APPLEBEE'S INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 26, 1995
To the Stockholders of Applebee's International, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Applebee's International, Inc., a Delaware corporation (the
"Company"), will be held on May 26, 1995, at 10:00 a.m., CDT, at 4551 W. 107th
Street, Suite 100, Overland Park, Kansas 66207 for the following purposes:
I. To approve an amendment to the Company's Certificate of Incorporation
which would classify the Board of Directors into three classes, each
with a term of three years;
II. To elect ten directors;
III. To amend the 1989 Stock Option Plan to increase the number of shares
of Common Stock subject to option thereunder by 1,500,000 shares;
IV. To approve the adoption of the Company's 1995 Equity Incentive Plan;
V. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Company for the 1995 fiscal year; and
VI. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
THE BOARD OF DIRECTORS RECOMMENDS A "YES" VOTE ON ALL PROPOSALS.
The Board of Directors has fixed the close of business on April 14, 1995,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT
THE MEETING. A POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. EVEN IF
YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING.
By Order of the Board of Directors
Robert T. Steinkamp, Secretary
Overland Park, Kansas
April 24, 1995
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APPLEBEE'S INTERNATIONAL, INC.
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Applebee's International, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on May
26, 1995, at 10:00 a.m. CDT, and at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual Meeting
of Stockholders. The Annual Meeting will be held at the Company's principal
executive office, 4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207.
This proxy statement and accompanying proxy ("Proxy Statement") will be
mailed on or about April 24, 1995, to all stockholders entitled to vote at the
Annual Meeting.
Voting Rights and Outstanding Shares
Only stockholders of record at the close of business on April 14, 1995,
will be entitled to notice of and to vote at the Annual Meeting. At the close of
business on April 14, 1995, there were [ ] outstanding shares of the Company's
common stock, par value $.01 per share (the "Common Stock"). Each share of
Common Stock outstanding on the record date is entitled to one vote. Approval of
Proposal I requires the affirmative vote of a majority of the shares of Common
Stock outstanding and entitled to vote. Approval of Proposals III, IV and V
requires the affirmative vote of a majority of the outstanding shares of Common
Stock represented at the meeting and entitled to vote. Thus, abstentions and
broker non-votes (i.e., shares present by proxy but for which no voting
authority has been given the record holder by the beneficial holder) have the
effect of votes against the proposals. Because directors are elected by a
plurality of the votes cast, abstentions and broker non-votes will not affect
the outcome of the election of directors.
On April 14, 1995, the closing sale price reported on The Nasdaq Stock
Market for a share of the Common Stock was $[ . ] (as reported by the National
Quotation Bureau, Inc.).
Revocability of Proxies
Any person giving a proxy pursuant to this solicitation has the power to
revoke it any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office a written
notice of revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
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Solicitation
The Company will bear the entire cost of solicitation of proxies in the
enclosed form, including preparation, assembly, printing and mailing of this
Proxy Statement and any additional information furnished by the Company to
stockholders. Original solicitation of proxies by mail may be supplemented by
telephone, telegraph or personal solicitation by directors, officers or other
regular employees of the Company or by agents employed by the Company for the
specific purpose of supplemental proxy solicitation. Such soliciting agents, if
engaged, would be paid a reasonable fee for their services. No additional
compensation will be paid to directors, officers or other regular Company
employees for such services.
Stockholder Proposals
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 1996 Annual Meeting of Stockholders must comply
with the rules of the Securities and Exchange Commission ("SEC") and be received
by the Company from qualified stockholders no later than December 26, 1995 in
order to be included in the proxy statement and proxy relating to that meeting.
Certain Information Concerning the Board of Directors
ABE J. GUSTIN, JR., age 60. Mr. Gustin has been a director of the Company
since September 1983 when the Company was formed. He served as Chairman of the
Board of Directors of the Company from September 1983 until January 1988 and was
again elected as Chairman in September 1992. He was Vice President from November
1987 to January 1988, and from January 1988 until December 1994, he served as
President of the Company. Mr. Gustin continues to serve as Chief Executive
Officer of the Company. From 1983 to 1990, he also served as Chairman of Juneau
Holding Co., a Kansas City, Missouri-based firm which at one time owned and
operated 18 Taco Bell restaurants. Mr. Gustin has over 15 years of experience in
the restaurant industry. Mr. Gustin currently serves as a member of the
Strategic Planning Committee and served as a member of the Audit Committee until
January 1995.
D. PATRICK CURRAN, age 50. Mr. Curran became a director of the Company in
November 1992. He has served as Chief Executive Officer of the Curran Companies
in North Kansas City, Missouri since August 1979. Mr. Curran serves as a member
of the board of directors of Sealright Co., Inc., Unitog Company, and American
Safety Razor Company, all publicly traded corporations. Mr. Curran serves as a
member of the Audit Committee, the Executive Compensation Committee, the
Nominating Committee and the Strategic Planning Committee.
ERIC L. HANSEN, age 46. Mr. Hansen was elected a director of the Company in
January 1991. He is presently a partner in the Kansas City law firm of Holman,
McCollum and Hansen, P.C., a professional association. From September 1984 to
December 1990, he served as a tax partner at Deloitte & Touche LLP, and from
September 1974 to September 1984, he was a certified public accountant with
Deloitte & Touche LLP. Mr. Hansen serves as a member of the Audit Committee, the
Executive Compensation Committee and the Strategic Planning Committee.
JACK P. HELMS, age 42. Mr. Helms became a director of the Company in March
1994. He is presently a principal and shareholder in the investment banking firm
of Goldsmith, Agio, Helms and Company in Minneapolis, Minnesota. From May 1978
to January 1986, Mr. Helms was a partner in the law firm of Fredrikson & Byron,
P.A. in Minneapolis, Minnesota. Mr. Helms serves as a member of the Audit
Committee, the Executive Compensation Committee and the Strategic Planning
Committee.
KENNETH D. HILL, age 61. Mr. Hill became a director of the Company in
November 1992. He was employed by the Company in April 1991, serving as
Executive Vice President and Chief Operating Officer until January 1994, when he
was named President of International Development. Effective February 28, 1995,
Mr. Hill resigned as an employee and officer of the Company and became a
consultant to the Company for governmental affairs, industry relations, and new
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concept development. From May 1990 to March 1991, he was President and Chief
Executive Officer of Creative Restaurant Management, a company created in a
leveraged buy-out from Gilbert/Robinson, Inc., a Kansas City-based specialty
restaurant group. In March 1992, Creative Restaurant Management filed a petition
for bankruptcy, and the bankruptcy proceeding has not yet been discharged. Mr.
Hill served as President and Chief Executive Officer of T.J. Cinnamons, Ltd., a
gourmet bakery concept, from 1985 to 1990. He was President of Gilbert/Robinson,
Inc. from 1973 to 1985. Mr. Hill has over 38 years of restaurant industry
experience and is an honorary director of the National Restaurant Association,
after having served as both a director of that association and as chairman of
most of its major committees during the past 15 years.
LLOYD L. HILL, age 51. Mr. Hill was elected a director of the Company in
August 1989 and was appointed Executive Vice President and Chief Operating
Officer of the Company in January 1994. In December 1994, he assumed the role of
President in addition to his role as Chief Operating Officer. Prior to 1994, he
served as President and a director of Kimberly Quality Care, having joined that
organization in 1980. Kimberly Quality Care is engaged in the business of home
health care and nurse personnel staffing. Mr. Hill served as a member of the
Audit Committee until January 1995. Mr. Lloyd Hill and Mr. Kenneth Hill are not
related.
ROBERT A. MARTIN, age 64. Mr. Martin was elected a director of the Company
in August 1989. In April 1991, he became Vice President of Marketing, and in
January 1994, he was promoted to Senior Vice President of Marketing. From
January 1990 to April 1991, he served as President of Kayemar Enterprises, a
Kansas City-based marketing consulting firm. From 1983 to January 1990, he
served as the President, Chief Operating Officer and a director of Juneau
Holding Co., of which Abe Gustin, Chief Executive Officer of the Company, was
Chairman. From July 1977 to June 1981, he served as President of United Vintners
Winery and prior to that time was employed for 25 years by Schlitz Brewing
Company, most recently in the position of Senior Vice President of Sales and
Marketing. Mr. Martin has more than 12 years of experience in the restaurant
industry. Mr. Martin serves as a member of the Nominating Committee.
JOHYNE H. RECK, age 45. Ms. Reck was elected a director of the Company in
May 1985. Ms. Reck currently serves as a consultant to the Company on its civic
and philanthropic programs. She previously served as Secretary from May 1985 to
January 1990, as Treasurer from May 1985 to December 1989, and as an Executive
Vice President from March 1988 until April 1991. From March 1983 to 1991, she
served as a director and President of Corner and Main Advertising, Inc., an
advertising agency which she owned. Ms. Reck is the wife of Ronald B. Reck,
Executive Vice President and Chief Administrative Officer of the Company. Ms.
Reck serves as a member of the Nominating Committee.
BURTON M. SACK, age 57. Mr. Sack was elected a director and an Executive
Vice President of the Company effective October 24, 1994. Mr. Sack was the
principal shareholder, a director, and the President of Pub Ventures of New
England, Inc., previously a franchisee of the Company, from 1984 until its
acquisition by the Company in October 1994. Mr. Sack has also been a director of
Bay Street Restaurants since 1988 and of Restaurant Capital Corporation since
1986. Mr. Sack was a director of Western Sizzlin Steakhouses from 1993 through
1994 and has been on the board of advisors of Restaurant Associates, Inc. since
1993.
RAYMOND D. SCHOENBAUM, age 49. Mr. Schoenbaum was elected a director of the
Company effective March 24, 1995. He was the founder, majority shareholder, and
chairman of the board of directors of Innovative Restaurant Concepts, Inc.,
operator of the Rio Bravo Cantina Mexican concept, prior to its acquisition by
the Company in March 1995. Mr. Schoenbaum served as Vice Chairman of Restaurant
Systems, Inc., a franchisee of Wendy's International, Inc., from 1974 until 1986
and was a Shoney's franchisee from 1971 until 1974.
The Board has four standing committees: the Audit Committee, the Executive
Compensation Committee, the Nominating Committee and the Strategic Planning
Committee. (On March 22, 1994, the Stock Option Committee was combined with the
Compensation Committee and became the Executive Compensation Committee.) The
Audit Committee recommends engagement of the Company's independent accountants,
reviews and approves services performed by such accountants, reviews and
evaluates the Company's accounting system and its system of internal controls,
and performs other related duties delegated to such Committee by the Board of
Directors. The members of the Audit Committee are Mr. Curran, Mr. Hansen, and
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Mr. Helms. The Executive Compensation Committee is responsible for recommending
to the Board of Directors executive compensation levels, bonus plan
participation and executive and overall compensation policies. It also makes
option grants under the Company's 1989 Stock Option Plan. The members of the
Executive Compensation Committee are Mr. Curran, Mr. Hansen and Mr. Helms. The
Nominating Committee was established by the Board of Directors in January 1994
to evaluate and recommend candidates for nomination to the Board of Directors.
Pursuant to the Company's By-laws, stockholder nominations for Board candidates
must be submitted to the Nominating Committee, along with certain information
about the candidate, at least 60 days prior to the Annual Meeting date. The
Nominating Committee is responsible for reviewing and accepting or rejecting any
stockholder nominations. The members of the Nominating Committee are Mr. Curran,
Mr. Martin and Ms. Reck. The Strategic Planning Committee was established in May
1994 for the purpose of long-term planning and establishing strategic goals for
the Company. The members of the Strategic Planning Committee are Mr. Gustin, Mr.
Curran, Mr. Hansen and Mr. Helms.
During fiscal year 1994, the Board of Directors held 15 meetings (including
five regular meetings), the Audit Committee held two meetings, the Executive
Compensation Committee held eight meetings, the Nominating Committee held two
meetings, and the Strategic Planning Committee held one meeting. During fiscal
year 1994, each director attended more than 75% of the Board meetings and the
meetings of the committees on which such director served.
Directors who are not employees receive director fees of $1,500 for each
regular Board meeting attended, plus a retainer of $500 per month and
reimbursement of out-of-pocket expenses. Under the Company's 1989 Stock Option
Plan, directors receive a number of stock options each year determined through a
formula based on changes in the Company's earnings before income taxes ("EBIT")
from one year to the next. Non-employee directors receive an annual base grant
of options to acquire 12,000 shares of Common Stock, which is increased or
decreased by 1,500 shares for each 5% increase or decrease in EBIT from the
prior fiscal year. The maximum increase or decrease is 6,000 shares. Employee
directors receive options, as directors, in accordance with the same formula,
but are limited to 50% of the number of options granted non-employee directors.
In the event Proposal IV is adopted, this director option program will remain in
place. However, the Board of Directors has engaged an independent consulting
firm to analyze the Company's director compensation program, and based on that
analysis, the Board may change its compensation program. Any changes in the
director option program will be effective for grants made in 1996, and no
changes will be made without stockholder approval. In fiscal 1994, options for
18,000 shares of Common Stock were granted to Mr. Curran, Mr. Hansen, Mr. Helms,
and Ms. Reck for serving as non-employee directors of the Company, and options
for 9,000 shares of Common Stock were granted to each of Mr. Gustin, Mr. Lloyd
Hill, Mr. Kenneth Hill and Mr. Martin for serving as employee directors. In
addition, Mr. Martin and Mr. Sack received cash compensation of $180,117 and
$39,808 respectively, and Mr. Martin received options to purchase 20,000 shares
of Common Stock for services rendered to the Company in fiscal 1994. Ms. Reck
also received cash compensation of $43,200 for services rendered to the Company
in fiscal 1994. See "Certain Transactions."
Certain Information Concerning Executive Officers
Information regarding the executive officers of the Company, who are not
also directors of the Company, as of December 25, 1994, is as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Ronald B. Reck........................... 46 Executive Vice President and Chief Administrative
Officer
George D. Shadid......................... 40 Executive Vice President and Chief Financial Officer
Stuart F. Waggoner....................... 49 Senior Vice President of Operations
</TABLE>
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RONALD B. RECK was employed by the Company in March 1991. He served as
Executive Vice President of Human Resources and Training until January 1993 when
he was named Executive Vice President and Chief Administrative Officer. From
1987 until March 1991, he was a self-employed consultant to the Company in the
personnel, human resources and corporate development areas. During the period
from 1984 through 1990, he was President of Aero-Mark Services, Inc., a
temporary health care personnel leasing service company located in Kansas City,
Missouri. Mr. Reck is the husband of Johyne Reck, a director of the Company.
