu. The Captain D's menu is designed to capitalize on the
trend of increased per capita consumption of seafood by serving
fried fish fillets, broiled fish, shrimp, clams, stuffed crab in
a natural shell and salads. To extend the appeal of its menu to
all family members, Captain D's also serves hamburgers, chicken
fillets, french fries, hush puppies and country style vegetables.
Captain D's also offers broiled entrees to benefit from the
increased health consciousness of its customers. The Company, in
conjunction with Shoney's, Inc., continually
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develops and tests new items for the Captain D's menu and seeks
to improve existing products. This year, Captain D's has added
new menu items including caesar salads, kabobs, and sandwich
combos. The Company's Captain D's have experienced slightly
rising prices on its shrimp supplies.
History. Captain D's restaurants have been in operation in the
southeastern United States since 1969. As of February 19, 1995,
there were 640 Captain D's in operation, 308 of which are
franchised. TPI Restaurants operates approximately 22% of the
franchised Captain D's restaurants. The Company opened its first
Captain D's restaurant in 1973 and presently operates 69 Captain
D's in Alabama, Arkansas, Georgia, Mississippi, North Carolina,
South Carolina and Tennessee. During 1994, the Company opened
three newly constructed Captain D's restaurants and closed one
underperforming restaurant.
Other Restaurants
During 1993, the Company closed all of its remaining Hungry
Fisherman and Danver's restaurants. The Company recorded the
estimated losses related to the disposition of these properties
during 1992 and anticipates no future financial impact from these
restaurants.
Employees
As of December 25, 1994, the Company had approximately 10,300
employees, including approximately 8,000 restaurant employees,
1,900 store management personnel (including field supervision and
management-in-training), 150 headquarters personnel and 250
commissary personnel. Employment in Shoney's restaurants is
seasonal and is highest in the second and third quarters.
Competition and Markets
The restaurant business is highly competitive. Key competitive
factors in the industry are the quality, variety and value of the
food products offered, quality and speed of service, advertising,
name identification, restaurant location and attractiveness of
facilities. There are a large number of national and regional
chain operators, fast food restaurants and other family
restaurants that compete directly and indirectly with the
Company. Some of these entities have significantly greater
financial resources and higher sales volume than does the
Company. The restaurant business is often affected by changes in
consumer tastes and discretionary spending priorities, national,
regional or local economic conditions, demographic trends,
consumer confidence in the economy, weather conditions, traffic
patterns, employee availability, and the type, number and
location of competing restaurants. Any change in these factors
could adversely affect the Company. In addition, factors such as
inflation and increased food, labor and other employee
compensation costs could also adversely affect the Company.
Financial Controls
The Company maintains centralized accounting controls for all
of its restaurants through the use of computerized management
information systems. Weekly reports of individual restaurant
sales, labor costs, food costs and other expenses and daily
reports of sales, all with comparisons to prior periods, give the
Company's management current operating results by restaurant as
well as on a company-wide basis.
A new point of sale system was installed in 34 of the 69
Captain D's during 1994. This system enhances management's
ability to evaluate sales, costs, and menu preferences and to
quickly make modifications where warranted. As of March, 1995,
an additional 17 units were installed with this system. The
Company is in the process of testing the system.
The Company does not have significant receivables or inventory
and receives trade credit based upon negotiated terms in
purchasing food and supplies. Because funds available from cash
sales are not needed immediately to pay for food and supplies or
to finance receivables or inventory, they may be used for non-
current capital expenditures. Therefore, the Company, like many
other companies in the restaurant industry, normally operates
with a working capital deficit.
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Acquisition and Distribution of Food and Supplies
To achieve consistent food quality and control costs, the
Company centrally purchases all major food and supply items used
in its restaurants. These items, which account for approximately
98.7% of all food and supplies used, are delivered to the
Company's commissary centers in Memphis, Tennessee and Charlotte,
North Carolina, from which they are redistributed at least twice
weekly to its restaurants. The Memphis distribution center
contains 80,000 square feet of storage area, and the Charlotte
distribution center contains 70,000 square feet of storage area.
Since 1990, the range of products provided from the commissary
has been significantly expanded from that provided in prior
years. This strategy has led to reduced costs and consistent
food quality and freshness and should continue to do so as the
commissary operations are expanded to serve additional
restaurants. The commissary centers are able to control costs by
purchasing food and supply items in bulk quantities in
anticipation of future needs and price increases.
The Company's ability to maintain consistent quality throughout
its chain of restaurants depends in part upon the ability to
acquire food products and related items from reliable sources.
In situations when supplies may be expected to become unavailable
or prices are expected to rise significantly, the Company may
enter into purchase contracts or purchase quantities for future
use. The Company is currently under one long-term contract for
the purchase of food. This contract was entered into due to
expected price increases. Adequate alternative sources are
believed to be available for those items not covered under
contracts or other agreements.
Reserved Area and License Agreements
Shoney's. The Company operates its Shoney's restaurants under
a series of reserved area agreements, pursuant to which Shoney's,
Inc. has granted the Company the exclusive right to develop
Shoney's restaurants within specified geographic areas, and
license agreements entered into between the Company and Shoney's,
Inc. The existing license agreements for Shoney's generally
provide for 20-year terms with 20-year renewal options subject to
the satisfaction of certain conditions. The current expiration
dates of the Shoney's license agreements, including renewals,
range from 2016 to 2033. In 1994, the average royalty fee paid
by the Company for its Shoney's restaurants was 1.9% of gross
sales compared to 3.5% which new franchisees are currently being
required to pay. Shoney's restaurants built by the Company
pursuant to its reserved area agreements will be subject to
varying royalty rates of up to 3.0% of sales.
The license agreements impose specifications as to the
preparation of the products as well as general procedures, such
as advertising, maintenance of records, protection of trademarks
and provisions for inspection by the franchisor. The license
agreements also require the prior approval of Shoney's, Inc. (not
to be unreasonably withheld) in order for the Company to close
any of its Shoney's restaurants. Termination of the license
agreements may be effected for breach of conditions of the
agreements, including sale of adulterated products or failure to
meet proper standards of quality and sanitation. The Company has
never been subjected to any involuntary termination of its
license agreements.
Several of the Company's reserved area agreements include
expansion schedules requiring the Company to develop a minimum
number of stores over a defined period of time. The reserved
area agreement for 28 counties in Texas, which covers Fort Worth
and much of Dallas County, requires the development of 14
Shoney's restaurants over a nine year period amended during 1995
to end in 1999. To date, the Company has opened four restaurants
in the reserved area. The Company's development agreements for
expansion of the Shoney's concept in certain parts of Broward and
Palm Beach Counties in south Florida, northwest Harris County,
Texas, Maricopa County, Arizona, and Michigan were extended
during 1995 resulting in new store building requirements to begin
in 1996. The current amended agreement requires the development
of six restaurants in the Florida area by 2004, six restaurants
in the Harris County area by 1999, three stores in the Arizona
area by 1999, and eleven stores in the Michigan area by 2001.
During 1994, one store was opened in each of the Harris County,
Texas area, the Florida area, and the Michigan area. If above
schedules are not satisfied, Shoney's, Inc. has the right to
terminate the Company's exclusive rights in these areas. The
reserved area agreements permit the Company to open as many
Shoney's restaurants as it deems desirable within such reserved
territories in compliance with the terms of the reserved area
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agreement, in addition to those required to be open in accordance
with the development schedule.
The Company is a party to other exclusive territory agreements
in the areas of its Shoney's operations, including agreements
covering over 170 additional counties in Texas; all of Arkansas;
over 75 counties in North Carolina; over 30 counties in
Mississippi; over 20 counties in Tennessee; and several
additional counties in Georgia, South Carolina, Florida and
Alabama. With respect to the reserved areas described in the
preceding sentence, the Company has no required development
schedule and is entitled to open as many Shoney's restaurants in
such reserved areas as it deems desirable in compliance with the
terms of the reserved area agreements. Shoney's, Inc. may
terminate any reserved area agreement upon the default by
Restaurants under the terms of any license agreement for
operation of a Shoney's restaurant within such reserved area. In
addition, the reserved area agreement covering the 28 counties in
Texas provides that Shoney's, Inc. may terminate such reserved
area agreement upon the expiration of more than 10% of the
Company's license agreements for Shoney's restaurants within such
reserved area (without replacing those restaurants within two
years following such expiration). The Company has never had a
reserved area agreement involuntarily terminated by Shoney's,
Inc.
Captain D's. The Company's Captain D's restaurants are
operated under a master reserved area agreement with individual
license agreements with Shoney's, Inc. The Company has the right
to develop Captain D's in 124 counties in seven southeastern
states (Alabama, Arkansas, Georgia, Mississippi, North Carolina,
South Carolina and Tennessee). The Company must open an aggregate
of 30 new Captain D's, by July 11, 2011, at a rate of two
restaurants per year. The reserved area agreement permits the
Company to open as many Captain D's restaurants as it deems
desirable within its reserved territories in addition to those
required to be opened in accordance with the development
schedule. The reserved area agreement provides that Shoney's,
Inc. may terminate the reserved area agreement (i) upon the
default by Restaurants under the terms of any license agreement
for operation of a Captain D's restaurant or (ii) after July 11,
2011, upon the expiration of more than 10% of Restaurants'
license agreements for Captain D's (without replacing those
restaurants within two years following such expiration).
The Company's existing license agreements for Captain D's
generally provide for 20-year terms with two 20-year renewal
options subject to the satisfaction of certain conditions. The
current expiration dates of the license agreements, including
renewals, assuming compliance with the expansion schedule in the
Captain D's reserved area agreement, range from 2035 to 2052. In
1994, the average royalty paid to Shoney's, Inc. by the Company's
Captain D's was 1.5% of sales.
Advertising and Promotion
The license agreements for the Company's Shoney's and Captain
D's restaurants require that the Company pay fees equal to 0.35%
and 0.65% of sales, respectively, in addition to its franchise
fees, which are put into production funds and used by the
franchisor to produce radio and television commercials and
printed advertising materials. Shoney's, Inc. uses such
commercials in its nationwide advertising and marketing programs.
The Company is also required to spend for local marketing on its
own behalf and through a cooperative in which other franchisees
and Shoney's, Inc. participate. The aggregate amount spent by
the Company in 1994 for such advertising, inclusive of the fee
paid to the franchisor described above to the production funds,
was approximately 3.5% of sales. As part of such local
marketing, the Company purchases television and radio spots to
air commercials produced by the franchisor. Through such
advertising, management believes that Shoney's and Captain D's
have a high level of name recognition and positive customer
perceptions on key attributes of food quality, service and
atmosphere. As part of its marketing program, the Company offers
several weekly promotions, including free nights for children, a
special senior citizens' menu and "all-you-care-to-eat" seafood
buffets at Shoney's restaurants. In addition, the Company has
increased its reliance on radio and television advertising and
reduced its reliance on coupon and billboard advertising.
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Regulation
The Company is subject to the Fair Labor Standards Act and
various state laws governing such matters as minimum wages,
overtime and other working conditions. Significant numbers of
the Company's food service personnel are paid at rates related to
the federal and state minimum wage, and accordingly, increases in
the minimum wage increase the Company's labor costs.
TPI Transportation, Inc., a wholly-owned subsidiary of
Restaurants, obtained a license from the Interstate Commerce
Commission to conduct interstate trucking and is subject to
applicable federal regulations relating to interstate trucking.
Each Company restaurant is subject to licensing and regulation
by state and local health, sanitation, safety, fire and other
departments. Difficulties or failures in obtaining or renewing
any required licensing or approval could affect the Company's
restaurants.
The Company is also subject to various federal, state and local
laws regulating the discharge of materials into the environment.
The cost of developing restaurants has increased as a result of
the Company's compliance with such laws. Such costs relate
primarily to the necessity of obtaining more land, landscaping
and below surface storm drainage and the cost of more expensive
equipment necessary to decrease the amount of effluent emitted
into the air and ground.
The Company believes it is in material compliance with the
regulations to which it is subject.
Other Activities
Insurex Agency, Inc., a wholly-owned subsidiary of Restaurants,
was organized as a Tennessee corporation in 1975 for the purpose
of acting as agent for property and casualty, workers'
compensation, life and health and other insurance policies for
Restaurants, other corporations and the general public.
Approximately 98% of the insurance premiums written by Insurex
are for insured entities not affiliated with Restaurants.
Insurex Benefits Administrators, Inc., ("IBA") a wholly-owned
subsidiary of Restaurants, was organized as a Tennessee
corporation in 1989 for the purpose of operating as a third party
administrator of medical and dental claims for Restaurants and
other corporations. Approximately 91% of IBA's revenues are from
other corporations.
TPI Transportation, Inc. and TPI Commissary, Inc. were a part
of Restaurants' operations during 1993 and became wholly-owned
subsidiaries of Restaurants during 1994.
TPI Insurance Corporation, a wholly-owned subsidiary of the
Company, was incorporated in 1993 and is licensed as a pure
captive insurance company in the state of Hawaii. Under the
terms of its Certificate of Authority, it provides workers'
compensation insurance for the Company.
Maxcell Telecom Plus, Inc.'s ("Maxcell"), a wholly-owned
subsidiary of the Company, original business plan was to create a
cellular telephone network that would operate throughout the
southeastern United States. In 1986, Maxcell disposed of
substantially all of its remaining interests in the cellular
business. Since 1986, Maxcell has had no operations. Beginning
in late 1988, and extending to 1989, Maxcell invested
approximately $150,000 to participate in lotteries held by the
Federal Communication Commission ("FCC") for rights to develop
cellular systems for approximately 300 markets. Maxcell
continues to have outstanding applications for markets which may
be re-lotteried by the FCC. Maxcell does not intend to apply for
any new permits from the FCC or to conduct any non-restaurant
business other than in connection with the permits for which
applications are pending. There can be no assurance that such
markets will be re-lotteried or that Maxcell would win any such
lottery. See Item 3 "Legal Proceedings".
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Discontinued Operations
On February 24, 1989, the Company, through its wholly-owned
subsidiary, TPI Entertainment, Inc. ("Entertainment"), acquired
leasehold interests and other assets related to the operation of
55 movie theaters from American Multi-Cinema, Inc. ("AMC"), a
wholly-owned subsidiary of AMC Entertainment Inc. ("AMCE"),
subject to a management agreement and certain other agreements,
which subsidiary at that time held 6,275,144 shares of the
Company's common stock. On March 4, 1991, Entertainment entered
into the General Partnership Agreement of Exhibition Enterprises
Partnership (the "Partnership Agreement") with Cinema
Enterprises, Inc. ("CENI"), a Missouri corporation and a wholly-
owned subsidiary of AMC, forming Exhibition Enterprises
Partnership, a New York general partnership (the "Partnership").
Pursuant to the Partnership Agreement, effective April 19,
1991, (a) Entertainment contributed to the Partnership its
interest in the assets (subject to certain exclusions) relating
to the 57 movie theaters Entertainment then owned and other
leasehold interests, subject to obligations under notes, loans
and capital leases, (b) the Partnership assumed certain
liabilities of Entertainment and (c) CENI contributed to the
Partnership 3,800,000 shares (the "Shares") of common stock.
Thereafter, the Partnership distributed the shares and cash to
Entertainment.
On May 28, 1993, the Company completed the sale of its 50%
interest in the Partnership to AMC for $17,500,000. See Item 3
"Legal Proceedings".
Item 2. PROPERTIES
General
The Company is currently in the process of moving its Tennessee
operations and its West Palm Beach headquarters facility to a new
facility at 3950 RCA Boulevard, Suite 5001, Palm Beach Gardens,
Florida. This facility consists of 38,000 square feet under a
lease expiring in 2004 and provides for an annual base rental of
$331,000. The lease requires the Company to pay certain
operating expenses and contains escalation clauses relating to
real estate taxes and the like.
The Company's executive offices were located at 777 South
Flagler Drive, West Palm Beach, Florida, where it occupied
approximately 4,800 square feet of space under a lease expiring
in 1999 and providing for an annual base rent of approximately
$119,000.
Restaurants' corporate headquarters were located in Memphis,
Tennessee in a leased building consisting of approximately 48,000
square feet. The lease agreement, which expires December 1995,
provides for an annual rent of $84,000 and requires the Company
to pay certain expenses of approximately $95,000 annually.
Restaurants operates its commissary centers in leased facilities
in Memphis, Tennessee and Charlotte, North Carolina consisting of
80,000 and 70,000 square feet of storage area in each location,
respectively.
Restaurants
The majority of the Company's Shoney's restaurants are free
standing buildings of approximately 5,000 square feet and 170
seats. The Company opened five new Shoney's in 1994 at an
average cost of $1,061,000 for building and equipment and
$526,000 for land costs.
Each Captain D's is a free standing building of approximately
2,200 square feet and 70 seats. The Company opened three new
Captain D's in 1994 at an average cost of $582,000 for the
building and equipment and $182,000 for land costs.
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A majority of the operating restaurant properties used by Restaurants are
leased from others under noncancelable agreements. The following table sets
forth certain information regarding Restaurants' restaurant properties as of
March 15, 1995:
Land and Land Leased Land and
Building Building Building
Type of Restaurant Owned Owned Owned Total
----------------------- --------- ----------- -------- ------
Shoney's . . . . . . . 69 39 79 187
Captain D's . . . . . 29 26 14 69
---- ---- ---- ----
98 65 93 256
==== ==== ==== ====
Most of the restaurant leases provide for 10 to 25 year initial terms, with
renewal options by Restaurants for additional periods ranging from 5 to 15
years. The leases generally have rents which are the greater of a fixed minimum
amount or a percentage of gross sales ranging from 1.0% to 6.5%. The following
table summarizes the expiration dates of the original or current terms of all of
Restaurants' leases and the number of related leases currently having renewal
options.
Number of Number with
Lease Term Expires Leases Renewal Options
1995 . . . . . . . . . . . . 2 2
1996-2000 . . . . . . . . . . . . 69 54
2001-2005 . . . . . . . . . . . . 37 31
2006-2010 . . . . . . . . . . . . 46 45
2011-2014 . . . . . . . . . . . . 4 2
The Company's experience has been that where leases do not contain renewal
options and Restaurants desires to continue operating at the same location,
negotiating a new lease at competitive terms has been possible. However, prior
to negotiating a new lease (or exercising a renewal option ), the Company
carefully reviews the site location to determine if it continues to be optimal.
The Company has from time to time found alternative locations in the same area
to be more desirable. The amount of rent varies considerably from lease to
lease. Restaurants' philosophy is to own its restaurant sites in each situation
where possible and to utilize lease financing, as necessary, to supplement other
financing sources.
10
<PAGE>
Item 3. LEGAL PROCEEDINGS
Maxcell Telecom Plus, Inc., et al., v. McCaw Cellular
Communications, Inc., et al.
On November 1, 1993, the Company and its wholly-owned
subsidiary, Maxcell Telecom Plus, Inc., filed a complaint in the
Circuit Court of the Fifteenth Judicial Circuit in and for Palm
Beach County, Florida. The complaint against McCaw Cellular
Communications, Inc. ("McCaw"), Charisma Communications Corp.
("Charisma") and various related parties, relates to McCaw's
failure to disclose the existence of a side agreement between
McCaw and Charisma to share in the net profits from the resale of
certain cellular properties which were sold by the Company to
McCaw. The Company seeks recision of the sales contract and
damages based upon the defendants alleged fraudulent
misrepresentation, breach of fiduciary duty, conspiracies and
tortious interference with contracts. The Company's attorneys
are unable at this time to state the likelihood of a favorable
outcome.
Reading Company and James J. Cotter v. TPI Enterprises, Inc.
On March 7, 1995, a civil action captioned James J. Cotter v.
TPI Enterprises, Inc., 95 Civ. 1579 was filed in the United
States District Court for the Southern District of New York. The
plaintiffs allege inter alia breach of contract and seek damages
of $1,250,000 plus interest, punitive damages and attorney's fees
in connection with the sale to a subsidiary of American Multi-
Cinema, Inc. of TPI Entertainment, Inc.'s interest in Exhibition
Enterprises Partnership in April 1991. The Company's attorneys
are unable at this time to state the likelihood of an unfavorable
outcome.
Other Proceedings
The Company and its subsidiaries are defendants in various
lawsuits arising in the ordinary course of business. It is the
opinion of the management of the Company that the outcome of such
litigation will not have a material adverse effect on the
consolidated financial statements.
11
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
There were no matters submitted to a vote of security holders
of the registrant during the fourth quarter of the fiscal year
ended December 25, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the
following list is included as an unnumbered Item in Part I of
this Report in lieu of being included in its entirety in the
Proxy Statement.
The following sets forth certain information regarding the
Company's executive officers as of March 15, 1995:
Name Age Positions held with the Company
J. Gary Sharp . 48 President and Chief Executive
Officer of TPI
Enterprises; President of TPI
Restaurants; Director of
TPI Enterprises and TPI
Restaurants
Frederick W. 44 Executive Vice President, Chief
Burford . . . . Financial Officer of TPI
Enterprises ; Vice President,
Chief Financial Officer and
Treasurer of TPI Restaurants;
Director of TPI Enterprises and
TPI Restaurants
Robert A. 46 Executive Vice President and
Kennedy . . . . Secretary of TPI Enterprises; Vice
Chairman of the Board and
Secretary of TPI Restaurants;
Director of TPI
Restaurants; Vice President of
Human Resources
Haney A. Long, 49 Senior Vice President, Procurement
Jr. . . . . . . and Distribution of TPI
Restaurants; Director of TPI
Restaurants
J. Gary Sharp was an employee of Shoney's, Inc. from 1969
through 1986 holding positions ranging from store manager to
group Vice President of all of Shoney's, Inc.'s operations. He
left Shoney's, Inc. in 1986 to own and operate franchises in
Orlando, Florida and was President of Sharp Concepts, Inc. from
1985 through September 1989. Mr. Sharp has served as President,
Chief Operating Officer and a Director of TPI Restaurants since
1989. Mr. Sharp was elected a Director of TPI Enterprises in
April 1992. He was named Chief Executive Officer of TPI
Enterprises in March 1993.
Frederick W. Burford joined TPI Restaurants in November 1991,
after 14 years in top management positions at The Promus
Companies (formerly Holiday Corporation). Mr. Burford was a
Corporate Vice President and served in capacities as both
Treasurer and Controller at the Promus Companies. Mr. Burford
was elected Vice President, Chief Financial Officer, Treasurer
and a Director of TPI Restaurants in November 1991. He was named
Executive Vice President, Chief Financial Officer, and a Director
of TPI Enterprises, Inc. in March 1993.
Robert A. Kennedy joined TPI Enterprises in February 1977 as a
Vice President and was elected Executive Vice President in
February 1985 and Secretary in September 1988. Mr. Kennedy was a
Director of TPI Enterprises between August 1984 and March 1993.
Mr. Kennedy was elected Vice Chairman of the Board and Assistant
Secretary of TPI Restaurants in 1989, Secretary in 1991, a
Director in 1988, and Vice President of Human Resources in 1995.
12
<PAGE>
Haney A. Long, Jr., joined TPI Restaurants in November, 1989 as
Senior Vice President of Procurement and Distribution. Prior to
joining the Company, Mr. Long served as Senior Vice President of
Procurement at Rich SeaPak Corporation between 1979 and 1989. He
also served as Executive Director of Commissary Operations for
Shoney's, Inc., between 1975 and 1977. He was elected Director
of TPI Restaurants in June 1993.
Stephen R. Cohen announced his retirement from the Company and
as Chairman of the Board of TPI Enterprises effective January 31,
1995. He continues to serve as President and Director of
Maxcell.
13
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The Company's common shares are traded in the National Market System
of the over-the-counter market (NASDAQ symbol: TPIE). As of March 15, 1995,
there were 2,118 shareholders of record of the Company's common shares. The
following table sets forth, for the periods indicated, the high and low sales
prices, as reported by the National Quotation Bureau, Incorporated.
Over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
The Company has never paid any dividends on its common shares. The
Company currently intends to retain all earnings, if any, to support the
development and growth of the Company's restaurant business. Accordingly, the
Company does not anticipate that any cash dividends will be declared on its
common shares for the foreseeable future. The indentures covering the 8 1/4%
Convertible Subordinated Debentures and the 5% Convertible Senior Subordinated
Debentures prohibit the payment of cash dividends while the debentures remain
outstanding. The Company's credit facility also limits the payment of dividends
by the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
1994 1993 1992
-------------------- -------------------- ---------------------
High Low High Low High Low
-------------------- -------------------- ---------------------
First Quarter $10 7/8 $6 7/8 $10 7/8 $ 8 1/8 $7 3/8 $5 3/4
Second Quarter 9 3/16 5 3/4 10 1/2 7 1/2 7 1/8 5 7/8
Third Quarter 7 9/16 6 12 9 3/8 6 7/8 5 1/8
Fourth Quarter 6 1/2 3 1/2 12 1/2 9 3/4 8 7/8 6 1/4
14
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The Company recognized a $5,273,000 gain, net of tax, in 1993
following the sale of its remaining 20interest in Exhibition Enterprises
Partnership (the "Partnership"). During 1992, the Company recorded an
extraordinary loss, net of tax, of $11,949,000 in connection with an early
extinguishment of debt. (See Note 6 to the Consolidated Financial Statements.)
During 1990, the Company recognized an after-tax gain of approximately
$11,600,000 from the sale of a cellular telephone construction permit by its
wholly-owned subsidiary Maxcell Telecom Plus, Inc. Discontinued operations
include the results of TPI Entertainment, Inc. ("Entertainment") since
February 24, 1989. Discontinued operations also include the gains or losses
resulting from the disposal of the discontinued operations of Entertainment,
as well as the Company's telecommunication business discontinued in 1986. See
Note 3 to the Consolidated Financial Statements for a discussion of the disposal
of discontinued operations including the sale of Entertainment's interest in its
movie theater operations.
<TABLE><CAPTION>
Statement of Operations Data
Fiscal Year Ended
----------------------------------------------------------------------
December 25, December 26, December 31, December 31, December 31,
1994 1993 1992 1991 1990
----------- ----------- ----------- ------------ -----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . $287,384 $289,439 $277,390 $261,130 $252,370
Income (loss) from
continuing operations. . . . (3,717) (36,488) 662 (12,053) 5,731
Income (loss) before
extraordinary item and
cumulative effect of
accounting changes . . . . (3,717) (31,215) 662 10,667 1,528
Net income (loss). . . . . . . (3,717) (31,215) (14,125) 10,667 1,528
Income (loss) per share
from continuing
operations. . . . . . . . . (.18) (1.81) .04 (.63) .26
Net income (loss) per
share. . . . . . . . . . . . (.18) (1.55) (.77) .55 .07
</TABLE>
<TABLE>
<CAPTION>
Balance Sheet Data
----------------------------------------------------------------------
December 25, December 26, December 31, December 31, December 31,
1994 1993 1992 1991 1990
----------- ----------- ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Working capital
(deficiency) . . . . . . . $ (17,972) $ (10,796) $ 2,734 $ 28,123 $ 18,218
Total assets . . . . . . . . . 254,496 258,839 255,607 282,794 427,037
Short-term obligations . . . . 3,725 1,728 5,278 18,905 10,399
Long-term obligations
including minority
interest. . . . . . . . . 107,721 106,773 110,937 107,710 213,986
Shareholders' equity . . . . . 67,570 70,559 83,650 97,318 110,489
</TABLE>
15
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
1994 Compared to 1993
Revenues
Revenues decreased .7% or $2.0 million to $287.4 million due primarily to
softness in same store sales at the Shoney's concept. New restaurants
accounted for $7.3 million of 1994 revenues, while comparable store
sales declined $9.3 million, or 4.3%, in the Shoney's concept and increased
$2.6 million or 6.0% in the Captain D's concept. The first twelve weeks of
a new restaurants' operations are excluded from the comparable store sales
computation. Revenues for 1993 include $19.9 million relating primarily to 27
underperforming units, which were either closed subsequent to the second
quarter of 1993 or are scheduled to be closed in accordance with the
Company's restructuring plan adopted in 1993. Revenues and expenses related
to units provided for in the reserve for restructuring have been excluded
from the 1994 statement of operations. In fiscal 1995, the Company's
comparable store sales have declined 5.5 % in the Shoney's concept
and .9% in the Captain D's concept through March 19, 1995.
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant labor and
benefits, restaurant depreciation and amortization, and other restaurant
operating expenses. A summary of cost of sales as a percentage of revenues
for 1994 and 1993 is shown below.
1994 1993
Food, supplies and uniforms. . . . . . . . . . . . . . . . 35.8% 35.2%
Restaurant labor and benefits. . . . . . . . . . . . . . . 30.5% 31.2%
Restaurant depreciation and amortization . . . . . . . . . 4.9% 4.7%
Other restaurant operating expenses. . . . . . . . . . . . 18.3% 17.7%
89.5% 88.8%
The Company's food costs suffered from price increases in several high volume
commodities during 1994, including shrimp and cooking oil. These increases,
along with relatively fixed costs for supplies and uniforms, resulted in
increased food costs as a percentage of revenues. The decrease in labor costs
during the current year at the restaurants is due to a decline in workers'
compensation. This decline in workers' compensation expense is primarily
due to a $4.5 million adjustment to workers' compensation in the fourth
quarter of 1993 to increase the Company's reserves to better reflect the
likely outcome of its liabilities. Restaurant depreciation and amortization
increased in relation to the prior year due to the full year of depreciation
expense related to the 18 newly constructed units during 1993. Other
restaurant operating expenses increased as a percentage of revenues primarily
due to increased repairs and maintenance expenses along with increased
advertising costs. The increase in repairs and maintenance expenses in
relation to 1993 is primarily due to the increased aging of the buildings,
cleaning and repair costs of the carpets installed in various store locations
during 1993, and increased restocking of smallwares. The increase in
advertising is primarily due to promotional outdoor advertising begun
during 1994.
General and administrative expenses decreased $4.7 million in relation
to 1993 due to decreased workers' compensation and general liability expense
for the Company and decreased salary expense associated with a reduction
in corporate staff along with a decrease in executive compensation. The
decrease in workers' compensation and general liability expense is primarily
due to an increase in the reserves at the end of 1993
16
<PAGE>
to better reflect the likely outcome of its liabilities.
Operating income rose 84.8% or $2.4 million excluding the restructuring
charges in 1994 and 1993. This increase was primarily driven by a 16.5%
decrease in general and administrative expenses which was somewhat
offset by slightly higher food costs and other restaurant operating expenses.
Other Income and Expenses
Interest income decreased $.26 million primarily due to a reduction in the
investment balance held during the current year. Interest expense declined
$.3 million primarily due to a lower weighted average interest rate during
1994 as compared to 1993.
Restructuring Charges
The Company adopted a restructuring plan at the end of the fourth quarter of
1993 which included closing or relocating 31 of its restaurants by the end
of 1994, not exercising options to renew leases with respect to an
additional 19 of its restaurants upon expiration of the current lease
terms, and the restructuring of divisional management as well as
consolidation of the Company's two corporate offices. With respect to the
restaurants to be closed or relocated, the Company recorded $19.8 million
of restructuring charges in 1993 consisting primarily of the write-off of
assets and the accrual of lease and other expenses, net of projected sales
proceeds and sublease income. As of December 25, 1994, the Company has
closed 22 restaurants with plans to close an additional 4 restaurants during
the first half of 1995. During the fourth quarter of 1994, management
determined that improved operations at 5 of the restaurants, previously
included in the restructure plan, indicated the locations should not be
closed. Accordingly, the Company reduced its reserve by approximately
$2.5 million related to these 5 locations. During 1994, the reserve was
also charged $3.5 million for expenditures and asset write-offs related
to the other 26 units.
With respect to the 19 restaurants projected to be closed no later than
the expiration of their current lease terms, the Company determined that
the recoverability of the assets had been permanently impaired, and
accordingly, recorded a charge of $4.5 million primarily for the write-down of
assets at the end of 1993. During 1994, three of these units were closed
prior to or upon the expiration of their current lease terms. The reserve
was charged approximately $.7 million for the write-down of assets.
With respect to the Company's restructuring of its divisional
management and consolidation of its corporate offices, the Company recorded
approximately $1.8 million for the cost of moving the Memphis office,
$1.3 million for the write-off of assets and accrual of remaining lease
obligations at the Company's present facilities and $1.2 million for
severance costs and other costs relating to the restructuring of divisional
and corporate overhead. During 1994, the Company paid out approximately
$1.1 million related to the restructure of which $.3 million was for severance.
In addition to the amounts paid, management determined that an additional
$1.2 million should be provided for the write-off of assets at its Memphis
location. The Company expects to pay the majority of the remaining
relocation obligations during 1995 as the consolidation of the corporate
offices is completed. In addition to these reserves, the Company also
recorded approximately $6.5 million in the prior year related to
units that were closed prior to 1993 and for the sale of vacant properties.
During 1994, the reserve had charges of approximately $1.7 million
resulting from expenditures and asset write-offs and an increase of $.3
million related to changes in original estimates for the costs of disposal.
1993 Compared to 1992
Revenues
Revenues for 1993 increased to $289.4 million, 4.3% over the $277.4 million
earned in 1992. New restaurants accounted for $30.4 million of 1993
revenues, while comparable store sales declined $7.2 million, or 3.3%,
in the Shoney's concept and remained flat in the Captain D's concept. The
first twelve weeks of new
17
<PAGE>
restaurants' operations are excluded from the comparable store sales
computation. Revenues from closed stores, primarily Hungry Fisherman
and Danver's restaurants, which are excluded from 1993 sales, totalled
$11.2 million in 1992.
Costs and Expenses
Cost of sales includes food, supplies and uniforms, restaurant labor and
benefits, restaurant depreciation and amortization, and other restaurant
operating expenses. A summary of cost of sales as a percentage of
revenues for 1993 and 1992 is shown below.
1994 1993
Food, supplies and uniforms. . . . . . . . . . . . . . . . 35.2% 34.6%
Restaurant labor and benefits. . . . . . . . . . . . . . . 31.2% 29.2%
Restaurant depreciation and amortization . . . . . . . . . 4.7% 4.1%
Other restaurant operating expenses. . . . . . . . . . . . 17.7% 16.2%
88.8% 84.1%
The Company's food costs suffered from significant price increases in several
high volume commodities during 1993, including pork, eggs and shrimp. These
increases were partially offset by a decrease in white fish prices, which
contributed to a decrease in food costs as a percentage of revenues in the
Company's Captain D's restaurants. Most restaurant operating expenses,
including restaurant labor, restaurant depreciation and amortization, repairs
and maintenance, utilities and advertising, are relatively fixed, and
accordingly, a decrease in same store sales results in an unfavorable margin
impact. Management completed anextensive review of the Company's exposure
resulting from its self insurance program for workers' compensation and
general liability in 1993. The review, which was based on improved data
available to the Company relating to the trend in claims development,
indicated that the Company's reserves for retained losses were near the
lower end of the expected range of possible losses. Management determined
it would be appropriate to increase the Company's reserves to better reflect
the likely outcome of its liability within the possible range of losses.
Accordingly, as of the end of the fourth quarter of 1993, workers'
compensation insurance reserves were increased by charging $4.5 million to
restaurant labor and benefits and $0.7 million to general and administrative
expenses. Also, a charge of $1.8 million was made to other restaurant
operating expenses and $0.6 million to the gain on sale of discontinued
operations (theater operations) to increase the general liability insurance
reserves.
General and administrative expenses declined as a percentage of revenues from
10.2% in 1992 to 9.9% in 1993. The Company experienced savings during 1993
from the restructuring and relocation of TPI Enterprises, Inc.'s headquarters
in the latter half of 1992. In addition to the workers' compensation reserve
adjustment described above, the Company recorded charges of $1.2 million
following the termination and settlement of its retirement plan in December
1993 and $0.9 million resulting from the reduction in the discount rate used to
compute the Company's deferred compensation obligations. General and
administrative expenses for 1992 include a $1.1 million charge to pension
expense resulting from the early retirement of a senior executive officer.
Restructuring Charges
The Company adopted a restructuring plan as of the end of the fourth quarter
of 1993 which included closing or relocating 31 of its restaurants by the end
of 1994, not exercising options to renew leases with respect to an additional
19 of its restaurants upon expiration of the current lease terms and
restructuring divisional management and consolidating the Company's two
corporate offices. After an in-depth evaluation of the Company's Shoney's and
Captain D's restaurants, management identified 31 restaurants, which had not
18
<PAGE>
performed well and appeared to have limited potential for improvement in the
future, to be closed or relocated. Included in these restaurants were five
Shoney's and four Captain D's closed in December 1993. With respect to the
restaurants closed or to be closed, the Company recorded $19.8 million of
restructuring charges consisting primarily of the write-off of assets and the
accrual of lease and other expenses, net of projected sales proceeds and
sublease income. With respect to the 19 restaurants projected to be closed no
later than the expiration of their current lease terms, the Company
determined that the recoverability of the assets has been permanently
impaired, and accordingly, recorded a charge of $4.5 million primarily for the
write-down of assets. The Company is continuing its efforts to restructure
and downsize corporate overhead by consolidating its Memphis, Tennessee
corporate office with its headquarters office in West Palm Beach, Florida.
The Company recorded approximately $1.8 million for the cost of moving the
Memphis office and $1.3 million for the write-off of assets and accrual of
remaining lease obligations at the Company's present facilities. In
addition, the Company accrued $1.2 million for severance costs and other costs
relating to the restructuring of divisional and corporate overhead. Further,
the Company wrote down vacant properties to net realizable value and revised
its estimated loss with respect to units closed prior to 1993 by increasing
its restructuring charge and related reserve by $6.5 million.
The Company's restructuring charges of $3.6 million in 1992 consisted of
a $4.0 million provision forclosed units relating primarily to the closings
of the remaining Hungry Fisherman restaurants, and a $0.4 million reduction
in previously accrued reserves relating to the 1991 charge of $2.8 million for
restructuring the Company's operations and moving its headquarters.
Other Income and Expenses
Interest income decreased $3.0 million, primarily due to interest earned in
1992 on income tax refunds. During the third quarter of 1992, the Company
refinanced Restaurants' 14 1/4% Senior Subordinated Notes. Primarily as a
result of this debt restructuring, and the investment by the Airlie Group,
L.P., and other related parties (the "Airlie Group"), in March 1993, interest
expense decreased $3.8 million in 1993 compared to 1992.
Discontinued Operations
The Company realized a $5.3 million gain, net of $2.7 million of income tax
expense, on the sale of its investment in Exhibition Enterprises Partnership
in 1993.
Extraordinary Item and Cumulative Effect of Accounting Changes
The Company recorded a charge to income of $11.9 million during 1992 in
connection with the refinancing of Restaurants' 14 1/4% Senior Subordinated
Notes. The Company also recorded charges of $2.8 million during
1992 relating to the implementation of Financial Accounting Standard No.
112, "Employers' Accounting for Postemployment Benefits" and Financial
Accounting Standard No. 109, "Accounting for Income Taxes".
LIQUIDITY AND CAPITAL RESOURCES
Working capital declined from a deficiency of $10.8 million in 1993 to a
deficiency of $18.0 million in 1994 due primarily to the utilization of cash
on hand for capital expenditures in the Company's restaurant operations
and an increase in current liabilities due to an increase in the current
portion of long term debt. Approximately 88% of the Company's restaurant
sales are for cash and the remainder are for credit card receivables which
are generally collected within 3 days. Since the Company's payables,
including amounts forinventory and other operating expenses, are paid over a
longer period of time, it is not unusual for the Company, like many others
in the restaurant industry, to operate with a working capital deficit.
Net cash provided by operating activities decreased from $19.6 million in
1993 to $12.7 million in 1994. A significant factor contributing to this net
decrease is a decrease in accounts payable trade of $4.3 million in 1994
compared to an increase of $4.7 million in 1993 due to significant amounts
relating to construction payables at the end of 1993. Another factor
relating to this change is an increase of $3.4 million in accrued expenses
and current liabilities in 1994 compared to an increase of $7.4 million in 1993.
Also, inventories
19
<PAGE>
increased by $.5 million over 1993, largely due to increased purchases
of fish, compared to a net decrease in inventories of $3.5 million
in 1993. The decrease in the restructuring reserve in 1994 includes $2.3
million in payments relating to the payment of lease obligations and related
expenses for closed units and $1.1 million in payments relating to the
consolidation of the corporate offices and restructure of divisional and
corporate overhead. As of December 25, 1994, restructuring charges included in
accrued expenses and other current liabilities includes $3.7 million relating
to the consolidation of the corporate offices and approximately $2.0 million
relating to the ongoing costs of closed restaurants expected to be expended
over the next year. The above decreases in cash were partially offset by the
receipt of a federal income tax refund of $2.5 million in 1994.
Net cash used in investing activities decreased $28.8 million from 1993. The
decrease in cash used is primarily the result of the Company building fewer
restaurants in 1994 compared to 1993. The Company has invested $19.4 million
in capital expenditures in 1994 compared to $48.5 million in 1993. Of the
$19.4 million invested in the current year, $8.2 million was for the
acquisition of sites and construction of five new Shoney's restaurants and
three new Captain D's, $3.3 million for the remodeling of six Shoney's and 22
Captain D's, $3.6 million for maintenance type capital expenditures,
$.8 million for sites to be constructed in coming years, and $.8 million
relating to the new point of sale system. The remaining $2.7 million
relates primarily to the purchase of commissary equipment and to the
relocation of the Company's headquarters to Florida. Proceeds in 1994
include $2.7 million from the disposal of restaurants, $1.9 million from the
sale of excess property and other property and equipment, and $.5 million from
a sale leaseback.
The Company has various reserved areas with minimum development
requirements. Aggregate commitments beyond 1994 require 35 restaurants to
be constructed in the Company's reserved areas in Phoenix, West Palm
Beach, Michigan, Houston, and certain other counties in Texas prior to
October 6, 2004. The Company has delayed building any more Shoney's
restaurants during 1995 as Shoney's, Inc. evaluates the Shoney's concept
and how best to update it to meet customer preferences.
The Company has the right to develop Captain D's restaurants in 124
counties in seven Southeastern states (Alabama, Arkansas, Georgia,
Mississippi, North Carolina, South Carolina and Tennessee). To avoid
termination of the reserved area agreement, the Company is required to open
30 additional Captain D's by July 11, 2011. The Company anticipates
investing $1.0 million on remodels and incurring maintenance and other
capital expenditures of less than $3.5 million in 1995. The Company does
not intend to build any Captain D's restaurants during 1995.
Financing activities provided $2.3 million in 1994 compared to $6.5 million
in the prior year. The Company used proceeds of $3.4 million under its
credit facility and proceeds of $.6 million from the issuance of stock
pursuant to employee stock plans primarily to fund capital expenditures
during 1994. Other long-term debt payments during 1994 related to payments
on capital lease obligations and other long-term debt. In 1993, the Airlie
Group L.P. and certain related parties made an investment in the Company
which resulted in net proceeds of $29.1 million from the issuance of $15
million of convertible debentures and $15 million of common stock and
warrants. These proceeds were used to reduce borrowings under the Company's
credit facility and pay other long-term debt.
The Credit Facility which previously consisted of a $50,000,000 Revolving
Credit Facility was amended as of December 23, 1994. This amendment and
waiver restricted the total borrowings available under the facility
to $40,000,000 and waived compliance with certain financial ratios through
January 31, 1995. The Credit Facility was amended and restated as of
January 31, 1995. The amendment to the facility limits borrowings to
$40,000,000, revises certain financial covenant ratios and requires the
collateralization of additional properties. The Credit Facility matures
on June 3, 1996, unless extended by the Banks. The Credit Facility
continues to bear interest at either a defined base rate or a rate based on
the London Interbank Offered Rate. The amount available for borrowing under
the Credit Facility is reduced by any outstanding letters of credit. The
Company pays a fee of 2.0% on outstanding letters of credit and a commitment
fee of .5% on the average daily unused Credit Facility. The terms of the
Second Amended and Restated Credit Agreement require that
20
<PAGE>
the fee paid on borrowings and letters of credit be increased by .50%
effective January 31, 1995.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of Restaurants, whenever issued, intercompany debt of
Restaurants owed to the Company and ground lease mortgages with respect
to certain premises in which the land is currently leased but the building
located thereon is owned by Restaurants. In addition, the banks have
exercised their right to obtain, as security, assignments of other
leases and/or mortgages on real property currently owned or subsequently
acquired. However, the Company has rights to finance certain of these
properties and obtain a release of the collateral under certain
conditions. The Company has also agreed to reduce the outstanding
Credit Facility whereby any amounts received by Restaurants in excess of
$5 million from any asset sales, mortgage financings or sale/leasebacks
will be applied 50% for general corporate purposes and 50% to the paydown
of the revolving credit facility and commitment. The appropriate release
of collateral will be made at the time of paydown. Restaurants may
repay intercompany borrowings but may not transfer amounts to the Company
except for the payment of a management fee not to exceed $2.5 million
in each fiscal year and a dividend in an amount sufficient to pay
interest on the Company's 5% Convertible Senior Subordinated Debentures
and 8 1/4% Convertible Subordinated Debentures, in each case provided that
no defaults under the Credit Facility exist either immediately before
or after the transfer. Restaurants must also maintain certain financial
ratios. At December 25, 1994, $22.4 million was outstanding on the Credit
Facility and letters of credit in the amount of $11.0 million were
outstanding, resulting in a remaining balance available to borrow of
$6.6 million under the Agreement, as revised.
The Company has outstanding $15 million of 5% Convertible Senior
Subordinated Debentures, due 2003, convertible into common stock at $11
per share (the "Senior Debentures"). The Senior Debenture holders may
require the Company to repurchase the Senior Debentures, in whole or in
part, in certain circumstances involving a change in control of the
Company. Restaurants has guaranteed the repayment of the Senior
Debentures on a subordinated basis.
In addition, the Company has outstanding $51.6 million of 8 1/4%
Convertible Subordinated Debentures (the "Debentures"). The Debentures
are convertible at the option of the holder into common shares of the Company
at any time prior to maturity, unless previously redeemed or repurchased, at
a conversion price of $6.50 per share, subject to adjustment in certain
events. The Debentures mature on July 15, 2002 and are redeemable,
in whole or in part, at the option of the Company at any time on or after
July 15, 1995, initially at 105.775% of their principal amount and declining
to 100% of their principal amount on July 15, 2002, together with accrued
and unpaid interest. The Debenture holders may also require the Company to
repurchase the Debentures, in whole or in part, in certain circumstances
involving a change in control of the Company as defined in the indenture
covering the Debentures (the "Indenture"). However, a change in control, as
defined in the Indenture, will create an event of default under the Credit
Facility and, as a result, any repurchase would, absent a waiver, be blocked
by the subordination provisions of the Indenture until the Credit Facility
(and any other senior indebtedness of the Company and senior indebtedness
of Restaurants with respect to which there is a payment default) has been
repaid in full. The Debentures are unconditionally guaranteed (the
"Guarantee") on a subordinated basis by Restaurants. The Debentures and the
Guarantee are subordinated to all existing and future senior indebtedness,
as defined in the Indenture, of the Company. The Indenture does not
prohibit or limit the ability of the Company or any of its subsidiaries to
incur additional indebtedness, including that which will rank senior to the
Debentures.
Management believes sufficient funds will be available from cash on hand, cash
flow from operations and borrowings under the Credit Facility to meet its debt
service requirements, as well as its capital expenditure and working capital
requirements in the foreseeable future. The Company believes that there are
several alternatives available when the current Credit Facility matures,
including a new Credit Facility, sale/leaseback financing, and/or
securitization.
21
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of TPI Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of TPI
Enterprises, Inc., and its subsidiaries as of December 25, 1994 and
December 26, 1993, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three fiscal years in
the period ended December 25, 1994. Our audits also included the financial
statement schedules listed in the Index at Item 14(a)(2). These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in al
material respects, the financial position of TPI Enterprises, Inc. and its
subsidiaries as of December 25, 1994 and December 26, 1993, and the results
of their operations and their cash flows for each of the three fiscal years
in the period ended December 25, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1992 the
Company changed its method of accounting for income taxes and postemployment
benefits to conform with Statement of Financial Accounting Standards Nos. 109
and 112. The Company reflected the cumulative effect of these changes in 1992.
/s/ Deloitte & Touche LLP
March 10, 1995
Memphis, Tennessee
22
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 25, December 26,
1994 1993
------------ ------------
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 17,228 $ 16,664
Accounts receivable - trade (net of allowance for doubtful
accounts of $59 in 1994). . . . . . . . . . . . . . . . . . . . . . 806 984
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,969 11,424
Deferred tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . 5,666 6,734
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . 3,256 5,514
--------- -------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . 38,925 41,320
--------- -------
PROPERTY AND EQUIPMENT (at cost) . . . . . . . . . . . . . . . . . . . . . 240,394 232,240
Less accumulated depreciation and amortization. . . . . . . . . . . . 70,401 57,802
Less allowance for unit closings. . . . . . . . . . . . . . . . . . . 12,430 18,695
--------- -------
157,563 155,743
OTHER ASSETS:
Goodwill (net of accumulated amortization of $8,152 in 1994
and $6,873 in 1993) . . . . . . . . . . . . . . . . . . . . . . . . 37,675 38,954
Other intangible assets (net of accumulated amortization of
$5,157 in 1994 and $3,420 in 1993) . . . . . . . . . . . . . . . 19,726 21,923
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 899
58,008 61,776
$ 254,496 $ 258,839
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 25, December 26,
1994 1993
------------ ------------
(Dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 3,725 $ 1,728
Accounts payable - trade. . . . . . . . . . . . . . . . . . . . . . . 15,565 19,910
Accrued expenses and other current liabilities. . . . . . . . . . . . 36,889 29,829
Income taxes currently payable. . . . . . . . . . . . . . . . . . . . 718 649
--------- ----------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . . . . . 56,897 52,116
--------- ----------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,721 106,773
--------- ----------
RESERVE FOR RESTRUCTURING. . . . . . . . . . . . . . . . . . . . . . . . . 14,735 20,230
--------- ----------
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,663 6,734
--------- ----------
OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 2,427
--------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred shares, no par value; 20,000,000 shares authorized;
none issued and outstanding . . . . . . . . . . . . . . . . . . . . . --- ---
Common shares, $.01 par value; 100,000,000 shares authorized;
33,241,118 and 33,118,614 issued. . . . . . . . . . . . . . . . . . . 332 331
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . 226,144 225,417
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (88,961) (85,244)
--------- ----------
137,515 140,504
Less treasury stock, at cost, 12,846,094 common shares in 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,945 69,945
--------- ----------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . 67,570 70,559
$ 254,496 $ 258,839
--------- ----------
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
December 25, December 26, December 31,
1994 1993 1992
-------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Restaurant revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 287,384 $ 289,439 $ 277,390
--------- --------- ---------
Costs and expenses:
Food, supplies and uniforms . . . . . . . . . . . . . . . . . . . . . 102,831 101,980 95,957
Restaurant labor and benefits . . . . . . . . . . . . . . . . . . . . 87,644 90,263 80,911
Restaurant depreciation and amortization. . . . . . . . . . . . . . . 14,138 13,632 11,466
Other restaurant operating expenses . . . . . . . . . . . . . . . . . 52,727 51,291 44,916
General and administrative expenses . . . . . . . . . . . . . . . . . 23,906 28,641 28,178
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . (986) 35,082 3,586
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940 819 1,063
--------- --------- ---------
281,200 321,708 266,077
--------- --------- ---------
Operating income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . 6,184 (32,269) 11,313
--------- --------- ---------
Other income and expenses:
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 337 593 3,604
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . (10,238) (10,539) (14,302)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (109) 321
(9,901) (10,055) (10,377)
--------- --------- ---------
Income (loss) from continuing operations before income
taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,717) (42,324) 936
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . - (5,836) 274
--------- --------- ---------
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . (3,717) (36,488) 662
--------- --------- ---------
Discontinued operations:
Gain on disposal of discontinued operations, net. . . . . . . . . . . - 5,273 -
--------- --------- ---------
Income (loss) before extraordinary item and cumulative
effect of accounting changes. . . . . . . . . . . . . . . . . . . . . . (3,717) (31,215) 662
--------- --------- ---------
Extraordinary item - loss on early extinguishment of
debt, net of income taxes. . . . . . . . . . . . . . . . . . . . . . - - (11,949)
Cumulative effect of accounting changes, net of income
taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (2,838)
--------- --------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,717) $ (31,215) $ (14,125)
========= ========= =========
</TABLE>
25
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
December 25, December 26, December 31,
1994 1993 1992
-------------- --------------- ---------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Primary income (loss) per common
share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.18) $ (1.81) $ 0.04
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . - .26 -
Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (0.65)
Cumulative effect of accounting
changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (0.16)
Net income (loss) per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.18) $ (1.55) $ (0.77)
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,415 20,127 18,293
</TABLE>
See notes to consolidated financial statements.
26
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
December 25, December 26, December 31,
1994 1993 1992
-------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,717) $ (31,215) $ (14,125)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 19,216 18,046 14,869
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . (3) (2,501) (1,421)
Reserve for restructuring. . . . . . . . . . . . . . . . . . . . . (667) 35,100 854
Gain on disposal of discontinued
operations. . . . . . . . . . . . . . . . . . . . . . . . . --- (5,273) ---
Extraordinary item - loss on early
extinguishment of debt . . . . . . . . . . . . . . . . . . . --- --- 11,949
Cumulative effect of accounting changes. . . . . . . . . . . . . . --- --- 2,838
Changes in assets and liabilities:
Accounts receivable - trade . . . . . . . . . . . . . . . . . . 178 79 13
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . (545) 3,488 (2,013)
Other current assets. . . . . . . . . . . . . . . . . . . . . . 2,258 (777) 3,797
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . 752 (1,415) 123
Accounts payable - trade. . . . . . . . . . . . . . . . . . . . (4,345) 4,688 1,020
Accrued expenses and other current
liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 3,365 7,424 388
Reserve for restructuring . . . . . . . . . . . . . . . . . . . (3,370) (4,703) ---
Income taxes currently payable. . . . . . . . . . . . . . . . . 69 (1,471) (656)
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . (517) (1,878) (21)
Total adjustments . . . . . . . . . . . . . . . . . . . . . . 16,391 50,807 31,740
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . 12,674 19,592 17,615
Cash flows from investing activities:
Acquisition of property and equipment. . . . . . . . . . . . . . . . . . (19,402) (43,867) (24,026)
Acquisition of businesses, net of cash received. . . . . . . . . . . . . --- (4,660) (4,525)
Disposition of property and equipment. . . . . . . . . . . . . . . . . . 5,054 5,230 3,679
Proceeds from sale-leaseback transactions. . . . . . . . . . . . . . . . --- --- 1,254
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 115 (1,019)
Net cash used in investing activities. . . . . . . . . . . . . $(14,364) $ (43,182) $ (24,637)
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
December 25, December 26, December 31,
1994 1993 1992
-------------- --------------- ---------------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Net borrowings (payments) on Credit Facilities . . . . . . . . . . . . . $ 3,400 $ (18,550) $ 35,545
Common shares issued . . . . . . . . . . . . . . . . . . . . . . . . . . 576 17,204 457
Net payments on lines of credit. . . . . . . . . . . . . . . . . . . . . --- --- (4,250)
Net proceeds of 8 1/4% Convertible
Subordinated Debentures. . . . . . . . . . . . . . . . . . . . . . . --- --- 47,948
Repurchase of 14 1/4% Subordinated Notes . . . . . . . . . . . . . . . . --- --- (98,526)
Restricted cash deposits . . . . . . . . . . . . . . . . . . . . . . . . --- --- 11,700
Proceeds from 5% Convertible Senior
Subordinated Debentures . . . . . . . . . . . . . . . . . . . . . . . --- 15,000 ---
Other long - term debt payments. . . . . . . . . . . . . . . . . . . . . (1,722) (7,186) (1,789)
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,254 6,468 (8,915)
Net cash provided by (used in) continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . 564 (17,122) (15,937)
Net cash provided by (used in) discontinued
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 12,766 (1,907)
Net cash used by extraordinary item. . . . . . . . . . . . . . . . . . . . --- --- (13,206)
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 564 (4,356) (31,050)
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . 16,664 21,020 52,070
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . $ 17,228 $ 16,664 $ 21,020
Supplemental Disclosure of Cash Flow
Information:
Non-cash transactions:
Capitalized lease obligations entered into. . . . . . . . . . . . . . $ 1,430 $ 3,241 $ 2,331
Conversion of 8 1/4% Subordinated
Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 --- ---
Liabilities assumed in acquisitions of
properties . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 1,819 4,975
Common stock issued in acquisitions of
properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 895 ---
Cash payments (refunds) during the year for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,226 $ 10,100 $ 13,263
Interest capitalized. . . . . . . . . . . . . . . . . . . . . . . . . 77 202 172
Income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . (2,164) 2,810 (5,046)
</TABLE>
See notes to consolidated financial statements.
28
<PAGE>
<TABLE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
Common Shares Issued Additional
Number of Paid-in Treasury
Shares Amount Capital Deficit Stock Total
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 . . . 30,932,295 $ 309 $ 206,858 $ (39,904) $ (69,945) $ 97,318
Issue of shares pursuant to
employee stock plans . . . . 85,394 1 456 --- --- 457
Net loss . . . . . . . . . . . . --- --- --- (14,125) --- (14,125)
---------- ----- --------- ---------- ---------- ---------
Balance, December 31, 1992 . . . 31,017,689 310 207,314 (54,029) (69,945) 83,650
Investment in Company by the
Airlie Group L.P.. . . . . . . . 1,503,220 15 14,030 --- --- 14,045
Issue of shares in connection
with acquisition. . . . . . . 94,300 1 894 --- --- 895
Issue of shares pursuant to
employee stock plans . . . . 499,559 5 3,154 --- --- 3,159
Conversion of subordinated
debentures . . . . . . . . . . 3,846 --- 25 --- --- 25
Net loss . . . . . . . . . . . . --- --- --- (31,215) --- (31,215)
---------- ----- --------- ---------- ---------- ---------
Balance, December 26, 1993 . . . 33,118,614 331 225,417 (85,244) (69,945) 70,559
Issue of shares pursuant to
employee stock plans . . . . . 97,582 1 575 --- --- 576
Conversion of subordinated
debentures . . . . . . . . . . 24,922 --- 152 --- --- 152
Net loss . . . . . . . . . . . . --- --- --- (3,717) --- (3,717)
---------- ----- --------- ---------- ---------- ---------
Balance, December 25, 1994 . . . 33,241,118 $ 332 $ 226,144 $(88,961) $(69,945) $67,570
========== ===== ========= ========== ========== =========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
TPI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of TPI
Enterprises, Inc. (the "Company") and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation. During 1993, the Company changed its fiscal year from a
calendar year to a 52-53 week period, ending on the last Sunday in December
in order to be consistent with the year end of its wholly-owned subsidiary,
TPI Restaurants, Inc., ("Restaurants"). The Company's quarters end as of
the end of the 16th, 28th, and 40th weeks of each fiscal year.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, certificates of
deposit and short-term marketable securities with maturities of 90 days or
less when purchased, as cash and cash equivalents.
Restaurants utilizes a cash management system under which cash overdrafts
exist in the book balances of its primary disbursing accounts. These
overdrafts represent the uncleared checks in the disbursing accounts. The
cash amounts presented in the consolidated financial statements represent
balances on deposit at other locations prior to their transfer to the
primary disbursing accounts. Uncleared checks of $7,229,000 and $7,393,000
are included in accounts payable at December 25, 1994 and December 26,
1993, respectively.
Inventories
Inventories, consisting of food items, beverages and supplies, are stated
at the lower of weighted average cost (which approximates first-in,
first-out) or market.
Pre-opening Costs
Direct costs incidental to the opening of new restaurants are capitalized
and amortized over the restaurants' first year of operations.
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided on
the straight-line method over the estimated useful lives of the assets or,
in the case of leasehold improvements and certain property under capital
leases, over the lesser of the useful life or the lease term.
Goodwill related to the acquisition of Restaurants is amortized on a
straight-line basis over a thirty- six year period. The costs of franchise
license agreements which govern the individual Shoney's and Captain D's
restaurants and reserved area agreements are amortized on a straight-line
basis over the lives of the related franchise license agreements, up to 40
years.
Postemployment Benefits
The Company recognizes the cost of postemployment benefits on an accrual
basis in accordance with Financial Accounting Standard No. 112, "Employers
Accounting for Postemployment Benefits." The adoption of this statement
during the year ended December 31, 1992 resulted in an increase of $102,000
in 1992 income from continuing operations. The cumulative effect on years
prior to January 1, 1992 of $716,000, or $.04 per share, is included in
1992 net income.
30
<PAGE>
Income Taxes
Effective January 1, 1992, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes", which requires an asset
and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities. Prior to 1992, income taxes were
accounted for under Accounting Principles Board Opinion No. 11.
The effect of adopting Statement 109 on 1992 net income (loss) was a
decrease of $697,000, or $.04 per share. This effect consists of an
increase of $898,000, or $.05 per share, relating to continuing operations,
an increase of $500,000, or $.03 per share, relating to the extraordinary
item and $27,000 relating to the cumulative effect of adopting Statement
112. The cumulative effect of the change on years prior to January 1, 1992
of $2,122,000, or $.12 per share, decreased 1992 net income.
Income (Loss) Per Share
Primary earnings per share amounts are computed by dividing net income
(loss) by the weighted average number of common and common equivalent
shares outstanding during the period. Reported primary per share amounts
include common equivalents relating to dilutive stock options of 80,000,
514,000 and 165,000 shares in 1994, 1993 and 1992, respectively.
Fully diluted earnings per share amounts are similarly computed, but also
include the effect, when dilutive, of the Company's 8 1/4% Convertible
Subordinated Debentures issued in July and August of 1992 and 5%
Convertible Senior Subordinated Debentures issued March 1993, after the
elimination of the related interest requirements, net of income taxes. The
Company's convertible debentures are excluded from the fiscal 1994 and
1993 computation due to their antidilutive effect during that period.
The inclusion of the Company's dilutive outstanding options in the
calculation, determined based on market values at the end of each period,
as applicable, is either antidilutive or does not result in a material
dilution of earnings per share for 1994, 1993 and 1992.
Reclassification
Certain amounts in prior years have been reclassified to conform to the
1994 presentation.
31
<PAGE>
NOTE 2 - RESTRUCTURING CHARGES
The Company adopted a restructuring plan at the end of the fourth quarter
of 1993 which included closing or relocating 31 of its restaurants by the
end of 1994, not exercising options to renew leases with respect to an
additional 19 of its restaurants upon expiration of the current lease
terms, and the restructuring of divisional management as well as
consolidating the Company's two corporate offices. With respect to the
restaurants to be closed or relocated, the Company recorded $19,800,000 of
restructuring charges in 1993 consisting primarily of the write-off of
assets and the accrual of lease and other expenses, net of projected sales
proceeds and sublease income. As of December 25, 1994, the Company has
closed 22 restaurants with plans to close an additional 4 restaurants
during the first half of 1995. During the fourth quarter of 1994,
management determined that improved operations at 5 of the restaurants,
previously included in the restructure plan, indicated the locations should
not be closed. Accordingly, the Company reduced its reserve by
approximately $2,500,000 related to these 5 locations. During 1994, the
reserve was also charged $3,500,000 for expenditures and asset write-offs
related to the other 26 units.
With respect to the 19 restaurants projected to be closed no later than
the expiration of their current lease terms, the Company determined that
the recoverability of the assets had been permanently impaired, and
accordingly, recorded a charge of $4,500,000 primarily for the write-down
of assets at the end of 1993. During 1994, three of these units were closed
prior to or upon the expiration of their current lease terms. The reserve
was charged approximately $700,000 for the write-down of assets.
With respect to the Company's restructuring of its divisional management
and consolidation of its corporate offices, the Company recorded
approximately $1,800,000 for the cost of moving the Memphis office,
$1,300,000 for the write-off of assets and accrual of remaining lease
obligations at the Company's present facilities and $1,200,000 for
severance costs and other costs relating to the restructuring of divisional
and corporate overhead. Severance costs included amounts to be paid to
approximately 80 employees at the divisional level and at the Memphis
corporate office whose employment would be terminated as a result of the
restructuring of its divisional management and consolidation of its
corporate offices. During 1994, the Company paid out approximately
$1,100,000 related to the restructure of which $300,000 was for severance.
In addition to the amounts paid, management determined that an additional
$1,200,000 should be provided for the write-off of assets at its Memphis
location. The Company expects to pay the majority of the remaining
relocation obligations during 1995 as the consolidation of the corporate
offices is completed. In addition to these reserves, the Company also
recorded approximately $6,500,000 in the prior year related to units that
were closed prior to 1993 and for the sale of vacant properties. During
1994, the reserve had charges of approximately $1,700,000 resulting from
expenditures and asset write-offs and an increase of $300,000 related to
changes in original estimates for the costs of disposal.
NOTE 3 - DISCONTINUED OPERATIONS
TPI Entertainment, Inc.
During the period from March 1991 through May 1993, TPI Entertainment,
Inc. ("Entertainment"), a wholly- owned subsidiary of the Company, owned a
50% interest in a partnership, Exhibition Enterprises Partnership, (the
"Partnership"), with Cinema Enterprises, Inc., a wholly-owned subsidiary
of American Multi-Cinema, Inc. ("AMC"). At the end of 1991, the Company
resolved to offer for sale its 50% interest in the Partnership.
Accordingly, all theater operations are classified as discontinued
operations in the financial statements. The Company's proportionate share
of the Partnership loss was not recorded in 1993 or 1992, as the Company
anticipated proceeds from the sale of its interest in the Partnership would
exceed its carrying value.
On May 28, 1993, the Company completed the sale of its 50% interest in
the Partnership to AMC for $17,500,000. As a result of this transaction,
the Company recognized a gain of $5,273,000, net of income taxes of
$2,717,000 for the year ended December 26, 1993.
32
<PAGE>
The following condensed balance sheet reflects the financial position of
the Partnership as of May 28, 1993, the date of the completion of the sale
of the Company's interest in the Partnership.
<TABLE>
<CAPTION>
May 28, 1993
(Unaudited)
-------------
(Dollars in
thousands)
<S> <C>
Assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ 778
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Property, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,251
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . 46,713
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,279
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $111,151
Liabilities and Partners' Capital:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,853
Accrued expenses and other current liabilities . . . . . . . . . . . . . 7,093
Borrowings, including current portion of long-term debt. . . . . . . . . 56,125
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 71,071
Partner's Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,080
Total Liabilities and Partners' Capital . . . . . . . . . . . . . . . $111,151
</TABLE>
Results of theater operations are as follows:
<TABLE>
<CAPTION>
21 Weeks Ended May 28, 1993
(Partnership) (Unaudited) 53 Weeks Ended Dec. 31, 1992
(Partnership)
----------------------------- -----------------------------
(Dollars in thousands)
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,919 $148,397
Costs and expenses . . . . . . . . . . . . . . . . . . . . . . 55,581 138,211
Operating income . . . . . . . . . . . . . . . . . . . . . . . 1,338 10,186
Other expense. . . . . . . . . . . . . . . . . . . . . . . . . (3,816) (9,962)
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $(2,478) $ 224
</TABLE>
The Company received an administrative fee of 1/4% of theater revenue
from the theater operations which was deducted from the carrying value of
the Partnership. Such fees were $230,000 and $370,000 for 1993 and 1992,
respectively.
33
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Owned:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,602 $ 37,434
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,616 47,553
Leasehold improvements and buildings on leased land . . . . . . . . . 51,344 52,061
Equipment and furnishings . . . . . . . . . . . . . . . . . . . . . . 75,003 69,135
--------- ---------
214,565 206,183
--------- ---------
Leased:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,905 24,116
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,924 1,941
--------- ---------
25,829 26,057
--------- ---------
Property and equipment (at cost) . . . . . . . . . . . . . . . . . . . . . 240,394 232,240
--------- ---------
Less accumulated depreciation and amortization . . . . . . . . . . . . . . 70,401 57,802
--------- ---------
Less allowance for unit closings . . . . . . . . . . . . . . . . . . . . . 12,430 18,695
--------- ---------
Total property and equipment. . . . . . . . . . . . . . . . . . . . . $ 157,563 $ 155,743
========= =========
</TABLE>
Property and equipment with a net book value of approximately $22,233,000
and $22,681,000 were pledged as collateral for the Company's debt
facilities as of December 25, 1994 and December 26, 1993, respectively.
Depreciation and amortization are calculated using the straight-line
method and are based on the estimated useful lives of the assets as
follows: buildings, 30 years; equipment and furnishings, 3-15 years; and
leasehold improvements, primarily representing buildings constructed on
leased property, the lesser of the term of the lease or 30 years.
Depreciation and amortization of property and equipment, exclusive of
depreciation and amortization included in discontinued operations, totalled
approximately $14,985,000, $14,104,000 and $12,880,000 during 1994, 1993
and 1992, respectively. In 1994, 1993 and 1992, approximately $1,643,000,
$1,716,000 and $1,843,000, respectively, related to capitalized leases.
Property and equipment includes capitalized interest on construction of
$425,000, $374,000 and $172,000 at December 25, 1994, December 26, 1993
and December 31, 1992, respectively.
34
<PAGE>
NOTE 5 - OTHER INTANGIBLE ASSETS
Other intangible assets consists of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Franchise and reserved area rights. . . . . . . . . . . . . . . . . . $ 17,704 $ 17,729
Deferred debt costs . . . . . . . . . . . . . . . . . . . . . . . . . 6,175 6,085
Unamortized pre-opening expense . . . . . . . . . . . . . . . . . . . 946 1,473
Other deferred charges. . . . . . . . . . . . . . . . . . . . . . . . 58 56
--------- ---------
24,883 25,343
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . 5,157 3,420
--------- ---------
$ 19,726 $ 21,923
========= =========
</TABLE>
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
8 1/4% Convertible Subordinated Debentures, due 2002 . . . . . . . . . . . $ 51,563 $ 51,725
5% Convertible Senior Subordinated Debentures, due 2003. . . . . . . . . . 15,000 15,000
Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 19,000
Notes payable, interest rates of 7.75% to 10%, due through 2007 . . . . . 4,863 4,209
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . 17,620 18,567
--------- ---------
111,446 108,501
Less amounts due within one year. . . . . . . . . . . . . . . . . . . 3,725 1,728
--------- ---------
$ 107,721 $106,773
========= =========
</TABLE>
Scheduled annual principal maturities of long-term debt, excluding
obligations under capital leases, for the five years subsequent to
December 25, 1994, are as follows: $2,224,000 in 1995; $24,010,000 in 1996;
$41,000 in 1997; $46,000 in 1998 and $51,000 in 1999.
Interest expense from continuing operations for 1994, 1993 and 1992
includes interest on obligations under capital leases of $1,952,000,
$2,334,000 and $2,610,000, respectively.
Debentures
On March 19, 1993, the Airlie Group, L.P., and certain related parties
(the "Airlie Group") made an investment in the Company of $30,000,000
including $15,000,000 of 5% Convertible Senior Subordinated Debentures (the
"Senior Debentures"), due 2003, the issuance of 1,500,000 shares of the
Company's common stock at $10 per share and the issuance of warrants to
purchase an additional 1,000,000 shares of common stock at $11 per share.
The Senior Debentures are senior to the 8 % Convertible Subordinated
Debentures (the "Debentures"). The Senior Debentures are convertible at
the option of the holder into common shares of the Company at any time
prior to maturity at $11 per share, subject to adjustment in certain
events. The Senior Debentures mature on April 15, 2003 and are redeemable,
in whole or in part, at the option of the Company at any time on or after
April 15, 1996, initially at 103.5% of their principal amount and declining
to 100% of their principal amount on April 15, 2003. The Debenture holders
may require the Company to repurchase the Senior Debentures, in whole or in
part, in certain circumstances involving a change in control
35
<PAGE>
NOTE 6 - LONG-TERM DEBT (Continued)
Debentures (Continued)
of the Company as defined in the Debenture Purchase Agreement (the
"Agreement"). However, a change in control, as defined in the Agreement,
will create an event of default under the Credit Facility (described below)
and, as a result, any repurchase would, absent a waiver, be blocked by the
subordination provisions of the Agreement until the Credit Facility (and
any other senior indebtedness of the Company and senior indebtedness of
Restaurants with respect to which there is a payment default) has been
repaid in full. The Senior Debentures are unconditionally guaranteed on a
subordinated basis by Restaurants. They are subordinated to all existing
and future senior indebtedness of the Company and Restaurants, excluding
the Debentures.
The 8 1/4% Convertible Subordinated Debentures (the "Debentures"), which
provided proceeds to the Company of $47,948,000, net of $3,802,000 in
deferred debt costs, are convertible at the option of the holder into
common shares of the Company at any time prior to maturity at a conversion
price of $6.50 per share subject to adjustment in certain events. The
Debentures mature on July 15, 2002, and are redeemable at the option of the
Company at any time on or after July 15, 1995, at a premium which declines
as the Debentures approach maturity. The Debenture holders may also
require the Company to repurchase the Debentures, in whole or in part, in
certain circumstances involving a change in control of the Company as
defined in the indenture covering the Debentures (the "Indenture").
However, a change in control, as defined in the Indenture, will create an
event of default under the Credit Facility and, as a result, any repurchase
would, absent a waiver, be blocked by the subordination provisions of the
Indenture until the Credit Facility (and any other senior indebtedness of
the Company and senior indebtedness of Restaurants with respect to which
there is a payment default) has been repaid in full. The Debentures are
unconditionally guaranteed on a subordinated basis by Restaurants. They
are subordinated to all existing and future senior indebtedness of the
Company and Restaurants.
During 1992, the Company recorded a charge of $11,949,000 following the
repurchase of $98,526,000 principal amount of the 14 % Senior Subordinated
Notes of Restaurants (the "Notes"). The costs of the repurchased Notes in
excess of their principal amounts, together with the related deferred
finance costs and expenses related to the repurchase, were charged to
income as an extraordinary item, net of income tax of $6,170,000. The
remaining $l,474,000 principal amount of the Notes was repurchased on
November 15, 1993. Premiums on the purchases and the write-off of deferred
debt costs resulted in a charge of $109,000 to other income and expense
during 1993.
Credit Facility
The Credit Facility which previously consisted of a $50,000,000 Revolving
Credit Facility was amended as of December 23, 1994. This amendment and
waiver restricted the total borrowings available under the facility to
$40,000,000 and waived compliance with certain financial ratios through
January 31, 1995. The Credit Facility was amended and restated as of
January 31, 1995. The amendment to the facility limits borrowings to
$40,000,000, revises certain financial covenant ratios and requires the
collateralization of additional properties. The Credit Facility matures on
June 3, 1996, unless extended by the Banks.
36
<PAGE>
NOTE 6 - LONG-TERM DEBT (continued)
Credit Facility (continued)
Borrowings under the Credit Facility, at the Company's option, bear
interest at either a defined base rate or a rate based on the London
Interbank Offered Rate. The weighted average interest rate on the amount
outstanding was 8.2% and 5.72% for 1994 and 1993, respectively. The
Company paid certain fees and expenses to the Banks in connection with the
original commitment letter, which along with other costs associated with
the Original Credit Facilities, totalled approximately $2,000,000 and also
agreed to indemnify the Banks against certain liabilities. The Company
also paid an amendment fee of $80,000 for its Second Amended and Restated
Credit Agreement dated January 31, 1995. The Company also pays a fee based
on the Eurodollar rate, 2.0% at December 25, 1994, in connection with
letters of credit issued and a commitment fee equal to 0.50% per annum on
the average daily unused amount of the Credit Facility. The terms of the
Second Amended and Restated Credit Agreement require that the fee paid on
borrowings and letters of credit be increased by .50% effective January 31,
1995.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of Restaurants, whenever issued, intercompany debt of
Restaurants owed to the Company and ground lease mortgages with respect to
certain premises in which the land is currently leased but the building
located thereon is owned by Restaurants. In addition, the Banks have
exercised their right to obtain, as security, assignments of other leases
and/or mortgages on real property currently owned or subsequently acquired.
However, the Company has rights to finance certain of these properties and
obtain a release of the collateral under certain conditions. The Credit
Facility limits the amount of additional indebtedness which the Company and
its subsidiaries may incur and the aggregate annual amount to be spent on
capital expenditures. In addition, the Credit Facility limits, among other
things, the ability of the Company and its subsidiaries to pay dividends,
create liens, sell assets, engage in mergers or acquisitions and make
investments in subsidiaries. Restaurants may not transfer amounts to the
Company except for the payment of a management fee not to exceed $2,500,000
in each fiscal year and a dividend in an amount sufficient to pay interest
on the Senior Debentures and the Debentures, in each case provided that no
defaults under the Credit Facility exist either immediately before or after
the transfer. Restaurants must also maintain certain financial ratios.
At December 25, 1994, $22,400,000 was drawn on the facility and letters
of credit in the amount of $10,951,000 were outstanding, resulting in a
remaining available balance of $6,649,000 under the revised Agreement.
Notes Payable
Notes payable as of December 25, 1994 consist of obligations secured by
buildings, land, equipment, and cash value life insurance policies with a
net book value of $8,381,000.
Fair Value of Financial Instruments
The estimated fair value of the Company's Debentures, based on the
quoted market price, is $39,200,000 and $86,900,000 for December 25, 1994
and December 26, 1993, respectively. The estimated fair value of the
Company's Senior Debentures at December 25, 1994 is $11,600,000, based on
the estimated borrowing rates available to the Company. The Credit
Facility reprices frequently at market rates; therefore, the carrying
amount of this facility is a reasonable estimate of its fair value at
December 25, 1994 and December 26, 1993. The estimated fair value of the
Company's notes payable approximates the principal amount of such notes
outstanding at December 25, 1994 and December 26, 1993, which is based upon
the estimated borrowing rates available to the Company.
The fair value estimates presented herein are based on pertinent
information available to management as of December 25, 1994 and December
26, 1993. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.
37
<PAGE>
NOTE 7 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
1994 1993
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,368 $ 13,417
Reserve for restructuring. . . . . . . . . . . . . . . . . . . . . . . . . 5,700 2,005
Taxes other than income taxes. . . . . . . . . . . . . . . . . . . . . . . 4,451 5,232
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,407 2,401
Payroll and compensation . . . . . . . . . . . . . . . . . . . . . . . . . 2,878 1,987
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,085 4,787
$ 36,889 $ 29,829
</TABLE>
The Company is primarily self insured for general liability and
workers' compensation risks supplemented by stop loss type insurance
policies. The self insurance liabilities, related to continuing
operations, included in accrued insurance at December 25, 1994 and December
26, 1993 were approximately $17,022,000 and $12,300,000, respectively.
In 1993, management completed an extensive review of the Company's
exposure resulting from its self insurance program for workers'
compensation and general liability. The review, which was based on
improved data available to the Company relating to the trend in claims
development, indicated that the Company's reserves for retained losses were
near the lower end of the expected range of possible losses. Management
determined it would be appropriate to increase the Company's reserves to
better reflect the likely outcome of its liability within the possible
range of losses. Accordingly, as of the end of the fourth quarter of
1993, workers' compensation insurance reserves were increased by charging
$4,500,000 to restaurant labor and benefits and $700,000 to general and
administrative expenses. Also a charge of $1,800,000 was made to other
restaurant operating expenses and $600,000 to the gain on sale of
discontinued operations (theater operations) to increase the general
liability insurance reserves.
38
<PAGE>
NOTE 8 - INCOME TAXES
The provision (benefit) for income taxes on continuing operations is
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ (3,335) $ 1,695
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
---------- ---------- ----------
3 (3,335) 1,695
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (1,611) (1,275)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (890) (146)
---------- ---------- ----------
(3) (2,501) (1,421)
$ -- $ (5,836) $ 274
========== ========== ==========
</TABLE>
The provision (benefit) for income taxes on continuing operations is
different from the amount that would be computed by multiplying the income
(loss) from continuing operations before provision (benefit) for income
taxes by the statutory U.S. federal income tax rates for the following
reasons:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Income (loss) from continuing operations before
provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . $(3,717) $ (42,324) $ 936
Provision (benefit) at statutory rate of 34% . . . . . . . . . . . . . . . (1,264) (14,390) 318
State and local income taxes, net of federal income tax
benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (587) (97)
Goodwill and other nondeductible items . . . . . . . . . . . . . . . . . . 476 435 501
Tax refund claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (619) ---
Targeted jobs tax credit . . . . . . . . . . . . . . . . . . . . . . . . . (318) (105) (446)
Tip credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (388) --- ---
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,454 9,502 ---
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 (72) (2)
Income tax provision (benefit) on continuing operations. . . . . . . . . . $ --- $ (5,836) $ 274
</TABLE>
39
<PAGE>
NOTE 8 - INCOME TAXES (continued)
The tax effects of principal temporary differences in 1994 are shown in the
following table:
<TABLE>
<CAPTION>
Assets Liabilities Total
---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . . . . . . . . . . . . . $ 162 $ ---20 $ 162
Net operating loss and contributions
carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 --- 783
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 7,563 --- 7,563
Unamortized pre-opening expenses . . . . . . . . . . . . . . . . . . . . . --- (18) (18)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 496 (287) 209
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,033) --- (3,033)
---------- ---------- ----------
Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,971 (305) 5,666
---------- ---------- ----------
Unamortized intangible assets. . . . . . . . . . . . . . . . . . . . . . . --- (1,138) (1,138)
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,827 --- 7,827
Investment related basis differences . . . . . . . . . . . . . . . . . . . --- (3,847) (3,847)
Excess tax over book depreciation and sale-
leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (14,250) (14,250)
Deferred compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . 564 --- 564
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 8,616 --- 8,616
AMT, targeted jobs tax credit, and tip credit carry
forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,673 --- 5,673
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 (1,757) (1,323)
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,785) --- (7,785)
---------- ---------- ----------
Total Noncurrent. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,329 (20,992) (5,663)
---------- ---------- ----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,300 $(21,297) $ 3
========== ========== ==========
</TABLE>
Other current assets include income tax refund receivable of $132,000
and $3,171,000 in 1994 and 1993, respectively.
The valuation allowance at December 25, 1994 of $10,818,000 resulted
from an increase in net operating losses in excess of deferred liabilities.
40
<PAGE>
NOTE 8 - INCOME TAXES (continued)
The tax effects of principal temporary differences in 1993 are shown in the
following table:
<TABLE>
<CAPTION>
Assets Liabilities Total
---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . . . . . . . . . . . . . $ 209 $ --- $ 209
Net operating loss and contributions
carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . 4,425 --- 4,425
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 6,026 --- 6,026
Unamortized pre-opening expenses . . . . . . . . . . . . . . . . . . . . . --- (275) (275)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (289) (289)
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,362) --- (3,362)
Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,298 (564) 6,734
Unamortized intangible assets. . . . . . . . . . . . . . . . . . . . . . . --- (1,237) (1,237)
Net operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,625 --- 3,625
Investment related basis differences . . . . . . . . . . . . . . . . . . . --- (3,847) (3,847)
Excess tax over book depreciation and
sale-leasebacks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (10,450) (10,450)
Deferred compensation and pension expense. . . . . . . . . . . . . . . . . 848 --- 848
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 5,402 --- 5,402
AMT and targeted jobs tax credit
carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,595 --- 4,595
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470 --- 470
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,140) --- (6,140)
Total Noncurrent. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,800 (15,534) (6,734)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,098 $ (16,098) $ ---
</TABLE>
The Company increased its deferred tax asset and liability in 1993 as
a result of legislation enacted during 1993, increasing the corporate tax
rate from 34% to 35% commencing in 1993. The valuation allowance at
December 26, 1993 of $9,502,000 resulted from a change in circumstances
during 1993 surrounding the likelihood of the realization of the deferred
tax assets in future years.
41
<PAGE>
NOTE 8 - INCOME TAXES (continued)
The tax effects of principal temporary differences in 1992 are shown in the
following table:
<TABLE>
<CAPTION>
Assets Liabilities Total
---------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . . . . . . . . . . . . . $ 235 $ --- $ 235
Net operating loss and contributions
carryforwards. . . . . . . . . . . . . . . . . . . . . . . . . . 1,599 --- 1,599
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 5,062 --- 5,062
Unamortized pre-opening expenses . . . . . . . . . . . . . . . . . . . . . --- (189) (189)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- (260) (260)
Total Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,896 (449) 6,447
Unamortized intangible assets. . . . . . . . . . . . . . . . . . . . . . . 328 (1,130) (802)
Investment related basis differences . . . . . . . . . . . . . . . . . . . --- (5,186) (5,186)
Excess tax over book depreciation and
sale-leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . 3,203 (13,294) (10,091)
Deferred compensation and pension expense. . . . . . . . . . . . . . . . . 1,298 --- 1,298
Reserves and accrued expenses. . . . . . . . . . . . . . . . . . . . . . . 346 --- 346
AMT and targeted jobs tax credit
carryforward. . . . . . . . . . . . . . . . . . . . . . . . . . 5,487 --- 5,487
Total Noncurrent. . . . . . . . . . . . . . . . . . . . . . . . . . . 10,662 (19,610) (8,948)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,558 $(20,059) $ (2,501)
</TABLE>
42
<PAGE>
NOTE 8 - INCOME TAXES (continued)
The Company has tax carryforwards at December 25, 1994 expiring as
follows:
<TABLE>
<CAPTION>
Net Targeted
Operating Jobs Tax Tip
Expiration Contributions Loss Credit Credit
- ---------- --------------- ---------------------- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
1995 . . . . . . . . . . . . . . $ 180 $ --- $ --- $ ---
1996 . . . . . . . . . . . . . . 41 --- --- ---
1997 . . . . . . . . . . . . . . 536 --- --- ---
1998 . . . . . . . . . . . . . . 703 --- --- ---
1999 . . . . . . . . . . . . . . 779 --- --- ---
2003 . . . . . . . . . . . . . . --- --- 330 ---
2004 . . . . . . . . . . . . . . --- 13 403 ---
2005 . . . . . . . . . . . . . . --- 135 304 ---
2006 . . . . . . . . . . . . . . --- 332 501 ---
2007 . . . . . . . . . . . . . . --- 8,609 714 ---
2008 . . . . . . . . . . . . . . --- 12,131 159 ---
2009 . . . . . . . . . . . . . . --- 1,143 489 589
Total. . . . . . . . . . . . . . $ 2,239 $ 22,363 $ 2,900 $ 589
</TABLE>
The use of these carryforwards is limited to future taxable income.
Alternative minimum tax credits total $2,222,000 and may be carried forward
indefinitely.
43
<PAGE>
NOTE 8 - INCOME TAXES (continued)
The overall (benefit) provision for income taxes, during 1994, 1993
and 1992 is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended December 25, 1994
--------------------------------------------
Federal State and local Total
---------- --------------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . .$ --- $ --- $ ---
Net benefit. . . . . . . . . . . . . . . . . . . . . . . . . . .$ --- $ --- $ ---
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 26, 1993
--------------------------------------------
Federal State and local Total
---------- --------------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,946) $ (890) $ (5,836)
Discontinued operations:
Gain on disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,717 --- 2,717
Net benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,229) $ (890) $ (3,119)
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1992
--------------------------------------------
Federal State and local Total
---------- --------------- ------
(Dollars in thousands)
<S> <C> <C> <C>
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 420 $ (146) $ 274
Extraordinary loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,160) (10) (6,170)
Cumulative effect of adopting
Statement 112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (365) --- (365)
Net benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,105) $ (156) $ (6,261)
</TABLE>
44
<PAGE>
NOTE 9 - LEASE COMMITMENTS
The Company leases certain of its restaurant locations under long-term
lease arrangements. Lease terms generally range from 10 to 25 years and
normally contain renewal options ranging from 5 to 15 years, but do not
contain purchase options. The Company is generally obligated for the cost
of property taxes and insurance. Some of these leases contain contingent
rental clauses based on a percentage of revenue. The building portions of
such leases are capitalized and the land portions are accounted for as
operating leases. Contingent rentals on capital leases in continuing
operations were $389,000, $526,000 and $581,000 during 1994, 1993 and 1992,
respectively.
Rent expense under operating leases included in continuing operations
is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- --------------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
Land and buildings:
Minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,918 $ 5,184 $ 5,084
Contingent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 686 714 840
5,604 5,898 5,924
Equipment leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,386 2,124 1,687
$ 7,990 $ 8,022 $ 7,611
</TABLE>
A summary of future minimum lease payments under capital leases,
non-cancelable operating leases, and leases reserved for in the provision
for restructuring recorded as of the fourth quarter of 1993 with remaining
terms in excess of one year at December 25, 1994 follows:
<TABLE>
<CAPTION>
Capital Operating Reserved
Leases Leases Leases
---------- --------------- ----------
(Dollars in thousands)
<S> <C> <C> <C>
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,268 $ 7,267 $ 1,206
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,157 6,863 1,216
1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011 6,578 1,177
1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,706 6,177 941
1999. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,279 5,257 931
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,331 24,233 4,948
30,752 56,375 10,419
Less interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,365 --- ---
$ 17,387 $ 56,375 $10,419
</TABLE>
Future minimum lease payments on operating leases in continuing
operations have been reduced for sublease rental income of approximately
$158,000 to be received in the future under non-cancelable subleases.
45
<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Several of the Company's reserved area agreements include expansion
schedules requiring it to develop a minimum number of Shoney's restaurants
in the reserved areas over a defined period of time. Pursuant to these
agreements, the Company is required to open a minimum of 36 Shoney's
restaurants through October 6, 2004. In 1991, the Company entered into an
agreement with Shoney's, Inc., to develop 38 new Captain D's restaurants
over 20 years, at the approximate rate of two per year. The Company has
constructed eight restaurants with respect to this agreement.
During 1994, the Company entered into a long-term purchase commitment
to purchase 8 million pounds of french fries, annually, over a two year
period beginning on December 1, 1994 through November 30, 1996. The total
estimated cost related to this commitment totals approximately $5,800,000.
As of December 25, 1994, approximately 570,000 pounds, or $208,000, was
purchased under the current contract.
NOTE 11 - LITIGATION
Maxcell Telecom Plus, Inc., et al., v. McCaw Cellular Communications, Inc.,
et al.
