Wendy's 2009 Annual Report Download - page 130

AFA Dues Subsidy
As of April 1, 2010 and for the remainder of 2010, the AFA Board has approved a dues increase based on
a tiered rate structure for the payment of the advertising and marketing service fee ranging between 1.4% and
3.6% of sales. ARG’s advertising and marketing service fee percentage similarly calculated will be
approximately 2.4% as of April 1, 2010. In addition, ARG has agreed to partially subsidize the top two rate
tiers in 2010 thereby decreasing franchisees’ effective advertising and marketing service fee percentages. It is
estimated that this subsidy will require payments by ARG of approximately $4,200 to AFA for 2010.
(22) Transactions with Related Parties
Deferred compensation trusts
Prior to 2007 the Company provided aggregate incentive compensation of $22,500 to the Former
Executives which had been invested in two deferred compensation trusts (the “Deferred Compensation Trusts”)
for their benefit. As of January 1, 2007, the obligation to the Former Executives related to the Deferred
Compensation Trusts was $35,679. This obligation was settled effective July 1, 2007 as a result of the Former
Executives’ resignation and the assets in the Deferred Compensation Trusts were either distributed to the
Former Executives or used to satisfy withholding taxes. In addition, the Former Executives paid $801 to the
Company during 2007 which represented the balance of withholding taxes payable on their behalf. As of the
settlement date, the obligation was $38,195 which represented the then fair value of the assets held in the
Deferred Compensation Trusts. Deferred compensation expense of $2,516 was recognized in 2007 through the
settlement date for net increases in the fair value of the investments in the Deferred Compensation Trusts. The
Company was unable to recognize any investment income for unrealized net increases in the fair value of those
investments in the Deferred Compensation Trusts that were accounted for under the Cost Method. The
Company recognized net investment income from investments in the Deferred Compensation Trusts of $8,653
in 2007 through the settlement date. The net investment income during 2007 consisted of $8,449 of realized
gains almost entirely attributable to the transfer of the investments to the Former Executives and $222 of
interest income, less management fees of $18. Realized gains, interest income and investment management fees
are included in “Investment (expense) income, net” and deferred compensation expense is included in “General
and administrative.”
In October 2007, there was a settlement of a lawsuit related to an investment that had been included in
the Deferred Compensation Trusts. The terms of the Contractual Settlements included provisions pursuant to
which the Former Executives would be responsible for any settlement amounts under this lawsuit. As a result,
the Former Executives were responsible for the approximate $1,500 settlement cost. The Company reduced its
deferred compensation expense included in “General and administrative”, to reflect the responsibility of the
Former Executives for the settlement, and its “Investment income, net” for 2007 to reflect the cost of the
settlements. The Company received the reimbursements from the Former Executives, net of the tax withheld
during 2007 and an adjustment of the settlement amount in 2008, paid the settlement amount during 2007
and received a refund for the applicable taxes withheld with the respective payroll tax return filings in 2008.
Distributions to co-investment shareholders
As part of its overall retention efforts, the Company provided certain of its Former Executives and current
and former employees, the opportunity to co-invest with the Company in certain investments. The Company
and certain of its former management have one remaining co-investment, 280 BT, which is a limited liability
holding company principally owned by the Company and former company management that, among other
things, invested in operating companies. During 2009 and 2008, the Company received distributions of $795
and $2,014, respectively, from the liquidation of certain of the investments owned by 280 BT. The minority
portions of these distributions of $156 and $402 in 2009 and 2008, respectively, were further distributed to
280 BT’s minority shareholders.
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Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)