GEORGE D. SHADID was employed by the Company in August 1992, and served as
Senior Vice President and Chief Financial Officer until January 1994 when he was
promoted to Executive Vice President and Chief Financial Officer. He became
Treasurer in March 1995. From 1985 to 1987, he served as Corporate Controller of
Gilbert/Robinson, Inc., at which time he was promoted to Vice President, and in
1988 assumed the position of Vice President and Chief Financial Officer, which
he held until joining the Company. In November 1991, Gilbert/Robinson, Inc.
filed a petition for bankruptcy. The bankruptcy proceeding was discharged in
December 1992. From 1976 until 1985, Mr. Shadid was employed by Deloitte &
Touche LLP.
STUART F. WAGGONER has been an employee of the Company since December 1988
and served as the Executive Director of Franchise Operations until March 1991,
when he became Vice President of Franchise Operations. In December 1994, Mr.
Waggoner assumed the newly created position of Senior Vice President of
Operations, with overall responsibility for franchise and Company owned
Applebee's restaurant operations and international development. From October
1987 to December 1988, Mr. Waggoner was a Vice President of Operations for
Eateries', Inc., a restaurant company based in Oklahoma City, Oklahoma. From
1985 to July 1987, Mr. Waggoner was President of Pendleton's Bar & Grill in
Dallas, Texas. From October 1974 to March 1985, Mr. Waggoner was Vice President
of Restaurant Administration for TGI Friday's, Inc., in Dallas, Texas. Mr.
Waggoner has more than 25 years of restaurant experience.
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Security Ownership of Officers, Directors and Certain Beneficial Owners
The following table sets forth information, as of April 14, 1995, regarding
the ownership of the Common Stock, the Company's only class of outstanding
securities, by (i) each person known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each director and each
executive officer named in the Summary Compensation Table, and (iii) all
executive officers and directors of the Company as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
<TABLE>
<CAPTION>
Beneficial Ownership
Number of Percent
Shares Held
<S> <C> <C>
Burton M. Sack(1)...................................................... 2,286,250 8.0%
Abe J. Gustin, Jr. (1) (2)............................................. 1,542,000 5.4%
Raymond D. Schoenbaum(1)(3)............................................ 1,531,018 5.3%
Ronald B. Reck (1) (2)................................................. 545,940 1.9%
Lloyd L. Hill (1) (2).................................................. 89,000 0.3%
Johyne H. Reck (1) (2)................................................. 83,000 0.3%
Robert A. Martin (1) (2)............................................... 64,000 0.2%
Kenneth D. Hill (1) (2)................................................ 58,500 0.2%
Eric L. Hansen (1) (2)................................................. 41,350 0.1%
D. Patrick Curran (1) (2).............................................. 41,000 0.1%
George D. Shadid(1) (2)................................................ 40,101 0.1%
Jack P. Helms(1) (2)................................................... 19,500 0.1%
Massachusetts Financial Services Company............................... 2,532,200 8.8%
500 Boylston Street
Boston, MA 02116
Putnam Investments, Inc................................................ 2,300,782 8.0%
One Post Office Square
Boston, MA 02109
Tom E. DuPree, Jr...................................................... 1,739,850 6.1%
617 Dixie Avenue
Madison, GA 30650
All executive officers and directors as a group (13 persons) (2)....... 6,401,709 22.3%
<FN>
---------------
(1) The mailing address of this person is 4551 W. 107th Street, Suite 100,
Overland Park, Kansas 66207.
(2) Includes certain shares subject to options exercisable as of April 14, 1995
or within 60 days thereafter: 42,000 shares for Mr. Gustin, 69,500 shares
for Mr. Reck, 89,000 shares for Lloyd L. Hill, 83,000 shares for Ms. Reck,
39,000 shares for Mr. Martin, 58,500 shares for Kenneth D. Hill, 36,000
shares for Mr. Hansen, 36,000 shares for Mr. Curran, 40,101 shares for Mr.
Shadid, 18,000 shares for Mr. Helms, and 563,201 shares for all executive
officers and directors as a group.
(3) Includes 114,826 shares held in escrow resulting from the recent merger of
the Company with Innovative Restaurant Concepts, Inc. and its affiliates.
</FN>
</TABLE>
Mr. Gustin is a party to a voting agreement which binds Mr. Reck. Pursuant
to the voting agreement, these parties have agreed to vote all voting securities
of the Company held by them at any time (i) to maintain the size of the Board of
Directors at ten members unless otherwise mutually agreed, (ii) to vote for the
election of Mr. Gustin and Ms. Reck as directors of the Company at each election
of directors, (iii) to vote against the removal of Mr. Gustin and Ms. Reck as
directors of the Company, and (iv) to vote their shares so that the Board of
Directors has at least two independent directors at all times. In addition, in
the event of the death of any of the parties, the voting agreement contains
provisions relating to voting for the election of a successor director of the
deceased party. The voting agreement terminates upon the death of any two of the
parties. The voting agreement terminates in 1999, and does not apply to any
voting securities transferred to a third party in a public transaction.
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Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of the Common Stock,
to file certain reports of ownership and changes in ownership with the SEC.
Officers, directors and persons owning beneficially greater than 10% of the
Company's Common Stock are required by SEC regulations to furnish the Company
with copies of all such reports.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that all filing requirements applicable to its officers, directors, and
greater than 10% beneficial owners were complied with during the fiscal year
ended December 25, 1994, except that certain reports were not timely filed
covering two transactions by Lloyd Hill and one transaction each by Ronald Reck,
Johyne Reck and Stuart Waggoner. The transactions were reported by each of these
persons on their year-end reports on Form 5, which also were not timely filed.
PROPOSAL I
AMENDMENT TO CERTIFICATE OF INCORPORATION
ESTABLISHING A CLASSIFIED BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
The Board of Directors has unanimously adopted a resolution approving and
submitting to a vote by the Stockholders of the Company a proposed amendment
(the "Proposed Amendment") to the Certificate of Incorporation of the Company
that would classify the Board of Directors into three classes, each with a term
of three years. Classifying the directors into three groups results in only
approximately one-third of the Board standing for election each year. This
procedure provides stability and continuity to the Board and requires directors
to make a long-term commitment to their duties. Set forth below is a discussion
of the Proposed Amendment. The complete text of the Proposed Amendment is set
forth in Appendix A.
In updating its corporate records following the 1994 Annual Meeting of
Stockholders, the Company reviewed the voting records of earlier stockholder
meetings and has determined that the results of the vote on a proposal submitted
to its stockholders at its 1992 Annual Meeting to classify the Board of
Directors were incorrectly reported. A reexamination of the voting records of
the 1992 Annual Meeting indicates that although the proposal received the
affirmative vote of more than a majority of the shares voting at the meeting, it
did not receive the affirmative vote of a majority of all outstanding shares. As
a result, the proposal to amend the Certificate of Incorporation to classify the
Board of Directors was not adopted. Nevertheless, the Board of Directors did act
to amend the Company's By-laws to conform with the classified Board provisions
which a majority of the stockholders voting at the 1992 Annual Meeting voted to
adopt. To clarify this matter, the Company is resubmitting to its stockholders
the proposal to amend the Certificate of Incorporation and By-laws to classify
its Board of Directors.
Section 141 of the Delaware General Corporation Law ("DGCL") provides that
a corporation's directors may be divided into one, two or three classes.
Proposal I would divide the Company's Board of Directors into three classes, as
nearly equal in number as possible, designated Class I, Class II, and Class III.
If Proposal I is adopted, the term of office of the initial Class I Directors
will expire at the 1996 annual meeting of Stockholders, the term of office of
the initial Class II Directors will expire at the 1997 annual meeting, and the
term of office of the initial Class III Directors will expire at the 1998 annual
meeting. At each annual meeting following such initial classification and
election, Directors elected to succeed those whose terms expire at the time of
the meeting will be elected for a three-year term.
The Proposed Amendment to the Certificate is not the result of management's
knowledge of any specific effort to obtain control of the Company by means of an
accumulation of the Company's securities, a merger, a tender offer, a proxy
solicitation in opposition to management or otherwise. The Board of Directors
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periodically reviews the Company's vulnerability to a hostile takeover that
might be detrimental to long-term stockholder value and seeks advice from its
investment bankers and legal counsel concerning actions the Board might wish to
consider to provide it ways to protect stockholder value. The Board of Directors
will in the future take such actions as it deems appropriate in this regard;
however, the Proposed Amendment was not adopted in response to any efforts by
another party to acquire a controlling interest or to seek Board of Directors
representation. The submission of the Proposed Amendment to the Certificate is
not a part of any plan by the Company's management to adopt a series of
amendments to the Certificate or By-laws intended to render a change in control
of the Company more difficult. Except as indicated below, management is not
aware of the existence of any other provisions in the Certificate or By-laws
having an anti-takeover effect.
The Company has in place certain provisions in its Certificate and By-laws
which may have the effect of delaying a change in control of the Company. A
classified Board of Directors makes it more difficult for stockholders to
replace the entire Board of Directors (otherwise than for cause) in one annual
meeting, even when this may be desired by holders of a majority of the shares of
Common Stock. A person or entity desiring to acquire control of the Company by
merger, acquisition of shares or other means may be discouraged from doing so
because they must hold a majority of the shares voting at two successive annual
meetings of the stockholders in order to change a majority of the members of the
Board of Directors. Further, the Certificate does not provide for cumulative
voting. As a result, in order to ensure representation on the Board of
Directors, a stockholder must control the votes of a majority of the shares
present and voting at a stockholders' meeting at which a quorum is present. The
lack of cumulative voting requires a person or entity seeking a takeover to
acquire a substantially greater number of shares to ensure representation on the
Board of Directors than would be necessary were cumulative voting available. The
Certificate authorizes the issuance of 1,000,000 shares of preferred stock which
may be classified, divided and issued in series by the Board of Directors. No
shares of preferred stock are currently outstanding, although shares have been
reserved for issuance under the shareholder rights plan described below. The
rights of the holders of shares of different series of preferred stock may vary
with respect to the matters which the Board of Directors has the discretion to
establish. Those matters include dividend rights, preferences with respect to
liquidation or other distributions, redemption and conversion rates and terms,
and voting powers. Because the voting powers of any such series of preferred
stock are to be determined by the Board of Directors, the existence of that
class of securities enables the Board of Directors to vest large amounts of
voting power in persons acquiring preferred stock. Holders of preferred stock
may be given the right to vote as a class on certain matters and to elect
directors, and each share may be convertible into such number of shares of
Common Stock as may be specified by the Board of Directors. The ability of the
Board of Directors to establish voting, redemption, conversion and other rights
of holders of preferred stock might be used to ward off a takeover attempt of
the Company. The Board of Directors might establish and issue preferred stock
even though the stockholders generally approve of the terms of a proposed
takeover. In addition, the Company's By-laws include a provision requiring that
any stockholder who wishes to make a nomination for director at an annual
stockholders' meeting must give written notice to the Company at least 60 days
in advance of the meeting. Stockholder nominations would be referred to the
Nominating Committee of the Board of Directors for review and recommendation.
This requirement affords the Board of Directors adequate time to consider the
qualifications of the proposed nominee and determine an appropriate response. It
may also, however, conceivably discourage some persons from attempting to
acquire control of the Company by potentially lengthening the time required for
a person to acquire control of the Company through a proxy contest or the
election of a majority of the directors.
The Company has adopted a shareholder rights plan under which all
shareholders of record on September 19, 1994 received a right to purchase shares
of Series A Participating Cumulative Preferred Stock on certain conditions
relating to an acquisition by a person or group of more than 15% of the
outstanding Common Stock or the commencement of a tender offer which could
result in such ownership. The rights plan imposes significant limitations on
anyone attempting to gain control of the Company without first obtaining the
approval of the Company's Board of Directors. The rights have certain
anti-takeover effects by causing substantial dilution to a person or group that
attempts to acquire the Company without complying with the terms and conditions
of the rights.
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The Board of Directors recommends that stockholders vote YES to the
proposed amendment. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting will
be required for adoption of the Proposed Amendment.
PROPOSAL II
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF EACH NAMED NOMINEE.
Shares of Common Stock represented by executed proxies will be voted, if
authority to do so is not withheld, for the election of the Nominees named
below. If any Nominee should become unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute Nominee as the Company may propose. Each person nominated for
election has agreed to serve if elected, and the Company has no reason to
believe that any Nominee will be unavailable to serve. Additional information
concerning the following Nominees is set forth in "Certain Information
Concerning the Board of Directors."
<TABLE>
<CAPTION>
Director
Name Age Position With The Company Since
<S> <C> <C> <C>
Abe J. Gustin, Jr. 60 Chairman and Chief Executive Officer 1983
Lloyd L. Hill 51 President and Chief Operating Officer 1989
Robert A. Martin 64 Senior Vice President of Marketing 1989
Burton M. Sack 57 Executive Vice President 1994
D. Patrick Curran 50 Director 1992
Eric L. Hansen 46 Director 1991
Jack P. Helms 42 Director 1994
Kenneth D. Hill 61 Director 1992
Johyne H. Reck 45 Director 1985
Raymond D. Schoenbaum 49 Director 1995
</TABLE>
Classification of Board
In the event that Proposal I is approved, the Nominees are proposed to be
elected to the classes as set forth below:
<TABLE>
<CAPTION>
Term
Class Nominee Expires
<S> <C> <C>
I Eric L. Hansen 1996
I Kenneth D. Hill 1996
I Raymond D. Schoenbaum 1996
II D. Patrick Curran 1997
II Abe J. Gustin, Jr. 1997
II Robert A. Martin 1997
II Johyne H. Reck 1997
III Jack P. Helms 1998
III Lloyd L. Hill 1998
III Burton M. Sack 1998
</TABLE>
10
<PAGE>
In the event that Proposal I is not approved, the Nominees will, if
elected, hold office until the next Annual Meeting of Stockholders and until his
or her successor is elected and has qualified or until such director's death,
resignation, or removal.
PROPOSAL III
AMENDMENT TO THE COMPANY'S 1989 STOCK OPTION PLAN INCREASING THE NUMBER OF
SHARES OF THE COMPANY'S COMMON STOCK AVAILABLE FOR OPTIONS UNDER SUCH PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
The stockholders are being asked to ratify Amendment No. 4 to the 1989
Stock Option Plan. Although the 1989 Stock Option Plan has 3,000,000 shares
authorized for option grants, there are currently only a total of 674,480 shares
of Common Stock remaining available for option grants under the 1989 Stock
Option Plan. The amendment increases the number of shares of Common Stock
available for options under the 1989 Stock Option Plan by 1,500,000 shares.