On November 1, 1993, the Company and its wholly-owned subsidiary,
Maxcell Telecom Plus, Inc., filed a complaint in the Circuit Court of the
Fifteenth Judicial Circuit in and for Palm Beach County, Florida. The
complaint against McCaw Cellular Communications, Inc. ("McCaw"), Charisma
Communications Corp. ("Charisma") and various related parties, relates to
McCaw's failure to disclose the existence of a side agreement between McCaw
and Charisma to share in the net profits from the resale of certain
cellular properties which were sold by the Company to McCaw. The Company
seeks recision of the sales contract and damages based upon the defendant's
alleged fraudulent misrepresentation, breach of fiduciary duty,
conspiracies and tortious interference with contracts. The Company's
attorneys are unable at this time to state the likelihood of a favorable
outcome.
Reading Company and James J. Cotter v. TPI Enterprises, Inc.
On March 7, 1995, a civil action captioned James J. Cotter v. TPI
Enterprises, Inc., 95 Civ. 1579 was filed in the United States District
Court for the Southern District of New York. The plaintiffs allege inter
alia breach of contract and seek damages of $1,250,000 plus interest,
punitive damages and attorney's fees in connection with the sale to a
subsidiary of American Multi-Cinema, Inc. of TPI Entertainment, Inc.'s
interest in Exhibition Enterprises Partnership in April 1991. The
Company's attorneys are unable at this time to state the likelihood of an
unfavorable outcome.
Other
The Company and its subsidiaries are defendants in various lawsuits
arising in the ordinary course of business. It is the opinion of the
management of the Company that the outcome of such litigation will not have
a material adverse effect on the consolidated financial statements.
46
<PAGE>
NOTE 12 - SHAREHOLDERS' EQUITY
Stock Option Plans
Officers and other key employees have been granted options to purchase
common shares under non- qualified stock option plans adopted in 1982,
1983, 1984 and 1992. In addition, 165,000 shares of the Company's common
stock are reserved under the 1992 stock option plan for non-employee
directors. At December 25, 1994, an aggregate of 3,127,360 common shares
were reserved under these plans. The number of shares available for future
grants was 890,000 at December 25, 1994. Options are generally granted at
the market price on the date of grant and generally become exercisable in
20% increments over a five year period and expire ten years from the date
of grant. At December 25, 1994, options were exercisable to purchase
1,386,920 shares at prices ranging from $5.00 to $10.88. The Company's
stock option transactions are summarized as follows:
Number Exercise Price
of Options per Option
-------------- -----------------
Outstanding at December 31, 1991 . . . . . . . 1,831,600 $5.00 - $7.00
Granted . . . . . . . . . . . . . . . . . 1,631,900 $6.63 - $8.38
Exercised . . . . . . . . . . . . . . . . (2,000) $6.25
Cancelled or lapsed . . . . . . . . . . . (918,750) $6.25 - $7.00
Outstanding at December 31, 1992 . . . . . . . 2,542,750 $5.00 - $8.38
Granted . . . . . . . . . . . . . . . . . 57,500 $9.38 - $10.88
Exercised . . . . . . . . . . . . . . . . (426,140) $5.00 - $8.38
Cancelled or lapsed . . . . . . . . . . . (29,850) $6.25 - $8.38
Outstanding at December 26, 1993 . . . . . . . 2,144,260 $5.00 - $10.88
Granted . . . . . . . . . . . . . . . . . 117,500 $9.18 - $9.75
Exercised . . . . . . . . . . . . . . . . (6,650) $6.25 - $7.00
Cancelled or lapsed . . . . . . . . . . . (17,750) $6.25 - $8.38
Outstanding at December 25, 1994 . . . . . . . 2,237,360 $5.00 - $10.88
The Company has warrants outstanding at December 25, 1994 to purchase
1,000,000 shares of the Company's common stock at $11 per share.
47
<PAGE>
NOTE 12 - SHAREHOLDERS' EQUITY (continued)
Employee Stock Purchase Plan
On August 16, 1989, the Company adopted the 1989 Employee Stock
Purchase Plan (the "Employee Plan") pursuant to which up to 500,000 common
shares of the Company may be purchased at 85% of the fair market value of
common shares on the first or last business day of each of thirteen
purchase periods. This Employee Plan will terminate on April 16, 1995. On
December 16, 1994, the Company and certain subsidiaries adopted the 1995
Employee Stock Purchase Plan (the new Employee Plan) pursuant to which
1,000,000 common shares of the Company may be purchased at 85% of the fair
market value of common shares on the first or last business day of each of
thirteen purchase periods. The new Employee Plan is open to all active
adult employees of the Company and Restaurants who have been employed for
at least six months, customarily work more than 20 hours per week and more
than five months per year, and are not directors or 5% shareholders of the
Company or any subsidiary, as defined in the Employee Plan. Employees can
designate up to 10% of their compensation for the purchase of common
shares, which is consistent with the prior plan. During 1994, 1993 and
1992, 90,932, 73,419 and 83,394 shares, respectively, were issued under the
Employee Plan at prices ranging from $3.77 to $8.29 per Common Share in
1994, $6.91 to $9.14 per common share in 1993 and $4.78 to $6.59 per common
share in 1992. Aggregate purchases were approximately $532,000, $582,000
and $444,000 in 1994, 1993 and 1992, respectively.
NOTE 13 - EMPLOYMENT AGREEMENTS, DEFERRED COMPENSATION AND RETIREMENT
PLAN Employment Agreements
The Company has agreements with two executive officers which expire at
various dates through January 13, 1999. The aggregate minimum commitment
for future salaries under these agreements is approximately $1,855,000.
Additionally, three key employees of Restaurants are covered by agreements
with two expiring on January 1, 1996 and one containing a self-renewing
term of three years. The aggregate minimum commitment for future salaries
under Restaurants' agreements is $902,000. In addition to salaries, the
Company will pay minimum annual bonuses in connection with the above
agreements of $127,000. The Company also is required to pay incentive
bonuses equal to an aggregate of 4.2% of the annual increase in operating
income over the prior year and $44,000 for each percentage point increase,
or portion thereof, in the Company's same store sales. Additional bonuses
are at the discretion of the Board of Directors. All of the above
agreements provide severance benefits in the event of a change of control
or an involuntary termination of the officer or key employee. The maximum
contingent liability related to these severance benefits at December 25,
1994 was $2,904,000.
The Company also has an agreement with Robert A. Kennedy which
stipulates that the Company will pay Mr. Kennedy, upon a favorable outcome
of the courts, .50% or 1% of the gross proceeds relating to the McCaw
Cellular Communications, Inc. lawsuit. See further discussion of the
lawsuit included in Note 11.
In addition, the 1994 results of operations include a charge of
$1,600,000 resulting from the retirement of the Company's Chairman,
effective January 31, 1995. The provision includes all amounts due under
his current employment contracts. The agreement also stipulates that the
Company will pay the former Chairman of the Board, upon a favorable outcome
of the courts, 3% or 5% of the gross proceeds relating to the McCaw
Cellular Communications, Inc. lawsuit. See further discussion of the
lawsuit included in Note 11.
Deferred Compensation Agreements
Deferred compensation of $1,619,000 and $2,382,000 included in other
liabilities at December 25, 1994 and December 26, 1993, respectively,
relates to agreements with two former officers of Restaurants. Due to
interest rate fluctuations occuring at the measurment date, the Company
recorded a $913,000 charge to operations and a $562,000 increase in
operations during the fourth quarter of 1993 and 1994, respectively.
48
<PAGE>
NOTE 13 - EMPLOYMENT AGREEMENTS, DEFERRED COMPENSATION AND RETIREMENT PLAN
(continued)
Retirement Plan
In December 1993, the Board of Directors authorized the termination of
the Company's non-qualified retirement plan for certain senior executives.
Prior to December 31, 1992, the plan had four participants selected by the
Board of Directors to participate in the plan. Three participants became
eligible during 1992 to begin receiving retirement benefits under the early
retirement provisions of the plan. In February 1993, one of these
participants informed the Company of his intentions to retire prior to the
end of 1993. The Company paid a lump sum benefit payment to this officer of
$1,850,000 during March 1993. Operations was charged $1,148,000 for the
year ended December 31, 1992 in connection with this curtailment. Upon
termination of the plan, the Company made total lump sum benefit payments
of $4,225,000 to the three remaining participants in the plan. These
payments were determined through negotiations with the participants and
were less than the aggregate actuarial present value of the retirement
benefits otherwise payable under the plan. This termination resulted in a
charge to operations of $1,220,000 during the year ended December 26, 1993.
Net periodic pension cost for the fiscal years ended December 26, 1993
and December 31, 1992 consists of the following:
1993 1992
-----------------------
(Dollars in thousands)
Service cost - benefits earned during the period . . . $ 254 $ 282
Interest cost on projected benefit obligations . . . . 335 343
Amortization of unrecognized prior service costs . . . 195 261
Effect of curtailment and settlements. . . . . . . . . 1,220 1,148
-------- ---------
Net periodic pension costs . . . . . . . . . . . . . . $ 2,004 $ 2,034
======== =========
Assumed rates of increase in compensation levels . . . 6.0% 6.0%
======== =========
Assumed discount rate. . . . . . . . . . . . . . . . . 6.0% 8.0%
======== =========
NOTE 14 - RELATED PARTY TRANSACTIONS
Restaurants
On July 21, 1993, the Company, through a wholly-owned subsidiary,
acquired the stock of a company which operated three Shoney's restaurants,
including one owned and two leased locations. Included in the acquisition
were the exclusive rights to operate Shoney's restaurants in the
surrounding northern Palm Beach County, Florida area. The purchase price
of $3,860,000 included the issuance of 94,300 shares of the Company's
common stock at $9.49 per share, the weighted average price for the prior
twenty days. In conjunction with this transaction, the Company purchased
the land and building at one of the leased restaurant locations for
$1,240,000. The President and Chief Executive Officer of the Company was a
20% shareholder of the acquired company and had a 50% interest in the land
and building the Company purchased. The Company engaged the services of an
independent appraisal company to review the fairness of the transaction.
On January 19, 1993, Restaurants purchased an airplane from a corporation
owned by the President and Chief Executive Officer of the Company for
$650,000. Prior to this purchase, Restaurants leased the airplane for
approximately $87,000 during 1992. In addition, Resturants paid chartering
fees and expenses to the corporation of approximately $42,000 during 1992.
The cost of the charter arrangements and the lease arrangement were
comparable to similar arrangements available from unrelated third parties.
A mortgage on the airplane was obtained in 1994.
49
<PAGE>
NOTE 14 - RELATED PARTY TRANSACTIONS (continued)
Exhibition Enterprises Partnership
On May 28, 1993, the Company completed the sale of its 50% interest in
the Partnership to American Multi-Cinema, Inc. ("AMC"), the parent company
of Entertainment's partner in the Partnership and the original owner of 56
of the 57 theaters owned by the Partnership, for $17,500,000. In addition,
AMC retired the bank loan owed by the Partnership, which was guaranteed by
Entertainment. For the year ended December 31, 1992, the Partnership
incurred AMC management fees of $8,876,000. For the approximate five month
period prior to the completion of the sale of Entertainment's 50% interest
in the Partnership on May 28, 1993 to AMC, the Partnership incurred AMC
management fees of $3,428,000.
During the period ended May 28, 1993 and the year ended December 31,
1992, the Partnership incurred interest expense on notes payable to AMC of
$2,061,000 and $5,084,000, respectively.
Additionally, during the period ended May 28, 1993 and the year ended
December 31, 1992, the Partnership recorded charges of $133,000 and
$370,000, respectively, for an administrative fee payable to the Company.
50
<PAGE>
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (unaudited)
Summarized quarterly financial information for 1994 and 1993 reflects
the results of operations of Restaurants as continuing operations and the
Company's interest in theater operations as discontinued operations (Note
3). Restaurants' fiscal year is comprised of fifty-two or fifty-three
weeks divided into four quarters of sixteen, twelve, twelve, twelve or
thirteen weeks, respectively. Both 1994 and 1993 were fifty-two week
years. During the fourth quarter of 1994, the Company recorded $1,600,000
related to the retirement of the Company's Chairman (Note 13), $562,000 for
adjustments to the Company's deferred compensation obligation (Note 13),
and a $1,000,000 reduction to the Company's restructure reserve (Note
2).During 1993, the Company changed its fiscal year from a calendar year
end to Restaurants' fiscal year. During the fourth quarter of 1993, the
Company recorded restructuring charges of $35,082,000 (Note 2). Other
unusual charges during the fourth quarter of 1993 include $7,000,000 for
additions to insurance reserves (Note 7), $1,220,000 for termination of the
Company's retirement plan (Note 13), and $913,000 for adjustments to the
Company's deferred compensation obligation (Note 13). The second and third
quarters of 1993 include gains on the disposal of discontinued operations
of $6,115,000, and $85,000, respectively. The fourth quarter of 1993
includes a loss on the disposal of discontinued operations of $927,000.
First Second Third Fourth
Quarter ended - 1994 Quarter Quarter Quarter Quarter
- -------------------- --------- --------- ---------- -------
(Dollars in thousands, except per share data)
Net sales, previously reported . $87,397 $68,730 $67,325 $63,932
Effect of change in estimate . 1,026 799 761 (2,586)
Net sales, restated . . . . . . 88,423 69,529 68,086 61,346
Gross profit . . . . . . . . . . 10,714 8,474 6,589 4,267
Net income (loss) from
continuing operations . . . . . 847 336 (1,246) (3,654)
Net income (loss). . . . . . . . 847 336 (1,246) (3,654)
Primary earnings per share:
Continuing operations . . . . . 0.04 0.02 (0.06) (0.18)
Net income (loss) . . . . . . . 0.04 0.02 (0.06) (0.18)
Quarter ended - 1993
- --------------------
Net sales. . . . . . . . . . . . $ 85,133 $69,850 $70,326 $64,130
Gross profit . . . . . . . . . . 12,008 10,093 9,355 817
Net income (loss) from
continuing operations . . . . 976 1,125 491 (39,080)
Net income (loss). . . . . . . . 976 7,240 576 (40,007)
Primary earnings per share:
Continuing operations . . . . . 0.05 0.06 0.02 (1.93)
Net income (loss) . . . . . . . 0.05 0.36 0.03 (1.98)
Fully diluted earnings per share:
Continuing operations . . . . . 0.05 0.06 0.02 (1.93)
Net income (loss) . . . . . . . 0.05 0.27 0.03 (1.98)
51
<PAGE>
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (Continued)
The quarters ended April 17, 1994, July 10, 1994, and October 2, 1994
have been restated as indicated above for a change in an accounting
estimate related to the Company's restructuring plan. See Note 2.
Gross profit equals revenues less food, supplies and uniforms,
restaurant labor and benefits, restaurant depreciation and amortization and
other restaurant operating expenses. Net income (loss) per share is
computed separately for each period and, therefore, the sum of such
quarterly per share amounts may differ from the total for the year. The
effect of convertible debentures and stock options on the fully- diluted
earnings per share computation for all of 1994 and for the first, third,
and fourth quarters of 1993 were either antidilutive or did not result in a
material dilution of earnings per share and, therefore, primary and
fully-diluted earnings per share are equivalent.
52
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, accountants during
1994.
PART III
Items 10, 11, 12, and 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
The information required by these Items is omitted because the Company
will file a definitive proxy statement pursuant to Regulation 14A, which
information is herein incorporated by reference as if set out in full.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements Page
-----
The following financial statements of the Company have been filed
under Item 8 hereto:
Independent Auditors' Report. . . . . . . . . . . . . . . . 22
Consolidated Balance Sheets as of December 25, 1994 and
December 26, 1993. . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Operations for each of the Three
Fiscal Years in the Period Ended December 25, 1994 . . . . . 25
Consolidated Statements of Cash Flows for each of the Three
Fiscal Years in the Period Ended December 25, 1994 . . . . . 27
Consolidated Statements of Shareholders' Equity for each of
the Three Fiscal Years in the Period Ended December 25, 1994. 29
Notes to Consolidated Financial Statements. . . . . . . . . 30
2. Financial Statement Schedules Page
----
The following financial statement schedules for the three years
ended December 25, 1994 are filed herewith at the page indicated:
Schedule I -- Condensed Financial Information of the Registrant S-1
Schedule II -- Reserves . . . . . . . . . . . . . . . . . . S-7
53
<PAGE>
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(continued)
The following financial statements and schedules of the Company's
wholly-owned subsidiary, TPI Restaurants, Inc. are filed herewith at the
page indicated:
Page
------
Independent Auditors' Report. . . . . . . . . . . . . . . . W-1
Consolidated Balance Sheets as of December 25, 1994 and
December 26, 1993 . . . . . . . . . . . . . . . . . . . . . W-2
Consolidated Statements of Operations for each of the Three
Fiscal Years in the Period Ended December 25, 1994 . . . . . W-4
Consolidated Statements of Cash Flows for each of the Three
Fiscal Years in the Period Ended December 25, 1994 . . . . . W-5
Consolidated Statements of Stockholder's Equity for each of
the Three Fiscal Years in the Period Ended December 25, 1994 W-7
Notes to Consolidated Financial Statements . . . . . . . . . W-8
Schedule II -- Reserves . . . . . . . . . . . . . . . . . . WS-1
All other schedules have been omitted because they are
inapplicable or the information required is shown in the consolidated
financial statements or the notes thereto.
3. Exhibits
A list of exhibits required to be filed as part of this
report on Form 10-K is set forth in the "Exhibit Index," which immediately
precedes such exhibits, and is incorporated herein by reference.
(b). Reports on Form 8-K.
There were no reports on Form 8-K filed by the Company
during the last quarter of the period covered by this report.
(c). Exhibits
All exhibits required by item 601 are listed on the
accompanying "Exhibit Index" described in (a) 3 above.
(d). Financial Statements of Subsidiary
The financial statements of the Company's wholly-owned
subsidiary, TPI Restaurants, Inc. are filed under (a) 2 above.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
TPI ENTERPRISES, INC.
------------------------
Registrant
Date:
By: /s/ J. GARY SHARP
-----------------------
J. Gary Sharp
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ J. GARY SHARP President and Chief Executive March 27, 1995
- ------------------------- Officer and Director
J. Gary Sharp
/s/ FREDERICK W. BURFORD Executive Vice President, Chief Financial Officer, March 27, 1995
- ------------------------- and Director (Principal
Frederick W. Burford Financial and Accounting Officer)
/s/ DOUGLAS K. BRATTON Director March 27, 1995
- -------------------------
Douglas K. Bratton
/s/ OSWALDO CISNEROS Director March 27, 1995
- -------------------------
Oswaldo Cisneros
/s/ LAWRENCE F. LEVY Director March 27, 1995
- -------------------------
Lawrence F. Levy
/s/ JOHN L. MARION, JR. Director March 27, 1995
- -------------------------
John L. Marion, Jr.
/s/ PAUL JAMES SIU Director March 27, 1995
- -------------------------
Paul James Siu
/s/ EDWIN B. SPIEVACK Director March 27, 1995
- -------------------------
Edwin B. Spievack
/s/ THOMAS M. TAYLOR Director March 27, 1995
- -------------------------
Thomas M. Taylor
</TABLE>
55
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET
December 25, December 26,
---------------- ---------------
1994 1993
---------------- ---------------
(Dollars in thousands)
ASSETS
Current Assets:
Cash and cash equivalents. . . . . $ 11,976 $ 10,637
Deferred tax benefit . . . . . . . 5,666 6,734
Income tax refund. . . . . . . . . 779 3,171
Other current assets . . . . . . . 45 64
-------- --------
Total Current Assets . . . 18,466 20,606
-------- --------
Property and Equipment, net. . . . . 245 291
-------- --------
Other Assets:
Investments in and advances
to subsidiaries, net . . . . . . . 139,924 142,834
Other. . . . . . . . . . . . . . 3 8
-------- --------
139,927 142,842
-------- --------
Total Assets . . . . . . . . . . . $158,638 $163,739
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-trade . . . . . $ 77 $ 40
Accrued expenses and other
current liabilities . . . . . . 2,652 2,311
Income taxes currently payable . 718 649
-------- --------
Total Current Liabilities. 3,447 3,000
-------- --------
Due to subsidiary. . . . . . . . . . 15,104 15,954
-------- --------
Long-term debt . . . . . . . . . . . 66,563 66,725
-------- --------
Deferred income taxes. . . . . . . . 5,663 6,734
-------- --------
Other liabilities. . . . . . . . . . 291 767
Shareholders' Equity: -------- --------
Preferred shares, no par value;
20,000,000 shares authorized;
none issued and outstanding. . . --- ---
Common shares, $.01 par value;
100,000,000 shares authorized;
33,241,118 and 33,118,614 issued . 332 331
Additional paid-in capital . . . . 226,144 225,417
Deficit. . . . . . . . . . . . . . (88,961) (85,244)
-------- --------
137,515 140,504
Less treasury stock, at cost:
12,846,094 common shares in 1994 and 1993 69,945 69,945
-------- --------
Total Shareholders' Equity . . . . . 67,570 70,559
-------- --------
Total Liabilities and Shareholders' Equity . $158,63820 $163,739
-------- --------
See notes to condensed financial statements.
S-1
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
Fiscal Year Ended
-----------------------------------------
December 25, December 26, December 31,
1994 1993 1992
------------- ------------- -----------
(Dollars in thousands)
Revenue:
Management fee income. . . . $2,500 $2,455 $1,714
Interest income. . . . . . 267 428 3,414
Equity in subsidiary earnings. . --- 30 215
Other. . . . . . . . . . . . . . --- --- 381
------ ------ ------
2,767 2,913 5,724
------ ------ ------
Expenses:
Equity in subsidiary losses. . . 2,838 39,348 17,726
General and administrative . . . 3,589 4,803 5,937
Depreciation and amortization. . 57 235 357
Corporate restructuring. . . . . --- 511 (465)
Interest expense . . . . . . . . --- 340 433
------ ------ ------
6,484 45,237 23,988
------ ------ ------
Loss from continuing operations
before income taxes. . . . . . . . (3,717) (42,324) (18,264)
Income tax benefit . . . . . . . . --- 5,836 6,261
------ ------ ------
Loss from continuing operations. . (3,717) (36,488) (12,003)
Discontinued operations:
Gain on disposal, net. . . . . . --- 5,273 ---
------ ------ ------
Loss before cumulative effect
of accounting changes . . . . . (3,717) (31,215) (12,003)
Cumulative effect of accounting
changes. . . . . . . . . . . . . --- --- (2,122)
------ ------ ------
Net loss . . . . . . . . . . . . $(3,717) $(31,215) $(14,125)
======= ======== ========
See notes to condensed financial statements.
S-2
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
-----------------------------------------
December 25, December 26, December 31,
1994 1993 1992
------------- ------------- -----------
(Dollars in thousands)
Cash Flows From Operating Activities:
Net loss . . . . . . . . . . . . . $(3,717) $(31,215) $(14,125)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization. . 57 235 357
Equity in subsidiary losses. . . 2,838 39,318 17,511
Equity in subsidiary earnings
from discontinued operations . . --- (7,990) ---
Deferred income taxes. . . . . . (3) (2,444) (5,566)
Cumulative effect of
accounting changes. . . . . . . --- --- 2,122
Changes in assets and liabilities,
net of effects of discontinued
operations:
Income tax refund . . . . . . . 2,392 (3,171) ---
Other current assets . . . . . . 19 1,655 4,609
Intangible pension asset. . . . --- 330 50
Other . . . . . . . . . . . . . 5 15 ---
Accounts payable-trade. . . . . 37 (50) (283)
Accrued expenses and other
current liabilities. . . . . . 341 (474) (742)
Income taxes currently payable. 69 (1,016) (647)
Other liabilities . . . . . . . (476) (1,996) 89
-------- --------- -------
Net cash provided by (used in)
operating activities . . . . . $ 1,562 $ (6,803) $ 3,375
-------- --------- -------
S-3
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(Continued)
Fiscal Year Ended
------------------------------------------
December 25, December 26, December 31,
1994 1993 1992
------------- ------------- -----------
(Dollars in thousands)
Cash flows from investing
activities:
Investment in and advances
to subsidiaries, net. . . . . . $ 72 $(32,926) $(102,576)
Acquisition of property and
equipment. . . . . . . . . . . . (11) --- (391)
Dividends received from subsidiary . --- 5,254 9,000
Disposition of property and
equipment. . . . . . . . . . . . . --- --- 386
-------- --------- ---------
Net cash provided by (used in)
investing activities. . . . . . . 61 (27,672) (93,581)
-------- --------- ---------
Cash flows from financing activities:
Payment of advances from subsidiaries . (850) --- ---
Proceeds of 8 1/4% Convertible
Subordinated Debentures . . . . . . . --- --- 51,750
Restricted cash deposits . . . . . . . --- --- 11,700
Common shares issued . . . . . . . . . 566 17,204 457
Proceeds from 5% Convertible Senior
Subordinated Debentues. . . . . . . . --- 15,000 ---
-------- --------- ---------
Net cash provided by (used in)
financing activities. . . . . . . . . (284) 32,204 63,907
-------- --------- ---------
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . 1,339 (2,271) (26,299)
Cash and cash equivalents,
beginning of period . . . . . . . . 10,637 12,908 39,207
-------- --------- ---------
Cash and cash equivalents,
end of period . . . . . . . . . . . $ 11,976 $10,637 $12,908
======== ======= =======
Supplemental Disclosure of Cash
Flow Information:
Non-cash transactions:
Conversion of 8 1/4% Subordinated
Debentures . . . . . . .. . . . $ 165 $ --- $ ---
Cash payments (refunds) during
the year for:
Income taxes . . . . . . . . . $(2,164) $2,810 $(5,046)
See notes to condensed financial statements.
S-4
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except share data)
<TABLE><CAPTION>
Common Shares Issued Additional
Number of Paid-in Treasury
Shares Amount Capital Deficit Stock Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 . . 30,932,295 $ 309 $ 206,858 $ (39,904) $ (69,945) $ 97,318
Issue of shares pursuant to
employee stock plans . . . . 85,394 1 456 --- --- 457
Net Loss . . . . . . . . . . . --- --- --- (14,125) --- (14,125)
Balance, December 31, 1992 . . 31,017,689 310 207,314 (54,029) (69,945) 83,650
Investment in Company by the
Airlie Group L.P.. . . . . . 1,503,220 15 14,030 --- --- 14,045
Issue of shares in connection
with acquisition.. . . . . . 94,300 1 894 --- --- 895
Issue of shares pursuant to
employee stock plans . . . . 499,559 5 3,154 --- --- 3,159
Conversion of subordinated
debentures . . . . . . . . . 3,846 --- 25 --- --- 25
Net loss . . . . . . . . . . . --- --- --- (31,215) --- (31,215)
Balance, December 26, 1993 . . 33,118,614 331 225,417 (85,244) (69,945) 70,559
Issue of shares pursuant to
employee stock plans . . . . 97,582 1 575 --- --- 576
Conversion of subordinated
debentures . . . . . . . . . 24,922 --- 152 --- --- 152
Net loss . . . . . . . . . . . --- --- --- (3,717) --- (3,717)
Balance, December 25, 1994 . . 33,241,118 $ 332 $ 226,144 $ (88,961)$ (69,945) $ 67,570
See notes to condensed financial statements.
</TABLE>
S-5
<PAGE>
Schedule I
TPI ENTERPRISES, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Note 1 - Accounting Policies
The investments in the Company's subsidiaries are carried at the
Company's equity in the subsidiary which represents amounts invested less the
Company's equity in the earnings and losses to date. Significant intercompany
balances and activities have not been eliminated in this unconsolidated
financial information.
Certain information and footnote disclosures normally included in
financial statements prepared in conformity with generally accepted accounting
principals have been condensed or omitted. Accordingly, these financial
statements should be read in conjunction with the Company's consolidated
financial statements.
Note 2 - Cash Dividend Paid by Subsidiary
Subsequent to the sale of its interest in the Partnership, the
Company's wholly-owned subsidiary, TPI Entertainment, Inc., paid a dividend of
$5,254,000 to the Company. On September 30, 1992, the Company's wholly-owned
subsidiary, Maxcell Telecom Plus, Inc., paid a dividend of $9,000,000 to the
Company.
S-6
<PAGE>
<TABLE><CAPTION>
Schedule II
TPI ENTERPRISES, INC. AND SUBSIDIARIES
RESERVES
(Dollars in thousands)
Additions
Balance at Additions charged to Deductions Balance
beginning charged to other from at end of
of period operations accounts reserves period
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year Ended December 25, 1994: $ --- $ 59 $ --- $ --- $ 59
Year Ended December 26, 1993: $ --- $ --- $ --- $ --- $ ---
Year Ended December 31, 1992: $ 28 $ --- $ --- $ 28 $ ---
ALLOWANCE FOR UNIT CLOSINGS:
Year Ended December 25, 1994: $ 18,695 $ --- $ --- $ 6,265(1) $ 12,430
Year Ended December 26, 1993: $ 3,773 $ 17,286 $ --- $ 2,364 $ 18,695
Year Ended December 31, 1992: $ --- $ 3,773 $ --- $ --- $ 3,773
(1) Represents deductions for the write-off of assets and changes in assumptions in connection with the
Company's restructure plan. See Note 2.
</TABLE>
S-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of TPI Restaurants, Inc.:
We have audited the accompanying consolidated balance sheets of TPI
Restaurants, Inc., (a wholly-owned subsidiary of TPI Enterprises, Inc.) and
its subsidiaries as of December 25, 1994 and December 26, 1993, and the
related consolidated statements of operations, stockholder's equity and
cash flows for each of the three fiscal years in the period ended December
25, 1994. Our audits also included the financial statement schedules
listed in the Index at Item 14 (a)(2). These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of TPI Restaurants, Inc. and
its subsidiaries as of December 25, 1994 and December 26, 1993, and the
results of their operations and their cash flows for each of the three
fiscal years in the period ended December 25, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1992
the Company changed its method of accounting for income taxes and
postemployment benefits to conform with Statements of Financial Accounting
Standards No. 109 and 112. The Company has reflected the cumulative effect
of these changes in 1992.
/s/ Deloitte & Touche LLP
March 10, 1995 Memphis, Tennessee
W-1
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 25 December 26
1994 1994
----------- ---------
(Dollars in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 4,832 $ 5,675
Accounts receivable - trade (net of allowance for doubtful
accounts of $59 in 1994). . . . . . . . . . . . . . . . . . . 805 939
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . 11,969 11,424
Deferred tax benefit. . . . . . . . . . . . . . . . . . . . . . 3,611 1,346
Other current assets. . . . . . . . . . . . . . . . . . . . . . 1,566 2,220
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . 22,783 21,604
---------- ----------
PROPERTY AND EQUIPMENT (at cost) . . . . . . . . . . . . . . . . . . 239,991 231,848
Less accumulated depreciation and amortization. . . . . . . . . 70,243 57,701
Less allowance for unit closings. . . . . . . . . . . . . . . . 12,430 18,695
---------- ----------
157,318 155,452
---------- ----------
OTHER ASSETS:
Goodwill (net of accumulated amortization of $8,152 in 1994
and $6,873 in 1993). . . . . . . . . . . . . . . . . . . . . . 37,675 38,954
Other intangible assets (net of accumulated amortization of
$5,144 in 1994 and $3,420 in 1993) . . . . . . . . . . . . . 19,681 21,867
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609 901
---------- ----------
57,965 61,722
$ 238,066 $ 238,778
========== ==========
</TABLE>
See notes to consolidated financial statements.
W-2
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
December 25 December 26
1994 1994
----------- ---------
(Dollars in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . . . . . . . $ 3,725 $ 1,728
Accounts payable - trade. . . . . . . . . . . . . . . . . . . 15,488 19,870
Accrued expenses and other current liabilities. . . . . . . . 31,656 24,759
---------- ----------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . . . 50,869 46,357
---------- ----------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 107,721 106,773
---------- ----------
RESERVE FOR RESTRUCTURING. . . . . . . . . . . . . . . . . . . . . 14,735 19,508
---------- ----------
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . 3,611 1,346
---------- ----------
PAYABLE TO PARENT. . . . . . . . . . . . . . . . . . . . . . . . . 14,872 15,177
---------- ----------
OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . 1,619 2,382
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Series A preferred stock ($40,000 aggregate liquidation
preference). . . . . . . . . . . . . . . . . . . . . . . . --- ---
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . --- ---
Additional paid-in capital. . . . . . . . . . . . . . . . . . 115,216 115,064
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . (70,577) (67,829)
---------- ----------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . . . . . . . 44,639 47,235
---------- ----------
$ 238,066 $ 238,778
========== ==========
</TABLE>
See notes to consolidated financial statements.
W-3
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
December 25 December 26 December 26
1994 1994 1994
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Restaurant revenues. . . . . . . . . . . . . . . . .. . $ 287,384 $ 289,439 $ 277,390
--------- --------- ---------
Costs and expenses:
Food, supplies and uniforms . . . . . . . . . . . 102,831 101,980 95,957
Restaurant labor and benefits . . . . . . . . .. . 87,467 88,693 80,911
Restaurant depreciation and amortization. . . . . . 14,138 13,632 11,466
Other restaurant operating expenses . . . . . .. . 52,727 51,291 44,917
General and administrative expenses . . . . . .. . 20,256 23,504 21,893
Restructuring charges . . . . . . . . . . . . . . . . (986) 34,571 4,051
Other, net. . . . . . . . . . . . . . . . . . .. . 3,440 3,275 2,753
--------- --------- ---------
279,873 316,946 261,948
--------- --------- ---------
Operating income (loss). . . . . . . . . . . . . . .. . 7,511 (27,507) 15,442
--------- --------- ---------
Other income and expenses:
Interest income . . . . . . . . . . . . . . . . . 66 112 378
Interest expense. . . . . . . . . . . . . . . .. . . (10,325) (10,203) (14,667)
Other . . . . . . . . . . . . . . . . . . . . .. - (109) 321
--------- --------- ---------
(10,259) (10,190) (13,968)
--------- --------- ---------
Income (loss) before income taxes. . . . . . . . . .. (2,748) (37,697) 1,474
Income tax expense . . . . . . . . . . . . . . . . .. . - 85 669
--------- --------- ---------
Income (loss) before extraordinary item and cumulative
effect of accounting changes . . . . . . . . . . . . (2,748) (37,782) 805
--------- --------- ---------
Extraordinary item - loss on early extinguishment of
debt, net of income taxes. . . . . . . . . . . . . . - - (16,069)
Cumulative effect of accounting changes, net of
income taxes. . . . . . . . . . . . . . . . . . . . . - - (2,462)
--------- --------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . $ (2,748) $ (37,782) $ (17,726)
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
W-4
<PAGE>
TPI RESTAURANTS, INC. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
December 25 December 26 December 26
1994 1994 1994
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . $ (2,748) $ (37,782) $ (17,726)
Adjustments to reconcile net loss to net cash
provided by operating activities::
Depreciation and amortization . . . . . . . . . . 19,158 17,810 14,775
Deferred income taxes . . . . . . . . . . . . --- --- (1,134)
Reserves for restructuring . . . . . . . . . . . . . . (667) 34,571 838
Extraordinary item - loss on early
extinguishment of debt . . . . . . . . . . . . . . . --- --- 16,069
Cumulative effect of accounting changes . . . . . . . --- --- 2,462
Changes in assets and liabilities:
Accounts receivable trade . . . . . . . . . . . . . . 134 494 28
Inventories. . . . . . . . . . . . . . . . . . . . . . (545) 3,488 (2,013)
Other current assets . . . . . . . . . . . . . . . . . 654 329 960
Other assets . . . . . . . . . . . . . . . . . . . . . 754 (1,415) (187)
Accounts payable trade . . . . . . . . . . . . . . . . (4,382) 4,854 732
Accrued expenses and other current liabilities. . . . 3,725 4,911 (905)
Reserves for restructuring . . . . . . . . . . . . . . (3,172) (4,136) ---
Other liabilities . . . . . . . . . . . . . . . . . . (763) 840 (110)
--------- ----------- ----------
Total adjustments. . . . . . . . . . . . . . . . . . 14,896 61,746 31,515
--------- ----------- ----------
Net cash provided by operating activities. . . . . . . 12,148 23,964 13,789
--------- ----------- ----------
Cash flows from investing activities:
Acquisition of property and equipment. . . . . . . . . (19,391) (43,867) (23,216)
Acquisition of business, net of cash received. . . . . --- (4,660) (4,525)
Disposition of property and equipment. . . . . . . . . 5,054 5,230 2,872
Proceeds from sale-leaseback transactions. . . . . . . --- --- 1,254
Other. . . . . . . . . . . . . . . . . . . . . . . . . (27) (199) (1,026)
--------- ----------- ----------
Net cash used in investing activities . . . . . . $ (14,364) $ (43,496) $ (24,641)
--------- ----------- ----------
</TABLE>
W-5
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
December 25 December 26 December 26
1994 1994 1994
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from financing activities::
Net proceeds from (payments on) Credit Facilities. . . . $ 3,400 $ (18,550) $ 35,545
Contribution from parent . . . . . . . . . . . . . . . . --- 17,065 47,079
Borrowings from (payments to) parent . . . . . . . . . . (305) 15,177 ---
Net payments on lines of credit . . . . . . . . . . . .. --- --- (4,250)
Net proceeds of 8 1/4% Debentures . . . . . . . . . . .. --- --- 47,948
Repurchase of 14 1/4% Subordinated Notes. . . . . . . .. --- --- (98,526)
Proceeds from 5% Senior Debentures . . . . . . . . . . . --- 15,000 ---
Other long term debt payments . . . . . . . . . . . . .. (1,722) (7,209) (1,789)
--------- ----------- ----------
Net cash provided by financing activities. . . . . . . . 1,373 21,483 26,007
--------- ----------- ----------
Net cash provided by (used in) operations before
extraordinary item . . . . . . . . . . . . . . . . . .. (843) 1,951 15,155
--------- ----------- ----------
Cash used by extraordinary item. . . . . . . . . . . . . . --- --- (15,596)
Net increase (decrease) in cash and cash equivalents . . . (843) 1,951 (441)
Cash and cash equivalents, beginning of year . . . . . . . 5,675 3,724 4,165
--------- ----------- ----------
Cash and cash equivalents, end of year . . . . . . . . . . $ 4,832 $ 5,675 $ 3,724
========= =========== ==========
Supplemental Disclosure of Cash Flow Information:
Non-cash transactions:
Capitalized lease obligations entered into . . . . . . . $ 1,430 $ 3,241 $ 2,331
Conversion of 8 1/4% Subordinated Debentures . . . . . . . 162 --- ---
Liabilities assumed in acquisitions of properties . . . . --- 1,819 4,975
Common stock issued in acquisitions of
properties . . . . . . . . . . . . . . . . . . . . . . . --- 895 ---
Cash payments during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,301 $ 9,764 $ 13,513
Interest capitalized . . . . . . . . . . . . . . . . . . . 77 202 172
</TABLE>
See notes to consolidated financial statements.
W-6
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Additional
Preferred Common Pain-in
Stock Stock Stock Deficit Total
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, December 29, 1991 . . . $ --- $ --- $ 50,000 $(12,321) $37,679
Stockholder contribution . . . . --- --- 47,009 --- 47,079
Net loss . . . . . . . . . . . . --- --- --- (17,726) (17,726)
Balance, December 27, 1992 . . . --- --- 97,079 (30,047) 67,032
Stockholder contribution . . . . --- --- 17,985 --- 17,985
Net loss . . . . . . . . . . . . --- --- --- (37,782) (37,782)
Balance, December 26, 1993 . . . --- --- 115,064 (67,829) 47,235
Stockholder contribution . . . . --- --- 152 --- 152
Net loss . . . . . . . . . . . . --- --- --- (2,748) (2,748)
Balance, December 25, 1994 . . . $ --- $ --- $ 115,216 $(70,577) $44,639
</TABLE>
See notes to consolidated financial statements.
W-7
<PAGE>
TPI RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of TPI
Restaurants, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation. The Company maintains its books on a 52-53 week fiscal year
ending on the last Sunday in December.
Cash and Cash Equivalents
The Company considers cash on hand, deposits in banks, certificates of
deposit and short-term marketable securities with maturities of 90 days or
less when purchased, as cash and cash equivalents.
The Company utilizes a cash management system under which cash
overdrafts exist in the book balances of its primary disbursing accounts.
These overdrafts represent the uncleared checks in the disbursing accounts.
The cash amounts presented in the consolidated financial statements
represent balances on deposit at other locations prior to their transfer to
the primary disbursing accounts. Uncleared checks of $7,229,000 and
$7,393,000 are included in accounts payable at December 25, 1994 and
December 26, 1993, respectively.
Inventories
Inventories, consisting of food items, beverages and supplies, are
stated at the lower of weighted average cost (which approximates first-in,
first-out) or market.
Preopening Costs
Direct costs incidental to the opening of new restaurants are
capitalized and amortized over the restaurants' first year of operation.
Depreciation and Amortization
Depreciation and amortization of property and equipment is provided on
the straight-line method over the estimated useful lives of the assets or,
in the case of leasehold improvements and certain property under capital
leases, over the lesser of the useful life or the lease term.
Goodwill related to the acquisition of the Company by TPI Enterprises,
Inc. is amortized on a straight-line basis over a thirty-six year period.
The costs of franchise license agreements which govern the individual
Shoney's and Captain D's restaurants and reserved area agreements are
amortized on a straight-line basis over the lives of the related franchise
license agreements, up to 40 years.
Postemployment Benefits
The Company recognizes the cost of postemployment benefits on an
accrual basis in accordance with Financial Accounting Standard 112,
"Employers' Accounting for Postemployment Benefits." The adoption of this
statement during the year ended December 27, 1992 resulted in an increase
of $79,000 in 1992 income before extraordinary item and cumulative effect
of account charges. The cumulative effect on years prior to December 30,
1991 of $968,000 is included in 1992 net income.
W-8
<PAGE>
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Income Taxes
The Company's income taxes are computed in accordance
with a tax sharing and payment agreement with its parent company.
Effective December 30, 1991, the Company adopted Financial Accounting
Standard No. 109, "Accounting for Income Taxes", which requires an asset
and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually
for differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities. Prior to 1992, income taxes were
accounted for under Accounting Principles Board Opinion No. 11.
The effect of adopting Statement 109 was an increase of $646,000,
relating to income before extraordinary item and cumulative effect of
accounting changes, an increase of $849,000 relating to the extraordinary
item and the cumulative effect of adopting Statement 112. The cumulative
effect of the change on years prior to December 30, 1991 of $1,495,000 is a
decrease in 1992 net income. The adoption of Statement 109 had no effect
on 1992 net income.
Working Capital Deficiency
The Company had a working capital deficiency of $28,086,000 and
$24,753,000 at December 25, 1994 and December 26, 1993, respectively.
The Company does not have significant receivables or inventory and receives
trade credit based upon negotiated terms in purchasing food and supplies.
Because funds available from cash sales are not needed immediately to pay for
food and supplies or to finance receivables or inventory, they may be used for
non-current capital expenditures.
Reclassification
Certain amounts in prior years have been reclassified to conform to the
1994 presentation.
NOTE 2 - RESTRUCTURING CHARGES
The Company approved a restructuring plan as of the end of the fourth
quarter of 1993 which includes closing or relocating 31 of its restaurants
by the end of 1994, not exercising options to renew leases with respect to
an additional 19 of its restaurants upon expiration of the current lease
terms and the restructuring of divisional management as well as
consolidating the Company's corporate office with its parent company's
office. With respect to the restaurants to be closed or relocated, the
Company recorded $19,800,000 of restructuring charges in 1993 consisting
primarily of the write-off of assets and the accrual of lease and other
expenses, net of projected sales proceeds and sublease income. As of
December, 1994, the Company has closed 22 restaurants with plans to close
an additional 4 restaurants during the first half of 1995. During the
fourth quarter of 1994, management determined that improved operations at 5
of the restaurants, previously included in the restructure plan, indicated
the locations should not be closed. Accordingly, the Company reduced its
reserve by approximately $2,500,000 related to these 5 locations. During
1994, the reserve was also charged $3,500,000 for expenditures and asset
write-offs related to the other 26 units.
With respect to the 19 restaurants projected to be closed no later
than the expiration of their current lease terms, the Company determined
that the recoverability of the assets had been permanently impaired, and
accordingly, recorded a charge of $4,500,000 primarily for the write-down
of assets at the end of 1993. During 1994, three of these units were closed
prior to or upon the expiration of their current lease terms. The reserve
was charged approximately $700,000 for the write-down of assets.
W-9
<PAGE>
NOTE 2 - RESTRUCTURING CHARGES (Continued)
With respect to the Company's restructuring of its divisional
management and consolidation of its corporate offices, the Company recorded
approximately $1,800,000 for the cost of moving the Memphis office,
$800,000 for the write-off of assets and accrual of remaining lease
obligations at the Company's present facilities and $1,200,000 for
severance costs and other costs relating to the restructuring of divisional
and corporate overhead. Severance costs included amounts to be paid to
approximately 80 employees at the divisional level and at the Memphis
corporate office who would be terminated as a result of the restructuring
of its divisional management and consolidation of its corporate offices.
During 1994, the Company paid out approximately $1,100,000 related to the
restructure of which $300,000 was for severance.
In addition to the amounts paid, management determined that an
additional $1,200,000 should be provided for the write-off of assets at its
Memphis location. The Company expects to pay the majority of the remaining
relocation obligations during 1995 as the consolidation of the corporate
offices is completed. In addition to these reserves, the Company also
recorded approximately $6,500,000 in the prior year related to units that
were closed prior to 1993 and for the sale of vacant properties. During
1994, the reserve had charges of approximately $1,700,000 resulting from
expenditures and asset write-offs and an increase of $300,000 related to
changes in original estimates for the costs of disposal.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE><CAPTION>
1994 1993
------------- -----------
(Dollars in thousands)
<S> <C> <C>
Owned:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,602 $ 37,434
Buildings . . . . . . . . . . . . . . . . . . . . . . . 52,616 47,553
Leasehold improvements and buildings on leased land . . 51,259 51,981
Equipment and furnishings . . . . . . . . . . . . . . . 74,685 68,823
--------- ---------
214,162 205,791
--------- ---------
Leased:
Buildings . . . . . . . . . . . . . . . . . . . . . . . 23,905 24,116
Equipment . . . . . . . . . . . . . . . . . . . . . . . 1,924 1,941
--------- ---------
25,829 26,057
--------- ---------
Property and equipment, at cost. . . . . . . . . . . . . . . 239,991 231,848
--------- ---------
Less accumulated depreciation and amortization . . . . . . . 70,243 57,701
--------- ---------
Less allowance for unit closings . . . . . . . . . . . . . . 12,430 18,695
--------- ---------
Total property and equipment. . . . . . . . . . . . . . $157,318 $155,452
========= ==========
</TABLE>
Property and equipment with a net book value of approximately
$22,233,000 and $22,681,000 were pledged as collateral for the Company's
debt facilities as of December 25, 1994 and December 26, 1993,
respectively.
Depreciation and amortization are calculated using the straight-line
method and are based on the estimated useful lives of the assets as
follows: buildings, 30 years; equipment and furnishings, 3-15 years; and
leasehold improvements, primarily representing buildings constructed on
leased property, the lesser of the term of the lease or 30 years.
Depreciation and amortization of property and equipment totalled
approximately $14,928,000, $14,048,000 and $12,833,000 during 1994, 1993
and 1992 respectively. In 1994, 1993 and 1992, approximately $1,643,000,
$1,649,000 and $1,844,000, respectively, related to capitalized leases.
Property and equipment includes capitalized interest on construction of
$425,000, $374,000 and $172,000 at December 25, 1994, December 26, 1993 and
December 27, 1992, respectively.
W-10
<PAGE>
NOTE 4 - OTHER INTANGIBLE ASSETS
Other intangible assets consists of the following:
<TABLE><CAPTION>
1994 1993
------------- -----------
(Dollars in thousands)
<S> <C> <C>
Franchise and reserved area rights. . . . . . . . . . $ 17,704 $ 17,729
Deferred debt costs . . . . . . . . . . . . . . . . . 6,175 6,085
Other deferred charges. . . . . . . . . . . . . . . . 946 1,473
--------- ---------
24,825 25,287
========= ===========
Less accumulated amortization . . . . . . . . . . . . 5,144 3,420
--------- ---------
$ 19,681 $ 21,867
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE><CAPTION>
1994 1993
------------- -----------
(Dollars in thousands)
<S> <C> <C>
8 1/4% Convertible Subordinated Debentures,
due 2002. . . . . . . . . . . . . . . . . . . . . . $ 51,563 $ 51,725
5% Senior Convertible Subordinated Debentures,
due 2003 . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000
Credit Facilities . . . . . . . . . . . . . . . . . . . 22,400 19,000
Notes payable, interest rates of 7.75% to 10%, due
through 2007. . . . . . . . . . . . . . . . . . . . . 4,863 4,209
Obligations under capital leases. . . . . . . . . . . . 17,620 18,567
--------- ---------
111,446 108,501
Less: amounts due within one year . . . . . . . . . . . 3,725 1,728
--------- ---------
$ 107,721 $ 106,773
========= =========
</TABLE>
Scheduled annual principal maturities of long-term debt, excluding
capital leases, for the five years subsequent to December 25, 1994, are as
follows: $2,224,000 in 1995; $24,010,000 in 1996; $41,000 in 1997; $46,000
in 1998 and $51,000 in 1999.
Interest expense for 1994, 1993, and 1992 includes interest on
obligations under capital leases of $1,952,000, $2,334,000 and $2,610,000
respectively.
W-11
<PAGE>
NOTE 5 - LONG-TERM DEBT (Continued)
Debentures
On March 19, 1993, the Airlie Group, L.P. and certain related parties
(the "Airlie Group") made an investment in TPI Enterprises, Inc.
("Enterprises") of $30,000,000 including $15,000,000 of 5% Convertible
Senior Subordinated Debentures (the "Senior Debentures"), due 2003, the
issuance of 1,500,000 shares of Enterprises' common stock at $10 per share
and the issuance of warrants to purchase an additional 1,000,000 shares of
common stock at $11 per share. The Senior Debentures are senior to the 8
1/4% Convertible Subordinated Debentures (described below). The Senior
Debentures are convertible at the option of the holder into common shares
of Enterprises at any time prior to maturity at $11 per share, subject to
adjustment in certain events. The Senior Debentures mature on April 15,
2003 and are redeemable, in whole or in part, at the option of Enterprises
at any time on or after April 15, 1996, initially at 103.5% of their
principal amount and declining to 100% of their principal amount on April
15, 2003. The Senior Debenture holders may require Enterprises to
repurchase the Senior Debentures, in whole or in part, in certain
circumstances involving a change in control of Enterprises as defined in
the Debenture Purchase Agreement (the "Agreement"). However, a change in
control, as defined in the Agreement, will create an event of default under
the Credit Facility (described below) and, as a result, any repurchase
would, absent a waiver, be blocked by the subordination provision of the
Agreement until the Credit Facility (and any other senior indebtedness of
Enterprises and senior indebtedness of the Company with respect to which
there is a payment default) have been repaid in full. The Senior Debentures
are unconditionally guaranteed on a subordinated basis by the Company.
They are subordinated to all existing and future senior indebtedness of
Enterprises and the Company.
The 8 1/4% Convertible Subordinated Debentures (the "Debentures"),
which provided proceeds to Enterprises of $47,948,000, net of $3,802,000 in
deferred debt costs, are convertible at the option of the holder into
common shares of Enterprises at any time prior to maturity at a conversion
price of $6.50 per share subject to adjustment in certain events. The
Debentures mature on July 15, 2002, and are redeemable at the option of
Enterprises at any time on or after July 15, 1995, at a premium which
declines as the Debentures approach maturity. The Debenture holders may
also require Enterprises to repurchase the Debentures, in whole or in part,
in certain circumstances involving a change in control of Enterprises as
defined in the indenture covering the Debentures (the "Indenture").
However, a change in control, as defined in the Indenture, will create an
event of default under the Credit Facility and, as a result, any repurchase
would, absent a waiver, be blocked by the subordination provisions of the
Indenture until the Credit Facility (and any other senior indebtedness of
Enterprises and senior indebtedness of the Company with respect to which
there is a payment default) have been repaid in full.
During 1992, the Company recorded a charge of $16,069,000 following
the repurchase of $82,676,000 principal amount of it's 14 1/4% Senior
Subordinated Notes (the "Notes"). The Company had previously purchased
$15,850,000 aggregate principal amount of the Notes in the open market.
The costs of all repurchased Notes in excess of their principal amounts,
together with the related deferred finance costs and expenses related to
the repurchase, were charged to income as extraordinary items, net of
income tax of $2,050,000. The remaining $1,474,000 principal amount was
repurchased on November 15, 1993. Premiums on the purchases and the
write-off of deferred debt costs resulted in a charge of $109,000 to other
income and expense during 1993.
W-12
<PAGE>
NOTE 5 - LONG-TERM DEBT (Continued)
Credit Facility
The Credit Facility which previously consisted of a $50,000,000
Revolving Credit Facility was amended as of December 23, 1994. This
amendment and waiver restricted total borrowings available under the
facility to $40,000,000 and waived compliance with certain financial ratios
through January 31, 1995. The Credit Facility was amended and restated as
of January 31, 1995. The amendment to the facility limits borrowings to
$40,000,000, revises certain financial covenant ratios and requires the
collateralization of additional properties. The Credit Facility matures on
June 3, 1996, unless extended by the Banks.
Borrowings under the Credit Facility, at the Company's option, bear
interest at either a defined base rate or a rate based on the London
Interbank Offered Rate. The weighted average interest rate on the amount
outstanding was 8.2% and 5.2% for 1994 and 1993, respectively. The Company
paid certain fees and expenses to the Banks in connection with the original
commitment letter, which along with other costs associated with the
Original Credit Facilities, totalled approximately $2,000,000 and also
agreed to indemnify the Banks against certain liabilities. The Company
also pays a fee based on the Eurodollar rate, 2.00% at December 25, 1994,
in connection with letters of credit issued and a commitment fee equal to
0.50% per annum on the average daily unused amount of the Credit Facility.
The terms of the Second Amended and Restated Credit Agreement requires that
the fee paid on borrowings and letters of credit be increased by .50%
effective January 31, 1995.
Borrowings under the Credit Facility are secured by all shares of the
capital stock of the Company, whenever issued, intercompany debt of the
Company owed to Enterprises and ground lease mortgages with respect to
certain premises in which the land is currently leased but the building
located thereon is owned by the Company. In addition, the Banks have the
right to obtain, as security, assignments of other leases and/or mortgages
on real property currently owned or subsequently acquired. However, the
Company has rights to finance certain of these properties and obtain a
release of the collateral under certain conditions. The Credit Facility
limits the amount of additional indebtedness which Enterprises, the Company
and its subsidiaries may incur and the aggregate annual amount to be spent
on capital expenditures. In addition, the Credit Facility limits, among
other things, the ability of Enterprises, the Company and its subsidiaries
to pay dividends, create liens, sell assets, engage in mergers or
acquisitions and make investments in subsidiaries. The Company may not
transfer amounts to Enterprises except for the payment of a management fee
not to exceed $2,500,000 in each fiscal year and a dividend in an amount
sufficient to pay interest on the Senior Debentures and the Debentures, in
each case provided that no defaults under the Credit Facility exist either
immediately before or after the transfer. The Company must also maintain
certain financial ratios and defined levels of net worth.
At December 25, 1994, $22,400,000 was drawn on the facility and
letters of credit in the amount of $10,951,000 were outstanding, resulting
in a remaining available balance of $6,649,000.
Notes Payable
Notes payable as of December 25, 1994 consists of obligations secured
by buildings, land, equipment, and cash value life insurance policies with
a net book value of $8,381,000.
W-13
<PAGE>
NOTE 5 - LONG-TERM DEBT (Continued)
Fair Value of Financial Instruments
The estimated fair value of the Company's Debentures, based on the
quoted market price, is $39,200,000 and $86,900,000 at December 25, 1994
and December 26, 1993, respectively. The estimated fair value of the
Company's Senior Debentures at December 25, 1994 is $11,600,000, based on
the estimated borrowing rates available to the Company. The Credit
Facility reprices frequently at market rates; therefore, the carrying
amount of the Credit Facility is a reasonable estimate of its fair value at
December 25, 1994 and December 26, 1993. The estimated fair value of the
Company's notes payable approximates the principal amount of such notes
outstanding at December 25, 1994 and December 26, 1993, which is based upon
the estimated borrowing rates available to the Company.
The fair value estimates presented herein are based on pertinent
information available to management as of December 25, 1994 and December
26, 1993. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have
not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.
W-14
<PAGE>
NOTE 6 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
1994 1993
-------------- -------------
(Dollars in thousands)
Reserve for restructuring. . . . . . . . . . $ 5,177 $ 2,005
Insurance. . . . . . . . . . . . . . . . . . 14,578 10,520
Taxes other than income taxes. . . . . . . . 4,463 3,790
Interest . . . . . . . . . . . . . . . . . . 2,407 2,401
Payroll. . . . . . . . . . . . . . . . . . . 1,524 1,987
Other. . . . . . . . . . . . . . . . . . . . 3,507 4,056
--------- ---------
$ 31,656 $ 24,759
========= =========
The Company is primarily self insured for general liability and
workers' compensation risks supplemented by stop loss type insurance
policies. The self-insurance liabilities included in accrued insurance at
December 25, 1994 and December 26, 1993 were approximately $14,232,000 and
$9,451,000, respectively.
During 1993, management completed an extensive review of the Company's
exposure resulting from its self insurance program for workers'
compensation and general liability. The review, which was based on
improved data available to the Company relating to the trend in claims
development, indicated that the Company's reserves for retained losses were
near the lower end of the expected range of possible losses. Management
determined it would be appropriate to increase the Company's reserves to
better reflect the likely outcome of its liability within the possible
range of losses. Accordingly, as of the end of the fourth quarter of 1993,
workers' compensation insurance reserves were increased by charging
$2,900,000 to restaurant labor and benefits and $1,800,000 to other
operating expenses, respectively.
W-15
<PAGE>
NOTE 7 - INCOME TAXES
The provision (benefit) for income taxes on income before
extraordinary item and cumulative effect of accounting changes is as
follows:
1994 1993 1992
--------- -------- -------
(Dollars in thousands)
Current:
Federal . . . . . . . . . . . . . . . . $ --- $ --- $1,803
State and local . . . . . . . . . . . . . --- --- ---
------- ------- -----
--- --- 1,803
------- ------- -----
Deferred:
Federal . . . . . . . . . . . . . . . . --- --- (1,349)
State and local . . . . . . . . . . . . . --- 85 215
------- ------- -----
--- 85 (1,134)
------- ------- -----
$ --- $ 85 $ 669
======= ======= =====
The provision (benefit) for income taxes is different from the amount
that would be computed by multiplying the income (loss) before provision
(benefit) for income taxes by the statutory U.S. federal income tax rates
for the following reasons:
1994 1993 1992
--------- -------- ------
(Dollars in thousands)
Income (loss) before provision (benefit)
for income taxes. . . . . . . . . . . . . . $ (2,748) $(37,782) $ 1,474
Provision (benefit) at statutory rate
of 34%. . . . . . . . . . . . . . . . . . .. (935) (12,845) 501
State and local income taxes, net of
federal income tax benefit . . . . . . . . . --- --- 142
Goodwill and other nondeductible items . . . . 475 476 449
Targeted jobs tax credit . . . . . . . . . . . (318) (105) (446)
Tip credits. . . . . . . . . . . . . . . . . . (388) --- ---
Valuation allowance. . . . . . . . . . . . . . 1,284 12,474 ---
Other. . . . . . . . . . . . . . . . . . . . . (118) 85 23
------- ------ ------
Total provision (benefit) for income
taxes on continuing operations. . . . . . . $ --- $ 85 $ 669
======= ====== ======
W-16
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
The tax effects of principal temporary differences in 1994 are shown in the
following table:
<TABLE><CAPTION>
Assets Liabilities Total
--------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . . $ 162 $ --- $ 162
Net operating loss and contributions carryforward 870 --- 870
Reserves and accrued expenses. . . . . . . . . . . . 6,610 --- 6,610
Other. . . . . . . . . . . . . . . . . . . . . . . . --- (37) (37)
Valuation allowance. . . . . . . . . . . . . . . . . (3,994) --- (3,994)
--------- --------- ---------
Current. . . . . . . . . . . . . . . . . . . . . . 3,648 (37) 3,611
--------- --------- ---------
Unamortized intangible assets. . . . . . . . . . . . --- (1,204) (1,204)
Excess tax over book depreciation and
sale-leasebacks. . . . . . . . . . . . . . . . .. --- (11,738) (11,738)
Deferred compensation. . . . . . . . . . . . . . . . 559 --- 559
Reserves and accrued expenses. . . . . . . . . . . . 6,104 --- 6,104
Other. . . . . . . . . . . . . . . . . . . . . . . . --- (1,690) (1,690)
AMT, net operating loss and targeted jobs
tax credit carryforward . . . . . . . . . . . . . 19,174 --- 19,174
Valuation allowance. . . . . . . . . . . . . . . . . (14,816) --- (14,816)
--------- --------- ---------
Noncurrent. . . . . . . . . . . . . . . . . . . . . 11,021 (14,632) (3,611)
--------- --------- ---------
Total. . . . . . . . . . . . . . . . . . . . . . . $14,669 $(14,669) $ ---
========= ========= =========
</TABLE>
W-17
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
The tax effects of principal temporary differences in 1993 are shown
in the following table:
<TABLE><CAPTION>
Assets Liabilities Total
--------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . $ 209 $ --- $ 209
Net operating loss and contributions carryforward. 4,237 --- 4,237
Reserves and accrued expenses. . . . . . . . . . . 5,792 --- 5,792
Other. . . . . . . . . . . . . . . . . . . . . . . --- (20) (20)
Valuation allowance. . . . . . . . . . . . . . . . (8,872) --- (8,872)
--------- --------- ---------
Current . . . . . . . . . . . . . . . . . . . 1,366 (20) 1,346
--------- --------- ---------
Unamortized intangible assets. . . . . . . . . . . --- (1,319) (1,319)
Excess tax over book depreciation and
sale-leasebacks . . . . . . . . . . . . . . . . .. --- (12,061) (12,061)
Deferred compensation. . . . . . . . . . . . . . . 833 --- 833
Reserves and accrued expenses. . . . . . . . . . . 7,322 --- 7,322
Other. . . . . . . . . . . . . . . . . . . . . . . --- (272) (272)
AMT, net operating loss and targeted jobs
tax credit carryforward . . . . . . . . . . . .. 12,202 --- 12,202
Valuation allowance. . . . . . . . . . . . . . . . (8,051) --- (8,051)
--------- --------- ---------
Noncurrent . . . . . . . . . . . . . . . . . .. 12,306 (13,652) (1,346)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . $ 13,672 $ (13,672) $ ---
========= ========== ========
</TABLE>
W-18
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
The tax effects of principal temporary differences in 1992 are shown
in the following table:
<TABLE><CAPTION>
Assets Liabilities Total
--------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C>
Additional inventory costs for tax purposes. . . . $ 235 $ --- $ 235
Reserves and accrued expenses. . . . . . . . . . . 3,946 --- 3,946
Unamortized preopening expenses . . . . . . . . . --- (188) (188)
Current . . . . . . . . . . . . . . . . . . . 4,181 (188) 3,993
Unamortized intangible assets. . . . . . . . . . . 328 (1,146) (818)
Excess tax over book depreciation and
sale-leasebacks . . . . . . . . . . . . . . . 3,203 (13,295) (10,092)
Deferred compensation. . . . . . . . . . . . . . . 586 --- 586
Reserves and accrued expenses. . . . . . . . . . . 346 --- 346
Contribution carryforwards . . . . . . . . . . . . 488 --- 488
AMT, net operating loss and targeted jobs tax
credit carryforward . . . . . . . . . . . .. 10,063 --- 10,063
Valuation allowance. . . . . . . . . . . . . . . . (4,566) --- (4,566)
Noncurrent. . . . . . . . . . . . . . . . . . 10,448 (14,441) (3,993)
Total. . . . . . . . . . . . . . . . . . $ 14,629 $(14,629) $ ---
</TABLE>
The Company increased its deferred tax asset and liability in 1993 as
a result of legislation enacted during 1993 increasing the corporate tax
rate from 34% to 35% commencing in 1993. The net change in the valuation
for deferred tax assets was an increase of $12,357,000.
W-19
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
The Company's share of Enterprises' consolidated tax carryforwards at
December 25, 1994 expire as follows:
<TABLE><CAPTION>
Net Targeted
Operating Jobs Tax Tip
Expiration Contributions Loss Credit Credit
- ----------- ------------------ ------------- ----------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
1995 . . . . . . . . . . . . . $ 215 $ --- $ --- $ ---
1996 . . . . . . . . . . . . . 400 --- --- ---
1997 . . . . . . . . . . . . . 259 --- --- ---
1998 . . . . . . . . . . . . . 601 --- --- ---
2003 . . . . . . . . . . . . . 681 --- 330 ---
2004 . . . . . . . . . . . . . --- --- 403 ---
2005 . . . . . . . . . . . . . --- 677 304 ---
2006 . . . . . . . . . . . . . --- 359 500 ---
2007 . . . . . . . . . . . . . --- 7,573 706 ---
2008 . . . . . . . . . . . . . --- 11,970 160 ---
2009 . . . . . . . . . . . . . --- 1,392 489 589
---------- -------- -------- -----
$ 2,156 $ 21,971 $ 2,892 $ 589
========== ======== ======== =====
</TABLE>
The use of these carryforwards is limited to future taxable income.
Alternative minimum tax credits total $873,000 and may be carried forward
indefinitely.
W-20
<PAGE>
NOTE 7 - INCOME TAXES (Continued)
The overall (benefit) provision for income taxes, during 1992 is as
follows:
<TABLE><CAPTION>
Federal State and local Total
------------ ----------------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Income before extraordinary item and
cumulative effect of accounting change. . $ 454 $ 215 $ 669
Extraordinary loss . . . . . . . . . . . . . . . (1,723) (327) (2,050)
Cumulative effect of adopting Statement 112. . . (96) (18) (114)
------------ ---------
Net benefit. . . . . . . . . . . . . . $ (1,365) $ (130) $ (1,495)
</TABLE>
The Company entered into a tax sharing and payment agreement with
Enterprises (the "Agreement"), effective as of April 17, 1988, and
applicable to the consolidated federal income tax returns filed by
Enterprises for its taxable year beginning January 1, 1988. This Agreement
provides that the Company, acting for itself and its subsidiaries, shall be
allocated and shall reimburse Enterprises for their share of the
consolidated federal income tax liability of the Enterprises consolidated
group, and such share shall be determined by comparing the separate taxable
incomes (as defined for consolidated federal income tax reporting purposes)
of the Company and its subsidiaries to the sum of the separate taxable
incomes of members of the Enterprises consolidated group. Enterprises
will have the right to assess the Company on a quarterly basis for its
share of the estimated consolidated federal income tax liability.
Through December 25, 1994, deferred income taxes have not been
provided with respect to timing differences which gave rise to
approximately $1,800,000 of net operating losses, for tax purposes. The
losses were utilized by Enterprises in the computation of its consolidated
federal income tax liability in accordance with the Agreement. However,
Enterprises has agreed to credit the Company with tax benefits related to
such net operating losses to offset future federal income taxes otherwise
payable by the Company under the Agreement.
W-21
<PAGE>
NOTE 8 - LEASE COMMITMENTS
The Company leases certain of its restaurant locations under long-term
lease arrangements. Lease terms generally range from 10 to 25 years and
normally contain renewal options ranging from 5 to 15 years, but do not
contain purchase options. The Company is generally obligated for the cost
of property taxes and insurance. Some of these leases contain contingent
rental clauses based on a percentage of revenue. The building portions of
such leases are capitalized and the land portions are accounted for as
operating leases. Contingent rentals on capital leases were $389,000,
$526,000 and $581,000 during 1994, 1993 and 1992, respectively.
Rent expense under operating leases included in continuing operations
is as follows:
1994 1993 1992
------------ -------------- ------------
(Dollars in thousands)
Land and buildings:
Minimum . . . . . . $ 4,777 $ 5,018 $ 4,825
Contingent. . . . . 686 714 840
------- ------- -------
5,463 5,732 5,665
Equipment leases . . . . 2,338 2,060 1,610
------- ------- -------
$ 7,801 $ 7,792 $ 7,275
======= ======= =======
A summary of future minimum lease payments under capital leases,
non-cancelable operating leases, and leases reserved for in the provision
for closed units recorded in the fourth quarter of 1993 with remaining
terms in excess of one year at December 25, 1994 follows:
Capital Operating Reserved
Leases Leases Leases
------------ -------------- ------------
(Dollars in thousands)
1995. . . . . . . . $ 3,268 $ 7,092 $ 1,206
1996. . . . . . . . 3,157 6,717 1,216
1997. . . . . . . . 3,011 6,429 1,177
1998. . . . . . . . 2,706 6,021 941
1999. . . . . . . . 2,279 5,149 931
Thereafter. . . . . 16,331 24,233 4,948
30,752 55,641 10,419
Less interest . . . 13,365 --- ---
$ 17,387 $ 55,641 $10,419
Future minimum lease payments on operating leases have been reduced
for sublease rental income of approximately $158,000 to be received in the
future under non-cancelable subleases.
W-22
<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Several of the Company's reserved area agreements include expansion
schedules requiring the Company to develop a minimum number of Shoney's
restaurants in the reserved areas over a defined period of time. Pursuant
to these agreements, the Company is required to open a minimum of 36
Shoney's restaurants through October 6, 2004. In 1991, the Company entered
into an agreement with Shoney's, Inc. to develop 38 new Captain D's
restaurant over 20 years, at the approximate rate of two per year. The
Company has constructed eight restaurants with respect to this agreement.
During 1994, the Company entered into a long-term commitment to
purchase 8 million pounds of french fries, annually, over a two year period
beginning on December 1, 1994 and continuing through November 30, 1996.
The total estimated cost related to this commitment totals approximately
$5,800,000. As of December 25, 1994, approximately 570,000 pounds, or
$208,000, was purchased under the current contract.
NOTE 10 - LITIGATION
The Company and its subsidiaries are defendants in various lawsuits
arising in the ordinary course of business. It is the opinion of the
management of the Company that the outcome of such litigation will not have
a material adverse effect on the consolidated financial statements.
NOTE 11 - STOCKHOLDER'S EQUITY
The authorized capital stock of the Company consists of 10,000 shares
of Series A Preferred Stock, par value $.01, which are issued and
outstanding and 1,000 shares, par value $.01, of common stock which are
issued and outstanding.
Dividends are payable on the Series A Preferred Stock at the annual
rate of $400 per share. The dividends begin to accrue and are cumulative
from the date of issue and are payable when and if declared by the Board of
Directors. As of December 25, 1994, there had been no dividends declared
and the aggregate cumulative dividends were approximately $24,942,000.
Cumulative dividends in arrears also have a liquidation preference and must
be satisfied upon the redemption of the preferred stock by the Company.
The payment of dividends on the Company's stock is limited as described in
Note 5.
W-23
<PAGE>
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES
On October 5, 1988, the Company and Enterprises entered into a
management services agreement, pursuant to which Enterprises agreed to
provide certain management services to the Company on an ongoing basis.
These services include financial and tax advice and assistance, auditing
and accounting advice and services, advice relating to personnel, including
benefit plans, and assistance with the administration and operation of the
Company in general. The management services agreement originally provided
that the Company pay an annual fee of $1,000,000 to Enterprises as
compensation for rendering management services. As of August 1, 1992, this
fee was increased to $2,500,000. Enterprises will also be reimbursed for
its out-of-pocket expenses incurred in connection with rendering the
management services. The management services agreement is effective until
December 31, 1998, at which time it may be renewed for succeeding one-year
terms by mutual agreement of the parties. During the years ended December
25, 1994, December 26, 1993 and December 27, 1992, the Company accrued and
expensed $2,500,000, $2,487,000 and $1,693,000, respectively, pursuant to
this agreement.
As part of the refinancing completed in August 1992, Enterprises
purchased $15,850,000 aggregate principal amount of the Company's Notes.
The Company paid approximately $798,000 of interest relating to these Notes
to Enterprises during the year ended December 27, 1992.
On July 21, 1993, Enterprises acquired, for a purchase price of
$3,860,000, the stock of a company which operated three Shoney's
restaurants, including one owned and two leased locations. Included in the
acquisition were the exclusive rights to operate Shoney's restaurants in
the surrounding northern Palm Beach County, Florida area. Enterprises
subsequently contributed all assets and related liabilities acquired in the
transaction to the Company. In conjunction with this transaction, the
Company purchased the land and building at one of the leased restaurant
locations for $1,240,000. The President and Chief Executive Officer of the
Company was a 20% shareholder of the acquired company and had a 50%
interest in the land and building the Company purchased. The Company
engaged the service of an independent appraisal company to review the
fairness of the transaction.
On January 19, 1993, the Company purchased an airplane from a
corporation owned by the President and Chief Executive Officer of the
Company for $650,000. Prior to this purchase, the Company leased the
airplane for approximately $87,000 during 1992. In addition, the Company
paid chartering fees and expenses to the corporation of approximately
$42,000 during 1992. The cost of the charter arrangements and the lease
arrangement were comparable to similar arrangements available from
unrelated third parties. A mortgage on the airplane was obtained in 1994.
W-24
<PAGE>
NOTE 13 - QUARTERLY FINANCIAL INFORMATION (unaudited)
During the fourth quarter of 1994, the Company recorded $562,000 for
adjustments to the Company's deferred compensation obligation (Note 13) and
a $1,000,000 reduction to the Company's restructure reserve (Note 2).
During the fourth quarter of 1993, the Company recorded restructuring
charges of $34,571,000 relating primarily to a provision for closed units
(Note 2). The Company's fiscal year is comprised of fifty-two or
fifty-three weeks divided into four quarters of sixteen, twelve, twelve and
twelve or thirteen weeks, respectively.
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- --------- --------- --------
(Dollars in thousands)
Quarter ended - 1994
- --------------------
Net sales, previously reported $ 87,397 $ 68,730 $ 67,325 $ 63,932
Effect of change in estimate 1,026 799 761 (2,586)
Net sales, restated 88,423 69,529 68,086 61,346
Gross profit 10,729 8,486 6,602 4,404
Net income (loss) 608 140 (1,416) (2,080)
Quarter ended - 1993
- --------------------
Net sales $ 85,133 $ 69,850 $ 70,326 $ 64,130
Gross profit 12,008 10,093 9,355 2,387
Net income (loss) 1,320 1,414 1,424 (41,940)
The quarters ended April 17, 1994, July 10, 1994, and October 2, 1994
have been restated as indicated above for a change in an accounting
estimate related to the Company's restructuring plan. See Note 2.
Gross profit equals revenues less food, supplies and uniforms, restaurant
labor and benefits, restaurant depreciation and amortization and other
restaurant operating expense.
W-25
<PAGE>
<TABLE><CAPTION>
Schedule II
TPI ENTERPRISES, INC. AND SUBSIDIARIES
RESERVES
(Dollars in thousands)
Additions
Balance at Additions charged to Deductions Balance
beginning charged to other from at end of
of period operations accounts reserves period
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year Ended December 25, 1994: $ --- $ 59 $ --- $ --- $ 59
Year Ended December 26, 1993: $ --- $ --- $ --- $ --- $ ---
Year Ended December 27, 1992: $ 28 $ --- $ --- $ 28 $ ---
ALLOWANCE FOR UNIT CLOSINGS:
Year Ended December 25, 1994: $ 18,695 $ --- $ --- $ 6,265(1) $ 12,430
Year Ended December 26, 1993: $ 3,773 $ 17,286 $ --- $ 2,364 $ 18,695
Year Ended December 27, 1992: $ --- $ 3,773 $ --- $ --- $ 3,773
(1) Represents deductions for the write-off of assets and changes in assumptions in connection with the
Company's restructure plan. See Note 2.
</TABLE>
WS-1
<PAGE>
<TABLE><CAPTION>
Exhibit
Number Description Page
------------ --------------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Restated Certificate of Incorporation and Certificate of Amendment dated
March 25, 1987; Certificate of Amendment dated November 10, 1988
3.2 By-laws as amended through December 18, 1987 (3), Amendment thereto dated
November 9, 1988 (8), Amendment thereto dated May 15, 1989 (9), Amendment
thereto dated April 27, 1990 (4), and Amendment thereto dated March 9, 1992
(3), and Amendment thereto dated March 19, 1993 (2)
10.1 Lease between Registrant and 53rd at Third Venture, dated December 6, 1985,
as amended, covering premises situated at 885 Third Avenue, New York, New
York (3)
10.2 Sublease dated August 14, 1992 between Registrant and Systemhouse, Inc. for
premises at 53rd at 3rd, 885 Third Avenue, New York, New York (2)
10.3 Lease dated June 26, 1992 between Registrant and Murray H. Goodman, for
premises at Phillips Point, West Palm Beach, Florida (2)
10.4 Medical Expense Reimbursement Plan (13)
10.5 1982 Stock Option Plan (4), and Amendment thereto dated April 15, 1991(3)
10.6 1983 Stock Option Plan, Amendment thereto dated August 8, 1990 (4), and
Amendment thereto dated March 9, 1992 (3)
10.7 1984 Stock Option Plan and Amendment thereto dated November 15, 1989 (4)
and Amendment thereto dated February 5, 1992 (3)
10.8 1989 Employee Stock Purchase Plan (10); and Amendment thereto dated
December 16, 1994
10.9 1989 Employee Stock Purchase Plan Trust Agreement (9)
10.10 1992 Stock Option and Incentive Plan (2)
10.11 Non-Employee Directors Stock Option Plan (2), Amendment thereto adopted
March 19, 1993 (1), and Amendment thereto adopted December 16, 1994 subject
to stockholder ratification
10.12 TPI Enterprises, Inc. 1995 Employee Stock Purchase Plan, subject to
stockholder ratification
10.13 Amended and Restated TPI Enterprises, Inc. Employee Stock Purchase Plan
Trust Agreement
10.14 NationsBank Defined Contribution Master Plan and Trust Agreement
10.15 Form of letter agreement, dated January, 1984 between Registrant and Robert
A. Kennedy setting forth, among other matters, certain rights upon
termination of employment (4)
10.16 Termination Agreement, Receipt and Release dated as of January 31, 1995
between Registrant, Maxcell Telecom Plus, Inc., and Stephen R. Cohen (15)
10.17 Termination Agreement dated November 19, 1992 between Registrant and Robert
A. Kennedy, Amendment to Termination Agreement dated December 31, 1993
between Registrant and Robert A. Kennedy (1); Agreement dated February 20,
1995 between Registrant and Robert A. Kennedy
10.18 Employment Agreement dated as of January 13, 1994, between Registrant and
J. Gary Sharp(1)
</TABLE>
<PAGE>
<TABLE><CAPTION>
Exhibit
Number Description Page
------------ --------------------------------------------------------------------------- ------
<S> <C> <C>
10.19 Employment Agreement dated as of January 1, 1995, between Registrant,
Restaurants and Frederick W. Burford (1)
10.20 Stipulation and Agreement of Compromise and Settlement, dated January 6,
1988, among Robert M. Gintel, Ralph I. Reis, Daniel Schoonover, Stephen R.
Cohen, Thomas J. Burger, Joseph P. Gowan, Ira M. Lieberman, Robert A.
Kennedy, and Registrant (2)
10.21 Management Services Agreement, dated as of October 5, 1988, between the
Registrant and Restaurants (11)
10.22 Tax Sharing and paying Agreement effective as of April 22, 1988 between the
Registrant and Restaurants (11)
10.23 Form of Shoney's Franchise Agreement (4)
10.24 Form of Agreement amending Franchise Agreements with Shoney's, Inc. (12)
10.25 Form of Captain D's Franchise Agreements (4)
10.26 Second Amended and Restated Credit Agreement dated January 31, 1995 by and
among TPI Restaurants, Inc., the banks party thereto, The Bank of New York
as Administrative Agent and NationsBank of North Carolina, N.A., as
collateral Agent (the "Collateral Agent") (15)
10.27 Amended and Restated Enterprises Guaranty, dated as of June 3, 1993 made by
Registrant and Restaurants to NationsBank of North Carolina, N.A., as
Collateral Agent (1) and Amendment No. 1, dated as of February 18, 1994,
and Amendment No. 2 dated as of January 31, 1995 (15)
10.28 Debenture Purchase Agreement, dated as of March 19, 1993 among Registrant
and the Purchasers named therein, relating to the $15,000,000 5%
Convertible Senior Subordinated Debentures, due April 15, 2003 (2)
10.29 Warrant Purchase Agreement, dated as of March 19, 1993 among Registrant and
the Purchasers named therein, relating to Warrants to Purchase 1,000,000
Shares of Common Stock (2)
10.30 Stock Purchase Agreement, dated as of March 19, 1993 among Registrant and
the Purchasers named therein, relating to the purchase of 1,500,000 Shares
of Common Stock (2)
10.31 Side Agreement, dated as of March 19, 1993 among Registrant and the
Purchasers named therein (2)
10.32 Amended and Restated Registration Rights Agreement dated as of July 21,
1993 by and among the Company and the shareholders who are signatories
thereto (6)
10.33 Management Consulting Agreement, dated as of June 30, 1989, between
Registrant and FirstMark (5)
10.34 Reserved Area Agreement dated May 1, 1989 between Shoney's, Inc. and
Restaurants; as amended by Addendum to Reserved Area Agreement dated May 8,
1989; as amended by Amended and Restated Addendum to Reserved Area Agreement
entered into January 1, 1990; as amended by Second Amended and Restated
Addendum to Reserved Area Agreement entered into April, 1991
10.35 Reserved Area Agreement dated August 2, 1988 between Shoney's, Inc.,
Registrant and Shoney's South, Inc. (predecessor to Restaurants); as
amended by letter agreement dated July 30, 1993
</TABLE>
<PAGE>
<TABLE><CAPTION>
Exhibit
Number Description Page
------------ --------------------------------------------------------------------------- ------
<S> <C> <C>
10.36 Shoney's Market Development Agreement dated December 1, 1992 between
Shoney's, Inc. and Restaurants (regarding area in Michigan); as amended
by Addendum to Market Development Agreement entered into January 26, 1995;
as amended by Second Addendum to Market Development Agreement entered into
February 27, 1995
10.37 Shoney's Market Development Agreement dated August 17, 1993 between
Shoney's, Inc. and Restaurants (regarding area in Arizona); as amended
by Addendum to Market Development Agreement entered into January 26, 1993;
as amended by Second Addendum to Market Development Agreement dated
February 27, 1995
10.38 Shoney's Market Development Agreement dated July 18, 1993 between
Shoney's, Inc. and Restaurants (regarding area in Florida); as amended
by Addendum to Market Development Agreement entered into January 26, 1993;
as amended by Second Addendum to Market Development Agreement entered into
February 27, 1995
10.39 Shoney's Market Development Agreement dated October 11, 1993 between
Shoney's, Inc. and Restaurants (regarding area in Texas); as amended
by letter agreement dated July 30, 1993
10.40 Shoney's Market Development Agreement dated April 1, 1993 between
Shoney's, Inc. and Restaurants (regarding area in Texas); as amended
by Addendum to Market Development Agreement entered into November 30, 1993;
as amended by Second Addendum to Market Development Agreement entered into
January 26, 1995; as amended by Third Addendum to Market Development
Agreement entered into February 27, 1995
10.41 Franchisor Estoppel Letter dated January 31, 1995
10.42 Employment Agreement dated as of January 1, 1993 between Restaurants and
Haney A. Long, Jr.
11 Computation of Earning Per Share
21 Subsidiaries of the Registrantxxx5
27 Financial Data Schedule
31 Consent of Deloitte & Touche LLP
- ----------------------
(1) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 26, 1993, and incorporated herein by reference
(2) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by reference
(3) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by reference
(4) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990, and incorporated herein by reference.
(5) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989 and incorporated herein by reference.
(6) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q, dated
July 11, 1993.
(7) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated May
8, 1991, and incorporated herein by reference.
(8) Filed as an exhibit to Registrant's Current Report on Form 8-K dated March
4, 1991, and incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE><CAPTION>
Exhibit
Number Description Page
------------ --------------------------------------------------------------------------- ------
<S> <C> <C>
(9) Filed as an exhibit to Registrant's Registration Statement on Form S-8 (No.
33-30551), dated August 16, 1989, and incorporated herein by reference.
(10) Filed as an exhibit to Amendment No. 4 to Registrant's Registration
Statement on Form S-2 (No. 33-24166), dated November 9, 1988, and
incorporated herein by reference.
(11) Filed as an exhibit to Registrant's Registration Statement on Form S-2 (No.
33-24166), dated October 13, 1988, and incorporated herein by reference.
(12) Filed as an exhibit to Registrant's Registration Statement on Form S-2 (No.
33-24166), dated September 2, 1988, and incorporated herein by reference.
(13) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
2-72119), dated May 5, 1981, and incorporated herein by reference.
(14) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated July
29, 1992, and incorporated herein by reference.
(15) Filed as an exhibit to Registrant's Current Report on Form 8-K, dated
February 7, 1995, and incorporated herein by reference.
</TABLE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
TELECOM PLUS INTERNATIONAL, INC.
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-5, of
the New Jersey Business Corporation Act, the undersigned
corporation hereby executes the following Restated Certifi-
cate of Incorporation:
FIRST: (a) The name of the corporation shall be
TELECOM PLUS INTERNATIONAL, INC.
SECOND: The purpose or purposes for which the
Corporation is organized are to engage in any activity
within the purposes for which corporations may be organized
under the New Jersey Business Corporation Act, including,
but not limited to, engaging in the business of selling,
installing and servicing telephone equipment that is inter-
connected into telephone lines leased from regulated tele-
phone companies and that is used in place of equipment
furnished by regulated telephone companies, and to do every-
thing necessary, convenient or incidental to the conduct of
such business.
THIRD: A. General Authorization
The aggregate number of shares of all
classes of Capital Stock which the Corporation shall have
authority to issue is One Hundred Twenty Million (120,000,0-
00) Shares consisting of:
(1) One Hundred Million (100,000,000)
Common shares, par value $.01 per share; and
<PAGE>
(2) Twenty Million (20,000,000) Pre
B. Preferred Shares
(1) The Board of Directors is autho-
rized, subject to limitations prescribed by law and the
provisions of this subparagraph B, to provide for the issu-
ance of the Preferred Shares, in series, and by filing a
certificate of amendment, pursuant to the Business Corpora-
tion Act, to establish the number of shares to be included
in each such series, and to fix the designation, relative
rights, preferences and limitations of the shares of each
such series. The authority of the Board with respect to
each series shall include, but not be limited to, the deter-
mination of the following:
(a) the number of shares constituting
that series and the distinctive designation of that series;
(b) the dividend rate, if any, on the
shares of that series, whether dividends shall be cumulative
and, if so, from which date or dates;
(c) whether that series shall have
voting rights, in addition to the voting rights provided by
law and, if so, the terms of such voting rights;
(d) whether that series shall have
conversion privileges and, if so, the terms and conditions
of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors
shall determine;
(e) whether or not the shares of the
series shall be redeemable and, if so, the terms and condi-
tions of such redemption, including the date or dates upon
or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary
under different conditions and at different redemption
dates;
(f) the rights of the shares of that
series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; and
(g) any other relative rights, prefer-
ences and limitations of that series.
2
<PAGE>
(2) Dividends on outstanding Preferred
Shares of such series on which dividends shall be declared
and paid, or set apart for payments, on the Common Shares
with respect to the same dividend period.
C. Common Shares
(1) The Common Shares may be issued by
the Corporation from time to time for such consideration and
upon such terms as may be fixed from time to time by the
Board of Directors and as may be permitted by law, without
action by any shareholders.
(2) Subject to any limitations which
may be imposed pursuant to subparagraph B of this Article
THIRD, the holders of Common Shares shall be entitled to
dividends only if, when and as the same shall be declared by
the Board of Directors and as may be permitted by law.
(3) Subject to any limitations which
may be imposed pursuant to subparagraph B of this Article
THIRD, each Common Share shall entitle the holder thereof to
one vote, in person or by proxy, at any and all meetings of
the shareholders of the Corporation on all propositions
before such meetings.
D. Fractional Shares
The Corporation may, but shall not be
obliged to, issue a certificate for a fractional share of
any class of capital stock issued pursuant to this Article
THIRD and, by action of the Board of Directors, may either
pay cash therefor or issue in lieu thereof scrip or other
evidence of ownership which shall entitle the holder to
receive a certificate for a full share of stock upon the
surrender of such scrip or other evidence of ownership
aggregating a full share, but which shall not, unless other-
wise provided, entitle the holder to exercise any voting
right, or to receive dividends thereon, or to participate in
any of the assets of the Corporation in the event of liqui-
dation. The Board of Directors may cause such scrip or
evidence of ownership to be issued subject to the condition
that it shall become void if not exchanged for share certif-
icates before a specified date, or subject to the condition
that the shares for which such scrip or evidence of owner-
ship is exchangeable may be sold by the Corporation and the
proceeds thereof distributed to the holders of such scrip or
3
<PAGE>
evidence of ownership, or subject to any other condition
which the Board of Directors may deem advisable.
E. Preemptive Rights
No holder of any shares of Capital Stock
of the Corporation shall have any preferential or preemptive
right to subscribe for, purchase or receive any shares of
stock of the Corporation of any class, now or hereafter
authorized, or any options or warrants or any rights to
subscribe to or purchase any securities convertible into or
exchangeable for any shares of capital stock of the Corpora-
tion of any class, now or hereafter authorized, which may at
any time be issued, sold or offered for sale by the Corpora-
tion or to have any other preemptive rights as now or here-
after defined by the laws of the State of New Jersey.
FOURTH: The address of the Corporation's current
registered office is: 15 Exchange Place, Jersey City, New
Jersey 07302 and the name of its current registered agent
at such address is the Corporation Trust Company.
FIFTH: The number of Directors constituting the
current Board of Directors is eight (8). The names and
addresses of the Directors are as follows:
NAMES ADDRESSES
----- ---------
Stephen R. Cohen c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
Thomas J. Burger c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
Joseph P. Gowan c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
Ira M. Lieberman c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
4
<PAGE>
Robert A. Kennedy c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
Herbert J. Breger c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
Phillip Ean Cohen c/o Morgan, Schiff & Co., Inc.