The text of the proposed amendment is as follows:
The Applebee's International, Inc. 1989 Stock Option Plan is hereby amended
as follows:
Section 2 is hereby amended to read as follows:
"Section 2. Stock and Maximum Number of Shares Subject to the Plan.
Subject to the adjustments provided for in Section 6.6 hereof, the
aggregate number of shares of Stock which may be issued pursuant to
the exercise of all Options granted hereunder shall equal but shall
not exceed 4,500,000 Shares."
Stock Option Plan
The Company's 1989 Stock Option Plan provides for the grant of both
nonqualified stock options and options that qualify as incentive stock options
under Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), and is administered by the Executive Compensation Committee, comprised
of three or more disinterested persons appointed by the Board of Directors (the
"Committee"). Key employees of the Company and subsidiaries at least 50% owned
by the Company, including executive officers and directors, are eligible to
receive options granted under the Plan (approximately 600 eligible persons at
December 25, 1994). The Committee has complete discretion to select the
optionees and to establish the terms and condition of each option, subject in
all cases to the provisions of the Plan. The Plan currently provides that a
total of up to 3,000,000 shares of Common Stock may be made subject to options
granted thereunder. The Plan provides that the option price of each option shall
be fixed by the Committee; however, the option price of each incentive stock
option granted under the Plan must be not less than 100% (110% if granted to a
stockholder owning 10% or more of the outstanding Common Stock) of the fair
market value of the Common Stock as of the date the option is granted. During
any calendar year the aggregate fair market value, determined at the date of
grant, of shares that become exercisable under an incentive stock option granted
to one employee must not exceed $100,000. The term of each incentive stock
option, which is also fixed by the Committee, may not exceed 10 years from the
date the option is granted or five years in the case of incentive stock options
granted to stockholders owning 10% or more of the outstanding Common Stock or
nonstatutory options granted to directors of the Company. Options granted under
the Plan are not transferable, except by will or the laws of descent or
distribution, and are subject to various other conditions and restrictions.
Shares subject to canceled or lapsed options are available for subsequently
granted options under the Plan.
11
<PAGE>
Nonqualified stock options differ from incentive stock options in several
additional respects. To the extent that a nonqualified stock option is granted
at an exercise price below the fair market value of the Common Stock on the date
of grant, under current generally accepted accounting principles, the Company
would recognize compensation expense in an amount per share equal to the
difference between the exercise price and the fair market value of a share of
Common Stock at the date of grant. The grant of an incentive option at a fair
market value exercise price would not require the Company to recognize any
compensation expense but, upon exercise, would instead be reflected as a capital
transaction affecting only the Company's balance sheet. For federal income tax
purposes, the Company would be entitled upon exercise of a nonqualified option
to a deduction for compensation paid in an amount per share equal to the
difference between the exercise price and the fair market value of each share of
Common Stock at the date of exercise. No deduction would be available to the
Company upon exercise of an incentive option. The Plan requires all nonqualified
options to be granted at an exercise price not less than 100% of the fair market
value on the date of grant, provided that the exercise price shall never be less
than the par value per share of the Common Stock.
As of the date hereof, stock options have been granted with respect to
2,325,520 shares available under the Plan. Of those, options with respect to
781,351 shares were exercisable as of December 25, 1994.
As of December 25, 1994, the following persons or groups held options to
purchase shares of Common Stock as indicated:
<TABLE>
<CAPTION>
Number of
Options
Held
<S> <C>
Abe J. Gustin, Jr., Chairman and Chief Executive Officer............................ 82,000
Lloyd L. Hill, President and Chief Operating Officer 96,000
Kenneth D. Hill, Executive Vice President and
President of International Development......................................... 109,500
Ronald B. Reck, Executive Vice President and Chief Administrative Officer........... 76,500
George D. Shadid, Executive Vice President and Chief Financial Officer.............. 70,101
All executive officers as a group................................................... 541,701
All employees other than executive officers......................................... 785,722
All directors who are not executive officers........................................ 150,000
</TABLE>
PROPOSAL IV
ADOPTION OF THE COMPANY'S 1995 EQUITY INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
As a result of a comprehensive review of the Company's executive
compensation programs, the Executive Compensation Committee of the Board of
Directors believes it is in the Company's best interest to replace the existing
1989 Stock Option Plan with a new plan allowing greater flexibility in the use
of equity-related compensation. As a result, the Board had adopted the 1995
Equity Incentive Plan which is being submitted to the stockholders for approval
in order to satisfy certain requirements of the Securities Exchange Act of 1934
related to compensation plans involving payment in Company securities and of the
Internal Revenue Code relating to deductibility of certain executive
compensation above a $1,000,000 annual amount. A copy of the 1995 Equity
Incentive Plan appears in Appendix B.
The Board of Directors believes that the 1995 Equity Incentive Plan will
become an important part of the Company's management compensation program by
12
<PAGE>
helping to attract and retain motivated, highly competent employees. By
providing stock options, restricted stock grants, and other equity-related
compensation, the Board believes that the participants will have a strong
incentive to emphasize stockholder value.
General
In the event the Plan is approved by the stockholders, the Company's
present 1989 Stock Option Plan will be terminated and future stock options will
be issued under the Plan. Stock options outstanding under the existing 1989
Stock Option Plan will not be effected by the termination of that plan.
The Plan allows the granting of stock options, stock appreciation rights
("SARs"), restricted stock awards, performance unit awards and performance share
awards (collectively, "Awards") to eligible Plan participants. While the Company
has no current plans to grant Awards other than stock options, the Board of
Directors believes that the ability to use different types of equity
compensation vehicles will give the Company the flexibility needed to adapt most
effectively over time to changes in the labor market and in equity compensation
practices.
The number of shares authorized to be issued pursuant to Awards granted
under the Plan is 2,000,000. If an Award expires or is canceled without having
been fully exercised or vested, the unvested or canceled shares generally will
be available thereafter for grants of Awards. The number of shares available for
grant under the Plan, as well as outstanding Awards, the formula for granting
non-employee director options, and the numerical limits for individual grants,
will be adjusted as appropriate to reflect any stock splits, stock dividends,
recapitalizations, reorganizations or other changes to the capital structure of
the Company.
Purpose of the Plan
The Plan is intended to attract, motivate and retain (1) employees of the
Company and its affiliates, (2) consultants who provide significant services to
the Company and its affiliates, and (3) directors of the Company, including
those who are employees of neither the Company nor any affiliate ("non-employee
directors"). The Plan also is designed to further the growth and financial
success of the Company and its affiliates by aligning the interests of the
participants, through stock ownership and other incentives, with the interests
of the Company's stockholders.
Description of the Plan
The following paragraphs provide a summary of the principal features of the
Plan and its operation. The Plan is set forth in its entirety as Appendix B to
this Proxy Statement. The following summary is qualified in its entirety by
reference to Appendix B.
Administration of the Plan
The Plan will be administered by the Executive Compensation Committee of
the Board of Directors (the "Committee"). The members of the Committee must
qualify as "disinterested persons" under Rule 16b-3 under the Securities
Exchange Act of 1934, and as "outside directors" under section 162(m) of the
Internal Revenue Code (for purposes of qualifying amounts received under the
Plan as "performance-based compensation" under section 162(m)).
Subject to the terms of the Plan, the Committee has the sole discretion to
determine the employees and consultants who shall be granted Awards, the size
and types of such Awards, and the terms and conditions of such Awards. The
Committee may delegate its authority to grant and administer awards to a
separate committee appointed by the Committee, but only the Committee may make
awards to participants who are executive officers of the Company. The director
option portion of the Plan will be administered by the full Board of Directors,
rather than the Committee.
13
<PAGE>
Eligibility to Receive Awards
Employees and consultants of the Company and its affiliates (i.e., any
corporation or other entity controlling, controlled by or under common control
with the Company) are eligible to be selected to receive one or more Awards. The
actual number of employees and consultants who will receive Awards under the
Plan cannot be determined because selection for participation in the Plan is in
the sole discretion of the Committee.
The Plan also provides for the grant of stock options to the Company's
employee and non-employee directors. Such options will automatically be granted
pursuant to a nondiscretionary formula. The terms and conditions of options to
be granted to directors are discussed below under "Director Options."
Options
The Committee may grant nonqualified stock options, incentive stock options
(which are entitled to favorable tax treatment) ("ISOs"), or any combination
thereof. The number of shares covered by each option will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted options for more than 100,000 shares.
The exercise price of each option is set by the Committee, but generally
cannot be less than 100% of the fair market value of the Company's Common Stock
on the date of grant. Thus, an option will have value only if the Company's
Common Stock appreciates in value after the date of grant. The exercise price of
an ISO must be at least 110% of the fair market value if the participant, on the
grant date, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its subsidiaries. Also,
the aggregate fair market value of the shares (determined on the grant date)
covered by ISOs which first become exercisable by any participant during any
calendar year may not exceed $100,000.
The exercise price of each option must be paid in full at the time of
exercise. The Committee also may permit payment through the tender of shares of
the Company's Common Stock then owned by the participant, or by any other means
that the Committee determines to be consistent with the Plan's purpose. Any
taxes required to be withheld must be paid by the participant at the time of
exercise.
Options become exercisable at the times and on the terms established by the
Committee. Options expire at the times established by the Committee, but
generally not later than 10 years after the date of grant (13 years in the event
of the optionee's death). The Committee may extend the maximum term of any
option granted under the Plan, subject to the preceding limits.
Director Options
Under the Plan, each non-employee Director will receive an annual grant of
Director Options to purchase 12,000 shares of Common Stock, which is
automatically increased or decreased by 1,500 shares for each increment of 5% by
which the actual earnings before income taxes of the Company for a particular
fiscal year exceed or are less than the earnings before income taxes for the
previous fiscal year. The maximum increase or decrease is 6,000 shares.
Employee Directors will also receive an annual grant of Director Options to
purchase 6,000 shares of Common Stock, automatically increased or decreased by
750 shares for each increment of 5% by which the actual earnings before income
taxes of the Company for a particular fiscal year exceed or are less than the
earnings before income taxes for the previous fiscal year. The maximum increase
or decrease is 3,000 shares.
Directors who are employees of the Company and who are not members of the
Executive Compensation Committee may also receive other grants of options to
purchase Common Stock so long as such grants are in compliance with all
provisions of Rule 16b-3(c)(2) of the Securities and Exchange Commission
relating to administration of the Plan by "disinterested persons."
14
<PAGE>
All Director Options are subject to the following provisions:
(i) Director Options shall be granted each year at the annual
meeting of the Board of Directors.
(ii) No Director Option may be exercised within twelve months after
the date of grant. Thereafter, all Director Options shall be
immediately exercisable and shall expire five years from the
date of grant.
(iii) The exercise price of all Director Options shall not be less
than the fair market value of the Common Stock at the time of
the grant.
(iv) The provisions of the Plan regarding non-transferability,
termination of a directorship, disability and death of a
director apply to Director Options.
Stock Appreciation Rights
The Committee determines the terms and conditions of each SAR. SARs may be
granted in conjunction with an option, or may be granted on an independent
basis. The number of shares covered by each SAR will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted SARs for more than 100,000 shares.
Upon exercise of a SAR, the participant will receive payment from the
Company in an amount determined by multiplying (1) the positive difference
between (a) the fair market value of a share of Company Common Stock on the date
of exercise, and (b) the exercise price, by (2) the number of shares with
respect to which the SAR is exercised. Thus, a SAR will have value only if the
Company's Common Stock appreciates in value after the date of grant.
SARs are exercisable at the times and on the terms established by the
Committee. Proceeds from SAR exercises may be paid in cash or shares of the
Company's Common Stock, as determined by the Committee. SARs expire at the times
established by the Committee, but are subject to the same maximum time limits as
are applicable to employee options granted under the Plan.
Restricted Stock Awards
Restricted stock awards are shares of the Company's Common Stock that vest
in accordance with terms established by the Committee. The number of shares of
restricted stock (if any) granted to a participant will be determined by the
Committee, but during any fiscal year of the Company, no participant may be
granted more than 100,000 shares.
In determining the vesting schedule for each Award of restricted stock, the
Committee may impose whatever conditions to vesting as it determines to be
appropriate. For example, the Committee may (but is not required to) provide
that restricted stock will vest only if one or more performance goals are
satisfied. [In order for the Award to qualify as "performance-based"
compensation under section 162(m) of the Internal Revenue Code, the Committee
must use one or more of the following measures in setting the performance goals:
(1) earnings per share, (2) individual performance objectives, (3) net income,
(4) pro forma net income, (5) return on designated assets, (6) return on
revenues, and (7) satisfaction of Company-wide or department based operating
objectives. These performance measures are set forth in the Plan and are some of
the same measures that are used in setting performance goals under the Company's
1994 Management and Executive Incentive Plan and under the 1994 Long-Term
Incentive Plan which was approved by the stockholders at last year's Annual
Meeting. The Committee may apply the performance measures on a corporate or
business unit basis, as deemed appropriate in light of the participant's
specific responsibilities. The Committee may, in its sole discretion, accelerate
the time at which any restrictions lapse or remove any restrictions.
15
<PAGE>
Performance Unit Awards and Performance Share Awards
Performance unit awards and performance share awards are amounts credited
to a bookkeeping account established for the participant. A performance unit has
an initial value that is established by the Committee at the time of its grant.
A performance share has an initial value equal to the fair market value of a
share of the Company's Common Stock on the date of grant. The number of
performance units or performance shares (if any) granted to a participant will
be determined by the Committee, but during any fiscal year of the Company, no
participant may be granted more than 100,000 performance shares or performance
units having an initial value greater than $250,000.
Whether a performance unit or performance share actually will result in a
payment to a participant will depend upon the extent to which performance goals
established by the Committee are satisfied. The applicable performance goals
will be determined by the Committee. In particular, the Plan permits the
Committee to use the same performance goals as are discussed above with respect
to restricted stock. The Committee may, in its sole discretion, waive any
performance goal requirement.
After a performance unit or performance share award has vested (that is,
after the applicable performance goal or goals have been achieved), the
participant will be entitled to receive a payout of cash, Common Stock, or any
combination thereof, as determined by the Committee. Unvested performance units
and performance shares will be forfeited upon the earlier of the recipient's
termination of employment or the date set forth in the Award agreement.
Nontransferability of Awards
Awards granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
applicable laws of descent and distribution; provided, however, that a
participant may designate one or more beneficiaries to receive any exercisable
or vested Awards following his or her death.
Change in Control
In the event of a change in control not approved by the Board of Directors,
all Awards granted under the Plan then outstanding but not then exercisable (or
subject to restrictions) shall become immediately exercisable, unless otherwise
provided in the applicable Award agreement. In general, a change in control
occurs if (1) a person (other than the Company and its affiliates) directly or
indirectly owns 30% of the Common Stock, (2) the composition of the Board
changes during any two year period whereby directors at the beginning of the
period (including new directors approved by a vote of at least two-thirds of the
directors then in office) cease to constitute a majority of the Board, or (3)
the stockholders of the Company approve a merger, consolidation or plan of
complete liquidation of the Company or approve an agreement for the sale of all
or substantially all of the Company's assets.
Tax Aspects
The following discussion is intended to provide an overview of the U.S.
federal income tax laws which are generally applicable to Awards granted under
the Plan as of the date of this Proxy Statement. People or entities in differing
circumstances may have different tax consequences, and the tax laws may change
in the future. This discussion is not to be construed as tax advice.
A recipient of a stock option or SAR will not have taxable income on the
date of grant. Upon the exercise of nonqualified options and SARs, the
participant will recognize ordinary income equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Any gain or loss recognized upon any later disposition of the shares generally
will be capital gain or loss.
16
<PAGE>
Purchase of shares upon exercise of an ISO will not result in any taxable
income to the participant, except for purposes of the alternative minimum tax.
Gain or loss recognized by the participant on a later sale or other disposition
either will be long-term capital gain or loss or ordinary income, depending upon
how long the participant holds the shares. Any ordinary income recognized will
be in the amount, if any, by which the lesser of (1) the fair market value of
such shares on the date of exercise, or (2) the amount realized from the sale,
exceeds the exercise price.
Upon receipt of restricted stock, a performance unit or a performance
share, the participant will not have taxable income unless he or she elects to
be taxed. Absent such election, upon vesting the participant will recognize
ordinary income equal to the fair market value of the shares or units at such
time.
The Committee may permit participants to satisfy tax withholding
requirements in connection with the exercise or receipt of an Award by (1)
electing to have the Company withhold otherwise deliverable shares, or (2)
delivering to the Company then owned shares having a value equal to the amount
required to be withheld.
The Company will be entitled to a tax deduction for an Award in an amount
equal to the ordinary income realized by the participant at the time the
participant recognizes such income. In addition, beginning with the Company's
1995 fiscal year, new Internal Revenue Code section 162(m) contains special
rules regarding the federal income tax deductibility of compensation paid to the
Company's Chief Executive Officer and to each of the other four most highly
compensated executive officers. The general rule is that annual compensation
paid to any of these specified executives will be deductible only to the extent
that it does not exceed $1 million. The Company can preserve the deductibility
of certain compensation in excess of $1 million, however, if the Company
complies with conditions imposed by section 162(m), including (1) the
establishment of a maximum number of shares with respect to which Awards may be
granted to any one employee during a specified time period, and (2) for
restricted stock, performance units and performance shares, inclusion in the
Plan of performance goals which must be achieved prior to payment. The Plan has
been designed to permit the Committee to grant Awards which satisfy the
requirements of new section 162(m).
Amendment and Termination of the Plan
The Board generally may amend or terminate the Plan at any time and for any
reason, but in accordance with section 162(m) of the Internal Revenue Code and
Rule 16b-3 under the Securities Exchange Act of 1934, certain material
amendments to the Plan will be subject to stockholder approval.
The Board of Directors recommends that stockholders vote YES on this
proposal. The affirmative vote of the holders of a majority of the shares of
Common Stock represented at the Annual Meeting will be required for adoption of
the proposal. If Proposal III is not approved by the stockholders, the 1995
Equity Incentive Plan will not be implemented and the existing 1989 Stock Option
Plan will remain in effect.
PROPOSAL V
RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY FOR THE 1995 FISCAL YEAR
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
The Audit Committee has selected the accounting firm of Deloitte & Touche
LLP to serve as the Company's independent auditors for the 1995 fiscal year. The
stockholders are being asked to ratify this selection. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting. Such
representatives will have the opportunity to make a statement at the Annual
Meeting if they so choose and will be available to respond to appropriate
questions.
17
<PAGE>
EXECUTIVE COMPENSATION
Executive Compensation Committee Report
This report discusses the manner in which base salaries, incentive
compensation and stock option grants for Abe J. Gustin, Jr., the Company's Chief
Executive Officer ("CEO") and the other executives named in the Summary
Compensation Table (the "Named Executives") were determined for the 1994 fiscal
year.
The Company believes that its past growth and success have been, and that
its continued growth and success will be dependent in part on its ability to
attract and retain highly-qualified senior management. In addition, the Company
believes that executive officers should have their personal financial interests
closely aligned with stockholder value. As a result, executive compensation
packages for 1994 were established that the Company believes to be competitive
in the restaurant industry, based on the data described in the compensation
survey described below, and focused on the Company's operating performance. The
Company's executive compensation arrangements consist of three primary parts:
competitive base salary levels, significant Company performance-based bonus
payments, and stock options. The Committee believes that these components are
appropriate ways to provide its executives financial security and motivation to
increase profitability in both the near-term and over time. Although the Company
had written employment agreements with the CEO and each Named Executive during
1994, those agreements addressed only first-year base salary levels and did not
determine 1994 compensation levels. Base salary, bonus and stock option levels
are left to the discretion of the Committee each year.
In reviewing compensation levels for 1994, the Committee conducted a
thorough review and study of the Company's executive salary and bonus policies
in order to provide the Company's executive officers with appropriate financial
and motivational arrangements in 1994 and the future. The Committee selected the
consulting firm of William M. Mercer, Incorporated ("Mercer") to assist it in
developing an executive compensation program designed to meet the Committee's
objectives. Mercer's efforts consisted of comparing the base salaries of the
Company's executives with those of comparable companies (the "Mercer Study
Group"), and of reviewing and recommending modifications to the Company's cash
incentive compensation programs. (The Mercer Study Group included eight
publicly-traded restaurant companies, three of which are also included in the
industry peer group used in the Performance Graph included in this Proxy
Statement. The Committee did not direct Mercer as to which specific companies to
use in its study. The companies were selected because they were generally
comparable to the Company in size and recent growth rate.) The results of the
Committee's review were implemented in a series of changes to the Company's
bonus compensation practices, including the adoption of the 1994 Long-Term
Incentive Plan (approved by the stockholders at the 1994 Annual Meeting) and the
1994 Management and Executive Incentive Plan. In addition, the review of
executive compensation led to the development of the 1995 Equity Incentive Plan,
being submitted for stockholder approval under Proposal IV, above.
Base Salary
In determining the 1994 base salaries for the CEO and Named Executives, the
Committee considered several criteria, including growth in stockholder value,
free cash flow, earnings before interest, taxes, depreciation, and amortization
("EBITDA"), net earnings, franchisee relations and new restaurant openings (the
"Corporate Performance Criteria"). These criteria were not weighted by any
predetermined formula, but rather, were considered in light of the overall
achievement of the Company's goals and of general industry and economic factors.
The significance of any particular criterion varied depending upon the
particular position or area of responsibility of the executive in question. Mr.
Gustin's 1994 base salary of $375,000 represented an increase of 57% over 1993
and reflected the continued strong operational and financial performance of the
Company and of the Applebee's franchise system, evidenced by, among other
things, continued large earnings growth and a record number of restaurant
openings.
18
<PAGE>
The compensation review by Mercer resulted in significant increases in base
salaries for 1994, and supported the level of base salary approved for Lloyd
Hill when he joined the Company's management team in January 1994. The Committee
believes that base salaries should remain competitive, but not significantly
exceed the middle portion of the industry range determined by the Mercer Study
Group. The Committee also believes that for most executive and management
employees, base salary should comprise a relatively greater portion of total
executive compensation.
Incentive Compensation
While the Committee believes that base salaries should represent a higher
percentage of compensation than in the past, it feels strongly that a
significant part of compensation for the CEO and other senior executives should
continue to be based on the achievement of operating and financial goals. For
several years the Company used an executive bonus plan that allocated a
percentage of profits to a bonus pool in the event a specified level of the
Company's goals was achieved. The pool was then divided among the participants
based upon their comparative "point" assignments.
In 1994, a new bonus program, consisting of the 1994 Management and
Executive Incentive Plan (a cash bonus plan) for all executives and the 1994
Long-Term Incentive Plan (a stock award plan) for all executives other than the
CEO and Executive Vice Presidents, was implemented. Under the cash bonus plan,
the Committee established operating and financial goals for the Company and
individual bonus payments, based on a percentage of base salary, to be paid at
various levels of goal achievement. The Committee believes that this new program
will provide an appropriate, attractive incentive opportunity to the Company's
executives for both short-term and long-term rewards.
The Committee established the minimum achievement level to receive bonus
payments under the 1994 Management and Executive Incentive Plan at 65% of the
Company's internal targeted pre-tax profit, the same achievement level used in
1993. The Company's actual pre-tax profit in 1994 exceeded 90% of the Company's
internal targeted pre-tax profit, resulting in bonuses for 1994 of approximately
43% of base salary for the CEO and each of the Named Executives.
Stock Options
Stock option grants in 1994, including those to the CEO and the Named
Executives, were made by the Committee and based primarily on the level of each
recipient's responsibility within the Company. Thus, Mr. Gustin, as Chairman and
CEO, who was ultimately responsible for all operations of the Company and for
the franchise system and relationships with franchisees, received the largest
option grant, comprising 6.8% of all options granted in 1994.
The Committee believes that stock option grants and other equity-related
compensation programs should be an important element of the Company's executive
compensation program; and as a result, the Committee has approved the 1995
Equity Incentive Plan, recommended for approval by the stockholders in Proposal
IV, above, to use equity-related compensation more effectively to attract,
motivate and retain experienced, qualified members of management. In addition,
the Committee reviewed certain outstanding, but fully-vested, options that were
to expire during 1994 and determined that the original three-year terms were not
long enough to provide the holders with the intended benefits of those options.
As a result, the Committee, with the agreement of the individuals, approved the
extensions of certain options through the tenth anniversary of their original
grant and increased the exercise price of those options from $3.02 per share to
$14.38 per share (the market price on the extension date), as shown in the
following table.
19
<PAGE>
<TABLE>
<CAPTION>
10-YEAR SUMMARY OF OPTION REPRICINGS
Market Expiration
Number of Price of Exercise Date of
Options Stock at Price at New Option at
Repriced Time of Time of Exercise Date
Date of (#) Repricing Repricing Price of Repricing
Name Repricing ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Lloyd L. Hill 5/25/94 12,000 $14.38 $3.02 $14.38 8/13/94
President and Chief
Operating Officer
Ronald B. Reck 5/25/94 12,000 $14.38 $3.32 $14.38 8/13/94
Executive Vice
President and Chief
Administrative Officer
Stuart F. Waggoner 5/25/94 9,000 $14.38 $3.02 $14.38 8/13/94
Senior Vice President
of Operations
</TABLE>
Other Information
Regulations under section 162(m) of the Internal Revenue Code, regarding
the annual deduction limitation of $1,000,000 on the compensation of certain
executive officers of publicly held corporations, did not apply to the 1994
fiscal year of the Company which began prior to January 1, 1994. Although no
executive of the Company has historically received annual compensation in excess
of $1,000,000, the Committee has designed the 1995 Equity Incentive Plan to meet
the requirements of section 162(m).
EXECUTIVE COMPENSATION COMMITTEE
D. Patrick Curran
Eric L. Hansen
Jack P. Helms
Compensation Committee Interlocks and Insider Participation
During a portion of 1994, the Company had both a Stock Option Committee and
a Compensation Committee. At the beginning of 1994, the Stock Option Committee
consisted of D. Patrick Curran and Eric L. Hansen and the Compensation Committee
also consisted of Mr. Curran and Mr. Hansen. In March 1994, the Compensation
Committee and the Stock Option Committee were combined into the Executive
Compensation Committee and, at that time, Jack P. Helms was also appointed to
the combined Committee. None of these individuals has ever been an officer or
employee of the Company.
20
<PAGE>
Summary Compensation Table
The following Summary Compensation Table sets forth the compensation of the
Chief Executive Officer and each of the next four most highly compensated
executive officers of the Company whose annual salary and bonuses exceeded
$100,000 for services in all capacities to the Company during the last three
fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Other Annual
Fiscal Salary Bonus(1) Compensation(2) Options(3)
Name and Principal Position Year ($) ($) ($) (#)
<S> <C> <C> <C> <C> <C>
Abe J. Gustin, Jr. 1994 $366,965 $161,719 $ 369 49,000
Chairman and Chief Executive 1993 247,425 222,303 12,485 33,000
Officer 1992 219,078 152,896 4,800 15,000
Lloyd L. Hill(4) 1994 $244,111 $119,229 $67,418 51,000
President and Chief Operating 1993 -- -- -- 33,000
Officer 1992 -- -- -- 12,000
Kenneth D. Hill(5) 1994 $222,234 $ 97,031 $ 4,750 39,000
Executive Vice President and 1993 168,197 133,381 5,929 28,500
President of International 1992 150,577 91,737 5,441 15,000
Development
Ronald B. Reck 1994 $220,650 $ 97,031 $ 4,510 42,000
Executive Vice President and 1993 167,792 133,381 19,985 19,500
Chief Administrative Officer 1992 142,154 91,737 4,800 15,000
George D. Shadid(6) 1994 $197,203 $ 86,250 $18,378 30,000
Executive Vice President and 1993 165,149 115,189 4,985 15,000
Chief Financial Officer 1992 45,769 38,821 1,569 42,000
<FN>
---------------
(1) Represents payments made under the 1994 Management and Executive Incentive
Plan and payments made under executive bonus plans in prior years. In
addition, amounts applicable to Mr. Shadid include bonuses of $4,037 and
$10,963 in 1993 and 1992, respectively, constituting a $15,000 bonus paid
for 1992 pursuant to an agreement between Mr. Shadid and the Company made
at the time he initially joined the Company. Amounts applicable to Mr.
Lloyd Hill include a bonus of $15,000 paid in 1994 pursuant to an agreement
between Mr. Lloyd Hill and the Company made at the time he joined the
Company as an officer.