55 Broad Street
New York, New York 10004
Jerry Finkelstein c/o Telecom Plus International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33434
IN WITNESS WHEREOF, the undersigned has executed this
certificate on behalf of the Corporation on this the 16th day of
May, 1986.
TELECOM PLUS INTERNATIONAL, INC.
By /s/ Thomas J. Burger
-------------------------
Thomas J. Burger, President
5
<PAGE>
CERTIFICATE REQUIRED TO BE FILED WITH THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TELECOM PLUS INTERNATIONAL, INC.
Pursuant to the provisions of Section 14A:9-5(5)
of the New Jersey Business Corporation Act, the undersigned
Corporation hereby executes the following certificate:
FIRST: The name of the corporation is
TELECOM PLUS INTERNATIONAL, INC.
SECOND: the Restated Certificate of Incorpora-
tion was adopted on the 16th day of May, 1986.
Dated this 16th day of May, 1986.
TELECOM PLUS INTERNATIONAL, INC.
By /s/ Thomas J. Burger
----------------------------
Thomas J. Burger, President
<PAGE>
CERTIFICATE OF CORRECTION
OF THE
CERTIFICATE OF INCORPORATION
OF
TELECOM PLUS INTERNATIONAL, INC.
The undersigned, in order to correct its Certifi-
cate of Incorporation, pursuant to the New Jersey Business
Corporation Act, hereby certifies as follows:
FIRST: The name of the corporation is Telecom Plus Inter-
national, Inc. (the "Corporation").
SECOND: The Restated Certificate of Incorporation of the
Corporation was filed by the Department of State on May 28,
1986.
THIRD: The Certificate of Incorporation is an inaccurate
record in that a line was inadvertently omitted from Section
B(2) of ARTICLE THIRD in the Corporation's Restated Certifi-
cate of Incorporation filed by the Department of State on
May 28, 1986.
FOURTH: Section B(2) of ARTICLE THIRD of the Certificate
of Incorporation is hereby corrected to read as follows:
"Dividends on outstanding Preferred Shares of such
series on which dividends shall be payable shall
be declared and paid, or set apart for payment,
before any dividends shall be declared and paid,
or set apart for payment, on the Common Shares
with respect to the same dividend period."
<PAGE>
In Witness Whereof, the undersigned has signed his name on
behalf of the Corporation this 29th day of October, 1986.
TELECOM PLUS INTERNATIONAL, INC.
By: /s/ William R. Griffith
-------------------------------
William R. Griffith, Vice President
Suite 2300
805 Third Avenue
New York, New York 10022
2
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TELECOM PLUS INTERNATIONAL, INC.
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-4, of
the New Jersey Business Corporation Act, the undersigned
Corporation hereby certifies as follows:
FIRST: The name of the Corporation is
Telecom Plus International, Inc.
SECOND: The Amendments to the Certificate
of Incorporation effected hereby are as follows:
Paragraph FIRST of the Certificate of Incorpora-
tion is hereby amended to read as follows:
"FIRST: The name of the Corporation shall be
TPI Enterprises, Inc."
Paragraph SECOND of the Certificate of Incorpora-
tion is hereby amended to read as follows:
"SECOND: The purposes for which the Corpora-
tion is organized are to engage in any activity within the
purposes for which corporations may be organized under the
New Jersey Business Corporation Act."
THIRD: The foregoing amendments were
adopted by the shareholders of the corporation on March 9,
1987.
FOURTH: At the time the amendments were
adopted, there were 30,683,674 shares outstanding and enti-
tled to vote thereon.
<PAGE>
FIFTH: The number of shares voted for said
adoption is 17,284,295; and the number of shares voted
against said adoption is 11,877,301.
EXECUTED on behalf of the Corporation this
25th day of March, 1987.
Telecom Plus International, Inc.
By: /s/ Thomas J. Burger
----------------------------
Thomas J. Burger, President
By: /s/ Ira M. Lieberman
----------------------------
Ira M. Lieberman, Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
TPI ENTERPRISES, INC.
TO: Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4)
and Section 14A:9-4(3) of the New Jersey Business Corpora-
tion Act, the undersigned corporation, incorporated under
the laws of the State of New Jersey, does hereby execute the
following Amendment (the "Amendment") to its Restated Cer-
tificate of Incorporation:
FIRST: The name of the corporation is TPI
Enterprises, Inc. (the "Corporation").
SECOND: The Restated Certificate of Incorpora-
tion is hereby amended to add a new paragraph SIXTH to the
Restated Certificate of Incorporation, as follows:
"SIXTH. To the fullest extent from time to
time permitted by law, directors and officers
shall not be personally liable to the Corpo-
ration or its shareholders for damages for
breach of any duty owed to the Corporation or
its shareholders. Unless otherwise permitted
by law, the provisions of this Paragraph
SIXTH shall not relieve a director or officer
from liability for any breach of duty based
upon an act or omission (a) in breach of such
person's duty of loyalty to the Corporation
or its shareholders, (b) not in good faith or
involving a knowing violation of law or (c)
resulting in receipt by such person of an
improper personal benefit. No amendment or
repeal of this provision shall adversely
affect any right or protection of a director
or officer of the Corporation existing at the
time of such amendment or repeal."
<PAGE>
THIRD: The Amendment was approved by the Board
of Directors of the Corporation on September 9, 1988 and
thereafter duly adopted by the shareholders of the Corpora-
tion at the Annual Meeting of Shareholders held on November
9, 1988.
FOURTH: At the time of the adoption of the
Amendment by shareholders of the Corporation, there were
outstanding and entitled to vote 24,315,816 shares of common
stock of the Corporation.
FIFTH: A total of 22,677,819 such shares voted
for the Amendment, a total of 542,603 shares voted against
the Amendment and a total of 57,950 shares abstained.
Dated: November 10, 1988.
TPI ENTERPRISES, INC.
By: /s/ Robert A. Kennedy
---------------------------
Robert A. Kennedy
Executive Vice President
and Secretary
2
EXHIBIT 10.8
AMENDMENT TO TPI ENTERPRISES, INC.
1989 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED DECEMBER 16, 1994
1. The fourth sentence of Section 3 of the 1989
Stock Purchase Plan shall be amended to read as
follows:
"Without further action by the Compensation
Committee, "Purchase Period" shall mean with
respect to TPI Enterprises, Inc. and TPI Res-
taurants, Inc. ("Restaurants"), each of the
thirteen Accounting Periods used by Restaurants
during each year while the Plan is in effect."
2. The fifth sentence of Section 8 of the 1989
Stock Purchase Plan shall be amended to read as
follows:
"Without any action being required, the Plan
will terminate on April 16, 1995 or at any ear-
lier time if the maximum number of shares of
Common Stock to be sold under the Plan (as
hereinafter provided in Section 12) has been
purchased, but such termination shall not im-
pair any rights which under the Plan shall have
vested on or prior to the date of such termina-
tion."
3. The following sentence shall be added to the
end of Section 8 of the 1989 Stock Purchase
Plan:
"Notwithstanding the foregoing, if the Board
adopts an employee stock purchase plan to suc-
ceed the Plan following its termination, all
employees participating in the Plan shall be-
come automatically enrolled in the new employee
stock purchase plan and all Recorded Amounts as
of the date of termination, as well as certifi-
cates for the whole shares of Common Stock then
held by the Plan Trustees for the benefit of
participants, shall automatically transfer to
the trust established in connection with the
new employee stock purchase plan; provided,
that if a participant notifies the Company in
<PAGE>
writing within thirty days of termination of
the Plan that it does not want to be enrolled
in the new employee stock purchase plan, then
all transferred Recorded Amounts and certifi
cates as well as any payroll deductions made
under the new employee purchase plan shall be
delivered to such participant at no cost to the
participant as soon as practicable after the
date the notification is received by the Compa
ny."
2
EXHIBIT 10.11
AMENDMENT TO TPI ENTERPRISES, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ADOPTED DECEMBER 16, 1994
The first paragraph of Section 5 of the TPI
Enterprises, Inc. Non-Employee Directors Stock Option
Plan is hereby deleted and the following substituted in
lieu thereof:
The stock subject to Options granted hereunder
shall be shares of Common Stock. Such shares
may, in whole or in part, be authorized but
unissued shares or shares that shall have been
or that may be reacquired by TPI. The maximum
number of shares of Common Stock as to which
Options may be granted from time to time under
the Plan shal not exceed 165,000. The limita-
tion established by the preceding sentence
shall be subject to adjustment as provided in
Section 6(k) hereof.
EXHIBIT 10.12
TPI ENTERPRISES, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the 1995 Employee
Stock Purchase Plan (the "Plan") is to provide employees
of TPI Enterprises, Inc. (the "Company") and its Subsid-
iary Companies (as hereinafter defined in Section 14)
with added incentive to continue in the employment of
such companies and to encourage increased efforts to
promote the best interests of such companies by permit-
ting eligible employees to purchase shares of common
stock of the Company, par value $.01 per share (the
"Common Stock"), at prices less than the then current
market price thereof. The Plan is intended to qualify as
an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the
"Code"). The Plan is intended to be a successor to the
Company's 1989 Employee Stock Purchase Plan, as amended
(the "1989 Plan"). The Company and its Subsidiary Compa-
nies are sometimes hereinafter called collectively the
"Participating Companies."
2. Eligibility. Participation under the Plan
shall be open to all active employees of the Partici-
pating Companies who are at least 18 years of age except
(a) employees who have not been continuously employed by
<PAGE>
the Participating Companies (and certain predecessor
employers as determined by the Compensation Committee (as
defined hereafter)) for at least six months; (b) employ-
ees whose customary employment by the Participating
Companies is 20 hours or less per week; (c) employees
whose customary employment by the Participating Companies
is for not more than five months in any calendar year;
and (d) directors of TPI Enterprises, Inc. Employees of
the Participating Companies who are eligible to partici-
pate in the Plan pursuant to this Section shall be re-
ferred to as "Eligible Employees." No right to purchase
Common Stock shall accrue under the Plan in favor of any
person who is not an Eligible Employee, and no Eligible
Employee shall acquire such right to purchase (i) if,
immediately after receiving such right, such employee
would own 5% or more of the total combined voting power
or value of all classes of stock of the Company or any
subsidiary corporation (as defined in Section 424(f) of
the Code) thereof, taking into account in determining
stock ownership any stock attributable to such employee
under Section 424(d) of the Code; or (ii) if such right
would permit such employee's rights to purchase stock
under all employee stock purchase plans from time to time
in effect of the Company and its subsidiary
2
<PAGE>
corporations (as defined in Section 424(f) of the Code)
to accrue at a rate which exceeds $25,000 of fair market
value of such stock for each calendar year, all deter-
mined in the manner provided by Section 423(b)(8) of the
Code. For purposes of the Plan, "Compensation Committee"
is a committee designated by the Company's Board of
Directors (the "Board"), which committee members are not
eligible to participate in the Plan (hereinafter some-
times referred to as the "Committee").
3. Effective Date of Plan; Purchase Periods.
The Plan shall become effective on April 17, 1995, sub-
ject to shareholders' approval as set forth in Section 8
of the Plan ("Effective Date"). The first purchase
period (the "Initial Purchase Period") under the Plan
shall commence on the Effective Date. The term "Purchase
Period" shall have such meaning as may be determined by
the Compensation Committee from time to time. Without
further action by the Compensation Committee, "Purchase
Period" shall mean each of the consecutive thirteen four-
week periods beginning with the Initial Purchase Period
commencing on April 17, 1995. In certain years, the
final Purchase Period in a calendar year may be five
weeks long.
3
<PAGE>
4. Basis of Participation. (a) Each Eligible
Employee shall be entitled to enroll in the Plan as of
the first day of the Purchase Period following the month
in which such employee shall first become an Eligible Em-
ployee. If such employee shall not enroll in the Plan as
of such day, he shall be entitled to enroll in the Plan
as of the first day of any subsequent Purchase Period.
Notwithstanding the foregoing, each Eligible Employee who
was a participant in the 1989 Plan as of April 16, 1995
shall automatically be enrolled in the Plan as of its
Effective Date, and such Participant's most recent valid
payroll deduction authorization card under the 1989 Plan
shall be deemed to be a valid Authorization (as defined
below) under the Plan. Any such participant, however,
may elect not to enroll in the Plan, or may file a re-
vised Authorization, as described below.
To enroll in the Plan, an Eligible Employee
shall execute and deliver a payroll deduction authoriza-
tion card (the "Authorization") which shall become effec-
tive on the first day of the first Purchase Period which
begins on or after the date which is ten days after the
date on which such Authorization, if properly executed,
is received by the Plan Trustees. Each Authorization
from an Eligible Employee shall direct that deductions be
4
<PAGE>
made by the Participating Company that is the employer of
such Eligible Employee for each payroll period ending
during the period while such employee is a participant in
the Plan. The amount of each payroll deduction specified
in an Authorization for each such payroll period shall be
a whole percentage amount not to exceed 10% of the par-
ticipant's compensation (before withholding or other
deductions) from time to time paid to such participant by
the Participating Company that is his employer for such
payroll period. For purposes of this Plan, "compensa-
tion" shall mean gross salary or wages (including over-
time, tips and gratuities, but exclusive of incentive
bonuses, and certain other fringe benefits as may be
determined from time to time by the Compensation Commit-
tee).
(b) Payroll deductions shall be made for each
participant in accordance with such participant's Autho-
rization until the participant's participation in the
Plan terminates, his Authorization is revised or the Plan
terminates, all as hereinafter provided.
(c) A participant may change the amount of his
payroll deductions as of the first day of any Purchase
Period while the Plan is in effect. No other changes by
a participant in the amount of his payroll deduction
5
<PAGE>
shall be permitted except that a participant may elect to
terminate his participation in the Plan as hereinafter
provided. All such permitted changes shall be effected
by filing a new Authorization with the Plan Trustees.
Such amendment by a participant shall become effective on
the first day of the first Purchase Period which begins
on or after the date which is ten days after the date on
which such authorization, if properly executed, is re-
ceived by the Plan Trustees.
(d) The following shall be accumulated during
each Purchase Period, recorded by the Company for each
Purchase Period, and used by the Company for general
corporate purposes: (i) payroll deductions authorized
pursuant to paragraphs (a), (b), or (c) of this Section 4
(with respect to each participant, the "Plan Deduc-
tions"); and (ii) cash dividends paid with respect to
those shares of Common Stock purchased pursuant to the
terms of this Plan for which the participants owning such
shares have not requested certificates. Within ten days
after the last day of each Purchase Period, the aggregate
amount so recorded for such Purchase Period for each
participant shall be applied to the purchase, for the
trust account established under this Plan for such par-
ticipant (the "Trust Account," and collectively, the
6
<PAGE>
"Trust Accounts"), of the number of whole shares of
Common Stock determined by dividing (x) such amount by
(y) the Purchase Price (as hereinafter defined) for such
Purchase Period; provided, however, that in no event will
-------- -------
the number of shares of Common Stock purchased for a
participant's Trust Account for any Purchase Period
exceed an amount determined under the following formula:
2 X (A/B), where A equals the Plan Deductions for and
Recorded Amounts (as hereinafter defined) to be applied
in such Purchase Period, and B equals the product of 0.85
and the fair market value of a share of Common Stock on
the first day of such Purchase Period. Any cash balance
remaining after the purchase of whole shares for the
Trust Account of a participant for a Purchase Period, any
Plan Deductions that accrue after the last payroll date
of a Purchase Period, and any additional payments sent by
the participant to the Company pursuant to paragraph (e)
of this Section 4 that are not timely received with
respect to such Purchase Period (such cash balances, Plan
Deductions and additional payments are referred to col-
lectively as "Recorded Amounts") shall be retained, used
and recorded by the Company in the same manner as de-
scribed in the first sentence of this paragraph (d) and
shall be applied to the purchase of shares of Common
7
<PAGE>
Stock for the Trust Account of such participant at the
end of the next succeeding Purchase Period unless the
participant withdraws from the Plan, or the Plan termi-
nates, prior to such date. In the event of such a with-
drawal or termination, such amount shall be paid in cash
to the participant within three weeks of the occurrence
of such event.
Notwithstanding the foregoing, as of the Effec-
tive Date, the Trust Accounts shall also include all
amounts and all shares of Common Stock that have been
transferred from the 1989 Plan pursuant to the terms of
the 1989 Plan.
(e) Since the amount of a payroll check from a
Participating Company to a participant may not reflect
the amount of tips and gratuities received by the partic-
ipant, the amount of a payroll check may at times be
insufficient to fund all of the payroll deductions that a
participant has authorized pursuant to the Plan or other-
wise for such payroll period. In such event, funds
available for deduction will be allocated according to
the following priorities:
(i) Statutorily required payroll deduc-
tions, including withholdings for federal income
tax, any state and local taxes and FICA.
8
<PAGE>
(ii) Except for deductions stipulated
below, all other deductions presently withheld by
the Participating Company, including deductions for
the cost of a participant's uniforms, bad checks,
shortages, garnishments, advances, charitable con-
tributions, and insurance.
(iii) Plan Deductions.
(iv) Christmas Club.
If, after deductions for items with higher
priorities, the funds remaining are inadequate to fund
the full amount of the Plan Deductions, the participant
shall have the option of paying into the Plan an addi-
tional amount equal to the difference between (x) his
Plan Deductions for such payroll period and (y) the
amount of funds available after deduction for items with
higher priorities than that of the Plan. If a partici-
pant chooses to pay an additional amount into the Plan,
such additional amount must be paid by check payable to
the Company, and must be sent to the Company at the ad-
dress of its principal executive offices. Such check
must be received by the Company at least ten days before
the end of the Purchase Period in which the participant
expects such amount to be invested in shares of Common
Stock. Any such payment shall be applied under the Plan
9
<PAGE>
in the same manner as a Plan Deduction. Any such payment
will be returned to a participant only if a written
request is received by the Plan Trustees at least 48
hours before such payment is invested.
5. Purchase Price. The purchase price (the
"Purchase Price") per share of Common Stock hereunder for
any Purchase Period shall be 85% of the lesser of the
fair market value of a share of Common Stock on the first
business day or the last business day of such Purchase
Period; provided that if such percentage results in a
fraction of one cent, the Purchase Price shall be in-
creased to the next higher full cent. The fair market
value of a share of Common Stock on the applicable valua-
tion date of a Purchase Period shall be deemed to be the
closing selling price of the Common Stock on NASDAQ or on
the exchange on which such Common Stock is listed on such
day, or if there shall be no such sale of the Common
Stock on such day, then on the next preceding day on
which there shall have been such a sale. In no event,
however, shall the Purchase Price be less than the par
value of the Common Stock.
6. Issuance of Shares. Common Stock issued
under the Plan will be held by the Plan Trustees in
trust, in uncertificated form or otherwise as the Compen-
10
<PAGE>
sation Committee may determine from time to time, (i) in
the name of the participant, or (ii) if his Authorization
so specifies, in the name of the participant and another
person of legal age as joint tenants with rights of
survivorship, unless prohibited by any provision of
applicable law. A participant may make a written request
to the Company for the issuance of certificates for his
whole shares at any time, but the Company shall not be
required to issue any certificates to such participant
sooner than three weeks after receipt of such request.
The balance of a participant's accumulated Plan
Deductions for a Purchase Period shall be debited in the
amount of $3.00 for each request that certificates be
issued that is received during such Purchase Period from
such participant.
No interest shall at any time accrue with
respect to any Plan Deduction or Recorded Amount. After
the close of every fiscal quarter of the Company (or more
often, in the sole discretion of the Compensation Commit-
tee) a report will be made to each participant, stating
the number of shares of Common Stock purchased, the date
of purchase, the applicable Purchase Prices, the fair
market value of the Common Stock on which such Purchase
Prices were based, the total dollar amount of the pur-
11
<PAGE>
chases and the total number of shares which are then held
in the Trust Account of such participant.
7. Termination of Participation. A partici-
pant may at any time elect to terminate his participation
in the Plan, except that no such termination shall be
effective as to any Purchase Period unless such election
is received in writing by the Participating Company that
is the employer of such participant at least five days
prior to the last day of such Purchase Period. If such
election to terminate is received prior to the last day
of such Purchase Period, but is not received at least
five days prior thereto, the Plan Deductions of the
participant making such election shall be stopped as of
the earliest practicable date (the "Deduction Termination
Date") following receipt of such election. Accumulated
Plan Deductions and Recorded Amounts for the portion of
such Purchase Period prior to the Deduction Termination
Date will be applied to the purchase of Common Stock in
keeping with the terms of the Plan.
If a participant's payroll deductions are
interrupted by any legal process, an election to termi-
nate will be considered as having been received from him
on the day such interruption occurs.
12
<PAGE>
No distribution of certificates (or Recorded
Amounts, if any) shall be made to any participant who
terminates his or her participation in the Plan unless
such participant so requests the Company in writing. A
participant may not at any time request payment to him of
all or any part of any such Recorded Amount without
thereby terminating his participation in the Plan.
Certificates for the shares of Common Stock held for the
benefit of such participant by the Plan Trustees will
remain in such participant's Trust Account, and any such
Recorded Amounts will be held by the Company, unless
otherwise requested by such participant.
A participant who has withdrawn from the Plan
may rejoin the Plan, provided that such participant (a)
remains an Eligible Employee at the time he rejoins the
Plan, and (b) executes and delivers a new Authorization.
Such new Authorization will not become effective with
respect to such participant until the first day of the
first Purchase Period which begins after three complete
calendar months have elapsed following the date on which
the most recent withdrawal from the Plan by such partici-
pant became effective.
In the event of the death of any participant,
the termination of his employment with any of the Partic-
13
<PAGE>
ipating Companies for any reason (unless he remains or
immediately becomes employed by another Participating
Company), or any other cessation of his eligibility to
participate in the Plan, his participation in the Plan
shall immediately terminate, and all Plan Deductions and
other Recorded Amounts not used to purchase Common Stock
as of the date of such termination, together with a
certificate for the whole shares of Common Stock held for
his benefit by the Plan Trustees, shall be returned to
him or his legal representatives within three weeks upon
his written request or the written request of such repre-
sentatives to the Company. If no such request is re-
ceived by the Company within one year of the date on
which the participation of such participant in the Plan
terminates, the Company or the trustees shall send a
notice to the last known address of such participant.
Unless the Company or the Trustees becomes aware, subse-
quent to the date on which such notice is sent (the
"Notice Date"), of a change in the address of such par-
ticipant, such Plan Deductions, Recorded Amounts, and
certificate shall be sent to such participant's last
known address within 60 days after the Notice Date.
8. Termination or Amendment of the Plan. The
Company, by action of the Board, may terminate the Plan
14
<PAGE>
as of the beginning of any Purchase Period. Notice of
termination shall be given to all participants, but any
failure to give such notice shall not impair the effec-
tiveness of the termination.
Without any action being required, the Plan
will terminate in any event if it does not receive the
approval of the shareholders of the Company, in a manner
described in Section 423(b)(2) of the Code and regula-
tions thereunder, within 12 months before or after the
Plan is adopted by the Board. If such approval is not
received, certificates for all shares of Common Stock
held in the Trust Accounts of the participants, and all
Recorded Amounts with respect to such participants, shall
be distributed to such participants in accordance with
such Trust Accounts and records as soon as practicable
after such failure to receive shareholder approval.
Without any action being required, the Plan will termi-
nate upon the expiration of 10 years from the Effective
Date, or at any earlier time if the maximum number of
shares of Common Stock to be sold under the Plan (as
hereinafter provided in Section 12) has been purchased,
but such termination shall not impair any rights which
under the Plan shall have vested on or prior to the date
of such termination. If at any time the number of shares
15
<PAGE>
of Common Stock remaining available for purchase under
the Plan is not sufficient to satisfy all then outstand-
ing purchase rights, the Board or the Committee may
determine an equitable basis of apportioning available
shares among all participants.
The Board may amend the Plan from time to time
in any respect in order to meet changes in legal require-
ments or for any other reason; provided, however, that no
such amendment shall (a) materially adversely affect any
purchase rights outstanding under the Plan during the
Purchase Period in which such amendment is to be effect-
ed, (b) increase the maximum number of shares of Common
Stock which may be purchased under the Plan (except as
provided in Section 12 hereof), or (c) decrease the
Purchase Price of the Common Stock for any purchase
period below 85% of the fair market value of the Common
stock on the applicable valuation date of such period.
Upon termination of the Plan, a refund of all
Recorded Amounts as of such date of termination, as well
as certificates for the whole shares of Common Stock then
held by the Plan Trustees for the benefit of partici-
pants, shall be delivered to participants as soon as
practicable after such date of termination.
16
<PAGE>
9. Non-Transferability. Rights acquired under
the Plan are not transferable and may be exercised only
by a participant.
10. Shareholders' Rights. No Eligible Employ-
ee or participant shall by reason of the Plan have any
rights of a shareholder of the Company until and to the
extent he shall acquire shares of Common Stock (whether
or not certificated) as herein provided.
11. Administration of the Plan. The Plan
shall be administered by the Compensation Committee so as
to ensure that all participants have the same rights and
privileges as are provided by Section 423(b)(5) of the
Code.
Members of the Compensation Committee may be
appointed from time to time by the Board and shall be
subject to removal by the Board. The decision of a
majority in number of the members of the Committee in
office at the time shall be deemed to be the decision of
the Committee.
The Board or the Committee, from time to time,
may approve the forms of any documents or writings pro-
vided for in the Plan, may adopt, amend and rescind rules
and regulations not inconsistent with the Plan for carry-
ing out the Plan and may construe the Plan. The Board or
17
<PAGE>
the Committee may delegate responsibility for maintaining
all or a portion of the records pertaining to partici-
pants' accounts to persons not affiliated with the Par-
ticipating Companies. All expenses of administering the
Plan shall be paid by the Participating Companies. The
interpretation and construction by the Committee of any
provisions of the Plan shall be final. The Committee may
from time to time adopt such rules and regulations for
carrying out the Plan as it may deem best. No member of
the Committee shall be liable for any action, omission or
determination relating to the Plan, if such liability
would be inconsistent with the provisions of the Certifi-
cate of Incorporation or By-Laws of the Company. The
Company shall indemnify and hold harmless each member of
the Committee, and each other director or employee of the
Company to whom any duty or power relating to the admin-
istration or interpretation of the Plan has been delegat-
ed, against any cost, expense (including reasonable
attorneys' fees) or liability arising out of any action,
omission or determination relating to the Plan, to the
fullest extent permitted by the Certificate of Incorpora-
tion and By-Laws of the Company, and by New Jersey law.
12. Changes in Capital; Dividends. The maxi-
mum number of shares of Common Stock may be purchased
18
<PAGE>
under the Plan is 1,000,000, subject, however, to adjust-
ment as hereinafter set forth. Common Stock sold hereun-
der may be treasury shares, authorized and unissued
shares or a combination thereof. If at any time the
numbers of shares remaining available for purchase under
the Plan is not sufficient to satisfy all then outstand-
ing purchase rights, the available shares will be appor-
tioned among all participants on an equitable basis.
If the Common Stock subject to the Plan shall
at any time be changed or exchanged by declaration of a
stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation or other corpo-
rate reorganization in which the Company is the surviving
corporation, the number and kind of shares subject to
this Plan and the prices shall be appropriately and
equitably adjusted so as to maintain the prices thereof.
In the event of a dissolution or liquidation of the
Company or a merger, consolidation, sale of all or sub-
stantially all of its assets, or other corporate reorga-
nization in which the Company is not the surviving corpo-
ration but the holders of Common Stock receive securities
of another corporation, any outstanding options hereunder
shall not in any way prevent any transaction described
19
<PAGE>
herein and no holder of an option shall have the right to
prevent such transaction.
Any cash dividends paid upon Common Stock
(whether or not uncertificated) held by the Plan Trustees
pursuant to the Plan shall be treated as described in
paragraph (d) of Section 4 herein. Any cash dividends
paid upon shares of Common Stock that have been issued
pursuant to the Plan and for which certificates have been
issued to the participant will not be automatically
invested in shares of Common Stock but will be paid
directly to the participant.
Similarly, in the case of stock dividends or
stock splits upon shares of Common Stock that have been
issued pursuant to the Plan and for which certificates
have been issued to the participant, certificates repre-
senting such stock dividends or stock splits will be sent
directly to the participant. In the case of stock divi-
dends or stock splits upon shares of Common Stock (wheth-
er or not uncertificated) held by the Plan Trustees, the
number of shares in the participant's Trust Account will
be increased appropriately.
13. Application of Funds. The proceeds re-
ceived by the Company from the issuance of Common Stock
20
<PAGE>
pursuant to the Plan will be used for general corporate
purposes.
14. Miscellaneous. Except as otherwise ex-
pressly provided herein, any Authorization, election,
notice or document under the Plan from any Eligible
Employee or participant shall be delivered to his employ-
er corporation and, subject to any limitation specified
in the Plan, shall be effective when so delivered.
The term "Subsidiary Companies" shall mean TPI
Restaurants, Inc., and such other subsidiary corporations
(within the meaning of Section 424(f) of the Code) of
which the Company is a common parent as the Board of
Directors of the Company shall determine from time to
time.
The masculine pronoun shall include the femi-
nine.
The Plan, and the Company's obligation to sell
and deliver shares of Common Stock hereunder, shall be
subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approval by any
regulatory or governmental agency as may, in the opinion
of counsel for the Company, be required.
21
Exhibit 10.13
AMENDED AND RESTATED
TPI ENTERPRISES, INC.
EMPLOYEE STOCK PURCHASE PLAN
TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT
(hereinafter referred to as this "Agreement"), entered
into on the 27th day of March, 1995 by and between TPI
ENTERPRISES, INC., a corporation organized and existing
under the laws of the State of New Jersey (the "Company")
and Michael D. Sanford, Frederick W. Burford and Joy
Palmer, as Trustees (the "Trustees"), effective as of
April 17, 1995.
W I T N E S S E T H:
WHEREAS, the Company entered into a trust
agreement with Dennis A. Reeve, Joseph P. Gowan, Jr.,
Michael D. Sanford and Joey L. Stoner, as trustees on
August 16, 1989 (the "1989 Trust Agreement") for the
benefit of its employees and the employees of its Subsid-
iary Companies, as such term is defined in the Company's
1989 Employee Stock Purchase Plan, as amended (the "1989
Plan"), who participate in the 1989 Plan, for the purpose
of receiving and holding shares (which may be in uncerti-
ficated form or otherwise, in the discretion of the Board
of Directors of the Company or the Compensation
<PAGE>
Committee thereof) of the Company's Common Stock
("Shares") issued to participants as provided by the
terms of the 1989 Plan;
WHEREAS, the Company adopted the 1995 Employee
Stock Purchase Plan (the "1995 Plan"), as a successor
plan to the 1989 Plan (the 1989 Plan and the 1995 Plan
together referred to as the "Plans"), on the 16th day of
December, 1994, effective April 17, 1995; and
WHEREAS, the Company desires to amend and
restate the 1989 Trust to cover the 1995 Plan, and there-
by to include participants of the 1989 Plan and the 1995
Plan (the "Participants"), for the purpose of receiving
and holding Shares issued to Participants as provided by
the terms of both of the Plans.
NOW, THEREFORE, in consideration of the forego-
ing and the mutual obligations and undertakings hereinaf-
ter set forth, this Agreement is hereby adopted, effec-
tive as of April 17, 1995.
ARTICLE I
THE TRUST
---------
1.1. The Trust. The Company, in accordance
---------
with the terms of the Plans, hereby establishes this
trust, to be known as the "TPI Enterprises, Inc. Employee
Stock Purchase Plan Trust" (the "Trust"). The Trust
2
<PAGE>
assets (the "Assets") shall consist of such Shares as
shall be issued by the Company to Participants pursuant
to the terms of the Plans, together with stock splits or
stock dividends, if any, to the extent provided in Sec-
tion 12 of each of the Plans. The Assets shall be held
by the Trustees, in trust, in accordance with the provi-
sions of the Plans and of this Agreement.
ARTICLE II
CONTRIBUTIONS THROUGH EMPLOYEE PAYROLL DEDUCTIONS
-------------------------------------------------
2.1. Contributions to Trust. The Company
----------------------
intends to deposit with the Trustees from time to time
the Shares that are issued for the benefit of Partici-
pants in exchange for funds withheld or received by the
Company from Participants' salaries or wages pursuant to
the Plans, including funds received by the Company pursu-
ant to paragraph (e) of Section 4 of each of the Plans
("Contributions").
ARTICLE III
TRUST FUND AND TRUSTEES
-----------------------
3.1. Establishment and Acceptance of Trust.
-------------------------------------
The Trustees shall receive the Shares transferred to them
by the Company. All Shares so received shall be held in
trust pursuant to the terms of the Plans and of this
Agreement. The Trustees hereby accept the Trust created
3
<PAGE>
hereunder and agree to perform the duties required of
them by law and by the terms hereof.
3.2. Trust Account. The Trustees agree to
-------------
maintain a separate trust account ("Trust Account") for
the interest of each Participant, provided, however, that
-------- -------
the Assets attributable to each Trust Account may be
commingled with Assets attributable to other Trust Ac-
counts and held in common on behalf of all individuals
who have an interest in the Assets. The Trustees agree
to cause the Company to perform and the Company agrees to
perform the accounting for each Trust Account, at no
cost to the Trust, and pursuant to procedures and stan-
dards approved in writing from time to time by the Trust-
ees.
3.3. Issuance of Shares from the Company.
-----------------------------------
Within 10 days after the last day of each Purchase Period
(as defined in the Plan) (i) a statement of each
Participant's payroll deductions will be delivered by the
Company to the Trustees, and (ii) the number of whole
Shares that can be paid for by any Contributions attrib-
uted to each Participant will be issued to the Trustees
by the Company, in uncertificated form or otherwise; pro-
----
vided, however, that Recorded Amounts (as defined in the
----- -------
Plans) will be retained by the Company and not exchanged
4
<PAGE>
for Shares until the last day of the subsequent Purchase
Period; and, provided further, that no Shares will be
-------- -------
issued by the Company to the Trustees in contravention of
Sections 4(d), 7, or any other applicable provision of
the Plan. The Trustees may receive only Shares, subject
to Sections 3.4(a) and (g) of this Agreement. The Trust-
ees will cause the Company to allocate to each
Participant's Trust Account the number of Shares received
by the Trustees on behalf of each such Participant.
3.4. Powers of Trustees. The Trustee shall
------------------
have the following powers and authority, to be exercised
in accordance with and subject to the provisions of the
Plan and of this Agreement:
(a) Receipt of Property. To accept and
-------------------
retain in trust Shares that are reserved by the Company
for the purposes of the Plans and, to the extent provided
in Section 12 of each of the Plan, any stock splits or
stock dividends thereon.
(b) Conveyance and Transfer of Property.
-----------------------------------
To convey or transfer Shares to a Participant or to his
or her beneficiaries entitled to such Shares under the
terms of the Plans and of this Agreement, subject however
to payment by such Participant or beneficiaries of any
fee for issuance of stock certificates in their name or
5
<PAGE>
names as may be specified from time to time by the Trust-
ees.
(c) Supervision of Recordkeeping. To
----------------------------
supervise, inspect, review, and require changes in the
books, records, reports, and accounting procedures main-
tained by the Company with regard to the Plans.
(d) Exercise of Owner's Rights. To
--------------------------
deliver or cause to be delivered to the Participants all
notices, prospectuses, financial statements, proxies, and
proxy solicitation materials relating to the Shares held
hereunder; provided, however, that the Company may deliv-
-------- -------
er or cause to be delivered any such materials if it
provides the Trustees with an undertaking that it will do
so in a timely fashion for each Participant entitled to
receive such materials. The Trustees shall not vote any
of the Shares held hereunder except in accordance with
the written instructions of each Participant. Subject to
and in accordance with the written instructions of each
Participant, the Trustees shall have the power (i) to
vote the Shares held in trust; (ii) to give general or
special proxies or powers of attorney with or without
power of substitution; (iii) to exercise any conversion
privileges, subscription rights, or other options and to
cause to be made any payments incidental thereto; (iv) to
6
<PAGE>
oppose, or to consent to, or to otherwise participate in,
corporate reorganizations or other changes affecting
corporate securities, and to delegate discretionary
powers, and to cause to be paid any assessments or charg-
es in connection therewith; and (v) generally to exercise
any of the powers of an owner with respect to stock held
as part of the Assets.
(e) Dispensation of Cash Dividends. To
------------------------------
cause the Company (i) to distribute to Participants any
cash dividends or distributions paid with regard to
Shares and/or (ii) to issue additional whole Shares for
the account of Participants in lieu of payment of cash
dividends or distributions; provided, however, that such
-------- -------
distributions or issuance shall be made only with respect
to Shares for which Participants have been issued certif-
icates.
(f) Registration of Investments. To
---------------------------
cause Shares held as part of the Assets to be registered
(i) in the name of the Trust (or of the Trustees, as
such) or (ii) in the name of one or more nominees; and to
hold any such Shares in bearer form, in uncertificated
form, or otherwise in the discretion of the Board of
Directors of the Company (the "Board") or the Compensa-
tion Committee thereof (the "Compensation Committee"),
7
<PAGE>
provided, however, that the books and records maintained
-------- -------
by the Company for the Trust shall at all times show that
all such Shares are part of the Assets and that such
Shares are allocated to the specific Trust Accounts of
Participants.
(g) Retention of Property Acquired. To
------------------------------
accept and retain for such time as they may deem advis-
able any securities or other property received or ac-
quired by them as Trustees hereunder, whether or not such
securities or other property would normally be received
or accepted hereunder.
(h) Execution of Instruments. To make,
------------------------
execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instru-
ments that may be necessary or appropriate to carry out
the powers herein granted.
(i) Settlement of Claims and Debts. To
------------------------------
settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Trust, to
commence or defend suits or legal or administrative
proceedings, and to represent the Trust in all suits and
legal and administrative proceedings.
(j) Employment of Agents and Counsel. To
--------------------------------
employ suitable agents and counsel (who may be counsel
8
<PAGE>
for the Company, subject to Article IV of this Agree-
ment), and to pay their reasonable expenses and compensa-
tion.
(k) Power to Do any Necessary Act. To
-----------------------------
undertake all such acts or proceedings and to exercise
all such rights and privileges (although not specifically
mentioned herein) including, without limitation, the
delegation of administrative duties, as the Trustees may
deem necessary to administer the Assets or to carry out
the purposes of the Plan and of this Agreement.
3.5. Court Actions. The Trustees shall not be
-------------
required to receive any order or consent of any court as
a prerequisite to taking any action hereunder, or to file
any return or report to any court.
ARTICLE IV
FIDUCIARY RESPONSIBILITIES
--------------------------
4.1. Exclusive Benefit Rule. The Trustees
----------------------
shall discharge their duties hereunder solely in the
interest of the Participants and their beneficiaries and
for the exclusive purpose of providing benefits to Par-
ticipants and their beneficiaries. The Trustees shall
exercise such care, skill, prudence and diligence under
the circumstances then prevailing that men of prudence
acting in like capacity and familiar with such matters
9
<PAGE>
would use in the conduct of an enterprise of like charac-
ter and with like aims.
4.2. Conflicts of Interest. The Trustees
---------------------
shall not:
(a) deal with the Assets of the Plan in
their own interests or for their own accounts;
(b) in their individual or in any other
capacity, act in any transaction involving the Plans or
in behalf of a party (or represent a party) where the
interests of the Trustees are adverse to the interests of
the Plans or the interests of the Participants and their
beneficiaries; or
(c) receive any consideration for their
own personal account from any party dealing with the
Plans in connection with a transaction involving the
Assets; provided, however, that nothing in this Section
-------- -------
shall be construed to preclude the Trustees from receiv-
ing reasonable compensation for services rendered, or for
reimbursement of expenses properly and actually incurred
in the performance of their duties under the Plan or from
serving as Trustees.
4.3. Duties. The Trustees shall be under no
------
duties whatsoever except such duties as are specifically
set forth in this Agreement, and no implied covenant or
10
<PAGE>
obligation shall be read into this Agreement against the
Trustees. In the performance of their duties, the Trust-
ees shall be liable for their own negligence or willful
misconduct, unless otherwise provided by the Certificate
of Incorporation or By-Laws of the Company. In accept-
ing, holding, and distributing Shares hereunder and caus-
ing the Company or the transfer agent of the Company (the
"Transfer Agent") to perform certain acts pursuant to the
Plans, the Trustees may rely solely upon the accuracy of
all facts and representations supplied or made at any
time by the Participants or by the Company. The Partici-
pants shall have the sole authority and responsibility
for the enforcement or defense of the terms and condi-
tions of this Agreement. The Trustees shall not be
required to prosecute, defend, or respond to any action
or any judicial proceeding relating to the Assets unless
they have previously received indemnification satisfacto-
ry to them in form and substance. The Company shall, at
all times, fully indemnify and save harmless the Trustees
from any liability for which they may be indemnified
pursuant to the Certificate of Incorporation or By-Laws
of the Company. If the provisions of the Certificate of
Incorporation and the By-Laws of the Company are deter-
mined by a court of competent jurisdiction to be not
11
<PAGE>
applicable to a particular Trustee or Trustees, then such
Trustee or Trustees shall be liable only to the minimum
extent required by, and shall be indemnified to the
fullest extent permitted by, New Jersey law.
4.4. Insurance. Nothing in this Article shall
---------
preclude:
(a) the Trustees from purchasing insur-
ance for the Plans or themselves to cover liability or
losses occurring by reason of any act or omission of a
fiduciary, provided such insurance shall permit recourse
by the insurer against the fiduciary in the case of a
breach of a fiduciary obligation by the fiduciary; or
(b) a fiduciary from purchasing insurance
to cover liability under this Article for his own ac-
count. Premiums for such insurance purchased by individ-
ual Trustees shall be paid by the Company.
ARTICLE V
ACCOUNTING AND REPORTS
----------------------
5.1. Accounts. The Trustees shall cause the
--------
Company to keep accurate and detailed records pertaining
to each Trust Account with respect to contributions,
receipts, investments, distributions, disbursements, and
all other transactions hereunder. On or before the
thirtieth day of each month following the close of each
12
<PAGE>
fiscal quarter of the Company, the Trustees shall cause
the Company to furnish to each Participant a written
report (as described in Section 6 of each of the Plans)
reflecting all transactions for each such Participant's
Trust Account effected pursuant to the Plans during the
preceding Purchase Period or such other appropriate
period. The Company may, in the sole discretion of the
Compensation Committee, furnish such additional written
reports to each Participant as it deems useful or neces-
sary. In the absence of the filing in writing with the
Trustees by Participants of exceptions or objections to
any report within 30 days after mailing such report, each
Participant not filing such objections shall be deemed to
have approved such report and the Trustees shall be
released, relieved and discharged from all liability to
anyone with respect to all matters set forth in such
report.
ARTICLE VI
AUTHORIZATIONS FOR TRUSTEES' ACTION
-----------------------------------
6.1. Payments. The Trustees, in accordance
--------
with provisions of the Plans, shall cause the Company or
the Transfer Agent for the Shares to make payments of any
dividends or distributions with respect to the Assets
either to (i) the Participants in the form of cash or
13
<PAGE>
Shares in amounts consistent with each Participant's
interest in the Assets or (ii) the Trustees in the form
of Shares. The Trustees shall be fully protected in
acting upon any such written instructions from Partici-
pants without inquiry or investigation.
6.2. Direction of Committee. The Trustees
----------------------
shall be fully protected in relying upon the written
certification of the Company as to the membership and
extent of authority of any committee (the "Committee")
duly authorized to act on behalf of the Company with
regard to the Plans and in continuing to rely thereupon
until subsequent certification is filed with the Trust-
ees. The Trustees shall be fully protected in relying
and acting upon any written direction of such Committee,
and in continuing to so act and rely until subsequent
certification that said authority has been revoked or
modified has been filed with the Trustees.
6.3. Impossibility of Performance. In case it
----------------------------
becomes impossible for the Company or the Trustees to
perform any act under the Plans, that act shall be per-
formed which in the judgment of the Trustees will most
nearly carry out the intent and purpose of the Plans.
All parties to this Agreement or any and all parties
14
<PAGE>
interested in the Plans shall be bound by any acts per-
formed under such conditions.
ARTICLE VII
EXPENSES
--------
7.1. Expenses. The expenses incurred by the
--------
Company in the installation, administration and revision
of the Plans and in the installation and revision of this
Agreement shall be paid by the Company. Such compensa-
tion to the Trustees as may be agreed upon in writing
from time to time between the Company and the Trustees
and the expenses incurred by the Trustees in the perfor-
mance of their duties, including professional fees of any
person, firm or agent employed by the Trustees to carry
out the administrative functions hereunder, shall be paid
by the Company subject to the following limitations:
(a) any persons now or hereafter serving
as Trustees of the Plans who are employees and/or share-
holders of the Company, shall not be entitled to any fees
or other compensation solely in consideration of acting
as a Trustee under the Plans. Such persons shall, howev-
er, be entitled to payment or reimbursement of taxes and
expenses, as set forth above, to the same extent as any
other Trustee; and
15
<PAGE>
(b) any Trustee that is a fiduciary
institution shall pay the cost of any insurance purchased
pursuant to Section 4.4 of this Agreement.
7.2. Taxes. The Company shall reimburse the
-----
Trustees for and indemnify and hold harmless the Trustees
from the payment of taxes of any and all kinds, includ-
ing, without limitation, property taxes and income taxes
levied or assessed under existing or future laws upon or
with respect to the Trust, any of the Assets, or the
income therefrom, subject to the terms of any agreements
or contracts made, if any, concerning such tax payments.
The Trustees may assume that any taxes assessed on or
with respect to the Trust or its income are lawfully
assessed unless the Company shall in writing advise the
Trustees that in the opinion of counsel for the Company
such taxes are or may be unlawfully assessed. In the
event that the Company shall so advise the Trustees, the
Trustees will, if so requested in writing by the Company,
contest the validity of such taxes in any manner deemed
appropriate by the Company or its counsel, in which event
the Trustees agree to execute all documents, instruments,
claims, and petitions necessary or advisable in the opin-
ion of the Company or its counsel for the refund, abate-
ment, reduction, or elimination of any such taxes.
16
<PAGE>
ARTICLE VIII
APPOINTMENT, RESIGNATION, OR REMOVAL OF TRUSTEES
------------------------------------------------
8.1. Qualifications of Trustees. The Compen-
--------------------------
sation Committee shall appoint and/or replace the Trust-
ees. The Compensation Committee shall appoint (i) at
least three individual employees or officers of the
Participating Companies (as defined in the Plan) as
Trustees, or (ii) a fiduciary institution plus up to
three individuals referred to in (i). No person may be
simultaneously both a Trustee and a Compensation Commit-
tee member.
8.2. Resignation or Removal of Trustees. A
----------------------------------
Trustee may resign at any time upon thirty (30) days
written notice to the Company. A Trustee may be removed
by the Board or the Compensation Committee at any time
upon thirty (30) days written notice delivered to the
Trustee. If a Trustee is no longer an employee of a
Participating Company, he shall no longer be a Trustee
effective as of the date his employment is terminated,
without any further action by the Trustee or the Partici-
pating Company. If following such resignation, removal
or employment termination there are less than three
remaining Trustees and the Plan is to be continued, the
Board or the Compensation Committee shall designate a
17
<PAGE>
successor trustee. If the Board or the Compensation
Committee does not so designate such successor trustee
within thirty (30) days after the written notice to the
Company or a Trustee, as applicable, the Trustees that
have not been so removed or that have not resigned may
apply to a court of competent jurisdiction for the pur-
pose of securing the designation of same.
8.3. Transfer of Assets to a Successor Trust-
----------------------------------------
ee. In the event the Company wishes to continue the Plan
--
through a successor trustee, it may, upon thirty (30)
days written notice and upon furnishing evidence of the
continuation of the Plans through a successor trustee or
trustees, direct the Trustees to transfer the Assets of
this Trust to said successor trustee or trustees, in
which event the Trustee shall deliver the Assets of the
Trust and such instruments of conveyance and further
assurances as may be reasonably required for vesting in
such successor trustee or trustees all right, title, and
interest of the Trustees in the Assets. The transfer of
the Assets under the circumstances above shall not, by
itself, be deemed a termination of the Plans.
18
<PAGE>
ARTICLE IX
AMENDMENT OR TERMINATION
------------------------
9.1. Amendment or Termination. The Board
------------------------
reserves the right at any time and from time to time to
amend, in whole or in part, any or all of the provisions
of this Agreement by written instrument signed and deliv-
ered to and acknowledged by the Trustees, provided that
(i) no amendment which affects the rights, duties, or
responsibilities of the Trustees may be made without
their written consent; (ii) any amendment requiring the
approval of the Company's shareholders under either of
the Plans is so approved; (iii) any such amendment is
consistent with the terms of the Plans, as amended from
time to time; and (iv) no amendment shall authorize or
permit, at any time prior to the satisfaction of all
liabilities with respect to Participants and their bene-
ficiaries under the Plans, any part of the corpus or
income of the Trust to be used for, or diverted to,
purposes other than for the exclusive benefit of Partici-
pants and their beneficiaries.
The Company may at any time deliver notice to
the Trustees that this Agreement is to be terminated as
of the beginning of any Purchase Period. Upon receipt of
such notice, the Trustees shall distribute the Assets in
19
<PAGE>
accordance with the written directions of the Company.
Following such distribution, this Trust shall terminate.
ARTICLE X
PROVISIONS RELATING TO MULTIPLE TRUSTEES
----------------------------------------
10.1. Application. If on the date hereof or
-----------
at any time hereafter there shall be more than one per-
son, firm, corporation or other entity serving in the
capacity of Trustees or Co-Trustees under this Agreement,
their proceedings shall be conducted in the manner pre-
scribed in this Article 10.
10.2. Meetings. Actions of the Trustees shall
--------
be taken at one or more meetings called for the purpose,
pursuant to seven (7) days advance written notice; pro-
----
vided, however, that such notice may be waived in writing
----- -------
and shall be deemed waived by personal or telephonic
attendance at the meeting.
10.3. Consent. The foregoing provision to the
-------
contrary notwithstanding, the Trustees may transact
business by unanimous written consent in lieu of a meet-
ing called for the purpose.
10.4. Secretary. The Trustees shall appoint
---------
one of their members as Secretary, who shall keep written
records of all their proceedings. The Secretary shall
have authority to call meetings of the Trustees as pre-
20
<PAGE>
scribed in Section 10.2 above. He shall also have au-
thority to certify the actions taken by the Trustees to
all interested persons.
10.5. Quorum and Voting. A majority of the
-----------------
Trustees shall constitute a quorum for the transaction of
business; provided, however, that any matter coming
-------- -------
before the meeting must be decided by a majority vote of
all Trustees, and not by a majority vote of the quorum.
In the case of a tie vote, or of the absence of a majori-
ty of the Trustees to act upon any matter, a meeting may
be adjourned and reconvened until such time as the requi-
site number is present and voting.
10.6. Other Rules. The Trustees shall have
-----------
authority to adopt such rules and procedures for the
conduct of their affairs, not inconsistent with the rules
set forth above, as they deem prudent and necessary.
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1. Protection of Trustees. The Trustees do
----------------------
not guarantee the Assets of the Trust from loss or depre-
ciation and shall not be liable to anyone on account of
such loss or depreciation unless they fail to discharge
their duties in accordance with Articles III and IV of
this Trust Agreement.
21
<PAGE>
11.2. Titles. Title and Articles and headings
------
to Sections in this Agreement are inserted for conve-
nience of reference only and, in the event of any con-
flict, the text of this instrument, rather than such
titles or headings, shall control.
11.3. Separability Clause. In case any provi-
-------------------
sion of this Agreement shall be invalid, illegal, or
unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be
affected thereby.
11.4. Governing Law. This indenture shall be
-------------
construed in accordance with and governed by the laws of
the State of New Jersey, without regard to the conflict
of law principles thereof.
11.5. Execution in Counterparts. This Agree-
-------------------------
ment may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but
one and the same instrument.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on March 27, 1995 to be effective
as of the 17th day of April, 1995.
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
---------------------------
J. Gary Sharp
TRUSTEES
/s/ Michael D. Sanford
---------------------------
Michael D. Sanford
/s/ Frederick W. Burford
---------------------------
Frederick W. Burford
/s/ Joy Palmer
---------------------------
Joy Palmer
23
EXHIBIT 10.14
NATIONSBANK
DEFINED CONTRIBUTION MASTER PLAN
AND
TRUST AGREEMENT
<PAGE>
<TABLE><CAPTION>
Defined Contribution Master Plan
TABLE OF CONTENTS
<S> <C>
ALPHABETICAL LISTING OF DEFINITIONS ........... iii 3.06 Accrual of Benefit ............................ 3.03
3.07 - 3.16 Limitations on Allocations ............. 3.05
3.17 Special Allocation Limitation ................. 3.07
ARTICLE I, DEFINITIONS 3.18 Defined Benefit Plan Limitation ............... 3.07
1.01 Employer .............................. 1.01 3.19 Definitions - Article III ..................... 3.07
1.02 Trustee ............................... 1.01 ARTICLE IV, PARTICIPANT CONTRIBUTIONS
1.03 Plan .................................. 1.01 4.01 Participant Nondeductible Contributions........ 4.01
1.04 Adoption Agreement .................... 1.01 4.02 Participant Deductible Contributions........... 4.01
1.05 Plan Administrator .................... 1.01 4.03 Participant Rollover Contributions ............ 4.01
1.06 Advisory Committee .................... 1.02 4.04 Participant Contribution - Forfeitability ..... 4.02
1.07 Employee .............................. 1.02 4.05 Participant Contribution -
1.08 Serf-Employed Individual/ Withdrawal/Distribution ....................... 4.02
Owner-Employee ....................... 1.02 4.06 Participant Contribution -
1.09 Highly Compensated Employee ........... 1.02 Accrued Benefit ............................... 4.02
1.10 Participant ........................... 1.03 ARTICLE V, TERMINATION OF SERVICE -
1.11 Beneficiary ........................... 1.03 PARTICIPANT VESTING
1.12 Compensation .......................... 1.03 5.01 Normal Retirement Age ......................... 5.01
1.13 Earned Income ......................... 1.05 5.02 Participant Disability or Death ............... 5.01
1.14 Account ............................... 1.05 5.03 Vesting Schedule .............................. 5.01
1.15 Accrued Benefit ....................... 1.05 5.04 Cash-out Distributions to Partially-
1.16 Nonforfeitable ........................ 1.05 Vested Participants/Restoration of
1.17 Plan Year/Limitation Year ............. 1.05 Forfeited Accrued Benefit ..................... 5.01
1.18 Effective Date ........................ 1.05 5.05 Segregated Account for Repaid Amount........... 5.02
1.19 Plan Entry Date ....................... 1.05 5.06 Year of Service - Vesting ..................... 5.03
1.20 Accounting Date ....................... 1.05 5.07 Break in Service - Vesting .................... 5.03
1.21 Trust ................................. 1.05 5.08 Included Years of Service - Vesting ........... 5.03
1.22 Trust Fund ............................ 1.05 5.09 Forfeiture Occurs ............................. 5.03
1.23 Nontransferable Annuity ............... 1.05 ARTICLE VI, TIME AND METHOD OF PAYMENT
1.24 ERISA ................................. 1.05 OF BENEFITS
1.25 Code .................................. 1.05 6.01 Time of Payment of Accrued Benefit ............ 6.01
1.26 Service ............................... 1.05 6.02 Method of Payment of Accrued Benefit .......... 6.02
1.27 Hour of Service ....................... 1.05 6.03 Benefit Payment Elections ..................... 6.04
1.23 Disability ............................ 1.07 6.04 Annuity Distributions to Participants
1.29 Service for Predecessor Employer ...... 1.07 and Surviving Spouses ......................... 6.06
1.30 Related Employers ..................... 1.07 6.05 Waiver Election - Qualified Joint and
1.31 Leased Employees ...................... 1.08 Survivor Annuity .............................. 6.07
1.32 Special Rules for Owner-Employees ..... 1.08 6.06 Waiver Election - Preretirement Survivor
1.33 Determination of Top Heavy Status ..... 1.09 Annuity ....................................... 6.08
1.34 Paired Plans .......................... 1.10 6.07 Distributions Under Domestic
ARTICLE II, EMPLOYEE PARTICIPANTS Relations Orders .............................. 6.08
2.01 Eligibility ........................... 2.01 ARTICLE VII, EMPLOYER ADMINISTRATIVE
2.02 Year of Service - Participation ....... 2.01 PROVISIONS
2.03 Break in Service - Participation ...... 2.01 7.01 Information to Committee ...................... 7.01
2.04 Participation upon Re-employment ...... 2.01 7.02 No Liability .................................. 7.01
2.05 Change in Employee Status ............. 2.02 7.03 Indemnity of Certain Fiduciaries .............. 7.01
2.06 Election Not to Participate ........... 2.02 7.04 Employer Direction of Investment .............. 7.01
ARTICLE III, EMPLOYER CONTRIBUTIONS AND 7.05 Amendment to Vesting Schedule ................. 7.01
FORFEITURES ARTICLE VIII, PARTICIPANT ADMINISTRATIVE
3.01 Amount ................................ 3.01 PROVISIONS
3.02 Determination of Contribution ......... 3.01 8.01 Beneficiary Designation ....................... 8.01
3.03 Time of Payment of Contribution ....... 3.01 8.02 No Beneficiary Designation/Death
3.04 Contribution Allocation ............... 3.01 of Beneficiary ................................ 8.01
3.05 Forfeiture Allocation ................. 3.03 8.03 Personal Data to Committee .................... 8.02
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</TABLE>
<PAGE>
<TABLE>
Defined Contribution Master Plan
<S> <C>
8.04 Address for Notification ................. 8.02 11.04 Dividend Plan ....................... 11.02
8.05 Assignment or Alienation.................. 8.02 11.05 Insurance Company Not a Party
8.06 Notice of Change in Terms ................ 8.02 to Agreement ........................ 11.03
8.07 Litigation Against the Trust ............. 8.02 11.06 Insurance Company Not Responsible
8.08 Information Available..................... 8.02 for Trustee's Actions................ 11.03
8.09 Appeal Procedure for Denial of Benefits... 8.02 11.07 Insurance Company Reliance on
8.10 Participant Direction of investment ...... 8.03 Trustee's Signature ................. 11.03
ARTICLE IX, ADVISORY COMMITTEE, DUTIES 11.08 Acquittance ............................ 11.03
WITH RESPECT TO PARTICIPANTS ACCOUNTS 11.09 Duties of insurance Company ............ 11.03
9.01 Members' Compensation, Expenses .......... 9.01 ARTICLE XII, MISCELLANEOUS
9.02 Term ..................................... 9.01
9.03 Powers ................................... 9.01 12.01 Evidence ............................ 12.01
9.04 General .................................. 9.01 12.02 No Responsibility for Employer
Action .............................. 12.01
9.05 Funding Policy ........................... 9.02 12.03 Fiduciaries Not Insurers ............ 12.01
9.06 Manner of Action.......................... 9.02 12.04 Waiver of Notice .................... 12.01
9.07 Authorized Representative ................ 9.02 12.05 Successors .......................... 12.01
9.08 Interested Member ........................ 9.02 12.06 Word Usage; ......................... 12.01
9.09 Individual Accounts ...................... 9.02 12.07 State Law ........................... 12.01
9.10 Value of Participant's Accrued Benefit.... 9.02 12.08 Employer's Right to Participate ..... 12.01
9.11 Allocation and Distribution of 12.09 Employment Not Guaranteed............ 12.02
Net Income Gain or Loss .................. 9.03 ARTICLE XIII, EXCLUSIVE BENEFIT, AMENDMENT,
9.12 Individual Statement...................... 9.03 TERMINATION
9.13 Account Charged .......................... 9.04 13.01 Exclusive Benefit ................... 13.01
9.14 Unclaimed Account Procedure .............. 9.04 13.02 Amendment by Employer ............... 13.01
ARTICLE X, TRUSTEE AND CUSTODIAN, POWERS
AND DUTIES 13.03 Amendment by Master Plan Sponsor..... 13.02
10.01 Acceptance ............................... 10.01 13.04 Discontinuance ...................... 13.02
10.02 Receipt of Contributions ................. 10.01 13.05 Full Vesting on Termination ......... 13.02
10.03 Investment Powers ........................ 10.01 13.06 Merger/Direct Transfer .............. 13.02
10.04 Records and Statements ................... 10.06 13.07 Termination.......................... 13.03
ARTICLE XIV, CODE Sec.401(k) AND CODE Sec.401(m)
10.05 Fees and Expenses from Fund .............. 10.06 ARRANGEMENTS
10.06 Parties to Litigation..................... 10.06
10.07 Professional Agents ...................... 10.06 14.01 Application .......................... 14.01
10.08 Distribution of Cash or Property ......... 10.06 14.02 Code 401(k) Arrangement .............. 14.01
10.09 Distribution Directions .................. 10.06 14.03 Definitions .......................... 14.01
10.10 Third Party/Multiple Trustees ............ 10.06 14.04 Matching Contributions/
10.11 Resignation .............................. 10.07 Employee Contributions ............... 14.03
10.12 Removal .................................. 10.07 14.05 Time of Payment of
10.13 Interim Duties and Successor Trustee ..... 10.07 Contributions ........................ 14.03
14.06 Special Allocation Provisions-
10.14 Valuation of Trust ....................... 10.07 Deferral Contributions, Matching
10.15 Limitation on Liability - II Contributions and Qualified
Investment Manager, Ancillary Trustee Nonelective Contributions ............ 14.04
or Independent Fiduciary Appointed ....... 10.07 14.07 Annual Elective Deferral
10.16 Investment in Group Trust Fund ........... 10.07 Limitation ........................... 14.05
10.17 Appointment of Ancillary Trustee or
Independent Fiduciary ................... 10.08 14.08 Actual Deferral Percentage
("ADP")Test .......................... 14.06
ARTICLE XI, PROVISIONS RELATING TO INSURANCE 14.09 Nondiscrimination Rules for Employer
AND INSURANCE COMPANY Matching Contributions/Participant
11.01 Insurance Benefit.......................... 11.01 Nondeductible Contributions .......... 14.08
11.02 Limitation on Life Insurance
Protection................................. 11.01 14.10 Multiple Use Limitation .............. 14.10
11.03 Definition~ ................................ 11.02 14.11 Distribution Restrictions ............ 14.10
14.12 Special Allocation Rules ............. 14.11
ii 1/90
</TABLE>
<PAGE>
<TABLE><CAPTION>
Defined Contribution Master Plan
ALPHABETICAL LISTING OF DEFINITIONS
Section Reference Section Reference
Plan Definition (Page Number) Plan Definition (Page Number)
<S> <C>
100% Limitation ............................. 3.19(1) (3.10) Group Trust Fund ...................... 10.16 (10.07)
Account ..................................... 1.14 (1.05) Hardship .............................. 6.01(A)(4) (6.01)
Accounting Date ............................. 120 (1.05) Hardship for Code 401(k) Purposes ..... 14.11(A) (14.11)
Accrued Benefit ............................. 1.15 (1.05) Highly Compensated Employee ........... 1.09 (1.02)
Actual Deferral Percentage ("ADP") Test...... 14.08 (14.06) Highly Compensated Group .............. 14.03(d) (14.02)
Adoption Agreement .......................... 1.04 (1.01) Hour of Service ....................... 127 (1.08)
Advisory Committee .......................... 1.06 (1.02) Incidental Insurance Benefits ......... 11.01(A) (11.01)
Annual Addition ............................. 3.19(a)(3.07) Insurable Participant ................. 11.03(d)(11.02)
Average Contribution Percentage Test ........ 14.09 (14.08) Investment Manager .................... 9.04(i) (9.01)
Beneficiary ................................. 1.11 (1.03) Issuing Insurance Company ............. 11.03(b) (11.02)
Break in Service for Eligibility Purposes ... 2.03 (2.01) Joint and Survivor Annuity ............ 6.04(A) (6.06)
Break in Service for Vesting Purposes ....... 5.07 (5.03) Key Employee .......................... 1.33(B)(1) (1.09)
Cash-out Distribution ....................... 5.04 (5.01) Leased Employee ....................... 1.31 (1.08)
Code ........................................ 1.25 (1.06) Limitation Year ......... 1.17 and 3.19(e) (1.05 and 3.08)
Code Sec.411(d)(6) Protected Benefits ....... 13.02 (13.01) Loan Policy ........................... 9.04(A) (9.02)
Compensation ................................ 1.12 (1.03) Mandatory Contributions ............... 14.04(A) (14.03)
Compensation for Code Sec.401(k) Purposes ... 14.03(0 (14.02) Mandatory Contributions Account ....... 14.04(A) (14.03)
Compensation for Code Sec.415 Purposes ...... 3.19(b) (3.08) Master or Prototype Plan .............. 3.19(f)(3.08)
Compensation for Top Heavy Purposes.......... 1.33(B)(3) (1.09) Matching Contributions ................ 14.03(i) (14.02)
Contract(s) ................................. 11.03(c) (11.02) Maximum Permissible Amount ............ 3.19(g) (3.08)
Custodian Designation ....................... 10.03[B] (10.03) Minimum Distribution Incidental Benefit 6.02(A) (6.03)
Deemed Cash-out Rule ........................ 5.04(C) (5.02) Multiple Use Limitation ............... 14.10 (14.10)
Deferral Contributions ...................... 14.03(g) (14.02) Named Fiduciary ....................... 10.03[D] (10.05)
Deferral Contributions Account .............. 14.06(A) (14.04) Nonelective Contributions ............. 14.03(j)(14.02)
Defined Benefit Plan ........................ 3.19(i) (3.09) Nonforfeitable ........................ 1.16 (1.05)
Defined Benefit Plan Fraction ............... 3.19(i) (3.09) Nonhighly Compensated Employee ........ 14.03(b) (14.02)
Defined Contribution Plan ................... 3.19(h) (3.08) Nonhighly Compensated Group ........... 14.03(e) (14.02)
Defined Contribution Plan Fraction .......... 3.19(k) (3.09) Non-Key Employee ...................... 1.33(B)(2) (1.09)
Determination Date .......................... 1.33(B)(7) (1.10) Nontransferable Annuity ............... 123 (1.05)
Disability .................................. 1.28 (1.07) Normal Retirement Age ................. 5.01 (5.01)
Distribution Date ........................... 6.01 (6.01) Owner-Employee ........................ 1.08 (1.02)
Distribution Restrictions ................... 14.03(m) (14.03) Paired Plans .......................... 1.34 (1.10)
Earned Income ............................... 1.13 (1.05) Participant ........................... 1.10 (1.03)
Effective Date .............................. 1.18 (1.05) Participant Deductible Contributions .. 4.02 (4.01)
Elective Deferrals .......................... 14.03(h) (14.02) Participant Forfeiture ................ 3.05 (3.03)
Elective Transfer ........................... 13.06(A) (13.03) Participant Loans ..................... 10.03[E] (10.04)
Eligible Employee ........................... 14.03(c) (14.02) Participant Nondeductible Contributions 4.01 (4.01)
Employee .................................... 1.07 (1.02) Permissive Aggregation Group .......... 1.33(B)(5) (1.10)
Employee Contributions ...................... 14.03(n) (14.03) Plan .................................. 1.03 (1.01)
Employer .................................... 1.01 (1.01) Plan Administrator .................... 1.05 (1.01)
Employer Contribution Account ............... 14.06 (14.04) Plan Entry Date ....................... 1.19 (1.05)
Employer for Code Sec. 415 Purposes ......... 3.19(c) (3.08) Plan Year ............................. 1.17 (1.05)
Employer for Top Heavy Purposes ............. 1.33(B)(6) (1.10) Policy ................................ 11.03(a) (11.02)
Employment Commencement Date ................ 2.02 (2.01) Predecessor Employer .................. 1.29 (1.07)
ERISA ....................................... 1.24 (1.06) Preretirement Survivor Annuity ........ 6.04(B) (6.06)
Excess Aggregate Contributions .............. 14.09(D) (14.09) Qualified Domestic Relations Order .... 6.07 (6.08)
Excess Amount ............................... 3.19(d) (3.08) Qualified Matching Contributions ...... 14.03(k) (14.02)
Excess Contributions ........................ 14.08 (14.07) Qualified Nonelective Contributions.... 14.03(1) (14.03)
Exempt Participant .......................... 8.01 (8.01) Qualifying Employer Real Property ..... 10.03[F] (10.05)
Forfeiture Break in Service ................. 5.08 (5.03) Qualifying Employer Securities ........ 10.03[F] (10.05)
1/90 iii
</TABLE>
<PAGE>
<TABLE><CAPTION>
Defined Contribution Master Plan
Section Reference Section Reference
Plan Definition (Page Number) Plan Definition (Page Number)
<S> <C>
Related Employers ...................... 130 (1.07) Top Heavy Ratio .......................... 133 (1.09)
Required Aggregation Group ............. 133(B)(4) (1.09) Trust .................................... 1.21 (1.05)
Required Beginning Date ................ 6.01(B) (6.02) Trustee .................................. 1.02 (1.01)
Rollover Contributions ................. 4.03 (4.01) Trustee Designation ...................... 10.03[A] (10.01)
Self-Employed Individual ............... 1.08 (1.02) Trust Fund ............................... 122 (1.05)
Service ................................ 1.26 (1.06) Weighted Average Allocation Method........ 14.12 (14.11)
Term Life Insurance Contract ........... 11.03 (11.02) Year of Service for Eligibility Purposes.. 2.02 (2.01)
Top Heavy Minimum Allocation ........... 3.04(B) (3.01) Year of Service for Vesting Purposes ..... 5.06 (5.03)
* * * * * * * * * * * * * * * * * * * * * *
</TABLE>
iv 1/90
<PAGE>
NATIONSBANK
DEFINED CONTRIBUTION MASTER PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT #03
NationsBank, in its capacity as Master Plan Sponsor, establishes
this Master Plan intended to conform to and qualify under Section 401
and Section 501 of the Internal Revenue Code of 1986, as amended. An
Employer establishes a Plan and Trust under this Master Plan by
executing an Adoption Agreement. If the Employer adopts this Plan as a
restated Plan in substitution for, and in amendment of, an existing
plan, the provisions of this Plan, as a restated Plan, apply solely to
an Employee whose employment with the Employer terminates on or after
the restated Effective Date of the Employer's Plan. If an Employee's
employment with the Employer terminates prior to the restated Effective
Date, that Employee is entitled to benefits under the Plan as the Plan
existed on the date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by
executing an Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute
the Employer's Adoption Agreement, or any successor in office who in
writing accepts the position of Trustee. The Employer must designate in
its Adoption Agreement whether the Trustee will administer the Trust as
a discretionary Trustee or as a nondiscretionary Trustee. If a person
acts as a discretionary Trustee, the Employer also may appoint a
Custodian. See Article X. If the Master Plan Sponsor is a bank savings
and loan, credit union or similar financial institution, a person other
than the Master Plan Sponsor (or its affiliate) may not serve as
Trustee or as Custodian of the Employer's Plan without the written
consent of the Master Plan Sponsor.
1.03 "Plan" means the retirement plan established or continued by
the Employer in the form of this Agreement, including the Adoption
Agreement under which the Employer has elected to participate in this
Master Plan. The Employer must designate the name of the Plan in its
Adoption Agreement. An Employer may execute more than one Adoption
Agreement offered under this Master Plan, each of which will constitute
a separate Plan and Trust established or continued by that Employer. The
Plan and the Trust created by each adopting Employer is a separate Plan
and a separate Trust, independent from the plan and the trust of any
other employer adopting this Master Plan. All section references within
the Plan are Plan section references unless the Context clearly
indicates otherwise.
1.04 "Adoption Agreement" means the document executed by each
Employer adopting this Master Plan. The terms of this Master Plan as
modified by the terms of an adopting Employer's Adoption Agreement
constitute a separate Plan and Trust to be construed as a single
Agreement. Each elective provision of the Adoption Agreement corresponds
by section reference to the section of the Plan which grants the
election. Each Adoption Agreement offered under this Master Plan is
either a Nonstandardized Plan or a Standardized Plan, as identified in
the preamble to that Adoption Agreement. The provisions of this Master
Plan apply equally to Nonstandardized Plans and to Standardized Plans
unless otherwise specified.
1.05 "Plan Administrator" is the Employer unless the Employer
designates another person to hold the position of Plan Administrator. In
addition to his other duties, the Plan Administrator has full
responsibility for compliance with the reporting and disclosure rules
under ERISA as respects this Agreement.
1.01
<PAGE>
Defined Contribution Master Plan
1.06 "Advisory Committee" means the Employer's Advisory Committee
as from time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed
Individual) of the Employer. The Employer must specify in its Adoption
Agreement any Employee, or class of Employees, not eligible to
participate in the Plan. If the Employer elects to exclude collective
bargaining employees, the exclusion applies to any employee of the
Employer included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining agreement
between employee representatives and one or more employers unless the
collective bargaining agreement requires the employee to be included
within the Plan. The term "employee representatives" does not include
any organization more than half the members of which are owners,
officers, or executives of the Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed
Individual" means an individual who has Earned Income (or who would have
had Earned Income but for the fact that the trade or business did not
have net earnings) for the taxable year from the trade or business for
which the Plan is established. "Owner-Employee" means a Serf-Employed
Individual who is the sole proprietor in the case of a sole
proprietorship. If the Employer is a partnership, "Owner-Employee" means
a Self-Employed Individual who is a partner and owns more than 10% of
either the capital or profits interest of the partnership.
1.09 "Highly Compensated Employee" means an Employee who, during
the Plan Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the
constructive ownership rules of Code Section 3 18, and applying the
principles of Code Section 3 18, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of
the top-paid 20% group of employees (based on Compensation for the
relevant year); or
(d) has Compensation in excess of 50% of the dollar amount
prescribed in Code Section 415(b)(1)(A) (relating to defined benefit
plans) and is an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d)
in the Plan Year but does not satisfy clause (b), (c) or (d) during the
preceding 12-month period and does not satisfy clause (a) in either
period, the Employee is a Highly Compensated Employee only ff he is one
of the 100 most highly compensated Employees for the Plan Year. The
number of officers taken into account under clause (d) will not exceed
the greater of 3 or 10% of the total number (after application of the
Code Section 414(q) exclusions) of Employees, but no more than 50
officers. If no Employee satisfies the Compensation requirement in
clause (d) for the relevant year, the Advisory Committee will treat the
highest paid officer as satisfying clause (d) for that year.
For purposes of this Section 1.09, "Compensation" means
Compensation as defined in Section 1.12, except any exclusions from
Compensation elected in the Employer's Adoption Agreement Section 1.12
do not apply, and Compensation must include "elective contributions"
(a.s defined in Section 1.12). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the
top 100 paid Employees, the number of officers includible in clause (d)
and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a
calendar year election to determine the Highly Compensated Employees for
the Plan Year, as prescribed by Treasury regulations. A calendar year
election must apply to all
1.02
<PAGE>
Defined Contribution Master Plan
plans and arrangements of the Employer. For purposes of applying any
nondiscrimination test required under the Han or under the Code, in a
manner consistent with applicable Treasury regulations, the Advisory
Committee will treat a Highly Compensated Employee and all family
members (a spouse, a lineal ascendant or descendant, or a spouse of a
lineal ascendant or descendant) as a single Highly Compensated Employee,
but only if the Highly Compensated Employee is a more than 5% owner or
is one of the 10 Highly Compensated Employees with the greatest
Compensation for the Han Year. This aggregation rule applies to a family
member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former
Employee who separated from Service (or has a deemed Separation from
Service, as determined under Treasury regulations) prior to the Plan
Year, performs no Service for the Employer during the Plan Year, and was
a Highly Compensated Employee either for the separation year or any Plan
Year ending on or after his 55th birthday. if the former Employee's
Separation from Service occurred prior to January 1, 1987, he is a
Highly Compensated Employee only if he satisfied clause (a) of this
Section 1.09 or received Compensation in excess of $50,000 during: (1)
the year of his Separation from Service (or the prior year); or (2) any
year ending after his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes
a Participant in accordance with the provisions of Section 2.01.
1.11 "Beneficiary" is a person designated by a Participant who is
or may become entitled to a benefit under the Plan. A Beneficiary who
becomes entitled to a benefit under the Plan remains a Beneficiary under
the Plan until the Trustee has fully distributed his benefit to him. A
Beneficiary's right to (and the Plan Administrator's, the Advisory
Committee's or a Trustee's duty to provide to the Beneficiary)
information or data concerning the Plan does not arise until he first
becomes entitled to receive a benefit under the Plan.
1.12 "Compensation" means, except as provided in the Employer's
Adoption Agreement, the Participant's Earned Income, wages, salaries,
fees for professional service and other amounts received for personal
services actually rendered in the course of employment with the Employer
maintaining the plan (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses). The
Employer must elect in its Adoption Agreement whether to include
elective contributions in the definition of Compensation. "Elective
contributions" are amounts excludible from the Employee's gross income
under Code Section 125, 402(a)(8), 402(h) or 403(b), and contributed by
the Employer, at the Employee's election, to a Code 401(k) arrangement,
a Simplified Employee Pension, cafeteria plan or tax-sheltered annuity.
The term "Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if
includible in the definition of Compensation under Section 1.12 of the
Employer's Adoption Agreement) to a plan of deferred compensation to the
extent the contributions are not included in the gross income of the
Employee for the taxable year in which contributed, on behalf of an
Employee to a Simplified Employee Pension Plan to the extent such
contributions are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of
whether such amounts are includible in the gross income of the Employee
when distributed.
(b) Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial
risk of forfeiture.
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a stock option described in Part II, Subchapter D,
Chapter 1 of the Code.
1.03
<PAGE>
Defined Contribution Master Plan
(d) Other amounts which receive special tax benefits, such as premiums
for group term life insurance (but only to the extent that the premiums
are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the contributions are
excludible from the gross income of the Employee), other than "elective
contributions," if elected in the Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into
account only Compensation actually paid for the relevant period. A
Compensation payment includes Compensation by the Employer through
another person under the common paymaster provisions in Code Section
3121 and 3306.
(A) Limitations on Compensation.
(1) Compensation dollar limitation. For any Han Year beginning
after December 31, 1988, the Advisory Committee must take into account
only the first $200,000 (or beginning January 1, 1990, such larger
amount as the Commissioner of Internal Revenue may prescribe) of any
Participant's Compensation. For any Plan Year beginning prior to January
1, 1989, this $200,000 limitation (but not the family aggregation
requirement described in the next paragraph) applies only if the Plan is
top heavy for such Plan Year or operates as a deemed top heavy plan for
such Plan Year.
(2) Application of compensation limitation to certain family
members. The $200,000 Compensation limitation applies to the combined
Compensation of the Employee and of any family member aggregated with
the Employee under Section 1.09 who is either (i) the Employee's spouse;
or (ii) the Employee's lineal descendant under the age of 19. if, for a
Plan Year, the combined Compensation of the Employee and such family
members who are Participants entitled to an allocation for that Plan
Year exceeds the $200,000 (or adjusted) limitation, "Compensation" for
each such Participant, for purposes of the contribution and allocation
provisions of Article l]l, means his Adjusted Compensation. Adjusted
Compensation is the amount which bears the same ratio to the $200,000
(or adjusted) limitation as the affected Participant's Compensation
(without regard to the $200,000 Compensation limitation) bears to the
combined Compensation of all the affected Participants in the family
unit. If the Plan uses permitted disparity, the Advisory Committee must
determine the integration level of each affected family member
Participant prior to the proration of the $200,000 Compensation
limitation, but the combined integration level of the affected
Participants may not exceed $200,000 (or the adjusted limitation). The
combined Excess Compensation of the affected Participants in the family
unit may not exceed $200,000 (or the adjusted limitation) minus the
affected Participants' combined integration level (as determined under
the preceding sentence). If the combined Excess Compensation exceeds
this limitation, the Advisory Committee will prorate the Excess
Compensation limitation among the affected Participants in the family
unit in proportion to each such individual's Adjusted Compensation minus
his integration level. If the Employer's Plan is a Nonstandardized Plan,
the Employer may elect to use a different method in determining the
Adjusted Compensation of the affected Participants by specifying that
method in an addendure to the Adoption Agreement, numbered Section 1.12.
(B) Nondiscrimination. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation
means Compensation as defined in this Section 1.12, except: (1) the
Employer may elect to include or to exclude elective contributions,
irrespective of the Employer's election in its Adoption Agreement
regarding elective contributions; and (2) the
1.04
<PAGE>
Defined Contribution Master Plan
Employer will not give effect to any elections made in the
"modifications to Compensation definition" section of Adoption Agreement
Section 1.12. The Employer's election described in clause (1) must be
consistent and uniform with respect to all Employees and all plans of
the Employer for any particular Plan Year. ff the Employer's Plan is a
Nonstandardized Plan, the Employer, irrespective of clause (2), may
elect to exclude from this nondiscrimination definition of Compensation
any items of Compensation excludible under Code Section 14(s) and the
applicable Treasury regulations, provided such adjusted definition
conforms to the nondiscrimination requirements of those regulations.
1.13 "Earned Income" means net earning from self-employment in the
trade or business with respect to which the Employer has established the
Plan, provided personal services of the individual are a material income
producing factor. The Advisory Committee will determine net earnings
without regard to items excluded from gross income and the deductions
allocable to those items. The Advisory Committee will determine net
earning after the deduction allowed to the Self-Employed Individual for
all contributions made by the Employer to a qualified plan and, for Plan
Years beginning after December 31, 1989, the deduction allowed to the
Sell-Employed under Code Section 164(f) for sell-employment taxes.
1.14 "Account" means the separate account(s) which the Advisory
Committee or the Trustee maintains for a Participant under the
Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and
Employee contributions, if any.
1.16 "Nonforfeitable" means a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the
Participant's Accrued Benefit.
1.17 "Plan Year" means the Section year of the Plan, the
consecutive month period specified in the Employer's Adoption Agreement.
The Employer's Adoption Agreement also must specify the "Limitation
Year" applicable to the limitations on allocations described in Article
III. If the Employer maintains Paired Plans, each Plan must have the
same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the
Employer's Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01
of the Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Han Year.
Unless otherwise specified in the Plan, the Advisory Committee will make
all Plan allocations for a particular Plan Year as of the Accounting
Date of that Plan Year.
1.21 'Trust" means the separate Trust created under the Employer's
Plan.
1.22 'Trust Fund" means all property of every kind held or acquired
by the Employer's Plan, other than incidental benefit insurance
contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms
provides that it may not be sold, assigned, discounted, pledged as
collateral for a loan or security for the performance of an obligation
or for any purpose to any person other than the insurance company. If
the Plan distributes an annuity contract, the contract must be a
Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.05
<PAGE>
Defined Contribution Master Plan
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the
employ of the Employer, including any period the Employee is on an
unpaid leave of absence authorized by the Employer under a uniform,
nondiscriminatory policy applicable to all Employees. "Separation from
Service" means the Employee no longer has an employment relationship
with the Employer maintaining this Plan.
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits
Hours of Service under this paragraph (a) to the Employee for the
computation period in which the Employee performs the duties,
irrespective of when paid; (b) Each Hour of Service for back pay,
irrespective of mitigation of damages, to which the Employer has agreed
or for which the Employee has received an award. The Advisory Committee
credits Hours of Service under this paragraph (b) to the Employee for
the computation period(s) to which the award or the agreement pertains
rather than for the computation period in which the award, agreement or
payment is made; and (c) Each Hour of Service for which the Employer,
either directly or indirectly, pays an Employee, or for which the
Employee is entitled to payment (irrespective of whether the employment
relationship is terminated), for reasons other than for the performance
of duties during a computation period, such as leave of absence,
vacation, holiday, sick leave, illness, incapacity (including
disability), layoff, jury duty or military duty. The Advisory Committee
will credit no more than 501 Hours of Service under this paragraph (c)
to an Employee on account of any single continuous period during which
the Employee does not perform any duties (whether or not such period
occurs during a single computation period). The Advisory Committee
credits Hours of Service under this paragraph (c) in accordance with the
rules of paragraphs (b) and (c) of Labor Reg. Section 2530200b-2, which
the Plan, by this reference, specifically incorporates in full within
this paragraph (c).
The Advisory Committee will not credit an Hour of Service under
more than one of the above paragraphs. A computation period for purposes
of this Section 1.27 is the Plan Year, Year of Service period, Break in
Service period or other period, as determined under the Plan provision
for which the Advisory Committee is measuring an Employee's Hours of
Service. The Advisory Committee will resolve any ambiguity with respect
to the crediting of an Hour of Service in favor of the Employee.
(A) Method of crediting Hours of service. The Employer must elect in its
Adoption Agreement the method the Advisory Committee will use in
crediting an Employee with Hours of Service. For purposes of the Plan,
"actual' method means the determination of Hours of Service from records
of hours worked and hours for which the Employer makes payment or for
which payment is due from the Employer. If the Employer elects to apply
an "equivalency' method, for each equivalency period for which the
Advisory Committee would credit the Employee with at least one Hour of
Service, the Advisory Committee will credit the Employee with: (i) 10
Hours of Service for a daily equivalency; (ii) 45 Hours of Service for a
weekly equivalency; (iii) 95 Hours of Service for a semimonthly payroll
period equivalency; and (iv) 190 Hours of Service for a monthly
equivalency. (B) Maternity/paternity leave. Solely for purposes of
determining whether the Employee incurs a Break in Service under any
provision of this Plan, the Advisory Committee must credit Hours of
Service during an Employee's unpaid absence period due to maternity or
paternity leave. The Advisory Committee considers an Employee on
maternity or paternity leave if the Employee's absence is due to the
Employee's pregnancy, the birth of the Employee's child, the placement
with
1.06
<PAGE>
Defined Contribution Master Plan
the Employee of an adopted child, or the care of the Employee's child
immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of
the number of Hours of Service the Employee would receive if he were
paid during the absence period or, if the Advisory Committee cannot
determine the number of Hours of Service the Employee would receive, on
the basis of 8 hours per day during the absence period. The Advisory
Committee will credit only the number (not exceeding 501) of Hours of
Service necessary to prevent an Employee's Break in Service. The
Advisory Committee credits all Hours of Service described in this
paragraph to the computation period in which the absence period begins
or, if the Employee does not need these Hours of Service to prevent a
Break in Service in the computation period in which his absence period
begins, the Advisory Committee credits these Hours of Service to the
immediately following computation period.
1.28 "Disability" means the Participant, because of a physical or
mental disability, will be unable to perform the duties of his customary
position of employment (or is unable to engage in any substantial
gainful activity) for an indefinite period which the Advisory Committee
considers will be of long continued duration. A Participant also is
disabled if he incurs the permanent loss or loss of use of a member or
function of the body, or is permanently disfigured, and incurs a
Separation from Service. The Plan considers a Participant disabled on
the date the Advisory Committee determines the Participant satisfies the
definition of disability. The Advisory Committee may require a
Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this
Section 1.28 in a nondiscriminatory, consistent and uniform manner. If
the Employer's Plan is a Nonstandardized Plan, the Employer may provide
an alternate definition of disability in an addendure to its Adoption
Agreement, numbered Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains
--------------------------------
the plan of a predecessor employer, the Plan treats service of the
Employee with the predecessor employer as service with the Employer. ff
the Employer does not maintain the plan of a predecessor employer, the
Plan does not credit service with the predecessor employer, unless the
Employer identifies the predecessor in its Adoption Agreement and
specifies the purposes for which the Plan will credit service with that
predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
-----------------
corporations (as defined in Code $414(b)), trades or businesses (whether
or not incorporated) which are under common control (as defined in Code
Section 414(c)) or an affiliated service group (as defined in Code
Section 414(m) or in Code $414(o)). If the Employer is a member of a
related group, the term "Employer" includes the related group members
for purposes of crediting Hours of Service, determining Years of Service
and Breaks in Service under Articles II and V, applying the
Participation Test and the Coverage Test under Section 3.06(E), applying
the limitations on allocations in Part 2 of Article III, applying the
top heavy rules and the minimum allocation requirements of Article Iii,
the definitions of Employee, Highly Compensated Employee, Compensation
and Leased Employee, and for any other purpose required by the
applicable Code section or by a Plan provision. However, an Employer may
contribute to the Plan only by being a signatory to the Execution Page
of the Adoption Agreement or to a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's related
group members become Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the term
"Employer" includes the participating related group members for all
purposes of the Plan, and "Plan Administrator" means the Employer that
is the signatory to the Execution Page of the Adoption Agreement. If
the Employer's Plan is a Standardized Plan, all Employees of the
Employer or of any member of the Employer's related group, are eligible
to participate in the Plan, irrespective of whether the related group
member directly employing the Employee is a Participating Employer. If
the Employer's Plan is a Nonstandardized Plan, the Employer must specify
in Section 1.07 of its Adoption Agreement, whether the Employees of
related group members that are not Participating
1.07
<PAGE>
Defined Contribution Master Plan
Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the
definition of "Compensation. for allocation purposes any Compensation
received from a related employer that has not executed a Participation
Agreement and whose Employees are not eligible to participate in the
Plan.