(2) Represents automobile allowances, club membership fees paid on behalf of
certain officers, payments made in connection with the Company's 401(k)
plan in 1992 and 1993, and payments made in connection with the Company's
non-qualified retirement savings plan in 1994. In 1994, the Company
established a non-qualified defined contribution retirement plan for key
employees, and such employees were no longer eligible to participate in the
Company's 401(k) plan. Amounts applicable to Mr. Lloyd Hill also include
moving and relocation expense reimbursements of $67,378 in 1994.
(3) Represents options granted pursuant to the Company's 1989 Stock Option
Plan, including options granted to directors who are also executive
officers (see "Certain Information Concerning the Board of Directors").
(4) Mr. Lloyd Hill's employment with the Company commenced February 1, 1994.
Mr. Lloyd Hill received 12,000 and 18,000 options in 1992 and 1993,
respectively, for serving as a non-employee director and also received
15,000 options in 1993 in connection with joining the Company as an
officer.
(5) Effective February 28, 1995, Mr. Kenneth Hill resigned as an employee and
officer of the Company.
(6) Mr. Shadid's employment with the Company commenced August 17, 1992.
</FN>
</TABLE>
21
<PAGE>
During 1994, the Company had written employment agreements with Mr. Gustin,
Mr. Lloyd Hill, Mr. Kenneth Hill, Mr. Reck, and Mr. Shadid. The agreements with
Mr. Gustin and Mr. Reck expired March 1, 1995, and have been extended through
June 1, 1995. Mr. Shadid's agreement also expired March 1, 1995, and he has
entered into a new agreement described below. Effective February 28, 1995, Mr.
Kenneth Hill resigned as an executive officer of the Company and became a
consultant under the terms of a written consulting agreement. See "Certain
Transactions."
Mr. Lloyd Hill's agreement was for an original term of one year, expiring
in January 1995, and automatically renews for successive one-year terms unless
otherwise terminated as provided in the agreement. The Company also entered into
a severance and noncompetition agreement with Mr. Hill which provides a
continuation of salary, bonus and benefits for a period of three years following
certain "triggering events," including termination by the Company without cause
or termination by Mr. Hill if the Company substantially reduces his
compensation, benefits, or duties or requires a relocation from the Kansas City
area. If the three-year severance payments are due, Mr. Hill will be bound by a
three-year non-compete. If the severance payments are not due, the Company can
elect to impose a one-year non-compete on Mr. Hill if it pays him 50% of his
base salary.
Effective March 1, 1995, the Company and Mr. Shadid entered into a new
employment agreement with an initial term ending December 29, 1996, and
renewable thereafter for additional one year terms. The agreement allows
periodic salary increases as determined by the Executive Compensation Committee
and provides a 26 month severance payment based on the current year's salary and
bonus (the "Severance Amount") in the event of termination by the Company
without cause (as defined) or by Mr. Shadid with reason (as defined). If Mr.
Shadid elects to receive the Severance Amount, the agreement imposes a
noncompetition and an employee nonsolicitation clause. The agreement also
provides for a lump sum payment equal to 26 times his prior year's monthly
salary plus bonus, plus an amount equal to all bonuses paid or accrued in the
fiscal year of termination, without the imposition of a noncompetition or
nonsolicitation clause, in the event Mr. Shadid resigns or is terminated
following a change in control.
In October 1994, the Company entered into a one-year employment agreement
with Mr. Sack in connection with Mr. Sack joining the Company as an Executive
Vice President. Mr. Sack's employment agreement provides for a base salary of
$210,000, with future periodic salary adjustments as determined by the Executive
Compensation Committee and is renewable for two additional one-year terms by
mutual agreement as provided in the agreement. The agreement also contains a
confidentiality provision and a one-year noncompetition covenant. In addition,
the agreement provides for a continuation of salary and benefits for a period of
18 months in the event Mr. Sack resigns or is terminated following a change in
control of the Company.
Each of the 1994 employment agreements provided for periodic salary
adjustments as determined by the Executive Compensation Committee. In January
1995, Mr. Gustin's salary was increased to $425,000, Mr. Lloyd Hill's salary was
increased to $310,000, Mr. Reck's salary was increased to $250,000 and Mr.
Shadid's salary was increased to $240,000. The 1994 employment agreements also
contained a confidentiality provision and a one-year noncompetition covenant
which the Company could have extended for an additional year under certain
circumstances. These employment agreements also provided for a lump sum payment
in the event the employee resigned or was terminated following a change in
control of the Company in an amount equal to (i) twice the employee's cash
compensation for the prior fiscal year (salary plus bonus), and (ii) the amount
of all bonuses paid or accrued in the fiscal year of termination.
The Company has entered into severance arrangements for the other senior
employees of the Company (seven persons), which provide for lump sum payments in
the event the employee resigns or is terminated following a change in control of
the Company in an amount equal to (i) one and two-thirds times the officer's
cash compensation for the prior year (salary plus bonus), and (ii) the amount of
all bonuses paid or accrued in the fiscal year of termination. If all officers
with change in control severance agreements (12 persons) had been terminated as
of December 25, 1994, as a result of a change in control, the Company would have
been required to make payments under the change in control severance provisions
of the above agreements aggregating approximately $5,000,000.
22
<PAGE>
The following tables set forth information regarding options granted and
exercised during fiscal year 1994 with respect to the Chief Executive Officer
and the next four most highly compensated executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants(1) for Option Term(2)
Number of % of Total
Securities Options
Underlying Granted to Exercis
Options Employees or Bas
Granted in Fiscal Price Expiration 5% 10%
Name (#) Year ($/Share) Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Abe J. Gustin, Jr. 40,000 6.8% $13.8150 8/15/04 $347,527 $880,703
9,000(3) 1.5 14.6900 5/25/99 36,528 80,715
Lloyd L. Hill 30,000 5.1 13.8150 8/15/04 260,648 660,529
9,000(3) 1.5 14.6900 5/25/99 36,528 80,715
12,000(4) 2.0 14.3800 8/13/01 72,920 171,108
Kenneth D. Hill 30,000 5.1 13.8150 8/15/04 260,648 660,529
9,000(3) 1.5 14.6900 5/25/99 36,528 80,715
Ronald B. Reck 30,000 5.1 13.8150 8/15/04 260,648 660,529
12,000(4) 2.0 14.3800 8/13/01 72,920 171,108
George D. Shadid 30,000 5.1 13.8150 8/15/04 260,648 660,529
<FN>
---------------
(1) Options are granted at the fair market value on the date of grant and vest
one year after date of grant.
(2) The assumed rates are compounded annually for the full terms of the
options.
(3) Represents options granted to executive officers who are also directors
(see "Certain Information Concerning the Board of Directors").
(4) Represents repriced options originally granted in 1991.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-The-Money
Unexercised Options Options at
Shares at 12/25/94 12/25/94(2)
Acquired Value (#) ($)
at Exercise Realized(1) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Abe J. Gustin, Jr. None None 26,068/ 55,932 $ 16,548/ $ 47,542
Lloyd L. Hill None None 57,000/ 39,000 $ 168,400/ $ 33,660
Kenneth D. Hill None None 62,521/ 46,979 $ 476,551/ $ 52,399
Ronald B. Reck None None 39,048/ 37,452 $ 158,080/ $ 42,855
George D. Shadid None None 28,064/ 42,037 $ 167,809/ $111,079
<FN>
--------------
(1) Market value less option price.
(2) Based upon the closing sale price of the Common Stock on December 23, 1994
(the last trading day in fiscal year 1994).
</FN>
</TABLE>
23
<PAGE>
Performance Graph
The following graph compares the annual change in the Company's
cumulative total stockholder return for the five fiscal years ended December 25,
1994 (December 31, 1989 to December 25, 1994) based upon the market price of the
Company's Common Stock, compared with the cumulative total return on Media
General's NASDAQ Total Return Index and the Company's customized Industry Peer
Group as indexed by Media General. The Media General NASDAQ Index includes both
the NASDAQ NMS and NASDAQ Small-Cap Issuers indices. The customized Industry
Peer Group consists of the Company; Brinker International, Inc.; Chart House
Enterprises, Inc.; Cracker Barrel Old Country Store, Inc.; Max & Erma's
Restaurants, Inc.; Morrison Restaurants, Inc.; Spaghetti Warehouse, Inc.; and
Uno Restaurant Corporation.
APPLEBEE'S INTERNATIONAL, INC.
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
APPLEBEE'S INTERNATIONAL, INC. VS. CUSTOM PEER GROUP VS.
NASDAQ TOTAL RETURN INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Applebee's Custom NASDAQ
(Fiscal Year Covered) International, Inc. Peer Group Total Return Index
Measurement Point -
<S> <C> <C> <C>
December 31, 1989 $100.00 $100.00 $100.00
December 30, 1990 $ 54.07 $ 92.69 $ 81.12
December 29, 1991 $108.66 $183.64 $104.14
December 27, 1992 $218.01 $244.85 $105.16
December 26, 1993 $483.68 $322.69 $126.14
December 25, 1994 $349.12 $239.38 $132.44
</TABLE>
Assumes $100 Invested on December 31, 1989
Assumes Dividends Reinvested
Fiscal Year Ending December 25, 1994
24
<PAGE>
Certain Indemnification Agreements
The Company has entered into Indemnification Agreements with each of its
directors and officers. Under the Indemnification Agreements, the Company agreed
to hold harmless and indemnify each indemnitee generally to the full extent
permitted by Section 145 of the Delaware General Corporation Law and against any
and all liabilities, expenses, judgments, fines, penalties and costs in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative to which the indemnitee
is made a party by reason of the fact that the indemnitee has, is or at the time
becomes a director or officer of the Company or any other entity at the request
of the Company. The indemnity does not cover liability arising out of fraudulent
acts, deliberate dishonesty or willful misconduct, violations of certain
securities laws, or if a court determines that such indemnification is not
lawful. In addition, the By-laws of the Company provide for indemnification to
all officers and directors of the Company to essentially the same extent as
provided in the indemnification agreements.
The Company presently carries director and officer liability insurance to
insure its directors and officers against certain liabilities they might incur
in connection with performing their duties for the Company. The proceeds of such
insurance would be available to the extent thereof to satisfy any obligation of
the Company to indemnify its directors or officers with respect to the liability
giving rise to the insurance proceeds. The insurance does not cover all
liabilities that could give rise to indemnification by the Company.
CERTAIN TRANSACTIONS
The Company and certain franchisees have obtained restaurant equipment from
Sal Reck Equipment Company. Sal Reck, the owner of such company, is the father
of Ronald B. Reck. During the 1994 fiscal year, the Company paid $3,869,000 for
equipment and services purchased from Sal Reck Equipment Company. In addition,
at December 25, 1994, the Company had $194,000 in accounts payable to such
company. The Company believes that all such transactions have been on terms at
least as favorable as could have been obtained from unaffiliated third parties.
One of the Company's restaurants is leased from a corporation of which Abe
J. Gustin, Jr., Ronald B. Reck and Johyne H. Reck each owns a 25% interest. The
Company paid $173,000 under this lease in the 1994 fiscal year. The Company
believes that the terms of the lease reflect fair market value rentals which are
comparable to those which could have been obtained from an unaffiliated third
party. Abe J. Gustin, Jr. personally guaranteed a restaurant lease for a former
franchisee in Dallas. When the Company undertook the operation of this franchise
restaurant it agreed to assume the lease prospectively. This decision was
approved by a majority of the disinterested members of the Board of Directors.
Mr. Gustin remains liable on his guarantee. In the 1994 fiscal year, the
aggregate payments made by the Company on the lease were $96,000.
Mr. Gustin's brother and a brother-in-law own two of the Company's
franchisees, A.N.A., Inc., which operates nine restaurants, and Penn-Apple,
Inc., which holds the rights to a development territory. Another brother-in-law
of Mr. Gustin owns a 50% interest in Apple-Bay East, Inc., another of the
Company's franchisees which operates two restaurants. The Company has also
entered into development agreements for two territories with Apple Partners
Limited Partnership. Ronald B. Reck's brother-in-law owns a 50% interest in the
corporate general partner of this limited partnership. As of [April , 1995], the
Company had $[ ] in accounts receivable from Apple Partners Limited Partnership.
The development and franchise agreements of A.N.A., Inc., Penn-Apple, Inc.,
Apple-Bay East, Inc. and Apple Partners Limited Partnership are standard in form
and require payment of standard franchise, royalty, and advertising fees.
As of December 6, 1994, Tom E. DuPree, Jr., Chairman of the Board, Chief
Executive Officer and the beneficial owner of approximately 35.5% of the
outstanding common stock of Apple South, Inc., reported ownership of 1,739,850
shares (6.1% of the Company's outstanding Common Stock as of April 14, 1995).
Apple South, Inc., the Company's largest franchisee, operated 120 Applebee's
restaurants as of December 25, 1994. Approximately 28% ($8,867,000) of the
25
<PAGE>
Company's fiscal year 1994 franchise income and approximately 4% of the
Company's fiscal year 1994 total operating revenues were generated by Apple
South. As of December 25, 1994, the Company had $970,000 in accounts receivable
from Apple South, which has been subsequently paid in the normal course of
business.
In October 1994, the Company acquired Pub Ventures of New England, Inc.
("PVNE"), a franchisee of the Company, in exchange for 3,300,000 shares of the
Company's Common Stock. Burton M. "Skip" Sack beneficially owned 68% of PVNE. In
connection with this acquisition, the Company assumed approximately $4,000,000
of PVNE debt which had been guaranteed by Mr. Sack and Mr. Sack became an
Executive Vice President and a member of the Board of Directors of the Company.
The Company also agreed to nominate Mr. Sack for reelection to the Board of
Directors at the 1995 Annual Meeting of Stockholders.
In March 1995, the Company acquired Innovative Restaurant Concepts, Inc.
and its affiliates ("IRC"). IRC owns and operates the Rio Bravo Cantina chain of
Mexican restaurants and four other specialty restaurant concepts. Under the
terms of the agreement, approximately 2,777,000 shares of the Company's Common
Stock or options to purchase such shares, subject to adjustment, were exchanged
for all of the outstanding stock, stock options and partnership interests of IRC
and approximately $13,700,000 of IRC indebtedness was assumed. Raymond D.
Schoenbaum owned beneficially approximately 55% of IRC and was released from his
personal guarantee of a portion of the IRC debt. As a part of the acquisition,
Mr. Schoenbaum entered into a consulting agreement with the Company. The
consulting agreement, which has an initial term of one year and is extendible
thereafter by mutual agreement, pays Mr. Schoenbaum a fee of $165,000. The
agreement also includes a one year period after termination in which Mr.
Schoenbaum is precluded from competing in the casual dining restaurant industry
and from hiring any employees of the Company. Mr. Schoenbaum became a member of
the Board of Directors on March 24, 1995, and under the terms of the consulting
agreement, the Company agreed to nominate him for reelection to the Board of
Directors at the 1995 Annual Meeting of Stockholders.
Effective March 1, 1995, the Company entered into a two-year consulting
agreement with Mr. Kenneth Hill to act as a consultant to the Company for
governmental affairs and restaurant industry relations. Mr. Hill will be paid
$200,000 for the first year of the agreement and $150,000 for the second year.
The agreement contains nondisclosure, noncompetition, and employee
nonsolicitation clauses and also provides that all concepts and discoveries
conceived by Mr. Hill alone or with others become the exclusive property of the
Company.
OTHER MATTERS
The Company knows of no other matters to be considered at the Annual
Meeting. However, if any other matters are properly presented at the meeting, it
is the intention of the persons named in the accompanying proxy to vote in
respect thereof in accordance with their best judgment.
The Board of Directors encourages each stockholder to attend the Annual
Meeting. Whether or not you plan to attend, you are urged to complete, sign and
return the enclosed proxy in the accompanying envelope. A prompt response will
greatly facilitate arrangements for the meeting, and your cooperation will be
appreciated. Stockholders who attend the meeting may vote their shares
personally even though they have sent in their proxies.
By Order of the Board of Directors
Robert T. Steinkamp, Secretary
Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Overland Park, Kansas
April 24, 1995
26
APPENDIX A
RESOLVED, that the Certificate of Incorporation be amended by adding a new
Article 11 thereto, said new Article 11 to be and read in its entirety as
follows:
"11. Upon the effectiveness of this amendment to the Certificate of
Incorporation pursuant to the Delaware General Corporation Law, the Board
of Directors of the Corporation shall be divided into three classes,
designated Class I, Class II and Class III, which at all times shall be as
nearly equal in number as possible, as determined by the Board of
Directors. The term of office of the initial Class I Directors shall expire
at the Annual Meeting of Stockholders next succeeding the date on which
this amendment to the Certificate of Incorporation becomes effective as
provided above, the term of office of the initial Class II Directors shall
expire at the Annual Meeting which the term of office of the initial Class
I Director expires, and the term of office of the initial Class III
Directors shall expire at the Annual Meeting of Stockholders next
succeeding the Annual Meeting at which the term of office of the initial
Class II Directors expires. The appointment of incumbent Directors to the
Board of Directors Classes, I, II and III at the time of the effectiveness
of this amendment to the Certificate of Incorporation pursuant to the
Delaware General Corporation Law shall be by a resolution adopted by a
majority of the Stockholders entitled to vote in an election of directors.
At each Annual Meeting of Stockholders following such initial
classification and election, Directors elected to succeed those whose terms
expire at the time of such meeting shall be elected to hold office until
the third succeeding Annual Meting of Stockholders after their election. In
the event of any increase in the number of Directors of the corporation,
the additional Directors shall be classified so that all classes of
Directors shall be increased equally as nearly as possible. Each Director
shall hold office until his or her successor is elected and qualified, or
until his or her earlier resignation or removal. Directors need not be
Stockholders."
APPENDIX B
APPLEBEE'S INTERNATIONAL, INC.
1995 EQUITY INCENTIVE PLAN
SECTION 1
PURPOSE AND DURATION
1.1 Effective Date. This Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, SARs, Restricted Stock, Performance Units and
Performance Shares. This Plan shall become effective upon the affirmative vote
of the holders of a majority of the Shares which are present in person or by
proxy and entitled to vote at the 1995 Annual Meeting of Stockholders.
1.2 Purpose of this Plan. This Plan is intended to attract, motivate, and
retain (a) employees of the Company and its Affiliates, (b) consultants who
provide significant services to the Company and its Affiliates, and (c)
directors of the Company who are employees of neither the Company nor any
Affiliate. This Plan also is designed to further the growth and financial
success of the Company and its Affiliates by aligning the interests of the
Participants, through the ownership of Shares and through other incentives, with
the interests of the Company's stockholders.
SECTION 2
DEFINITIONS
The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:
"1934 Act" means the Securities Exchange Act of 1934, as amended. Reference
to a specific section of the 1934 Act or regulation thereunder shall include
such section or regulation, any valid regulation promulgated under such section,
and any comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
"Affiliate" means any corporation or any other entity (including, but not
limited to, partnerships and joint ventures) controlling, controlled by or under
common control with the Company.
"Affiliated SAR" means an SAR that is granted in connection with a related
Option, and that automatically will be deemed to be exercised at the same time
that the related Option is exercised.
1
<PAGE>
"Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock,
Performance Units or Performance Shares.
"Award Agreement" means the written agreement setting forth the terms and
provisions applicable to each Award granted under this Plan.
"Board" or "Board of Directors" means the Board of Directors of the
Company.
"Change in Control" shall have the meaning assigned to such term in Section
13.2.
"Code" means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section
or regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.
"Committee" means the committee appointed by the Board (pursuant to Section
3.1) to administer this Plan.
"Company" means Applebee's International, Inc., a Delaware corporation, and
any successor thereto. With respect to the definitions of the Performance Goals,
the Committee in its sole discretion may determine that "Company" means
Applebee's International and its consolidated subsidiaries.
"Consultant" means any consultant, independent contractor or other person
who provides significant services to the Company or its Affiliates, but who is
neither an Employee nor a Director.
"Director" means any individual who is a member of the Board of Directors
of the Company.
"Disability" means a permanent and total disability within the meaning of
Code section 22(e)(3), provided that in the case of Awards other than Incentive
Stock Options, the Committee in its sole discretion may determine whether a
permanent and total disability exists in accordance with uniform and
non-discriminatory standards adopted by the Committee from time to time.
"Earnings Per Share" means as to any Fiscal Year, the Company's Net Income
or a business unit's Pro Forma Net Income, divided by a weighted average number
of Shares outstanding and dilutive equivalent Shares deemed outstanding.
"Employee" means any employee of the Company or of an Affiliate, whether
such employee is so employed at the time this Plan is adopted or becomes so
employed subsequent to the adoption of this Plan.
2
<PAGE>
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific section of ERISA or regulation thereunder shall
include such section or regulation, any valid regulation promulgated under such
section, and any comparable provision of any future legislation or regulation
amending, supplementing or superseding such section or regulation.
"Exercise Price" means the price at which a Share may be purchased by a
Participant pursuant to the exercise of an Option.
"Fair Market Value" means the last quoted per share selling price at which
Shares are traded on any given date, or if no Shares are traded on such date,
the most recent prior date on which Shares were traded, as reported in The Wall
Street Journal. Notwithstanding the preceding, for federal, state and local
income tax reporting purposes, fair market value shall be determined by the
Committee (or its delegate) in accordance with uniform and nondiscriminatory
standards adopted by it from time to time.
"Fiscal Year" means the fiscal year of the Company.
"Freestanding SAR" means a SAR that is granted independently of any Option.
"Grant Date" means, with respect to an Award, the date that the Award was
granted.
"Incentive Stock Option" means an Option to purchase Shares which is
designated as an Incentive Stock Option and is intended to meet the requirements
of section 422 of the Code.
"Individual MBOs" means as to a Participant, the objective and measurable
goals set by a "management by objectives" process and approved by the Committee
(in its sole discretion).
"Net Income" means as to any Fiscal Year, the income after taxes of the
Company for the Fiscal Year determined in accordance with generally accepted
accounting principles; provided, however, that prior to the Fiscal Year, the
Committee shall determine whether any significant item(s) shall be included or
excluded from the calculation of Net Income with respect to one or more
Participants.
"Nonemployee Director" means a Director who is not an employee of the
Company or of any Affiliate.
"Nonqualified Stock Option" means an Option to purchase Shares which is not
an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonqualified Stock Option.
"Participant" means an Employee, Consultant or Nonemployee Director who has
an outstanding Award.
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"Performance Goals" means the goal(s) (or combined goal(s)) determined by
the Committee (in its sole discretion) to be applicable to a Participant with
respect to an Award. As determined by the Committee, the Performance Goals
applicable to an Award may provide for a targeted level or levels of achievement
using one or more of the following measures: (a) Earnings Per Share, (b)
Individual MBOs, (c) Net Income, (d) Pro Forma Net Income, (e) Return on
Designated Assets, (f) Return on Revenues, and (g) Satisfaction MBOs. The
Performance Goals may differ from Participant to Participant and from Award to
Award.
"Performance Period" shall have the meaning assigned to such term in
Section 8.3.
"Performance Share" means an Award granted to a Participant pursuant to
Section 8.
"Performance Unit" means an Award granted to a Participant pursuant to
Section 8.
"Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock are subject to restrictions and, therefore, the
Shares are subject to a substantial risk of forfeiture. As provided in Section
7, such restrictions may be based on the passage of time, the achievement of
target levels of performance or the occurrence of other events as determined by
the Committee in its sole discretion.
"Plan" means the Applebee's International, Inc. 1995 Equity Incentive Plan,
as set forth in this instrument and as hereafter amended from time to time.
"Pro Forma Net Income" means as to any business unit for any Fiscal Year,
the portion of Company's Net Income allocable to such business unit; provided,
however, that prior to such Fiscal Year, the Committee shall determine the basis
on which such allocation shall be made.
"Restricted Stock" means an Award granted to a Participant pursuant to
Section 7.
"Retirement" means, in the case of an Employee, a Termination of Service by
reason of the Employee's retirement at or after age sixty-five (65). With
respect to a Consultant, no Termination of Service shall be deemed to be on
account of "Retirement". With respect to a Nonemployee Director, "Retirement"
means termination of service on the Board at or after age seventy (70).
"Return on Designated Assets" means as to any Fiscal Year, (a) the Pro
Forma Net Income of a business unit, divided by the average of beginning and
ending business unit designated assets, or (b) the Net Income of the Company,
divided by the average of beginning and ending designated corporate assets.
"Return on Revenues" means as to any Fiscal Year, the percentage equal to
the Company's Net Income or the business unit's Pro Forma Net Income, divided by
the Company's or the business unit's Annual Revenue.
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"Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, and any
future regulation amending, supplementing or superseding such regulation.
"Satisfaction MBOs" means as to any Participant, the objective and
measurable individual goals set by a "management by objectives" process and
approved by the Committee, which goals relate to the satisfaction of external or
internal requirements.
"Section 16 Person" means a person who, with respect to the Shares, is
subject to section 16 of the 1934 Act.
"Shares" means the shares of common stock of the Company.
"Stock Appreciation Right" or "SAR" means an Award, granted alone or in
connection with a related Option, that is designated as a SAR pursuant to
Section 7.
"Subsidiary" means any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"Tandem SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
an equal number of Shares under the related Option (and when a Share is
purchased under the Option, the SAR shall be canceled to the same extent).
"Termination of Service" means (a) in the case of an Employee, a cessation
of the employee-employer relationship between an employee and the Company or an
Affiliate for any reason, including, but not limited to, a cessation by
resignation, discharge, death, Disability, Retirement or the disaffiliation of
an Affiliate, but excluding any such cessation where there is a simultaneous
reemployment by the Company or an Affiliate, and (b) in the case of a
Consultant, a cessation of the service relationship between a Consultant and the
Company or an Affiliate for any reason, including, but not limited to, a
cessation by resignation, discharge, death, Disability or the disaffiliation of
an Affiliate, but excluding any such cessation where there is a simultaneous
reengagement of the Consultant by the Company or an Affiliate.
SECTION 3
ADMINISTRATION
3.1 The Committee. This Plan shall be administered by the Committee. The
Committee shall consist of not less than two (2) Directors. The members of the
Committee shall be appointed from time to time by, and shall serve at the
pleasure of, the Board of Directors. The Committee shall be comprised solely of
Directors who both are (a) "disinterested persons" under Rule 16b-3, and (b)
"outside directors" under section 162(m) of the Code.
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3.2 Authority of the Committee. It shall be the duty of the Committee to
administer this Plan in accordance with its provisions. The Committee shall have
all powers and discretion necessary or appropriate to administer this Plan and
to control its operation, including, but not limited to, the power to (a)
determine which Employees and Consultants shall be granted Awards, (b) prescribe
the terms and conditions of the Awards (other than the Options granted to
Directors pursuant to Section 9), (c) interpret this Plan and the Awards, (d)
adopt rules for the administration, interpretation and application of this Plan
as are consistent therewith, and (e) interpret, amend or revoke any such rules.
3.3 Delegation by the Committee. The Committee, in its sole discretion and
on such terms and conditions as it may provide, may delegate all or any part of
its authority and powers under this Plan to one or more directors or officers of
the Company; provided, however, that the Committee may not delegate its
authority and powers (a) with respect to Section 16 Persons, or (b) in any way
which would jeopardize this Plan's qualification under section 162(m) of the
Code or Rule 16b-3.
3.4 Nonemployee Director Options. Notwithstanding any contrary provision of
this Section 3, the Board shall administer Section 9 of this Plan, and the
Committee shall exercise no discretion with respect to Section 9. In the Board's
administration of Section 9 and the Options granted to Nonemployee Directors,
the Board shall have all authority and discretion otherwise granted to the
Committee with respect to the administration of this Plan.
3.5 Decisions Binding. All determinations and decisions made by the
Committee, the Board and any delegate of the Committee pursuant to Section 3.3
shall be final, conclusive, and binding on all persons, and shall be given the
maximum deference permitted by law.
SECTION 4
SHARES SUBJECT TO THIS PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the
total number of Shares available for grant under this Plan shall not exceed
2,000,000. Shares granted under this Plan may be either authorized but unissued
Shares or treasury Shares, or any combination thereof.
4.2 Lapsed Awards. If an Award is settled in cash, or is cancelled,
terminates, expires or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award thereafter shall be available to be the subject
of an Award.