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an
----------------
Employee of the Employer. A Leased Employee is an individual (who
otherwise is not an Employee of the Employer) who, pursuant to a leasing
agreement between the Employer and any other person, has performed
services for the Employer (or for the Employer and any persons rented to
the Employer within the meaning of Code Section 144(a)(3)) on a
substantially full time basis for at least one year and who performs
services historically performed by employees in the Employer's business
field. If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, 'Compensation" includes Compensation from the
leasing organization which is attributable to services performed for the
Employer. (A) Safe harbor plan exception. The Plan does not treat a
Leased Employee as an Employee if the leasing organization covers the
employee in a safe harbor plan and, prior to application of this safe
harbor plan exception, 20% or less of the Employer's Employees (other
than Highly Compensated Employees) are Leased Employees. A safe harbor
plan is a money purchase pension plan providing immediate participation,
full and immediate vesting, and a nonintegrated contribution formula
equal to at least 10% of the employee's compensation without regard to
employment by the leasing organization on a specified date. The safe
harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective
contributions (as defined in Section 1.12). (B) Other requirements. The
Advisory Committee must apply this Section 131 in a manner consistent
with Code Sections 414(n) and 414(o) and the regulations issued under
those Code sections. The Employer must specify in the Adoption Agreement
the manner in which the Plan will determine the allocation of Employer
contributions and Participant forfeitures on behalf of a Participant if
the Participant is a Leased Employee covered by a plan maintained by the
leasing organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special
---------------------------------
provisions and restrictions apply to Owner-Employees: (a) If the Plan
provides contributions or benefits for an Owner-Employee or for a group
of Owner-Employees who controls the trade or business with respect to
which this Plan is established and the Owner-Employee or
Owner-Employees also control as Owner-Employees one or more other
trades or businesses, plans must exist or be established with respect to
all the controlled trades or businesses so that when the plans are
combined they form a single plan which satisfies the requirements of
Code Section 401(a) and Code Section 401(d) with respect to the
employees of the controlled trades or businesses. (b) The Plan
excludes an Owner-Employee or group of Owner-Employees if the Owner-
Employee or group of Owner-Employees controls any other trade or
business, unless the employees of the other controlled trade or
business participate in a plan which satisfies the requirements of
Code Section 401(a) and Code Section 401(d). The other qualified plan
must provide contributions and benefits which are not less favorable
than the contributions and benefits provided for the Owner-Employee
or group of Owner-Employees under this Plan, or if an Owner-Employee
is covered under another qualified plan as an Owner-Employee, then the
plan established with respect to the trade or business he does
control must provide contributions or benefits as favorable as those
provided under the most favorable plan of the trade or business he
does not control. If the exclusion of this paragraph (b) applies and the
Employer's Plan is a Standardized Plan, the Employer may not
participate or continue to participate in this Master Plan and the
Employer's Plan becomes an individually-designed plan for purposes of
qualification reliance.
1.08
<PAGE>
Defined Contribution Master Plan
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an
Owner-Employee or group of Owner-Employees controls a trade or business
if the Owner-Employee or Owner-Employees together (1) own the entire
interest in an unincorporated trade or business, or (2) in the case of a
partnership, own more than 50% of either the capital interest or the
profits interest in the partnership.
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only
---------------------------------
qualified plan maintained by the Employer, the Plan is top heavy for a
Plan Year if the top heavy ratio as of the Determination Date exceeds
60%. The top heavy ratio is a fraction, the numerator of which is the
sum of the present value of Accrued Benefits of all Key Employees as of
the Determination Date and the denominator of which is a similar sum
determined for all Employees. The Advisory Committee must include in
the top heavy ratio, as part of the present value of Accrued Benefits,
any contribution not made as of the Determination Date but includible
under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory
Committee must calculate the top heavy ratio by disregarding the Accrued
Benefit (and distributions, if any, of the Accrued Benefit) of any
Non-Key Employee who was formerly a Key Employee, and by disregarding
the Accrued Benefit (including distributions, if any, of the Accrued
Benefit) of an individual who has not received credit for at least one
Hour of Service with the Employer during the Determination Period. The
Advisory Committee must calculate the top heavy ratio, including the
extent to which it must take into account distributions, rollovers and
transfers, in accordance with Code Section 16 and the regulations under
that Code section 1.28.
If the Employer maintains other qualified plans (including a
simplified employee pension plan), or maintained another such plan which
now is terminated, this Plan is top heavy only if it is pan of the
Required Aggregation Group, and the top heavy ratio for the Required
Aggregation Group and for the Permissive Aggregation Group, if any, each
exceeds 60%. The Advisory Committee will calculate the top heavy ratio
in the same manner as required by the first paragraph of this Section
1.33, taking into account all plans within the Aggregation Group. To the
extent the Advisory Committee must take into account distributions to a
Participant, the Advisory Committee must include distributions from a
terminated plan which would have been pan of the Required Aggregation
Group ff it were in existence on the Determination Date. The Advisory
Committee wi// calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included
within the group in accordance with the terms of those plans, Code
Section 16 and the regulations under that Code section. If a Participant
in a defined benefit plan is a Non-Key Employee, the Advisory Committee
will determine his accrued benefit under the accrual method, if any,
which is applicable uniformly to all defined benefit plans maintained by
the Employer or, if there is no uniform method, in accordance with the
slowest accrual rate permitted under the fractional rule accrual method
described in Code Section 1 l(b)(1)(C). If the Employer maintains a
defined benefit plan, the Employer must specify in Adoption Agreement
Section 3.18 the actuarial assumptions (interest and mortality only) the
Advisory Committee will use to calculate the present value of benefits
from a defined benefit plan. If an aggregated plan does not have a
valuation date coinciding with the Determination Date, the Advisory
Committee must value the Accrued Benefits in the aggregated plan as of
the most recent valuation date falling within the twelve-month period
ending on the Determination Date, except as Code Section 416 and
applicable Treasury regulations require for the first and second plan
year of a defined benefit plan. The Advisory Committee will calculate
the top heavy ratio with reference to the Determination Dates that fall
within the same calendar year.
(A) Standardized Plan. If the Employer's Plan is a Standardized Plan,
the Plan operates as a deemed top heavy plan in all Plan Years, except,
if the Standardized Plan includes a Code Section 401(k) arrangement, the
Employer may elect to apply the top heavy requirements only in Plan
Years for which the Plan actually is top heavy. Under a deemed top heavy
plan, the Advisory Committee need not determine whether the Plan
actually is top heavy. However, if the Employer, in Adoption
1.09
<PAGE>
Defined Contribution Master Plan
Agreement Section 3.18, elects to override the 100% limitation, the
Advisory Committee will need to determine whether a deemed top heavy
Plan's top heavy ratio for a Plan Year exceeds 90%. (B) Definitions.
For purposes of applying the provisions of this Section 1.33: (1)
"Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan
Year in the Determination Period: (i) has Compensation in excess of
50% of the dollar amount prescribed in Code Section 415(b)(1)(A)
(relating to defined benefit plans) and is an officer of the Employer;
(ii) has Compensation in excess of the dollar amount prescribed in
Code Section 415(c)(1)(A) (relating to defined contribution plans)
and is one of the Employees owning the ten largest interests in the
Employer; (iii) is a more than 5% owner of the Employer; or (iv) is
a more than 1% owner of the Employer and has Compensation of more
than $150,000. The constructive ownership rules of Code Section 318 (or
the principles of that section, in the case of an unincorporated
Employer,) will apply to determine ownership in the Employer. The
number of officers taken into account under clause (i) will not
exceed the greater of 3 or 10% of the total number (after application of
the Code Section 414(q) exclusions) of Employees, but no more than
50 officers. The Advisory Committee will make the determination of
who is a Key Employee in accordance with Code Section 416(i)(1) and the
regulations under that Code section.
(2) "Non-Key Employee" is an employee who does not meet the
definition of Key Employee. (3) 'Compensation" means Compensation as
determined under Section 1.09 for purposes of identifying Highly
Compensated Employees. (4) 'Required Aggregation Group' means: (i)
each qualified plan of the Employer in which at least one Key
Employee participates at any time during the Determination Period; and
(ii) any other qualified plan of the Employer which enables a plan
described in clause (i) to meet the requirements of Code Section
401(a)(4) or of Code Section 410. (5) 'Permissive Aggregation Group'
is the Required Aggregation Group plus any other qualified plans
maintained by the Employer, but only if such group would satisfy in the
aggregate the requirements of Code Section 401(a)(4) and of Code
Section 410. The Advisory Committee will determine the Permissive
Aggregation Group. (6) 'Employer' means the Employer that adopts
this Plan and any related employers described in Section 1.30.
(7) 'Determination Date" for any Plan Year is the Accounting Date of
the preceding Plan Year or, in the case of the first Han Year of the
Plan, the Accounting Date of that Plan Year. The "Determination
Period' is the 5 year period ending on the Determination Date.
1.34 "Paired Plans" means the Employer has adopted two
Standardized Plan Adoption Agreements offered with this Master Plan, one
Adoption Agreement being a Paired Profit Sharing Plan and one Adoption
Agreement being a Paired Pension Plan. A Paired Profit Sharing Plan may
include a Code Section 401(k) arrangement. A Paired Pension Plan must be
a money purchase pension plan or a target benefit pension plan. Paired
Plans must be the subject of a favorable opinion letter issued by the
National Office of the Internal Revenue Service. This Master Plan does
not pair any of its Standardized Plan Adoption Agreements with
Standardized Plan Adoption Agreements under a defined benefit master
plan.
1.010
<PAGE>
Defined Contribution
Master Plan
ARTICLE II EMPLOYEE
PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan
-----------
in accordance with the participation option selected by the Employer in
its Adoption Agreement. If this Plan is a restated Plan, each Employee
who was a Participant in the Plan on the day before the Effective Date
continues as a Participant in the Plan, irrespective of whether he
satisfies the participation conditions in the restated Plan, unless
otherwise provided in the Employer's Adoption Agreement.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
-------------------------------
participation in the Plan under Adoption Agreement Section 2.01, the
Plan takes into account all of his Years of Service with the Employer,
except as provided in Section 2.03. "Year of Service" means an
eligibility computation period during which the Employee completes not
less than the number of Hours of Service specified in the Employer's
Adoption Agreement. The initial eligibility computation period is the
first 12 consecutive month period measured from the Employment
Commencement Date. The Plan measures succeeding eligibility computation
periods in accordance with the option selected by the Employer in its
Adoption Agreement. If the Employer elects to measure subsequent periods
on a Plan Year basis, an Employee who receives credit for the required
number of Hours of Service during the initial eligibility computation
period and during the first applicable Plan Year will receive credit for
two Years of Service under Article II. "Employment Commencement Date"
means the date on which the Employee first performs an Hour of Service
for the Employer. If the Employer elects a service condition under
Adoption Agreement Section 2.01 based on months, the Plan does not apply
any Hour of Service requirement after the completion of the first Hour
of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break
--------------------------------
in Service" ff during any 12 consecutive month period he does not
complete more than 500 Hours of Service with the Employer. The "12
consecutive month period" under this Section 2.03 is the same 12
consecutive month period for which the Plan measures "Years of Service"
under Section 2.02.
(A) 2-year Eligibility. If the Employer elects a 2 years of service
condition for eligibility purposes under Adoption Agreement Section
2.01, the Plan treats an Employee who incurs a one year Break in Service
and who has never become a Participant as a new Employee on the date he
first performs an Hour of Service for the Employer after the Break in
Service.
(B) Suspension of Years of Service. The Employer must elect in its
Adoption Agreement whether a Participant will incur a suspension of
Years of Service after incurring a one year Break in Service. If this
rule applies under the Employer's Plan, the Plan disregards a
Participant's Years of Service (as defined in Section 2.02) earned prior
to a Break in Service until the Participant completes another Year of
Service and the Plan suspends the Participant's participation in the
Plan. If the Participant completes a Year of Service following his Break
in Service, the Plan restores that Participant's pre-Break Years of
Service (and the Participant resumes active participation in the Plan)
retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial
computation period under this Section 2.03(B) is the 12 consecutive
month period measured from the date the Participant first receives
credit for an Hour of Service following the one year Break in Service
period. The Plan measures any subsequent periods, ff necessary, in a
manner consistent with the computation period selection in Adoption
Agreement Section 2.02. This Section 2.03(B) does not affect a
Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will
not result in the restoration of any Year of Service disregarded under
the Break in Service rule of Section 2.03(A).
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose
--------------------------------
employment with the Employer terminates will re-enter the Plan as a
Participant on the date of his re-employment, subject to the Break in
Service rule, ff applicable, under Section 2.03(B). An Employee who
satisfies the Plan's eligibility conditions but who terminates
employment with the
2.01
<PAGE>
Defined Contribution Master Plan
Employer prior to becoming a Participant will become a Participant on
the later of the Plan Entry Date on which he would have entered the Plan
had he not terminated employment or the date of his re-employment,
subject to the Break in Service rule, if applicable, under Section
2.03(B). Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with
Adoption Agreement Section 2.01. 2.05 CHANGE IN EMPLOYEE STATUS. If a
Participant has not incurred a Separation from Service but ceases to be
eligible to participate in the Plan, by reason of employment within an
employment classification excluded by the Employer under Adoption
Agreement Section 1.07, the Advisory Committee must treat the
Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a participant's sharing in the allocation of
Employer contributions and Participant forfeitures, if applicable, by
disregarding his Compensation paid by the Employer for services rendered
in his capacity as an Excluded Employee. However, during such period of
exclusion, the Participant, without regard to employment
classification, continues to receive credit for vesting under Article V
for each included Year of Service and the Participant's Account
continues to share fully in Trust Fund allocations under Section
9.11. If an Excluded Employee who is not a Participant becomes
eligible to participate in the Plan by reason of a change in employment
classification, he will participate in the Plan immediately if he has
satisfied the eligibility conditions of Section 2.01 and would have been
a participant had he not been an Excluded Employee during his period of
Service. Furthermore, the Plan takes into account all of the
participant's included Years of Service with the Employer as an Excluded
Employee for purposes of vesting credit under Article V. 2.06
ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a Standardized
Plan, the Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan. If the Employer's
Plan is a Nonstandardized Plan, the Employer must specify in its
Adoption Agreement whether an Employee eligible to participate, or any
present Participant, may elect not to participate in the Plan. For an
election to be effective for a particular Plan Year, the Employee or
Participant must file the election in writing with the Plan
Administrator not later than the time specified in the Employer's
Adoption Agreement. The Employer may not make a contribution under the
Plan for the Employee or for the Participant for the Plan Year for which
the election is effective, nor for any succeeding Plan Year, unless the
Employee or Participant re-elects to participate in the Plan. After an
Employee's or Participant's election not to participate has been
effective for at least the minimum period prescribed by the Employer's
Adoption Agreement, the Employee or Participant may re-elect to
participate in the Plan for any Plan Year and subsequent Plan Years.
An Employee or participant may re-elect to participate in the Plan by
filing his election in writing with the Plan Administrator not later
than the time specified in the lo ?????????? An Employee or
Participant who re-elects to participate may again Employ
' ..... the Employer's Ado,,??? Agreement If an Employee is
to participate only as permitted m plo Section r
elect not P ' 'P Y
' ' election ???? --emitted by Treasury regulations a
Serf-Employed Individual, the Employee s e Section , p
per without creating a Code Section 401(k) arrangement with respect
to that Serf-Employed Individual) must be effective no later than the
date the Employee first would become a Participant in the Plan and
the election is irrevocable. The Plan Administrator must furnish an
Employee or a Participant any form required for purposes of an
election under this Section 2.06. An election timely filed is
effective for the entire Plan Year. A participant who elects not
to participate may not receive a distribution of his Accrued Benefit
attributable either to Employer or to Participant contributions except
as provided under Article IV or under Article VI. Whenever, for each
Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in
Trust Fund allocations under Article IX. Furthermore, the Employee or
the Participant receives vesting credit under Article V for each
included Year of Service during the period the election 'not to
participate is effective.
2.02
<PAGE>
Defined Contribution
Master Plan
ARTICLE III EMPLOYER
CONTRIBUTIONS AND FORFEITURES
Part 1. Amount of Employer Contributions and Plan Allocations: Sections
3.01 through 3.06
3.01 AMOUNT. For each Plan Year, the Employer contributes to the
------
Trust the amount determined by application of the contribution option
selected by the Employer in its Adoption Agreement. The Employer may
not make a contribution to the Trust for any Plan Year to the extent
the contribution would exceed the Participants' Maximum Permissible
Amounts.
The Employer contributes to this Plan on the condition its
contribution is not due to a mistake of fact and the Revenue Service
will not disallow the deduction for its contribution. The Trustee, upon
written request from the Employer, must return to the Employer the
amount of the Employer's contribution made by the Employer by mistake
of fact or the amount of the Employer's contribution disallowed as a
deduction under Code Section 404. The Trustee will not return any
portion of the Employer's contribution under the provisions of this
paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the ?????? ?????? as a deduction, and then,
only to the extent of the disallowance.
The Trustee will not increase the amount of the Employer
contribution returnable under this Section 3.01 for any earnings
attributable to the contribution, but the Trustee will decrease the
Employer contribution returnable for any losses attributable to it. The
Trustee may require the Employer to furnish it whatever evidence the
Trustee deems necessary to enable the Trustee to confirm the amount the
Employer has requested be returned is properly returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its
-----------------------------
records, determines the amount of any contributions to be made by it to
the Trust under the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
-------------------------------
contribution for each Plan Year in one or more installments without
interest. The Employer must make its contribution to the Plan within the
time prescribed by the Code or applicable Treasury regulations. Subject
to the consent of the Trustee, the Employer may make its contribution in
property rather than in cash, provided the contribution of property is
not a prohibited transaction under the Code or under ERISA.
3.04 CONTRIBUTION ALLOCATION. (A) Method of Allocation. The Employer
-----------------------
must specify in its Adoption Agreement the manner of allocating each
annual Employer contribution to this Trust.
(B) Top Heavy Minimum Allocation. The Plan must comply with the
provisions of this Section 3.04(B), subject to the elections in the
Employer's Adoption Agreement.
(1) Top Heavy Minimum Allocation Under Standardized Plan. Subject
to the Employer's election under Section 3.04(B)(3), the top heavy
minimum allocation requirement applies to a Standardized Plan for each
Plan Year, irrespective of whether the Plan is top heavy.
(a) Each Participant employed by the Employer on the last day of
the Plan Year will receive a top heavy minimum allocation for that
Plan Year. The Employer may elect in Section 3.04 of its Adoption
Agreement to apply this paragraph (a) only to a Participant who is
a Non-Key Employee.
3.01
<PAGE>
Defined Contribution Master Plan
(b) Subject to any overriding elections in Section 3.18 of the
Employer's Adoption Agreement, the top heavy minimum allocation is the
lesser of 3% of the Participant's Compensation for the Plan Year or the
highest contribution rate for the Han Year made on behalf of any
Participant for the Plan Year. However, if the Employee participates in
Paired plans, the top heavy minimum allocation is 3% of his
Compensation. if, under Adoption Agreement Section 3.04, the Employer
elects to apply paragraph (a) only to a Participant who is a Non-Key
Employee, the Advisory Committee will determine the "highest
contribution rate" described in the first sentence of this paragraph (b)
by reference only to the contribution rates of Participants who are Key
Employees for the Plan Year.
(2) Top Heavy Minimum Allocation Under Nonstandardized Plan. The
top heavy minimum allocation requirement applies to a Nonstandardized
Plan only in Plan Years for which the Plan is top heavy. Except as
provided in the Employer's Adoption Agreement, if the Plan is top heavy
in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by the
Employer on the last day of the Plan Year will receive a top heavy
minimum allocation for that Plan Year, irrespective of whether he
satisfies the Hours of Service condition under Section 3.06 of the
Employer's Adoption Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the Non-Key
Employee's Compensation for the Plan Year or the highest contribution
rate for the Plan Year made on behalf of any Key Employee. However, if a
defined benefit plan maintained by the Employer which benefits a Key
Employee depends on this Plan to satisfy the antidiscrimination rules of
Code 401(a)(4) or the coverage rules of Code 410 (or another plan
benefiting the Key Employee so depends on such defined benefit plan),
the top heavy minimum allocation is 3% of the Non-Key Employee's
Compensation regardless of the contribution rate for the Key Employees.
(3) Special Election for Standardized Code 401(k) Plan. if the
Employer's Plan is a Standardized Code Section 401(k) Plan, the Employer
may elect in Adoption Agreement Section 3.04 to apply the top heavy
minimum allocation requirements of Section 3.04(B)(1) only for Plan
Years in which the Plan actually is a top heavy plan.
(4) Special Definitions. For purposes of this Section 3.04(B), the
term "Participant" includes any Employee otherwise eligible to
participate in the Plan but who is not a Participant because of his
Compensation level or because of his failure to make elective deferrals
under a Code 401(k) arrangement or because of his failure to make
mandatory contributions. For purposes of subparagraph (1)(o) or (2)(0),
"Compensation" means Compensation as defined in Section 1.12, except
Compensation does not include elective contributions, irrespective of
whether the Employer has elected to include these amounts in Section
1.12 of its Adoption Agreement, any exclusion selected in Section 1.12
of the Adoption Agreement (other than the exclusion of elective
contributions) does not apply, and any modification to the definition of
Compensation in Section 3.06 does not apply.
(5) Determining Contribution Rates. For purposes of this Section
3.04(B), a Participant's contribution rate is the sum of all Employer
contributions (not including Employer contributions to Social Security)
and forfeitures allocated to the Participant's Account for the Plan Year
divided by his Compensation for the entire Plan Year. However, for
purposes of satisfying a Participant's top heavy minimum allocation in
Plan Years beginning after December 31, 1988, the Participant's
contribution rate does not include any elective contributions under a
Code Section 401(k) arrangement nor any Employer matching contributions
allocated on the basis of those elective contributions or on
3.02
<PAGE>
Defined Contribution Master Plan
the basis of employee contributions, except a Nonstandardized Plan may
include in the contribution rate any matching contributions not
necessary to satisfy the nondiscrimination requirements of Code Section
401(k) or of Code Section 401(m).
If the Employee is a Participant in ????????, the Advisory
Committee will consider the Paired ??? as a single Plan to determine a
Participant's contribution rate and to determine whether the Plans
satisfy this top heavy minimum allocation requirement. To determine a
Participant's contribution rate under a Nonstandardized Plan, the
Advisory Committee must treat all qualified top heavy defined
contribution plans maintained by the Employer (or by any related
Employers described in Section 1.30) as a single plan.
(6) No Allocations. If, for a Plan Year, there are no allocations
of Employer contributions or forfeitures for any Participant (for
purposes of Section 3.04 (B)(1)(b)) or for any Key Employee (for
purposes of Section 3.04(B)(2)(b)), the Plan does not require any top
heavy minimum allocation for the Plan Year, unless a top heavy minimum
allocation applies because of the maintenance by the Employer of more
than one plan.
(7) Election of Method. The Employer must specify in its Adoption
Agreement the manner in which the Plan will satisfy the top heavy
minimum allocation requirement. (a) If the Employer elects to make
any necessary additional contribution to this Plan, the Advisory
Committee first will allocate the Employer contributions (and
Participant forfeitures, if any) for the Plan Year in accordance
with the provisions of Adoption Agreement Section 3.04. The Employer
then will contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this
Plan and any other plan aggregated under paragraph (5), is less than
the top heavy minimum allocation. The additional amount is the
amount necessary to increase the Participant's contribution rate to the
top heavy minimum allocation. The Advisory Committee will allocate
the additional contribution to the Account of the Participant on
whose behalf the Employer makes the contribution. (b) If the
Employer elects to guarantee the top heavy minimum allocation under
another plan, this Plan does not provide the top heavy minimum
allocation and the Advisory Committee will allocate the annual
Employer contributions (and Participant forfeitures) under the Plan
solely in accordance with the allocation method selected under Adoption
Agreement Section 3.04.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued
---------------------
Benefit forfeited under the Plan is a Participant forfeiture. The
Advisory Committee will allocate Participant forfeitures in the manner
specified by the Employer in its Adoption Agreement. The Advisory
Committee will continue to hold the undistributed, non-vested portion of
a terminated Participant's Accrued Benefit in his Account solely for his
benefit until a forfeiture occurs at the time specified in Section 5.09
or ff applicable, until the time specified in Section 9.14. Except as
provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the
------------------
accrual of benefit (Employer contributions and Participant forfeitures)
on the basis of the Plan Year in accordance with the Employer's
elections in its Adoption Agreement.
(A) Compensation Taken Into Account. The Employer must specify in its
Adoption Agreement the Compensation the Advisory Committee is to take
into account in allocating an Employer contribution to a Participant's
Account for the Plan Year in which the Employee first becomes a
Participant. For all other Plan Years, the Advisory Committee will take
into account only the
3.03
<PAGE>
Defined Contribution Master Plan
Compensation determined for the portion of the Plan Year in which the
Employee actually is a Participant. The Advisory Committee must take
into account the Employee's entire Compensation for the Han Year to
determine whether the Plan satisfies the top heavy minimum allocation
requirement of Section 3.04(B). The Employer, in an addendum to its
Adoption Agreement numbered 3.06(A), may elect to measure Compensation
for the Plan Year for allocation purposes on the basis of a specified
period other than the Plan Year.
(B) Hours of Service Requirement. Subject to the applicable minimum
allocation requirement of Section 3.04, the Advisory Committee will not
allocate any portion of an Employer contribution for a Plan Year to any
Participant's Account if the Participant does not complete the
applicable minimum Hours of Service requirement specified in the
Employer's Adoption Agreement.
(C) Employment Requirement. If the Employer's Plan is a Standardized
Plan, a Participant who, during a particular Plan Year, completes the
accrual requirements of Adoption Agreement Section 3.06 will share in
the allocation of Employer contributions for that Plan Year without
regard to whether he is employed by the Employer on the Accounting Date
of that Plan Year. If the Employer's Plan is a Nonstandardized Plan, the
Employer must specify in its Adoption Agreement whether the Participant
will accrue a benefit if he is not employed by the Employer on the
Accounting Date of the Plan Year. If the Employer's Plan is a money
purchase plan or a target benefit plan, whether Nonstandardized or
Standardized, the Plan conditions benefit accrual on employment with the
Employer on the last day of the Plan Year for the Plan Year in which the
Employer terminates the Plan.
(D) Other Requirements. If the Employer's Adoption Agreement includes
options for other requirements affecting the Participant's accrual of
benefits under the Plan, the Advisory Committee will apply this Section
3.06 in accordance with the Employer's Adoption Agreement selections.
(E) Suspension of Accrual Requirements Under Nonstandardized Plan. If
the Employer's Plan is a Nonstandardized Plan, the Employer may elect in
its Adoption Agreement to suspend the accrual requirements elected under
Adoption Agreement Section 3.06 if, for any Plan Year beginning after
December 31, 1989, the Plan fails to satisfy the Participation Test or
the Coverage Test. A Plan satisfies the Participation Test if, on each
day of the Plan Year, the number of Employees who benefit under the Plan
is at least equal to the lesser of 50 or 40% of the total number of
Includible Employees as of such day. A Plan satisfies the Coverage Test
if, on the last day of each quarter of the Plan Year, the number of
????? Compensated Employees who benefit under the Plan is at least equal
to 70% of the total number of ??Indudible Nonhighly Compensated
Employees as of such day. "Indudible" Employees are all Employees other
than: (1) those Employees excluded from participating in the Plan for
the entire Plan Year by reason of the collective bargaining unit
exclusion or the nonresident alien exclusion under Adoption Agreement
Section 1.07 or by reason of the participation requirements of Sections
2.01 and 2.03; and (2) any Employee who incurs a Separation from Service
during the Plan Year and fails to complete at least 501 Hours of Service
for the Plan Year. A "Nonhighly Compensated Employee" is an Employee who
is not a Highly Compensated Employee and who is not a family member
aggregated with a Highly Compensated Employee pursuant to Section 1.09
of the Plan.
For purposes of the Participation Test and the Coverage Test, an
Employee is benefiting under the Plan on a particular date if, under
Adoption Agreement Section 3.04, he is entitled to an allocation for the
Plan Year. Under the Participation Test, when determining whether' an
Employee is entitled to an allocation under Adoption Agreement Section
3.04, the Advisory Committee will disregard any allocation required
solely by reason of the top heavy minimum allocation, unless the top
heavy minimum allocation is the only allocation made under the Plan for
the Plan Year.
3.04
<PAGE>
Defined Contribution Master Plan
If this Section 3.06(E) applies for a Plan Year, the Advisory
Committee will suspend the accrual requirements for the Includible
Employees who are Participants, beginning first with the Includible
Employee(s) employed with the Employer on the last day of the Plan Year,
then the Includible Employee(s) who have the latest Separation from
Service during the Plan Year, and continuing to suspend in descending
order the accrual requirements for each Includible Employee who incurred
an earlier Separation from Service, from the latest to the earliest
Separation from Service date, until the Plan satisfies both the
Participation Test and the Coverage Test for the Plan Year. If two or
more Includible Employees have a Separation from Service on the same
day, the Advisory Committee will suspend the accrual requirements for
all such Includible Employees, irrespective of whether the Plan can
satisfy the Participation Test and the Coverage Test by accruing
benefits for fewer than all such Includible Employees. If the Plan
suspends the accrual requirements for an Includible Employee, that
Employee will share in the allocation of Employer contributions and
Participant forfeitures, if any, without regard to the number of Hours
of Service he has earned for the Plan Year and without regard to whether
he is employed by the Employer on the last day of the Plan Year. If the
Employer's Plan includes Employer matching contributions subject to Code
401(m), this suspension of accrual requirements applies separately to
the Code Section 401(m) portion of the Plan, and the Advisory Committee
will treat an Employee as benefiting under that portion of the Plan if
he is an Eligible Employee for purposes of the Code Section 401(m)
nondiscrimination test. The Employer may modify the operation of this
Section 3.06(E) by electing appropriate modifications in Section 3.06 of
its Adoption Agreement.
Part 2. Limitations On Allocations: Sections 3.07 through 3.19
[Note: Sections 3.07 through 3.10 apply only to Participants in
this Plan who do not participate, and who have never participated, in
another qualified plan or in a welfare benefit fund (as defined in Code
Section 419(e)) maintained by the Employer.]
3.07 The amount of Annual Additions which the Advisory Committee
may allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount. If the amount the
Employer otherwise would contribute to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the Maximum
Permissible Amount, the Employer will reduce the amount of its
contribution so the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount. If an allocation of Employer
contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances
described in Section 3.10) to the Participant's Account, the Advisory
Committee will reallocate the Excess Amount to the remaining
Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The
Advisory Committee will make this reallocation on the basis of the
allocation method under the Plan as if the Participant whose Account
otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual
Compensation for a Limitation Year, the Advisory Committee may determine
the Maximum Permissible Amount on the basis of the Participant's
estimated annual Compensation for such Limitation Year. The Advisory
Committee must make this determination on a reasonable and uniform basis
for all Participants similarly situated. The Advisory Committee must
reduce any Employer contributions (including any allocation
of.forfeitures) based on estimated annual Compensation by any Excess
Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum
Permissible Amount for such Limitation Year on the basis of the
Participant's actual Compensation for such Limitation Year.
3.05
<PAGE>
Defined Contribution Master Plan
3.10 If, pursuant to Section 3.09, or because of the allocation of
forfeitures, there is an Excess Amount with respect to a Participant for
a Limitation Year, the Advisory Committee will dispose of such Excess
Amount as follows:
(a) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the return would
reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan covers the Participant at the end of the Limitation
Year, then the Advisory Committee will use the Excess Amount(s) to
reduce future Employer contributions (including any allocation of
forfeitures) under the Plan for the next Limitation Year and for each
succeeding Limitation Year, as is necessary, for the Participant. ff the
Employer's Plan is a profit sharing plan, the Participant may elect to
limit his Compensation for allocation purposes to the extent necessary
to reduce his allocation for the Limitation Year to the Maximum
Permissible Amount and eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess Amount
unallocated in a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including allocation
of forfeitures) for all remaining Participants in the next Limitation
Year, and in each succeeding Limitation Year if necessary. Neither the
Employer nor any Employee may contribute to the Plan for any Limitation
Year in which the Plan is unable to allocate fully a suspense account
maintained pursuant to this paragraph (c).
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
[Note: Sections 3.11 through 3.16 apply only to Participants who,
in addition to this Plan, participate in one or more plans (including
Paired Plans), all of which are qualified Master or Prototype defined
contribution plans or welfare benefit funds (as defined in Code Section
419(e)) maintained by the Employer during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee
may allocate under this Plan on a Participant's behalf for a Limitation
Year may not exceed the Maximum Permissible Amount, reduced by the sum
of any Annual Additions allocated to the Participant's Accounts for the
same Limitation Year under this Plan and such other defined contribution
plan. If the amount the Employer otherwise would contribute to the
Participant's Account under this Plan would cause the Annual Additions
for the Limitation Year to exceed this limitation, the Employer will
reduce the amount of its contribution so the Annual Additions under all
such plans for the Limitation Year will equal the Maximum Permissible
Amount. If an allocation of Employer contributions, pursuant to Section
3.??, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.10) to the
Participant's Account, the Advisory Committee will reallocate the Excess
Amount to the remaining Participants who are eligible for an allocation
of Employer contributions for the Plan Year in which the Limitation Year
ends. The Advisory Committee will make this reallocation on the basis of
the allocation method under the Plan as if the Participant whose Account
otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the Advisory Committee may
determine the amounts referred to in 3.11 above on the basis of the
Participant's estimated annual Compensation for such Limitation Year.
The Advisory Committee will make this determination on a reasonable and
uniform basis for all Participants similarly
3.06
<PAGE>
Defined Contribution Master Plan
situated. The Advisory Committee must reduce any Employer contribution
(including allocation of forfeitures) based on estimated annual
Compensation by any Excess Amounts carried over from prior years.
3.13 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts
referred to in 3.11 on the basis of the Participant's actual
Compensation for such Limitation Year.
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annum Additions under this Plan and all
such other plans result in an Excess Amount, such Excess Amount will
consist of the Amounts last allocated. The Advisory Committee will
determine the Amounts last allocated by treating the Annual Additions
attributable to a welfare benefit fund as allocated first, irrespective
of the actual allocation date under the welfare benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess
Amount attributed to this Plan, ff the Advisory Committee allocates an
Excess Amount to a Participant on an allocation date of this Plan which
coincides with an allocation date of another plan.
3.16 The Advisory Committee will dispose of any Excess Amounts
attributed to this Plan as provided in Section 3.10.
[Note: Section 3.17 applies only to Participants who, in addition
to this Plan, participate in one or more qualified plans which are
qualified defined contribution plans other than a Master or Prototype
plan maintained by the Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions
-----------------------------
which the Advisory Committee may allocate under this Plan on behalf of
any Participant are limited in accordance with the provisions of Section
3.11 through 3.16, as though the other plan were a Master or Prototype
plan, unless the Employer provides other limitations in an addendum to
the Adoption Agreement, numbered Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. ff the Employer maintains a
-------------------------------
defined benefit plan, or has ever maintained a defined benefit plan
which the Employer has terminated, then the sum of the defined benefit
plan fraction and the defined contribution plan fraction for any
Participant for any Limitation Year must not exceed 1.0. The Employer
must provide in Adoption Agreement Section 3.18 the manner in which the
Plan will satisfy this limitation. The Employer also must provide in its
Adoption Agreement Section 3.18 the manner in which the Plan will
satisfy the top heavy requirements of Code 9416 after taking into
account the existence (or prior maintenance) of the defined benefit
plan.
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the
-------------------------
following terms mean:
(a) "Annual Addition" The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year, of (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee
contributions. Except to the extent provided in Treasury regulations,
Annual Additions include excess contributions described in Code 9401(k),
excess aggregate contributions described in Code 9401(m) and excess
deferrals described in Code 9402(g), irrespective of whether the plan
distributes or forfeits such excess amounts. Annual Additions also
include Excess Amounts reapplied to reduce Employer contributions under
Section 3.10. Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code 9415(1)(2)) included as part of a
defined benefit plan maintained by the Employer are Annual
3.07
<PAGE>
Defined Contribution Master Plan
Additions. Furthermore, Annual Additions include contributions paid or
accrued after December 31, 1985, for taxable years ending after December
31, 1985, attributable to post- retirement medical benefits allocated to
the separate account of a key employee (as defined in Code Section
19A(d)(3)) under a welfare benefit fund (as defined in Code Section
419(e)) maintained by the Employer.
Co) "compensation" - For purposes of applying the limitations of Part 2
of this Article "Compensation" means Compensation as defined in Section
1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these
amounts as Compensation under Section 1.12 of its Adoption Agreement,
and any exclusion selected in Section 1.12 of the Adoption Agreement
(other than the exclusion of elective contributions) does not apply.
(c) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.30. Solely for purposes of applying the
limitations of Part 2 of this Article HI, the Advisory Committee will
determine related employers described in Section 1.30 by modifying Code
Sections 14(b) and (c) in accordance with Code Section 415(h).
(d) "Excess Amount" - The excess of the Participant's Annual Additions
for the Limitation Year over the Maximum Permissible Amount.
(e) "Limitation Year" - The period selected by the Employer under
Adoption Agreement Section 1.17. All qualified plans of the Employer
must use the same Limitation Year. If the Employer amends the Limitation
Year to a different 12 consecutive month period, the new Limitation Year
must begin on a date within the Limitation Year for which the Employer
makes the amendment, creating a short Limitation Year.
(f) "Master or Prototype Plan" - A plan the form of which is the subject
of a favorable notification letter or a favorable opinion letter from
the Internal Revenue Service.
(g) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code
Section 415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for
the Limitation Year. If there is a short Limitation Year because of a
change in Limitation Year, the Advisory Committee will multiply the
$30,000 (or adjusted) limitation by the following fraction:
Number of months in the short Limitation Year 12
---------------------------------------------
(h) "Defined contribution plan" - A retirement plan which provides for
an individual account for each participant and for benefits based solely
on the amount contributed to the participant's account, and any income,
expenses, gains and losses, and any forfeitures of accounts of other
participants which the plan may allocate to such participant's account.
The Advisory Committee must treat all defined contribution plans
(whether or not terminated) maintained by the Employer as a single plan.
Solely for purposes of the limitations of Part 2 of this Article III,
the Advisory Committee will treat employee contributions made to a
defined benefit plan maintained by the Employer as a separate defined
contribution plan. The Advisory Committee also will treat as a defined
contribution plan an individual medical account (as defined in Code
Section 415(1)(2)) included as part of a defined benefit plan maintained
by the Employer and, for taxable years ending after December 31, 1985, a
welfare benefit fund under Code Section 19(e) maintained by the Employer
to the extent there are post-retirement medical benefits allocated to
the separate account of a key employee (as defined in Code Section
19A(d)(3)).
3.08
<PAGE>
Defined Contribution
Master Plan
(i) "Defined benefit plan" - A retirement plan which does not
provide for individual accounts for Employer contributions. The
Advisory Committee must treat all defined benefit plans (whether or
not terminated) maintained by the Employer as a single plan.
[Note: The definitions in paragraphs (j), (k) and (1) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j ) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under the defined
-------------------------------------------------------------
benefit plan(s) The lesser of (i) 125% (subject to the "100%
---------------
limitation" in paragraph (1)) of the dollar limitation in effect
under Code Section 415C(b)(1)(A) for the Limitation Year, or
(ii) 140% of the Participant's average Compensation for his
high three (3) consecutive Years of Service
To determine the denominator of this fraction, the Advisory
Committee will make an,. adjustment required under Code Section
415(b) and will determine a Year of Service, unless otherwise
provided in an addendum to Adoption Agreement Section 3.18, as a Plan
Year in which the Employee completed at least 1,000 Hours of Service.
The "projected annual benefit' is the annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if the
plan expresses such benefit in a form other than a straight life annuity
or qualified joint and survivor annuity) of the Participant under the
terms of the defined benefit plan on the assumptions he continues
employment until his normal retirement age (or current age, if later
as stated in the defined benefit plan, his compensation continues at the
same rate as in effect in the Limitation Year under consideration
until the date of his normal retirement age and all other relevant
factors used to determine benefits under the defined benefit plan remain
constant as of the current Limitation Year for all future Limitation
Years.
Current Accrued Benefit. If the Participant accrued benefits in
one or more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the dollar limitation used in the
denominator of this fraction will not be less than the Participant's
Current Accrued Benefit. A Participant's Current Accrued Benefit is the
sum of the annual benefits under such defined benefit plans which the
Participant had accrued as of the end o the 1986 Limitation Year (the
last Limitation Year beginning before January 1, 1987) determined
without regard to any change in the terms or conditions of the Plan made
after May 5, 1986, and without regard to any cost of living
adjustment occurring after May 5, 1986 This Current Accrued Benefit
rule applies only if the defined benefit plans individually and h the
aggregate satisfied the requirements of Code Section 415 as in effect at
the end of the 1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the dose of the Limitation Year, of the Annual
Additions to the Participant's Account under the defined
contribution plan(s) The sum of the lesser of the following
--------------------------------------------
amounts determined for the Limitation Year and for each prior Year
------------------
of Service with the Employer: (i) 125% (subject to the "100%
limitation" in paragraph (1)) of the dollar limitation in effect
under Code Section 415(c)(1)(A) for the Limitation Year (determined
without regard to the special dollar limitations for employee
stock ownership plans), or (ii) 35% of the Participant's
Compensation for the Limitation Year
For purposes of determining the defined contribution plan
fraction, the Advisory Committee will not recompute Annual Additions
in Limitation Years beginning prior to
* * * * * * * * * * * * * * * * *
3.09
<PAGE>
Defined Contribution Master Plan
January 1, 1987, to treat all Employee contributions as Annual
Additions. If the Plan satisfied Code Section 415 for Limitation Years
beginning prior to January 1, 1987, the Advisory Committee will
redetermine the defined contribution plan fraction and the defined
benefit plan fraction as of the end of the 1986 Limitation Year, in
accordance with this Section 3.19. ff the sum of the redetermined
fractions exceeds 1.0, the Advisory Committee will subtract permanently
from the numerator of the defined contribution plan fraction an amount
equal to the product of (1) the excess of the sum of the fractions over
1.0, times (2) the denominator of the defined contribution plan
fraction. In making the adjustment, the Advisory Committee must
disregard any accrued benefit under the defined benefit plan which is in
excess of the Current Accrued Benefit. This Plan continues any
transitional rules applicable to the determination of the defined
contribution plan fraction under the Employer's Plan as of the end of
the 1986 Limitation Year.
(I) "100% limitation." If the 100% limitation applies, the Advisory
Committee must determine the denominator of the defined benefit plan
fraction and the denominator of the defined contribution plan fraction
by substituting 100% for 125%. If the Employer's Plan is a Standardized
Plan, the 100% limitation applies in all Limitation Years, subject to
any override provisions under Section 3.18 of the Employer's Adoption
Agreement. If the Employer overrides the 100% limitation under a
Standardized Plan, the Employer must specify in its Adoption Agreement
the manner in which the Plan satisfies the extra minimum benefit
requirement of Code Section 416(h) and the 100% limitation must continue
to apply if the Plan's top heavy ratio exceeds 90%. If the Employer's
Plan is a Nonstandardized Plan, the 100% limitation applies only if: (i)
the Plan's top heavy ratio exceeds 90%; or (ii) the Plan's top heavy
ratio is greater than 60%, and the Employer does not elect in its
Adoption Agreement Section 3.18 to provide extra minimum benefits which
satisfy Code Section 416(h)(2).
3.010
<PAGE>
Defined Contribution Master Plan
ARTICLE IV PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not
---------------------------------------
permit Participant nondeductible contributions unless the Employer
maintains its Plan under a Code Section 401(k) Adoption Agreement. If
the Employer does not maintain its Plan under a Code Section 401(k)
Adoption Agreement and, prior to the adoption of this Master Plan, the
Plan accepted Participant nondeductible contributions for a Plan Year
beginning after December 31, 1986, those contributions must satisfy the
requirements of Code Section 401(m). This Section 4.01 does not prohibit
the Plan's acceptance of Participant nondeductible contributions prior
to the first Plan Year commencing after the Plan Year in which the
Employer adopts this Master Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS. A qualified Plan may not
------------------------------------
accept Participant deductible contributions after April 15, 1987. If the
Employer's Plan includes Participant deductible contributions ("DECs")
made prior to April 16, 1987, the Advisory Committee must maintain a
separate accounting for the Participant's Accrued Benefit attributable
to DECs, including DECs which are part of a rollover contribution
described in Section 4.03. The Advisory Committee will treat the
accumulated DECs as part of the Participant's Accrued Benefit for all
purposes of the Plan, except for purposes of determining the top heavy
ratio under Section 1.33. The Advisory Committee may not use DECs to
purchase life insurance on the Participant's behalf.
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
----------------------------------
Employer's written consent and after filing with the Trustee the form
prescribed by the Advisory Committee, may contribute cash or other
property to the Trust other than as a voluntary contribution if the
contribution is a "rollover contribution" which the Code permits an
employee to transfer either directly or indirectly from one qualified
plan to another qualified plan. Before accepting a rollover
contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified
plan. A rollover contribution is not an Annual Addition under Part 2 of
Article III.
The Trustee will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the Trustee
(or the Named Fiduciary, in the case of a nondiscretionary Trustee
designation), in its sole discretion, agrees to invest the rollover
contribution as part of the Trust Fund. The Trustee will not have any
investment responsibility with respect to a Participant's segregated
rollover Account. The Participant, however, from time to time, may
direct the Trustee in writing as to the investment of his segregated
rollover Account in property, or property interests, of any kind, real,
personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated
rollover Account alone will bear any extraordinary expenses resulting
from investments made at the direction of the Participant. As of the
Accounting Date (or other valuation date) for each Plan Year, the
Advisory Committee will allocate and credit the net income (or net loss)
from a Participant's segregated rollover Account and the increase or
decrease in the fair market value of the assets of a segregated rollover
Account solely to that Account. The Trustee is not liable nor
responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action
taken pursuant to and in accordance with the direction of the
Participant. In all other respects, the Trustee will hold, administer
and distribute a rollover contribution in the same manner as any
Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same
extent and in the same manner as a Participant. If an Employee makes a
rollover contribution to the Trust prior to satisfying the Plan's
eligibility conditions, the Advisory Committee and Trustee must treat
the Employee as a Participant for all
1/Section o 4.01
4.01
<PAGE>
Defined Contribution Master Plan
purposes of the Plan' except the Employee is not a Participant for
purposes of sharing in Employer contributions or Participant forfeitures
under the Plan until he actually becomes a Participant in the Plan. If
the Employee has a Separation from Service prior to becoming a
Participant, the Trustee will distribute his rollover contribution
Account to him as ff it were an Employer contribution Account.
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's
-----------------------------------------
Accrued Benefit is, at all times, 100% Nonforfeitable to the extent the
value of his Accrued Benefit is derived from his Participant
contributions described in this Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A
--------------------------------------------------
Participant, by giving prior written notice to the Trustee, may withdraw
all or any part of the value of his Accrued Benefit derived from his
Participant contributions described in this Article IV. A distribution
of Participant contributions must comply with the joint and survivor
requirements described in Article VI, if those requirements apply to the
Participant. A Participant may not exercise his right to withdraw the
value of his Accrued Benefit derived from his Participant contributions
more than once during any Plan Year. The Trustee, in accordance with the
direction of the Advisory Committee, will distribute a Participant's
unwithdrawn Accrued Benefit attributable to his Participant
contributions in accordance with the provisions of Article VI applicable
to the distribution of the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory
------------------------------------------
Committee must maintain a separate Account(s) in the name of each
Participant to reflect the Participant's Accrued Benefit under the Plan
derived from his Participant contributions. A Participant's Accrued
Benefit derived from his Participant contributions as of any applicable
date is the balance of his separate Participant contribution Account(s).
4.02
<PAGE>
Defined Contribution Master Plan
ARTICLE V TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal
---------------------
Retirement Age in its Adoption Agreement. A Participant's Accrued
Benefit derived from Employer contributions is 100% Nonforfeitable upon
and after his attaining Normal Retirement Age (if employed by the
Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its
-------------------------------
Adoption Agreement to provide a Participant's Accrued Benefit derived
from Employer contributions will be 100% Nonforfeitable if the
Participant's Separation from Service is a result of his death or his
disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and
----------------
5.02, for each Year of Service, a Participant's Nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions
equals the percentage in the vesting schedule completed by the Employer
in its Adoption Agreement.
(A) Election of Special Vesting Formula. if the Trustee makes a
distribution (other than a cash-out distribution described in Section
5.04) to a partially-vested Participant, and the Participant has not
incurred a Forfeiture Break in Service at the relevant time, the
Advisory Committee will establish a separate Account for the
Participant's Accrued Benefit. At any relevant time following the
distribution, the Advisory Committee will determine the Participant's
Nonforfeitable Accrued Benefit derived from Employer contributions in
accordance with the following formula: P(AB + (R x D))- (n x D). To
apply this formula, P is the Participant's current vesting percentage at
the relevant time, "AB" is the Participant's Employer-derived Accrued
Benefit at the relevant time, 'R" is the ratio of 'AB" to the
Participant's Employer-derived Accrued Benefit immediately following the
earlier distribution and 'D" is the amount of the earlier distribution.
If, under a restated Plan, the Plan has made distribution to a
partially-vested Participant prior to its restated Effective Date and is
unable to apply the cash-out provisions of Section 5.04 to that prior
distribution, this special vesting formula also applies to that
Participant's remaining Account. The Employer, in an addendure to its
Adoption Agreement, numbered Section 5.03, may elect to modify this
formula to read as follows: P(AB + D) - D. 5.04 CASH-OUT
--------
DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION OF FORFEITED
------------------------------------------------------------------------
ACCRUED BENEFIT. If, pursuant to Article VI, a partially- vested
---------------
Participant receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Section 5.08), the cash-out
distribution will result in an immediate forfeiture of the nonvested
portion of the Participant's Accrued Benefit derived from Employer
contributions. See Section 5.09. A partially-vested Participant is a
Participant whose Nonforfeitable Percentage determined under Section
5.03 is less than 100%. A cash-out distribution is a distribution of the
entire present value of the Participant's Nonforfeitable Accrued
Benefit.
(A) Restoration and Conditions upon Restoration. A partially-vested
Participant who is re-employed by the Employer after receiving a
cash-out distribution of the Nonforfeitable percentage of his Accrued
Benefit may repay the Trustee the amount of the cash-out distribution
attributable to Employer contributions, unless the Participant no longer
has a right to restoration by reason of the conditions of this Section
5.04(A). If a partially-vested Participant makes the cash-out
distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the
dollar amount of his Accrued Benefit on the Accounting Date, or other
valuation date, immediately preceding the date of the cash-out
distribution, unadjusted for any gains or losses occurring subsequent to
that Accounting Date, or other valuation date. Restoration of the
Participant's
5.01
<PAGE>
Defined Contribution Master Plan
Accrued Benefit includes restoration of all Code Section 411(d)(6)
protected benefits with respect to that restored Accrued Benefit, in
accordance with applicable Treasury regulations. The Advisory Committee
will not restore a re-employed Participant's Accrued Benefit under this
paragraph if: (1) 5 years have elapsed since the Participant's first
re-employment date with the Employer following the cash-out
distribution; or (2) The Participant incurred a Forfeiture Break in
Service (as defined in Section 5.08). This condition also applies if
the Participant makes repayment within the Plan Year in which he
incurs the Forfeiture Break in Service and that Forfeiture Break in
Service would result in a complete forfeiture of the amount the
Advisory Committee otherwise would restore. (B) Time and Method of
Restoration. If neither of the two conditions preventing restoration of
the Participant's Accrued Benefit applies, the Advisory Committee will
restore the Participant's Accrued Benefit as of the Plan Year
Accounting Date coincident with or immediately following the repayment.
To restore the Participant's Accrued Benefit, the Advisory Committee, to
the extent necessary, will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain
for the Plan Year; and (3) Third, the Employer contribution for the
Plan Year to the extent made under a discretionary formula. In an
addendure to its Adoption Agreement numbered 5.04(B), the Employer may
eliminate as a means of restoration any of the amounts described in
clauses (1), (2) and (3) or may change the order of priority of these
amounts. To the extent the amounts described in clauses (1), (2) and (3)
are insufficient to enable the Advisory Committee to make the required
restoration, the Employer must contribute, without regard to any
requirement or condition of Section 3.01, the additional amount
necessary to enable the Advisory Committee to make the required
restoration. If, for a particular Plan Year, the Advisory Committee must
restore the Accrued Benefit of more than one re-employed Participant,
then the Advisory Committee will make the restoration allocations to
each such Participant's Account in the same proportion that a
Participant's restored amount for the Plan Year bears to the restored
amount for the Plan Year of all re-employed Participants. The Advisory
Committee will not take into account any allocation under this Section
5.04 in applying the limitation on allocations under Part 2 of Article
III. (C) 0% Vested Participant. The Employer must specify in its
Adoption Agreement whether the deemed cash-out rule applies to a 0%
vested Participant. A 0% vested Participant is a Participant whose
Accrued Benefit derived from Employer contributions is entirely
forfeitable at the time of his Separation from Service. If the
Participant's Account is not entitled to an allocation of Employer
contributions for the Plan Year in which he has a Separation from
Service, the Advisory Committee will apply the deemed cash-out rule as
if the 0% vested Participant received a cash-out distribution on the
date of the Participant's Separation from Service. If the Participant's
Account is entitled to an allocation of Employer contributions or
Participant forfeitures for the Plan Year in which he has a Separation
from Service, the Advisory Committee will apply the deemed cash-out rule
as if the 0% vested Participant received a cash-out distribution on the
first day of the first Plan Year beginning after his Separation from
Service. For purposes of applying the restoration provisions of this
Section 5.04, the Advisory Committee will treat the 0% vested
Participant as repaying his cash-out "distribution" on the first date of
his re-employment with the Employer. If the deemed cash-out rule does
not apply to the Employer's Plan, a 0% vested Participant will not incur
a forfeiture until he incurs a Forfeiture Break in Service. 5.05
SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
------------------------------------
restores the Participant's Accrued Benefit, as described in Section
5.04, the Trustee ??? invest the cash-out amount the Participant has
repaid in a segregated Account maintained solely for that
5.02
<PAGE>
Defined Contribution Master Plan
Participant. The Trustee must invest the amount in the Participant's
segregated Account in Federally insured interest bearing savings
account(s) or time deposit(s) (or a combination of both), or in other
fixed income investments. Until commingled with the balance of the Trust
Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of
the Trust, but it alone shares in any income it earns and it alone bears
any expense or loss it incurs. Unless the repayment qualifies as a
rollover contribution, the Advisory Committee will direct the Trustee to
repay to the Participant as soon as is administratively practicable the
full amount of the Participant's segregated Account if the Advisory
Committee determines either of the conditions of Section 5.04(A)
prevents restoration as of the applicable Accounting Date,
notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under
-------------------------
Section 5.03, Year of Service means any 12-consecutive month period
designated in the Employer's Adoption Agreement during which an Employee
completes not less than the number of Hours of Service (not exceeding
1,000) specified in the Employer's Adoption Agreement. A Year of Service
includes any Year of Service earned prior to the Effective Date of the
Plan, except as provided in Section 5.08.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
--------------------------
Participant incurs a 'Break in Service' ff during any vesting
computation period he does not complete more than 500 Hours of Service.
If, pursuant to Section 5.06, the Plan does not require more than 500
Hours of Service to receive credit for a Year of Service, a Participant
incurs a Break in Service in a vesting computation period in which he
????? to complete a Year of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of
-----------------------------------
determining 'Years of Service" under Section 5.06, the Plan takes into
account all Years of Service an Employee completes with the Employer
except: (a) For the sole purpose of determining a Participant's
Nonforfeitable percentage of his Accrued Benefit derived from
Employer contributions which accrued for his benefit prior to a
Forfeiture Break in Service, the Plan disregards any Year of Service
after the Participant first incurs a Forfeiture Break in Service. The
Participant incurs a Forfeiture Break in Service when he incurs 5
consecutive Breaks in Service.
(b) The Plan disregards any Year of Service excluded under the
Employer's Adoption Agreement.
The Plan does not apply the Break in Service rule under Code
Section 411(a)(6)(B). Therefore, an Employee need not complete a Year of
Service after a Break in Service before the Plan takes into account the
Employee's otherwise included Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his
-----------------
Accrued Benefit derived from Employer contributions occurs under the
Plan on the earlier of:
(a) The last day of the vesting computation period in which the
Participant first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's
Accrued Benefit forfeiture, if any, under this Section 5.09 solely by
reference to the vesting schedule of Section 5.03. A Participant does
not forfeit any portion of his Accrued Benefit for any other reason or
cause except as expressly provided by this Section 5.09 or as provided
under Section 9.14.
5.03
<PAGE>
Defined Contribution
Master Plan
ARTICLE VI TIME AND METHOD OF
PAYMENT OF BENEFITS
6.01 TIME OF 'PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to
-----------------------------------
Section 6.03, the Participant or the Beneficiary elects in writing to a
different time or method of payment, the Advisory Committee will direct
the Trustee to commence distribution of a Participant's Nonforfeitable
Accrued Benefit in accordance with this Section 6.01. A Participant must
consent, in writing, to any distribution required under this Section
6.01 ff the present value of the Participant's Nonforfeitable Accrued
Benefit, at the time of the distribution to the Participant, exceeds
$3,500 and the Participant has not attained the later of Normal
Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04
requires the spouse's consent. For all purposes of this Article VI, the
term "annuity starting date" means the first day of the first period
for which the Plan pays an amount as an annuity or in any other form. A
distribution date under this Article VI, unless otherwise specified
within the Plan, is the date or dates the Employer specifies in the
Adoption Agreement, or as soon as administratively practicable
following that distribution date. For purposes of the consent
requirements under this Article VI, ff the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of any
distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant. (A) Separation from Service For a
Reason Other Than Death.
(1) Participant's Nonforfeitable Accrued Benefit Not Exceeding
$3,500. If the Participant's Separation from Service is for any reason
other than death, the Advisory Committee will direct the Trustee to
distribute the Participant's Nonforfeitable Accrued Benefit in a lump
sum, on the distribution date the Employer specifies in the Adoption
Agreement, but in no event later than the 60th day following the close
of the Plan Year in which the Participant attains Normal Retirement
Age. If the Participant has attained Normal Retirement Age at the time
of his Separation from Service, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan
Year in which the Participant's Separation from Service occurs.
(2) Participant's Nonforfeitable Accrued Benefit Exceeds $3,500.
If the Participant's Separation from Service is for any reason other
than death, the Advisory Committee will direct the Trustee to commence
distribution of the Participant's Nonforfeitable Accrued Benefit in a
form and at the time elected by the Participant, pursuant to Section
6.03. In the absence of an election by the Participant, the Advisory
Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum (or, ff applicable, the
normal annuity form of distribution required under Section 6.04), on the
60th day following the close of the Plan Year in which the latest of the
following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's
Separation from Service.
(3) Disability. If the Participant's Separation from Service is
because of his disability, the .Advisory Committee will direct the
Trustee to pay the Participant's Nonforfeitable Accrued Benefit m lump
sum, on the distribution date the Employer specifies in the Adoption
Agreement, subject to the notice and consent requirements of this
Article VI and subject to the applicable mandatory commencement dates
described in Paragraphs (1) and (2). (4) Hardship. Prior to the time
at which the Participant may receive distribution under Paragraphs (1),
(2) or (3), the Participant may request a distribution from his
Nonforfeitable Accrued Benefit in an amount necessary to satisfy a
hardship, ff the Employer elects in the Adoption Agreement to permit
hardship distributions. Unless the Employer elects otherwise in the
Adoption Agreement, a hardship distribution must be on account of any of
the following: (a) medical expenses; (b) the purchase (excluding
mortgage payments) of the Participant's principal residence; (c)
post-secondary education tuition, for the next semester or quarter, for
the Participant or for the Participant's spouse, children or dependents;
(d) to prevent the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's
6.01
<PAGE>
Defined Contribution Master Plan
principal residence; (e) funeral expenses of the Participant's family
member; or (f) the Participant's disability. A partially-vested
Participant may not receive a hardship distribution described in this
Paragraph (A)(4) prior' to incurring a Forfeiture Break in Service,
unless the hardship distribution is a cash-out distribution (as defined
in Article V). The Advisory Committee will direct the Trustee to make
the hardship distribution as soon as administratively practicable after
the Participant makes a valid request for the hardship distribution. (B)
Required Beginning Date. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's
Required Beginning Date, the Advisory Committee instead must direct the
Trustee to make distribution on the Participant's Required Beginning
Date, subject to the transitional election, if applicable, under Section
6.03(D). A Participant's Required Beginning Date is the April 1
following the close of the calendar year in which the Participant
attains age 70??. However, if the Participant, prior to incurring a
Separation from Service, attained age 70!/: by January 1, 1988, and, for
the five Plan Year period ending in the calendar year in which he
attained age 70: and for all subsequent years, the Participant was not a
more than 5% owner, the Required Beginning Date is the April 1 following
the close of the calendar year in which the Participant separates from
Service or, ff earlier, the April 1 following the close of the calendar
year in which the Participant becomes a more than 5% owner. Furthermore,
if a Participant who was not a more than 5% owner attained age 70??:
during 1988 and did not incur a Separation from Service prior to January
1, 1989, his Required Beginning Date is April 1, 1990. A mandatory
distribution at the Participant's Required Beginning Date will be in
lump sum (or, if applicable, the normal annuity form of distribution
required under Section 6.04) unless the Participant, pursuant to the
provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) Death of the Participant. The Advisory Committee will direct the
Trustee, in accordance with this Section 6.01(C), to distribute to the
Participant's Beneficiary the Participant's Nonforfeitable Accrued
Benefit remaining in the Trust at the time of the Participant's death.
Subject to the requirements of Section 6.04, the Advisory Committee will
determine the death benefit by reducing the Participant's Nonforfeitable
Accrued Benefit by any security interest the Plan has against that
Nonforfeitable Accrued Benefit by reason of an outstanding Participant
loan.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does Not
Exceed $3,500. The Advisory Committee, subject to the requirements of
Section 6.04, must direct the Trustee to distribute the deceased
Participant's Nonforfeitable Accrued Benefit in a single sum, as soon as
administratively practicable following the Participant's death or, if
later, the date on which the Advisory Committee receives notification of
or otherwise confirms the Participant's death.
(2) Deceased Participant's Nonforfeitable Accrued Benefit Exceeds
$3,500. The Advisory Committee will direct the Trustee to distribute the
deceased Participant's Nonforfeitable Accrued Benefit at the time and in
the form elected by the Participant or, ff applicable by the
Beneficiary, as permitted under this Article VI. In the absence of an
election, subject to the requirements of Section 6.04, the Advisory
Committee will direct the Trustee to distribute the Participant's
undistributed Nonforfeitable Accrued Benefit in a lump sum on the first
distribution date following the dose of the Plan Year in which the
Participant's death occurs or, ff later, the first distribution date
following the date the Advisory Committee receives notification of or
otherwise confirms the Participant's death.
If the death benefit is payable in full to the Participant's
surviving spouse, the surviving spouse, in addition to the distribution
options provided in this Section 6.01(C), may elect distribution at any
time or in any form (other than a joint and survivor annuity) this
Article VI would permit for a Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
------------------------------------
distribution requirements, ff any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a
6.02
<PAGE>
Defined Contribution
Master Plan Participant or Beneficiary may elect distribution under
one, or any combination, of the following methods: (a) by payment in a
lump sum; or (b) by payment in monthly, quarterly or annual
installments over a .fixed reasonable period of time, not exceeding the
life expectancy of the Participant, or the joint life and last
survivor expectancy of the Participant and his Beneficiary. The
Employer may elect in its Adoption Agreement to modify the methods of
payment available under this Section 6.02.
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable
Accrued Benefit, at the time of the distribution to the Participant,
exceeds $3,500. To facilitate installment payments under this Article
VI, the Advisory Committee may direct the Trustee to segregate all or
any part of the Participant's Accrued Benefit in a separate Account.
The Trustee will invest the Participant's segregated Account in
Federally insured interest bearing savings account(s) or time
deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it
alone shares in any income it earns, and it alone boars any expense or
loss it incurs. A Participant or Beneficiary may elect to receive an
installment distribution in the form of a Nontransferable Annuity
Contract. Under an installment distribution, the Participant or
Beneficiary, at any time, may elect to accelerate the payment of all,
or any portion, of the Participant's unpaid Nonforfeitable Accrued
Benefit, subject to the requirements of Section 6.04. (A) Minimum
Distribution Requirements for Participants. The Advisory Committee may
not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee
distribute his Nonforfeitable Accrued Benefit, under a method of payment
which, as of the Required Beginning. Date, does not satisfy the minimum
distribution requirements under Code Section 401(a)(9) and the
applicable Treasury regulations. The minimum distribution for a
calendar year equals the Participant's Nonforfeitable Accrued Benefit as
of the latest valuation date preceding the beginning of the calendar
year divided by the Participant's life expectancy or, if applicable,
the joint and last survivor expectancy of the Participant and his
designated Beneficiary (as determined under Article VIII, subject to
the requirements of the Code Section 401(a)(9) regulations). The
Advisory Committee will increase the Participant's Nonforfeitable
Accrued Benefit, determined on the relevant valuation date, for
contributions or forfeitures allocated after as
the valuation date and by December 31 of the valuation calendar
year, and will decrease the valuation by distributions made after the
valuation date and by December 31 of the valuation calendar year. For
purposes of this valuation, the Advisory Committee will treat any
portion of the minimum distribution for the first distribution calendar
year made after the close of that year as a distribution occurring in
that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. Section 1.72-9. The Advisory
Committee, only upon the Participant's written request, will compute the
minimum distribution for a calendar year subsequent to the first
calendar year for which the. Plan requires a minimum distribution by
redetermining the applicable life expectancy. However, the Advisory
Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in
a manner which takes into account any adjustment to a life expectancy
other than the Participant's life expectancy. If the Participant's
spouse is not his designated Beneficiary, a method of payment to the
Participant (whether by Participant election or by Advisory Committee
direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan
must satisfy the minimum distribution incidental benefit ("??? ")
requirement in the Treasury regulations issued under Code Section
401(a)(9) for distributions made on or after the Participant's Required
Beginning Date and before the Participant's death. To satisfy the MDIB
requirement, the Advisory Committee will compute the minimum
distribution required by this Section 6.02(A) by substituting the
applicable MDIB divisor for the applicable life expectancy factor, if
the ?????? divisor is a lesser number. Following the Participant's
death, the Advisory Committee will compute the minimum distribution
required by this Section 6.02(A) solely on the basis of the applicable
Life expectancy factor and will disregard the ?????? factor. For Plan
Years beginning prior to January 1, 1989, the Plan satisfies the
incidental benefits requirement if the distributions to the Participant
satisfied the ?????? requirement or if the present value of the
retirement benefits
6.03
<PAGE>
Defined Contribution Master Plan
payable solely to the Participant is greater than 50% of the present
value of the total benefits payable to the Participant and his
Beneficiaries. The Advisory Committee must determine whether benefits to
the Beneficiary are incidental as of the date the Trustee is to commence
payment of the retirement benefits to the Participant, or as of any date
the Trustee redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year
is due by the Participant's Required Beginning Date. The minimum
distribution for each subsequent distribution calendar year, including
the calendar year in which the Participant's Required Beginning Date
occurs, is due by December 31 of that year. If the Participant receives
distribution in the form of a Nontransferable Annuity Contract, the
distribution satisfies this Section 6.02(A) if the contract complies
with the requirements of Code Section 401(a)(9) and the applicable
Treasury regulations.
(B) Minimum Distribution Requirements for Beneficiaries. The method of
distribution to the Participant's Beneficiary must satisfy Code Section
401(a)(9) and the applicable Treasury regulations. If the Participant's
death occurs after his Required Beginning Date or, if earlier, the date
the Participant commences an irrevocable annuity pursuant to Section
6.04, the method of payment to the Beneficiary must provide for
completion of payment over a period which does not exceed the payment
period which had commenced for the Participant. If the Participant's
death occurs prior to his Required Beginning Date, and the Participant
had not commenced an irrevocable annuity pursuant to Section 6.04, the
method of payment to the Beneficiary, subject to Section 6.04, must
provide for completion of payment to the Beneficiary over a period not
exceeding: (i) 5 years after the date of the Participant's death; or
(ii) if the Beneficiary is a designated Beneficiary, the designated
Beneficiary's life expectancy. The Advisory Committee may not direct
payment of the Participant's Nonforfeitable Accrued Benefit over a
period described in clause (ii) unless the Trustee will commence payment
to the designated Beneficiary no later than the December 31 following
the close of the calendar year in which the Participant's death occurred
or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 3 1 of the calendar year in which the
Participant would have attained age 70%. If the Trustee will make
distribution in accordance with clause (ii), the minimum distribution
for a calendar year equals the Participant's Nonforfeitable Accrued
Benefit as of the latest valuation date preceding the beginning of the
calendar year divided by the designated Beneficiary's life expectancy.
The Advisory Committee must use the unisex life expectancy multiples
under Treas. Reg. Section 1.72-9 for purposes of applying this
paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, will recalculate
the life expectancy of the Participant's surviving spouse not more
frequently than annually, but may not recalculate the life expectancy of
a nonspouse designated Beneficiary after the Trustee commences payment
to the designated Beneficiary. The Advisory Committee will apply this
paragraph by treating any amount paid to the Participant's child, which
becomes payable to the Participant's surviving spouse upon the child's
attaining the age of majority, as paid to the Participant's surviving
spouse. Upon the Beneficiary's written request, the Advisory Committee
must direct the Trustee to accelerate payment of all, or any portion, of
the Participant's unpaid Accrued Benefit, as soon as administratively
practicable following the effective date of that request.
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not
-------------------------
later than 30 days, before the Participant's annuity starting date, the
Advisory Committee must provide a benefit notice to a Participant who is
eligible to make an election under this Section 6.03. The benefit notice
must explain the optional forms of benefit in the Plan, including the
material features and relative values of those options, and the
Participant's right to defer distribution until he attains the later of
Normal Retirement Age or age 62. If a Participant or Beneficiary
makes an election prescribed by this Section 6.03, the Advisory
Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that election. Any
election under this Section 6.03 is subject to the requirements of
Section 6.02 and of Section 6.04. The Participant or Beneficiary must
make an election under this Section 6.03 by filing his election with the
Advisory Committee at any time before the
6.04
<PAGE>
Defined Contribution
Master Plan Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI. (A)
Participant Elections After Separation from Service. If the present
value of a Participant's Nonforfeitable Accrued Benefit exceeds $3,500,
he may elect to have the Trustee commence distribution as of any
distribution date permitted under the Employer's Adoption Agreement
Section 6.03. The Participant may reconsider an election at any time
prior to the annuity starting date and elect to commence distribution as
of any other distribution date permitted under the Employer's Adoption
Agreement Section 6.03. ff the Participant is partially-vested in his
Accrued Benefit, an election under this Paragraph (A) to distribute
prior to the Participant's incurring a Forfeiture Break in Service (as
defined in Section 5.08), must be in the form of a cash-out distribution
(as defined in Article V). A Participant may not receive a cash-out
distribution if, prior to the time the Trustee actually makes the
cash-out distribution, the Participant returns to employment with the
Employer. Following his attainment of Normal Retirement Age, a
Participant who has separated from Service may elect distribution as of
any distribution date, irrespective of the elections under Adoption
Agreement Section 6.03.
(B) Participant Elections Prior to Separation from Service. The
Employer must specify in its Adoption Agreement the distribution
elect/on rights, if any, a Participant has prior to his Separation from
Service. A Participant must make an elect/on under this Section 6.03(B)
on a form prescribed by the Advisory Committee at any time during the
Plan Year for which his election is to be effective. In his written
election, the Participant must specify the percentage or dollar amount
he wishes the Trustee to distribute to him. The Participant's election
relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for
a particular Plan Year greater than the dollar amount or percentage
specified in his election form terminates on the Accounting Date. The
Trustee must make a distribution to a Participant in accordance with
his election under this Sect/on 6.03(B) within the 90 day period (or as
soon as administratively practicable) after the Participant files his
written election with the Trustee. The Trustee will distribute the
balance of the Participant's Accrued Benefit not distributed pursuant
to his election(s) in accordance with the other distribution provisions
of this Plan.
(C) Death Benefit Elections. If the present value of the deceased
Participant's Nonforfeitable Accrued Benefit exceeds $3,500, the
Participant's Beneficiary may elect to have the Trustee distribute the
Participant's Nonforfeitable Accrued Benefit in a form and within a
period permitted under Section 6.02. The Beneficiary's election is
subject to any restrictions designated in writing by the Participant
and not revoked as of his date of death.
(D) Transitional Elections. Notwithstanding the provisions of Sections
Participant (or Beneficiary) signed a written distribution designation
prior 6.01 and 6.02, if the
to January 1, 1984, the Advisory
Committee must distribute the Participant's Nonforfeitable Accrued
Benefit in accordance with that designation, subject however, to the
survivor requirements, if applicable, of Sections 6.04, 6.05 and 6.06.
This Section 6.03(D) does not apply to a pre-1984 distribution
designation, and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method of
distribution would have disqualified the Plan under Code Section
401(a)(9) as in effect on December 31, 1983; (2) the Participant did not
have an Accrued Benefit as of December 31, 1983; (3) the distribution
designation does not specify the timing and form of the distribution and
the death Beneficiaries (in order of priority); (4) the substitution of
a Beneficiary modifies the payment period of the distribution; or, (5)
the Participant (or Beneficiary) modifies or revokes the distribution
designation. In the event of a revocation, the Plan must distribute, no
later than December 31 of the calendar year following the year of
revocation, the amount which the .Participant would have received under
Section 6.02(A) if the distribution designation had not been m effect
or, if the Beneficiary revokes the distribution designation, the amount
which the .Beneficiary would have received under Section 6.02(B) if the
distribution designation had not been in effect. The Advisory Committee
will apply this Section 6.03(D) to rollovers and transfers in accordance
with Part J of the Code Section 401(a)(9) Treasury regulations.
6.05
<PAGE>
Defined Contribution Master Plan
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
-----------------------------------------------------------
(A) Joint and Survivor Annuity. The Advisory Committee must direct the
Trustee to distribute a married or unmarried Participant's
Nonforfeitable Accrued Benefit in the form of a qualified joint and
survivor annuity, unless the Participant makes a valid waiver election
(described in Section 6.05) within the 90 day period ending on the
annuity starting date. If, as of the annuity starting date, the
Participant is married, a qualified joint and survivor annuity is an
immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life annuity for the
Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity
payable during the life of the Participant. If, as of the annuity
starting date, the Participant is not married, a qualified joint and
survivor annuity is an immediate life annuity for the Participant which
is purchasable with the Participant's Nonforfeitable Accrued Benefit. On
or before the annuity starting date, the Advisory Committee, without
Participant or spousal consent, must direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in a lump sum, in lieu of a
qualified joint and survivor annuity, in accordance with Section 6.01,
if the Participant's Nonforfeitable Accrued Benefit is not greater than
$3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August
22, 1984. (B) Preretirement Survivor Annuity. If a married Participant
dies prior to his annuity starting date, the Advisory Committee will
direct the Trustee to distribute a portion of the Participant's
Nonforfeitable Accrued Benefit to the Participant's surviving spouse in
the form of a preretirement survivor annuity, unless the Participant has
a valid waiver election (as described in Section 6.06) in effect, or
unless the Participant and his spouse were not married throughout the
one year period ending on the date of his death. A preretirement
survivor annuity is an annuity which is purchasable with 50% of the
Participant's Nonforfeitable Accrued Benefit (determined as of the date
of the Participant's death) and which is payable for the life of the
Participant's surviving spouse. The value of the preretirement survivor
annuity is attributable to Employer contributions and to Employee
contributions in the same proportion as the Participant's Nonforfeitable
Accrued Benefit is attributable to those contributions. The portion of
the Participant's Nonforfeitable Accrued Benefit not payable under this
paragraph is payable to the Participant's Beneficiary, in accordance
with the other provisions of this Article VI. If the present value of
the preretirement survivor annuity does not exceed $3,500, the Advisory
Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving
spouse, in lieu of a preretirement survivor annuity. This Section
6.04(B) applies only to a Participant who dies after August 22, 1984,
and either (i) completes at least one Hour of Service with the Employer
after August 22, 1984, or (ii) separated from Service with at least 10
Years of Service (as defined in Section 5.06) and completed at least one
Hour of Service with the Employer in a Plan Year beginning after
December 31, 1975.
(C) Surviving Spouse Elections. If the present value of the
preretirement survivor annuity exceeds $3,500, the Participant's
surviving spouse may elect to have the Trustee commence payment of the
preretirement survivor annuity at any time following the date of the
Participant's death, but not later than the mandatory distribution
periods described in Section 6.02, and may elect any of the forms of
payment described in Section 6.02, in lieu of the preretirement survivor
annuity. In the absence of an election by the surviving spouse, the
Advisory Committee must direct the Trustee to distribute the
preretirement survivor annuity on the first distribution date following
the dose of the Plan Year in which the ?????? of the following events
occurs: (i) the Participant's death; (ii) the date the Advisory
Committee receives notification of or otherwise confirms the
Participant's death; (iii) the date the Participant would have attained
Normal Retirement Age; or (iv) the date the Participant would have
attained age 62.
(D) Special Rules. If the Participant has in effect a valid waiver
election regarding the qualified joint and survivor annuity or the
preretirement survivor annuity, the Advisory Committee must direct the
Trustee to distribute the Participant's Nonforfeitable Accrued Benefit
in accordance with Sections 6.01, 6.02 and 6.03. The Advisory Committee
will reduce the Participant's Nonforfeitable Accrued Benefit by any
security interest (pursuant to any offset rights authorized by Section
6.06
<PAGE>
Defined Contribution Master Plan
10.03[E]) held by the Plan by reason of a Participant loan to determine
the value of the Participant's Nonforfeitable Accrued Benefit
distributable in the form of a qualified joint and survivor annuity or
preretirement survivor annuity, provided any post-August 18, 1985, loan
satisfied the spousal consent requirement described in Section 10.03[E]
of the Plan. For purposes of applying this Article VI, the Advisory
Committee treats a former spouse as the Participant's spouse or
surviving spouse to the extent provided under a qualified domestic
relations order described in Section 6.07. The provisions of this
Section 6.04, and of Sections 6.05 and 6.06, apply separately to the
portion of the Participant's Nonforfeitable Accrued Benefit subject to
the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
(E) Profit Sharing Plan Election. If this Plan is a profit sharing plan,
the Employer must elect the extent to which the preceding provisions of
Section 6.04 apply. If the Employer elects to apply this Section 6.04
only to a Participant described in this Section 6.04(E), the preceding
provisions of this Section 6.04 apply only to the following
Participants: (1) a Participant as respects whom the Plan is a direct or
indirect transferee from a plan subject to the Code Section 417
requirements and the Plan received the transfer after December 31, 1984,
unless the transfer is an elective transfer described in Section 13.06;
(2) a Participant who elects a life annuity distribution (if Section
6.02 or Section 13.02 of the Plan requires the Plan to provide a life
annuity distribution option); and (3) a Participant whose benefits under
a deemed benefit plan maintained by the Employer are offset by benefits
provided under this Plan. If the Employer elects to apply this Section
6.04 to all Participants, the preceding provisions of this Section 6.04
apply to all Participants described in the ?????? two paragraphs of this
Section 6.04, without regard to the limitations of this Section 6.04(E).
Sections 6.05 and 6.06 only apply to Participants to whom the preceding
provisions of this Section 6.04 apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not
------------------------------------------------------
earlier than 90 days, but not later than 30 days, before the
Participant's annuity starting date, the Advisory Committee must
provide the Participant a written explanation of the terms and
conditions of the qualified joint and survivor annuity, the
Participant's right to make, and the effect of, an election to waive
the joint and survivor form of benefit, the rights of the Participant's
spouse regarding the waiver election and the Participant's right to
make, and the effect of, a revocation of a waiver election. The Plan
does not limit the number of times the Participant may revoke a waiver
of the qualified joint and survivor annuity or make a new waiver during
the election period.
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has
received the written explanation described in this Section 6.05, has
consented in writing to the waiver election, the spouse's consent
acknowledges the effect of the election, and a notary public or the Plan
Administrator (or his representative) witnesses the spouse's consent,
(b) the spouse consents to the alternate form of payment designated by
the Participant or to any change in that designated form of payment, and
(c) unless the spouse is the Participant's sole primary Beneficiary, the
spouse consents to the Participant's Beneficiary designation or to any
change in the Participant's Beneficiary designation. The spouse's
consent to a waiver of the qualified joint and survivor annuity is
irrevocable, unless the Participant revokes the waiver election. The
spouse may execute a blanket consent to any form of payment designation
or to any Beneficiary designation made by the Participant, if the spouse
acknowledges the right to limit that consent to a specific designation
but, in writing,' waives that right. The consent requirements of this
Section 6.05 apply to a former spouse of the Participant, to the extent
required under a qualified domestic relations order described in Section
6.07.
The Advisory Committee will accept as valid a waiver election which
does not satisfy the spousal consent requirements if the Advisory
Committee establishes the Participant does not have a spouse, the
Advisory Committee is not able to locate the Participant's spouse, the
Participant is legally separated or has been abandoned (within the
meaning of State law) and the Participant has a court order to that
effect, or other circumstances exist under which the Secretary of the
6.07
<PAGE>
Defined Contribution Master Plan
Treasury will excuse the consent requirement. ff the Participant's
spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The Advisory
Committee must provide a written explanation of the preretirement
survivor annuity to each married Participant, within the following
period which ends last: (1) the period beginning on the first day of the
Plan Year in which the Participant attains age 32 and ending on the last
day of the Plan Year in which the Participant attains age 34; (2) a
reasonable period after an Employee becomes a Participant; (3) a
reasonable period after the joint and survivor rules become applicable
to the Participant; or (4) a reasonable period after a fully subsidized
preretirement survivor annuity no longer satisfies the requirements for
a fully subsidized benefit. A reasonable period described in clauses
(2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from
Service before attaining age 35, choices (1), (2), (3) and (4) do not
apply and the Advisory Committee must provide the written explanation
within the period beginning one year before and ending one year after
the Separation from Service. The written explanation must describe, in a
manner consistent with Treasury regulations, the terms and conditions of
the preretirement survivor annuity comparable to the explanation of the
qualified joint and survivor annuity required under Section 6.05. The
Plan does not limit the number of times the Participant may revoke a
waiver of the preretirement survivor annuity or make a new waiver during
the election period.
A Participant's waiver election of the preretirement survivor
annuity is not valid unless (a) the Participant makes the waiver
election no earlier than the first day of the Plan Year in which he
attains age 35 and (b) the Participant's spouse (to whom the
preretirement survivor annuity is payable) satisfies the consent
requirements described in Section 6.05, except the spouse need not
consent to the form of benefit payable to the designated Beneficiary.
The spouse's consent to the waiver of the preretirement survivor annuity
is irrevocable, unless the Participant revokes the waiver election.
Irrespective of the time of election requirement described in clause
(a), ff the Participant separates from Service prior to the first day of
the Plan Year in which he attains age 35, the Advisory Committee will
accept a waiver election as respects the Participant's Accrued Benefit
attributable to his Service prior to his Separation from Service.
Furthermore, ff a Participant who has not separated from Service makes a
valid waiver election, except for the timing requirement of clause (a),
the Advisory Committee will accept that election as valid, but only
until the first day of the Plan Year in which the Participant attains
age 35. A waiver election described in this paragraph is not valid
unless made after the Participant has received the written explanation
described in this Section 6.06.
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing
---------------------------------------------
contained in this Plan prevents the Trustee, in accordance with the
direction of the Advisory Committee, from complying with the provisions
of a qualified domestic relations order (as defined in Code Section
414(p)). This Plan specifically permits distribution to an alternate
payee under a qualified domestic relations order at any time,
irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment
of earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and
the alternate payee to authorize an earlier distribution; and (2) ff the
present value of the alternate payee's benefits under the Plan exceeds
$3,500, and the order requires, the alternate payee consents to any
distribution occurring prior to the Participant's attainment of earliest
retirement age. The Employer, in an addendum to its Adoption Agreement
numbered 6.07, may elm to limit distribution to an alternate payee only
when the Participant has attained his earliest retirement age under the
Plan. Nothing in this Section 6.07 gives a Participant a right to
receive distribution at a time otherwise not permitted under the Plan
nor does it permit the alternate payee to receive a form of payment not
otherwise permitted under the Plan.
* * * * * * * * * * * * * * *
6.08
<PAGE>
Defined Contribution
Master Plan
The Advisory Committee must establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon
receiving a domestic relations order, the Advisory Committee promptly
will notify the Participant and any alternate payee named in the order,
in writing, of the receipt of the order and the Plan's procedures for
determining the qualified status of the order. Within a reasonable
period of time after receiving the domestic relations order, the
Advisory Committee must determine the qualified status of the order and
must notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this
paragraph by mailing to the individual's address specified in the
domestic relations order, or in a manner consistent with Department of
Labor regulations. If any portion of the Participant's Nonforfeitable
Accrued Benefit is payable during the period the Advisory Committee is
making its determination of the qualified status of the domestic
relations order, the Advisory Committee must make a separate accounting
of the amounts payable. ff the Advisory Committee determines the order
is a qualified domestic relations order within 18 months of the date
amounts first are payable following receipt of the order, the Advisory
Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute
if the order did not exist and will apply the order prospectively if the
Advisory Committee later determines the order is a qualified domestic
relations order.
To the extent it is not inconsistent with the provisions of the
qualified domestic relations order, the Advisory Committee may direct
the Trustee to invest any partitioned amount in a segregated subaccount
or separate account and to invest the account in Federally insured,
.interest-.bearing savings account(s) or time deposit(s) (or a
combination of both), or in other fixed income investments. A segregated
subaccount remains a part of the Trust, but it alone shares in any
income it earns, and it alone bears any expense or loss it incurs. The
Trustee will make any payments or distributions required under this
Section 6.07 by separate benefit checks or other separate distribution
to the alternate payee(s).
* * * * * * * * * * * * * * * * *
6.09
<PAGE>
Defined Contribution
Master Plan
ARTICLE VII EMPLOYER
ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current
------------------------
information to the Advisory Committee as to the name, date of birth,
date of employment, annual compensation, leaves of absence, Years of
Service and date of termination of employment of each Employee who is,
or who will be eligible to become, a Participant under the Plan,
together with any other information which the Advisory Committee
considers necessary. The Employer's records as to the current
information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or
------------
responsibility to any of its Employees, Participants or Beneficiaries
for any act of, or failure to act, on the part of its Advisory Committee
(unless the Employer is the Advisory Committee), the Trustee, the
Custodian, ff any, or the Plan Administrator (unless the Employer is the
Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and
--------------------------------
saves harmless the Plan Administrator and the members of the Advisory
Committee, and each of them, from and against any and all loss resulting
from liability to which the Plan Administrator and the Advisory
Committee, or the members of the Advisory Committee, may be subjected by
reason of any act or conduct (except willful misconduct or gross
negligence) in their official capacities in the administration of this
Trust or Plan or both, including all expenses reasonably incurred in
their defense, in case the Employer fails to provide such defense. The
indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may
have under ERISA for breach of a fiduciary duty. Furthermore, the Plan
Administrator and the Advisory Committee members and the Employer may
execute a letter agreement further delineating the indemnification
agreement of this Section 7.03, provided the letter agreement must be
consistent with and does not violate ERISA. The indemnification
provisions of this Section 7.03 extend to the Trustee (or to a
Custodian, if any) solely to the extent provided by a letter agreement
executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right
--------------------------------
to direct the Trustee with respect to the investment and re-investment
of assets comprising the Trust Fund only if the Trustee consents in
writing to permit such direction. If the Trustee consents to Employer
direction of investment, the Trustee and the Employer must execute a
letter agreement as a part of this Plan containing such conditions,
limitations and other provisions they deem appropriate before the
Trustee will follow any Employer direction as respects the investment or
re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves
-----------------------------
the right to amend the vesting schedule at any time, the Advisory
Committee will not apply the amended vesting schedule to reduce the
Nonforfeitable percentage of any Participant's Accrued Benefit derived
from Employer contributions (determined as of the later of the date the
Employer adopts the amendment, or the date the amendment becomes
effective) to a percentage less than the Nonforfeitable percentage
computed under the Plan without regard to the amendment. An amended
vesting schedule will apply to a Participant only if the Participant
receives credit for at least one Hour of Service after the new schedule
becomes effective.
If the Employer makes a permissible amendment to the vesting
schedule, each Participant having at least 3 Years of Service with the
Employer may elect to have the percentage of his Nonforfeitable Accrued
Benefit computed under the Plan without regard to the amendment. For
Plan Years beginning prior to January 1, 1989, the election described in
the preceding sentence
* * * * * * * * * * * * * * *
7.01
<PAGE>
Defined Contribution Master Plan
applies only to PartiCipants having at least 5 Years of Service with the
Employer. The Participant must file his election with the Advisory
Committee within 60 days of the latest of (a) the Employer's adoption of
the amendment; (b) the effective date of the amendment; or (c) his
receipt of a copy of the amendment. The Advisory Committee, as soon as
practicable, must forward a true copy of any amendment to the vesting
schedule to each affected Participant, together with an explanation of
the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule
provided under the Plan prior to the amendment and notice of the time
within which the Participant must make an election to remain under the
prior vesting schedule. The election described in this Section 7.05 does
not apply to a Participant if the amended vesting schedule provides for
vesting at least as rapid at all times as the vesting schedule in effect
prior to the amendment. For purposes of this Section 7.05, an amendment
to the vesting schedule includes any Plan amendment which directly or
indirectly affects the computation of the Nonforfeitable percentage of
an Employee's rights to his Employer derived Accrued Benefit.
Furthermore, the Advisory Committee must treat any shift in the vesting
schedule, due to a change in the Plan's top heavy status, as an
amendment to the vesting schedule for purposes of this Section 7.05.
7.02
<PAGE>
Defined Contribution
Master Plan
ARTICLE VIII PARTICIPANT
ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
-----------------------
designate, in writing, any person or persons, contingently or
successively, to whom the Trustee will pay his Nonforfeitable Accrued
Benefit (including any life insurance proceeds payable to the
Participant's Account) in the event of his death and the Participant may
designate the form and method of payment. The Advisory Committee will
prescribe the form for the written designation of Beneficiary and, upon
the Participant's filing the form with the Advisory Committee, the form
effectively revokes all designations filed prior to that date by the
same Participant.
(A) Coordination with survivor requirements. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01
does not impose any special spousal consent requirements on the
Participant's Beneficiary designation. However, in the absence of
spousal consent (as required by Article VI) to the Participant's
Beneficiary designation: (1) any waiver of the joint and survivor
annuity or of the preretirement survivor annuity is not valid; and (2)
if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of
the death benefit which is not payable as a preretirement survivor
annuity. Regarding clause (2), if the Participant's surviving spouse is
a primary Beneficiary under the Participant's Beneficiary designation,
the Trustee will satisfy the spouse's interest in the Participant's
death benefit first from the portion which is payable as a preretirement
survivor annuity.