4.3 Adjustments in Awards and Authorized Shares. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, stock split, Share combination, or other change in
the corporate structure of the Company affecting the Shares, the Committee shall
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adjust the number and class of Shares which may be delivered under this Plan,
the number, class and price of Shares subject to outstanding Awards, and the
numerical limits of Sections 4.1, 5.1, 6.1, 7.1 and 8.1, in such manner as the
Committee (in its sole discretion) shall determine to be advisable or
appropriate to prevent the dilution or diminution of such Awards. In the case of
Options granted to Nonemployee Directors pursuant to Section 9, the foregoing
adjustments shall be made by the Board with respect to Options granted and that
may be granted thereafter from time to time pursuant to Section 9.
Notwithstanding the preceding, the number of Shares subject to any Award always
shall be a whole number.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of this Plan,
Options may be granted to Employees and Consultants at any time and from time to
time as determined by the Committee in its sole discretion. The Committee, in
its sole discretion, shall determine the number of Shares subject to each
Option; provided, however, that during any Fiscal Year, no Participant shall be
granted Options covering more than 100,000 Shares. The Committee may grant
Incentive Stock Options, Nonqualified Stock Options, or any combination thereof.
5.2 Award Agreement. Each Option shall be evidenced by an Award Agreement
that shall specify the Exercise Price, the expiration date of the Option, the
number of Shares to which the Option pertains, any conditions to exercise of the
Option and such other terms and conditions as the Committee, in its sole
discretion, shall determine. The Award Agreement also shall specify whether the
Option is intended to be an Incentive Stock Option or a Nonqualified Stock
Option.
5.3 Exercise Price. Subject to the provisions of this Section 5.3, the
Exercise Price for each Option shall be determined by the Committee in its sole
discretion.
5.3.1 Nonqualified Stock Options. In the case of a Nonqualified Stock
Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date.
5.3.2 Incentive Stock Options. In the case of an Incentive Stock
Option, the Exercise Price shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date; provided,
however, that if on the Grant Date, the Employee (together with persons
whose stock ownership is attributed to the Employee pursuant to section
424(d) of the Code) owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any of its
Subsidiaries, the Exercise Price shall be not less than one hundred ten
percent (110%) of the Fair Market Value of a Share on the Grant Date.
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5.3.3 Substitute Options. Notwithstanding the provisions of Sections
5.3.1 and 5.3.2, in the event that the Company or an Affiliate consummates
a transaction described in section 424(a) of the Code (e.g., the
acquisition of property or stock from an unrelated corporation), persons
who become Employees or Consultants on account of such transaction may be
granted Options in substitution for options granted by such former employer
or recipient of services. If such substitute Options are granted, the
Committee, in its sole discretion and consistent with section 424(a) of the
Code, may determine that such substitute Options shall have an exercise
price less than one hundred (100%) of the Fair Market Value of the Shares
on the Grant Date.
5.4 Expiration of Options.
5.4.1 Expiration Dates. Each Option shall terminate upon the earlier
of the first to occur of the following events:
(a) The date for termination of the Option set forth in the Award
Agreement; or
(b) The expiration of ten (10) years from the Grant Date; or
(c) The expiration of one (1) year from the date of the
Optionee's Termination of Service for a reason other than the
Optionee's death, Disability or Retirement (except as provided in
Section 5.8.2 regarding Incentive Stock Options); or
(d) The expiration of three (3) years from the date of the
Optionee's Termination of Service by reason of Disability (except as
provided in Section 5.8.2 regarding Incentive Stock Options) or death;
or
(e) The expiration of three (3) years from the date of the
Optionee's Retirement (except as provided in Section 5.8.2 regarding
Incentive Stock Options).
5.4.2 Committee Discretion. Subject to the limits of Section 5.4.1,
the Committee, in its sole discretion, (a) shall provide in each Award
Agreement when each Option expires and becomes unexercisable, and (b) may,
after an Option is granted, extend the maximum term of the Option (subject
to Section 5.8.4 regarding Incentive Stock Options).
5.5 Exercisability of Options. Options granted under this Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall determine in its sole discretion. After an Option is
granted, the Committee, in its sole discretion, may accelerate the
exercisability of the Option. However, in no event may any Option granted to a
Section 16 Person be exercisable until at least six (6) months following the
Grant Date (or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3).
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5.6 Payment. Options shall be exercised by the Participant's delivery of a
written notice of exercise to the Secretary of the Company (or its designee),
setting forth the number of Shares with respect to which the Option is to be
exercised, accompanied by full payment for the Shares.
Upon the exercise of any Option, the Exercise Price shall be payable to the
Company in full in cash or its equivalent. The Committee, in its sole
discretion, also may permit exercise (a) by tendering previously acquired Shares
having an aggregate Fair Market Value at the time of exercise equal to the total
Exercise Price, or (b) by any other means which the Committee, in its sole
discretion, determines (i) to provide legal consideration for the Shares, and
(ii) to be consistent with the purposes of this Plan.
As soon as practicable after receipt of a written notification of exercise
and full payment for the Shares purchased, the Company shall deliver to the
Participant (or the Participant's designated broker), Share certificates (which
may be in book entry form) representing such Shares.
5.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option as it
may deem advisable or appropriate in its sole discretion, including, but not
limited to, restrictions related to applicable Federal securities laws, the
requirements of any national securities exchange or system upon which Shares are
then listed or traded, and any blue sky or state securities laws.
5.8 Certain Additional Provisions for Incentive Stock Options.
5.8.1 Exercisability. The aggregate Fair Market Value (determined on
the Grant Date(s)) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Employee during any
calendar year (under all plans of the Company and its Subsidiaries) shall
not exceed $100,000.
5.8.2 Termination of Service. No Incentive Stock Option may be
exercised more than three (3) months after the Participant's Termination of
Service for any reason other than Disability or death, unless (a) the
Participant dies during such three-month period, and (b) the Award
Agreement or the Committee permits later exercise. No Incentive Stock
Option may be exercised more than one (1) year after the Participant's
termination of employment on account of Disability, unless (a) the
Participant dies during such one-year period, and (b) the Award Agreement
or the Committee permits later exercise.
5.8.3 Company and Subsidiaries Only. Incentive Stock Options may be
granted only to persons who are employees of the Company or a Subsidiary on
the Grant Date.
5.8.4 Expiration. No Incentive Stock Option may be exercised after the
expiration of ten (10) years from the Grant Date; provided, however, that
if the Option is granted to an Employee who, together with persons whose
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stock ownership is attributed to the Employee pursuant to section 424(d) of
the Code, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries,
the Option may not be exercised after the expiration of five (5) years from
the Grant Date.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 Grant of SARs. Subject to the terms and conditions of this Plan, an SAR
may be granted to Employees and Consultants at any time and from time to time as
shall be determined by the Committee, in its sole discretion. The Committee may
grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination
thereof.
6.1.1 Number of Shares. The Committee shall have complete discretion
to determine the number of SARs granted to any Participant, provided that
during any Fiscal Year, no Participant shall be granted SARs covering more
than 100,000 Shares.
6.1.2 Exercise Price and Other Terms. The Committee, subject to the
provisions of this Plan, shall have complete discretion to determine the
terms and conditions of SARs granted under this Plan; provided, however,
that the exercise price of a Freestanding SAR shall be not less than one
hundred percent (100%) of the Fair Market Value of a Share on the Grant
Date. The exercise price of Tandem or Affiliated SARs shall equal the
Exercise Price of the related Option. In no event shall an SAR granted to a
Section 16 Person become exercisable until at least six (6) months after
the Grant Date (or such shorter period as may be permissible while
maintaining compliance with Rule 16b-3).
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable. With respect to a Tandem SAR granted in connection with an
Incentive Stock Option: (a) the Tandem SAR shall expire no later than the
expiration of the underlying Incentive Stock Option; (b) the value of the payout
with respect to the Tandem SAR shall be for no more than one hundred percent
(100%) of the difference between the Exercise Price of the underlying Incentive
Stock Option and the Fair Market Value of the Shares subject to the underlying
Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the
Tandem SAR shall be exercisable only when the Fair Market Value of the Shares
subject to the Incentive Stock Option exceeds the Exercise Price of the
Incentive Stock Option.
6.3 Exercise of Affiliated SARs. An Affiliated SAR shall be deemed to be
exercised upon the exercise of the related Option. The deemed exercise of an
Affiliated SAR shall not necessitate a reduction in the number of Shares subject
to the related Option.
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6.4 Exercise of Freestanding SARs. Freestanding SARs shall be exercisable
on such terms and conditions as the Committee, in its sole discretion, shall
determine; provided, however, that no SAR granted to a Section 16 Person shall
be exercisable until at least six (6) months after the Grant Date (or such
shorter period as may be permissible while maintaining compliance with Rule
16b-3).
6.5 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the exercise price, the term of the SAR, the conditions of
exercise, and such other terms and conditions as the Committee, in its sole
discretion, shall determine.
6.6 Expiration of SARs. An SAR granted under this Plan shall expire upon
the date determined by the Committee, in its sole discretion, as set forth in
the Award Agreement. Notwithstanding the foregoing, the terms and provisions of
Section 5.4 also shall apply to SARs.
6.7 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The positive difference between the Fair Market Value of a Share
on the date of exercise over the exercise price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, or in any combination thereof.
SECTION 7
RESTRICTED STOCK
7.1 Grant of Restricted Stock. Subject to the terms and provisions of this
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Employees and Consultants in such amounts as the Committee,
in its sole discretion, shall determine. The Committee, in its sole discretion,
shall determine the number of Shares to be granted to each Participant;
provided, however, that during any Fiscal Year, no Participant shall receive
more than 100,000 Shares of Restricted Stock.
7.2 Restricted Stock Agreement. Each Award of Restricted Stock shall be
evidenced by an Award Agreement that shall specify the Period of Restriction,
the number of Shares granted, and such other terms and conditions as the
Committee, in its sole discretion, shall determine. Unless the Committee, in its
sole discretion, determines otherwise, Shares of Restricted Stock shall be held
by the Company as escrow agent until the end of the applicable Period of
Restriction.
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7.3 Transferability. Except as provided in this Section 7, Shares of
Restricted Stock may not be sold, transferred, gifted, bequeathed, pledged,
assigned, or otherwise alienated or hypothecated, voluntarily or involuntarily,
until the end of the applicable Period of Restriction; provided, however, that
in no event may the restrictions on Restricted Stock granted to a Section 16
Person lapse prior to six (6) months following the Grant Date (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3).
7.4 Other Restrictions. The Committee, in its sole discretion, may impose
such other restrictions on Shares of Restricted Stock as it may deem advisable
or appropriate in accordance with this Section 7.4.
7.4.1 General Restrictions. The Committee may set restrictions based
upon (a) the achievement of specific performance objectives (Company-wide,
divisional or individual), (b) applicable Federal or state securities laws,
or (c) any other basis determined by the Committee in its sole discretion.
7.4.2 Section 162(m) Performance Restrictions. For purposes of
qualifying grants of Restricted Stock as "performance-based compensation"
under section 162(m) of the Code, the Committee, in its sole discretion,
may set restrictions based upon the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Restricted Stock to qualify as
"performance-based compensation" under section 162(m) of the Code. In
granting Restricted Stock that is intended to qualify under Code section
162(m), the Committee shall follow any procedures determined by it in its
sole discretion from time to time to be necessary, advisable or appropriate
to ensure qualification of the Restricted Stock under Code section 162(m)
(e.g., in determining the Performance Goals).
7.4.3 Legend on Certificates. The Committee, in its sole discretion,
may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions. For example, the Committee may
determine that some or all certificates representing Shares of Restricted
Stock shall bear the following legend:
"THE SALE OR OTHER TRANSFER OF THE SHARES OF STOCK REPRESENTED BY
THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION
OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE APPLEBEE'S INTERNATIONAL, INC. 1995 EQUITY INCENTIVE
PLAN, AND IN A RESTRICTED STOCK AGREEMENT. A COPY OF THIS PLAN
AND SUCH RESTRICTED STOCK AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF APPLEBEE'S INTERNATIONAL, INC."
7.5 Removal of Restrictions. Except as otherwise provided in this Section
7, Shares of Restricted Stock covered by each Restricted Stock grant made under
this Plan shall be released from escrow as soon as practicable after the end of
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the applicable Period of Restriction. The Committee, in its sole discretion, may
accelerate the time at which any restrictions shall lapse and remove any
restrictions; provided, however, that the Period of Restriction on Shares
granted to a Section 16 Person may not lapse until at least six (6) months after
the Grant Date (or such shorter period as may be permissible while maintaining
compliance with Rule 16b-3). After the end of the applicable Period of
Restriction, the Participant shall be entitled to have any legend or legends
under Section 7.4.3 removed from his or her Share certificate, and the Shares
shall be freely transferable by the Participant.
7.6 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares, unless the applicable Award Agreement provides
otherwise.
7.7 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock shall be entitled to receive all
dividends and other distributions paid with respect to such Shares unless
otherwise provided in the applicable Award Agreement. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted
Stock with respect to which they were paid.
With respect to Restricted Stock granted to a Section 16 Person, any
dividend or distribution that constitutes a "derivative security" or an "equity
security" under section 16 of the 1934 Act shall be subject to a Period of
Restriction equal to the longer of (a) the remaining Period of Restriction on
the Shares of Restricted Stock with respect to which the dividend or
distribution is paid, or (b) six (6) months.
7.8 Return of Restricted Stock to Company. On the date set forth in the
applicable Award Agreement, the Restricted Stock for which restrictions have not
lapsed shall revert to the Company and thereafter shall be available for grant
under this Plan.
SECTION 8
PERFORMANCE UNITS AND PERFORMANCE SHARES
8.1 Grant of Performance Units/Shares. Performance Units and Performance
Shares may be granted to Employees and Consultants at any time and from time to
time, as shall be determined by the Committee, in its sole discretion. The
Committee shall have complete discretion in determining the number of
Performance Units and Performance Shares granted to each Participant; provided,
however, that during any Fiscal Year, (a) no Participant shall receive
Performance Units having an initial value greater than $250,000, and (b) no
Participant shall receive more than 100,000 Performance Shares.
8.2 Value of Performance Units/Shares. Each Performance Unit shall have an
initial value that is established by the Committee on or before the Grant Date.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the Grant Date.
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8.3 Performance Objectives and Other Terms. The Committee shall set
performance objectives in its sole discretion which, depending on the extent to
which they are met, will determine the number or value of Performance Units or
Performance Shares, or both, that will be paid out to the Participants. The time
period during which the performance objectives must be met shall be called the
"Performance Period". Performance Periods of Awards granted to Section 16
Persons shall, in all cases, exceed six (6) months in length (or such shorter
period as may be permissible while maintaining compliance with Rule 16b-3). Each
Award of Performance Units or Performance Shares shall be evidenced by an Award
Agreement that shall specify the Performance Period, and such other terms and
conditions as the Committee, in its sole discretion, shall determine.