(B) Profit sharing plan exception. If the Plan is a profit sharing
plan, the Beneficiary designation of a married Exempt Participant is
not valid unless the Participant's spouse consents (in a manner
described in Section 6.05) to the Beneficiary designation. An "Exempt
Participant" is a Participant who is not subject to the joint and
survivor requirements of Article VI. The spousal consent requirement in
this paragraph does not apply ff the Exempt Participant and his spouse
are not married throughout the one year period ending on the date of
the Participant's death, or ff the Participant's spouse is the
Participant's sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a
-----------------------------------------------
Participant fails to name a Beneficiary in accordance with Section
8.01, or ff the Beneficiary named by a Participant predeceases him,
then the Trustee will pay the Participant's Nonforfeitable Accrued
Benefit in accordance with Section 6.02 in the following order of
priority, unless the Employer specifies a different order of priority
in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted
children, in equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies
prior to distribution of the Participant's entire Nonforfeitable
Accrued Benefit, the Trustee will pay the remaining Nonforfeitable
Accrued Benefit to the Beneficiary's estate unless the Participant's
Beneficiary designation provides otherwise or unless the Employer
provides otherwise in its Adoption Agreement. If the Plan is a profit
sharing plan, and the Plan includes Exempt Participants, the Employer
may not specify a different order of priority in the Adoption Agreement
unless the Participant's surviving spouse will be first in the
different order of priority. The Advisory Committee will direct the
Trustee as to the method and to whom the Trustee will make payment
under this Section 8.02.
8.01
<PAGE>
Defined Contribution Master Plan
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each
--------------------------
Beneficiary of a deceased Participant must furnish to the Advisory
Committee such evidence, data or information as the Advisory Committee
considers necessary or desirable for the purpose of administering the
Plan. The provisions of this Plan are effective for the benefit of each
Participant upon the condition precedent that each Participant will
furnish promptly full true and complete evidence, data and information
when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to
comply with its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each
------------------------
Beneficiary of a deceased Participant must file with the Advisory
Committee from time to time, in writing, his post office address and any
change of post office address. Any communication, statement or notice
addressed to a Participant, or Beneficiary, at his ??? post office
address filed with the Advisory Committee, or as shown on the records of
the Employer, binds the Participant, or Beneficiary, for all purposes of
this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code Section 414(p)
------------------------
relating to qualified domestic relations orders, neither a Participant
nor a Beneficiary may anticipate, assign or alienate (either at law or
in equity) any benefit provided under the Plan, and the Trustee will not
recognize any such anticipation, assignment or alienation. Furthermore,
a benefit under the Plan is not subject to attachment, garnishment,
levy, execution or other legal or equitable process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the
-------------------------
time prescribed by ERISA and the applicable regulations, must furnish
all Participants and Beneficiaries a summary description of any ?????
amendment to the Plan or notice of discontinuance of the Plan and other
information required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent
----------------------------
jurisdiction may authorize any appropriate equitable relief to redress
violations of ERISA or to enforce any provisions of ERISA or the terms
of the Plan. A fiduciary may receive reimbursement of expenses properly
and actually incurred in the performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE .. Any Participant in the Plan or any
----------------------
Beneficiary may examine copies of the Plan description, blest annual
report, any bargaining agreement, this Plan and Trust, contract or any
other instrument under which the Plan was established or is operated.
The Plan Administrator will maintain all of the items listed in this
Section 8.08 in his office, or in such other plans or places as he may
designate from time to time in order to comply with the regulations
issued under ERISA, for examination during reasonable business hours.
Upon the written request of a Participant or Beneficiary the Plan
Administrator must furnish him with a copy of any item listed in this
Section 8.08. The Plan Administrator may make a reasonable charge to the
requesting person for the copy so furnished.
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant or a
---------------------------------------
Beneficiary ("Claimant") may file with the Advisory Committee a written
claim for benefits, if the Participant or Beneficiary determines the
distribution procedures of the Plan have not provided him his proper
Nonforfeitable Accrued Benefit. The Advisory Committee must render a
decision on the claim within 60 days of the Claimant's written claim for
benefits. The Plan Administrator must provide adequate notice in writing
to the Claimant whose claim for benefits under the Plan the Advisory
Committee has denied. The Plan Administrator's notice to the Claimant
must Set forth:
(a) The specific reason for the denial;
8.02
<PAGE>
Defined Contribution Master Plan
(b) Specific references to pertinent Plan provisions on which the
Advisory Committee based its denial; (c) A description of any
additional material and information needed for the Claimant to
perfect his claim and an explanation of why the material or information
is needed; and (d) That any appeal the Claimant wishes to make of
the adverse determination must be in writing to the Advisory
Committee within 75 days after receipt of the Plan Administrator's
notice of denial of benefits. The Plan Administrator's notice must
further advise the Claimant that his failure to appeal the action to
the Advisory Committee in writing within the 75-day period will
render the Advisory Committee's determination final, binding and
conclusive. ff the Claimant should appeal to the Advisory Committee,
he, or his duly authorized representative, may submit, in writing,
whatever issues and comments he, or his duly authorized representative,
feels are pertinent. The Claimant, or his duly authorized
representative, may review pertinent Plan documents. The Advisory
Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified
under the circumstances. The Advisory Committee must advise the Claimant
of its decision within 60 days of the Claimant's written request for
review, unless special circumstances (such as a hearing) would make the
rendering of a decision within the 60-day limit unfeasible, but in no
event may the Advisory Committee render a decision respecting a denial
for a claim for benefits later than 120 days after its receipt of a
request for review. The Plan Administrator's notice of denial of
benefits must identify the name of each member of the Advisory Committee
and the name and address of the Advisory Committee member to whom the
Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the
-----------------------------------
right to direct the Trustee with respect to the investment or
re-investment of the assets comprising the Participant's Individual
Account only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Participant direction of
investment, the Trustee will accept direction from each Participant on a
written election form (or other written agreement), as a part of this
Plan, containing such conditions, limitations and other provisions the
parties deem appropriate. The Trustee or, with the Trustee's consent,
the Advisory Committee, may establish written procedures, incorporated
specifically as part of this Plan, relating to Participant direction of
investment under this Section 8.10. The Trustee will maintain a
segregated investment Account to the extent a Participant's Account is
subject to Participant self-direction. The Trustee is not liable for any
loss, nor is the Trustee liable for any breach, resulting from a
Participant's direction of the investment of any part of his directed
Account.
The Advisory Committee, to the extent provided in a written loan
policy adopted under Section 9.04, will treat a loan made to a
Participant as a Participant direction of investment under this Section
8.10. To the extent of the loan outstanding at any time, the borrowing
Participant's Account alone shares in any interest paid on the loan, and
it alone bears any expense or loss it incurs in connection with the
loan. The Trustee may retain any principal or interest paid on the
borrowing Participant's loan in an interest bearing segregated Account
on behalf of the borrowing Participant until the Trustee (or the Named
Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account
under the Plan.
If the Trustee consents to Participant direction of investment of
his Account, the Plan treats any post-December 31, 1981, investment by a
Participant's directed Account in collectibles (as defined by Code
Section 408(m)) as a deemed distribution to the Participant for Federal
income tax purposes.
* * * * * * * * * * * * * * * *
8.03
<PAGE>
Defined Contribution
Master Plan
ARTICLE IX ADVISORY COMMITTEE - DUTIES
WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an
-------------------------------
Advisory Committee to administer the Plan, the members of which may or
may not be Participants in the Plan, or which may be the Plan
Administrator acting alone. In the absence of an Advisory Committee
appointment, the Plan Administrator assumes the powers, duties and
responsibilities of the Advisory Committee. The members of the Advisory
Committee will serve without compensation for services as such, but the
Employer will pay all expenses of the Advisory Committee, except to the
extent the Trust properly pays for such expenses, pursuant to Article X.
9.02 TERM. Each member of the Advisory Committee serves until the
----
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
------
Committee, the remaining members of the Advisory Committee may exercise
any and all of the powers, authority, duties and discretion conferred
upon the Advisory Committee pending the filling of the vacancy.
9.04 GENES. The Advisory Committee has the following powers and
duties:
(a) To select a Secretary, who need not be a member of the Advisory
Committee;
Section ) To determine the rights of eligibility of an Employee to
participate in the Plan, the value of a Participant's Accrued Benefit
and the Nonforfeitable percentage of each Participant's Accrued
Benefit;
<c) To adopt rules of procedure and regulations necessary for the
proper and efficient administration of the Plan provided the rules
are not inconsistent with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents
and documents related to the Plan's operation;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as
defined in ERISA Section 3(38)), each of whom will have full power
and authority to manage, acquire or dispose (or direct the Trustee
with respect to acquisition or disposition) of any Plan asset under its
control;
(.j) To establish, in its sole discretion, a nondiscriminatory policy
(see Section 9.04(A)) which the Trustee must observe in making loans,
if any, to Participants and Beneficiaries; and
9.01
<PAGE>
Defined Contribution Master Plan
(k) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in
accordance with the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
(A) Loan Policy. ff the Advisory Committee adopts a loan policy,
pursuant to paragraph O), the loan policy must be a written document and
must include: (1) the identity of the person or positions authorized to
administer the participant loan program; (2) a procedure for applying
for the loan; (3) the criteria for approving or denying a loan; (4) the
limitations, if any, on the types and amounts of loans available; (5)
the procedure for determining a reasonable rate of interest; (6) the
types of collateral which may secure the loan; and (7) the events
constituting default and the steps the Plan will take to preserve plan
assets in the event of default. This Section 9.04 specifically
incorporates a written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less
often than annually, all pertinent Employee information and Plan data in
order to establish the funding policy of the Han and to determine the
appropriate methods of carrying out the Plan's objectives. The Advisory
Committee must communicate periodically, as it deems appropriate, to the
Trustee and to any Plan Investment Manager the Plan's short-term and
long-term financial needs so investment policy can be coordinated with
Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members
appointed and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE-. The Advisory Committee may
authorize any one of its members, or its Secretary, to sign on its
behalf any notices, directions, applications, certificates, consents,
approvals, waivers, letters or other documents. The Advisory Committee
must evidence this authority by an instrument signed by all members and
filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may
decide or determine any matter concerning the distribution, nature or
method of settlement of his own benefits under the Plan, except in
exercising an election available to that member in his capacity as a
Participant, unless the Plan Administrator is acting alone in the
capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or
direct the Trustee to maintain, a separate Account, or multiple
Accounts, in the name of each Participant to reflect the Participant's
Accrued Benefit under the Plan. If a Participant re-enters the Plan
subsequent to his having a Forfeiture Break in Service, the Advisory
Committee, or the Trustee, must maintain a separate Account for the
Participant's pre-Forfeiture Break in Service Accrued Benefit and a
separate Account for his post-Forfeiture Break in Service Accrued
Benefit, unless the Participant's entire Accrued Benefit under the Han
is 100% Nonforfeitable.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants in
accordance with the provisions of Section 9.11. The Advisory Committee
may direct the Trustee to maintain a temporary segregated investment
Account in the name of a Participant to prevent a distortion of income,
gain or loss allocations under Section 9.11. The Advisory Committee must
maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net
worth (at fair market value) of the Employer's Trust Fund which the net
credit balance in his Account (exclusive of the cash value of
9.02
<PAGE>
Defined Contribution Master Plan
incidental benefit insurance contracts) bears to the total net credit
balance in the Accounts (exclusive of the cash value of the incidental
benefit insurance contracts) of all Participants plus the cash surrender
value of any incidental benefit insurance contracts held by the Trustee
on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date
immediately preceding the date of the distribution. Any distribution
(other than a distribution from a segregated Account) made to a
Participant (or to his Beneficiary) more than 90 days after the most
recent valuation date may include interest on the amount of the
distribution as an expense of the Trust Fund. The interest, ff any,
accrues from such valuation date to the date of the distribution at the
rate established in the Employer's Adoption Agreement.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A
"valuation date" under this Plan is each Accounting Date and each
interim valuation date determined under Section 10.14. As of each
valuation date the Advisory Committee must adjust Accounts to reflect
net income, gain or loss since the last valuation date. The valuation
period is the period beginning the day after the last valuation date and
ending on the current valuation date.
(A) Trust Fund Accounts. The allocation provisions of this paragraph
apply to all Participant Accounts other than segregated investment
Accounts. The Advisory Committee first will adjust the Participant
Accounts, as those Accounts stood at the beginning of the current
valuation period, by reducing the Accounts for any forfeitures arising
under Section 5.09 or under Section 9.14, for amounts charged during the
valuation period to the Accounts in accordance with Section 9.13
(relating to distributions) and Section 11.01 (relating to insurance
premiums), and for the cash value of incidental benefit insurance
contracts. The Advisory Committee then, subject to the restoration
allocation requirements of Section 5.04 or of Section 9.14, will
allocate the net income, gain or loss pro rata to the adjusted
Participant Accounts. The allocable net income, gain or loss is the net
income (or net loss), including the increase or decrease in the fair
market value of assets, since the last valuation date.
(B) Segregated investment Accounts. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs.
The Advisory Committee will adopt uniform and nondiscriminatory
procedures for determining income or loss of a segregated investment
Account in a manner which reasonably reflects investment directions
relating to pooled investments and investment directions occurring
during a valuation period. As of the valuation date, the Advisory
Committee must reduce a segregated Account for any forfeiture arising
under Section 5.09 after the Advisory Committee has made all other
allocations, changes or adjustments to the Account for the Plan Year.
(C) Additional rules. An Excess Amount or suspense account described in
Part 2 of Article III does not share in the allocation of net income,
gain or loss described in this Section 9.11. If the Employer maintains
its Plan under a Code Section 401(k) Adoption Agreement, the Employer
may specify. in its Adoption Agreement alternate valuation provisions
authorized by that Adoption Agreement. This Section 9.11 applies solely
to the allocation of net income, gain or loss of the Trust. The Advisory
Committee will allocate the Employer contributions and Participant
forfeitures, if any, in accordance with Article HI.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the
Accounting Date of each Plan Year, but within the time prescribed by
ERISA and the regulations under ERISA, the Plan Administrator will
deliver to each Participant (and to each Beneficiary) a statement
reflecting the condition of his Accrued Benefit in the Trust as of that
date and such other information ERISA requires be furnished the
Participant or Beneficiary. No Participant, except a member of the
9.03
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Defined Contribution Master Plan
Advisory Committee, has the right to inspect the records reflecting the
Account of any other Participant. 9.13 ACCOUNT CHARGED. The Advisory
Committee will charge a Participant's Account for all distributions made
from that Account to the Participant, to his Beneficiary or to an
alternate payee. The Advisory Committee also will charge a Participant's
Account for any administrative expenses incurred by the Plan directly
related to that Account.
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either
the Trustee or the Advisory Committee to search for, or to ascertain the
whereabouts of, any Participant or Beneficiary. At the time the
Participant's or Beneficiary's benefit becomes distributable under
Article VI, the Advisory Committee, by certified or registered mail
addressed to his last known address of record with the Advisory
Committee or the Employer, must notify any Participant, or Beneficiary,
that he is entitled to a distribution under this Plan. The notice must
quote the provisions of this Section 9.14 and otherwise must comply with
the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his
whereabouts known in writing to the Advisory Committee within 6 months
from the date of mailing of the notice, the Advisory Committee will
treat the Participant's or Beneficiary's unclaimed payable Accrued
Benefit as forfeited and will reallocate the unclaimed payable Accrued
Benefit in accordance with Section 3.05. A forfeiture under this
paragraph will occur at the end of the notice period or, if later, the
earliest date applicable Treasury regulations would permit the
forfeiture. Pending forfeiture, the Advisory Committee, following the
expiration of the notice period, may direct the Trustee to segregate the
Nonforfeitable Accrued Benefit in a segregated Account and to invest
that segregated Account in Federally insured interest bearing savings
accounts or time deposits (or in a combination of both), or in other
fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of
his Accrued Benefit under the provisions of the first paragraph of this
Section 9.14 makes a claim, at any time, for his forfeited Accrued
Benefit, the Advisory Committee must restore the Participant's or
Beneficiary's forfeited Accrued Benefit to the same dollar amount as the
dollar amount of the Accrued Benefit forfeited, unadjusted for any gains
or losses occurring subsequent to the date of the forfeiture. The
Advisory Committee will make the restoration during the Plan Year in
which the Participant or Beneficiary makes the claim, first from the
amount, if any, of Participant forfeitures the Advisory Committee
otherwise would allocate for the Plan Year, then from the amount, ff
any, of the Trust Fund net income or gain for the Plan Year and then
from the amount, or additional amount, the Employer contributes to
enable the Advisory Committee to make the required restoration. The
Advisory Committee must direct the Trustee to distribute the
Participant's or Beneficiary's restored Accrued Benefit to him not later
than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture
provisions of this Section 9.14 apply solely to the Participant's or to
the Beneficiary's Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * * *
*
9.04
<PAGE>
Defined Contribution
Master Plan
ARTICLE X TRUSTEE AND
CUSTODIAN, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the
----------
Plan and agrees to perform the obligations imposed. The Trustee must
provide bond for the faithful performance of its duties under the Trust
to the extent required by ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the
------------------------
Employer for the funds contributed to it by the Employer, but does not
have any duty to see that the contributions received comply with the
provisions of the Plan. The Trustee is not obliged to collect any
contributions from the Employer, nor is obliged to see that funds
deposited with it are deposited according to the provisions of the Plan.
10.03 INVESTMENT POWERS.
-----------------
[A] Discretionary Trustee Designation. If the Employer, in Adoption
Agreement Section 1.02, designates the Trustee to administer the Trust
as a discretionary Trustee, then the Trustee has full discretion and
authority with regard to the investment of the Trust Fund, except with
respect to a Plan asset under the control or direction of a properly
appointed Investment Manager or with respect to a Plan asset properly
subject to Employer, Participant or Advisory Committee direction of
investment. The Trustee must coordinate its investment policy with Plan
financial needs as communicated to it by the Advisory Committee. The
Trustee is authorized and empowered, but not by way of limitation, with
the following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or dosed-end mutual funds, put and call
options traded on a national exchange, United States retirement plan
bonds, corporate bonds, debentures, convertible debentures,
commercial paper, U.S. Treasury bills, U.S. Treasury notes and other
direct or indirect obligations of the United States Government or
its agencies, improved or unimproved real estate situated in the
United States, limited partnerships, insurance contracts of any type,
mortgages, notes or other property of any kind, real or personal, to buy
or sell options on common stock on a nationally recognized exchange
with or without holding the underlying common stock, to buy and sell
commodities, commodity options and contracts for the future delivery
of commodities, and to make any other investments the Trustee deems
appropriate, as a prudent man would do under like circumstances with
due regard for the purposes of this Plan. Any investment made or
retained by the Trustee in good faith is proper but must be of a
kind constituting a diversification considered by law suitable for trust
investments.
(b) To retain in cash so much of the Trust Fund as it may deem
advisable to satisfy liquidity needs of the Plan and to deposit any
cash held in the Trust Fund in a bank account at reasonable
interest.
(c) To invest, if the Trustee is a bank or similar financial
institution supervised by the United States or by a State, in any
type of deposit of the Trustee (or of a bank related to the Trustee
within the meaning of Code Section 414(b)) at a reasonable rate of
interest or in a common trust fund, as described in Code Section
584, or in a collective investment fund, the provisions of which
govern the investment of such assets and which the Plan incorporates by
this reference, which the Trustee (or its affiliate, as defined in
Code Section 1504) maintains exclusively for the collective
investment of money contributed by the bank (or the affiliate) in
its capacity as trustee and which conforms to the rules of the
Comptroller of the Currency.
10.01
<PAGE>
Defined Contribution Master Plan
(d) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for
any term even though commencing in the future or extending beyond the
term of the Trust, and otherwise deal with all property, real or
personal, in such manner, for such considerations and on such terms and
conditions as the Trustee decides.
(e) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee
or distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making
any payment or distribution. The Trustee is accountable only to the
Advisory Committee for any payment or distribution made by it in good
faith on the order or direction of the Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands, in
its discretion.
(h) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights.
(i) To lease for oil, gas and other mineral purposes and to create
mineral reserves by grant or reservation; to pool or unitize interests
in oil, gas and other minerals; and to enter into operating agreements
and to execute division and transfer orders.
(j) To hold any securities or other property in the name of the Trustee
or its nominee, with depositories or agent depositories or in another
form as it may deem best, with or without disclosing the trust
relationship.
(k) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(1) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until final adjudication is made by a
court of competent jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the Advisory
Committee an annual statement of account showing the condition of the
Trust Fund and all investments, receipts, disbursements and other
transactions effected by the Trustee during the Plan Year covered by the
statement and also stating the assets of the Trust held at the end of
the Plan Year, which accounts are conclusive on all persons, including
the Employer, the Plan Administrator and the Advisory Committee, except
as to any act or transaction concerning which the Employer, the Plan
Administrator or the Advisory Committee files with the Trustee written
exceptions or objections within 90 days after the receipt of the
accounts or for which ERISA authorizes a longer period within which to
object.
(o) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee is not
obliged or required to do so unless indemnified to its satisfaction.
10.02
<PAGE>
Defined Contribution Master Plan
[B] Nondiscretionary Trustee Designation/Appointment of Custodian. If
the Employer, in its Adoption Agreement Section 1.02, designates the
Trustee to administer the Trust as a nondiscretionary Trustee, then the
Trustee will not have any discretion or authority with regard to the
investment of the Trust Fund, but must act solely as a directed trustee
of the funds contributed to it. A nondiscretionary Trustee, as directed
trustee of the funds held by it under the Employer's Plan, is authorized
and empowered, by way of limitation, with the following powers, rights
and duties, each of which the nondiscretionary Trustee exercises solely
as directed trustee in accordance with the written direction of the
Named Fiduciary (except to the extent a Plan asset is subject to the
control and management of a properly appointed Investment Manager or
subject to Advisory Committee or Participant direction of investment):
(a) To invest any part or all of the Trust Fund in any common or
preferred stocks, open-end or closed-end mutual funds, put and call
options traded on a national exchange, United States retirement plan
bonds, corporate bonds, debentures, convertible debentures,
commercial paper, U.S. Treasury bills, U.S. Treasury notes and other
direct or indirect obligations of the United States Government or
its agencies, improved or unimproved real estate situated in the
United States, limited partnerships, insurance contracts of any type,
mortgages, notes or other property of any kind, real or personal, to buy
or sell options on common stock on a nationally recognized options
exchange with or without holding the underlying common stock, to buy
and sell commodities, commodity options and contracts for the future
delivery of commodities, and to make any other investments the Named
Fiduciary deems appropriate.
(b) To retain in cash so much of the Trust Fund as the Named Fiduciary
may direct in writing to satisfy liquidity needs of the Plan and to
deposit any cash held in the Trust Fund in a bank account at reasonable
interest, including, specific authority to invest in any type of deposit
of the Trustee (or of a bank related to the Trustee within the meaning
of Code 414(b)) at a reasonable rate of interest.
(c) To sell, contract to sell, grant options to purchase, convey,
exchange, transfer, abandon, improve, repair, insure, lease for any term
even though commencing in the future or extending beyond the term of the
Trust, and otherwise deal with all property, real or personal, in such
manner, for such considerations and on such terms and conditions as the
Named Fiduciary directs in writing.
(d) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee
or distributee is entitled to' any payment or whether the distribution
is proper or within the terms of the Plan, or as to the manner of making
any payment or distribution. The Trustee is accountable only to the
Advisory Committee for any payment or distribution made by it in good
faith on the order or direction of the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(f) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights, provided the exercise of any
such powers is in accordance with and at the written direction of the
Named Fiduciary.
(g) To lease for oil, gas and other mineral purposes and to create
mineral severance by grant or reservation; to pool or unitize interests
in oil, gas and other minerals; and to enter into operating agreements
and to execute division and transfer orders, provided the exercise
10.03
<PAGE>
Defined Contribution Master Plan
of any such powers is in accordance with and at the written direction of
the Named Fiduciary.
(h) To hold any securities or other property in the name of the
nondiscretionary Trustee or its nominee, with depositories or agent
depositories or in another form as the Named Fiduciary may deem best,
with or without disclosing the custodial relationship.
(i) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until a court of competent
jurisdiction makes final adjudication.
(j) To file all tax returns required of the Trustee.
(k) To furnish to the Named Fiduciary, the Employer, the Plan
Administrator and the Advisory Committee an annual statement of account
showing the condition of the Trust Fund and all investments, receipts,
disbursements and other transactions effected by the nondiscretionary
Trustee during the Plan Year covered by the statement and also stating
the assets of the Trust held at the end of the Plan Year, which accounts
are conclusive on all persons, including the Named Fiduciary, the
Employer, the Plan Administrator and the Advisory Committee, except as
to any act or transaction concerning which the Named Fiduciary, the
Employer, the Plan Administrator or the Advisory Committee ???? with the
nondiscretionary Trustee written exceptions or objections within 90 days
after the receipt of the accounts or for which ERISA authorizes a longer
period within which to object.
(1) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee is not
obliged or required to do so unless indemnified to its satisfaction.
Appointment of Custodian. The Employer may appoint a Custodian
under the Plan, the acceptance by the Custodian indicated on the
execution page of the Employer's Adoption Agreement. If the Employer
appoints a Custodian, the Employer's Plan must have a discretionary
Trustee, as described in Section 10.03[A]. A Custodian has the same
powers, fights and duties as a nondiscretionary Trustee, as described in
this Section 10.03115]. The Custodian accepts the terms of the Plan and
Trust by executing the Employer's Adoption Agreement. Any reference in
the Plan to a Trustee also is a reference to a Custodian where the
context of the Plan dictates. A limitation of the Trustee's liability by
Plan provision also acts as a limitation of the Custodian's liability.
Any action taken by the Custodian at the discretionary Trustee's
direction satisfies any 'provision in the Plan referring to the
Trustee's taking that action.
Modification of Powers/Limited Responsibility. The Employer and the
Custodian or nondiscretionary Trustee, by letter agreement, may limit
the powers of the Custodian or .nondiscretionary Trustee to any
combination of powers listed within this Section 10.03113]. If there xs
a Custodian or a nondiscretionary Trustee under the Employer's Plan,
then the Employer, in adopting this Plan acknowledges the Custodian or
nondiscretionary Trustee has no discretion with respect to the
investment or re-investment of the Trust Fund and that the Custodian or
nondiscretionary Trustee is acting solely as custodian or as directed
trustee with respect to the assets comprising the Trust Fund.
[C] Limitation of Powers of Certain Custodians. If a Custodian is a bank
which, under its governing state law, does not possess trust powers,
then paragraphs (a), (c), (e), (f), '(g) of Section 10.03[B], Section
10.16 and Article XI do not apply to that bank and that bank only has
the power and authority to exercise the remaining powers, rights and
duties under Section 10.03115].
10.04
<PAGE>
Defined Contribution Master Plan
[D] Named Fiduciary/Limitation of Liability of Nondiscretionary Trustee
or Custodian. Under a nondiscretionary Trustee designation, the Named
Fiduciary under the Employer's Plan has the sole responsibility for the
management and control of the Employer's Trust Fund, except with respect
to a Plan asset under the control or direction of a properly appointed
Investment Manager or with respect to a Plan asset properly subject to
Participant or Advisory Committee direction of investment. If the
Employer appoints a Custodian, the Named Fiduciary is the discretionary
Trustee. Under a nondiscretionary Trustee designation, unless the
Employer designates in writing another person or persons to serve as
Named Fiduciary, the Named Fiduciary under the Plan is the president of
a corporate Employer, the managing partner of a partnership Employer or
the sole proprietor, as appropriate. The Named Fiduciary will exercise
its management and control of the Trust Fund through its written
direction to the nondiscretionary Trustee or to the Custodian, whichever
applies to the Employer's Plan. The nondiscretionary Trustee or
Custodian has no duty to review or to make recommendations regarding
investments made at the written direction of the Named Fiduciary. The
nondiscretionary Trustee or Custodian must retain any investment
obtained at the written direction of the Named Fiduciary until further
directed in writing by the Named Fiduciary to dispose of such
investment. The nondiscretionary Trustee or Custodian is not liable in
any manner or for any reason for making retaining or disposing of any
investment pursuant to any written direction described in this
paragraph. Furthermore, the Employer agrees to indemnify and to hold the
nondiscretionary Trustee or Custodian harmless from any damages, costs
or expenses, including reasonable counsel fees, which the
nondiscretionary Trustee or Custodian may incur as a result of any claim
asserted against the nondiscretionary Trustee, the Custodian or the
Trust arising out of the nondiscretionary Trustee's or Custodian's
compliance with any written direction described in this paragraph.
[E] Participant Loans. This Section 10.03[E] specifically authorizes
the Trustee to make loans on a nondiscriminatory basis to a Participant
or to a Beneficiary in accordance with the loan policy established by
the Advisory Committee, provided: (1) the loan policy satisfies the
requirements of Section 9.04; (2) loans are available to all
Participants and Beneficiaries on a reasonably equivalent basis and are
not available in a greater mount for Highly Compensated Employees than
for other Employees; (3) any loan is adequately secured and bears a
reasonable rate of interest; (4) the loan provides for repayment within
a specified time; (5) the default provisions of the note prohibit
offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's
Nonforfeitable Accrued Benefit; (6) the amount of the loan does not
exceed (at the time the Plan extends the loan) the present value of the
Participant's Nonforfeitable Accrued Benefit; and (7) the loan
otherwise conforms to the exemption provided by Code Section
4975(d)(1). If the joint and survivor requirements of Article VI apply
to the Participant, the Participant may not pledge any portion of his
Accrued Benefit as security for a loan made after August 18, 1985,
unless, within the 90 day period ending on the date the pledge becomes
effective, the Participant's spouse, if any, consents (in a manner
described in Section 6.05 other than the requirement relating to the
consent of a subsequent spouse) to the security or, by separate consent,
to an increase in the amount of security. If the Employer is an
unincorporated trade or business, a Participant who is an
Owner-Employee may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of
Labor. If the Employer is an "S Corporation," a Participant who is a
shareholder-employee (an employee or an officer) who, at any time
during the Employer's taxable year, owns more than 5%, either directly
or by attribution under Code Section 318(a)(1), of the Employer's
outstanding stock may not receive a loan from the Plan, unless he has
obtained a prohibited transaction exemption from the Department of
Labor. If the Employer is not an unincorporated trade or business nor
an "S Corporation," this Section 10.03[E] does not impose any
restrictions on the class of Participants eligible for a loan from the
Plan.
[F] Investment in qualifying Employer securities and qualifying
Employer real property. The investment options in this Section 10.03[F]
include the ability to invest in qualifying Employer securities or
qualifying Employer real property, as defined in and as limited by
ERISA. If the Employer's Plan is a Nonstandardized profit sharing plan,
it may elect in its Adoption Agreement to
10.05
<PAGE>
Defined Contribution Master Plan
permit the aggregate investments in qualifying Employer securities and
in qualifying Employer real property to exceed 10% of the value of Plan
assets.
10.04 RECORDS AND STATEMENTS. The records of the Trustee
----------------------
pertaining to the Plan must be open to the inspection of the Plan
Administrator, the Advisory Committee and the Employer at all
reasonable times and may be audited from time to time by any person or
persons as the Employer, Plan Administrator or Advisory Committee may
specify in writing. The Trustee must furnish the Plan Administrator or
Advisory Committee with whatever information relating to the Trust Fund
the Plan Administrator or Advisory Committee considers necessary.
10.05 FEES AND EXPENSES FROM FUND. A Trustee or Custodian will
---------------------------
receive reasonable annual compensation as may be agreed upon from time
to time between the Employer and the Trustee or Custodian. No person
who in receiving full pay from the Employer may receive compensation
for services as Trustee or as Custodian. The Trustee will pay from the
Trust Fund all fees and expenses reasonably incurred by the Plan, to
the extent such fees and expenses are for the ordinary and necessary
administration and operation of the Plan, unless the Employer pays such
fees and expenses. Any fee or expense paid, directly or indirectly, by
the Employer is not an Employer contribution to the Plan, provided the
fee or expense relates to the ordinary and necessary administration of
the Fund. 10.06 PARTIES TO LITIGATION. Except as otherwise provided
---------------------
by ERISA, no Participant or Beneficiary is a necessary party or is
required to receive notice of process in any court proceeding involving
the Plan, the Trust Fund or any fiduciary of the Plan. Any final
judgment entered in any proceeding will be conclusive upon the Employer,
the Plan Administrator, the ???? Committee, the Trustee, Custodian,
Participants and Beneficiaries. 10.07 PROFESSIONAL AGENTS. The
-------------------
Trustee may employ and pay from the Trust Fund reasonable compensation
to agents, attorneys, accountants and other persons to advise the
Trustee as in its opinion may be necessary. The Trustee may delegate to
any agent, attorney, accountant or other person selected by it any
non-Trustee power or duty vested in it by the Plan, and the Trustee may
act or refrain from acting on the advice or opinion of any agent,
attorney, accountant or other person so selected.
10.08 DISTRIBUTION OF CASH OR PROPERTY. The Trustee may make
--------------------------------
??????? on under the Plan in cash or property, or partly in each, at its
fair market value as determined by the Trustee. For purposes of a
distribution to a Participant or to a Participant's designated
Beneficiary or surviving spouse, "property" includes a Nontransferable
Annuity Contract, provide the contract satisfies the requirements of
this Plan.
10.09 DISTRIBUTION DIRECTIONS. If no one claims a payment or
-----------------------
distribution made from the Trust, the Trustee must promptly notify the
Advisory Committee and then dispose of the payment in accordance with
the subsequent direction of the Advisory Committee.
10.10 THIRD PARTY/MULTIPLE TRUSTEES. No person dealing with the
-----------------------------
Trustee is obligated to see to the proper application of any money paid
or property delivered to the Trustee, or to inquire whether the Trustee
has acted pursuant to any of the terms of the Plan. Each person dealing
with the Trustee may act upon any notice, request or representation in
writing by the Trustee, or by the Trustee's duly authorized agent,. and
is not liable to any person in so acting. The certificate of the Trustee
that it is acting/n accordance with the Plan will be conclusive in favor
of any person relying on the certificate. If more than two persons act
as Trustee, a decision of the majority of such persons controls with
respect to any decision regarding the administration or investment of
the Trust Fund or of any portion of the Trust Fund with respect to which
such persons act as Trustee. However, the signature of only one Trustee
is necessary to effect any transaction on behalf of the Trust.
10.06
<PAGE>
Defined Contribution Master Plan
10.11 RESIGNATION. The Trustee or Custodian may resign its position
-----------
at any time by giving 30 days' written notice in advance to the Employer
and to the Advisory Committee. If the Employer fails to appoint a
successor Trustee within 60 days of its receipt of the Trustee's written
notice of resignation, the Trustee will treat the Employer as having
appointed itself as Trustee and as having filed its acceptance of
appointment with the former Trustee. The Employer, in its sole
discretion, may replace a Custodian. If the Employer does not replace a
Custodian, the discretionary Trustee will assume possession of Plan
assets held by the former Custodian.
10.12 REMOVAL. The Employer, by giving 30 days' written notice in
-------
advance to the Trustee, may remove any Trustee or Custodian. In the
event of the resignation or removal of a Trustee, the Employer must
appoint a successor Trustee if it intends to continue the Plan. If two
or more persons hold the position of Trustee, in the event of the
removal of one such person, during any period the selection of a
replacement is pending, or during any period such person is unable to
serve for any reason, the remaining person or persons will act as the
Trustee.
10.13 INTERIM DUTIES AND SUCCESSOR TRUSTEE. Each successor Trustee
------------------------------------
succeeds to the title to the Trust vested in his predecessor by
accepting in writing his appointment as successor Trustee and by filing
the acceptance with the former Trustee and the Advisory Committee
without the signing or filing of any further statement. The resigning or
removed Trustee, upon receipt of acceptance in writing of the Trust by
the successor Trustee, must execute all documents and do all acts
necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary
and ministerial, conferred under this Agreement upon his predecessor. A
successor Trustee is not personally liable for any act or failure to act
of any predecessor Trustee, except as required under ERISA. With the
approval of the Employer and the Advisory Committee, a successor
Trustee, with respect to the Plan, may accept the account rendered and
the property delivered to it by a predecessor Trustee without incurring
any liability or responsibility for so doing.
10.14 VALUATION OF TRUST. The Trustee must value the Trust Fund as
------------------
of each Accounting Date to determine the fair market value of each
Participant's Accrued Benefit in the Trust. The Trustee also must value
the Trust Fund on such other valuation dates as directed in writing by
the Advisory Committee or as required by the Employer's Adoption
Agreement.
10.15 LIMITATION ON LIABILITY IF INVESTMENT MANAGER, ANCILLARY
--------------------------------------------------------
TRUSTEE OR INDEPENDENT FIDUCIARY APPOINTED. The Trustee is not liable
------------------------------------------
for the acts or omissions of any Investment Manager the Advisory
Committee may appoint, nor is the Trustee under any obligation to invest
or otherwise manage any asset of the Plan which is subject to the
management of a properly appointed Investment Manager. The Advisory
Committee, the Trustee and any properly appointed Investment Manager may
execute a letter agreement as a part of this Plan delineating the
duties, responsibilities and liabilities of the Investment Manager with
respect to any part of the Trust Fund under the control of the
Investment Manager. The limitation on liability described in this
Section 10.15 also applies to the acts or omissions of any ancillary
trustee or independent fiduciary properly appointed under Section 10.17
of the Plan. However, if a discretionary Trustee, pursuant to the
delegation described in Section 10.17 of the Plan, appoints an ancillary
trustee, the discretionary Trustee is responsible for the periodic
review of the ancillary trustee's actions and must exercise its
delegated authority in accordance with the terms of the Plan and in a
manner consistent with ERISA. The Employer, the discretionary Trustee
and an ancillary trustee may execute a letter agreement as a part of
this Plan delineating any indemnification agreement between the parties.
10.16 INVESTMENT IN GROUP TRUST FUND. The Employer, by adopting
------------------------------
this Plan, specifically authorizes the Trustee to invest all or any
portion of the assets comprising the Trust Fund in any group trust fund
which at the time of the investment provides for the pooling of the
assets of plans qualified under Code Section 401(a). This authorization
applies solely to a group trust fund
10.07
<PAGE>
Defined Contribution Master Plan
exempt from taxation under Code Section 501(a) and the trust agreement
of which satisfies the requirements of Revenue Ruling 81-100. The
provisions of the group trust fund agreement, as amended from time to
time, are by this reference incorporated within this Plan and Trust. The
provisions of the group trust fund will govern any investment of Plan
assets in that fund. The Employer must specify in an attachment to its
adoption agreement the group trust fund(s) to which this authorization
applies. If the Trustee is acting as a nondiscretionary Trustee, the
investment in the group trust fund is available only in accordance with
a proper direction, by the Named Fiduciary, in accordance with Section
10.03[B]. Pursuant to paragraph (c) of Section 10.03[A] of the Plan, a
Trustee has the authority to invest in certain common trust funds and
collective investment funds without the need for the authorizing
addendum described in this Section 10.16. Furthermore, at the
Employer's direction, the Trustee, for collective investment purposes,
may combine into one trust fund the Trust created under this Plan with
the Trust created under any other qualified retirement plan the Employer
maintains. However, the Trustee must maintain separate records of
account for the assets of each Trust in order to ?????? properly each
Participant's Accrued Benefit under the plan(s) in which he is a
Participant. 10.17 APPOINTMENT OF ANCILLARY TRUSTEE OR INDEPENDENT
-----------------------------------------------
FIDUCIARY. The Employer, in writing, may appoint any person in any State
---------
to act as ancillary trustee with respect to a designated portion of the
Trust Fund, subject to the consent required under Section 1.02 if the
Master Plan Sponsor is a financial institution. An ancillary trustee
must acknowledge in writing its acceptance of the terms and conditions
of its appointment as ancillary trustee and its fiduciary status under
ERISA. The ancillary trustee has the rights, powers, duties and
discretion as the Employer may delegate, subject to any limitations or
directions specified in the instrument evidencing appointment of the
ancillary trustee and to the terms of the Plan or of ERISA. The
investment powers delegated to the ancillary trustee may include any
investment powers available under Section 10.03 of the Plan including
the right to invest any portion of the assets of the Trust Fund in a
common trust fund, as described in Code Section 584, or in any
collective investment fund, the provisions of which govern the
investment of such assets and which the Plan incorporates by this
reference, but only if the ancillary trustee is a bank or similar
financial institution supervised by the United States or by a State and
the ancillary trustee (or its affiliate, as defined in Code Section
1504) maintains the' common trust fund or collective investment fund
exclusively for the collective investment of money contributed by the
ancillary trustee (or its affiliate) in a trustee capacity and which
conforms to the rules of the Comptroller of the Currency. The Employer
also may appoint as an ancillary trustee, the trustee of any group trust
fund designated for investment pursuant to the provisions of Section
10.16 of the Plan.
The ancillary trustee may resign its position at any time by
providing at least 30 days' advance written notice to the Employer,
unless the Employer waives this notice requirement. The Employer, in
writing, may remove an ancillary trustee at any time. In the event of
resignation or removal, the Employer may appoint another ancillary
trustee, return the assets to the control and management of the Trustee
or receive such assets in the capacity of ancillary trustee. The
Employer may delegate its responsibilities under this Section 10.17 to a
discretionary Trustee under the Plan, but not to a nondiscretionary
Trustee or to a Custodian, subject to the acceptance by the
discretionary Trustee of that delegation. If the U.S. Department of
Labor ("the Department") requires engagement of an independent fiduciary
to have control or management of all or a portion of the Trust Fund, the
Employer will appoint such independent fiduciary, as directed by the
Department. The independent fiduciary will have the duties,
responsibilities and powers prescribed by the Department and will
exercise those duties, responsibilities and powers in accordance with
the terms, restrictions and conditions established by the Department
and, to the extent not inconsistent with ERISA, the terms of the Plan.
The independent fiduciary must accept its appointment in writing and
must acknowledge its status as a fiduciary of the Plan.
10.08
<PAGE>
Defined Contribution
Master Plan
ARTICLE XI PROVISIONS RELATING TO
INSURANCE AND INSURANCE COMPANY
11.01 INSURANCE BENEFIT. The Employer may elect to provide
-----------------
incidental life insurance benefits for insurable Participants who
consent to life insurance benefits by signing the appropriate insurance
company application form. The Trustee will not purchase any incidental
life insurance benefit for any Participant prior to an allocation to the
Participant's Account. At an insured Participant's written direction,
the Trustee will use all or any portion of the Participant's
nondeductible voluntary contributions, ff any, to pay insurance premiums
covering the Participant's life. This Section 11.01 also authorizes the
purchase of life insurance, for the benefit of the Participant, on the
life of a family member of the Participant or on any person in whom the
Participant has an insurable interest. However, if the policy is on the
joint lives of the Participant and another person, the Trustee may not
maintain that policy if that other person predeceases the Participant.
The Employer will direct the Trustee as to the insurance company
and insurance agent through which the Trustee is to purchase the
insurance contracts, the amount of the coverage and the applicable
dividend plan. Each application for a policy, and the policies
themselves, must designate the Trustee as sole owner, with the right
reserved to the Trustee to exercise any right or option contained in the
policies, subject to the terms and provisions of this Agreement. The
Trustee must be the named beneficiary for the Account of the insured
Participant. Proceeds of insurance contracts paid to the Participant's
Account under this Article XI are subject to the distribution
requirements of Article V and of Article VI. The Trustee will not retain
any such proceeds for the benefit of the Trust.
The Trustee will charge the premiums on any incidental benefit
insurance contract covering the life of a Participant against the
Account of that Participant. The Trustee wi]l hold all incidental
benefit insurance contracts issued under the Plan as assets of the Trust
created under the Plan.
(A) Incidental insurance benefits. The aggregate of life insurance
premiums paid for the benefit of a Participant, at all times, may not
exceed the following percentages of the aggregate of the Employer's
contributions allocated to any Participant's Account: (i) 49% in the
case of the purchase of ordinary life insurance contracts; or (ii) 25%
in the case of the purchase of term life insurance or universal life
insurance contracts. If the Trustee purchases a combination of ordinary
Life insurance contract(s) and term life insurance or universal life
insurance contract(s), then the sum of one-haft of the premiums paid for
the ordinary life insurance contract(s) and the premiums paid for the
term Life insurance or universal life insurance contract(s) may not
exceed 2.5% of the Employer contributions allocated to any Participant's
Account.
(B) Exception for certain profit sharing plans. If the Employer's Plan
is a profit sharing plan, the incidental insurance benefits requirement
does not apply to the Plan if the Plan purchases life insurance benefits
only from Employer contributions accumulated in the Participant's
Account for at least two years (measured from the allocation date).
11.02 LIMITATION ON LIFE INSURANCE PROTECTION. The Trustee will not
---------------------------------------
continue any life insurance protection for any Participant beyond his
annuity starting date (as defined in Article VI). If the Trustee holds
any incidental benefit insurance contract(s) for the benefit of a
Participant when he terminates his employment (other than by reason of
death), the Trustee must proceed as follows:
11.01
<PAGE>
Defined Contribution Master Plan
(a) If the entire cash value of the contract(s) is vested in the
terminating Participant, or ff the contract(s) will have no cash value
at the end of the policy year in which termination of employment occurs,
the Trustee will transfer the contract(s) to the Participant endorsed so
as to vest in the transferee all right, title and interest to the
contract(s), free and clear of the Trust; subject however, to
restrictions as to surrender or payment of benefits as the issuing
insurance company may permit and as the Advisory Committee directs;
(b) If only part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee, to the extent the Participant's
interest in the cash value of the contract(s) is not vested, may adjust
the Participant's interest in the value of his Account attributable to
Trust assets other than incidental benefit insurance contracts and
proceed as in (a), or the Trustee must effect a loan from the issuing
insurance company on the sole security of the contract(s) for an amount
equal to the difference between the cash value of the contract(s) at the
end of the policy year in which termination of employment occurs and the
amount of the cash value that is vested in the terminating Participant,
and the Trustee must transfer the contract(s) endorsed so as to vest in
the transferee all right, title and interest to the contract(s), free
and dear of the Trust; subject however, to the restrictions as to
surrender or payment of benefits as the issuing insurance company may
permit and the Advisory Committee directs;
(c) If no part of the cash value of the contract(s) is vested in the
terminating Participant, the Trustee must surrender the contract(s) for
cash proceeds as may be available.
In accordance with the written direction of the Advisory Committee,
the Trustee will make any transfer of contract(s) under this Section
11.02 on the Participant's annuity starting date (or as soon as
administratively practicable after that date). The Trustee may not
transfer any contract under this Section 11.02 which contains a method
of payment not specifically authorized by Article VI or which fails to
comply with the joint and survivor annuity requirements, ff applicable,
of Article VI. In this regard, the Trustee either must convert such a
contract to cash and distribute the cash instead of the contract, or
before making the transfer, require the issuing company to delete the
unauthorized method of payment option from the contract.
11.03 DEFINITIONS. For purposes of this Article XI:
-----------
(a) "Policy" means an ordinary life insurance contract or a term life
insurance contract issued by an insurer on the life of a Participant.
(b) "Issuing insurance company" is any life insurance company which has
issued a policy upon application by the Trustee under the terms of this
Agreement.
(c) "Contract" or "Contracts" means a policy of insurance. In the event
of any conflict between the provisions of this Plan and the terms of any
contract or policy of insurance issued in accordance with this Article
XI, the provisions of the Plan control.
(d) "Insurable Participant" means a Participant to whom an insurance
company, upon an application being submitted in accordance with the
Plan, will issue insurance coverage, either as a standard risk or as a
risk in an extra mortality classification.
11.04 DIVIDEND PLAN. The dividend plan is premium reduction unless
-------------
the Advisory, Committee directs the Trustee to the contrary. The Trustee
must use all dividends for a contract to purchase insurance benefits or
additional insurance benefits for the Participant on whose life the
insurance company has issued the contract. Furthermore, the Trustee must
arrange, where possible, for all policies issued on the lives of
Participants under the Plan to have the same premium due
11.02
<PAGE>
Defined Contribution Master Plan
date and all ordinary life insurance contracts to contain guaranteed
cash values with as uniform basic options as are possible to obtain. The
term "dividends" includes policy dividends, refunds of premiums and
other credits.
11.05 INSURANCE COMPANY NOT A PARTY TO AGREEMENT. No insurance
------------------------------------------
company, solely in its capacity as an issuing insurance company, is a
party to this Agreement nor is the company responsible for its validity.
11.06 INSURANCE COMPANY NOT RESPONSIBLE FOR TRUSTEE'S ACTIONS. No
insurance company, solely in its capacity as an issuing insurance
company, need examine the terms of this Agreement nor is responsible for
any action taken by the Trustee.
11.07 INSURANCE COMPANY RELIANCE ON TRUSTEE'S SIGNATURE. For the
-------------------------------------------------
purpose of making application to an insurance company and in the
exercise of any right or option contained in any policy, the insurance
company may rely upon the signature of the Trustee and is saved harmless
and completely discharged in acting at the direction and authorization
of the Trustee.
11.08 ACQUITTANCE. An insurance company is discharged from all
-----------
liability for any amount paid to the Trustee or paid in accordance with
the direction of the Trustee, and is not obliged to see to the
distribution or further application of any moneys it so pays.
11.09 DUTIES OF INSURANCE COMPANY. Each insurance company must keep
---------------------------
such records, make such identification of contracts, funds and accounts
within funds, and supply such information as may be necessary for the
proper administration of the Plan under which it is carrying insurance
benefits.
Note: The provisions of this Article XI are not applicable, and the
Plan may not invest in insurance contracts, ff a Custodian signatory to
the Adoption Agreement is a bank which has not acquired trust powers
from its governing state banking authority.
* * * * * * * * * * * * * * *
11.03
<PAGE>
Defined Contribution
Master Plan
ARTICLE XII
MISCELLANEOUS
12.01 EVIDENCE. Anyone required to give evidence under the terms
--------
of the Plan may do so by certificate, affidavit, document or other
information which the person to act in reliance may consider pertinent,
reliable and genuine, and to have been signed, made or presented by the
proper party or parties. The Advisory Committee and the Trustee are
fully protected in acting and relying upon any evidence described under
the immediately preceding sentence.
12.02 NO RESPONSIBILITY FOR EMPLOYER ACTION. Neither the Trustee
-------------------------------------
nor the Advisory Committee has any obligation or responsibility with
respect to any action required by the Plan to be taken by the Employer,
any Participant or eligible Employee, or for the failure of any of the
above persons to act or make any payment or contribution, or to
otherwise provide any benefit contemplated under this Plan.
Furthermore, the Plan does not require the Trustee or the Advisory
Committee to collect any contribution required under the Plan, or to
determine the correctness of the amount of any Employer contribution.
Neither the Trustee nor the Advisory Committee need inquire into or be
responsible for any action or failure to act on the part of the others,
or on the part of any other person who has any responsibility regarding
the management, administration or operation of the Plan, whether by the
express terms of the Plan or by a separate agreement authorized by the
Plan or by the applicable provisions of ERISA. Any action required of a
corporate Employer must be by its Board of Directors or its designate.
12.03 FIDUCIARIES NOT INSURERS. The Trustee, the Advisory
------------------------
Committee, the Plan Administrator and the Employer in no way guarantee
the Trust Fund from loss or depreciation. The Employer does not
guarantee the payment of any money which may be or becomes due to any
person from the Trust Fund. The liability of the Advisory Committee and
the Trustee to make any payment from the Trust Fund at any time and all
times is limited to the then available assets of the Trust.
12.04 WAIVER OF NOTICE. Any person entitled to notice under the
----------------
Plan may waive the notice, unless the Code or Treasury regulations
prescribe the notice or ERISA specifically or impliedly prohibits such a
waiver.
12.05 SUCCESSORS. The Plan is binding upon all persons entitled to
----------
benefits under the Plan, their respective heirs and legal
representatives, upon the Employer, its successors and assigns, and upon
the Trustee, the Advisory Committee, the Plan Administrator and their
successors.
12.06 WORD USAGE. Words used in the masculine also apply to the
----------
feminine where applicable, and wherever the context of the Employer's
Plan dictates, the plural includes the singular and the singular
includes the plural.
12.07 STATE LAW. The law of the state of the Employer's principal
---------
place of business (unless otherwise designated in an addendure to the
Employer's Adoption Agreement) will determine all questions arising with
respect to the provisions of this Agreement except to the extent
superseded by Federal law.
12.08 EMPLOYER'S RIGHT TO PARTICIPATE. If the Employer's Plan
-------------------------------
fails to qualify or to maintain qualification or if the Employer makes
any amendment or modification to a provision of this Plan (other than a
proper completion of an elective provision under the Adoption .Agreement
or the attachment of an addendure authorized by the Plan or by the
Adoption Agreement), the Employer may no longer participate under this
Master Plan. The Employer also may not participate (or continue to
participate) in this Master Plan if the Trustee or Custodian (or a
change in the Trustee or Custodian) does not satisfy the requirements of
Section 1.02 of the Plan. If the
12.01
<PAGE>
Defined Contribution Master Plan
Employer is not entitled to participate under this Master Plan, the
Employer's Plan is an individually-designed' plan and the reliance
procedures specified in the applicable Adoption Agreement no longer will
apply.
12.09 EMPLOYMENT NOT GUARANTEED. Nothing contained in this Plan, or
-------------------------
with respect to the establishment of the Trust, or any modification or
amendment to the Plan or Trust, or in the creation of any Account, or
the payment of any benefit, gives any Employee, Employee-Participant or
any Beneficiary any right to continue employment, any legal or equitable
right against the Employer, or Employee of the Employer, or against the
Trustee, or its agents or employees, or against the Han Administrator,
except as expressly provided by the Plan, the Trust, ERISA or by a
separate agreement.
* * * * * * * * * * * * * * * *
*
12.02
<PAGE>
Defined Contribution
Master Plan
ARTICLE XIII EXCLUSIVE BENEFIT,
AMENDMENT, TERMINATION
13.01 EXCLUSIVE BENEFIT. Except as provided under Article III, the
-----------------
Employer has no beneficial interest in any asset of the Trust and no
part of any asset in the Trust may ever revert to or be repaid to an
Employer, either directly or indirectly; nor, prior to the satisfaction
of all liabilities with respect to the Participants and their
Beneficiaries under the Plan, may any part of the corpus or income of
the Trust Fund, or any asset of the Trust, be (at any time) used for, or
diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, ff the Commissioner of
Internal Revenue, upon the Employer's request for initial approval of
this Plan, determines the Trust created under the Plan is not a
qualified trust exempt from Federal income tax, then (and only then) the
Trustee, upon written notice from the Employer, will return the
Employer's contributions (and increment attributable to the
contributions) to the Employer. The Trustee must make the return of the
Employer contribution under this Section 13.01 within one year of a
final disposition of the Employer's request for initial approval of the
Plan. The Employer's Plan and Trust will terminate upon the Trustee's
return of the Employer's contributions.
13.02 AMENDMENT BY EMPLOYER. The Employer has the right at any
---------------------
time and from time to time:
(a) To amend the elective provisions of the Adoption Agreement in
any manner it deems necessary or advisable in order to qualify (or
maintain qualification of) this Plan and the Trust created under it
under the provisions of Code Section 401(a);
(b) To amend the Plan to allow the Plan to operate under a waiver
of the minimum funding requirement; and
(c) To amend this Agreement in any other manner.
No amendment may authorize or permit any of the Trust Fund (other
than the part which is required to pay taxes and administration
expenses) to be used for or diverted to purposes other than for the
exclusive benefit of the Participants or their Beneficiaries or estates.
No amendment may cause or permit any portion of the Trust Fund to revert
to or become a property of the Employer. The Employer also may not make
any amendment which affects the rights, duties or responsibilities of
the Trustee, the Plan Administrator or the Advisory Committee without
the written consent of the affected Trustee, the Plan Administrator or
the affected member of the Advisory Committee. The Employer must make
all amendments in writing. Each amendment must state the date to which
it is either retroactively or prospectively effective. See Section 12.08
for ????? of certain amendments adopted by the Employer.
(A) Code Section 411(d)(6) protected benefits. An amendment (including
the adoption of this Plan as a restatement of an existing plan) may not
decrease a Participant's Accrued' Benefit, except to the extent
permitted under Code Section 412(c)(8), and may not reduce or eliminate
Code Section 41 l(d)(6) protected benefits determined immediately prior
to the adoption date (or, if later, the effective date) of the
amendment. An amendment reduces or eliminates Code Section 411(d)(6)
protected benefits if the amendment has the effect of either (1)
eliminating or reducing an early retirement benefit or a retirement-type
subsidy (as defined in Treasury regulations), or (2) except as provided
by Treasury regulations, eliminating an optional form of benefit. The
Advisory Committee must disregard an amendment to the extent application
of the amendment would fall to satisfy this paragraph. If the Advisory
Committee must disregard an amendment because the amendment would
violate clause (1)
13.01
<PAGE>
Defined Contribution Master Plan
or clause (2), the Advisory Committee must maintain a schedule of the
early retirement option or other optional forms of benefit the Plan must
continue for the affected Participants.
13.03 AMENDMENT BY MASTER PLAN SPONSOR. The Master Han Sponsor (or
--------------------------------
???, as agent of the Master Plan Sponsor), without the Employer's
consent, may amend the Plan and Trust, from time to time, in order to
conform the Plan and Trust to any requirement for qualification of the
Plan and Trust under the Internal Revenue Code. The Master Plan Sponsor
may not amend the Plan in any manner which would modify any election
made by the Employer under the Plan without the Employer's written
consent. Furthermore, the Master Plan Sponsor may not amend the Plan in
any manner which would violate the proscription of Section 13.02. A
Trustee does not have the power to amend the Plan or Trust.
13.04 DISCONTINUANCE. The Employer has the right, at any time, to
--------------
suspend or discontinue its contributions under the Plan, and to
terminate. at any time, this Plan and the Trust created under this
Agreement. The Plan will terminate upon the first to occur of the
following: (a) The date terminated by action of the Employer;
(b) The dissolution or merger of the Employer, unless the successor
makes provision to continue the Plan, in which event the successor must
substitute itself as the Employer under this Plan. Any termination of
the Plan resulting from this paragraph (b) is not effective until
compliance with any applicable notice requirements under ERISA.
13.05 FULL VESTING ON TERMINATION. Upon either full or partial
---------------------------
'termination of the Plan, or, if applicable, upon complete
discontinuance of profit sharing plan contributions to the Plan, an
affected Participant's right to his Accrued Benefit is 100%
Nonforfeitable, irrespective of the Nonforfeitable percentage which
otherwise would apply under Article V.
13.06 MERGER/DIRECT TRANSFER. The Trustee may not consent to, or be
----------------------
a party to, any merger or consolidation with another plan, or to a
transfer of assets or liabilities to another plan, unless immediately
after the merger, consolidation or transfer, the surviving Plan provides
each Participant a benefit equal to or greater than the benefit each
Participant would have received had the Plan terminated immediately
before the merger or consolidation or transfer. The Trustee possesses
the specific authority to enter into merger agreements or direct
transfer of assets agreements with the trustees of other retirement
plans described in Code Section 401(a), including an elective transfer,
and to accept the direct transfer of plan assets, or to transfer plan
assets, as a party to any such agreement.
The Trustee may accept a direct transfer of plan assets on behalf
of an Employee prior to the date the Employee satisfies the Plan's
eligibility conditions. tf the Trustee accepts such a direct transfer of
plan assets, the Advisory Committee and Trustee must treat the Employee
as a Participant for all purposes of the Plan except the Employee is not
a Participant for purposes of sharing in Employer contributions or
Participant forfeitures under the Plan until he actually becomes a
Participant in the Plan.
(A) Elective transfers. The Trustee, after August 9, 1988, may not
consent to, or be a party to a merger, consolidation or transfer of
assets with a defined benefit plan, except with respect to an elective
transfer, or unless the transferred benefits are in the form of paid-up
individual annuity contracts guaranteeing the payment of the transferred
benefits in accordance with the terms of the transferor plan and in a
manner consistent with the Code and with ERISA. The Trustee will hold,
administer and distribute the transferred assets as a part of the Trust
Fund and the Trustee must maintain a separate Employer contribution
Account for the benefit of the Employee on whose behalf the Trustee
accepted the transfer in order to reflect the value of the transferred
assets. Unless a transfer of assets to this Plan is an elective
transfer, the Plan will preserve all Code Section 11(d)(6)
13.02
<PAGE>
Defined Contribution Master Plan
protected benefits with respect to those transferred assets, in the
manner described in Section 13.02. A transfer is an elective transfer
if: (1) the transfer satisfies the first paragraph of this Section
13.06; (2) the transfer is voluntary, under a fully informed election by
the Participant; (3) the Participant has an alternative that retains his
Code Section 411(d)(6) protected benefits (including an option to leave
his benefit in the transferor plan, if that plan is not terminating);
(4) the transfer satisfies the applicable spousal consent requirements
of the Code; (5) the transferor plan satisfies the joint and survivor
notice requirements of the Code, ff the Participant's transferred
benefit is subject to those requirements; (6) the Participant has a
right to immediate distribution from the transferor plan, in lieu of the
elective transfer; (7) the transferred benefit is at least the greater
of the single sum distribution provided by the transferor plan for which
the Participant is eligible or the present value of the Participant's
accrued benefit under the transferor plan payable at that plan's normal
retirement age; (8) the Participant has a 100% Nonforfeitable interest
in the transferred benefit; and (9) the transfer otherwise satisfies
applicable Treasury regulations. An elective transfer may occur between
qualified plans of any type. Any direct transfer of assets from a
defined benefit plan after August 9, 1988, which does not satisfy the
requirements of this paragraph will render the Employer's Han
individually-designed. See Section 12.08.
(B) Distribution restrictions under Code [401(k). If the Plan receives a
direct transfer (by merger or otherwise) of elective contributions (or
amounts treated as elective contributions) under a Plan with a Code
Section ]401(k) arrangement, the distribution restrictions of Code
Sections 401(k)(2) and (10) continue to apply to those transferred
elective contributions.
13.07 TERMINATION.
-----------
(A) Procedure. Upon termination of the Plan, the distribution provisions
of Article VI remain operative, with the following exceptions:
(1) if the present value of the Participant's Nonforfeitable Accrued
Benefit does not exceed $3,500, the Advisory Committee will direct the
Trustee to distribute the Participant's Nonforfeitable Accrued Benefit
to him in lump sum as soon as administratively practicable after the
Plan terminates; and
(2) if the present value of the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500, the Participant or the Beneficiary, in addition
to the distribution events permitted under Article VI, may elect to have
the Trustee commence distribution of his Nonforfeitable Accrued Benefit
as soon as administratively practicable after the Plan terminates.
To liquidate the Trust, the Advisory Committee will purchase a
deferred annuity contract for each Participant which protects the
Participant's distribution rights under the Plan, if the Participant's
Nonforfeitable Accrued Benefit exceeds $3,500 and the Participant does
not elect an immediate distribution pursuant to Paragraph (2).
If the Employer's Plan is a profit sharing plan, in lieu of the
preceding provisions of this Section 13.07 and the distribution
provisions of Article VI, the Advisory Committee will direct the Trustee
to distribute each Participant's Nonforfeitable Accrued Benefit, in lump
sum, as soon as administratively practicable after the termination of
the Plan, irrespective of the present value of the Participant's
Nonforfeitable Accrued Benefit and whether the Participant consents to
that distribution. This paragraph does not apply if: (1) the Plan
provides an annuity option; or (2) as of the period between the Plan
termination date and the final distribution of assets, the Employer
maintains any other defined contribution plan (other than an ESOP). The
Employer, in an addendum to its Adoption Agreement numbered 13.07, may
elect not to have this paragraph apply.
* * * * * * * * * * * * * * * *
*
13.03
<PAGE>
Defined Contribution Master Plan
The Trust will continue until the Trustee in accordance with the
direction of the Advisory Committee has distributed all of the benefits
under the Plan. On each valuation date, the Advisory Committee will
credit any pan of a Participant's Accrued Benefit retained in the Trust
with its proportionate share of the Trust's income, expenses, gains and
losses, both realized and unrealized. Upon termination of the Plan, the
amount, if any, in a suspense account under Article ?? will revert to
the Employer, subject to the conditions of the Treasury regulations
permitting such a reversion. A resolution or amendment to freeze all
future benefit accrual but otherwise to continue maintenance of this
Plan, is not a termination for purposes of this Section 13.07.
(B) Distribution restrictions under Code [401(k). If the Employer's Plan
includes a Code Section 401(k) arrangement or if transferred assets
described in Section 13.06 are subject to the distribution restrictions
of Code Sections 401(k)(2) and (10), the special distribution provisions
of this Section 13.07 are subject to the restrictions of this paragraph.
The portion of the Participant's Nonforfeitable Accrued Benefit
attributable to elective contributions (or to amounts treated under the
Code Section 401(k) arrangement as elective contributions) is not
distributable on account of Plan termination, as described in this
Section 13.07, unless: (a) the Participant otherwise is entitled under
the Plan to a distribution of that portion of his Nonforfeitable Accrued
Benefit; or (b) the Plan termination occurs without the establishment of
a successor plan. A successor plan under clause (b) is a defined
contribution plan (other than an ESOP) maintained by the Employer (or by
a related employer) at the time of the termination of the Plan or within
the period ending twelve months after the final distribution of assets.
A distribution made after March 31, 1988, pursuant to clause (b), must
be part of a lump sum distribution to the Participant of his
Nonforfeitable Accrued Benefit.
13.04
<PAGE>
Defined Contribution
Master Plan
ARTICLE XIV CODE Section
401(k) AND CODE Section 401(m) ARRANGEMENTS
14.01 APPLICATION. This Article XIV applies to an Employer's Plan
-----------
only if the Employer is maintaining its Plan under a Code Section
401(k) Adoption Agreement. 14.02 CODE .Section 401(k) ARRANGEMENT.
-----
The Employer will elect in Section 3.01 of its Adoption Agreement the
terms of the Code Section 401(k) arrangement, ff any, under the Plan. If
the Employer's Plan is a Standardized Plan, the Code Section 401(k)
arrangement must be a salary reduction arrangement. If the Employer's
Plan is a Nonstandardized Plan, the Code Section 401(k) arrangement may
be a salary reduction arrangement or a cash or deferred arrangement.
(A) Salary Reduction Arrangement. If the Employer elects a salary
reduction arrangement, any Employee eligible to participate in the Plan
may file a salary reduction agreement with the Advisory Committee. The
salary reduction agreement may not be effective earlier than the
following date which occurs last: (i) the Employee's Plan Entry Date
(or, in the case of a reemployed Employee, his reparticipation date
under Article II); (ii) the execution date of the Employee's salary
reduction agreement; (iii) the date the Employer adopts the Code Section
401(k) arrangement by executing the Adoption Agreement; or (iv) the
effective date of the Code Section 401(k) arrangement, as specified in
the Employer's Adoption Agreement. Regarding clause (i), an Employee
subject to the Break in Service rule of Section 2.03(B) of the Plan may
not enter into a salary reduction agreement until the Employee has
completed a sufficient number of Hours of Service to receive credit for
a Year of Service (as defined in Section 2.02) following his
reemployment commencement date. A salary reduction agreement must
specify the amount of Compensation (as defined in Section 1.12) or
percentage of Compensation the Employee wishes to defer. The salary
reduction agreement will apply only to Compensation which becomes
currently available to the Employee after the effective date of the
salary reduction agreement. The Employer will apply a reduction election
to all Compensation (and to increases in such Compensation) unless the
Employee specifies in his salary reduction agreement to limit the
election to certain Compensation. The Employer will specify in Adoption
Agreement Section 3.01 the rules and restrictions applicable to the
Employees salary reduction agreements.
(B) Cash or deterred arrangement. If the Employer elects a cash or
deferred arrangement, a Participant may elect to make a cash election
against his proportionate share of the Employer's Cash or Deferred
Contribution, in accordance with the Employer's elections in Adoption
Agreement Section 3.01. A Participant's proportionate share of the
Employer's Cash or Deferred Contribution is the percentage of the total
Cash or Deferred Contribution which bears the same ratio that the
Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year. For purposes of
determining each Participant's proportionate share of the Cash or
Deferred Contribution, a Participant's Compensation is his Compensation
as determined under Section 1.12 of the Plan (as modified by Section
3.06 for allocation purposes), excluding any effect the proportionate
share may have on the Participant's Compensation for the Plan Year. The
Advisory Committee will determine the proportionate share prior to the
Employer's actual contribution to the Trust, to provide the Participants
the opportunity to file cash elections. The Employer will pay directly
to the Participant the portion of his proportionate share the
Participant has elected to receive in cash.
(C) Election not to participate. A Participant's or Employee's election
not to participate, pursuant to Section 2.06, includes his right to
enter into a salary reduction agreement or to share in the allocation of
a Cash or Deferred Contribution, unless the Participant or Employee
limits the effect of the election to the non-401(k) portions of the
Plan. 14.03 DEFINITIONS. For purposes of this Article XIV:
-----------
(a) "Highly Compensated Employee" means an Eligible Employee who
satisfies the definition in Section 1.09 of the Plan. Family members
aggregated as a single Employee under Section 1.09 constitute a
single Highly Compensated Employee, whether a particular family member
is a
14.01
<PAGE>
Defined Contribution Master Plan
Highly Compensated Employee or a Nonhighly Compensated Employee
without the application of family aggregation.
(b) "Nonhighly Compensated Employee" means an Eligible Employee who is
not a Highly Compensated Employee and who is not a family member
treated as a Highly Compensated Employee. (c) "Eligible Employee"
means, for purposes of the ADP test described in Section 14.08, an
Employee who is eligible to enter into a salary reduction agreement for
the Plan Year, irrespective of whether he actually enters into such an
agreement, and a Participant who is eligible for an allocation of the
Employer's Cash or Deferred Contribution for the Plan Year. For
purposes of the ACP test described in Section 14.09, an "Eligible
Employee" means a Participant who is eligible to receive an allocation
of matching contributions (or would be eligible if he made the type of
contributions necessary to receive an allocation of matching
contributions) and a Participant who is eligible to make nondeductible
contributions, irrespective of whether he actually makes nondeductible
contributions. An Employee continues to be an Eligible Employee during
a period the Plan suspends the Employee's fight to make elective
deferrals or nondeductible contributions following a hardship
distribution. (d) "Highly Compensated Group" means the group of
Eligible Employees who are Highly Compensated Employees for the Plan
Year. (e) "Nonhighly Compensated Group" means the group of Eligible
Employees who are Nonhighly Compensated Employees for the Plan Year.
(f) "Compensation" means, except as specifically provided in this
Article XIV, Compensation as defined for nondiscrimination purposes in
Section 1.12(B) of the Plan. To compute an Employee's ADP or ACP, the
Advisory Committee may limit Compensation taken into account to
Compensation received only for the portion of the Plan Year in which the
Employee was an Eligible Employee and only for the portion of the Plan
Year in which the Plan or the Code Section 401(k) arrangement was in
effect. (g) "Deferral contributions" are Salary Reduction Contribution
and Cash or Deferred Contributions the Employer contributes to the
Trust on behalf of an Eligible Employee, irrespective of whether, in
the case of Cash or Deferred Contributions, the contribution is at the
election of the Employee. For Salary Reduction Contributions, the terms
"deferral contributions" and "elective deferrals" have the same
meaning. (h) "Elective deferrals" are all Salary Reduction Contributions
and that portion of any Cash or Deferred Contribution which the Employer
contributes to the Trust at the election of an Eligible Employee. Any
portion of a Cash or Deferred Contribution contributed to the Trust
because of the Employee's failure to make a cash election is an elective
deferral. However, any portion of a Cash or Deferred Contribution over
which the Employee does not have a cash election is not an elective
deferral. Elective deferrals do not include amounts which have become
currently available to the Employee prior to the election nor amounts
designated as nondeductible contributions at the time of deferral or
contribution. (i) "Matching contributions" are contributions made by the
Employer on account of elective deferrals under a Code Section 401(k)
arrangement or on account of employee contributions. Matching
contributions also include Participant forfeitures allocated on account
of such elective deferrals or employee contributions. (j) "Nonelective
contributions" are contributions made by the Employer which are not
subject to a deferral election by an Employee and which are not matching
contributions. (k) "Qualified matching contributions" are matching
contributions which are 100% Nonforfeitable at all times and which are
subject to the distribution restrictions described in paragraph (m).
Matching contributions are not 100% Nonforfeitable at all times ff the
Employee has a 100% Nonforfeitable interest because of his Years of
Service taken into account under a vesting schedule. Any matching
contributions allocated to a Participant's
14.02
<PAGE>
Defined Contribution Master Plan
Qualified Matching Contributions Account under the Plan
automatically satisfy the definition of qualified matching
contributions. (1) "Qualified nonelective contributions" are
nonelective contributions which are 100% Nonforfeitable at all
times and which are subject to the distribution restrictions
described in paragraph (m). Nonelective contributions are not 100%
Nonforfeitable at all times if the Employee has a 100%
Nonforfeitable interest because of his Years of Service taken into
account under a vesting schedule. Any nonelective contributions
allocated to a Participant's Qualified Nonelective Contributions
Account under the Plan automatically satisfy the definition of
qualified nonelective contributions.
(m) "Distribution restrictions" means the Employee may not receive a
distribution of the specified contributions (nor earnings on those
contributions) except in the event of (1) the Participant's death,
disability, termination of employment or attainment of age ??? , (2)
financial hardship satisfying the requirements of Code Section 401(k)
and the applicable Treasury regulations, (3) a plan termination, without
establishment of a successor defined contribution plan (other than an
ESOP), (4) a sale of substantially all of the assets (within the meaning
of Code Section 409(d)(2)) used in a trade or business, but only to an
employee who continues employment with the corporation acquiring those
assets, or (5) a sale by a corporation of its interest in a subsidiary
(within the meaning of Code Section 409(d)(3)), but only to an employee
who continues employment with the subsidiary. For Plan Years beginning
after December 31, 1988, a distribution on account of financial
hardship, as described in clause (2), may not include earnings on
elective deferrals credited as of a date later than December 31, 1988,
and may not include qualified matching contributions and qualified
nonelective contributions, nor any earnings on such contributions,
credited after December 31, 1988. A plan does not violate the
distribution restrictions if, instead of the December 31, 1988, date in
the preceding sentence the plan specifies a date not later than the end
of the last Plan Year ending before July 1, 1989. A distribution
described in clauses (3), (4) or (5), ff made after March 31, 1988, must
be a lump sum distribution, as required under Code Section 401(k)(10).
(n) "Employee contributions" are contributions made by a Participant on
an after-tax basis, whether voluntary or mandatory, and designated,
at the time of contribution, as an employee (or nondeductible)
contribution. Elective deferrals and deferral contributions are not
employee contributions. Participant nondeductible contributions,
made pursuant to Section 4.01 of the Plan, are employee
contributions. 14.04 MATCHING CONTRIBUTIONS EMPLOYEE CONTRIBUTIONS. The
---------------------------------------------
Employer may elect in Adoption Agreement Section 3.01 to provide
matching contributions. The Employer also may elect in Adoption
Agreement Section 4.01 to permit or to require a Participant to make
nondeductible contributions. (A) Mandatory contributions. Any
Participant nondeductible contributions eligible for matching
contributions are mandatory contributions. The Advisory Committee will
maintain a separate accounting, pursuant to Section 4.06 of the Plan, to
reflect the Participant's Accrued Benefit derived from his mandatory
contributions. The Employer, under Adoption Agreement Section 4.05, may
prescribe special distribution restrictions which will apply to the
Mandatory Contributions Account prior to the Participant's Separation
from Service. Following his Separation from Service, the general
distribution provisions of Article VI apply to the distribution of the
Participant's Mandatory Contributions Account. 14.05 TIME OF PAYMENT OF
------------------
CONTRIBUTIONS. The Employer must make Salary Reduction Contributions to
-------------
the Trust within an administratively reasonable period of time after
withholding the corresponding Compensation from the Participant.
Furthermore, the Employer must make Salary Reduction Contributions, Cash
or Deferred Contributions, Employer matching contributions (including
qualified Employer matching contributions) and qualified Employer
nonelective contributions no later than the time prescribed by the Code
or by applicable Treasury regulations. Salary Reduction Contributions
and Cash or Deferred Contributions are Employer contributions for all
purposes under this Plan, except to the extent the Code or Treasury
14.03
<PAGE>
Defined Contribution Master Plan
regulations prohibit the use of these contributions to satisfy the
qualification requirements of the Code.
14.06 SPECIAL ALLOCATION PROVISIONS - DEFERRAL CONTRIBUTIONS,
-------------------------------------------------------
MATCHING CONTRIBUTIONS AND QUALIFIED NONELECTIVE CONTRIBUTIONS. To
--------------------------------------------------------------
make allocations under the Plan, the Advisory Committee must
establish a Deferral Contributions Account, a Qualified Matching
Contributions Account, a Regular Matching Contributions Account, a
Qualified Nonelective Contributions Account and an Employer
Contributions Account for each Participant. (A) Deferral
contributions. The Advisory Committee will a/locate to each
Participant's Deferral Contributions Account the amount of
Deferral Contributions the Employer makes to the Trust on behalf
of the Participant. The Advisory Committee will make this
allocation as of the last day of each Plan Year unless, in
Adoption Agreement Section 3.04, the Employer elects more frequent
allocation dates for salary reduction contributions. (B) Matching
contributions. The Employer must specify in its Adoption Agreement
whether the Advisory Committee will allocate matching
contributions to the Qualified Matching Contributions Account or
'to the Regular Matching Contributions Account of each Participant.
The Advisory Committee will make this allocation as of the last
day of each Plan Year unless, in Adoption Agreement Section 3.04,
the Employer elects more frequent allocation dates for matching
contributions. (1) To the extent the Employer makes matching
contributions under a fixed matching contribution formula, the
Advisory Committee will allocate the matching contribution to the
Account of the Participant on whose behalf the Employer makes that
contribution. A fixed matching contribution formula is a
formula under which the Employer contributes a certain
percentage or dollar amount on behalf of a Participant based on
that Participant's deferral contributions or nondeductible
contributions eligible for a match, as specified in Section 3.01
of the Employer's Adoption Agreement. The Employer may contribute
on a Participant's behalf under a specific matching
contribution formula only if the Participant satisfies the accrual
requirements for matching contributions specified in Section 3.06
of the Employer's Adoption Agreement and only to the extent the
matching contribution does not exceed the Participant's annual
additions limitation in Part 2 of Article III. (2) To the
extent the Employer makes matching contributions under a
discretionary formula, the Advisory Committee will allocate the
discretionary matching contributions to the Account of each
Participant who satisfies the accrual requirements for matching
contributions specified in Section 3.06 of the Employer's
Adoption Agreement. The allocation of discretionary matching
contributions to a Participant's Account is in the same proportion
that each Participant's eligible contributions bear to the
total eligible contributions of all Participants. ff the
discretionary formula is a tiered formula, the Advisory Committee
will make this allocation separately with respect to each tier
of eligible contributions, allocating in such manner the amount
of the matching contributions made with respect to that tier.
"Eligible contributions" are the Participant's deferral
contributions or nondeductible contributions eligible for an
allocation of matching contributions, as specified in Section 3.01
of the Employer's Adoption Agreement. If the matching
contribution formula applies both to deferral contributions and to
Participant nondeductible contributions, the matching contributions
apply first to deferral contributions. Furthermore, the matching
contribution formula does not apply to deferral contributions that
are excess deferrals under Section 14.07. For this purpose: (a)
excess deferrals relate first to deferral contributions for the
Plan Year not otherwise eligible for a matching contribution; and
(2) if the Plan Year is not a calendar year, the excess deferrals
for a Plan Year are the last elective deferrals made for a calendar
year. Under a Standardized Plan, an Employee forfeits any matching
contribution attributable to an excess contribution or to an excess
aggregate contribution, unless distributed pursuant to Sections
14.08 or 14.09. Under a Nonstandardized Plan, this forfeiture rule
applies only ff specified in Adoption Agreement Section 3.06. The
provisions of Section 3.05 govern
14.04
<PAGE>
Defined Contribution Master Plan
the treatment of any forfeiture described in this paragraph, and the
Advisory Committee will compute a Participant's ACP under 14.09 by
disregarding the forfeiture. (C) Qualified nonelective contributions.
If the Employer, at the time of contribution, designates a
contribution to be a qualified nonelective contribution for the Plan
Year, the Advisory Committee will allocate that qualified nonelective
contribution to the Qualified Nonelective Contributions Account of
each Participant eligible for an allocation of that designated
contribution, as specified in Section 3.04 of the Employer's Adoption
Agreement. The Advisory Committee will make the allocation to each
eligible Participant's Account in the same ratio that the Participant's
Compensation for the Plan Year bears to the total Compensation of all
eligible Participants for the Plan Year. The Advisory Committee
wi//determine a Participant's Compensation in accordance with the
general definition of Compensation under Section 1.12 of the Plan, as
modified by the Employer in Sections 1.12 and 3.06 of its Adoption
Agreement.
(D) Nonelective contributions. To the extent the Employer makes
nonelective contributions for the Plan Year which, at the time of
contribution, it does not designate as qualified nonelective
contributions, the Advisory Committee will allocate those contributions
in accordance with the elections under Section 3.04 of the Employer's
Adoption Agreement. For purposes of the special nondiscrimination tests
described in Sections 14.08 and 14.09, the Advisory Committee may treat
nonelective contributions allocated under this paragraph as qualified
nonelective contributions, if the contributions otherwise satisfy the
definition of qualified nonelective contributions.
14.07 ANNUAL ELECTIVE DEFERRAL LIMITATION. (A) Annual Elective Deferral
-----------------------------------
Limitation. An Employee's elective deferrals for a calendar year
beginning after December 31, 1986, may not exceed the 402(g) limitation.
The 402(g) limitation is the greater of $7,000 or the adjusted amount
determined by the Secretary of the Treasury. if, pursuant to a salary
reduction agreement or pursuant to a cash or deferral election, the
Employer determines the Employee's elective deferrals to the Plan for a
calendar year would exceed the 402(g) limitation, the Employer will
suspend the Employee's salary reduction agreement, ff any, until the
following January 1 and pay in cash the portion of a cash or deferral
election which would result in the Employee's elective deferrals for
the calendar year exceeding the 402(g) limitation. ff the Advisory
Committee determines an Employee's elective deferrals already
contributed to the Hart for a calendar year exceed the 402(g)
limitation, the Advisory Committee will distribute the amount in excess
of the 402(g) limitation (the "excess referral"), as adjusted for
allocable income, no later than April 15 of the following calendar year.
ff the Advisory Committee distributes the excess deferral by the
appropriate April 15, it may make the distribution irrespective of any
other provision under this Plan or under the Code. The Advisory
Committee will reduce the amount of excess deferrals for a calendar
year distributable to the Employee by the amount of excess
contributions (as determined in Section 14.08), ff any, previously
distributed to the Employee for the Plan Year beginning in that
calendar year. If an Employee participates in another plan under which
he makes elective deferrals pursuant to a Code Section 401(k)
arrangement, elective deferrals under a Simplified Employee Pension, or
salary reduction contributions to a tax-sheltered annuity, irrespective
of whether the Employer maintains the other plan, he may provide the
Advisory Committee a written claim for excess deferrals made for a
calendar year. The Employee must submit the claim no later than the
March 1 following the close of the particular calendar year and the
claim must specify the amount of the Employee's elective deferrals under
this Hart which are excess deferrals. ff the Advisory Committee receives
a timely claim, it will distribute the excess deferral (as adjusted for
allocable income) the Employee has assigned to this Han, in accordance
with the distribution procedure described in the immediately preceding
paragraph. (B) Allocable income. For purposes of making a distribution
of excess deferrals pursuant to this Section 14.07, allocable income
means net income or net loss allocable to the excess deferrals for the
calendar year in which the Employee made the excess deferral, determined
in a manner which is uniform, nondiscriminatory and reasonably
reflective of the manner used by the Plan to allocate income to
Participants' Accounts.
14.05
<PAGE>
Defined Contribution Master Plan
14.08 ACTUAL DEFERRAL PERCENTAGE ("ADP") TEST. For each Plan Year, the
---------------------------------------
Advisory Committee must determine whether the Plan's Code Section 401(k)
arrangement satisfies either of the following ADP tests: (i) The
average ADP for the Highly Compensated Group does not exceed 1.25 times
the average ADP of the Nonhighly Compensated Group; or (ii) The
average ADP for the Highly Compensated Group does not exceed the average
ADP for the Nonhighly Compensated Group by more than two percentage
points (or the lesser percentage permitted by the multiple use
Limitation in Section 14.10) and the average ADP for the Highly
Compensated Group is not more than twice the average ADP for the
Nonhighly Compensated Group.
(A) Calculation of ADP. The average ADP for a group is the average of
the separate ADPs calculated for each Eligible Employee who is a member
of that group. An Eligible Employee's ADP for a Plan Year is the ratio
of the Eligible Employee's deferral contributions for the Plan Year to
the Employee's Compensation for the Plan Year. For aggregated family
members treated as a single Highly Compensated Employee, the ADP of the
family unit is the ADP determined by combining the deferral
contributions and Compensation of all aggregated family members. A
Nonhighly Compensated Employee's ADP does not include elective deferrals
made to this Plan or to any other Plan maintained by the Employer, to
the extent such elective deferrals exceed the 402(g) limitation
described in Section 14.07(A). The Advisory Committee, in a manner
consistent with Treasury regulations, may determine the ADPs of the
Eligible Employees by taking into account qualified nonelective
contributions or qualified matching contributions, or both, made to this
Plan or to any other qualified Plan maintained by the Employer. The
Advisory Committee may not include qualified nonelective contributions
in the ADP test unless the allocation of nonelective contributions is
nondiscriminatory when the Advisory Committee takes into account all
nonelective contributions (including the qualified nonelective
contributions) and also when the Advisory Committee takes into account
only the nonelective contributions not used in either the ADP test
described in this Section 14.08 or the ACP test described in Section
14.09. For Plan Years beginning after December 31, 1989, the Advisory
Committee may not include in the ADP test any qualified nonelective
contributions or qualified matching contributions under another
qualified plan unless that plan has the same plan year as this Plan. The
Advisory Committee must maintain records to demonstrate compliance with
the ADP test, including the extent to which the Plan used qualified
nonelective contributions or qualified matching contributions to satisfy
the test.
For Plan Years beginning prior to January 1, 1992, the Advisory
Committee may elect to apply a separate ADP test to each component
group under the Plan. Each component group separately must satisfy
the commonality requirement of the Code Section 01(k) regulations
and the minimum coverage requirements of Code 410(b). A component
group consists of all the allocations and other benefits, rights
and features provided that group of Employees. An Employee may not
be part of more than one component group. The correction rules
described in this Section 14.08 apply separately to each component
group.
(B) Special aggregation rule for Highly Compensated Employees. To
determine the ADP of any Highly Compensated Employee, the deferral
contributions taken into account must include any elective deferrals
made by the Highly Compensated Employee under any other Code Section
401(k) arrangement maintained by the Employer, unless the elective
deferrals are to an ESOP. If the plans containing the Code 401(k)
arrangements have different plan years, the Advisory Committee will
determine the combined deferral contributions on the basis of the plan
years ending in the same calendar year. (C) Aggregation of certain Code
401(k) arrangements. If the Employer treats two plans as a unit for
coverage or nondiscrimination purposes, the Employer must combine the
Code Section 401(k) arrangements under such plans to determine whether
either plan satisfies the ADP test. This
14.06
<PAGE>
Defined Contribution Master Plan
aggregation rule applies to the ADP determination for all Eligible
Employees, irrespective of whether an Eligible Employee is a Highly
Compensated Employee or a Nonhighly Compensated Employee. For Plan
Years beginning after December 31, 1989, an aggregation of Code Section
401(k) arrangements under this paragraph does not apply to plans which
have different plan years and, for Plan Years beginning after December
31, 1988, the Advisory Committee may not aggregate an ESOP (or the
ESOP portion of a plan) with a non-ESOP plan (or non-ESOP portion of a
plan). (D) Characterization or excess contributions. If, pursuant to
this Section 14.08, the Advisory Committee has elected to include
qualified matching contributions in the average ADP, the Advisory
Committee will treat excess contributions as attributable
proportionately to deferral contributions and to qualified matching
contributions allocated on the basis of those deferral contributions.
If the total amount of a Highly Compensated Employee's excess
contributions for the Plan Year exceeds his deferral contributions or
qualified matching contributions for the Plan Year, the Advisory
Committee will treat the remaining portion of his excess contributions
as attributable to qualified nonelective contributions. The Advisory
Committee will reduce the amount of excess contributions for a Plan
Year distributable to a Highly Compensated Employee by the amount of
excess deferrals (as determined in Section 14.07), if any, previously
distributed to that Employee for the Employee's taxable year ending in
that Plan Year. (E) Distribution of excess contributions. ff the
Advisory Committee determines the Plan fails to satisfy the ADP test
for a Plan Year, it must distribute the excess contributions, as
adjusted for allocable income, during the 'next Plan Year. However, the
Employer will incur an excise tax equal to 10% of the amount of excess
contributions for a Plan Year not distributed to the appropriate Highly
Compensated Employees during the first 2V2?? months of that next Plan
Year. The excess contributions are the amount of deferral contributions
made by the Highly Compensated Employees which causes the Plan to fail
to satisfy the ADP test. The Advisory Committee will distribute to each
Highly Compensated Employee his respective share of the excess
contributions. The Advisory Committee will determine the respective
shares of excess contributions by starting with the Highly Compensated
Employee(s) who has the greatest ADP, reducing his ADP (but not below
the next highest ADP), then, if necessary, reducing the ADP of the
Highly Compensated Employee(s) at the next highest ADP level (including
the ADP of the Highly Compensated Employee(s) whose ADP the Advisory
Committee already has reduced), and continuing in this manner until the
average ADP for the Highly Compensated Group satisfies the ADP test. If
the Highly Compensated Employee is part of an aggregated family group,
the Advisory Committee, in accordance with the applicable Treasury
regulations, will determine each aggregated family member's allocable
share of the excess contributions assigned to the family unit. (F)
Allocable income. To determine the amount of the corrective distribution
required under this Section 14.08, the Advisory Committee must calculate
the allocable income for the Plan Year in which the excess contributions
arose. "Allocable income" means net income or net loss. To calculate
allocable income for the Plan Year, the Advisory Committee will use a
uniform and nondiscriminatory method which reasonably reflects the
manner used by the Plan to allocate income to Participants' Accounts.