8.3.1 General Performance Objectives. The Committee may set
performance objectives based upon (a) the achievement of Company-wide,
divisional or individual goals, (b) applicable Federal or state securities
laws, or (c) any other basis determined by the Committee in its discretion.
8.3.2 Section 162(m) Performance Objectives. For purposes of
qualifying grants of Performance Units or Performance Shares as
"performance-based compensation" under section 162(m) of the Code, the
Committee, in its sole discretion, may determine that the performance
objectives applicable to Performance Units or Performance Shares, as the
case may be, shall be based on the achievement of Performance Goals. The
Performance Goals shall be set by the Committee on or before the latest
date permissible to enable the Performance Units or Performance Shares, as
the case may be, to qualify as "performance-based compensation" under
section 162(m) of the Code. In granting Performance Units or Performance
Shares which are intended to qualify under Code section 162(m), the
Committee shall follow any procedures determined by it from time to time to
be necessary or appropriate in its sole discretion to ensure qualification
of the Performance Units or Performance Shares, as the case may be, under
Code section 162(m) (e.g., in determining the Performance Goals).
8.4 Earning of Performance Units/Shares. After the applicable Performance
Period has ended, the holder of Performance Units or Performance Shares shall be
entitled to receive a payout of the number of Performance Units or Performance
Shares, as the case may be, earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance objectives have been achieved. After the grant of a Performance Unit
or Performance Share, the Committee, in its sole discretion, may reduce or waive
any performance objectives for such Performance Unit or Performance Share;
provided, however, that Performance Periods of Awards granted to Section 16
Persons shall not be less than six (6) months (or such shorter period as may be
permissible while maintaining compliance with Rule 16b-3).
8.5 Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units or Performance Shares shall be made as soon as
practicable after the end of the applicable Performance Period. The Committee,
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in its sole discretion, may pay earned Performance Units or Performance Shares
in the form of cash, in Shares (which have an aggregate Fair Market Value equal
to the value of the earned Performance Units or Performance Shares, as the case
may be, at the end of the applicable Performance Period), or in any combination
thereof.
8.6 Cancellation of Performance Units/Shares. On the earlier of date set
forth in the Award Agreement or the Participant's Termination of Service (other
than by death, Disability or, with respect to an Employee, Retirement), all
unearned or unvested Performance Units or Performance Shares shall be forfeited
to the Company, and thereafter shall be available for grant under this Plan. In
the event of a Participant's death, Disability or, with respect to an Employee,
Retirement, prior to the end of a Performance Period, the Committee shall reduce
his or her Performance Units or Performance Shares proportionately based on the
date of such Termination of Service.
SECTION 9
DIRECTOR OPTIONS
The provisions of this Section 9 are applicable only to Options granted to
Nonemployee Directors and to Directors who are also Employees to the extent
Options are granted to them in their capacity as Directors. The provisions of
Section 5 are applicable to Options granted to Employees and Consultants (and to
the extent provided in Section 9.2.7, to Director Options).
9.1 Granting of Options.
9.1.1 Nonemployee Director Grants. Each Nonemployee Director shall
receive an annual grant of Director Options to purchase 12,000 shares of
Stock. Such amount shall automatically increase or decrease by 1,500 shares
for each increment of 5% by which the actual earnings before income taxes
of the Corporation for a particular year exceed or are less than the
earnings before income taxes for the previous year. The maximum increase
shall be 6,000 shares and the maximum decrease shall be 6,000 shares.
9.1.2 Employee Director Grants. Employee Directors shall receive an
annual grant of Director Options to purchase 6,000 shares of Stock. Such
amount shall automatically increase or decrease by 750 shares for each
increment of 5% by which the actual earnings before income taxes of the
Corporation for a particular year exceed or are less than the earnings
before income taxes for the previous year. The maximum increase shall be
3,000 shares and the maximum decrease shall be 3,000 shares.
9.1.3 Date of Grant. All Director Options shall be granted at the
annual meeting of the Board.
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9.2 Terms of Options.
9.2.1 Option Agreement. Each Option granted pursuant to this Section 9
shall be evidenced by a written stock option agreement which shall be
executed by the Optionee and the Company.
9.2.2 Exercise Price. The Exercise Price for the Shares subject to
each Option granted pursuant to this Section 9 shall be 100% of the Fair
Market Value of such Shares on the Grant Date.
9.2.3 Exercisability. Each Option granted pursuant to Section 9.1.1
shall become immediately exercisable on the first anniversary of the Grant
Date. Notwithstanding the preceding, once an optionee ceases to be a
Director, his or her Options which are not exercisable shall not become
exercisable thereafter.
9.2.4 Expiration of Options. Each Option shall terminate upon the
first to occur of the following events:
(a) The expiration of five (5) years from the Grant Date; or
(b) The expiration of one (1) year from the date of the
Optionee's termination of service as a Director for any reason other
than the Optionee's death, Disability or Retirement; or
(c) The expiration of one (1) year from the date of the
Optionee's termination of service by reason of Disability or
Retirement.
9.2.5 Death of Director. Notwithstanding Section 9.2.4, if a Director
dies prior to the expiration of his or her Options in accordance with
Section 9.2.4, his or her Options shall terminate one (1) year after the
date of his or her death.
9.2.6 Not Incentive Stock Options. Options granted pursuant to this
Section 9 shall not be designated as Incentive Stock Options.
9.2.7 Other Terms. All provisions of this Plan not inconsistent with
this Section 9 shall apply to Options granted to Nonemployee Directors;
provided, however, that Section 5.2 (relating to the Committee's discretion
to set the terms and conditions of Options) shall be inapplicable with
respect to Nonemployee Directors.
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SECTION 10
MISCELLANEOUS
10.1 Deferrals. The Committee, in its sole discretion, may permit a
Participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant under an Award. Any such
deferral election shall be subject to such rules and procedures as shall be
determined by the Committee in its sole discretion.
10.2 No Effect on Employment or Service. Nothing in this Plan shall
interfere with or limit in any way the right of the Company to terminate any
Participant's employment or service at any time, with or without cause. For
purposes of this Plan, transfer of employment of a Participant between the
Company and any of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment with the Company and its Affiliates is on an
at-will basis only, unless otherwise provided by an applicable employment
agreement between the Participant and the Company or its Affiliate, as the case
may be.
10.3 Participation. No Employee or Consultant shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
10.4 Indemnification. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from (a) any loss, cost, liability or expense (including
attorneys' fees) that may be imposed upon or reasonably incurred by him or her
in connection with or resulting from any claim, action, suit or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action taken or failure to act under this Plan or any Award Agreement,
and (b) from any and all amounts paid by him or her in settlement thereof, with
the Company's prior written approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit or proceeding against him or her;
provided, however, that he or she shall give the Company an opportunity, at its
own expense, to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of Incorporation or
Bylaws, by contract, as a matter of law or otherwise, or under any power that
the Company may have to indemnify them or hold them harmless.
10.5 Successors. All obligations of the Company under this Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation or otherwise, of all or substantially
all of the business or assets of the Company.
10.6 Beneficiary Designations. If permitted by the Committee, a Participant
under this Plan may name a beneficiary or beneficiaries to whom any vested but
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unpaid Award shall be paid in the event of the Participant's death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, any vested benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate and, subject to
the terms of this Plan and of the applicable Award Agreement, any unexercised
vested Award may be exercised by the administrator or executor of the
Participant's estate.
10.7 Nontransferability of Awards. No Award granted under this Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the limited
extent provided in Section 10.6. All rights with respect to an Award granted to
a Participant shall be available during his or her lifetime only to the
Participant.
10.8 No Rights as Stockholder. Except to the limited extent provided in
Sections 7.6 and 7.7, no Participant (nor any beneficiary thereof) shall have
any of the rights or privileges of a stockholder of the Company with respect to
any Shares issuable pursuant to an Award (or the exercise thereof), unless and
until certificates representing such Shares shall have been issued, recorded on
the records of the Company or its transfer agents or registrars, and delivered
to the Participant (or his or her beneficiary).
SECTION 11
AMENDMENT, TERMINATION, AND DURATION
11.1 Amendment, Suspension, or Termination. The Board, in its sole
discretion, may amend or terminate this Plan, or any part thereof, at any time
and for any reason; provided, however, that if and to the extent required to
maintain this Plan's qualification under Rule 16b-3, any such amendment shall be
subject to stockholder approval; further provided, however, that as required by
Rule 16b-3, the provisions of Section 9 regarding the manner for determining the
amount, exercise price, and timing of Director Options shall in no event be
amended more than once every six (6) months, other than to comport with changes
in the Code or ERISA. (ERISA currently is inapplicable to this Plan.) The
amendment, suspension or termination of this Plan shall not, without the consent
of the Participant, alter or impair any rights or obligations under any Award
theretofore granted to such Participant. No Award may be granted during any
period of suspension or after termination of this Plan.
11.2 Duration of this Plan. This Plan shall become effective on the date
specified herein, and subject to Section 11.1 (regarding the Board's right to
amend or terminate this Plan), shall remain in effect thereafter; provided,
however, that without further stockholder approval, no Incentive Stock Option
may be granted under this Plan after the tenth anniversary of the effective date
of this Plan.
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SECTION 12
TAX WITHHOLDING
12.1 Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Award (or the exercise thereof), the Company shall have the power
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state and local taxes
(including the Participant's FICA obligation) required to be withheld with
respect to such Award (or the exercise thereof).
12.2 Withholding Arrangements. The Committee, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit a
Participant to satisfy such tax withholding obligation, in whole or in part, by
(a) electing to have the Company withhold otherwise deliverable Shares, or (b)
delivering to the Company Shares then owned by the Participant having a Fair
Market Value equal to the amount required to be withheld. The amount of the
withholding requirement shall be deemed to include any amount that the Committee
agrees may be withheld at the time any such election is made, not to exceed the
amount determined by using the maximum federal, state or local marginal income
tax rates applicable to the Participant with respect to the Award on the date
that the amount of tax to be withheld is to be determined. The Fair Market Value
of the Shares to be withheld or delivered shall be determined as of the date
that the taxes are required to be withheld.
SECTION 13
CHANGE IN CONTROL
13.1 Change in Control. In the event of a Change in Control of the Company,
all Awards granted under this Plan that then are outstanding and not then
exercisable or are subject to restrictions, shall, unless otherwise provided for
in the Agreements applicable thereto, become immediately exercisable, and all
restrictions shall be removed, as of the first date that the Change in Control
has been deemed to have occurred, and shall remain as such for the remaining
life of the Award as provided herein and within the provisions of the related
Agreements.
13.2 Definition. For purposes of Section 13.1 above, a Change in Control of
the Company shall be deemed to have occurred if the conditions set forth in any
one or more of the following shall have been satisfied, unless such condition
shall have received prior approval of a majority vote of the Continuing
Directors, as defined below, indicating that Section 13.1 shall not apply
thereto:
(a) any "person", as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities;
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(b) during any period of two consecutive years (not including any
period prior to the Effective Date of this Plan), individuals
("Existing Directors") who at the beginning of such period constitute
the Board of Directors, and any new director (an "Approved Director")
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
paragraph (a), (b) or (c) of this Section 13.2) whose election by the
Board of Directors or nomination for election by the Company's
shareholders was approved by a vote of a least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
previously was so approved (Existing Directors together with Approved
Directors constituting "Continuing Directors"), cease for any reason
to constitute at least a majority of the Board of Directors; or
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other person, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities for the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger in which no "person" (as defined in
Section 13.2(a)) acquires more than thirty percent (30%) of the
combined voting power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
SECTION 14
LEGAL CONSTRUCTION
14.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
14.2 Severability. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of this Plan, and this Plan shall be construed and enforced
as if the illegal or invalid provision had not been included.
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14.3 Requirements of Law. The grant of Awards and the issuance of Shares
under this Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required from time to time.
14.4 Securities Law Compliance. With respect to Section 16 Persons, Awards
under this Plan are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of this Plan, Award Agreement or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable or appropriate by the Committee in
its sole discretion.
14.5 Governing Law. This Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Kansas (excluding
its conflict of laws provisions).
14.6 Captions. Captions are provided herein for convenience of reference
only, and shall not serve as a basis for interpretation or construction of this
Plan.
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THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF APPLEBEE'S INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS, MAY 26, 1995
The undersigned hereby appoints each of Abe J. Gustin, Jr. and Robert
T. Steinkamp the proxy and attorney-in-fact of the undersigned with full power
of substitution for and in the name of the undersigned to attend the Annual
Meeting of Stockholders of Applebee's International, Inc., to be held at 4551 W.
107th Street, Suite 100, Overland Park, Kansas 66207 on May 26, 1995 at 10:00
a.m., CDT, and any and all adjournments thereof, and to vote thereat the number
of shares of Common Stock of Applebee's International, Inc., which the
undersigned would be entitled to vote if then personally present. The Board of
Directors recommends votes FOR proposals I through V.
I. To amend the Company's Certificate of Incorporation which would
classify the Board of Directors into three classes, each with a term of
three years.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
II. To elect ten directors to serve until the next Annual Meeting of
Stockholders or, in the event Proposal I is approved, to serve until
the Annual Meeting of Stockholders to be held in the year indicated;
Nominees: Abe J. Gustin, Jr. - 1997, Lloyd L. Hill - 1998, Robert A.
Martin - 1997, Burton M. Sack - 1998, D. Patrick Curran - 1997, Eric L.
Hansen - 1996, Jack P. Helms - 1998, Kenneth D. Hill - 1996, Johyne H.
Reck - 1997, and Raymond D. Schoenbaum - 1996.
[ ] FOR all nominees listed above.
[ ] FOR all nominees listed above except____________________________.
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
III. To amend the 1989 Stock Option Plan to increase the number of shares of
Common Stock subject to option thereunder by 1,500,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. To approve the adoption of the Company's 1995 Equity Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
V. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Company for the 1995 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
VI. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR PROPOSALS I THROUGH V.
Signature _________________ Date __________
Signature _________________ Date __________
Sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, give full
title. If a corporation, sign full corporate
name by President or other authorized officer.
If a partnership, sign in partnership name by
authorized partner.
MARK, DATE, SIGN, AND PROMPTLY RETURN PROXY
CARD IN ENCLOSED ENVELOPE.
2