14.09 NONDISCRIMINATION RULES FOR EMPLOYER MATCHING CONTRIBUTIONS
-----------------------------------------------------------
PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. For Plan Years beginning
---------------------------------------
after December 31, 1986, the Advisory Committee must determine
whether the annual Employer matching contributions (other than
qualified matching contributions used in the ADP under Section
14.08), ff any, and the Employee contributions, if any, satisfy
either of the following average contribution percentage ("ACP")
tests: (i) The ACP for the Highly Compensated Group does not
exceed 1.25 times the ACP of the Nonhighly Compensated Group; or
(ii) The ACP for the Highly Compensated Group does not exceed the
ACP for the Nonhighly Compensated Group by more than two
percentage points (or the lesser percentage permitted by the
multiple use Limitation in Section 14.10) and the ACP for the
Highly Compensated Group is not more than twice the ACP for the
Nonhighly Compensated Group.
14.07
<PAGE>
Defined Contribution Master Plan
(A) Calculation of ACP. The average contribution percentage for a
group is the average of the separate contribution percentages
calculated for each Eligible Employee who is a member of that group.
An Eligible Employee's contribution percentage for a Plan Year is the
ratio of the Eligible Employee's aggregate contributions for the Plan
Year to the Employee's Compensation for the Plan Year. "Aggregate
contributions" are Employer matching contributions (other than qualified
matching contributions used in the ADP test under Section 14.08) and
employee contributions (as defined Section 14.03). For aggregated
family members treated as a single Highly Compensated Employee, the
contribution percentage of the family unit is the contribution
percentage determined by combining the aggregate contributions and
Compensation of all aggregated family members.
The Advisory Committee, in a manner consistent with Treasury
regulations, may determine the contribution percentages of the
Eligible Employees by taking into account qualified nonelective
contributions (other than qualified nonelective contributions used
in the ADP test under Section 14.08) or elective deferrals, or
both, made to this Plan or to any other qualified Plan maintained
by the Employer. The Advisory Committee may not include qualified
nonelective contributions in the ACP test unless the allocation of
nonelective contributions is nondiscriminatory when the Advisory
Committee takes into account all nonelective contributions
(including the qualified nonelective contributions) and also when
the Advisory Committee takes into account only the nonelective
contributions not used in either the ADP test described in Section
14.08 or the ACP test described in this Section 14.09. The
Advisory Committee may not include elective deferrals in the ACP
test, unless the Plan which includes the elective deferrals
satisfies the ADP test both with and without the elective
deferrals included in this ACP test. For Plan Years beginning after
December 31, 1989, the Advisory Committee may not include in the
ACP test any qualified nonelective contributions or elective
deferrals under another qualified plan unless that plan has the
same plan year as this Plan. The Advisory Committee must maintain
records to demonstrate compliance with the ACP test, including the
extent to which the Plan used qualified nonelective contributions
or elective deferrals to satisfy the test. For Plan Years
beginning prior to January 1, 1992, the component group testing
rule permitted under Section 14.08(A) also applies to the ACP test
under this Section 14.09.
(B) Special aggregation rule for Highly Compensated Employees. To
determine the contribution percentage of any Highly Compensated
Employee, the aggregate contributions taken into account must include
any matching contributions (other than qualified matching contributions
used in the ADP test) and any Employee contributions made on his behalf
to 'any other plan maintained by the Employer, unless the other plan is
an ESOP. If the plans have different plan years, the Advisory Committee
will determine the combined aggregate contributions on the basis of the
plan years ending in the same calendar year. (C) Aggregation of certain
plans, If the Employer treats two plans as a unit for coverage or
nondiscrimination purposes, the Employer must combine the plans to
determine whether either plan satisfies the ACP test. This aggregation
rule applies to the contribution percentage determination for all
Eligible Employees, irrespective of whether an Eligible Employee is a
Highly Compensated Employee or a Nonhighly Compensated Employee. For
Plan Years beginning after December 31, 1989, an aggregation of plans
under this paragraph does not apply to plans which have different plan
years and, for Plan Years beginning after December 31, 1988, the
Advisory Committee may not aggregate an ESOP (or the ESOP portion of a
plan) with a non-ESOP plan (or non-ESOP portion of a plan). (D)
Distribution of excess aggregate contributions, The Advisory Committee
will determine excess aggregate contributions after determining excess
deferrals under Section 14.07' and excess contributions under Section
14.08. if the Advisory Committee determines the Plan fails to satisfy
the ACP test for a Plan Year, it must distribute the excess aggregate
contributions, as adjusted for allocable income, during the next Plan
Year. However, the Employer will incur an excise tax equal to 10% of the
amount of excess aggregate contributions for a Plan Year not distributed
to the appropriate Highly Compensated Employees during the first 21/2
months of that next Plan Year. The excess aggregate contributions are
the amount of aggregate contributions allocated on behalf of the Highly
Compensated Employees which causes the Plan to fail to satisfy the ACP
test. The Advisory
14.08
<PAGE>
Defined Contribution Master Plan
Committee will distribute to each Highly Compensated Employee his
respective share of the excess aggregate contributions. The Advisory
Committee will determine the respective shares of excess aggregate
contributions by starting with the Highly Compensated Employee(s) who
has the greatest contribution percentage, reducing his contribution
percentage (but not below the next highest contribution percentage),
then, if necessary, reducing the contribution percentage of the Highly
Compensated Employee(s) at the next highest contribution percentage
level (including the contribution percentage of the Highly Compensated
Employee(s) whose contribution percentage the Advisory Committee already
has reduced), and continuing in this manner until the ACP for the Highly
Compensated Group satisfies the ACP test. If the Highly Compensated
Employee is part of an aggregated family group, the Advisory Committee,
in accordance with the applicable Treasury regulations, will determine
each aggregated family member's allocable share of the excess aggregate
contributions assigned to the family unit. (E) Allocable income. To
determine the amount of the corrective distribution required under this
Section 14.09, the Advisory Committee must calculate the allocable
income for the Plan Year in which the excess aggregate contributions
arose. "Allocable income" means net income or net loss. The Advisory
Committee will determine allocable income in the same manner as
described in Section 14.08(F) for excess contributions. (F)
Characterization of excess aggregate contributions. The Advisory
Committee will treat a Highly Compensated Employee's allocable share of
excess aggregate contributions in the following priority: (1) first as
attributable to his Employee contributions which are voluntary
contributions, if any; (2) then as matching contributions allocable with
respect to excess contributions determined under the ADP test described
in Section 14.08; (3) then on a pro rata basis to matching contributions
and to the deferral contributions relating to those matching
contributions which the Advisory Committee has included in the ACP test;
(4) then on a pro rata basis to Employee contributions which are
mandatory contributions, if any, and to the matching contributions
allocated on the basis of those mandatory contributions; and (5) last to
qualified nonelective contributions used in the ACP test. To the extent
the Highly Compensated Employee's excess aggregate contributions are
attributable to matching contributions, and he is not 100% vested in his
Accrued Benefit attributable to matching contributions, the Advisory
Committee will distribute only the vested portion and forfeit the
nonvested portion. The vested portion of the Highly Compensated
Employee's excess aggregate contributions attributable to Employer
matching contributions is the total amount of such excess aggregate
contributions (as adjusted for allocable income) multiplied by his
vested percentage (determined as of the last day of the Plan Year for
which the Employer made the matching contribution). The Employer will
specify in Adoption Agreement Section 3.05 the manner in which the Plan
will allocate forfeited excess aggregate contributions. 14.10 MULTIPLE
--------
USE LIMITATION. For Plan Years beginning after December 31, 1988, if at
--------------
least one Highly Compensated Employee is includible in the ADP test
under Section 14.08 and in the ACP test under Section 14.09, the sum of
the Highly Compensated Group's ADP and ACP may not exceed the multiple
use limitation.
The multiple use limitation is the sum of (i) and (ii): (i) 125%
of the greater of: (a) the ADP of the Nonhighly Compensated Group under
the Code Section 401(k) arrangement; or (b) the ACP of the Nonhighly
Compensated Group for the Plan Year beginning with or within the Plan
Year of the Code Section 401(k) arrangement. (ii) 2% plus the lesser
of (i)(a) or (i)(b), but no more than twice the lesser of (i)(a) or
(i)(b). The Advisory Committee, in lieu of determining the multiple
use limitation as the sum of (i) and (ii), may elect to
determine the multiple use limitation as the sum of (iii) and
(iv): (iii) 125% of the lesser of: (a) the ADP of the
Nonhighly Compensated Group under the Code Section 401(k)
arrangement; or (b) the ACP of the Nonhighly Compensated Group
for the Plan Year beginning with or within the Plan Year of
the Code Section 401(k) arrangement.
14.09
<PAGE>
Defined Contribution Master Plan
(iv) 2% plus the greater of (iii)(a) or (??ii)(b), but no more than
twice the greater of (iii)(a) or (iii)(b). The Advisory Committee
will determine whether the Plan satisfies the multiple use Limitation
after applying the ADP test under Section 14.08 and the ACP test under
Section 14.09 and after making any corrective distributions required by
those Sections. If, after applying this Section 14.10, the Advisory
Committee determines the Plan has failed to satisfy the multiple use
limitation, the Advisory Committee will correct the failure by treating
the excess amount as excess contributions under Section 14.08 or as
excess aggregate contributions under Section 14.09, as it determines in
its sole discretion. This Section 14.10 does not apply unless, prior to
application of the multiple use limitation, the ADP and the ACP of the
Highly Compensated Group each exceeds 125% of the respective percentages
for the Nonhighly Compensated Group.
14.11 DISTRIBUTION RESTRICTIONS. The Employer must elect in Section
-------------------------
6.03 the Adoption Agreement the distribution events permitted under
the Plan. The distribution events applicable to the Participant's
Deferral Contributions Account, Qualified Nonelective Contributions
Account and Qualified Matching Contributions Account must satisfy
the distribution restrictions described in paragraph (m) of Section
14.03. (A) Hardship distributions from Deferral Contributions
Account. The Employer must elect in Adoption Agreement Section 6.03
whether a Participant may receive hardship distributions from his
Deferral Contributions Account prior to the Participant's
Separation from Service. Hardship distributions from the Deferral
Contributions Account must satisfy the requirements of this Section
14.11. A hardship distribution option may not apply to the
Participant's Qualified Nonelective Contributions Account or
Qualified Matching Contributions Account, except as provided in
paragraph (3).
(1) Definitions of hardship. A hardship distribution under this
Section 14.11 must be on account of one or more of the following
immediate and heavy financial needs: (1) medical care described in
Code Section 213(d) incurred by the Participant, by the
Participant's spouse, or by any of the Participant's dependents, or
necessary to obtain such medical care; (2) the purchase (excluding
mortgage payments) of a principal residence for the Participant;
(3) the payment of post-secondary education tuition and related
educational fees, for the next 12-month period, for the
Participant, for the Participant's spouse, or for any of the
Participant's dependents (as defined in Code Section 152); (4) to
prevent the eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the Participant's
principal residence; or (5) any need prescribed by the Revenue
Service in a revenue ruling, notice or other document of general
applicability which satisfies the safe harbor definition of
hardship.
(2) Restrictions. The following restrictions apply to a
Participant who receives a hardship distribution: (a) the
Participant may not make elective deferrals or employee
contributions to the Plan for the 12-month period following the
date of his hardship distribution; (13) the distribution is not in
excess of the amount of the immediate and heavy financial need
(including any amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to ???? from the
distribution); (c) the Participant must have obtained all
distributions, other than hardship distributions, and all
nontaxable loans (determined at the time of the loan) currently
available under this Plan and all other qualified plans maintained
by the Employer; and (d) the Participant agrees to limit elective
deferrals under this Plan and under any other qualified Plan
maintained by the Employer, for the Participant's taxable year
immediately following the taxable year of the hardship
distribution, to the 402(g) limitation (as described in Section
14.07), reduced by the amount of the Participant's elective
deferrals made in the taxable year of the hardship distribution.
The suspension of elective deferrals and employee contributions
described in clause (a) also must apply to all other qualified
plans and to all nonqualified plans of deferred compensation
maintained by the Employer, other than any mandatory employee
contribution portion of a defined benefit plan, including stock
option, stock purchase and other similar plans, but not including
health or welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan).
14.010
<PAGE>
Defined Contribution Master Plan
(3) Earnings. For Plan Years beginning after December 31, 1988, a
hardship distribution under this Section 14.11 may not include
earnings on an Employee's elective deferrals credited after
December 31, 1988. Qualified matching contributions and qualified
nonelective contributions, and any earnings on such contributions,
credited as of December 31, 1988, are subject to the hardship
withdrawal only ff the Employer specifies in an addendum to this
Section 14.11. The addendum may modify the December 31, 1988, date
for purposes of determining credited amounts provided the date is
not later than the end of the last Plan Year ending before July 1,
1989. (B) Distributions after Separation from Service. Following
the Participant's Separation from Service, the distribution events
applicable to the Participant apply equally to all of the
Participant's Accounts, except as elected in Section 6.03 of the
Employer's Adoption Agreement. (C) Correction or Annul Additions
Limitation. If, as a result of a reasonable error in determining
the amount of elective deferrals an Employee may make without
violating the limitations of Part 2 of Article 111, an Excess
Amount results, the Advisory Committee will return the Excess
Amount (as adjusted for allocable income) attributable to the
elective deferrals. The Advisory Committee will make this
distribution before taking any corrective steps pursuant to Section
3.10 or to Section 3.16. The Advisory Committee will disregard any
elective deferrals returned under this Section 14.11(C) for
purposes of Sections 14.07, 14.08 and 14.09.
14.12 SPECIAL ALLOCATION RULES. ff the Code Section 401(k)
------------------------
arrangement provides for salary reduction contributions, ff the
Plan accepts Employee contributions, pursuant to Adoption Agreement
Section 4.01, or ff the Plan allocates matching contributions as of
any date other than the last day of the Plan Year, the Employer
must elect in Adoption Agreement 9.11 whether any special
allocation provisions will apply under Section 9.11 of the Plan.
For purposes of the elections:
(a) A "segregated Account" direction means the Advisory Committee
will establish a segregated Account for the applicable
contributions made on the Participant's behalf during the Plan
Year. The Trustee must invest the segregated Account in Federally
insured interest bearing savings account(s) or time deposits, or a
combination of both, or in any other fixed income investments,
unless otherwise specified in the Employer's Adoption Agreement. As
of the last day of each Plan Year (or, if earlier, an allocation
date coinciding with a valuation date described in Section 9.11),
the Advisory Committee will. reallocate the segregated Account to
the Participant's appropriate Account, in accordance with Section
3.04 or Section 4.06, whichever applies to the contributions.
(b) A "weighted average allocation" method will treat a weighted
portion of the applicable contributions as if includible in the
Participant's Account as of the beginning of the valuation period.
The weighted portion is a fraction, the numerator of which is the
number of months in the valuation period, excluding each month in
the valuation period which begins prior to the contribution date of
the applicable contributions, and the denominator of which is the
number of months in the valuation period. The Employer may elect in
its Adoption Agreement to substitute a weighing period other than
months for purposes of this weighted average allocation.
* * * * * * * * * * * * * * * *
*
14.011
<PAGE>
ARTICLE A
APPENDIX TO BASIC PLAN' DOCUMENT
This Article is necessary.' to comply with the Unemployment
Compensation .-Amendments .-act of 1992 and is an integral part of the
basic plan document. Section 12.08 applies to any modifications or
amendment to this Article.
A-I. APPLICATIONS. This Article applies to distributions made
------------
on or after January,- I. 1993 Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's election
under this Article, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
A-2. DEFINITIONS.
-----------
(a) "Eligible rollover distribution." 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 disributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such distribution is
required under Code 401(a)(9); and the portion of any distribution that
is not includible in gross income (determined without regard to the
exclusion of net unrealized appreciation with respect to employer
securities).
(b) "Eligible retirement plan." An eligible retirement
plan is an individual retirement account described in Code 408(a), an
individual retirement annuity described in Code 408(b), an annuity plan
described in Code 403(a), or a qualified trust described in Code 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.
(c) 'Distributee." 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.
(d) 'Direct rollover." A direct rollover is a payment
by the Plan to the eligible retirement plan specified by the
distributee.
<PAGE>
ARTICLE B APPENDIX TO
BASIC PLAN DOCUMENT
This Article is necessary to comply with the Omnibus Budget
Reconciliation Act of 1993 (OBRA '93) and is an integral part of the
basic plan document. Section 12.08 applies to any modification or
amendment of this Article.
In addition to other applicable limitations set forth in the
plan, and notwithstanding any other provision of the plan to the
contrary, for plan years beginning on or after January 1, 1994, the
annual compensation of each employee taken into account under the plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination period,
and the denominator of which is 12.
For plan years beginning on or after January 1, 1994, any
reference in this plan to the limitation under Section 401(a)(17) of the
Code shall mean the OBRA '93 annual compensation limit set forth in this
provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current
plan year, the compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination periods
beginning before the first day of the first plan year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
<PAGE>
ADOPTION AGREEMENT #013
SHORT-FORM NONSTANDARDIZED CODE SECTION 401(k) PROFIT SHARING PLAN
The undersigned, TPI Enterprises, Inc. ("Employer"), by executing this
Adoption Agreement, elects to become a participating Employer in the
NationsBank Defined Contribution Master Plan (basic plan document #03) by
adopting the accompanying Plan and Trust in full as if the Employer were a
signatory to that Agreement. The Employer makes the following elections
granted under the provisions of the Master Plan.
Note: For any "Specify" option, the Employer may attach an addendum
to the Adoption Agreement setting forth its provision if the available space is
not sufficient.
ARTICLE I
DEFINITIONS
1.03 PLAN. The name of the Plan as adopted by the Employer is TPI
Enterprises, Inc. 401(k) Retirement Savings Plan.
1.07 EMPLOYEE. The following Employees are not eligible to participate
in the Plan: (Choose (a) or at least one of (b) through (e))
[ ] (a) No exclusions.
[X] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the
Plan, the Employer must be able to provide evidence that retirement
benefits were the subject of good faith bargaining.]
[X] (c) Nonresident aliens who do not receive any earned income (as defined
in Code Section 911(d)(2)) from the Employer which constitutes United
States source income (as defined in Code Section 861(a)(3)).
[X] (d) Leased Employees treated as Employees under Section 1.31 of the Plan.
[X] (e) (Specify) Employees grades 17 or higher and executive officers of
the Employer.
Related Employers. If any member of the Employer's related group (as defined in
Section 1.30 of the Plan) executes a Participation Agreement to this Adoption
Agreement, such member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification elected under this
Adoption Agreement Section 1.07. If any member of the Employer's related group
does not execute a Participation Agreement, that related group member's
Employees are not eligible to participate in the Plan unless, in an addendum,
the Employer designates the Employees of that nonparticipating related group
member as eligible to participate in the Plan.
1.12 COMPENSATION. The Employer makes the following election(s) regarding
the definition of Compensation for purposes of the contribution/allocation
formula in Article III: (Choose (a) or at least one of (b) through (e))
[ ] (a) No modifications to the definition in Section 1.12 of the Plan.
[ ] (b) W-2 wages in lieu of the definition in Section 1.12 of the Plan.
W-2 wages means wages for federal income tax withholding purposes,
as defined under Code Section 3401(a), plus all other payments
<PAGE>
to an Employee in the course of the Employer's trade or business, for which
the Employer must furnish the Employee a written statement under Code Section
Section 6041(d) and 6051(a)(3), disregarding any rules limiting the
remuneration included as wages under this definition based on the nature or
location of the employment or service performed. As long as the instructions
to Box 10 of Form W-2 are consistent with the instructions for the 1991 Form
W-2, the Employer may treat the amount reported in Box 10 as satisfying
this definition.
[ ] (c) The Plan excludes reimbursements or other expense allowances, fringe
benefits (cash and noncash), moving expenses, deferred compensation and
welfare benefits.
[X] (d) The Plan increases Compensation by the amount of elective
contributions (as defined in Section 1.12 of the Plan) made on the
Participant's behalf.
[X] (e) (Specify) the plan excludes commissions and includes overtime,
bonuses and tips.
If, for any Plan Year, the Plan uses a permitted disparity formula to allocate
Employer nonelective contributions, any election of Option (e) is ineffective
for such Plan Year with respect to any Nonhighly Compensated Employee's
allocation under that formula unless the elected definition satisfies Code
Section 414(s).
Salary Reduction Contributions/Matching Contributions. Unless otherwise
specified in (e), the following rules apply to salary reduction contributions
and matching contributions: (1) any limitation on matching contributions based
on Compensation applies to Compensation paid during the period the Employee is
eligible to participate under the Code Section 401(k) arrangement; and (2)
if the Employee makes elective contributions to another plan maintained by the
Employer, the Advisory Committee will determine the amount of the Employee's
salary reduction contribution for the withholding period prior to the reduction
elected under the other plan.
1.17 PLAN YEAR/LIMITATION YEAR. Plan Year and Limitation Year mean: (Choose (a)
or (b))
[X] (a) The 12 consecutive month period ending every December 31.
[ ] (b) (Specify)
1.18 EFFECTIVE DATE. (New plans must choose (a),' restated plans must
choose (b))
[X] (a) New Plan. The "Effective Date" of the Plan is January 1, 1995.
[ ] (b) Restated Plan. The restated Effective Date is
amendment of an existing retirement plan(s) originally established
This Plan is a substitution and
[ ] (c) Special Effective Dates. The following special Effective Dates apply:
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is: (Choose
at least one)
[X] (a) The actual method.
[ ] (b) The equivalency
----------------------------------------------------
method. [Note.' Insert "daily, ""weekly, ""semi-monthly payroll periods
"or "monthly. "]
[ ] (c) In lieu of the equivalency method stated in (b), the actual method
applies for purposes of
2
<PAGE>
1.29 SERVICE FOR PREDECESSOR EMPLOYER. [Note: The Employer may attach a
schedule to this Adoption Agreement Section 1.29 designating predecessor or
prior employers and the applicable service crediting elections. If this Plan
is a successor of a plan maintained by a predecessor employer, see Section 1.29
of the Plan for certain predecessor service automatically taken into account. ]
1.31 LEASED EMPLOYEES. [Note: If the Plan covers any Leased Employee who
also participates in a plan maintained by the leasing organization, the Plan
will not reduce that Leased Employee's allocation of Employer contributions
under this Plan except as provided in an addendum. ]
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility Conditions. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (Choose at least one of (a), (b)
and (c); (d) and (e) are optional)
[X] (a) Attainment of age 21 (specify age, not exceeding 21).
[X] (b) One Year of Service.
[ I (c) (Specify) [Note:
Any specified service requirement may not exceed either the one-year
requirement in (b) or, for any portion of the plan other than the Code
Section 401 (k) arrangement, the two-year requirement in Code
Section 410(a)(1)(B), depending on the vesting schedule elected in
Section 5.03, and any specified age requirement may not exceed 21. ]
[X] (d) A Participant prior to the restated Effective Date may not continue
as a Participant unless he satisfies the eligibility conditions of this
Section 2.01. [Note: If the Employer does not elect (d), current
Participants need not complete the eligibility conditions of this Section
2.01. ]
[ ] (e) The eligibility conditions of this Section 2.01 apply solely to an
Employee employed by the Employer after __ If the Employee was employed
by the Employer on or before the specified date, the Employee will become
a Participant on the later of the Effective Date or his Employment
Commencement Date.
Plan Entry Date. "Plan Entry Date" means the Effective Date and: (Choose 09
or (g))
[ ] (f) Semi-annual Entry Dates. The first day of the Plan Year and the first
day of the seventh month of the Plan Year.
[X] (g) (Specify entry dates) Semi-annual Entry Dates. The first day of the
Plan Year, the first day of the seventh month of the Plan Year, and
February 1, 1995.
Time of Participation. An Employee will become a Participant, unless excluded
under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed
on that date): (Choose (h) or (i))
IX] (h) immediately following
[ I (i)
3
<PAGE>
the date the Employee completes the eligibility conditions described in this
Adoption Agreement Section 2.01. [Note: Unless otherwise excluded under Section
1.07, the Employee must become a Participant by the earlier of: (1) the first
day of the Plan Year beginning after the date the Employee completes the age and
service requirements of Code Section 410(a); or (2) 6 months after the
date the Employee completes those requirements. ]
2.02 YEAR OF SERVICE ~ PARTICIPATION. (Complete (a) and (b))
[X] (a) Hours of Service. An Employee must complete 1,000 Hour(s) of Service
during an eligibility computation period to receive credit for a Year of
Service under Article II. [Note: The number may not exceed 1,000. If
left blank, the requirement is 1,000. ]
[X] (b) Eligibility Computation Period. After the initial eligibility
computation period described in Section 2.02 of the Plan, the Plan
measures the eligibility computation period as: (Choose (1) or (2))
[ ] (1) The 12 consecutive month period beginning with each anniversary
of an Employee's Employment Commencement Date.
[X] (2) The Plan Year, beginning with the Plan Year which includes
the first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule described in
Section 2.03(B) of the Plan: (Choose (a) or (b))
IX] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a) or (b))
[X] (a) Does not permit an eligible Employee or a Participant to elect not
to participate.
[ ] (b) Does permit an eligible Employee or a Participant to elect not to
participate in accordance with Section 2.06 and with the following rules:
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3:01 AMOUNT.
Part I. Amount of Employer's Contribution. The amount of the Employer's annual
contribution to the Trust will equal: (Choose at least one)
[X] (a) Deferral Contributions (Code Section 401(k) Arrangement. The amount
by which the Participants have reduced their Compensation for the Plan
Year, pursuant to their salary reduction agreements. The Plan refers to
these amounts as salary reduction contributions.
[X] (b) Matching Contributions. The matching contributions made pursuant to
Part II of this Adoption Agreement Section 3.01.
4
<PAGE>
[X] (c) Nonelective Contributions. The amount (or additional amount) the
Employer may from time to time deem advisable, without regard to Net
Profits. The Employer, in its sole discretion, may designate all or any
portion of its nonelective contributions to be qualified nonelective
contributions.
[ ] (d) Frozen Plan. This Plan is a frozen Plan effective __ The Employer
will not contribute to the Plan for any period following the stated date.
Part II. Matching Contributions. [Note: Do not complete Part II unless the
Employer elected Option (b). ]
[X] (e) Matching Contributions Formula. For each Plan Year, the Employer's
matching contribution is: (Choose at least one of (1) and (2); (3) and (4)
are available only as additional options)
[X] (1) An amount equal to the following percentage(s) of eligible
contributions for the Plan Year: 25% of eligible contributions.
The Advisory Committee will allocate the amounts described in this
Option (e)(1) to the:
(Choose (i) or (ii))
[X] (i) Regular Matching Contributions Account.
[ ] (ii) Qualified Matching Contributions Account.
[X] (2) Discretionary formula. An amount (or additional amount) equal
to a matching percentage the Employer from time to time may deem
advisable of the Participant's eligible contributions for the Plan
Year (or tiers of eligible contributions, if applicable under Option
(f)). The Employer must designate the portion, if any, of its
discretionary matching contribution allocable to the Regular
Matching Contributions Accounts of the eligible Participants and the
portion, if any, of its discretionary matching contribution
allocable to the Qualified Matching Contributions Accounts of the
eligible Participants.
[ ] (3) The following limitations apply to a Participant's matching
contributions:
[ ] (4) The Advisory Committee will allocate matching contributions on
the following allocation
dates: [Note: If
-------------------------------------------------
the Employer does not check (4), the last day of the Plan Year is the
only allocation date for matching contributions.]
[X] (f) Eligible Contributions. For purposes of applying the matching
contribution formula in Option
(e), the term "eligible contributions" means: (Choose at least one of (1)
or (2); (3) through (5) are available only as additional selections)
[X] (1) Salary reduction contributions.
[ ] (2) Participant mandatory contributions, as designated in Adoption
Agreement Section 4.01. See Section 14.04 of the Plan.
[X] (3) The Plan disregards eligible contributions exceeding 6% of a
Participant's Compensation for the payroll period.
5
<PAGE>
[ ] (4) The Plan takes into account eligible contributions in tiers,
defined as follows:
[ ] (5) (Specify)
Part III. Special rules for Code Section 401(k) Arrangement. (Choose the
applicable elections)
[X] (g) Limitation on amount. the Employee's salary reduction contributions
are subject to the following limitations: contributions may not exceed
20% of Compensation for the Plan Year, must equal at least 1% and must be
in 1% increments. [Note.' If the Employer does not elect Option (g),
the salary reduction contributions are not subject to any limitations
other than the annual additions limitation described in Pan 2 of Article
III and the 402(g) limitation described in Section 14.07 of the Plan. ]
[X] (h) Revocation. An Employee, on a prospective basis, may revoke a salary
reduction agreement or may file a new agreement following a prior
revocation: (Choose one)
[ ] (1) As of any Plan Entry Date.
[ ] (2) As of the first day of each quarter.
[X] (3) (Specify at least once per Plan Year) See attached Addendum.
[X] (i) Modifying Elections. An Employee, on a prospective basis, may increase
or may decrease his salary reduction percentage or dollar amount: (Choose
one)
[ ] (1) As of the beginning of each payroll period.
IX] (2) As of the first day of each quarter.
[ ] (3) As of any Plan Entry Date.
[ ] (4) (Specify at least once per Plan Year)
[X] (j) Allocation Dates. The Advisory Committee will allocate salary reduction
contributions on the following allocation dates: any business day the
United States financial markets are open. [Note.' If the Employer does not
check q), the last day of the Plan Year is the only allocation date for
salary reduction contributions. ]
3.04 CONTRIBUTION ALLOCATION. The elections in this Section 3.04 (other
than Option (d)) apply only to the allocation of nonelective contributions
(other than qualified nonelective contributions).
(Choose an allocation method under (a) or (b); (c) is mandatory if the Employer
elects (b); (d) and (e) are optional)
IX] (a) Nonintegrated location Formula. The Advisory Committee will make
the allocation in the same ratio that each Participant's Compensation for
the Plan Year bears to the total Compensation of all Participants for the
Plan Year.
[ ] (b) Permitted Disparity. The following formula described in Appendix A
applies: (Choose (I), (2) or (3))
[ ] (1) Two-Tiered Formula.
6
<PAGE>
[ ] (2) Four-Tiered Formula.
[ ] (3) Two-Tiered Formula when the Plan is not top heavy and the Four-Tiered
Formula when the Plan is top heavy.
[ ] (c) Excess Compensation. For purposes of Option (b), "Excess
Compensation" means Compensation in excess of the following Integration
Level: (Choose one)
[ ] (1) ~% of the taxable wage base in effect on the first day of the Plan
Year, rounded to the next highest $. (not exceeding the taxable
wage base).
[ ] (2) The taxable wage base in effect on the first day of the Plan Year.
[ ] (3) (Specify - may not exceed the taxable wage base)
[ ] (d) Modifications to Top Heavy Minimum Allocation. (Choose (1) or (2))
[1
[ ] (1) The Employer will satisfy the top heavy minimum allocation by making
any necessary additional contribution to the following defined
contribution plan maintained by the Employer:
[ ] (2) In lieu of 3 %, substitute the following percentage to determine the
top heavy minimum allocation:
[ ] (e) Related Employers. If two or more related employers (as defined in
Section 1.30) contribute to this Plan, the Advisory Committee will allocate
all Employer contributions and forfeitures only to the Participants
directly employed by the contributing Employer. If a Participant receives
Compensation from more than one contributing Employer, the Advisory
Committee will determine the allocations under this Adoption Agreement
Section 3.04 by prorating among the participating Employers the
Participant's Compensation and, if applicable, the Participant's
Integration Level under Option (c). [Note: If the Employer does not elect
(e), the Advisory Committee will allocate all contributions and forfeitures
without regard to which Participants are directly employed by a contributing
related group member. ]
Addendum. In an addendum to this Section 3.04 or to Section 3.01,the Employer
may: (1) specify other modifications to the top heavy rules, to the extent
permissible under Code Section 416; or (2) incorporate special contribution
or allocation provisions affecting Employer contributions or Participant
forfeitures (e.g., different allocation formulas or matching contribution
formulas for different employment classifications). If the top heavy ratio
includes the present value of accrued benefits under a defined benefit plan, the
Advisory Committee will use the actuarial assumptions stated in the defined
benefit plan to determine the top heavy ratio unless the addendum specifies
other assumptions.
3.05 FORFEITURE ALLOCATION. The Advisory Committee will allocate a Participant
forfeiture: (Choose at least one)
[ ] (a) As if the forfeiture were an additional Employer nonelective
contribution for the Plan Year in which the forfeiture occurs.
7
<PAGE>
[ ] (b) To reduce Employer contributions (including matching contributions, if
applicable) for the Plan Year: (Choose one)
IX] (1) in which the forfeiture occurs.
[ ] (2) following the Plan Year in which the forfeiture occurs.
(c) To the extent attributable to matching contributions:
Excess aggregate contributions. To the extent Section 14.09 of the Plan results
in a forfeiture of nonvested excess aggregate contributions, the Advisory
Committee will allocate the forfeited amount as described in (a), (b) or (c),
whichever applies, or in an addendum to Section 3.04, if applicable. An
allocation of forfeited amounts as discretionary contributions (including
discretionary matching contributions) must disregard the Highly Compensated
Employees who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation Taken Into Account. For the Plan Year in which the Employee
first becomes a Participant, the Advisory Committee will determine the
allocation of nonelective contributions (including qualified nonelective
contributions) by taking into account: (Choose (a) or (b))
[X] (a) The Employee's Compensation for the entire Plan Year.
[ ] (b) The Employee's Compensation only for the portion of the Plan Year in
which the Employee actually is a Participant in the Plan.
Accrual Requirements. The Plan does not apply any accrual requirement to
salary reduction contributions. To receive an allocation of matching
contributions or of nonelective contributions (including qualified
nonelective contributions) and forfeitures, a Participant must satisfy the
conditions described in the following elections: (Choose at least one)
[ ] (c) Safe Harbor Rule. The Participant either must be employed by the
Employer on the last day of the Plan Year or must complete at least 501
Hours of Service during the Plan Year.
[X] (d) Hours of Service Condition. The Participant must complete at least the
following number of Hours of Service for the Plan Year: 1,000. [Note:
The number may not exceed 1,000.]
[X] (e) Employment Condition. The Participant must be employed by the
Employer on the last day of the Plan Year.
[x] (f) Exception. Any condition specified in (d) and (e) does not apply if
the Participant terminates employment during the Plan Year on account
of death, disability or attainment of Normal Retirement Age in the
current Plan Year or in a prior Plan Year.
[X] (g) (Specify other conditions, if applicable): any condition specified
in (d) and (e) does not apply to fixed Employer Matching Contributions
under 3.01(e)(1).
[x] (h) Suspension of Accrual Requirements. The suspension of accrual
requirements of Section 3.06(E) of the Plan applies to the Employer's
Plan, subject to any modifications stated in an addendum. [Note: If the
Employer does not elect Option (h), Section 3.06(E) of the Plan does not
apply. ]
8
<PAGE>
Unless otherwise specified in (g), the Advisory Committee will allocate
qualified nonelective contributions only to Participants who are Nonhighly
Compensated Employees for the Plan Year.
3.15 MORE THAN ONE PLAN LIMITATION. Unless otherwise provided in an
addendum, if the provisions of Section 3.15 apply, the Excess Amount attributed
to this Plan equals the product of:
(a) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code Section 415), times
(b) the ratio of (1) the amount allocated to the Participant as of such
date under this Plan divided by (2) the total amount allocated as of such
date under all qualified defined contribution plans (determined without
regard to the limitations of Code Section 415).
3.18 DEFINED BENEFIT PLAN LIMITATION. The limitation under Section 3.18
applies to the Employer's Plan if the Employer maintains (or ever
maintained) a defined benefit plan. To the extent necessary to satisfy
the limitation under Section 3.18,the Employer will reduce the
Participant's projected annual benefit under the defined benefit plan
under which the Participant participates, if the Employer still
maintains the defined benefit plan as an active plan. If the Employer
has frozen or terminated the defined benefit plan, the Employer will
reduce its contribution or allocation on behalf of the Participant to the
defined contribution plan(s) under which the Participant participates.
The Employer may prescribe an alternate means of satisfying the Section
3.18 limitation in an addendum.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The following elections apply
to nondeductible contributions: (Choose (a) or (b); (c), (d) and (e) are
available only as additional options)
[X] (a) The Plan does not permit Participant nondeductible contributions.
[ ] (b) The Plan permits Participant nondeductible contributions. See
Section 14.04 of the Plan.
[ ] (c) The Plan treats the following portion of the Participant's
nondeductible contributions for the Plan Year as "mandatory"
contributions:
[ ] (d) The Advisory Committee will allocate Participant nondeductible
contributions on the following allocation dates: [Note.'
If the Employer does not elect (d), the last day of the Plan Year is
the only allocation date for Participant nondeductible contributions.]
[ ] (e) In lieu of the withdrawal rules under Section 4.05, the following
rules apply to Participant nondeductible contributions:
ARTICLE V
TERMINATION OF SERVICE- PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. A Participant attains Normal Retirement Age under
the Plan on the following date: (Choose (a) or (b))
[X] (a) The date he attains age 65 [Note: The age may not exceed age 65].
[ ] (b ) The later of the date he attains years of age or the __
anniversary of the first day of the
9
<PAGE>
Plan Year in which he commenced participation in the Plan. [Note.' The age
may not exceed age 65 and the anniversary may not exceed the 5th]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting rule under Section
5.02 of the Plan applies to death and to disability, unless the Employer
provides a different vesting rule in an addendum.
5.03 VESTING SCHEDULE. The vesting elections in this Section 5.03 apply
only to the Regular Matching Contributions Account, if any, and the Employer
Contributions Account, if any. 100 % immediate vesting applies to all other
Accounts. The Employer elects the following vesting schedule: (Choose (a)
or (b); (c), (d) and (e) are available only in addition to (b))
[ ] (a) Immediate Vesting. 100% Nonforfeitable at all times.
[X] (b) Graduated Vesting Schedules. (Complete (1); (2) is optional in
addition to (1))
<TABLE><CAPTION>
[X] (1) Top Heavy Schedule [ ] (2) Non Top Heavy Schedule
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
<S> <C> <C>
Less than 1 .................... 0 Less than 1 .................
1 ....................... 0 1 ......................
2 ...................... 20 2 ......................
3 ...................... 40 3 ......................
4 ...................... 60 4 ......................
5 ...................... 80 5 ......................
6 or more ............ 100% 6 ......................
7 or more .............. 100%
</TABLE>
If the Employer does not elect (b)(2), the vesting schedule in (b)(1) applies
to all Plan Years. [Note: The Top Heavy Schedule must satisfy Code Section 416.
If the Employer elects Option (b)(2), the Non Top Heavy Schedule must satisfy
Code Section 411(a)(2).]
[ ] (c) Minimum Vesting Amount. The lesser of $ or his entire Accrued
Benefit, even if the application of the graduated vesting schedule under
Option (b) would result in a smaller Nonforfeitable Accrued Benefit.
[X] (d) Application of Top Heavy Schedule. The Top Heavy Schedule applies
in the Plan Year for which the Plan first is top heavy and then in all
subsequent Plan Years. [Note: If the Employer elects (b) (2) but not (d), the
Top Heavy Vesting Schedule applies only in top heavy Plan Years. ]
[ ] (e) Special Vesting Rules. (Specify)
[Note: Any special rule must satisfy Code Section 411(a).]
5.04 DEEMED CASH-OUT DISTRIBUTIONS. To determine the timing of forfeitures
for 0% vested Participants, the deemed cash-out rule described in Section
5.04(C)of the Plan: (Choose (a) or (b))
[ ] (a) Does not apply. [X] (b) Applies.
10
<PAGE>
5.06 YEAR OF SERVICE - VESTING. (Complete (a) and (b))
(a) Hours of Service. An Employee must complete at least 1,000 Hours of
Service during a vesting computation period to receive credit for a Year of
Service under Article V. [Note: The number may not exceed I, 000. If left
blank, the requirement is 1,000. ]
[X] (b) Vesting Computation Period. The Plan measures a Year of Service
on the basis of the following 12 consecutive month periods: (Choose (1)
or (2))
[X] (1) Plan Years.
[ ] (2) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and
each successive 12 consecutive month period measured from each anniversary
of that Employment Commencement Date.
5.08 INCLUDED YEARS OF SERVICE -VESTING. The Employer specifically excludes
the following Years of Service: (Choose (a) or at least one of (b) through
(D); choose (a) if the term "Year of Service "does not apply to the vesting
election in Adoption Agreement Section 5.03)
IX] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of 18.
[ ] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[ ] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds 5. This exception applies
only if the Participant is0% vested in his Accrued Benefit derived from
Employer contributions at the time he has a Break in Service.
[ ] (e) Any Years of Service disregarded under the terms of the Plan prior to
the restated Effective Date.
[ ] (f) (Specify) [Note:
Any specified exception must comply with Code Section 411(a)(4).]
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. The following elections apply to
Section 6.01 of the Plan: ((a) is mandatory; (b), (c) and (d) are optional
in addition to (a))
[X] (a) Nonforfeitable Accrued Benefit Not Exceeding $3,500. The Plan will
distribute a Nonforfeitable Accrued Benefit not exceeding $3,500: (Choose
(1), (2) or (3))
[X] (1) As soon as administratively practicable following the Participant's
Separation from Service.
[ ] (2) As soon as administratively practicable in the Plan Year
-------------
beginning after the Participant's Separation from Service.
[ ] (3) (Specify)
11
<PAGE>
[ ] (b) Disability. If the Participant terminates by reason of a disability,
the following special rules apply to the distribution of the Participant's
Nonforfeitable Accrued Benefit:
[ ] (c) Hardship. The Plan permits a hardship distribution, as defined in
Section 14.11(A)(1), to a Participant who has separated from Service,
subject to any special rules provided in an addendum.
[x] (d) Default on a Loan. If a Participant or Beneficiary defaults on a loan
made pursuant to a loan policy adopted by the Advisory Committee
pursuant to Section 9.04, the Plan treats the default as a distributable
event. The Trustee, at the time of the default, will reduce the
Participant's Nonforfeitable Accrued Benefit by the lesser of the amount
in default (plus accrued interest) or the Plan's security interest in
that Nonforfeitable Accrued Benefit. In the case of the portion of the
loan attributable to the Participant's Deferral Contributions Account,
Qualified Matching Contributions Account or Qualified Nonelective
Contributions Account, the reduction described in the preceding
sentence will not occur before the earlier of the Participant's Separation
from Service or attainment of age 59%.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Section 6.02 of the Plan, which
permits lump sum or installment distribution elections, applies without
modification, except as provided in an addendum.
6.03 BENEFIT PAYMENT ELECTIONS. ((a) is mandatory; (b) is optional)
[x] (a) Participant Elections After Separation from Service. A Participant whose
Nonforfeitable Accrued Benefit exceeds $3,500 may elect to commence
distribution of his Nonforfeitable Accrued Benefit: (Choose at least one)
[X] (1) As of the earliest administratively practicable date following
Separation from Service.
[ ] (2) As of the earliest administratively practicable date in the Plan
------
Year(s) beginning after Separation from Service.
[ ] (3) As of the earliest administratively practicable date after the close
of the Plan Year in which the Participant attains Normal Retirement Age.
[ ] (4) (Specify)
See Section 6.01(A)(2) if the Participant fails to make an election or has
passed the latest elective date described in this Option (a).
[x] (b) Participant Elections Prior to Separation from Service. A Participant,
prior to his Separation from Service, may elect to receive all or any
portion of his Nonforfeitable Accrued Benefit under the condition(s)
specified in this Option (b). Unless otherwise specified in (b)(5), each
event selected represents an independent withdrawal right and a Participant
must have a 100% Nonforfeitable interest in his Accrued Benefit to be
eligible for an in-service withdrawal. Each election applies to all
Accounts unless otherwise specified. A reference to "restricted Accounts"
means the Deferral Contributions Account, Qualified Matching Contributions
Account and Qualified Nonelective Contributions Account. (Choose at least
one of (1), (2), (3), (4)or (5))
[X] (1) The Participant has attained age 59 1/4.
12
<PAGE>
[X] (2) The Participant has incurred a hardship under the rules
described in Section 14.11(A). To the extent distributed from
the Regular Matching Contributions Account and the Employer
Contributions Account, the provisions of Sections 14.11(A)(2) and
14.1 1(A)(3) do not apply.
[ ] (3) The Participant has participated in the Plan for a period of
not less than 5 years, but only from Accounts other than
restricted Accounts.
[ ] (4) If the Employer sells substantially all of the assets (within
the meaning of Code Section 409(d)(2)) used in a trade or business
or sells a subsidiary (within the meaning of Code Section
409(d)(3)), but only for a Participant who continues employment
with the acquiring corporation. A distribution under this Option
must be a lump sum distribution, determined in a manner consistent
with Code Section 401(k)(10) and the applicable Treasury
regulations.
[X] (5) (Specify) distributions under 6.03(b)(2) above are available
from Deferral Contributions Accounts only. [Note: An in-service
distribution from restricted Accounts may not be available
unless the Participant has attained age 59 1/2, is disabled or
satisfies the hardship rules of Section 14.11 of the Plan.]
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
The annuity distribution requirements of Section 6.04: (Choose (a) or (b))
[X] (a) Do not apply to a Participant, unless the Participant is described in
Section 6.04(E) of the Plan (relating to the profit sharing exception to the
joint and survivor requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a distribution (other than
a distribution from a segregated Account) occurs more than 90 days after the
most recent valuation date, the distribution will include interest at the
following rate: 0%. [Note: If left blank, the percentage is 0%.]
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. Pursuant to
Section 14.12, the elections in this Section 9.11 apply to the allocation of
net income, gain or loss attributable to salary reduction contributions,
matching contributions and Participant nondeductible contributions. Unless
otherwise specified, the elections apply to all these contributions. (Choose at
least one) '
[X] (a) Apply Section 9.11 without modification.
[ ] (b) Use the segregated account approach described in Section 14.12.
[ ] (c) Use the weighted average method described in Section 14.12, based
on a weighting period.
--------
13
<PAGE>
[ ] (d) Treat as part of the relevant Account at the beginning of the
valuation period % of the contributions: (Choose (1) or (2))
----
[ ] (1) made during that valuation period.
[ ] (2) made by the following specified time:
[ I (e) (Specify)
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. The following additional investment options or
limitations apply under Section 10.03: the aggregate investments in
qualifying Employer securities may not exceed 100% of Plan assets. [Note:
Enter "N/A "if not applicable.]
10.14 VALUATION OF TRUST. In addition to the last day of the Plan Year, the
Trustee must value the Trust Fund on the following valuation date(s): any
business day the United States financial markets are open.
[Note: Enter "N/A" if not applicable. If left blank, the last day of the Plan
Year is the only mandatory valuation date. Regardless of whether the Employer
specifies other valuation dates, the Advisory Committee has the discretion to
direct valuation at any time. See Section 10.14 of the Plan.]
14
<PAGE>
Execution Page
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts its position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian)
under the Master Plan and Trust. The Employer hereby agrees to the provisions of
this Plan and Trust, and in witness of its agreement, the Employer by its duly
authorized officers, has executed this Adoption Agreement, and the Trustee
(and Custodian, if applicable) has signified its acceptance, on this twenty-
second day of December ,1994 .
Name of Employer: TPI Enterprises, Inc.
Employer's EIN: 22-1899681
Signed:
Name(s) of Trustee: NationsBank of Georgia, N.A.
Signed:
Signed:
Name of Custodian (Optional):
Signed:
Trustee Investment Powers. The Trustee has (check one): [ ] discretionary
[X] nondiscretionary investment powers. See Section 10.03. [Note: The Employer
must check "discretionary"if a Custodian executes this Adoption Agreement.]
Plan Nmnber. The 3-digit plan number the Employer assigns to this Plan for
ERISA reporting purposes (Form 5500 Series) is: 002.
Use of Adoption Agreement. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's recordkeeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
Master Plan Sponsor. The Master Plan Sponsor identified on the first page of
the basic plan document will notify all adopting employers of any amendment of
this Master Plan or of any abandonment or discontinuance by the Master Plan
Sponsor of its maintenance of this Master Plan. For inquiries regarding
the adoption of the Master Plan, the Master Plan Sponsor's intended meaning
of any plan provisions or the effect of the opinion letter issued to the
Master Plan Sponsor, please contact the Master Plan Sponsor at the following
address and telephone number: NationsBank; Trust- Master Plan Services;
901 Main Street, 16th Floor; Dallas, Texas 75202 (214) 508-1738.
Reliance on Opinion Letter. The Employer may not rely on the Master Plan
Sponsor's opinion letter covering this Adoption Agreement. For reliance on the
Plan's qualification, the Employer must obtain a determination letter from the
applicable IRS Key District office.
15
<PAGE>
Code Section 411(d)(6) Protected Benefits. To the extent the elections under
Article VI would eliminate a Code Section 411(d)(6) protected benefit, see
Section 13.02 of the Plan. If the elections liberalize the optional forms
of benefit under the Plan, the more liberal options apply on the later of the
adoption date or the Effective Date of this Adoption Agreement.
16
<PAGE>
PARTICIPATION AGREEMENT FOR RELATED GROUP MEMBERS
[ ] Check here if not applicable and do not complete this page.
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the Plan identified in Section
1.03 of the accompanying Adoption Agreement, as if the Participating Employer
were a signatory to that Agreement. The Participating Employer accepts,
and agrees to be bound by, all of the elections granted under the provisions
of the Master Plan as made by TPI Enterprises, Inc., the Signatory Employer to
the Execution Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's participation
in the designated Plan is: January 1, 1995.
2. The undersigned Employer's adoption of this Plan constitutes:
[X] (a) The adoption of a new plan by the Participating Employer.
[ ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as , and having an
--------------
original effective date of
--------
Dated this 22nd day of Dec, 1994
N~ame ~of Participating Employer, Inc.
Signed:
Participating Employer's EIN: 62-0840246
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory .Employer: TPI Enterprises, Inc.
Accepted: 12/22/94
[Date:] Signed:
_
Name(s) of Trustee: NationsBank of Georgia, N.A.
Accepted:
[Date] Signed:
[Note: Each Participating Employer must execute a separate Participation
Agreement. See the Execution Page of the Adoption Agreement for important
Master Plan information. ]
<PAGE>
Appendix A (Permitted Disparity Plans Only)
Note: The Adoption Agreement must include Appendix A even if it does not
apply to the Employer's Plan. The Employer may disregard Appendix A if it
elected Option (a) under Adoption Agreement Section 3.04.]
Two-Tiered Integrated Allocation Formula - Maximum Disparity. First, the
Advisory Committee will allocate the annual Employer nonelective contributions
in the same ratio that each Participant's Compensation plus Excess
Compensation for the Plan Year bears to the total Compensation plus Excess
Compensation of all Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's Compensation plus
Excess Compensation, must not exceed the applicable percentage
(5.7%, 5.4% or 4.3%) listed under the Maximum Disparity Table.
The Advisory Committee then will allocate any remaining Employer nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan
Year.
Four-Tiered Integrated location Formula. First, the Advisory Committee will
allocate the annual Employer nonelective contributions in the same ratio that
each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year, but not exceeding 3 % of
each Participant's Compensation. Solely for purposes of this first tier
allocation, a "Participant" means, in addition to any Participant who
satisfies the requirements of Section 3.06 for the Plan Year, any other
Participant entitled to a top heavy minimum allocation under Section 3.04(B)
of the Plan.
As a second tier allocation, the Advisory Committee will allocate the annual
Employer nonelective contributions in the same ratio that each Participant's
Excess Compensation for the Plan Year bears to the total Excess Compensation
of all Participants for the Plan Year, but not exceeding 3 % of each
Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will allocate the annual
Employer nonelective contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan Year.
The allocation under this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed the applicable
percentage (2.7%, 2.4% or 1.3%)listed under the Maximum Disparity Table.
The Advisory Committee then will allocate any remaining Employer nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
Maximum Disparity Table. The applicable percentage is:
<TABLE><CAPTION>
Integration Level (as Applicable Percentages for Applicable Percentages for
percentage of taxable wage base) Two-Tiered Formula Four-Tiered Formula
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% and not more than 80% 4.3% 1.3 %
20% or less 5.7% 2.7%
</TABLE>
[Note: If the Integration Level does not exceed $10,000, use 5. 7% for the
Two-Tiered Formula and 2.7% for the Four-Tiered Formula, regardless of the
percentage in the table.]
19
<PAGE>
ADDENDUM TO ADOPTION AGREEMENT
PLAN NAME: TPI Restaurants, Inc. Retirement Savings Plan
EFFECTIVE DATE: January 1, 1995 PLAN NUMBER: 002
For purposes of this Plan, the Advisory Committee will apply the following
changes and/or language to the Adoption Agreement sections as indicated.
SECTION 1.18(c). Special Effective Dates. The following special Effective
Dates apply:
The allocation dates for salary reduction contributions elected under
Adoption Agreement Section 3.01 are effective beginning January 1, 1995 or as
soon as administratively feasible thereafter.
The valuation dates elected under Adoption Agreement Section 10.14 are
effective for beginning January 1, 1995 or as soon as administratively
feasible thereafter.
SECTION 3.01(h).
Revocation. An Employee, on a prospective basis, may revoke a salary
reduction agreement as of the first day of any payroll period, and may file a
new agreement following a prior revocation as of any subsequent Plan Entry
Date.
SECTION 3.06(h). Suspension of Accrual Requirements. The Advisory Committee
will apply Section 3.06(E) of the Plan by using the substitute language
described in paragraphs 1. and 2. below:
1. In lieu of the Coverage Test definition in the first paragraph of Section
3.06(E), the Plan satisfies the Coverage Test if, on the last day of each
quarter of the Plan Year, the ratio of the Nonhighly Compensated Employees
who benefit under the Plan to the total number of Includible Nonhighly
Compensated Employees is at least equal to 70 % of the ratio of the
Highly Compensated Employees who benefit under the Plan to the total
number of Includible Highly Compensated Employees. As an alternative to
quarterly testing, the annual testing method may be used. Under this
method the Plan, as of the last day of the Plan Year, must take into
account all Includible Employees employed at any time during the Plan Year.
2. The Advisory Committee will apply the third paragraph of Section 3.06(E),
of the Plan first by suspending the accrual requirements for the
Includible Nonhighly Compensated Employees who are Participants, in the
order described in Section 3.06(E), to the extent necessary to satisfy
the Coverage Test. The Advisory Committee then will suspend the accrual
requirements for the Includible Highly Compensated Employees who are
Participants, in the order described in Section 3.06(E), only if
necessary to satisfy the Participation Test.
SECTION 3.15. More than One Plan Limitation. The Advisory Committee modifies
Adoption Agreement Section 3.15 by substituting the following language - "The
Excess Amount attributed to this Plan equals the total Excess Amount."
EXHIBIT 10.17
AGREEMENT
---------
This Agreement is entered into between
Robert A. Kennedy ("Executive"), an individual residing
in Boca Raton, Florida, and TPI Enterprises, Inc., a New
Jersey corporation ("Employer") with its headquarters in
West Palm Beach, Florida. Maxcell Telecom Plus, Inc., a
Delaware corporation ("Maxcell"), joins herein for the
purposes hereinafter set forth.
The parties hereto are entering into this
Agreement in order to clarify the second sentence of
Section 4.1 of the employment agreement, dated as of
December 31, 1993 by and between Employer and Executive
(the "Employment Agreement"), which provision has sur-
vived termination of the Employment Agreement. The
parties hereto hereby agree as follows:
1. Maxcell is a party to the Maxcell Telecom
Plus, Inc. and TPI Enterprises, Inc. v. McCaw Cellular
Communications, Inc. et al. litigation (the "Litiga-
tion"), currently pending in the Circuit Court for the
Fifteenth Judicial Circuit of Florida, in and for Palm
Beach County, Civil Division. Maxcell hereby covenants
that (i) upon the full or partial settlement of the
Litigation, Maxcell shall pay to Executive an aggregate
of 1% of the gross proceeds (without deduction of expens-
es including, without limitation, legal fees) received by
Maxcell upon such full or partial settlement of the
Litigation, or (ii) upon the final, non-appealable judg-
ment in the Litigation, Maxcell shall pay to Executive an
aggregate of 0.5% of the gross proceeds (without deduc-
tion of expenses including, without limitation, legal
fees) received by Maxcell upon disposition of the Litiga-
tion. Maxcell agrees to make the payments called for by
this Section 1 within 10 days of its receipt of funds as
above set forth. Employer agrees to cause Maxcell to
make the payments set forth in this Section 1. In the
event neither of (i) or (ii) occurs, Maxcell shall not be
obligated to pay any additional amounts to Executive
pursuant to this Section 1.
<PAGE>
2. Employer and Executive hereby agree that
the payment to Executive set forth in Section 1 hereof
shall be deemed to satisfy any payment obligations Em-
ployer may have to Executive pursuant to the second
sentence of Section 4.1 of the Employment Agreement,
which provision has survived termination of the Employ-
ment Agreement, and upon payment to Executive pursuant to
Section 1 hereof, the second sentence of Section 4.1 of
the Employment Agreement shall have no future force and
effect.
3. If a party prevails in its attempts to en-
force any right or benefit under this Agreement, the non-
prevailing party agrees to reimburse the prevailing party
for all fees and disbursements of counsel, if any, in-
curred in connection therewith.
4. This Agreement may not be assigned by any
party hereto without the express written consent of the
other parties hereto.
5. It is the intention of the parties hereto
that this Agreement shall not supersede, and shall be
interpreted and applied in conjunction with the terms of
any other agreements whether now in existence (which are
attached hereto as Annex A) or entered into in the future
between Executive and Employer.
6. Should any part, term or provision of this
Agreement be declared or be determined by any court of
competent jurisdiction to be illegal, invalid or unen-
forceable, the legality, validity, and unenforceability
of the remaining parts, terms or provisions shall not be
affected thereby, and said illegal, unenforceable or
invalid part, term or provision shall be deemed not to be
a part of this Agreement.
7. Each party agrees to cooperate fully and
to execute any and all supplementary documents and to
take all additional actions that may reasonably be neces-
sary or appropriate to give full force and effect to the
basic terms and intent of this Agreement and which are
not inconsistent with its terms.
8. Maxcell agrees that it will not dispose in
any fashion of all or part of its interest in the Litiga-
tion without obtaining adequate assurance that the
2
<PAGE>
amounts set forth in Section 1 hereof, if any, will be
paid to Executive in accordance with the terms of Section
1. Maxcell's obligations hereunder and under Section 1
hereof shall be binding on its successors and assigns.
9. THIS AGREEMENT SHALL IN ALL RESPECTS BE
INTERPRETED, ENFORCED AND GOVERNED BY AND UNDER THE LAWS
OF THE STATE OF FLORIDA.
10. This Agreement shall survive termination
of Executive's employment with Employer.
Witness the execution of this Agreement effec-
tive this 20th day of February, 1995.
/s/ Robert A. Kennedy
---------------------
ROBERT A. KENNEDY
"EXECUTIVE"
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
-------------------
"EMPLOYER"
SOLELY FOR PURPOSES OF
MAKING THE COVENANTS CON-
TAINED IN SECTIONS 1 AND 8
HEREOF
MAXCELL TELECOM PLUS, INC.
By: /s/ J. Gary Sharp
-------------------
"MAXCELL"
3
<PAGE>
Annex A
-------
1. Letter Agreement dated November 19, 1991 between
Robert A. Kennedy and the Company as amended by
agreements dated February 23, 1993, March 17, 1993
and December 31, 1993.
2. Letter Agreement dated January 9, 1984 between
Robert A. Kennedy and the Company.
3. Employment Agreement dated as of December 31, 1993
between Robert A. Kennedy and the Company (expired
except for a provision in Section 4.1 which survived
termination).
4. Stock Option Agreements dated August 16, 1989 and
February 5, 1992.
4
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 1995, between
Frederick W. Burford, (the "Executive") and TPI Enterprises,
Inc., a New Jersey corporation ("TPIE"), and TPI Restaurants,
Inc. ("Restaurants"), a Tennessee corporation (collectively, the
"Companies").
WHEREAS, Restaurants and the Executive entered into an
Employment Agreement dated as of October 1, 1991 (the "Old
Agreement") pursuant to which the Executive was employed by
Restaurants as Chief Financial Officer;
WHEREAS, the Companies and the Executive desire to amend and
restate the Old Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter set forth, the parties hereto have
agreed, and do hereby agree, as follows:
1. Employment; Term. Subject to the terms and provisions
-----------------
of this Employment Agreement, the Companies hereby agree to
employ the Executive and the Executive hereby agrees to be
employed by the Companies for the period commencing on the date
hereof and ending on December 31, 199[6], unless sooner
terminated as hereinafter provided (the "Employment Term").
2. Duties; Full Time Employment. During the Employment
-----------------------------
Term, the Executive shall be Chief Financial Officer and
Executive Vice President of each of TPIE and Restaurants, and
shall perform duties commensurate with such positions as shall
from time to time be delegated or assigned to him by the Board of
Directors of the Companies. During the Employment Term, the
Executive shall devote his entire working time, energy and skill
to the services of the Companies and the promotion of their
interests.
3. Place of Performance. During the Employment Term, the
---------------------
Executive shall be based at the Companies' corporate headquarters
in West Palm Beach, Florida or such other place to which such
corporate headquarters may be relocated. If such relocation
occurs, Companies will reimburse Executive's reasonable
relocation expenses not to exceed $10,000.
4. Compensation
------------
(a) Base Salary. As compensation for his services to
------------
the Companies under this Agreement, the Companies will pay
to the Executive during the Employment Term a base salary at
the rate of not less than $222,937 per annum, in
installments which are customary with the practice of the
Companies' payment of salaries to their other senior
management employees. On the last Sunday on December 1994
and the last Sunday in December of each year thereafter
during the Employment Term, the Executive's base salary
shall be increased by an amount which is not less than five
percent (5%) of the immediately preceding year's base
salary.
<PAGE>
(b) Incentive Compensation. The Executive shall be
----------------------
entitled to receive an annual bonus (the "Bonus"), which
shall be paid no later than February 15 of each year during
the Employment Term with respect to the immediately
preceding year, commencing with the year beginning January
1, 1995. The Bonus shall be calculated and paid as follows:
(i) The Bonus for any year (commencing with the
year beginning January 1, 1994) shall be the amount
equal to 1.50% of the increase in the Companies'
Profits attributable to the Companies' operations for
the calendar year just ended over the Companies'
Profits for the prior year excluding any Restaurants
acquired during that Year for which the Bonus is being
calculated. "Profits" shall mean earnings attributable
to the Companies' operations and shall consist of
earnings before reductions for interest payments and
taxes but after reductions for depreciation and shall
be based on the consolidated earnings of both TPIE and
TPI Restaurants, Inc.
(ii) When calculating the Bonus for any given year
(the "Bonus Year") for restaurants acquired that year
in which the Companies have acquired additional
restaurants, the Companies shall determine the pro
forma effect on the acquisition of such restaurants
upon the Companies' financial statements and Profits
for the 12-month period immediately preceding the date
of such acquisition. The Executive's Bonus with
respect to the twelve months after the acquisition of
such restaurants shall be the amount equal to 1.50% of
the increase in the Profits over the amount of Profits
stated in the pro forma financial statements referred
to in the immediately preceding sentence. After each
newly acquired restaurant has been in operation for
twelve months, such restaurant shall be included in the
bonus calculation for general operation of the
Companies set forth in Section 4(b)(i) above.
(iii) In addition to the amounts paid pursuant
to Sections 4(b)(i) and 4(b)(ii) above, Executive shall
be paid an additional Bonus equal to $16,000 for each
percentage point increase in the Companies' same store
nominal sales (which shall include menu price increase)
each calculated and payable annually, with such amount
to be prorated in the case of an increase in nominal
sales of less than a full percentage point.
(iv) Following the close of each fiscal year, the
Compensation Committee of TPIE's Board will review the
Companies' financial performance and make a
discretionary grant to the Executive of 10-year stock
options that vest pro rata over 5 years, having a
strike price equal to the then current market price of
TPIE stock, not to exceed options covering 50,000
shares per year.
(v) In addition, Executive will be granted
additional options expiring on December 31, 1998,
having a strike price equal to the market price of TPIE
stock on the date of this Employment Agreement as
follows:
2
<PAGE>
(a) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$18 for 20 consecutive trading days;
(b) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$19 for 20 consecutive trading days;
(c) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$20 for 20 consecutive trading days;
(d) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$21 for 20 consecutive trading days;
(e) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$22 for 20 consecutive trading days;
(f) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$23 for 20 consecutive trading days;
(g) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$24 for 20 consecutive trading days;
(h) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$25 for 20 consecutive trading days;
(i) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$26 for 20 consecutive trading days;
(j) Options covering 3,000 shares at such
time as the closing price of TPIE stock exceeds
$27 for 20 consecutive trading days;
(vi) All newly granted options including those set
forth in Paragraph 4(b)(v), will terminate fourteen
business days after the Executive's termination of
employment by the Companies for "Cause", and on the
earlier to occur of (i) the expiration of the options,
(ii) one year after a termination of employment by the
Executive for "Good Reason", or (iii) one year after
the Executive's termination of employment by the
Companies without "Cause". Existing stock options
granted to the Executive under the TPIE 1992 Stock
Option and Incentive Plan shall be amended to reflect
the foregoing provisions regarding exercisability upon
termination of employment. Solely for the purposes and
as such terms are defined in TPIE's 1983 Stock Option
Plan and 1984 Stock Option Plan, the Companies shall
retain the Executive as an "employee" and maintain his
"employment" for a period (the "Period") following the
Employment Term as set forth below. The Period shall
be fourteen business days after the Executive's
termination of employment by the Companies for "Cause"
and the Period shall be the shorter of (i) from the end
of the Employment Term through the date of expiration
of the options, and (ii) one year following the end of
the Employment Term if the Executive terminates his
employment for "Good Reason" or if the
3
<PAGE>
Companies terminate the Executive's employment without
"Cause". During the Period, the Executive shall have
no duties other than any he may agree to and the
Companies shall have no obligations to pay the
Executive more than a nominal amount or to provide any
employee benefits other than to maintain the continued
exercisability of his stock options.
(c) Participation in Benefit Plans. During the
---------------------------------
Employment Term, the Executive shall be entitled to
participate in all employee benefit plans generally
available to members of the Companies' senior management,
including, without limitation, medical benefit plans,
subject to and on a basis consistent with the terms,
conditions and overall administration of such plans, and
shall be entitled to such vacation and other perquisites
generally available to members of the Companies' senior
management.
5. Reimbursement for Expenses. The Companies shall
----------------------------
reimburse the Executive for all reasonable and necessary
business, traveling and entertainment expenses and other
disbursements incurred by him (in accordance with reasonable
policies and procedures established for executive officers of the
Companies) for or on behalf of the Companies in the performance
of his duties during the Employment Term under this Agreement
upon submission to the Companies by the Executive of
documentation evidencing such expenses.
6. Unauthorized Disclosure; Competitive Activity.
---------------------------------------------
(a) During the Employment Term and for a period of two
years thereafter (the "Nondisclosure Period"), the Executive
shall not make any Unauthorized Disclosure. For purposes of
this Agreement, "Unauthorized Disclosure" shall mean
disclosure by the Executive to any person, other than an
employee of the Companies or a person to whom disclosure is
reasonably necessary or appropriate or legally required in
connection with the performance by the Executive of his
duties as an executive of the Companies, without the written
consent of the Board of Directors of the Companies, of any
information obtained by the Executive while in the employ of
the Companies with respect to any of the Companies'
business, customers, or methods of distribution, the
disclosure of which he knows or has reason to believe will
or would be damaging to the Companies; provided that the
--------
Executive shall not be prohibited from using or disclosing
any information (i) known generally to the public (other
than as a result of disclosure by him), (ii) known to the
Executive prior to his signing of this Agreement, (iii)
which is non-confidential and disclosed to him or (iv) not
otherwise considered confidential by a person engaged in the
same business as that conducted by the Companies.
(b) Competitive Activity. The Executive agrees that
--------------------
during the Noncompetition Period (as defined below), he will
not, directly or indirectly, own or operate any restaurant
located within five miles of any restaurant owned or
operated by the Companies without the written consent of the
Board of Directors of the Companies. For purposes of this
Agreement the Noncompetition Period shall commence on the
Date hereof and terminate:
4
<PAGE>
(i) if the Executive terminates his employment
hereunder for Good Reason (as defined below), on the
Date of Termination, as determined pursuant to Section
7(g);
(ii) if the Executive's employment hereunder is
terminated by the Companies for Cause (as defined
below), on the second anniversary of the Date of
Termination, as determined pursuant to Section 7(g);
(iii) if the Executive's employment hereunder
is terminated for any other reason provided for in the
Agreement on or prior to the second anniversary of the
Date of Termination, as determined pursuant to Section
7(g).
7. Termination. The Executive's employment with the
-----------
Companies shall terminate in accordance with the following
provisions:
(a) Death. The Executive's employment with the
-----
Companies shall terminate upon the Executive's death.
(b) Disability. The Executive's employment with the
----------
Companies shall terminate if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive
shall have been absent from the Executive's duties with the
Companies for 120 consecutive days, and within thirty days
after Notice of Termination (as hereinafter defined) is
received by the Executive, the Executive shall not have
returned to the full-time performance of his duties.
(c) Cause. The Companies may terminate the
-----
Executive's employment for "Cause". For the purposes of
this Employment Agreement, the Companies shall have "Cause"
to terminate the Executive's employment hereunder upon (1)
the willful and continued failure by the Executive to
reasonably perform the Executive's duties with the Companies
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness), after a
written demand for performance is delivered to the Executive
by the Board of Directors of each of the Companies which
specifically identifies and sets forth with particularity
the manner in which the Board of Directors of each of the
Companies reasonably believes that the Executive has not
substantially performed the Executive's duties, (2) the
willful engaging by the Executive in dishonesty, fraud,
embezzlement or theft, or Executive's conviction of a
felony, (3) Executive's chronic alcoholism or the willful
engaging by the Executive in unethical business conduct
which is materially injurious to the Companies, or (4) a
willful breach of Section 6 hereof by the Executive which is
materially injurious to the Companies.
(d) Good Reason. The Executive may terminate his
------------
employment for "Good Reason." For purposes of this
Agreement, "Good Reason" shall mean:
(i) proven criminal conduct by any of the senior
officers of the Companies in connection with the
operation of the Companies;
5
<PAGE>
(ii) any material breach by the Companies of any
provision of this Agreement, which is not remedied
within 10 business days after receipt by the Companies
of written notice from the Executive; or
(iii) failure of the Executive to be elected
to, or removal of the Executive from, the position of
Chief Financial Officer of TPIE and/or of Restaurants
and/or failure of the Executive to be elected to, or
removal of the Executive from, the Board of Directors
of TPIE and/or Restaurants and/or any material change
in the Executive's duties from the duties as they exist
on the date hereof.
(e) Without Cause. The Companies may terminate the
--------------
Executive's employment without "Cause".
(f) Notice of Termination. Any termination pursuant
----------------------
to clauses (b), (c), (d) or (e) above shall be communicated
by written Notice of Termination from the party seeking
termination of the Executive's employment. For purposes of
this Employment Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Employment Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Executive's employment under the provisions so indicated.
(g) Date of Termination. "Date of Termination" shall
-------------------
mean (1) if the Executive's employment is terminated due to
the expiration of the Employment Term, the date of such
expiration; (2) if the Executive's employment is terminated
due to the death of the Executive, the date of the
Executive's death; (3) if the Executive's employment is
terminated for Disability, thirty days after Notice of
Termination is received by the Executive, provided that the
--------
Executive shall not have returned to the performance of the
Executive's duties on a full-time basis during such thirty
day period; (4) if the Executive's employment is terminated
for Cause, the date specified in the Notice of Termination;
(5) if the Executive's employment is terminated by Companies
without "Cause", the date specified in the Notice of
Termination.
8. Compensation During Disability and Upon Termination.
---------------------------------------------------
(a) During any period that the Executive fails to
perform his duties hereunder as a result of Disability, the
Executive shall continue to receive his full base salary at
the rate then in effect plus any payments payable under
Section 4(b) and 4(c) until the Executive's employment is
terminated pursuant to Section 7. Thereafter, the
Executive's benefits shall be determined in accordance with
the Companies' disability insurance plan or its substantial
equivalent, or any substitute plan or plans then in effect,
if any.
(b) If the Executive's employment is terminated due to
the Executive's death, the Companies shall pay to the
Executive's surviving spouse, or if there is no spouse
surviving, then to the Executive's estate, a lump sum cash
payment, in an amount equal to the Executive's base salary
in effect on the date of the Executive's death for the
twelve full months following the month in which such death
occurs plus incentive compensation
6
<PAGE>
pursuant to Section 4(b) prorated to date of death, plus any
benefits which would have been payable during such three
month period pursuant to Section 4(c).
(c) If the Executive's employment is terminated for
"Cause" pursuant to Section 7(c) hereof, the Companies shall
pay the Executive his full base salary at the rate then in
effect through the Date of Termination and Executive shall
be entitled to receive the option rights as provided in
paragraph 4(b) hereof, and the right to exercise same for
fourteen business days after termination for "Cause" as
provided in paragraph 4(b)(vi) hereof to the extent same are
earned or otherwise qualify for exercise by Executive during
the fourteen business days following a termination for
"Cause", and the Companies shall have no further obligations
to the Executive under this Employment Agreement.
(d) If the Executive's employment is terminated (1)
without "Cause" pursuant to Section 7(e) hereof, or (2) by
the Executive with "Good Reason" pursuant to Section 7(d),
hereof, the Companies shall pay the Executive his full base
salary at the rate then in effect for one year following
termination plus accrued bonus to the date of termination,
payable when other bonuses for such calendar year are paid
by Companies and the Executive shall be entitled to receive
the option rights as provided in paragraph 4(b) hereof to
the extent same are earned or otherwise qualify for exercise
by Executive during the one-year period following a
termination by the Companies without "Cause" or by Executive
with "Good Reason", and the right to exercise same for one
(1) year after termination by the Companies without "Cause",
or by Executive with "Good Reason", as provided in paragraph
4(b)(vi) hereof.
(e) Executive shall have no duty to mitigate the
amounts payable under this paragraph 8, and any payments
provided for in this paragraph 8 and subparagraph thereof,
shall be paid to Executive without regard to any
compensation received by Executive from subsequent employers
and Companies shall not offset or receive a credit against
any amounts otherwise due Executive under this Agreement.
9. Indemnification. The Companies shall indemnify, defend
---------------
and hold harmless the Executive from and against all obligations,
liabilities, demands, claims, actions, losses, damages, costs and
expenses, including without limitation, interest, penalties and
attorney's fees (at the trial level and/or appellate level) and
expenses, arising out of or relating to Executive's employment
with the Companies or either one of them, at any time, and such
indemnification shall be to the fullest extent allowed or
provided by law. The terms of this indemnification provision
shall survive the termination of this Agreement and/or
Executive's employment.
10. Successors; Binding Agreement; Assignment. Nothing in
-----------------------------------------
this Employment Agreement shall prevent the consolidation of the
Companies with, or its merger with or into, any other
corporation, or the sale by the Companies of all or substantially
all of its properties or assets to any other corporation. The
Companies will use their best efforts to cause any corporation
succeeding (whether direct or indirect, by purchase, merger or
consolidation or otherwise) to all or substantially all of the
properties and assets of the Companies (the "Successor")
expressly to assume and agree to perform this Employment
Agreement in the same manner and to the same extent that the
Companies would be required to perform it if no such
7
<PAGE>
succession had taken place. In the event that any Successor
expressly assumes and agrees to perform this Employment Agreement
or any of the obligations hereunder, and the Companies assign
this Employment Agreement or any part of this Employment
Agreement to the Successor, such assumption shall not relieve the
Companies of such assumed obligations to the Executive. The
Executive's rights and obligations under this Employment
Agreement shall not be transferable by assignment or otherwise
nor shall the Executive's rights be subject to encumbrance or
subject to the claims of the Companies' creditors. This
Employment Agreement is for the sole benefit of the parties
hereto and shall not create any rights in third parties, except
as expressly set forth herein.
11. Entire Agreement; Severability. Except for executive
-------------------------------
perquisite plan(s), retirement plans, and any other regular
employee benefit plans, this Employment Agreement constitutes
the entire agreement between the parties hereto in respect of the
employment of the Executive by the Companies during the
Employment Term and supersedes and replaces any and all prior
written agreements and understandings between the parties
regarding the subject matter hereof, whether written or oral,
including, without limitation, the Old Agreement. The provisions
herein shall be regarded as divisible, and if any of such
provisions or any part thereof are declared invalid or
unenforceable, the validity and enforceability of the remainder
of such provisions or parts thereof and the applicability thereof
shall not be affected thereby.
12. Governing Law. The validity, interpretation,
---------------
construction, performance and enforcement of this Employment
Agreement shall be governed by the laws of the State of
Tennessee.
13. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed to have been
duly given if delivered in person or sent by certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the Companies, to:
TPI Enterprises, Inc.
East Tower, Suite 903-909
777 South Flagler Drive
West Palm Beach, Florida 33401
Attn: Chairman of the Board
If to the Executive to:
Fred Burford
___________________
___________________
or to such other address as the party to whom notice is to be
given may, from time to time, designate in writing delivered in a
like manner; provided that notices of changes of address shall be
--------
effective only upon receipt thereof. Notice given by mail as set
forth above shall be deemed delivered on the fifth day following
the date the same is postmarked. Notice delivered in person
shall be deemed delivered on the date received.
8
<PAGE>
14. Modifications and Waivers. No provision of this
---------------------------
Employment Agreement may be modified, altered or amended except
by an instrument in writing executed by the parties hereto. No
waiver by either party hereto of any breach by the other party
hereto of any term of provision of this Employment Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar terms or provisions at that time or at any
prior or subsequent time.
15. Headings. The headings contained herein are solely for
--------
the purpose of reference, are not part of this Employment
Agreement and shall not in any way affect the meaning or
interpretation of this Employment Agreement.
16. Counterparts. This Employment Agreement may be
------------
executed in two or more counterparts, each of which shall be
deemed to be an original but all of which together shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the Companies have caused this
Employment Agreement to be executed by authority of their
respective Board of Directors, and the Executive has hereunto set
his hand, the day and year first above written.
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
--------------------------------
Name: J. Gary Sharp
------------------------------
Title: President
-----------------------------
TPI RESTAURANTS, INC.
By: /s/ J. Gary Sharp
--------------------------------
Name: J. Gary Sharp
------------------------------
Title: President
-----------------------------
/s/ Frederick W. Burford
-----------------------------------
FREDERICK W. BURFORD
State of Florida
County of Palm Beach
The foregoing instrument was acknowledged before me this 5th of
---
January, 1995, by J. Gary Sharp & Frederick Burford.
------- ----------------------------------
(Seal) /s/ Christine Cervantes
-----------------------
Notary Public
Both Personally known to me X
-------------
Produced identification:_____________
Type:________________________________
10
EXHIBIT 10.34
SECOND AMENDED AND RESTATED
ADDENDUM TO RESERVED AREA AGREEMENT
This Agreement is a Second Amended and Restated Addendum to
that certain Reserved Area Agreement dated May 1, 1989 relating
to the development of "Shoney's" restaurants (the "Reserved
Area Agreement") within certain counties within the State of
Texas by and between Shoney's, Inc. (hereinafter referred to as
the "Licensor") and T.P.I. Restaurants, Inc. (hereinafter
referred to as the "Licensee").
WITNESSETH:
WHEREAS, Licensor and Licensee wish to make certain
changes in the Reserved Area Agreement, which changes are more
particularly set forth herein.
NOW. THEREFORE, for and in consideration of the covenants
and agreements set forth herein and in the Reserved Area
Agreement, it is mutually agreed as follows:
1. With respect to paragraph 2 of the Reserved Area
Agreement:
(a) "Operational good standing" shall be determined by
Licensor from those restaurants then being operated by
Licensee within the Reserved Area; and
(b) The reference to "then current form of license
agreement" shall be deemed to mean that form of
license agreement together with such addendum as has
heretofore been agreed to by Licensor and Licensee.
2. Paragraph 4 of the Reserved Area Agreement is deleted
in its entirety.
3. Paragraph 6 of the Reserved Area Agreement is amended
as follows:
(a) After the word "Licensor" and before the comma in the
second line thereof, insert the words "for operation
of a restaurant within the Reserved Area"; and
(b) After the word "expiration" in the third line there
insert the following: "(without replacing those
restaurants whose license agreements expire within two
(2) years following such expiration)".
(c) The following sentence shall be added: "The
termination of Licensee's rights under this agreement
shall be Licensor's sole remedy for Licensee's
allowing the expiration (and failure to replace) such
license agreements."
<PAGE>
4. Exhibit B to the Reserved Area Agreement is amended to
change "1996" in the Development Schedule to "1998."
5. Except as expressly modified herein, all other terms
and provisions in any agreements between the parties
(including, without limitation, those contained in that
agreement dated August 2, 1988 by and among Licensor, Licensee
(then known as Shoney's South, Inc.) and T.P.I. Enterprises,
Inc. and in the Reserved Area Agreement), including the
provisions relating to the required fees, shall remain in full
force and effect; provided, however, that this Second Amended
and Restated Addendum shall replace and supersede that Amended
and Restated Addendum dated January 1, 1990 to the Reserved
Area Agreement.
IN WITNESS WHEREOF, the parties have executed this Second
Amended and Restated Addendum this day of April, 1991.
SHONEY'S, INC. T.P.I. RESTAURANTS
By: /s/ Stephen C. Sanders By: J. Gary Sharp
Title: Division President Title:
By: /s/ Russell L. Cooper
Title: SR. V.P. Franchising & Development
<PAGE>
THIRD ADDENDUM TO RESERVED AREA AGREEMENT
THIS AGREEMENT is a third addendum to that certain Reserved
Area Agreement dated May 1, 1989 (the "Reserved Area Agreement"),
by and between Shoney's Inc. (hereinafter referred to as the
"Licensor") and TPI RESTAURANTS, INC. (hereinafter referred to as
the "Developer") in connection with the development of Shoney's
Restaurants within Texas.
W I T N E S S E T H:
WHEREAS, Licensor and Developer wish to make certain changes
in the Reserved Area Agreement, which changes are more particularly
set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Reserved Area Agreement, it
is mutually agreed as follows:
1. Exhibit B to the Reserved Area Agreement is amended to
modify the Development Schedule as follows: Licensee
shall build and open fourteen (14) Shoney's restaurants
within the Reserved Area on or before October 1, 1999.
2. Except as expressly amended herein, all other terms and
conditions of the Reserved Area Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the day of , 1995.
DEVELOPER: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By:
Title: V.P. of Development
Title:
By:
Title:
<PAGE>
1/2/89
SHONEY'S RESTAURANT
RESERVED AREA AGREEMENT
THIS AGREEMENT, made and entered into this day of May
1989, by and between SHONEY'S, INC.., a Tennessee corporation,
Its principal place of business located at 1727 Elm Hill
Nashville, Tennessee 37210 (hereinafter referred to as
"Licensor") and T.P.I. Restaurants, Inc. (hereinafter referee
to as the "Licensee").
WITNESSETH:
WHEREAS, Licensee desires to reserve the right to develop
and operate restaurants to be operated under the names
"Shoney's" or such other name as Licensor shall designate
(hereinafter referred to as "Shoney's restaurants") to be
located in the area specified in Exhibit A hereto, which area
in hereinafter referred to as the "Reserved Area"; and
WHEREAS, Licensor is willing to reserve to Licensee the
right to develop and operate Shoney's restaurants in the
Reserved Area under the terms and conditions set forth below.
NOW, THEREFORE, for and in consideration of the sum of Ten
Dollars ($10.00) and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the
parties covenant as follows:
1. Without the prior written consent of Licensee,
Licensor agrees not to develop or operate for itself or grant
an option or license to any other party to develop or operate a
Shoney's restaurant in the Reserved Area, except as hereinafter
provided in this Agreement.
'
2. Licensee agrees to open Shoney's restaurants in the
Reserved Area in accordance with the development schedule set
forth in Exhibit B attached hereto. Prior to opening any such
restaurant, Licensee shall submit an application to Licensor
for each new Shoney's restaurant Licensee desires to open in
the Reserved Area. Following such application, Licensor shall
review the operations and financial condition of Licensee and
______ Licensor (Initial Here)
______ Licensee (Initial Here)
<PAGE>
of all existing Shoney's or other restaurants operated by
Licensee and if Licensor determines that Licensee and said
restaurants are in good standing, both financially and
operationally, Licensee shall be given the right to execute
Licensor's then current form of license agreement for the
operation of such restaurant. For the purposes of this
Agreement, "financial good standing" shall mean the ability to
bear the risk of losses that may result from the construction
and operation of additional restaurants without compromising
any existing restaurant operations either in terms of quality
or extent of services. "Operational good standing" shall mean
that Licensee shall be able to staff and operate a new
restaurant in conformity with the standards of service,
sanitation and food Preparation then in effect without
compromising those same standards in his existing restaurant
operations. If, in the opinion of Licensor, Licensee is not in
good standing at the time of the review, Licensor will issue in
writing a statement listing any and all deficiencies, and
Licensee will then have a period of thirty (30) days from the
date of such statement to correct the deficiencies. If Licensee
corrects the deficiencies and in the opinion of Licensor is
then in good standing, Licensee shall then be given the right
to execute a license agreement under the terms set forth above
in this paragraph. If Licensee fails to correct the
deficiencies within said thirty (30) day period, then all of
Licensee's rights under this Agreement shall terminate as
provided in paragraph 3. Licensor agrees that it shall begin
the review of Licensee's operations required under this
paragraph no later than thirty (30) days after receiving a
request by Licensee for a license to develop and operate a
Shoney's restaurant in the Reserved Area, and will complete and
notify Licensee within sixty (60) days after receiving the
request.
3. In the event Licensee fails to open Shoney's
restaurants within the Reserved Area in accordance with the
development schedule set forth on Exhibit B attached hereto,
this Agreement shall, at the option of the Licensor, terminate
and Licensor shall thereafter be free to develop and operate
for itself or to grant a license to any other party to develop
or operate Shoney's restaurants in the Reserved Area, and
Licensee shall have only such rights as shall have been granted
to it pursuant to any existing license agreement and shall have
no further rights pursuant to this Agreement.
4. Should any Shoney's restaurant be destroyed or should
the site for such restaurant be condemned, Licensee shall have
one year from the date of such destruction or condemnation to
reopen said Shoney's Restaurant or replace it with a new
Shoney's restaurant. If Licensee fails to reopen or replace the
______ Licensor (Initial Here)
______ Licensee (Initial Here)
-2-
<PAGE>
destroyed or condemned restaurant within the one year period,
then all of Licensee's rights under this Agreement shall
terminate as provided in paragraph 3. Licensee shall not be
charged an initial license fee for any new Shoney's restaurant
opened to replace a restaurant destroyed or condemned.
5. Unless otherwise set forth on Exhibit B attached to
this Agreement, the franchise fees, royalty fees and other fees
applicable to any new Shoney's restaurant opened pursuant to
this Agreement shall be at the rates contained in the first
license agreement for a Shoney's restaurant in the Reserved
Area granted to Licensee.
6. Upon the default by Licensee under the terms of any
license agreement executed by Licensee with Licensor, or the
expiration of more than ten percent (10%) of Licensee's license
agreements for operation of Shoney's restaurants within the
Reserved Area, Licensee's rights under this Agreement shall, at
Licensor's option, terminate.
7. Licensee shall not be limited to opening the number of
Shoney's restaurants shown on Exhibit B but shall be entitled
to open as many restaurants in the Reserved Area as it deems
desirable provided Licensee is in compliance with the terms
hereof and following the procedures set forth herein for the
opening of new Shoney's restaurants in the Reserved Area.
8. Licensee may not assign, transfer or convey all or any
part of this Agreement or the rights granted to it hereunder
except with the prior written consent of Licensor.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the day and date first above written, the
corporate party(ies) by their duly authorized officer or
officers.
LICENSOR: SHONEY'S INC, LICENSEE:
By: /s/ [Signature] By: /s/ Larry P. Waeba
Title: Title: Sr. Vice Pres.
By
Title:
-3-
<PAGE>
EXHIBIT A
to Reserved Area Agreement
Dated May 1, 1989 between
Shoney's, Inc. and T.P.I. Restaurants, Inc.
Reserved Area
The following counties, all within the State of Texas:
Limestone Hill
Bosque Hood
Johnson Ellis
Navarro Henderson
Van Zandt Kaufman
Dallas (except as Tarrant
set forth below) Wise
Parker Rains
Rockwall Franklin
Wood Morris
Titus Cass
Marion Hunt
Hopkins Delta
Upshur Red River
Camp
Excluded from the reserved area set forth above, however,
is that area within Dallas County, Texas that is within a 5
mile radius of 2310 Stemmons Trail, Dallas, Texas 75220.
In exchange for the grant of the foregoing reserved area,
Licensee hereby relinquishes any claim or right to develop
and/or open Shoney's restaurants within the areas referred to
as the "Illinois/Indiana Territory", the "Iowa Territory", the
"Wisconsin Territory" and the "Minnesota Territory" in that
Agreement dated January 9, 1987 (the "Settlement Agreement")
between Shoney's, Inc. and Shoney's South, Inc., the predecessor
corporation of Licensee. With the exception of the preceding
sentence, the terms and Provisions of the Settlement Agreement
shall remain in full force and effect.
______ Licensor (Initial Here)
______ Licensee (Initial Here)
06281/5-1-89
<PAGE>
EXHIBIT B
to Reserved Area Agreement
Dated May 1, 1989 between
Shoney's, Inc. and T.P.I. Restaurants, Inc.
Development Schedule
Licensee shall build and open fourteen (14) Shoney's
restaurants within the Reserved Area on or before October 1,
1996.
Fee Schedule
For any Shoney's restaurant opened within the-Reserved
Area, the initial fees and royalties shall be:
Initial Fee: $4,000 per restaurant
Royalty: 3% of gross sales
______ Licensor (Initial Here)
______ Licensee (Initial Here)
06281/5.-8-89
-3-
<PAGE>
ADDENDUM TO RESERVED AREA AGREEMENT
This Agreement is an Addendum to that certain Reserved Area
Agreement relating to the development of "Shoney's" restaurants
dated May _____ 1989 (the "Reserved Area Agreement") by and
between Shoney's, Inc. (hereinafter referred to as the
"Licensor") and T.P.I. Restaurants, Inc. (hereinafter referred
to as the "Licensee")
WITNESSETH:
WHEREAS, Licensor and Licensee wish to make certain
changes in the Reserved Area Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants
and agreements set forth herein and in the Reserved Area
Agreement, it is mutually agreed as follows:
1. With respect to paragraph 2 of the Reserved Area
Agreement:
(a) "Operational good standing" shall be determined by
Licensor from those restaurants then being operated by
Licensee within the Reserved Area; and
(b) The reference to "then current form of license
agreement" shall be deemed to mean that form of
license agreement together with such addendum as has
heretofore been agreed to by Licensor and Licensee.
2. Paragraph 4 of the Reserved Area Agreement is deleted
in its entirety.
3. Paragraph 6 of the Reserved area Agreement is amended
as follows:
(a) After the word "Licensor" and before the comma in the
second line thereof, insert the words "for operation
of a restaurant within the Reserved Area"; and
(b) After the word "expiration" in the third line thereof,
insert the following: "(without replacing those
restaurants whose license agreements expire within two
(2) years following such expiration)".
(c) The following sentence shall be added: "The
termination of Licensee's rights under this agreement
shall be Licensor's sole remedy for Licensee's
allowing the expiration (and failure to replace) such
license agreements."
4. Except as expressly modified herein, all other terms
and provisions of the Reserved Area Agreement, including the
provisions relating to the required fees, shall remain in full
force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Addendum this 8th day of May, 1989.
SHONEY'S, INC. T.P.I. RESTAURANTS
By: /s/ [Signature]
By: /s/ Larry R. Walla
Title:
Title: Sr. Vice Pres.
By:
Title:
06461/5-8-89
-2-
<PAGE>
AMENDED AND RESTATED
ADDENDUM TO RESERVED AREA AGREEMENT
This Agreement is an Amended and Restated Addendum to
certain Reserved Area Agreement dated May 1, 1989 relating to
the development of "Shoney's" restaurants (the "Reserved Area
Agreement") within certain counties within the State of Texas
by and between Shoney's, Inc. (hereinafter referred to as the
"Licensor") and T.P.I. Restaurants, Inc. (hereinafter referred
to as the "Licensee").
WITNESSETH:
WHEREAS, Licensor and Licensee wish to make certain
changes in the Reserved Area Agreement. which changes are
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants
and agreements set forth herein and in the Reserved Area
Agreement, it is mutually agreed as follows:
1. With respect to paragraph 2 of the Reserved
Agreement:
(a) "Operational good standing" shall be determined by
Licensor from those restaurants then being operated by
Licensee within the Reserved Area; and
(b) The reference to "then current form of license
agreement" shall be deemed to mean that form of
license agreement together with such addendum
heretofore been agreed to by Licensor and Licensee.
2. Paragraph 4 of the Reserved Area Agreement is deleted
in its entirety.
3. Paragraph 6 of the Reserved Area Agreement is amended
as follows:
(a) After the word "Licensor" and before the comma in the
second line thereof, insert the words "for operation
of a restaurant within the Reserved Area"; and
(b) After the word "expiration" in the third line, the
insert the following: "(without replacing those
restaurants whose license agreements expire within two
(2) years following such expiration)"
(c) The following sentence shall be added: "The
termination of Licensee's rights under this agreement
shall be Licensor's sole remedy for Licensee's
allowing the expiration (and failure to replace) such
license agreements."
<PAGE>
4. Exhibit B to the Reserved Area Agreement is amended to
change "1996" in the Development Schedule to "1997."
5. Except as expressly modified herein, all other terms
and provisions in any agreements between the parties
(including, without limitation, those contained in that
agreement dated August 2, 1988 by and among Licensor, Licensee
(then known as Shoney's South, Inc.) and T.P.I. Enterprises,
Inc. and in the Reserved Area Agreement), including the
provisions relating to the required fees, shall remain in full
force and effect; provided, however, that this Amended and
Restated Addendum shall replace and supersede that Addendum
dated May 1, 1989 to the Reserved Area Agreement.
IN WITNESS WHEREOF, the parties have executed this
Addendum this 1st day of January, 1990.
SHONEY'S, INC. T.P.I. RESTAURANTS
By: /s/ F.C. McDaniel, Jr. By: /s/ Gary Sharp
Title: Secretary Title: President
By:
Title:
EXHIBIT 10.35
THIS AGREEMENT made and entered into the
day of August 1988, by and between Shoney's, Inc., a Tennes-
see corporation, with its principal place of business
located at 1727 Elm Hill Pike, Nashville, Tennessee,
37210 (hereinafter referred to as the ("Licensor"), TPI
Enterprises, Inc. a New Jersey corporation, with its
principal place of business located at 885 Third Avenue,
New York, New York 10022 (hereinafter referred to as
"TPI") and Shoney's South, Inc., a Tennessee corporation,
with its principal place of business located at 2158
Union Avenue, Memphis, Tennessee 38174, (hereinafter
referred to as the "Licensee").
WITNESSETH
WHEREAS, Licensee has entered into certain
Reserved Area and License Agreements (as modified by an
Addendum) with Licensor pursuant to which Licensee has
the exclusive rights in certain territories to develop
and operate restaurants using the "Shoney's" service
mark, which Agreements are identified on Exhibits 1 and 2
hereof,
WHEREAS, Licensee has entered into certain
Reserved Area and License Agreements (as modified by an
<PAGE>
Addendum) with Licensor pursuant to which Licensee has
the exclusive rights in certain territories to develop
and operate restaurants using the "Captain D's" service
mark, which Agreements are identified on Exhibits 3 and 4
hereof,
WHEREAS, TPI has become and continues to be the
beneficial owner of a majority of the shares of common
stock of Licenses,
WHEREAS, Licensee, TPI and Licensor mutually
wish to amend certain of the terms and conditions of the
License Agreements, as modified by the Addenda thereto,
identified on Exhibits 2 and 4 hereof,
NOW THEREFORE, for and in consideration of the
sum of ten dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is
hereby acknowledged, Licensee, TPI and Licensor agree as
follows:
1. Paragraph 5(c) of each License Agreement,
as modified by the Addendum to each such License Agree-
ment, is further amended to require that in the event
that Licensee's balance sheet, statement of income,
statement of changes in financial position and statement
of changes in equity are no longer made available to the
public, then, during any such period of unavailability,
2
<PAGE>
TPI shall furnish to Licensor such financial information
for TPI when and to the extent such information is made
available to the public. Should TPI's financial informa-
tion and/or statements not be made available to the pub-
lic, it is agreed that TPI will nevertheless provide such
information to Licensor within forty-five (49) days after
the end of each of TPI's first three fiscal quarters and
within ninety (90) days after the end of TPI's fiscal
year.
2. Paragraph 8(d) of each License Agreement,
as modified by the Addendum to each such License Agree-
ment, is further amended to provide that Licensee Will
not operate any Shoney's or Captain D's restaurant as a
twenty-four (24) hour concept, provided however, Licensee
is entitled to operate Shoney's and Captain D's restau-
rants during hours of operation ion consistent with the prior
operation by Licensee of such restaurants it operates
under the Licensee Agreements identified on Exhibits 2
and 4 hereof including on a twenty-four (24) consecutive
hourly basis for special events.
3. Neither Licensee nor TPI will in the future
issue any public equity, public debt or any other type of
public financing whatsoever, including, without limita-
tion, financing that would be public but for an exemption
3
<PAGE>
from the registration thereof, using the word "Shoney's"
as part of the name of Licenses or any successor thereto,
except as may be necessary by reason of any applicable
federal or state law.
4. Paragraph 18(a) of each License Agreement,
as modified by the Addendum to each such License Agree-
mentn is further amended to add the following: in the
event that the shares of stock or interests in such stock
of Licensee are to be sold or transferred, Licensee and
TPI, if possible, shall suggest to any prospective buyer
of such shares that it meet with Licensor to discuss such
buyer's possible operations of Licensee's business. It
is understood and agreed, however, that the failure of
any prospective buyer to meet with Licensor prior to an
acquisition of such shares of Licenses shall not affect
any right that exists to sell the stock of Licensee with-
out the prior consent or approval of Licensor.
5. Paragraph 19 of each License Agreement, as
modified by the Addendum to each such License Agreement,
is further amended to state:
4
<PAGE>
(i) the standards for determining whether a
food service business is "similar" to the food service
businesses operated under the Shoney's System and the
Captain D's System shall include without limitation a
consideration of (a) whether the food service business
has a liquor license, (b) the concept and style of the
food service business, (c) the average check price,
(d) the primary market segment targeted and (e) the menu
items offered.
(ii) TPI and any successor thereto is a
"related corporation" of Licensee as that term is used in
Paragraph 19 of each License Agreement, as modified by
the Addendum to each such License Agreement.
(iii) The officers. directors and key employ-
ees of Licensee, specified in the Agreements identified
in Exhibits 2 and 4 hereto, and such successor management
that assume the same or comparable management positions
with Licensee as those officers, directors and key em-
ployees now hold (hereinafter referred to as "Covered
Employees"), are covered by Paragraph 19 of each License
Agreement, as modified by the Addendum to each such Li-
cense Agreement, during the period of their employment by
Licensee and for twelve (12) months after termination of
such employment. Notwithstanding the foregoing, it is
5
<PAGE>
understood and agreed, however, that in the event any
Covered Employee while in the employ of Licenses and
without Licensee's knowledge or after termination of his
employment by Licensee fails to comply with the terms of
Paragraph 19 of each License Agreement, as modified by
the Addendum to each such License Agreement, such failure
shall not constitute a breach by Licensee of any License
Agreement or Reserved Area Agreement between Licensee and
Licensor, or a cause for default or termination of any
such License Agreement or Reserved Area Agreement.
6. Notwithstanding Paragraph 20(i) and (j) of
each License Agreement, Licensor agrees that it will
unreasonably withhold its consent to the closure of any
restaurant operated under license by Licensee from Llcen-
sor that is not operating profitably or for which the
term of the License Agreement extends beyond the term of
any lease for the restaurant in question; provided, how-
ever, any such unit, so closed, shall not be converted by
Licensee or TPI to another restaurant similar to the
restaurants operated under the "Shoney's", "Captain D's"
or "Lee's Famous Recipe" system. Any such unit closed
shall be replaced so that, on July 1, 1993, the net num-
ber of both Shoney's and Captain D's restaurants operated
by Licensee under license from Licensor shall be the same
6
<PAGE>
or greater than the number of such restaurants operated
by Licensee on July 1, 1988. A failure to meet this goal
shall result in termination of all Licensee's Reserved
Area Agreements (identified on Exhibits 1 and 3 hereto).
A failure to meet this goal shall not, however operate
to terminate any then existing License Agreement between
Licensee and Licensor; provided, further, that a unit
that is sold to another franchisee of Licensor, who exe-
cutes a License Agreement with Licensor for operation of
that unit shall not count as a "closed" unit.
7. In the event Licensee, with the approval of
Licensor, opens any new restaurants to be operated under
license by Licensee from Licensor or acquires any restau-
rant(s) operated by others under license from Licensor,
Licensee's operation of such restaurant(s) shell be gov-
erned by the execution of a License Agreement for such
restaurants in the form of the License Agreement then in
effect (unless a different applicable form of License
Agreement has previously been agreed upon by the parties)
as modified by the Addendum to such License Agreements
and by this Agreement (except with respect to Royalty
Rate) and with such changes in points of detail as are
necessary.
7
<PAGE>
8. The parties agree to execute, or cause to
be executed, such other and further documents and/or
instruments as may be necessary or appropriate to carry
out the agreements set forth herein.
9. It is agreed and understood that by reason
of its signing this Agreement, TPI is not and shall not
be construed to be a licensee of Licensor and that TPI is
not and shall not be construed to be a party to any Li-
cense Agreements between Licensor and Licensee.
10. This Agreement and the covenants, restric-
tions and limitations contained herein shall be binding
upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns.
SHONEY'S, INC.
By:
Title:
SHONEY'S SOUTH, INC.
By: /s/ Larry R. Waeber
Title: Sr. Vice Pres. C.D.O.
TPI ENTERPRISES, INC.
By:
Title:
8
EXHIBIT 10.36
01/02/92
SHONEY'S
MARKET DEVELOPMENT AGREEMENT
This Agreement made and entered into this 1st day of December, 1992 in
Nashville, Tennessee by and between Shoney's Inc., a Tennessee corporation with
its principal office at 1727 Elm Hill Pike, Nashville, Tennessee 37210
("Licensor"); and TPI RESTAURANTS, INC., corporation with its principal office
at 2158 Union Avenue, Memphis, TN 38104 ("Developer").
WHEREAS, Licensor at a substantial expenditure of time effort and money,
has developed and perfected a system of opening and operating restaurants
utilizing the "Shoney's" service mark ("Shoney's restaurants"); and
WHEREAS, Licensor has acquired knowledge and experience in the
composition, distribution, advertising and sale of food products by Shoney's
Restaurants and with respect to the style of the buildings and signs used
by said restaurant and has successfully established a reputation, demand and
goodwill for the products sold by such restaurants; and
WHEREAS, Developer recognizes the value of uniformity in a system of
restaurants and Developer further recognizes the value of Licensor's knowledge
and experience gained through the operation of Shoney's Restaurants, and the
value of the trade names, trademarks, service marks and other distinctive
features of Shoney's Restaurants; and
WHEREAS, Developer acknowledges Licensor's sole and exclusive ownership of
any rights to Licensor's current and future trade names, trademarks and service
marks and to all current and future related practices, procedures, methods,
devices, techniques, recipes and systems; and
WHEREAS, Developer desires to open and operate a certain number of
Shoney's Restaurants within the geographic area specified in this Agreement
within the term of this Agreement; and
WHEREAS, Licensor is willing to grant Developer such rights in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, it is mutually agreed as follows:
1. GRANT. Licensor hereby grants to Developer during the term of
this Agreement and subject to the conditions hereof the right to open and
operate Shoney's Restaurants in the limited
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geographical area identified and set forth in Exhibit A hereto; this
geographical area being hereinafter referred to as the "Territory." The
operation of each of the Shoney's Restaurants developed pursuant to this
Agreement will be governed by individual License Agreements issued by Licensor
in accordance with Paragraph 12 below. During the term of this Agreement,
without the consent of Developer, Licensor shall not grant options for or
license others to operate, nor will it itself operate, any new or additional
Shoney's Restaurants in the Territory.
2. TERM; RENEWAL.
(a) Unless earlier terminated pursuant to Paragraph 14, this Agreement
shall terminate, without any action on the part of either of the parties being
necessary, upon the date of execution by Licensor of the License Agreement for
the last of the Shoney's Restaurants then required to be opened and operated
pursuant to this Agreement or any renewal hereof, unless Developer, upon, or not
more than thirty (30) days prior to, execution of the License Agreement for such
last restaurant, gives notice to Licensor (in accordance with this Agreement)
of Developer's intent to renew this Agreement (a "Renewal Notice"). Upon
receipt of a Renewal Notice, Licensor shall conduct a survey of the
Territory and, within ninety (90) days following receipt of the Renewal Notice,
shall notify Developer of the additional number of Shoney's restaurants that
Licensor proposes to be built and opened within the Territory, if any, and the
development schedule for such additional restaurants (a "Development Notice").
If Licensor and Developer, within ninety (90) days from Licensor's sending a
Development Notice to Developer, agree on the number of additional Shoney's
restaurants to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this Agreement shall be
extended until the time of execution of the License Agreement for the last of
the additional Shoney's restaurants that Licensor and Developer agree should be
built and opened within the Territory. If Licensor and Developer, within ninety
(90) days from Licensor's sending a Development Notice to Developer, do not
agree (with both Licensor and Developer being obligated to negotiate in good
faith) upon the additional number of restaurants to be built and opened within
the Territory or the development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either of the
parties being necessary, on the ninety first (91st) day following Licensor's
sending the most recent Development Notice to Developer.
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(b) If, at the time of any proposed renewals of this agreement by
Developer pursuant to this Paragraph 2, Licensor determines that no additional
Shoney's restaurants are then required to be built and opened within the
Territory, the Development Notice sent by Licensor in connection with such
proposed renewal shall so state. In such event, the term this Agreement
shall be extended for a period of one (1) year from the date Licensor sent the
Development Notice to Developer indicating that no additional Shoney's
restaurants are then required to be built and opened within the Territory.
Thereafter, this Agreement shall automatically renew for successive one (1)
year terms, unless Licensor determines that an additional restaurant or
restaurants are then required and at least ninety (90) days prior to
expiration of the then current term, sends a Development Notice to Developer
stating the number of restaurants to be built and opened within the
Territory and the development schedule for such additional restaurants.
If Licensor and Developer, within ninety (90) days from Licensor's sending
the Development Notice to Developer, agree on the number of additional Shoney's
restaurants to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this Agreement shall be
extended until the time of execution of the License Agreement for the last of
the additional Shoney's restaurants that Licensor and Developer agree should
be built and opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending Development Notice to Developer, do
not agree (with both Licensor and Developer being obligated to negotiate in
good faith) upon the additional number of restaurants to be built and opened
within the Territory or the development schedule for such additional
restaurants, this Agreement shall terminate, without any action on the part
of either of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the Development Notice to Developer.
3. DEVELOPMENT FEE. Upon execution of this Agreement, Developer shall
pay to Licensor the fee set forth in Exhibit B hereto and designated as the
development fee (the "Development Fee"). This Development Fee shall be fully
earned by Licensor in consideration of its execution of this Agreement and shall
be non-refundable. However, Licensor shall credit the Development Fee, pro
rata, based upon the number of Shoney's restaurants to be built within the
Territory, toward the License Fees payable under any of the License Agreements
issued to Developer pursuant to this Agreement, provided applicable restaurants
are constructed and opened with the schedule set forth in Exhibit B (the
Schedule"). Upon renewal of this Agreement and an agreement by Franchisor and
the developer/franchisee to build additional
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restaurants pursuant to Paragraph 2, an additional Development Fee will be due.
The amount will be determined in the same manner as the original Development Fee
charged upon execution of this Agreement (number of restaurants multiplied by
one-half of the license fee for each such restaurant), and is fully earned at
the time of the extension of this Agreement. The additional Development Fee also
will be credited pro rata against the individual license fees of the additional
restaurants opened pursuant to this Agreement if the developer/franchisee
remains in compliance with all terms and conditions of this Agreement, including
the development schedule for the additional restaurants.
4. DEVELOPMENT SCHEDULE. Developer shall build, open and operate properly
licensed Shoney's Restaurants in accordance with the Development Schedule. In
the event that Developer opens and continuously operates a greater number of
Shoney's restaurants than required during any interim period of the Development
Schedule, the requirements of the succeeding period(s) shall be deemed satisfied
to the extent of such excess number of restaurants, up to the total number of
restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for locating pro-
posed sites within the Territory for each of the restaurants contemplated in the
Development Schedule. During the term of this Agreement, Developer shall use
its best efforts to locate suitable sites. Licensor, in its discretion, may
offer counseling and advice in site selection. In no event, however, shall
Licensor be obligated to loan money, guarantee leases, provide financing or
otherwise become directly involved and/or obligated to Developer or to any third
party in respect of such site selection or development; these activities and
undertakings, financially and otherwise, shall be the exclusive responsibility
of Developer.
6. SITE ACCEPTANCE. Upon selection by Developer of a proposed site for a
Shoney's restaurant, Developer promptly shall submit to Licensor such specific
site data and demographic and other information concerning the site as may be
reasonably required by Licensor, utilizing such forms as may be
required by Licensor. Licensor shall either accept or reject such
site in accordance with Licensor's then-current site selection policies and
procedures. To be effective, any acceptance must be in writing. Developer
understands and acknowledges that Licensor may reject any proposed site,
in which event Developer will not proceed at the rejected site, but
will seek to locate an acceptable site. The acquisition in any manner of any
proposed site prior to acceptance by Licensor shall be at the sole risk and
responsibility of Developer and
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shall not obligate Licensor in any way to accept such site or to issue a License
Agreement for operation of a Shoney's restaurant at such site.
7. DISCLAIMER. In executing this Agreement, accepting a proposed site,
giving approvals or advice or providing services or assistance in connection
with this Agreement, Licensor does not guarantee the suitability of an accepted
site or the success of any particular Shoney's restaurant established at any
such site. Licensor expressly disclaims any warranties, express or implied, with
respect to the suitability of any site or the success of any restaurant.
Developer understands and acknowledges that the suitability of a site and the
success of any restaurant, depend on many factors outside the contol of either
Licensor or Developer (including, without limitation, such factors as interest
rates, unemployment rates, demographic trends and the general economic climate),
but principally depend on Developer's efforts in the operation of the
restaurant.
8. LOCATION REQUIREMENTS. As a condition for proposed site, Licensor
may require Developer to negotiate a lease or sales contract that includes
certain terms regarding duration or other specified matters. Developer
understands and acknowledges that a site acceptance may be conditioned on
such matters and that if Developer does not wish to, or cannot satisfy the
pertinent conditions within a reasonable time, ths site will be deemed rejected.
9. CONSTRUCTION.
(a) Upon receiving acceptance for a proposed site, Developer shall
proceed promptly to secure control of the accepted site and to obtain necessary
zoning and building approvals and permits. Following acceptance of Licensor
shall provide Developer with fifteen (15) sets of standard architectural plans
and specifications for a prototype Shoney's restaurant. After a site is accepted
but before commencing construction of any Shoney's restaurant contemplated by
this Agreement, Developer shall, if requested by Licensor, at Developer's
expense, furnish to Licensor for Licensor's
acceptance, the following:
(i) A proposed preliminary site plan for the Shoney's restaurant which,
if accepted, shall not thereafter be changed without Licensor's prior written
consent; and
(ii) A copy of Developer's plans and specifications for construction
of the Shoney's restaurant in proposed final form, which plans and
specifications shall have been
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adopted, at Developer's expense, from Licensor's then standard plans and
specifications and which, if accepted, shall not thereafter be changed without
Licensor's prior written consent. In addition, upon request by Licensor,
Developer shall furnish Licensor information as Licensor may from time to time
request, which may include, without limitation, copies of all commitments and
plans for construction and permanent financing, the name, address and contact
with respect to each lender, the name and address of the contractor, together
with a copy of the construction contract.
(b) Thereafter, Developer shall break ground and commence construction of
the particular Shoney's restaurant in accordance with the accepted site plan and
building plans and specifications as soon as possible and shall complete all the
construction thereof, including the acquisition and installation of all
equipment specified by Licensor, and have the restaurant ready to open for
business within the time specified in the Development Schedule. Licensor and its
agents shall have the right to inspect the construction at any reasonable time.
Developer agrees to give Licensor at least ten (10) days notice prior to pouring
the concrete slab for any Shoney's restaurant to be opened pursuant to this
Agreement and to give Licensor notice immediately after completion of the
electrical and mechanical rough-ins to enable Licensor to inspect the
construction at such times. Developer shall correct, upon request and at
Developer's expense, any deviation from any approved site plan or plans and
specifications. Licensor assumes no responsibility for the quality of any
construction because of any inspections made by it or any reports or
recommendations made as a result of such inspections.
(c) In the event Developer fails to open any Shoney's restaurant within
the time periods set forth in the Development Schedule, except for any delay due
in material part to war, strikes, lock-outs, governmentally imposed building
moratoriums, or similar causes beyond the control of Developer (which do
not include general construction delays), or in the event Developer commences
construction of any Shoney's restaurant according to plans and specifications
not accepted by Licensor or alters such accepted site plan or plans and
specifications without Licensor's approval, then, Licensor, at its option, may
elect to cancel and terminate this Agreement, by written notice to Developer,
in which case any Development Fee paid to Licensor pursuant to Paragraph 3
shall be retained by Licensor as liquidated and agreed damages and no further
License Agreements will be issued for any proposed Shoney's restaurants.
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10. ADVISORY SERVICES AND TRAINING.
(a) During the term of this Agreement, Licensor shall at reasonable times,
upon the request of, and at no charge to Developer (except as otherwise
expressly provided in this Paragraph 10), furnish counseling and advisory
services to Developer with respect to the construction and pre-opening
activities related to the operation of Shoney's restaurants including
consultation and advice regarding:
(i) parking and building layouts;
(ii) traffic planning;
(iii) construction and financing of the restaurant
building and other improvements;
(iv) equipment selection and layout;
(v) employee selection and training;
(vi) advertising and promotion;
(vii) bookkeeping and accounting; and
(viii) purchasing and inventory control.
(b) Developer and its employees shall attend and conduct such training
programs as Licensor may reasonably require in order to train Developer's
personnel properly to operate the Shoney's restaurants contemplated by this
Agreement. No charge will be made by Licensor for training programs conducted by
it, but Developer shall be required to pay all expense of Developer's personnel
who take part in any such program or programs.
(c) Developer shall not employ or seek to employ any person who is at the
time employed by Licensor or by any other licensee or optionee of Licensor
without first obtaining the consent of such person's employer and Developer will
not, directly or indirectly, induce any such person to leave his or her
employment.
11. LICENSE FEE. Upon execution by Licensor of each License Agreement for
a Shoney's restaurant contemplated by this Agreement, Developer shall pay to
Licensor the sum set forth on Exhibit B hereto that is specified as the License
Fee for each such Shoney's restaurant. This License Fee is full earned by
Licensor upon execution of the License Agreement and thereafter shall be
non-refundable. Any Development Fee paid by Developer hereunder shall be
credited toward payment of the License Fee in accordance with the terms of
Paragraph 3 of this Agreement.
12. LICENSE AGREEMENTS.
(a) Upon the due performance by Developer within the time periods set
forth in the Development Schedule, as extended or
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renewed pursuant to Paragraph 2, of all of the requirements set forth above
(including, without limitation, payment of the Development Fee, and License
Fee, satisfaction of all construction and training requirements) with respect
to each of the Shoney's restaurants contemplated by this Agreement, Licensor,
except as set forth below, will execute, issue and deliver to Developer
Licensor's then-current form of License Agreement to operate each of the
Shoney's restaurants contemplated by this Agreement; provided, however, that
the License Fees and royalties payable under any License Agreement for a
Shoney's restaurant to be built and operated within the Territory shall be at
the rate set forth in Exhibit B. In addition, during the term of this
Agreement or any renewal hereof, with respect to any License Agreement
executed for a Shoney's restaurant to be built and operated within the
Territory, Licensor agrees that:
(1) the maximum amount (expressed as a percentage of sales
of required advertising expenditures under any License
Agreement shall not be increased from the amount set
forth in the first License Agreement executed by Developer
during the term of this Agreement for a Shoney's restaurant
to be built and operated within the Territory;
(2) the protected radius (expressed in distance) provided for
in any License Agreement shall not be reduced from the
distance set forth as a protected radius in the first License
Agreement executed by Developer during the term of this Agreement
for a Shoney's restaurant to be built and operated within the
Territory;
(3) each License Agreement shall have an initial term of twenty
(20) years with the option (upon satisfaction of the conditions
for renewal set forth therein) to renew for one additional term of
twenty (20) years;
(4) neither the radius (expressed in distance) nor the length of time
(expressed in months) of the post-termination covenant not to
compete set forth in any License Agreement shall be increased from
those set forth in the first License Agreement executed by
Developer during the term of this Agreement for a Shoney's
restaurant to be built and operated within the Territory;
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(5) the formula for determining the price to be paid by Licensor for
any of Developer's assets upon termination of any License
Agreement shall not be changed from that set forth in the
first License Agreement executed by Developer during term of
this Agreement for a Shoney's restaurant to be built and operated
within the Territory; and
(6) no material change in the reasons that allow a License Agreement
to be terminatedshall be made from those set forth in the first
License 'Agreement executed by Developer during the term of this
Agreement for a Shoney's restaurant to be built and operated
within the Territory.
(b) As a condition of Licensor's execution of such License Agreement,
Licensor may require Developer or its principals to provide a personal
guarantee, letter of credit or guarantee in a form acceptable to Licensor to
secure payment royalties and other fees required to be paid to Licensor or
its affiliates under any such License Agreement, or otherwise. Developer
shall comply with Licensor's then-current franchising policies and procedures
for issuance of each License Agreement Licensor shall be under no obligation
to execute and License Agreement unless Developer has complied in a timely
manner with all terms and conditions of this Agreement and has satisfied all
requirements set forth herein. In addition, Licensor shall be under no
obligation to execute and issue a License Agreement if Developer is in breach
or default of any other License Agreement, License Option Agreement, Market
Development Agreement or any other agreement between Licensor and Developer,
or if Developer is not eligible for expansion pursuant to Licensor's
then-current criteria for expansion. If and when each License Agreement
contemplated in this Agreement is executed by Licensor, it shall
supersede this Agreement and govern the relations between the parties with
respect to the particular restaurant.
13. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer acknowledges that
until a License Agreement has been issued for a specified site, Developer
shall not have or be entitled to exercise any of the rights, powers and
privileges granted by the License Agreement, including without limitation
the right to use Licensor's trademarks, service marks and that the execution
of this Agreement shall not grant any such rights, powers or privileges to
Deveploper; and that Developer may not under any circumstances commence
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operation of any Shoney's restaurant prior to execution by Licensor of a
License Agreement for the particular location.
14. TERMINATION.
14.1 Automatic Termination. This Agreement shall terminate immediately
and without notice to either party:
(a) if Developer files a petition under any bankruptcy or reorganization
law, becomes insolvent, or has a trustee or receiver appointed by a court of
competent jurisdiction for all or any part of Developer's property; or
(b) if Developer seeks to effect a plan of liquidation reorganization,
composition or arrangement of Developer's affairs, whether or not the same
shall be subsequently approved by a court of competent jurisdiction, it
being understood that in no event shall this Agreement or any right or interest
hereunder be deemed an asset in any insolvency, receivership, bankruptcy,
composition, liquidation, arrangement or reorganization proceeding; or
(c) if Developer has an involuntary proceeding filed under any
bankruptcy or reorganization laws or any other laws and does not have such
proceeding dismissed within ninety (90) days thereafter; or
(d) if Developer makes a general assignment for the benefit of
creditors.
14.2 By Licensor. Licensor, at its option, may terminate this Agreement
immediately upon notice to Developer, upon the occurrence of any of the
following:
(a) failure to comply with the Development Schedule;
(b) the assignment of this Agreement without the prior written approval
of Licensor;
(c) if Developer is a corporation or a partnership, the transfer of
any of the capital stock or partnership interest of such corporation or
partnership during the term of this Agreement without the prior written
approval of Licensor; or, in the event that any shareholder or partner of
Developer (the "Shareholder") is a corporation, limited partnership,
business trust, partnership or similar association, the transfer of any of the
capital stock or other interests of the shareholder's limited partners, trustees
beneficiaries, partners or investors, as the case may be, in such Shareholder,
term of this Agreement without the prior written approval of Licensor;
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(d) the discovery by Licensor of any material misrepresentation in
any of the information or documents submitted to Licensor by or on behalf
of Developer;
(e) any material violation by Developer of any of the provisions of
this Agreement if such material violation shall continue for thirty (30) days
after Licensor gives written notice of such material violation to Optionee
or if such material violation cannot be reasonably corrected within such
thirty (30) day period, then if such material violation is not corrected
within such additional time as may be required assuming Optionee proceeds
with reasonable diligence; provided, however, that such written notice and a
reasonable time to correct material violations shall not be required
if Optionee repeatedly fails to perform in accordance with the terms and
conditions contained herein; or
(f) any default by Developer under any other agreement with Licensor
and Developer's failure to cure such default within the time specified in
such agreement, if any.
15. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration of this
Agreement, or upon its termination for any reason, any and all rights granted
to Developer hereunder shall be extinguished immediately. Licensor thereafter
shall have the right to operate or license others to operate
Shoney's Restaurants within the Territory, except as limited by the
provisions of any other then-effective agreements with Licensor.
16. RESTRICTIONS. Licensor is engaged in the business of developing
and franchising Shoney's restaurants on a national basis. Developer
acknowledges that the appropriation or duplication of Shoney's restaurants
or any part thereof for a purpose other than to operate a Shoney's
restaurant pursuant to a License Agreement with Licensor would damage the
franchising a business of Licensor. Developer acknowledges that Licensor
owns trade secrets and that all material or other information now
or hereafter provided or disclosed to Developer regarding Shoney's
restaurants is disclosed to Developer in confidence and Developer agrees not
to disclose any part of it to anyone who is not an employee of Licensor, or
of its licensees. Licensor shall be entitled to obtain injunctive relief
in addition to any other legal or equitable remedies it may have if
Developer fails to comply with the provisions contained herein.
17. ASSIGNMENT.
(a) Developer shall not sell, assign, transfer, encumber its rights
and obligations hereunder or suffer permit any such assignment, transfer
or encumbrance to occur by
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operation of law without the prior express written consent of Licensor. In
the event Developer is a corporation, limited partnership, business
trust, partnership or similar association, the shareholders,
limited partners, beneficiaries, partners or investors, as the case may be,
may not sell, assign, or otherwise transfer their shares or interests in
such corporation, limited partnership, business trust, partnership or
similar association, without the prior written consent of Licensor.
Furthermore, in the event that any shareholder of Developer (the
"Shareholder") is a corporation, limited partnership, business trust,
partnership or similar association, the interests of the shareholders,
limited partners, trustees, beneficiaries, partners or investors, as the
case may be, in such Shareholder, may not be sold, assigned or otherwise
transferred, without the prior written consent of
Licensor.
(b) In the event of the death of the Developer or if the Developer is
a corporation or similar entity, then in the event of the death of any
stockholder, investor or similar person, Licensor shall not unreasonably
withhold its consent to transfer or assignment of Developer's interest
herein, or if Developer is a corporation, the transfer of the deceased
stockholder's stock in such corporation to a descendant, heir or legatee
of the decedent, who shall in the sole judgment of Licensor be capable of
performing the duties and obligations of Developer hereunder and under any
License Agreement to be issued pursuant to this agreement, or to a
responsible bona fide purchaser acceptable to Licensor. Any approval by
Licensor of such transfer or assignment shall be subject to the assignee's
agreement in writing to assume and perform all of Developer's duties and
obligations hereunder and under any License Agreement to be issued pursuant
to this agreement.
18. CONSTRUCTION. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall be deemed
and construed to include any other number and any other gender, as the
context or sense of this Agreement or any provision hereof may require, as
if such words had been fully and properly written in the appropriate
number and gender. All covenants, agreements and obligations assumed herein
by Developer shall be deemed to be joint and several covenants, agreements
and obligations of each of the persons named as Developer, if more than one
person is so named.
19. HEADINGS. Captions and section headings are used herein for
convenience only. They are not part of this Agreement and shall not be used
in construing it.
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20. NOTICES. Whenever notice is required or permitted to be given
under the terms of this Agreement, it shall be given in writing, and be
delivered personally, by certified, expressor registered mail, or by an
overnight delivery service (e.g. Federal Express), postage prepaid, addressed to
the party for whom intended. All such notices shall be addressed to the
party to be notified at the respective addresses first above writtens or at
such other address or addresses as the parties may time to time designate
in writing.
21. COSTS AND ATTORNEY'S FEES. Should Developer institute an action
against Licensor or any of Licensor's agents or employees for any claim
arising out of or related to this Agreement, Licensor (or its agents or
employees), if it prevails, shall recover from Developer its costs and
reasonable attorneys, fees incurred in defending said action.
22. WAIVER. No waiver, delay, omission or forbearance on the part of
the Licensor to exercise any right, option, duty or power arising from any
default or breach by Developer shall affect or impair the rights of Licensor
with respect to any subsequent default of the same or a different kind;
nor shall any delay or omission of Licensor to exercise any right arising
from any such default affect or impair Licensor's rights as to such default
or any future default.
23. SEVERABILITY. If any term, restriction or covenant of this Agreement
is deemed invalid or unenforceable, all other terms, restrictions and
covenants and the application thereof to all persons and circumstances
subject hereto shall remain unaffected to the extent permitted by law; and
if any application of any term, restriction or covenant to any person or
circumstance is deemed invalid or unenforceable, the application of such
terms, restriction or covenant to other persons and circumstances shall
remain unaffected to the extent permitted by law.
24. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto and there are no representations,
inducements, promises, agreements, arrangements or undertakings,
oral or written, between the parties that have been relied upon by either
party other than those set forth herein. No agreement of any kind relating
to the matters covered by this agreement shall be binding upon either party
unless and until the same is made in writing and executed by both
Developer and Licensor.
25. DEVELOPER'S ACKNOWLEDGMENTS. Developer understands and acknowledges
that there are significant risks in any businness venture and that the
primary factor in Developer's success or
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failure under this Agreement will be Developer's own efforts. IN ADDITION,
DEVELOPER ACKNOWLEDGES THAT LICENSOR AND ITS REPRESENTATIVES HAVE MADE NO
REPRESENTATIONS TO DEVELOPER OTHER THAN OR INCONSISTENT WITH THE MATTERS SET
FORTH IN THE UNIFORM FRANCHISE OFFERING CIRCULAR PROVIDED TO DEVELOPER AND
THAT DEVELOPER HAS UNDERTAKEN THIS VENTURE SOLELY IN RELIANCE UPON THE
MATTERS SET FORTH IN THE UNIFORM FRANCHISE OFFERING CIRCULAR AND DEVELOPER'S
OWN INDEPENDENT INVESTIGATION OF MERITS OF THIS VENTURE.
DEVELOPER: TPI RESTAURANTS, INC.
(corporate) By: /s/ J. Gary Walba
Title: President
Date: 8/16/93
SHONEY'S, INC.
By: /s/ James W. Arnett, Jr.
James W. Arnett, Jr.
Title: President & C.O.O.
By: /s/ James M. Grout
JAMES M. GROUT
Title: Executive Vice President
Franchisinq & Development
Date: 9-1-93
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EXHIBIT A
to Market Development Agreement
Dated December 1, 1992 Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
A delineated territory within the state of Michigan using measured
coordinates of a longitude line (as shown on the attached map marked Exhibit
C), which begins at a center point of Southfield Freeway (Hwy. 39)
and Highway 102 and extends north and south through the State of Michigan.
Subject to Shoney's site acceptance, TPI's development will include all
areas east of this line, excluding a 2 1/2 mile radius around the
intersection of Southfield Freeway and Ford Road, within the State of
Michigan. (See attached map marked Exhibit C).
ACKNOWLEDGED AND APPROVED
____________________ (Developer)
____________________ (Licensor)
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EXHIBIT B
to Market Development Agreement
Dated December 1, 1992
Between Shoney's, Inc. and TPI RESTAURANTS, INC.
DEVELOPMENT FEE: $195,000.00
LICENSE FEES/ROYALTIES
For each Shoney's restaurant opened within the Territory pursuant to this
Agreement, the License Fee payable shall be $30,000 and the royalties
payable shall be 3% of gross sales.
DEVELOPMENT SCHEDULE
Three (3) Shoney's restaurants open by December 1, 1993;
Three (3) additional (total of six (6)) Shoney's restaurants
open by December 1, 1994;
Three (3) additional (total of nine (9)) Shoney's restaurants
open by December 1, 1995;
Three (3) additional (total of twelve (12)) Shoney's restaurants
open by December 1, 1996; and
One (1) additional (total of thirteen (13)) Shoney's restaurants
open by December 1, 1997.
or less - TPI to build the same number of units per year as Shoney's Inc.
ACKNOWLEDGED AND APPROVED
(Developer)
/s/ [Initialed]
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(Licensor)
/s/ [Signature]
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<PAGE>
ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is an addendum to that certain Market Development
Agreement dated December 1, 1992 (the "Market Development Agreement"), by
and between Shoney's Inc. (herein after referred to as the "Licensor") and
TPI RESTAURANTS, INC. (herein after referred to as the "Developer") in
connection with the development of Shoney's Restaurants within Michigan.
WITNESSETH:
WHEREAS, Licensor and Developer wish to make certain changes in the
Market Development Agreement, which changes are more particularly set forth
herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development Agreement, it is
mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
Two (2) additional (total of four (4)) Shoney's restaurants
open by December 1, 1995; two (2) additional (total of six (6))
Shoney's restaurants open by December 1, 1996; two (2)
additional (total of eight (8)) Shoney's restaurants open by
December 1, 1997; two (2) additional (total of ten (10))
Shoney's restaurants open by December 1, 1998; two (2)
additional (total of twelve (12)) Shoney's restaurants open
by December 1, 1999; and one (1) additional (total of
thirteen (13)) Shoney's restaurants open by December 1, 2000.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
26th day of January , 1995.
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
------------------ ----------------------
Les Lockhart CHARLES E. PORTER
Title: V.P. of Development Title: President
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By: /s/ Charles Vaughn
---------------------
CHARLES VAUGHN
Title: Vice President
Franchisinq & Development
-------------------------
<PAGE>
SECOND ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a second addendum to that certain Market
Development Agreement dated December 1, 1992 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to as the
"Licensor") and TPI RESTAURANTS, INC. (hereinafter referred to as the
"Developer") in connection with the development of Shoney's Restaurants
within Michigan.
WITNESSETH:
WHEREAS, Licensor and Developer wish to make certain changes in the
Market Development Agreement, which changes are more particularly set forth
herein.
NOW, THEREFORE, for and in consideration of the covenants
and agreements set forth herein and in the Market Development Agreement, it
is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
Two (2) additional (total of four (4)) Shoney's
restaurants open by December 1, 1996; two (2) additional
(total of six (6)) Shoney's restaurants open by December
1, 1997; two (2) additional (total of eight (8)) Shoney's
restaurants open by December 1, 1998; two (2) additional
(total of ten (10)) Shoney's restaurants open by December
1, 1999; two (2) additional (total of twelve (12))
Shoney's restaurants open by December 1, 2000; and one
(1) additional (total of thirteen (13)) Shoney's
restaurants open by December 1, 2001.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as
of the day of , 1995.
Developer: LICENSOR:
TPI RESTAURANTS, INC SHONEY'S, INC.
By: By: /s/ Charles E. Porter
CHARLES E. PORTER
Title: Title: President
By: /s/ Charles Vaughn
CHARLES VAUGHN
Title: Vice President
Franchising & Development
EXHIBIT 10.37
01/02/93
SHONEY'S
MARKET DEVELOPMENT AGREEMENT
This Agreement made and entered into this 17th day of August, 1993 in
Nashville, Tennessee by and between Shoney's Inc., a Tennessee corporation with
its principal office at 1727 Elm Hill Pike, Nashville, Tennessee 37210
("Licensor"), and TPI RESTAURANTS , INC. (corporation) with its principal office
2158 Union Avenue, Memphis, TN 38104 ("Developer").
WHEREAS, Licensor at a substantial expenditure of time, effort and money,
has developed and perfected a system of opening and operating restaurants
utilizing the "Shoney's" service mark ("Shoney's restaurants"); and
WHEREAS, Licensor has acquired knowledge and experience in the composition,
distribution, advertising and sale of food products by Shoney's restaurants and
with respect to the style of the building and signs used by said restaurants
and has successfully established a reputation, demand and goodwill for the
products sold by such restaurants; and
WHEREAS, Developer recognizes the value of uniformity in a system of
restaurants and Developer further recognizes the value of Licensor's knowledge
and experience gained through the operation of Shoney's restaurants, and the
value of the trade names, trademarks, service marks and other distinctive
features of Shoney's restaurants; and
WHEREAS, Developer acknowledges Licensor's sole and exclusive
ownership of any rights to Licensor's current and future trade
names, trademarks and service marks and to all current and future
related practices, procedures, methods, devices, techniques,
recipes and systems; and
WHEREAS, Developer desires to open and operate a certain
number of Shoney's restaurants within the geographic area specified
in this Agreement within the term of this Agreement; and
WHEREAS, Licensor is willing to grant Developer such rights in
accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, it is mutually agreed as follows:
1. GRANT. Licensor hereby grants to Developer during the
term of this Agreement and subject to the conditions hereof the
right to open and operate Shoney's restaurants in the limited
<PAGE>
geographical area identified and set forth in Exhibit A hereto;
this geographical area being hereinafter referred to as the
"Territory." The operation of each of the Shoney's restaurants
developed pursuant to this Agreement will be governed by individual
License Agreements issued by Licensor in accordance with Paragraph
12 below. During the term of this Agreement, without the consent of
Developer, Licensor shall not grant options for or license others
to operate, nor will it itself operate, any new or additional
Shoney's restaurants in the Territory.
2. TERM; RENEWAL.
(a) Unless earlier terminated pursuant to Paragraph 13, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, upon the date of execution by
Licensor of the License Agreement for the last of the Shoney's
restaurants then required to be opened and operated pursuant to
this Agreement or any renewal hereof, unless Developer, upon,
not more than thirty (30) days prior to, execution of the License
Agreement for such last restaurant, gives notice to Licensor (in
accordance with this Agreement) of Developer's intent to renew this
Agreement (a "Renewal Notice"). Upon receipt of a Renewal Notice,
Licensor shall conduct a survey of the Territory and, within ninety
(90) days following receipt of the Renewal Notice, shall notify
Developer of the additional number of Shoney's restaurants that
Licensor proposes to be built and opened within the Territory, if
any, and the development schedule for such additional restaurants
(a "Development Notice"). If Licensor and Developer, within ninety
(90) days from Licensor's sending a Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending a Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the most recent Development Notice to
Developer.
(b) If, at the time of any proposed renewals of this
Agreement by Developer pursuant to this Paragraph 2, Licensor
determines that no additional Shoney's restaurants are then
required to be built and opened within the Territory, the
Development Notice sent by Licensor in connection with such
proposed renewal shall so state. In such event, the term of this
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Agreement shall be extended for a period of one (1) year from the
date Licensor sent the Development Notice to Developer indicating
that no additional Shoney's restaurants are then required to be
built and opened within the Territory. Thereafter, this Agreewent
shall automatically renew for successive one (1) year terms unless
Licensor determines that an additional restaurant or restaurants
are then required and, at least ninety (90) days prior to
expiration of the then current term, sends a Development Notice to
Developer stating the number of restaurants to be built and opened
within the Territory and the development schedule for such
additional restaurants. If Licensor and Developer, within ninety
(90) days from Licensor's sending the Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending the Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the Development Notice to Developer.
3. DEVELOPMENT FEE. Upon execution of this Agreement,
Developer shall pay to Licensor the fee set forth in Exhibit B
hereto and designated as the development fee (the "Development
Fee"). This Development Fee shall be fully earned by Licensor in
consideration of its execution of this Agreement and shall be
non-refundable. However, Licensor shall credit the Development
Fee, pro rata, based upon the number of Shoney's restaurants to be
built within the Territory, toward the License Fees payable under
any of the License Agreements issued to Developer pursuant to this
Agreement, provided that the applicable restaurants are constructed
and opened in accordance with the schedule set forth in Exhibit B
(the "Development Schedule"). Upon renewal of this Agreement and
an agreement by Franchisor and the developer/franchisee to build
additional restaurants pursuant to Paragraph 2, an additional
Development Fee will be due. The amount will be determined in the
same manner as the original Development Fee charged upon execution
of this Agreement (number of restaurants multiplied by one-half of
the license fee for each such restaurant), and is fully earned at
the time of the extension of this Agreement. The additional
Development Fee also will be credited pro rata against the
individual license fees of the additional restaurants opened
pursuant to this Agreement if the developer/franchisee remains in
compliance with all terms and conditions of this Agreement,
including the development schedule for the additional restaurants.
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<PAGE>
4. DEVELOPMENT SCHEDULE. Developer shall build, open and
operate properly licensed Shoney's restaurants in accordance with
the Development Schedule. In the event that Developer opens and
continuously operates a greater number of Shoney's restaurants than
required during any interim period of the Development Schedule, the
requirements of the succeeding period(s) shall be deemed satisfied
to the extent of such excess number of restaurants, up to the total
number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for
locating proposed sites within the Territory for each of the
restaurants contemplated in the Development Schedule. During the
term of this Agreement, Developer shall use its best efforts to
locate suitable sites. Licensor, in its discretion, may offer
counseling and advice in site selection. In no event, however
shall Licensor be obligated to loan money, guarantee leases,
provide financing or otherwise become directly involved and/or
obligated to Developer or to any third party in respect of such
site selection or development; these activities and undertakings,
financially and otherwise, shall be the exclusive responsibility of
Developer.
6. SITE ACCEPTANCE. Upon selection by Developer of a
proposed site for a Shoney's restaurant, Developer promptly shall
submit to Licensor such specific site data and demographic and
other information concerning the site as may be reasonably required
by Licensor, utilizing such forms as may be required by Licensor.
Licensor shall either accept or reject such site in accordance with
Licensor's then-current site selection policies and procedures. To
be effective, any acceptance must be in writing. Developer
understands and acknowledges that Licensor may reject any proposed
site, in which event Developer will not proceed at the rejected
site, but will seek to locate an acceptable site. The acquisition
in any manner of any proposed site prior to acceptance by Licensor
shall be at the sole risk and responsibility of Developer and shall
not obligate Licensor in any way to accept such site or to issue a
License Agreement for operation of a Shoney's restaurant at such
site.
7. DISCLAIMER. In executing this Agreement, accepting a
proposed site, giving approvals or advice or providing services or
assistance in connection with this Agreement, Licensor does not
guarantee the suitability of an accepted site or the success of any
particular Shoney's restaurant established at any such site.
Licensor expressly disclaims any warranties, express or implied,
with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the
suitability of a site and the success of any restaurant depend on
many factors outside the control of either Licensor or Developer
(including, without limitation, such factors as interest rates,
unemployment rates, demographic trends and the general economic
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<PAGE>
climate), but principally depend on Developer's efforts in the
operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a
proposed site, Licensor may require Developer to negotiate a lease
or sales contract that includes certain terms regarding duration or
other specified matters. Developer understands and acknowledges
that a site acceptance may be conditioned on such matters and that
if Developer does not wish to, or cannot, satisfy the pertinent
conditions within a reasonable time, the site will be deemed
rejected.
9. CONSTRUCTION.
(a) Upon receiving acceptance for a proposed site Developer
shall proceed promptly to secure control of the accepted site and
to obtain necessary zoning and building approvals and permits.
Following acceptance of any site, Licensor shall provide Developer
with fifteen (15) sets of standard architectural plans and
specifications for a prototype Shoney's restaurant. After a site is
accepted but before commencing construction of any Shoney's
restaurant contemplated by this Agreement, Developer shall, if
requested by Licensor, at Developer's expense, furnish to Licensor
for Licensor's acceptance, the following:
(i) A proposed preliminary site plan for the Shoney's
restaurant which, if accepted, shall not thereafter be changed
without Licensor's prior written consent; and
(ii) A copy of Developer's plans and specifications for
construction of the Shoney's restaurant in proposed final
form, which plans and specifications shall have been adopted,
at Developer's expense, from Licensor's then standard plans
and specifications and which, if accepted, shall not
thereafter be changed without Licensor's prior written
consent. In addition, upon request by Licensor, Developer
shall furnish Licensor information as Licensor may from time
to time request, which may include, without limitation, copies
of all commitments and plans for construction and permanent.
financing, the name, address and contact with respect to each
lender, the name and address of the contractor, together with
a copy of the construction contract.
(b) Thereafter, Developer shall break ground and commence
construction of the particular Shoney's restaurant in accordance
with the accepted site plan and building plans and specifications
as soon as possible and shall complete all the construction
thereof, including the acquisition and installation of all
equipment specified by Licensor, and have the restaurant ready to
open for business within the time specified in the Development
Schedule. Licensor and its agents shall have the right to inspect
the construction at any reasonable time. Developer agrees to give
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<PAGE>
Licensor at least ten (10) days notice prior to pouring the
concrete slab for any Shoney's restaurant to be opened pursuant to
this Agreement and to give Licensor notice immediately after
completion of the electrical and mechanical rough-ins to enable
Licensor to inspect the construction at such times. Developer shall
correct, upon request and at Developer's expense, any deviation
from any approved site plan or plans and specifications. Licensor
assumes no responsibility for the quality of any construction
because of any inspections made by it or any reports or
recommendations made as a result of such inspections.
(c) In the event Developer fails to open any Shoney's
restaurant within the time periods set forth in the Development
Schedule, except for any delay due in material part to war,
strikes, lock-outs, governmentally imposed building moratoriums, or
similar causes beyond the control of Developer (which do not
include general construction delays), or in the event Developer
commences construction of any Shoney's restaurant according to
plans and specifications not accepted by Licensor or alters such
accepted site plan or plans and specifications without Licensor's
approval, then, Licensor, at its option, may elect to cancel and
terminate this Agreement, by written notice to Developer, in which
case any Development Fee paid to Licensor pursuant to Paragraph 3
shall be retained by Licensor as liquidated and agreed damages and
no further License Agreements will be issued for any proposed
Shoney's restaurants.
10. ADVISORY SERVICES AND TRAINING.
(a) During the term of this Agreement, Licensor shall at
reasonable times, upon the request of, and at no charge to
Developer (except as otherwise expressly provided in this Paragraph
10), furnish counseling and advisory services to Developer with
respect to the construction and pre-opening activities related to
the operation of Shoney's restaurants, including consultation and
advice regarding:
(i) parking and building layouts;
(ii) traffic planning;
(iii) construction and financing of the restaurant
building and other improvements;
(iv) equipment selection and layout;
(v) employee selection and training;
(vi) advertising and promotion;
(vii) bookkeeping and accounting; and
(viii) purchasing and inventory control.
(b) Developer and its employees shall attend and conduct such
training programs as Licensor may reasonably require in order to
train Developer's personnel properly to operate the Shoney's
restaurants contemplated by this Agreement. No charge will be made
by Licensor for training programs conducted by it, but Developer
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<PAGE>
shall be required to pay all expenses of Developer's personnel who
take part in any such program or programs.
(c) Developer shall not employ or seek to employ any person
who is at the time employed by Licensor or by any other licensee or
optionee of Licensor without first obtaining the consent of such
person's employer and Developer will not, directly or indirectly,
induce any such person to leave his or her employment.
11. LICENSE FEE. Upon execution by Licensor of each License
Agreement for a Shoney's restaurant contemplated by this Agreement
Developer shall pay to Licensor the sum set forth on Exhibit B
hereto that is specified as the License Fee for each such Shoney's
restaurant. This License Fee is fully earned by Licensor upon
execution of the License Agreement and thereafter shall be
non-refundable. Any Development Fee paid by Developer hereunder
shall be credited toward payment of the License Fee in accordance
with the terms of Paragraph 3 of this Agreement.
12. LICENSE AGREEMENTS.
(a) Upon the due performance by Developer within the time
periods set forth in the Development Schedule, as extended or
renewed pursuant to Paragraph 2, of all of the requirements set
forth above (including, without limitation, payment of the
Development Fee, and License Fee, satisfaction of all construction
and training requirements) with respect to each of the Shoney's
restaurants contemplated by this Agreement, Licensor, except as set
forth below, will execute, issue and deliver to Developer
Licensor's then-current form of License Agreement to operate each
of the Shoney's restaurants contemplated by this Agreement;
provided, however, that the License Fees and royalties payable
under any License Agreement for a Shoney's restaurant to be built
and operated within the Territory shall be at the rate set forth in
Exhibit B. In addition, during the term of this Agreement or any
renewal hereof, with respect to any License Agreement executed for
a Shoney's restaurant to be built and operated within the
Territory, Licensor agrees that:
(1) the maximum amount (expressed as a percentage of sales)
of required advertising expenditures under any License
Agreement shall not be increased from the amount set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory;
(2) the protected radius (expressed in distance) provided for
in any License Agreement shall not be reduced from the
distance set forth as a protected radius in the first License
Agreement executed by Developer during the term of this
Agreement for a Shoney's restaurant to be built and operated
within the Territory;
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<PAGE>
(3) each License Agreement shall have an initial term of
twenty (20) years with the option (upon satisfaction of the
conditions for renewal set forth therein) to renew for one
additional term of twenty (20) years;
(4) neither the radius (expressed in distance) nor the length
of time (expressed in months) of the post-termination covenant
not to compete set forth in any License Agreement shall be
increased from those set forth in the first License Agreement
executed by Developer during the term of this Agreement for a
Shoney's restaurant to be built and operated within the
Territory;
(5) the formula for determining the price to be paid by
Licensor for any of Developer's assets upon termination of any
License Agreement shall not be changed from that set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory; and
(6) no material change in the reasons that allow a License
Agreement to be terminated shall be made from those set forth
in the first License Agreement executed by Developer during
the term of this Agreement for a Shoney's restaurant to be
built and operated within the Territory.
(b) As a condition of Licensor's execution of such License
Agreement, Licensor may require Developer or its principals to
provide a personal guarantee, letter of credit or corporate
guarantee in a form acceptable to Licensor to secure payment of
royalties and other fees required to be paid to Licensor or its
affiliates under any such License Agreement, or otherwise.
Developer shall comply with Licensor's then-current franchising
policies and procedures for issuance of each License Agreement.
Licensor shall be under no obligation to execute and issue a
License Agreement unless Developer has complied in a timely manner
with all terms and conditions of this Agreement and has satisfied
all requirements set forth herein. In addition, Licensor shall be
under no obligation to execute and issue a License Agreement if
Developer is in breach or default of any other License Agreement,
License Option Agreement, Market Development Agreement or any
other agreement between Licensor and Developer, or if Developer is
not eligible for expansion pursuant to Licensor's then-current
criteria for expansion. If and when each License Agreement
contemplated in this Agreement is executed by Licensor, it shall
supersede this Agreement and govern the relations between the
parties with respect to the particular restaurant.
13. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer
acknowledges that until a License Agreement has been issued for a
specified site, Developer shall not have or be entitled to exercise
any of the rights, powers and privileges granted by the License
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Agreement, including without limitation the right to use Licensor's
trademarks, service marks and trade names; that the execution of
this Agreement shall not be deemed to grant any such rights, powers
or privileges to Developer; and that Developer may not under any
circumstances commence operation of any Shoney's restaurant prior
to execution by Licensor of a License Agreement for the particular
location.
14. TERMINATION.
14.1 Automatic Termination. This Agreement shall terminate
immediately and without notice to either party:
(a) if Developer files a petition under any bankruptcy or
reorganization law, becomes insolvent, or has a trustee or receiver
appointed by a court of competent jurisdiction for all or any part
of Developer's property; or
(b) if Developer seeks to effect a plan of liquidation,
reorganization, composition or arrangement of Developer's affairs,
whether or not the same shall be subsequently approved by a court
of competent jurisdiction, it being understood that in no event
shall this Agreement or any right or interest hereunder be deemed
an asset in any insolvency, receivership, bankruptcy, composition,
liquidation, arrangement or reorganization proceeding; or
(c) if Developer has an involuntary proceeding filed under
any bankruptcy or reorganization laws or any other laws and does
not have such proceeding dismissed within ninety (90) days
thereafter; or
(d) if Developer makes a general assignment for the benefit
of creditors.
14.2 By Licensor. Licensor, at its option, may terminate this
Agreement immediately upon notice to Developer, upon the occurrence
of any of the following:
(a) failure to comply with the Development Schedule;
(b) the assignment of this Agreement without the prior
written approval of Licensor;
(c) if Developer is a corporation or a partnership, the
transfer of any of the capital stock or partnership interest of
such corporation or partnership during the term of this Agreement
without the prior written approval of Licensor; or, in the event
that any shareholder or partner of Developer (the "Shareholder") is
a corporation, limited partnership, business trust, partnership or
similar association, the transfer of any of the capital stock or
other interests of the shareholders, limited partners, trustees,
beneficiaries, partners or investors, as the case may be, in such
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Shareholder, during the term of this Agreement without the prior
written approval of Licensor;
(d) the discovery by Licensor of any material misrepre-
sentation in any of the information or documents submitted to
Licensor by or on behalf of Developer;
(e) any material violation by Developer of any of the
provisions of this Agreement if such material violation shall
continue for thirty (30) days after Licensor gives written notice
of such material violation to Optionee or if such material
violation cannot be reasonably corrected within such thirty (30)
day period, then if such material violation is not corrected within
such additional time as may be required assuming Optionee proceeds
with reasonable diligence; provided, however, that such written
notice and a reasonable time to correct material violations shall
not be required if Optionee repeatedly fails to perform in
accordance with the terms and conditions contained herein; or
(f) any default by Developer under any other agreement with
Licensor and Developer's failure to cure such default within the
time specified in such agreement, if any.
15. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration of
this Agreement, or upon its termination for any reason, any and all
rights granted to Developer hereunder shall be extinguished
immediately. Licensor thereafter shall have the right to operate or
license others to operate Shoney's restaurants within the
Territory, except as limited by the provisions of any other
then-effective agreements with Licensor.
16. RESTRICTIONS. Licensor is engaged in the business of
developing and franchising Shoney's restaurants on a national
basis. Developer acknowledges that the appropriation or duplication
of Shoney's restaurants or any part thereof for a purpose other
than to operate a Shoney's restaurant pursuant to a License
Agreement with Licensor would damage the franchising business of
Licensor. Developer acknowledges that Licensor owns trade secrets
and that all material or other information now or hereafter
provided or disclosed to Developer regarding Shoney's restaurants
is disclosed to Developer in confidence and Developer agrees not to
disclose any part of it to anyone who is not an employee of
Licensor, or of its licensees. Licensor shall be entitled to obtain
injunctive relief in addition to any other legal or equitable
remedies it may have if Developer fails to comply with the
provisions contained herein.
17. ASSIGNMENT.
(a) Developer shall not sell, assign, transfer, convey or
encumber its rights and obligations hereunder or suffer or permit
any such assignment, transfer or encumbrance to occur by operation
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of law without the prior express written consent of Licensor. In
the event Developer is a corporation, limited partnership, business
trust, partnership or similar association, the shareholders
limited partners, beneficiaries, partners or investors, as the case
may be, may not sell, assign, or otherwise transfer their shares or
interests in such corporation, limited partnership, business trust,
partnership or similar association, without the prior written
consent of Licensor. Furthermore, in the event that any
shareholder of Developer (the "Shareholder") is a corporation
limited partnership, business trust, partnership or similar
association, the interests of the shareholders, limited partners,
trustees, beneficiaries, partners or investors, as the case may be
in such Shareholder, may not be sold, assigned or otherwise
transferred, without the prior written consent of Licensor.
(b) In the event of the death of the Developer or if the
Developer is a corporation or similar entity, then in the event of
the death of any stockholder, investor or similar person, Licensor
shall not unreasonably withhold its consent to a transfer or
assignment of Developer's interest herein, or if Developer is a
corporation, the transfer of the deceased stockholder's stock in
such corporation to a descendant, heir or legatee of the decedent,
who shall in the sole judgment of Licensor be capable of performing
the duties and obligations of Developer hereunder and under any
License Agreement to be issued pursuant to this agreement, or to a
responsible bona fide purchaser acceptable to Licensor. Any
approval by Licensor of such transfer or assignment shall be
subject to the assignee's agreement in writing to assume and
perform all of Developer's duties and obligations hereunder and
under any License Agreement to be issued pursuant to this
agreement.
18. CONSTRUCTION. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall
be deemed and construed to include any other number and any other
gender, as the context or sense of this Agreement or any provision
hereof may require, as if such words had been fully and properly
written in the appropriate number and gender. All covenants,
agreements and obligations assumed herein by Developer shall be
deemed to be joint and several covenants, agreements and
obligations of each of the persons named as Developer, if more than
one person is so named.
19. HEADINGS. Captions and section headings are used herein
for convenience only. They are not part of this Agreement and shall
not be used in construing it.
20. NOTICES. Whenever notice is required or permitted to be
given under the terms of this Agreement, it shall be given in
writing, and be delivered personally, by certified, express or
registered mail, or by an overnight delivery service (e.g., Federal
Express), postage prepaid, addressed to the party for whom
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intended. All such notices shall be addressed to the paty to be
notified at the respective addresses first above written, or at
such other address or addresses as the parties may from time to
time designate in writing.
21. COSTS AND ATTORNEY'S FEES. Should Developer institute an
action against Licensor or any of Licensor's agents or employees
for any claim arising out of or related to this Agreement, Licensor
(or its agents or employees), if it prevails, shall recover from
Developer its costs and reasonable attorneys' fees incurred in
defending said action.
22. WAIVER. No waiver, delay, omission or forbearance on the
part of the Licensor to exercise any right, option, duty or power
arising from any default or breach by Developer shall affect or
impair the rights of Licensor with respect to any subsequent
default of the same or a different kind; nor shall any delay or
omission of Licensor to exercise any right arising from any such
default affect or impair Licensor's rights as to such default or
any future default.
23. SEVERABILITY. If any term, restriction or covenant of
this Agreement is deemed invalid or unenforceable, all other terms,
restrictions and covenants and the application thereof to all
persons and circumstances subject hereto shall remain unaffected to
the extent permitted by law; and if any application of any term,
restriction or covenant to any person or circumstance is deemed
invalid or unenforceable, the application of such terms,
restriction or covenant to other persons and circumstances shall
remain unaffected to the extent permitted by law.
24. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties that have been
relied upon by either party other than those set forth herein. No
agreement of any kind relating to the matters covered by this
agreement shall be binding upon either party unless and until the
same is made in writing and executed by both Developer and
Licensor.
25. DEVELOPER'S ACKNOWLEDGMENTS. Developer understands and
acknowledges that there are significant risks in any business
venture and that the primary factor in Developer's success or
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<PAGE>
failure under this Agreement will be Developer's own efforts. IN
ADDITION, DEVELOPER ACKNOWLEDGES THAT LICENSOR AND ITS
REPRESENTATIVES HAVE MADE NO REPRESENTATIONS TO DEVELOPER OTHER
THAN OR INCONSISTENT WITH THE MATTERS SET FORTH IN THE UNIFORM
FRANCHISE OFFERING CIRCULAR PROVIDED TO DEVELOPER AND THAT
DEVELOPER HAS UNDERTAKEN THIS VENTURE SOLELY IN RELIANCE UPON THE
MATTERS SET FORTH IN THE UNIFORM FRANCHISE OFFERING CIRCULAR AND
DEVELOPER'S OWN INDEPENDENT INVESTIGATION OF THE MERITS OF THIS
VENTURE.
DEVELOPER:
TPI RESTAURANTS, INC.
(corporation) By: /s/ J. Gary Sharp
------------------------------------
TPI RESTAURANTS, INC.
Title: President
---------------------------------
Date: 8/16/93
----------------------------------
LICENSOR:
SHONEY'S, INC.
By: /s/ James M. Grout
------------------------------------
JAMES M. GROUT
Title: Executive Vice President
---------------------------------
Franchising & Development
---------------------------------
By: /s/ James W. Arnett, Jr.
------------------------------------
JAMES W. ARNETT, JR.
Title: President & C.O.O.
---------------------------------
- 13 -
<PAGE>
EXHIBIT A
to Market Development Agreement
Dated August 17, 1993 Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
The following area within Maricopa County, Arizona, bounded and
more particularly described as follows:
Beginning at a point where 1-17 intersects with the
northern border of Maricopa County and traveling south
along 1-17 until intersecting 1-17/I-10 (Maricopa
Freeway). Thence traveling south easterly 1/2 mile to
the west of 1-10 until intersecting the Maricopa County
line, thence following the Maricopa County line to the
point of beginning.
ACKNOWLEDGED AND APPROVED
(Licensor)
- -----------------------
(Developer)
- -----------------------
- 14 -
<PAGE>
EXHIBIT B
to Market Development Agreement
Dated August 17, 1993
Between Shoney's, Inc. and TPI RESTAURANTS, INC.
DEVELOPMENT FEE: $37,500
------------------------
LICENSE FEES/ROYALTIES
For each Shoney's restaurant opened within the Territory
pursuant to this Agreement, the License Fee payable shall be
$25,000 and the royalties payable shall be 3% of gross sales.
DEVELOPMENT SCHEDULE
One (1) Shoney's Restaurant open by FeDruary 28, 1995;
One (1) additional (total of two (2)) Shoney's Restaurants
open by February 28, 1996; and
One (1) additional (total of three (3)) Shoney's Restaurants
open by February 28, 1997.
THIS MARKET DEVELOPMENT AGREEMENT SUPERSEDES AND REPLACES THAT
CERTAIN RESERVED AREA AGREEMENT DATED MARCH 6, 1990 ISSUED TO
RICHARD L. EARLY FOR DEVELOPMENT OF THREE (3) SHONEY'S RESTAURANTS
WITHIN NORTHWEST MARICOPA COUNTY, ARIZONA, WHICH WAS ASSIGNED TO
DEVELOPER. UPON EXECUTION OF THIS AGREEMENT, NEITHER DEVELOPER NOR
LICENSOR SHALL HAVE ANY RIGHTS OR OBLIGATIONS UNDER THE RESERVED
AREA AGREEMENT.
ACKNOWLEDGED AND APPROVED
(Licensor)
- -----------------------
(Developer)
- -----------------------
<PAGE>
ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is an addendum to that certain Market
Development Agreement dated August 17, 1993 (the "Market
Development Agreement"), by and between Shoney's Inc. (hereinafter
referred to as the "Licensor") and TPI RESTAURANTS, INC
(hereinafter referred to as the "Developer") in connection with the
development of Shoney's Restaurants within Arizona.
WITNESSETH:
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) Shoney's restaurant open by February 28, 1996;
one (1) additional (total of two (2)) Shoney's
restaurants open by February 28, 1997; and one (1)
additional (total of three (3)) open by February 28,
1998.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed tls agreement
as of the 26th day of January , 1995.
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
------------------------------ ------------------------------
LES LOCKHART CHARLES E. PORTER
Title: V.P. of Development Title: President
--------------------------- ---------------------------
By: /s/ Charles Vaughn
------------------------------
CHARLES VAUGHN
Title: Vice President
---------------------------
Franchising & Development
---------------------------
<PAGE>
SECOND ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a second addendum to that certain Market
Development Agreement dated August 17, 1993 (the "Market
Development Agreement"), by and between Shoney's Inc, (hereinafter
referred to as the "Licensor") and TPI RESTAURANTS, INC.
(hereinafter referred to as the "Developer") in connection with the
development of Shoney's Restaurants within Arizona.
WITNESSETH:
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) Shoney's restaurant open by February 28, 1997;
one (1) additional (total of two (2)) Shoney's
restaurants open by February 28, 1998; and one (1)
additional (total of three (3)) open by February 28,
1999.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 27th day of February, 1995.
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
------------------------------ ------------------------------
LES LOCKHART CHARLES E. PORTER
Title: V.P. of Development Title: President
--------------------------- ---------------------------
By: /s/ Charles Vaughn
------------------------------
CHARLES VAUGHN
Title: Vice President
---------------------------
Franchising & Development
---------------------------
EXHIBIT 10.38
01/02/93
SHONEY'S
MARKET DEVELOPMENT AGREEMENT
----------------------------
This Agreement made and entered into this 18th day of July,
1993 in Nashville, Tennessee by and between Shoney's, Inc., a
Tennessee corporation with its principal office at 1727 Elm Hill
Pike, Nashville, Tennessee 37210 ("Licensor"), and TPI
RESTAURANTS, INC. (corporation) with its principal office at
2158 Union Avenue, Memphis, TN 38104 ("Developer").
WHEREAS, Licensor at a substantial expenditure of time,
effort and money, has developed and perfected a system of
opening and operating restaurants utilizing the "Shoney's"
service mark ("Shoney's restaurants"); and
WHEREAS, Licensor has acquired knowledge and experience in
the composition, distribution, advertising and sale of food
products by Shoney's restaurants and with respect to the style
of the buildings and signs used by said restaurants and has
successfully established a reputation, demand and goodwill for
the products sold by such restaurants; and
WHEREAS, Developer recognizes the value of uniformity in a
system of restaurants and Developer further recognizes the value
of Licensor's knowledge and experience gained through the
operation of Shoney's restaurants, and the value of the trade
names, trademarks, service marks and other distinctive features
of Shoney's restaurants; and
WHEREAS, Developer acknowledges Licensor's sole and
exclusive ownership of any rights to Licensor's current and
future trade names, trademarks and service marks and to all
current and future related practices, procedures, methods,
devices, techniques, recipes and systems; and
WHEREAS, Developer desires to open and operate a certain
number of Shoney's restaurants within the geographic area
specified in this Agreement within the term of this Agreement;
and
WHEREAS, Licensor is willing to grant Developer such rights
in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, it is mutually agreed as follows:
1. GRANT. Licensor hereby grants to Developer during the
term of this Agreement and subject to the conditions hereof the
right to open and operate Shoney's restaurants in the limited
<PAGE>
geographical area identified and set forth in Exhibit A hereto;
this geographical area being hereinafter referred to as the
"Territory." The operation of each of the Shoney's restaurants
developed pursuant to this Agreement will be governed by individual
License Agreements issued by Licensor in accordance with Paragraph
12 below. During the term of this Agreement, without the consent of
Developer, Licensor shall not grant options for or license others
to operate, nor will it itself operate, any new or additional
Shoney's restaurants in the Territory.
2. TERM; RENEWAL.
(a) Unless earlier terminated pursuant to Paragraph 13, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, upon the date of execution by
Licensor of the License Agreement for the last of the Shoney's
restaurants then required to be opened and operated pursuant to
this Agreement or any renewal hereof, unless Developer, upon, or
not more than thirty (30) days prior to, execution of the License
Agreement for such last restaurant, gives notice to Licensor (in
accordance with this Agreement) of Developer's intent to renew this
Agreement (a "Renewal Notice"). Upon receipt of a Renewal Notice,
Licensor shall conduct a survey of the Territory and, within ninety
(90) days following receipt of the Renewal Notice, shall notify
Developer of the additional number of Shoney's restaurants that
Licensor proposes to be built and opened within the Territory, if
any, and the development schedule for such additional restaurants
(a "Development Notice"). If Licensor and Developer, within ninety
(90) days from Licensor's sending a Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending a Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the most recent Development Notice to
Developer.
(b) If, at the time of any proposed renewals of this
Agreement by Developer pursuant to this Paragraph 2, Licensor
determines that no additional Shoney's restaurants are then
required to be built and opened within the Territory, the
Development Notice sent by Licensor in connection with such
proposed renewal shall so state. In such event, the term of this
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<PAGE>
Agreement shall be extended for a period of one (1) year from the
date Licensor sent the Development Notice to Developer indicating
that no additional Shoney's restaurants are then required to be
built and opened within the Territory. Thereafter, this Agreement
shall automatically renew for successive one (1) year terms, unless
Licensor determines that an additional restaurant or restaurants
are then required and, at least ninety (90) days prior to
expiration of the then current term, sends a Development Notice to
Developer stating the number of restaurants to be built and opened
within the Territory and the development schedule for such
additional restaurants. If Licensor and Developer, within ninety
(90) days from Licensor's sending the Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending the Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the Development Notice to Developer.
3. DEVELOPMENT FEE. Upon execution of this Agreement,
Developer shall pay to Licensor the fee set forth in Exhibit B
hereto and designated as the development fee (the "Development
Fee"). This Development Fee shall be fully earned by Licensor in
consideration of its execution of this Agreement and shall be
non-refundable. However, Licensor shall credit the Development
Fee, pro rata, based upon the number of Shoney's restaurants to be
built within the Territory, toward the License Fees payable under
any of the License Agreements issued to Developer pursuant to this
Agreement, provided that the applicable restaurants are constructed
and opened in accordance with the schedule set forth in Exhibit B
(the "Development Schedule"). Upon renewal of this Agreement and
an agreement by Franchisor and the developer/franchisee to build
additional restaurants pursuant to Paragraph 2, an additional
Development Fee will be due. The amount will be determined in the
same manner as the original Development Fee charged upon execution
of this Agreement (number of restaurants multiplied by one-half of
the license fee for each such restaurant), and is fully earned at
the time of the extension of this Agreement. The additional
Development Fee also will be credited pro rata against the
individual license fees of the additional restaurants opened
pursuant to this Agreement if the developer/franchisee remains in
compliance with all terms and conditions of this Agreement,
including the development schedule for the additional restaurants.
- 3 -
<PAGE>
4. DEVELOPMENT SCHEDULE. Developer shall build, open and
operate properly licensed Shoney's restaurants in accordance with
the Development Schedule. In the event that Developer opens and
continuously operates a greater number of Shoney's restaurants than
required during any interim period of the Development Schedule, the
requirements of the succeeding period(s) shall be deemed satisfied
to the extent of such excess number of restaurants, up to the total
number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for
locating proposed sites within the Territory for each of the
restaurants contemplated in the Development Schedule. During the
term of this Agreement, Developer shall use its best efforts to
locate suitable sites. Licensor, in its discretion, may offer
counseling and advice in site selection. In no event, however,
shall Licensor be obligated to loan money, guarantee leases,
provide financing or otherwise become directly involved and/or
obligated to Developer or to any third party in respect of such
site selection or development; these activities and undertakings,
financially and otherwise, shall be the exclusive responsibility of
Developer.
6. SITE ACCEPTANCE. Upon selection by Developer of a
proposed site for a Shoney's restaurant, Developer promptly shall
submit to Licensor such specific site data and demographic and
other information concerning the site as may be reasonably required
by Licensor, utilizing such forms as may be required by Licensor.
Licensor shall either accept or reject such site in accordance with
Licensor's then-current site selection policies and procedures. To
be effective, any acceptance must be in writing. Developer
understands and acknowledges that Licensor may reject any proposed
site, in which event Developer will not proceed at the rejected
site, but will seek to locate an acceptable site. The acquisition
in any manner of any proposed site prior to acceptance by Licensor
shall be at the sole risk and responsibility of Developer and shall
not obligate Licensor in any way to accept such site or to issue a
License Agreement for operation of a Shoney's restaurant at such
site.
7. DISCLAIMER. In executing this Agreement, accepting a
proposed site, giving approvals or advice or providing services or
assistance in connection with this Agreement, Licensor does not
guarantee the suitability of an accepted site or the success of any
particular Shoney's restaurant established at any such site.
Licensor expressly disclaims any warranties, express or implied,
with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the
suitability of a site and the success of any restaurant depend on
many factors outside the control of either Licensor or Developer
(including, without limitation, such factors as interest rates,
unemployment rates, demographic trends and the general economic
- 4 -
<PAGE>
climate), but principally depend on Developer's efforts in the
operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a
proposed site, Licensor may require Developer to negotiate a lease
or sales contract that includes certain terms regarding duration or
other specified matters. Developer understands and acknowledges
that a site acceptance may be conditioned on such matters and that
if Developer does not wish to, or cannot, satisfy the pertinent
conditions within a reasonable time, the site will be deemed
rejected.
9. CONSTRUCTION.
(a) Upon receiving acceptance for a proposed site, Developer
shall proceed promptly to secure control of the accepted site and
to obtain necessary zoning and building approvals and permits.
Following acceptance of any site, Licensor shall provide Developer
with fifteen (15) sets of standard architectural plans and
specifications for a prototype Shoney's restaurant. After a site is
accepted but before commencing construction of any Shoney's
restaurant contemplated by this Agreement, Developer shall, if
requested by Licensor, at Developer's expense, furnish to Licensor
for Licensor's acceptance, the following:
(i) A proposed preliminary site plan for the Shoney's
restaurant which, if accepted, shall not thereafter be changed
without Licensor's prior written consent; and
(ii) A copy of Developer's plans and specifications for
construction of the Shoney's restaurant in proposed final
form, which plans and specifications shall have been adopted,
at Developer's expense, from Licensor's then standard plans
and specifications and which, if accepted, shall not
thereafter be changed without Licensor's prior written
consent. In addition, upon request by Licensor, Developer
shall furnish Licensor information as Licensor may from time
to time request, which may include, without limitation, copies
of all commitments and plans for construction and permanent
financing, the name, address and contact with respect to each
lender, the name and address of the contractor, together with
a copy of the construction contract.
(b) Thereafter, Developer shall break ground and commence
construction of the particular Shoney's restaurant in accordance
with the accepted site plan and building plans and specifications
as soon as possible and shall complete all the construction
thereof, including the acquisition and installation of all
equipment specified by Licensor, and have the restaurant ready to
open for business within the time specified in the Development
Schedule. Licensor and its agents shall have the right to inspect
the construction at any reasonable time. Developer agrees to give
- 5 -
<PAGE>
Licensor at least ten (10) days notice prior to pouring the
concrete slab for any Shoney's restaurant to be opened pursuant to
this Agreement and to give Licensor notice immediately after
completion of the electrical and mechanical rough-ins to enable
Licensor to inspect the construction at such times. Developer shall
correct, upon request and at Developer's expense, any deviation
from any approved site plan or plans and specifications. Licensor
assumes no responsibility for the quality of any construction
because of any inspections made by it or any reports or
recommendations made as a result of such inspections.
(c) In the event Developer fails to open any Shoney's
restaurant within the time periods set forth in the Development
Schedule, except for any delay due in material part to war,
strikes, lock-outs, governmentally imposed building moratoriums, or
similar causes beyond the control of Developer (which do not
include general construction delays), or in the event Developer
commences construction of any Shoney's restaurant according to
plans and specifications not accepted by Licensor or alters such
accepted site plan or plans and specifications without Licensor's
approval, then, Licensor, at its option, may elect to cancel and
terminate this Agreement, by written notice to Developer, in which
case any Development Fee paid to Licensor pursuant to Paragraph 3
shall be retained by Licensor as liquidated and agreed damages and
no further License Agreements will be issued for any proposed
Shoney's restaurants.
10. ADVISORY SERVICES AND TRAINING.
(a) During the term of this Agreement, Licensor shall at
reasonable times, upon the request of, and at no charge to
Developer (except as otherwise expressly provided in this Paragraph
10), furnish counseling and advisory services to Developer with
respect to the construction and pre-opening activities related to
the operation of Shoney's restaurants, including consultation and
advice regarding:
(i) parking and building layouts;
(ii) traffic planning;
(iii) construction and financing of the restaurant
building and other improvements;
(iv) equipment selection and layout;
(v) employee selection and training;
(vi) advertising and promotion;
(vii) bookkeeping and accounting; and
(viii) purchasing and inventory control,
(b) Developer and its employees shall attend and conduct such
training programs as Licensor may reasonably require in order to
train Developer's personnel properly to operate the Shoney's
restaurants contemplated by this Agreement, No charge will be made
by Licensor for training programs conducted by it, but Developer
- 6 -
<PAGE>
shall be required to pay all expenses of Developer's personnel who
take part in any such program or programs.
(c) Developer shall not employ or seek to employ any person
who is at the time employed by Licensor or by any other licensee or
optionee of Licensor without first obtaining the consent of such
person's employer and Developer will not, directly or indirectly,
induce any such person to leave his or her employment.
11. LICENSE FEE. Upon execution by Licensor of each License
Agreement for a Shoney's restaurant contemplated by this Agreement,
Developer shall pay to Licensor the sum set forth on Exhibit B
hereto that is specified as the License Fee for each such Shoney's
restaurant. This License Fee is fully earned by Licensor upon
execution of the License Agreement and thereafter shall be
non-refundable. Any Development Fee paid by Developer hereunder
shall be credited toward payment of the License Fee in accordance
with the terms of Paragraph 3 of this Agreement.
12. LICENSE AGREEMENTS.
(a) Upon the due performance by Developer within the time
periods set forth in the Development Schedule, as extended or
renewed pursuant to Paragraph 2, of all of the requirements set
forth above (including, without limitation, payment of the
Development Fee, and License Fee, satisfaction of all construction
and training requirements) with respect to each of the Shoney's
restaurants contemplated by this Agreement, Licensor, except as set
forth below, will execute, issue and deliver to Developer
Licensor's then-current form of License Agreement to operate each
of the Shoney's restaurants contemplated by this Agreement;
provided, however, that the License Fees and royalties payable
under any License Agreement for a Shoney's restaurant to be built
and operated within the Territory shall be at the rate set forth in
Exhibit B. In addition, during the term of this Agreement or any
renewal hereof, with respect to any License Agreement executed for
a Shoney's restaurant to be built and operated within the
Territory, Licensor agrees that:
(1) the maximum amount (expressed as a percentage of sales)
of required advertising expenditures under any License
Agreement shall not be increased from the amount set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory;
(2) the protected radius (expressed in distance) provided for
in any License Agreement shall not be reduced from the
distance set forth as a protected radius in the first License
Agreement executed by Developer during the term of this
Agreement for a Shoney's restaurant to be built and operated
within the Territory;
- 7 -
<PAGE>
(3) each License Agreement shall have an initial term of
twenty (20) years with the option (upon satisfaction of the
conditions for renewal set forth therein) to renew for one
additional term of twenty (20) years;
(4) neither the radius (expressed in distance) nor the length
of time (expressed in months) of the post-termination covenant
not to compete set forth in any License Agreement shall be
increased from those set forth in the first License Agreement
executed by Developer during the term of this Agreement for a
Shoney's restaurant to be built and operated within the
Territory;
(5) the formula for determining the price to be paid by
Licensor for any of Developer's assets upon termination of any
License Agreement shall not be changed from that set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory; and
(6) no material change in the reasons that allow a License
Agreement to be terminated shall be made from those set forth
in the first License Agreement executed by Developer during
the term of this Agreement for a Shoney's restaurant to be
built and operated within the Territory.
(b) As a condition of Licensor's execution of such License
Agreement, Licensor may require Developer or its principals to
provide a personal guarantee, letter of credit or corporate
guarantee in a form acceptable to Licensor to secure payment of
royalties and other fees required to be paid to Licensor or its
affiliates under any such License Agreement, or otherwise.
Developer shall comply with Licensor's then-current franchising
policies and procedures for issuance of each License Agreement.
Licensor shall be under no obligation to execute and issue a
License Agreement unless Developer has complied in a timely manner
with all terms and conditions of this Agreement and has satisfied
all requirements set forth heroin. In addition, Licensor shall be
under no obligation to execute and issue a License Agreement if
Developer is in breach or default of any other License Agreement,
License Option Agreement, Market Development Agreement or any
other agreement between Licensor and Developer, or if Developer is
not eligible for expansion pursuant to Licensor's then-current
criteria for expansion. If and when each License Agreement
contemplated in this Agreement is executed by Licensor, it shall
supersede this Agreement and govern the relations between the
parties with respect to the particular restaurant.
13. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer
acknowledges that until a License Agreement has been issued for a
specified site, Developer shall not have or be entitled to exercise
any of the rights, powers and privileges granted by the License
- 8 -
<PAGE>
Agreement, including without limitation the right to use Licensor's
trademarks, service marks and trade names; that the execution of
this Agreement shall not be deemed to grant any such rights, powers
or privileges to Developer; and that Developer may not under any
circumstances commence operation of any Shoney's restaurant prior
to execution by Licensor of a License Agreement for the particular
location.
14. TERMINATION.
14.1 Automatic Termination. This Agreement shall terminate
immediately and without notice to either party:
(a) if Developer files a petition under any bankruptcy or
reorganization law, becomes insolvent, or has a trustee or receiver
appointed by a court of competent jurisdiction for all or any part
of Developer's property; or
(b) if Developer seeks to effect a plan of liquidation,
reorganization, composition or arrangement of Developer's affairs,
whether or not the same shall be subsequently approved by a court
of competent jurisdiction, it being understood that in no event
shall this Agreement or any right or interest hereunder be deemed
an asset in any insolvency, receivership, bankruptcy, composition,
liquidation, arrangement or reorganization proceeding; or
(c) if Developer has an involuntary proceeding filed under
any bankruptcy or reorganization laws or any other laws and does
not have such proceeding dismissed within ninety (90) days
thereafter; or
(d) if Developer makes a general assignment for the benefit
of creditors.
14.2 By Licensor. Licensor, at its option, may terminate this
Agreement immediately upon notice to Developer, upon the occurrence
of any of the following:
(a) failure to comply with the Development Schedule;
(b) the assignment of this Agreement without the prior
written approval of Licensor;
(c) if Developer is a corporation or a partnership, the
transfer of any of the capital stock or partnership interest of
such corporation or partnership during the term of this Agreement
without the prior written approval of Licensor; or, in the event
that any shareholder or partner of Developer (the "Shareholder") is
a corporation, limited partnership, business trust, partnership or
similar association, the transfer of any of the capital stock or
other interests of the shareholders, limited partners, trustees,
beneficiaries, partners or investors, as the case may be, in such
- 9 -
<PAGE>
Shareholder, during the term of this Agreement without the prior
written approval of Licensor;
(d) the discovery by Licensor of any material misrepre-
sentation in any of the information or documents submitted to
Licensor by or on behalf of Developer;
(e) any material violation by Developer of any of the
provisions of this Agreement if such material violation shall
continue for thirty (30) days after Licensor gives written notice
of such material violation to Optionee or if such material
violation cannot be reasonably corrected within such thirty (30)
day period, then if such material violation is not corrected within
such additional time as may be required assuming Optionee proceeds
with reasonable diligence; provided, however, that such written
notice and a reasonable time to correct material violations shall
not be required if Optionee repeatedly fails to perform in
accordance with the terms and conditions contained herein; or
(f) any default by Developer under any other agreement with
Licensor and Developer's failure to cure such default within the
time specified in such agreement, if any.
15. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration of
this Agreement, or upon its termination for any reason, any and all
rights granted to Developer hereunder shall be extinguished
immediately. Licensor thereafter shall have the right to operate or
license others to operate Shoney's restaurants within the
Territory, except as limited by the provisions of any other
then-effective agreements with Licensor.
16. RESTRICTIONS. Licensor is engaged in the business of
developing and franchising Shoney's restaurants on a national
basis. Developer acknowledges that the appropriation or duplication
of Shoney's restaurants or any part thereof for a purpose other
than to operate a Shoney's restaurant pursuant to a License
Agreement with Licensor would damage the franchising business of
Licensor. Developer acknowledges that Licensor owns trade secrets
and that all material or other information now or hereafter
provided or disclosed to Developer regarding Shoney's restaurants
is disclosed to Developer in confidence and Developer agrees not to
disclose any part of it to anyone who is not an employee of
Licensor, or of its licensees. Licensor shall be entitled to obtain
injunctive relief in addition to any other legal or equitable
remedies it may have if Developer fails to comply with the
provisions contained herein.
17. ASSIGNMENT.
(a) Developer shall not sell, assign, transfer, convey or
encumber its rights and obligations hereunder or suffer or permit
any such assignment, transfer or encumbrance to occur by operation
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<PAGE>
of law without the prior express written consent of Licensor. In
the event Developer is a corporation, limited partnership, business
trust, partnership or similar association, the shareholders,
limited partners, beneficiaries, partners or investors, as the case
may be, may not sell, assign, or otherwise transfer their shares or
interests in such corporation, limited partnership, business trust,
partnership or similar association, without the prior written
consent of Licensor. Furthermore, in the event that any
shareholder of Developer (the "Shareholder") is a corporation,
limited partnership, business trust, partnership or similar
association, the interests of the shareholders, limited partners,
trustees, beneficiaries, partners or investors, as the case may be,
in such Shareholder, may not be sold, assigned or otherwise
transferred, without the prior written consent of Licensor.
(b) In the event of the death of the Developer or if the
Developer is a corporation or similar entity, then in the event of
the death of any stockholder, investor or similar person, Licensor
shall not unreasonably withhold its consent to a transfer or
assignment of Developer's interest herein, or if Developer is a
corporation, the transfer of the deceased stockholder's stock in
such corporation to a descendant, heir or legatee of the decedent,
who shall in the sole judgment of Licensor be capable of performing
the duties and obligations of Developer hereunder and under any
License Agreement to be issued pursuant to this agreement, or to a
responsible bona fide purchaser acceptable to Licensor. Any
approval by Licensor of such transfer or assignment shall be
subject to the assignee's agreement in writing to assume and
perform all of Developer's duties and obligations hereunder and
under any License Agreement to be issued pursuant to this
18. CONSTRUCTION. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall
be deemed and construed to include any other number and any other
gender, as the context or sense of this Agreement or any provision
hereof may require, as if such words had been fully and properly
written in the appropriate number and gender. All covenants,
agreements and obligations assumed heroin by Developer shall be
deemed to be joint and several covenants, agreements and
obligations of each of the persons named as Developer, if more than
one person is so named.
19. HEADINGS. Captions and section headings are used herein
for convenience only. They are not part oft his Agreement and shall
not be used in construing it.
20. NOTICES. Whenever notice is required or permitted to be
given under the terms of this Agreement, it shall be given in
writing, and be delivered personally, by certified, express or
registered mail, or by an overnight delivery service (e.g., Federal
Express), postage prepaid, addressed to the party for whom
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<PAGE>
intended. All such notices shall be addressed to the party to be
notified at the respective addresses first above written, or at
such other address or addresses as the parties may from time to
time designate in writing.
21. COSTS AND ATTORNEY'S FEES. Should Developer institute an
action against Licensor or any of Licensor's agents or employees
for any claim arising out of or related to this Agreement, Licensor
(or its agents or employees), if it prevails, shall recover from
Developer its costs and reasonable attorneys' fees incurred in
defending said action.
22. WAIVER. No waiver, delay, omission or forbearance on the
part of the Licensor to exercise any right, option, duty or power
arising from any default or breach by Developer shall affect or
impair the rights of Licensor with respect to any subsequent
default of the same or a different kind; nor shall any delay or
omission of Licensor to exercise any right arising from any such
default affect or impair Licensor's rights as to such default or
any future default.
23. SEVERABILITY. If any term, restriction or covenant of
this Agreement is deemed invalid or unenforceable, all other terms,
restrictions and covenants and the application thereof to all
persons and circumstances subject hereto shall remain unaffected to
the extent permitted by law; and if any application of any term,
restriction or covenant to any person or circumstance is deemed
invalid or unenforceable, the application of such terms,
restriction or covenant to other persons and circumstances shall
remain unaffected to the extent permitted by law.
24. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties that have been
relied upon by either party other than those set forth herein. No
agreement of any kind relating to the matters covered by this
agreement shall be binding upon either party unless and until the
same is made in writing and executed by both Developer and
25. DEVELOPER'S ACKNOWLEDGMENTS. Developer understands and
acknowledges that there are significant risks in any business
venture and that the primary factor in Developer's success or
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<PAGE>
failure under this Agreement will be Developer's own efforts. IN
ADDITION, DEVELOPER ACKNOWLEDGES THAT LICENSOR AND ITS
REPRESENTATIVES HAVE MADE NO REPRESENTATIONS TO DEVELOPER OTHER
THAN OR INCONSISTENT WITH THE MATTERS SET FORTH IN THE UNIFORM
FRANCHISE OFFERING CIRCULAR PROVIDED TO DEVELOPER AND THAT
DEVELOPER HAS UNDERTAKEN THIS VENTURE SOLELY IN RELIANCE UPON
THE MATTERS SET FORTH IN THE UNIFORM FRANCHISE OFFERING CIRCULAR
AND DEVELOPER'S OWN INDEPENDENT INVESTIGATION OF THE MERITS OF
THIS VENTURE.
DEVELOPER:
TPI RESTAURANTS, INC.
(corporation)By /s/
--------------------------------
Title: President
------------------------------
Date:
-------------------------------
LICENSOR:
SHONEY'S, INC.
By: /s/ J.M. Grout
---------------------------------
JAMES M. GROUT
Title: Executive Vice President
------------------------------
Franchising & Development
------------------------------
By: /s/
---------------------------------
JAMES W. ARNETT, JR.
Title: President & C.O.O.
------------------------------
Date:
-------------------------------
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<PAGE>
EXHIBIT A
---------
to Market Development Agreement
Dated July 18, 1993 Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
---------
PALM BEACH COUNTY, FLORIDA
and
THE FOLLOWING TERRITORY WITHIN BROWARD COUNTY, FLORIDA:
Northern boundary: The Broward/Palm Beach County line.
Southern boundary: The northern side of Atlantic Boulevard
(Highway 814) running east/west from the Atlantic Ocean and
continuing in a straight line to the Collier County line.
(Units must be located on the northern side of Atlantic
Boulevard.)
Western boundary: The Hendry/Collier and Broward County line.
Eastern boundary: The Atlantic Ocean.
ACKNOWLEDGED AND APPROVED
(Licensor)
----------------------
/s/ (Developer)
----------------------
<PAGE>
EXHIBIT B
---------
to Market Development Agreement
Dated July 18, 1993
Between Shoney's, Inc. and TPI RESTAURANTS, INC.
DEVELOPMENT FEE: $87,500
-----------------------------------------
LICENSE FEES/ROYALTIES
- ----------------------
For each Shoney's restaurant opened within the Territory
pursuant to this Agreement, the License Fee payable shall be
$25,000 and the royalties payable shall be 3% of gross sales.
NOTE: The $62,500 paid under the Market Development Agreement
dated October 6, 1992 for 5 restaurants within Florida shall be
credited toward the development fee for this agreement.
DEVELOPMENT SCHEDULE
--------------------
One (1) Shoney's restaurant open by April 6, 1994;
One (1) additional (total of two (2)) Shoney's restaurants open
by October 6, 1995;
One (1) additional (total of three (3)) Shoney's restaurants
open by April 6, 1997;
One (1) additional (total of four (4)) Shoney's restaurants open
by October 6, 1998;
One (1) additional (total of five (5)) Shoney's restaurants open
by April 6, 2000;
One (1) additional (total of six (6)) Shoney's restaurants open
by October 6, 2001;
One (1) additional (total of seven (7) Shoney's restaurants open
by April 6, 2003.
THIS MARKET DEVELOPMENT AGREEMENT SUPERSEDES AND REPLACES THAT
CERTAIN RESERVED AREA AGREEMENT DATED FEBRUARY 23, 1987 ISSUED
TO WPB RESTAURANTS, INC. FOR DEVELOPMENT OF FIVE (5) SHONEY'S
RESTAURANTS WITHIN NORTH PALM BEACH COUNTY, FLORIDA, WHICH WAS
ASSIGNED TO DEVELOPER. THIS MARKET DEVELOPMENT AGREEMENT ALSO
SUPERSEDES AND REPLACES THAT CERTAIN MARKET
DEVELOPMENT
AGREEMENT DATED OCTOBER 6, 1992 ISSUED TO TPI RESTAURANTS, INC.
FOR 5 SHONEY'S RESTAURANTS WITHIN A SPECIFIED AREA IN FLORIDA.
UPON EXECUTION OF THIS AGREEMENT, NEITHER DEVELOPER NOR LICENSOR
SHALL HAVE ANY RIGHTS OR OBLIGATIONS UNDER THE RESERVED AREA
AGREEMENT OR MARKET DEVELOPMENT AGREEMENT.
ACKNOWLEDGED AND APPROVED
(Licensor)
- ----------------------
/s/ (Developer)
- ----------------------
<PAGE>
ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
----------------------------------------
THIS AGREEMENT is an addendum to that certain Market
Development Agreement dated July 18, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Developer") in connection with the development of
Shoney's Restaurants within Florida.
W I T N E S S E T H:
--------------------
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by April 6, 1996; one (1) additional
(total of three (3)) Shoney's restaurants open by October
6, 1997; one (1) additional (total of four (4)) Shoney's
restaurants open by April 6, 1999; one (1) additional
(total of five (5)) Shoney's restaurants open by October
6, 2000; one (1) additional (total of six (6)) Shoney's
restaurants open by April 6, 2002; and one (1) additional
(total of seven (7)) open by October 6, 2003.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 26th day of January, 1995.
---- -------
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
--------------------------- -----------------------------
Les Lockhart CHARLES E. PORTER
Title: V.P. of Development Title: President
------------------------ --------------------------
By: /s/ Charles Vaughn
-----------------------------
CHARLES VAUGHN
Title: Vice President
--------------------------
Franchising & Development
--------------------------
<PAGE>
SECOND ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a second addendum to that certain Market
Development Agreement dated July 18, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Developer") in connection with the development of
Shoney's Restaurants within Florida.
W I T N E S S E T H:
--------------------
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by April 6, 1997; one (1) additional
(total of three (3)) Shoney's restaurants open by October
6, 1998; one (1) additional (total of four (4)) Shoney's
restaurants open by April 6, 2000; one (1) additional
(total of five (5)) Shoney's restaurants open by October
6, 2001; one (1) additional (total of six (6)) Shoney's
restaurants open by April 6, 2003; and one (1) additional
(total of seven (7)) open by October 6, 2004.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 27th day of February, 1995.
---- --------
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
--------------------------- -----------------------------
CHARLES E. PORTER
Title: V.P. of Development Title: President
------------------------ --------------------------
By: /s/ Charles Vaughn
-----------------------------
CHARLES VAUGHN
Title: Vice President
--------------------------
Franchising & Development
--------------------------
EXHIBIT 10.39
01/02/93
SHONEY'S
MARKET DEVELOPMENT AGREEMENT
----------------------------
This Agreement made and entered into this 18th day of July,
1993 in Nashville, Tennessee by and between Shoney's, Inc., a
Tennessee corporation with its principal office at 1727 Elm Hill
Pike, Nashville, Tennessee 37210 ("Licensor"), and TPI
RESTAURANTS, INC. (corporation) with its principal office at
2158 Union Avenue, Memphis, TN 38104 ("Developer").
WHEREAS, Licensor at a substantial expenditure of time,
effort and money, has developed and perfected a system of
opening and operating restaurants utilizing the "Shoney's"
service mark ("Shoney's restaurants"); and
WHEREAS, Licensor has acquired knowledge and experience in
the composition, distribution, advertising and sale of food
products by Shoney's restaurants and with respect to the style
of the buildings and signs used by said restaurants and has
successfully established a reputation, demand and goodwill for
the products sold by such restaurants; and
WHEREAS, Developer recognizes the value of uniformity in a
system of restaurants and Developer further recognizes the value
of Licensor's knowledge and experience gained through the
operation of Shoney's restaurants, and the value of the trade
names, trademarks, service marks and other distinctive features
of Shoney's restaurants; and
WHEREAS, Developer acknowledges Licensor's sole and
exclusive ownership of any rights to Licensor's current and
future trade names, trademarks and service marks and to all
current and future related practices, procedures, methods,
devices, techniques, recipes and systems; and
WHEREAS, Developer desires to open and operate a certain
number of Shoney's restaurants within the geographic area
specified in this Agreement within the term of this Agreement;
and
WHEREAS, Licensor is willing to grant Developer such rights
in accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, it is mutually agreed as follows:
1. GRANT. Licensor hereby grants to Developer during the
term of this Agreement and subject to the conditions hereof the
right to open and operate Shoney's restaurants in the limited
<PAGE>
geographical area identified and set forth in Exhibit A hereto;
this geographical area being hereinafter referred to as the
"Territory." The operation of each of the Shoney's restaurants
developed pursuant to this Agreement will be governed by individual
License Agreements issued by Licensor in accordance with Paragraph
12 below. During the term of this Agreement, without the consent of
Developer, Licensor shall not grant options for or license others
to operate, nor will it itself operate, any new or additional
Shoney's restaurants in the Territory.
2. TERM; RENEWAL.
(a) Unless earlier terminated pursuant to Paragraph 13, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, upon the date of execution by
Licensor of the License Agreement for the last of the Shoney's
restaurants then required to be opened and operated pursuant to
this Agreement or any renewal hereof, unless Developer, upon, or
not more than thirty (30) days prior to, execution of the License
Agreement for such last restaurant, gives notice to Licensor (in
accordance with this Agreement) of Developer's intent to renew this
Agreement (a "Renewal Notice"). Upon receipt of a Renewal Notice,
Licensor shall conduct a survey of the Territory and, within ninety
(90) days following receipt of the Renewal Notice, shall notify
Developer of the additional number of Shoney's restaurants that
Licensor proposes to be built and opened within the Territory, if
any, and the development schedule for such additional restaurants
(a "Development Notice"). If Licensor and Developer, within ninety
(90) days from Licensor's sending a Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending a Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the most recent Development Notice to
Developer.
(b) If, at the time of any proposed renewals of this
Agreement by Developer pursuant to this Paragraph 2, Licensor
determines that no additional Shoney's restaurants are then
required to be built and opened within the Territory, the
Development Notice sent by Licensor in connection with such
proposed renewal shall so state. In such event, the term of this
- 2 -
<PAGE>
Agreement shall be extended for a period of one (1) year from the
date Licensor sent the Development Notice to Developer indicating
that no additional Shoney's restaurants are then required to be
built and opened within the Territory. Thereafter, this Agreement
shall automatically renew for successive one (1) year terms, unless
Licensor determines that an additional restaurant or restaurants
are then required and, at least ninety (90) days prior to
expiration of the then current term, sends a Development Notice to
Developer stating the number of restaurants to be built and opened
within the Territory and the development schedule for such
additional restaurants. If Licensor and Developer, within ninety
(90) days from Licensor's sending the Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending the Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the Development Notice to Developer.
3. DEVELOPMENT FEE. Upon execution of this Agreement,
Developer shall pay to Licensor the fee set forth in Exhibit B
hereto and designated as the development fee (the "Development
Fee"). This Development Fee shall be fully earned by Licensor in
consideration of its execution of this Agreement and shall be
non-refundable. However, Licensor shall credit the Development
Fee, pro rata, based upon the number of Shoney's restaurants to be
built within the Territory, toward the License Fees payable under
any of the License Agreements issued to Developer pursuant to this
Agreement, provided that the applicable restaurants are constructed
and opened in accordance with the schedule set forth in Exhibit B
(the "Development Schedule"). Upon renewal of this Agreement and
an agreement by Franchisor and the developer/franchisee to build
additional restaurants pursuant to Paragraph 2, an additional
Development Fee will be due. The amount will be determined in the
same manner as the original Development Fee charged upon execution
of this Agreement (number of restaurants multiplied by one-half of
the license fee for each such restaurant), and is fully earned at
the time of the extension of this Agreement. The additional
Development Fee also will be credited pro rata against the
individual license fees of the additional restaurants opened
pursuant to this Agreement if the developer/franchisee remains in
compliance with all terms and conditions of this Agreement,
including the development schedule for the additional restaurants.
- 3 -
<PAGE>
4. DEVELOPMENT SCHEDULE. Developer shall build, open and
operate properly licensed Shoney's restaurants in accordance with
the Development Schedule. In the event that Developer opens and
continuously operates a greater number of Shoney's restaurants than
required during any interim period of the Development Schedule, the
requirements of the succeeding period(s) shall be deemed satisfied
to the extent of such excess number of restaurants, up to the total
number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for
locating proposed sites within the Territory for each of the
restaurants contemplated in the Development Schedule. During the
term of this Agreement, Developer shall use its best efforts to
locate suitable sites. Licensor, in its discretion, may offer
counseling and advice in site selection. In no event, however,
shall Licensor be obligated to loan money, guarantee leases,
provide financing or otherwise become directly involved and/or
obligated to Developer or to any third party in respect of such
site selection or development; these activities and undertakings,
financially and otherwise, shall be the exclusive responsibility of
Developer.
6. SITE ACCEPTANCE. Upon selection by Developer of a
proposed site for a Shoney's restaurant, Developer promptly shall
submit to Licensor such specific site data and demographic and
other information concerning the site as may be reasonably required
by Licensor, utilizing such forms as may be required by Licensor.
Licensor shall either accept or reject such site in accordance with
Licensor's then-current site selection policies and procedures. To
be effective, any acceptance must be in writing. Developer
understands and acknowledges that Licensor may reject any proposed
site, in which event Developer will not proceed at the rejected
site, but will seek to locate an acceptable site. The acquisition
in any manner of any proposed site prior to acceptance by Licensor
shall be at the sole risk and responsibility of Developer and shall
not obligate Licensor in any way to accept such site or to issue a
License Agreement for operation of a Shoney's restaurant at such
site.
7. DISCLAIMER. In executing this Agreement, accepting a
proposed site, giving approvals or advice or providing services or
assistance in connection with this Agreement, Licensor does not
guarantee the suitability of an accepted site or the success of any
particular Shoney's restaurant established at any such site.
Licensor expressly disclaims any warranties, express or implied,
with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the
suitability of a site and the success of any restaurant depend on
many factors outside the control of either Licensor or Developer
(including, without limitation, such factors as interest rates,
unemployment rates, demographic trends and the general economic
- 4 -
<PAGE>
climate), but principally depend on Developer's efforts in the
operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a
proposed site, Licensor may require Developer to negotiate a lease
or sales contract that includes certain terms regarding duration or
other specified matters. Developer understands and acknowledges
that a site acceptance may be conditioned on such matters and that
if Developer does not wish to, or cannot, satisfy the pertinent
conditions within a reasonable time, the site will be deemed
rejected.
9. CONSTRUCTION.
(a) Upon receiving acceptance for a proposed site, Developer
shall proceed promptly to secure control of the accepted site and
to obtain necessary zoning and building approvals and permits.
Following acceptance of any site, Licensor shall provide Developer
with fifteen (15) sets of standard architectural plans and
specifications for a prototype Shoney's restaurant. After a site is
accepted but before commencing construction of any Shoney's
restaurant contemplated by this Agreement, Developer shall, if
requested by Licensor, at Developer's expense, furnish to Licensor
for Licensor's acceptance, the following:
(i) A proposed preliminary site plan for the Shoney's
restaurant which, if accepted, shall not thereafter be changed
without Licensor's prior written consent; and
(ii) A copy of Developer's plans and specifications for
construction of the Shoney's restaurant in proposed final
form, which plans and specifications shall have been adopted,
at Developer's expense, from Licensor's then standard plans
and specifications and which, if accepted, shall not
thereafter be changed without Licensor's prior written
consent. In addition, upon request by Licensor, Developer
shall furnish Licensor information as Licensor may from time
to time request, which may include, without limitation, copies
of all commitments and plans for construction and permanent
financing, the name, address and contact with respect to each
lender, the name and address of the contractor, together with
a copy of the construction contract.
(b) Thereafter, Developer shall break ground and commence
construction of the particular Shoney's restaurant in accordance
with the accepted site plan and building plans and specifications
as soon as possible and shall complete all the construction
thereof, including the acquisition and installation of all
equipment specified by Licensor, and have the restaurant ready to
open for business within the time specified in the Development
Schedule. Licensor and its agents shall have the right to inspect
the construction at any reasonable time. Developer agrees to give
- 5 -
<PAGE>
Licensor at least ten (10) days notice prior to pouring the
concrete slab for any Shoney's restaurant to be opened pursuant to
this Agreement and to give Licensor notice immediately after
completion of the electrical and mechanical rough-ins to enable
Licensor to inspect the construction at such times. Developer shall
correct, upon request and at Developer's expense, any deviation
from any approved site plan or plans and specifications. Licensor
assumes no responsibility for the quality of any construction
because of any inspections made by it or any reports or
recommendations made as a result of such inspections.
(c) In the event Developer fails to open any Shoney's
restaurant within the time periods set forth in the Development
Schedule, except for any delay due in material part to war,
strikes, lock-outs, governmentally imposed building moratoriums, or
similar causes beyond the control of Developer (which do not
include general construction delays), or in the event Developer
commences construction of any Shoney's restaurant according to
plans and specifications not accepted by Licensor or alters such
accepted site plan or plans and specifications without Licensor's
approval, then, Licensor, at its option, may elect to cancel and
terminate this Agreement, by written notice to Developer, in which
case any Development Fee paid to Licensor pursuant to Paragraph 3
shall be retained by Licensor as liquidated and agreed damages and
no further License Agreements will be issued for any proposed
Shoney's restaurants.
10. ADVISORY SERVICES AND TRAINING.
(a) During the term of this Agreement, Licensor shall at
reasonable times, upon the request of, and at no charge to
Developer (except as otherwise expressly provided in this Paragraph
10), furnish counseling and advisory services to Developer with
respect to the construction and pre-opening activities related to
the operation of Shoney's restaurants, including consultation and
advice regarding:
(i) parking and building layouts;
(ii) traffic planning;
(iii) construction and financing of the restaurant
building and other improvements;
(iv) equipment selection and layout;
(v) employee selection and training;
(vi) advertising and promotion;
(vii) bookkeeping and accounting; and
(viii) purchasing and inventory control,
(b) Developer and its employees shall attend and conduct such
training programs as Licensor may reasonably require in order to
train Developer's personnel properly to operate the Shoney's
restaurants contemplated by this Agreement, No charge will be made
by Licensor for training programs conducted by it, but Developer
- 6 -
<PAGE>
shall be required to pay all expenses of Developer's personnel who
take part in any such program or programs.
(c) Developer shall not employ or seek to employ any person
who is at the time employed by Licensor or by any other licensee or
optionee of Licensor without first obtaining the consent of such
person's employer and Developer will not, directly or indirectly,
induce any such person to leave his or her employment.
11. LICENSE FEE. Upon execution by Licensor of each License
Agreement for a Shoney's restaurant contemplated by this Agreement,
Developer shall pay to Licensor the sum set forth on Exhibit B
hereto that is specified as the License Fee for each such Shoney's
restaurant. This License Fee is fully earned by Licensor upon
execution of the License Agreement and thereafter shall be
non-refundable. Any Development Fee paid by Developer hereunder
shall be credited toward payment of the License Fee in accordance
with the terms of Paragraph 3 of this Agreement.
12. LICENSE AGREEMENTS.
(a) Upon the due performance by Developer within the time
periods set forth in the Development Schedule, as extended or
renewed pursuant to Paragraph 2, of all of the requirements set
forth above (including, without limitation, payment of the
Development Fee, and License Fee, satisfaction of all construction
and training requirements) with respect to each of the Shoney's
restaurants contemplated by this Agreement, Licensor, except as set
forth below, will execute, issue and deliver to Developer
Licensor's then-current form of License Agreement to operate each
of the Shoney's restaurants contemplated by this Agreement;
provided, however, that the License Fees and royalties payable
under any License Agreement for a Shoney's restaurant to be built
and operated within the Territory shall be at the rate set forth in
Exhibit B. In addition, during the term of this Agreement or any
renewal hereof, with respect to any License Agreement executed for
a Shoney's restaurant to be built and operated within the
Territory, Licensor agrees that:
(1) the maximum amount (expressed as a percentage of sales)
of required advertising expenditures under any License
Agreement shall not be increased from the amount set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory;
(2) the protected radius (expressed in distance) provided for
in any License Agreement shall not be reduced from the
distance set forth as a protected radius in the first License
Agreement executed by Developer during the term of this
Agreement for a Shoney's restaurant to be built and operated
within the Territory;
- 7 -
<PAGE>
(3) each License Agreement shall have an initial term of
twenty (20) years with the option (upon satisfaction of the
conditions for renewal set forth therein) to renew for one
additional term of twenty (20) years;
(4) neither the radius (expressed in distance) nor the length
of time (expressed in months) of the post-termination covenant
not to compete set forth in any License Agreement shall be
increased from those set forth in the first License Agreement
executed by Developer during the term of this Agreement for a
Shoney's restaurant to be built and operated within the
Territory;
(5) the formula for determining the price to be paid by
Licensor for any of Developer's assets upon termination of any
License Agreement shall not be changed from that set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory; and
(6) no material change in the reasons that allow a License
Agreement to be terminated shall be made from those set forth
in the first License Agreement executed by Developer during
the term of this Agreement for a Shoney's restaurant to be
built and operated within the Territory.
(b) As a condition of Licensor's execution of such License
Agreement, Licensor may require Developer or its principals to
provide a personal guarantee, letter of credit or corporate
guarantee in a form acceptable to Licensor to secure payment of
royalties and other fees required to be paid to Licensor or its
affiliates under any such License Agreement, or otherwise.
Developer shall comply with Licensor's then-current franchising
policies and procedures for issuance of each License Agreement.
Licensor shall be under no obligation to execute and issue a
License Agreement unless Developer has complied in a timely manner
with all terms and conditions of this Agreement and has satisfied
all requirements set forth heroin. In addition, Licensor shall be
under no obligation to execute and issue a License Agreement if
Developer is in breach or default of any other License Agreement,
License Option Agreement, Market Development Agreement or any
other agreement between Licensor and Developer, or if Developer is
not eligible for expansion pursuant to Licensor's then-current
criteria for expansion. If and when each License Agreement
contemplated in this Agreement is executed by Licensor, it shall
supersede this Agreement and govern the relations between the
parties with respect to the particular restaurant.
13. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer
acknowledges that until a License Agreement has been issued for a
specified site, Developer shall not have or be entitled to exercise
any of the rights, powers and privileges granted by the License
- 8 -
<PAGE>
Agreement, including without limitation the right to use Licensor's
trademarks, service marks and trade names; that the execution of
this Agreement shall not be deemed to grant any such rights, powers
or privileges to Developer; and that Developer may not under any
circumstances commence operation of any Shoney's restaurant prior
to execution by Licensor of a License Agreement for the particular
location.
14. TERMINATION.
14.1 Automatic Termination. This Agreement shall terminate
immediately and without notice to either party:
(a) if Developer files a petition under any bankruptcy or
reorganization law, becomes insolvent, or has a trustee or receiver
appointed by a court of competent jurisdiction for all or any part
of Developer's property; or
(b) if Developer seeks to effect a plan of liquidation,
reorganization, composition or arrangement of Developer's affairs,
whether or not the same shall be subsequently approved by a court
of competent jurisdiction, it being understood that in no event
shall this Agreement or any right or interest hereunder be deemed
an asset in any insolvency, receivership, bankruptcy, composition,
liquidation, arrangement or reorganization proceeding; or
(c) if Developer has an involuntary proceeding filed under
any bankruptcy or reorganization laws or any other laws and does
not have such proceeding dismissed within ninety (90) days
thereafter; or
(d) if Developer makes a general assignment for the benefit
of creditors.
14.2 By Licensor. Licensor, at its option, may terminate this
Agreement immediately upon notice to Developer, upon the occurrence
of any of the following:
(a) failure to comply with the Development Schedule;
(b) the assignment of this Agreement without the prior
written approval of Licensor;
(c) if Developer is a corporation or a partnership, the
transfer of any of the capital stock or partnership interest of
such corporation or partnership during the term of this Agreement
without the prior written approval of Licensor; or, in the event
that any shareholder or partner of Developer (the "Shareholder") is
a corporation, limited partnership, business trust, partnership or
similar association, the transfer of any of the capital stock or
other interests of the shareholders, limited partners, trustees,
beneficiaries, partners or investors, as the case may be, in such
- 9 -
<PAGE>
Shareholder, during the term of this Agreement without the prior
written approval of Licensor;
(d) the discovery by Licensor of any material misrepre-
sentation in any of the information or documents submitted to
Licensor by or on behalf of Developer;
(e) any material violation by Developer of any of the
provisions of this Agreement if such material violation shall
continue for thirty (30) days after Licensor gives written notice
of such material violation to Optionee or if such material
violation cannot be reasonably corrected within such thirty (30)
day period, then if such material violation is not corrected within
such additional time as may be required assuming Optionee proceeds
with reasonable diligence; provided, however, that such written
notice and a reasonable time to correct material violations shall
not be required if Optionee repeatedly fails to perform in
accordance with the terms and conditions contained herein; or
(f) any default by Developer under any other agreement with
Licensor and Developer's failure to cure such default within the
time specified in such agreement, if any.
15. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration of
this Agreement, or upon its termination for any reason, any and all
rights granted to Developer hereunder shall be extinguished
immediately. Licensor thereafter shall have the right to operate or
license others to operate Shoney's restaurants within the
Territory, except as limited by the provisions of any other
then-effective agreements with Licensor.
16. RESTRICTIONS. Licensor is engaged in the business of
developing and franchising Shoney's restaurants on a national
basis. Developer acknowledges that the appropriation or duplication
of Shoney's restaurants or any part thereof for a purpose other
than to operate a Shoney's restaurant pursuant to a License
Agreement with Licensor would damage the franchising business of
Licensor. Developer acknowledges that Licensor owns trade secrets
and that all material or other information now or hereafter
provided or disclosed to Developer regarding Shoney's restaurants
is disclosed to Developer in confidence and Developer agrees not to
disclose any part of it to anyone who is not an employee of
Licensor, or of its licensees. Licensor shall be entitled to obtain
injunctive relief in addition to any other legal or equitable
remedies it may have if Developer fails to comply with the
provisions contained herein.
17. ASSIGNMENT.
(a) Developer shall not sell, assign, transfer, convey or
encumber its rights and obligations hereunder or suffer or permit
any such assignment, transfer or encumbrance to occur by operation
- 10 -
<PAGE>
of law without the prior express written consent of Licensor. In
the event Developer is a corporation, limited partnership, business
trust, partnership or similar association, the shareholders,
limited partners, beneficiaries, partners or investors, as the case
may be, may not sell, assign, or otherwise transfer their shares or
interests in such corporation, limited partnership, business trust,
partnership or similar association, without the prior written
consent of Licensor. Furthermore, in the event that any
shareholder of Developer (the "Shareholder") is a corporation,
limited partnership, business trust, partnership or similar
association, the interests of the shareholders, limited partners,
trustees, beneficiaries, partners or investors, as the case may be,
in such Shareholder, may not be sold, assigned or otherwise
transferred, without the prior written consent of Licensor.
(b) In the event of the death of the Developer or if the
Developer is a corporation or similar entity, then in the event of
the death of any stockholder, investor or similar person, Licensor
shall not unreasonably withhold its consent to a transfer or
assignment of Developer's interest herein, or if Developer is a
corporation, the transfer of the deceased stockholder's stock in
such corporation to a descendant, heir or legatee of the decedent,
who shall in the sole judgment of Licensor be capable of performing
the duties and obligations of Developer hereunder and under any
License Agreement to be issued pursuant to this agreement, or to a
responsible bona fide purchaser acceptable to Licensor. Any
approval by Licensor of such transfer or assignment shall be
subject to the assignee's agreement in writing to assume and
perform all of Developer's duties and obligations hereunder and
under any License Agreement to be issued pursuant to this
18. CONSTRUCTION. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall
be deemed and construed to include any other number and any other
gender, as the context or sense of this Agreement or any provision
hereof may require, as if such words had been fully and properly
written in the appropriate number and gender. All covenants,
agreements and obligations assumed heroin by Developer shall be
deemed to be joint and several covenants, agreements and
obligations of each of the persons named as Developer, if more than
one person is so named.
19. HEADINGS. Captions and section headings are used herein
for convenience only. They are not part oft his Agreement and shall
not be used in construing it.
20. NOTICES. Whenever notice is required or permitted to be
given under the terms of this Agreement, it shall be given in
writing, and be delivered personally, by certified, express or
registered mail, or by an overnight delivery service (e.g., Federal
Express), postage prepaid, addressed to the party for whom
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<PAGE>
intended. All such notices shall be addressed to the party to be
notified at the respective addresses first above written, or at
such other address or addresses as the parties may from time to
time designate in writing.
21. COSTS AND ATTORNEY'S FEES. Should Developer institute an
action against Licensor or any of Licensor's agents or employees
for any claim arising out of or related to this Agreement, Licensor
(or its agents or employees), if it prevails, shall recover from
Developer its costs and reasonable attorneys' fees incurred in
defending said action.
22. WAIVER. No waiver, delay, omission or forbearance on the
part of the Licensor to exercise any right, option, duty or power
arising from any default or breach by Developer shall affect or
impair the rights of Licensor with respect to any subsequent
default of the same or a different kind; nor shall any delay or
omission of Licensor to exercise any right arising from any such
default affect or impair Licensor's rights as to such default or
any future default.
23. SEVERABILITY. If any term, restriction or covenant of
this Agreement is deemed invalid or unenforceable, all other terms,
restrictions and covenants and the application thereof to all
persons and circumstances subject hereto shall remain unaffected to
the extent permitted by law; and if any application of any term,
restriction or covenant to any person or circumstance is deemed
invalid or unenforceable, the application of such terms,
restriction or covenant to other persons and circumstances shall
remain unaffected to the extent permitted by law.
24. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties that have been
relied upon by either party other than those set forth herein. No
agreement of any kind relating to the matters covered by this
agreement shall be binding upon either party unless and until the
same is made in writing and executed by both Developer and
25. DEVELOPER'S ACKNOWLEDGMENTS. Developer understands and
acknowledges that there are significant risks in any business
venture and that the primary factor in Developer's success or
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<PAGE>
failure under this Agreement will be Developer's own efforts. IN
ADDITION, DEVELOPER ACKNOWLEDGES THAT LICENSOR AND ITS
REPRESENTATIVES HAVE MADE NO REPRESENTATIONS TO DEVELOPER OTHER
THAN OR INCONSISTENT WITH THE MATTERS SET FORTH IN THE UNIFORM
FRANCHISE OFFERING CIRCULAR PROVIDED TO DEVELOPER AND THAT
DEVELOPER HAS UNDERTAKEN THIS VENTURE SOLELY IN RELIANCE UPON
THE MATTERS SET FORTH IN THE UNIFORM FRANCHISE OFFERING CIRCULAR
AND DEVELOPER'S OWN INDEPENDENT INVESTIGATION OF THE MERITS OF
THIS VENTURE.
DEVELOPER:
TPI RESTAURANTS, INC.
(corporation)By /s/
--------------------------------
Title: President
------------------------------
Date:
-------------------------------
LICENSOR:
SHONEY'S, INC.
By: /s/ J.M. Grout
---------------------------------
JAMES M. GROUT
Title: Executive Vice President
------------------------------
Franchising & Development
------------------------------
By: /s/
---------------------------------
JAMES W. ARNETT, JR.
Title: President & C.O.O.
------------------------------
Date:
-------------------------------
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<PAGE>
EXHIBIT A
---------
to Market Development Agreement
Dated July 18, 1993 Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
---------
PALM BEACH COUNTY, FLORIDA
and
THE FOLLOWING TERRITORY WITHIN BROWARD COUNTY, FLORIDA:
Northern boundary: The Broward/Palm Beach County line.
Southern boundary: The northern side of Atlantic Boulevard
(Highway 814) running east/west from the Atlantic Ocean and
continuing in a straight line to the Collier County line.
(Units must be located on the northern side of Atlantic
Boulevard.)
Western boundary: The Hendry/Collier and Broward County line.
Eastern boundary: The Atlantic Ocean.
ACKNOWLEDGED AND APPROVED
(Licensor)
----------------------
/s/ (Developer)
----------------------
<PAGE>
EXHIBIT B
---------
to Market Development Agreement
Dated July 18, 1993
Between Shoney's, Inc. and TPI RESTAURANTS, INC.
DEVELOPMENT FEE: $87,500
-----------------------------------------
LICENSE FEES/ROYALTIES
- ----------------------
For each Shoney's restaurant opened within the Territory
pursuant to this Agreement, the License Fee payable shall be
$25,000 and the royalties payable shall be 3% of gross sales.
NOTE: The $62,500 paid under the Market Development Agreement
dated October 6, 1992 for 5 restaurants within Florida shall be
credited toward the development fee for this agreement.
DEVELOPMENT SCHEDULE
--------------------
One (1) Shoney's restaurant open by April 6, 1994;
One (1) additional (total of two (2)) Shoney's restaurants open
by October 6, 1995;
One (1) additional (total of three (3)) Shoney's restaurants
open by April 6, 1997;
One (1) additional (total of four (4)) Shoney's restaurants open
by October 6, 1998;
One (1) additional (total of five (5)) Shoney's restaurants open
by April 6, 2000;
One (1) additional (total of six (6)) Shoney's restaurants open
by October 6, 2001;
One (1) additional (total of seven (7) Shoney's restaurants open
by April 6, 2003.
THIS MARKET DEVELOPMENT AGREEMENT SUPERSEDES AND REPLACES THAT
CERTAIN RESERVED AREA AGREEMENT DATED FEBRUARY 23, 1987 ISSUED
TO WPB RESTAURANTS, INC. FOR DEVELOPMENT OF FIVE (5) SHONEY'S
RESTAURANTS WITHIN NORTH PALM BEACH COUNTY, FLORIDA, WHICH WAS
ASSIGNED TO DEVELOPER. THIS MARKET DEVELOPMENT AGREEMENT ALSO
SUPERSEDES AND REPLACES THAT CERTAIN MARKET
DEVELOPMENT
AGREEMENT DATED OCTOBER 6, 1992 ISSUED TO TPI RESTAURANTS, INC.
FOR 5 SHONEY'S RESTAURANTS WITHIN A SPECIFIED AREA IN FLORIDA.
UPON EXECUTION OF THIS AGREEMENT, NEITHER DEVELOPER NOR LICENSOR
SHALL HAVE ANY RIGHTS OR OBLIGATIONS UNDER THE RESERVED AREA
AGREEMENT OR MARKET DEVELOPMENT AGREEMENT.
ACKNOWLEDGED AND APPROVED
(Licensor)
- ----------------------
/s/ (Developer)
- ----------------------
<PAGE>
ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
----------------------------------------
THIS AGREEMENT is an addendum to that certain Market
Development Agreement dated July 18, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Developer") in connection with the development of
Shoney's Restaurants within Florida.
W I T N E S S E T H:
--------------------
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by April 6, 1996; one (1) additional
(total of three (3)) Shoney's restaurants open by October
6, 1997; one (1) additional (total of four (4)) Shoney's
restaurants open by April 6, 1999; one (1) additional
(total of five (5)) Shoney's restaurants open by October
6, 2000; one (1) additional (total of six (6)) Shoney's
restaurants open by April 6, 2002; and one (1) additional
(total of seven (7)) open by October 6, 2003.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 26th day of January, 1995.
---- -------
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
--------------------------- -----------------------------
Les Lockhart CHARLES E. PORTER
Title: V.P. of Development Title: President
------------------------ --------------------------
By: /s/ Charles Vaughn
-----------------------------
CHARLES VAUGHN
Title: Vice President
--------------------------
Franchising & Development
--------------------------
<PAGE>
SECOND ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a second addendum to that certain Market
Development Agreement dated July 18, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Developer") in connection with the development of
Shoney's Restaurants within Florida.
W I T N E S S E T H:
--------------------
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by April 6, 1997; one (1) additional
(total of three (3)) Shoney's restaurants open by October
6, 1998; one (1) additional (total of four (4)) Shoney's
restaurants open by April 6, 2000; one (1) additional
(total of five (5)) Shoney's restaurants open by October
6, 2001; one (1) additional (total of six (6)) Shoney's
restaurants open by April 6, 2003; and one (1) additional
(total of seven (7)) open by October 6, 2004.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 27th day of February, 1995.
---- --------
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By: /s/ Les Lockhart By: /s/ Charles E. Porter
--------------------------- -----------------------------
CHARLES E. PORTER
Title: V.P. of Development Title: President
------------------------ --------------------------
By: /s/ Charles Vaughn
-----------------------------
CHARLES VAUGHN
Title: Vice President
--------------------------
Franchising & Development
--------------------------
01/02/93
SHONEY'S
MARKET DEVELOPMENT AGREEMENT
This Agreement made and entered into this 1st day of April,
1993 in Nashville, Tennessee by and between Shoney's, Inc., a
Tennessee corporation with its principal office at 1727 Elm Hill
Pike, Nashville, Tennessee 37210 ("Licensor"), and TPI
RESTAURANTS, INC. (corporation) with its principal office at
2158 Union Avenue, Memphis, TN 38104 ("Developer").
Whereas, Licensor at a substantial expenditure of time,
effort and money, has developed and perfected a system of
opening and operating restaurants utilizing the "Shoney's"
service mark ("Shoney's restaurants"); and
WHEREAS, Licensor has acquired knowledge and experience in
the composition, distribution, advertising and sale of food
products by Shoney's restaurants and with respect to the style
of the buildings and signs used by said restaurants and has
successfully established a reputation, demand and goodwill for
the products sold by such restaurants; and
WHEREAS, Developer recognizes the value of uniformity in a
system of restaurants and Developer further recognizes the value
of Licensor's knowledge and experience gained through the
operation of Shoney's restaurants, and the value of the trade
names, trademarks, service marks and other distinctive features
of Shoney's restaurants; and
WHEREAS, Developer acknowledges Licensor's sole and
exclusive ownership of any rights to Licensor's current and
future trade names, trademarks and service marks and to all
current and future related practices, procedures, methods,
devices, techniques, recipes and systems; and
WHEREAS, Developer desires to open and operate a certain
number of Shoney's restaurants within the geographic area
specified in this Agreement within the term of this Agreement;
and
WEREAS, Licensor is willing to grant Developer such rights
in accordance with the terms and conditions of this Agreement;
NOW THEREFORE, it is mutually agreed as follows:
1. GRANT. Licensor hereby grants to Developer during the
term of this is Agreement and subject to the conditions hereof the
right to open and operate Shoney's restaurants in the limited
geographical area identified and set forth in Exhibit A hereto;
this geographical area being hereinafter referred to as the
"Territory." The operation of each of the Shoney's restaurants
developed pursuant to this Agreement will be governed by individual
License Agreements issued by Licensor in accordance with Paragraph
12 below. During the term of this Agreement, without the consent of
Developer, Licensor shall not grant options for or license others
to operate, nor will it itself operate, any new or additional
Shoney's restaurants in the Territory.
2. TERM; RENEWAL.
(a) Unless earlier terminated pursuant to Paragraph 13, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, upon the date of execution by
Licensor of the License Agreement for the last of the Shoney's
restaurants then required to be opened and operated pursuant to
this Agreement or any renewal hereof, unless Developer, upon, or
not more than thirty (30) days prior to, execution of the License
Agreement for such last restaurant, gives notice to Licensor (in
accordance with this Agreement) of Developer's intent to renew this
Agreement (a "Renewal Notice"). Upon receipt of a Renewal Notice,
Licensor shall conduct a survey of the Territory and, within ninety
(90) days following receipt of the Renewal Notice, shall notify
Developer of the additional number of Shoney's restaurants that
Licensor proposes to be built and opened within the Territory, if
any, and the development schedule for such additional restaurants
(a "Development Notice"). If Licensor and Developer, within ninety
(90) days from Licensor's sending a Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending a Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the most recent Development Notice to
Developer.
(b) If, at the time of any proposed renewals of this
Agreement by Developer pursuant to this Paragraph 2, Licensor
determinates that no additional Shoney's restaurants are then
required to be built and opened within the Territory, the
Development Notice sent by Licensor in connection with such
proposed renewal shall so state. In such event, the term of this
Agreement shall be extended for a period of one (1) year from the
date Licensor sent the Development Notice to Developer indicating
that no additional Shoney's restaurants are then required to be
built and opened within the Territory. Thereafter, this Agreement
shall automatically renew for successive one (1) year terms, unless
Licensor determines that an additional restaurant or restaurants
are then required and, at least ninety (90) days prior to
expiration of the then current term, sends a Development Notice to
Developer stating the number of restaurants to be built and opened
within the Territory and the development schedule for such
additional restaurants. If Licensor and Developer, within ninety
(90) days from Licensor's sending the Development Notice to
Developer, agree on the number of additional Shoney's restaurants
to be built and opened within the Territory and the development
schedule for such additional restaurants, the term of this
Agreement shall be extended until the time of execution of the
License Agreement for the last of the additional Shoney's
restaurants that Licensor and Developer agree should be built and
opened within the Territory. If Licensor and Developer, within
ninety (90) days from Licensor's sending the Development Notice to
Developer, do not agree (with both Licensor and Developer being
obligated to negotiate in good faith) upon the additional number of
restaurants to be built and opened within the Territory or the
development schedule for such additional restaurants, this
Agreement shall terminate, without any action on the part of either
of the parties being necessary, on the ninety first (91st) day
following Licensor's sending the Development Notice to Developer.
3. DEVELOPMENT FEE. Upon execution of this Agreement,
Developer shall pay to Licensor the fee set forth in Exhibit B
hereto and designated as the development fee (the "Development
Fee"). This Development Fee shall be fully earned by Licensor in
consideration of its execution of this Agreement and shall be
non-refundable. However, Licensor shall credit the Development
Fee, pro rata, based upon the number of Shoney's restaurants to be
built within the Territory, toward the License Fees payable under
any of the License Agreements issued to Developer pursuant to this
Agreement, provided that the applicable restaurants are constructed
and opened in accordance with the schedule set forth in Exhibit B
(the "Development Schedule"). Upon renewal of this Agreement and
an agreement by Franchisor and the developer/franchises to build
additional restaurants pursuant to Paragraph 2, an additional
Develcpment Fee will be due. The amount will be determined in the
same manner as the original Development Fee charged upon execution
of this Agreement (number of restaurants multiplied by one-half of
the license fee for each such restaurant), and is fully earned at
the time of the extension of this Agreement. The additional
Development Fee also will be credited pro rata against the
individual license fees of the additional restaurants opened
pursuant to this Agreement if the developer/franchises remains in
compliance with all terms and conditions of this Agreement,
including the development schedule for the additional restaurants.
4. DEVELOPMENT SCHEDULE. Developer shall build, open and
operate properly licensed Shoney's restaurants in accordance with
the Development Schedule. In the event that Developer opens and
continuously operates a greater number of Shoney's restaurants than
required during any interim period of the Development Schedule, the
requirements of the succeeding period(s) shall be deemed satisfied
to the extent of such excess number of restaurants, up to the total
number of restaurants specified in the Development Schedule.
5. LOCATION OF RESTAURANTS. Developer is responsible for
locating proposed sites within the Territory for each of the
restaurants. contemplated in the Development Schedule. During the
term of this Agreement, Developer shall use its best efforts to
locate suitable sites. Licensor, in its discretion, may offer
counseling and advice in site selection. In no event, however,
shall Licensor be obligated to loan money, guarantee leases,
provide financing or otherwise become directly involved and/or
obligated to Developer or to any third party in respect of such
site selection or development; these activities and undertakings,
financially and otherwise, shall be the exclusive responsibility of
Developer.
6. SITE ACCEPTANCE. Upon selection by Developer of a
proposed site for a Shoney's restaurant, Developer promptly shall
submit to Licensor such specific site data and demographic and
other information concerning the site as may be reasonably required
by Licensor, utilizing such forms as may be required by Licensor.
Licensor shall either accept or reject such site in accordance with
Licensor's then-current site selection policies and procedures. To
be effective, any acceptance must be in writing. Developer
understands and acknowledges that Licensor may reject any proposed
site, in which event Developer will not proceed at the rejected
site, but will seek to locate an acceptable site. The acquisition
in any manner of any proposed site prior to acceptance by Licensor
shall be at the sole risk and responsibility of Developer and shall
not obligate Licensor in any way to accept such site or to issue a
License Agreement for operation of a Shoney's restaurant at such
site.
7. DISCLAIMER. In executing this Agreement, accepting a
proposed site, giving approvals or advice or providing services or
assistance in connection with this Agreement, Licensor does not
guarantee the suitability of an accepted site or the success of any
particular Shoney's restaurant established at any such site.
Licensor expressly disclaims any warranties, express or implied,
with respect to the suitability of any site or the success of any
restaurant. Developer understands and acknowledges that the
suitability of a site and the success of any restaurant depend on
many factors outside the control of either Licensor or Developer
(including, without limitation, such factors as interest rates,
unemployment rates, demographic trends and the general economic
-- 4 --
climate), but principally depend on Developer's efforts in the
operation of the restaurant.
8. LOCATION REQUIREMENTS. As a condition for accepting a
proposed site, Licensor may require Developer to negotiate a lease
or sales contract that includes certain terms regarding duration or
other specified matters. Developer understands and acknowledges
that a site acceptance may be conditioned on such matters and that
if developer does not wish to, or cannot, satisfy the pertinent
conditions within a reasonable time, the site will be deemed
rejected.
9. CONSTRUCTION.
(a) Upon receiving acceptance for a proposed site, Developer
shall proceed promptly to secure control of the accepted site and
to obtain necessary zoning and building approvals and permits.
Following acceptance of any site, Licensor shall provide Developer
with fifteen (15) sets of standard architectural plans and
specifications for a prototype Shoney's restaurant. After a site is
accepted but before commencing construction of any Shoney's
restaurant contemplated by this Agreement, Developer shall, if
requested by Licensor, at Developer's expense, furnish to Licensor
for Licensor's acceptance, the following:
(i) A proposed preliminary site plan for the Shoney's
restaurant which, if accepted, shall not thereafter be changed
without Licensor's prior written consent; and
(ii) A copy of Developer's plans and specifications for
construction of the Shoney's restaurant in proposed final
form, which plans and specifications shall have been adopted,
at Developer's expense, from Licensor's then standard plans
and specifications and which, if accepted, shall not
thereafter be changed without Licensor's prior written
consento In addition, upon request by Licensor, Developer
shall furnish Licensor information as Licensor may from time
to time request, which may include, without limitation, copies
of all commitments and plans for construction and permanent
financing, the name, address and contact with respect to each
lender, the name and address of the contractor, together with
a copy of the construction contract.
(b) Thereafter, Developer shall break ground and commence
construction of the particular Shoney's restaurant in accordance
with the accepted site plan and building plans and specifications
as soon as possible and shall complete all the construction
thereof, including the acquisition and installation of all
equipment specified by Licensor, and have the restaurant ready to
open for business within the time specified in the Development
Schedule. Licensor and its agents shall have the right to inspect
the construction at any reasonable time, Developer agrees to give
Licensor at least ten (10) days notice prior to pouring the
concrete slab for any Shoney's restaurant to be opened pursuant to
this Agreement and to give Licensor notice immediately after
completion of the electrical and mechanical rough-ins to enable
Licensor to inspect the construction at such times. Developer shall
correct, upon request and at Developer's expense, any deviation
from any approved site plan or plans and specifications. Licensor
assumes no responsibility for the quality of any construction
because of any inspections made by it or any reports or
recommendations made as a result of such inspections.
(c) In the event Developer fails to open any Shoney's
restaurant within the time periods set forth in the Development
Schedule, except for any delay due in material part to war,
strikes, lock-outs, governmentally imposed building moratoriums, or
similar causes beyond the control of Developer (which do not
include general construction delays), or in the event Developer
commences construction of any Shoney's restaurant according to
plans and specifications not accepted by Licensor or alters such
accepted site plan or plans and specifications without Licensor's
approval, then, Licensor, at its option, may elect to cancel and
terminate this Agreement, by written notice to Developer, in which
case any Development Fee paid to Licensor pursuant to Paragraph 3
shall be retained by Licensor as liquidated and agreed damages and
no further License Agreements will be issued for any proposed
Shoney's restaurants.
10. ADVISORY SERVICES AND TRAINING.
(a) During the term of this Agreement, Licensor shall at
resonable times, upon the request of, and at no charge to
developer (except as otherwise expressly provided in this Paragraph
10), furnish counseling and advisory services to Developer with
respect to the construction and pre-opening activities related to
the operation of Shoney's restaurants, including consultation and
advice regarding:
(i) parking and building layouts;
(ii) traffic planning;
(iii) construction and financing of the restauran~
building and other improvements;
(iv) equipment selection and layout;
(v) employee selection and training;
(vi) advertising and promotion;
(vii) bookkeeping and accounting; and
{v.'!ii} purchasing and inventory control.
(b) Developer and its employees shall attend and conduct such
traing programs as Licensor may reasonably require in order to
train Developer's personnel properly to operate the Shoney's
restaurants contemplated by this Agreement. No charge will be made
by Licensor for training programs conducted by it, but Developer
- 6 -
shall be required to pay all expenses of Developer's personnel who
take part in any such program or programs.
(c) Developer shall not employ or seek to employ any person
who is at the time employed by Licensor or by any other licensee or
optionee of Licensor without first obtaining the consent of such
person's employer and Developer will not, directly or indirectly,
induce any such person to leave his or her employment.
11.LICENSE FEE. Upon execution by Licensor of each License
Agreement for a Shoney's restaurant contemplated by this Agreement,
Developer shall pay to Licensor the sum set forth on Exhibit B
hereto that is specified as the License Fee for each such Shoney's
restaurant. This License Fee is fully earned by Licensor upon
execution of the License Agreement and thereafter shall be
non-refundable. Any Development Fee paid by Developer hereunder
shall be credited toward payment of the License Fee in accordance
with the terms of Paragraph 3 of this Agreement.
12. LICENSE AGREEMENTS.
(a) Upon the due performance by Developer within the time
periods set forth in the Development Schedule, as extended or
renewed pursuant to Paragraph 2, of all of the requirements set
forth above (including, without limitation, payment of the
Development Fee, and License Fee, satisfaction of all construction
and training requirements) with respect to each of the Shoney's
restaurants contemplated by this Agreement, Licensor, except as set
forth below, will execute, issue and deliver to Developer
Licensor's then-current form of License Agreement to operate each
of the Shoney's restaurants contemplated by this Agreement;
provided, however, that the License Fees and royalties payable
under any License Agreement for a Shoney's restaurant to be built
and operated within the Territory shall be at the rate set forth in
Exhibit B. In addition, during the term of this Agreement or any
renewal hereof, with respect to any License Agreement executed for
a shoney's restaurant to be built and operated within the
Territory, Licensor agrees that:
(1) the maximum amount (expressed as a percentage of sales)
of required advertising expenditures under any License
Agreement shall not be increased from the amount set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant~to be built
and operated within the Territory;
(2) the protected radius (expressed in distance) provided for
in any License Agreement shall not be reduced from the
distance set forth as a protected radius in the first License
Agreement executed by Developer during the term of this
Agreement. ment for a Shoney's restaurant to be built and operated
within the Territory;
-- 7 --
(3) each License Agreement shall have an initial term of
twenty (20) years with the option (upon satisfaction of the
conditions for renewal set forth therein) to renew for one
additional term of twenty (20) years;
(4) neither the radius (expressed in distance) nor the length
of time (expressed in months) of the post-termination covenant
not to compete set forth in any License Agreement shall be
increased from those set forth in the first License Agreement
executed by Developer during the term of this Agreement for a
shoney's restaurant to be built and operated within the
Territory;
(5) the formula for determining the price to be paid by
Licensor for any of Developer's assets upon termination of any
License Agreement shall not be changed from that set forth in
the first License Agreement executed by Developer during the
term of this Agreement for a Shoney's restaurant to be built
and operated within the Territory; and
(6) no material change in the reasons that allow a License
agreement to be terminated shall be made from those set forth
in the first License Agreement executed by Developer during
the term of this Agreement for a Shoney's restaurant to be
built and operated within the Territory.
(b) As a condition of Licensor's execution of such License
Agreement, Licensor may require Developer or its principals to
provide a personal guarantee, letter of credit or corporate
guarantee in a form acceptable to Licensor to secure payment of
royalties and other fees required to be paid to Licensor or its
affiliates under any such License Agreement, or otherwise.
Developer shall comply with Licensor's then-current franchising
policies and procedures for issuance of each License Agreement.
Licensor shall be under no obligation to execute and issue a
License Agreement unless Developer has complied in a timely manner
with all terms and conditions of this Agreement and has satisfied
all requirements set forth herein. In addition, Licensor shall be
under no obligation to execute and issue a License Agreement if
Developer is in breach or default of any other License Agreement,
License Option Agreement, Market Development Agreement or any
other agreement between Licensor and Developer, or if Developer is
not eligible for expansion pursuant to Licensor's then-current
criteria for expansion. If and when each License Agreement
contemplated in this Agreement is executed by Licensor, it shall
supersede this Agreement and govern the relations between the
parties with respect to the particular restaurant.
13. NO RIGHT TO OPERATE OR USE TRADEMARKS. Developer
acknowledges that until a License Agreement has been issued for a
specified site, Developer shall not have or be entitled to exercise
any of the rights, powers and privileges granted by the License
- 8 -
Agreement, including without limitation the right to use Licensor's
trademarks, service marks and trade names; that the execution of
this Agreement shall not be deemed to grant any such rights, powers
or privileges to Developer; and that Developer may not under any
circumstances commence operation of any Shoney's restaurant prior
to execution by Licensor of a License Agreement for the particular
location.
14. TERMINATION.
14.1 Automatic Termination. This Agreement shall terminate
immediately. and without notice to either party:
(a) if Developer files a petition under any bankruptcy or
reorganization law, becomes insolvent, or has a trustee or receiver
appointed by a court of competent jurisdiction for all or any part
of Developer's property; or
(b) if Developer seeks to effect a plan of liquidation,
reorganization, composition or arrangement of Developer's affairs,
whether or not the same shall be subsequently approved by a court
of competent jurisdiction, it being understood that in no event
shall this Agreement or any right or interest hereunder be deemed
an asset in any insolvency, receivership, bankruptcy, composition,
liquidation, arrangement or reorganization proceeding; or
(c) if Developer has an involuntary proceeding filed under
any bankruptcy or reorganization laws or any other laws and does
not have such proceeding dismissed within ninety (90) days
thereafter; or
(d) if Developer makes a general assignment for the benefit
of creditors.
14.2 By Licensor. Licensor, at its option, may terminate this
Agreement immediately upon notice to Developer, upon the occurrence
of any of the following:
(a) failure to comply with the Development Schedule;
(b) the assignment of this Agreement without the prior
written approval of Licensor;
(c) if Developer is a corporation or a partnership, the
transfer of any of the capital stock or partnership interest of
such corporation or partnership during the term of this Agreement
without the prior written approval of Licensor; or, in the event
that any shareholder or partner of Developer (the "Shareholder") is
a corporation, limited partnership, business trust, partnership or
similar association, the transfer of any of the capital stock or
other interests of the shareholders, limited partners, trustees,
beneficiaries, partners or investors, as the case may be, in such
Shareholder, during the term of this Agreement without the prior
written approval of Licensor;
(d) the discovery by Licensor of any material misrepre-
sentation in any of the information or documents submitted to
Licensor by or on behalf of Developer;
(e) any material violation by Developer of any of the
provisions of this Agreement if such material violation shall
continue for thirty (30) days after Licensor gives written notice
of such material violation to Optionee or if such material
violation cannot be reasonably corrected within such thirty (30)
day period, then if such material violation is not corrected within
such additional time as may be required assuming Optionee proceeds
with reasonable diligence; provided, however, that such written
notice and a reasonable time to correct material violations shall
not be required if Optionee repeatedly fails to perform in
accordance with the terms and conditions contained herein; or
(f) any default by Developer under any other agreement with
Licensor and Developer's failure to cure such default within the
time specified in such agreement, if any.
15. EFFECT OF EXPIRATION OR TERMINATION. Upon expiration of
this Agreement, or upon its termination for any reason, any and all
rights granted to Developer hereunder shall be extinguished
immediately. Licensor thereafter shall have the right to operate or
license others to operate Shoney's restaurants within the
Territory, except as limited by the provisions of any other
then-effective agreements with Licensor.
16. RESTRICTIONS. Licensor is engaged in the business of
developing and franchising Shoney's restaurants on a national
basis. Developer acknowledges that the appropriation or duplication
of Shoney's restaurants or any part thereof for a purpose other
than to operate a Shoney's restaurant pursuant to a License
agreement with Licensor would damage the franchising business of
Licensor. Developer acknowledges that Licensor owns trade secrets
and that all material or other information now or hereafter
provided or disclosed to Developer regarding Shoney's restaurants
is disclosed to Developer in confidence and Developer agrees not to
disclose any part of it to anyone who is not an employee of
Licensor, or of its licensees. Licensor shall be entitled to obtain
injunctive relief in addition to any other legal or equitable
remedies it may have if Developer fails to comply with the
provisions contained herein.
17. ASSIGNMENT.
(a) Developer shall not sell, assign, transfer, convey or
encumber its rights and obligations hereunder or suffer or permit
any such assignment, transfer or encumbrance to occur by operation
of law without the prior express written consent of Licensor. In
the event Developer is a corporation, limited partnership, business
trust, partnership or similar association, the shareholders,
limited partners, beneficiaries, partners or investors, as the case
may be, may not sell, assign, or otherwise transfer their shares or
interests in such corporation, limited partnership, business trust,
partnership or similar association, without the prior written
consent of Licensor. Furthermore, in the event that any
shareholder of Developer (the "Shareholder,,) is a corporation,
limited partnership, business trust, partnership or similar
association, the interests of the shareholders, limited partners,
trustees, beneficiaries, partners or investors, as the case may be,
in such Shareholder, may not be sold, assigned or otherwise
transferred, without the prior written consent of Licensor.
(b) In the event of the death of the Developer or if the
Developer is a corporation or similar entity, then in the event of
the death of any stockholder, investor or similar person, Licensor
shall not unreasonably withhold its consent to a transfer or
assignment of Developer,s interest herein, or if Developer is a
corporation, the transfer of the deceased stockholder,s stock in
such corporation to a descendant, heir or legatee of the decedent,
who shall in the sole judgment of Licensor be capable of performing
the duties and obligations of Developer hereunder and under any
License Agreement to be issued pursuant to this agreement, or to a
responsible bona fide purchaser acceptable to Licensor. Any
approval by Licensor of such transfer or assignment shall be
subject to the assignee's agreement in writing to assume and
perform all of Developer,s duties and obligations hereunder and
under any License Agreement to be issued pursuant to this
agreement.
18. CONSTRUCTION. All terms and words used in this Agreement,
regardless of the number and gender in which they are used, shall
be deemed and construed to include any other number and any other
gender, as the context or sense of this Agreement or any provision
hereof may require, as if such words had been fully and properly
written in the appropriate number and gender. All covenants,
agreements and obligations assumed herein by Developer shall be
deemed to be joint and several covenants, agreements and
obligations of each of the persons named as Developer, if more than
one person is so named.
19. HEADINGS. Captions and section headings are used herein
for convenience only. They are not part of this Agreement and shall
not be used in construing it.
20. NOTICES. Whenever notice is required or permitted to be
given under the terms of this Agreement, it shall be given in
writing, and be delivered personally, by certified, express or
registered mail, or by an overnight delivery service (e.G., Federal
express), postage prepaid, addressed to the party for whom
- 11 -
intended. All such notices shall be addressed to the party to be
notified at the respective addresses first above written, or at
such other address or addresses as the parties may from time to
time designate in writing.
21. COSTS AND ATTORNEY'S FEES. Should Developer institute an
action against Licensor or any of Licensor's agents or employees
for any claim arising out of or related to this Agreement, Licensor
(or its agents or employees), if it prevails, shall recover from
Developer its costs and reasonable attorneys, fees incurred in
defending said action.
22. WAIVER. No waiver, delay, omission or forbearance on the
part of the Licensor to exercise any right, option, duty or power
arising from any default or breach by Developer shall affect or
impair the rights of Licensor with respect to any subsequent
default of the same or a different kind; nor shall any delay or
omission of Licensor to exercise any right arising from any such
default affect or impair Licensor's rights as to such default or
any future default.
23. SEVERABILITY. If any term, restriction or covenant of
this Agreement is deemed invalid or unenforceable, all other terms,
restrictions and covenants and the application thereof to all
persons and circumstances subject hereto shall remain unaffected to
the extent permitted by law; and if any application of any term,
restriction or covenant to any person or circumstance is deemed
invalid or unenforceable, the application of such terms,
restriction or covenant to other persons and circumstances shall
remain unaffected to the extent permitted by law.
24. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties that have been
relied upon by either party other than those set forth herein. No
agreement of any kind relating to the matters covered by this
agreement shall be binding upon either party unless and until the
same is made in writing and executed by both Developer and
Licensor.
25. DEVELOPER'S ACKNOWLEDGMENTS. Developer understands and
acknowledges that there are significant risks in any business
venture and that the primary factor in Developer's success or
failure under this Agreement will be Developer's own efforts. IN
ADDITION, DEVELOPER ACKNOWLEDGES THAT LICENSOR AND ITS
REPRESENTATIVES HAVEMADE NO REPRESENTATIONS TO DEVELOPER OTHER
THAN OR INCONSISTENT WITH THE MATTERS SET FORTH IN THE UNIFORM
FRANCHISE OFFERING CIRCULAR PROVIDED TO DEVELOPER AND THAT
DEVELOPER HAS UNDERTAKEN THIS VENTURE SOLELY IN RELIANCE UPON
THEMATTERS SET FORTH IN THE UNIFORMFRANCHISE OFFERING CIRCULAR
AND DEVELOPER'S OWN INDEPENDENT INVESTIGATION OF THE MERITS OF
THIS VENTURE.
DEVELOPER:
TPI RESTAURANTS, INC.
(corporation) ~:e~-~
t
Date:..
LICENSOR:
SHONEY'S, INC.
,
By:
Title:
By:
Title:
Date:...,
- 13 -
EXHIBIT A
to Market Development Agreement
Dated April 1, 1993 Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
The following area within northwest Harris County, Texas,
bounded and more particularly described as follows:
Beginning on the westerly border of Harris, County, Texas at a
point where the Northwest Expressway (U.S. 290) intersects the
Harris County line and continuing in a southeasterly direction
along the center of the Northwest Expressway for approximately
14 miles until the Northwest Expressway intersects Interstate
610; thence in a north and easterly direction along the median
of Interstate 610 for approximately 10 miles until Interstate
610 intersects Hardy Road; thence in a northerly direction along
the center of Hardy Road approximately 30 miles until Hardy Road
lntersects with the Harris County line; thence in a westerly and
southerly direction following the Harris County line to the
point of beginning.
ACKNOWLEDGED AND APPROVED
(Licensor)
(Developer)
<PAGE>
EXHIBIT B
to Market Development Agreement
Dated April 1, 1993
Between Shoney's, Inc. and TPI RESTAURANTS, INC.
DEVELOPMENT FEE: $75,000
LICENSE FEES/ROYALTIES
For each Shoney's restaurant opened within the Territory
pursuant to this Agreement, the License Fee payable shall be
$25,000 and the royalties payable shall be 3% of gross sales.
DEVELOPMENT SCHEDULE
One (1) Shoney's restaurant open by December 31, 1993;
One (1) additional (total of two (2)) Shoney's restaurants open
by December 31, 1994;
One (1) additional (total of three (3)) Shoney's restaurants
open by December 31, 1995;
One (1) additional (total of four (4)) Shoney's restaurants open
by December 31, 1996;
One (1) additional (total of five (5)) Shoney's restaurants open
by December 31, 1997;
One (1) additional (total of six (6)) Shoney's restaurants open
by December 31, 1998.
THIS MARKET DEVELOPMENT AGREEMENT SUPERSEDES AND REPLACES THAT
CERTAIN RESERVED AREA AGREEMENT (THE "RAA") DATED OCTOBER 10,
1989 ISSUED TO BILL EMENDORFER FOR DEVELOPMENT OF SEVEN (7)
SHONEY'S RESTAURANTS WITHIN THE SAME AREA ENCOMPASSED BY THIS
AGREEMENT, WHICH WAS ASSIGNED TO DEVELOPER. UPON EXECUTION OF
THIS AGREEMENT, NEITHER DEVELOPER NOR LICENSOR SHALL HAVE ANY
RIGHTS OR OBLIGATIONS UNDER THE RAA.
ACKNOWLEDGED AND APPROVED
(Licensor)
(Developer)
ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is an addendum to that certain Market
Development Agreement dated April 1, 1993, (the Market Development
Agreement"), by and between Shoney's, Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Licensee") in connection with development of Shoney's
Restaurants within northwest Harris County, Texas.
W I T N E S S E T H:
WHEREAS, Licensor and Licensee wish to make certain changes in
the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit A of the Market Development Agreement is amended
by deleting the present Exhibit A in its entirety and
substituting in the place thereof what is attached as
Exhibit A to this Addendum.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 30th day of November , 1993.
LICENSEE: LICENSOR:
SHONEY'S, INC.
By: \
/
Title: Title:
By:
Title:
EXHIBIT A
To Addendum dated November 30 , 1993, to
Market Development Agreement Dated April 1, 1993, Between
Shoney's, Inc. and TPI RESTAURANTS, INC.
for the Development of Shoney's Restaurants
Within the Territory Described Below
TERRITORY
The following area within northwest Harris County, Texas, bounded
and more particularly described as follows:
Beginning at a point where the westerly border of Harris County in
the state of Texas, intersects one (1) mile south of U.S. 290
(Northwest Expressway) and the Harris County line; thence
continuing in a southeasterly direction one mile south from the
center of U.S. 290 until intersecting West 34th Street. Thence
east along the northerly side of 34th Street; thence north on the
westerly side of Sheperd Drive; thence east on the northerly side
of H.B. & T. Railroad across 1-45 to Hardy Road; thence, north on
the westerly side of Hardy Road until Hardy Road intersects with
the Harris County line; thence in a westerly and southerly
direction following the Harris County line to the point of
beginning.
ACKNOWLEDGED AND APPROVED
(Licensor)
(Developer)
SECOND ADDENDUMTO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a second addendum to that certain MaEket
Development Agreement datedApril 1, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the "Developer") in connection with the development of
Shoney's Restaurants within Texas.
WITNESSETH:
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by December 31, 1995; two (2) additional
(total of four (4)) Shoney's restaurants open by December
31, 1996; one (1) additional (total of five (5)) Shoney'~
restaurants open by December 31, 1997; and one (1)
additional (total of six (6)) Shoney's restaurants open
by December 31, 1998.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement
as of the 26th day of January , 1995.
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
BY'~ By:Ok
'tle: Title:
sy: _/
Title:
THIRD ADDENDUM TO MARKET DEVELOPMENT AGREEMENT
THIS AGREEMENT is a third addendum to that certain Market
Development Agreement dated April 1, 1993 (the "Market Development
Agreement"), by and between Shoney's Inc. (hereinafter referred to
as the "Licensor") and TPI RESTAURANTS, INC. (hereinafter referred
to as the ,'Developer") in connection with the development of
Shoney's Restaurants within Texas.
WITNESSETH:.
WHEREAS, Licensor and Developer wish to make certain changes
in the Market Development Agreement, which changes are more
particularly set forth herein.
NOW, THEREFORE, for and in consideration of the covenants and
agreements set forth herein and in the Market Development
Agreement, it is mutually agreed as follows:
1. Exhibit B to the Market Development Agreement is amended
to modify the Development Schedule as follows:
One (1) additional (total of two (2)) Shoney's
restaurants open by December 31, 1996; two (2) additional
(total of four (4)) Shoney's restaurants open by December
31, 1997; one (1) additional (total of five (5)) Shoney's
restaurants open by December 31, 1998; and one (1)
additional (total of six (6)) Shoney's restaurants open
by December 31, 1999.
2. Except as expressly amended herein, all other terms and
conditions of the Market Development Agreement shall
remain in full force and effect.
IN WITNESS.WHEREOF,the parties have executeda this agreement
as of the day of , 1995.
{
Developer: LICENSOR:
TPI RESTAURANTS, INC. SHONEY'S, INC.
By.~ By: ~'
Title: . Title:
By: ~
Title:
January 31, 1995
The Bank of New York, as
Administrative Agent
One Wall Street
New York, New York 10286
NationsBank of North Carolina, N.A., as
Collateral Agent
One NationsBank Plaza
Charlotte, North Carolina 28255
Re: License Agreements from Shoney's, Inc. ("Franchisor") in favor
of TPI Restaurants, Inc. ("Franchisee") for the operation of
certain (i) restaurants as Shoney's restaurants and to use the
Shoney's System, and (ii) restaurants as Captain D's restaurants
and to use the Captain D's System (collectively and as amended
to the date hereof, the "Franchise Agreements".
The undersigned, W. Craig Barber, on behalf of the Franchisor, having the power
and authority to do so, hereby states, certifies and affirms to The Bank of
New York, as administrative agent (in such capacity, the "Administrative Agent")
for the banks (the "Banks") party to the Credit Agreement referred to in
paragraph 3 below and NationsBank of North Carolina, N.A. as collateral agent
for the banks under such Credit Agreement (in such capacity, the "Collateral
Agent" and, together with the Administrative Agent, the "Agents"):
1. All Franchise Agreements between Franchisor and Franchisee and
all Reserved Area and Market Development Agreements (collectively with the
Franchise Agreements, the "Agreements") between Franchisor and Franchisee are
in full force and effect as of the date hereof and the Franchise Agreements
constitute, together with any addendum thereto and the Agreement, dated as of
August 2, 1988, between Franchisor and Franchisee, the complete agreement
between Franchisor and Franchisee with respect to (i) the use of the Shoney's
System (as defined in any such Franchise Agreement) and the operation of
restaurants owned by Franchisee as "Shoney's" restaurants and (ii) the use of
the Captain D's System (as defined in any such Franchise Agreement) and the
operation of restaurants owned by Franchisee as "Captain D's" restaurants.
2. The Franchisee is paying all of the franchise fees due under the
Franchise Agreements (the "Franchise Fees") and other charges in accordance
with the provisions of the Franchise Agreements, and as of the date hereof,
the Franchisee is not in default in making any of such payments in accordance
with the provisions of the Franchise Agreements. To the best of our knowledge,
the Franchisee is in full compliance with all other material requirements and
material standards of operation of Franchisor and the Agreements and here are
no other defaults under the Agreements.
3. Franchisor hereby acknowledges that Franchisee is restructuring
certain financing
<PAGE>
pursuant to a Second Amended and Restated Credit Agreement, dated as of
January 31, 1995, among Franchisee, the Banks and the Agent (together with all
amendments, restatements and/or modifications thereof, the "Credit Agreement").
Franchisor also acknowledges that the financing under the Credit Agreement is
(i) guaranteed by, among others, Franchisee's parent, TPI Enterprises, Inc.
("Enterprises"), which guaranty is to be secured by a pledge to the Collateral
Agent of all Enterprises' stock in Franchisee (the "Pledged Stock") and (ii)
secured by certain ground and other leases and real property on which
restaurants owned by Franchisees and operated as either Shoney's or Captain D's
restaurants (the "Restaurants") are situated. Franchisor acknowledges and
agrees that in the event of an Event of Default under the Credit Agreement,
the Collateral Agent, on its behalf and on behalf of the Banks, has the right
to sell the Pledged Stock without the consent of the Franchisor and the
Franchisor further acknowledges that no such sale shall affect any of the
rights or obligations of the Franchisee under the Franchise Agreements.
Notwithstanding the foregoing, the Franchisor shall have the right, subject to
the terms and conditions set forth in paragraph 9.2 of the Credit Agreement,
to purchase the Notes (as defined in the Credit Agreement). In this connection,
the Franchisor consents to the amendment in such paragraph to substitute Tuke
Yopp & Sweeney for Farris, Warfield & Kanaday therein. A copy of Paragraph 9.2
of the Credit Agreement, as amended, is annexed hereto as Exhibit A.
4. Security Interests of Agents and the Banks. Franchisor hereby
acknowledges that Franchisee has heretofore granted a first priority security
interest in the Pledged Stock and certain of Franchisee's other property (real
and personal) to the Agent and the Banks and its rights to do so and from time
to time to grant a first priority security interest in any other property of
Franchisee (whether real or personal). In connection with such security
interests, Franchisor and the Agents individually, and on behalf of the Banks,
agreed and hereby confirm such agreement (notwithstanding anything to the
contrary in any of the Franchise Agreements or the Credit Agreement)
as follows:
(a) Modification of Franchisor's Default Rights. If Franchisee
defaults in the performance of any of the terms of any of the Franchise
Agreements, Franchisor shall provide the Agent and the Banks with
written notice simultaneously with the giving of written notice to
Franchisee, specifying the nature of the default(s) and, with respect
to any default arising under any of the Franchise Agreements that is
solely of a monetary nature, the Agents and/or the Banks shall have the
right, but not the obligation, to cure such default(s) during the
period provided therein for Franchisee to cure such default plus 10
days. Franchisor agrees to accept all payments made by the Agents
and/or the Banks on behalf of Franchisee within the time limit is set
forth above, as though the same had been paid by Franchisee so that
they shall be as effective to cure a default as the same would have
been if timely paid by Franchisee. The Franchisor shall have no right
to terminate any Franchise Agreement unless and until such notice is
given and the time for curing defaults, as modified herein, has expired.
(b) Franchisor's Right to Purchase Notes. Subject to the
provisions of paragraph 92 of the Credit Agreement (a copy of which
provision is annexed hereto), Franchisor shall have the right to
purchase the Banks' Notes (as defined in the Credit Agreement) prior to
the enforcement of the Agent's and the Banks' rights thereunder. The
provisions of such paragraph 9.2 shall not be amended or deleted from
the Credit Agreement without the written consent of Franchisor.
<PAGE>
(c) In General. Except as specifically set forth herein,
nothing in this Agreement shall be deemed to limit the rights of the
Agents and the Banks fights under the Credit Agreement or of the
Franchisor under the Franchise Agreements.
5. Franchisor agrees in the event of any default under any Franchise
Agreement which is not cured in accordance with paragraph 4 above and which
default gives the right to terminate such Franchise Agreement, (i) Franchisor's
exercise of its right to terminate such Franchise Agreement shall not affect
Franchisee's rights under any other Franchise Agreement in respect of which no
default has occurred (or any default thereunder has been cured in accordance
with paragraph 4 above) and (ii) Franchisee shall continue to have all rights
that it is granted under each such other Franchise Agreement.
6. Notice hereunder shall be in writing and shall be sent by United
States Registered or Certified Mail or a reputable overnight delivery service,
postage or charges prepaid, addressed to the party for whom intended at such
party's address herein specified, or at such other address as such party may
have substituted therefor by proper notice to the other and shall be deemed
given when received or first refused.
If intended for Franchisor, such notice shall be addressed to:
Shoney's Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Attention: Secretary
with copies to:
Tuke Yopp & Sweeney
Third National Bank Building, 17th Floor
201 Fourth Avenue Noah
Nashville, Tennessee 37219
Attention: Gary M. Brown, Esq.
If intended for Franchisee, such notice shall be addressed to:
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38104
Attention: Frederick W. Burford
Vice President and
Chief Financial Officer
with a copy to:
<PAGE>
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Ronald Barusch, Esq.
If intended for the Banks or the Agents, such notice shall be
addressed to:
The Bank of New York,
as Administrative Agent
One Wall Street
Agency Function Administration
18th Floor
New York, New York 10286
Attention: Kalyani Bose
Agency Function Administrator
with a copy to:
The Bank of New York
One Wall Street
22nd Floor
New York, New York 10286
Attention: Gregory L. Batson
Assistant Vice President
NationsBank of North Carolina, N.A.
as Collateral Agent
One NationsBank Plaza
Charlotte, North Carolina 28255
Attention: Elizabeth S. Garver
Corporate Lending Support
with a copy to:
NationsBank of North Carolina, N.A.
One NationsBank Plaza
Location Code: M-2
Nashville, Tennessee 37239-1967
Attention: John E. Ball
Senior Vice President
7. Franchisor agrees that the information furnished herein may be
supplied to each Bank and other lender that becomes a party to or a
participant in the Credit Agreement and that each such Bank and other lender
may rely upon the truth and accuracy of all the statements herein contained.
<PAGE>
8. This letter is being delivered in, is intended to be performed
in, shall be construed and enforceable in accordance with and be governed by
the internal laws of, the State of New York without regard to principles of
conflict of laws (other that Section 5-1401 of the New York General Obligations
Law). Nothing herein shall affect the provisions of any Franchise Agreement
regarding the choice of Franchisor and Franchisee of the law applicable
thereto.
9. This letter may be executed in any number of counterparts, each
of which shall be an original and all of which shall constitute one
Certificate. It shall not be necessary in making proof of this Certificate to
produce or account for more than on counterpart signed by the party to be
charged.
IN WITNESS WHEREOF, the undersigned has caused this statement to be
duly executed as of the day and year first above written.
SHONEY'S, INC.
By:_____________________________
W. Craig Barber
Senior Executive Vice President
and Chief Financial Officer
The Agents are signing this Certificate solely for the purpose of
acknowledging their obligations under paragraph 4(b) hereof.
THE BANK OF NEW YORK,
as Administrative Agent
By:____________________________
Name:__________________________
Title:_________________________
NATIONSBANK OF NORTH CAROLINA
as Collateral Agent
By:____________________________
Name:__________________________
Title:_________________________
<PAGE>
EXHIBIT A
9.2 Purchase of Notes by the Franchisor.
(a) After the occurrence and at any time during the continuance of
an Event of Default and prior to exercising any remedies under the Loan
Documents with respect to the Collateral, the Administrate Agent will notify
the Franchisor of the occurrence of such Event of Default. During the period
of 10 Business Days after such notice is given, the Franchisor shall have the
right to purchase the Notes of all (but not less than all) of the Banks,
without recourse, for an amount equal to the unpaid principal balance thereof
together with accrued and unpaid interest, fees and all other amounts due
under the Loan Documents. In the event that the Franchisor notifies the
Administrative Agent that it agrees to so purchase the Notes, payment
therefor shall be made in Dollars in immediately available funds within 10
Business Days after such notice. In such event, the Franchisor shall succeed
to all the rights of the Agents and the Banks under the Loan Documents. In the
event that the Franchisor fails to give timely notice of its agreement to so
purchase the Notes, or if the Franchisor notifies the Administrative Agent
that it does not agree to purchase the Notes, The Collateral Agent shall be
free to exercise all of the remedies with respect to the Collateral under the
Loan Documents.
(b) Notices to the Franchisor under this paragraph 9.2 shall be in
writing and shall be mailed or sent by telegram, telecopy or telex (with a
copy to the Company at its address set forth in paragraph 11.2), as follows:
Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Attention: Secretary
with copies to:
Tuke Yopp & Sweeney
Third National Bank Building, 17th Floor
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: Gary M. Brown, Esq.
TPI Restaurants, Inc.
2158 Union Avenue
Memphis, Tennessee 38104
Attention: Frederick W. Burford
Vice President and
Chief Financial Officer
and
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C 20005
Attention: Ronald Barusch, Esq.
EMPLOYMENT AGREEMENT
This Agreement is made as of the 1st day of January, 1993, by and between TPI
RESTAURANTS, INC. ("Company") and HANEY A. LONG, JR. of Memphis, Tennessee
("Employee").
WITNESSETH:
WHEREAS, Company desires to engage Employee as the Vice President of
Procurement and Distribution of the Company effective as of January 1, 1993;
and
WHEREAS, Company desires to restrict Employee's ability to act as an
employee of others and to compete with Company during and after the period in
which he is an employee of the Company; and
WHEREAS, the parties wish to execute an agreement designating the terms
and conditions relating to the foregoing.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein set forth, and for other good and valuable consideration, the
receipt and sufficiency of all of which is hereby acknowledged, the parties
hereto agree as follows:
1. Engagement. The Company agrees to engage the Employee and the
Employee agrees to serve the Company as Vice President of Procurement and
Distribution.
2. Term and Salary. Company hereby employs Employee as an employee
of Company for a period of three (3) years or such longer as the panics may
hereinafter agree upon in writing, commencing as of January 1, 1993, unless
earlier terminated herein set forth for a base salary equal to Two hundred two
thousand, five hundred eighty five dollars ($202,585.00) per year payable
bi-weekly. On the last Sunday in December of each year during the Employment
Term, the Executive's base salary shall be increased by an amount which is not
less than five percent (5%) of the immediately preceding year's base salary.
The Company will make available to Employee such non-cash benefits (by way of
illustration and not by way of obligation, such as medical care, insurance,
etc.) On the same terms as are or shall be granted or made available by the
Company to the executive officers of the Company, to the extent that Employee
shall become qualified or eligible for such employee benefits or any of them.
3. Services. The Employee shall exert his best efforts and devote
substantially all of his time and attention to the Company's affairs during
the term of this Agreement. As Vice President he shall have and agree to
assume primary responsibly (subject at all times to the control of the Board
of Directors ) for all food supply procurement and distribution for the
Company. In the performance of such duties, Employee agrees to make available
to the Company all of his professional and managerial knowledge and skill and
such portion of his time as may be require for the proper fulfillment of his
duties. In addition, during the term of this Agreement, Employee shall serve
in such other offices and capacities to which he may be appointed or elected
by the Board of Directors of the Company.
4. Expenses and Company Car. The Employee shall be entitled to
reimbursement
<PAGE>
for all reasonable expenses necessarily incurred by him in the performance of
his duties upon presentation of voucher indicating the amount and business
purposes. The Employee's reimbursement shall include, but not be limited to,
a reasonable entertainment expense allowance. The Employee will be furnished
an automobile and the related reasonable expenses of operating and maintaining
such automobile shall be paid by the Company.
5. Non-Compete and Confidentiality Agreement. It is specifically
agreed that during the term of this Agreement and for a period of one (1) year
after termination of this Agreement, Employee will not act as an employee and
will not, (either directly or indirectly, alone or with others) advise, own,
invest in, manager, or enter into or engage in any business which directly
competes with the business of Company, within any of the Company's territories
at such time. In addition, Employee shall take all steps necessary to ensure
that information about Company obtained by Employee, directly or indirectly,
by virtue of his relationship envisioned in Agreement and other relationships
with Company shall remain confidential and shall not be disclosed or revealed
to outside sources. "Confidential information" includes information ordinarily
known only to Company's personnel, and includes such information as customer
lists, supplier lists, trade secrets, channels of distribution, pricing and
records, inventory records, and such other information normally understood to
be confidential or otherwise designated as such by the Company. Such
confidential information is and shall be deemed "trade secrets" by the
undersigned. In the event of any breach of this Agreement, Employee agrees to
submit to a court of competent jurisdiction in Shelby County, Tennessee and
does agree and consent to the entry of an injunction permanently prohibiting
Employee form violating this Agreement.
6. Termination.
(a) Without Cause. Without cause, the Company may
terminate this Agreement at any time upon thirty (30) days written notice to
the Employee and the payment to the Employee of his regular compensation
inclusive of bonuses (pro-rated) up to the date of termination. Without cause,
the Employee may terminate this Agreement upon thirty (30) days written notice
to the Company. In such event, the Employee shall continue to render his
services and shall be paid his regular compensation inclusive of bonuses
(pro-rated) up to the date of termination.
(b) With Cause. With cause, the Company may terminate this
Agreement upon thirty (30) days written notice to the Employee and the payment
to the Employee of his regular compensation exclusive of bonuses herein
provided to the date of such termination. "Cause" shall mean fraud or any
illegal act by or on the part of the Employee in the performance of his
duties under this Agreement or the Employee's willful and consistent failure
to perform his duties under this Agreement.
7. Payment Upon Termination. In the event that this Agreement
is terminated by Employer pursuant to paragraph 6 (a), the Employee shall be
paid, as severance pay, additional compensation hereunder in an amount equal
to one year's salary and bonus (bonus equal to previous year).
8. Bonus. Employee shall be entitled to the following bonuses:
a. 12.5% of base salary payable at end of 1st quarter each
year.
b. 12.5% of base salary payable at end of 2nd quarter each
year.
c. Minimum of 2% of gross salary and bonus earned during
year just ended payable at year end.
9. Vacation. The Employee shall be entitled to a vacation of
three (3) weeks per year during which time his compensation shall be paid in
full.
<PAGE>
10. Death During Employment. In the event of the death of the
Employee during the term of this Agreement, the Company shall pay to the
estate of the deceased Employee three years' salary and guaranteed bonus.
11. Good Faith. Company and Employee agree that each party shall act in
good faith in the performance under this Agreement.
12. Attorney's Fees. In the event that either party is required to
retain the services of any attorney to enforce such party's fights under this
contract, such party shall be entitled to indemnification for the reasonable
legal fees, cost and expenses incurred by such party pertaining to any
contested issue as to which such party shall completely prevail in the
litigation or arbitration of such contested issue.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered
mail to his residence, in the case of the Employee, or to its principal
office, in the case of the Company.
14. Applicable Law. This Agreement is intended to be performed in
the state of Tennessee and shall be construed and enforced in accordance with
the laws thereof
15. Merger. This Agreement contains the entire understanding of
the parties and all prior contemporaneous oral or written understandings of
the parties with relation thereto are void and of no effect whatsoever. Except
as herein provided, no amendment, change or modification of any of the terms
hereinabove contained shall be binding unless set forth in a writing signed by
the party to be changed.
16. Benefit. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, and their respective representatives, heirs,
successors and assigns.
17. Severability. Should any provision of this Agreement be determined
by a court of competent jurisdiction to be invalid or unenforceable, such
invalidity or unenforceability of a provision shall not affect the remaining
provisions of this Agreement, which remaining provisions shall be enforceable
to the fullest extend allowed by law.
IN WITNESS WHEREOF, the undersigned parties have duly executed this
Agreement which shall be effective a of the day and year first above written.
TPI RESTAURANTS, INC. (Company)
By:____________________________
Title:_________________________
_______________________________
HANEY A. LONG, JR., Employee
